XXXXX INCORPORATED
FOUNDER-EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made effective as of July 2, 1999
by and between XXXXX, Inc., a Delaware corporation ("XXXXX"), and Xxxxxx Xxxxx,
an individual and XXXXX founder (" Gates"). An executive position may be
occupied by Gates in XXXXX, one or more of its divisions or any of its wholly
owned subsidiaries ("Subsidiary"). This agreement is also binding for any
Subsidiary to which Gates is assigned.
Gates and XXXXX wish to provide mutual promises and assurances that will define
the nature and terms and conditions of their relationship. Therefore, in
consideration of the mutual promises, acknowledgments and representations
herein, the parties agree as follows:
1. EMPLOYMENT AND DUTIES. Gates will work exclusively and on a full-time basis
for XXXXX and shall devote his best efforts to accomplishing the goals and
objectives mutually established with XXXXX'x Chief Executive Officer ("CEO").
Gates' primary title shall be Vice President of XXXXX. Xxxxx may also have
titles and executive responsibilities for one or more XXXXX divisions or
subsidiaries.
2. TERM. Employment under this Agreement shall commence on the effective date
and shall continue for a period of five (5) years, unless earlier terminated as
set forth in Section 5 below. Thereafter, this Agreement shall automatically
renew for additional three (3)-year terms unless either party gives the other
written notice of non-renewal at least one (1) year prior to the expiration of
the initial term or any renewal term.
3. COMPENSATION.
(a) Base Salary. XXXXX agrees to pay Gates a base salary, before deducting all
applicable withholdings, at the rate of $125,000 per year, which shall be
payable in accordance with XXXXX'x standard payroll policies as they may be
revised from time to time. XXXXX shall consider increases in the annual
rate of pay to be effective on Gates' anniversary date of each year,
commencing on July 2, 1999.
(b) Incentive Bonus. Gates shall be entitled to participate in a bonus plan for
XXXXX Executives. By meeting specific objectives established with the CEO,
Gates may earn, in addition to his base salary, an incentive bonus of up to
40% of Gates' base salary per year based one-half on Gates' individual
performance (as mutually agreed upon with the CEO) and one half on the
Executive staff's achieving its planned and budgeted operating income goals
for the company. This incentive bonus will be paid on an annual basis not
later than the end of the third fiscal month of each following fiscal year.
(c) Auto Allowance. Gates is entitled to an automobile allowance of $650 per
month (after withholding), paid on the last day of the month as a payroll
item. Payment of Auto Allowance shall begin on condition of cash
availability.
4. BENEFITS. In addition to the compensation described above, while Gates is
employed, XXXXX shall provide Gates the benefits described in this section. All
benefits shall terminate upon expiration or termination of this Agreement and
unused benefits shall have no cash value and shall not be compensated to Gates
upon termination or expiration of this agreement.
(a) HEALTH AND MEDICAL INSURANCE. XXXXX shall pay for and provide Gates and his
family with the same type of health, medical, dental and vision insurance
as is provided from time to time to all of XXXXX'x Founder Executives.
(b) LIFE AND DISABILITY INSURANCE. XXXXX will purchase a term life insurance
policy for Gates in an amount equal to five (5) times Gates' annual income
provided Gates meets all the usual and customary qualifying criteria
established by Gates' life insurance provider. In addition to any
disability income available from the Arizona Worker's Compensation Fund,
XXXXX shall also purchase a long-term disability insurance policy for Gates
that will provide a disability benefit to Gates equal to one-half of Gates'
annual income. Gates shall be subject to all exclusions, limitations and
restrictions contained in the life and disability policies provided and
XXXXX shall not be a guarantor of any benefits available under these
policies.
(c) PAID TIME OFF. Gates shall have three weeks annual vacation. If Gates is
unable, due to the demands of his position, take vacation, the vacation
shall accrue into the next year. Gates may accrue unused vacation up to 27
weeks.
(d) EXPENSE REIMBURSEMENT. XXXXX shall, upon receipt of appropriate
documentation, reimburse Gates for his reasonable travel, lodging and other
ordinary and necessary business expenses consistent with XXXXX'x policies
as in effect from time to time.
(e) 401K PROGRAM. When such plan becomes available, Gates will be eligible to
participate in XXXXX'x 401K retirement program under the same terms as
those applicable to all XXXXX Executives.
5. TERMINATION. XXXXX may terminate this Agreement at any time in the manner
provided herein. Gates may terminate this Agreement at any time upon delivery of
thirty days' written notice. Termination of this Agreement shall terminate
completely Gates' employment with XXXXX.
(a) NOTICE OF NON-RENEWAL. Notice of non-renewal shall be given in writing at
least one-year prior to expiration of the then current term, in which case,
this Agreement shall not be automatically renewed and shall terminate upon
expiration of the then current term. In the case of non-renewal, XXXXX
shall pay Gates a severance payment of one year's salary calculated on the
salary paid Gates at the time of notice of non-renewal.
(b) FOR CAUSE. XXXXX may terminate this Agreement for cause upon written notice
to Gates stating the facts constituting such cause. If Gates is terminated
for cause, XXXXX shall be obligated to pay Gates base salary at the current
rate due him through the date of termination. For purposes of this section,
"cause" shall include: (1) neglect of duties as established by mutual
consent (2) the appropriation or attempted appropriation of a material
business opportunity of XXXXX, including attempting to secure or securing
any personal profit in connection with any transaction entered into on
behalf of XXXXX; (3) the misappropriation or attempted misappropriation of
any of XXXXX'x funds or property; (4) the conviction of, the indictment for
(or its procedural equivalent), or the entering of a guilty plea or plea of
no contest with respect to, a felony, or any other crime with respect to
which imprisonment is a possible punishment.
(c) WITHOUT CAUSE. XXXXX may terminate this Agreement at any time without
cause, by giving 120 days' written notice to Gates. Within seventy-two
hours of termination without cause, XXXXX shall pay to Gates the base
salary due him through the date of termination plus the amount remaining in
his term of employment plus an additional five years' salary. XXXXX shall
provide paid medical insurance for Gates and his family and other benefits
for a period of three (3) years after termination without cause. If Gates
is terminated without cause, XXXXX will also vest all non-vested options
and shares in the company due Gates and Gates' shares and options shall
have "piggyback" registration rights in any subsequent public offering for
a period of ten (10) years
(d) DISABILITY. If during the term of this Agreement, Gates fails to perform
his duties hereunder because of illness or other incapacity for a period of
300 consecutive days, XXXXX shall have the right to terminate this
Agreement without further obligation hereunder except for any amounts
payable pursuant to disability plans generally applicable to XXXXX'x
Executives.
(e) DEATH. If Gates dies during the term of this Agreement, this Agreement
shall terminate immediately, and Gates' legal representatives shall be
entitled to receive the base salary and benefits due Gates through the term
of the agreement, and any other death benefits generally applicable to
Executives.
(f) UNFRIENDLY TAKEOVER OF XXXXX. In the event that control of XXXXX is
obtained under hostile or unfriendly circumstances, Gates' stock and
options shall immediately vest and Gates' employment shall automatically
renew for five additional years.
6. Nondisclosure of Proprietary Information. XXXXX, due in part to Gates'
direction and leadership, invents, develops, manufactures and markets processes
and products that involve experimental or inventive work. XXXXX'x success
depends upon the protection of these processes and products by patent or by
secrecy. Gates will substantially contribute to and have access to much of
XXXXX'x "Proprietary Information." It is mutually agreed that XXXXX and Gates
will keep such information secret:
(a) "Proprietary Information" shall mean: (1.) any and all methods, inventions,
improvements, information, data or discoveries, whether or not patentable,
that are secret, proprietary, confidential or generally undisclosed,
(including information originated or provided by Gates) in any area of
knowledge, including information concerning trade secrets, processes,
software, products, patents, inventions, formulae, apparatus, techniques,
technical data, improvements, specifications, servicing, attributes and
relative attributes relating to any of XXXXX'x equipment, devices,
processes or products; and (2.) the identities of XXXXX'x customers and
potential customers ("Customers") including Customers Gates successfully
cultivates or maintains during his Engagement using XXXXX'x products, name
or infrastructure; the identities of contact persons at Customers; the
preferences, likes, dislikes and technical and other requirements of
Customers and contact persons with respect to product types, pricing, sales
calls, timing, sales terms, rental terms, lease, terms, service plans, and
other marketing terms and techniques; XXXXX'x business methods, practices,
strategies, forecasts, know-how, pricing, and marketing plans and
techniques; the identity of key accounts; the identity of potential key
accounts; and the identities of XXXXX'x key customer representatives and
Executives. Proprietary Information shall not be deemed to include (1.)
information that was known to Gates on a non-confidential basis prior to
the Engagement with XXXXX of this Agreement or (2.) information that is or
hereafter becomes known to the general public without a breach or fault on
the part of Gates.
(b) Gates acknowledges that XXXXX has exclusive property rights to certain
Proprietary Information and Gates hereby assigns all rights he might
possess in certain Proprietary Information to XXXXX. Except as required in
the performance of the duties of his employment with XXXXX, Gates will not
at any time during or after the term of his Engagement, without the prior
written consent of XXXXX, directly or indirectly use, communicate,
disclose, disseminate, lecture upon, publish articles or otherwise put in
the public domain, any Proprietary Information or any other information of
a secret, proprietary, confidential or general undisclosed nature relating
to XXXXX, its products, Customers, processes or services, including
information relating to testing, research, development, manufacturing,
marketing or selling.
(c) All documents, records, notebooks, notes, memoranda, data bases, and
similar repositories containing Proprietary Information made or compiled by
Gates at any time during his term of employment, including any and all
copies thereof, are and shall be the property of XXXXX, shall be held by
him in trust solely for the benefit of XXXXX, and shall be delivered to
XXXXX by him on the termination of his employment or at any other time upon
the request of XXXXX.
(d) Gates agrees to certify in writing at or before final termination of the
employment that Gates no longer has in Gates' possession, custody or
control any copies of any business documents generated at or relating to
XXXXX nor XXXXX'x Proprietary Information, whether in hard copy, on a
computer's hard drive, on disks or in any other form or media.
(e) All pertinent information regarding XXXXX'x business disclosed to, learned
by or developed by Gates during the course of the employment shall be
presumed to be Proprietary Information.
(f) Gates agrees to provide notification, at the start of any new engagement or
employment, to all subsequent Employers or contracting parties who are
involved in any way in the semiconductor industry or are otherwise XXXXX'x
competitors, of the terms and conditions of this Agreement, along with a
copy of this Agreement.
7. INVENTIONS.
(a) For purposes of this section, the term "Inventions" shall mean discoveries,
concepts, and ideas, whether patentable or not, including improvements,
know-how, data, processes, methods, formulae, and techniques, concerning
XXXXX activities, business and products that Gates makes, discovers or
conceives either solely or jointly with others during employment by XXXXX
and, if based on or related to Proprietary Information, at any time after
termination of such employment. All Inventions shall be solely the property
of XXXXX and Gates agrees to perform the requirements of this Section with
respect thereto without the payment by XXXXX of any royalty or any
consideration other than as provided in this Agreement.
(b) Gates shall apply, at XXXXX'x request, support and expense, for United
States and foreign letters patent in Gates' name (or jointly if the patent
has several authors).
(c) Gates hereby assigns to XXXXX all rights to Inventions, and to applications
for United States and/or foreign letters patent and to United States and/or
foreign letters patent granted upon Inventions generated under this
agreement and during the term of Gates' employment.
(d) Gates shall acknowledge and deliver promptly to XXXXX without charge to
XXXXX but at its expense such written instruments (including applications
and assignments) and do such other acts, such as giving testimony in
support of Gates' inventorship, as may be necessary in the opinion of XXXXX
to obtain, maintain, extend, reissue and enforce United States and/or
foreign letters patent relating to the Inventions and to vest the entire
right and title thereto in XXXXX or its nominee.
(e) Gates' obligation to assist XXXXX in obtaining and enforcing patents for
Inventions in any and all countries shall continue beyond employment but
XXXXX shall compensate Gates at a reasonable rate for time actually spent
at XXXXX'x request on such assistance. If XXXXX is unable for any reason
whatsoever to secure Gates' signature to any lawful and necessary document
required to apply for or execute any patent application with respect to any
Inventions, including renewals, extensions, continuations, division or
continuations in part thereof, Gates hereby irrevocably designates and
appoints XXXXX and its duly authorized officers and agents, as his agents
and attorneys-in-fact to act for and in his behalf and instead of Gates, to
execute and file any application and to do all other lawful permitted acts
to further the prosecution and issuance of patents with the same legal
force and effect as if executed by Gates.
(f) As a matter of record Gates has identified on Exhibit A attached hereto all
inventions or improvements relevant to the activity of XXXXX which have
been made or conceived or first reduced to practice by Gates alone or
jointly with others prior to his Engagement by XXXXX, that he desires to
remove from the operation of this and Gates covenants that such list is
complete. If there is no such list or if no Exhibit A is attached, Gates
represents that he has made no such inventions and improvements at the time
of signing this Agreement.
(g) Gates will assign rights to XXXXX to certain inventions, discoveries,
concepts or ideas, or improvements thereof, or know-how related thereto, as
having been made or acquired by him prior to his being engaged by XXXXX. In
return, XXXXX will remunerate Gates a fair value for this intellectual
property. If XXXXX and Xxxxx are unable to agree on a fair value, they will
agree to a value established by a mutually acceptable third party expert.
8. Non-solicitation of Customers or Employees of XXXXX.
(a) For a period of one year after termination of this Agreement, Gates agrees
not to solicit or call on any third party or entity, any customer or
potential customer of XXXXX whom Xxxxx solicited or called on during the
one year period immediately prior to the termination of his employment, or
such customers or potential customers with which he became acquainted or of
which he learned during his last year of employment unless the products or
service represented do not compete with any of the products or services
manufactured, assembled, distributed, offered or sold by XXXXX.
(b) During the term of this Agreement and for a period of one year after
termination this Agreement, Gates will not solicit any of XXXXX'x Employees
for a competing business or otherwise induce or attempt to induce such
Employees to terminate their employment with XXXXX.
9. EXCLUSIVE ENGAGEMENT. During the period of this Agreement, Gates shall not,
without the Board's express written consent, engage in any employment,
consulting activity or business other than for XXXXX. Activity as a passive
investor in or outside director for another business enterprise shall not be
considered a violation of this section for so long as such business enterprise
is not competing or conducting business with XXXXX and so long as such
activities do not adversely impact the performance of Gates' duties to XXXXX.
10. NON-COMPETE. The parties acknowledge that Gates has acquired or will acquire
much knowledge and information concerning XXXXX'x business and Customers as the
result of Gates' status as founder and Executive employee. The parties further
acknowledge that the scope of business in which XXXXX is engaged is worldwide
and very competitive, that such business is one in which few companies can
compete successfully, and that competition by Gates in that business would
injure XXXXX severely. Accordingly, Gates agrees that during his employment and
for a period of one year following the end of the employment, Gates will not
take any of the following actions within 1,500 miles of Gates' principal office
location, or, in the event Gates had an assigned territory, in the territory or
territories Gates worked in on behalf of XXXXX:
(a) Directly or indirectly, sell or attempt to sell products or services for or
on behalf of any business that manufactures, assembles, distributes, offers
or sells any products or services that compete with any services or
products then manufactured, assembled, distributed, offered or sold by
XXXXX;
(b) Persuade or attempt to persuade any potential customer or client to which
XXXXX has made a proposal or sale, or with which XXXXX has been having
discussions, not to transact business with XXXXX, or instead to transact
business with Gates, another person or organization;
(c) Solicit the business of any company that has been a customer or client of
XXXXX at any time during Gates' employment, provided, however, if Gates
becomes employed by or represents a business that exclusively sells
products or services that do not compete with products or services then
marketed or intended to be marketed by XXXXX, such contact shall be
permissible.
11. COMPLIANCE WITH LAW AND AMENDMENT BY COURT: If there is any conflict between
any provision of this Agreement and any statue, law, regulation or judicial
precedent, the latter shall prevail, but the provisions of this Agreement thus
affected shall be curtailed and limited only to the extent necessary to bring it
within the requirements of the law. If any part of this Agreement shall be held
by a court of proper jurisdiction to be indefinite, invalid or otherwise
unenforceable, the entire Agreement shall not fail on account thereof, but: (i)
the balance of the Agreement shall continue in full force and effect unless such
construction would clearly be contrary to the intention of the parties or would
result in an unconscionable injustice; and (ii) the court shall amend the
Agreement to the extent necessary to make the Agreement valid and enforceable.
12. FREEDOM FROM ENGAGEMENT RESTRICTIONS. Gates represents and warrants that
Gates has not entered into any agreement, whether express, implied, oral, or
written, that poses an impediment to Gates' employment by XXXXX including Gates'
compliance with the terms of this Agreement. In particular, Gates is not subject
to a preexisting non-competition agreement, and no restrictions or limitations
exist respecting Gates' ability to perform fully Gates' obligations to XXXXX.
13. THIRD PARTY TRADE SECRETS. During Gates' employment, Gates agrees not to
copy, refer to, or in any way use information that is proprietary to any third
party (including any previous Employers). Gates represents and warrants that he
has not improperly taken any documents, listings, hardware, software, discs, or
any other tangible medium that embodies Proprietary Information from any third
party, and that Gates does not intend to copy, refer to, or in any way use
information that is proprietary to any third party in performing Gates' duties
for XXXXX.
14. INJUNCTIVE RELIEF. Gates acknowledges that a breach of this Agreement is
likely to result in irreparable and unreasonable harm to XXXXX, that damages
caused by a breach would be extremely difficult to calculate, and that
injunctive relief, as well as damages, would be appropriate.
15. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon Gates, his
heirs, executors, assigns, and administrators and shall inure to the benefit of
XXXXX, its successors, and assigns.
16. WAIVER. No waiver of any of the provisions of this Agreement shall be deemed
to, or shall constitute a waiver of, any other provisions, whether or not
similar, nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
17. GOVERNING LAW AND VENUE. Arizona law shall govern the construction and
enforcement of this Agreement and the parties agree that any litigation
pertaining to this Agreement shall be in courts located in Maricopa County,
Arizona, and each of the parties consents to the exclusive jurisdiction of such
courts and waives any objection to jurisdiction or venue of such courts.
18. CONSTRUCTION. The language in all parts of this Agreement shall in all cases
be construed as a whole according to its fair meaning and not strictly for nor
against any party. The Section headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement. All terms used in one number or gender shall
be construed to include any other number or gender as the context may require.
The parties agree that each party has reviewed this Agreement and has had the
opportunity to have counsel review the same and that any rule of construction to
the effect that ambiguities are to be resolved against the drafting party shall
not apply in the interpretation of this Agreement or any amendment or any
exhibits thereof.
19. NONDELEGABILITY OF GATES' RIGHTS AND XXXXX ASSIGNMENT RIGHTS. The
obligations, rights and benefits of Gates hereunder are personal and may not be
delegated, assigned or transferred in any manner whatsoever, nor are such
obligations, rights or benefits subject to involuntary alienation, assignment or
transfer. Upon reasonable notice to Gates, XXXXX may transfer Gates to an
affiliate of XXXXX, which affiliate shall assume the obligations of XXXXX under
this Agreement. This Agreement shall be assigned automatically to any entity
merging with or acquiring XXXXX or its business.
20. SEVERABILITY. In the event any term or provision of this Agreement is
declared by a court of competent jurisdiction to be invalid or unenforceable for
any reason, this Agreement shall remain in full force and effect, and either (a)
the invalid or unenforceable provision shall be modified to the minimum extent
necessary to make it valid and enforceable or (b) if such a modification is not
possible, this Agreement shall be interpreted as if such invalid or
unenforceable provision were not a part hereof.
21. ATTORNEYS' FEES. Except as otherwise provided herein, in the event any party
hereto institutes an action or other proceeding to enforce any rights arising
out of this Agreement, the party prevailing in such action or other proceeding
shall be paid all reasonable costs and attorneys' fees by the non-prevailing
party, such fees to be set by the court and not by a jury and to be included in
any judgment entered in such proceeding.
22. NOTICES. All notices required or permitted hereunder shall be in writing and
shall be deemed duly given upon receipt if either personally delivered, sent by
certified mail, return receipt requested, or sent by a nationally-recognized
overnight courier service, addressed to the parties as follows:
If to XXXXX: XXXXX, Inc.
Attention: President/Chief Executive Officer
0000 X. 0xx Xxxxxx
Xxxxx, XX 00000
With a copy to: Xxxxxxx & Xxxxx
Attention: Xxxxx X. Xxxxxx
Xxx Xxxx Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
If to Gates: Xxxxxx Xxxxx
0000 X. 00xx Xxxxx
Xxxxx, XX 00000
or to such other address as any party may provide to the other in accordance
with this Section.
23. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof (I.E., Gates' employment
by XXXXX) and supersedes all prior or contemporaneous understandings or
agreements in regard thereto. No modification or addition to this Agreement
shall be valid unless in writing, specifically referring to this Agreement and
signed by all parties.
IN WITNESS WHEREOF, the parties have executed this Agreement.
EMPLOYER: EXECUTIVE:
XXXXX, Inc., Xxxxxx Xxxxx
A Delaware Corporation
------------------------------------ ------------------------------------
Xxx X. Xxxxxxx, Xx. Xxxxxx Xxxxx
Its President/Chief Executive Officer
Date:
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Exhibit A
Gates Personal Intellectual Property List
