EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of this 1st day of
June, 1999 (the "Effective Date") is entered into by and between Xxxxxx.xxx
(the "Company") and Xxxx X. Xxxxxxx ("Executive"). In consideration of the
mutual covenants and agreements hereinafter set forth, the parties agree as
follows:
1. EMPLOYMENT
1.1 POSITION. During the Employment Period (as hereinafter defined)
and subject to the terms and conditions set forth herein, the Company agrees
to employ Executive as its President and Chief Executive Officer, reporting
directly to the Board of Directors of the Company (the "Board"). Executive
shall be recommended for election to the Board as of the Effective Date.
1.2 DUTIES AND RESPONSIBILITIES. During the Employment Period,
Executive shall devote sufficient time and energy to fulfill his
responsibilities to the business of the Company and shall not be engaged in
any competitive business activity without the express written consent of the
Company. Executive hereby represents that he is not a party to any agreement
which would be an impediment to entering into this Agreement and that he is
permitted to enter into this Agreement and perform the obligations hereunder;
provided that Executive has obligations of confidentiality to his previous
employer, Encanto Networks, Inc.
1.3 PERIOD OF EMPLOYMENT. The "Employment Period" means the period
commencing on the Effective Date and terminating on the earlier of three (3)
years from the Effective Date or as set forth in paragraph 5 of this
Agreement.
1.4 COMPENSATION.
(a) BASE SALARY. In consideration of and as compensation of and as
compensation for the services agreed to be performed by Executive hereunder,
the Company agrees to pay Executive a gross annual base salary of ONE HUNDRED
SEVENTY-FIVE THOUSAND DOLLARS ($175,000.00) during the initial twelve (12)
months of the Employment Period and thereafter in an amount to be mutually
agreed upon by the Executive and the Compensation Committee of the Company's
Board of Directors, such amounts to be payable in accordance with the
Company's standard payment policy, less applicable withholdings and
deductions (the "Base Salary"). Such Base Salary will be subject to increase
at any time during the Employment Period at the sole discretion of the
Compensation Committee of the Board with the consent of the Executive.
(b) BONUS. Executive's bonus shall be governed by the Company's
management incentive plan as approved by the Company's Board of Directors for
executive officers of the Company.
(c) PARTICIPATION IN BENEFIT PLAN. During the Employment Period,
Executive and his dependents, as applicable, shall be entitled to participate
in any employee benefit plans and programs that are generally available to
other executive officers of the Company (including, without limitation,
health, disability, life insurance, annual physical or retirement plan)
subject to the terms and conditions of such plan or program and to the extent
permitted by law.
(d) COBRA COVERAGE. The Company will use its best efforts to assure
coverage and provided in paragraph (d) above for Executive and his
dependents; however, to the extent the Company is unable to provide such
coverage or to provide coverage consistent with Executive's existing
coverage, the Company agrees to reimburse Executive for his premium payments
and the payments of his dependents for continuation of the present health
coverage or its equivalent. Provided, however, that the Company shall
discontinue such reimbursement (or a portion thereof) for each such
individual upon Executive and/or each eligible dependent becoming eligible
for participation under the Company's health plans without any limitation for
preexisting conditions.
(e) VACATION. During the Employment Period, Executive will be
entitled to four (4) weeks of paid vacation per annum.
(f) REIMBURSEMENT OF EXPENSES. Company shall pay all ordinary and
necessary expenses incurred by Executive in the conduct of Company's
business, including but not limited to all travel and accommodation expenses.
Company will pay all reasonable travel and accommodation expenses for
Executive's spouse whenever necessary to accompany Executive in the business
of the Company. Executive agrees to provide Company with itemized accounts,
receipts and other documentation for such reasonable expenses as are
reasonably required by the Company. In addition, the Company will reimburse
Executive for all reasonable costs associated with Executive's moving his
household and related items as part of this relocation to the San Diego area.
2. RESTRICTIVE COVENANT.
During the Employment Period, and except for involvement by Executive on
Boards of Directors of other companies as approved by the Board of the
Company, as hereinafter set forth:
2.1 Executive shall devote his time and energy to the performance of
Executive's duties described herein, except during periods of illness or
vacation periods.
2.2 Executive shall not directly or indirectly provide services to or
through any person, firm or other entity except the Company, unless otherwise
authorized by the Company in writing.
2.3 Executive shall not render any services of any kind or character
for Executive's own account or for any other person, firm or entity without
first obtaining the Company's written consent.
2.4 Notwithstanding the foregoing, Executive shall have the right to
perform such incidental services as are necessary in connection with (i) his
private passive investments, but only if Executive is not obligated or
required to (and shall not in fact) devote any managerial efforts which
interfere with the services required to be performed by him hereunder, (ii)
his charitable or community activities or (iii) his participation in trade or
professional organizations, but only if such incidental services do not
significantly interfere with the performance of Executive's services
hereunder, and (iv) his service on boards of directors as mutually agreed to
by the Executive and the Company.
3. NON-COMPETITION.
3.1 During the Employment Period, and subject to paragraph 2.4 in
this Agreement, Executive shall not directly or indirectly own, manage,
operate, join, control or participate in the ownership, management, operation
or control of, or be employed by or connected in any manner with, any
enterprise which is engaged in any business competitive with that which the
Company is at the time conducting or proposing to conduct, provided, however,
that such restriction shall not apply to any passive investment representing
an interest of less than two percent (2%) of an outstanding class of publicly
traded securities of any corporation or other enterprise which is not, at the
time of such investment, engaged in a business competitive with the Company's
business.
3.2 Executive acknowledges that the services that he shall provide to
the Company under this Agreement are unique and that irreparable harm shall be
suffered by the Company in the event of the breach by Executive of any of his
obligations under this paragraph 3, paragraph 2 or paragraph 4 of this
Agreement, and that the Company shall be entitled, in addition to its other
rights and remedies, whether legal or equitable, to enforce such obligations
by an injunction or decree of specific performance. Any claims asserted by
Executive against the Company shall not constitute a defense in any
injunction action brought by the Company to obtain specific performance of
such obligations.
4. CONFIDENTIAL INFORMATION.
4.1 Executive understands that the Company and its affiliates possess
Proprietary Information (as defined below) which is important to its business
and that this Agreement creates a relationship of confidence and trust
between Executive and the Company and its affiliates with regard to
Proprietary Information. Nothing in this paragraph 4 shall be deemed modified
or terminated in the event of the termination or expiration of this Agreement.
4.2 For purposes of this Agreement, "Proprietary Information" is
information that was or will be developed, created, or discovered by or on
behalf of the
Company and its affiliates and predecessors or is developed, created or
discovered by Executive while performing services under this Agreement, or
which became or will become known by, or was or is conveyed to the Company
and its affiliates which has commercial value in the Company's and its
affiliates' business. "Proprietary Information" includes, but is not limited
to, trade secrets, ideas, techniques, business, product, or franchise
development plans, customer information, franchisee information and any other
information concerning the Company's and its affiliates' actual or anticipated
business, development, personnel information, or which is received in
confidence by or for the Company and its affiliates from any other person.
4.3 For one (1) year after the termination of this Agreement,
Executive will keep in confidence and trust, and will not use or disclose,
any Proprietary Information without prior written consent of the Board.
4.4 Executive understands that the Company and its affiliates possess
or will possess "Company Documents" which are important to its business. For
purposes of this Agreement, "Company Documents" are documents or other media
that contain or embody Proprietary Information or any other information
concerning the business, operations or plans of the Company and its
affiliates, whether such documents have been prepared by Executive or by
others. "Company Documents" include, but are not limited to, blueprints,
drawings, photographs, charts, graphs, notebooks, customer lists, computer
disks, personnel files, tapes or printouts and other printed, typewritten or
handwritten documents. All Company Documents are and shall remain the sole
property of the Company, Executive agrees not to remove any Company Documents
from the business premises of the Company or deliver any Company Documents to
any person or entity outside the Company, except as required to do in
connection with performance of the services under this Agreement. Executive
further agrees that, immediately upon the Company's request and in any event
upon completion of Executive's services, Executive shall deliver to the
Company all Company Documents, apparatus, equipment and other physical
property or any reproduction of such property.
4.5 During the term of this Agreement and for one (1) year
thereafter, Executive will not encourage or solicit any employee of the
Company or any affiliate to leave the Company or any affiliate for any reason.
4.6 Injunctive Relief: Executive acknowledges and agrees that the
covenants and obligations contained in paragraphs 2, 3 and 4 of this
Agreement relate to special unique and extraordinary matters and that a
violation of any of such covenants and obligations may cause the Company
irreparable injury for which adequate remedy at law will not be available.
Therefore, Executive agrees that the Company shall be entitled to an
injunction, restraining order, or other equitable relief from any court of
competent jurisdiction, restraining Executive from committing any violation
of the covenants and obligations set forth therein.
5. STOCK OPTION.
In addition to the Common Stock of the Company that Executive owns by
virtue of being a founder of the Company, Executive shall be entitled to a
stock option to purchase 1,600,000 shares of Common Stock of the Company for
the option price of $.10 per share. The Company encourages Executive to
purchase stock in the Company as its Chief Executive Officer and a voting
member of the Board of Directors. These option shares will vest 25% on March
, 2000 and the remaining 75% in equal monthly installments over the 36 month
period commencing on March , 2000.
5.1 Notwithstanding the foregoing, in the event the Company enters
into any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) which will result in
the corporation's ultimate beneficial stockholders immediately prior to such
transaction not holding (by virtue of such shares or securities issued solely
with respect thereto) at least a majority of the voting power of the surviving
or continuing entity, or in the event of any sale of all or substantially all
of the assets of the corporation, unless the corporation's ultimate
beneficial stockholders immediately prior to such sale will, as a result of
such sale, hold (by virtue of securities issued as consideration for the
corporation's sale) at least a majority of the voting power of the purchasing
entity, all unvested options shall become fully vested upon the closing of
such transaction.
6. TERMINATION OF EMPLOYMENT.
6.1 METHOD OF TERMINATION. Executive's employment pursuant to this
Agreement and the Employment Period provided for herein shall terminate upon
the first of the following to occur:
(a) Executive's death;
(b) Date that written notice is deemed given or made by the Company
to Executive of his inability to perform his services. Such notice may be
issued when the Board has reasonably determined that Executive has become
unable to substantially perform his services and duties hereunder because of
physical or mental illness, injury or disability and that it is reasonably
likely that he will not be able to substantially resume performing his
services and duties on substantially the terms and conditions as set forth in
this Agreement;
(c) Date that final written notice is deemed given or made by the
Company to Executive of termination for "cause," provided Executive is given
an initial prior written notice of the general facts underlying the for
"cause" event(s) and an opportunity to cure such event(s), if such event is
capable of being cured. For purposes of this Agreement, "cause" shall mean
any one of the following:
(1) Gross negligence or the willful or repeated failure of
Executive to perform his duties and responsibilities to the satisfaction of
the Board or any breach by Executive of his fiduciary duties to the Company
or any material term of this Agreement; or
(2) The conviction of Executive for a felony involving dishonesty
by Executive;
(d) Executive's resignation or voluntary departure as an officer or
employee of the Company; or
(e) Date that written notice is deemed given or made by the Company
to Executive of Executive's termination without "cause."
Pursuant to sections (d) and (e) of paragraph 5.1, each of Executive and
the Company agree that they shall have the separate right to terminate
Executive's employment with the Company at any time, for any reason, with or
without cause.
6.2 EFFECT OF TERMINATION FOR CAUSE, EXECUTIVE'S RESIGNATION OR OTHER
EVENTS. Upon the termination of Executive for cause or Executive's
resignation or voluntary departure or departure pursuant to section (a) or
(b) of paragraph 5.1 of this Agreement, Executive will not be entitled to any
additional compensation or other rights or benefits from the Company; and, as
a result, the Company shall be obligated to pay Executive only that portion
of his Base Salary that Executive has earned prior to the date of termination
of Executive's services or Executive's departure or resignation.
6.3 Upon the termination by the Company of Executive without cause,
Executive shall be entitled to payment of his then Base Salary as
compensation pursuant to Section 1.4(a) above for a period of one year
following the date of his termination by the Company.
7. MISCELLANEOUS.
7.1 NOTICES. All notices, demands and request required by this
Agreement shall be in writing and shall be deemed to have been given or made
for all purposes (i) upon personal delivery, (ii) one day after being sent,
when sent by professional overnight courier service, (iii) fifteen days
after posting when sent by registered or certified mail, or (iv) on the date
of transmission when sent by telegraph, telegram, telex, or other form of
"hard copy" transmission to either party hereto at the address set forth
below or at such other address as either party may designate by notice
pursuant to this paragraph.
If to the Company, to:
Xxxxxx.xxx
0000 Xxxxxxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attn: Board of Directors
And a Copy to:
Xxx X. Xxxxxxx
Xxxxxxxx & Xxxxxx, P.C.
0000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
If to Executive, to:
Xxxx X. Xxxxxxx
000 Xxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
7.2 ASSIGNMENT. This Agreement shall be binding on, and shall inure
to the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns; provided, however, that Executive
may not assign, transfer or delegate his rights or obligations hereunder and
any attempt to do so shall be void; and provided, further, that after an
assignment or transfer of the Company's obligations under this Agreement to a
third party, the Company shall remain secondarily liable to fulfill the terms
of this Agreement if the third party assignee or transferee is unwilling or
unable to fulfill such terms.
7.3 DEDUCTIONS. All amounts paid to Executive hereunder are subject
to all deductions required by law, as authorized under this Agreement, and as
authorized by Executive from time to time.
7.4 ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties with respect to the subject matter hereof, and all prior
agreements, written or oral, are merged herein and are of no further force or
effect.
7.5 AMENDMENT. This Agreement may be modified or amended only by a
written agreement signed by amendment of the Board and Executive.
7.6 WAIVERS. No waiver of any term or provision of this Agreement
will be valid unless such waiver is in writing signed by the party against
whom enforcement of the waiver is sought. The waiver of any term or provision
of this Agreement shall not apply to any subsequent breach of this Agreement.
7.7 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but together they
shall constitute one and the same instrument.
7.8 SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and if any part of any provision is held illegal, void or invalid
under applicable law, such provision may be changed to the extent reasonably
necessary to make the provision, as so changed, legal, valid and binding. If
any provision of this Agreement is held illegal, void or invalid in its
entirety, the remaining provisions of this Agreement
shall not in any way be affected or impaired but shall remain binding in
accordance with their terms.
7.9 GOVERNING LAW. This Agreement shall, in all respects, be
governed by the laws of the state of California applicable to agreements
executed and to be wholly performed within the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year written above.
XXXXXX.XXX
By: /s/ Xxxxxx X. Xxxxxxxxxxx
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Xxxxxx X. Xxxxxxxxxxx
Title: Chairman, Board of Directors
/s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
