XXXXXXX XXXXXXX
EXECUTIVE EMPLOYMENT
AGREEMENT
THIS EXECUTIVE
EMPLOYMENT AGREEMENT ("Agreement"), dated as of June 10, 2004, by and
between VILLAGEEDOCS, a California corporation, ("Company"), and
XXXXXXX XXXXXXX ("Executive").
WHEREAS, the Company
is engaged in the business of developing and marketing internet-enabled fax
services to organizations throughout the United States and internationally and,
through its wholly-owned subsidiary, provides various programming, processing
and printing services to governmental entities, including installing software,
hardware, printing and mailing of property tax forms;
WHEREAS, the Company
wishes to emphasize growth through strategic acquisitions;
WHEREAS, the Company
wishes to emphasize profitability through focused management of the Company and
its new acquisitions;
WHEREAS, the
Executive is currently employed by the Company as its Chief Financial Officer;
and
WHEREAS, the Company
wishes to assure itself of the continued services of the Executive for the
period provided in this Agreement and the Executive is willing to serve in the
employ of the Company for such period upon the terms and conditions hereinafter
set forth.
NOW THEREFORE, in
consideration of the mutual covenants herein contained, the parties, intending
to be legally bound, hereby agree as follows:
1. EMPLOYMENT. The Company hereby
agrees to employ the Executive upon the terms and conditions herein contained,
and the Executive hereby agrees to accept such employment for the term
described below. The Executive agrees to serve as the Company's Chief
Executive Financial Officer during the term of this Agreement. In such
capacity, the Executive shall have the authorities, functions, powers, duties
and responsibilities that are customarily associated with such positions and as
the Chief Executive Officer may reasonably assign to him from time to time
consistent with such positions.
Throughout the term
of this Agreement, the Executive shall devote his best efforts and
substantially all of his business time and services to the business and affairs
of the Company.
2. TERM OF
AGREEMENT. The initial two (2) year term of employment under this Agreement
shall commence as of June 15, 2004 (the "Effective Date"). After the
expiration of such initial two year employment period, the term of the
Executive's employment hereunder shall automatically be extended without
further action by the parties for successive one (1) year renewal terms,
provided that if either party gives the other party at least ninety (90) days
advance written notice of his or its intention to not renew this Agreement for
an additional term, the Agreement shall terminate upon the expiration of the
current term.
Notwithstanding the
foregoing, the Company shall be entitled to terminate this Agreement
immediately, subject to a continuing obligation to make any payments required
under Section 5 below, if the Executive (i) becomes disabled as described in
Section 5(b), (ii) is terminated for Cause, as defined in Section 5(c), or (iii)
voluntarily terminates his employment before the current term of this Agreement
expires, as described in Section 5(d).
3. EXECUTIVE COMPENSATION.
(a) Annual Base Salary. The Executive
shall receive an annual base salary during the first year of this Agreement at
a rate of Ninety-Five Thousand Dollars ($95,000), payable in installments
consistent with the Company's normal payroll schedule. The Chief Executive
Officer shall review this base salary at annual intervals, and may adjust the
Executive's annual base salary from time to, provided, however, that the salary
for the second and each succeeding year shall not be less than 105% of the
salary for the prior year.
(b) Stock
Options. Executive shall receive a stock option grant of 650,000 shares of Company
common stock (the "Option Shares"). The Option Shares will vest over
a five (5) year period from the Effective Date; provided that Executive is
employed as of any vesting date and if Executive is terminated for cause, all
unvested stock will be forfeited and cancelled; and provided further that
Executive shall be fully vested in any, , then unvested Option Shares (A) in
the event of the termination of Executive's employment by the Company other
than for Cause (as defined below), (B) upon the consummation of a Change in
Control, or (C) upon the death or disability of the Executive. This stock
option grant shall be under the Company 2002 Incentive Stock Option Plan and
the parties shall enter into a separate stock option agreement reflecting the
terms of this stock option grant. The stock option grant shall provide that
(i) any vested options, options, may be exercised at any time within 7 years
after the date of vesting, except that any options that vest because of an
event described in (A), (B) or (C) may be exercised only during the seven (7)
year period beginning on occurrence of the vesting event and (ii) such options
shall be entitled to full ratchet anti-dilution protection with respect to
forty (40%) percent of the vested options. The stock option grant shall
further provide that, if at any time when there is not an effective
Registration Statement on Form S-8 covering the option shares, the Company
shall determine to prepare and file with the Securities and Exchange Commission
a registration statement relating to an offering for its own account or the
account of others under the Securities Act of 1933 of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act), the Company provide the Executive with written notice of such
determination and, if the Executive so desires, the Company will cause the
registration under the Securities Act of such number of option shares as the
Executive shall designate. The Company shall use its best efforts to register,
and maintain the effectiveness of the registration, for resale all of the
Option Shares granted to Executive pursuant to a Form S-8 (or any successor
form) registration statement under the Securities Act.
Additionally, any stock options
granted Executive prior to this employment agreement that are vested or being
vested as of the date of this agreement may be exercised at any time within 7
years after the date executive's termination for any reason. The stock option
grants shall further provide that, if at any time when there is not an
effective Registration Statement on Form S-8 covering the option shares, the
Company shall determine to prepare and file with the Securities and Exchange
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of 1933 of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act), the Company provide the Executive with written notice of such determination
and, if the Executive so desires, the Company will cause the registration under
the Securities Act of such number of option shares as the Executive shall
designate. The Company shall use its best efforts to register, and maintain
the effectiveness of the registration, for resale all of the Option Shares
granted to Executive pursuant to a Form S-8 (or any successor form)
registration statement under the Securities Act.
4. ADDITIONAL
COMPENSATION AND BENEFITS. The Executive shall receive the following
additional compensation and welfare and fringe benefits:
(a) Participation
in Benefit Plans. The Executive shall be eligible to participate in the
employee benefit plans and programs maintained by the Company from time to time
for its executives, or for its employees generally, including without
limitation any life, medical, dental, accidental and disability insurance and
profit sharing, pension, retirement, savings, stock option, incentive stock and
deferred compensation plans, in accordance with the terms and conditions as in
effect from time to time.
(b) Vacation.
The Executive shall be entitled to Two weeks of vacation during each year
during the term of this Agreement and any extensions thereof, prorated for
partial years.
(c) Business
Expenses. The Company shall reimburse the Executive for all reasonable
expenses he incurs in promoting the Company's business, including expenses for
travel, entertainment of business associates, service and usage charges for
business use of cellular phones and similar items, upon presentation by the
Executive from time to time of an itemized account of such expenditures.
In addition to the
benefits provided pursuant to the preceding paragraphs of this Agreement, the
Executive shall be eligible to participate in such other executive compensation
and retirement plans of the Company as are applicable generally to other
officers, and in such welfare benefit plans, programs, practices and policies
of the Company as are generally applicable to other key employees.
5. PAYMENTS UPON TERMINATION
(a) Involuntary
Termination. If the Company terminates the Executive's employment during the
term of this Agreement, the Executive shall be entitled to receive his base
salary accrued through the date of termination. The Executive shall also
receive any nonforfeitable benefits already earned and payable to him under the
terms of any deferred compensation, incentive or other benefit plan maintained
by the Company, payable in accordance with the terms of the applicable plan.
If the termination is
not for death, disability as described in paragraph (b), for Cause as described
in paragraph (c) or a voluntary termination by the Executive as described in
paragraph (d), the Company shall also be obligated to make a series of monthly
payments to the Executive for each month during the remaining term of this
Agreement, but not less than six (6) months. Each monthly payment shall be
equal to one-twelfth (1/12th) of the Executive's annual base salary, as in
effect on the date of termination. In addition, the vesting of any restricted
stock, stock options or other awards granted to the Executive under the terms
of the Company's stock plan or any written agreement with the Executive shall
become immediately vested in full and, in the case of stock options,
exercisable in full. Executive shall also be permitted to continue to
participate at the Company's expense in all benefit and insurance plans,
coverage and programs in which he was participating in for a period of six (6)
months. Executive shall not be required to mitigate the amount of any payment
or benefit contemplated by this paragraph.
(b) Disability.
The Company shall be entitled to terminate this Agreement, if the Board
determines that the Executive has been unable to attend to his duties for at
least ninety (90) days because of a medically diagnosable physical or mental
condition, and has received a written opinion from a physician acceptable to
the Board that such condition prevents the Executive from resuming full performance
of his duties and is likely to continue for an indefinite period. Upon such
termination, the Company shall pay to Executive a monthly disability benefit
equal to one-twelfth (1/12th) of his current annual base salary at the time he
became permanently disabled. Payment of such disability benefit shall commence
on the last day of the month following the date of the termination by reason of
permanent disability and cease with (i) the month in which the Executive
returns to active employment, either with the Company or otherwise, or the
latest of (ii) the end of the initial term of this Agreement, or the current
renewal term, as the case may be, or (iii) the sixth month after the date of
the termination. Any amounts payable under this Section 5(b) shall be reduced
by any amounts paid to the Executive under any long-term disability plan or
other disability program or insurance policies maintained or provided by the
Company.
(c) Termination
for Cause. If the Executive's employment is terminated by the Company for
Cause, the amount the Executive shall be entitled to receive from the Company
shall be limited to his base salary accrued through the date of termination,
and any nonforfeitable benefits already earned and payable to the Executive
under the terms of deferred compensation or incentive plans maintained by the
Company.
For purposes of this
Agreement, the term "Cause" shall be limited to (i) any action by the
Executive involving willful disloyalty to the Company, such as embezzlement,
fraud, misappropriation of corporate assets or a breach of the covenants set
forth in Sections 9 and 10 below; or (ii) the Executive being convicted of a
felony; or (iii) the Executive being convicted of any lesser crime or offense
committed in connection with the performance of his duties hereunder or
involving fraud, dishonesty or moral turpitude; or (iv) the intentional gross
misconduct or willful gross neglect of the Executive in carrying out his duties
hereunder resulting in material economic harm to the Company (other than
resulting from the Executive's incapacity due to physical or mental disability)
if Executive acted without a good faith belief that the act or omission was in
the best interest of the Company. Notwithstanding the foregoing, no
termination pursuant to subsection (iv) shall be treated as termination for
cause unless the Board has provided executive with at least thirty (30) days
prior written notice specifying in reasonable detail the alleged breach and
giving the Executive a minimum of one hundred twenty (120) days or such longer
period as is reasonably necessary to correct such alleged breach.
(d) Voluntary Termination by the
Executive. If the Executive resigns or otherwise voluntarily terminates his
employment before the end of the current term of this Agreement, the amount the
Executive shall be entitled to receive from the Company shall be limited to his
base salary accrued through the date of termination, and any nonforfeitable
benefits already earned and payable to the Executive under the terms of any
deferred compensation or incentive plans of the Company.
6. EFFECT OF CHANGE IN CORPORATE CONTROL
(a) In the
event of a Change in Corporate Control, the vesting of any restricted stock,
stock options or other awards granted to the Executive under the terms of the
Company's stock plans or any written agreement with Executive shall become
immediately vested in full and, in the case of stock options, exercisable in
full.
In addition, if, at
any time during the period of twelve (12) consecutive months following or six
(6) months prior to the occurrence of a Change in Corporate Control, the
Executive is involuntarily terminated (other than for Cause) by the Company,
the Executive shall be entitled to receive as severance pay from the Company in
a lump sum payment within 30 days the amount equal to the sum of (i) 50% of the
Executive's annual base salary in effect at the time of the Change in Corporate
Control plus (ii) 50% of the annual bonus paid to the Executive with respect to
the last fiscal year of the Company ending prior to the Change in Corporate
Control.
(b) For
purposes of this Agreement, a "Change in Corporate Control" shall
include any of the following events:
(1) The
acquisition in one or more transactions of more than fifty percent (50%) of the
Company's outstanding Common Stock by any corporation, or other person or group
(within the meaning of Section 14(d)(3) of the Securities Exchange Act of 1934,
as amended);
(2) Any merger
or consolidation of the Company into or with another corporation in which the
Company is not the surviving entity, or any transfer or sale of substantially
all of the assets of the Company or any merger or consolidation of the Company
into or with another corporation in which the Company is the surviving entity
and, in connection with such merger or consolidation, all or part of the
outstanding shares of Common Stock shall be changed into or exchanged for other
stock or securities of any other person, or cash, or any other property.
In the event that any
payment or benefits received or to be received by Executive pursuant to this
Agreement ("Benefits") would (i) constitute a "parachute
payment" within the meaning of Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), or any comparable successor
provisions, and (ii) but for this subsection, would be subject to the excise
tax imposed by Section 4999 of the Code, or any comparable successor provisions
(the "Excise Tax"), then benefits to which Executive will be entitled
pursuant to this Section 6 (the "Benefits") shall be either: (i)
provided to Executive in full, or (ii) provided to Executive as to such lesser
extent which would result in no portion of such benefits being subject to the
Excise Tax, whichever of the foregoing amounts, when taking into account
applicable federal, state, local and foreign income and employment taxes, the
Excise Tax, and any other applicable taxes, results in the receipt by
Executive, on an after-tax basis, of the greatest amount of benefits, notwithstanding
that all or some portion of such benefits may be taxable under the Excise Tax.
Unless the Company and Executive otherwise agree in writing, any determination
required under this subsection shall be made in writing in good faith by an
accountant selected by the mutual agreement of Executive and the Company (the
"Accountant"). The Company shall bear all costs the Accountant may
reasonably incur in connection with any calculations contemplated by this
subsection.
7. DEATH. If
the Executive dies during the term of this Agreement, the Company shall pay to
the Executive's estate a lump sum payment equal to the sum of the Executive's
base salary accrued through the date of death plus the total unpaid amount of
any bonuses earned with respect to the fiscal year of the Company most recently
ended. In addition, the death benefits payable by reason of the Executive's
death under any retirement, deferred compensation or other employee benefit
plan maintained by the Company shall be paid to the beneficiary designated by
the Executive in accordance with the terms of the applicable plan or plans.
8. WITHHOLDING.
The Company shall, to the extent permitted by law, have the right to withhold
and deduct from any payment hereunder any federal, state or local taxes of any
kind required by law to be withheld with respect to any such payment.
9. PROTECTION
OF CONFIDENTIAL INFORMATION. The Executive agrees that he will keep all
confidential and proprietary information of the Company or relating to its
business (including, but not limited to, information regarding the Company's
customers, pricing policies, methods of operation, proprietary computer
programs and trade secrets) confidential, and that he will not (except with the
Company's prior written consent), while in the employ of the Company or
thereafter, disclose any such confidential information to any person, firm,
corporation, association or other entity, other than in furtherance of his
duties hereunder, and then only to those with a "need to know." The
Executive shall not make use of any such confidential information for his own
purposes or for the benefit of any person, firm, corporation, association or
other entity (except the Company) under any circumstances during or after the
term of his employment. The foregoing shall not apply to any information which
is already in the public domain, or is generally disclosed by the Company or is
otherwise in the public domain at the time of disclosure.
The Executive
recognizes that because his work for the Company will bring him into contact
with confidential and proprietary information of the Company, the restrictions
of this Section 9 are required for the reasonable protection of the Company and
its investments and for the Company's reliance on and confidence in the
Executive.
10. COVENANT
NOT TO COMPETE. The Executive hereby agrees that he will not, either during
the term of the Employment Agreement or during the period of six (6) months
from the time this Employment Agreement is terminated or expires for any reason,
(i) engage in any business activities on behalf of any enterprise which
competes with the Company in the business of providing or managing radiation
therapy services in any state which the Company then operates in, (ii) solicit
the Company's employees or customers or (iii) hire any of the Company's
employees. The Executive will be deemed to be engaged in such business
activities if he participates in such a business enterprise as an employee,
officer, director, consultant, agent, partner, proprietor, or other
participant; provided that the ownership of no more than 2 percent of the stock
of a publicly traded corporation shall not be deemed to be engaging in business
activities.
11. INJUNCTIVE
RELIEF. The Executive acknowledges and agrees that it would be difficult to
fully compensate the Company for damages resulting from the breach or
threatened breach of the covenants set forth in Sections 9 and 10 of this
Agreement and accordingly agrees that the Company shall be entitled to
temporary and injunctive relief, including temporary restraining orders,
preliminary injunctions and permanent injunctions, to enforce such provisions
in any action or proceeding instituted in any court in the State of California
having subject matter jurisdiction. This provision with respect to injunctive
relief shall not, however, diminish the Company's right to claim and recover
damages.
It is expressly
understood and agreed that although the parties consider the restrictions
contained in this Agreement to be reasonable, if a court determines that the
time or territory or any other restriction contained in this Agreement is an
unenforceable restriction on the activities of the Executive, no such provision
of this Agreement shall be rendered void but shall be deemed amended to apply
as to such maximum time and territory and to such extent as such court may
judicially determine or indicate to be reasonable.
The Executive
acknowledges and confirms that (a) the restrictive covenants contained in
Sections 9 and 10 hereof are reasonably necessary to protect the legitimate
business interests of the Company, and (b) the restrictions contained in
Sections 9 and 10 hereof (including without limitation the length of the term
of the provisions of Sections 9 and 10 hereof) are not overbroad, overlong, or
unfair and are not the result of overreaching, duress or coercion of any kind.
The Executive further acknowledges and confirms that his full, uninhabited and
faithful observance of each of the covenants contained in Sections 9 and 10 hereof
will not cause him any undue hardship, financial or otherwise, and that
enforcement of each of the covenants contained herein will not impair his
ability to obtain employment commensurate with his abilities and on terms fully
acceptable to him or otherwise to obtain income required for the comfortable
support of him and his family and the satisfaction of the needs of his
creditors. The Executive acknowledges and confirms that his special knowledge
of the business of the Company is such as would cause the Company serious
injury or loss if he were to use such ability and knowledge to the benefit of a
competitor or were to compete with the Company in violation of the terms of
Sections 9 and 10 hereof. The Executive further acknowledges that the restrictions
contained in Sections 9 and 10 hereof are intended to be, and shall be, for the
benefit of and shall be enforceable by, the Company's successors and assigns.
If the Executive
shall be in violation of any provision of Sections 9 and 10, then each time limitation
set forth in the applicable section shall be extended for a period of time
equal to the period of time during which such violation or violations occur. If
the Company seeks injunctive relief from such violation in any court, then the
covenants set forth in Sections 9 and 10 shall be extended for a period of time
equal to the pendency of such proceeding including all appeals by the
Executive.
Sections 9, 10 and 11
of this Agreement shall survive the termination or expiration of this
Agreement.
12. SEPARABILITY.
If any provision of this Agreement shall be declared to be invalid or
unenforceable, in whole or in part, such invalidity or unenforceability shall
not affect the remaining provisions hereof which shall remain in full force and
effect.
13. ASSIGNMENT.
This Agreement shall be binding upon and inure to the benefit of the heirs and
representatives of the Executive and the assigns and successors of the Company,
but neither this Agreement nor any rights hereunder shall be assignable or otherwise
subject to hypothecation by the Executive. The Company may assign this
Agreement to any of its subsidiaries or affiliates.
14. ENTIRE
AGREEMENT. This Agreement represents the entire agreement of the parties and
shall supersede any prior agreements and any other previous contracts,
arrangements or understandings between the Company and the Executive related to
employment. The Agreement may be amended at any time by mutual written
agreement of the parties hereto.
15. GOVERNING
LAW. This Agreement shall be construed, interpreted, and governed in
accordance with the laws of the State of California, other than the conflict of
laws provisions of such laws.
16. HEADINGS.
The headings contained in this Agreement are included for convenience only and
no such heading shall in any way alter the meaning of any provision.
17. WAIVER.
The failure of either party to insist upon strict adherence to any obligation
of this Agreement shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing.
18. COUNTERPARTS.
This Agreement may be executed in two (2) counterparts, each of which shall be
considered an original.
IN WITNESS WHEREOF,
the Company has caused this Agreement to be duly executed, and the Executive
has hereunto set his hand, as of the day and year first above written.
VILLAGEEDOCS EXECUTIVE:
By:
/s/ J. Xxxxxx Xxxxxx
/s/ Xxxxxxx X. Xxxxxxx
Name: Xxxx Xxxxxx Xxxxxx
Xxxxxxx Xxxxxxx
Title: Board
of Directors, Chair