EMPLOYMENT AGREEMENT
Exhibit 10.30
This
EMPLOYMENT AGREEMENT (the “Agreement”) dated as of July 27, 2009 (the “Date of this
Agreement”), is made by and between Xxxxx.xxx Corporation, a Delaware corporation (the “Employer”
or “Company”), and Xxxxxxx Xxxxxxx (the “Executive”).
WHEREAS, the Employer wishes to employ the Executive on the terms set forth below.
WHEREAS, Executive wishes to accept such employment.
Accordingly, the parties hereto agree as follows:
1. Term.
The Employer hereby employs the Executive, and the Executive hereby accepts such employment,
for an initial term commencing as of the Date of this Agreement and ending on the first anniversary
of such date, unless sooner terminated in accordance with the provisions of Section 4 or Section 5;
with such employment to continue thereafter for successive one-year periods in accordance with the
terms of this Agreement beginning on each anniversary of the Date of this Agreement (subject to
termination as aforesaid) unless either party notifies the other party in writing not less than
thirty (30) days before expiration of the initial term and each annual renewal thereof (the period
during which the Executive is employed hereunder being hereinafter
referred to as the “Term”) of an
intent not to renew this Agreement.
2. Duties.
During the Term, the Executive shall be employed by the Employer as its Chief Technical
Officer, and as such, the Executive shall faithfully perform for the Employer the duties and have
the powers customary for such position, including general financial oversight of the Employer’s
operations and preservation of the Employer’s assets. During the Term, the Executive shall be
required to report to the Chief Executive Officer of the Employer (the “CEO”). The Executive shall
devote substantially all of his business time and effort to the performance of his duties
hereunder, and shall work primarily at the Employer’s main business offices. Executive shall not
be prohibited from engaging in such personal, charitable, or other nonemployment activities as do
not interfere with full time employment hereunder and which do not violate the other provisions of
this Agreement.
3. Compensation.
3.1 Salary. In consideration of the services to be rendered under this Agreement, the
Employer shall pay the Executive during the Term a salary at the rate of Two Hundred Sixty Thousand
Dollars ($260,000) per annum (the “Annual Salary”), in accordance with the customary payroll
practices of the Employer applicable to senior executives, provided the payments are no less
frequent than monthly (or, if there is no such policy, payments shall be semi-monthly). The Annual
Salary shall be annually reviewed by the Employer for possible increases. The Annual Salary shall
be subject to possible further increase from time to time at the discretion of the CEO, the Board
of Directors of the Employer (“Board”), or a committee of
the Board designated for such purpose. Any increased Annual Salary shall thereupon be the
“Annual Salary” for the purposes hereof. The Executive’s Annual Salary shall not be decreased
without his prior written consent at any time during the Term.
3.2 Incentive Compensation. During the Term, the Executive shall be eligible to
receive, in addition to his Annual Salary, an annual bonus (the “Bonus”) of up to forty percent
(40%) of the Annual Salary. Any increase in the bonus target shall thereupon be the “Bonus” for
the purposes hereof. The amount of such Bonus and any performance standards or goals required to be
attained in order to receive such Bonus shall be mutually agreed upon by Executive and the CEO or
such committee of the Board as they shall designate for such purpose from time to time and
memorialized in a writing executed by Executive and Employer, as may be amended from time to time
by the mutual written agreement of Employer and Executive. The Bonus shall be declared and paid
according to the Company’s payroll policies and practices. Any actual Bonus paid shall be
determined by achievement of mutually agreed goals and company performance.
3.3 Stock Options. The Executive shall be granted options to purchase Two Hundred
Sixty (260,000) shares of the common stock of the Employer pursuant to the Employer’s Equity
Incentive Plans (the “Options”). At the option of the Executive as of the date of grant, the
Options may be intended to qualify as “incentive stock options” within the meaning of Section 422
of the Internal Revenue Code of 1986, as amended. The Options shall be granted on the Executive’s
first day of employment and shall have a strike price equal to the closing stock price on such
date. Tthe Options will be issued as follows:
| Grant 1 Options to purchase 130,000 shares of Employer’s common stock (“Grant 1”). | |||
| Grant 2 Options to purchase 43,333 shares of Employer’s common stock (“Grant 2”). | |||
| Grant 3 Options to purchase 43,333 shares of Employer’s common stock (“Grant 3”). | |||
| Grant 4 Options to purchase 43,334 shares of Employer’s common stock (“Grant 4”). |
Grant 1 will vest over a period of 3 years, with one-third (1/3) vesting after twelve months of
employment and the remainder on a quarterly basis thereafter, provided that the Executive is
employed by the Employer as of each such Option vesting date. Grant 2 will vest over a period of 3
years, with one-third (1/3) vesting after twenty-four months of employment and the remainder on a
quarterly basis thereafter, provided that the Executive is employed by the Employer as of each such
Option vesting date. Options in Grant 3 will vest over a period of 3 years, with one-third (1/3)
vesting after thirty-six months of employment and the remainder on a quarterly basis thereafter,
provided that the Executive is employed by the Employer as of each such Option vesting date.
Options in Grant 4 will vest over a period of 3 years, with one-third (1/3) vesting after
forty-eight months of employment and the remainder on a quarterly basis thereafter, provided that
the Executive is employed by the Employer as of each such Option
vesting date. The vesting periods shall be subject to possible acceleration in the discretion of
the
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CEO or such committee of the Board as they shall designate for such purpose from time to time.
The Options shall become fully vested immediately and shall remain exercisable during the term of
each such option as if the Executive were still employed by Employer upon (i) a Change of Control,
defined below, of the Employer, or (ii) a termination of the executive by Employer without Cause
(defined in Section 5.1(a) below), or a termination by Executive for Good Reason (defined in
Section 5.2(a) below), if such event of termination without cause or for good reason occurs within
120 days prior and/or subsequent to the execution and delivery of an acquisition, merger,
consolidation or other agreement which results in a Change of Control. For purposes of this
Agreement “Change of Control” shall mean the occurrence of any one of the following events:
(a) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of
the Company representing thirty-five percent (35%) or more, excluding in the calculation of
Beneficial Ownership securities acquired directly from the Company, of the combined voting power of
the Company’s then outstanding voting securities;
(b) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of
the Company representing over fifty percent (50.00%) or more of the combined voting power of the
Company’s then outstanding voting securities;
(c) the following individuals cease for any reason to constitute a majority of the number of
directors of the Company then serving: individuals who, as of February 23, 2009, constitute the
Board of Directors of the Company (the “Board”) and any new director (other than a director whose
initial assumption of office is in connection with an actual or threatened election contest,
including but not limited to a consent solicitation, relating to the election of directors of the
Company) whose appointment or election by the Board or nomination for election by the Company’s
stockholders was approved or recommended by a vote of the at least two-thirds (2/3) of the
directors then still in office who either were directors on February 23, 2009 or whose appointment,
election or nomination for election was previously so approved or recommended;
(d) there is a consummated merger or consolidation of the Company or any direct or indirect
subsidiary of the Company with any other corporation, other than (A) a merger or consolidation
which would result in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into voting
securities of the surviving or parent entity) more than fifty percent (50.00%) of the combined
voting power of the voting securities of the Company or such surviving or parent equity outstanding
immediately after such merger or consolidation or (B) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no person, directly
or indirectly, acquired twenty-five percent (25%) or more of the combined voting power of the
Company’s then outstanding securities (not including in the securities beneficially owned by such
person any securities acquired directly from the Company or its Affiliates); or
(e) the stock holders of the Company approve a plan of complete liquidation of the Company or
there is consummated an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets (or any transaction having a
similar
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effect), other than a sale or disposition by the Company of all or substantially all of the
Company’s assets to an entity, at least fifty percent (50%) of the combined voting power of the
voting securities of which are owned by stockholders of the Company in substantially the same
proportions as their ownership of the Company immediately prior to such sale.
The terms of this Section 3.3 shall be included in the applicable stock option agreements
between Employer and Executive relating to the issuance of the Options. For purposes of this
Section 3.3, the following terms used above shall have the following meanings:
“Affiliate” shall mean an affiliate of the Company, as defined in Rule 12b-2
promulgated under Section 12 of the Securities Exchange Act of 1934, as amended from time to
time (the “Exchange Act”);
“Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange
Act; and
“Person” shall have the meaning set forth in Section 3(a)(9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not
include (1) the Company, (2) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (3) an underwriter temporarily holding securities
pursuant to an offering of such securities or (4) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same proportions as
their ownership of shares of Common Stock of the Company.
Notwithstanding anything to the contrary set forth herein, Employee and Employer understand and
agree that the issuance of the Options will be subject to the approval by the stockholders of the
Company of a proposal to approve at the 2009 Annual Meeting of Stockholders an amendment to the
Company’s equity plans to increase the total number of shares of the Company’s common stock
available for issuance pursuant to such equity plans and the subsequent registration of such shares
by the Company with the Securities and Exchange Commission. In the event stockholder approval is
not obtained at the 2009 Annual Meeting, Company and Employer agree to work in good faith to
establish alternative arrangements for the long term compensation of Employee, which are mutually
agreeable to the Employer and Employee.
3.4 Benefits. Except as otherwise provided herein, the Executive shall be entitled to
participate in any group life, medical or disability insurance plans, health programs, retirement
plans, fringe benefit programs and similar benefits that may be available to other senior
executives of the Employer generally, on the same terms as such other executives, to the extent
that the Executive is eligible under the terms of such plans or programs as they may be in effect
from time to time. Employer will provide coverage for the Executive under the Employer’s health
benefits plan and will pay 100% of the cost of spouse or dependent coverage up to a total
of $500 per month. Coverage under the health benefits plan will be in effect commencing with
the first month following thirty (30) days of Executive’s employment.
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3.5 Expenses. The Employer shall pay or reimburse the Executive for all ordinary and
reasonable out-of-pocket expenses actually incurred (and, in the case of reimbursement, paid) by
the Executive during the Term in the performance of the Executive’s services under this Agreement,
provided that (i) such expenditure is of a nature qualifying it as a proper business expense
deduction on the Employer’s federal and state income tax returns and (ii) the Executive submits
proof of such expenses, with the properly completed forms as prescribed from time to time by the
Employer, no later than 30 days after the end of the monthly period in which such expenses have
been so incurred. In addition, the Employer will pay the Executive a non-accountable relocation
expense of $75,000, fifty percent (50%) of which is payable on Start date and the remaining 50% is
payable on October 1, 2009. Should Executive’s employment terminate pursuant to Section 5.1 within
one year of payment of relocation expense, then Executive will, within 180 days after said
Termination, reimburse Employer for 100% of the relocation expense already received from the
Employer, less any applicable taxes already paid or due.
3.6 Compliance with Section 409A of the Internal Revenue Code; Short-Term Deferral
Exemption. This Agreement is not intended to provide for any deferral of compensation subject
to Section 409A of the Internal Revenue Code (the “Code”) and, accordingly, any compensation
provided pursuant to this Agreement is intended to be paid not later than the later of: (i) the
fifteenth day of the third month following Executive’s first taxable year in which such benefit is
no longer subject to a substantial risk of forfeiture, and (ii) the fifteenth day of the third
month following the first taxable year of the Employer in which such benefit is no longer subject
to a substantial risk of forfeiture, as determined in accordance with Section 409A of the Code and
any Treasury Regulations and other guidance issued thereunder. The date determined under this
subsection is referred to as the “Short-Term Deferral Date.” Notwithstanding anything to the
contrary herein, in the event that any benefits provided pursuant to this Agreement are not
actually or constructively received by the Executive on or before the Short-Term Deferral Date, to
the extent such benefit constitutes a deferral of compensation subject to Code Section 409A, then
such benefit shall be paid upon the Executive’s separation from service, with respect to the
Employer and its affiliates within the meaning of Section 409A of the Code. Notwithstanding any
other provision of this Agreement to the contrary, Executive and the Company shall in good faith
amend this Agreement to the extent necessary to comply with the requirements under Section 409A of
the Code and any regulations or other guidance issued thereunder, in order to ensure that any
amounts paid or payable hereunder are not subject to the additional 20% income tax thereunder while
maintaining to the maximum extent practicable the original intent of this Agreement.
4. Termination upon Death or Disability.
If the Executive dies during the Term, the Term shall terminate as of the date of death, and
the obligations of the Employer to or with respect to the Executive shall terminate in their
entirety upon such date except as otherwise provided under this Section 4. If the Executive
becomes disabled for purposes of the long-term disability plan of the Employer for which the
Executive is eligible, or, in the event that there is no such plan, if the Executive by virtue
of ill health or other disability is unable to perform substantially and continuously the duties
assigned to him for more than 180 consecutive or non-consecutive days out of any consecutive
12-month
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period, then the Employer shall have the right, to the extent permitted by law, to
terminate the employment of the Executive upon notice in writing to the Executive. Upon
termination of employment due to death or disability, (i) the Executive (or the Executive’s estate
or beneficiaries in the case of the death of the Executive) shall be entitled to receive any Annual
Salary and other benefits earned and accrued under this Agreement prior to the date of termination
(and reimbursement under this Agreement for expenses incurred prior to the date of termination),
including, but not limited to a pro-rata Bonus for the year of termination (which in no event shall
be less than a similar pro-rata portion of the Executive’s bonus for the preceding year) to be paid
at such time as Bonuses are ordinarily paid; (ii) in the case of termination due to disability, the
Executive shall be entitled to receive his Annual Salary for twelve (12) months following such
termination less any amounts for which Executive is eligible to receive from long term disability
insurance benefits under disability coverage furnished by the Employer to the Executive during such
twelve (12) month period; (iii) the Executive (or, in the case of his death, his spouse and/or
dependents) shall continue to receive all applicable benefits elected by Executive for which he
received reimbursement for pursuant to Section 3.4 herein for a period of twelve (12) months
following such termination and Company shall continue to pay for the foregoing in accordance with
Section 3.4 herein as if no such termination had occurred; and (iv) the Executive (or, in the case
of his death, his estate and beneficiaries) shall have no further rights to any other compensation
or benefits hereunder on or after the termination of employment, or any other rights hereunder,
except as otherwise provided in the plans and policies of the Employer.
5. Certain Terminations of Employment.
5.1 Termination for Cause; Termination of Employment by the Executive without Good
Reason.
(a) For purposes of this Agreement, “Cause” shall mean the Executive’s:
(i) conviction of (or pleading nolo contendere to) a felony involving the crime of theft or a
related or similar act of unlawful taking, or a felony involving the federal or California
securities or pension laws, or any felony, which results in material economic harm to the Employer;
(ii) engagement in the performance of his duties hereunder or otherwise to the material and
demonstrable detriment of the Employer, in willful misconduct, willful or gross neglect, fraud,
misappropriation or embezzlement;
(iii) After notice from the Board of Directors, and, if requested by Executive, the
opportunity to be heard by the Board of Directors, the failure to adhere to the lawful and
reasonable directions of the Board that are consistent with the terms of this Agreement (so long as
the directive does not give the Executive Good Reason (as defined below) to terminate his
employment as described in Section 5.2), or the failure to devote substantially all
of the business time and effort to the Employer (except for any activities expressly
authorized by the Employer);
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(iv) material breach of any of the provisions of Section 6, other than inadvertent breaches;
or
(v) breach in any material respect of the terms and provisions of this Agreement and failure
to cure such breach within thirty (30) days following written notice from the Employer specifying
such breach; provided however, if Executive delivers written notice to Employer during the 30 day
cure period requesting to be heard at a meeting of the Board, his termination under this Section
5.2(a)(v) shall not be effective until such Board meeting at which Executive had an opportunity to
be heard,
provided that Cause shall not exist except on written notice given to the Executive at any time not
more than 60 days following the later of either the occurrence of any of the events described above
or Employer’s actual knowledge thereof, which events in any case must have occurred after the
effective date of this Agreement.
(b) The Employer may terminate the Executive’s employment hereunder for Cause, and the
Executive may terminate his employment for any or no reason on at least 30 days’ and not more than
60 days’ written notice given to the Employer. If the Employer terminates the Executive for Cause,
or the Executive terminates his employment and the termination by the Executive is not covered by
Section 4 or 5.2, (i) the Executive shall receive Annual Salary and other benefits earned and
accrued under this Agreement prior to the termination of employment (and reimbursement under this
Agreement for expenses incurred prior to the termination of employment); and (ii) the Executive
shall have no further rights to any other compensation or benefits hereunder on or after the
termination of employment, or any other rights hereunder, except as otherwise provided in the plans
and policies of the Employer.
5.2 Termination by the Employer without Cause; or by the Executive for Good Reason.
(a) For purposes of this Agreement, “Good Reason” shall mean, unless otherwise consented to in
writing by the Executive;
(i) a reduction in Annual Salary or in benefits of the Executive, or the failure of the
Employer timely to make any Annual Salary payment due to the Executive, provided that such deferral
or failure to pay continues unremedied for more than thirty (30) days;
(ii) any action by the Employer that results in a material diminution in the Executive’s
title(s), status, position, authority, duties or responsibilities;
(iii) a material breach of any provision of this Agreement by the Employer;
(iv) a failure of the Employer to have any successor entity specifically assume this
Agreement;
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(v) if there is a Change of Control of the Company and Executive terminates his employment for
any reason or no reason at all during the 120 day period immediately following the Change of
Control;
(vi) a relocation of the Executive to offices other than those set forth herein, or a
relocation of the offices set forth herein to a location more than 25 miles from its current
location, without Executive’s prior written consent;
(vii) a change in Executive’s reporting so that he no longer reports directly to the CEO; or
(viii) the assignment to Executive of any duties or responsibilities which are inconsistent
with his status, position or responsibilities as set forth in Section 2 hereof.
Notwithstanding the foregoing, (i) Good Reason shall not be deemed to exist unless notice of
termination on account thereof (specifying a termination date no later than 30 days from the date
of such notice) is given no later than the later of either (1) 60 days after the time at which the
event or condition giving rise to Good Reason first occurs or arises or (2) Executive’s actual
knowledge thereof; and (ii) if there exists (without regard to this clause (ii)) an event or
condition that constitutes Good Reason, the Employer shall have 30 days from the date notice of
such a termination is given to cure such event or condition and, if the Employer does so fully cure
such event or condition, such event or condition shall not constitute Good Reason hereunder, unless
the same or similar events or conditions occur again, in which case no further opportunity to cure
will be afforded Employer and Good Reason will exist as if all applicable notice requirements had
been met in their entirety.
(b) The Employer may terminate the Executive’s employment at any time for any reason or no
reason and the Executive may terminate the Executive’s employment with the Employer for Good
Reason. A notice of non-renewal, as provided for pursuant to Section 1 above, shall constitute a
termination of employment by the Employer without Cause.
(c) If the Employer terminates the Executive’s employment and the termination is not covered
by Section 4 or 5.1, or the Executive terminates his employment for Good Reason, the Executive
shall receive:
(i) Annual Salary and other benefits earned and accrued under this Agreement prior to the
termination of employment (and reimbursement under this Agreement for expenses incurred prior to
the termination of employment);
(ii) one (1) times the Annual Salary payable in accordance with standard payroll practices of
the Company;
(iii) an amount equal to all Bonuses earned during the four quarters immediately prior to the
termination date (unless the termination occurs as a result of or in connection with a Change of
Control, in which case the amount will be equal to all Bonuses earned during the four quarters
immediately prior to the Change of Control if so requested by Executive), payable (A) in accordance
with standard bonus payment practices of the Company,
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or (B) immediately, if and to the extent the same will be used by Executive to exercise his
stock options as provided in clause (v) below;
(iv) reimbursement for COBRA payments equal to employee’s regular monthly contributions toward
the Executive’s health insurance benefits for the one (1) year period following the termination
date if the Executive elects COBRA benefits, and;
(v) the right to exercise any or all vested stock options for a period of twelve (12) months
after the effective date of termination of Executive’s employment; provided however, (A) in the
event the termination occurs within 120 days of the execution of a Change of Control agreement as
provided in Section 3.3 above, vesting of all options shall be accelerated as provided in Section
3.3 above, and (B) in the event the termination occurs at a time not within such 120 day period,
for purposes of this provision, all unvested options that would have vested had this Agreement
remained in force through the end of the initial Term, shall be fully vested immediately prior to
the termination under this Section 5.2(c); The provisions of this subparagraph (v) shall be
included in any stock option agreement between the Employer and the Executive.
In order to be eligible to receive the benefits specified under sections 5.2(c)(ii) — (iv),
the Executive must execute a general release of claims in a form acceptable to the Employer, which
shall not apply to the Employer’s obligations described above in this Section 5.2(c).
6. Invention, Non-Disclosure and Non-Competition.
6.1 Inventions and Patents.
(a) The Executive will promptly and fully disclose to the Employer any and all inventions,
discoveries, improvements, ideas, developments, designs, products, formulas, software programs,
processes, techniques, technology, know-how, negative know-how, data, research, technical data and
original works of authorship (whether or not patentable or registrable under patent, copyright or
similar statutes and including all rights to obtain, register, perfect and enforce those
proprietary interests) that are related to or useful in the Employer’s present or future business
or result from use of property owned, leased, or contracted for by the Employer and which the
Executive develops, makes, conceives or reduces to practice during the Executive’s employment by
the Employer, either solely or jointly with others (collectively, the “Developments”). All such
Developments shall be the sole property of the Employer, and the Executive hereby assigns to the
Employer, without further compensation, all of the Executive’s right, title and interest in and to
such Developments and any and all related patents, patent applications, copyrights, copyright
applications, trademarks, service marks and trade names in the United States and elsewhere.
(b) The Executive shall disclose promptly to an officer or to attorneys of the Employer in
writing any inventions, discoveries, improvements, ideas, developments, designs, products,
formulas, software programs, processes, techniques, technology, know-how, negative know-how, data,
research, technical data and original works of authorship, whether or not patentable or registrable
under patent, copyright or similar statutes that are related to or useful in
the Employer’s present or future business, the Executive may conceive, make, develop or work
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on, in whole or in part, solely or jointly with others during the Executive’s employment, for the
purpose of permitting the Employer to determine whether they constitute Developments. The Employer
shall receive such disclosures in confidence.
(c) The Executive will keep and maintain adequate and current written records of all
Developments (in the form of notes, sketches, drawings and as may be specified by the Employer),
which records shall be available to and remain the sole property of the Employer at all times.
(d) The Executive will assist the Employer in obtaining and enforcing patent, copyright,
trademark, service marks and other forms of legal protection for the Developments in any country.
Upon request, the Executive will sign all applications, assignments, instruments and papers and
perform all acts necessary or desired by the Employer to assign all such Developments fully and
completely to the Employer and to enable the Employer, its successors, assigns and nominees, to
secure and enjoy the full and exclusive benefits and advantages thereof.
(e) The Executive understands that the Executive’s obligations under this section will
continue after the termination of the Executive’s employment with the Employer and that during the
Executive’s employment the Executive will perform such obligations without further compensation,
except for reimbursement of expenses incurred at the request of the Employer. The Executive
further understands that if the Executive is not employed by the Employer as an employee at the
time the Executive is requested to perform any obligations under this section, the Executive shall
receive for such performance a reasonable per diem fee, as well as reimbursement of any expenses
incurred at the request of the Employer.
(f) Any provision in this Agreement requiring the Executive to assign the Executive’s rights
in all Developments shall not apply to an invention that qualifies fully under the provisions of
California Labor Code section 2870, the terms of which are set forth below:
(i) Any provision in an employment agreement which provides that an employee shall
assign, or offer to assign, any of his or her rights in an invention to his or her employer
shall not apply to an invention that the employee developed entirely on his or her own time
without using the employer’s equipment, supplies, facilities, or trade secret information
except for those inventions that either:
(1) Relate at the time of conception or reduction to practice of the invention to the
employer’s business, or actual or demonstrably anticipated research or development of the
employer; or
(2) Result
from any work performed by the employee for the employer.
(ii) To the extent a provision in an employment agreement purports to require an
employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (i), the provision is against the public
policy of this state and is unenforceable.
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6.2 Proprietary Information.
(a) The Executive recognizes that the Executive’s relationship with the Employer is one of
high trust and confidence by reason of the Executive’s access to and contact with the trade secrets
and confidential and proprietary information of the Employer including, without limitation,
information not previously disclosed to the public regarding current and projected revenues,
expenses, costs, profit margins and any other financial and budgeting information; marketing and
distribution plans and practices; business plans, opportunities, projects and any other business
and corporate strategies; product information; names, addresses, terms of contracts and other
arrangements with customers, suppliers, agents and employees of the Employer; confidential and
sensitive information regarding other employees, including information with respect to their job
descriptions, performance strengths and weaknesses, and compensation; and other information not
generally known regarding the business, affairs and plans of the Employer (collectively, the
“Proprietary Information”). The Executive acknowledges and agrees that Proprietary Information is
the exclusive property of the Employer and that the Executive shall not at any time, either during
the Executive’s employment with the Employer or thereafter disclose to others, or directly or
indirectly use for the Executive’s own benefit or the benefit of others, any of the Proprietary
Information.
(b) The Executive acknowledges that the unauthorized use or disclosure of Proprietary
Information would be detrimental to the Employer and would reasonably be anticipated to materially
impair the Employer’s value.
(c) The Executive’s undertakings and obligations under this Section 6.2 will not apply,
however, to any Proprietary Information which: (a) is or becomes generally known to the public
through no action on the Executive’s part, (b) is generally disclosed to third parties by the
Employer without restriction on such third parties, (c) is approved for release by written
authorization of the Board, (d) is known to the Executive other than as a result of work performed
for the Employer, or (e) is required to be disclosed by law or governmental or court process or
order.
(d) Upon termination of the Executive’s employment with the Employer or at any other time upon
request, the Executive will promptly deliver to the Employer all notes, memoranda, notebooks,
drawings, records, reports, written computer code, files and other documents (and all copies or
reproductions of such materials) in the Executive’s possession or under the Executive’s control,
whether prepared by the Executive or others, which contain Proprietary Information. The Executive
acknowledges that this material is the sole property of the Employer.
6.3 Covenant Not to Compete.
(a) During the time that this Agreement is in effect, the Executive shall not directly or
indirectly:
(i) own, engage in, conduct, manage, operate, participate in, be employed by, be connected in
any manner whatsoever with, or render services or advice to (whether for compensation or without
compensation), any other person or business entity which,
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in the sole judgment of the Employer,
directly or indirectly competes with the Business of the Employer (as hereinafter defined); or
(ii) recruit or otherwise solicit or induce any employee of the Employer to terminate his or
her employment with, or otherwise cease his or her relationship with, the Employer in order to join
any person or entity which, in the sole judgment of the Employer, competes with the Business of the
Employer.
(b) For a period of six months after the expiration or termination of this Agreement, the
Executive shall not directly or indirectly recruit or otherwise solicit or induce any employee of
the Employer to terminate his or her employment with, or otherwise cease his or her relationship
with, the Employer in order to join any person or entity which, in the sole judgment of the
Employer, competes with the business of the employer as engaged in at the expiration or termination
of this Agreement.
(c) The obligations set forth in paragraphs 6.3(a) and (b) above shall not restrict the
Executive’s right to invest in the securities (not to exceed 1% of the outstanding securities of
any class) of any publicly-held corporation in the management of which the Executive does not
participate.
(d) For purposes of Section 6.3(a), “Business of the Employer” means the business of Employer
as engaged in from time to time during the term of this Agreement, including, but not limited to,
paid search.
(e) The Executive hereby represents that, except as the Executive has disclosed in writing to
the Employer on Exhibit A attached hereto, the Executive is not bound by the terms of any agreement
with any previous employer or other party to refrain from using or disclosing any trade secret or
confidential or proprietary information in the course of the Executive’s employment with the
Employer or to refrain from competing, directly or indirectly, with the business of such previous
employer or any other party.
(f) The Executive further represents that the Executive’s performance of all the terms of this
Agreement and as an employee of the Employer does not and will not breach any agreement to keep in
confidence proprietary information, knowledge or data acquired by the Executive in confidence or in
trust prior to his employment with the Employer, and the Executive will not disclose to the
Employer or induce the Employer to use any confidential or proprietary information or material
belonging to any previous employer or others.
6.4 Other Obligations. The Executive acknowledges that the Employer from time to time
may have agreements with other persons or with the U.S. Government or agencies thereof, which
impose obligations or restrictions on the Employer regarding inventions made during the course of
work under such agreements or regarding the confidential nature of such work. The Executive agrees
to be bound by all such obligations and restrictions which are made known to
the Executive and to take all action necessary to discharge the obligations of the Employer
under such agreements.
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6.5 Rights and Remedies upon Breach. The Executive acknowledges and agrees that any
breach by him of any of the provisions of Section 6 (the “Restrictive Covenants”) would result in
irreparable injury and damage for which money damages may not provide an adequate remedy.
Therefore, if the Executive breaches any of the provisions of Section 6, the Employer shall have
the following rights and remedies, each of which rights and remedies shall be independent of the
other and severally enforceable, and all of which rights and remedies shall be in addition to, and
not in lieu of, any other rights and remedies available to the Employer under law or in equity
(including, without limitation, the recovery of damages) the right and remedy to have the
Restrictive Covenants specifically enforced (without posting bond and without the need to prove
damages) by any court having equity jurisdiction, including, without limitation, the right to an
entry against the Executive of restraining orders and injunctions (preliminary, mandatory,
temporary and permanent) against violations, threatened or actual, and whether or not then
continuing, of such covenants.
7. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment, award, benefit or distribution (or any acceleration of any payment,
award, benefit or distribution) by the Company (or any of its affiliated entities) or any entity
that effectuates a Change of Control (or any of its affiliated entities) to or for the benefit of
Executive (whether pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 7) (the “Payments”) would be subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
“Code”), or any interest or penalties are incurred by Executive with respect to such excise tax
(such excise tax, together with any such interest and penalties, are hereinafter collectively
referred to as the “Excise Tax”), then the Company shall pay to Executive an additional payment (a
“Gross-Up Payment”) in an amount such that after payment by Executive of all taxes (including any
income, employment and Excise Tax) imposed upon the Gross-Up Payment, Executive retains an amount
of the Gross-Up Payment equal to the sum of (x) the Excise Tax imposed upon the Payments and (y)
the product of any deductions disallowed because of the inclusion of the Gross-Up Payment in
Executive’s adjusted gross income and the highest applicable marginal rates of each of federal,
state and local income taxation for the calendar year in which the Gross-Up Payment is to be made.
For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to
(i) pay federal income taxes at the highest marginal rate of federal income taxation for the
calendar year in which the Gross-Up Payment is to be made (ii) pay applicable state and local
income taxes at the highest marginal rate of taxation for the calendar year in which the Gross-Up
Payment is to be made, net of the maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes, and (iii) pay all federal, state and local
employment-related taxes (including, but not limited to, FICA) at the highest marginal rate of
taxation. Notwithstanding the foregoing provisions of this Section 7(a), if it shall be determined
that Executive is entitled to a Gross-Up Payment, but that the Payments would not be subject to the
Excise Tax if the Payments were reduced by an amount that is less than 5% of the portion of the
Payments that would be
treated as “parachute payments” under Section 280G of the Code, then the amounts payable to
Executive under this Agreement shall be reduced (but not below zero) to the maximum amount that
could be paid to Executive without giving rise to the Excise Tax (the
13
“Safe Harbor Cap”), and no
Gross-Up Payment shall be made to Executive. The reduction of the amounts payable hereunder, if
applicable, shall be made by a method determined by Executive in his sole discretion. If the
reduction of the amounts payable hereunder would not result in a reduction of the Payments to the
Safe Harbor Cap, no amounts payable under this Agreement shall be reduced pursuant to this
provision.
(b) Subject to the provisions of Section 7(a), all determinations required to be made under
this Section 7(b), including whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment, the reduction of the Payments to the Safe Harbor Cap and the assumptions to be
utilized in arriving at such determinations, shall be made by the public accounting firm that is
retained by the Company as of the date immediately prior to the Change in Control (the “Accounting
Firm”) which shall provide detailed supporting calculations both to the Company and Executive
within fifteen (15) business days of the receipt of notice from the Company or the Executive that
there has been a Payment, or such earlier time as is requested by the Company (collectively, the
“Determination”). In the event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, Executive may appoint another
nationally recognized public accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses
of the Accounting Firm shall be borne solely by the Company and the Company shall enter into any
agreement requested by the Accounting Firm in connection with the performance of the services
hereunder. The Gross-Up Payment under this Section 7 with respect to any Payments shall be made no
later than thirty (30) days following such Payment. If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall furnish Executive with a written opinion to such
effect, and to the effect that failure to report the Excise Tax, if any, on Executive’s applicable
federal income tax return will not result in the imposition of a negligence or similar penalty. In
the event the Accounting Firm determines that the Payments shall be reduced to the Safe Harbor Cap,
it shall furnish Executive with a written opinion to such effect. The Determination by the
Accounting Firm shall be binding upon the Company and Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the Determination, it is possible that
Gross-Up Payments that will not have been made by the Company should have been made
(“Underpayment”) or Gross-Up Payments are made by the Company that should not have been made
(“Overpayment”), consistent with the calculations required to be made hereunder. In the event the
Executive thereafter is required to make payment of any Excise Tax or additional Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code)
shall be promptly paid by the Company to or for the benefit of Executive. In the event the amount
of the Gross-Up Payment exceeds the amount necessary to reimburse the Executive for Excise Tax, the
Accounting Firm shall determine the amount of the Overpayment that has been made and any such
Overpayment (together with interest at the rate provided in Section 1274(b)(2) of the Code) shall
be promptly paid by Executive (to the extent he has received a refund if the applicable Excise Tax
has been paid to the Internal Revenue Service) to or for the
benefit of the Company. Executive shall cooperate, to the extent Executive’s expenses are
reimbursed by the Company, with any reasonable requests by the Company in connection with any
contests or disputes with the Internal Revenue Service in connection with the Excise Tax.
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8. Other Provisions.
8.1 Severability. The Executive acknowledges and agrees that (i) he has had an
opportunity to seek advice of counsel in connection with this Agreement and (ii) the Restrictive
Covenants are reasonable in geographical and temporal scope and in all other respects. If it is
determined that any of the provisions of this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, is invalid or unenforceable, the remainder of the
provisions of this Agreement shall not thereby be affected and shall be given full effect, without
regard to the invalid portions.
8.2 Duration and Scope of Covenants. If any court or other decision-maker of
competent jurisdiction determines that any of the Executive’s covenants contained in this
Agreement, including, without limitation, any of the Restrictive Covenants, or any part thereof, is
unenforceable because of the duration or geographical scope of such provision, then, after such
determination has become final and unappealable, the duration or scope of such provision, as the
case may be, shall be reduced so that such provision becomes enforceable and, in its reduced form,
such provision shall then be enforceable and shall be enforced.
8.3 Resolution of Differences Over Breaches of Agreement. The parties shall use good
faith efforts to resolve any controversy or claim arising out of, or relating to this Agreement or
the breach thereof. If, despite their good faith efforts, the parties are unable to resolve such
controversy or claim through the Employer’s internal review procedures, then such controversy or
claim shall be resolved by binding arbitration before a single, mutually acceptable arbitrator
under the rules of the Judicial Arbitration and Mediation Service in Orange County, California and
judgment upon the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. If any contest or dispute shall arise between the Employer and the Executive
regarding any provision of this Agreement, the prevailing party, as determined by the Arbitrator,
shall be entitled to an award of all legal fees, costs, and expenses reasonably incurred in
connection with such contest or dispute.
8.4 Notices. All notices or deliveries authorized or required pursuant to this
Agreement shall be deemed to have been given when in writing and when (i) deposited in the U.S.
mail, certified, return receipt requested, postage prepaid, or (ii) otherwise delivered by hand or
by overnight delivery, against written receipt, by a common carrier or commercial courier or
delivery service addressed to the parties at the following addresses or to such other addresses as
either may designate in writing to the other party:
To the Employer:
|
Xxxxx.xxx Corporation Attn: Xxxxx Xxxxx, COO Xxx Xxxxxxxxxx Xxxxx, Xxxxxxxx X Xxxxxx, XX 00000 |
|
to the Executive:
|
Xxxx Xxxxxxx x/x Xxx Xxxxxxxxxx Xxxxx, Xxxxxxxx X Xxxxxx, XX 00000 |
15
8.5 Entire Agreement. This Agreement, together with the Option Agreement described in
Section 3.3, contains the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements, written or oral, with respect thereto.
8.6 Waivers and Amendments. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written instrument signed by the
parties or, in the case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any such right, power or privilege nor any single or
partial exercise of any such right, power or privilege, preclude any other or further exercise
thereof or the exercise of any other such right, power or privilege.
8.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
8.8 Assignment. This Agreement, and the Executive’s rights and obligations hereunder,
may not be assigned by the Executive; any purported assignment by the Executive in violation hereof
shall be null and void. In the event of any sale, transfer or other disposition of all or
substantially all of the Employer’s assets or business, whether by merger, consolidation or
otherwise, the Employer may assign this Agreement and its rights hereunder, subject at all times to
Executive’s rights with respect to a Change of Control as set forth elsewhere herein; provided that
such assignment shall not limit the Employer’s liability under this Agreement to the Executive.
8.9 Withholding. The Employer shall be entitled to withhold from any payments or
deemed payments any amount of tax withholding required by law.
8.10 Binding Effect. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors, permitted assigns, heirs, executors and legal
representatives.
8.11 Counterparts. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original but all such
counterparts together shall constitute one and the same instrument. Each counterpart may consist
of two copies hereof each signed by one of the parties hereto.
8.12 Survival. Anything contained in this Agreement to the contrary notwithstanding,
the provisions of Sections 4 through 9, and the other provisions of this Agreement to the extent
necessary to effectuate the survival of Sections 4 through 9, shall survive termination of this
Agreement and any termination of the Executive’s employment hereunder.
8.13 Headings. The headings in this Agreement are for reference only and shall not
affect the interpretation of this Agreement.
8.14 Indemnification; Directors and Officers Insurance. To the fullest extent
permitted by law, the Employer shall indemnify, defend and hold harmless the Executive from and
against
16
all actual or threatened actions, suits or proceedings, whether civil or criminal,
administrative or investigative, together with all attorneys’ fees and costs, fines, judgments or
settlements imposed upon or incurred by the Executive in connection therewith, that arise from the
Executive’s employment by, or serving as an officer of, the Employer, so long as the Executive
acted or refrained from acting legally and in good faith or reasonably believed that his actions or
refraining from acting were legal and performed or omitted in good faith. Employer currently has
directors and officers liability insurance and will use all reasonable efforts to maintain such
insurance coverage during the term of this Agreement, but if it is unable to do so, it will
immediately notify Executive of this fact. All agreements and obligations of the Company contained
herein shall continue during the period Executive is a director, officer, employee or agent of the
Company (or is or was serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other enterprise) and shall
continue thereafter so long as Executive shall be subject to any possible claim or threatened,
pending or completed action, suit or proceeding, whether civil, criminal or investigative, by
reason of the fact that Executive was an officer or director of the Company or serving in any other
capacity referred to herein.
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IN WITNESS WHEREOF, the parties hereto have signed their names as of the day and year first
above written to this Executive Agreement.
| EMPLOYER XXXXX.XXX CORPORATION, a Delaware corporation |
||||
| By: | /s/ Xxxxx Xxxxxx | , | ||
| Xxxxx Xxxxxx | ||||
| Chief Executive Officer | ||||
| EXECUTIVE |
||||
| /s/ Xxxx Xxxxxxx | ||||
| Xxxx Xxxxxxx | ||||
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STATEMENT OF ATTORNEYS FOR EXECUTIVE
The undersigned are the attorneys for _______, the Executive herein. We have been consulted in
connection with negotiation, preparation and execution of this Employment Agreement. We have
explained the terms and provisions of the Agreement to our client and have advised him in
connection with his legal rights related to this Agreement.
| Dated: | ||||
| Attorney for Executive | ||||
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Invention, Non-Disclosure and Non-Competition Agreement
Exhibit A
Please list terms of any agreements with any previous employer or other party which restrains
you from using or disclosing any trade secret or confidential or proprietary information acquired
by you in the course of your employment with any previous employer or restrains you from competing
directly or indirectly with the business of such previous employer or any other party.
20
