EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and
entered into effective as of the 20th day of March, 1999, by and between
NetZero, Inc., a California corporation (the "Company"), with principal
corporate offices at 00000 Xxxxxx Xxxx #000, Xxxxxxxx Xxxxxxx, XX 00000, and
Xxxx Xxxxxxxx, whose address is 00000 Xxxxxxxxx Xxxx, Xxxxxxx Xxxxx, Xxxxxxxxxx
00000 ("Employee").
1. EMPLOYMENT.
1.1 The Company hereby agrees to employ Employee, and Employee
hereby accepts such employment, on the terms and conditions
set forth herein, commencing March 20, 1999 (the "Effective
Date"), and continuing through March 19, 2003 (the "Term"),
unless terminated earlier as provided in Section 4 below.
2. DUTIES OF EMPLOYEE.
2.1 Employee shall serve as the Chief Executive Officer and
Chairman of the Company. In this capacity, Employee shall
perform such customary, appropriate and reasonable executive
duties as are usually performed by the Chief Executive Officer
and Chairman, including such duties as are delegated to him
from time to time by the Board of Directors of the Company
(the "Board"). Employee shall report directly to the Company's
Board.
2.2 Employee agrees to devote Employee's good faith, full time,
attention, skill and efforts to the performance of his duties
for the Company during the Term; provided, however, that the
Company acknowledges that Employee has certain
responsibilities to and involvement with other entities and
agrees to allow Employee to continue his involvement with such
entities in the following manner without in anyway
jeopardizing his employment with the Company:
(a) SILICON GRAPHICS. Employee has certain
responsibilities to Silicon Graphics that will
require Employee's attention for several days a month
through June 30, 1999;
(b) CALIFORNIA CONCEPTS. Employee has certain
responsibilities to California Concepts that will
require his attention through December 31, 1999. In
addition, Employee may serve on California Concept's
Board of Directors for an indefinite period, once
such a Board is established; and
(c) PATENT SERVICE CORPORATION AND CLUB MOM, INC.
Employee has an ownership interest in the Patent
Service Corporation and Club Mom, Inc. Employee shall
be allowed to continue his involvement with these
organizations, both as a partial owner, and as his
services are needed to promote the organizations'
interests.
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In addition to the organizations specifically referenced
above, Employee currently sits on two academic boards which
only require a minimal time commitment but which will be
ongoing into the future. Moreover, this Agreement shall not be
interpreted to prohibit Employee from making passive personal
investments if those activities do not materially interfere
with the services required under this Agreement.
3. COMPENSATION AND OTHER BENEFITS.
3.1 BASE SALARY. During the first two years of the Term, the
Company shall pay to Employee a base salary of Two Hundred
Thousand Dollars ($200,000) per calendar year (the "Base
Salary"), prorated for any portion thereof during the first
two years of the Term, payable at the rate of Sixteen Thousand
Six Hundred Sixty-Six and 67/100 Dollars ($16,666.67) per
month, with payments to be made in accordance with the
Company's standard payment policy and subject to such
withholding as may be required by law.
3.2 BONUS. During the first two years of the Term, the Company
shall also pay to Employee a cash bonus in a gross amount
equal to Two Hundred Thousand Dollars ($200,000) per calendar
year (the "Annual Bonus"), less withholding required by law,
one quarter of which is payable on each of the last business
days of March, June, September and December of each year
during the first two years of the Term. The first payment of
this bonus is due to Employee on March 31, 1999. Employee
shall not be eligible to receive any unpaid Annual Bonus if
his employment hereunder is terminated pursuant to either
Section 4.1, or if Employee voluntarily resigns.
3.3 SIGNING BONUS. The Company shall also pay to Employee a cash
bonus of Three Hundred Thousand Dollars ($300,000), less
withholding required by law, in one lump sum on January 1,
2000, provided, such bonus shall only be paid if Employee is
employed by the Company on such date.
3.4 NEGOTIATION OF COMPENSATION TERMS FOR FINAL TWO YEARS OF
EMPLOYMENT AGREEMENT. At one month prior to the end of his
second year of employment, I.E., by February 19, 2001, the
Company and Employee shall negotiate in good faith for a
period of 30 days regarding the terms of Employee's
compensation package for the final two years of the Employment
Term. The terms of the compensation package shall include
equity and cash compensation (salary and bonus) and benefits,
and such terms shall be at least commensurate with the terms
of compensation packages of similarly situated executives
(I.E., Chairmen and Chief Executive Officers) of similar
companies. In the event the Company and Employee do not reach
agreement on the terms of such compensation package within the
30-day period, this Employment Agreement will terminate
effective as of March 20, 2001. Furthermore, if this
Employment Agreement is so terminated and Company did not
offer Employee, during such negotiations, an annual base
salary in an amount greater than Two Hundred Thousand Dollars
($200,000) and a guaranteed annual bonus in an amount greater
than Two Hundred Thousand
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Dollars ($200,000), payable quarterly, then Employee shall
be entitled to receive the severance payment and other
benefits set forth in Section 4.3 below.
3.5 VACATION. Employee shall be entitled to a minimum of four (4)
weeks paid vacation per year.
3.6 OTHER BENEFITS. During the Term, Employee shall be entitled to
participate in all group life, health, medical, dental or
disability insurance or other employee, health and welfare
benefits made available generally to other executives of the
Company, when and as Employee becomes eligible therefor. If
Employee elects to participate in any of such plans,
Employee's portion of the premium(s) will be deducted from
Employee's paycheck.
3.7 BUSINESS EXPENSES. The Company shall promptly reimburse
Employee for all reasonable and necessary business expenses
incurred by Employee in connection with the business of the
Company and the performance of his duties under this
Agreement, subject to Employee providing the Company with
reasonable documentation thereof.
3.8 OPTION GRANT. Employee shall be granted a stock option (the
"Option") under the Company's 1999 Stock Option/Stock
Incentive Plan, for 4,190,922 shares of the Company's Common
Stock, at an exercise price of $0.15 per share. Such stock
option shall have such other terms and conditions as specified
in the Notice of Grant (the "Notice") attached hereto as
Exhibit A.
3.9 LOAN. The Company will lend Employee such amount as is
necessary to exercise the Option. The loan will be 50%
recourse with respect to the Employee as provided in the
Promissory Note executed by Employee in favor of the Company
of even date herewith.
3.10 BOARD OF DIRECTORS. Employee shall be appointed as Chairman of
the Company and also to the Company's Board of Directors.
Employee's appointments as Chairman and as a member of the
Board will automatically terminate upon the termination of
Employee's employment with the Company for any reason.
3.11 REGISTRATION RIGHTS. By or before April 9, 1999, the Company
and Employee will reach agreement on Employee's registration
rights applicable to shares of the Company's common stock held
by Employee as of the date hereof or issuable upon exercise of
those options granted pursuant to that Stock Option Agreement
dated March 20, 1999, which registration rights shall be
"piggy back" registration rights comparable to those held by
existing investors in the Company, and at least as favorable
as those held by idealab Capital Partners I-A, L.P. and
idealab Capital Partners I-B, L.P.
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4. TERMINATION.
4.1 TERMINATION FOR CAUSE.
(a) Termination "for cause" is defined as follows: (1) if
Employee is convicted of a felony, including any act
of moral turpitude, or (2) if Employee materially
breaches the Company's Confidentiality and
Proprietary Agreement.
(b) The Company may terminate this Agreement immediately
for any of the reasons stated in Section 4.1(a) by
giving written notice to Employee without prejudice
to any other remedy to which the Company may be
entitled. The notice of termination shall specify the
grounds for termination. If Employee's employment
hereunder is terminated "for cause" pursuant to this
Section 4.1, Employee shall be entitled to receive
hereunder his accrued but unpaid Base Salary and
vacation pay through the date of termination, and
reimbursement for any expenses as set forth in
Section 3.5, through the date of termination, but
shall not be entitled to receive any unpaid portion
of the Annual Bonus or any other amount.
4.2 TERMINATION WITHOUT CAUSE. If Employee's employment is
terminated without "cause" as defined in Section 4.1(a), he
will be eligible for the severance benefits set forth in
Section 4.3.
4.3 SEVERANCE PAYMENTS AND OTHER BENEFITS UPON TERMINATION WITHOUT
CAUSE OR INVOLUNTARY TERMINATION. If the Company terminates
Employee's employment hereunder without cause, or if Employee
is Involuntarily Terminated, the Company (or its successor, as
the case may be) shall pay to Employee (i) any accrued but
unpaid Base Salary and vacation through the date of
termination, (ii) reimbursement for any expenses as set forth
in Section 3.5, through the date of termination, (iii)
Employee's Annual Bonus, prorated through the date of
termination, and (iv) a severance payment in an amount equal
to One Million Dollars ($1,000,000.00), payable in one lump
sum, subject to withholding as may be required by law. In
addition, Employee shall be entitled to accelerated vesting of
the Option, as set forth in the Notice. As used in this
Section 4.3, "Involuntarily Terminated" shall mean (a)
Employee's voluntary resignation following a Corporate
Transaction in which Employee is not offered a position of
comparable pay and responsibilities in the greater Los
Angeles, California metropolitan area, or (b) where, within
twelve (12) months of a Corporate Transaction, Employee
voluntarily resigns following either (X) a reduction of
Employee's salary or (Y) a material change of Employee's
responsibilities. As used in this Section 4.3, "Corporate
Transaction" shall mean (i) a merger or consolidation or other
reorganization or transaction in which securities possessing
more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities are transferred
or issued to a person or persons different from the persons
holding those securities immediately prior to such
transaction, or (ii) the sale, transfer or other disposition
of all or substantially all
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of the Company's assets in complete liquidation or
dissolution of the Company. As used in this Section 4.3, a
"material change" in Employee's responsibilities includes
any decrease in Employee's compensation or benefits or any
material change in Employee's job duties, title, or
location of employment (out of the greater Los Angeles,
California metropolitan area).
5. EXCISE TAX. If any payments or transfers of property to be made to
Employee hereunder are subject, in whole or in part, to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, ("the
Excise Tax") and application of Section 280G of such Code, can be
avoided by an appropriate shareholder vote, pursuant to Section
280G(b)(5)(A) of the Code, the Company and Employee agree that they
will respectively take all steps necessary or appropriate to obtain a
favorable shareholder vote to assure that the Excise Tax and the
provisions of Section 280G are not applicable with respect to such
compensation.
6. ASSIGNMENT. Employee may not assign this Agreement or any rights or
obligations hereunder. The Company may assign this Agreement to any of
its subsidiaries or affiliates or in connection with any Corporate
Transaction or reincorporation of the Company.
7. MISCELLANEOUS.
7.1 This Agreement supersedes any and all other agreements, either
oral or in writing, between the parties hereto with respect to
the employment of Employee by the Company and constitutes the
entire agreement between the Company and the Employee with
respect to its subject matter.
7.2 This Agreement may not be amended, supplemented, modified or
extended, except by written agreement which expressly refers
to this Agreement, which is signed by of the parties hereto
and which is authorized by the Company's Board of Directors.
7.3 This Agreement is made in and shall be governed by the laws of
California, without giving effect to its conflicts-of-law
principles.
7.4 In the event that any provision of this Agreement is
determined to be illegal, invalid or void for any reason, the
remaining provisions hereof shall continue in full force and
effect.
7.5 Employee represents and warrants to the Company that there is
no restriction or limitation, by reason of any agreement or
otherwise, upon Employee's right or ability to enter into this
Agreement and fulfill his obligations under this Agreement.
7.6 All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by
first-class mail, postage prepaid, registered or certified, or
delivered either by hand, by messenger or by overnight courier
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service, and addressed to the receiving party at the
respective address set forth in the heading of this Agreement,
or at such other address as such party shall have furnished to
the other party in accordance with this Section 7.6 prior to
the giving of such notice or other communication.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the first date written above.
NETZERO, INC.
By: /s/ XXXXXX X. XXXX
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Xxxxxx X. Xxxx, President
/s/ XXXX XXXXXXXX
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Xxxx Xxxxxxxx
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