Exhibit 10.3
EMPLOYMENT AGREEMENT
BETWEEN
XXXXXXX.XXX, LTD.
AND
XXXXXXX XXXXXXX
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), effective as of the 6th
day of May, 1999 by and between XXXXXXX.XXX, LTD. a Delaware corporation having
its principal place of business at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, XX 00000 (the
"Corporation") and XXXXXXX XXXXXXX, an individual residing at 00 Xxxxxxxxx
Xxxxxxx, Xxxxxxx, XX 00000 (the "Executive").
WITNESSETH THAT:
WHEREAS, the Corporation desires to employ the Executive on the
terms and conditions set forth in this Agreement; and
WHEREAS, the Executive desires to be employed by the Corporation on
the terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I. EMPLOYMENT TERM AND DUTIES
SECTION 1.1 EMPLOYMENT. The Corporation hereby agrees to employ the
Executive, and the Executive hereby agrees to accept such employment, upon the
terms and conditions herein contained.
SECTION 1.2 TERM. The term of employment under this Agreement (the
"Employment Term") shall commence on May 6, 1999 (the "Effective Date"), and
shall continue until May 5, 2002. Thereafter, this Agreement shall automatically
renew for additional one-year terms with a
minimum increase of 10% per year unless the Corporation gives the Executive
written notice stating that it does not desire to renew at least six months
before the end of the term.
SECTION 1.3 DUTIES. During the Employment Term, the Executive shall serve
as President and Chief Executive Officer of the Corporation, and shall be the
highest ranking officer of the Corporation. The Executive shall perform such
duties as are reasonable and customary for an individual holding such office and
such other duties as are set forth in the Bylaws of the Corporation or as may be
agreed to from time to time by the Executive. Executive shall devote
substantially his full and exclusive professional time and attention to
performing his obligations hereunder.
ARTICLE II. COMPENSATION
SECTION 2.1 BASIC COMPENSATION. During the Employment Term (but commencing
only after the closing of the Corporation's first sale of securities to a
venture capital investor), the Corporation shall pay to the Executive an annual
base salary (which shall accrue proportionately from day to day and shall be
payable in accordance with the Corporation's usual payroll practices with
respect to officers of the Corporation) of $200,000 (the "Basic Compensation").
SECTION 2.2 ANNUAL BONUS. In addition to Basic Compensation, the Executive
may also receive other bonus or incentive compensation and salary increases as
shall be determined by the Board of Directors of the Corporation (the "Board")
in accordance with applicable Corporation policies in effect at such time.
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SECTION 2.3 BENEFITS. During the Employment Term, Executive shall be
entitled to participate in all benefit plans, if any, provided to other
similarly situated senior executives of the Corporation.
SECTION 2.4 VACATION. During the Employment Term, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Corporation as in effect generally with respect to
other executives of the Corporation.
ARTICLE III. BOARD SEAT
During the Employment Term, the Corporation shall use its best
efforts to nominate Executive for election as a member of and Chairman of the
Board and cause Executive to be elected thereto.
ARTICLE IV. TERMINATION OF EMPLOYMENT
SECTION 4.1 EVENTS OF TERMINATION.
(a) DEATH. The Executive's employment shall terminate automatically
upon the Executive's death.
(b) WITHOUT CAUSE. Notwithstanding any other provision hereunder,
the Corporation shall have the right to terminate the Executive's employment
hereunder without "Cause" (as defined in Section 4.1(c)) at any time during the
Employment Term for any reason in the sole discretion of the Corporation upon
not less than ninety (90) days' notice to the Executive.
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(c) CAUSE. The Corporation may terminate the Executive's employment
during the Employment Term for Cause. For purposes of this Agreement, "Cause"
shall mean: (i) gross negligence or willful misconduct of the Executive in the
performance of any of his duties under this Agreement (including the willful
failure by the Executive to perform his duties hereunder); (ii) any embezzlement
or misappropriation of funds or property or intellectual property of the
Corporation; (iii) any conviction or plea of guilty or NOLO CONTENDERE in
connection with fraud or any crime that constitutes a felony in the jurisdiction
involved; and (iv) any material breach by the Executive of the terms of this
Agreement, which is not cured within thirty (30) days of notice of the breach
given by the Corporation.
(d) GOOD REASON. The Executive may terminate his employment during
the term of this Agreement for Good Reason upon thirty (30) days' notice to the
Corporation as long as such notice is given within ninety (90) days of the date
Executive becomes aware of the occurrence of any of the events specified below.
For purposes of this Agreement, "Good Reason" shall mean the occurrence, without
the Executive's express written consent, of any one or more of the following
events:
(i) A material change in the Executive's titles or duties
described in Section 1.3, or any removal of the Executive from, or any failure
to re-elect the Executive to, any of such positions.
(ii) A failure by the Corporation to pay Executive's Basic
Compensation, not caused by Executive, which failure to pay is not cured within
30 days after written notice from Executive.
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(iii) The filing of a voluntary or involuntary petition of
bankruptcy by or against the Corporation or the insolvency of the Corporation.
(iv) A Change of Control as defined in Section 4.2(c) below.
(v) Removal of Executive from the Board or as Chairman of the
Board. (vi) Executive is no longer the highest ranking officer of the
Corporation.
(vii) Executive is forced to work outside of the New York
metropolitan area on a permanent basis.
(viii) The Corporation breaches any material term hereof.
(e) WITHOUT GOOD REASON. The Executive may terminate his employment
during the Employment Term without Good Reason upon thirty (30) days notice to
the Corporation.
SECTION 4.2 TERMINATION PROCEDURES AND CERTAIN DEFINITIONS.
(a) NOTICE OF TERMINATION. Any termination by the Corporation for
Cause or without Cause or by the Executive for Good Reason or without Good
Reason, shall be communicated by Notice of Termination to the other party. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date. The failure
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by the Executive or the Corporation to set forth in the Notice of Termination
any fact orcircumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the Corporation, respectively,
hereunder or preclude the Executive or the Corporation, respectively, from
asserting the fact or circumstance in enforcing the Executive's or the
Corporation's rights hereunder. The Executive's continued employment with the
Corporation after a Notice of Termination is provided shall not constitute
consent to, or a waiver of any rights with respect to, any circumstance
constituting Good Reason hereunder.
(b) DATE OF TERMINATION. "Date of Termination" means (i) if the
Executive's employment is terminated by the Corporation for Cause, the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be, (ii) if the Executive's employment is terminated by the Corporation
other than for Cause or death, the Date of Termination shall be the date not
less than ninety (90) days after the date on which the Corporation notifies the
Executive of such termination, (iii) if the Executive terminates his employment
for Good Reason, the Date of Termination shall be the date, not less than thirty
(30) days after the date on which the Executive notifies the Corporation of such
termination, and (iv) if the Executive's employment is terminated by reason of
death, the Date of Termination shall be the date of death of the Executive.
(c) CHANGE OF CONTROL. A "Change of Control" shall have occurred if:
(i) any "person" within the meaning of Section 14(d) of the
Securities Exchange Act of 1934 (the "Exchange Act"), other than the
Corporation, a subsidiary of the Corporation, any employee benefit plan
sponsored by the Corporation or any subsidiary of the Corporation, Xxxxxxx
Xxxxxxx or an underwriter who has acquired securities for the purpose of
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distributing them in a firmly underwritten public offering, becomes the
"beneficial owner" as defined in Rule 13d-3 under the Exchange Act, directly or
indirectly, of 49% or more of the combined voting power of the securities of the
Corporation entitled to vote in an election of directors to the Board; or
(ii) a merger or equivalent combination occurs after which 49%
or more of the voting stock of the surviving corporation is held by persons
other than former stockholders of the Corporation; or
(iii) the sale, assignment, transfer or other disposition of
assets of the Corporation having a value in excess of 49% of the total assets of
the Corporation.
SECTION 4.3 OBLIGATIONS OF THE CORPORATION ON TERMINATION.
(a) TERMINATION UPON DEATH. If the Executive's Employment is
terminated upon his death:
(i) IN GENERAL. The Corporation shall immediately pay the
Executive in cash the amount of Basic Compensation previously earned but not yet
paid.
(ii) SEVERANCE BENEFITS. The Corporation shall pay the
Executive his Basic Compensation for the remainder of the Employment Term (the
"Severance Period") or one year of Basic Compensation, whichever is greater,
payable in accordance with the Corporation's usual payroll practices. Any
amounts payable under this Agreement shall be paid to Executive's estate.
(b) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON. If Executive's
employment is terminated without Cause or for Good Reason:
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(i) IN GENERAL. The Corporation shall immediately pay the
Executive in cash the amount of Basic Compensation previously earned but not yet
paid.
(ii) SEVERANCE BENEFITS. The Corporation shall pay the
Executive either his Basic Compensation for the remainder of the Employment Term
(the "Severance Period") or one year of Basic Compensation, which ever is
greater, payable in a lump sum within thirty (30) days following said
termination.
(iii) STOCK OPTIONS; RESTRICTED STOCK. Upon the Date of
Termination, when Executive is terminated without Cause or for Good Reason (i)
all options to purchase stock of the Corporation held by Executive shall become
immediately exercisable as to all shares of stock which are subject thereto and
shall remain exercisable for the remainder of the term thereof and (ii) any
contractual restrictions including, but not limited to, risks of forfeiture with
respect to stock of the Corporation held by Executive shall immediately
terminate.
(c) TERMINATION FOR CAUSE OR TERMINATION WITHOUT GOOD REASON. In
case of a Termination for Cause or Termination without Good Reason, the
Executive shall be entitled to his Basic Compensation accrued to the Date of
Termination and any other benefits or awards vested prior to such date. Except
as otherwise provided in this Agreement or under any employee benefit plan
maintained by the Corporation, the Corporation shall have no further obligations
to the Executive.
(d) GROSS UP PAYMENTS.
(i) If, on account of the termination of the Executive
following a Change in Control, the "Severance Payment" (as defined below) paid
by the Corporation to the Executive pursuant to this Agreement constitutes an
"excess parachute payment" within the
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meaning of Section 280G of the Code subject to the tax imposed by Section 4999
of the Code (the "Excise Tax"), then the Corporation shall pay to the Executive
an additional amount (the "Gross Up Payment") such that the amount paid or
transferred to the Executive after deduction of any Excise Tax on the Severance
Payment, and any federal, state and local income tax, employment tax and Excise
Tax upon the Gross Up Payment, shall be equal to the Severance Payment. For
purposes of this Section 4.3(d) only, "Severance Payment" shall mean any payment
or other benefit paid pursuant to this Agreement.
(ii) For purposes of determining whether any portion of a
Severance Payment will be subject to the Excise Tax and the amount of such
Excise Tax, (A) the Severance Payment and payments provided for in Section
4.3(d)(i) shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of Section 280(G)(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless and to the extent that tax counsel selected by the Corporation's
independent auditors and acceptable to the Executive is of the opinion that the
Severance Payment (in whole or in part) does not constitute a "parachute
payment" or such "excess parachute payment" (in whole or in part) represents
reasonable compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code in excess of the allocable base amount within the
meaning of Section 280G(b)(3) of the Code, or the Severance Payment is otherwise
not subject to the Excise Tax, (B) the amount of the Severance Payment that is
treated as subject to the Excise Tax shall be equal to the lesser of (X) the
total amount of the Severance Payment and (Y) the amount of "excess parachute
payments" within the meaning of Section 280G(b)(1) of the Code (after applying
clause (A) above), (C) any Gross Up Payment pursuant to Section 4.3(d)(i) shall
be
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treated as subject to the Excise Tax in its entirety and (D) the value of any
non-cash benefits or any deferred payment or benefit shall be determined by the
Corporation's independent auditors in accordance with the principles of Sections
280G(d)(3) and (4) of the Code.
(iii) If in circumstances described in Section 4.3(d)(i), by
reason of the filing by the Executive of an amended tax return, an audit by the
Internal Revenue Service or other taxing authority, or a final determination by
a court of competent jurisdiction, it is determined that "excess parachute
payments" exceeding those previously reported in his tax returns were received
by the Executive and as a result an additional Excise Tax (the "Additional
Excise Tax") shall become due, the Corporation shall pay the Executive an
additional amount (the "Subsequent Gross Up Payment") such that the amount paid
or transferred to the Executive, after deduction of (A) any Additional Excise
Tax and (B) on an after tax basis, any interest, additions and penalties with
respect to the Additional Excise Tax and (C) any federal, state and local income
tax, employment tax and Excise Tax upon the Subsequent Gross Up Payment and (D)
the payments provided for in Section 4.3(d)(i), shall be equal to the Severance
Payment.
(iv) Any Gross Up Payment required hereunder shall be made at
least ten days prior to the due date (without regard to extensions) of the
Executive's federal income tax return for the year with respect to which the
"excess parachute payment" is deemed made under the Code. Any Subsequent Gross
Up Payment required hereunder shall be made to the Executive within 30 days
after the amount thereof is determined. Notwithstanding the two immediately
preceding sentences, the Executive shall pay any federal, state and local tax or
taxes and employment taxes required to be withheld from the Executive's wages
(within the meaning of Section 3121 and 3402 of the Code) with respect to the
"excess parachute payment" and any
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such tax or taxes paid by the Corporation to the Internal Revenue Service or
state or local taxing authority shall constitute payment to the Executive.
(v) If the Excise Tax is finally determined (whether by the
filing of an amended tax return by the Executive, by audit of the Internal
Revenue Service or other taxing authority, or by a final determination of a
court of competent jurisdiction) to be less than the amount paid to or on behalf
of the Executive under the provisions of Sections 4.3(d)(i)-(iv) and the
overpayment is refunded to the Executive, the Executive shall repay to the
Corporation, promptly following the receipt of the refund, the portion of the
Gross Up Payment (and/or Subsequent Gross Up Payment) attributable to such
reduction of the Excise Tax (plus the portion attributable to federal, state and
local income tax and employment taxes imposed on the portion being repaid by the
Executive but only to the extent that the repayment may result in a tax benefit
to the Officer under Section 1341 of the Code and similar provisions of
applicable state and local law).
(vi) The provisions of this Section 4.3(d) shall inure to the
benefit of the Executive during the Employment Term regardless of whether or not
his employment is terminated, and if the Executive's employment is terminated,
the rights and obligations of the Executive and the Corporation under this
Section 4.3(d) shall survive the termination of this Agreement.
ARTICLE V. PURPOSE
SECTION 5.1 PURPOSE. The Corporation recognizes that the Executive is a
key executive of the Corporation and is expected to be a factor in the growth
and success of the
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Corporation. The Corporation also recognizes that the continued success of the
Corporation depends, to a significant degree, upon the effective performance of
the Executive's duties as set forth in this Agreement. Therefore, one of the
primary purposes of this Agreement is to provide for the long-term financial
security of the Executive and his family so that he will be better able to
direct his undivided attention to the successful performance of his duties on
behalf of the Corporation.
SECTION 5.2 NON-COMPETE AND CONFIDENTIALITY. Except as to such actions
within the ordinary course of the Executive's employment by the Corporation
which the Executive in good faith believes to be in the best interests of the
Corporation, the Executive shall not at any time during the Employment Term or
two years thereafter, without the prior written consent of the Corporation: (i)
request or advise any supplier, or other person, firm, partnership, association,
corporation or business organization, entity or enterprise having business
dealings with the Corporation or any subsidiary or affiliate of the Corporation
to withdraw, curtail or cancel such business dealings; (ii) disclose to any
third party including, but not limited to, any competitor or potential
competitor of the Corporation or any subsidiary or affiliate of the Corporation
any trade secret, know-how or knowledge relating to costs, products, equipment,
merchandising and marketing methods, business plans, or research results used
by, or useful to, the Corporation or any subsidiary or affiliate of the
Corporation or other confidential information of the Corporation (the
"Confidential Information"); (iii) induce or attempt to influence any executive
of the Corporation or any subsidiary or affiliate of the Corporation to
terminate, or in any way violate the terms of, his or her employment; or (iv)
engage directly or engage indirectly in any business in competition with the
business of the Corporation or its subsidiaries, provided, however, that
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the ownership by Executive of not more than 5% of the equity securities of any
company or similar business venture shall not be deemed a violation of this
Section 5.2(iv). For purposes of this Section 5.2, Confidential Information
shall not include: (a) information that is in the public domain; provided that
Executive was not responsible for the disclosure to the public; (b) information
that was already known to Executive prior to his employment by the Corporation;
and (c) information required to be disclosed in connection with any judicial or
administrative proceeding or inquiry; provided that Executive shall notify the
Corporation as promptly as practicable of such proceeding or inquiry and
cooperate with the Corporation in taking legally available steps to resist or
narrow the required disclosure.
ARTICLE VI. MISCELLANEOUS
SECTION 6.1 ENFORCEABILITY. If the scope of any provision of this
Agreement is too broad to permit enforcement of such provision to its fullest
extent, then such provision shall be enforced to the maximum extent permitted by
applicable law, and, if necessary, the scope of any such provision may be
judicially modified (to the extent necessary in any proceeding brought to
enforce such provision) and thereafter fully enforced.
SECTION 6.2 WORKS FOR HIRE. Executive agrees that all improvements in the
Corporation's method of conducting its business as well as all inventions
conceived of or developed by Executive related directly or indirectly to the
Corporation's business during the Employment Term, the negotiation thereof or
the period of six months after the expiration or termination of this Agreement,
regardless of the time and place made, and all proprietary rights therein, shall
belong exclusively to the Corporation as works-for-hire, having been specially
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commissioned by the Corporation, and Executive will promptly disclose such work
product to the Chairman of the Board of the Corporation. To the extent necessary
to supplement the foregoing, Executive hereby transfers and assigns to the
Corporation the proprietary rights in perpetuity in all such work product and
all rights therein of any kind in all media now or hereafter known. In addition
to the rights granted to the Corporation in this Section 6.2, Executive agrees
that all patents related directly or indirectly to the Corporation's business
obtained by or issued in the name of Executive during the Employment Term are
property of the Corporation. Executive further agrees to assign any such patents
to the Corporation without payment of any additional compensation other than the
compensation specified in Article II above.
SECTION 6.3 REMEDIES. The parties acknowledge that the remedy at law for
any breach of any party's obligations hereunder would be inadequate and consent
to the granting of temporary and permanent injunctive relief in any proceeding
brought to enforce any of such provisions without the necessity of proof of
actual damages; provided, however, that the foregoing shall not be construed to
limit any other right or remedy available to the Corporation or the Executive at
law or in equity, and all such rights and remedies shall be cumulative to the
extent permitted by applicable law, and the exercise of any one or more of such
rights or remedies shall be without prejudice to the exercise of any other such
right or remedy.
SECTION 6.4 ASSIGNMENT BY THE EXECUTIVE; SUCCESSORS.
(a) This Agreement is personal to the Executive and without the
prior written consent of the Corporation shall not be assignable by the
Executive otherwise than by will or the
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laws of descent and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's legal representatives.
(b) Except as is otherwise herein expressly provided, this Agreement
shall inure to the benefit of and be binding upon the Corporation, its
successors and assigns, and upon the Executive, his spouse, heirs, executors and
administrators, provided, however, that the obligations of the Executive
hereunder shall not be delegated.
(c) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. As used in this Agreement, "Corporation" shall mean
Corporation as hereinbefore defined and any successor to its business or assets
as aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
SECTION 6.5 WAIVER. Failure of either party hereto to insist upon strict
compliance by the other party with any term, covenant or condition hereof shall
not be deemed a waiver of such term, covenant or condition, nor shall any waiver
or relinquishment or failure to insist upon strict compliance with any right or
power hereunder at any one time or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 6.6 SURVIVAL. Notwithstanding the expiration or termination of
this Agreement, Sections 4.3, 5.2 and 6.2 shall survive.
SECTION 6.7 NOTICE. Except as otherwise provided in Section 4.2(a) hereof,
any notice required or desired to be given pursuant to this Agreement shall be
sufficient if in writing sent by
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registered or certified mail to the addresses set forth above or to such other
address as any party hereto may designate in writing, transmitted by hand
delivery or by registered or certified mail to the other; provided, the failure
by the Executive to observe the notice provisions hereof shall not in any way
limit, reduce or effect the Executive's rights and benefits hereunder.
SECTION 6.8 APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to any otherwise applicable choice of law rules.
SECTION 6.9 TAXES. The Corporation may deduct from all amounts paid under
this Agreement all federal, state, local and other taxes required by law to be
withheld with respect to such payments.
SECTION 6.10 ENTIRE AGREEMENT. The parties hereto agree that this
Agreement (together with, to the extent benefits or rights are otherwise
affected by this Agreement, any employee benefit plan maintained or sponsored by
the Corporation) contains the entire understanding and agreement between them
and supersedes all previous agreements and arrangements, if any, relating to the
employment of the Executive. This Agreement shall not be amended, modified or
supplemented in any respect except by an agreement in writing signed by the
Executive and the Corporation.
SECTION 6.11 COUNTERPARTS. This Agreement may be signed in counterparts,
each of which shall be an original, and all of which, taken together shall be
deemed to be one instrument.
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IN WITNESS WHEREOF, the Corporation and the Executive have duly
executed this Agreement as of the day and the year first above written.
XXXXXXX.XXX, LTD. EXECUTIVE
By: /s/ /s/
------------------------ ----------------------------
Name: Xxxxxxx Xxxxxxx
Title:
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