EXHIBIT 10.2
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "AGREEMENT") is made and
entered into as of this 1st day of July, 2005 (the "EFFECTIVE DATE"), by and
between Patron Systems, Inc., a Delaware corporation (the "COMPANY") and Xxxxxx
X. Xxxxx ("EXECUTIVE").
1. ENGAGEMENT AND DUTIES.
1.1 Commencing upon the Effective Date, and upon the
terms and subject to the conditions set forth in this Agreement, the Company
hereby engages and employs Executive as an officer of the Company, with the
title and designation of Chief Executive Officer of the Company. Executive
hereby accepts such engagement and employment.
1.2 Executive's duties and responsibilities shall be
those normally and customarily vested in the office of Chief Executive Officer
of a corporation, subject to the supervision, direction and control of the Board
of Directors of the Company ("BOARD"). In addition, Executive's duties shall
include those duties and services for the Company and its affiliates as the
Board shall from time to time reasonably direct. Executive shall report directly
to the Board.
1.3 Executive agrees to devote his primary business time,
energies, skills, efforts and attention to his duties hereunder, and will not,
without the prior written consent of the Board, which consent will not be
unreasonably withheld, render any material services to any other business
concern. Notwithstanding the foregoing, Executive shall be authorized to serve
as a member of not more than 3 boards of directors of commercial enterprises and
not-for-profit organizations not in competition with the Company, and shall be
authorized to devote minimal time during business hours (such time not to exceed
5 hours per week) to a venture capital partnership with Xxxxxxx Xxxxxxxxx.
Executive will use his best efforts and abilities faithfully and diligently to
promote the Company's business interests.
1.4 Except for routine travel incident to the business of
the Company, Executive shall perform his duties and obligations under this
Agreement principally from an office provided by the Company in Chicago,
Illinois, or such other location as the Board may from time to time determine.
2. TERM OF EMPLOYMENT. Unless earlier terminated pursuant to the
provisions hereof, the initial term ("INITIAL TERM") of Executive's employment
under this Agreement shall be for a period of one (1) year commencing on the
Effective Date. Said term shall be automatically renewed thereafter for
successive one (1)-year terms (the Initial Term and any renewal terms, the
"TERM") unless the Board or any successor entity provides Executive with written
notice 90 days prior to the expiration of the then current Term.
3. TERMINATION.
3.1 Executive's employment pursuant to this Agreement
shall terminate on the earliest to occur of the following:
(a) the expiration of the Term;
(b) the death of Executive;
(c) delivery to Executive of written notice of
termination by the Company if Executive shall suffer a "permanent disability,"
which for purposes of this Agreement shall mean a physical or mental disability
which, in the reasonable judgment of the Board, is likely to render Executive
unable to perform his duties and obligations under this Agreement for 90 days in
any 12-month period;
(d) delivery to Executive of written notice of
termination by the Company "for cause," by reason of: (i) any act or omission
knowingly undertaken or omitted by Executive with the intent of causing damage
to the Company or its affiliates, its properties, assets or business, or its
stockholders, officers, directors or employees; (ii) any act of Executive
involving a material personal profit to Executive, including, without
limitation, any fraud, misappropriation or embezzlement, involving properties,
assets or funds of the Company or any of its subsidiaries; (iii) Executive's
consistent failure to perform his normal duties or any obligation under any
provision of this Agreement, in either case, as directed by the Board; (iv)
conviction of, or pleading nolo contendere to, (A) any crime or offense
involving monies or other property of the Company; (B) any felony offense; or
(C) any crime of moral turpitude; or (v) the chronic or habitual use or
consumption of drugs or alcoholic beverages;
(e) delivery to the Company of written notice of
termination by Executive "for good reason," by reason of (i) a material change
in Executive's function, authority, duties, compensation or responsibilities,
without Executive's express written consent; (ii) a substantial difference of
opinion between Executive and the Board develops, or other circumstances should
arise such that Executive, in good faith, no longer believes that he can
function effectively as Chief Executive Officer of the Company; (iii) any
material failure by the Company to comply with any of the provisions of this
Agreement; or (iv) any other matter or circumstance requested by the Board if
either (a) made with the intent of hindering Executive in the performance of his
duties hereunder or creating an incentive for Executive to exercise his rights
under this Section 3.1(e) hereof or (b) the effect of such request could
reasonably be expected to hinder Executive in the performance of his duties
hereunder or create an incentive for Executive to exercise his rights under this
Section 3.1(e);
(f) delivery to the Company of at least thirty
days' prior written notice of termination by Executive at any time subsequent to
the expiration of the Initial Term; or
(g) delivery to Executive of written notice of
termination by the Company "without cause."
3.2 With regard to Section 3.1(d), the Company shall
first provide Executive with 30-days written notice of such alleged misconduct,
including a specific description of such misconduct sufficient to allow
Executive an opportunity to correct such noted problems. Executive shall have
the opportunity to appear before the Board, with his legal counsel, to present
any relevant information he believes the Board should consider. Executive shall
not be terminated under Section 3.1(d) unless, after the notice period expires,
Executive continues to fail to satisfactorily perform his duties.
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3.3 With regard to Section 3.1(e), if Executive
determines that "good reason" as defined in Section 3.1(e) exists, Executive
shall so notify the Company in writing. The Company shall have thirty (30) days
to remedy the facts and circumstances that provided "good reason" as defined in
Section 3.1(e). If adequate remedy has occurred, Executive shall continue in the
employ of the Company as if no notice had been given. If adequate remedy has not
occurred, Executive may, at his option, terminate his employment for "good
reason" as defined in Section 3.1(e).
4. COMPENSATION; EXECUTIVE BENEFIT PLANS.
4.1 The Company shall pay to Executive a base salary at
an annual rate of $200,000 during the term of this Agreement ("BASE SALARY").
The Base Salary shall be payable in installments throughout the year in the same
manner and at the same times the Company pays base salaries to other executive
officers of the Company. The Executive will receive a non-recoverable draw in
the net amount of $100,000 (grossed up for taxes) during the first six months of
this agreement. In the event that Executive's employment is terminated pursuant
to SECTIONS 3.1(E), (F) OR (G), above, Executive shall continue to receive
Executive's Base Salary and shall be entitled to continued participation in the
Company Executive Benefit Plans (as defined below) for a period of six (6)
months. Notwithstanding the foregoing, the Company shall not be obligated to pay
Executive any amounts hereunder following the termination of Executive's
employment pursuant to SECTION 3.1(E), (F) OR (G), above, from and after any
time that Executive accepts an employment or consulting position with any person
or entity that is determined by the Board, in the exercise of its reasonable
discretion, to be a competitor of the Company.
4.2 In addition to the Base Salary to be paid to
Executive hereunder, the Company shall pay a performance bonus (the "BONUS")
determined in accordance with revenue milestones to be agreed upon between
Executive and the Board on a quarterly basis. Executive shall be eligible to
receive a Bonus of up to one hundred percent (100%) of Executive's Base Salary
for each quarter upon achieving the revenue milestones agreed upon between
Executive and the Board, and payments of such lesser amounts upon achieving
results less than the agreed upon revenue milestones as shall be agreed upon
between Executive and the board.
4.3 Executive shall be entitled each year to vacation for
a minimum of four (4) calendar weeks, plus such additional period or periods as
the Board may approve in the exercise of its reasonable discretion, during which
time his compensation shall be paid in full.
4.4 Executive shall be entitled to reimbursement from the
Company for the reasonable costs and expenses which he incurs in connection with
the performance of his duties and obligations under this Agreement in a manner
consistent with the Company's practices and policies as adopted or approved from
time to time by the Board for executive officers.
4.5 The Company may deduct from any compensation payable
to Executive the minimum amounts sufficient to cover applicable federal, state
and/or local income tax withholding, old-age and survivors' and other social
security payments, state disability and other insurance premiums and payments.
5. OTHER BENEFITS.
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5.1 COMPANY EXECUTIVE BENEFIT PLANS. During the term of
his employment hereunder, Executive shall be eligible to participate in all
operative employee benefit and welfare plans of the Company then in effect from
time to time and in respect of which all executive officers of the Company and
its affiliates generally are entitled to participate ("COMPANY EXECUTIVE BENEFIT
PLANS"), including, to the extent then in effect, group life, medical,
disability and other insurance plans, all on the same basis applicable to
employees of the Company whose level of management and authority is comparable
to that of Executive.
5.2 BOARD OF DIRECTORS. During the term of his employment
hereunder, the Board of Directors shall nominate Executive to become a member of
the Board of Directors.
5.3 COMMON STOCK OPTIONS. The Company hereby grants to
Executive, as of the Effective Date, an option (the "OPTION") to purchase
1,000,000 shares of the Common Stock, par value $0.01 per share ("COMMON STOCK")
of the Company, at an exercise price of $0.65 per share. The Option shall vest
according to the following schedule: 25% on the Effective Date, 25% on September
30, 2005, 25% on December 31, 2005 and 25% on March 31, 2006. The option shall
expire on June 30, 2012. Concurrently herewith, Executive and the Company shall
enter into an Option Agreement substantially in the form attached hereto as
EXHIBIT A.
6. CONFIDENTIALITY OF PROPRIETARY INFORMATION AND MATERIAL.
6.1 INDUSTRIAL PROPERTY RIGHTS. For the purpose of this
Agreement, "INDUSTRIAL PROPERTY RIGHTS" shall mean all of the Company's patents,
trademarks, trade names, inventions, copyrights, know-how or trade secrets,
formulas and science, now in existence or hereafter developed or acquired by the
Company or for its use, relating to any and all products and services which are
developed, formulated and/or manufactured by the Company.
6.2 TRADE SECRETS. For the purpose of this Agreement,
"TRADE SECRETS" shall mean any formula, pattern, device, or compilation of
information that is used in the Company's business and gives the Company an
opportunity to obtain an advantage over its competitors who do not know and/or
do not use it. This term includes, but is not limited to, information relating
to the marketing of the Company's products and services, including price lists,
pricing information, customer lists, customer names, the particular needs of
customers, information relating to their desirability as customers, financial
information, intangible property and other such information which is not in the
public domain.
6.3 TECHNICAL DATA. For the purpose of this Agreement,
"TECHNICAL DATA" shall mean all information of the Company in written, graphic
or tangible form relating to any and all products which are developed,
formulated and/or manufactured by the Company, as such information exists as of
the Effective Date or is developed by the Company during the term hereof.
6.4 PROPRIETARY INFORMATION. For the purpose of this
Agreement, "PROPRIETARY INFORMATION" shall mean all of the Company's Industrial
Property Rights, Trade Secrets and Technical Data. Proprietary Information shall
not include any information which (i) was lawfully in the possession of
Executive prior to Executive's employment with the Company, (ii) may be obtained
by a reasonably diligent businessperson from readily available and public
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sources of information, (iii) is lawfully disclosed to Executive after
termination of Executive's employment by a third party which does not have an
obligation to the Company to keep such information confidential, or (iv) is
independently developed by Executive after termination of Executive's employment
without utilizing any of the Company's Proprietary Information.
6.5 AGREEMENT NOT TO COPY OR USE. Executive agrees, at
any time during the term of his employment and for a period of ten years
thereafter, not to copy, use or disclose (except as required by law after first
notifying the Company and giving it an opportunity to object) any Proprietary
Information without the Company's prior written permission. The Company may
withhold such permission as a matter within its sole discretion during the term
of this Agreement and thereafter.
7. RETURN OF CORPORATE PROPERTY AND TRADE SECRETS. Upon any
termination of this Agreement, Executive shall turn over to the Company all
property, writings or documents then in his possession or custody belonging to
or relating to the affairs of the Company or comprising or relating to any
Proprietary Information.
8. DISCOVERIES AND INVENTIONS.
8.1 DISCLOSURE. Executive will promptly disclose in
writing to the Company complete information concerning each and every invention,
discovery, improvement, device, design, apparatus, practice, process, method,
product or work of authorship, whether patentable or not, made, developed,
perfected, devised, conceived or first reduced to practice by Executive, whether
or not during regular working hours (hereinafter referred to as "DEVELOPMENTS"),
either solely or in collaboration with others, (a) prior to the term of this
Agreement while working for the Company, (b) during the term of this Agreement
or (c) within six months after the term of this Agreement, if relating either
directly or indirectly to the business, products, practices, techniques or
confidential information of the Company.
8.2 ASSIGNMENT. Executive, to the extent that he has the
legal right to do so, hereby acknowledges that any and all Developments are the
property of the Company and hereby assigns and agrees to assign to the Company
any and all of Executive's right, title and interest in and to any and all of
such Developments; PROVIDED, HOWEVER, that the provisions of this SECTION 8.2
shall not apply to any Development that the Executive developed entirely on his
own time without using the Company's equipment, supplies, facilities or trade
secret information except for those Developments that either:
(a) relate at the time of conception or
reduction to practice of the Development to the Company's business, or actual or
demonstrably anticipated research or development of the Company; or
(b) result from any work performed by Executive
for the Company.
8.3 ASSISTANCE OF EXECUTIVE. Upon request and without
further compensation therefor, but at no expense to Executive, and whether
during the term of this Agreement or thereafter, Executive will do all
reasonable lawful acts, including, but not limited to, the execution of papers
and lawful oaths and the giving of testimony, that, in the reasonable opinion of
the Company, its successors and assigns, may be necessary or desirable in
obtaining,
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sustaining, reissuing, extending and enforcing United States and foreign Letters
Patent, including, but not limited to, design patents, on any and all
Developments and for perfecting, affirming and recording the Company's complete
ownership and title thereto, subject to the proviso in SECTION 8.2 hereof, and
Executive will otherwise reasonably cooperate in all proceedings and matters
relating thereto.
8.4 RECORDS. Executive will keep complete and accurate
accounts, notes, data and records of all Developments in the manner and form
requested by the Company. Such accounts, notes, data and records shall be the
property of the Company, subject to the proviso in SECTION 8.2 hereof, and, upon
request by the Company, Executive will promptly surrender the same to it or, if
not previously surrendered upon its request or otherwise, Executive will
surrender the same, and all copies thereof, to the Company upon the conclusion
of his employment.
8.5 OBLIGATIONS, RESTRICTIONS AND LIMITATIONS. Executive
understands that the Company may enter into agreements or arrangements with
agencies of the United States Government and that the Company may be subject to
laws and regulations which impose obligations, restrictions and limitations on
it with respect to inventions and patents which may be acquired by it or which
may be conceived or developed by employees, consultants or other agents
rendering services to it. Executive agrees that he shall be bound by all such
obligations, restrictions and limitations applicable to any such invention
conceived or developed by him during the term of this Agreement and shall take
any and all further action which may be required to discharge such obligations
and to comply with such restrictions and limitations.
9. NON-SOLICITATION COVENANT; COVENANT NOT TO COMPETE.
9.1 NON-SOLICITATION AND NONINTERFERENCE. During the term
of this Agreement and for a period of one year thereafter, Executive shall not
(a) induce or attempt to induce any employee of the Company to leave the employ
of the Company or in any way interfere adversely with the relationship between
any such employee and the Company, (b) induce or attempt to induce any employee
of the Company to work for, render services or provide advice to or supply
confidential business information or trade secrets of the Company to any third
person, firm or corporation or (c) induce or attempt to induce any customer,
supplier, licensee, licensor or other business relation of the Company to cease
doing business with the Company or in any way interfere with the relationship
between any such customer, supplier, licensee, licensor or other business
relation and the Company.
9.2 INDIRECT SOLICITATION. Executive agrees that, during
the term of this Agreement and the period covered by SECTION 9.1 hereof, he will
not, directly or indirectly, assist or encourage any other person in carrying
out, directly or indirectly, any activity that would be prohibited by the
provisions of SECTION 9.1 if such activity were carried out by Executive, either
directly or indirectly; and, in particular, Executive agrees that he will not,
directly or indirectly, induce any employee of the Company to carry out,
directly or indirectly, any such activity.
9.3 COVENANT NOT TO COMPETE. During the term of this
Agreement and for a period of one year thereafter, Executive shall not, directly
or indirectly, either individually or as a principal, partner, agent, employee,
employer, consultant, stockholder, joint venturer, or
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investor, or as a director or officer of any corporation or association, or in
any other manner or capacity whatsoever, engage in, assist or have any active
interest in a business that engages in the business of the development and
distribution of information and homeland security software and systems.
Notwithstanding the above, this paragraph shall not be construed to prohibit
Executive from owning less than two percent (2%) of the securities of a
corporation which is publicly traded on a securities exchange or
over-the-counter.
10. INJUNCTIVE RELIEF. Executive hereby recognizes, acknowledges
and agrees that in the event of any breach by Executive of any of his covenants,
agreements, duties or obligations contained in SECTIONS 6, 7, 8 AND 9 of this
Agreement, the Company would suffer great and irreparable harm, injury and
damage, the Company would encounter extreme difficulty in attempting to prove
the actual amount of damages suffered by the Company as a result of such breach,
and the Company would not be reasonably or adequately compensated in damages in
any action at law. Executive therefore covenants and agrees that, in addition to
any other remedy the Company may have at law, in equity, by statute or
otherwise, in the event of any breach by Executive of any of his covenants,
agreements, duties or obligations contained in SECTIONS 6, 7, 8 AND 9 of this
Agreement, the Company shall be entitled to seek and receive temporary,
preliminary and permanent injunctive and other equitable relief from any court
of competent jurisdiction to enforce any of the rights of the Company, or any of
the covenants, agreements, duties or obligations of Executive hereunder, and/or
otherwise to prevent the violation of any of the terms or provisions hereof, all
without the necessity of proving the amount of any actual damage to the Company
or any affiliate thereof resulting therefrom; provided, however, that nothing
contained in this SECTION 10 shall be deemed or construed in any manner
whatsoever as a waiver by the Company of any of the rights which the Company may
have against Executive at law, in equity, by statute or otherwise arising out
of, in connection with or resulting from the breach by Executive of any of his
covenants, agreements, duties or obligations hereunder.
11. MISCELLANEOUS.
11.1 ARBITRATION. The parties agree that they will use
their best efforts to amicably resolve any dispute arising out of or relating to
this Agreement. Any controversy, claim or dispute that cannot be so resolved
shall be settled by final binding arbitration in accordance with the rules of
the American Arbitration Association and judgment upon the award rendered by the
arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. Any such arbitration shall be conducted in Xxxx County, Illinois, or
such other place as may be mutually agreed upon by the parties. Within fifteen
(15) days after the commencement of the arbitration, each party shall select one
person to act arbitrator, and the two arbitrators so selected shall select a
third arbitrator within ten (10) days of their appointment. Each party shall
bear its own costs and expenses and an equal share of the arbitrators expenses
and administrative fees of arbitration.
11.2 NOTICES. All notices, requests and other
communications (collectively, "NOTICES") given pursuant to this Agreement shall
be in writing, and shall be delivered by personal service or by United States
first class, registered or certified mail (return receipt requested), postage
prepaid, addressed to the party at the address set forth below:
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If to Company:
Patron Systems, Inc.
000 Xxxxx Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: Board of Directors
If to Executive, at the address maintained for
Executive in the Company's payroll records.
Any Notice shall be deemed duly given when received
by the addressee thereof, provided that any Notice sent by registered or
certified mail shall be deemed to have been duly given three days from date of
deposit in the United States mails, unless sooner received. Either party may
from time to time change its address for further Notices hereunder by giving
notice to the other party in the manner prescribed in this section.
11.3 ENTIRE AGREEMENT. This Agreement contains the sole
and entire agreement and understanding of the parties with respect to the entire
subject matter of this Agreement, and any and all prior agreements, discussions,
negotiations, commitments and understandings, whether oral or otherwise, related
to the subject matter of this Agreement are hereby merged herein. No
representations, oral or otherwise, express or implied, other than those
contained in this Agreement have been relied upon by any party to this
Agreement.
11.4 ATTORNEYS' FEES. If any action, suit or other
proceeding is instituted to remedy, prevent or obtain relief from a default in
the performance by any party of its obligations under this Agreement, the
prevailing party shall recover all of such party's costs and reasonable
attorneys' fees incurred in each and every such action, suit or other
proceeding, including any and all appeals or petitions therefrom.
11.5 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES THEREOF.
11.6 CAPTIONS. The various captions of this Agreement are
for reference only and shall not be considered or referred to in resolving
questions of interpretation of this Agreement.
11.7 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
11.8 BUSINESS DAY. If the last day permissible for
delivery of any Notice under any provision of this Agreement, or for the
performance of any obligation under this Agreement, shall be other than a
business day, such last day for such Notice or performance shall be extended to
the next following business day (provided, however, under no circumstances shall
this provision be construed to extend the date of termination of this
Agreement).
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IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first set forth above.
Company: Executive:
PATRON SYSTEMS, INC.
By: /s/ Xxxxx Xxxxxxx /s/ Xxxxxx X. Xxxxx
-------------------------------- ------------------------------------
Xxxxx Xxxxxxx, President Xxxxxx X. Xxxxx
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EXHIBIT A
OPTION AGREEMENT
