EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT is made and entered into as of the
___ day of January, 2000, by and between Authoriszor Inc., a Delaware
corporation (hereafter the "Company"), and Xxxxxxx X. Xxxxxxxx, a resident of
the Commonwealth of Massachusetts (hereafter the "Executive").
COMPENSATION
1. The Company agrees to compensate the Executive on a salary basis at
the semi-monthly rate of $9,375 ($225,000 annually). The Executive's salary will
be reviewed by the Company's Board of Directors as of each January 1 occurring
during the term of this Agreement, taking into consideration the Executive's
performance and changes in competitive market conditions, and the Board may, in
its sole discretion, increase the Executive's base salary in such amount as the
Board may determine in its reasonable discretion. Both the Company and the
Executive acknowledge that such compensation and the compensation detailed in
Paragraphs 2, 3, 4, 5, 6, 7 and 8 of this Agreement is fair and adequate
compensation for the Executive's services, and for the mutual promises described
below.
2. The Company agrees to grant the Executive four (4) Nonqualified
Stock Options (collectively, the "Options" and individually, an "Option"),
pursuant to the terms of four (4) separate Stock Option Agreements, to purchase
a cumulative total of 500,000 shares of the Company's common stock, $.01 par
value (the "Company Common Stock"), in increments of (i) 200,000 shares
exercisable on or after January 1, 2001, (ii) 100,000 shares exercisable on or
after January 1, 2002, (iii) 100,000 shares exercisable on or after January 1,
2003, and (iv) 100,000 shares exercisable on or after January 1, 2004, all at an
exercise price of $6.75 per share, upon execution of this Agreement. Any
unvested Options will be void and shall not vest if (i) the Company terminates
this Agreement for "Cause," as defined in Paragraph 25 of this Agreement, (ii)
the Executive becomes physically or mentally disabled, as defined by 29 C.F.R.
Section 1630.2(g)(1), and cannot perform the essential functions of his
position, with reasonable accommodation, (iii) the death of the Executive, or
(iv) the expiration of the respective term of each Option.
3. In the event a Sale of the Company, as defined below, occurs during
the term of this Agreement, (a) all payments hereunder that would be payable
through the term hereof shall accelerate and become immediately due and payable,
including but not limited to then current base salary and bonus compensation
amounts as if the Company had achieved the Management-By-Objectives targets
hereunder, and (b) the Options shall automatically vest in full and become
immediately exercisable (collectively, the "Severance Compensation"). In the
event any payment or benefit due to the Executive under this Agreement
constitutes a payment or benefit in the nature of compensation that is made or
supplied to a "disqualified individual" as defined in Section 280G(c) of the
Internal Revenue Code of 1986 (a "Golden Parachute Payment"), such payment or
benefit shall be deferred and paid out by the Company to the Executive over a
period of time in order that such payment or benefit does not so qualify as a
Golden
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Parachute Payment. A "Sale of the Company" shall mean (i) a merger,
consolidation or other business combination of the Company with or into another
corporation pursuant to which the Company will not survive or will survive only
as a subsidiary of another corporation, (ii) a sale, lease, exchange or other
disposition of all or substantially all of the assets or capital stock of the
Company, or (iii) any combination of the foregoing or an event or transaction
having substantially the same economic effect. The Company shall provide the
Executive with prompt written notice of approval of a Sale of the Company by the
Company's Board of Directors.
4. The Company and the Executive agree that the Executive will be
eligible to receive, in his first year of service to the Company, total annual
bonus compensation in the amount of $125,000 in quarterly pro rata increments in
the event that the Company achieves each quarterly Management-By- Objectives
target mutually determined by the Company's Board of Directors, or its
Compensation Committee, and the Executive. The first quarterly
Management-By-Objectives target is attached hereto as Exhibit A. The Executive
shall be eligible for future bonuses which will be tied to quarterly Management-
By-Objectives targets and payable quarterly in pro rata amounts of the annual
bonus.
5. The Company will provide the Executive with a Company car (the
"Company Car") for use for business purposes during his employment under this
Agreement. The Company Car shall be a BMW or Mercedes. Upon the termination of
this Agreement for any reason, by the Company or the Executive, the Executive
will return the Company Car to the Company pursuant to the procedure outlined in
Paragraph 29 of this Agreement.
6. The Company and the Executive acknowledge and agree that the Company
shall promptly reimburse the Executive for any reasonable expenses, including,
but not limited to, travel expenses, lodging expenses, meals or entertainment
expenses, that the Executive may incur in the performance of his duties and
obligations under this Employment Agreement. PROVIDED, HOWEVER, that the
Executive shall be required to submit receipts or other acceptable documentation
to the Company to verify such expenses prior to any reimbursements.
7. The Executive shall be entitled to paid banking holidays, twenty
(20) paid vacation days per year and reasonable paid personal and sick days. Any
vacation days not taken during a given year may be carried over to subsequent
years without limitation, or may be paid out as additional compensation in
January for the preceding year; however, no more than ten (10) vacation days
from any calendar year can be carried over to subsequent years or paid out as
additional compensation.
8. The Executive acknowledges and agrees that, at the discretion of the
Company, certain employee benefits may be provided to the Executive incident to
the Executive's employment with the Company. The Executive acknowledges and
agrees that any employee benefits provided to the Executive by the Company
incident to the Executive's employment are governed by the applicable plan
documents, summary plan descriptions or employment policies, and may be
modified, suspended or revoked at any time, in accordance with the terms and
provisions of the applicable documents. The Executive acknowledges and agrees
that any employee benefits provided to the Executive by the Company incident
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to the Executive's employment are not a part of this Employment Agreement.
PROVIDED, HOWEVER, that (a) the Executive shall be entitled to such employee
benefits maintained by the Company applicable to other senior executive
employees of the Company, (b) the Company shall reimburse the Executive for up
to $5,000 in annual premiums so that the Executive can personally seek to
procure and maintain a $5,000,000 life insurance policy for the benefit of the
Executive's designated beneficiaries, (c) the Company shall reimburse the
Executive for up to $3,000 in premiums so that the Executive can personally seek
to procure and maintain a long term disability policy for his own benefit, and
(d) the Company shall reimburse the Executive for the premiums on his current
COBRA medical plan until such time as the Company institutes standard medical
and dental benefit plans. The Company shall be in no way liable for any medical
or dental payments in addition to the Executive's COBRA premiums pursuant to
this Agreement.
DURATION
9. This Employment Agreement shall continue in full force and effect
for four (4) years, commencing on January 1, 2000, and will expire and terminate
by its own terms on December 31, 2003, unless this Employment Agreement is
terminated prior to December 31, 2003, in accordance with the TERMINATION
provisions set forth below in Paragraphs 24, 25, 26, 27 and 28.
RESPONSIBILITIES
10. The Company and the Executive agree that the Executive shall serve
as the Chief Executive Officer of the Company and shall be subject to the
general direction and control of the Board of Directors. In such capacity, the
Executive will report to the Board of Directors of the Company and perform such
duties on behalf of the Company as are directed by the Board of Directors of the
Company and as are consistent with the title and position of a chief executive
officer of a company that designs and markets internet-based security and
management systems for corporations and governments.
11. The Executive covenants and agrees that he will faithfully devote
his best efforts and all his working time to his duties and responsibilities
under this Agreement, unless the Company's Board approves any other use of his
efforts or working time. The foregoing shall not prevent the Executive from
performing a reasonable amount of service on the boards of directors of other
charitable entities, and reasonable investment activities, both subject to the
terms of the Employee's non-competition obligations under this Agreement, nor
from engaging in academic, religious, charitable, community and other non-profit
activities that do not impair his ability to fulfill his duties and
responsibilities under this Agreement.
12. The Executive acknowledges and agrees that he has a fiduciary duty
of loyalty to the Company, and that he will not engage in any activity which
will or could be reasonably expected to, in any way, harm the business, business
interests, or reputation of the Company.
13. The Executive acknowledges and agrees that he will not directly or
indirectly engage in competition with the Company at any time during the
existence of the employment relationship between the
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Company and the Executive, and the Executive will not on his own behalf, or as
another's agent, employee, partner, shareholder or otherwise, engage in any of
the same or similar duties and/or responsibilities required by the Executive's
position with the Company, other than as an employee of the Company pursuant to
this Employment Agreement.
XXXXXXXXXXXXX
00. The Executive acknowledges and agrees that the Company anticipates
developing significant relationships and goodwill between the Company,
prospective suppliers and prospective customers by providing superior products
and service, and that these relationships and goodwill will constitute a
valuable asset belonging solely to the Company.
15. The Executive acknowledges and agrees that as an employee and
representative of the Company, the Executive will be responsible for building
and maintaining business relationships and goodwill with current and future
customers and suppliers of the Company on a personal level. The Executive
acknowledges and agrees that this responsibility creates a special relationship
of trust and confidence between the Company, the Executive and the customers and
suppliers.
16. The Executive acknowledges and agrees that this special
relationship of trust and confidence between the Company, the Executive and the
customers and suppliers creates a high risk and opportunity for the Executive to
misappropriate the relationship and goodwill existing between the Company and
its customers and suppliers. The Executive acknowledges and agrees that it is
fair and reasonable for the Company to take steps to protect the Company from
the risk of such misappropriation.
17. The Executive acknowledges and agrees that the Company will make a
significant investment in the future success of the Executive by providing the
Executive with the following valuable assets: (i) confidential information
concerning the Company's intellectual property, products, techniques and
equipment; and (ii) confidential information relating to the identity and
special needs of the Company's current and prospective customers and the
Company's current and prospective suppliers, as well as their contacts, the
needs and preferences of the Company's current and prospective customers and
suppliers, the Company's current and prospective products and inventories, the
Company's business projections and market studies, the Company's business plans
and strategies, the Company's pricing studies and price lists, marketing plans,
sales techniques, and information concerning the technology unique to the
Company.
18. The Executive agrees that all information and know-how, whether or
not in writing, of a private, secret or confidential nature concerning the
Company's business or financial affairs (collectively, "Proprietary
Information") is and will be the exclusive property of the Company. By way of
illustration, but not limitation, Proprietary Information includes the
information identified in Paragraph 17 above, and information pertaining to: (i)
the Company's internet-based security and management systems; (ii) financial
statements and information; and (iii) special processes, procedures and services
of the Company. The Executive acknowledges and agrees that this investment has
substantial and significant value, and the
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Company has a legitimate interest in protecting future misappropriation of this
investment by the Executive. The Executive will not disclose any Proprietary
Information to others outside the Company or use the Proprietary Information for
any unauthorized purposes without written approval by an officer of the Company,
either during or after his employment, unless and until such Proprietary
Information has become public knowledge without the fault of the Executive. The
Executive agrees that all files, letters, memoranda, reports, records, data,
sketches, drawings, notebooks, notes, specifications, programs, computer program
listings, or other written, photographic, or other tangible material containing
Proprietary Information, whether created by the Executive or others, which comes
into his custody or possession is the exclusive property of the Company, to be
used by the Executive only in the performance of his duties for the Company.
19. The breach of any provision of this Agreement by the Company shall not
excuse Executive's compliance with his obligations in Paragraph 18 above.
NON-COMPETITION; NON-INTERFERENCE
20. During the Employment Period and for a period of twelve (12) months
after that employment is terminated by the Company or the Executive for any
reason other than the cessation of business by the Company pursuant to a filing
for bankruptcy protection or liquidation initiated by the Company, the Executive
will not, without the Company's prior written approval, directly or indirectly:
(a) recruit, solicit or knowingly induce, or attempt to
recruit, solicit or induce, any employee, consultant, contract or temporary
worker of the Company to terminate his or her employment or consulting
relationship with, or otherwise cease his or her relationship with, the Company;
(b) solicit, contact, communicate with any person, company or
business that was a supplier or prospective supplier, customer or prospective
customer of the Company, and that the Executive personally solicited, contacted,
communicated with or accepted business from while he was an employee of the
Company at any time during the twelve (12) months preceding termination of this
Employment Agreement, for the purpose of distributing, marketing or selling any
product or service or the equivalent of any product or service developed,
produced, distributed, marketed or sold by the Company; or
(c) engage (whether for compensation or without compensation)
as an individual proprietor, partner, stockholder, officer, employee, director,
joint venturer, investor, lender, or in any other capacity whatsoever (otherwise
than as the holder of not more than five percent (5%) of the total outstanding
stock of a publicly-held company), in any business which provides products or
services being sold, licensed or provided (as the case may be) by the Company on
the date of termination of the Executive's employment by the Company or under
development by the Company for commercial release, sale or licensing within six
months after the Executive's termination of employment.
21. The Executive acknowledges and agrees that in exchange for the
execution of the noncompetition and non-interference agreements set forth at
Paragraph 20, the Executive will receive
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substantial, valuable consideration including: (i) Proprietary Information; (ii)
employment; (iii) continued employment; and (iv) compensation and benefits as
described above in Paragraphs 1-8. The Executive acknowledges and agrees that
this constitutes fair and adequate consideration for the execution of the
noncompetition and non-interference agreements set forth in Paragraph 20.
22. The restrictions contained in Paragraph 20 are necessary for the
protection of the business and goodwill of the Company and are considered by the
Executive to be reasonable for this purpose. The Executive agrees that any
breach of Paragraph 20 will cause the Company substantial and irrevocable damage
which cannot be accurately calculated in monetary damages and, therefore, the
Executive acknowledges and agrees that the Company shall be entitled to
immediate injunctive relief, either by temporary or permanent injunction, to
prevent such a violation. The Executive acknowledges and agrees that this
injunctive relief shall be in addition to any other legal or equitable relief to
which the Company would be entitled. The Executive acknowledges and agrees that
the non-competition and non-interference agreements set forth in Paragraph 20
are ancillary to an otherwise enforceable agreement and supported by independent
valuable consideration. If any restriction set forth in this Paragraph is found
by any court of competent jurisdiction to be unenforceable because it extends
for too long a period of time or over too great a range of activities or in too
broad a geographic area, it will be interpreted to extend only over the maximum
period of time, range of activities or geographic areas to which it may be
enforceable.
23. The breach of any provision of this Agreement by the Company shall not
excuse Executive's compliance with his obligations in Paragraph 20 above.
TERMINATION
24. The Executive acknowledges and agrees that the Board of Directors
of the Company reserves the right to terminate this Executive Agreement without
cause in the sole discretion of the Board of Directors, by providing the
Executive with written notice of the termination, delivered in person, or by
registered U.S. mail to the Executive's last known address reflected in the
Company's personnel records. Such notice shall be effective upon personal
delivery or mailing. In the event that the Executive is terminated without cause
by the Company, the Company shall pay the Executive the Severance Compensation
and the Executive shall remain bound by the non-disclosure, noncompetition and
non- interference provisions of Paragraphs 18 and 20 of this Agreement.
25. The Company may terminate the Executive's employment with the
Company upon notice for Cause, whereupon all compensation and benefits under
this Agreement will cease effective as of the date of termination. For purposes
of this Agreement, "Cause" shall mean:
(a) the conviction of the Executive for, or the entry of a
pleading of guilty or nolo contendere by the Executive with respect to, any
felony offense or any crime involving money, other property of the Company or
moral turpitude;
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(b) any act of the Executive involving fraud or embezzlement;
(c) the failure of the Executive to substantially perform the
reasonable directives of the Company's Board of Directors which will not have
been corrected within 45 days after the Board of Directors, by majority vote,
will have notified the Executive in writing of its intention to terminate the
Executive's employment in accordance with the provisions of this Paragraph 25;
(d) any material breach of Paragraphs 12-23 of this Agreement
by the Executive which will not have been corrected within 45 days after the
Board of Directors, by majority vote, will have notified the Executive in
writing of its intention to terminate the Executive's employment in accordance
with the provisions of this Paragraph 25; or
(e) the Board unanimously determines and provides written
notice to the effect that the Executive has engaged in grossly negligent
execution of his duties, and the Executive fails to cure any such deficiency
after 45 days notice.
26. The Executive may terminate his employment with the Company for any
of the reasons which the parties agree shall be deemed a termination by the
Company without Cause, whereupon the Company shall pay Severance Compensation to
the Executive as of the date of termination:
(a) any substantial diminution, or any substantial change in a
manner adverse to the Executive, of (i) his title, office or position with the
Company, (ii) his salary, bonus, or other benefits, or (iii) his duties,
responsibilities or employment condition, which will not have been corrected
within 45 days after the Executive shall have notified the Board of Directors in
writing of such breach;
(b) any material breach of this Agreement by the Company which
will not have been corrected within 45 days after the Executive will have
notified the Board of Directors in writing of such breach, including without
limitation the failure of the Company to pay the Executive any portion of his
compensation; or
(c) the Company's requiring the Executive to be based at any
office or location more than 75 miles from the Company's current main office.
27. The Executive acknowledges and agrees that in the event of the
Executive's death, this Employment Agreement will terminate immediately, without
notice, on the date of the Executive's death whereupon all compensation and
benefits under this Agreement will cease effective as of the date of death other
than compensation and benefits that had been accrued or to which the Executive
was entitled at the time of death.
28. The Executive acknowledges and agrees that this Employment
Agreement will terminate immediately, without notice, in the event the Executive
becomes physically or mentally disabled, as defined by 29 C.F.R. ss.
1630.2(g)(1), and cannot perform the essential functions of his position, with
reasonable
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accommodation, whereupon all compensation and benefits under this Agreement will
cease effective as of the date of determination of such disability other than
compensation and benefits that had been accrued or to which the Executive was
entitled at the time of the determination of such disability.
29. The Executive acknowledges and agrees that in the event of
termination of this Employment Agreement, for whatever reason, whether at the
insistence of the Executive or at the insistence of the Company, the Executive
will return to the Company within five (5) business days of the time when notice
of termination is communicated by either party, the Company Car, any and all
equipment, literature, documents, data, information, order forms, memoranda,
correspondence, customer and prospective customer lists, customer's orders,
records, cards or notes acquired, supplier and prospective supplier lists,
compiled or coming into the Executive's knowledge, possession or control in
connection with his activities as an employee of the Company as well as all
other materials received from the Company or from any of its customers, agents
or suppliers, in connection with such activities.
30. Both parties mutually agree that neither will make disparaging,
defamatory or harmful remarks, either verbally or in writing, regarding each
other during or after termination of this Agreement.
INDEMNIFICATION
31. Notwithstanding any change in the Company's Certificate of
Incorporation or By-Laws, the Company will indemnify the Executive and hold him
harmless, at a minimum in accordance with the provisions in effect as of the
date of this Agreement in the Company's Certificate of Incorporation and By-
Laws, against any losses, claims, damages, liabilities, costs, expenses
(including advancing from time to time his attorney's fees and expenses in
advance of the final disposition of any claim, action, suit, proceeding or
investigation), judgments, fines and amounts paid in settlement in connection
with any threatened or actual claim, action, suit, proceeding or investigation,
whether civil, criminal or administrative, in which the Executive is, or is
threatened to be, made a party by reason of being or having been a director or
officer of the Company or serving or having served at the request of the Company
as a director, trustee, officer, employee or agent of another corporation or of
a partnership, joint venture, trust or other enterprise, including service with
respect to an employee benefit plan, whether the basis of such proceeding is
alleged action or failure to act in an official capacity as a director, trustee,
officer employee or agent, PROVIDED that the Company will have choice of counsel
in any such action. The obligations of the Company under this Paragraph will
survive the termination of this Agreement. Notwithstanding the foregoing, the
Company will not be obligated to indemnify the Executive beyond the extent
permissible under Section 145 of the Delaware General Corporation Law and other
applicable law, including, without limitation, applicable securities law.
SEVERABILITY
32. The Executive acknowledges and agrees that each covenant and/or
provision of this Employment Agreement shall be enforceable independently of
every other covenant and/or provision. Furthermore, the Executive acknowledges
and agrees that, in the event any covenant and/or provision of
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this Employment Agreement is determined to be unenforceable for any reason, the
remaining covenants and/or provisions will remain effective, binding and
enforceable.
WAIVER; NO DUTY TO MITIGATE
33. The Executive acknowledges and agrees that the failure of the
Company to enforce any provision of this Employment Agreement shall not
constitute a waiver of that particular provision, or of any other provisions of
this Employment Agreement.
34. The Executive will not be required to mitigate the amount of any
payment contemplated by this Agreement (whether by seeking new employment or in
any other manner), nor will any such payment be reduced by any earnings that the
Executive may receive from any other source.
SUCCESSORS AND ASSIGNS
35. Subject to Paragraph 3, the Executive acknowledges and agrees that
this Employment Agreement may be assigned by the Company to any
successor-in-interest, without the notice or consent of the Executive, and shall
inure to the benefit of, and be fully enforceable by, any successor and/or
assignee.
36. The Executive acknowledges and agrees that his obligations, duties
and responsibilities under this Employment Agreement are personal and shall not
be assignable. In the event of the Executive's death or disability, this
Employment Agreement shall be enforceable by the Executive's estate, executors
and/or legal representatives, to the extent provided herein.
ARBITRATION; CHOICE OF LAW
37. Both parties acknowledge and agree that the law of Massachusetts
will govern the validity, interpretation and effect of this Employment
Agreement, and any other dispute relating to, or arising out of, the employment
relationship between the Company and the Executive. The parties agree that any
controversy, claim or dispute arising out of or relating to Executive's
employment hereunder, or the termination of such employment will be settled by
arbitration before a mutually selected arbitrator to be held in the City of
Boston, Massachusetts in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction, and the parties consent to
the non-exclusive jurisdiction of the courts of Massachusetts for this purpose.
The arbitrator will determine whether and which party or parties will be
entitled to costs and expenses (including reasonable attorneys' fees) resulting
from such dispute or controversy. HOWEVER, if such controversy, claim or dispute
involves a claim for injunctive relief under the non- disclosure, noncompetition
or non-interference provisions at Paragraphs 18 and 20, both the Company and the
Executive shall have the express right to file and litigate such action in state
or federal court and disregard the arbitration provisions of this Paragraph 37.
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MODIFICATION
38. Both parties acknowledge and agree that this Employment Agreement
constitutes the complete and entire agreement between the parties; that the
parties have executed this Employment Agreement based upon the express terms and
provisions set forth herein; that the parties have not relied on any
representations, oral or written, which are not set forth in this Employment
Agreement; that no previous agreement, either oral or written, shall have any
effect on the terms or provisions of this Employment Agreement; and that all
previous agreements, either oral or written, are expressly superseded and
revoked by this Employment Agreement.
39. Both parties acknowledge and agree that the covenants and/or
provisions of this Employment Agreement may not be modified by any subsequent
agreement unless the modifying agreement: (i) is in writing; (ii) contains an
express provision referencing this Employment Agreement; (iii) is signed and
executed by the Chairman of the Board of the Company, as a representative of the
Company; (iv) is signed by the Executive; and (v) is approved by the Board of
Directors of the Company.
LEGAL CONSULTATION
40. The Executive and the Company acknowledge and agree that both
parties have been afforded a reasonable opportunity to review this Employment
Agreement with legal counsel prior to executing the agreement.
ENTERED INTO AS OF THIS ____ DAY OF JANUARY 2000.
EXECUTIVE
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Xxxxxxx X. Xxxxxxxx
AUTHORISZOR INC.
By:
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Name:
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Title:
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