EXHIBIT 10.6
STAMPMASTER, INC.
EMPLOYMENT AGREEMENT
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This Employment Agreement (the "Agreement") is dated as of January 20,
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1998, by and between Xxxxx Xxxxxx ("Employee") and StampMaster, Inc., a Delaware
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corporation (the "Company").
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1. Term of Agreement. Subject to the provisions hereof, including Section 3,
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this Agreement shall commence on the date hereof and continue until January 20,
2002 unless properly terminated in accordance with Section 5.
2. Duties.
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a. Position. Employee shall initially be employed as President and Chief
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Executive Officer and will report to the Company's Board of Directors. Employee
shall also serve as Chairman of the Company's Board of Directors. Employee
acknowledges and agrees that the Company intends to recruit a Chief Executive
Officer that would replace Employee as Chief Executive Officer and that upon the
successful hiring of a Chief Executive Officer, Employee shall resign as Chief
Executive Officer and shall serve as Chief Technology Officer.
b. Obligations to the Company. Employee agrees to the best of his ability
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and experience that he will at all times loyally and conscientiously perform all
of the duties and obligations required of and from Employee pursuant to the
express and implicit terms hereof, and to the reasonable satisfaction of the
Company. During the term of Employee's employment relationship with the Company,
and except as otherwise specified herein, Employee further agrees that he will
devote all of his business time and attention to the business of the Company,
the Company will be entitled to all of the benefits and profits arising from or
incident to all such work services and advice, Employee will not render
commercial or professional services of any nature to any person or organization,
whether or not for compensation, without the prior written consent of the
Company's Board of Directors, and Employee will not directly or indirectly
engage or participate in any business that is competitive in any manner with the
business of the Company. Employee will comply with and be bound by the Company's
operating policies, procedures and practices from time to time in effect during
the term of Employee's employment.
3. At-Will Employment. The Company and Employee acknowledge that Employee's
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employment is and shall continue to be at-will, as defined under applicable law,
and that Employee's employment with the Company may be terminated by either
party at any time for any or no reason, with or without Cause. If Employee's
employment terminates for any or no reason, Employee shall not be entitled to
any payments, benefits, damages, award or compensation other than as provided in
this Agreement.
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4. Compensation. For the duties and services to be performed by Employee
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hereunder, the Company shall pay Employee, and Employee agrees to accept, the
salary, stock options, bonuses and other benefits described below in this
Section 4.
a. Salary. Until the sale by the Company of shares of its Series B
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Preferred Stock (a "Series B Financing"), Employee shall receive a monthly
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salary of $5,000, which is equivalent to $60,000 on an annualized basis. After
the Series B Financing, if Employee remains employed as Chief Executive Officer
of the Company, Employee's salary shall be increased to the rate paid by
companies of similar size in the software industry for employees of comparable
position and experience (the "Market Rate"), as reasonably determined in good
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faith by the Company's Board of Directors, for so long as Employee remains Chief
Executive Officer of the Company. If at any time after the Series B Financing,
Employee is not employed as Chief Executive Officer of the Company, but
continues to serve as an employee of the Company, Employee's salary shall be
adjusted to the Market Rate for the new position, as reasonably determined in
good faith by the Company's Board of Directors. Employee's monthly salary will
be payable in two (2) equal biweekly installments pursuant to the Company's
normal payroll practices.
b. Stock Grant, Stock Options and Other Incentive Programs. Employee
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shall be eligible to participate in any stock option or other incentive programs
available to officers or employees of the Company.
In connection with the commencement of Employee's employment, the Board
of Directors has authorized the sale to Employee of 1,448,397 shares of the
Company's Common Stock (the "Shares") at the price of $.02 per share pursuant to
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that certain Common Stock Purchase Agreement dated January 20, 1998 between the
Company and Employee. The Shares shall vest as follows: 50% of the shares will
initially be subject to the Company's right of repurchase on termination of
employment or consulting relationship and 1/48 of the shares shall be released
from the Company's right of repurchase at the end of each month after January
20, 1998. Vesting will, of course, depend on Employee's continued employment
with the Company. Subject to the discretion of the Board of Directors, Employee
may be eligible to receive additional grants of stock options or purchase rights
from time to time in the future, on such terms and subject to such conditions as
the Board of Directors shall determine as of the date of any such grant.
c. Vesting on Termination. Notwithstanding the provisions of Sections
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4(b) above, in the event that Employee's employment is terminated by the Company
or a successor to the Company without Cause under Section 5(a)(ii) below or as a
result of a Constructive Termination under Section 5(a)(iv) below, 100% of the
Shares that have not yet become vested shall become fully vested on the
effective date of such termination of employment.
d. Additional Benefits. Employee will have the ability to participate in
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the Company's employee benefit plans of general application, including, without
limitation, those plans covering medical and disability insurance in accordance
with the rules established for individual participation in any such plan and
under applicable law. Employee will be eligible for vacation and sick leave in
accordance with the policies in effect at the Company during the term
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of this Agreement and will receive such other benefits as the Company generally
provides to its other employees of comparable position and experience.
e. Reimbursement of Expenses. Employee shall be authorized to incur on
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behalf and for the benefit of, and shall be reimbursed by, the Company for
reasonable expenses, provided that such expenses are substantiated in accordance
with Company policies.
5. Termination of Employment and Severance Benefits.
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a. Termination of Employment. This Agreement may be terminated upon
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notice of one or more of the following events:
(i) The Company's determination in good faith that it is terminating
Employee for Cause (as defined in Section 6 below) ("Termination for
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Cause");
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(ii) The Company's determination that it is terminating Employee
without Cause, which determination may be made by the Company at any time
at the Company's sole discretion, for any or no reason (Termination Without
Cause);
(iii) The effective date of a written notice sent to the Company from
Employee stating that Employee is electing to terminate his employment with
the Company ("Voluntary Termination");
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(iv) In the event a Constructive Termination (as defined in Section
5(b)(iv) below) has occurred; or
(v) Following Employee's death or Disability (as defined in Section 7
below).
x. Xxxxxxxxx Benefits. Employee shall be entitled to receive severance
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benefits upon termination of employment only as set forth in this Section 5(b):
(i) Voluntary Termination. If Employee's employment terminates by
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Voluntary Termination, then Employee shall not be entitled to receive
payment of any severance benefits. Employee will receive payment(s) for all
salary and unpaid vacation accrued as of the date of Employee's termination
of employment and Employee's benefits will be continued under the Company's
then existing benefit plans and policies in accordance with such plans and
policies in effect on the date of termination and in accordance with
applicable law.
(ii) Involuntary Termination. If Employee's employment is terminated
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under Section 5(a)(ii) or 5(a)(iv) above (such termination, an "Involuntary
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Termination"), prior to the Series B Financing, Employee shall be entitled
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to receive payment of severance benefits in the amount of $75,000, payable
at the rate of $8,333.33 per month in accordance with the Company's
standard payroll policies, for a period of nine (9) months after the
effective date of such termination (the "Severance Period"). If Employee's
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employment is terminated after the Series B Financing as a result of an
Involuntary
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Termination, Employee shall be entitled to receive payment of severance
benefits equal to Employee's then regular monthly salary for the Severance
Period. Such payments shall be made ratably over the Severance Period
according to the Company's standard payroll policies. Health insurance
benefits with the same coverage provided to Employee prior to the
termination (e.g. medical, dental, optical, mental health) and in all other
respects significantly comparable to those in place immediately prior to
the termination will be provided at the Company's cost over the Severance
Period. Any unvested stock options, warrants, or shares of restricted stock
held by Employee as of the date of Employee's termination of employment as
a result of an Involuntary Termination shall immediately vest in full or
the Company's right of repurchase shall immediately lapse with respect to
all of such securities.
(iii) Termination for Cause. If Employee's employment is terminated
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for Cause, then Employee shall not be entitled to receive payment of any
severance benefits. Employee will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Employee's termination of
employment and Employee's benefits will be continued under the Company's
then existing benefit plans and policies in accordance with such plans and
policies in effect on the date of termination and in accordance with
applicable law.
(iv) Constructive Termination. A "Constructive Termination" shall be
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deemed to occur if Employee is asked by the Company to relocate to a
facility or location more than 50 miles from the Company's current location
and within the 30-day period thereafter Employee elects to terminate his or
her employment voluntarily and such request is not revoked by the Company
during such 30-day period.
(v) Termination by Reason of Death or Disability. In the event that
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Employee's employment with the Company terminates as a result of Employee's
death or Disability (as defined in Section 7 below), Employee or Employee's
estate or representative will receive all salary and unpaid vacation
accrued as of the date of Employee's death or Disability and any other
benefits payable under the Company's then existing benefit plans and
policies in accordance with such plans and policies in effect on the date
of death or Disability and in accordance with applicable law.
6. Definition of Cause. For purposes of this Agreement, "Cause" for
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Employee's termination will exist at any time after the happening of one or more
of the following events: "Cause" shall mean (i) Employee's gross negligence or
willful misconduct in the performance of Employee's duties to the Company; (ii)
Employee's repeated unexplained or unjustified absence from the Company; (iii) a
material and willful violation of any federal or state law by Employee; (iv)
Employee's refusal or failure to act in accordance with any specific direction
or order of the Company; (v) Employee's commission of any act of fraud with
respect to the Company or Employee's deliberate attempt to injure the Company;
(vi) conviction of a felony or a crime involving moral turpitude causing
material harm to the standing and reputation of the Company, in each case as
determined by the Board of Directors of the Company; or (vii) Employee's
incurable material breach of any element of the Company's Confidential
Information and
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Invention Assignment Agreement, including without limitation, Employee's theft
or other misappropriation of the Company's proprietary information.
7. Definition of Disability. For purposed of this Agreement, "Disability"
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shall mean that the Employee has been unable to perform his or her Company
duties as the result of his or her incapacity due to physical or mental illness,
and such inability, at least 26 weeks after its commencement, is determined to
be total and permanent by a physician selected by the Employee or the Employee's
legal representative and acceptable to the Company or its insurers (such
agreement as to acceptability not to be unreasonably withheld). Termination
resulting from Disability may only be effected after at least 30 days' written
notice by the Company of its intention to terminate the Employee's employment.
In the event that the Employee resumes the performance of substantially all of
his or her duties hereunder before the termination of his or her employment
becomes effective, the notice of intent to terminate shall automatically be
deemed to have been revoked.
8. Confidentiality Agreement. Employee shall sign, or has signed, a
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Confidential Information and Invention Assignment Agreement (the
"Confidentiality Agreement" substantially in the form attached hereto as Exhibit
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A Employee hereby represents and warrants to the Company that he has complied
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with all obligations under the Confidentiality Agreement and agrees to continue
to abide by the terms of the Confidentiality Agreement and further agrees that
the provisions of the Confidentiality Agreement shall survive any termination of
this Agreement or of Employee's employment relationship with the Company.
9. Noncompetition Covenant. Employee hereby agrees that he shall not, during
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the term of his employment pursuant to this Agreement and the Severance Period,
if any, and with respect to subsections (b) and (c) below, for a period of
twenty-four (24) months after termination of employment for any or no reason,
with or without Cause, do any of the following without the prior written consent
of the Board of Directors:
a. Compete. Carry on any business or activity (whether directly or
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indirectly, as a partner, stockholder, principal, agent, director, affiliate,
employee or consultant) which is competitive with the business conducted by the
Company (as conducted now or during the term of Employee's employment), nor
engage in any other activities that conflict with Employee's obligations to the
Company.
b. Solicit Business. Solicit or influence or attempt to influence any
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client, customer or other person either directly or indirectly, to direct his or
its purchase of the Company's products and/or services to any person, firm,
corporation, institution or other entity in competition with the business of the
Company.
c. Solicit Personnel. Solicit or influence or attempt to influence any
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person employed by the Company to terminate or otherwise cease his employment
with the Company or become an employee of any competitor of the Company. These
subsections 9(b) and 9(c) are to be read in conjunction with Section 7 of the
Confidential Information and Invention Assignment Agreement executed by
Employee.
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10. Limitation On Payments. In the event that the severance and other benefits
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provided for in this Agreement or otherwise payable to the Employee (i)
constitute "parachute payments" within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the "Code"), and (ii) but for this
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Section 10, would be subject to the excise tax imposed by Section 4999 of the
Code (or any corresponding provisions of state income tax law), then the
Employee's severance benefits under Section 5(b) shall be either
a. delivered in full; or
b. delivered as to such lesser extent which would result in no portion of
such severance benefits being subject to excise tax under Section 4999 of the
Code, whichever of the foregoing amounts, taking into account the applicable
federal, state and local income taxes and the excise tax imposed by Section
4999, results in the receipt by the Employee on an after-taxbasis, of the
greater amount of severance benefits, notwithstanding that all or some portion
of such severance benefits may be taxable under Section 4999 of the Code. Unless
the Company and the Employed otherwise agree in writing, any determination
required under this Section 10 shall be made in writing by the Accountants,
whose determination shall be conclusive and binding upon the Employee and the
Company for all purposes. For purposes of making the calculations required by
this Section 10, the Accountants may make reasonable assumptions and
approximations concerning applicable taxes and may rely on reasonable, good
faith interpretations concerning the application of Sections 280G and 4999 of
the Code. The Company and the Employee shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make a determination under this Section. The Company shall bear all costs the
Accountants may reasonably incur in connection with any calculations
contemplated by this Section 10. In the event that subsection (a) above applies,
then Employee shall be responsible for any excise taxes imposed with respect to
such severance and other benefits. In the event that subsection (b) above
applies, then each benefit provided hereunder shall be proportionately reduced
to the extent necessary to avoid imposition of such excise taxes.
11. Conflicts. Employee represents that his performance of all the terms of
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this Agreement will not breach any other agreement to which Employee is a party.
Employee has not, and will not during the term of this Agreement, enter into any
oral or written agreement in conflict with any of the provisions of this
Agreement. Employee further represents that he is entering into or has entered
into an employment relationship with the Company of his own free will and that
he has not been solicited as an employee in any way by the Company.
12. Successors. Any successor to the Company (whether direct or indirect and
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whether by purchase, lease, merger, consolidation, liquidation or otherwise) to
all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agrees expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
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13. Miscellaneous Provisions.
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a. No Duly to Mitigate. Employee shall not be required to mitigate the
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amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor, except as otherwise provided in this
Agreement, shall any such payment be reduced by any earnings that Employee may
receive from any other source.
b. Amendments and Waivers. Any term of this Agreement may be amended or
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waived only with the written consent of the parties.
c. Sole Agreement. This Agreement, including any Exhibits hereto,
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constitutes the sole agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof.
d. Notices. Any notice required or permitted by this Agreement shall be
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in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS , or forty-eight (48) hours after being deposited in the U.S.
mail as certified or registered mail with postage prepaid, if such notice is
addressed to the party to be notified at such party's address as set forth below
or as subsequently modified by written notice.
e. Choice of Law. The validity, interpretation, construction and
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performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
f. Severability. If one or more provisions of this Agreement are held to
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be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (a) such
provision shall be excluded from this Agreement, (b) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (c) the
balance of the Agreement shall be enforceable in accordance with its terms.
g. Counterparts. This Agreement may be executed in counterparts, each of
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which shall be deemed an original, but all of which together will constitute one
and the same instrument.
h. Arbitration. Any dispute or claim arising out of-or in connection with
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this Agreement will be finally settled by binding arbitration in Los Angeles,
California in accordance with the rules of the American Arbitration Association
by one (1) arbitrator appointed in accordance with said rules. The arbitrator
shall apply California law, without reference to rules of conflicts of law or
rules of statutory arbitration, to the resolution of any dispute. Judgment on
the award rendered by the arbitrator may be entered in any court having
jurisdiction thereof Notwithstanding the foregoing, the parties may apply to any
court of competent jurisdiction for preliminary or interim equitable relief, or
to compel arbitration in accordance with this paragraph, without breach of this
arbitration provision. This Section 13(h) shall not apply to the
Confidentiality Agreement.
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i. Advice of Counsel. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES THAT, IN
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EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK THE ADVICE
OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE TERMS AND
PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED AGAINST ANY
PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
[Signature Page Follows]
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The parties have executed this Agreement the date first written above.
STAMPMASTER, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Title:
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Address: 0000 Xxxx Xxxxxxxx Xxxx Xxxx.
Xxxxx 000
Xxxxxxxx Xxxxxxx. XX 00000
XXXXX XXXXXX
Signature: /s/ Xxxxx Xxxxxx
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Address: 000 Xxxxxxxx Xxxxxx Xx
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Xxxxxxxx Xxxxxxx, XX 00000
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The parties have executed this Agreement the date first written above.
STAMPMASTER, INC.
By: /s/ Xxxxxx X. Xxxxxx
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Title:
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Address: 0000 Xxxx Xxxxxxxx Xxxx Xxxx.
Xxxxx 000
Xxxxxxxx Xxxxxxx. XX 00000
XXXXX XXXXXX
Signature: /s/ Xxxxx Xxxxxx
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Address: 000 Xxxxxxxx Xxxxxx Xx
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Xxxxxxxx Xxxxxxx, XX 00000
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