EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
September 20, 2005 and shall be effective as of September 20, 2005 (the
"Effective Date") by and between Digicorp, a Utah corporation, with an office
located at 000 Xxxxxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxx Xxxxxx, Xxxxxxxxxx 00000
(the "Company"), and Xxxxxx Xxxxx, an individual, with an address 0000 Xxxxxxx
Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000 ("Individual").
WHEREAS, the Company is in the business of internet and digital media holdings
company and incubator; and
WHEREAS, Individual has had experience in the operations of businesses doing
digital video production and pre-production and internet and new media turn-key,
technology sourcing and development; and
WHEREAS, the Company desires to retain the services of Individual; and
WHEREAS, Individual is willing to be employed by the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
parties agree as follows:
1. Employment. Individual is hereby employed and engaged to serve the Company as
the Chief Technology Officer of the Company, or such additional titles as the
Company shall specify from time to time, and Individual does hereby accept, and
Individual hereby agrees to such engagement and employment.
2. Duties. Individual shall be responsible for the overall development and
operations of the Company's in-house technology, business technology operations
and internet platforms. In addition, Individual's duties shall be such duties
and responsibilities as the Company shall specify from time to time, and shall
entail those duties customarily performed by the Chief Technology Officer of a
company with a sales volume and number of employees commensurate with those of
the Company. Individual shall have such authority, discretion, power and
responsibility, and shall be entitled to office, secretarial and other
facilities and conditions of employment, as are customary or appropriate to his
position. Individual shall diligently and faithfully execute and perform such
duties and responsibilities, subject to the general supervision and control of
the Company's chief executive officer. Individual shall be responsible and
report only to the Company's chief executive officer. The Company's chief
executive officer, in its sole and absolute discretion, shall determine
Individual's duties and responsibilities and may assign or reassign Individual
to such duties and responsibilities as it deems in the Company's best interest.
Individual shall devote his full-time attention, energy, and skill during normal
business hours to the business and affairs of the Company and shall not, during
the Employment Term, as that term is defined below, be actively engaged in any
other business activity, except with the prior written consent of the Company's
board of directors.
Nothing in this Agreement shall preclude Individual from devoting reasonable
periods required for:
(a) serving as a director or member of a committee of any organization
or corporation involving no conflict of interest with the interests
of the Company;
(b) serving as a consultant in his area of expertise (in areas other
than in connection with the business of the Company), to government,
industrial, and academic panels where it does not conflict with the
interests of the Company; and
(c) managing his personal investments or engaging in any other
non-competing business; provided that such activities do not
materially interfere with the regular performance of his duties and
responsibilities under this Agreement as determined by the Company.
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3. Best Efforts of Individual. During his employment hereunder, Individual
shall, subject to the direction and supervision of the Company's chief executive
officer, devote his full business time, best efforts, business judgment, skill,
and knowledge to the advancement of the Company's interests and to the discharge
of his duties and responsibilities hereunder. Notwithstanding the foregoing,
nothing herein shall be construed as preventing Individual from investing his
assets in any business.
4. Employment Term. Unless terminated pursuant to Section 13 of this Agreement,
the term of this Agreement shall commence as of the Effective Date of this
Agreement and shall continue for a term of thirty-six (36) months (the "Initial
Term"), and shall be automatically renewed for successive one (1) year terms
(the "Renewal Term") unless a party hereto delivers to the other party written
notice of such party's intention not to renew at least thirty (30) days prior to
the end of the Initial Term or the applicable Renewal Term, as the case may be
(the terms "Initial Term" and "Renewal Term" will collectively hereinafter be
referred to as the "Employment Term").
5. Compensation of Individual.
(a) Base Compensation. As compensation for the services provided by
Individual under this Agreement, the Company shall pay Individual an
annual salary of Ninety-five Thousand Dollars ($95,000) plus Forty-five
Thousand Dollars ($45,000) in a restricted stock grant during each year of
the Employment Term, all grants vesting quarterly each year. The
compensation of Individual under this Section shall be paid in accordance
with the Company's usual payroll procedures.
(b) Bonus. In addition to the above base compensation, Individual shall be
eligible to receive an annual bonus determined by the chief executive
officer based on the performance of the Company.
(c) Stock and Stock Options. Individual shall also be eligible to receive
shares of the Company's authorized stock and options to purchase shares of
the Company's authorized stock from time to time as determined by the
chief executive officer, but specifically contained hereto as two hundred
fifty thousand (250,000) options, vesting annually over 3 years (i.e.,
83,334 vesting on September 20, 2005, 83,333 vesting on September 20,
2006, and 83,333 vesting on September 20, 2007), at a strike price of
twenty-five cents ($0.25).
(d) Buy-back. In the first year of the employment term, if Individual
cannot sell stock in the open market, the Company will purchase fifty
thousand ($50,000) in stock back from Individual.
6. Voting/Veto Rights. Individual shall have and obtain the veto rights for
three (3) years to (i) veto a chief executive officer candidate as replacement
to Xxxxxx "Xxxx" Xxxx, III and (ii) veto a decision to sell the Company, or any
of its core assets or technologies related to iCode as outlined in the Asset
Purchase Agreement being executed concurrently herewith, in the event the
Company sells for less than fifty million dollars ($50,000,000). If termination
occurs for any reason, Individual will forfeit the right to this veto power.
7. Benefits. Individual shall also be entitled to participate in any and all
Company benefit plans, from time to time, in effect for employees of the
Company. Such participation shall be subject to the terms of the applicable plan
documents and generally applicable Company policies.
8. Vacation, Sick Leave and Holidays. Individual shall be entitled to three (3)
weeks of paid vacation, with such vacation to be scheduled and taken in
accordance with the Company's standard vacation policies. In addition,
Individual shall be entitled to such sick leave and holidays at full pay in
accordance with the Company's policies established and in effect from time to
time.
9. Business Expenses. The Company shall promptly reimburse Individual for all
reasonable out-of-pocket business expenses incurred in performing Individual's
duties and responsibilities hereunder in accordance with the Company's policies,
provided Individual promptly furnishes to the Company adequate records of each
such business expense.
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10. Location of Individual's Activities. Individual's principal place of
business in the performance of his duties and obligations under this Agreement
shall be at a place to be mutually determined by the chief executive officer and
Individual. Notwithstanding the preceding sentence, Individual will engage in
such travel and spend such time in other places as may be necessary or
appropriate in furtherance of his duties hereunder.
11. Confidentiality. Individual recognizes that the Company has and will have
business affairs, products, future plans, trade secrets, customer lists, and
other vital information (collectively "Confidential Information") that are
valuable assets of the Company. Individual agrees that he shall not at any time
or in any manner, either directly or indirectly, divulge, disclose, or
communicate in any manner any Confidential Information to any third party
without the prior written consent of the Company's board of directors.
Individual will protect the Confidential Information and treat it as strictly
confidential.
12. Non-Competition. Individual acknowledges that he has gained, and will gain
extensive knowledge in the business conducted by the Company and has had, and
will have, extensive contacts with customers of the Company. Accordingly,
Individual agrees that he shall not compete directly or indirectly with the
Company, anywhere in Los Angeles County, either during the Employment Term or
during the three (3) year period immediately after the termination of
Individual's employment under Section 13 and shall not, during such period, make
public statements in derogation of the Company. For the purposes of this Section
12, competing directly or indirectly with the Company shall mean engaging,
directly or indirectly, as principal owner, officer, partner, consultant,
advisor, or otherwise, either alone or in association with others, in the
operation of any entity engaged in a business similar to that of the Company's
which uses the iCodemedia or similar suite of websites and Internet properties
to be sold to Company by Individual.
13. Termination. Notwithstanding any other provisions hereof to the contrary,
Individual's employment hereunder shall terminate under the following
circumstances:
(a) Voluntary Termination by Individual. Individual shall have the right
to voluntarily terminate this Agreement and his employment hereunder at
any time during the Employment Term.
(b) Voluntary Termination by the Company. The Company shall have the right
to voluntarily terminate this Agreement and Individual's employment
hereunder at any time after the Employment Term.
(c) Termination for Cause. The Company shall have the right to terminate
this Agreement and Individual's employment hereunder at any time for
cause. As used in this Agreement, "cause" shall mean refusal by Individual
to implement or adhere to lawful policies or directives of the Company's
board of directors, breach of this Agreement, Individual's conviction of a
felony, other conduct of a criminal nature that may have a material
adverse impact on the Company's reputation, breach of fiduciary duty or
the criminal misappropriation by Individual of funds from or resources of
the Company. Cause shall not be deemed to exist unless the Company shall
have first given Individual a written notice thereof specifying in
reasonable detail the facts and circumstances alleged to constitute
"cause" and ten (10) days after such notice such conduct has, or such
circumstances have, as the case may be, not entirely ceased and not been
entirely remedied.
(d) Termination Upon Death or for Disability. This Agreement and
Individual's employment hereunder shall automatically terminate upon
Individual's death or upon written notice to Individual and certification
of Individual's disability by a qualified physician or a panel of
qualified physicians if Individual becomes disabled beyond a period of
twelve (12) months and is unable to perform the duties contain in this
Agreement.
(e) Effect of Termination. In the event that this Agreement and
Individual's employment is voluntarily terminated by Individual pursuant
to Section 13(a), or in the event the Company voluntarily terminates this
Agreement pursuant to Section 13(b) or for cause pursuant to Section
13(c), all obligations of the Company and all duties, responsibilities and
obligations of Individual under this Agreement shall cease. Upon such
termination pursuant to Section 13(b) (which would include a change in
control caused by any of the events enumerated in the last sentence of
this Section 13(e)), the Company shall (i) pay Individual a stock and cash
lump sum equal to (x) all accrued base salary through the date of
termination plus all accrued vacation pay and bonuses, if any, plus (y)
five hundred thousand (500,000) shares of the Company's stock,
unrestricted, plus (z) Two Hundred Fifty Thousand Dollars ($250,000) as
severance compensation. In the event this Agreement is terminated pursuant
to Section 13(a) or 13(c), Individual shall not be entitled to any
compensation pursuant to Section 5 for the period between the effective
termination date to the end of the Employment Term pursuant to Section 4,
nor will Individual receive any unvested options, milestone options or
bonuses. In the event of a merger, consolidation, sale, or change of
control, the Company's rights hereunder shall be assigned to the surviving
or resulting company, which company shall then honor this Agreement with
Individual.
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The obligations set forth in Sections 11, 12 and 18 of this Agreement are
intended to survive the termination of Individual's employment with Company.
14. Resignation as Officer. In the event that Individual's employment with the
Company is terminated for any reason whatsoever, Individual agrees to
immediately resign as an Officer and/or Director of the Company, if applicable,
and any related entities. For the purposes of this Section 14, the term
"Company" shall be deemed to include subsidiaries, parents, and affiliates of
the Company.
15. Governing Law, Jurisdiction and Venue. This Agreement shall be governed by
and construed in accordance with the laws of the State of California without
giving effect to any applicable conflicts of law provisions.
16. Business Opportunities. During the Employment Term, Individual agrees to
bring to the attention of the Company's chief executive officer all written
business proposals that come to Individual's attention and all business or
investment opportunities of whatever nature that are created or devised by
Individual and that relate to areas in which the Company conducts business and
might reasonably be expected to be of interest to the Company or any of its
subsidiaries.
17. Employee's Representations and Warranties. Individual hereby represents and
warrants that he is not under any contractual obligation to any other company,
entity or individual that would prohibit or impede Individual from performing
his duties and responsibilities under this Agreement and that he is free to
enter into and perform the duties and responsibilities required by this
Agreement. Individual hereby agrees to indemnify and hold the Company and its
officers, directors, employees, shareholders and agents harmless in connection
with the representations and warranties made by Individual in this Section 17.
18. Indemnification.
(a) The Company agrees that if Individual is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was a director, officer or employee of
the Company or is or was serving at the request of the Company as a
director, officer, member, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether or not the basis of such
Proceeding is Individual's alleged action in an official capacity while
serving as a director, officer, member, employee or agent, Individual
shall be indemnified and held harmless by the Company to the fullest
extent permitted or authorized by the Company's certificate of
incorporation or bylaws or, if greater, by the laws of the State of
California, against all cost, expense, liability and loss (including,
without limitation, attorney's fees, judgments, fines, ERISA excise taxes
or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by Individual in connection therewith, and such
indemnification shall continue as to Individual even if he has ceased to
be a director, member, employee or agent of the Company or other entity
and shall inure to the benefit of Individual's heirs, executors and
administrators. The Company shall advance to Individual to the extent
permitted by law all reasonable costs and expenses incurred by him in
connection with a Proceeding within 20 days after receipt by the Company
of a written request, with appropriate documentation, for such advance.
Such request shall include an undertaking by Individual to repay the
amount of such advance if it shall ultimately be determined that he is not
entitled to be indemnified against such costs and expenses.
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(b) Neither the failure of the Company (including its board of directors,
independent legal counsel or stockholders) to have made a determination
prior to the commencement of any proceeding concerning payment of amounts
claimed by Individual that indemnification of Individual is proper because
he has met the applicable standard of conduct, nor a determination by the
Company (including its board of directors, independent legal counsel or
stockholders) that Individual has not met such applicable standard of
conduct, shall create a presumption that Individual has not met the
applicable standard of conduct.
(c) The Company agrees to continue and maintain a directors' and officers'
liability insurance policy covering Individual to the extent the Company
provides such coverage for its other executive officers.
(d) Promptly after receipt by Individual of notice of any claim or the
commencement of any action or proceeding with respect to which Individual
is entitled to indemnity hereunder, Individual shall notify the Company in
writing of such claim or the commencement of such action or proceeding,
and the Company shall (i) assume the defense of such action or proceeding,
(ii) employ counsel reasonably satisfactory to Individual, and (iii) pay
the reasonable fees and expenses of such counsel. Notwithstanding the
preceding sentence, Individual shall be entitled to employ counsel
separate from counsel for the Company and from any other party in such
action if Individual reasonably determines that a conflict of interest
exists which makes representation by counsel chosen by the Company not
advisable. In such event, the reasonable fees and disbursements of such
separate counsel for Individual shall be paid by the Company to the extent
permitted by law.
(e) After the termination of this Agreement and upon the request of
Individual, the Company agrees to reimburse Individual for all reasonable
travel, legal and other out-of-pocket expenses related to assisting the
Company to prepare for or defend against any action, suit, proceeding or
claim brought or threatened to be brought against the Company or to
prepare for or institute any action, suit, proceeding or claim to be
brought or threatened to be brought against a third party arising out of
or based upon the transactions contemplated herein and in providing
evidence, producing documents or otherwise participating in any such
action, suit, proceeding or claim. In the event Individual is required to
appear after termination of this Agreement at a judicial or regulatory
hearing in connection with Individual's employment hereunder, or
Individual's role in connection therewith, the Company agrees to pay
Individual a sum, to be mutually agreed upon by Individual and the
Company, per diem for each day of his appearance and each day of
preparation therefor.
19. Notices. All demands, notices, and other communications to be given
hereunder, if any, shall be in writing and shall be sufficient for all purposes
if personally delivered, sent by facsimile or sent by United States mail to the
address below or such other address or addresses as such party may hereafter
designate in writing to the other party as herein provided.
Company: Digicorp Individual: Xxxxxx Xxxxx
000 Xxxxxxxx Xxxx., Xxxxx 0000 0000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxx, XX 00000 Xxx Xxxxxxx, XX 00000
Fax: (000) 000-0000 Cell: (000) 000-0000
Phone: (000) 000-0000
20. Assignment; Ratification of Agreement. No right or obligation under this
Agreement may be assigned or delegated by either party without the prior written
consent of the other party, and any purported assignment or delegation of any
such right or obligation without such consent shall be null and void.
21. Inventions. Individual hereby sells, transfers and assigns to the Company,
or to any person or entity designated by the Company, all of the entire right,
title and interest of Individual in an to all inventions, ideas, disclosures and
improvements, whether patented or unpatented, and copyrightable material, made
or conceived by Individual, solely or jointly, or in whole or in part, during
the terms hereof, which (i) relate to methods, apparatus, designs, products,
processes or devices sold, leased, used or under construction or development by
the Company or any subsidiary or affiliate, or (ii) otherwise relate to or
pertain to the business, functions, or operations of the Company or any
subsidiary or affiliate, or (iii) arise (wholly or partly, directly or
indirectly) from the efforts of Individual during the term hereof. Individual
shall communicate promptly and disclose to the Company, in such form as the
Company requests, all information, details, and data pertaining to the
aforementioned requests, all information, details and data pertaining to the
aforementioned inventions, ideas, disclosures, and improvements; and, whether
during the term hereof or thereafter, Individual shall execute and deliver to
the Company such formal transfers and assignments and such other papers and
documents as may reasonably be required of him to permit the Company or any
person or entity designated by the Company to file and prosecute the patent
applications and, as to copyrightable material, to obtain copyright thereon. Any
invention by Individual within one (1) year following the termination of this
Agreement shall be deemed to fall within the provisions of this paragraph unless
proved by Individual to have been first conceived and made by him following such
termination.
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22. Entire Agreement. This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other agreement,
whether oral or written. This Agreement supersedes any prior written or oral
agreements between the parties. This Agreement may be modified or amended, if
the amendment is made in writing and is signed by both parties. This Agreement
is for the unique personal services of Individual and is not assignable or
delegable, in whole or in part, by Individual. This Agreement may be assigned or
delegated, in whole or in part, by the Company and, in such case, shall be
assumed by and become binding upon the person, firm, company, corporation or
business organization or entity to which this Agreement is assigned. The
headings contained in this Agreement are for reference only and shall not in any
way affect the meaning or interpretation of this Agreement. If any provision of
this Agreement shall be held to be invalid or unenforceable for any reason, the
remaining provisions shall continue to be valid and enforceable. The failure of
either party to enforce any provision of this Agreement shall not be construed
as a waiver or limitation of that party's right to subsequently enforce and
compel strict compliance with every provision of this Agreement. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument
and, in pleading or proving any provision of this Agreement, it shall not be
necessary to produce more than one of such counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
Company: Digicorp, a Utah corporation INDIVIDUAL:
By: /s/ Xxxxxx Ault____________________ /s/ Xxxxxx Xxxxx
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Name: Xxxxxx "Xxxx" Xxxx, III Xxxxxx Xxxxx
Title: Chairman and Chief Executive Officer
