EMPLOYMENT AGREEMENT
EXHIBIT
10.26
Employment
Agreement (the “Agreement”), dated as of July 24, 2006, by and between AeroGrow
International, Inc., a Nevada corporation (the “Company”), and Xxxxxx Xxx
Xxxxxxx (“Employee”).
In
consideration of the promises and conditions contained herein, the parties
hereto agree as follows:
Section
1. Employment.
The
Company hereby agrees to employ Employee, and Employee hereby accepts employment
by the Company effective as of the date of this Agreement (the “Commencement
Date”), upon the terms and subject to the conditions hereinafter set
forth.
Section
2. Duties.
Employee
shall serve as the Chief Marketing Officer of the Company. Employee will perform
the duties attendant to his executive position with the Company under the
direction of the Chief Executive Officer and the Board of Directors of the
Company.
Section
3. Term.
Unless
Employee's employment hereunder is terminated earlier pursuant
to Section 7 of this Agreement, Employee's employment hereunder shall begin
on
July
1, 2006,
and shall expire on the last day of the twenty fourth (24th)
month
(calculated from the first day of the month following execution of this
agreement) (the initial “Contract Term”), provided that upon the expiration of
the initial Contract Term, the Employee's employment hereunder shall continue
for additional consecutive extension terms of one (1) year each until either
party gives notice of termination to the other at least thirty (30) days prior
to end of the Contract
Term. The initial Contract Term and any extension is referred to as the Contract
Term.
Section
4. Place
of Employment. Employee
will live in and maintain an office in the greater Chicagoland area, or location
of his choosing. Employee will commit approximately 50% of his working time
to
the Chicago office and will commit approximately 50% of his working time
traveling on behalf of the Company to either his office at Company headquarters
or to other locations as mutually agreed to. Employee when working outside
of
the Company headquarters will make his best efforts to be accessible and
available to the Company Executive team as needed during normal business hours.
Employee agrees to use all technological devices available to help ensure proper
communication including webcams and cell phones as needed.
Section
5. Compensation
and Benefits. In
consideration for the services of the Employee hereunder, the Company will
compensate Employee as follows:
(a)
Base
Salary. Beginning
on the Commencement Date, Employee shall be entitled to receive a base salary
of
$200,000 per annum with an annual review. Such Base Salary shall be payable
in
periodic installments in accordance with the terms of the Company's regular
payroll practices in effect from the time during the term of this Agreement
and
subject to applicable tax withholding, but in no event less frequently than
once
each month. Base salary is to be reviewed annually prior to the anniversary
date
and will be adjusted upwards as a performance based increase provided at the
discretion of the CEO and/or Governance Committee of the AeroGrow Board of
Directors.
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(b
) Bonus.
Employee
shall receive an annual cash bonus in an amount representing 1.5% of the EBITDA
of the Company as determined by the Company’s annual financial statements and
will
be
pro rated for any portion of such annual period covered under this Agreement.
Such bonus
shall be
payable not later than one hundred and twenty (120) days after the end of each
of the Company’s
fiscal years covered under this agreement. Employee acknowledges the foregoing
may be modified by the Board of Directors subsequent to the initial Contract
Term, however, in such event; the Bonus herein shall in no event be less
favorable than that granted to the Company’s senior executives. In the event the
Employee is terminated or the contract period has expired and has not been
renewed, Employee will receive the pro rata bonus he has earned during the
employment period, and the bonus will be payable not later than one hundred
and
twenty (120) days after the end of the Company’s fiscal year.
(c) Benefits.
Employee
shall be entitled to participate in and receive benefits under any and all
employee benefit plans and programs which are from time to time generally made
available to the executive employees of the Company, subject to approval and
grant by the Governance Committee of the Board with respect to programs calling
for such approvals or grants and consistent with plan terms. Additionally,
Company will provide a $1,350 payment towards Employee’s current monthly health
and dental insurance until such time as Company offers such coverage to Employee
directly. Employee shall also be given the option to opt-out of healthcare
and
dental benefits provided by Company. In the event Employee exercises the opt-out
option, Employee shall be entitled to receive a non-accountable/non-taxable
expense allowance of $950 per month as reimbursement for Employee’s health and
dental insurance premiums. Additionally, should Employee exercise the opt-out
option, and later wishes to enroll in the Company’s health and dental insurance
plan, Employee shall be given that right, subject to State and Federal
regulations. Employee will accrue 1.67 days of vacation for each month of
employment in addition to the holidays normally paid for in accordance with
Company policy, and any other company-wide paid holiday days granted by Company.
Vacation accrual will be post-dated to a January 1, 2006 start date. Vacation
days earned, accrued and not used will roll over from year to year, not to
exceed ten (10) days rollover per year. At Employee termination, end
of
contract period not renewed or Employee resignation any accrued vacation days
earned but
not used
will be paid in a lump sum to Employee.
(d) Equity
Compensation. Employee
shall be entitled to participate in and receive benefits under the 2005 Equity
Compensation Plan, and any successor plan providing for compensation in the
form
of stock, stock options and other equity-related compensation provided by the
Company to its employees. The initial grant of the Stock Options granted to
Employee pursuant to the Company’s 2005 Equity Compensation Plan shall not be
less than 125,000 options to purchase the common stock of the Company at an
exercise price of not greater than $5.00. The options shall; (i) vest pursuant
to terms no less than a minimum of 50% of the amount of the grant per each
twelve month period beginning January 1, 2006; (ii) shall not expire in less
than five (5) years from the date of grant, (iii) shall be subject to other
standard terms and conditions under the 2005 Equity Compensation Plan, and;
(iv)
shall have other terms and conditions no less favorable than that granted to
other senior executives of the Company. Employee agrees that the foregoing
options shall be subject to the lockup provisions as required by the Company’s
investment bankers in conjunction with a private placement offering conducted
during February 2006. In the event that the Employee is terminated or the
Employee’s contract period has expired and not renewed, the total amount of
options, not less than 125,000 will be immediately awarded to Employee and
said
options will be vested in full. Employee and Company hereby agree that the
option grant of 125,000 options granted by the Company on March 28, 2006 was
in
full satisfaction of the foregoing.
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(e )
Indemnification.
Company
will indemnify, and hold harmless Employee against all claims
made against Employee and Company. Company will use commercially reasonable
efforts
to
obtain and continue in force Directors & Officers liability
insurance.
Section
6. Expenses.
(a)
It is acknowledged that Employee, in connection with the services to be
performed by
him
pursuant to the terms of this Agreement, will be required to make payments
for
travel, entertainment of business associates and similar expenses. The Company
will reimburse Employee for all expenses authorized by the Company and incurred
by Employee in the performance
of his duties hereunder within fifteen days from date Employee submits a request
for
such
reimbursement. Employee will comply with such budget limitations and approval
and reporting
requirements with respect to expenses as the Company may establish from time
to
time.
Travel
to Company headquarters, including but not limited to corporate housing, meals,
airfare, rental car and miscellaneous expenses incurred while working at Company
headquarters will be reimbursed to Employee as travel expense. While not a
material requirement of this Agreement, Employee may exercise the option to
relocate to Boulder, Colorado. Should relocation take place the Company’s
obligation to Employee shall include tax-free reimbursement all of Employee’s
expenses related to such relocation up to a maximum of $12,000 or a greater
amount that is mutually agreeable to both parties at that time.
(b)
In addition to the foregoing, Employee shall be entitled to receive a
non-accountable/non-taxable expense allowance of $1,200 per month as
reimbursement for Employee’s
auto, home office and other expenditures in addition to those included in
Section 6(a)
that are
commensurate with Employee’s position.
Section
7. Termination.
(a) For
Cause by Company. The
Company may terminate the Employee's employment under
this Agreement at any time for Cause. “Cause” is defined as (i) a material act
of dishonesty
by
Employee in connection with his responsibilities as an Employee, (ii) conviction
of, or plea of nolo contendere to, a felony, (iii) gross misconduct, or (iv)
continued substantial violation of his employment duties after Employee has
received a written demand for performance from the Company which specifically
sets forth the factual basis for the Company’s belief that Employee has not
substantially performed his duties.
(b) Without
Cause by Company. The
Company may terminate the Employee's employment under this Agreement at any
time
without Cause. If the Company breaches any term of this Agreement and fails
to
cure such breach within thirty (30) days of notice of such breach from the
Employee, and if Employee terminates his employment with the Company within
thirty (30) days after the period for the cure of the breach by the Company
expires, the Company shall be deemed to have terminated the Employee's
employment hereunder without Cause. Material breach, as defined herein shall
include, without limitation, (a) any failure by the Company to comply with
Section 4, 5 or 6 hereof in any material way; or (b) any misrepresentation
by
Company to any government or other violation of law.
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(c) Entitlements.
If
the
Employee’s employment is terminated pursuant to Section 7, the Employee shall be
entitled to; (i) a lump sum payment totaling six (6) months of his Base Salary,
at the rate in effect immediately before the termination; (ii) the payment
by
the Company of medical benefits payable to employee until the end of the twelfth
(12th
) month
following termination, and; (iii) the pro rata portion of bonus payable pursuant
to Section 5(b) as determined by the EBITDA as of the nearest quarter end
financial statements of the Company. The foregoing is provided that the Employee
honors the restrictive covenants provided in this Agreement and executes a
release of all claims arising from his employment by the Company, in such form
as may then be used by the Company respecting termination of
employees.
(d) Without
Cause by Employee. The
Employee may terminate the Employee's employment under this Agreement at any
time without Cause upon giving at least thirty (30) day’s advance written
notice.
(e) Change
of Control. Upon
termination by the Company without cause after the occurrence of a Change of
Control, Employee shall be entitled to; (i) a lump sum payment in an amount
equal to 12 months of his Base Salary, at the rate in effect immediately before
the termination; (ii) the payment by the Company of medical benefits payable
to
employee until the end of the twelfth (12th
) month
following termination, and; (iii) the pro rata portion of bonus payable pursuant
to Section 5(b) as determined by the EBITDA as of the nearest quarter end
financial statements of the Company. Upon the occurrence of a Change of Control,
Employee may, at Employee’s option, terminate Employee's employment under this
Agreement after (90) ninety days of the occurrence of such Change of Control
upon giving at least one hundred and eighty days (180) day’s advance written
notice. For purposes of this Agreement, a "change of control" shall mean the
appointment by the Board of Directors of a new Chief Executive Officer, a change
in Employee’s reporting structure, or a material change in job responsibilities
not mutually agreed to between Employee and Company.
(f) Disability.
If
Employee becomes permanently and totally disabled, this Agreement shall be
terminated. Employee shall be deemed permanently and totally disabled if he
is
unable to engage in the activities required by this Agreement by reason of
any
medically determinable physical or mental impairment, as confirmed by three
independent physicians, which can be expected to result in death or which has
lasted or can be expected to last for a continuous period of not less than
twelve (12) months. Upon termination due to disability, any portion of any
of
the Options granted to the Employee that is not then vested shall vest and
all
Options shall be exercisable by Employee until ninety (90) days after the
termination. Nothing herein shall limit the entitlement of the Employee to
any
other rights or benefits then available to the Employee under any plan or
program of the Company or under applicable law.
(g) Death.
If
Employee dies during the Employment Term, the Employment shall be terminated
on
the last day of the calendar month of his death and any portion of any of the
Options granted to the Employee that is not then vested shall become vested
and
all Options shall be exercisable by the designated beneficiary, the estate
or
personal representative of Employee ninety (90) days after death. This Section
will not limit the entitlement of the Employee's estate, personal representative
or beneficiaries to any death or other benefits then available to the
Employee
under any life insurance, stock ownership, stock options, or other benefit
plan
or policy
that is
maintained by the Company for the Employee's benefit.
(h) Non-Renewal
Is Termination. The
notice by the Company not to renew the Contract Term for another year shall
be
deemed a termination without cause by the Company under this
Agreement.
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Section
8. Restrictive
Covenants and Representations.
(a) Confidential
Data. The
Employee will hold in a fiduciary capacity and will not reveal, communicate
or
divulge during the period of his employment by the Company or thereafter, any
information, knowledge or data to any person, firm or corporation other than
the
Company or persons, firms or corporations designated by the Company, which
relates to the names of the customers, finances, technical data concerning
products or services, or any other secret or confidential information, knowledge
or data of the Company or of any firm owned by the Company, which was learned
through or as a result of employment by the Company.
(b) Covenant
Not to Compete. In
consideration for his employment hereunder, during the term of this agreement,
and for twenty-four (24) months after the termination of this agreement,
whichever is later, the Employee shall not, within the United States, either
directly or indirectly, own, have a proprietary interest of any kind in, be
employed by, or serve as a consultant to or in any
other
capacity for any firm which is in the primary business of providing aeroponics
products or
businesses, or which is otherwise engaged in a business that is competitive
with
that conducted
by the
Company. Notwithstanding the foregoing, the Employee may invest in the
securities of any corporation whose shares are listed on a national securities
exchange or registered under the Securities Exchange Act of 1934.
(c) Ownership
of Inventions. There
shall become the exclusive property of the Company, its
successors and assigns, every invention and improvement conceived, invented
or
developed by
the
Employee during the term of his employment hereunder relating to products or
services to be manufactured, sold, used or in the process of development by
the
Company or by any parent or affiliate of the Company during such period of
employment, or which may be sold or used in competition
with any such product. Employee agrees to execute such assignments, instruments
or
other
documents as the Company or its counsel may request to implement this
paragraph.
(d) Non-Solicitation
of Employees. The
Employee and any entity controlled by him or with which he is associated (as
the
terms "control" and "associate" are defined in the Exchange Act) shall not,
during the Contract Term and for a term of eighteen (18) months thereafter,
directly or indirectly solicit, interfere with, offer to hire or induce any
person who is or was an officer or employee of the Company or any affiliate
(as
the term "affiliate" is defined in the Exchange Act) (other than secretarial
personnel) to discontinue his or her relationship with the Company or an
affiliate of the Company, in order to accept employment by, or enter into a
business relationship with, any other entity or person. (These acts are
hereinafter referred to as the "prohibited acts of solicitation.")
(e) Return
of Property. Upon
termination of employment, and at the request of the Company, the Employee
agrees to promptly deliver to the Company all Company or affiliate memoranda,
notes, records, reports, manuals, drawings, designs, computer files in any
media, and
any
other documents (including extracts and copies thereof) relating to the Company
or its affiliates, and all other property of the Company. Upon termination,
the
Executive shall cease to use all such materials and information set forth under
this Section 8(a).
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(f)
Representations.
The
Employee represents and warrants to the Company that he has full power and
authority to enter into this Agreement and perform his duties hereunder, and
that he has no outstanding agreement, whether oral or written or any obligation
that is or may be in conflict with any of the provisions of this Agreement
or
that would preclude Employee from complying with the provisions of this
Agreement and the performance of his duties shall not result in a breach of,
or
constitute a default under, any agreement , whether oral or written,
including,
without limitation, any restrictive covenant or confidentiality agreement,
to
which he is
a party
or by which he may be bound. Employee further represents and warrants that
he
has not misappropriated any confidential information and/or trade secrets of
any
third party that he intends
to use in the performance of his duties under this Agreement. Company and the
individual
signing
this Agreement on behalf of Company each represent and warrant that they each
have full power and authority to enter into this Agreement, that there are
no
agreements whether oral or written, or legal requirements, that conflict with
any provisions of this Agreement, and that the performance of this Agreement
shall not result in a breach of, or constitute a material default, under, any
such agreement or legal requirement.
Section
9. Indemnities
(a) Employee.
Employee
shall indemnify and hold harmless the Company from and against any losses,
claims, damages or liabilities which arise out of any breach of Employee's
representations and warranties set forth in Section 8 (f) of this Agreement
as
determined in a court of law and made part of a final judgment after exhaustion
of, or the time has lapsed for, any appeal thereof.
(b) Company.
Company
shall defend, indemnify and hold Employee harmless from and against any losses,
claims, damages or liabilities which arise out of any: (a) action or inaction
taken or not taken by him in the ordinary course of Company's business or as
directed by the Chairman, CEO or the Board unless a court of law determines
that
Employee has breached the Employee's representations and warranties set forth
in
Section 8 (f) of this Agreement as part of a final judgment after exhaustion
of,
or the time has lapsed for, any appeal thereof. The Company agrees to obtain
and
maintain Directors and Officers Liability Insurance which will specifically
cover Employee during the Contract Term with coverage of not less than $1.5
million.
Section
10. General.
(a)
Notices.
All
notices and other communications hereunder will be in writing or by written
telecommunication, and will be deemed to have been duly given if delivered
personally or
if
mailed by certified mail, return receipt requested, or by written
telecommunication, to the relevant address set forth below, or to such other
address as the recipient of such notice or communication will have specified
to
the other party hereto in accordance with this Section ll(a):
If
to
Employer, to:
If
to
Employee, to:
Xxxxxx
Xxx Xxxxxxx
0000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
0000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
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(b) Withholding;
No Offset. All
payments required to be made by Employer under this Agreement to Employee will
be subject to the withholding of such amounts, if any, relating to federal,
state and local taxes as may be required by law. No payment under this Agreement
will be subject to offset or reduction attributable to any amount Employee
may
owe to the Company or any other person.
(c) Equitable
Remedies. Each
of
the parties hereto acknowledges and agrees that upon any breach by Employee
of
his obligations under any of Section 7 hereof, the Company will have no adequate
remedy at law, and accordingly will be entitled to specific performance and
other appropriate injunctive and equitable relief.
(d) Severability.
If
any
provision of this Agreement is held to be illegal, invalid or unenforceable,
such provision will be fully severable and this Agreement will be construed
and
enforced as if such illegal, invalid or unenforceable provision never comprised
a part hereof; and the
remaining provisions hereof will remain in full force and effect and will not
be
affected by the
illegal,
invalid or unenforceable provision or by its severance herefrom. Furthermore,
in
lieu of such illegal, invalid or unenforceable provision, there will be added
automatically as part of this Agreement
a provision as similar in its terms to such illegal, invalid or unenforceable
provision as
may be
possible and be legal, valid and enforceable.
(e) Waivers.
No
delay
or omission by either party hereto in exercising any right, power or privilege
hereunder will impair such right, power or privilege, nor will any single or
partial exercise
of any such right, power or privilege preclude any further exercise thereof
or
the exercise
of any
other right, power or privilege.
(f) Counterparts.
This
Agreement may be executed in multiple counterparts, each of which will be deemed
an original, and all of which together will constitute one and the same
instrument.
(g) Captions.
The
captions in this Agreement are for convenience of reference only and will not
limit or otherwise affect any of the terms or provisions hereof
(h) Reference
to Agreement. Use
of
the words “herein,” “hereof,” “hereto” and the like in this Agreement refer to
this Agreement only as a whole and not to any particular subsection or provision
of this Agreement, unless otherwise noted.
(i) Binding
Agreement. This
Agreement will be binding upon and inure to the benefit of the parties and
will
be enforceable by the personal representatives and heirs of Employee and the
successors of Employer. If Employee dies while any amounts would still be
payable to him hereunder, such amounts will be paid to Employee’s estate. This
Agreement is not otherwise assignable by Employee.
(j) Designation
of Beneficiary. If
the
Employee shall die before receipt of all payments and
benefits to which he is entitled under this Agreement, payment of such amounts
or benefits in
the
manner provided herein shall be made to such beneficiary as he shall have
designated in writing filed with the Secretary of the Company or, in the absence
of such designation, to his estate or personal representative.
(k) Attorneys
Fees. In
any
proceeding brought to enforce any provision of this Agreement, or to seek
damages for a breach of any provision hereof, or when any provision hereof
is
validly asserted as a defense, the prevailing party will be entitled to receive
from the other party all reasonable attorney's fees and costs in connection
therewith.
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(l) Entire
Agreement. This
Agreement contains the entire understanding of the parties, supersedes all
prior
agreements and understandings relating to the subject matter hereof and may
not
be amended except by a written instrument hereafter signed by each of the
parties hereto.
(m) Governing
Law. This
Agreement and the performance hereof will be construed and governed in
accordance with the laws of the State of Nevada, without regard to its choice
of
law principles.
EXECUTED
as of the date first above written.
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| AEROGROW INTERNATIONAL, INC. | ||
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| By: | /s/ W. Xxxxxxx Xxxxxxxxxxx | |
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Its:
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W. Xxxxxxx Xxxxxxxxxx, Chief Executive Officer |
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| EMPLOYEE: | ||
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| By: | /s/ Xxxxxx Xxx Xxxxxxx | |
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Xxxxxx
Xxx Xxxxxxx
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