Employee Agreement between Registrant and Xxxxx Xxxxxxxx dated as of January 1,
1998
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 1st day of January, 1998 ("Effective Date"), by and between ModaCAD, Inc., a
California corporation ("Employer"), and Xxxxx Xxxxxxxx, an individual resident
in California ("Executive").
RECITALS
A. Employer is a corporation engaged in the business of designing,
developing, marketing and distributing computer software products.
B. Executive is employed by Employer as its Chairman and Chief Executive
Officer pursuant to an Employment Agreement dated January 1, 1996 (the "Existing
Agreement).
C. Employer and Executive now desire to enter into this Agreement for the
purpose of superseding the Existing Agreement in its entirety and to provide for
the continued employment of Executive by Employer on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the above recitals and the mutual
promises and covenants set forth herein, and for other valuable consideration,
the adequacy and receipt of which are hereby acknowledged, the parties hereby
agree as follows:
1. Employment; Employment Term
1.1 Employer agrees to employ Executive, and Executive agrees to be
employed by Employer, as Employer's Chairman and Chief Executive Officer,
for a term commencing on the Effective Date and continuing until December
31, 2005, unless earlier terminated in accordance with the provisions of
Section 4 hereof (the "Employment Term"). Executive's primary duties and
responsibilities hereunder shall be to manage, administer and direct,
subject to the supervision and direction of Employer's Board of Directors,
the business and operations of Employer as well as such other duties and
responsibilities as may be prescribed from time to time by Employer's Board
of Directors. Executive agrees to perform such duties and to satisfy such
responsibilities throughout the Employment Term.
1.2 The services to be rendered by Executive hereunder shall be
furnished at such places as Employer deems appropriate, but in no event
will Executive be required to relocate her principal residence outside Los
Angeles, California, or to spend more than thirty (30) days in any one
calendar year outside of Los Angeles, California, in order to perform
Executive's duties under this Agreement.
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2. Compensation
2.1 Employer agrees to pay Executive a salary at the rate of Two
Hundred Thousand Dollars ($200,000) per year, payable in accordance with
Employer's regular salary payroll policies and procedures. In addition,
upon execution and delivery of this Agreement, Employer shall pay Executive
a signing bonus of One Hundred Thousand Dollars ($100,000).
2.2 In addition to the salary payable to Executive under Paragraph
2.1, Employer shall pay to Executive an annual performance bonus for each
calendar year of the Employment Term in an amount to be determined by the
Compensation Committee of Employer's Board of Directors.
2.3 It is recognized that during the Employment Term Executive will be
required to incur ordinary and necessary business promotion expenses in
connection with the performance of her duties and Executive shall be
entitled to reimbursement for such expenses upon her own authorization or
in accordance with Employer's general reimbursement policies and procedures
as may be established from time to time by Employer's Board of Directors.
2.4 It is recognized that the services to be performed by Executive
will require the use of a suitable automobile and Employer shall pay to
Executive monthly on the first business day of each month during the
Employment Term an automobile expenses reimbursement allowance in an amount
of Six Hundred Dollars ($600).
2.5 It is recognized that during the Employment Term Executive will be
required to incur continuing expenses to stay abreast of developments in
the areas of Executive's expertise. Executive shall be entitled to
reimbursement for such expenses to the extent incurred in accordance with
Employer's policies upon presentation of vouchers or other evidence of
those expenditures in a form in accordance with Employer's policies and
procedures as may be established from time to time by Employer's Board of
Directors.
2.6 Executive shall be entitled to reimbursement for expenses incurred
in connection with her home office as may be required in order to perform
her duties under this Agreement, upon presentation of vouchers or other
evidence of those expenditures in a form in accordance with Employer's
policies and procedures as may be established from time to time by
Employer's Board of Directors. Without limitation of the immediately
preceding sentence, Employer acknowledges that it is a requirement of
Executive's duties that Executive have a separate telephone line at her
home office and the expense incurred by Executive in connection with the
installation and use of such separate telephone facilities shall be
reimbursed to Executive when and as incurred.
2.7 During the Employment Term and for a period of five (5) years
thereafter, without regard to whether Executive is employed by Employer
during any part of such period, Executive and Executive's dependents shall
be entitled to participate in any and all of Employer's group medical,
dental and medical reimbursement programs (which shall be fully paid for by
Employer, including coverage for Executive's dependents), life insurance
benefit programs, the benefits set forth in Paragraph 3, and other such
benefit programs as may be made available to Employer's executives
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generally, upon the same terms and conditions as such programs are made
available to other senior executive executives of Employer; provided,
however, that if at any time during such period of time Employer does not
offer Executive and Executive's dependents full coverage under a
comprehensive medical and dental reimbursement plan, Employer shall
promptly reimburse Executive for all costs and expenses of Executive's own
medical and dental reimbursement plan for Executive and Executive's
dependents; and provided, further, that Employer shall have no obligation
under this Section 2.7 following any termination of Executive pursuant to
Section 4.2.
2.8 Executive shall be entitled to three (3) full weeks of vacation
during each calendar year of the Employment Term, commencing with calendar
year 1998. Executive agrees that without the express prior written consent
of Employer such vacation periods shall not be accumulated, but shall be
taken during each calendar year or forfeited, and Executive agrees to
schedule and take such vacation at a time or times which do not
unreasonably impair Employer's operations.
2.9.1 Employer shall grant Executive, effective on the date of
adoption by Employer's Board of Directors of the resolutions effecting such
grant (the "Date of Grant", an incentive stock option to purchase 200,000
shares of Employer's Common Stock (the "Option") under and pursuant to
Employer's 1995 Stock Option Plan, as now and hereafter amended, and/or
Employer's 1998 Stock Option Plan, if such a plan is adopted by Employer,
subject to Employer obtaining shareholder approval at Employer's 1998
Annual Meeting of Shareholders (or at any other meeting of, or written
adoption of resolutions by, Employer's shareholders) of an increase in the
number of shares authorized for grant subject to stock options under said
plan or plans; provided, however, that the fair market value of all shares
of Common Stock subject to the Option which first become exercisable in any
one calendar year may not exceed $100,000 (such fair market value to be
determined on the Date of Grant), and, if and to the extent that the fair
market value of the shares do exceed $100,000, the number of shares whose
fair market value so exceeds $100,000 shall be deemed subject to a
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nonstatutory stock option. (For purposes of this Section 2.9.1, the term
"Option" shall collectively refer to the incentive stock option and, if
required by the immediately preceding sentence, the nonstatutory stock
option.) The Option shall be exercisable based on the following schedule:
With respect to calendar year 1998 and any calendar year of the Employment
Term in which the "ISO Trigger" (as defined herein) occurs, a portion of
the Option shall become exercisable with respect to fifty (50) shares of
Employer's Common Stock for each One Thousand Dollars ($1,000) of
Employer's net income before taxes and executive bonuses in such year, as
reported on Employer's audited financial statements for that year (for
purposes of this sentence, the term Employer shall include any subsidiary
or affiliate of Employer whose results of operations are included within
Employer's consolidated financial statements). As used herein, the term
"ISO Trigger" shall mean that, at least once during the applicable calendar
year, the closing sales price of Employer's Common Stock, as quoted on the
NASDAQ Stock Market or as listed on a recognized stock exchange, for twenty
(20) consecutive trading days averages $10 or more, which dollar figure
shall be adjusted appropriately to reflect any stock split, reverse stock
split or stock dividend, a recapitalization (other than the conversion of
convertible securities according to their terms), a combination of shares
or other like capital adjustment. The Option shall be exercisable at a
price per share equal to the fair market value of a share of Employer's
Common Stock on the Date of Grant, which for this purpose shall be deemed
the closing sales price as quoted on the NASDAQ Stock Market on the day
before the Date of Grant. As each respective portion of the Option first
becomes exercisable in accordance with the foregoing schedule, such portion
shall thereafter remain exercisable for a period of five (5) years;
provided, however, that any portion that is an incentive stock option shall
not be exercisable after the tenth (10th) anniversary of the Date of Grant.
The Option shall be granted pursuant to a written stock option agreement,
in the form attached as Exhibit "A" hereto, providing, among other things:
(a) if the employment of Executive with Employer shall terminate because of
disability (as provided in Paragraph 3.2) or death, the Option, to the
extent then presently exercisable (including, for such purpose, any portion
which becomes exercisable because the ISO Trigger occurs and the Company
has consolidated net income before taxes and executive bonuses in the
calendar year in which death or disability occurs), shall remain
exercisable for a period of twelve (12) months after the date of such
termination and, to the extent not then presently exercisable, shall
terminate as of the date of termination of employment; (b) if the
employment of Executive with Employer shall terminate for any reason other
than as described in clause (a) or other than for a reason constituting
"just cause" pursuant to Section 4.2, or if there is a "Change in Control"
(as defined below), the exercisability of the Option shall accelerate so
that it becomes immediately exercisable, as of the date of termination or
Change in Control, as to all of the shares covered by the Option and shall
thereafter remain exercisable for a period of 90 days, in the case of such
a termination (except that the 90 day period shall be extended to 12 months
if Executive shall die during such 90 day period) or, in the case of a
Change in Control, for a period of five (5) years; and (c) for customary
antidilution protections.
2.9.2 As used herein, the term "Change in Control" shall be deemed to
have occurred (a) on the date Employer first has actual knowledge that any
person (as such term in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) who is not such
beneficial owner on the Date of Grant has become the beneficial owner (as
defined in Rule 13(d)-3 under the Exchange Act), directly or indirectly, of
securities of Employer representing 40% or more of the combined voting
power of Employer's then outstanding securities or (b) on a date the
stockholders of Employer approve (i) a merger of Employer with or into any
other corporation in which Employer is not the surviving corporation or in
which Employer survives as a subsidiary of another corporation, (ii) a
consolidation of Employer with any other corporation or (iii) the sale or
disposition of all or substantially all of Employer's assets or a plan of
complete liquidation.
2.9.3 In addition to any ISOs granted to Executive pursuant to Section
2.9.1, Employer shall grant such number of additional options, exercisable
for five (5) years at a per share price equal to the fair market value of a
share of Employer's Common Stock on the date of grant, to purchase shares
of Employer's Common Stock as the Compensation Committee shall determine is
appropriate from time to time. To the extent permitted under Section 422(d)
of the Internal Revenue Code of 1986, as amended, such additional options
shall be "incentive stock options" and, to the extent not so permitted,
such options will be "nonstatutory stock options".
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2.10 Executive shall be entitled to participate in any profit-sharing,
pension, stock option, stock ownership, insurance or other plans, benefits
or policies available generally to Executives of Employer on terms and
conditions not less advantageous than those applicable to such Executives.
2.11 Executive shall be entitled during the Employment Term, and
thereafter in regard to any claim or assertion relating to actions,
circumstances or events occurring during the Employment Term, to the
benefit of the indemnification provisions contained in Employer's Bylaws,
as they may be amended from time to time, to the extent permitted by
applicable law; provided, however, that, notwithstanding such
indemnification provisions, Executive shall not be required to serve as a
director of Employer during any period of time in which Executive is not
covered by a policy of directors' and officers' errors and omissions
insurance policy, having coverage in an amount and scope reasonably
satisfactory to Executive.
3. Sick Leave and Disability.
3.1 During the Employment Term, in the event that Executive shall, by
reason of illness or other physical or mental disability, be unable to
perform her duties herein for a period of up to one hundred eighty (180)
consecutive days, said disability shall be deemed for purposes of this
Agreement to be temporary and Executive shall continue to receive all
compensation payable pursuant to Section 2.
3.2 During the Employment Term, in the event that Executive shall, by
reason of illness or other physical or metal disability, be unable to
perform her duties hereunder for more than One Hundred Eighty (180)
consecutive days, said disability shall be deemed for purposes of this
Agreement to be permanent, and this Agreement shall thereupon terminate,
and, subject to the provisions of Section 3.3 hereof, Employer shall have
no further obligations whatever to Executive, except pursuant to the Option
and to make the severance payments provided in Sections 4.3.1 and 4.3.2
hereof, which payments shall be paid to Executive immediately upon such
termination. It is understood that, except as provided in Sections 3.1 and
3.3 hereof, Executive shall not be entitled to receive compensation during
any period of disability.
3.3 In the event of Executive's permanent disability as provided in
Sections 3.2 hereof, if Employer does not then have an Employer-paid
disability insurance plan providing for Executive to receive payments for
as long as Executive remains permanently disabled in amounts equal to at
least seventy percent (70%) of Executive's salary paid as provided in this
Agreement, Employer shall make disability payments monthly to Executive for
so long as Executive remains permanently disabled in an amount equal to
seventy percent (70%) of Executive's salary paid as provided in this
Agreement.
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4. Termination of Agreement.
4.1.1 Employer, acting only through a resolution adopted by its Board
of Directors, may terminate Executive's employment under this Agreement at
Employer's election by sending a six-months' written notice to Executive,
notifying Executive that effective at the end of such six-months' period
this Agreement and the Employment Term shall be terminated. Upon the
expiration of such six-months' period, Employer's employment of Executive
and the Employment Term shall cease and be at an end and Employer shall
have no further obligations whatever to Executive, except pursuant to the
Option and to continue to provide Executive the benefits set forth in
Section 2.7 and to make the severance payments provided in Sections 4.3.1
and 4.3.2 hereof, the performance of which shall be an absolute condition
to the effectiveness of any termination by Employer of Executive's
employment pursuant to this Section 4.1.1.
4.1.2 Executive may terminate her employment with Employer by giving
sixty (60) days' written notice of termination to Employer's Board of
Directors, and this Agreement and the Employment Term shall be terminated
effective at the close of business on said sixtieth (60th) day. Thereupon,
the Employment Term shall cease at the expiration of such sixty (60) day
period, Executive shall have no further obligations whatever to Employer
and Executive shall not be entitled to continue to receive the benefits set
forth in Section 2.7 or to be paid the severance payment provided in
Section 4.3 hereof.
4.2 Notwithstanding any provision set forth in Section 4.1 hereof,
Executive's employment may be terminated at any time by Employer
immediately and without any requirement of advance notice, and without any
obligation to pay any severance payment, for just cause. For purposes of
this Agreement, "just cause" means: (i) the continued use of non-medically
prescribed narcotic drugs by Executive which renders her unable to fulfill
her duties under this Agreement; and (ii) the commission by Executive of an
act of fraud or embezzlement against Employer or Executive's conviction of
a felony involving moral turpitude.
4.3.1 If Employer should terminate this Agreement for any reason other
than for a reason constituting just cause pursuant to Section 4.2 hereof,
Employer shall pay to Executive (and the vesting of the Option shall
accelerate in accordance with Section 2.9.1(b)), on the effective date of
such termination, a severance payment in an amount equal to the greater of:
(i) Seven Hundred Fifty Thousand Dollars ($750,000.00); or (ii) the
cumulative balance of Executive's salary which would have been payable to
Executive during the remainder of the full seven (7)-year Employment Term
(through December 31, 2005) pursuant to Section 2.1 of this Agreement if
Employer had not so terminated this Agreement. Further, upon the occurrence
of a Change in Control which does not result in this Employment Agreement,
and all rights and obligations hereunder, being fully assumed by, as the
case may be, the surviving corporation, the successor to Employer or the
transferee of all or substantially all of the Company's assets, such Change
in Control shall be deemed a termination entitling Executive to receive the
severance payments set forth in the immediately preceding sentence and in
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Section 4.3.2. In partial consideration of such payment and continuing for
a period of Two and One-Half years (913 days) thereafter (the "Advisory
Period"), Executive shall, to the extent that her physical and mental
conditions permit, be available to consult with and advise Employer's
officers, directors and other representatives in regard to matters
concerning Employer's business. Notwithstanding any other provision of this
Agreement, if Executive's physical or mental condition prevents her from
fulfilling her consulting or advisory duties, she shall still be paid such
severance payment. Executive and Employer agree that it is impossible to
determine with any reasonable accuracy the amount of prospective damages to
Executive from Employer's termination other than for just cause of this
Agreement; and, in consideration thereof, Executive and Employer agree that
the severance payment provided above is reasonable, and is not a penalty,
based upon facts and circumstances of the parties at the time of entering
into this Agreement, and with due regard to Executive's future
expectations. Notwithstanding the foregoing, if Executive should cease her
employment hereunder voluntarily for any reason, or if Employer should
terminate this Agreement for just cause, all compensation and benefits
payable to Executive (including those provided in Section 2.7) shall
thereupon without any further writing or act cease, lapse and be
unconditionally terminated.
4.3.2 If any payments made to Executive under this Agreement or
otherwise (the "Payments") are subject to the excise tax imposed by Section
4999 of the Code (the "Excise Tax"), then Employer shall pay Executive an
additional amount ("Gross Up") such that the net amount retained by
Executive after deduction of any Excise Tax on the Payments and any Federal
and State income taxes and Excise Tax upon the Payments shall be equal to
the Payments. For purposes of determining the amount of the Gross Up,
Executive shall be deemed to pay Federal, State and local income taxes at
the highest marginal rate of taxation in the calendar year in which the
Payment is to be made. State and local income taxes shall be determined
based upon the state and locality of Executive's domicile on the date
termination is effective. The determination of whether such Excise Tax is
payable and the amount thereof shall be based upon the opinion of tax
counsel selected by Employer and acceptable to Executive. If such opinion
is not finally accepted by the IRS upon audit, then appropriate adjustments
shall be computed (without interest but with Gross Up, if applicable) by
such tax counsel based upon the final amount of the Excise Tax so
determined. The amount shall be paid by the appropriate party in one lump
cash sum within 30 days of such computation.
4.4 On the event of Executive's death at any time during the
Employment Term, this Agreement and the Employment Term shall thereupon
terminate, and Employer shall be obligated to pay Executive's estate only
that portion of Executive's salary which had accrued through the date of
her death, plus a death benefit bonus, in an amount equal to six months'
salary of Executive, provided, that, if Executive should die after Employer
shall have given notice pursuant to Section 4.1.1 of termination of
Executive's employment other than for just cause, but prior to the
expiration of the six-month notice period required by that Section,
Employer shall nonetheless pay to Executive's estate the severance payment
provided in Section 4.3 hereof.
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4.5 Any demotion of Executive from the position set forth in Section
1.1 of this Agreement, or any material diminishment of the responsibilities
regularly exercised by an Executive holding that job title, shall be
conclusively presumed for purposes of this Agreement, unless Executive
otherwise agrees in advance in writing, to constitute Employer's
termination without just cause of Executive's employment under this
Agreement. Such presumptive termination shall entitle Executive to the
severance payment provided in Section 4.3 hereof and accelerated vesting of
the Option as provided in Section 2.9.1(b), without limitation of any other
right or remedy of Executive under this Agreement or applicable law.
5. Executive's Agreement Not to Compete With, and to Protect the
Proprietary Assets of Employer.
5.1 During the Employment Term, Executive shall not directly or
indirectly engage, be involved, or have any financial interest, in any
proprietorship, partnership, company or other business which engages in
competition with Employer in any line of business in which Employer is or
may be from time to time engaged during such period of time, whether
Executive does so as a partner, officer, director, Executive, consultant or
holder of any beneficial interest in any such business or activity. During
and after the Employment Term, Executive shall not divert nor attempt to
divert from Employer any business of any kind in which Employer is or may
be engaged. Furthermore, Executive shall not induce or attempt to induce
any person who is en Executive of Employer to leave the employ of Employer.
5.2 Employer acknowledges that in the performance of her duties as an
Executive of Employer she may have access to Employer's existing or
potential trade secrets, including, but not limited to, any formula,
discovery, idea or concept, pattern, device, compilation of information
used in Employer's business, designs, plan, proposal, software (both object
code and source code) and software documentation, flow charts, diagrams,
models, data and data bases, marketing and research and development plans,
pricing plans and price lists, financial data and projections of sales,
expenses, etc., and other confidential information, which allows Employer
to obtain an advantage over others, including competitors, who do not know
or use such trade secrets (cumulatively, "Trade Secrets"); inventions,
including but not limited to, any new machines, manufacturing or production
devices, methods, processes, uses, apparatuses, developments, improvements,
composition of matter, design, or configuration of any kind, discovered,
conceived, developed, made, or produced, or any improvements to them
(cumulatively, "Inventions"); and other confidential market information,
including, but not limited to, customer, marketing, sales, financial,
administrative, production, processing, operational and other proprietary
information used in Employer's business (cumulatively, "Confidential
Information") which are confidential and proprietary to Employer.
Accordingly, during and after the Employment Term, Executive shall keep in
confidence at all times and not disclose to any person, firm or
corporation, and not make any use of, except as expressly authorized by
Employer, any Trade Secrets, Inventions or Confidential Information which
are made available to Executive and identified as proprietary or which,
from the circumstances involved, Executive should recognize as proprietary.
Executive further agrees that all Trade Secrets, Inventions and
Confidential Information shall remain the exclusive property of Employer
and shall not be removed from Employer's premises under any circumstances
whatever, except as expressly authorized by Employer.
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5.3 If Executive at any time should have any question about
Executive's use or disclosure of Trade Secrets, Inventions or Confidential
Information or whether any ideas, procedures, information, documentation,
materials or representations are Trade Secrets, Inventions or Confidential
Information, Executive shall promptly discuss the question with Employer's
Board of Directors, whose determination shall be binding on Executive.
5.4 Executive further agrees not to disclose to Employer, or induce
Employer to use, any Trade Secrets, Inventions or Confidential Information
belonging to a third party.
6. Executive's Agreement that All Inventions Developed in the Course of
Employment Are the Property of Employer.
6.1 As part of Executive's employment responsibilities, Executive is
being hired to invent and develop further ideas, products, financial
policies and procedures relating to Employer's business, including, without
limitation, new products and systems. Accordingly, Executive shall:
(i) Disclose promptly, in writing, to such person and in such
manner as Employer may from time to time designate, all inventions,
made or conceived by Executive, either solely or jointly with others,
during the Employment Term relating to Employer's business or
Employer's actual or anticipated research and development or resulting
from any work which Executive performed for Employer. Executive also
agrees to assign and convey to Employer upon request, the complete
right, title and interest in and to all such inventions, improvements,
and developments. Executive understands that Employer does not require
disclosure or an assignment of any rights in an invention for which no
equipment, supplies, facility, Trade Secrets, Inventions or
Confidential Information of Employer was used, or which was developed
entirely on Executive's own time, and (a) which does not relate to the
business of Employer or to Employer's actual or anticipated research
or development, or (b) which does not result from any work which
Executive performed for Employer.
(ii) Upon request made during the Employment Term or thereafter,
to do all lawful acts, including the execution of papers and giving of
testimony, that may be necessary or helpful in obtaining, sustaining,
or reissuing patents of the United States and foreign counties on all
Trade Secrets and Inventions, and for perfecting and maintaining
Employer's title thereto; and to otherwise cooperate with Employer in
any controversy or legal proceedings relating to any invention or
patents thereon.
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(iii) Cooperate generally with Employer in any controversy or
legal proceedings relating to said inventions, improvement or
developments, or to patent applications or patents thereon or
copyrights thereof.
6.2 For purposes of this Agreement, an invention related to Employer's
business is deemed to have been made during the Employment Term, if, during
such period, the invention was conceived or actually reduced to practice.
Any patent applications filed by Executive during the Employment Term shall
be presumed to relate to an invention made during the Employment Term, and
Employer shall be entitled to all right, title and interest in and to each
such invention, unless a preponderance of the evidence shows that the
invention was not made during such period or was unrelated to Employer's
business.
6.3 Executive acknowledges and agrees that her covenants and
undertakings contained in this Section 6 relate to matters which are of a
special, unique and extraordinary character, which gives them a peculiar
value impossible of replacement by Employer and for the loss of which
Employer cannot be reasonably or adequately compensated by monetary
damages. Accordingly, any breach by Executive of the provisions of this
Section 6 would cause Employer irreparable injury and damages and Executive
therefore expressly agrees that Employer shall be entitled to injunctive
and other equitable relief to prevent a breach or a continuing breach of
any of the provisions of this Section 6, and to secure the enforcement of
any of these provisions, in addition to any other legal or equitable remedy
that may be available to Employer. Further, Executive agrees that the
provisions of this Section 6 shall survive any termination of Executive's
employment by Employer, and that those provisions shall not be construed to
limit any of Executive's obligations and duties to Employer which may be
provided by law.
7. Miscellaneous.
7.1 All notices hereunder to the parties hereto shall be in writing
and sent by certified or registered mail, return receipt requested, postage
prepaid, or by telegram or telex, addressed to the respective parties at
the following addresses:
EMPLOYER: ModaCAD, Inc.
0000 Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: The Board of Directors
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Executive: Xx. Xxxxx Xxxxxxxx
00000 Xxxxxxxx Xxxx
Xxx Xxxxxxx, XX 00000
Any party may, by written notice complying with the requirements of this
Section, specify another or different person or address for the purpose of
notification hereunder. Such notices shall be deemed to have been given and
received on the next day following the sending of such telegram or telex
and, if mailed, on the fifth business day following such mailing.
7.2 This Agreement contains the entire and only agreement of the
parties hereto respecting the matters herein set forth, supersedes all
prior agreements (including, without limitation, the Existing Employment
Agreement, provided, however, that any salary, bonus, expense allowance or
reimbursement, or other compensation or benefit accrued but unpaid to
Executive as of the Effective Date shall continue to be owing and payable
by the Employer to Executive and any incentive stock options which
Executive is entitled to under the provisions of Section 2.9 of the
Existing Employee Agreement shall be granted at the first Board of
Directors meeting following release of Employer's audited financial
statement for 1997) and understandings between the parties hereto regarding
the matters hereby contemplated, and may not be changed or terminated
orally, nor shall any change, termination or attempted waiver of any of the
provisions contained in this Agreement by binding unless in writing and
signed by the party against whom the same is sought to be enforced, nor
shall this Section itself be waived verbally. This Agreement may be amended
only by a written instrument duly executed by or on behalf of the parties
hereto.
7.3 This Agreement and all of its provisions, rights and obligations
shall be binding upon and shall inure to the benefit of the parties hereto
and their respective successors. This Agreement may be assigned by the
Employer to any person, firm or cooperation which shall become the owner of
substantially all of the assets of the Employer or which shall succeed to
the business of the Employer; provided, however, that in the event of any
such assignment Employer shall obtain an instrument in writing from the
assignee in which such assignee assumes the obligations of Employer
hereunder and Employer shall deliver an executed copy thereof to Executive,
whereupon Employer shall be released of all further liability to Executive
hereunder.
7.4 This Agreement is made and intended to be performed principally in
the State of California and shall take effect under, be construed and
enforced according to, and the rights and obligations of the parties shall
be governed in all respects by, the laws of the State of California. Should
any action be brought to interpret or enforce the terms hereof, the
prevailing party shall be awarded costs and reasonable attorneys' fees.
7.5 The headings of the Sections of this Agreement have been inserted
for convenience of reference only, and shall in no way affect the
interpretation of any of the terms or conditions of this Agreement.
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7.6 If any provision or part thereof of this Agreement for any reason
shall be held by an official body to be invalid or unenforceable, the valid
and enforceable provisions or parts of this Agreement shall nonetheless
continue to be given effect and bind Employer and Executive.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the day and year first above written.
MODACAD, INC.,
a California corporation
/s/ XXXXX XXXXXXXX By: /s/ XXXXXXXX XXXXXXXXX
-------------------------- --------------------------------------
Xxxxx Xxxxxxxx Xxxxxxxx Xxxxxxxxx,
"Executive" President & Chief Operating Officer
"Employer"
EXHIBIT "A"
MODACAD, INC.
INCENTIVE STOCK OPTION AGREEMENT
Effective April 8, 1998 (the "Date of Grant"), ModaCAD, Inc., a California
corporation (the "Company"), hereby grants to Xxxxx Xxxxxxxx (the "Optionee") an
option to purchase a total of 200,000 shares of Common Stock (the "Shares") of
the Company, at the price set forth herein, and in all respects subject to the
terms and provisions of the Company's 1995 Stock Option Plan, as now and
hereafter amended, and/or the Company's 1998 Stock Option Plan, if such a plan
is adopted by Employer, subject to Employer obtaining shareholder approval at
the Company's 1998 Annual Meeting of the Stockholders (or at any other meeting
of, or written adoption of resolutions by, Employer's shareholders) of an
increase in the number of shares authorized for grant subject to stock options
under said plan or plans, (the "Plan") applicable to incentive stock options
which terms and provisions are hereby incorporated by reference herein. Unless
otherwise defined or the context herein otherwise requires, the capitalized
terms used herein shall have the same meanings ascribed to them in the Plan.
1. Nature of the Option. This Option is intended to be an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"); provided, however, that the fair market value of all
shares of the Common Stock of the Company subject to the Option which first
become exercisable in any calendar year may not exceed $100,000 (such market
value to be determined on the Date of Grant), and if and to the extent that the
fair market value of the shares which first become exercisable in a given year
do exceed $100,000, the number of shares whose fair market value so exceeds
$100,000 shall be deemed subject to a non-statutory stock option. For purposes
of this Agreement, the term "Option" shall hereinafter collectively refer to the
incentive stock option granted hereby and, if required by the proviso of the
immediately preceding sentence, the non-statutory stock option.
2. Date of Grant; Vesting Term of Option. This Option is granted as of
April 8, 1998, subject to Employer obtaining shareholder approval at Employer's
1998 Annual Meeting of Shareholders (or at any other meeting of, or written
adoption of resolutions by, Employer's shareholders) of an increase in the
number of shares authorized for grant subject to stock options under said plan
or plans, and shall be exercisable based on the following schedule: with respect
to any calendar year of the "Employment Term" (as such term is defined in that
certain Employment Agreement dated effective as of January 1, 1998 (the
"Employment Agreement") between the Company and Optionee) in which the "ISO
Trigger" (as defined herein) occurs, a portion of the Option shall become
exercisable with respect to fifty (50) shares of the Company's Common Stock for
each one thousand dollars ($1,000) of the Company's and its subsidiaries'
consolidated net income before taxes and executive bonuses in such year as
reported on the Company's audited financial statements for that year. As used
herein, the term "ISO Trigger" shall mean that, at least once during the
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applicable calendar year, the closing sales price of the Company's common stock,
as quoted on the NASDAQ Stock Market or as listed on a recognized stock exchange
for twenty (20) consecutive trading days averages $10 or more, which dollar
figure shall be adjusted appropriately to reflect any stock splits, reverse
stock splits, stock dividends, recapitalization (other than the conversion of
convertible securities according to their terms), combination of shares or other
like capital adjustment. As each respective portion of the Option first becomes
exercisable in accordance with the foregoing schedule, such portion shall
thereafter remain exercisable for a period of five (5) years; provided, however,
that an incentive stock option shall not be exercisable after the tenth
anniversary of the Date of Grant. Notwithstanding the foregoing, exercisability
of the Option shall be accelerated, if applicable, in accordance with the
provisions of Paragraph 6.
3. Option Exercise Price. The Option exercise price is $14.00 per Share,
which price is not less than the fair market value thereof on the Date of Grant.
4. Exercise of Option. This Option shall be exercisable during it term only
in accordance with the terms and provisions of the Plan and this Option as
follows:
(a) Method of Exercise. This Option shall be exercisable by written
notice which shall state the election to exercise this Option, the number
of Shares in respect to which this Option is being exercised, such other
representations and agreements as to the Optionee's investment intent with
respect to such Shares as may be required by the Company hereunder or
pursuant to the provisions of the Plan. Such written notice shall be signed
by the Optionee and shall be delivered in person or by certified mail to
the Secretary of the Company or such other person as may be designated by
the Company. The written notice shall be accompanied by payment of the
exercise price, which shall be by cash or by check or by delivery to the
Company of shares of Common Stock of the Company, duly assigned to the
Company by a stock power with signatures guaranteed as provided on the back
of the stock certificate. The value of each share delivered in payment of
the exercise price of all or part of the Option shall be the fair market
value ("Fair Market Value") of the Common Stock on the date such shares are
delivered. The Fair Market Value of a share of the Common Stock on any date
shall be equal to the closing price of the Common Stock for the last
preceding day on which the Company's shares were traded, and the method for
determining the closing price shall be determined by the Committee. The
certificate or certificates for the Shares as to which the Option shall be
exercised shall be registered in the name of the Optionee and, shall be
legended as set forth in the Plan, the Stock Purchase Agreement and/or as
required under applicable law. This Option may not be exercised for a
fraction of a Share.
(b) Restrictions on Exercise. This Option may not be exercised if the
issuance of the Shares upon such exercise would constitute a violation of
any applicable federal or state securities laws or other laws or
regulations. As a condition to the exercise of this Option, the Company may
require the Optionee to make such representations and warranties to the
Company as may be required by any applicable law or regulation.
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(c) No Shareholder Rights before Exercise and Issuance. No rights as a
shareholder shall exist with respect to the Shares subject to the Option as
a result of the grant of the Option. Such rights shall exist only after
issuance of a stock certificate in accordance with Section 8(d) of the Plan
following the exercise of the Option as provided in this Agreement and the
Plan.
5. Investment Representations. In connection with the acquisition of this
Option, the Optionee represents and warrants as follows:
(a) The Optionee is acquiring this Option, and upon exercise of this
Option, she will be acquiring the Shares for investment for his own
account, not as a nominee or agent, and not with a view to, or for resale
in connection with, any distribution thereof.
(b) The Optionee has a preexisting business or personal relationship
with the Company or one of its directors, officers or controlling persons
and by reason of his business or financial experience, has, and could be
reasonably assumed to have, the capacity to evaluate the merits and risks
of purchasing Common Stock of the Company and to make an informed
investment decision with respect thereto and to protect Optionee's interest
in connection with the acquisition of this Option and the Shares.
6. Termination of Status as an Employee.
(a) If an Optionee's continuous Employment terminates for any reason
other than death or Disability (pursuant to, respectively, Paragraph 3.2 or
Paragraph 4.4 of the Employment Agreement), or a termination for "just
cause" (as defined in the Employment Agreement), or if there is a "Change
in Control" (as defined below), the exercisability of the Option shall
automatically accelerate, effective upon the date of termination of
employment or the Change in Control, so that the Option shall then become
exercisable in full, the Optionee shall have the right to exercise the
Option at any time within, as the case may be, ninety (90) days after the
date of such termination or five (5) years after the effective date of a
Change in Control.
(b) If the Optionee's Continuous Employment terminates due to the
death or disability (pursuant to, respectively, Paragraph 3.2 or Paragraph
4.4 of the Employment Agreement) of the Optionee, the Option, to the extent
then exercisable (including, for such purpose, any portion which becomes
exercisable because the ISO Trigger occurs and the Company has consolidated
net income before taxes and executive bonuses in the calendar year in which
death or disability occurs), may be exercised at any time within twelve
(12) months after the date of such termination, in the case of death, by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, or, in the case of disability, by the
Optionee.
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(c) Notwithstanding the foregoing regarding the exercise of the Option
after the termination of Continuous Employment, the Option shall not be
exercisable after the expiration of the periods of exercisability set forth
in Section 2 herein.
(d) If the Optionee's Continuous Employment with the Company
terminates due to his or her termination for "just cause," the Option shall
terminate as of the date of such termination, to the extent not exercised
prior to such date.
(e) A "Change in Control" of the Company shall be deemed to have
occurred (a) on the date the Company first has actual knowledge that any
person (as such term is used in Sections 13(d) and 14(d) (2) of the
Exchange Act) has become the beneficial owner (as defined in Rule 13(d)-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing forty percent (40%) or more of the combined voting
power of the Company's then outstanding securities or (b) on the date the
shareholders of the Company approve (i) a merger of the Company with or
into any other corporation in which the Company is not the surviving
corporation or in which the Company survives as a subsidiary of another
corporation, (ii) a consolidation of the Company with any other
corporation, or (iii) the sale or disposition of all or substantially all
of the Company's assets or a plan of complete liquidation.
7. Withholding. The Company reserves the right to withhold, in accordance
with any applicable laws, from any compensation or other consideration
payable to the Optionee, any taxes required to be withheld by federal,
state or local law as a result of the grant or exercise of this Option or
the sale or other disposition of the Shares issued upon exercise of this
Option; and, if such compensation or consideration is insufficient, the
Company may require Optionee to pay to the company an amount sufficient to
cover such withholding tax liability.
8. Nontransferability of Option. This Option may not be sold, pledged,
assigned, hypothecated, gifted, transferred or disposed of in any manner,
either voluntarily or involuntarily by operation of law or otherwise, other
than by will or by the laws of descent or distribution or a transfer
between spouses incident to a divorce, and may be exercised during the
lifetime or the Optionee only by such Optionee or his or her legal
guardian. Subject to the foregoing and the terms of the Plan, the terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
9. Changes in Capitalization.
(a) The number and class of shares subject to the Option, the exercise
price per share (but not the total price), and the minimum number of shares
as to which the Option may be exercised at any one time, shall be
proportionately adjusted in the event of any increase or decrease in the
number of the issued shares of Common Stock of the Company which results
from a split-up or consolidation of shares, payment of a stock dividend, a
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recapitalization (other than the conversion of convertible securities
according to their terms), a combination of shares or other like capital
adjustment, so that upon exercise of the Option, Optionee shall receive the
number and class of shares he would have received had he been the holder of
the number of shares of Common Stock for which the Option is being
exercised upon the date of such change or increase or decrease in the
number of issued shares of the Company.
(b) Upon a reorganization, merger of consolidation of the Company with
one or more corporations as a result of which the Company is not the
surviving corporation, or in which the Company survives as a subsidiary of
another corporation, a sale of all or substantially all of the property of
the Company to another corporation or any dividend or distribution to
shareholders of more than ten percent of the Company's assets, adequate
adjustment or other provisions shall be made by the Company or other party
to such transaction so that there shall remain and/or be substituted for
the Option Shares provided for herein, the shares, securities or assets
which would have been issuable or payable in respect of or in exchange for
the Option Shares then remaining under the Option, as if Optionee had been
the owner of such shares as of the applicable date. Any securities so
substituted shall be subject to similar successive adjustments.
10. Continuation of Employment. Neither the Plan, this Option, nor any
Option granted thereunder shall (a) confer upon the Optionee any right
whatsoever to continue in the employment of the Company or any of its
Subsidiaries or (b) limit or restrict in any respect the rights of the
Company, which rights are hereby expressly reserved, to terminate the
Optionee's employment and compensation at any time for any reason
whatsoever, with or without cause, in the Company's sole discretion and
with or without notice.
11. The Plan. The Option is subject to, and the Company and the Optionee
agree to be bound by, all of the terms and conditions of the Company's Plan
(as supplemented by the further terms and conditions of this Option, which
have been determined by the Company's Board of Directors in accordance with
Section 4(b) of the Plan) as such Plan may be amended from time to time in
accordance with the terms thereof, provided that no such amendment shall
deprive the Optionee, without his consent, of this Option or any rights
hereunder. Pursuant to the Plan, the Board is authorized to adopt rules and
regulations not inconsistent with the Plan as it shall deem appropriate and
proper. A copy of the Plan in its present form is available for inspection
at the Company's principal office during business hours by the Optionee or
the persons entitled to exercise this Option.
12. Entire Agreement. The terms of this Agreement and the Plan constitute
the entire agreement between the Company and the Optionee with respect to
the subject matter hereof and supersede any and all previous agreements
between the Company and the Optionee.
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ModaCAD, Inc.
a California corporation
Date: By: /s/ XXXXXXXX XXXXXXXXX
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Title: President and COO
Date: /s/ XXXXX XXXXXXXX
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Signature of Optionee
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Address
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City State Zip code
THIS OPTION AND THE SECURITIES WHICH MAY BE PURCHASED UPON EXECUTION OF
THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE, TRANSFER OR
DISTRIBUTION THEREOF. NO SUCH SALE, TRANSFER OR DISTRIBUTION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES WHICH MAY BE PURCHASED UPON EXERCISE OF THIS OPTION ARE SUBJECT
TO A RIGHT OF FIRST REFUSAL AND MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH THE
TERMS OF A STOCK PURCHASE AGREEMENT TO BE ENTERED INTO BETWEEN THE HOLDER OF
THIS OPTION AND THE COMPANY UPON EXERCISE OF THIS OPTION, A COPY OF WHICH
AGREEMENT IS ON FILE WITH THE SECRETARY OF THE COMPANY.
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