EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (this"Agreement") is made and entered into as of
August 28, l998, by and between PSW Technologies, Inc., a Delaware corporation
(the"Company"), and Xxxxxxx Xxxx, an individual (the"Executive").
RECITALS
WHEREAS, the Company desires to hire the Executive and the Executive
desires to become employed by the Company; and
WHEREAS, the Company and the Executive have determined that it is in their
respective best interest to enter into this Agreement on the terms and
conditions as set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. EMPLOYMENT TERMS AND DUTIES
1.1 Employment. The Company hereby employs the Executive, and the Executive
hereby accepts employment by the Company, upon the terms and conditions set
forth in this Agreement.
1.2 Duties. The Executive shall serve as President and Chief Executive Officer.
The Executive shall perform all reasonable duties assigned by the Company's
Board of Directors (the"Board"). The Company agrees to nominate for election or
to appoint Executive to the Board at the earliest possible date and at each
annual meeting of the stockholders during his employment. Executive agrees to
serve on the Board.
During the term of his employment hereunder, the Executive shall devote his
full working time and efforts to the performance of his duties and the
furtherance of the interests of the Company and shall not be otherwise employed.
Notwithstanding the above, Executive may serve as a director or trustee of other
organizations, or engage in charitable, civic, and/or governmental activities
provided that such service and activities do not prevent Executive from
performing his duties under this Agreement and further provided that Executive
obtains written consent for all such activities from the Board, which consent
will not be unreasonably withheld. Executive may engage in personal activities,
including, without limitation, personal investments (subject to Section 3.1.1),
provided that such activities do not interfere with his performance of duties
hereunder.
1.3 Term. Subject to the provisions of Section 1.5 below, the initial term of
employment of the Executive under this Agreement shall commence on August 28,
1998, (the"Hire Date") and shall continue for a period of six (6) years (the
"Initial Term"). This Agreement may be renewed by mutual agreement of the
parties for additional consecutive one (1) year periods (the"Renewal Term," and
together with the Initial Term, the"Employment Term").
1.4 Compensation and Benefits.
1.4.1 Base Salary. In consideration of the services rendered to the Company
hereunder by the Executive and the Executive's covenants hereunder, the Company
shall, during the Employment Term, pay the Executive a salary at the annual rate
of Three Hundred Twenty Five Thousand Dollars and 00/100 ($325,000.00) (the
"Base Salary"), less statutory deductions and withholdings, payable in
accordance with the Company's regular payroll practices. The Base Salary shall
be increased annually by four percent (4%). At least annually, the Board or a
committee thereof, will review the Base Salary and the options granted hereunder
for competitiveness and appropriateness in the industry, and may further
increase Base Salary and/or award a bonus to Executive.
1.4.2 Benefits Package. In addition to the Base Salary, during the Employment
Term, the Executive shall be entitled to receive such employee benefits and
holidays as may be in effect from time to time as are afforded to other
executives of the Company. The Company also agrees to indemnify Executive and to
provide Executive with liability insurance in accordance with Company policy and
to the same extent that it provides indemnification and liability insurance to
comparable directors and/or officers.
1.4.3 Vacation. The Executive shall be entitled to four (4) weeks' vacation each
fiscal year.
1.4.4 Expenses. The Company shall, upon receipt from the Executive of supporting
receipts to the extent required by applicable income tax regulations and the
Company's reimbursement policies, reimburse the Executive for all out-of-pocket
business expenses reasonably incurred by the Executive in connection with his
employment hereunder.
1.5 Stock Option.
1.5.1 On the Hire Date the Company shall grant to Executive, in accordance with
the terms of the PSW Technologies, Inc. 1996 Stock Issuance Plan (the"Plan"),
an option to purchase a total of Five Hundred Thousand (500,000) shares of the
Company's common stock (the"Option"). The Option shall vest over six (6) years
in accordance with the following vesting schedule: (i) One Hundred Thousand
(100,000) shares upon Executive's completion of six (6) months' employment with
the Company; (ii) an additional One Hundred Thousand (100,000) shares upon
Executive's completion of two (2) years' employment with the Company; (iii) an
additional One Hundred Thousand (100,000) shares upon Executive's completion of
three (3) years' employment with the Company; (iv) an additional Twenty Five
Thousand (25,000) shares upon Executive's completion of four (4) years'
employment with the Company; (v) an additional Seventy Five Thousand (75,000)
shares upon Executive's completion of five (5) years' employment with the
Company; and (vi) an additional One Hundred Thousand (100,000) shares upon
Executive's completion of six (6) years' employment with the Company. The Option
granted to Executive under this Section shall be an Incentive Stock Option as
defined under Section-422 of the Internal Revenue Code of 1986, as amended, up
to the permitted limitation as of the Hire Date and any balance shall be
reflected in a non-qualified option.
1.5.2 All or a portion of the Option may be immediately exercisable at the
discretion of Executive upon the delivery of cash equal to the exercise price of
those shares being exercised, subject to the limitations on exercising incentive
stock options, which will be exercisable to the maximum extent allowable as of
the Hire Date over the term of the vesting schedule. All exercised shares shall
be subject to repurchase rights in favor of the Company until the options
pursuant to which the shares were issued have otherwise vested pursuant to the
terms of Section 1.5.1. Subject to Section-1.7.2, in the event Executive's
employment is terminated, with or without cause, other than a termination
arising out of a Change in Control as defined in Section 1.5.3 of this
Agreement, the Company shall have fifteen (15) days after the last date of
Executive's employment to notify Executive of its intention to repurchase
Executive's unvested shares. Executive shall deliver all of the unvested shares
purchased by the Company, free of all encumbrances, within thirty (30) days of
receipt of notice of the Company's intention to repurchase the unvested shares.
The Company shall pay Executive the exercise price (subject to adjustments for
stock splits, reclassifications and the like) for the unvested shares.
1.5.3 In the event the Company is acquired by merger or asset sale or there
should be certain other changes in control or ownership of the Company, the
following provisions shall govern any accelerated vesting of the Option either
at the time of such acquisition or change in control or upon the subsequent
termination of Executive's employment under certain circumstances.
(i) To the extent that Option is, in connection with a Change in Control, to be
assumed or replaced with a comparable option, the Option shall not accelerate
(and repurchase rights will not lapse) upon the occurrence of that Change in
Control, and the Option shall accordingly continue, over Executive's period of
Service after the Change in Control, to become exercisable for the Option Shares
in one or more installments in accordance with Section 1.5.1. However,
immediately upon an Involuntary Termination of Executive's employment within
twelve (12) months following such Change in Control, the Option (or any
replacement grant), to the extent outstanding at the time but not otherwise
fully vested, shall automatically accelerate and become immediately exercisable
(or repurchase rights shall lapse) according to the vesting schedule set forth
in Section-1.5.1 to the same extent as if Executive had remained employed under
the Agreement for three (3) years following the date of the Involuntary
Termination. The Option shall remain exercisable until the earlier of (a) the
Option Term or (b) the expiration of the one (1) year period measured from the
date of such Involuntary Termination. The determination of option comparability
shall be made by the Plan Administrator, and its determination shall be final,
binding, and conclusive.
(ii) To the extent the Option is not assumed or replaced with a comparable
option in connection with a Change in Control, all vesting of the Option shall
be deemed to have accelerated and all repurchase rights for unvested, exercised
shares shall be deemed to have lapsed in full immediately prior to such Change
in Control. (iii) For purposes of this Section, the following definitions shall
be in effect:
(a) An Involuntary Termination shall mean the termination of Executive's Service
by reason of:
1. Involuntary dismissal or discharge by the Company (or Parent or Subsidiary
employing Executive) for reasons other than for Cause, or
2. Executive's voluntary resignation following (a) a change in Executive's
position with the Company (or Parent or Subsidiary employing Executive)
which materially reduces Executive's level of responsibility, (b) a
reduction in Executive's level of compensation (including base salary,
fringe benefits and participation in any corporate-performance based bonus
or incentive programs) or (c) a relocation of Executive's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Company without Executive's
consent, and
(b) a Change in Control shall be deemed to occur in the event of a change in
ownership or control of the Company effected through any of the following
transactions:
1. the acquisition, directly or indirectly, by any person or related group of
persons (other than the Company or a person that directly or indirectly
controls, or is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities pursuant to a tender or exchange offer
made directly to the Company's stockholders; or
2. the sale, transfer or other disposition of all or substantially all of the
Company's assets; or
3. a change in the composition of the Board over a period of thirty-six (36)
consecutive months or less such that a majority of the Board members
ceases, by reason of one or more contested elections for Board membership,
to be comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board;
or
4. the consummation of a merger or consolidation of the Company with or into
another entity or any other corporate reorganization, if more than fifty
percent (50%) of the combined voting power of the continuing or surviving
entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger, consolidation
or other reorganization.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
(iv) The provisions of Section 1.5.3(i) shall govern the period for which the
Option is to remain exercisable following the Involuntary Termination of
Executive's Service within twelve (12) months after a Change in Control and
shall supersede any provisions to the contrary in the Plan.
1.6 Termination. The Executive's employment and this Agreement (except as
otherwise provided hereunder) shall terminate upon the occurrence of any of the
following, at the time set forth therefor (the"Termination Date"):
1.6.1 Death or Disability. Immediately upon the death of the Executive or the
determination by the Board that the Executive has ceased to be able to perform
the essential functions of his duties, with or without reasonable accommodation,
for a period of not less than ninety (90) days, due to a mental or physical
illness or incapacity ("Disability") (termination pursuant to this Section 1.6.1
being referred to herein as termination for"Death or Disability"); or
1.6.2 Voluntary Termination. Thirty (30) days following the Executive's written
notice to the Company of termination of employment; provided, however, that the
Company may waive all or a portion of the thirty (30) days' notice and
accelerate the effective date of such termination (and the Termination Date)
(termination pursuant to this Section 1.6.2 being referred to herein as
"Voluntary" termination); or
1.6.3 Termination For Cause. Immediately following notice of termination for
"Cause" (as defined below), specifying such Cause, given by the Company
(termination pursuant to this Section 1.6.3 being referred to herein as
termination for"Cause"). As used herein,"Cause" means termination based on (i)
the Executive's material breach of this Agreement after receiving written
notification from the Board and following a reasonable cure period, (ii)-the
Executive's conviction or plea of "guilty" or"no contest" to (x) any crime
constituting a felony in the jurisdiction in which committed, (y) any crime
involving moral turpitude (whether or not a felony), or (z) any other violation
of criminal law involving dishonesty or willful misconduct that materially
injures the Company (whether or not a felony), (iii) substance abuse by the
Executive that in any manner materially interferes with the performance of his
duties under this Agreement, (iv) the failure or refusal of the Executive to
follow the lawful and proper directives of the Board that are within the scope
of thc Executive's duties set forth in Section 1.2 above and that is not
corrected within fifteen (15) days after written notice from the Board to the
Executive identifying such failure or refusal, (v) willful malfeasance or gross
misconduct by the Executive that discredits or damages the Company including,
without limitation, any breach of his obligations under Section 2 or Section 3
below, (vi) indictment of the Executive for a felony violation of the federal
securities laws or (vii) the Executive's chronic absence from work for reasons
other than illness; or
1.6.4 Termination Without Cause. Thirty (30) days following notice of
termination without Cause given by the Company; provided, however, that during
any such thirty (30) day notice period, the Company may suspend, with no
reduction in pay or benefits, the Executive from his duties as set forth herein
(including, without limitation, the Executive's position as a representative and
agent of the Company) (termination pursuant to this Section 1.6.4 being referred
to herein as termination "Without Cause"). 1.6.5 Other Remedies. Termination
pursuant to Section 1.6.3 above shall be in addition to and without prejudice to
any other right or remedy to which the Company may be entitled at law, in
equity, or under this Agreement.
1.7 Severance and Termination.
1.7.1 Voluntary Termination, Termination for Cause, Termination for Death or
Disability. In the case of a termination of Executive's employment hereunder for
Death or Disability in accordance with Section 1.6.1 above, or Executive's
Voluntary termination of employment hereunder in accordance with Section 1.6.2
above, or a termination of the Executive's employment hereunder for Cause in
accordance with Section 1.6.3 above, (i) the Executive shall not be entitled to
receive payment of, and the Company shall have no obligation to pay, any
severance or similar compensation attributable to such termination, other than
Base Salary earned but unpaid, accrued but unused vacation to the extent allowed
by the Company's policies, vested benefits under any employee benefit plan, and
any unreimbursed expenses pursuant to Section 1.4.5 hereof incurred by the
Executive as of the termination date, and (ii) the Company's obligations under
this Agreement shall immediately cease.
1.7.2 Termination Without Cause. In the case of a termination of the Executive's
employment hereunder Without Cause in accordance with Section 1.6.4 above, the
Company shall pay the Executive (i) an amount equal to twelve (12) months'
salary if the termination occurs during the first eighteen (18) months of the
Initial Term; (ii) an amount equal to three (3) months' salary if the
termination occurs after the first eighteen (18) months of employment but prior
to the expiration of the Initial Term (hereinafter the"Severance Payment"), in
each case payable at the times and subject to the tax withholding specified in
Section 1.4.1 above; and (iii)-unvested shares due to vest on the next scheduled
vesting date shall accelerate and shall become fully vested and any repurchase
rights in such shares (up to the next vesting date), shall immediately lapse in
full. The Company shall provide Executive with health and welfare benefits equal
to and under the same terms as such benefits were provided to Executive
immediately prior to the Termination Date, or pay premiums for such benefits
required of Executive under COBRA, 29 U.S.C. S 1161, et seq. (hereinafter
"Benefit Continuation"), throughout any period in which Executive receives
Severance Payment under this Section or until Executive receives comparable
benefits from any other source, whichever occurs first. Nothing contained herein
shall interfere with Executive's right to purchase continuation coverage under
COBRA. In the event of an Involuntary Termination under Section 1.5.3(iii)(a) of
this Agreement, Executive shall be entitled to the Severance Payment and Benefit
Continuation set forth in this paragraph in addition to the accelerated vesting
described in Section 1.5.3(i). The Company's obligation to pay and the
Executive's right to receive the Severance Payment shall cease in the event of
the Executive's breach of his obligations under Section 2 or Section 3 below.
1.7.3 Offset Against Severance. During the period in which the Executive is
receiving Severance Payments from the Company (the"Severance Period"), such
Severance Payments to be provided to the Executive shall be reduced on a
dollar-for-dollar basis by any wages or other compensation actually received by
the Executive during the Severance Period, regardless of whether such wages or
compensation are from employment, consulting, or other gainful activities. The
Executive promises and agrees to promptly advise the Company of the amount and
source of any wages or other compensation received by him, from any source,
during the Severance Period. 1.8 Location. Unless Executive otherwise consents
in writing, the principle place of employment of Executive will be the Austin,
Texas metropolitan area ("Austin") in office space to be provided by the
Company. The Executive's failure to relocate shall constitute a termination
Without Cause as defined in Section-1.6.4 hereof and entitle Executive to the
Severance Pay and vesting as described in Section-1.7.2.
2. CONFIDENTIAL INFORMATION - NON-DISCLOSURE
2.1 Recognition of the Company's Rights: Nondisclosure. Executive understands
that the Company possesses Proprietary Information.
2.1.1 "Proprietary Information" shall mean Information (as defined below) of
value to the Company that is created, invented, developed, prepared, conceived,
reduced to practice, made, suggested, discovered, received, or learned by the
Company including, for example, but not limited to, any trade secret, know-how,
show-how and other proprietary information, irrespective of (a) whether in
tangible or non-tangible form, (b) whether patentable or copyrighted or subject
to confidentiality, (c) its media, (d) whether solely or jointly created,
invented, developed, prepared, conceived, reduced to practice, made, suggested,
discovered, received, or learned by Executive and/or one or more other persons,
or (e) whether created, invented, developed, prepared, conceived, reduced to
practice, made, suggested, discovered, received, or learned before, during, or
after the term of this Agreement. Proprietary Information does not include
Information (as defined below) that Executive develops entirely on his own time
without using the Company's equipment, supplies, facilities, Proprietary
Information, or trade secret information except for such Information that either
relates at the time of conception or reduction to practice of the Information to
the Company's business, or actual or demonstrably anticipated research or
development of the Company, or results from any work performed by the Executive
for the Company.
2.1.2 "Information" shall mean any list, schematic, diagram, circuitry,
technology, inventory, invention, idea, discovery, improvement, design, concept,
technique, algorithm, formula, method, process, configuration, tooling,
mechanism, manufacture, assembly, installation, model, apparatus, product,
device, system, network, data, plan, library, work of authorship, file, media,
record, report, copy, pictorial work, graphic work, audiovisual work, hardware,
firmware, computer interface (including for example but not limited to
programming interfaces), computer language, computer protocol, computer software
program or application (irrespective of whether source code or object code),
flow chart, blueprint, drawing, photograph, chart, graph, notebook, book,
computer disk, tape, storage media, printout, sound recording, note, memorandum,
specification, paper, document (irrespective of whether printed, typewritten,
handwritten or otherwise), information, material, account, business plan,
business operation, business method, business practice, business strategy,
research, development, marketing, revenue, sale, forecast, budget, finance,
license, price, cost, salary, compensation, knowledge about suppliers, knowledge
about available skills, and knowledge about actual and/or prospective employees,
clients, and/or customers (including for example but not limited to their names,
addresses, and telephone numbers). 2.1.3"Non-party Information" shall mean
Information discovered, received, or learned by the Company from non-parties
with respect to which the Company is subject to a duty to maintain
confidentiality or to use only for certain limited purposes.
2.2 The Executive Covenant. In consideration of the Company's entering into this
Agreement, and providing the Base Salary and other benefits to the Executive,
the receipt and sufficiency of which is hereby acknowledged by the Executive,
the Executive covenants as follows:
2.2.1 Non-Disclosure of Proprietary Information and Non-Party Information. At
all times during the term of this Agreement and for three (3) years following
the Termination Date, Executive shall hold all Proprietary Information and
Non-party Information in strictest trust and confidence and shall neither
disclose (to anyone other than the Company personnel having a need to know such
Information in connection with their activities for the Company) nor use (except
insofar as required by Executive's activities for the Company under this
Agreement) any Proprietary Information or any Non-party Information, unless: (a)
Executive is expressly authorized in writing to the contrary by a duly
authorized officer of the Company; (b) absent breach or violation of this
Agreement, such Information is or becomes generally known to the public or
available to the public, as evidenced by a printed publication or other equally
conclusive evidence; (c) absent breach or violation of this Agreement, such
Information is rightfully received absent any confidentiality obligation by
Executive from a non-party outside of the Company, as evidenced by a dated and
witnessed writing prepared in the normal course of business or other equally
conclusive evidence; or (d) is required to be disclosed pursuant to a valid
order by a court or other governmental body or otherwise required by law,
provided that Executive informs the Company immediately upon Executive's receipt
of notice, in any form, that disclosure pursuant to this section may be required
so that the Company may oppose any compelled disclosure of its Proprietary
Information. Executive further agrees not to disclose any Proprietary
Information pursuant to this section unless and until he is informed that the
Company will not oppose such disclosure or that the Company's attempt to oppose
such disclosure has been denied.
2.2.2 Trade Secrets. All trade secrets of the Company will be entitled to all of
the protection and benefits under all applicable federal and state trade secrets
law. If any information that the Company deems to be a trade secret is found by
a court of competent jurisdiction not to be a trade secret for purposes of this
Agreement, such information will, nevertheless, be considered Proprietary
Information for purposes of this Agreement. The Executive hereby waives any
requirement that the Company submit proof of the economic value of any trade
secret or post a bond or other security.
2.3 Assignment of Inventions.
2.3.1 Definitions.
(i)"Moral Rights" shall mean (a) any right of paternity or integrity, (b) any
right to claim authorship or require authorship identification, (c) any right to
object to distortion, mutilation, or other modification of, or other derogatory
action in relation to, a work of authorship, and (d) any similar right existing
under judicial or statutory law of any country or under any treaty, irrespective
of whether such right is generally referred to as a"moral right."
(ii)"Proprietary Right" shall mean any patent, trade secret, confidentiality
protection, know-how right, show-how right, mask work right, copyright (e.g.,
including but not limited to any Moral Right), and any other intellectual
property protection and intangible interests and legal rights of exclusion, of
any and all countries, including for example but not limited to (a) any person's
publicity or privacy right, (b) any utility model or application therefor, (c)
any industrial model or application therefor, (d) any certificate of invention
or application therefor, (e) any application for patent, including, for example,
but not limited to, any provisional, divisional, reissue, reexamination or
continuation application, (f) any substitute, renewal or extension of any such
application, and (g) any right of priority resulting from the filing of any such
application.
(iii) "The Company Inventions" shall mean (a) any and all Proprietary
Information that is created, invented, developed, prepared, conceived, reduced
to practice, made, suggested, discovered, received, or learned by Executive,
either alone or jointly with one or more other persons, during the term of this
Agreement, and (b) any and all Proprietary Rights that may be available in such
Proprietary Information or result therefrom. (iv) Executive may develop and/or
review business plans, provided (a) he does so entirely on his own time and
without using the Company's equipment, supplies, facilities, Proprietary
Information, or trade secret information, and (b) that any such business plans
do not conflict with any of Executive's obligations under Section 3. Business
plans developed or reviewed by Executive in a manner consistent with this
Section shall be excluded from the definition of Company Inventions.
2.3.2 Executive's Covenant. Executive does hereby, without reservation,
irrevocably:
(i) sell, assign, grant, transfer, and convey to the Company (and the Company's
successors and assigns): Executive's entire right, title, and interest (present
and future and throughout the world) in and to all Company Inventions; provided
however that, to the extent that any one or more of the Company Inventions
includes a work of authorship created by Executive (solely or jointly with
others), each such work of authorship shall automatically be deemed to be
created as a"work made for hire" (as that term is defined in the United States
Copyright Act (17 U.S.C. Section S-101)) that is owned solely by the Company (as
between Executive and the Company);
(ii) acknowledge and agree that, as between the Company and Executive, (i) all
the Company Inventions shall be the sole and exclusive property of the Company,
its successors and assigns, and (ii) the Company, its successors and assigns
shall be the sole and exclusive owner of all the Company Inventions throughout
the world;
(iii) waive and quitclaim to the Company any and all claims, of any nature
whatsoever, that Executive has now or may hereafter have for infringement or
violation of any one or more of the Company Inventions;
(iv) consent to any and all use of names, likenesses, voices, and similar
aspects of all the Company Inventions or related to or associated with all the
Company Inventions;
(v) authorize the Company (and its successors, assigns, nominees,
representatives, and designees) to apply (in the Company's own name) for any and
all patents (and similar non-U.S. rights) that may be available in (or result
from) all the Company Inventions, and to claim any and all rights of priority
without further authorization from Executive so that such patents issue in the
name of the Company (or its successors or assigns);
(vi) represent, warrant, and covenant that Executive shall never assert any
Moral Right in any one or more of the Company Inventions;
(vii) forever waive all Moral Rights in the Company Inventions; (viii)
represent, warrant, and covenant that Executive shall disclose and deliver,
fully and in writing, to the Company, each and every Company Invention promptly
after such Company Invention is created, invented, developed, prepared,
conceived, reduced to practice, made, suggested, discovered, received, or
learned by Executive; and
(ix) represent, warrant, and covenant that Executive shall (at the request of
the Company, or any of its successors, assigns, nominees, representatives, or
designees) in every proper way cooperate and do everything (at the Company's
sole expense for Executive's reasonable actual costs, but without additional
charge to the Company) that the Company (or any one or more of its successors,
assigns, nominees, representatives, or designees) may reasonably consider
necessary or appropriate to assist the Company (and its successors, assigns,
nominees, representatives, and designees) to prepare and make filings in any and
all countries to apply for, prosecute, register, evidence, defend, obtain, hold,
secure, vest title to, protect, perfect, maintain, uphold, and enforce any and
all Proprietary Rights that may be available in (or result from) the Company
Inventions, including for example but not limited to: communicating to the
Company (and its successors, assigns, nominees, representatives, and designees)
any Information relating to conception or reduction to practice or prosecution
of any one or more of such Proprietary Rights; testifying and rendering prompt
assistance and cooperation in any and all legal proceedings (e.g., including but
not limited to any opposition, cancellation proceeding, interference proceeding,
priority contest, public use proceeding, reexamination proceeding, and court
proceeding) involving any one or more of such Proprietary Rights; and executing,
verifying and delivering any and all assignments, oaths, declarations, powers of
attorney, and other instruments and documents. If Executive fails or refuses to
execute any such assignment, oath, declaration, power of attorney, instrument,
or document, Executive hereby designates and appoints the Company (and its
successors and assigns) as Executive's true and lawful agent and
attorney-in-fact (such agency and power of attorney being irrevocable by
Executive and coupled with an interest in favor of the Company and its
successors and assigns), with full power of substitution, to act for Executive
and in Executive's behalf to do any lawfully permitted act in furtherance of the
purposes of the immediately preceding sentence (e.g., including but not limited
to executing, verifying, and filing such assignments, oaths, declarations,
powers of attorney, and other instruments and documents) in Executive's name and
stead and on behalf of and for the benefit of the Company and its successors and
assigns, with the same legal force and effect as if Executive performed such
act, irrespective of whether in Executive's name or the Company's name or
otherwise.
3. NON-COMPETITION AND NON-INTERFERENCE
3.1 Covenant of the Executive. In consideration of the Company's entering into
this Agreement, and providing the Base Salary, Option, and other benefits to the
Executive, and in consideration of the Executive's receipt of and/or continued
exposure to the Company's Proprietary Information, and the Executive's receipt
of specialized training, the receipt and sufficiency of which are hereby
acknowledged by Executive, the Executive covenants as follows:
3.1.1 Non-Competition. Executive hereby agrees that during the Employment Term
and for a period of one (1) year following the Termination Date, for any reason,
Executive will not, directly or indirectly (i)-engage in Restricted Activities
in the State of Texas or in any other State of the United States, or in any
other country in the world, where the Company engages in business, or proposes
to engage in business on the Termination Date, or (ii) participate in the
ownership, management, operation, financing, or control of, or be employed by or
consult for or otherwise render services to, a Restricted Business located in
the State of Texas or in any other State of the United States or in any other
country in the world, where the Company conducts or proposes to conduct business
on the Termination Date. Notwithstanding the foregoing, Executive is permitted
to own up to 5% of any class of securities of any corporation which is traded on
a national securities exchange or through Nasdaq.
(i) Restricted Activities shall mean shall mean (A)-the Company's
business as of the date of termination and/or (B)-designing,
developing, manufacturing, marketing, or selling products or
services which directly compete with business, products and/or
services of the Company and/or its subsidiaries as of the
Termination Date.
(ii) Restricted Business shall mean any person, corporation, firm,
company (or a division or group thereof), partnership,
proprietorship, or other business entity which designs, develops,
manufactures, markets, or sells products or services which
directly compete with the business, products, and/or services of
the Company and/or its subsidiaries as of the Termination Date.
3.1.2 No Diversion of Others. During the Employment Term and for a period of two
(2) years following the Termination Date, for any reason, the Executive shall
not, either for himself or for any other person, firm, corporation, or other
entity, directly or indirectly, or by action in concert with others:
(i) individually or on behalf of any other person, corporation, firm,
or other entity, solicit or encourage any employee of the Company
or any subsidiary or affiliate of the Company to terminate his or
her employment with the Company or such subsidiary or affiliate,
without the express prior written consent of the Company
(Executive's employment by a company or other entity that
recruits and/or hires Company employees will not constitute a
breach of this Section provided (a) Executive's employment is
permitted under Section 3.1.1, (b) Executive does not breach the
obligations set forth in this Section, and (c) Executive is
completely sealed off from and has no involvement whatsoever in
the recruitment or hiring process); or
(ii) take away or attempt to take away, or solicit or attempt to
solicit, any existing or Potential Customer (defined below) of
the Company (whether or not such customer is actually a customer
of the Company as of the date hereof, including without
limitation any customer solicited by the Executive or which
became known by the Executive prior to the date hereof) with the
purpose of obtaining such person as an employee or customer for a
business competitive with the Company's business. For purposes of
this Section, Potential Customer means any company or entity
actually solicited by the Company as of the Termination Date.
For purposes of this Agreement, "affiliate" shall mean a corporation or other
legal entity in common control with the Company.
3.1.3 Organizing Competitive Business. Without limiting any of the other
provisions contained in this Section 3, during the Employment Term and any
period during which Executive receives any Severance Payment, the Executive
shall not undertake planning for or organization of any business activity
competitive with the business of the Company, or conspire with agents,
employees, consultants, or other representatives of the Company for the purpose
of organizing any such competitive business activity.
4. INJUNCTIVE RELIEF AND ADDITIONAL REMEDY
The Executive acknowledges and agrees that any breach of the terms of Sections 2
or 3 above would result in irreparable injury and damage to the Company for
which the Company would have no adequate remedy at law; the Executive therefore
also acknowledges and agrees that in the event of such breach or any threat of
breach, the Company shall be entitled to an immediate injunction and restraining
order to prevent such breach and/or threatened breach and/or continued breach by
the Executive and/or any and all persons and/or entities acting for and/or with
the Executive, without having to prove damages, in addition to any other
remedies to which the Company may be entitled at law or in equity. The terms of
this paragraph shall not prevent the Company from pursuing any other available
remedies for any breach or threatened breach hereof, including but not limited
to the recovery of damages from the Executive.
5. REPRESENTATIONS AND WARRANTIES BY THE EMPLOYEE
The Executive represents and warrants to the Company that (i) this Agreement is
valid and binding upon and enforceable against him in accordance with its terms,
(ii) the Executive is not bound by or subject to any contractual or other
obligation that would be violated by his execution or performance of this
Agreement, including, but not limited to, any non-competition agreement
presently in effect, and (iii) the Executive is not subject to any pending or,
to the Executive's knowledge, threatened claim, action, judgment, order, or
investigation that could adversely affect his ability to perform his obligations
under this Agreement or the business reputation of the Company.
6. SURVIVAL OF CERTAIN RIGHTS AND OBLIGATIONS
Sections 1.7, 2 and 3 above shall survive any termination of this Agreement and
continue in full force and effect as is necessary or appropriate to enforce the
covenants and agreements of each party. The existence of any claim or cause of
action by the Executive against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of the covenants and agreements of Sections 2 and 3 above.
7. CHANGE IN CONTROL BENEFIT LIMIT
7.1 Benefit Limit. The aggregate Present Value (measured as of the Change in
Control) of the benefits to which Executive becomes entitled under this
Agreement either at the time of the Change in Control or at the time of his
subsequent termination of employment (namely, the salary continuation payments
under Section 1.6 and the Option Parachute Payment attributable to his
accelerated options) will in all events be limited to the amount (the"Benefit
Limit") which yields Executive the greatest after-tax amount payable to him
under this Agreement after taking into account the excise tax (if any) imposed
under Code Section 4999 ) on the payments and benefits which are provided
Executive under this Agreement or which constitute Other Parachute Payments.
7.2 Definitions For purposes of applying Code Sections 280(G) and 4999 and the
Treasury Regulations thereunder to determine the Benefit Limit in effect under
this Section 7.1, the following definitions shall be in effect:
Code means the Internal Revenue Code of 1986, as amended from time to time.
Option Parachute Payment means, with respect to any of Executive's options
accelerated pursuant to this Agreement, the portion of that option deemed to be
a parachute payment under Code Section 280G and the Treasury Regulations issued
thereunder. The portion of such Option which is categorized as an Option
Parachute Payment will be calculated in accordance with the valuation provisions
established under Code Section 280G and the applicable Treasury Regulations and
will include an appropriate dollar adjustment to reflect the lapse of
Executive's obligation to remain in the Company's employ as a condition to the
vesting of the accelerated installment. In no event, however, will the Option
Parachute Payment attributable to any accelerated option (or accelerated
installment) exceed the spread (the excess of the fair market value of the
accelerated option shares over the option exercise price payable for those
shares) existing at the time of acceleration.
Other Parachute Payment means any payment in the nature of compensation (other
than the benefits to which Executive becomes entitled under this Agreement)
which are made to him in connection with the Change in Control and which
accordingly qualify as parachute payments within the meaning of Code Section
280G(b)(2) and the Treasury Regulations issued thereunder.
Parachute Payment means any payment or benefit provided Executive under this
Agreement (other than the Option Parachute Payment) which is deemed to
constitute a parachute payment within the meaning of Code Section 280G(b)(2) and
the Treasury Regulations issued thereunder.
Present Value means the value, determined as of the date of the Change in
Control, of any payment in the nature of compensation to which Executive becomes
entitled in connection with the Change in Control or the subsequent termination
of his employment, including (without limitation) the Option Parachute Payment
attributable to the accelerated vesting of his options and any additional
benefits to which Executive becomes entitled under this Agreement. The Present
Value of each such payment shall be determined in accordance with the provisions
of Code Section 280G(d)(4), utilizing a discount rate equal to one hundred
twenty percent (120%) of the applicable Federal rate in effect at the time of
such determination, compounded semi-annually to the effective date of the Change
in Control.
7.3 Resolution Procedure. In the event there is any disagreement between
Executive and the Company as to whether one or more payments to which Executive
becomes entitled in connection with either the Change in Control or his
subsequent termination of employment constitute Parachute Payments, Option
Parachute Payments or Other Parachute Payments or as to the determination of the
Present Value thereof, such dispute will be resolved as follows:
(i) In the event temporary, proposed or final Treasury Regulations in
effect at the time under Code Section 280G (or applicable
judicial decisions) specifically address the status of any such
payment or the method of valuation therefor, the characterization
afforded to such payment by the Regulations (or such decisions)
will, together with the applicable valuation methodology, be
controlling.
(ii) In the event Treasury Regulations (or applicable judicial
decisions) do not address the status of any payment in dispute,
the matter will be submitted for resolution to the Company's
independent auditors ("Independent Auditors"). The resolution
reached by the Independent Auditors will be final and
controlling. All expenses incurred in connection with the
retention of the Independent Auditors to resolve the dispute
shall be shared equally by Executive and the Company.
(iii)In the event Treasury Regulations (or applicable judicial
decisions) do not address the appropriate valuation methodology
for any payment in dispute, the Present Value thereof will, at
the Independent Auditor's election, be determined through an
independent third-party appraisal, and the expenses incurred in
obtaining such appraisal shall be shared equally by Executive and
the Company.
7.4 Status of Benefits.
(i) No salary continuation payments will be made to Executive under
this Agreement and none of his options shall vest and become
exercisable on an accelerated basis hereunder, until the Present
Value of the Option Parachute Payment attributable to the
accelerated vesting of such options has been determined and the
status of any payments in dispute under Paragraph 7.3 has been
resolved in accordance therewith. The post-termination exercise
period for any options which cannot be exercised by reason of the
foregoing limitation shall automatically be stayed and shall not
be deemed to run during any period the option remains so
unexercisable.
(ii) Once the requisite determinations under Paragraph 7.3 have been
made, then to the extent the aggregate Present Value, measured as
of the Change in Control, of (1) the Option Parachute Payment
attributable to the accelerated options (or installments thereof)
plus (2) the Parachute Payment attributable to the Executive's
salary continuation benefits under this Agreement would, when
added to the Present Value of all of the Executive's Other
Parachute Payments, exceed the Benefit Limit, the Executive's
salary continuation payments will first be reduced and then the
number of option shares subject to accelerated vesting shall be
reduced (based on their Option Parachute Value) to the extent
necessary to assure the Benefit Limit is not exceeded. 8.
MISCELLANEOUS
8.1 Notices. All notices, requests, and other communications hereunder must be
in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission with answer back
confirmation or mailed (postage prepaid by certified or registered mail, return
receipt requested) or by overnight courier to the parties at the following
addresses or facsimile numbers:
If to the Executive, to:
Mr. Xxxxxxx Xxxx
0000 Xxxxx Xxxx Xxxx
Xxxxxx, Xxxxx 00000
Facsimile No: (000) 000-0000
If to the Company, to:
PSW Technologies, Inc.
Attention: Chairman of the Board
0000 Xxxxxxxxxxx Xxxxxxx, Xxxx. 0, Xxxxx 000
Xxxxxx, Xxxxx 00000
Facsimile No: (000) 000-0000
All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section 7.1, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section 7.1, be deemed given upon receipt, and (iii) if
delivered by mail in the manner described above to the address as provided in
this Section 7.1, be deemed given upon receipt (in each case regardless of
whether such notice, request, or other communication is received by any other
Person to whom a copy of such notice, request or other communication is to be
delivered pursuant to this Section). Any party from time to time may change its
address, facsimile number, or other information for the purpose of notices to
that parry by giving written notice specifying such change to the other parties
hereto.
8.2 Entire Agreement. This Agreement supersedes all prior discussions and
agreements among the parties with respect to the subject matter hereof and
contain the sole and entire agreement between the parties hereto with respect
thereto.
8.3 Waiver. Any term or condition of this Agreement may be waived at any time by
the party that is entitled to the benefit thereof, but no such waiver shall be
effective unless set forth in a written instrument duly executed by or on behalf
of the party waiving such term or condition. No waiver by any party hereto of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by law or otherwise afforded, will be cumulative and not
alternative. 8.4 Amendment. This Agreement may be amended, supplemented, or
modified only by a written instrument duly executed by or on behalf of each
party hereto. 8.5 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and the
Company's successors or assigns, and it is not the intention of the parties to
confer third-party beneficiary rights upon any other Person. 8.6 No Assignment;
Binding Effect. This Agreement shall inure to the benefit of any successors or
assigns of the Company. The Executive shall not be entitled to assign his
obligations under this Agreement. 8.7 Headings. The headings used in this
Agreement have been inserted for convenience of reference only and do not define
or limit the provisions hereof. 8.8 Severability. The Company and the Executive
intend all provisions of this Agreement to be enforced to the fullest extent
permitted by law. Accordingly, if a court of competent jurisdiction determines
that the scope and/or operation of any provision of this Agreement is too broad
to be enforced as written, the Company and the Executive intend that the court
should reform such provision to such narrower scope and/or operation as it
determines to be enforceable. If, however, any provision of this Agreement is
held to be illegal, invalid, or unenforceable under present or future law, and
not subject to reformation, then (i) such provision shall be fully severable,
(ii) this Agreement shall be construed and enforced as if such provision was
never a part of this Agreement, and (iii) the remaining provisions of this
Agreement shall remain in full force and effect and shall not be affected by
illegal, invalid, or unenforceable provisions or by their severance. 8.9
Governing Law. This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas applicable to contracts executed and
performed in such State without giving effect to conflicts of laws principles.
8.10 Jurisdiction. With respect to any suit, action, or other proceeding arising
from (or relating to) this Agreement, the Company and the Executive hereby
irrevocably agree to the non-exclusive personal jurisdiction and venue of the
United States District Court for the Western District of Texas (and any Texas
State Court within Xxxxxx County, Texas). 8.11 Counterparts. This Agreement may
be executed in any number of counterparts and by facsimile, each of which will
be deemed an original, but all of which together will constitute one and the
same instrument. IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the date first written above.
[SIGNATURE PAGE TO EMPLOYMENT AGREEMENT FOLLOWS]
"COMPANY"
PSW TECHNOLOGIES, INC.
a Delaware corporation
By: /s/ Xxxxx Xxxxxxxx
Name: Xxxxx Xxxxxxxx
Title: Chief Financial Officer
"EXECUTIVE"
XXXXXXX XXXX
/s/ Xxxxxxx Xxxx
Xxxxxxx Xxxx
