EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement" or "Employment Agreement") is
made as of April 1, 2003, by and between Digital Learning Institute, Inc., a
Delaware Corporation (the "Company"), and Xxxxxxxxx Xxxxxx ("Executive").
INTRODUCTION
The Company desires to employ Executive, and Executive desires to accept
such employment, under the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
EMPLOYMENT, TERM; DUTIES
1.1 Employment. Upon the terms and conditions hereinafter set forth, the
Company hereby employs Executive, and Executive hereby accepts employment, as
Chief Executive Officer and President of the Company. The Company shall take the
necessary steps to cause Executive to be elected as a member of the Board of
Directors of the Company as of the date of this Agreement, and shall nominate
and use its best efforts to secure Executive's election to such Board of
Directors for so long as the Company employs Executive.
1.2 Term. Subject to Section 4.1, Executive's employment hereunder shall
be for a term of two years commencing on the date hereof and expiring at the
close of business on the day prior to the second anniversary of the date hereof
(the "Initial Term"). The Initial Term shall be automatically extended for
successive two-year terms (each such extension referred to as a "Renewal Term")
unless either party gives the other party written notice of its or his desire to
terminate, which notice of termination shall be given not less than three months
prior to the expiration of the Initial Term or any Renewal Term, as the case may
be. Neither Executive nor Company shall have any express or implied obligation
to renew or extend this Agreement for any term or at all.
1.3 Duties. During the Initial Term or any Renewal Term (sometimes
collectively referred to as the "Term"), Executive shall perform such executive
duties for the Company and/or any affiliate of the Company, consistent with his
position hereunder, as may be assigned to him from time to time by the Board of
Directors of the Company. Executive shall perform his duties principally at the
office locations of the Company as such office locations exist as of the date of
this Agreement, excepting only for ordinary and necessary business travel
reasonably required in the performance of Executive's duties with the
concurrence of Executive. Executive shall devote his entire productive business
time and attention to his duties on the Company's behalf except for sick leave,
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vacations and approved leaves of absence; provided, however, that nothing shall
preclude Executive from (i) managing his personal investments and affairs, and
(ii) participating in civic and nonprofit activities, and (iii) participating as
a member of the board of directors of any other corporation involving no
conflict of interest with the interests of the Company and any affiliates of the
Company, provided that, in each case, such activities do not individually or
collectively interfere with or adversely affect the performance of his duties
under this Agreement and, without limiting the generality of the foregoing, are
subject to the limitations set forth in Article VI.
1.4 Reporting. Executive shall report directly to the Board of Directors
of the Company.
1.5 Exclusive Agreement. Executive represents and warrants to the Company
that there are no agreements or arrangements, whether written or oral, in effect
which would prevent Executive from rendering his exclusive services to the
Company during the Term. Executive agrees not to make any unauthorized
disclosure or use, on behalf of the Company, of any confidential information
belonging to any of Executive's former employers. Executive represents that he
is not in unauthorized possession or control of any materials containing
confidential and proprietary or private information of a third party. Executive
and the Company understand and acknowledge that Executive may and will use, in
the course of his employment with the Company, information generally known and
used by persons with training and experience comparable to Executive, and
information which is common knowledge in the industry or is otherwise lawfully
available in the public domain.
ARTICLE II
COMPENSATION
2.1 Compensation. For all services rendered by Executive hereunder and all
covenants and conditions undertaken by him pursuant to this Agreement, the
Company shall pay, and Executive shall accept, as full compensation, the amounts
set forth in this Article II.
2.2 Base Salary. The base salary shall be an annual salary of not less
than $240,000 ("Base Salary"), payable by the Company in twenty-four bi-monthly
installments.
2.3 Bonus.
(a) Annual Incentive Awards. Executive shall participate in such
annual incentive plan or plans as the Company shall maintain from time to time,
and any successor plan, on terms and conditions that are appropriate to his
positions and responsibilities at the Company, as may be determined by the
Company's Board of Directors, and that are no less favorable than those applying
to other senior-level executives in the internet educational industry. Such
incentive compensation plan or plans shall provide for calculation and payment
of incentive compensation based on objective measures of the performance of
Executive and of the Company for the compensation year or years covered by the
plan or plans, applying reasonably equivalent standards of performance to
Executive for each year of the contract Term; shall be adopted by the Company in
advance of the fiscal year or years for which Executive shall be eligible for
incentive compensation payments under the plan or plans; and shall identify a
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performance target or targets whose attainment shall entitle Executive to 100%
of the target incentive compensation payment provided by the plan or plans. Such
100% target compensation payment shall be not less than $100,000 each year of
the contract Term, and shall also provide measures entitling Executive to
greater or lesser payments based on the performance of Executive and the
Company. Such annual incentive plan shall provide a reasonable opportunity for
Executive to consult with the compensation committee of the Board of Directors
regarding the terms of the plan, the relationship of incentive payments to the
Company's annual business plan, and any performance issues that affect the
annual incentive plan payment received by Executive. Any annual incentive paid
to Executive hereunder shall be in addition to the Base Salary and to any and
all other benefits to which Executive is entitled as provided in this Agreement.
Payment of annual incentive awards shall be made at the end of the fiscal year
of the Company.
(b) Discretionary Bonuses. In addition to the Base Salary and annual
incentive awards, the Company may make discretionary bonus payments in cash or
equivalent consideration to Executive, under such terms, conditions and the
Company's Board of Directors in its sole discretion may establish.
2.4 Deductions. The Company shall deduct from the compensation described
in Sections 2.2 and 2.3 any federal, state or local withholding taxes, social
security contributions and any other amounts which may be required to be
deducted or withheld by the Company pursuant to any federal, state or local
laws, rules or regulations.
2.5 Disability Adjustment. Any compensation otherwise payable to Executive
pursuant to Sections 2.2 and 2.3 in respect of any period during which Executive
is disabled (as contemplated in section 4.3) shall be reduced by any amounts
payable to Executive for loss of earnings or the like under any insurance plan
or policy sponsored by the Company.
ARTICLE III
BENEFITS, EXPENSES
3.1 Benefits. During the Term, Executive shall be entitled to participate
in such group life, health, accident, disability or hospitalization insurance
plans, pension plans and retirement plans as the Company may make available to
its other executive employees as a group, subject to the term and conditions of
any such plans which shall be defined exclusively in written plan documents that
shall be available for Executive's review on request. The Company shall have the
right to amend, reduce or completely terminate any or all such plans by duly
authorized action respecting all executive employees covered by such plans as a
group.
3.2 Expenses. The Company agrees that Executive is authorized to incur
reasonable expenses in the performance of his duties hereunder and in promoting
the business of the Company. The Company shall from time to time pay or
reimburse Executive for the reasonable and necessary expenses incurred by
Executive in connection with the performance of his duties hereunder if such
expenses have been previously approved by the Company or if reimbursement is
otherwise appropriate in accordance with the Company's established policies and
if the Company receives such verification thereof as the Company may require in
order to qualify such expenses as deductible business expenses. The Company
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agrees that Executive's reasonable business expenses, reimbursable to Executive
or payable by the Company to Executive's order, at Executive's sole option in
each case, shall include without limitation (a) first class travel or, if first
class is unavailable, highest available class of travel for international
travel; (b) business class travel or, if business class is unavailable, highest
available class of travel including first class for domestic travel; (c) actual
out of pocket expenses for business entertainment at clubs; (d) cellular
telephones and cellular telephone services selected by Executive, including at
Executive's sole option Wildfire or equivalent or upgraded telephone
communications management systems or services; and (e) reasonable and actual
home office expenses including, without limitation, expenses of maintaining a
DSL or equivalent line for Internet access.
3.3 Vacation. Executive shall be deemed to have accrued a total of four
(4) work weeks of vacation effective upon the date of this Agreement, and shall
accrue, on a daily basis, a total of four (4) work weeks of vacation per year
following the date of this Agreement. If Executive's earned but unused vacation
time reaches six (6) work weeks, Executive will not continue to accrue
additional vacation time until he uses enough vacation to fall below this
maximum amount. Thereafter, Executive will start earning vacation benefits again
until the six (6)-work week maximum is again reached. Any accrued but unused
vacation time will be paid to Executive on a pro rata basis at termination of
employment.
3.4 Liability Insurance. The Company shall furnish Executive for the
remainder of his life (without reference to whether the Term of Employment
continues in effect) with Directors' and Officers' or other liability insurance
insuring Executive against all events insurable under applicable law arising
from or relating to Executive's alleged acts or omissions pertaining in any way
to Executive's employment which occur during the Term of Employment, such
insurance to have policy limits aggregating not less than the policy limits the
Company secures on its own behalf respecting such liability and otherwise to be
in substantially the same form and to contain substantially the same terms,
conditions and exceptions as the liability insurance policies provided for
officers and directors of the Company in force from time to time, provided that
such terms, conditions and exceptions shall not be, in the aggregate, materially
less favorable to Executive than those in effect on the effective date of this
Agreement.
3.5 Indemnification. In any situation where under applicable law the
Company has the power to indemnify (or advance expenses to) Executive in respect
of any judgments, fines, settlements, loss, cost or expense (including
attorneys' fees) of any nature related to or arising out of Executive's
activities as an agent, employee, officer or director of the Company or in any
other capacity on behalf of or at the request of the Company, the Company agrees
that it shall, promptly on written request, indemnify (and advance expenses as
incurred to) Executive to the fullest extent permitted by applicable law,
including but not limited to making such findings and determinations and taking
any and all such actions as the Company may, under applicable law, be permitted
to have the discretion to take so as to effectuate such indemnification or
advancement. Such agreement by the Company shall not be deemed to impair any
other obligation of the Company respecting indemnification of Executive
otherwise arising out of this or any other agreement or promise of the Company
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or under any statute. Expenses advanced to Executive under this Section 3.5
shall be repaid by Executive on demand if and to the extent such advanced
expenses are found not to be legally subject to indemnity by a competent
tribunal. Expenses otherwise subject to lawful indemnification hereunder shall
not be excluded from indemnification solely because they were incurred for
public relations services, so long as such expenses were incurred respecting the
assertion or publication of views consistent with the Company's position on the
same or related or similar matters.
3.6 Personal Guarantees. The Company acknowledges that the Executive has
in the past and may in the future provided personal guarantees or pledged
personal assets in order to accommodate the Company in obtaining financing to
carry on its day to day operations as well as to meet Company's capital needs
and in recognition such accommodation the Company agrees that it will ensure
that all such guarantee obligations are discharged upon demand from Executive
and in priority to any other obligations unless unlawful.
3.7 Key Employee Insurance. The Company may secure in its own name or
otherwise, and at its own expense, life, health, accident and other insurance
covering Executive alone or with others during the Term, and Executive shall not
have any right, title or interest in or to such insurance other than as
expressly provided herein. In full or partial satisfaction of this Section 3.8,
the Company may in its discretion, which discretion shall be reasonably
exercised, elect to succeed as beneficiary to the beneficiary of key employee
insurance currently covering Executive, provided that all necessary consents and
approvals have been obtained and other conditions of such continued coverage
have been fulfilled, for the duration of such policy's coverage period.
Executive agrees to assist the Company in procuring such insurance by submitting
to the usual and customary medical and other examinations to be conducted by
such physicians as the Company or such insurance company may designate and by
signing such applications and other written instruments as may be required by
the insurance companies to which application is made for such insurance.
Executive's failure to submit to such usual and customary medical and other
examinations shall be deemed a material breach of this Agreement.
ARTICLE IV
TERMINATION; DEATH; DISABILITY
Executive shall be employed for the term of this agreement. Company may,
however, terminate his employment at any time with or without cause or notice.
The following provisions of this Article IV are intended by Executive and the
Company to govern the rights of the parties in the event that termination
employment occurs prior to the expiration of the term of this agreement.
4.1 Termination of Employment With Cause.
(a) In addition to any other remedies available to the Company at
law, in equity or as set forth in this Agreement, the Company shall have the
right to terminate Executive's employment at any time for Cause in accordance
with this Section 4.1. For purposes of this Agreement, "Cause" shall mean:
(1) Executive is convicted of a felony involving moral
turpitude;
(2) Executive commits an act of gross misconduct in connection
with the performance of his duties;
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(3) Executive demonstrates habitual negligence in the
performance of his duties;
(4) Executive commits an act of fraud, misappropriation of
funds or embezzlement in connection with his employment hereunder.
(b) No termination of Executive's employment by the company for
Cause shall be effective unless the provisions of this Section 4.1(b) shall have
been complied with. Executive shall be given written notice by the Company of
the intention to terminate him for Cause, such notice (A) to state in detail the
particular circumstances that constitute the grounds on which the proposed
termination for Cause is based and (B) to be given no later than sixty (60) days
after the Company first learns of such circumstances. Executive shall have
thirty days after receiving such notice of proposed termination in which to cure
such grounds, to the extent such cure is possible. If he fails to cure such
grounds, Executive shall then be entitled to a hearing before the Board of
Directors of the Company or duly designated Committee of such Board responsible
for deciding whether the Company should terminate his employment for Cause. The
Company shall convene such hearing within sixty days of such notice to Executive
of proposed termination, providing Executive requests such hearing within thirty
days of delivery of such notice to him. Executive shall make himself reasonably
available for such hearing. Within thirty days following such hearing, the
Company's Board of Directors (i) shall determine in good faith whether an
adequate investigation of the grounds for employment termination has been made,
whether substantial evidence of the factual basis for employment termination has
been shown and whether Executive's employment should be terminated for Cause,
and (ii) shall notify Executive of such determinations. If an adequate
investigation has been made and substantial evidence of the factual grounds for
employment termination has been shown and the Board has determined that
Executive's employment should be terminated for Cause, and timely written notice
of such determinations is given to Executive pursuant to the preceding sentence
of this Section 4.1(b), Executive's employment with the Company shall thereupon
be terminated (a "Termination With Cause."). Notwithstanding the foregoing, in
the event of arbitration pursuant to Section 7.5, the arbitrator(s) shall
independently determine the existence of one or more of the factors required to
permit termination for cause, as set forth in Sections 4.1(a)(1)-(4).
(c) Upon any Termination With Cause of Executive's employment,
Executive shall be entitled to the following: The Company shall immediately pay
all accrued but unpaid salary; and
(1) The Company shall pay Executive amount equal to one year
salary based on Executive's annual salary at the time of termination
with cause.
(2) The Company shall reimburse Executive for all expenses
incurred in accordance with Section 3.2.
4.2 Termination of Employment Without Cause Or By Executive For Good
Reason.
(a) During the Term, the Company may at any time, in its sole
discretion, terminate the employment of Executive hereunder without cause by
written notice to him.
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(b) If the Company terminates the employment of Executive
during the Initial Term or any Renewal Term (the "Term") without Cause, or if
Executive terminates his employment during the Term for Good Reason as defined
below in Section 4.2(c) of this Agreement, the Company shall pay Executive an
amount equal to the sum of the following, subject to the condition that
Executive execute without subsequent revocation a Separation Agreement and
General and Special Release substantially in the form attached hereto as Exhibit
A:
(1) Any Salary accrued but unpaid as of the date of
termination;
(2) By way of severance, an amount equal to Executive's two
years Salary in effect on the date of termination, to be paid in a
lump sum upon termination, and a sum equal to the Annual Incentive
Award otherwise payable to Executive under Section 2.3(a) of this
Agreement respecting the year of termination, calculated as
Executive's guaranteed Award if payable respecting the first year of
Executive's employment under this Agreement and as a 100% target
incentive compensation payment if payable respecting any subsequent
year under this Agreement. Such annual incentive compensation
payment shall be payable as and when such amount would have been due
and payable hereunder had such termination not occurred;
(3) Payment of bonuses and incentive awards as and when such
amounts would have been due and payable for the Severance Period had
such termination not occurred.
(4) Reimbursement for expenses incurred in accordance with
Section 3.2; and
(5) Continuation of medical benefit insurance for a period of
eighteen (18) months following such termination. The Company shall
use its best efforts to arrange for the continuation, through the
Severance Period (twenty-four months), of such health and/or medical
benefits or plans as are in effect as of the date of termination, if
and only if permissible under such plans. If not so permissible, the
Company shall pay to Executive an amount sufficient to enable
Executive to arrange for substantially equivalent health and/or
medical coverage during the twenty-four month period.
Executive acknowledges that the payments and benefits referred to in
this Section 4.2, together with any rights or benefits under any written plan or
agreement not expressly referred to in this Section 4.2 which have vested on or
prior to the termination date of Executive's employment under this Section 4.2,
constitute the only payments to which Executive shall be entitled to receive
from the Company hereunder in the event of any termination of his employment
pursuant to this Section 4.2, and that except for such payments or benefits the
Company shall have no further liability or obligation to him hereunder or
otherwise in respect of his employment.
(c) Termination With Good Reason. For purposes of this Agreement,
Termination With Good Reason shall mean the Executive's resignation of
employment with the Company within ninety (90) days following the occurrence of
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any of the following subsequent to the date of this Agreement without
Executive's express written consent:
(1) The failure to elect or reelect Executive as a member of
the Company's Board of Directors or maintain Executive in the
position of Chief Executive Officer described in Section 1.1; the
removal of him from any such position; or any material diminution in
his duties or responsibilities in such positions (other than in
connection with a termination of Executive's employment due to
death, Disability, Termination With Cause or voluntary resignation
other than for Good Reason as defined in this Section 4.2(c));
(2) The assignment to Executive of duties that are materially
inconsistent with, or that materially impair his ability to perform,
the duties customarily assigned to an Executive holding the
position[s] accepted by Executive on the date of this Agreement in a
corporation of the size and nature of the Company; or a change in
the reporting structure so that Executive reports to someone other
than the Chairman of the Board or is subject to the direct or
indirect authority or control of a person or entity other than the
Chairman of the Board;
(3) The Company awards Executive an annual bonus in respect of
any year that is less than 50% of the amount awarded him in respect
of the prior year unless due to reduced performance by the Company
or by Executive, applying reasonably equivalent standards with
respect to both years;
(4) The Company fails to comply with the provisions hereof
governing compensation and benefits to Executive or otherwise
materially breaches any provision of this Agreement or any other
agreement with Executive;
(5) Conduct by the Company occurs that would cause Executive
to commit fraudulent acts or would expose Executive to criminal
liability;
(6) The Company's principal office or Executive's own office
as assigned to him by the Company is moved to a location more than
35 miles from Executive's own office as assigned to him by the
Company on the date of this Agreement;
(7) The Company fails to obtain the assumption in writing of
its obligation to perform this Agreement by any successor to all or
substantially all of the assets of the Company within 30 days after
a merger, consolidation, sale or similar transaction.
(8) The Company fails to discharge its obligations under
section 3.6 of this agreement.
4.3. Death and Disability.
(a) In the event that Executive dies or becomes Disabled (as defined
herein), Executive's employment shall terminate when such death or Disability
occurs and the Company shall pay Executive (or his legal representative, as the
case may be) as follows:
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(1) Any salary accrued but unpaid as of the date of death or
termination for Disability;
(2) An amount equivalent to Executive's monthly Base Salary in
effect on the date of death or termination for disability for a
twenty four (24) month period, to be paid in a lump sum upon death
or disability;
(3) A pro rata annual incentive award for the year in which
Executive's death or termination for disability occurs, calculated
based on a guaranteed award of $100,000 if payable respecting the
first year of the Initial Term, or, if payable respecting any year
thereafter, based on the 100% target award opportunity provided
pursuant to Section 2.3 for such year, payable in any case in a
single installment promptly following Executive's death or
termination for disability; and
(4) Any reimbursement for expenses incurred in accordance with
Section 3.2.
(b) "Disabled" and "Disability" Defined. For the purposes of this
Agreement, Executive shall be deemed to be "Disabled" or have a "Disability" if,
because of Executive's physical or mental disability: (1) he has been
substantially unable to perform his essential duties hereunder for twelve (12)
work weeks in any twelve (12) -month period with reasonable accommodations by
the Company, taking into account undue hardship to the Company from
accommodations to Executive's disability, and (2) he has utilized any and all
benefits available to him under state and federal laws. In the event of a
disagreement concerning Executive's perceived Disability, Executive shall submit
to such examinations as are deemed appropriate by three practicing physicians
specializing in the area of Executive's Disability, one selected by Executive,
one selected by the Company, and one selected by both such physicians. The
Company and Executive shall have a reasonable opportunity to advise such
physicians of Executive's essential duties, so that their determinations
concerning Executive's perceived Disability can be made on an informed basis.
The majority decision of such three physicians on whether Executive is disabled
shall be final and binding on the parties. Nothing in this paragraph is intended
to limit the Company's right to invoke the provisions of this paragraph with
respect to any perceived Disability of Executive.
(c) Executive acknowledges that the payments referred to in this
Section 4.3, together with any rights or benefits under any written plan or
agreement which have vested on or prior to the termination date of Executive's
employment under this Section 4.3, constitute the only payments to which
Executive (or his legal representative, as the case may be) shall be entitled to
receive from the Company hereunder in the event of a termination of his
employment for death or Disability, and that except for such payments the
Company shall have no further liability or obligation to him (or his legal
representatives, as the came may be) hereunder or otherwise in respect of his
employment.
4.4 Continued Compliance. The amounts or benefits payable by the Company
under Sections 4.2(b)(2), 4.2(b)(3) and 4.2(b)(4) are subject to Executive's
continued compliance with the provisions of Article VI below. If Executive
violates the provisions of Article VI, then the Company will have no obligation
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to make any of the payments that remain payable by the Company under Sections
4.2(b)(2), 4.2(b)(3), or 4.2(b)(4) on or after the date of such violation.
4.5 Voluntary Termination. A termination of employment by Executive on his
own initiative, other than a termination due to death or Disability or for Good
Reason, shall have the same consequences as provided in Section 4.1 for a
Termination With Cause.
4.6 Announcements and Statements In Event Of Termination. The Company and
Executive shall make no press or public announcement or statement of the basis
of Executive's employment termination during Executive's life except as agreed.
4.7 Designated Beneficiary. In the event of the death of Executive while
in the employ of the Company, or at any time thereafter during which amounts
remain payable to Executive under this Section 4, such payments shall thereafter
be made to such person or persons as Executive may specifically designate
(successively or contingently) to receive payments under this Agreement
following Executive's death by filing a written beneficiary designation with the
Company during Executive's lifetime. Such beneficiary designation shall be in
such form as may be reasonably prescribed by the Company and may be amended from
time to time or may be revoked by Executive pursuant to written instruments
filed with the Company during his lifetime. Beneficiaries designated by
Executive may be any natural or legal person or persons, including a fiduciary,
such as a trustee of a trust, or the legal representative of an estate. Unless
otherwise provided by the beneficiary designation filed by Executive, if all of
the persons so designated die before Executive on the occurrence of a
contingency not contemplated in such beneficiary designation, or if Executive
shall have failed to provide such beneficiary designation, then the amount
payable under this Agreement shall be paid to Executive's estate.
4.8 Other Termination Benefits. To the extent not otherwise provided in
this Agreement, and in addition to other benefits and payments expressly
provided to Executive in the event of employment termination in this Agreement
or otherwise, Executive or his estate shall be entitled to the following in the
event of any of the foregoing employment terminations in this Article IV:
(a) The balance of any incentive awards or bonuses, including awards
due for performance periods which have been completed, which have been earned
but have not yet been paid;
(b) Any amounts due under Articles II and III of this Agreement; and
(c) A lump sum payment of the monetary amount of accrued but unused
vacation days at Executive's Base Salary rate in effect on the date of his
termination.
ARTICLE V
CHANGE OF CONTROL
5.1 Vesting. Upon any Change of Control, all amounts, entitlements and
benefits in which Executive is not yet vested shall continue to become fully
vested and non-forfeitable on the dates and pursuant to the other terms provided
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as conditions provided for such amounts, entitlements and benefits prior to such
Change of Control.
5.2 Employment Termination Following Change of Control. If, during the
lesser of (a) twenty-four (24) months or (b) the remainder of the Term of this
Agreement, in either case following a Change of Control, Executive's employment
is terminated without Cause, or is terminated by Executive for Good Reason,
Executive (or Executive's beneficiary designated pursuant to this Agreement, if
Executive is deceased at the time of payment) shall receive (i) a payment in a
lump sum equal to Executive's Base Salary under Section 2.2 and Annual Incentive
Award under Section 2.3(a) for two years, such annual incentive payment to be
calculated as two (2) times the guaranteed or 100% target annual incentive
compensation payment respecting the year of employment termination, as the case
may be and (ii) all other payments and benefits (other than Base Salary) to
which Executive would have been entitled had his employment been terminated by
the Company without Cause or by Executive for Good Reason under Section 4.2
above, as well as any other or additional payments and benefits to which he may
be entitled under the circumstances. In the event that the termination of the
Executive's employment is for one of the reasons set forth above in this Section
5.2 and the aggregate of all payments or benefits made or provided to the
Executive under this Section 5.2 and under all other plans and programs of the
Company (the "Aggregate Payment") is determined to constitute a Parachute
Payment, as such term is defined in Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the "Code"), notwithstanding any other provision of
this Agreement to the contrary the aggregate amount of payments or benefits paid
by the Company to the Executive pursuant to this Agreement shall be reduced to
the maximum amount (if any) that can be so provided without any portion of the
Aggregate Payment being subject to any excise tax imposed by Section 4999 of the
Code ("Excise Tax"). The determination of whether the Aggregate Payment
constitutes a Parachute Payment and, if so, the amount to be paid to the
Executive and the time of payment pursuant to this Section 5.2 shall be made by
an independent auditor (the "Auditor") jointly selected by the Company and the
Executive and paid by the Company. The Auditor shall be a nationally recognized
United States public accounting firm which has not, during the two years
preceding the date of its selection, acted in any way on behalf of the Company
or any Affiliate thereof. If the Executive and the Company cannot agree on the
firm to serve as the Auditor, then the Executive and Company shall each select
one accounting firm and those two firms shall jointly select the accounting firm
to serve as the Auditor.
5.3 Change of Control Defined. For the purposes of this Article V, Change
of Control shall mean the occurrence of one or more of the following events
after the date of this Agreement (or, with respect to clauses (c) and (d), after
such time as the Company has become a Reporting Company (as defined below)):
(a) A sale of all or substantially all of the property or assets of
the Company;
or
(b) A merger, consolidation, reorganization or other business
combination (a "business combination") to which the Company is a party ("such
party"), whether or not such business combination results in outstanding voting
securities of such party being exchanged for or converted into cash, property
and/or securities not issued by such party, provided that the outstanding voting
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securities of such entity immediately prior to such business combination
represent less than 50% of the voting power of such entity immediately following
such business combination; or
(c) After such time as the Company has become subject to the public
reporting obligations of the Securities Exchange Act of 1934, as amended (a
"Reporting Company"), an acquisition by another person of voting stock of the
Company (other than an acquisition by a person that held voting stock of the
Company immediately prior to the time it became a Reporting Company) if such
person shall thereafter be the beneficial owner of 40% or more of such
outstanding voting stock; or
(d) After such time as the Company has become a Reporting Company,
any change in a majority of the board of directors of the Company occurring
within a period of two years or less, such that a majority of the board of
directors is comprised of individuals who are not "Continuing Directors."
For purposes of the foregoing, a "Continuing Director" shall be a director (i)
who was in office at the time the Company became a Reporting Company or (ii) was
elected subsequent to the time the Company became a Reporting Company with the
approval of not less than a majority of those directors referred to in clause
(i) who are then in office. Any director meeting the qualifications of clause
(ii) of the previous sentence shall, with respect to further determinations
after the date of such director's initial election, be deemed to be a director
meeting the qualifications of clause (i) of the previous sentence. As used
herein, the term "person" shall have the meaning of such term under Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "1934
Act"); and the term "beneficial owner" shall have the meaning set forth in Rule
13d-3 under the Act.
5.4 Trust. No later than the occurrence of a Change of Control, the
Company shall fund its obligations to provide payments and benefits under this
Agreement by the establishment of a trust to which it shall contribute an amount
sufficient to meet such obligations. The establishment and funding of such trust
shall not affect the obligations of the Company to provide such payments and
benefits. The trust described in this Section 5.4 shall be an irrevocable trust
established for the benefit of Executive.
ARTICLE VI
OWNERSHIP OF PROCEEDS OF EMPLOYMENT; NON-DISCLOSURE;
NON-COMPETITION
6.1 Ownership of Proceeds of Employment. The Company shall be the sole and
exclusive owner throughout the universe in perpetuity of all of the results and
proceeds of Executive's services, work and/or during the Term in connection with
Executive's employment by the Company, free and clear of any and all claims,
liens or encumbrances. All results and proceeds of Executive's services, work
and labor during the Term shall be deemed to be works-made-for-hire for the
Company within the meaning of the copyright laws of the United States and the
Company shall be deemed to be the sole author thereof in all territories and for
all purposes.
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6.2 Non-Disclosure of Confidential Information. As used herein,
"Confidential Information" means any and all information affecting or relating
to the business of the Company and its Affiliates, including without limitation,
financial data, customer lists and data, licensing arrangements, business
strategies, pricing information, product development, intellectual, artistic,
literary, dramatic or musical rights, works, or other materials of any kind or
nature (whether or not entitled to protection under applicable copyright laws,
or reduced to or embodied in any medium or tangible form), including without
limitation, all copyrights, patents, trademarks, service marks, trade secrets,
contract rights, titles, themes, stories, treatments, ideas, concepts,
technologies, art work, logos, hardware, software, and may be embodied in any
and all computer programs, tapes, diskettes, disks, mailing lists, lists of
actual or prospective customers and/or suppliers, notebooks, documents,
memoranda, reports, files, correspondence, charts, lists and all other written,
printed or otherwise recorded material of any kind whatsoever and any other
information, whether or not reduced to writing, including "know-how", ideas,
concepts, research, processes, and plans. "Confidential Information" does not
include information that is in the public domain, information that is generally
known in the trade, or information that Executive can show was acquired prior to
the execution of this agreement, and if acquired after execution of this
agreement, wholly independently of his employment with the Company. Executive
shall not, at any time during the Term or thereafter, directly or indirectly,
disclose or furnish to any other person, firm or corporation any Confidential
Information, except in the course of the proper performance of his duties
hereunder or as required by law (in which event Executive shall give prior
written notice to Company and shall cooperate with Company and Company's counsel
in complying with such legal requirements). Promptly upon the expiration or
termination of Executive's employment hereunder for any reason or whenever the
Company so requests, Executive shall surrender to the Company all documents,
drawings, work papers, lists, memoranda, records and other data (including all
copies) constituting or pertaining in any way to any of the Confidential
Information.
6.3 Non-Competition. Executive shall not, for so long as he shall be
actively employed by the Company under this Agreement, directly or indirectly:
(a) compete with the Company; or (b) be financially interested in, employed by,
engaged in or participate in the ownership, management, operation or control of,
or act in any advisory or other capacity for, any Competing Entity which
conducts its business within the Territory (as such terms are hereinafter
defined); provided, however, that notwithstanding the foregoing, Executive may
make solely passive investments in any competing entity the common stock of
which is "publicly held," and of which Executive shall not own or control,
directly or indirectly, in the aggregate securities which constitute more than
one (1%) percent of the voting rights or equity ownership of such Competing
Entity; or (c) solicit or divert any business or any customer or employee from
the Company or assist any person, firm or corporation in doing so or attempting
to do so; or (d) cause or seek to cause any person, firm or corporation to
refrain from dealing or being or becoming employed by or doing business with the
Company or assist any person, firm or corporation in doing so or attempting to
do so.
For purposes of this Section 6.3; (a) the phrase "compete with the
Company" shall mean to engage in any business activity that involves the
operation, management, consulting or development of any schools, universities or
other educational activity in which the Company is then engaged and specifically
does not encompass the development, marketing and servicing of computer software
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and hardware; and (b) the phrase "Competing Entity" shall mean any entity that
engages in any business activity that involves the operation, management,
consulting or development of any schools, universities or other educational
activity in which the Company is then engaged and specifically does not
encompass the development, marketing and servicing of computer software,
hardware and related products; and (c) the term "Territory" shall mean any
geographic area in which the Company conducts business during such period.
6.4 Non-Solicitation. Unless Executive's employment is terminated by the
Company without cause or by Executive for Good Reason, Executive shall not, for
a period of one (1) year from the date of any termination or expiration of his
employment hereunder, directly or indirectly: (a) solicit for hire, or attempt
to solicit for hire, any employee of the Company, or assist any person, firm or
corporation in doing so or attempting to do so, or (b) plan for, acquire any
financial interest in or perform any services for himself or any other entity in
connection with a business in which Executive's interest, duties or activities
would inherently require Executive to reveal any Confidential Information; or
(c) solicit or cause to be solicited the disclosure of or disclose any
Confidential Information for any purpose whatsoever or for any other party.
6.5 Breach of Provisions. In addition to and without limiting or waiving
any other remedies available in arbitration or at law or in equity, the Company
or Executive shall be entitled to any otherwise available immediate injunctive
relief in any court, domestic or foreign, having the capacity to grant such
relief, to restrain any breach or threatened breach of obligations respecting
Confidential Information under the provisions of this Article VI.
6.6 Reasonable Restrictions. The parties acknowledge that the foregoing
restrictions, the duration and the territorial scope thereof as set forth in
this Article VI, are under all of the circumstances reasonable and necessary for
the protection of the Company and its business.
6.7 Definition. For purposes of this Article VI, the term "Company" shall
be deemed any subsidiary of, affiliate of, predecessor to, or successor of the
Company.
6.8 Proprietary Information Agreement. Executive shall accept and execute
the Company's Proprietary Information Agreement, a copy of which is attached
hereto as Exhibit B. Executive agrees to comply with such Proprietary
Information Agreement to the extent such Agreement is not inconsistent with the
terms and conditions of this Employment Agreement. Executive acknowledges and
agrees that the terms and conditions of this Employment Agreement shall prevail
in the event of any inconsistency with such Proprietary Information Agreement.
ARTICLE VII
MISCELLANEOUS
7.1 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective legal representatives, heirs,
14
distributees, successor and assigns; provided that the rights and obligations of
Executive hereunder shall not be assignable by him.
7.2 Notices. Any notice provided for herein shall be in writing and shall
be deemed to have been given or made when personally delivered or three (3) days
following deposit for mailing by first class registered or certified mail,
return receipt requested, or if delivered by facsimile transmission, upon
confirmation of receipt of the transmission, to the address of the other party
set forth below or to such other address as may be specified by notice given in
accordance with this Section 7.2:
(a) If to the Company
00000 Xxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Or at the company's Corporate Head Quarters
(b) If to Executive:
At the home address designated on the Company records.
7.3 Severability. If any provision of this Agreement, or portion thereof,
shall be held invalid or unenforceable by a court of competent jurisdiction,
such invalidity or unenforceability shall attach only to such provision or
portion thereof, and shall not in any manner affect or render invalid or
unenforceable any other provision of this Agreement or portion thereof, and this
Agreement shall be carried out as if any such invalid or unenforceable provision
or portion thereof were not contained herein. In addition, any such invalid or
unenforceable provision or portion thereof shall be deemed, without further
action on the part of the parties hereto, modified, amended or limited to the
extent necessary to render the same valid and enforceable.
7.4 Confidentiality. The parties hereto agree that they will not, during
the term or thereafter, disclose to any other person or entity not employed by
the Company or affiliate under a written employment agreement the terms or
conditions of this Agreement (excluding the financial terms hereof) without the
prior written consent of the other party or as required by law, regulatory
authority or as necessary for either party to obtain personal loans or
financing. Approval of the Company and of Executive shall be required with
respect to any press releases regarding this Agreement and the activities of
Executive contemplated hereunder.
7.5 Arbitration. Any controversy, claim or dispute arising out of or in
any way relating to this Agreement, the alleged breach thereof, and/or
Executive's employment with the Company or termination there from, including
without limitation, any and all claims for employment discrimination or
harassment, shall be determined by final and binding arbitration administered by
The American Arbitration Association (AAA) at Los Angeles, California in
accordance with the AAA Arbitration Rules and Procedures for Employment Disputes
("Rules") which are in effect at the time of the arbitration or the demand
therefore. The Rules are hereby incorporated by reference. In the event of any
arbitration proceeding, a single neutral arbitrator shall be appointed by the
AAA. California Code of Civil Procedure ss. 1283.05, which provides for certain
discovery rights, shall apply to any such arbitration, and said code section, is
also hereby incorporated herein by reference. In reaching a decision, the
arbitrator shall have no authority to change, extend, modify or suspend any of
15
the terms of this Agreement. The arbitration shall be commenced and heard in Los
Angeles County, California. The arbitrator shall apply the substantive law of
California. As applicable to the claim(s) asserted, and the arbitrator is
without jurisdiction to apply any different substantive law. The arbitrator
shall render an award and a written, reasoned opinion in support thereof,
stating all findings of fact and conclusions of law. Judgment on the award may
be entered in any court of competent jurisdiction, even if a party who received
notice under the Rules fails to appear at the arbitration hearing(s). The
parties may seek, from a court of competent jurisdiction, provisional remedies
or injunctive relief in support of their respective rights and remedies
hereunder without waiving any right to arbitration. However, the merits of any
action that involves such provisional remedies or injunctive relief, including,
without limitation, any action seeking such relief for alleged violations of
Article VI of this Agreement and further including the terms of any permanent
injunction, shall be determined by arbitration under this paragraph. The parties
will pay the arbitrator's fees, divided evenly between them, except employer
shall advance and pay any arbitrator's fees in excess of $10,000. The arbitrator
shall have full authority to award all costs of the arbitration (excluding
attorney fees) fees to either party in a manner consistent with applicable law.
7.6 Waiver. No waiver by a party hereto of a breach or default hereunder
by the other party shall be considered valid unless in writing signed by such
first party, and no such waiver shall be deemed a waiver of any subsequent
breach or default of the same or any other nature.
7.7 Controlling Nature of Agreement. To the extent any terms of this
Agreement are inconsistent with the terms or provisions of the Company's
Employee Manual or any other personnel policy statements or documents, the terms
of this Agreement shall control. To the extent that any terms and conditions of
Executive's employment are not covered in this Agreement, the terms and
conditions set forth in the Employee Manual or any similar document shall
control such terms.
7.8 Entire Agreement. This Agreement sets forth the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
any and all prior agreements or understanding between the Company and Executive,
whether written or oral, fully or partially performed relating to any or all
matters covered by and contained or otherwise dealt with in this Agreement. This
Agreement does not constitute a commitment of the Company with regard to
Executive's employment, express or implied, other than to the extent expressly
provided for herein. Executive enters into this Agreement voluntarily and
without reliance upon any promise, warranty or representation, written or oral,
other than those expressly contained in this Agreement.
7.9 Amendment. No modification, change or amendment of this Agreement or
any of its provisions shall be valid unless in writing and signed by Executive
and a duly authorized Officer of the Company stating an intention to modify,
change or amend this Agreement.
7.10 Authority. The parties each represent and warrant that they have the
power, authority and right to enter into this Agreement and to carry out and
16
perform the terms, covenants and conditions hereof, and evidence of such power,
authorization and right shall be available for inspection on request.
7.11 Applicable Law. This Agreement, and all of the rights and obligations
of the parties in connection with the employment relationship established
hereby, shall be governed by and construed in accordance with the substantive
laws of the State of California without giving effect to principles relating to
conflicts of law. This Agreement shall be construed according to its fair
meaning and not for or against any party.
7.12 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Company. No rights or
obligations of the Company ("such entity") under this Agreement may be assigned
or transferred by such entity except that such rights or obligations may be
assigned or transferred pursuant to a merger or consolidation in which such
entity is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of such entity, provided that (a) the assignee
or transferee is the successor to all or substantially all of the assets of such
entity, (b) such assignee or transferee assumes the liabilities, obligations and
duties of such entity, as contained in this Agreement, either contractually or
as a matter of law, and (c) immediately following such transaction, the
consolidated net worth of the assignee or transferee is not less than the net
worth of such entity immediately prior to such transaction, both as measured
under generally accepted accounting principles consistently applied. The Company
further agrees that, in the event of a sale of assets or liquidation as
described in the preceding sentence, it shall take whatever action it legally
can in order to cause such assignee or transferee to expressly assume the
liabilities, obligations and duties of the assignor or transferor entity
hereunder. Except as expressly provided herein, Executive may not sell,
transfer, assign, or pledge any of his rights or obligations pursuant to this
Agreement.
7.13 Executive's Rights. Any rights of Executive hereunder shall be in
addition to any rights Executive may otherwise have under written benefit plans
or agreements of the Company to which he is a party or in which he is a
participant, including, but not limited to, any Company sponsored written
employee benefit plans, stock option plans, grants and agreements. Provisions of
this Agreement shall not in any way abrogate Executive's rights under such other
plans and agreements.
7.14 Survival of Rights and Obligations. The respective rights and
obligations of the parties hereunder shall survive any termination of
Executive's employment to the extent necessary to the intended preservation of
such rights and obligations.
7.15 Headings. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
17
7.16 Counterparts. Thus Agreement may be executed in counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
DIGITAL LEARNING INSTITUTE, INC.
By: ______________________________
XXXXX XXXXX, Vice President
EXECUTIVE
By: ____________________________________
XXXXXXXXX XXXXXX
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