EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this ____ day of March, 2000, is by and between
COYOTE NETWORK SYSTEMS, INC., a Delaware corporation (the "Company"), and
XXXXXXX X. XXXXXXXX (the "Employee").
RECITALS
WHEREAS, the Employee is willing to be employed by the Company upon the terms
and conditions set forth in this Agreement.
NOW, THEREFORE, in order to set forth the terms and conditions of the Employee's
employment with the Company and in consideration of the covenants and agreements
of the parties herein contained, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT SERVICES
Subject to the terms and conditions hereinafter set forth, the Company
hereby employees the Employee as General Counsel and Vice President of
Business Development commencing on April 15, 2000 and ending on the last
day of the Term (as defined below). The Employee accepts such employment
and agrees to perform all duties in a conscientious, reasonable and
competent manner and to devote his reasonable best efforts to perform his
duties pursuant to this Agreement and to further the business of the
Company, as directed by the Board of Directors. Without further action of
the Company, the Employee may engage in other business, consulting,
financial and other activities during the employment hereunder subject to
fulfilling his duties hereunder. The Employee has disclosed in Schedule 1
attached hereto the names of his other business affiliations as of the date
hereof and agrees to promptly notify the Company of any additional
affiliations.
2. TERM AND TERMINATION
2.1 TERM
Subject to section 2.2 hereof, the employment of the Employee under
this Agreement will commence on April 15, 2000 (the "Effective Date")
and continue until the occurrence of the first of the following (the
"Termination Date"):
(a) October 15, 2001 (i.e., a term of eighteen months);
(b) The Employee's death; or
(c) The Employee's illness, physical or mental disability or other
incapacity resulting in the Employee's inability to effectively
perform his duties under this Agreement for an aggregate of
thirty (30) days during any period of six (6) consecutive months.
The period beginning on the Effective Date and ending on the
Termination Date is referred to herein as the "Term."
2.2 TERMINATION
The Employee may be terminated prior to the expiration of the Term with or
without "Cause" at the sole discretion of the Board of Directors. "Cause"
shall include any of the following occurrences:
(a) The Employee's conduct involving fraud or moral turpitude or the
Employee's dishonesty involving the Company's business;
(b) The Employee's chronic absence from work other than by reason of
illness, injury, vacation or business- related travel, which continues
after the Employee has received a written notice from the Company to
halt such chronic absence;
(c) Conviction of any felony;
(d) The Employee's conviction of any misdemeanor which is substantially
related to the Employee's services hereunder;
(e) The Employee's abuse of alcohol (whether or not on the job) after
receiving a written notice from the Company to halt such usage or the
Employee's conviction of a crime involving alcohol;
(f) The Employee's use of illegal drugs or other illegal substance
(whether or not on the job) after receiving a written notice from the
Company to halt such usage or the Employee's conviction of a crime
involving illegal drugs or other illegal substance, which impairs the
Employee's ability to perform his duties under this Agreement or has
an adverse effect (other than an insignificant effect) on the Company,
its business or its relationship with any customer or supplier of the
Company;
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(g) A breach by the Employee of his obligations under sections 7, 8 or 9
hereof; and
(h) A material breach of any other provision of this Agreement by the
Employee, following written notice and failure to cure within a
reasonable time (which cure period shall be no less than five days
after Employee's receipt of such notice).
The Employee may resign and terminate this Agreement on five days prior
written notice to the Company for no reason or any reason ("Voluntary
Termination"). In addition, the Employee may terminate this Agreement if
the Company has materially breached any provision of this Agreement and the
Company has not cured such breach within a reasonable time (but no less
than five days) after receipt of written notice of such breach
("Termination for Good Cause").
2.3 EFFECT OF TERMINATION
If the Employee is terminated for "Cause" as defined above, or the Employee
effects a Voluntary Termination, then this Agreement shall terminate and
the Employee shall not be entitled to any unearned compensation or benefits
under this Agreement as of the date of termination and any unvested options
as of the date of termination granted pursuant to section 3.2 shall be void
and cancelled. If the Employee is terminated without "Cause" as defined
above, or the Employee effects a Termination for Good Cause, then this
Agreement shall terminate and the Employee shall nevertheless be entitled
to six months of semi-monthly salary installments as set forth in section
3.1 and the stock options and vesting schedule of section 3.2 shall remain
in effect. The Employee's obligations in sections 6, 7, 8, 9 and 10 hereof
shall survive the termination of employment hereunder for any reason.
3. COMPENSATION
3.1 SALARY
The Company agrees to pay the Employee for each full fiscal year of
the term of this Agreement an annual salary, payable in 24 equal
semi-monthly payments, at a rate equal to $180,000 per year.
3.2 STOCK OPTIONS
The Employee shall be entitled to receive five-year stock options of
the Company for 100,000 shares of the Company's common stock at
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an exercise price of $7.00/share and 150,000 five-year options at an
exercise price of $9.00/share (collectively the "Options"), with
vesting as set forth below:
Number of Options/Shares Vesting
33,334 $7.00 options on October 15, 2000
33,333 $7.00 options on April 15, 2001.
33,333 $7.00 options on October 15, 2001.
50,000 $9.00 options on October 15, 2000.
50,000 $9.00 options on April 15, 2001.
50,000 $9.00 options on October 15, 2001
All Options must be exercised on or before the earlier of (i) -April
15, 2006 or (ii) the date which is three (3) years after termination
of the Employee's employment with the Company for any reason.
Notwithstanding the foregoing, all stock options granted to the
Employee above shall immediately vest in the event of any transaction
in which substantially all of the assets of the Company are acquired
or 50% or more of the issued and outstanding common stock of the
Company is acquired by a single person, entity or group of such
persons or entities.
The Employee hereby acknowledges that the stock options set forth
above and the shares underlying such stock options have not been
registered or qualified for sale under the Securities Act of 1933, as
amended (the "Act"), or any state securities law and may not be sold,
hypothecated, pledged, assigned or otherwise transferred, nor will any
assignee, vendee or other transferee be recognized as having an
interest in such stock options or shares of stock, unless a
registration statement under the Act and any applicable state
securities laws is then in effect with respect to such stock options
or shares of stock or the availability of an exemption from such
registration is established to the satisfaction of the Company.
The Employee further acknowledges that the Company must amend its
Certificate of Incorporation (the "Charter Amendment") to authorize
the shares underlying such Options to permit the Employee to exercise
any such Options. The Company will use all
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commercially reasonable efforts to obtain the approval of its
stockholders and take such other actions as are necessary to effect
the Charter Amendment. Subject to the effectiveness of the Charter
Amendment, the Company shall at all times prior to by which all such
options must be exercised reserve and keep available, solely for
issuance and delivery upon the exercise of such Options, a number of
authorized shares of common stock equal to the number of shares of
common stock which may be purchased upon exercise of such Options.
3.3 SIGNING BONUS
As a signing bonus, on the effective date, the Company shall pay employee a
cash payment of $50,000 and 25,000 shares of the Company's common stock
3.4 ACKNOWLEDGEMENT
The Company acknowledges (i) that the Options being granted hereunder are
granted to the Employee in his individual capacity and not in payment of
the Employee providing any finder, broker, dealer, placement agent or other
investment banking or advisory services and (ii) the Options as awarded and
vested are in no way dependent on the Employee introducing or causing any
particular person or entity to invest in the Company or effect any given
transaction with the Company.
4. REIMBURSEMENT FOR EXPENSES
The Company agrees to reimburse the Employee for all reasonable business
expenses incurred by him in connection with the performance of his
obligations under this Agreement, subject to established reimbursement
policies of the Company in effect from time-to-time regarding expense
reimbursement, including, without limitation, reasonable travel,
entertainment, cell phone, long distance charges and other customary
expenses the Employee incurs in the performance of his duties hereunder,
and to further reimburse the Employee for any reasonable legal or
accounting fees incurred by Employee in connection with his entry into this
Agreement or the performance of his duties up through the date hereof.
5. BENEFITS
The Employee shall be entitled to the following benefits during the term of
his employment under this Agreement, and shall be offered any additional
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benefits typically offered or provided any other executive officers of the
Company.
5.1 VACATION
The Employee shall be allowed three (3) weeks of vacation per year
during the term of this Agreement, with full pay and without loss of
any other compensation of benefits, in accordance with established
Company policies. The Employee shall coordinate the schedule of his
vacations with other executives and the personnel of the Company at
its affiliates so as to provide sufficient managerial and executive
coverage for the Company's operations.
5.2 OFFICEALLOWANCE
Because Employee will not be permanently relocating to the Company's
offices in California, the Company and Employee acknowledge that
Employee will incur certain expenses in establishing a remote office.
Said expenses shall be submitted in writing and reimbursement agreed
to by and between the Company and the Employee. Employee will make
himself available in the Company Headquarters as needed.
5.3 OTHER BENEFITS
The Employee may receive such other benefits, if any, as the Board of
Directors may from time-to-time make available to the Employee in the
Board of Directors' sole discretion; provided, however, the Employee
shall be eligible for any benefits offered to any other member of the
Company's senior executive team on terms no less favorable that those
offered to other members of the senior executive team.
5.4 PAYMENTS
All cash payments due to the Employee hereunder shall be paid promptly
(no later than two business days after the due date) in immediately
available funds to the account specified by the Employee or by check
made payable to the order of the Employee.
6. DEFINITIONS
(a) As used in this Agreement, the following words have the meanings
specified:
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(b) "Proprietary Ideas" means ideas, suggestions, inventions and work
relating in any way to the business and activities of the Company
which may be subjects of protection under applicable laws, including
common law, respective patents, copyrights, trade secrets, trademarks,
service marks or other intellectual property rights.
(c) "Invention" means inventions, designs, discoveries, improvements and
ideas, whether or not patentable, including without limitation, upon
the generality of the foregoing, novel or improved products,
processes, machines, software, promotional and advertising materials,
business data processing programs and systems, and other manufacturing
and sales techniques, which either (a) relate to (i) the business of
the Company as conducted from time-to-time or (ii) the Company's
actual or demonstrably anticipated research or development, or (b)
result from any work performed by the Employee for the Company.
(d) "Confidential Information" means Proprietary Ideas and also
information related to the Company's business, whether or not in
written or printed form, not generally known in the trade or industry
of which the Employee has or will become informed during the period of
employment by the Company, which may include but is not limited to
product specifications, manufacturing procedures, methods, equipment,
compositions, technology, formulas, trade secrets, know-how, research
and development programs, sales methods, customer lists, mailing
lists, customer usage and requirements, software and other
confidential technical or business information and data; provided,
however, that Confidential Information shall not include any
information which is in the public domain by means other than
disclosure by the Employee or which the Employee must disclose by
operation of law or legal or administrative process.
(e) As used in sections 7, 8, 9 and 10 only, the term "the Company" shall
include all entities affiliated with the Company.
7. DISCLOSURE AND ASSIGNMENT OF INVENTIONS
The Employee agrees to disclose to the Company, and hereby assigns to the
Company all of the Employee's rights in and, if requested to do so, provide
a written description of, any Inventions conceived or reduced to practice
at any time during the Employee's employment by the Company, either solely
or jointly with others and whether or not developed on the Employee's own
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time or with the Company's resources. The Employee agrees that Inventions
first reduced to practice within one (1) year after termination of the
Employee's employment by the Company shall be treated as if conceived
during such employment unless the Employee can establish specific events
giving rise to the conception which occurred after such employment.
Further, the Employee disclaims and will not assert any rights in
Inventions as having been made, conceived or acquired prior to employment
by the Company except such as are specifically listed at the conclusion of
this Agreement. The Employee shall cooperate with the Company and shall
execute and deliver such documents and do such other acts and things as the
Company may request, at the Company's expense, to obtain and maintain
letters patent or registrations covering any Inventions and to vest in the
Company all rights therein free of all encumbrances and adverse claims.
8. CONFIDENTIAL INFORMATION
The Employee shall not disclose to the Company or induce the Company to use
any secret or confidential information belonging to persons not affiliated
with the Company, including any former employer of the Employee. In
addition to all duties of loyalty imposed on the Employee by law, the
Employee shall maintain Confidential Information in strict confidence and
secrecy and shall not at any time, during or at any time after termination
of employment with the Company, directly or indirectly, use or disclose to
others any Confidential Information, or use it for the benefit of any
person or entity (including the Employee) other than the Company, without
the prior written consent of any authorized officer of the Company (except
for disclosures to persons acting on the Company's behalf with a need to
know such information). The Employee shall carefully preserve any
documents, records, tangible data relating to Inventions or Confidential
Information coming into the Employee's possession and shall deliver the
same and any copies thereof to the Company upon request and, in any event,
upon termination of the Employee's employment by the Company.
9. NON-SOLICITATION
(a) The Employee agrees that he will not, during the one-year period
following termination of his employment with the Company, be connected
in any way with the solicitation of any then current or potential
(defined as persons or companies with pending quotes to or from the
Company) customers or suppliers of the Company if such solicitation is
likely to result in a loss of business for the Company.
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(b) The Employee agrees that he will not, during the one year period
following termination of his employment with the Company, solicit for
employment, employ or engage as a consultant any person who had been
an employee of the Company at any time in the two year period prior to
the Employee's termination of employment with the Company.
(c) In the event the covenants set forth in this section 9 are found to be
unenforceable or invalid by reason of being overly broad, the parties
hereto intend that such covenants shall be limited to such scope,
geographic area and duration as shall make such covenants valid and
enforceable.
10. ENFORCEMENT OF SECTION 7, 8 AND 9
Recognizing that compliance with the provisions of sections 7, 8 and 9 of
this Agreement is necessary to protect the goodwill and other proprietary
interests of the Company, and that breach of the Employee's agreements
thereunder will result in irreparable and continuing damages to the Company
for which there will be no adequate remedy at law, the Employee hereby
agrees that in the event of any breach of such agreements, the Company
shall be entitled to seek injunctive relief and such other and further
relief, including damages, as may be proper.
11. LAWS, REGULATIONS AND CONTRACTS
The Employee agrees to comply, and to do all things necessary for the
Company to comply, with all federal, state, local and foreign laws and
regulations which may be applicable to the business and operations of the
Company, and with any contractual obligations, including, without
limitation, confidentiality obligations, which may be applicable to the
Company or Executive under any contracts between the Company and its
customers, suppliers or third parties.
12. MISCELLANEOUS
12.1 AMENDMENT AND MODIFICATION
The Company (by action of the Board of Directors) and the Employee may
amend, modify and supplement this Agreement only in such manner as may
be agreed upon by the Company and the Employee in writing.
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12.2 ENTIRE AGREEMENT
This instrument embodies the entire agreement between the parties
hereto with respect to the employment relationship created hereby and
supersedes and replaces any prior agreements pertaining to employment
between the Employee and the Company. There have been and are no
agreements, representations or warranties between the parties other
than those set forth or provided for herein relating to such
employment relationship.
12.3 ASSIGNMENT
This Agreement shall not be assigned by the Employee without the
written consent of the Company. Any attempted assignment without such
written consent shall be null and void and without legal effect;
provided, however, nothing herein shall prevent the Employee from
assigning and of his rights to payment hereunder to any third company
in full compliance with all state and federal laws. This Agreement may
be assigned by the Company to a successor corporation or a good-faith
purchaser of the Company's stock or assets only in connection with a
sale of all or substantially all of the Company's assets or as a
result of a merger or other business combination involving the Company
and any such assignment shall not terminate or modify this Agreement,
except that the employing party to which the Employee shall have been
transferred shall, for the purposes of this Agreement, be construed as
standing in the same place and stead as the Company as of the date of
the assignment.
12.4 BINDING
Subject to section 12.3 hereof, this Agreement shall be binding upon
and insure to the benefit of the respective parties hereto and their
successors, assigns, heirs, executors, administrators and personal
representatives. The parties hereto shall be entitled, at their
option, to the remedy of specific performance to enforce any of the
provisions of this Agreement.
12.5 ARBITRATION
Any dispute, controversy or claim arising out of or relating to this
Agreement, or the breach hereof, shall be settled by binding
arbitration in Los Angeles, California administered by the American
Arbitration Association under its Employment Dispute Resolution,
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and judgment on the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof.
12.6 AGREEMENT SEVERABLE; WAIVER
This is a severable Agreement and in the event that any part of this
Agreement shall be held to be unenforceable, all other parts of this
Agreement shall remain valid and fully enforceable as if the
unenforceable part or parts had not been included herein. No waiver of
any provision of this Agreement shall be binding unless executed in
writing by the party to be bound hereby. No waiver of a breach of any
of the provisions of this Agreement shall be deemed to be or shall
constitute a waiver of a breach of any other provision of this
Agreement, whether or not similar, nor shall such waiver constitute a
continuing waiver of such breach unless otherwise expressly provided.
No failure or delay in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or
remedy.
12.7 NOTICES
For purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed
to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to EMPLOYEE, to: Xxxxxxx X. Xxxxxxxx
0000 Xxxxx Xxxxxxxx Xx.
Xxxxxxxxx, XX 00000
If to COMPANY, to: Coyote Network Systems, Inc.
Attn: President
0000 Xxxx Xxxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
or to such other address as either party may have furnished to the
other in writing in accordance herewith except that notices of a
change of address shall be effective only upon receipt.
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12.8 GOVERNING LAW
This Agreement shall be governed and construed under the laws of the
State of California.
12.9 INDEMNIFICATION; INSURANCE
The Company represents and warrants to the Employee that it has and
will maintain adequate directors and officers' liability insurance
coverage and that it will indemnify the Employee to the full extent
permitted by the General Corporation Law of the State of Delaware, as
provided in the Certificate of Incorporation of the Company.
12.10 CORPORATE AUTHORITY; ENFORCEABILITY
The Company represents and warrants to the Employee that it is a
corporation duly organized and validly existing under the laws of the
State of Delaware and that the execution and delivery of this
Agreement, and the performance by the Company of its obligations
hereunder, have been duly authorized by proper corporate action on the
part of the Company. This Agreement is a legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms.
THE EMPLOYEE ACKNOWLEDGES HAVING READ, EXECUTED AND RECEIVED A COPY OF THIS
AGREEMENT, INCLUDING THE FOLLOWING NOTICE, AND AGREES THAT, WITH RESPECT TO THE
SUBJECT MATTER HEREOF, IT CONSTITUTES THE EMPLOYEE'S ENTIRE AGREEMENT WITH THE
COMPANY, SUPERSEDING ANY PREVIOUS ORAL OR WRITTEN COMMUNICATIONS,
REPRESENTATIONS, UNDERSTANDINGS OR AGREEMENTS WITH THE COMPANY OR ANY OF ITS
OFFICIALS OR REPRESENTATIVES.
Notwithstanding anything to the contrary in section 7 hereof, this Agreement
does not apply to an Invention for which no equipment, supplies, facility, or
trade secret information of the Company was used and which was developed
entirely on the Employee's own time, unless (a) the Invention relates (i) to the
business of the Company as conducted from time-to-time or (ii) to the Company's
actual or demonstrably anticipated research or development, or (b) the Invention
results from any work performed by the Employee for the Company.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of
the day and year first above written.
COYOTE NETWORK SYSTEMS, INC.
BY
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Name
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Its
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XXXXXXX X. XXXXXXXX
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SCHEDULE 1
AFFILIATIONS OF XXXXXXX X. XXXXXXXX
IN OTHER BUSINESS VENTURES
A. Ownership Interests:
Name of Business Ownership Interest
---------------- ------------------
Zoom Kitchen, LLC 7%
I:Comm, LLC 2%
B. Directorships: C&L Communications, Inc.
C. Officer Positions in other Companies: None other than various positions
with the entities listed in section A above, an Of-Counsel position with
Reinhart, Boerner, Van Deuren, Xxxxxx & Rieselbach, S.C. and various other
non-profit organizations.
