EXHIBIT 10.12
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement") dated as of March 3, 2004 between
XXXXX X. XXXXXXX ("Employee") and TTR TECHNOLOGIES, INC., a Delaware
corporation, or any of its current or future subsidiaries, affiliates,
successors or assigns (collectively, the "Company").
WHEREAS, the parties hereto desire to enter into this Agreement in order
to set forth the terms pursuant to which the Company will employ Employee and
Employee will serve as an officer and employee of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements set forth herein, and other valuable consideration, the parties
hereto, intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT PERIOD; REPRESENTATION
(a) The Company agrees to employ Employee, and Employee hereby agrees to
such employment, subject to the terms and conditions set forth in this
Agreement.
(b) Employee represents that his material compliance with the terms of
this Agreement and his performance as an executive of the Company does not and
shall not breach any agreement to keep in confidence information acquired by
Employee in confidence or in trust prior to employment by the Company. Employee
has not entered into, and agrees not to enter into, any agreement, either
written or oral, in conflict herewith.
(c) Employee acknowledges that this Agreement contains non-competition,
non-disclosure and proprietary information provisions, and Employee agrees to
comply with these provisions. Employee understands that entering into and
complying with these provisions is a condition to Employee 's continued
employment with the Company and that failure to comply with the terms and
conditions of these provisions may result in termination "for cause" under this
Agreement and in other damages to the Company.
2. TERM
The employment of Employee by the Company shall commence on the
Stockholder Approval Date (as defined below) (such date being hereinafter
referred to as the "Start Date") and continue for the period of three (3) years
from the Start Date, unless Employee's employment is otherwise terminated
earlier by the Company or Employee in accordance with Section 6 hereof (the
"Initial Term"). For purposes of this Section 2, the term "Stockholder Approval
Date" shall mean March 15, 2004, PROVIDED, that, by such date the Company's
stockholders shall have approved, by the requisite vote, the transactions
contemplated by that certain Development and Licensing Agreement, dated as of
January 6, 2004, entered into by the Company and Lucent Technologies, Inc.
Subject to Section 10 below, unless the Board of Directors of the Company
(the "Board") of Employer shall determine to the contrary and shall so notify
Employee in writing on or before the end of Initial Term, then at the end of
such Initial Term, the term of this Agreement shall be automatically extended
for one (1) term of twelve (12) additional months to be added at the end of the
then current term of this Agreement.
3. POSITIONS AND DUTIES
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(a) Upon the commencement of the Initial Term, Employee shall occupy the
position and perform the duties of Chief Executive Officer of the Company on a
full-time basis. In his capacity as Chief Executive Officer, Employee shall
report directly to, and be responsible to, the Board of Directors of the Company
(the "Board"). Subject to the direction and authority of the Board, Employee
shall have general supervision, and control over and responsibility for, the day
to day operations of the Company. In addition, Employee shall perform such other
duties and responsibilities as are consistent with the position described above
which relate to the business of Company, or of any affiliates or subsidiaries of
the Company, or any business ventures in which Company, its affiliates or
subsidiaries may participate and as are reasonably and lawfully assigned to him
from time to time by the Board. Employee shall be available to confer and
consult with and advise the officers and directors of Employer at such times
that may be required by Employer.
(b) The Company shall maintain an office located in the New York
Metropolitan Area, which shall be Employee's principal place of work.
(c) Employee shall devote 100% of his working time, attention and
energies to the business of the Company and shall assume and perform such
further reasonable and lawful responsibilities and duties as may be assigned or
directed by the Board.
(d) Except as set forth herein, Employee agrees that he will at all times
devote his reasonable best efforts, skill and ability to: promote the Company's
interests and work with the Board and the other executives of the Company.
(e) Employee acknowledges and agrees that he is required to observe all
the lawful rules and policies of the Company generally applicable to senior
executives.
4. COMPENSATION AND BENEFITS
For the full and faithful performance of the services to be rendered by
Employee, in consideration of Employee's obligations under this Agreement,
provided Employee is not in material breach of this Agreement and that Employee
is employed by the Company as of each relevant payment date, and it being
understood and agreed by Employee and the Company that Employee would not be
entitled to the full compensation package and benefits without his absolute
commitment to comply with his undertakings set forth in this Agreement, the
Company shall pay to Employee and Employee shall be entitled to receive:
(a) Salary
The Company will pay to Employee during the term of his employment under
this Agreement, a salary of One Hundred Eighty Thousand Dollars ($180,000) per
annum, less required deductions for state and federal withholding tax, social
security and other employee taxes (said amounts hereinafter referred to as the
"Salary"). Any Salary payable hereunder shall be paid in regular intervals in
accordance with the Company's payroll practices, but no less frequently than
once each month.
Subject to the terms of this Agreement, on the first anniversary of the
Start Date, the Salary payable hereunder shall be increased to Two Hundred Ten
Thousand Dollars ($210,000) per annum less required deductions for state and
federal withholding tax, social security and other employee taxes.
Subject to the terms of this Agreement, on the second anniversary of the
Start Date, the Salary payable hereunder shall be increased to Two Hundred
Thirty Five Thousand Dollars ($235,000) per annum less required deductions for
state and federal withholding tax, social security and other employee taxes.
(b) Incentive Compensation
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(i) Cash Bonus. Upon the achievement of certain Company earnings or other
milestones to be mutually agreed upon by the Company and Employee on or before
December 31, 2004 (the "Milestones"), Employee shall be entitled to a cash bonus
payment in an agreed upon amount and/or acceleration of incentive stock options
vesting upon the achievement of such Milestones. The Company and Employee will
memorialize any understanding subsequently reached by them, if any, in a duly
authorized written instrument.
(ii) Company Plans. Employee shall be eligible to participate, on terms
no less favorable than those afforded to other executives of the Company, in any
employee benefit plan, life insurance plan, disability insurance plan,
retirement plan, 401(k) and other compensation plans that may hereafter be
adopted by the Company for its executives and management employees from time to
time. Such participation shall be subject to the terms of the applicable plan,
generally applicable policies of the Company, applicable law and the discretion
of the Board of Directors. Nothing contained in this Agreement shall be
construed to create any obligation on the part of the Company to establish any
such plan or to maintain the effectiveness of any such plan which may be in
effect from time to time.
(c) Stock Options
Employee shall be granted, pursuant to the Company's 2000 Equity
Incentive Plan (the "Plan") and the stock option agreement (the "Stock Option
Agreement") memorializing such grant, incentive stock options (the "Options") to
purchase one million three hundred and fifteen thousand two hundred and fifty
shares (1,315,250) at the closing market price on the trading day immediately
preceding the Stockholder Approval Date. The Options shall vest in full in three
(3) years in equal quarterly installments at the end of each fiscal quarter
beginning June 30, 2004; PROVIDED, HOWEVER, that in the event of a Change of
Control (as defined in the Stock Option Agreement), 100% of the unvested Options
shall vest immediately prior to the closing of such event. The terms of the
Options shall be specified in the Stock Option Agreement.
(d) Health Insurance
As Employee enjoys health insurance coverage through his previous
employer's plan, the Company will not provide health insurance coverage to the
Employee. Nevertheless, while this Agreement is in full force and effect, the
Employee shall be entitled to be reimbursed monthly, for medical insurance
payments made by the Employee to a bona fide health and/or dental insurance
provider, for the Employee's spouse and/or minor children, in accordance with
the Company's policy in effect, up to a maximum monthly amount of $600 payable
by the Company. The Company may in its sole discretion and at any time during
the course of this Agreement and in compliance with applicable law, substitute a
Company sponsored health and dental insurance program including without
limitation, medical insurance plan for the medical reimbursement payments
specified herein.
(e) Expense Reimbursement
The Company shall promptly pay the reasonable, business-related expenses
incurred by Employee in the performance of his duties hereunder, including,
without limitation, those incurred in connection with business related travel,
telecommunications and entertainment, or, if such expenses are paid directly by
Employee, shall promptly reimburse the Employee for such payment, provided that
Employee has properly accounted therefore in accordance with Company policy.
(f) Vacation
Employee shall be entitled to four (4) weeks paid vacation in accordance
with the Company's vacation policies for its executives, as in effect from time
to time. The timing and duration of any vacation shall be taken at such time so
as not to interfere with Employee's responsibilities and commitment to the
Company.
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Employee shall also be entitled to all paid holidays given by the Company
to its employees. The Employee shall not be entitled to accumulate unused
vacation or sick leave or other fringe benefits from year to year without the
written consent of the Company, unless the accumulation of any such unused leave
and/or fringe benefit is necessitated by the Company's actions or otherwise
caused by Employee's performance of Employee's job-related duties at the
Company.
5. BOARD SEAT; TITLE
On (and subject to) the Start Date, the Company agrees that the Employee
will be appointed to the Company's Board as part of management's slate of
directors, and , so long as this Agreement is in full force and effect, shall
continue to be nominated to the Board as part of management's slate of
directors. Notwithstanding the foregoing, the termination of Employee's
employment hereunder for any reason shall automatically be deemed as Employee's
resignation from the Board without any further action, except when the Board
shall, in writing, request a continuation of duty as a Director in its sole
discretion. Neither the change to Employee's title and position nor his service
as a member of the Board of Directors shall affect the amount of his
compensation provided for in Section 4 of this Agreement.
6. TERMINATION
Employee's services shall terminate upon the first to occur of the
following events:
(a) The expiration of the Initial Term or any renewal term, if
applicable;
(b) Upon Employee's date of death or the date Employee is given written
notice that he has been determined to be disabled by the Company. For purposes
of this Agreement, Employee shall be deemed to be disabled if Employee, as a
result of illness or incapacity, shall be unable to perform substantially his
required duties for a period of sixty (60) consecutive days or an aggregate of
one-hundred and twenty (120) days in any twelve (12) month period
("Incapacity"). Termination of Employee's employment by the Company due to
Incapacity shall be communicated to Employee by written notice to Employee and
shall be effective on the tenth (10) day after receipt of such notice by
Employee, unless Employee returns to full-time performance of his required
duties before such tenth (10th) day;
(c) On the date Employee is terminated by the Company for "Cause." For
purposes of this Agreement, Cause shall be defined as: (i) Employee's conviction
of, or plea of nolo contendere, to any felony or to a crime involving moral
depravity or fraud; (ii) Employee's commission of an act of dishonesty or fraud
or breach of fiduciary duty or act that has a material adverse effect on the
name or public image of the Company, as determined by the Board provided the
Board affords the Employee the opportunity to personally appear before the Board
in order to state his case prior to the Board voting to so terminate the
Employee; (iii) Employee's commission of an act of willful misconduct or gross
negligence, as determined by the Board provided the Employee shall have the
opportunity to state his case before the Board prior to the Board taking such
decision to so terminate the Employee; (iv) the failure of Employee to perform
his duties under this Agreement; (v) the material breach of any of Employee's
material obligations under this Agreement or the Employee Confidentiality,
Invention Assignment and Non-Competition Agreement annexed hereto as Exhibit A;
(vi) the failure of Employee to follow a directive of the Board; or (vii)
excessive absenteeism, chronic alcoholism or any other form of addiction that
prevents Employee from performing the essential functions of his position with
or without a reasonable accommodation; PROVIDED, HOWEVER, that the Company may
terminate Employee's employment for Cause, as to (iv) or (v) above, only after
failure by Employee to correct or cure, or to commence or to continue to pursue
the correction or curing of, such conduct or omission within ten (10) days after
receipt by Employee of written notice by the Company of each specific claim of
any such misconduct or failure.
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(d) On the date Employee terminates his employment with the Company for
Good Reason (as defined below) by giving the Board of Directors of the Company
thirty (30) calendar days written notice of intent to terminate, ("Notice
Period") which notice sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for such Good Reason termination. For
the purposes of this Agreement, "Good Reason" shall mean, without Employee's
express written consent, the occurrence of any one or more of the following: (i)
the assignment of Employee to duties materially and substantially inconsistent
with Employee's authorities, duties, responsibilities and status (including
offices (or removal therefrom), titles, and reporting requirements as set forth
hereunder, or a material and substantial reduction or alteration in the nature
or status of Employee's authorities, duties, or responsibilities, except for any
reduction in duties and responsibilities due to Employee's illness or
disability; provided that subject to the Board having included the Employee in
its slate for any proxy the failure of the Employee to be elected to the Board
by the shareholders of the Company or the removal of the Employee from the Board
through the vote of the shareholders of the Company shall not be considered Good
Reason hereunder, (ii) the breach by the Company of any of its material
obligations under this Agreement or (iii) if the Company does not raise by
August 31, 2004 aggregate gross proceeds of $2 million or more (it being
understood that such basis for "Good Reason" shall exist until September 30,
2004);
(e) On the date Employee terminates his employment without Good Reason,
provided that Employee shall give the Company thirty (30) days written notice
prior to such date of his intention to terminate his employment ("Notice
Period"); or
(f) On the date the Company terminates Employee's employment for any
reason, other than a reason set forth in Sections 6(b) or 6(c), provided that
the Company shall give Employee thirty (30) days written notice prior to such
date of its intention to terminate Employee's employment ("Notice Period").
During such Notice Period, Employee will continue to perform his duties and
responsibilities unless the Company advises Employee otherwise.
7. RIGHTS UPON TERMINATION
(a) Upon termination of Employee's employment by either party for any
reason, or by virtue of the expiration of the Initial Term or any renewal term,
if applicable, all rights Employee has to payment under this Agreement shall
cease as of the effective date of the termination, and except as expressly
provided herein or as may be provided under any employee benefit plan or as
required by law, Employee shall not be entitled to any additional compensation,
commission, bonus, perquisites, or benefits with the exception of this Section 7
which shall survive termination of this agreement as outlined herein.
(b) Upon termination of Employee's employment (i) by the Company for
Cause, (ii) by the Company for reason of Employee's death or Incapacity or (iii)
by Employee without Good Reason, the Company shall pay to Employee or Employee's
estate or representatives, as the case may be, his Salary and any benefits and
outstanding reimbursable expenses accrued and payable to him through the last
day of his actual employment by the Company.
(c) If at any time within twelve (12) months of the Start Date Employee's
employment is terminated by Employee pursuant to Section 6(d) or by the Company
pursuant to Section 6(f) hereof, (i) the Company shall pay to Employee his
salary and benefits accrued and payable to him through the last day of his
actual employment by the Company, (ii) Employee's salary and benefits shall
continue (in the customary manner in which Company has paid the base salary and
benefits) for the succeeding three months; if such termination occurs at any
time after the twelfth (12th) month following the Start Date, employee is
entitled to payment of six (6) months' salary less payroll deductions, payable
over such six (6) months in the customary manner in which Company has paid the
base salary and benefits. In order to be eligible for the severance benefits as
set forth in this Section 7(c), Employee must (i) execute and deliver to the
Company a general release, in a form satisfactory to the Company,
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and (ii) be and remain in full compliance with his obligations under this
Agreement and the Confidentiality Agreement. In the event Employee breaches any
obligation under this Agreement or the Confidentiality Agreement, any and all
payments or benefits provided for in this Section 7(c) shall cease immediately.
8. EMPLOYEE CONFIDENTIALITY, INVENTION ASSIGNMENT AND NON-COMPETITION
AGREEMENT
The Company values the protection of its confidential information and
proprietary materials essential to the survival of the Company. Therefore, as a
mandatory condition of Employee's employment, Employee agrees to comply with the
following provisions.
a. CONFIDENTIALITY
(i) The term "Information" as used in this section means any and all
confidential and proprietary information including but not limited to any and
all specifications, formulae, prototypes, software design plans, computer
programs, and any and all records, data, methods, techniques, processes and
projections, plans, marketing information, materials, financial statements,
memoranda, analyses, notes, and other data and information (in whatever form),
as well as improvements and know-how related thereto, relating to the Company or
its products. Information shall not include information that (a) was already
known to or independently developed by the Employee prior to its disclosure as
demonstrated by reasonable and tangible evidence satisfactory to the Company;
(b) shall have appeared in any printed publication or patent or shall have
become part of the public knowledge except as a result of breach of this
Agreement by the Employee or similar agreements by other Company employees (c)
shall have been received by the Employee from another person or entity having no
obligation of confidentiality to the Company or (d) is approved in writing by
the Company for release by the Employee.
(ii) Subject to the provisions of Section (iii) below, the Employee
agrees to hold in trust and confidence all Information disclosed to Employee and
further agrees not to exploit or disclose the Information to any other person or
entity or use the Information directly or indirectly for any purpose other than
for Employee's work with the Company, unless otherwise consented to in writing
by the Company.
(iii)The Employee agrees to disclose the Information only to persons
necessary in connection with Employee's work with the Company or who have
undertaken the same confidentiality obligations set forth herein in favor of the
Company. The Employee agrees to assume full responsibility for the
confidentiality of the Information disclosed to Employee and to prevent its
unauthorized disclosure, and shall take appropriate measures to ensure that such
persons acting on his behalf are bound by a like covenant of secrecy.
(iv) The Employee acknowledges and agrees that the Information furnished
hereunder is and shall remain proprietary to the Company. Unless otherwise
required by statute or government rule or regulation, all copies of the
Information, shall be returned to the Company immediately upon request without
retaining copies thereof.
b. NON-COMPETE; POACHING; DEVELOPMENT RIGHTS
(i) Unless otherwise expressly consented to in writing by the Company,
during the term of the Employee's employment hereunder, and for a period of
twelve (12) months following the date on which Employee's termination of
employment with the Company becomes effective, Employee will not, directly or
indirectly, for his own account or as an employee, officer, director,
consultant, joint venture, shareholder, investor, or otherwise (except as an
investor in a corporation whose stock is publicly traded and in which the
Employee holds less than 5% of the outstanding shares) interest him/herself or
engage, directly or indirectly, in the design, development, production, sale or
distribution of any
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product or component that directly or indirectly competes with a product or
component (i) being designed, produced, sold or distributed by the Company or
any of its affiliates (ii) or to which the Company or any of its affiliates
shall then have proprietary rights, provided such affiliates operate in a field
directly related to the business of the Company or involve distribution or
promoting of the Company's products or technology ( (i) & (ii) collectively the
Company Products"). The Parties agree that currently the sole Company Products
comprise management and routing technology, designed to provide
Fiber-to-the-Premises capabilities to customers for voice, video, data, and
voice-over-Internet protocol services.
(ii) HIRING OF COMPANY EMPLOYEES. During the term of the Employee's
employment hereunder, and for a period of twelve (12) months following the date
on which Employee's termination of employment with the Company becomes
effective, the Employee shall not, except in the course of the performance of
his duties hereunder or with the prior approval of the Board, in any way
directly or indirectly, with respect to any person who to the Employee's
knowledge was employed by the Company or its affiliates ("Company Employee") at
any time during the period commencing 12 months prior to the date of the hiring
of such Company Employee, hire or cause to be hired any Company Employee, or
contract the services of any closely held private corporation or other entity in
which such Company Employee is an officer or director or holds a 25% or greater
equity ownership interest.
(iii) Employee's undertakings herein under this Section 8 shall be
binding upon Employee's successors, heirs or assigns, and shall continue until
the later of (i) the expiration of one year from the date of execution of this
Agreement or (ii) the expiration of one year from the date the Employee last
represented him/herself as an employee, agent or representative of the Company
or any of its affiliates, subsidiaries or successors.
(iv) Employee acknowledges that the restricted period of time specified
under this Section 8 are reasonable, in view of the nature of the business in
which the Company is engaged and Employee's knowledge of the Company's business
and products. If such a period of time or geographical location should be
determined to be unreasonable in any judicial proceeding, then the period of
time and area of restriction shall be reduced so that this Agreement may be
enforced in such an area and during such a period of time as shall be determined
to be reasonable by such judicial proceeding.
(v) DEVELOPMENT RIGHTS. The Employee agrees and declares that all
proprietary information including but not limited to trade secrets, know-how,
patents and other rights in connection therewith developed by or with the
contribution of Employee's efforts during his employment with the Company shall
be the sole property of the Company. Employee shall keep and maintain adequate
and current records (in the form of notes, sketches, drawings and in any other
form that may be required by the Company) of all such proprietary information
developed by Employee. Employee shall at Company's request do all things and
execute all documents as Company may reasonably require to vest in Company the
rights and protection herein referred to. It is hereby acknowledged and agreed
that the Salary payable under this Agreement also constitutes sufficient
consideration for the Employee's obligation hereunder
9. COOPERATION FOLLOWING TERMINATION
Employee agrees that, following notice of termination of his employment
until the date of his termination, he shall in good faith cooperate with the
Company in all matters relating to the completion of his pending work on behalf
of the Company and the orderly transition of such work to such other employees
as the Company may designate. Employee further agrees that during and following
the termination of his employment he shall in good faith cooperate with the
Company as to any and all claims, controversies, disputes or complaints over
which he has any knowledge or that may relate to his employment relationship
with the Company; PROVIDED, HOWEVER, that (a) Employee will be reimbursed by the
Company for any out of pocket expenses incurred pursuant to his duties under
this Paragraph 9 and reasonably compensated for his time, and (b) Employee's
obligation to cooperate under this
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Section 9 shall in no way preclude Employee from seeking to enforce his rights
under this Agreement. Such cooperation includes, but is not limited to,
providing the Company with all information known to him related to such claims,
controversies, disputes or complaints and appearing and giving testimony in any
forum.
10. GOVERNING LAW
Except as otherwise explicitly noted, this Agreement shall be governed by
and construed in accordance with the laws of the State of New York (without
giving effect to the conflict of law rules of New York).
11. INTEGRATION
This Agreement, and the attached Confidentiality Agreement, constitute
the entire understanding between the parties hereto relating to the subject
matter hereof, superseding all negotiations, prior discussions, preliminary
agreements and agreements related to the subject matter hereof made prior to the
date hereof.
12. MODIFICATIONS AND AMENDMENTS
This Agreement may be modified or amended only by an instrument in
writing executed by the parties hereto and approved in writing by the Board of
Directors. Such modification or amendment will not become effective until such
approval has been given.
13. SEVERABILITY
If any of the terms or conditions of this Agreement shall be declared
void or unenforceable by any court or administrative body of competent
jurisdiction, such term or condition shall be deemed severable from the
remainder of this Agreement, and the other terms and conditions of this
Agreement shall continue to be valid and enforceable.
14. NOTICE
For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given as of the date if delivered in person or by telecopy, on the
next business day, if sent by a nationally recognized overnight courier service,
and on the second business day if mailed by registered mail, return receipt
requested, postage prepaid, in each case addressed as follows:
If to the Employee:
Xxxxx X. Xxxxxxx
00 Xxxxxx Xxx
Xxxxxxxxxxx, XX 00000
If to the Company:
TTR Technologies, Inc
0000 00xx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
with a copy to:
Xxxxx Xxxxxx
Aboudi and Xxxxxxxxxx
0 Xxxxxx Xx., Xxx. Xxxx Xxxx Xxxx
XXXXXX
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or to such other address as any party may have furnished to the other in
writing in accordance herewith, except that notices of changes of address shall
be effective upon receipt.
15. WAIVER
The observation or performance of any condition or obligation imposed
upon Employee hereunder may be waived only upon the written consent of the Board
of Directors. Such waiver shall be limited to the terms thereof and shall not
constitute a waiver of any other condition or obligation of the Employee under
this Agreement.
16. ASSIGNMENT
The rights and obligations of the Company in this Agreement shall inure
to its benefit and be binding upon its successors-in-interest (whether by
merger, consolidation, reorganization, sale of stock or assets or otherwise),
and the Company may assign this Agreement to any affiliate. This Agreement,
being for the personal services of Employee, shall not be assignable by
Employee.
17. HEADINGS
The headings have been inserted for convenience only and are not to be
considered when construing the provisions of this Agreement.
18. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
counterparts, when taken together, shall constitute but one and the same
agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above written. TTR TECHNOLOGIES, INC.
By: /S/ XXX XXXXX
Name: Xxx Xxxxx
Title: Chief Operating Officer
Date: March 3, 2004
EMPLOYEE
/s/ XXXXX X. XXXXXXX
-------------------------------
XXXXX X. XXXXXXX
Date: March 3, 2004
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