EXHIBIT 10.3
EMPLOYMENT AND STOCK REPURCHASE AGREEMENT FOR
XXXX X. XXXXXXXX
THIS EMPLOYMENT AND STOCK REPURCHASE AGREEMENT (this "Agreement"), dated as
of September 17, 1999 (the "Effective Date"), between ARISTOTLE PUBLISHING,
INC., a Delaware corporation (the "Company"), having its principal place of
business located at 000 Xxxxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000 and
Xxxx X. Xxxxxxxx, an individual and a founder of the Company (the "Founder").
R E C I T A L S
A. The Founder is currently serving as the President and a Director of the
Company.
B. The parties acknowledge the valuable contributions Founder has made to
the success of the Company, that the Founder's abilities and services are unique
and essential to the continued success of the Company and that future investors
will invest in the Company in partial reliance on the Founder's serving the
Company pursuant to this Agreement.
C. In light of the foregoing, the Company desires to employ the Founder as
its Chairman of the Board, Chief Executive Officer and a Director, and the
Founder desires to accept such employment.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the Founder's past services to the
Company, the parties hereto, intending to be legally bound, agree as follows:
1. Employment. The Company hereby employs the Founder and the Founder
----------
hereby accepts employment upon the terms and conditions hereinafter set forth.
2. Duties. The Founder shall be engaged initially with the title and
------
functions of Chairman of the Board, Chief Executive Officer and Director and,
subject to the direction of the Board of Directors, shall perform and discharge
faithfully and to the best of his ability the duties, which may be assigned to
him from time to time by the Company in connection with such title and
functions. The Founder shall devote substantially all of his time, attention and
energies to the business of the Company as is reasonably necessary, appropriate
or advisable to carry out the duties assigned to him. During the term of this
Agreement, nothing shall prohibit the Founder from engaging (whether or not
during normal business hours) in any other business or professional activity,
whether or not such activity is pursued for gain, profit or other pecuniary
advantage so long as such activity does not compete, directly or indirectly,
with the Company's business as currently conducted or proposed to be conducted;
including, without limitation, (a) investing his personal assets in businesses
that do not compete with the Company's business as currently conducted or
proposed to be conducted; (b) providing services as a director, consultant or
advisor to businesses that do not compete with the Company's business as
currently conducted
1
or proposed to be conducted; (c) purchasing securities in any corporation or
other entity that do not compete with the Company's business as currently
conducted or proposed to be conducted; (d) purchasing securities in any
corporation whose securities are regularly traded (provided that such purchase
shall not result in his collectively owning beneficially at any time five
percent (5%) or more of the equity securities of any corporation engaged in a
business competitive to that of the Company's business as currently conducted or
proposed to be conducted; and (e) engaging in charitable activities,
participating in conferences, preparing or publishing papers or books or
teaching.
3. Compensation. For all services rendered under this Agreement:
-------------
(a) The Company shall pay the Founder a base salary ("Base Salary") of
Two Hundred Twenty Thousand Dollars ($220,000) per annum in equal semi-monthly
installments, subject to applicable payroll tax withholding and any applicable
contributions to employee benefit programs. The Board of Directors will review,
at least annually, the Founder's compensation with a view to increasing it if,
in the sole judgment of the Board of Directors, the results of operations of the
Company or the services of the Founder merit such an increase.
(b) During the term of this Agreement, the Founder shall be entitled
to participate in any and all incentive compensation plans of the Company.
(c) During the term of his employment, the Founder shall be entitled
to participate in employee benefit plans or programs of the Company, including,
without limitation, any plans or programs for Founders of the Company, subject
to the rules and regulations applicable thereto.
(d) During the terms of his employment, the Company will lease an
automobile, reasonably satisfactory to Founder, for use by Founder.
(e) The Founder shall be entitled to prompt reimbursement of all
expenses incurred by him in the performance of his duties, subject to the
presenting of appropriate vouchers in accordance with the Company's policy.
4. Term. This Agreement shall commence on the Effective Date and
----
shall terminate as of the earlier of:
(a) two (2) years from the date hereof (the "Initial Term") unless
either the Founder or the Company notifies the other that he or it elects to
extend the term hereof for an additional one (1) year (the "Renewal Period"),
such notice to be given within 90 days before the end of the Initial Term hereof
or within 90 days before the end of each successive Renewal Period;
(b) the death of the Founder;
(c) thirty (30) days after notice is given by the Company to the
Founder; or
2
(d) thirty (30) days after notice is given by the Founder to the
Company, after a material breach of this Agreement by the Company.
5. Proprietary Information. Founder shall execute and abide by the
------------------------
Company's standard form of proprietary information and inventions agreement as
set forth on Exhibit A, the terms of which are hereby incorporated by reference;
provided, however, in the event that the terms of this Agreement conflict with
the terms of such proprietary information and inventions agreement, the terms of
this Agreement shall control.
6. Location of Performance: Relocation.
-----------------------------------
(a) The Founder's services will be performed in San Francisco,
California or its environs. The parties acknowledge, however, that the Founder
may be required to travel extensively in connection with the performance of his
duties hereunder.
(b) If the Founder is required to change his place of residence from
San Francisco, California to another location in order to perform hereunder and
the Founder agrees to do so, then Company shall pay all the costs and expenses
of the Founder and his family connected with such relocation, including
reasonable moving and travel expenses and reasonable temporary dwelling costs
(for a period not to exceed 180 days) and costs associated with purchasing and
selling a permanent place of residence, all such expenses not to exceed
$150,000.
7. Repurchase Option. Pursuant to this Agreement, One Million Five
-----------------
Hundred Thousand (1,500,000) shares of Common Stock of the Company owned by
Founder (the "Stock") shall be subject to the repurchase option of the Company
set forth below ("Purchase Option"):
(a) In the event that either (i) the Founder voluntarily ceases to be
an employee of or associated with the Company or (ii) the Founder is terminated
for Cause (as defined below), then the Company shall have the right at any time
within sixty (60) days after such cessation to exercise its option to repurchase
from the Founder or his personal representative, as the case may be, at the
Founder's cost, up to but not exceeding the number of shares of stock which have
not vested under the provisions of subsection (b) below. Engagement of the
Founder solely as a director, consultant or advisor to the Company shall not be
deemed as cessation of employment or association with the Company. As used
herein, employment with the Company shall include employment with a "parent" or
"subsidiary" of the Company as those terms are defined in Sections 424(e) and
(f) of the Internal Revenue Code of 1986, as amended.
(b) The Company may exercise its Purchase Option as to the maximum
portion of the Stock specified in the following table:
3
If employment ceases: Stock subject to Purchase Option:
____________________ ________________________________
----------------------------------------------------------------------------------------------
At the Effective Date 750,000 shares
----------------------------------------------------------------------------------------------
From the Effective Date until thirty (30) 750,000 minus (25,000 multiplied by number of
_____ __________
----------------------------------------------------------------------------------------------
months after the Effective Date full months since the Effective Date)
----------------------------------------------------------------------------------------------
Thereafter None
----------------------------------------------------------------------------------------------
(c) The Purchase Option shall be exercised by written notice signed by
an officer of the Company or by any assignee or assignees of the Company and
delivered or mailed as provided in Section 11. Such notice shall identify the
number of shares to be purchased and shall notify the Founder of the time, place
and date for settlement of such purchase, which shall be scheduled by the
Company within ninety (90) days from the date of cessation of employment or
association.
(d) The Founder shall not transfer by sale, assignment, hypothecation,
donation or otherwise any of the Stock or any interest therein subject to the
Purchase Option without the prior express written consent of the issuer of the
shares. The parties agree to execute and deliver such further instruments and
agreements and take such further actions as may reasonably be necessary to carry
out the intent of this Agreement.
(e) The Company shall not be required (i) to transfer on its books any
shares of Stock of the Company which shall have been transferred in violation of
any of the provisions set forth in this Agreement or (ii) to treat as owner of
such shares or to accord the right to vote as such owner or to pay dividends to
any transferee to whom such shares shall have been so transferred.
(f) The Founder shall exercise all rights and privileges of a
shareholder of the Company with respect to the Stock.
(g) This Section 7 shall terminate upon the exercise in full or
expiration of the Purchase Option or the closing of a firm commitment
underwritten public offering of the Company's common stock pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
whichever first occurs.
8. Severance.
---------
(a) If the Founder's employment or association with the Company
terminates due to an Involuntary Termination Without Cause at any time after the
Effective Date or a Constructive Termination at any time after a Change in
Control, the Founder shall be entitled to receive the benefits set forth in this
Section 8. As used herein, employment or association with the Company shall
include employment with a "parent" or "subsidiary" of the Company as those terms
are defined in Sections 424(e) and (f) of the Internal Revenue Code of 1986, as
amended.
4
(b) Within ten (10) days of Involuntary Termination Without Cause or a
Constructive Termination, the Founder shall receive from the Company the first
of a series of cash payments to occur twice monthly over a four-month period and
which, in the aggregate, shall equal one hundred percent (100%) of the Founder's
then Base Salary plus any other incentive compensation payable to the Founder,
subject to applicable tax withholding.
(c) Notwithstanding the language of the Founder's option agreement(s)
or any other language to the contrary, the vesting of the Founder's stock
option(s) shall accelerate and immediately become vested and exercisable with
respect to all of those option shares, which otherwise would not be vested and
exercisable on the date of such Founder's Involuntary Termination Without Cause
or Constructive Termination. Notwithstanding any language to the contrary, the
vesting of the Founder's Stock described in Section 7 above shall accelerate and
immediately become vested and the Purchase Option will lapse with respect to all
of Stock, which otherwise would not be vested on the date of the Founder's
Involuntary Termination Without Cause or Constructive Termination.
(d) The Founder and his covered dependents shall be eligible to
continue their health care benefit coverage as permitted by COBRA (I. R. C.
Section 4980B) at no cost to the Founder and his covered dependents for a period
of twelve (12) months after the Founder's Involuntary Termination Without Cause
or Constructive Termination; provided, however, that payment of such COBRA
premiums by the Company shall cease upon the Founder commencing employment with
a new employer that provides comparable benefits to the Founder and his covered
dependents.
(e) The Founder shall not be required to mitigate damages or the
amount of any payment provided under this Agreement by seeking other employment
or otherwise, nor shall the amount of any payment provided for under this
Agreement be reduced by any compensation earned by the Founder as a result of
employment by another employer or by any retirement benefits received by the
Founder after the date of the Founder's Involuntary Termination Without Cause or
Constructive Termination.
(f) Upon the occurrence of the Founder's Involuntary Termination
Without Cause or Constructive Termination, and prior to the receipt of any
benefits under this Agreement on account of such termination, the Founder shall
execute a release for the benefit of the Company in form and substance
reasonably acceptable to the Company and in compliance with applicable law.
(g) If the Employee has been disabled for a period of at least twelve
(12) months during which period he was disabled for two hundred seventy (270)
consecutive days, the Company may elect, upon notice to the Founder, to pay the
Founder one-half (1/2) of the compensation the Founder would otherwise be
entitled to pursuant to clause (i) above. Disability shall mean the Founder's
inability, due to sickness or injury, to perform effectively his duties
hereunder.
5
9. Registration Rights. The Founder shall be entitled to those
-------------------
rights set forth in Section 1.3 (Piggy-back Rights) of that certain Investors'
Rights Agreement, dated as of September 17, 1999 by and among the Company and
its holders of its shares of Series A Preferred Stock (the "IRR"). Capital stock
of the Company now owned or hereinafter acquired by the Founder shall be deemed
Registrable Securities (as defined under the IRR) and the Founder shall be
deemed a Holder (as defined under the IRR) for purposes of Section 1.3. The
Company shall obtain the consents necessary to add the Founder as a party to the
IRR.
10. Non-Compete. For the period of one year after termination of
------------
employment (other than for termination without Cause or Constructive
Termination), Founder shall not enter into or engage generally in direct
competition with the Company or its subsidiaries anywhere in the business of
operating, creating, designing, programming, marketing, or selling political
products, professional campaign services, campaign software, advertising, or
databases derived from registered voter lists, for any other person or entity,
including, specifically, but not limited to, any competitor, client, or former
client of the Company, or any governmental entity.
11. Assignment: Notices. This Agreement may not be assigned by any
-------------------
party hereto. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and sent by registered mail to the Founder at
0000 Xxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000 or the Company at its address set
forth above, Attention: Secretary.
12. Waiver of Breach. A waiver by the Company or the Founder of a
----------------
breach of any provision of this Agreement by the other party shall not operate
or be construed as a waiver of any subsequent breach by the other party.
13. Entire Agreement. This Agreement contains the entire agreement of
----------------
the parties with respect to the subject matter hereof, and supersedes any and
all prior agreements relating to the subject matter hereof. It may be changed
only by an agreement in writing signed by a party against whom enforcement of
any waiver, change, modification, extension or discharge is sought.
14. Governing Law. This Agreement shall be governed by, interpreted
-------------
and construed in accordance with the laws of the State of California without
regard to principles of conflicts of laws. The parties agree that any action
brought by either party to interpret or enforce any provision of this Agreement
shall be brought in, and each party agrees to, and does hereby, submit to the
personal jurisdiction and venue of, the appropriate state or federal court for
the district encompassing the Company's principal place of business.
15. Headings: Counterparts. The headings of the Sections hereof are
-----------------------
inserted for convenience only and shall not be deemed to constitute a part
hereof nor to affect the meaning thereof. This Agreement may be executed in one
or more counterparts, each of which shall be an original and all of which taken
together shall constitute one agreement.
16. Attorneys Fees. If either party hereto brings any claim or
--------------
action to enforce his or its rights hereunder, the prevailing party shall be
entitled to recover from the other party reasonable attorneys fees and costs
incurred in connection with such claim or action, whether or
6
not a legal proceedings is actually commenced in connection with enforcing such
party's rights hereunder.
17. Miscellaneous Definitions.
-------------------------
(a) "Cause" shall mean (i) an act of dishonesty by Founder intended to
result in gain or personal enrichment of Founder which causes material harm to
the reputation of the Company; (ii) Founder personally engaging in illegal
conduct which causes material harm to the reputation of the Company; (iii)
Founder's continued failure to substantially perform the duties and obligations
of his employment which are not remedied within twenty (20) days after notice
thereof from the Board of Directors; (iv) Founder being convicted of a felony,
misdemeanor or gross misdemeanor relating to, an act of dishonesty or fraud
against, or a misappropriation of property belonging to, the Company; (v)
Founder's engagement in substance abuse which substantially impairs his ability
to perform the duties and obligations of Founder's employment or causes material
harm to the reputation of the Company; (vi) Founder personally engaging in any
act of moral turpitude that causes material harm to the reputation of the
Company; or (vii) Founder knowingly and intentionally breaching in any material
respect the terms of this Agreement (or any confidentiality agreement or
invention or proprietary information agreement with the Company); provided,
however, Cause shall not include any act or omission undertaken or omitted to be
taken by the Founder that was done so at the direction of the Board of
Directors, or that he believed in good faith at the time was not illegal after
reasonable inquiry; it shall be deemed reasonable and in good faith for the
Founder to rely on advice provided by the Company's legal counsel, with respect
to legal issues, and the Company's accountants, with respect to accounting or
accounting related issues.
(b) "Change in Control" means the consummation of a merger or
consolidation of the Company with or into another entity or any other corporate
reorganization, if more than 40% of the combined voting power of the continuing
or surviving entity's securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
shareholders of the Company immediately prior to such merger, consolidation or
other reorganization; or the sale, transfer other disposition of all or
substantially all of the Company's assets. A transaction shall not constitute a
Change in Control if its sole purpose is to change the state of the Company's
incorporation or to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company's securities
immediately prior to such transaction.
(c) "Constructive Termination" means that the Founder voluntarily
terminates employment with the Company after any of the following are undertaken
without the Founder's express written consent:
(i) the assignment to the Founder of any duties or
responsibilities that result in a material diminution or materially adverse
change of the Founder's position, status or circumstances or employment;
provided, however, that a mere change in the Founder's title or reporting
relationship shall not constitute a Constructive Termination;
7
(ii) a reduction by the Company in the Founder's Base Salary;
(iii) any failure by the Company to maintain in effect any
benefit plan, including incentive plans, in which the Founder is
participating, or the taking of any action by the Company that would
materially adversely affect the Founder's participation in or reduce the
Founder's benefits under any of such plans or deprive the Founder of any
fringe benefit then enjoyed by the Founder; provided, however, that any
such failure shall not be deemed a Constructive Termination if (A) the
Company offers a range of benefit plans and programs that taken as a whole
are comparable to existing benefit plans and programs of the Company, or
(B) all similarly situated executive officers of the Company are affected
in the same manner,
(iv) a relocation of the Founder's business office to a location
more than twenty-five (25) miles from the location at which the Founder
performs duties as of the Effective Date, or such other location thereafter
that the Founder consents to, except for required travel by the Founder
contemplated in Section 6(a) hereof;
(v) any material breach of this Agreement by the Company or any
other agreement between the Founder and the Company that remains uncured
for twenty (20) days after written notice thereof to the Chairman or any
two members of the Company's Board of Directors; and
(vi) after a Change in Control and failure by the Company to
obtain the assumption by the Company's successor-in-interest or assignee of
this Agreement or any other material agreement between the Founder and the
Company relating to the Founder's employment.
(d) "Involuntary Termination Without Cause" means the Founder's
dismissal or discharge from the Company other than for Cause. The termination of
the Founder's employment as a result of death or disability will not be deemed
to be an Involuntary Termination Without Cause.
[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first hereinabove written.
ARISTOTLE PUBLISHING, INC.
BY: /s/ Xxxx Xxxxxxxx
___________________________________
Name: Xxxx Xxxxxxxx
____________________________
Title: CEO
___________________________
FOUNDER
_________________________________________
9
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first hereinabove written.
ARISTOTLE PUBLISHING, INC.
BY:
___________________________________
Name:
____________________________
Title:
___________________________
FOUNDER
/s/ Xxxx Xxxxxxxx
_________________________________________
10
EXHIBIT A
FORM OF PROPRIETARY INFORMATION AGREEMENT
[see Exhibit 10.13]
