EMPLOYMENT AGREEMENT
Exhibit 10.25
This Employment Agreement (the “Agreement”) is entered into on October 12, 2023 by and between Xxxxx Xxxxxxx (the “Executive”) and iLearningEngines, Inc. (the “Company”).
The Company desires to employ the Executive and, in connection therewith, to compensate the Executive for Executive’s personal services to the Company; and
Executive wishes to be employed by the Company and provide personal services and certain covenants to the Company in return for certain compensation and benefits.
Accordingly, in consideration of the mutual promises and covenants contained herein, the parties agree to the following:
| 1. | Employment by the Company. |
1.1 Position. Subject to the terms set forth herein, the Company agrees to employ Executive initially in the position of Chief Legal Officer and EVP Corporate Affairs, and Executive hereby accepts such employment.
1.2 Start Date. Executive’s employment with the Company shall commence on September 26, 2023, or such other date mutually agreed to in writing by Executive and the Company. The date Executive actually commences working for the Company is referred to as Executive’s “Start Date.” Prior to the Start Date or in the event that Executive does not commence employment with the Company under this Agreement, the Company shall have no obligation to provide Executive with compensation and benefits (including, but not limited to, the “Severance Benefits” stated in Section 6.1 or 6.2).
1.3 Duties. Executive will report to the Company’s Chief Executive Officer (the “CEO”), performing such duties as are normally associated with Executive’s position and such duties as are assigned to Executive from time to time, subject to the oversight and direction of the CEO or the CEO’s designee. During the term of Executive’s employment with the Company, Executive will devote Executive’s best efforts and substantially all of Executive’s business time and attention to the business of the Company. Executive shall perform Executive’s duties under this Agreement principally out of his residence in Brookline, Massachusetts and the Company’s corporate offices in Boston, Massachusetts. In addition, Executive shall make such business trips to such places as may be necessary or advisable for the efficient operations of the Company.
1.4 Company Policies and Benefits. The employment relationship between the parties shall be subject to the Company’s personnel policies and procedures as they may be established, interpreted, adopted, revised or deleted from time to time in the Company’s sole discretion. Executive will remain eligible to participate on the same basis as similarly-situated Executives in the Company’s benefit plans in effect from time to time during Executive’s employment. The Company reserves the right to change, alter, or terminate any benefit plan in its sole discretion. Notwithstanding the foregoing, in the event that the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.
| 2. | COMPENSATION. |
2.1 Salary. Executive shall receive for Executive’s services to be rendered under this Agreement an initial base salary of $350,000 on an annualized basis, subject to review and adjustment by the Company in its sole discretion, which may be increased from time to time to account for, among other things, cost of living and market rate adjustments for similarly situated executives. The base salary is payable subject to standard federal and state payroll withholding requirements in accordance with the Company’s standard payroll practices (“Base Salary”).
2.2 Restricted Stock Units.
(a) By no later than thirty (30) days after the closing of that certain Agreement and Plan of Merger and Reorganization, dated as of April 27, 2023, as it may be amended, by and among, Arrowroot Acquisition Corp., a Delaware corporation (“Acquiror”), ARAC Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of Acquiror and the Company (“Merger” and such agreement, the “Merger Agreement”) and provided that Executive remains an employee of the Company or its Affiliates as of the date of grant of the RSU Award, the Company shall grant Executive an award of restricted stock units with respect to 1,200,000 shares of the Company’s common stock (“RSU Award”). The RSU Award will be issued pursuant to the terms and conditions of the Company’s Equity Incentive Plan (“Plan”) adopted in connection with the Merger, and an award agreement entered into between Executive and the Company and will vest over four years, with 1/4th of the RSU Award vesting on the first anniversary of the Start Date, and 1/48th of the RSU Award vesting on each monthly anniversary thereafter, subject to Executive’s Continuous Service (as defined in the Plan) with the Company on each such vesting date. If the Company consummates a Change in Control (defined below, but not to include the Merger’s closing), one hundred percent (100%) of the unvested RSU Award subject to time- or service-based vesting that have been granted under the Plan to Executive will vest. The RSU Award will not be made effective if the Merger does not close.
(b) In the event that the Merger Agreement is terminated, then not later than 30 days after the effective date of such termination, and provided that Executive remains an employee of the Company or its Affiliates as of the date of grant, the Company shall grant Executive an award of restricted stock units with respect to 1,200,000 shares of the Company’s common stock (“Alternate RSU Award”). The Alternate RSU Award will be issued pursuant to the terms and conditions of the Company’s 2020 Equity Incentive Plan (“2020 Plan”), and an award agreement entered into between Executive and the Company. The Alternate RSU Award will be subject to two vesting conditions and both vesting conditions must be satisfied for the Alternate RSU Award to vest: (i) a time-based vesting condition that will vest over four years, with 1/4th of the Alternate RSU Award vesting on the first anniversary of the Start Date, and 1/48th of the Alternate RSU Award vesting on each monthly anniversary thereafter, subject to Executive’s Continuous Service (as defined in the 2020 Plan) with the Company on each such vesting date, and (ii) a liquidity event-based vesting condition. The liquidity event-based vesting condition will be satisfied on the first to occur of: (1) a Change in Control; or (2) (x) the date following the effective date of a registration statement of the Company filed under the Securities Act of 1933, as amended (“Securities Act”) for the sale of the Company’s Common Stock, (y) the settlement of the initial trade of shares of Common Stock on the Nasdaq Global Select Market, the New York Stock Exchange or another exchange or marketplace approved by the Board by means of an effective registration statement under the Securities Act that registers shares of existing Common Stock of the Company for resale, or (z) the Company’s completion of a merger or consolidation with a special purpose acquisition company or its subsidiary in which the common stock (or similar securities) of the surviving or parent entity are publicly traded in a public offering pursuant to an effective registration statement under the Securities Act. For clarity, Executive will be eligible for only the RSU Award or the Alternate RSU Award and not both. If the Company consummates a Change in Control, one hundred percent (100%) of the unvested Alternate RSU, subject to time- or service-based vesting that have been granted under the 2020 Plan to Executive will vest.
2
2.3 Bonus. Executive will be eligible to participate in any other discretionary bonus or incentive programs provided to other employees as may be created by the Company.
2.4 Benefits. Executive will receive medical and dental insurance coverage, participate in the Company’s 401k plan and any defined contribution retirement plan on the same terms and to the same extent as Named Executive Officers of the Company, and receive other group benefits (including but not limited to life insurance) consistent with the Company’s past practices for Named Executive Officers.
2.5 Expense Reimbursement. The Company will reimburse Executive for reasonable business expenses in accordance with the Company’s standard expense reimbursement policy, as the same may be modified by the Board from time to time. The Company shall reimburse Executive for all customary and appropriate business-related expenses actually incurred and documented in accordance with Company policy, as in effect from time to time. For the avoidance of doubt, to the extent that any reimbursements payable to Executive are subject to the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”): (a) any such reimbursements will be paid no later than December 31 of the year following the year in which the expense was incurred, (b) the amount of expenses reimbursed in one year will not affect the amount eligible for reimbursement in any subsequent year, and (c) the right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.
3. Confidential Information, Inventions, Non-Competition and Non- Solicitation Obligations. As a condition of employment, Executive agrees to execute and abide by the Employee Confidential Information and Invention Assignment Agreement attached as Exhibit A (“Confidential Information Agreement”), which may be amended by the parties from time to time without regard to this Agreement. The Confidential Information Agreement contains provisions that are intended by the parties to survive and do survive termination of this Agreement.
4. Outside Activities During Employment. Except with the prior written consent of the Company, Executive will not, while employed by the Company, undertake or engage in any other employment, occupation or business enterprise that would interfere with Executive’s responsibilities and the performance of Executive’s duties hereunder, except for (i) reasonable time devoted to volunteer services for or on behalf of such religious, educational, non-profit and/or other charitable organization as Executive may wish to serve, (ii) reasonable time devoted to activities in the non-profit and business communities consistent with Executive’s duties, and (iii) such other activities as may be specifically approved in writing by the Company. This restriction shall not, however, preclude Executive (i) from owning less than one percent (1%) of the total outstanding shares of a publicly-traded company, or (ii) from employment or service in any capacity with Affiliates of the Company. As used in this Agreement, “Affiliates” means an entity under common management or control with the Company. Executive agrees to promptly disclose to the Board his involvement in any activities contemplated by this Section 4.
3
5. No Conflict with Existing Obligations. Executive represents that Executive’s performance of all the terms of this Agreement and service as an executive of the Company do not and will not breach any agreement or obligation of any kind made prior to Executive’s employment by the Company, including agreements or obligations Executive may have with prior employers or entities for which Executive has provided services. Executive has not entered into, and Executive agrees that Executive will not enter into, any agreement or obligation, either written or oral, in conflict herewith.
6. Termination Of Employment. The parties acknowledge that Executive’s employment relationship with the Company will remain at-will. Either Executive or the Company may terminate the employment relationship for any reason whatsoever at any time, with or without cause or advance notice. The provisions in this Section govern the amount of compensation, if any, to be provided to Executive upon termination of employment and do not alter this at-will status.
6.1 Termination by the Company without Cause.
(a) The Company shall have the right to terminate Executive’s employment with the Company pursuant to this Section 6.1 at any time without “Cause” (as defined below) by giving notice as described in Section 7.1 of this Agreement. A termination pursuant to Sections 6.4 or 6.5 below is not a termination without Cause for purposes of receiving the benefits described in this Section 6.1.
(b) If the Company terminates Executive’s employment at any time without Cause, then Executive shall be entitled to receive the Accrued Obligations (as defined below), and provided that such termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “Separation from Service”) and subject to Executive’s compliance with the obligations in Section 6.1(c) below, Executive shall also be eligible to receive the following severance benefits (collectively, (i) through (iv), the “Severance Benefits”):
(i) The Company will pay Executive an amount equal to Executive’s then current Base Salary for twelve (12) months, less all applicable withholdings and deductions, and paid in equal installments beginning on the Company’s first regularly-scheduled payroll date following the Release Effective Date (as defined below), with the remaining installments occurring on the Company’s regularly-scheduled payroll dates thereafter; provided however, if the Merger has not closed or the Company is not otherwise a publicly traded company before Executive’s termination of employment, such period will be six (6) months (such applicable period, the “Severance Period”).
4
(ii) If Executive timely elects continued coverage under COBRA for Executive and Executive’s dependents under the Company’s group health plans following such termination, then the Company shall pay the COBRA premiums necessary to continue Executive’s and his covered dependents’ health insurance coverage in effect for Executive (and Executive’s covered dependents) on the termination date until the earliest of: (i) the date that is twelve months after the date Executive terminates employment with the Company; (ii) the date when Executive becomes eligible for substantially equivalent health insurance coverage in connection with new employment or self-employment; or (iii) the date Executive ceases to be eligible for COBRA continuation coverage for any reason, including plan termination (such period from the termination date through the earlier of (i)-(iii), (the “COBRA Payment Period”)). Notwithstanding the foregoing, if at any time the Company determines that its payment of COBRA premiums on Executive’s behalf would result in a violation of applicable law (including, but not limited to, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then in lieu of paying COBRA premiums pursuant to this Section, the Company shall pay Executive on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA premium for such month, subject to applicable tax withholding, for the remainder of the COBRA Payment Period. Nothing in this Agreement shall deprive Executive of his rights under COBRA or ERISA for benefits under plans and policies arising under his employment by the Company.
(iii) The Company will pay Executive, as additional severance, a bonus based on Executive’s on-target bonus rate, which bonus rate (for purposes of calculating the Bonus Severance (as defined below) only) will be not less than fifty percent (50%) of Executive’s base salary, pro-rated, based on the number of days Executive was employed during the Company’s fiscal year in which Executive’s separation date occurred, subject to applicable payroll deductions and withholdings (the “Bonus Severance”). For clarity, if Executive’s on-target bonus rate was fifty percent (50%) of Executive’s Base Salary (the “Hypothetical On-Target Bonus”) and Executive’s termination of service by the Company without Cause occurred on March 31 of a particular year, then the Bonus Severance would be calculated as 50% of Base Salary (i.e., the Hypothetical On-Target Bonus) prorated for three months out of twelve months, or 25% of the Hypothetical On-Target Bonus. The Bonus Severance, will be paid in equal monthly installments over the Severance Period, beginning on the Company’s first regularly-scheduled payroll date following the Release Effective Date (as defined below), with the remaining installments occurring on the Company’s regularly-scheduled payroll dates thereafter.
(iv) The Company will accelerate the vesting of Executive’s unvested outstanding equity awards subject to time- or service-based vesting that have been granted under the Plan or the 2020 Plan, as the case may be, to the Executive (including, without limitation, the RSU Award) as if Executive had completed additional Continuous Service for a period of months equal to the Severance Period immediately following Executive’s separation date.
5
(c) Executive will be paid all of the Accrued Obligations on the Company’s first payroll date after Executive’s date of termination from employment or earlier if required by law. Executive shall receive the Severance Benefits pursuant to Section 6.1(b) of this Agreement if: (i) by the sixtieth (60th) day following the date of Executive’s Separation from Service, Executive has signed and delivered to the Company a separation agreement containing (among other terms) an effective, general release of claims in favor of the Company and its affiliates and representatives, in a form presented by the Company (the “Release”) and which cannot be revoked in whole or part by such date (the date that the Release can no longer be revoked is referred to as the “Release Effective Date”); (ii) if Executive holds any other positions with the Company or any Affiliate, including a position on the Board, Executive resigns such position(s) to be effective no later than the date of Executive’s termination date (or such other date as requested by the Board); (iii) Executive returns all Company property; (iv) Executive is in compliance with his post-termination obligations under this Agreement and the Proprietary Information Agreement when any such Severance Benefits are due and payable; and (v) Executive complies with the terms of the Release, including without limitation any mutual non-disparagement and confidentiality provisions contained in the Release. To the extent that any of the Severance Benefits are deferred compensation under Section 409A of the Code, and are not otherwise exempt from the application of Section 409A, then, if the period during which Executive may consider and sign the Release spans two calendar years, the payment of the Severance Benefits will not be made or begin until the later calendar year.
(d) For purposes of this Agreement, “Accrued Obligations” are (i) Executive’s accrued but unpaid salary and accrued but unused vacation pay through the date of termination, (ii) any annual bonus awarded, but not yet paid, to Executive for the calendar year immediately preceding the year in which the termination occurs, (iii) any unreimbursed business expenses incurred by Executive payable in accordance with the Company’s standard expense reimbursement policies, and (iv) benefits owed to Executive under any qualified retirement plan or health and welfare benefit plan in which Executive was a participant in accordance with applicable law and the provisions of such plan.
(e) The Severance Benefits provided to Executive pursuant to this Section 6.1 are in lieu of, and not in addition to, any benefits to which Executive may otherwise be entitled under any Company severance plan, policy or program.
(f) Any damages caused by the termination of Executive’s employment without Cause would be difficult to ascertain; therefore, the Severance Benefits for which Executive is eligible pursuant to Section 6.1(b) above in exchange for the Release is agreed to by the parties as liquidated damages, to serve as full compensation, and not a penalty.
(g) For purposes of this Agreement, the term “Change in Control” means a “Change in Control” as defined in the Plan, but will not include the Merger.
6.2 Resignation by Executive for Good Reason.
(a) Provided Executive has not previously been notified of the Company’s intention to terminate Executive’s employment, Executive may resign from employment with the Company for Good Reason (as defined in Section 6.2(b) below).
6
(b) “Good Reason” for purposes of this Agreement shall mean the occurrence of any of the following conditions without Executive’s consent, after Executive’s provision of written notice to the Company of the existence of such condition (which notice must be provided as described in Section 7.1 within ninety (90) days of the initial existence of the condition and must specify the particular condition in reasonable detail), provided that the Company has not first provided notice to Executive of its intent to terminate Executive’s employment: (i) a non-de minimis reduction in Executive’s position, duties, responsibilities or authorities, provided, however, that the conversion of the Company to a subsidiary, division or unit of an acquiring entity in connection with a Change in Control (as defined above) will not be deemed a non-de minimis reduction in Executive’s position, title, duties, or responsibilities; (ii) a reduction by the Company of Executive’s Base Salary (except in the case of either an across-the-board reduction in salaries of less than ten percent that impacts all senior executives in the same or substantially equivalent matter or a temporary reduction due to financial exigency that does not exceed ninety days); or (iii) the relocation of Executive’s principal place of employment by thirty (30) or more miles from Executive’s then-current principal place of employment. Notwithstanding the foregoing, Good Reason shall only exist if the Company is provided a thirty (30) day period to cure the event or condition giving rise to Good Reason, and it fails to do so within that cure period (and, additionally, Executive must resign for such Good Reason condition by giving notice as described in Section 7.1 within thirty (30) days after the period for curing the violation or condition has ended).
(c) In the event Executive resigns from Executive’s employment with Good Reason, then Executive shall be entitled to the Accrued Obligations and, provided such resignation constitutes a Separation from Service and Executive complies with the obligations in Section 6.1(c) of this Agreement (including the requirement to provide an effective Release), Executive shall also be eligible to receive the same Severance Benefits as described in Section 6.1 and on the same conditions as if Executive had been terminated by the Company without Cause.
6.3 Termination by the Company for Cause.
(a) The Company shall have the right to terminate Executive’s employment with the Company at any time for Cause by giving notice as described in Section 7.1 of this Agreement.
(b) “Cause” for purposes of this Agreement shall mean that the Company has determined in its sole discretion that Executive has engaged in any of the following: (i) Executive has committed an act of fraud, embezzlement, misappropriation, moral turpitude, or theft in the course of Executive’s employment with Company; (ii) Executive has willfully and repeatedly refused to perform specific and material duties within the scope of Executive’s responsibilities set forth in this Agreement and consistent with Company’s policies (other than a failure as a result of Executive’s death or disability), and such refusal is not cured within thirty (30) days after Company provides written notice to Executive; or (iii) Executive has materially breached any material provision of this Agreement, and such failure or breach is not cured within thirty (30) days after Company provides written notice to Executive of such failure.
(c) In the event Executive’s employment is terminated at any time for Cause, Executive will not receive Severance Benefits or any other compensation or benefits, except that, pursuant to the Company’s standard payroll policies, the Company shall provide to Executive the Accrued Obligations.
7
6.4 Resignation by Executive (other than for Good Reason).
(a) Executive may resign from Executive’s employment with the Company at any time by giving notice as described in Section 7.1.
(b) In the event Executive resigns from Executive’s employment with the Company (other than for Good Reason), Executive will not receive Severance Benefits or any other compensation or benefits, except that, pursuant to the Company’s standard payroll policies, the Company shall provide to Executive the Accrued Obligations.
6.5 Termination by Virtue of Death or Disability of Executive.
(a) In the event of Executive’s death while employed pursuant to this Agreement, all obligations of the parties hereunder shall terminate immediately, and the Company shall, pursuant to the Company’s standard payroll policies, provide to Executive’s legal representatives all Accrued Obligations.
(b) Subject to applicable state and federal law, the Company shall at all times have the right, upon written notice to Executive, to terminate this Agreement based on Executive’s Disability. Termination by the Company of Executive’s employment based on “Disability” shall mean termination because Executive is unable due to a physical or mental condition to perform the essential functions of Executive’s position with or without reasonable accommodation for six (6) months in the aggregate during any twelve (12) month period or based on the written certification by two licensed physicians of the likely continuation of such condition for such period. This definition shall be interpreted and applied consistent with the Americans with Disabilities Act, the Family and Medical Leave Act, and other applicable law. In the event Executive’s employment is terminated based on Executive’s Disability, Executive will not receive the Severance Benefits, or any other severance compensation or benefit, except that, pursuant to the Company’s standard payroll policies, the Company shall provide to Executive the Accrued Obligations.
6.6 Application of Section 409A. It is intended that all of the severance payments payable under this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively, “Section 409A”) provided under Treasury Regulations Sections 1.409A-1(b)(4) and 1.409A-1(b)(9), and this Agreement will be construed in a manner that complies with Section 409A. If not so exempt, this Agreement (and any definitions hereunder) will be construed in a manner that complies with Section 409A, and incorporates by reference all required definitions and payment terms. No severance payments will be made under this Agreement unless Executive’s termination of employment constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h)). For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulations Section 1.409A-2(b)(2)(iii)), Executive’s right to receive any installment payments under this Agreement (whether severance payments or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment. To the extent that any severance payments are deferred compensation under Section 409A, and are not otherwise exempt from the application of Section 409A, then, if the period during which Executive may consider and sign the Release spans two calendar years, the severance payments will not begin until the second calendar year. If the Company determines that the Severance Benefits provided under this Agreement constitutes “deferred compensation” under Section 409A and if Executive is a “specified Executive” of the Company, as such term is defined in Section 409A(a)(2)(B)(i) of the Code at the time of Executive’s Separation from Service, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Severance Benefits will be delayed as follows: on the earlier to occur of (a) the date that is six months and one day after Executive’s Separation from Service, and (b) the date of Executive’s death (such earlier date, the “Delayed Initial Payment Date”), the Company will (i) pay to Executive a lump sum amount equal to the Severance Benefits that Executive would otherwise have received through the Delayed Initial Payment Date if the commencement of the payment of the Severance Benefits had not been delayed pursuant to this Section 6.6 and (ii) commence paying the balance of the Severance Benefits in accordance with the applicable payment schedule set forth in Section 6.1. No interest shall be due on any amounts deferred pursuant to this Section 6.6.
8
6.7 Notice; Effective Date of Termination.
(a) Termination of Executive’s employment pursuant to this Agreement shall be effective on the earliest of:
(i) immediately after the Company gives notice to Executive of Executive’s termination, with or without Cause, unless pursuant to Section 6.3(b)(i), (iv), (v) or (vii) in which case upon full satisfaction of the requirements set forth therein; or immediately upon Executive’s death;
(ii) ten (10) days after the Company gives notice to Executive of Executive’s termination on account of Executive’s Disability, unless the Company specifies a later date, in which case, termination shall be effective as of such later date, provided that Executive has not returned to the full-time performance of Executive’s duties prior to such date;
(iii) ten (10) days after Executive gives written notice to the Company of Executive’s resignation, provided that the Company may set a termination date at any time between the date of notice and the date of resignation, in which case Executive’s resignation shall be effective as of such other date. Executive will receive compensation through any required notice period; or
(iv) for a termination for Good Reason, immediately upon Executive’s full satisfaction of the requirements of Section 6.2(b).
(b) In the event notice of a termination under subsections (a)(i) and (iii) is given orally, at the other party’s request, the party giving notice must provide written confirmation of such notice within five (5) business days of the request in compliance with the requirement of Section 7.1 below. In the event of a termination for Cause, written confirmation shall specify the subsection(s) of the definition of Cause relied on to support the decision to terminate, as further described in Section 6.3.
9
6.8 Cooperation With Company After Termination of Employment. Following termination of Executive’s employment for any reason, Executive shall fully cooperate with the Company in all matters relating to the winding up of Executive’s pending work including, but not limited to, any litigation in which the Company is involved, and the orderly transfer of any such pending work to such other executives as may be designated by the Company. The Company will reimburse Executive for reasonable out-of-pocket expenses Executive incurs in connection with any such cooperation (excluding forgone wages, salary, or other compensation) and will make reasonable efforts to accommodate Executive’s scheduling needs.
6.9 Excise Tax Adjustment.
(a) If any payment or benefit Executive will or may receive from the Company or otherwise (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this Section, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment provided pursuant to this Agreement (a “Payment”) shall be equal to the Reduced Amount. The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax, or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state, and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in Executive’s receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax. If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for Executive. If more than one method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).
(b) Notwithstanding any provision of this Section 6.9 to the contrary, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A that would not otherwise be subject to taxes pursuant to Section 409A, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A as follows:
(A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest economic benefit for Executive as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without Cause) shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A.
10
(c) Unless Executive and the Company agree on an alternative accounting firm or law firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the Change in Control transaction shall perform the foregoing calculations. If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity, or group effecting the Change in Control transaction, the Company shall appoint a nationally recognized accounting or law firm to make the determinations required by this Section 6.9. The Company shall bear all expenses with respect to the determinations by such accounting or law firm required to be made hereunder. The Company shall use commercially reasonable efforts to cause the accounting or law firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to Executive and the Company within fifteen (15) calendar days after the date on which Executive’s right to a 280G Payment becomes reasonably likely to occur (if requested at that time by Executive or the Company) or such other time as requested by Executive or the Company.
(d) If Executive receives a Payment for which the Reduced Amount was determined pursuant to clause (x) of Section 6.9(a) and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, Executive agrees to promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of Section 6.9(a)) so that no portion of the remaining Payment is subject to the Excise Tax. For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) of Section 6.9(a), Executive shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.
7. General Provisions.
7.1 Notices. Any notices required hereunder to be in writing shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by electronic mail or confirmed facsimile if sent during normal business hours of the recipient, and if not, then on the next business day, (c) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next-day delivery, with written verification of receipt. All communications shall be sent to the Company at its primary office location and to Executive at Executive’s address as listed on the Company payroll or to Executive’s Company-issued email address or Executive’s email address as listed in Company records, or at such other address as the Company or Executive may designate by ten (10) days’ advance written notice to the other.
7.2 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never been contained herein.
7.3 Survival. Provisions of this Agreement which by their terms must survive the termination of this Agreement in order to effectuate the intent of the parties will survive any such termination, whether by expiration of the term, termination of Executive’s employment, or otherwise, for such period as may be appropriate under the circumstances.
11
7.4 Waiver. If either party should waive any breach of any provisions of this Agreement, it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.
7.5 Complete Agreement. This Agreement constitutes the entire agreement between Executive and the Company with regard to the subject matter hereof. This Agreement is the complete, final, and exclusive embodiment of their agreement with regard to this subject matter and supersedes any prior oral discussions or written communications and agreements. This Agreement is entered into without reliance on any promise or representation other than those expressly contained herein, and it cannot be modified or amended except in writing signed by Executive and an authorized officer of the Company. The parties will enter into a separate Confidential Information Agreement and may enter into separate agreements related to equity. These separate agreements govern other aspects of the relationship between the parties, have or may have provisions that survive termination of Executive’s employment under this Agreement, may be amended or superseded by the parties without regard to this Agreement and are enforceable according to their terms without regard to the enforcement provision of this Agreement.
7.6 Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.
7.7 Headings. 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.
7.8 Successors and Assigns. The Company shall assign this Agreement and its rights and obligations hereunder in whole, but not in part, to any Company or other entity with or into which the Company may hereafter merge or consolidate or to which the Company may transfer all or substantially all of its assets, if in any such case said Company or other entity shall by operation of law or expressly in writing assume all obligations of the Company hereunder as fully as if it had been originally made a party hereto, but may not otherwise assign this Agreement or its rights and obligations hereunder. The Executive may not assign or transfer this Agreement or any rights or obligations hereunder, other than to the Executive’s estate upon Executive’s death.
7.9 Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the Commonwealth of Massachusetts.
12
7.10 Resolution of Disputes. To aid the rapid and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, and in exchange for the mutual promises contained in this offer letter, Executive and the Company agree that any and all disputes, claims, or causes of action, in law or equity, including but not limited to statutory claims including, but not limited to, the Massachusetts Antidiscrimination Act, Mass. Gen. Laws ch.151B and the Massachusetts Wage Act, Mass. Gen. Laws ch. 149), arising from or relating to the enforcement, breach, performance, or interpretation of this letter agreement, Executive’s employment with the Company, or the termination of Executive’s employment, shall be resolved, to the fullest extent permitted by law, by final, binding and confidential arbitration conducted by JAMS, Inc. (“JAMS”) or its successor, under such arbitration service’s then applicable rules and procedures appropriate to the relief being sought (available upon request and also currently available at the following web address(es): (i) xxxxx://xxx.xxxxxxx.xxx/xxxxx-xxxxxxxxxx-xxxxxxxxxxx/ and (ii) xxxxx://xxx.xxxxxxx.xxx/xxxxx-xxxxxxxxxxxxx-xxxxxxxxxxx/) at a location closest to where Executive last worked for the Company or another mutually agreeable location. Executive acknowledges that by agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge. The Federal Arbitration Act, 9 U.S.C. § 1 et seq., will, to the fullest extent permitted by law, govern the interpretation and enforcement of this arbitration agreement and any arbitration proceedings This provision shall not be mandatory for any claim or cause of action to the extent applicable law prohibits subjecting such claim or cause of action to mandatory arbitration and such applicable law is not preempted by the Federal Arbitration Act or otherwise invalid (collectively, the “Excluded Claims”), including claims or causes of action alleging sexual harassment or a nonconsensual sexual act or sexual contact, or unemployment or workers’ compensation claims brought before the applicable state governmental agency. In the event Executive or the Company intend to bring multiple claims, including one of the Excluded Claims listed above, the Excluded Claims may be filed with a court, while any other claims will remain subject to mandatory arbitration. Nothing herein prevents Executive from filing and pursuing proceedings before a federal or state governmental agency, although if Executive chooses to pursue a claim following the exhaustion of any applicable administrative remedies, that claim would be subject to this provision. In addition, with the exception of Excluded Claims arising out of 9 U.S.C. § 401 et seq., all claims, disputes, or causes of action under this section, whether by Executive or the Company, must be brought in an individual capacity, and shall not be brought as a plaintiff (or claimant) or class member in any purported class, representative, or collective proceeding, nor joined or consolidated with the claims of any other person or entity. Executive acknowledges that by agreeing to this arbitration procedure, both Executive and the Company waive all rights to have any dispute be brought, heard, administered, resolved, or arbitrated on a class, representative, or collective action basis. The arbitrator may not consolidate the claims of more than one person or entity, and may not preside over any form of representative or class proceeding. If a court finds, by means of a final decision, not subject to any further appeal or recourse, that the preceding sentences regarding class, representative, or collective claims or proceedings violate applicable law or are otherwise found unenforceable as to a particular claim or request for relief, the parties agree that any such claim(s) or request(s) for relief be severed from the arbitration and may proceed in a court of law rather than by arbitration. All other claims or requests for relief shall be arbitrated. Executive will have the right to be represented by legal counsel at any arbitration proceeding. Questions of whether a claim is subject to arbitration and procedural questions which grow out of the dispute and bear on the final disposition are matters for the arbitrator to decide, provided however, that if required by applicable law, a court and not the arbitrator may determine the enforceability of this paragraph with respect to Excluded Claims. The arbitrator shall: (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written statement signed by the arbitrator regarding the disposition of each claim and the relief, if any, awarded as to each claim, the reasons for the award, and the arbitrator’s essential findings and conclusions on which the award is based. The arbitrator shall be authorized to award all relief that Executive or the Company would be entitled to seek in a court of law. Executive and the Company shall equally share all arbitration administrative fees, or such fees shall be paid in such other manner to the extent required by, and in accordance with, applicable law or rules to effectuate Executive and the Company’s agreement to arbitrate. To the extent the arbitration service does not collect or Executive otherwise does not pay an equal share of all arbitration administrative fees, and the Company pays Executive’s share, Executive acknowledges and agrees that the Company shall be entitled to recover from Executive in a federal or state court of competent jurisdiction half of the arbitration fees invoiced to the parties (less any amounts Executive paid to the arbitration service). Each party is responsible for its own attorneys’ fees, except as may be expressly set forth in Executive’s employee confidential information and inventions assignment agreement or as otherwise provided under applicable law. Nothing in this letter agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.
13
In Witness Whereof, the parties have executed this Employment Agreement on the day and year first written above.
| iLearningEngines, Inc. | ||
| By: | /s/ Xxxxxx Xxxxxx Xxxxx | |
| Xxxxxx Xxxxxx Xxxxx | ||
| Chief Financial Officer & | ||
| Head of Corporate Development | ||
| Executive: | ||
| /s/ Xxxxx Xxxxxxx | ||
| Xxxxx Xxxxxxx | ||
EXHIBIT A
EMPLOYEE CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT
