EXHIBIT 10.1
EMPLOYMENT AGREEMENT
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On March 24, 2006, netGuru, Inc., a Delaware corporation ("Employer"), and
Xxxxx X. Xxxxxx ("Employee") agree as follows:
1. TERM. Employer agrees to employ Employee, and Employee agrees to serve,
on the terms and conditions of this Agreement, for a period commencing on the
date hereof and continuing until terminated by either party. Notwithstanding any
provision to the contrary herein, employment pursuant to this contract is "at
will" and may be terminated at any time and for any reason.
2. DUTIES. Employee agrees to serve Employer as its Chief Financial Officer
and in such other capacities as may reasonably be requested from time to time by
the President of Employer or by Employer's Board of Directors where there are
potential conflicts of interest with the President of Employer. During the term
of this Agreement, Employee will devote his full time and exclusive attention
to, and use his best efforts to advance, the business and welfare of Employer.
During the term of this Agreement, Employee will not engage in any other
employment activities for any direct or indirect remuneration without the prior
written consent of Employer; provided, however, that Employee may serve on the
board of directors of any company not in direct competition with Employer
without requiring the prior written consent of Employer and Employee may be
compensated accordingly. Employee shall not be required to relocate from Orange
County, California, but agrees to undertake all reasonable travel required by
Employer to be conducted in connection with the performance of his duties.
3. SALARY AND BENEFITS.
3.1 BASE SALARY. During the term of this Agreement Employer shall pay
Employee a salary at the rate of One Hundred Twenty-Seven Thousand Dollars
($127,000) per year, or such greater amount as may be established by Employer's
Compensation Committee, payable in appropriate installments to conform with the
regular payroll dates for salaried personnel of Employer and subject to payroll
deductions as may be necessary or customary in respect of salaried personnel.
3.2 INCENTIVE COMPENSATION. In addition to the base salary to which
Employee is entitled pursuant to Section 3.1, Employer will pay to Employee
additional compensation ("Bonus"):
(a) A Bonus payment equal to three (3) months salary on the date
of execution of this Agreement;
(b) A Bonus payment equal to three (3) months salary at the
earlier of (i) five (5) days after Employer closes the sale of any of
Employer's three (3) remaining business units or (ii) April 21, 2006;
(c) A Bonus payment equal to three (3) months salary at the
earlier of (i) five (5) days after Employer enters into a definitive
agreement providing for the merger of Employer (or a subsidiary of
Employer) with any other company in which the stockholders of Employer
immediately prior to the merger will (by virtue of the ownership of
Employer stock) own less than 50% of the outstanding voting securities
of the surviving entity (or parent thereof) immediately after the
merger (a "Change of Control"), (ii) five (5) days after the
completion of the deregistration of Employer's securities under the
Securities Exchange Act of 1934, or (iii) July 31 2006; and
(d) A Bonus payment equal to three (3) months salary plus an
additional $20,000.00 at the earlier of (i) the completion of the sale
of all three (3) remaining business units, (ii) closing of a Change of
Control transaction, (iii) resignation of two or more members of
Employer's Board of Directors, including at least one (1) of the
independent members, after the date hereof, or (iv) November 18, 2006.
The foregoing not withstanding, (i) if Employee's employment is terminated for
"good cause" or Employee resigns without "good reason," as such terms are
defined below, Employee shall not be entitled to receive any Bonus payable after
the effective date of such termination and (ii) if (A) Employee's employment is
terminated by Employer for any reason other than "good cause" (including,
without limitation, a termination for disability), (B) Employee resigns for
"good reason" or (C) Employee dies, any unpaid Bonus amounts pursuant to clauses
(b), (c) or (d) above will become immediately due and payable. The Bonus
payments referred to in paragraphs (b), (c) and (d) above shall be placed into
escrow pursuant to an escrow agreement with Citibank satisfactory to Employer
and Employee, to be released to Employee (or his estate) in the installments
noted above immediately upon satisfaction of the applicable condition set forth
above for each Bonus payment, or released back to Employer if Employee's
employment is terminated for "good cause" prior to the payment date for any
payment or Employee resigns without "good reason" prior to the payment date for
any payment.
3.3 VACATIONS. Employee shall be entitled to three (3) weeks of paid
vacation in each year during the term of this Agreement, pro rated for any
period during the term of this Agreement that is less than one (1) year.
3.4 MEDICAL INSURANCE AND OTHER BENEFITS. During the term of this
Agreement Employer shall furnish Employee with the same medical and hospital
insurance and other benefits furnished to other salaried employees of Employer.
In addition in the event that Employee's employment terminates for any reason,
other than a termination by Employer for "good cause" or a resignation by
Employee without "good reason," as those terms are defined below, Employer shall
pay to Employee (or to Employee's family in the event of the Employee's death)
$500 per month until six (6) months from the date of termination or November 18,
2006, whichever first occurs.
4. AT-WILL EMPLOYMENT. EMPLOYEE'S EMPLOYMENT MAY BE TERMINATED BY EITHER
EMPLOYER OR EMPLOYEE FOR ANY REASON OR NO REASON, AT ANY TIME. NOTHING CONTAINED
IN THIS AGREEMENT SHALL BE DEEMED OR CONSTRUED AS RECOGNIZING OR CONSTITUTING
ANYTHING OTHER THAN AN AT-WILL EMPLOYMENT RELATIONSHIP. THE AT-WILL EMPLOYMENT
RELATIONSHIP WILL REMAIN IN EFFECT UNLESS SPECIFICALLY MODIFIED BY AN INDIVIDUAL
EXPRESS, WRITTEN AGREEMENT EXECUTED BY THE CHAIRMAN OF EMPLOYER'S COMPENSATION
COMMITTEE AND EMPLOYEE IN A WRITTEN AGREEMENT THAT SPECIFICALLY EXPRESSES A
DESIRE TO MODIFY THE AT-WILL NATURE OF EMPLOYEE'S EMPLOYMENT RELATIONSHIP WITH
EMPLOYER.
5. CONFIDENTIAL INFORMATION AND RESTRICTED ACTIVITIES.
5.1 NONDISCLOSURE AND NONUSE OF CONFIDENTIAL INFORMATION. Employee
acknowledges that Employer continually develops Confidential Information (as
defined in Section 5.7), that Employee may develop Confidential Information for
Employer and that Employee may learn of Confidential Information during the
course of his employment. Employee will comply with Employer's policies and
procedures for protecting Confidential Information and, except as required by
the nature of his duties, Employee will never, directly or indirectly, use or
disclose any Confidential Information without the prior written consent of
Employer's President. Employee understands that this restriction will continue
to apply after his employment terminates.
5.2 USE AND RETURN OF PROPERTY AND DOCUMENTS. Employee will protect
the integrity of Confidential Information and keep confidential all documents,
customer lists, records of research, proposals, reports, memoranda, computer
software and programming, financial information, and other materials
("Documents") including any copies thereof, in which Confidential Information
may be contained. Employee will not copy any Documents except as required by the
nature of his duties. Employee will not remove any Documents or copies from
Employer's premises unless authorized by Employer's President. Employee will
return to Employer immediately after his employment terminates all Documents and
copies and any other property of Employer then in his possession or control.
5.3 ASSIGNMENTS OF RIGHTS. Employee will promptly and fully disclose
all Company Property (as defined in Section 5.7) to Employer. Employee hereby
assigns and agrees to assign to Employer (or as otherwise directed by Employer)
his full right, title and interest to all Company Property. Employee agrees to
execute any and all applications for domestic and foreign patents, copyrights or
other proprietary rights and do such other acts (including, among others, the
execution and delivery of instruments of further assurance or confirmation)
requested by Employer to assign the Company Property to Employer and to permit
Employer to enforce any patents, copyrights or other proprietary rights in the
Company Property. Employee will not charge Employer for his time spent in
complying with these obligations. All copyrightable works that Employee creates
shall be considered "works made for hire." Employee acknowledges that he has
read and understands California Labor Code Section 2870, which reads as follows:
(a) Any provision in an employment agreement which provides that
an employee shall assign, or offer to assign, any of his or her rights
in an invention to his or her employer shall not apply to an invention
that the employee developed entirely on his or her own time without
using the employer's equipment, supplies, facilities or trade secret
information except for those inventions that either:
(i) Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual
or demonstrably anticipated research or development of the
employer.
(ii) Result from any work performed by the employee for the
employer.
(b) To the extent a provision in an employment agreement purports
to require an employee to assign an invention otherwise excluded from
being required to be assigned under subdivision (a), the provision is
against the public policy of this state and is unenforceable.
Employee understands that his obligations under this Agreement do not apply to
an invention that qualifies fully under the provisions of Section 2870.
5.4 DEFINITIONS: For the purposes of this Agreement, the following
definitions shall apply:
"Company Property" means developments, methods of doing business,
compositions, works, concepts and ideas (whether or not patentable or
copyrightable or constituting trade secrets) conceived, made, created, developed
or reduced to writing or practice by Employee (whether alone or with others, and
whether or not during normal business hours or on or off Employer's premises)
during Employee's employment that relate to either the services provided by,
business of, or any prospective activity of, Employer known to Employee as a
result of his employment.
"Confidential Information" means any and all information of Employer
which is not generally known in the business process outsourcing, IT services or
collaborative software (such as WEB4) businesses or any other businesses engaged
in by Employer during the term of this Agreement or the two years prior to the
date of this Agreement, or that is not generally known by others with whom
Employer does or plans to compete or do business. Confidential Information
includes, without limitation, information relating to (i) Employer's
development, research and marketing activities, (ii) Employer's financial
statements and strategic plans, (iii) the identity and special needs of
Employer's customers and (iv) people and organizations with whom Employer has
business relationships and those relationships. Confidential Information also
includes such information that Employer may receive or have received belonging
to customers or others who do business with Employer and, except to the extent
disclosed by Employer on a nonconfidential basis, the Company Property.
5.5 REMEDIES. Employee acknowledges that, were he to breach the
provisions of this Section 5, Employer shall be entitled to seek preliminary and
permanent injunctive relief against any such breach, without having to post a
bond.
5.6 ENFORCEABILITY OF COVENANTS. The parties intend that the covenants
and agreements contained in this Section 5 shall be deemed to include a series
of separate covenants and agreements, one for each and every county or
jurisdiction in which Employer does business or markets products or services.
If, in any judicial proceeding, a court refuses to enforce all of the separate
covenants deemed included in the action, then the unenforceable covenants shall
be deemed eliminated from the provisions hereof for the purposes of the
proceeding to the extent necessary to permit the remaining separate covenants to
be enforced in the proceeding.
6. EXPENSES. Employer will pay or reimburse Employee for the reasonable
travel, entertainment or other expenses as he incurs at the request of Employer
during the term of this Agreement in connection with the performance of his
duties hereunder. Employee shall furnish Employer with such evidence that the
expenses were incurred as Employer may from time to time reasonably require or
request. Employer will also continue to reimburse Employee in accordance with
Employer's current Executive Expense Policy.
7. PARTIAL DISABILITY OF EMPLOYEE. If Employee becomes disabled by reason
of illness or other incapacity extending for a period of more than twelve (12)
consecutive weeks during which Employee is unable to perform his duties
hereunder on a full-time basis but is able to perform his duties hereunder on a
part-time basis, all amounts otherwise payable to Employee shall be
proportionately reduced with respect to the period commencing at the end of the
twelve (12) week period to reflect the extent to which Employee's working time
is reduced below a level which would result in Employee working one thousand
eight hundred (1,800) hours per year. In determining when Employee becomes
disabled, the same criteria shall be applicable as are used in the disability
insurance policy Employer maintains for its employees.
8. TERMINATION. Except as otherwise provided in Sections 3.2 and 3.4 and
except for the obligation to pay any accrued but unpaid salary and vacation
through the date of termination, this Agreement, and all obligations of Employer
to pay base salary and benefits to Employee, shall terminate on the first to
occur of the following:
(a) The death of Employee;
(b) The permanent disability of Employee (which, for purposes hereof,
shall have the same meaning as in Employer's disability insurance policy
or, in the absence of such a policy, the continuous loss of one-half or
more of the time spent by Employee in the usual daily performance of his
duties as a result of physical or mental illness for a period in excess of
90 consecutive days);
(c) At the election of Employer, for good cause (as defined in Section
9); or
(d) Employee's resignation other than for good reason (as defined in
Section 9).
9. DEFINITIONS. The following terms shall have the meanings indicated:
(A) GOOD CAUSE. The term "good cause" is defined as any one or more of
the following occurrences:
(i) Employee's material breach of any of the covenants contained
in Section 5, which material breach is determined by the full
Board of Directors of Employer to be materially detrimental to
Employer;
(ii) Employee's conviction by, or entry of a plea of guilty or
nolo contendere in, a court of competent and final jurisdiction
for any crime involving moral turpitude or punishable by
imprisonment in the jurisdiction involved;
(iii) Employee's continuing repeated willful failure or refusal
to perform his material and lawful duties as required by this
Agreement, provided, that termination of Employee's employment
pursuant to this paragraph 9(a)(iii) shall not constitute valid
termination for good cause unless Employee shall have first
received written notice from the President of Employer stating
with specificity the nature of the failure or refusal and
affording Employee at least ten (10) days to correct the act or
omission complained of; or
(iv) Gross negligence, insubordination, material violation by
Employee of any duty of loyalty to Employer or any other material
misconduct on the part of Employee, provided that termination of
Employee's employment pursuant to this paragraph 9(a)(iv) shall
not constitute valid termination for good cause unless Employee
has first received written notice from the President of Employer
stating with specificity the nature of the failure or refusal and
affording Employee at least ten (10) days to correct the act or
omission complained of.
(B) GOOD REASON. The term "good reason" is defined as any one or more
of the following occurrences:
(i) Reduction of Employee's title from Chief Financial Officer;
(ii) A breach by Employer of any material provision of this
Agreement, including, without limitation, any failure to pay any
amount due hereunder in full when due, or any failure to provide
any material benefit required to be provided hereunder;
(iii) A failure of Employer to provide Employee (or to enable
Employee to hire) staff, either as employees or independent
contractors, that Employee reasonably deems necessary in order to
fulfill his financial duties and SEC reporting obligations; or
(iv) a failure of Employer to continue to provide Employee
benefits similar to those enjoyed by Employee as of the date
hereof or to compensate Employee for such benefits.
10. WAIVER AND TERMINATION OF AGREEMENT. Employer and Employee are parties
to a Change in Control and Executive Retention Agreement dated as of June 1,
2005 ("Retention Agreement"). In consideration of the parties' execution and
delivery of this Employment Agreement, the parties hereby agree as follows with
respect to the Retention Agreement:
10.1 TERMINATION OF RETENTION AGREEMENT. The Retention Agreement is
hereby terminated, effective immediately, and shall be of no further force and
effect.
10.2 WAIVER AND RELEASE. Employee hereby waives any right he may have
had to receive compensation, benefits or payments from Employer under the
Retention Agreement, and each of the parties hereby fully releases and
discharges the other from any obligations or liabilities the other may have had
to him or it under the Retention Agreement.
10.3 CIVIL CODE SS.1542. Employer and Employee each (a) represents,
warrants and acknowledges to the other that each has been fully advised by his
or its attorney of the contents of Section 1542 of the Civil Code of the State
of California, and (b) hereby expressly waives the benefits thereof and any
rights such party may have thereunder with respect to the rights released
pursuant to Section 10.2. Section 1542 of the Civil Code of the State of
California provides as follows:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor."
11. MISCELLANEOUS.
11.1 MODIFICATION AND WAIVER OF BREACH. No waiver or modification of
this Agreement shall be binding unless it is in writing signed by the parties
hereto. No waiver of a breach hereof shall be deemed to constitute a waiver of a
future breach, whether of a similar or dissimilar nature.
11.2 ASSIGNMENT. The rights of Employer under this Agreement may, with
the written consent of Employee, be assigned by Employer, (a) to any person,
firm, corporation, or other business entity which at any time, whether by
purchase, merger, or otherwise, directly or indirectly, acquires all or
substantially all of the assets or business of Employer, or (b) to any
subsidiary or affiliate of Employer, or any transferee, whether by purchase,
merger or otherwise, which directly or indirectly acquires all or substantially
all of the assets of Employer or the subsidiary or affiliate.
11.3 NOTICES. All notices and other communications required or
permitted under this Agreement shall be in writing, served personally on, or
mailed by certified or registered United States mail to, the party to be charged
with receipt thereof. Notices and other communications served by mail shall be
deemed given hereunder 72 hours after deposit of such notice or communication in
the United States Post Office as certified or registered mail with postage
prepaid and duly addressed to whom such notice or communication is to be given,
in the case of (a) Employer, netGuru, Inc., 00000 Xxxx Xxxxx Xxxxxxx, Xxxxx
Xxxxx, Xxxxxxxxxx 00000, Attention: Xxxxx X. Xxx, President or (b) Employee, 00
Xxxxxxx, Xxxxxx, Xxxxxxxxxx 00000. Any such party may change that party's
address for purposes of this Section by giving to the party intended to be bound
thereby, in the manner provided herein, a written notice of the change.
11.4 COUNTERPARTS. This instrument may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same Agreement.
11.5 CONSTRUCTION OF AGREEMENT. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of California applicable
to agreements executed and to be performed in California.
11.6 COMPLETE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated by this
Agreement and supersedes all previous oral and written and all contemporaneous
oral negotiations, commitments, writings, and understandings.
11.7 NON-TRANSFERABILITY OF INTEREST. None of the rights of Employee
to receive any form of compensation payable pursuant to this Agreement shall be
assignable or transferable except through a testamentary disposition or by the
laws of descent and distribution upon the death of Employee. Any attempted
assignment, transfer, conveyance, or other disposition (other than as noted
above) of any interest in the rights of Employee to receive any form of
compensation to be made by Employer pursuant to this Agreement shall be void.
11.8 LEGAL FEES. If any legal action, arbitration or other proceeding
is brought for the enforcement of this Agreement, or because of any alleged
dispute, breach, default or misrepresentation in connection with this Agreement,
the successful or prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs it incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the day
and year first above written.
EMPLOYEE: EMPLOYER:
/s/ XXXXX X. XXXXXX netGuru, Inc.
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Xxxxx X. Xxxxxx
By: /s/ XXXXX X. XXX
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Xxxxx X. Xxx, President
