EX-10.5
SONOMA COLLEGE, INC.
Employment Contract with H. ▇▇▇▇ ▇▇▇▇▇▇▇
Agreement entered into February 26, 2004, between H. ▇▇▇▇ ▇▇▇▇▇▇▇, Ph.D.
("▇▇▇▇▇▇▇"), and Sonoma College, Inc. ("Company")
1. SCOPE OF EMPLOYMENT
1.1. SONOMA COLLEGE. ▇▇▇▇▇▇▇ shall have the title of "president and chief
academic officer" of the school, Sonoma College ("College"), which is owned and
controlled by the Company, and will have the duties and responsibilities as
assigned by the board of directors of the company associated with the operations
of the College.
1.2. THE COMPANY. ▇▇▇▇▇▇▇ shall also be a director on the board of directors
of the Company as long as he is employed by the Company.
2. TERM OF THE AGREEMENT. ▇▇▇▇▇▇▇ has been employed by the Company since
July 1, 2003. His employment under this Agreement commenced July 1, 2003, and
shall terminate June 30, 2007, and thereafter renewable year-to-year by the
Company no later than May 31.
3. COMPENSATION.
3.1. BASE SALARY. $75,000 per year during the four-year agreement.
3.2. PERFORMANCE INCENTIVE PAY. The quarterly performance incentive pay will
be determined and paid as follows:
3.2.1. AMOUNT: Incentive Bonus of up to $18,750 each quarter.
3.2.2. QUARTERLY REVIEW: Each calendar quarter commencing July 1, 2003.
3.2.3. BASIS OF QUARTERLY GOALS.
3.2.3.1. 50% based on quarterly Enrollment Targets & Profitability
targets ("ETP Element").
3.2.3.2. 50% based on quarterly Management and Curricular
Objectives ("MCO Element").
3.2.3.3. The ETP Element and the MCO Element Goals will be
mutually agreed upon for each quarter no later than 15 days after
the commencement of the quarter.
3.2.4. PAYMENT BASED ON GOALS:
3.2.4.1. Payments are based on achieving separately and
independently the Goals for each Element. Payment or achieving
Goals for one Element are not dependent on achieving the Goals for
the other Element.
3.2.2.2. Achievement of Less than 80%: If achievement is less than
80% of the Goals for an Element, then no Incentive Payment is made
for that Element.
3.2.2.3. Achievement of 80% to 100%: If achievement is 80% to 100%
of the Goals for an Element, then the Incentive Payment shall be a
percentage of the maximum amount of the Incentive payable for that
Element. (For example, if the College achieves 90% of the Goal for
an Element, then 90% of $9,375 will be paid.)
1
3.2.2.4. Achievement exceeding 120% of the ETP Elements for all
four quarters: If achievement exceeds 120% of the Goals for ETP
Elements for all four quarters, then ▇▇▇▇▇▇▇ shall receive an
additional $25,000 Incentive Bonus.
3.3. PERFORMANCE INCENTIVE PAY FOR FY 2003-2004.
3.3.1. BASIC BONUS. Notwithstanding the provisions under 3.2, ▇▇▇▇▇▇▇
will receive a minimum Incentive Bonus of $50,000 for the year July 1,
2003, to June 30, 2004, and can receive a maximum bonus of $75,000.
3.3.2. PAYMENT SCHEDULE. ▇▇▇▇▇▇▇ has received $12,000 of the Incentive
Bonus and will receive an additional $6,500 by January 30, 2004, and
$6,500 by February 15, 2004. ▇▇▇▇▇▇▇ will receive an additional $25,000
of the Incentive Bonus no later than April 2, 2004.
3.3.3. ADDITIONAL BONUS. ▇▇▇▇▇▇▇ will receive an additional $25,000 if
Sonoma College achieves the ETP and MCO Element Goals for both the 3rd
and 4th quarters of the fiscal 2003-2004 year, and if earned will be paid
promptly after the end of the fourth quarter.
3.4. STOCK OPTIONS. Stock Options will be granted to ▇▇▇▇▇▇▇ as follows:
3.4.1. FIRST-YEAR OPTIONS. ▇▇▇▇▇▇▇ will receive immediately vested stock
options that if exercised would equal 5% of the outstanding stock of the
Corporation as of January 22, 2004.
3.4.2. SUBSEQUENT OPTIONS. Subsequent options totaling 15% will be issued
as provided below:
3.4.2.1. Option Year will run from July 1 to June 30 of each year.
The first option year will commence July 1, 2004.
3.4.2.2. ▇▇▇▇▇▇▇ must be employed by Sonoma College on June 30 of
the option year to be eligible for that year's options. No partial
year options will be granted.
3.4.2.3. Stock Option Percentage to be granted for an option year
will be 5% of the outstanding shares as of June 30 of the option
year if 80% of the performance goals have been met.
3.4.2.4. Performance Goals for the stock options will be based on
the yearly attainment of the ETP Element.
3.4.3. SALE OF COMPANY OR MAKING OF A PUBLIC OFFERING. Sale of Company or
Making of a Public Offering will be based on the amount of options that
▇▇▇▇▇▇▇ has been issued up to that point. ▇▇▇▇▇▇▇ agrees to exercise the
options if such action is a necessary prerequisite to a public offering
or sale of the Company.
3.4.4. EXERCISE PRICE. Exercise Price of Options will be a price equal to
50% of the value of a share of stock at the time of exercise. ▇▇▇▇▇▇▇ may
surrender options, using the value of the options to purchase the shares.
3.4.5. EXPIRATION OF OPTIONS. Options will Expire five years after the
date of the options are issued.
3.4.6. ADDITIONAL AGREEMENTS AND FORMS. The parties agree to execute
documents and forms necessary to comply with any applicable laws, such as
those relating to securities laws of California.
3.5. OTHER EXPENSES: ▇▇▇▇▇▇▇ will receive monthly the additional sums:
3.5.1. $200 for health insurance, until such time as the College has a
health plan.
2
2.4.2. $250 for auto/travel to cover all expenses involved in auto travel
for Sonoma operations, such as to and from San Francisco. There will be
no other reimbursement for auto travel expenses.
3.5.3. Reimbursement of actual costs for use of cell phone, not to exceed
$150.
3.6. VACATION.
3.6.1. At the end of each quarter ▇▇▇▇▇▇▇ is employed, he will receive
one week of vacation (or a lesser amount if necessary to comply with
section 3.6.2), for a maximum of four weeks of vacation for any one year.
3.6.2. Vacation time must be used in the manner provided in the employee
handbook for Sonoma College. However, no more than six consecutive work
days can be taken at a time without prior approval of ▇▇▇▇▇ ▇▇▇▇▇▇, or
other person designated by the Company's Board of Directors. (A work day
is any day, Monday through Friday, that the College's administrative
staff maintains open the College's offices.)
3.6.2. A maximum of four weeks can be accrued by ▇▇▇▇▇▇▇ at any time.
3.7. DETERMINATION OF ACHIEVEMENT OF GOALS. The determination of the
percentage achieved for all Goals shall be made in good faith by ▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, or others designated by the Board of Directors.
4. REPORTING REQUIREMENTS.
4.1. LINES OF COMMUNICATION. ▇▇▇▇▇▇▇ will report to ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ for all
issues except marketing. For marketing issues, ▇▇▇▇▇▇▇ will report to ▇▇▇▇▇▇
▇▇▇▇▇. The reporting lines can be changed by the Board of Directors. ▇▇▇▇▇▇▇
will also report to the Board of Directors.
4.2. PERFORMANCE REPORTS. ▇▇▇▇▇▇▇ will provide quarterly reports to the Board
of Directors within two days of the end of a quarter. The reports will contain
information regarding the progress of the College during the quarter in terms of
enrollment, attainment of management and curricular objectives, and proposed
objectives for the next quarter. The Board of Directors will respond by the 46th
day following the quarter regarding its evaluation of ▇▇▇▇▇▇▇'▇ quarterly
progress and the upcoming quarterly objectives. (The CFO will prepare financial
reports by the end of the month following the quarter.)
4.3. BUSINESS PLAN. ▇▇▇▇▇▇▇ is to provide a yearly proposed business plan
covering the next three years on a yearly basis. The business plan is to cover
the fiscal year--July 1 to June 30--and is to be submitted by May 1 before the
upcoming fiscal year.
5. CONFIDENTIALITY AND NON-COMPETITION.
5.1. CONFIDENTIALITY. At all times during and after ▇▇▇▇▇▇▇'▇ employment,
▇▇▇▇▇▇▇ will hold in trust, keep confidential, not make use of, and not disclose
or reveal to any third party any Confidential Information, except in the course
of ▇▇▇▇▇▇▇'▇ employment with Company and for the benefit of Company. ▇▇▇▇▇▇▇
will not cause the transmission, removal, or transport of Confidential
Information or Inventions from Company's principal place of business in
California, or such other place of business specified by Company, without prior
written approval of ▇▇▇▇▇ ▇▇▇▇▇▇, or such other person as specified by the board
of directors of the Company. ▇▇▇▇▇▇▇ acknowledges that the unauthorized use or
disclosure of Confidential Information may be highly
3
prejudicial to the interests of Company or its Clients, an invasion of privacy,
or an improper disclosure of trade secrets.
5.2. NON-COMPETE DURING EMPLOYMENT. Except with the express prior written
consent of ▇▇▇▇▇ ▇▇▇▇▇▇ or another person designated by the board of directors
of the Company, ▇▇▇▇▇▇▇ will not, during the period of employment with Company,
(i) engage in any employment or activity other than for Company in any business
in which Company is engaged or contemplates engaging, (ii) induce any other
employee of or consultant to Company to engage in any such employment or
activity, or (iii) solicit any Clients or potential Clients of Company for
services similar to those performed by Company, even if not directly competitive
with such services.
5.3. PROPER CONDUCT. During the term of this contract, ▇▇▇▇▇▇▇ will not engage
in any activity that will harm the professional, moral, legal, or ethical image
of Sonoma College, and that he will not act, nor fail to act if the circumstance
requires, that will affect Sonoma College's accreditation, licensing, or
governmental approvals.
6. MISCELLANEOUS.
6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties made herein, and the covenants made in this Agreement shall survive
beyond the date of this agreement.
6.2. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof, and supersedes all other
prior agreements and understandings, both written and oral, between the parties
or any of them with respect to the subject matter hereof, except for the
agreements required under section 7.
6.3. RESTRICTION ON ASSIGNMENT. Neither party may assign any rights or
obligations under this Agreement to another party without the prior written
consent of each other party, provided that no such assignment shall relieve each
of the party's obligations hereunder, if such assignee does not fully perform
the assignor's obligations.
6.4. AMENDMENTS. This Agreement may not be amended except by an instrument in
writing signed by all of the parties.
6.5. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, which shall remain in full force and effect.
6.6. NOTICE. All Notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have
been duly given upon receipt) by delivery in person, by FAX or by registered
mail, certified mail (postage prepaid, return receipt requested), express mail,
or overnight courier delivery service, to the respective parties as follows:
SONOMA COLLEGE, INC.:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Port Parties
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
4
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (fax)
H. ▇▇▇▇ ▇▇▇▇▇▇▇:
▇.▇. ▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as the person whom notice is given may have previously
furnished to the other in writing in the manner set forth above.
6.7. PARTIES IN INTEREST. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and its successors and assigns, but
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person any rights, benefits or remedies of any nature whatsoever.
6.8. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
6.9. GOVERNING LAW. This Agreement and any disputes arising hereunder shall be
interpreted and construed under, and be governed by, the local, internal laws of
the State of California as such laws are applied to any act or agreement entered
into in California between California residents and performed entirely within
California.
7. ASSIGNMENTS AND LICENSING AGREEMENTS.
7.1. ▇▇▇▇▇▇▇'▇ INTERESTS IN INTELLECTUAL PROPERTY. Material developed by
▇▇▇▇▇▇▇ during his employment with the Company relating to the operation of the
College and the courses and services offered by the Company, are solely the
property of the Company, and constitute a "work made for hire." To the extent
that any such work product is not a "work made for hire," ▇▇▇▇▇▇▇ agrees to
assign and upon creation thereof, assigns all rights, to such property to the
Company. The parties acknowledge that this agreement does not apply to any
"invention" that qualifies under California Labor Code section 2870, which is
reprinted in its entirety in Exhibit A, and ▇▇▇▇▇▇▇ acknowledges receipt of it.
The parties recognize that some material relating to "Homeland Security" and
"First Responder" were developed prior to ▇▇▇▇▇▇▇'▇ employment by the Company
and are addressed in 7.2.
7.2. SEPARATE INTELLECTUAL PROPERTY.
7.2.1. The parties recognize that some of the materials utilized in the
Homeland Security courses contain intellectual property (namely,
copyrighted material and trademarks) owned only in part by ▇▇▇▇▇▇▇ (under
the name Homeland Safety Training, Inc.) and in part by ▇▇▇▇▇▇▇ ▇▇▇▇▇.
However, ▇▇▇▇▇▇▇ represents that he has the authority to grant and does
hereby grant a license to the Company for the use the materials to the
Company under federal copyright and trademark law.
7.2.2. The parties recognize that all of the materials now contained in
the "First Responder Curriculum" were developed before ▇▇▇▇▇▇▇ became
employed by the Company and include intellectual property not owned
solely by ▇▇▇▇▇▇▇ (under the name
5
Homeland Safety Training, Inc.). However, ▇▇▇▇▇▇▇ represents he has the
authority to grant and does hereby grant a license to the Company for the
use of the materials used in the "First Responder Curriculum" and that he
will not grant to any other person the right to use such materials in a
competing first responder curriculum (although certain parts are and may
be used in other educational materials).
7.2.3. In consideration of the assignments and licences granted the
Company in this section 7.2, the Company agrees to grant options on the
Company's stock equal to in value of $200,000, as of June 30, 2007,
provided that the granting of such options shall be accelerated in the
same manner as ▇▇▇▇▇▇▇'▇ options under section 3.4.3. Such options are
granted to Homeland Safety Training, Inc. ("HSTi"). The exercise and
pricing of the options shall be as provided in section 3.4.
7.2.4. The parties agree to negotiate in good faith and execute within
two days of the date of this agreement, a separate agreement, to which
▇▇▇▇▇▇▇ and HSTi will be parties, to protect the intellectual property
rights of the Company as set forth in this Section 7.2.
7.2.5. The parties agree to negotiate and execute any ancillary
agreements or documents (such as assignment forms required by the
Trademark Office or the Copyright office) necessary to protect the
respective interests in the intellectual property.
Date: February 26, 2004 Date: February 26, 2004
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ /s/ H. ▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------- ---------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, CEO H. ▇▇▇▇ ▇▇▇▇▇▇▇, Ph.D.
Sonoma College, Inc.
CAUTION: THIS AGREEMENT AFFECTS YOUR RIGHTS TO INVENTIONS YOU MAKE DURING YOUR
EMPLOYMENT AND RESTRICTS YOUR RIGHT TO DISCLOSE OR USE COMPANY'S CONFIDENTIAL
INFORMATION DURING OR AFTER YOUR EMPLOYMENT.
6
EXHIBIT A
COMPANY'S WRITTEN NOTIFICATION TO ▇▇▇▇▇▇▇ OF LABOR CODE SECTION 2870
In accordance with California Labor Code section 2872, you are hereby
notified that your Confidentiality and Invention Assignment Agreement does not
require you to assign to Company any Invention for which no equipment, supplies,
facility, or trade secret information of Company was used and that was developed
entirely on your own time, and does not relate to the business of Company or to
Company's actual or demonstrably anticipated research or development, or does
not result from any work performed by you for Company.
The following is the text of California's Labor Code section 2870:
"(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 inventions that
either:
(1) 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; or (2) 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."
I hereby acknowledge receipt of this written notification.
Date: February 26, 2004
/s/ H. ▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------
H. ▇▇▇▇ ▇▇▇▇▇▇▇
7