EXHIBIT 10.5
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
EMPLOYMENT AGREEMENT
This Agreement is entered into as of June 21, 1999 (the "Effective Date"),
by and between ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. a Delaware corporation (the "Company"), and
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("Executive").
WHEREAS, the Company desires to retain the Executive as the Chief Financial
Officer and President of the Company, and Executive desires to perform such
service for the Company, on the terms and conditions as set forth herein;
NOW, THEREFORE, in consideration of the promises and mutual covenants
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is mutually agreed by the
parties as follows:
1. Duties and Scope of Employment.
------------------------------
(a) Position. Executive shall be employed as Chief Financial Officer
--------
of the Company.
(b) Duties. During the term of the Executive's employment with the
------
Company, the Executive shall devote his full time, skill and attention to his
duties and responsibilities, which the Executive shall perform faithfully,
diligently and competently, and the Executive shall use his best efforts to
further the business of the Company. During the term of this Agreement,
Executive agrees not to actively engage in any other employment, occupation or
consulting activity for any direct or indirect remuneration without the prior
approval of the Board, except that this provision shall not be interpreted to
prohibit Executive from involvement in any charitable or community
activity/organization that he is currently involved in and that does not
materially interfere with his ability to perform his duties under this
Agreement.
2. At-Will Employment. Executive and the Company understand and
------------------
acknowledge that Executive's employment with the Company constitutes "at-will"
employment. Executive and the Company acknowledge that this employment
relationship may be terminated at any time with or without notice, with or
without good cause or for any or no cause, at the option either of the Company
or Executive.
3. Compensation, Fringe Benefits and Stock Options.
-----------------------------------------------
(a) Base Salary. While employed by the Company pursuant to this
-----------
Agreement, the Company shall pay the Executive as compensation for his service a
base salary at the annualized rate of $150,000 (the "Base Salary") which
amount shall be reviewed annually at a minimum by the Board. Such salary shall
be paid periodically in accordance with normal Company payroll practices
and subject to the usual and applicable required withholding. Executive
understands and agrees that neither his job performance nor promotions,
commendations, bonuses or the like from the Company give rise to or in any way
serve as the basis for modification, amendment, or extension, by implication or
otherwise, of this Agreement.
(b) Cash Bonus. In addition to the Base Salary, the Board may, in its
----------
discretion, award the Executive, during the Executive's employment with the
Company pursuant to this Agreement, a cash bonus less applicable withholding,
following the Board's review of Executive's employment on an annual basis at a
minimum.
(c) Executive Benefits. During his employment hereunder, Executive
------------------
shall be eligible to participate in the employee benefit plans currently and
hereafter maintained by the Company of general applicability to other senior
executives of the Company. The Company reserves the right to cancel or change
the benefit plans and programs it offers to its employees at any time.
(d) Stock Options.
-------------
(i) Initial Grant. Subject to approval by the Board of
-------------
Directors of the Company, Executive shall be granted a Nonstatutory Stock Option
(as defined in the Company's 1998 Stock Plan). The Option shall consist of
401,606 shares of the Company's then issued and outstanding shares of Common
Stock at an exercise price equal to the fair market value of the shares on the
date of grant. The Option shall vest as to 5% of the shares immediately upon
grant; 10% 6 months from the Vesting Commencement Date; the remaining unvested
shares shall vest on a pro rata basis per quarter over the next 42 months, so
that 401,606 shares subject to the Option shall be fully vested four years from
the date of grant, subject to Executive continuing to render services to the
Company as an employee. In all other respects, the Option shall be subject to
the terms, definitions and provisions of the Company's 1998 Stock Option Plan
and the Stock Option Agreement by and between Executive and the Company, all of
which documents are incorporated herein by reference.
(ii) Right to Purchase Additional Shares of Common Stock.
---------------------------------------------------
Subject to approval by the Board of Directors of the Company, Executive shall be
granted a warrant to purchase 50,000 shares of Common Stock of the Company. The
exercise price of the warrant shall be $2.33 per share and the warrant shall be
exercisable from the date on which the Board of Directors of the Company
determines that the fair market value of the Common Stock of the Company is
equal to or greater than $2.33 per share. Subject to approval by the Board of
Directors of the Company, Executive shall also be granted an option to purchase
an additional 50,000 shares of Common Stock of the Company at $2.33 per share,
which warrant shall be exercisable upon the first to occur of (i) the first sale
of Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended, (ii) a Change of
Control (as defined below); (iii) an Involuntary Termination (as defined below)
of Executive within 12 months of the appointment of a new President or Chief
Executive Officer of the Company or (iv) five years following the date hereof
-2-
Acceleration. Upon the occurrence of (i) a "Change of Control" (as defined
------------
below) or (ii) the appointment of a new President or Chief Executive Officer of
the Company, which appointment is followed within twelve (12) months by an
"Involuntary Termination" (as defined below), 50% of the unvested portion of the
Option held by the Executive shall immediately vest and become exercisable in
full. For purposes of this Agreement, "Change of Control" shall mean (i) the
consummation of a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving or resulting entity) at least fifty
percent (50%) of the total voting power represented by the voting securities of
the Company or such surviving or resulting entity outstanding immediately after
such merger or consolidation; or (ii) the consummation of the sale or
disposition by the Company of a or substantially all the Company's assets. For
purposes of this Agreement, "Involuntary Termination" shall mean termination of
Executive's employment with the Company immediately following any of the
following: (i) a reduction by the Company of the Executive's base salary as in
effect immediately prior to such reduction; (ii) a material reduction by the
Company in the kind or level of employee benefits to which the Executive is
entitled immediately prior to such reduction with the result that the
Executive's overall benefits package is significantly reduced; (iii) the
material breach by the Company of a material provision of this Agreement which
is not cured or waived by Executive within thirty (30) days following written
notice thereof to the Company; or (iii) any purported termination of the
Executive by the Company which is not effected for "Cause" (as defined below).
For purposes of this Agreement, "Cause" shall mean (i) any act of personal
dishonesty taken by the Executive in connection with the his responsibilities to
the Company which is intended to result in substantial personal enrichment of
the Executive, (ii) Executive's conviction of a felony which the Board
reasonably believes has had or will have a material detrimental effect on the
Company's reputation or business, (iii) a willful act by the Executive which
constitutes misconduct and is injurious to the Company, and (iv) continued
willful violations by the Executive of his obligations to the Company after
there has been delivered to the Executive a written demand for performance from
the Company which describes the basis for the Company's belief that the
Executive has not substantially performed his duties.
4. Expenses. The Company will pay or reimburse Executive for reasonable
--------
travel, entertainment or other expenses incurred by Executive in the furtherance
of or in connection with the performance of Executive's duties hereunder in
accordance with the Company's established policies.
5. Confidential Information. Executive agrees to continue to maintain the
------------------------
confidentiality of all confidential and proprietary information of the Company
and agrees, if he has not done so already, to enter into the ▇▇▇▇▇▇▇▇▇▇.▇▇▇,
Inc. Confidential Information and Invention Assignment Agreement.
6. Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of (a) the heirs, executors and legal representatives of Executive upon
Executive's death and (b) any successor of the Company. Any such successor of
the Company shall be deemed substituted for the Company under the terms of this
Agreement for all purposes. As used herein, "successor" shall include any
person, firm, corporation or other business entity which at any time, whether by
purchase, merger or
-3-
otherwise, directly or indirectly, acquires all or substantially all of the
assets or business of the Company. None of the rights of Executive 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. Any attempted assignment, transfer, conveyance or other disposition
(other than as aforesaid) of any interest in the rights of Executive to receive
any form of compensation hereunder shall be null and void.
7. Notices. All notices, requests, demands and other communications
-------
called for hereunder shall be in writing and shall be deemed given if delivered
personally, one (1) day after mailing via Federal Express overnight or a similar
overnight delivery service, or three (3) days after being mailed by registered
or certified mail, return receipt requested, prepaid and addressed to the
parties or their successors in interest at the following addresses, or at such
other addresses as the parties may designate by written notice in the manner
aforesaid:
If to the Company: ▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
If to Executive: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
8. Severability. In the event that any provision hereof becomes or
------------
is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
9. Entire Agreement. This Agreement, the Stock Option Plan, the Option
----------------
Agreement, and the Company's Confidential Information and Invention Assignment
Agreement represent the entire agreement and understanding between the Company
and Executive concerning Executive's employment relationship with the Company,
and supersede in their entirety any and all prior agreements and understandings
concerning Executive's employment relationship with the Company.
10. Arbitration and Equitable Relief.
--------------------------------
(a) Except as provided in Section 10(e) below, Executive agrees that
any dispute or controversy arising out of, relating to, or in connection with
this Agreement, or the interpretation, validity, construction, performance,
breach, or termination thereof shall be settled by arbitration, to the extent
permitted by law, to be held in Los Angeles County, California in accordance
with the National Rules for the Resolution of Employment Disputes then in effect
of the American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction.
-4-
(b) The arbitrator shall apply California law to the merits of any
dispute or claim, without reference to rules of conflict of law. Executive
hereby expressly consents to the personal jurisdiction of the state and federal
courts of Los Angeles County located in California for any action or proceeding
arising from or relating to this Agreement and/or relating to any arbitration in
which the parties are participants.
(c) Executive understands that nothing in this Section modifies
Executive's at-will status. Either the Company or Executive can terminate the
employment relationship at any time, with or without cause.
(d) EXECUTIVE HAS READ AND UNDERSTANDS SECTION 10, WHICH DISCUSSES
ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE
AGREES TO SUBMIT ANY FUTURE CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION
WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE,
BREACH, OR TERMINATION THEREOF TO BINDING ARBITRATION TO THE EXTENT PERMITTED BY
LAW, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT
TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL
ASPECTS OF THE EMPLOYER/EXECUTIVE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO,
THE FOLLOWING CLAIMS:
(i) ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT;
BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD
FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL
INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION;
NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC
ADVANTAGE; AND DEFAMATION;
(ii) ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR
MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO THE CIVIL RIGHTS ACT OF 1991,
THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH
DISABILITIES ACT OF 1990, AND THE FAIR LABOR STANDARDS ACT;
(iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND
REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
(e) THE PARTIES MAY APPLY TO ANY COURT OF COMPETENT JURISDICTION FOR A
TEMPORARY RESTRAINING ORDER, PRELIMINARY INJUNCTION, OR OTHER INTERIM OR
CONSERVATORY RELIEF, AS NECESSARY, WITHOUT BREACH OF THIS ARBITRATION AGREEMENT
AND WITHOUT ABRIDGMENT OF THE POWERS OF THE ARBITRATOR.
-5-
11. No Oral Modification, Cancellation or Discharge. This Agreement may
-----------------------------------------------
only be amended, canceled or discharged in writing signed by Executive and the
Company.
12. Governing Law. This Agreement shall be governed by the internal
-------------
substantive laws, but not the choice of law rules, of the State of California.
13. Acknowledgment. Executive acknowledges that he has had the
--------------
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement,
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
respective dates set forth below.
▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------
Title: CEO
----------------------------------
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-6-