Employment Agreement - busybox.com inc. and Robert S. Sherman
BUSYBOX.COM, INC.
EMPLOYMENT AGREEMENT
This employment agreement ("Agreement") is entered into as of the date specified
on the signature page ("Effective Date") by and between busybox.com, inc., a
Delaware corporation located at 701 Battery Street, 3rd Floor, San Francisco,
California 94111 ("Company") and the individual specified on the signature page
("Employee").
RECITALS
R1. The parties desire to memorialize the employment relationship of Employee
with the Company.
R2. The Board of Directors of the Company has approved and authorized the entry
into this Agreement with Employee.
R3. The parties hereby enter into this Agreement setting forth the terms and
conditions for the employment relationship of Employee with the Company.
TERMS & CONDITIONS
1. EMPLOYMENT: From the Effective Date through the term of this Agreement,
Employee is employed as President of the Company and of any subsidiary or
other affiliate that it may acquire. Employee shall render executive,
policy and other management services to the Company and
subsidiaries/affiliates of the type customarily performed by persons
serving in similar executive officer capacities. Employee shall devote
substantially all of his working time and his best efforts to the Company
and his position, which shall include such duties as the company's Board of
Directors may from time to time reasonably direct that are reasonably
consistent with Employee's education, experience and background. During the
term of this Agreement, there shall be no material increase or decrease in
the duties and responsibilities of Employee otherwise than as provided
herein, unless the parties otherwise agree in writing.
2. COMPENSATION
2.1 SALARY: The Company agrees to pay Employee from the Effective Date at an
annual rate equal to ONE HUNDRED SEVENTY FIVE THOUSAND dollars ($175,000)
("Salary"), with such subsequent increases in Salary during the term of the
Agreement as may be determined by the Compensation Committee of the Board;
provided, however, that during the first three years following the
effective date of the registration statement with respect to the initial
public offering of the Company's stock, Employee's Salary hereunder shall
not exceed ONE HUNDRED SEVENTY FIVE THOUSAND dollars ($175,000) per annum
without the approval of the Compensation Committee. In determining Salary
increases, the Compensation Committee may compensate Employee for increases
in the cost of living and may also provide for performance or merit
increases. The Salary of Employee shall not be decreased at any time during
the term of this Agreement from the amount then in effect, unless Employee
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otherwise agrees in writing. Participation in deferred compensation, bonus,
discretionary bonus, retirement and other employee benefit plans shall not
reduce the Salary payable to Employee under this Section 2.1. The Salary
under this Section 2.1 shall be payable to Employee not less frequently
than monthly. Employee shall not be entitled to receive fees for serving as
a director of the Company or of any subsidiary or affiliate of the Company
or for serving as a member of any committee of any such board of directors.
2.2 ANNUAL BONUS: In addition to the Salary under Section 2.1 above, the
Company shall pay to Employee an annual bonus of FIFTY PERCENT (50%) of the
Salary under such Subsection. The annual bonus shall be payable in January
following each calendar year during the term of this Agreement and shall be
prorated for any partial years.
3. DISCRETIONARY & PERFORMANCE INCENTIVE BONUSES: During the term of this
Agreement, Employee shall be entitled to participate in an equitable manner
with all other executive employees of the Company in such discretionary
bonuses as may be authorized, declared and paid by the Compensation
Committee to its executive employees. The Company will adopt an incentive
bonus plan providing for the payment of annual performance incentive
bonuses to Employee and other executive officers based upon the increase in
the Company's operating profit or other appropriate performance objectives.
The incentive bonus arrangement will provide Employee with an opportunity
to earn additional incentive compensation in an amount up to THREE PERCENT
(3%) of the annual increase in the Company's net income before taxes as
reported in the Company's audited annual financial statement. No other
compensation provided for in this Agreement shall be deemed a substitute
for Employee's right to participate in such bonuses.
4. INSURANCE, RETIREMENT AND EMPLOYEE BENEFIT PLANS, FRINGE BENEFITS; BUSINESS
EXPENSES
4.1 OTHER BENEFITS AND PREREQUISITES: Employee shall be entitled to participate
in any plan of the Company relating to stock options, restricted stock,
employee stock purchase or ownership, pension, thrift, profit sharing,
group life insurance, medical coverage, education or other retirement or
employee benefit plans or arrangements that the Company has adopted or may
adopt for the benefit of its employees or executive officers. Employee
shall also be entitled to participate in, or enjoy the benefit of, any
other fringe benefits or prerequisites that are now or may be or become
applicable to the Company's executive employees.
4.2 BUSINESS EXPENSES: During the term of Employee's employment by the Company,
the Company shall promptly reimburse Employee for all reasonable and
customary expenses incurred by Employee in performing services for the
Company, including all living and travel expenses while away from home on
business or at the request of and in the service of the Company, provided
that such expenses are incurred and accounted for in accordance with the
policies and procedures established by the Company. Employee shall be
entitled to first or business class for all business air travel. Employee
shall be entitled to parking expenses, excluding violations, when on the
job, be it at the office or while on business trips. Employee shall be
entitled to a reasonable per diem for living expenses while in San
Francisco.
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4.3 DIRECTOR & OFFICER INSURANCE: At all times during the term of this
Agreement the Company shall maintain in full force and effect a director
and officer insurance policy with a national insurance underwriter insuring
Employee for his acts and omissions in his capacity as an Officer and
Director of the Company, with coverage under such policy of not less than
ONE MILLION dollars ($1,000,000).
5. TERM: The initial term of employment under this Agreement shall begin on or
before November 1, 1999, and continue until December 31, 2001. This
Agreement shall be automatically renewed for an subsequent three-year term,
unless either Employee or the Company gives contrary written notice to the
other party hereto not less than 180 days before the scheduled expiration
of the initial term of this Agreement. Each term and all such renewal terms
are collectively referred to herein as the term of this Agreement.
6. VOLUNTARY ABSENCES; VACATIONS: Employee shall be entitled, without loss of
pay, to be absent voluntarily for reasonable periods of time from the
performance of the duties and responsibilities under this Agreement. All
such voluntary absences shall count as paid vacation time, unless the Board
otherwise approves. Employee shall be entitled to an annual paid vacation
of at least six (6) weeks per year or such longer period as the Board may
approve. The timing of paid vacations shall be scheduled in a reasonable
manner by Employee.
7. TERMINATION OF EMPLOYMENT: Employee's employment may be terminated without
any breach of this Agreement only under the following circumstances:
7.1 DEATH: Employee's employment shall terminate upon his death.
7.2 DISABILITY: The Company may terminate Employee's employment because of
disability. For this purpose, "disability" shall mean the inability of
Employee to perform his duties under this Agreement because of physical or
mental illness or incapacity for a continuous period of six months during
which Employee shall have been absent from his duties under this Agreement
on a substantially full-time basis.
7.3 CAUSE: The Company may terminate Employee's employment for cause. For
purposes of this Agreement, the Company shall have "cause" to terminate
Employee's employment only in the event of (a) the willful and continued
failure by Employee to substantially perform his duties hereunder (other
than any such failure resulting from Employee's inability to perform such
duties as a result of physical or mental illness or incapacity or any such
actual or anticipated failure after the delivery of a Notice of
Termination, as defined in Section 7.5, by Employee for Good Reason, as
defined in Section 7.4.2) after delivery to Employee of a written demand
for substantial performance that specifically identifies the manner in
which the Company believes that Employee has not substantially performed
his duties and a reasonable opportunity to cure; (b) willful misconduct by
Employee that causes substantial and material injury to the business and
operations of the Company, the continuation of which, in the reasonable
judgment of the Board, will continue to substantially and materially injure
the business and operations of the Company in the future; or (c)
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conviction of Employee of a felony. No act or failure to act shall be
considered "willful" for this purpose unless done, or omitted to be done,
by Employee other than in good faith and other than with a reasonable
belief that his action or omission was in the best interests of the
Company. Employee shall not be deemed to have been terminated for cause
unless Employee shall have been provided with (i) a reasonable notice
setting forth the reasons that the Company believes constitute cause for
the termination of his employment; (ii) a Notice of Termination as defined
in Section 7.5 from the Board finding that, in the reasonable good faith
opinion of the Board, cause for the termination exists and specifying the
particulars thereof in reasonable detail.
7.4 TERMINATION BY EMPLOYEE: Employee may terminate his employment (a) for good
reason by giving ten days prior written notice to the Company or (b) at any
time by giving 120 days prior written notice to the Company.
7.4.1 GOOD REASON: For purposes of this Section, "good reason" shall
mean (a) the assignment to Employee of any duties inconsistent
with Employee's status or any substantial adverse alteration in
the nature or status of Employee's responsibilities; (b) any
change in Employee's reporting responsibility such that Employee
is required to report other than exclusively to the Chief
Executive Officer, (c) any purported termination of Employee's
employment by the Company that is not effected pursuant to a
Notice of Termination satisfying the requirements of Section 7.5
hereof; (d) any other failure by the Company to comply with any
material provision of this Agreement which failure continues for
more than ten days after written notice of such noncompliance
from Employee; or (e) any notices given by the Company to
Employee under Section 5 hereof that this Agreement will not be
renewed on any anniversary date.
7.5 NOTICE OF TERMINATION: Any termination of Employee's employment by the
Company or by Employee (other than termination pursuant to Section 7.1 or
7.2 hereof) shall be communicated by the terminating party to the other
party by a written Notice of Termination. Any Notice of Termination given
by a party shall specify the particular termination provision of this
Agreement relied upon by such party and shall set forth in reasonable
detail the facts and circumstances relied upon as providing a basis for the
termination under the provision so specified.
7.6 TERMINATION DATE: The termination date shall mean (a) if Employee's
employment is terminated by his death, the date of his death; (b) if
Employee's employment is terminated pursuant to Section 7.2 hereof, the
date specified in the Notice of Termination, which shall be after the
expiration of the six-month period specified in that Subsection; (c) if
Employee's employment is terminated by the Company for cause, the date
specified in the Notice of Termination; or (d) if Employee's employment is
terminated for any other reason, sixty days following the date on which the
Notice of Termination is given.
8. COMPENSATION UPON TERMINATION OF EMPLOYMENT
8.1 TERMINATION BECAUSE OF DEATH, FOR CAUSE OR WITHOUT GOOD REASON: If
Employee's employment is terminated because of his death, by the
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Company for cause, or by Employee other than for good reason, the Company
shall pay Employee his salary and a pro rata portion of the bonus specified
in Section 2(b) (based upon the bonus paid in respect of the preceding
year) through the Termination Date and the Company shall have no further
obligation to Employee hereunder.
8.2 TERMINATION BECAUSE OF DISABILITY: If Employee's employment is terminated
by the Company because of disability under Section 7.2 hereof, the Company
shall pay Employee an annual disability benefit equal to the excess of (a)
sixty percent of his Salary at the rate in effect under Section 2.1 hereof
(based upon the bonus paid in respect of the preceding year) over (b) the
amount of the long term disability benefit that is payable to Employee
under any policy of disability insurance provided for Employee by the
Company at its expense. The disability benefit shall be paid for such
period as is determined by the Board of Directors for the Company's senior
executives but shall not be less than the remainder of the scheduled term
of employment.
8.3 TERMINATION WITHOUT CAUSE OR WITH GOOD REASON: If (a) in breach of this
Agreement, the Company shall terminate Employee's employment other than for
cause or because of disability or (b) Employee shall terminate his
employment for Good Reason; then:
8.3.1 The Company shall pay Employee his salary and a pro rata portion
of the bonus specified in Section 2.1 hereof (based upon the
bonus paid in respect of the preceding year) through the
Termination Date and all other unpaid and pro rata amounts to
which Employee is entitled as of the Termination Date under any
compensation plan or program of the Company, including, without
limitation, any incentive performance bonus and all accrued
vacation time;
8.3.2 The Company shall pay as liquidated damages to Employee, and in
lieu of any further salary payments hereunder for periods after
the Termination Date, Employee's then current Salary (payable in
installments in accordance with the Company's normal payroll
practices) for the remainder of the scheduled term of employment
and the product of (a) the sum of (i) Employee's annual bonus
specified in Section 2.1 hereof (based upon the bonus paid in
respect of the preceding year) and (ii) the maximum annual bonus
amount that could have been paid to Employee under the Company's
performance incentive bonus plan for the year in which the
Termination Date occurs, and (b) the number of years (and any
fraction of a year) remaining in the term of this Agreement under
Section 5 hereof as of the Termination Date, which amount shall
be payable in equal monthly installments during the remainder of
the scheduled term of employment;
8.3.3 In addition to the liquidated amounts that are payable to
Employee, the following shall apply: (a) Employee shall continue
to participate in, and accrue benefits under, all retirement,
pension, profit sharing, employee stock ownership, thrift and
other deferred compensation plans of the Company for the
remaining term of this Agreement as if the termination of
employment of Employee had not occurred (with Employee being
deemed to receive annually for the purposes of such plans
Employee's then current Salary and
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bonus (at the time of his termination) under Sections 2.1 and 2.2
of this Agreement), except to the extent that such continued
participation and accrual is expressly prohibited by law, or to
the extent such plan constitutes a "qualified plan" under Section
401 of the Internal Revenue Code of 1986, as amended ("Code"), by
the terms of the Plan, in which case the Company shall provide
Employee a substantially equivalent, unfunded, non-qualified
benefit; (b) Employee shall be entitled to continue to receive
all other employee benefits and then existing fringe benefits
referred to in Sections 4.1 and 4.2 hereof for the remaining term
of this Agreement as if the termination of employment had not
occurred; and (c) all insurance or other provisions for
indemnification, defense or hold-harmless of officers and
directors of the Company that are in effect on the date the
Notice of Termination is sent to Employee shall continue for the
benefit of Employee with respect to all of his acts and omissions
while an officer or director as fully and completely as if such
termination had not occurred, and until the final expiration or
running of all periods of limitation against action which may be
applicable to such acts or omissions; and,
8.3.4 The liquidated amount and other benefits provided for in this
Section 8.3 shall not be reduced by any compensation or benefits
that Employee may receive for other employment with another
employer or through self-employment after termination of
employment with the Company.
8.4 COST OF ENFORCEMENT: In the event the employment of Employee is terminated
by the Company because of disability of without cause, or by Employee for
good reason, and the Company fails to make timely payment of the amounts
owed to Employee under this Agreement, Employee shall be entitled to
reimbursement for all reasonable costs, including attorney's fees, incurred
in Employee taking action to collect such amounts or otherwise to enforce
this Agreement, plus interest on such amounts at the rate of one percent
above prime rate (defined as the base rate on corporate loans at large US
money center commercial banks as published by The Wall Street Journal),
compounded monthly, for the period from the date of employment termination
until payment is made to Employee. Such reimbursement and interest shall be
in addition to all rights to which Employee is otherwise entitled under
this Agreement.
8.5 PARACHUTE PAYMENT LIMITATION: If any payment or benefit to Employee under
this Agreement would be considered a "parachute payment" within the meaning
of Section 280(g)(b)(2) of the Code and if, after reduction for any
applicable federal excise tax imposed by Section 4999 of the Code ("Excise
Tax") and federal income tax imposed by the Code, Employee's net proceeds
of the amounts payable and the benefits provided under this Agreement would
be less than the amount of Employee's net proceeds resulting from the
payment of the Reduced Amount described below, after reduction for federal
income taxes, then the amount payable and the benefits provided under this
Agreement shall be the largest amount that could be received by Employee
under this Agreement such that no amount paid to Employee under this
Agreement and any other agreement, contract or understanding heretofore or
hereafter entered into between Employee and the Company ("Other
Agreements")
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and any formal or informal plan or other arrangement heretofore or
hereafter adopted by the Company for the direct or indirect provision of
compensation to Employee (including groups or classes or participants or
beneficiaries of which Employee is a member), whether or not such
compensation is deferred, is in cash, or is in the form of a benefit to or
for Employee ("Benefit Plan") would be subject to the Excise Tax. In the
event that the amount payable to Employee shall be limited to the Reduced
Amount, then Employee shall have the right, in Employee's sole discretion,
to designate those payments or benefits under this Agreement, any Other
Agreements, and/or Benefit Plan, that should be reduced or eliminated so as
to avoid having the payment to Employee under this Agreement be subject to
the Excise Tax.
9. CONFIDENTIALITY: In consideration of the willingness of the Company to
employ Employee and the compensation to be paid and benefits to be received
therefor, and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, Employee agrees as follows:
9.1 THE COMPANY OWNS ALL OF EMPLOYEE'S WORK: All improvements, discoveries,
inventions, designs, documents, licenses and patents, software programs, or
other data devised, conceived, made, developed, obtained, filed, perfected,
acquired, or first reduced to practice, in whole or in part, by Employee
during the term of this Agreement, and related in any way to the business,
including research and development, of the Company or any subsidiary of
affiliate engaged in business substantially similar to that of the Company,
shall be promptly disclosed to the Company. Employee hereby assigns and
transfers to the Company all his right, interest and title thereto, and
such improvements, discoveries, inventions, designs, documents, licenses
and patents, or other data shall become the property of the Company. During
the term of this Agreement and at any time thereafter, upon request of the
Company, Employee will join and render assistance in any proceedings and
execute any papers necessary to file and prosecute applications for, and to
acquire, maintain and enforce, letters, patents, trademarks, registrations
and/or copyrights, both domestic and foreign, with respect to such
improvements, discoveries, inventions, designs, documents, licenses and
patents, or other data as required for vesting and maintaining title to
same in the Company.
9.2 NON-DISCLOSURE OF CONFIDENTIAL INFORMATION: Employee agrees and
acknowledges that the terms "Confidential and Proprietary Information"
shall mean any and all information not in the public domain, in any form,
emanating from or relating to the Company and its subsidiaries and
affiliates, including, but not limited to, trade secrets, technical
information, costs, designs, drawings, processes, systems, methods of
operation and procedures, formulae, test data, know-how, improvements,
price lists, financial data, code books, invoices and other financial
statements, computer programs, discs and printouts, sketches and plans
(engineering or otherwise), customer lists, telephone numbers, names,
addresses, information about equipment and processes (including
specifications and operating manuals), or any other compilation of
information written or unwritten that is used in the business of the
Company or any subsidiary or affiliate that gives the Company or any
subsidiary or affiliate any opportunity to obtain an advantage over
competitors of the Company who do not know or use
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such information. Employee agrees and acknowledges that all Confidential
and Proprietary information, in any form, and all copies and extracts
thereof, is and are and shall remain the sole and exclusive property of the
Company, and upon termination of his employment with the Company, Employee
hereby agrees to return to the Company the originals and all copies of any
Confidential and Proprietary Information provided to or acquired by
Employee during the term of his employment. Except as ordered by a court of
competent jurisdiction, Employee expressly agrees never to disclose to any
person (except to other Company employees, and then only on a "need to
know" basis) or entity any Confidential and Proprietary Information either
during the term of this Agreement or at any time after termination of his
employment, except with the express written authorization and consent of
the Company.
9.3 CUSTOMER & CLIENT INFORMATION: Employee understands and acknowledges that
each customer and client of the Company or its subsidiaries or affiliates
will disclose information that will be within the Company's control in
connection with the Company's furnishing of services to its customers and
clients. Employee covenants and agrees to hold such information in the
strictest confidence and shall treat such information in the same manner
and be obligated by the provisions of this Agreement as if such information
were Confidential and Proprietary Information as defined in Section 9.2
hereof.
10. COVENANT NOT TO COMPETE: During the term of employment and for a period of
TWO (2) years after the termination of Employee's employment by the
Company, Employee shall not directly or indirectly own, manage, operate,
control or be employed by or participate in the ownership, management,
operation or control of any business in the area which is the type and
character engaged in and competitive with that of the Company. Employee
shall not, during the term of this Agreement, have any other paid
employment other than with a subsidiary or affiliate of the Company, except
with the prior approval of the Board.
11. AMENDMENTS OR ADDITIONS; ACTION BY BOARD: No amendments or additions to the
Agreement shall be binding unless in writing and signed by all parties
thereto. The prior approval by a majority affirmative vote of the full
Board shall be required in order for the Company to authorize any
amendments or additions to this Agreement, to give any consents or waivers
of provisions of this Agreement, or to take any other action under this
Agreement including any Notice of Termination.
12. MISCELLANEOUS
12.1 NOTICES: Any notice required or permitted hereunder shall be given in
writing and shall be personally delivered or mailed by first class
registered or certified mail, postage prepaid, return-receipt-requested, or
transmitted by facsimile, telegram or telex, addressed to the Company or
Employee at the address set forth in this Agreement, or at such other
addresses as such party may designate by five business day advance written
notice to the other party. Each notice or communication that shall have
been transmitted in the manner described above, or that shall have been
delivered to a telegraph company, shall be deemed sufficiently given,
served, sent or received for purposes at such time as it is
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sent to the addressee (with the return receipt, delivery receipt or (with
respect to a telex) the answer back being deemed conclusive, but not
exclusive, evidence of such sending) or at such time as delivery is refused
by the addressee upon presentation.
12.2 SEVERABILITY: Nothing in this Agreement shall be construed so as to require
the commission of any act contrary to law and wherever there is any
conflict between any provision of this Agreement and any law, statute,
ordinance, order or regulation, the latter shall prevail, but in such event
any necessary action will be taken to bring it within applicable legal
requirements. If any provision of this Agreement should be held invalid or
unenforceable, the remaining provisions shall be unaffected by such a
holding.
12.3 COMPLETE AGREEMENT: This Agreement contains the entire Agreement and
understanding between the parties relating to the subject matter hereof,
and supersedes any prior understandings, agreements or representations by
or between the parties, written or oral, relating to the subject matter
hereof.
12.4 SUCCESSORS OR ASSIGNS: This Agreement and the rights and obligations of the
parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by way of reorganization, merger or consolidation
and any assignee of all or substantially all of its business assets, but
except as to any such successor or assignee of the Company, neither this
Agreement nor any rights or benefits hereunder may be assigned by the
Company or Employee. However, in the event of death of Employee all rights
to receive payments hereunder shall become rights of Employee's estate.
12.5 SECTION HEADINGS: The section headings used in this Agreement are included
solely for convenience and shall not affect, or be used in connection with,
the interpretation of this Agreement.
12.6 GOVERNING LAW: This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware.
12.7 ARBITRATION: Any and all disputes between the parties arising under this
Agreement shall be finally decided through binding arbitration before
Judicial Arbitration & Mediation Services, Inc. ("JAMS/ENDISPUTE") in San
Francisco, California, and judgment on any arbitration award may be entered
in any court having jurisdiction over the parties or their assets.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of
this date, October 20, 1999.
COMPANY: EMPLOYEE:
By: /S/ PATRICK A. GROTTO By: /S/ ROBERT S. SHERMAN
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Name: Patrick A. Grotto Name: Robert S. Sherman
Title: Chairman & Chief Executive Officer SSN:
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