Employment Agreement - SkyMall Inc. and Cary L. Deacon
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") is made effective this 4th day of August, 2000
(the "Effective Date"), by and between SKYMALL, INC., a Nevada corporation
("Employer"), and CARY L. DEACON ("Employee"):
RECITALS
WHEREAS, Employer wishes to retain the services of Employee; and
WHEREAS, Employee wishes to be employed by Employer as Chief Operating
Officer and President of Employer; and
WHEREAS, Employer and Employee wish to memorialize the terms of their
agreement.
NOW THEREFORE, in consideration of Employer's employment of Employee, the
compensation to be paid to Employee, and the mutual covenants and promises
contained herein, the parties agree as follows:
AGREEMENT
1. EMPLOYMENT. Employer shall employ Employee as Chief Operating Officer
and President of SkyMall, Inc., and Employee shall report directly to the Chief
Executive Officer of SkyMall, Inc. Employee shall accept such employment and
agrees to perform his duties and responsibilities in accordance with the terms
and conditions herein.
2. TERM. The term of the employment of Employee by Employer shall be for
a period of two years, commencing on September 18, 2000, and ending on September
18, 2002, unless sooner terminated in accordance with Section 15 of this
Agreement. The employment of Employee may be renewed by a written agreement
signed by the Employee and Employer specifically renewing Employee's employment
and specifying a renewal term. Neither the Employee nor Employer will have any
obligation to renew the employment.
3. EMPLOYEE'S OBLIGATIONS AND DUTIES. During the term of his employment,
Employee shall devote his full time and efforts to the business affairs of
Employer. Employee shall perform and discharge in a diligent and professional
manner such duties and responsibilities as may be reasonably prescribed from
time to time by Employer. Employee agrees to adhere to all of Employer's rules,
policies, and procedures as may be in effect from time to time, including, but
not limited to, Employer's policy requiring pre-employment and routine random
drug screening, any policies contained in Employer's employee guidebooks and any
other policies, rules or regulations adopted by Employer from time to time.
Employer may amend, revise, or discontinue any of its rules, policies, and
procedures, as Employer deems necessary or desirable. The terms of Employer's
rules, policies, procedures and employee handbooks do not create any contractual
rights in favor of Employee.
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4. ANNUAL BASE SALARY. During the term of Employee's employment under
this Agreement, Employer shall pay Employee an annual base salary of a minimum
of Two Hundred Seventy Five Thousand Dollars ($275,000.00). From time to time,
or in connection with performance evaluations, Employer may, but shall not be
obligated to, increase the amount of this base salary. All compensation paid
pursuant to this Section shall accrue and be payable in accordance with the
payroll practices of Employer as may be in effect from time to time. Employer's
current payroll practices provide for bi-weekly payment of wages.
5. INCENTIVE BONUS. During the term of Employee's employment under this
Agreement, Employee will be eligible to participate in Employee's incentive
compensation plan that will allow Employee to earn a cash bonus of up to fifty
percent (50%) of his annual base salary. The terms and conditions of this plan
shall be those approved by the Company's Board from time to time. Employee will
receive a one-time guaranteed minimum bonus of Thirty Thousand Dollars
($30,000.00) for his services in fiscal 2000 payable in fiscal 2001 in
accordance with Employer's standard policies as may be in effect during the term
of this Agreement.
6. STOCK OPTIONS. Subject to Board approval, Employee shall be eligible
to receive options to purchase Five Hundred Thousand (500,000) shares of stock
of SkyMall, Inc. at the following prices: (a) as to 300,000 shares the lesser
of: (i) $2.50; or (ii) the lowest closing price of SkyMall, Inc. Common Stock
between the Effective Date of this Agreement and seven (7) business days
thereafter (b) as to 100,000 shares $5.00 per share, and (c) as to 100,000
shares $10.00 per share. One-fourth of such options shall vest immediately, and
the remaining options shall vest as follows: one-fourth each year on the
anniversary of the date of this Agreement for each of the successive three (3)
years, with the lowest priced options vesting first. Employee shall be eligible
for additional option grants in accordance with Employer's policies as may be in
effect during the term of this Agreement. These options will be subject to the
terms of SkyMall's standard option agreement.
7. CHANGE-OF-CONTROL. Should Employer experience a Change-of-Control (as
defined herein), Employee will be paid an amount at least equal to: (i) two
years salary and benefits; (ii) bonuses for a two year period at a rate equal to
the greater of: the established target bonus at the time of the event specified
in Section 1 (a)(ii) below, or the most recent bonus paid prior to the
Change-of-Control; and (iii) Employee shall be entitled to retain any options
granted pursuant to this Agreement, all of which shall immediately vest upon a
Change-of-Control in accordance with the terms of any applicable option
agreement.
a. DEFINITION OF CHANGE-OF-CONTROL. As used herein
"Change-of-Control" shall be deemed to have occurred if ONE of the events in
items (1) through (4) of Subsection (i) below occurs AND the event in Section
(ii) occurs within one (1) year of the date of the event in Subsection (i):
(i) ORGANIZATIONAL CHANGE: (1) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a trustee or other fiduciary holding
securities of Employer under an employee benefit plan of Employer, becomes the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act
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except that a person shall be deemed to have "beneficial ownership" of all
securities that such person has a right to acquire, whether such right is
exercisable immediately or only after September 18, 2000), directly or
indirectly, of securities of Employer representing thirty percent (30%) or more
of the outstanding shares of Common Stock of Employer (or its successors or
assigns) (including, without limitation, the acquisition of shares by any
"person" who held shares of Employer immediately prior to September 18, 2000);
or (2) during any period of not more than two consecutive years, not including
any period prior to the date of this Agreement, individuals who at the beginning
of such period that constitute the Board of Directors of Employer, and any new
director (other than a director designated by a person who has entered into an
agreement with Employer to effect a transaction described in clause (1) or (3)
of this Section) whose election by the Board or nomination by Employer's
shareholders was approved by a vote of at least a majority of the directors
still in office who either were in office at the beginning of such period or
whose election or nomination for election was previously so approved, ceases for
any reason to constitute a majority of the Board; or (3) Employer is party to a
merger or consolidation which results in the holders of voting securities of
Employer outstanding immediately prior thereto failing to continue to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least fifty percent (50%) of the combined voting power
of the voting securities of Employer or such surviving entity outstanding
immediately after such merger or consolidation, or Employer sells, consigns,
conveys or otherwise disposes of all or substantially all of Employer's assets
or any transaction having a similar effect is consummated; or (4) Employer is
liquidated or dissolved or adopts a plan of liquidation; and
(ii) CHANGE IN RESPONSIBILITIES. Following any event in
Subsection (i) above, any one of the following: (i) any change in Employee's
title, authorities, or responsibilities (including reporting responsibilities)
which represents an adverse change from his status, title, position or
responsibilities (including reporting responsibilities) which were in effect
immediately prior to the event in Subsection (i) above, (ii) the assignment to
Employee of any material duties or work responsibilities which are inconsistent
with such status, title, position or work responsibilities in effect immediately
prior to the event in Subsection (i) above, or (iii) termination or constructive
discharge of Employee.
8. PERSONAL PAID TIME OFF. Employee shall be entitled to fifteen (15)
days of personal paid time off days per year (accrued at the rate of 4.615 hours
per pay period). Any unused days shall be forfeited, and no payment shall be
made in lieu of taking time off.
9. 401(K). After ninety (90) days of employment, Employee shall be
eligible to participate in Employer's 401(k) Plan. Employer shall match fifty
percent (50%) of Employee's contribution to the 401(k) Plan (up to six percent
(6%) of Employee's annual base salary, or the maximum allowable under law)
subject to vesting, in accordance with the terms of the Plan documents.
10. EMPLOYEE BENEFITS. During the term of Employee's employment under this
Agreement, Employee shall be eligible for medical, dental and vision insurance
(beginning on the first day of the month after one full month of employment),
short and long-term disability insurance and life insurance, all in accordance
with the standard benefits policies and procedures applicable to employees of
Employer during the term of this Agreement.
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11. EXPENSES. During the term of Employee's employment under this
Agreement, Employer shall reimburse Employee for all reasonable travel and other
expenses incurred by Employee in connection with the performance by Employee of
his duties and responsibilities hereunder, subject to Employee's submission of
receipts for the expenses, and in accordance with Employer's standard policies
as may be in effect from time to time.
12. RELOCATION REIMBURSEMENT. Employee shall be entitled to reimbursement
for reasonable travel expenses associated with up to three (3) visits during
which he and his spouse locate a home in Arizona, and reasonable moving expenses
associated with Employee's relocation from Minnesota to Arizona. The
reimbursement shall include the following items that are actually paid for by
Employee and documented with applicable receipts: commission costs on the sale
of Employee's home in Minnesota; packing, loading and transportation of
household goods. Employee shall provide Employer with two written relocation
estimates prior to incurring such expenses. Employer shall not purchase
Employee's current home.
13. WITHHOLDING OF TAXES. Employer may withhold from any compensation or
benefits payable to Employee under this Agreement all federal, state and local
taxes as may be required to be withheld by law, regulation or ruling.
14. PERFORMANCE REVIEWS. Employer shall provide Employee with annual
performance reviews in a manner deemed reasonable by Employer in its sole
discretion.
15. TERMINATION. Employee's employment is at-will and may be terminated at
any time, by either party, with or without Cause (as defined herein), by
providing written notice to the other.
a. BY EMPLOYEE. If Employee's employment is terminated by Employee
for any reason, or for no reason, Employer shall have no further obligation or
liability other than: (i) to provide Employee his pro-rata annual base salary
through the last date Employee performs work for Employer; and (ii) to provide
Employee continuing benefits as required under COBRA or other applicable law.
b. BY EMPLOYER. If Employee's employment is terminated by Employer
for any reason other than Cause, then Employer shall, in Employer's sole
discretion, either: (1) through September 18, 2002 continue to regularly pay to
Employee the annual base salary of Two Hundred Seventy Five Thousand Dollars
($275,000.00), in which case the Non-Compete Agreement in Section 17(b) herein
shall be limited to a period of one (1) year from the date of termination; or
(2) immediately pay Employee a lump sum equal to the base salary Employee would
have been paid for the remainder of the term of this Agreement. In either case,
the stock options to be awarded hereunder shall immediately vest upon
termination. Employer shall also be entitled to terminate this Agreement for
Cause and, thereafter, Employer shall have no further obligation or liability
other than: (i) to provide Employee his pro-rata annual base salary through the
last date Employee performs work for Employer; and (ii) to provide Employee
continuing benefits as required under COBRA or other applicable law; provided,
however, that in the event of termination for Cause due to death or disability
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as defined in Subsection (c)(vi) and (vii) below, employee shall also be
entitled to a pro rata portion of any bonus payments payable under any
applicable bonus or other incentive compensation plan.
c. CAUSE DEFINED. "Cause" shall mean: (i) any act of fraud which
results in or is intended to result in Employee's personal enrichment at the
direct expense of Employer, including without limitation, theft or embezzlement
from Employer; (ii) public conduct by Employee substantially detrimental to the
reputation of Employer, (iii) violation by Employee of any Employer policy,
regulation or practice, including the Employee Handbook; (iv) conviction of a
felony; (v) any disloyal, untruthful or dishonest act of any kind which results
in harm of any kind to Employer, (vi) death of Employee, (vii) Employee becomes
disabled such that Employee cannot perform the essential functions of his job,
and the disability shall have continued for a period of more than one hundred
twenty (120) consecutive days, or (viii) habitual intoxication, drug use or
chemical substance use by any intoxicating or chemical substance.
16. CONFIDENTIALITY.
a. CONFIDENTIAL MATERIAL. In the course of Employee's employment by
Employer, Employee will be given access to and become acquainted with trade
secrets and various other proprietary or confidential technical and commercial
information, including, but not limited to, the following: (i) business
strategies, pricing, marketing and cost data; (ii) technical information
regarding Employer's products and services; (iii) confidential customer
information; (iv) customer and supplier lists; (v) contents of contracts and
agreements with partners, merchants, customers and suppliers; (vi) customer
requirements and specifications; and (vii) e-commerce designs, plans,
development techniques and other products or processes, whether or not
copyrighted by Employer. All items described in the foregoing sentence are
defined herein as "Confidential Material." Employee further acknowledges that
the Confidential Material has been developed or acquired by the Employer through
expenditure of substantial time, effort and money, and that the Confidential
Material provides Employer with an advantage over competitors.
b. NON DISCLOSURE AGREEMENT. In consideration for access to
Confidential Material, Employee agrees that during his employment and continuing
for ten (10) years thereafter, he shall not directly or indirectly disclose or
use for any reason whatsoever any Confidential Material obtained by him by
reason of his employment with Employer, except as required to conduct the
business of Employer or as authorized by express written permission of the Board
of Directors of Employer or as otherwise required by law.
c. OWNERSHIP OF DATA. Employee confirms that all Confidential
Material and all documents reflecting such information remain the exclusive
property of Employer. All business records, papers, documents or other data, in
whatever form, kept or made by Employee relating to the business of Employer,
shall be and shall remain the property of Employer during the term of Employee's
employment and at all times thereafter. Employee will grant and hereby grants to
Employer the sole and exclusive ownership of (including the sole and exclusive
right to reproduce, use or disclose for any purpose) any and all reports,
drawings, data, programs, plans, writings or other information made or prepared
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by Employee alone or with others during the term of his employment that relate
to his employment or Employer's business.
d. REMEDIES. Employee hereby agrees that damages and any other
remedy available at law would be inadequate to redress or remedy any loss or
damage suffered by Employer upon any breach of the terms of this Section 16 by
Employee, and Employee therefore agrees that Employer, in addition to recovering
on any claim for damages or obtaining any other remedy available at law, also
may enforce the terms of this Section 16 by injunction or specific performance,
and may obtain any other appropriate remedy available in equity. Employee
further acknowledges and agrees that Employer shall be entitled to recover
attorneys' fees and costs associated with enforcement of this Section 16.
17. NON-COMPETE AGREEMENT.
a. HIGHLY-COMPETITIVE MARKET. Employee acknowledges and agrees that
Employer's products and services are sold and performed in a highly-competitive
market. Employee acknowledges that the services he may render to Employer, the
information exchanged between all parties in connection with rendering those
services, and Employer's relationships with customers, airlines, transportation
companies, catalog retailers, vendors, banks, accountants, and any other
Employer program participants, business partners or similar parties, are each of
a unique and valuable character. Employee acknowledges that the market for
Employer's products and services is national and international in scope.
b. LIMITATION OF ACTIVITIES. Except as specifically provided in
Section 15(b), Employee agrees that, for a period of two (2) years after the
termination of this Agreement or the date employer last makes a payment to
employee under this Agreement, he shall not engage in, plan for, organize, work
for, or assist, directly or indirectly, any business that is competitive,
directly or indirectly, with Employer's business, nor solicit participants in or
customers of the Employer's program, nor use Employee's knowledge of Employer or
its business in any manner that competes with Employer. As used in this Section
17, the term Employer includes SkyMall, Inc. and any of its affiliates or
subsidiaries. The foregoing restrictions shall be understood to prohibit
Employee from participating in the following non-exclusive list of activities:
(i) Provide services as an employee, director, consultant,
agent, or representative to any company or other entity that is competitive,
directly or indirectly, with Employer's plans and initiatives for the Internet,
Catalog or interactive shopping.
(ii) Provide services as an employee, director, consultant,
agent, or representative to any catalog company or other entity that is
competitive, directly or indirectly, with Employer or its products and services
or entities in which SkyMall has an equity interest.
(iii)Directly or indirectly solicit Employer's vendors,
customers, employees, business partners or similar third parties for any
activity that is directly or indirectly competitive with Employer.
(iv) Participate in, be employed in any capacity by, serve as
director, consultant, agent or representative for, or have any interest,
directly or indirectly, in any entity or enterprise which is engaged in a
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business directly or indirectly competitive to Employer, or which is competitive
to any products and services being actively developed by Employer with the bona
fide intent to market same.
(v) Own, either directly or indirectly or through or in
conjunction with one or more members of his family or his spouse's family or
through any trust or other contractual arrangement, a greater than five percent
(5%) interest in, or otherwise control either directly or indirectly, any
partnership, corporation, or other entity which has products and services that
are competitive to any products and services being developed or otherwise
offered by Employer or being actively developed by Employer with a bona fide
intent to market same.
c. REMEDIES. Employee hereby agrees that damages and any other
remedy available at law would be inadequate to redress or remedy any loss or
damage suffered by Employer upon any breach of the terms of this Section 17 by
Employee, and Employee therefore agrees that Employer, in addition to recovering
on any claim for damages or obtaining any other remedy available at law, also
may enforce the terms of this Section 17 by injunction or specific performance,
and may obtain any other appropriate remedy available in equity.
d. MODIFICATION. If any provision of this Section 17 is deemed, as a
matter of law, to be unreasonable as to time, area, or scope by any court, then
such court shall have authority to modify this Section as to time, area or
scope, but only to the limited extent necessary to make this Section reasonable
and enforceable.
18. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES. Employee represents and
warrants that this Agreement does not violate the terms, conditions or
provisions of any employment relationship with any prior employer. Employee
represents and warrants that Employee serves on no other Boards of Directors,
except for Net Radio Corporation. Employee shall not accept any appointments to
serve on any other Boards without prior written approval of Employer.
19. RETURN OF MATERIALS. Employee shall return to Employer promptly at its
request all materials furnished to Employee by Employer and all materials
prepared by Employee that contain Confidential Material together with all copies
thereof.
20. NOTICES. Any notice or other communication required or permitted
hereunder shall be sufficient if given in writing and delivered personally or
mailed by registered or certified mail, return receipt requested, postage
prepaid and addressed to the parties at the addresses listed below. Either party
may designate a different address by notice so given.
Employer: Christine Aguilera
General Counsel
SkyMall, Inc.
1520 East Pima Street
Phoenix, Arizona 85034
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Employee: Cary Leonard Deacon
6818 Highover Drive
Chanhassen, Minnesota 55317
21. GOVERNING LAW, ARBITRATION AND CHOICE OF FORUM. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Arizona without regard to its conflicts of law
principles. Except for the right of either party to apply for injunctive relief
as provided herein, any controversy or claim arising out of or related to this
Agreement or in connection with a breach of this Agreement ("Claim") will be
settled by arbitration in Phoenix, Arizona U.S.A. under the rules of the
American Arbitration Association in effect at the time such Claim is submitted
to arbitration. The arbitrator selected to arbitrate such Claim will be selected
from a panel of persons having experience with and knowledge of catalog
businesses or the e-commerce industry. Such arbitrator will not, in any event,
have any authority to make any ruling, finding or award that does not conform to
the terms and conditions of this Agreement. The arbitral award will be final and
binding on all parties and may be entered as a judgment and enforceable by any
court of competent jurisdiction. The parties agree that any lawsuit, dispute,
action or proceeding arising out of or related to this Agreement shall be
instituted in a state or federal court of competent jurisdiction located in
Maricopa County, Arizona. The parties accept the exclusive jurisdiction of the
aforesaid courts, and irrevocably agree to be bound by any judgment rendered by
said courts in connection with this Agreement. The party who substantially
prevails in any cause of action to enforce this Agreement shall be entitled to
recover reasonable attorney's fees and costs.
22. SEVERABILITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
23. AMENDMENT. This Agreement shall not be modified, amended or rescinded
except by written instrument duly executed by Employee and Employer.
24. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
25. CAPTIONS AND HEADINGS. The captions and headings of this Agreement are
for convenience of reference only and shall not be considered to be a part of
this Agreement, affect the meaning or interpretation of this Agreement, or be
used in determining the intent of the parties.
26. SURVIVAL. The provisions of Sections 16 and 17 of this Agreement shall
remain in full force and effect following the termination of Employee's
employment or the termination of this Agreement, except as otherwise provided
herein.
27. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be unenforceable by Employer's successors and assigns, and is fully
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assignable by Employer to any of Employer's current or future affiliates and
subsidiaries.
28. ENTIRE AGREEMENT. Except as stated herein, this Agreement sets forth
the entire understanding of the parties hereto with respect to the subject
matter hereof and supercedes any oral or written discussions on matters
contemplated herein.
EMPLOYER - SKYMALL, INC.,
A NEVADA CORPORATION
By: /s/ Lyle R. Knight Date: August 8, 2000
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Lyle R. Knight
Its: Chair, Compensation Committee of the Board of Directors
EMPLOYEE - CARY LEONARD DEACON
/s/ Cary L. Deacon Date: August 4, 2000
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Cary Leonard Deacon
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