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EMPLOYMENT AGREEMENT
This Employment Agreement ("
Agreement ") is dated as of
December 13th , 2006 (the " Effective
Date "), by and between netGuru, Inc., a
Delaware corporation (" NGRU ") (the " Company "),
and Koushik Dutta, an individual (the "
Employee ").
RECITALS
WHEREAS, BPO Management Services, Inc., a
Delaware corporation ("BPOMS"), and the Company intend to effect a
merger, as a result of which BPOMS will become a wholly-owned
subsidiary of the Company (the " Merger
Agreement ");
WHEREAS, Employee has been employed by the
Company on a full time continuous basis as Chief Technology Officer
of the Web4 division since April 2000 and Chief Operating Officer
since November 2005;
WHEREAS, the Company will secure the ongoing
services of the Employee upon the closing ("Closing") of such
Merger Agreement pursuant to the terms and conditions set forth
herein, and therefore the Employee and the Company intend hereby to
enter into an employment agreement as set forth herein;
WHEREAS, this Agreement is conditioned upon the
Closing and shall be void and of no effect if for any reason,
including, without limitation, a default or breach by the Company
or BPOMS, the Merger Agreement is terminated.
NOW, THEREFORE, in consideration of the premises
and the mutual covenants set forth below, the parties hereby agree
as follows:
1. Employment. From
and after the Effective Date, the Company hereby agrees to employ
the Employee as Chief Technology Officer of the Company, and the
Employee hereby accepts such employment, on the terms and
conditions set forth below.
2. Term. The term of this
Agreement shall begin on the Effective Date and shall end two (2)
years from the Effective Date or upon termination of the
Employee’s employment by the Company or by the Employee in
accordance with the terms of this Agreement. The two year
employment term herein shall be referred to as the "
Employment Period ". Thereafter,
the Company may elect, in its sole discretion to either: (i) o
enter into a new employment agreement upon terms and conditions as
then mutually agreed by the Company and the Employee; or (ii)
continue Employee’s employment on an "at will" basis only and
in such case the Company may terminate the Employee’s
employment at any time with or without cause and with or without
notice.
3. Position and
Duties.
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(a)
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During the Employment Period, the Employee shall
serve as Chief Technology Officer of the Company with such duties,
authority and responsibilities that are customary for such position
and such other related duties as requested by the Chief Executive
Officer or the President of the Company from time to time. The
Employee shall report directly to the Chief Executive Officer of
the Company. Unless otherwise authorized by the Chief Executive
Officer, the President or the Board of Directors of the Company
(" Board "), the Employee
shall devote substantially all of his working time, attention and
energies during normal business hours (other than absences due to
illness or vacation) to the performance of his duties for the
Company. Notwithstanding the above, the Employee shall be permitted
to (i) serve on civic or charitable boards or committees, or (ii)
serve on boards of other companies provided such activities do not
interfere with the Employee’s performance of his duties for
the Company. The Employee shall be entitled to receive and retain
all remuneration received by him from the items listed in clauses
(i) and (ii) of this paragraph.
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(b)
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In order to induce the Company to enter into this
Agreement, except for the employment agreement with the Company
concerning employment with the Company which has been disclosed to
BPOMS in writing by the Company or Employee prior to the execution
of the Merger Agreement, and which employment agreement shall be
terminated by the Company and Employee effective on the Closing,
Employee represents and warrants to the Company that (i) Employee
is not a party or subject to any employment agreement or
arrangement with any other person, firm, company, corporation or
other business entity; and (ii) Employee is subject to no
restraint, limitation or restriction by virtue of any agreement or
arrangement, or by virtue of any law or otherwise which would
impair Employee’s right or ability to enter the employ of the
Company or to perform fully his duties and obligations pursuant to
this Agreement.
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(c)
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Effective upon the Closing, and as a material
inducement for the Company to enter into this Agreement, Employee
agrees to execute and deliver to the Company: (i) the
Release Agreement in the form
of Exhibit A attached
hereto, which Release Agreement is intended to release the Company,
BPOMS and other parties as provided for in such Release Agreement
from all known and unknown claims, and as further provided for in
such Release Agreement; and (ii) the Employee
Proprietary Information And Inventions Agreement
in the form of Exhibit B
attached hereto.
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4. Place of Performance.
During the Employment Period, the location of employment of the
Employee shall be at the Company’s principal offices, which
currently are located in Yorba Linda, Orange County,
California.
5. Compensation and
Related Matters.
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(a)
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Base Salary. Commencing on the Effective Date and
thereafter during the Employment Period, the Company shall pay the
Employee a base salary at the rate of not less than $140,000.00 per
year (" Base Salary "). The
Base Salary shall be paid in approximately equal installments in
accordance with the Company’s customary payroll practices.
Effective upon the occurrence of two consecutive fiscal quarters
(i.e. with the first full fiscal quarter commencing after the
Closing )of positive EBITDA by the Company, as determined by the
Company, the Base Salary shall be increased, on a one time basis
only, by an amount equal to 15% of the then current Base Salary
(the "Base Salary Increase"). Notwithstanding any term in this
Agreement to the contrary, however, Employee shall be entitled to
receive no more than one Base Salary Increase. EBITDA for purposes
of this paragraph means earnings of the Company before interest,
taxes, and depreciation and amortization expenses as determined in
accordance with GAAP by the Company. The Company may not reduce the
Base Salary amount without the prior written consent of the
Employee.
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(b)
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Annual Bonus. Commencing on January 1, 2007 and
ending on the end of the Employment Period, the Employee shall be
eligible to earn an annual cash bonus (the " Annual
Bonus ") in such amount equal to 50% of the
then current Base Salary as shall be determined by the Board based
on the achievement of Company and individual performance goals for
the Company as established by the Board for each applicable
calendar year, with such Annual Bonus being prorated for any
Partial Year (as defined below), and except that no Annual Bonus
(or any pro-rated amount thereof for any Partial Year) shall be
accrued, due or payable or deemed earned by Employee if, prior to
the end of a calendar year, Employee voluntarily terminates his
employment with the Company other than for Good Reason as defined
below or if the Company terminates Employee’s employment for
Cause as defined in this Agreement. The Board shall establish
objective and subjective criteria to be used to determine the
extent to which performance goals have been satisfied. The Annual
Bonus shall be prorated for any applicable partial calendar year
(each a " Partial Year ").
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(c)
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Business, Travel and Entertainment Expenses. The
Company shall promptly reimburse the Employee for all business,
travel and entertainment expenses incurred during the Employment
Period with respect to the business or prospective business of the
Company, subject to the Company’s expense reimbursement
policies.
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(d)
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Vacation. During the Employment Period, the
Employee shall be entitled to four (4)
weeks of paid vacation per
year. Vacation not taken during the applicable fiscal year (but not
in excess of three weeks) shall be carried over to the next
following fiscal year and no vacation shall accrue during the time
period that Employee has accrued and unused vacation in excess of
five (5) weeks.
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(e)
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Equity Awards. The Employee is hereby granted
(the "Grant") an "incentive stock option" ("Option") as defined
under Section 422 of the Internal Revenue Code of 1986, as amended,
to purchase 75,000 shares of common stock of the Company at the
exercise price per share equal to the fair market value per share
of the Company’s common stock as of the Closing as determined
by the Board and subject to the following: (i) vesting shall be
conditioned upon being employed by the Company on a full time basis
and shall be subject to the following schedule: 25% shall vest and
become exercisable 6 months after the Closing; an additional 25%
shall vest and become exercisable 12 months after the Closing; an
additional 25% shall vest and become exercisable 18 months after
the Closing; and 25% shall vest and become exercisable 24 months
after the Closing and whereupon the Option shall have become vested
and exercisable as to one hundred percent (100%) of the stock
covered by the Option. (ii) full 100% accelerated vesting of the
Option upon termination of Employee’s employment by the
Company without Cause or by the Employee for Good Reason; (iii)
except as otherwise provided for above in this paragraph 5(e), such
other terms as provided for in the netGuru, Inc. 2003 Stock Option
Plan ("Plan"); and (iv) Employee shall be required to execute at
the Closing a stock option grant agreement in the form generally
utilized by the Company for incentive stock options granted under
the Plan and otherwise consistent with the terms herein.
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(f)
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Welfare, Pension and Incentive Benefit Plans.
During the Employment Period, the Employee (and his eligible spouse
and dependents) shall be entitled to participate in all welfare
benefit plans and programs maintained by the Company from time to
time for the benefit of its employees, including, without
limitation, all medical, hospitalization, dental, disability,
accidental death and dismemberment, travel accident and life
insurance plans, programs and arrangements. In addition, during the
Employment Period, the Employee shall be eligible to participate in
all pension, retirement, savings and other employee benefit plans
and programs maintained from time to time by the Company for the
benefit if its employees.
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(g)
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Automobile Allowance. The Company shall provide
the Employee with an automobile allowance of not less than $600.00
per month in connection with the performance of his
duties.
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(h)
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Additional Items. The Company shall provide the
Employee with the following additional items in connection with the
performance of his duties: laptop computer, internet connection at
home (or wireless internet), phone cards for overseas business
calls from outside office, Company credit card and mobile
telephone.
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6. Termination. The
Employee’s employment hereunder may be terminated during the
Employment Period under the following circumstances:
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(a)
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Death. The Employee’s employment hereunder
shall terminate upon his death.
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(b)
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Disability. If, as a result of the
Employee’s incapacity due to physical or mental illness as
determined by a physician selected by the Employee, and reasonably
acceptable to the Company (or selected by the Company if Employee
fails to designate a reasonably acceptable physician after
reasonable written notice by the Company), (i) the Employee shall
have been substantially unable to perform his duties hereunder for
four (4) consecutive months, or for an aggregate of 120 days during
any period of twelve (12) consecutive months and (ii) within thirty
(30) days after written Notice of Termination is given to the
Employee after such four-month or 120-aggregate-day period, the
Employee shall not have returned to the substantial performance of
his duties on a full-time basis, the Company shall have the right
to terminate the Employee’s employment hereunder for
"Disability."
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(c)
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Cause. The Company shall have the right to
terminate the Employee’s employment for "Cause." For purposes
of this Agreement, the Company shall have "Cause" to terminate the
Employee’s employment only upon the
Employee’s:
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(i) willful gross
misconduct or conviction of a felony after the Effective Date that,
in either case, results in material and demonstrable damage to the
business or reputation of the Company or which involves any crime
or offense involving money or other property of the Company or
BPOMS, or any of their respective subsidiaries or affiliates;
or
(ii) refusal to perform, or
willful breach or neglect of the performance of any of his duties
or obligations hereunder and continued failure to perform his
duties hereunder within ten (10) business days after the Company
delivers to him a written demand for performance that specifically
identifies the actions to be performed; or
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(iii) material breach of Section
3(a) or 3(b) or 3(c) of this Agreement; or
(iv) Employee’s performance of any
act or his failure to act, for which, if Employee were prosecuted
and convicted, a crime or offense involving money or property of
the Company or BPOMS or any of their respective subsidiaries or
affiliates, or which would constitute a felony in the jurisdiction
involved, would have occurred; or
(v) any attempt by Employee to
improperly secure any personal profit in connection with the
business of the Company or BPOMS or any of their respective
subsidiaries or affiliates; or
(vi) chronic alcoholism or drug
addiction; or
(vii) any breach by Employee of the terms
of Section 9 of this Agreement.
Cause shall not exist unless and until the
Company has delivered to the Employee written notice from the Board
or the Chief Executive Officer of the Company specifying the
particulars thereof in detail and unless and until the Company has
given the Employee fifteen (15) days in which to cure the
underlying breach, to the extent such breach is susceptible of
cure.
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(d)
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Without Cause. The Company shall have the right
to terminate the Employee’s employment hereunder without
Cause by providing the Employee with a Notice of Termination.
Termination without cause includes, without limitation, the Company
or its successor and/or its assigns terminating the Employee solely
as a result of a sale of the Company to a third party.
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(e)
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Good Reason. The Employee shall have the right to
terminate his employment for " Good Reason
." For purposes of this Agreement, the Employee
shall have "Good Reason" to terminate his employment
upon:
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(i) a reduction in the
Employee’s Base Salary; or
(ii) the failure of Company to pay
any compensation, or otherwise provide any material benefits, due
to the Employee in accordance with the terms of this Agreement, and
such failure is not cured within 20 days after written notice from
Employee of the failure to make such payment or benefit;
or
(iii) a material diminution of
Employee’s responsibilities, or the assignment to the
Employee of duties materially inconsistent with the
Employee’s position, duties, and status with the Company as
set forth in Section 3(a), if done without the Employee’s
prior written consent and provided such change is not rescinded by
the Company within 20 days after written notice from Employee
specifying the change; or
(iv) the Company moves the
Employee’s place of employment more than one hundred
twenty-five (125) miles from the location specified in
Section 4 hereof without the Employee’s prior written
consent.
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7. Termination
Procedure.
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(a)
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Notice of Termination. Any termination of the
Employee’s employment by the Company or by the Employee
during the Employment Period (other than pursuant to Section 6(a))
shall be communicated by written Notice of Termination to the other
party. For purposes of this Agreement, a " Notice of
Termination " shall mean a notice
indicating the specific termination provision in this Agreement
relied upon and setting forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Employee’s employment under that provision.
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(b)
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Date of Termination. " Date of
Termination " shall mean
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(i) if the Employee’s
employment is terminated by his death, the date of his
death,
(ii) if the Employee’s
employment is terminated pursuant to Section 6(b), thirty (30) days
after the date on which the Notice of Termination was transmitted
to the Employee (provided that the Em
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