EXHIBIT 10.32
AGREEMENT
This Agreement (the "Agreement") is made as of March 7, 2002, between Patriot
Scientific Corporation, a Delaware Corporation (the "Company"), and San Diego
Millennia Consultants aka SDMC, a California Corporation (the "Contractor").
WITNESSETH:
1. Term of Agreement.
(a) The Company hereby agrees to hire the Contractor and the Contractor
hereby agrees to provide Xxxxxxx X. Xxxxxx, an individual, (the "Executive") to
provide services to the Company as the CEO and President for a two year period
commencing March 18, 2002, or for such shorter period as may be mutually agreed
by the Company and the Contractor (the "Service Period'), subject to the terms
and conditions of this Agreement. In his capacity as CEO and President of the
Company, Executive will be responsible for the general duties associated with
his title including, but not limited to managing the budget, engineering
projects and objectives, business development, financial affairs, investor
relations, and/or such other management duties on behalf of the Company as may
be assigned to him from time to time by the Board of Directors of the Company.
(b) The Executive agrees that, during the Service Period, he will serve
the Company faithfully and to the best of his abilities, devoting his time,
energy and skill to the activities of the Company and the promotion of its
interests. It is expressly understood that the Executive may devote a reasonable
amount of time to such charitable, civic and personal affairs as shall not
interfere with the obligations set forth in the preceding sentence. The
Executive agrees not to work for or participate in any business that competes in
any manner with the business of the Company during the Service Period.
(c) The Contractor declares that all tax responsibilities for the
compensation provided by the Company to the Contractor will be the
responsibility of the Contractor.
2. Compensation and Benefit Plans
(a) The Contractor shall receive a base payment during the Service
Period which shall be payable semi-monthly on the 20th and 5th of the following
month as follows: (1) During the first year of the Service Period ("Year One"),
the Contractor shall receive a payment of not less than ten thousand dollars
($10,000) per month; (2) During the second year of the Service Period ("Year
Two"), the Contractor shall receive a payment of not less than the payment
received in Year One. The payment received in any year shall be subject to other
upward adjustments as shall be recommended and approved by the Board and
Compensation Committee.
(b) The Contractor is entitled, at the discretion of the Board of
Directors of the Company, to an Annual Incentive Bonus up to 50% of the total
yearly payments for the applicable year (the "Annual
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Incentive Bonus"). The Annual Incentive Bonus payment will be based upon
mutually agreed upon objectives and levels of performance, if any, and shall
otherwise be at the discretion of the Board of Directors.
(c) The Executive shall not be eligible to participate in any employee
benefit programs. To offset the lack of standard medical, dental, vision care
and life insurance benefits normally afforded to company executives, Company
will provide $700 per month allowance to the Contractor in lieu of these
normally Company funded benefits. The Company will also provide to the
Contractor a car allowance of $400 per month. During the Service Period, the
Executive is entitled to 4 weeks vacation per annum. Even though the Contractor
is being retained to provide services in March of calendar year 2002, the
Executive will be entitled to 4 weeks of vacation accrual during calendar year
2002.
(d) The Company will pay or reimburse the Contractor during the Service
Period for all expenses normally reimbursed by the Company and reasonably
incurred by the Executive in furtherance of his duties hereunder and authorized
by the Company, including but not limited to, expenses of entertainment, travel,
meals, hotel accommodations and the like upon the submission of the Executive of
vouchers or an itemized list thereof and as may be required in order to permit
such payments as proper deductions for the Company under the Internal Revenue
Code of 1986 and the rules and regulations adopted pursuant thereto now or
hereafter in effect.
(e) The Company agrees to the provide additional compensation and
incentives to the Contractor as follows:
(1) Company will remit to the Contractor a contract signing bonus of
$10,000 to be provided to the Contractor on its first day of
service with the Company.
(2) Company to provide Contractor with a stock option to purchase
1,000,000 common shares of the Company at an exercise price of
$.09 per share, the average of the closing bid and ask price on
the date that the initial offer for contract services was
tendered to the Contractor. Of these shares, 500,000 will vest
immediately upon commencement of this Agreement, an additional
250,000 shares will vest on the first anniversary date of this
Agreement and 250,000 shares will vest on the second anniversary
date of this Agreement.
(3) Company will place in escrow four (4) months of monthly payments
inclusive of service payments, car allowance and $700 per month
for equivalent benefit package (medical, dental, vision and life
insurance). Money placed in escrow by the Company shall be
released to the Contractor on termination of Executive's services
for any reason other than cause or Executive's resignation.
(4) In the event that the closing trade price of the Company's common
stock (as adjusted for stock splits) on its principal market
equals or exceeds any of the following thresholds for twenty
consecutive trading days, the Company will pay to the Contractor
on the first day of the month following the achievement the
following amounts:
i. Stock value achieved of $.25 - cash payment of $10,000
ii. Stock value achieved of $.40 - cash payment of $20,000
iii. Stock value achieved of $.50 - cash payment of $20,000
iv. Stock value achieved of $.60 - cash payment of $30,000
v. Stock value achieved of $.80 - cash payment of $30,000
vi. Stock value achieved of $1.00- cash payment of $50,000
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vii. Stock value achieved of $1.50 - cash payment of $100,000
viii. Stock value achieved of $2.00 - cash payment of $150,000
3. Termination of Agreement.
(a) The services of the Executive hereunder shall automatically
terminate if the Executive shall die during the Service Period. The services of
the Executive can be terminated for cause by the Company at its option only for
the following:
(1) the conviction of the Executive under state or federal law of a
felony or other crime, or the equivalent under foreign law;
unless in any such case Executive performed such act in good
faith and in a manner reasonably believed to be in or not opposed
to the best interests of the Company;
(2) the material breach by Executive of any provision of the
Agreement which has not been cured pursuant to the provisions of
Section 5 hereof; or
(3) a determination or request by an appropriate regulatory authority
that the Executive be removed or disqualified from acting as an
officer of the Company.
(b) If the Executive's services are terminated for other than cause by
the Company, then the Contractor is entitled to termination payments equal to
the lesser of (i) four (4) months of the current monthly payment payable in a
lump sum payment on the last day of the thirty (30) day notice period or (2) the
remaining current monthly payment amount for the term of this Agreement payable
in a lump sum payment on the last day of the thirty (30) day notice period.
(c) The Executive shall have the right at his sole option to terminate
his services at any time upon sixty (60) days written notice or for such other
notice period to be determined by the Board at its sole discretion.
(d) If within twelve (12) months of a Change in Control, as that term is
defined herein, Executive's services are terminated for other than cause or
Executive refused to accept or voluntarily resigns from a position other than a
Qualified Position, as that term is defined herein, Contractor shall receive
severance compensation equal to twelve (12) months of the then current monthly
payment. A "Change in Control" means the acquisition, directly or indirectly of
more than 40% of the outstanding shares of any class of voting securities of the
Company by one person or one entity that is not an existing shareholder as of
the date of this Agreement, or a merger, consolidation or sale of all or
substantially all of the assets of the Company, such that the individuals
constituting the Board of the Company immediately prior to such period shall
cease to constitute a majority of the Board, unless the election of each
director who was not a director prior thereto was approved by vote of at least
two-thirds of the directors then in office who were directors prior to such
period. Notwithstanding the foregoing, an acquisition of the requisite
percentage of voting securities in connection with a public offering of
securities by the Company for the primary purpose of providing capital resources
to the Company shall not be considered a "Change in Control" for purposes of
this Section 4(d). "Qualified Position" is an executive officer position with
the entity surviving the Change in Control with substantially the same
responsibilities as those held by the Executive on the date of the Change in
Control. Also, notwithstanding the foregoing, if the Company determines that the
amounts payable to Contractor under this Agreement, when considered together
within the other amounts payable to Contractor as a result of a Change in
Control, cause such payments to be treated as excess parachute payments within
the meaning of Section 280G of the Internal Revenue Code, the Company shall
reduce the amount payable to Contractor under this Section 4(d) to an amount
that will not subject Contractor to the imposition of tax
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under Section 4999 of the Internal Revenue Code; provided, however, that this
provision shall apply only to payments to be made under this Agreement and shall
not cause the reduction of any other payments to be made to Contractor by the
Company.
4. Notice of Breach. The Company and the Contractor agree that, prior to the
termination of the Service Period by reason of any breach of any provision of
the Agreement, the injured party will give the party in breach written notice,
specifying such breach and permitting the party in breach to cure such breach
within a period of thirty (30) days after receipt of such notice, except a
breach by Executive of provisions of Section 6 of this Agreement shall not have
a cure period.
5. Indemnification.
(a) If, after the date of the commencement of the Service Period, the
Executive is made a party or is threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director or officer of
the Company or is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation or partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether or not the basis of such Proceeding is an alleged act or
failure to act in an official capacity as a director, officer, member, employee
or agent, he shall be indemnified and held harmless by the Company to the
fullest extent authorized by Delaware law, as the same exists or may hereafter
be amended, against all expense, liability and loss (including, without
limitation, attorney's fees, judgments, fines and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Executive in connection
herewith, including , without limitation, payment of expenses incurred in
defending a Proceeding prior to the final disposition of such Proceeding
(subject to receipt of an undertaking by the Executive to repay such amount if
it shall ultimately be determined that the Executive is not entitled to be
indemnified by the Company under Delaware law), and such indemnification shall
continue as to the Executive even if he has ceased to be a director, officer,
member, employee or agent of the Company or other enterprise and shall inure to
the benefit of his heirs, executors and administrators.
(b) The right of indemnification and the payment of expenses incurred in
defending a Proceeding in advance of its final disposition conferring in this
Section 5 shall not be exclusive of any other right that the Executive may have
or hereafter may acquire under any statute, provision of the Certificate of
Incorporation or Bylaws of the Company, agreement, vote of shareholders or
disinterested directors or otherwise.
6. Trade Secrets of the Company. Patents and Inventions.
(a) Except as required by the performance of the Executive's services to
the Company under the terms of this Agreement, neither the Executive or any of
his agents or representatives, shall, during his employment and for so long
afterwards as the pertinent information or data remain Confidential Information,
directly or indirectly, make use of, permit others to use, divulge, disseminate,
copy or otherwise disclose the Company's Confidential Information and/or
Inventions as defined by subparagraphs (i) and (ii), respectively.
(i) "Confidential Information" means all information and material
which is proprietary to the Company, whether or not marked as
"confidential" or "proprietary" and which is disclosed to or
obtained from the Company by the Executive, which relates to
the Company's past, present or future research, development or
business activities. Confidential Information is all
information or materials prepared by or for the Company
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and includes, without limitation, all of the following:
designs, drawings, specifications, techniques, models, data,
source code, object code, documentation, diagrams, flow charts,
research, development, processes, systems, methods, machinery,
procedures, "know-how", new product or new technology
information, formulas, patents, patent applications, product
prototypes, product copies, cost of production, manufacturing,
developing or marketing techniques and materials, cost of
production, development or marketing time tables, customer
lists, strategies related to customers, suppliers or personnel,
contract forms, pricing policies and financial information,
volumes of sales, and other information of similar nature,
whether or not reduced to writing or other tangible form, and
any other Trade Secrets, as defined by subparagraph (iii), or
non-public business information. Confidential Information does
not include any information which (1) was in the lawful and
unrestricted possession of the Executive prior to its
disclosure by the Company, (2) is or becomes generally
available to the public by acts other than those of the
Executive after receiving it, or (3) has been received lawfully
and in good faith by the Executive from a third party who did
not derive it from the Company.
(ii) "Inventions" means and all discoveries, concepts and ideas,
whether patentable or not, including but not limited to,
processes, methods, formulas, compositions, techniques,
articles and machines, as well as improvements thereof or
"know-how" related thereto, relating at the time of conception
or reduction to practice to the business engaged in by the
Company, or any actual or anticipated research or development
by the Company.
(iii) "Trade Secrets" shall mean any scientific or technical data,
information, design, process, procedure, formula or improvement
that is commercially available to the Company and is not
generally known in the industry.
Materials involving Confidential Information and Inventions are the exclusive
property of the Company and shall not be removed under any circumstances from
the premises of the Company where the work is being carried on without prior
written consent of the Company except when consistent with the Company's normal
business practices.
(b) The Executive agrees that any inventions made, conceived or
completed by him during the term of his employment, solely or jointly with
others, which are made with the Company's equipment, supplies, facilities or
Confidential Information, or which relate at the time of conception or reduction
to purpose of the invention to the business of the Company or the Company's
actual or demonstrably anticipated research and development, or which result
from any work performed by the Executive for the Company, shall be the sole and
exclusive property of the Company. The Executive promises to assign such
inventions to the Company. The Executive also agrees that the Company shall have
the right to keep such inventions as trade secrets, if the Company chooses. The
Executive agrees to assign to the Company the Executive's rights in any other
inventions where the Company is required to grant those rights to the United
States government or any agency thereof. In order to permit the Company to claim
rights to which it may be entitled, the Executive agrees to disclose to the
Company in confidence all inventions which the Executive makes arising out of
the Executive's employment and all patent applications filed by the Executive
within one year after the termination of his employment.
(c) The Executive shall assist the Company in obtaining patents on all
inventions, designs, improvements and discoveries patentable by the Company in
the United States and in all foreign countries, and shall execute all documents
and do all things necessary to obtain letters patent, to vest the Company with
full and extensive title thereto, and to protect the same against infringement
by others.
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7. Severability In the event that any provisions or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by
law.
8. Assignment. The rights of the Company (but not its obligations) under this
Agreement may, without the consent of the Contractor, be assigned by the Company
to any parent, subsidiary, or a successor of the Company; provided that such
parent, subsidiary or successor acknowledges in writing that it is also bound by
the terms and obligations of this Agreement. Except as provided in the preceding
sentence, the Company may not assign all or any of its rights, duties or
obligations hereunder without the prior written consent of the Contractor.
9. Survival of Certain Provisions. The covenants and agreements set forth in
Paragraph 6 of this Agreement shall survive termination of the Executive's
services and/or this Agreement, and shall remain in full force and effect
regardless of the cause of such termination.
10. Intentionally left blank.
11. Notices. All notices, requests, demands and other communications shall be in
writing and shall be defined to have been duly given if delivered or if mailed
by registered mail, postage prepaid;
(a) If to the Contractor, addressed to it at the following address as
may be changed in writing from time to time:
SDMC Inc.
00000 Xxxxxxx Xxxxx Xxxxx
Xxx Xxxxx, XX 00000
(b) If to the Company, addressed to:
Patriot Scientific Corporation
00000 Xxx Xxxxxxxx
Xxx Xxxxx, XX 00000
or to such other address as any party may request by notice given as aforesaid
to the other parties hereto.
12. Titles and Headings. Titles and heading to paragraphs hereof are for the
purposes of references only and shall in no way limit, define or otherwise
effect the provisions hereof.
13. Governing Law. This Agreement is being executed and delivered and is
intended to be performed in the State of California, and shall be governed by
and construed in accordance with the laws of the State of California.
14. Arbitration/Sole Remedy for Breach of Agreement In the event of any dispute
between the Company and the Contractor concerning any aspect of this Agreement,
including any disputes upon termination, all such disputes shall be resolved by
binding arbitration before a single neutral arbitrator. The arbitrator shall be
selected from the "American Arbitration Association." The arbitration shall be
held in San Diego, California. The arbitrator is bound to rule only on whether
or not there has been a violation of the terms of this employment agreement and
to render an award, if any, that is consistent with the terms of this Agreement.
Neither party to this Agreement is entitled to any legal recourse or
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rights or remedies other than those provided within this Agreement. The
Contractor's sole remedies, are those set forth in this Agreement. The
arbitrator shall determine a "prevailing party" and shall award such prevailing
party (i) attorney's fees and costs and (ii) the prevailing party's portion of
the costs of arbitration.
In the event of any dispute between the Company, the Executive and the
Contractor concerning any ownership, use or disclosure of the Company's
Confidential Information or other intellectual property, the requirement of
arbitration may be waived, at the Company's sole election, and any such dispute
may be brought before a court having jurisdiction of the matter.
15. Counterparts. This Agreement shall be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall not be necessary
in making proof of this Agreement to produce or account for more than one
original counterpart.
16. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto and may be modified or amended only by a written instrument
executed by the parties hereto. Effective on the first day of the Service
Period, any prior agreements between the Company and the Contractor shall
terminate.
17. Good Faith. Each of the parties hereto agrees that he or it shall act in
good faith in all actions taken under this Agreement.
18. Waiver. No waiver of any of the provisions of this Agreement shall be deemed
to be or shall constitute a waiver of any other provision of the Agreement,
whether or not similar, nor shall any waiver constitute a continuing waiver. No
waiver of any provision of this Agreement shall be binding upon the parties
hereto unless it is executed in writing by the party making the waiver.
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of the day
and year first above written.
Patriot Scientific Corporation
By:
/S/ XXXXXX XXXXXXX
--------------------------------
Xxxxxx Xxxxxxx, Chairman
SDMC Inc.
By:
/S/ XXXXXXX X. XXXXXX
--------------------------------
Xxxxxxx X. Xxxxxx, President
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