EMPLOYMENT AGREEMENT
Exhibit
2.2
THIS
EMPLOYMENT AGREEMENT is made as of the 17th day of October, 2005, between
SMART
ONLINE, INC. (“SOL”), iMART INCORPORATED, a wholly owned subsidiary of SOL (the
“Company”) and XXXX XXXXXX (the “Employee”).
W
I T
N E S S E T H:
WHEREAS,
SOL is engaged in the business of providing web-hosted applications and
technology infrastructure syndication;
WHEREAS,
SOL has acquired all of the stock of the Company in a transaction of even
date
herewith;
WHEREAS,
the Company and the Employee wish to contract for the employment by the Company
of the Employee, and the Employee wishes to serve the Company, in the capacities
and on the terms and conditions set forth in this Agreement; and
WHEREAS,
the Company and SOL comprise an enterprise whose success is attributable
largely
to the creation and maintenance of certain Confidential Data (as defined
below)
and during the period of employment Employee will be situated to have access
to
and be knowledgeable with respect to the Confidential Data as well as the
customers of the Company and SOL; and
WHEREAS,
Company and SOL have a legitimate protectible business interest in the creation
and maintenance of their Confidential Data and the protection of the identity
of, and related information concerning, their customers and the Company’s and
SOL’s customer lists; and
WHEREAS,
the Company and SOL wish to protect their Confidential Data from disclosure
by
Employee by means of the restrictive covenants contained in this Agreement
and
Employee agrees to such covenants in exchange for the Company’s commitment to
continue to employ Employee and for other additional consideration agreed
to
between the parties;
THEREFORE,
it is hereby agreed as follows:
1. EMPLOYMENT
PERIOD.
The
Company shall employ the Employee, and the Employee shall serve the Company,
on
the terms and conditions set forth in this Agreement. Such employment pursuant
to the terms of this Agreement shall commence on the date hereof and shall
terminate two (2) years thereafter. The term during which this Agreement
is in
effect is referred to herein as the “Employment Period.” At the option of SOL,
Employee may become and employee of SOL, whereupon references to the Company
in
this Agreement shall mean SOL, as appropriate.
2. POSITION
AND DUTIES.
(a) During
the Employment Period, the Employee shall serve as the vice president and
chief
executive officer of the Company on a full-time basis, and shall report directly
to the President of the Company or the Chief Executive Officer of SOL or
the
person designated by the Chief Executive officer.
(b) During
the Employment Period, the Employee shall devote his loyalty, attention,
and
time exclusively to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Employee under
this
Agreement, use the Employee’s best efforts to carry out such responsibilities
faithfully and efficiently. Employee shall not work or provide services to
any
other entity, and shall comply with all employment policies of the Company
and
SOL.
(c) The
Employee’s services shall be performed primarily at the Company’s headquarters
in Grand Rapids, Michigan, or from time to time at such other locations as
the
Company or SOL shall require.
3. COMPENSATION.
(a) Salary.
The
Employee shall receive an annual salary of one hundred and fifty thousand
($150,000) dollars, payable in accordance with the Company’s normal payroll
schedule as established by the Company from time to time.
(b) Non-Compete.
In
consideration of the covenants made by Employee under Paragraph 7 hereof,
Company shall pay Employee five hundred ten thousand ($510,000) dollars,
which
shall be payable in eight equal calendar quarter installments of sixty-three
thousand seven hundred fifty ($63,750) dollars each, on January 2, 2006,
April
3, 2006, July 3, 2006, October 2, 2006, January 2, 2007, April 2, 2007, July
2,
2007, and October 1, 2007.
(c) Fringe
Benefits.
Employee shall be entitled to all of the non-wage benefits the Company provides
from time to time to all other full-time employees. The Employee shall also
receive such errors, omissions, employment practices, and other liability
insurance coverage as SOL may provide, from time to time, for directors,
officers, and senior management employees of SOL and its
affiliates.
(d) Withholding.
All
compensation paid pursuant to this Paragraph 3 shall be subject to withholding
of taxes and other amounts as shall be required by law.
4. EXPENSES.
Company
agrees to reimburse Employee for reasonable and necessary expenses incurred
by
Employee in the furtherance of the Company’s business in accordance with such
procedures as the Company may from time to time establish.
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5. TERMINATION
OF EMPLOYMENT.
(a) By
the
Company.
The
Company may terminate the Employee’s employment at any time With or Without
Cause by written notice to the Employee.
(i) “With
Cause” includes (but is not limited to):
A. Participation
in a fraud or act of dishonesty against the Company or SOL, or any other
person
or entity;
B. Any
chemical dependence which affects the performance of the Employee’s duties and
responsibilities to the Company;
C. Breach
of
Employee’s fiduciary obligations to the Company;
D. Failure
to perform the Employee’s duties, but only after the Employee has received
written notice from the President of the Company or the Chief Executive Officer
of SOL, describing the failure in sufficient detail for the Employee to take
corrective action, and the Employee has had a reasonable opportunity to take
corrective action;
E. Breach
of
the Company’s or SOL’s policies (including without limitation the following
policies of SOL: Xxxxxxx Xxxxxxx and Unauthorized Disclosures, Code of Ethics
and Corporate Conduct and Conflicts of Interest) or any material provision
of
this Agreement;
F. Misconduct
resulting in loss to the Company or SOL or damage to the reputation of the
Company or SOL; or
G. Conduct
by the Employee which, in the determination of the Company’s Board of Directors,
demonstrates unfitness to serve, but if the conduct can be corrected, then
only
after the Employee has received written notice from the Board, describing
the
conduct in sufficient detail for the Employee to take corrective action,
and the
Employee has had a reasonable opportunity to take corrective
action.
(ii) “Without
Cause” means termination of the Employee’s employment by the Company other than
With Cause listed in Paragraph 4(a)(i) above.
(b) By
the
Employee.
The
Employee may terminate the Employee’s employment at any time With or Without
Good Reason by written notice to the Company.
(i) “With
Good Reason” means any action by the Company that constitutes a constructive
termination by the Company Without Cause.
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(ii) “Without
Good Reason” means termination of the Employee’s employment by the Employee
other than With Good Reason listed in Paragraph 4(b)(i) above.
(c) Date
of Termination.
The
“Date of Termination” means the date on which the termination of employment
becomes effective.
(i) Termination
by the Company shall be effective immediately when the Company’s notice of
termination is given to the Employee or at any time thereafter as specified
by
the Company in the notice.
(ii) Termination
by the Employee shall be effective on the date specified in the Employee’s
notice of termination to the Company, but not earlier than thirty (30) days
after the notice is given. The Company reserves the right to accelerate the
effective date in its discretion to any earlier date after the date of
notice.
(d) Effect
of Termination.
(i) Except
as
provided in Paragraph (ii), upon termination of the Employee’s employment
hereunder, all obligations of the Company to pay the salary, bonus or stock
options to the Employee shall be terminated as of the Date of Termination,
except for salary, bonus, and other compensation earned by the Employee as
of
the Date of Termination.
(ii) In
the
case of termination by the Company Without Cause, or termination by the Employee
With Good Reason, before the end of the initial two-year term of this Agreement,
the Employee shall be entitle to receive the salary and non-wage benefits
under
this Agreement for the rest of the initial two-year term.
(iii) The
Company’s obligation to pay the amounts set forth in Paragraph 3(b) above shall
continue in all cases despite any termination of the Employee’s
employment.
6. REPRESENTATIONS
AND WARRANTIES OF EMPLOYEE.
Employee represents and warrants that:
(a) Employee
is under no contractual or other restriction or obligation which is inconsistent
with the execution of this Agreement, the performance of duties hereunder
or
other rights of the Company hereunder; and
(b) To
the
best of Employee’s knowledge, Employee is under no physical or mental disability
that renders him incapable of performing the essential functions involved
in his
anticipated duties or that would otherwise hinder the performance of duties
under this Agreement.
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7. COVENANT
NOT TO COMPETE.
Employee
covenants that during the “Noncompetition Period,” as defined in
Paragraph 13, and within the “Noncompetition Area,” as defined in
Paragraph 14, he shall not, directly or indirectly, as principal, agent,
consultant, trustee or through the agency of any corporation, partnership,
association, or agency engage in the “Business,” as defined in
Paragraph 15. Specifically, but without limiting the foregoing, Employee
agrees that during such period and within such area, he shall not do any
of the
following: (a) be the owner of the outstanding capital stock of any corporation
which conducts a business of a like or similar nature to the “Business” (other
than stock of a corporation traded on a national securities exchange or
automated quotation service); (b) be an officer or director of any corporation
which conducts a business of a like or similar nature to the “Business”; (c) be
a member of any partnership which conducts a business of a like or similar
nature to the “Business”; or (d) be a consultant to, an owner of or an employee
of any other business which conducts a business of a like or similar nature
to
the Business.
8. NONDISCLOSURE
COVENANT.
(a) The
parties acknowledge that the Company and SOL comprise an enterprise whose
success is attributable largely to the ownership, use and development of
certain
valuable confidential and proprietary information (the “Confidential Data”), and
that Employee’s employment with the Company will involve Employee’s access to
and work with such information. Employee acknowledges that his relationship
with
the Company is a confidential relationship. Employee covenants and agrees
that
(i) he shall keep and maintain the Confidential Data in strictest confidence,
and (ii) he shall not, either directly or indirectly, use any Confidential
Data
for his own benefit, or divulge, disclose, or communicate any Confidential
Data
in any manner whatsoever to any person or entity other than employees or
agents
of the Company having a need to know such Confidential Data, and only to
the
extent necessary to perform their responsibilities on behalf of the Company
and
SOL, and other than in the performance of Employee’s duties in the employment by
the Company, except as otherwise required by law, including any judicial
or
administrative order. Employee’s agreement not to disclose Confidential Data
shall apply to all Confidential Data, whether or not Employee participated
in
the development thereof. Upon termination of employment for any reason, Employee
will return to the Company all documents, notes, programs, data and any other
materials (including any copies thereof) in his possession.
(b) For
purposes of this Agreement, the term “Confidential Data” shall include any and
all information related to the business of the Company and SOL, or to their
products, sales or businesses which is not general public knowledge,
specifically including (but without limiting the generality of the foregoing)
all financial and accounting data; computer software; processes; formulae;
inventions; methods; trade secrets; computer programs; engineering or technical
data, drawings, or designs; manufacturing techniques; patents, patent
applications, copyrights and copyright applications (in any such case, whether
registered or to be registered in the United States of America or elsewhere)
applied for, issued to or owned by the Company or SOL; information concerning
pricing and pricing policies; marketing techniques; suppliers; methods and
manner of operations; and information relating to the identity, needs and
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location
of all past, present and prospective customers; but shall not include
information that is generally available to the public, already known to the
Employee on July 26, 2005 (i.e.,
the date
of the Letter of Intent for SOL’s acquisition of the Company), or lawfully
acquired by the Employee from other sources. The parties stipulate that as
between them the above-described matters are important and confidential and
gravely affect the successful conduct of the business of the Company and
SOL,
and that any breach of the terms of this Paragraph 8 shall be a material
breach
of this Agreement.
9. NONSOLICITATION/INTERFERENCE.
(a) The
Employee covenants that during the Noncompetition Period and in the
Noncompetition Area, he shall not directly or indirectly, on behalf of himself
or on behalf of any other person, firm, partnership, corporation, association
or
other entity, call upon any of the customers or clients of the Company or
SOL
for the purpose of soliciting or providing any product or service similar
to
that provided by the Company or SOL, nor will he, in any way, directly or
indirectly, for himself, or on behalf of any other person, firm, partnership,
corporation, association, or other entity solicit, divert or take away, or
attempt to solicit, divert, or take away any of the customers, clients,
business, or patrons of the Company or SOL.
(b) The
Employee covenants that during the Noncompetition Period and in the
Noncompetition Area, he shall not directly or indirectly, on behalf of himself
or on behalf of any other person, firm, partnership, corporation, association
or
entity, contract with, induce or attempt to influence, any individual or
entity
who is an employee, contractor, agent or representative of the Company or
SOL to
terminate or otherwise impair his or her employment or relationship with
the
Company or SOL.
10. INVENTIONS.
All
inventions, designs, improvements and developments made by Employee, either
solely or in collaboration with others, during his employment with the Company,
whether or not during working hours, and relating to any methods, apparatus
or
products which are manufactured, sold, leased, used or developed by the Company
or SOL, or which pertain to the Business (the “Developments”), shall become and
remain the property of the Company or SOL. Employee shall disclose promptly
in
writing to the Company all such Developments. Employee acknowledges and agrees
that all Developments shall be deemed “works made for hire” within the meaning
of the United States Copyright Act, as amended. If, for any reason, such
Developments are not deemed works made for hire, Employee shall assign, and
hereby assigns, to the Company, all of Employee’s right, title and interest
(including, but not limited to, copyright and all rights of inventorship)
in and
to such Developments. At the request and expense of the Company, whether
during
or after employment hereunder, Employee shall make, execute and deliver all
application papers, assignments or instruments, and perform or cause to be
performed such other lawful acts as the Company may deem necessary or desirable
in making or prosecuting applications, domestic or foreign, for patents
(including reissues, continuations and extensions thereof) and copyrights
related to such Developments or in vesting in the Company or SOL full legal
title to such Developments. Employee shall assist and cooperate with the
Company
and SOL, or their representatives in any controversy or legal proceeding
relating to such Developments, or to any patents, copyrights or trade secrets
with respect thereto.
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If
for
any reason Employee refuses or is unable to assist the Company or SOL in
obtaining or enforcing its rights with respect to such Developments, Employee
hereby irrevocably designates and appoints the Company, SOL and their duly
authorized agents as Employee’s agents and attorneys-in-fact to execute and file
any documents and to do all other lawful acts necessary to protect the Company’s
or SOL’s rights in the Developments. Employee expressly acknowledges that the
special foregoing power of attorney is coupled with an interest and is therefore
irrevocable and shall survive (i) Employee’s death or incompetency and (ii) any
termination of this Agreement.
11. INDEPENDENT
COVENANTS.
Each
of
the covenants on the part of Employee contained in Paragraphs 6, 7, 8, 9
and 10
of this Agreement shall be construed as an agreement independent of each
other
such covenant. The existence of any claim or cause of action of Employee
against
the Company or SOL, whether predicated on this Agreement or otherwise, shall
not
constitute a defense to the enforcement by the Company or SOL of any such
covenant, except as otherwise provided in the Stock Purchase Agreement for
SOL’s
acquisition of the Company.
12. REASONABLENESS;
INJUNCTION.
Employee
acknowledges that the covenants contained in this agreement are reasonably
necessary and designed for the protection of the Company and SOL and their
business, and that such covenants are reasonably limited with respect to
the
activities prohibited, the duration thereof, the geographic area thereof,
the
scope thereof and the effect thereof on Employee and the general public.
Employee further acknowledges that violation of the covenants would immeasurably
and irreparably damage the Company and SOL, and by reason thereof Employee
agrees that for violation or threatened violation of any of the provisions
of
this Agreement, the Company and SOL shall, in addition to any other rights
and
remedies available to it, at law or otherwise, be entitled to any injunction
to
be issued by any court of competent jurisdiction enjoining and restraining
Employee from committing any violation or threatened violation of this
Agreement. Employee consents to the issuance of such injunction.
13. NONCOMPETITION
PERIOD.
This
Agreement shall remain enforceable until the later of (i) four years from
after
the date hereof, it being understood that this provision is reasonable because
this was agreed to in connection with the role of the Company stated by Employee
or (ii) one year after the termination of Employee’s employment with the
Company, SOL or an affiliate of either, for any reason (such period not to
include any period(s) of violation or period(s) of time required for litigation
to enforce the covenants set forth herein).
14. NONCOMPETITION
AREA.
(a) Employee
acknowledges and agrees that the Company and SOL do business on an international
basis and that Employee will assist Company and SOL in developing their business
in both the United States and internationally, and that any breach of
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Employee’s
covenants contained herein would materially damage the Company and SOL,
regardless of the area of the world in which the activities constituting
such
breach were to occur. Accordingly, the terms and provisions of this Agreement
shall apply in the following Noncompetition Area:
(i) The
State
of Michigan;
(ii) Any
state
other than Michigan where Company and SOL conducts the “Business” and in or for
which the Employee assists or performs services assisting Company;
(iii) Any
political subdivision of foreign countries where Company and SOL do “Business”
or will do “Business” during the period of employment; and
(iv) Any
other
state, country, or political subdivision where Company or SOL does “Business”
and in or for which the Employee assists or performs services assisting
Company.
(b) It
is
agreed that the Company or SOL is doing business in a geographic area if
customers or potential customers can access its software or other services
from
that geographic area via the Internet and the Company or SOL need not have
a
physical presence in that same geographic area.
15. BUSINESS.
For
the
purposes of this Agreement, the “Business” shall include any business, service,
or product engaged in, provided, or produced by the Company or SOL, or any
affiliate or subsidiary of the Company or SOL, from the date of this Agreement
to the date of the termination of the employment, including, but not limited
to:
(i) the business of development, production, marketing, design, manufacturing,
leasing or selling software related to business plans, or form documents,
whether for use by professionals or consumers; (ii) providing web-hosted
applications and technology infrastructure syndication and/or (iii) any other
business conducted by the Company or SOL immediately prior to the date of
termination of Employee’s employment or in which the Company or SOL shall at the
time of termination of Employee’s employment with the Company be actively
preparing to enter.
16. MISCELLANEOUS.
(a) This
Agreement shall be subject to and governed by the substantive laws of the
State
of Michigan, without giving effect to the conflicts of laws provisions thereof.
The Company and SOL hereby submit to the jurisdiction and venue of the state
and
federal courts in Michigan, and the Company agrees that the Employee may,
at his
option, enforce his rights hereunder in such courts.
(b) Company’s
failure to insist upon strict compliance with any provision of this Agreement
shall not be deemed a waiver of such provision or any other
provision.
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(c) This
Agreement may not be modified except by an agreement in writing executed
by the
parties. The parties expressly waive their right to orally modify this
provision.
(d) The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision.
(e) The
Company has the right in its sole discretion to transfer the employment
relationship it has with the Employee and its rights, duties and obligations
as
the employer of Employee to SOL upon notice of such transfer to, but without
the
approval of, the Employee. Further, the term “Company” includes the Delaware
corporation that will be the Company’s successor by merger pursuant to Section
8.17(j) of the Stock Purchase Agreement for SOL’s acquisition of the
Company.
(f) Except
as
provided above in Paragraph (e), the Agreement shall not be assignable without
the written consent of the Company and Employee.
(f) This
Agreement expresses the whole and entire Employment Agreement between the
parties and supersedes and replaces any prior employment Agreement,
understanding or arrangement between Company, SOL and Employee.
IN
WITNESS WHEREOF, the parties executed this Agreement as of the day and year
first above written.
|
SMART
ONLINE, INC.
|
IMART
INCORPORATED
|
|
By:
/s/
Xxxxx Xxxxx
|
By:
/s/
Xxxx Xxxxxx
|
|
Title:
Vice President
|
Title:
President
|
|
EMPLOYEE:
|
|
|
By:
/s/
Xxxx Xxxxxx
|
|
|
Name:
Xxxx Xxxxxx
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