EMPLOYMENT AGREEMENT
Exhibit
10.14
THIS
EMPLOYMENT AGREEMENT (the “Agreement”) by and between Smart Online, Inc. a
Delaware corporation (the “Company”), and Xxxxxx Xxxx (the “Employee”), dated as
of the 1st day of April, 2004.
WITNESSETH
THAT
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;
WHEREAS,
the Company is 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 the 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
WHEREAS,
Company has a legitimate protectible business interest in the creation and
maintenance of its Confidential Data and the protection of the identity of,
and
related information concerning, its customers and the Company’s customer lists;
and
WHEREAS,
the Company wishes to protect its Confidential Data from disclosure by the
Employee by means of the restrictive covenants contained in this Agreement
and
the Employee agrees to such covenants in exchange for the Company’s commitment
to continue to employ the Employee and for other additional consideration
agreed
to between the parties;
NOW,
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 June
1,
2004, and shall terminate on the first to occur of (i) the termination of
this
Agreement as provided herein, or (ii) December 31, 2005; provided, however,
that
if neither party has given written notice to the other, at least thirty (30)
days prior to the expiration date then in effect, of the intention not to
renew
the Agreement beyond such expiration date, then the term of this Agreement
shall
automatically extend for an additional year at the conclusion of such expiration
date. The term during which this Agreement is in effect is referred to herein
as
the “Employment Period.”
2. POSITION
AND DUTIES.
(a) During
the Employment Period, the Employee shall serve as a full-time employee of
the
Company as Vice President of Sales with such duties and responsibilities
as are
customarily assigned to such position and such other duties and responsibilities
not inconsistent therewith as may from time to time be assigned to him by
the
President, Chief Executive Officer or Board of Directors.
(b) During
the Employment Period, the Employee shall devote his loyalty, attention,
and
time 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.
(c) The
Employee’s services shall be performed primarily at the Company’s headquarters
in Durham, North Carolina.
3. COMPENSATION.
(a) Base
Salary. The Employee’s base salary shall be $70,000 per annum, payable monthly,
which salary shall be reevaluated annually and is subject to such increases
as
the Board of Directors approves. Employee’s base salary shall be increased to
$90,000 effective July 1, 2004. The term “Annual Base Salary” shall refer to the
base salary prevailing during the applicable period until such time of any
increase in base salary whereupon it shall thereafter refer to such increased
amount.
(b) Other
Benefits. In addition, during the Employment Period the Employee shall be
entitled to participate, in accordance with the relevant provisions thereof,
in
all applicable incentive, savings, and retirement plans, practices, policies,
and programs of the Company for which senior management employees are eligible
generally.
(c) All
compensation hereunder shall be subject to all applicable federal and state
withholding, payroll and other taxes.
4. TERMINATION
OF EMPLOYMENT.
(a) Death
or
Disability. The Employee’s employment shall terminate automatically upon the
Employee’s death during the Employment Period. The Company shall be entitled to
terminate the Employee’s employment because of the Employee’s Disability during
the Employment Period. “Disability” means that the Employee has been unable, for
a period of thirty (30) consecutive calendar days, to perform the Employee’s
duties under this Agreement, as a result of physical or mental illness or
injury. A termination of the Employee’s employment by the Company for Disability
shall be communicated to the Employee by written notice, and shall be effective
on the date of receipt of such notice by the Employee (the “Disability Effective
Date”).
(b) By
the
Company.
(i) The
Company may terminate the Employee’s employment during the Employment Period for
Cause or without Cause. A termination of the Employee’s employment with Cause
shall be effective when communicated to the Employee by written or verbal
notice. “Cause” means unacceptable conduct, including:
A. participation
in a fraud or act of dishonesty against the Company;
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B. any
chemical dependence which affects the performance of his duties and
responsibilities to the Company;
C. breach
of
Employee’s fiduciary obligations to the Company;
D. Employee
willfully fails to perform his duties;
E. breach
of
the Company’s policies or any material provision of this Agreement;
F. misconduct
resulting in loss to the Company or damage to the reputation of the Company;
or
G. onduct
by
the Employee which, in the determination of the Company’s Board of Directors,
demonstrates unfitness to serve.
(ii)
“Without
cause” means termination of Employee’s employment for some reason other than
that listed in Paragraph 4(b)(i) above. A termination of the Employee’s
employment Without Cause shall be effective when communicated to the Employee
by
verbal or written notice.
(c) By
the
Employee. The Employee may signify his intention to terminate his employment
at
any time upon the giving of thirty (30) days’ notice (“Notice Period”) to the
Company of his intent to do so. Upon the expiration of the Notice Period
the
termination will be effective and the Date of Termination will be effective
as
referred to below. The Company reserves the right to accelerate the effective
“Date of Termination” in its discretion after the inception of the Notice
Period.
(d) Date
of
Termination. The “Date of Termination” means the date of the Employee’s death,
the Disability Effective Date, the date on which the termination of the
Employee’s employment by the Company for Cause or without Cause is effective, or
the date on which the termination of the Employee’s employment by the Employee
is effective, as the case may be.
5. OBLIGATIONS
OF THE COMPANY UPON TERMINATION.
(a) Termination
by the Company Without Cause or by the Employee for Good Reason. If the Company
terminates the employment of the Employee without Cause (as defined in Section
4(b) above) or if the Employee terminates her employment for Good Reason
(as
defined below):
| (i) |
the
Company shall pay the Employee the portion of his base salary in
termination as he may be entitled to receive for services rendered
prior
to the date of such termination;
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| (ii) |
for
a period of three (3) months following the date on which the Employee’s
employment with the Company terminates, the Company shall continue
to pay
the Employee her base salary in effect at the time of her termination
of
employment and shall continue to provide the Employee with all benefits
specified in this Agreement, with no adverse tax consequences to
the
Employee, as if she had remained employed by the Company pursuant
to this
Agreement during the entire such three (3) month period;
and
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For
purposes of this Agreement, the Employee shall be deemed to have terminated
her
employment for “Good Reason” if she voluntarily terminates his employment with
the Company under any of the following circumstances:
| (i) |
any
demotion or diminution in the Employee’s position, title, reporting
position or duties;
|
| (ii) |
relocation
of the Employee’s office to a location more than thirty (30) miles outside
of Research Triangle Park, North Carolina;
or
|
| (iii) |
any
material breach of this Agreement by the
Company.
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(b) By
the
Company for Cause; By the Employee; Death or Disability. If the Employee’s
employment is terminated by the Company for Cause during the Employment Period,
if Employee terminates employment during the Employment Period or if the
Employee’s employment is terminated by reason of the Employee’s death or
disability during the Employment Period, the Company shall pay the Employee
the
Annual Base Salary (then in effect) through the Date of Termination and the
Company shall have no further obligations under this Agreement.
6. EXPENSES.
The Company agrees to reimburse the Employee for reasonable and necessary
expenses incurred by the Employee in the furtherance of the Company’s business
in accordance with such procedures as the Company may from time to time
establish.
7. REPRESENTATIONS
AND WARRANTIES OF THE EMPLOYEE. The Employee represents and warrants
that:
(a) the
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 the Employee’s knowledge, the Employee is under no physical or mental
disability which will render 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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8. COVENANT
NOT TO COMPETE. The Employee covenants that during the “Noncompetition Period,”
as defined in paragraph 14, and within the “Noncompetition Area,” as
defined in paragraph 15, 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 16. Specifically, but without limiting the foregoing, the
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 system); (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.
9. NONDISCLOSURE
COVENANT.
(a) The
parties acknowledge that the Company is 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 the
Employee’s employment with the Company will involve the Employee’s access to and
work with such information. The Employee acknowledges that his relationship
with
the Company is a confidential relationship. The 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
the 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 other than in the performance of the Employee’s
duties in the employment by the Company. The Employee’s agreement not to
disclose Confidential Data shall apply to all Confidential Data, whether
or not
the Employee participated in the development thereof. Upon termination of
employment for any reason, the Employee will return to the Company all
documents, notes, programs, data and any other materials (including any copies
thereof) in his/her possession.
(b) For
purposes of this Agreement, the term “Confidential Data” shall include any and
all information related to the business of the Company, or to its 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; information concerning pricing and pricing
policies; marketing techniques; suppliers; methods and manner of operations;
and
information relating to the identity, needs and location of all past, present
and prospective customers. 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 that any breach of
the
terms of this paragraph shall be a material breach of this
Agreement.
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10. NONSOLICITATION
COVENANT. The Employee covenants that during the Noncompetition Period 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 for the purpose of soliciting
or
providing any product or service similar to that provided by the Company
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. The Employee
further covenants that during the Noncompetition Period he shall not induce
or
attempt to induce any person to leave the employ of the Company.
11. INVENTIONS.
All inventions, designs, improvements and developments made by the 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 which pertain to the Business (the “Developments”), shall become
and remain the property of the Company. The Employee shall disclose promptly
in
writing to the Company all such Developments. The 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, the Employee shall assign,
and
hereby assigns, to the Company, all of the 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, the 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 full legal title
to
such Developments. The Employee shall assist and cooperate with the Company
or
its representatives in any controversy or legal proceeding relating to such
Developments, or to any patents, copyrights or trade secrets with respect
thereto. If for any reason the Employee refuses or is unable to assist the
Company in obtaining or enforcing its rights with respect to such Developments,
the Employee hereby irrevocably designates and appoints the Company and its
duly
authorized agents as the 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 rights in the Developments. The Employee expressly acknowledges that
the special foregoing power of attorney is coupled with an interest and is
therefore irrevocable and shall survive (i) the Employee’s death or incompetency
and (ii) any termination of this Agreement.
12. INDEPENDENT
COVENANTS. Each of the covenants on the part of the Employee contained in
paragraphs 8, 9, 10, and 11 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 the Employee against the Company, whether predicated on this Agreement
or otherwise, shall not constitute a defense to the enforcement by the Company
of any such covenant.
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13. REASONABLENESS;
INJUNCTION. The Employee acknowledges that the covenants contained in this
agreement are reasonably necessary and designed for the protection of the
Company and its 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 the Employee and the
general public. The Employee further acknowledges that violation of the
covenants would immeasurably and irreparably damage the Company, and by reason
thereof the Employee agrees that for violation or threatened violation of
any of
the provisions of this Agreement, the Company shall, in addition to any other
rights and remedies available to it, at law or otherwise, by entitled to
any
injunction to be issued by any court of competent jurisdiction enjoining
and
restraining the Employee from committing any violation or threatened violation
of this Agreement. The Employee consents to the issuance of such
injunction.
14. NONCOMPETITION
PERIOD. This Agreement shall remain enforceable during the Employee’s employment
with the Company and for a period of two years after termination of the
Employee’s employment 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).
15. NONCOMPETITION
AREA.
(a) The
Employee acknowledges and agrees that the Company does business on an
international basis and that the Employee will assist Company in developing
Company’s business in both the United States and Europe, with customers
throughout the United States and additionally existing in Europe, particularly
servicing France, Spain, the United Kingdom and Germany, and that any breach
of
the Employee’s covenants contained herein would materially damage the Company,
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:
(b) The
State
of North Carolina;
(c) Any
state
other than North Carolina where Company conducts the “Business” and in or for
which the Employee assists or performs services assisting Company;
(d) Any
political subdivision of foreign countries where Company does “Business” or will
do “Business” during the period of employment; and
(e) Any
other
state, country, or political subdivision where Company does “Business” and in or
for which the Employee assists or performs services assisting
Company.
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16. BUSINESS.
For the purposes of this Agreement, the “Business” shall include any business,
service, or product engaged in, provided, or produced by the Company 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, legal services, 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 immediately prior to the date
of
termination of Employee’s employment or in which the Company shall at the time
of termination of Employee’s employment with the Company be actively preparing
to enter.
17. MISCELLANEOUS.
(a) This
Agreement shall be subject to and governed by the substantive laws of the
State
of North Carolina, without giving effect to the conflicts of laws provisions
thereof. The Employee hereby submits to the jurisdiction and venue of the
state
and federal courts of North Carolina.
(b) The
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.
(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) This
Agreement shall not be assignable without the written consent of the Company
and
the Employee.
(f) This
Agreement shall inure to the benefit of and be binding upon the Company and
it
successors and assigns.
(g) 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 and the Employee.
18. This
Agreement terminates the Employment Agreement dated September 11, 2001, as
amended to date. Except for that agreement, all other agreements between
the
Company and Employee remain in full force and effect.
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IN
WITNESS WHEREOF, the parties executed this Agreement as of the day and year
first above written.
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SMART
ONLINE, INC.
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By:
/s/ Xxxxxxx Xxxxx
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Title:
CEO
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WITNESS:
/s/ Xxxxx Xxxxxxx
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EMPLOYEE:
/s/ Xxxxxx Xxxx
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