EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT"), is made and entered into as of
the 16 day of November, 1998, by and between NETGATEWAY, a Nevada corporation
(together with its subsidiaries, successors and assigns, the "COMPANY"), and
XXXX XXXXXXX XXXXXX ("EMPLOYEE").
R E C I T A L S
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A. UniNet has developed and is the sole owner of a computer software
program used by Shopping Planet and UniNet. The program is a small business
operating system that includes inventory management, purchasing management,
order fulfillment, order status, commission calculator, Web-based order
processing and payment processing (the "Software");
B. Concurrently with the execution of this Agreement, the Company and
UniNet have entered into an agreement under which the Company has agreed,
subject to the terms and conditions thereof, to acquire the Software;
C. Prior to the date of this Agreement, the Employee has served as a
senior programmer for Pinamar Corporation, doing business as Shopping Planet
("SHOPPING PLANET") and UniNet Imaging, Inc. ("UNINET") and has been the chief
architect of the Software described below;
D. Employee is not a United States citizen and is currently allowed in
the United States pursuant to an H-1 Visa and it will be necessary for Employee
to apply for a change of company to update his Visa ("RESIDENCY STATUS");
E. The commencement of employment under this Agreement is contingent
upon the successful completion of application to change Residence Status and the
reasonable assurance that Employee will be able to remain in the United States
for the three (3) year term of this Agreement;
F. Concurrently with the execution of this Agreement, Company is
purchasing the Software from UniNet, a company in which Employee has an
ownership interest. It is acknowledged and understood that the Covenant Not to
Compete provisions set forth herein are given by Employee as additional
consideration for the purchase of the Software by Company from UniNet;
G. The Company desires to employ the Employee and to enter into this
Agreement embodying the terms of such employment and the Employee desires to
accept such employment and to enter into this Agreement.
AGREEMENT
NOW, THEREFORE, on the basis of the foregoing recitals and in
consideration of the premises and mutual covenants contained herein and for
other good and valuable consideration, the Company and the Employee
(individually a "PARTY" and together the "PARTIES") agree as follows:
1. DEFINITIONS.
1.1 "AFFILIATE" shall mean any person or entity controlling,
controlled by or under common control with the Corporation.
1.2 "BASE SALARY" shall mean the salary provided for in Section 3 of
this Agreement or any increased salary (a) granted to the Employee by the Board,
or (b) pursuant to the provisions of Section 3.
1.3 "BOARD" shall mean the Board of Directors of the Company.
1.4 "CAUSE" shall mean (a) the Employee is convicted of a felony
involving moral turpitude, or (b) the Employee, in carrying out his duties under
this Agreement, is guilty of continued willful gross neglect or continued
willful gross misconduct resulting, in either case, in material economic harm to
the Company, unless such act, or failure to act, was believed by the Employee in
good faith to be in the best interests of the Company or any Affiliate.
1.5 "COMPANY" shall mean NetGateway, Inc., together with its
subsidiaries, successors and assigns.
1.6 "DISABILITY" shall mean the Employee's inability to render, for a
period of six consecutive months, full and effective services hereunder by
reason of permanent mental or physical disability, whether resulting from
illness, accident or otherwise; PROVIDED, HOWEVER, that in no event will the
Employee be considered disabled for the purposes of this Agreement unless he is
deemed disabled pursuant to the Company's long-term disability plan and the
Special LTD Policy.
1.7 "GROSS REVENUE" shall mean all gross sales proceeds and other
gross income that is earned, accrued or received by the Company or any Affiliate
during any specified period.
1.8 "TERM OF EMPLOYMENT" shall mean, initially, the period specified
in subsection 2.2 below, provided that such initial Term of Employment shall
automatically be extended thereafter for successive 12 month periods if neither
Party has advised the other in writing at least 12 months prior to the end of
the then current Term of Employment that such Term of Employment shall not be
extended for an additional 12 month period.
2. TERM OF EMPLOYMENT, POSITIONS AND DUTIES.
2.1 EMPLOYMENT ACCEPTED. The Company hereby employs the Employee, and
the Employee hereby accepts employment with the Company, for the Term of
Employment, in the position(s) and with the duties and responsibilities set
forth below, and upon such other terms and conditions as are hereinafter stated.
2.2 INITIAL TERM OF EMPLOYMENT. The initial term of employment shall
commence upon the date of this Agreement and shall terminate upon the close of
business on the 3rd anniversary of the date of this Agreement.
2.3 DUTIES AND RESPONSIBILITIES. During the Term of Employment, the
Employee shall be employed as an Application Architect by the Company or one of
its subsidiaries. The Employee in carrying out his duties under this Agreement
shall report to such officers or managers as the Company shall from time to time
designate. During the Term of Employment, the
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Employee shall devote his full business time and attention to the business
and affairs of the Company and shall use his best efforts, skills and
abilities to promote the Company's interests.
3. SALARY.
3.1 BASE SALARY. During the Term of Employment, the Employee shall be
entitled to receive a Base Salary payable no less frequently than in equal
semi-monthly installments at an annualized rate of Sixty Thousand Dollars
($60,000.00) per year.
3.2 EQUITY. In addition to the Base Salary, the Employee shall receive
as additional salary, stock options with an equity component valued at Forty
Thousand Dollars ($40,000.00) (the "EQUITY PORTION"). The Equity Portion for any
year shall be determined at the beginning of the year as follows. The average
closing price for the NetGateway stock over the five (5) days immediately
preceding the commencement of employment shall be determined (the "AVERAGE
PRICE"). For these purposes, only days in which stock is actually traded shall
be counted. The exercise price for Employee's options will then be set at
one-half (1/2) the Average Price and the difference between the exercise price
and the Average price will be determined and shall be referred to herein as the
"MARGIN AMOUNT." The amount of options to be granted will be determined by
dividing the Equity Portion by the Margin Amount and rounding the result off to
the next highest whole number to avoid options for fractional shares. The amount
of options so determined shall be earned by and issued to Employee throughout
the year on a monthly basis.
4. EMPLOYMENT BENEFIT PROGRAMS. During the Term of Employment, the
Employee shall be entitled to participate in all employee benefit programs made
available to the Company's Employees or salaried employees generally, as such
programs may be in effect from time to time, including, without limitation,
pension and other retirement plans, profit sharing plans, group life insurance,
accidental death and dismemberment insurance, hospitalization, surgical, major
medical coverage, long-term disability, sick leave (including salary
continuation arrangements), vacations, holidays and other employee benefit
programs sponsored by the Company, subject to any limitations imposed by
applicable Canadian or US law.
5. BUSINESS EXPENSE REIMBURSEMENT AND VACATIONS.
5.1 EXPENSE REIMBURSEMENT. During the Term of Employment, the Employee
shall be entitled to receive reimbursement by the Company for all reasonable,
out-of-pocket expenses incurred by him in performing services under this
Agreement, provided, Employee obtains the prior written approval of the Company
to such expenditures.
5.2 VACATIONS. During the Term of Employment, the Employee shall also
be entitled to vacation time of at least 2 weeks per year, such time to accrue
ratably throughout the year.
6. TERMINATION OF EMPLOYMENT.
6.1 TERMINATION. In the event of the Employee's employment is
terminated for any reason, the Employee shall be entitled to:
(a) such portion of the Base Salary as has been earned but not
paid on the date of termination;
(b) any bonus awarded but not yet paid;
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(c) reimbursement for expenses incurred but not paid prior to
such termination of employment;
(d) any stock or stock options accrued and vested but not yet
paid on the date of termination;
(e) in the case of death, the Employee's rights to other
compensation and benefits as may be provided in applicable plans and programs of
the Company shall be determined according to the terms and provisions of such
plans and programs.
6.2 TERMINATION BY THE COMPANY FOR CAUSE. In the event the Company
terminates the Employee's employment for Cause, the Employee shall be given
written notice that the Company intends to terminate his employment for Cause.
Such written notice shall specify the particular act or acts, or failure to act,
which is or are the basis for the decision to so terminate the Employee's
employment for cause. The Employee shall be given the opportunity within 30 days
of the receipt of such notice to meet with the Board to defend such act or acts,
or failure to act, and the Employee shall be given 30 days after such meeting to
correct such act or failure to act. Upon failure of the Employee, within 30
days, to correct such act or failure to act, the Employee's employment by the
Company shall automatically be terminated under this Section for Cause.
Anything herein to the contrary notwithstanding, if, following a
termination of the Employee's employment by the Company for Cause based upon the
conviction of the Employee for a felony, such conviction is overturned on
appeal, the Employee shall be entitled to the payments and the economic
equivalent of the benefits he would have received if his employment had been
Terminated Without Cause.
6.3 VOLUNTARY TERMINATION. A "VOLUNTARY TERMINATION" shall mean a
termination of employment by the Employee on his own initiative other than (i) a
termination due to Disability, (ii) a termination due to the expiration of the
Term of Employment. Such a termination shall not be deemed a breach of this
Agreement and shall entitle the Employee to all of the rights and benefits to
which he would be entitled in the event of a termination for Cause.
7. INDEMNIFICATION.
7.1 GENERAL. The Company agrees that if the Employee 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 of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is alleged action in an official
capacity as a director, officer, member, employee or agent while service as a
director, officer, member, employee or agent, he shall be indemnified and held
harmless by the Company to the fullest extent authorized by California law, as
the same exists or may hereafter be amended, against all expense, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) reasonably incurred or
suffered by the Employee in connection therewith.
7.2 NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this
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Section shall not be exclusive of any other right which the Employee may have or
hereafter may acquire under any statute, provision of the certificate of
incorporation or bylaws of the Company, agreement, vote of stockholders or
disinterested directors or otherwise.
8. COVENANT NOT TO COMPETE OR ENGAGE IN CERTAIN OTHER ACTS.
8.1 NON-COMPETE. During the Term of Employment and for one (1) year
thereafter, the Employee shall not, directly or indirectly, except when acting
on behalf of the Company or on behalf of any affiliate of the Company, engage in
any business whether as an employee, consultant, partner, principal, agent,
representative or stockholder (other than as a stockholder of less than a ten
percent equity interest) or in any other corporate or representative capacity,
if it involves:
(a) business to business internet commerce in the Southern
California area (the "NON-COMPETE AREA"). For purposes hereof, Southern
California shall mean any area in Los Angeles, Orange or Ventura counties.
(b) rendering services or advice pertaining to business to
business Internet Commerce to, or on behalf of, any person, firm or corporation
in the Non-Compete Area; or
(c) engaging in, or rendering services or advice pertaining to
any other line of business that the Company was actively conducting or actively
considering during the Term of Employment in competition with the Company in the
Non-Compete Area.
The parties acknowledge that Employee currently holds and will continue to hold
after the commencement of the term of this Agreement, an interest in Pinamar
Corporation and UniNet Imaging, Inc.
8.2 NON-ASSISTANCE; NON-DIVERSION. The Employee agrees that for the
period described in subparagraph 8.1(a) above, except when acting on behalf of
the Company or any affiliate of the Company, he shall not:
(a) assist any other entity in eCommerce business or internet
commerce or training business (the "RELEVANT BUSINESSES") or any other line of
business that the Company was actively conducting or was actively considering
during the Term of Employment in the Non-Compute Area;
(b) take any action to divert any Relevant Businesses business
from the Company or any business which was under active consideration by the
Company during the Term of Employment; or
(c) induce customers, agents, franchisees or other persons under
contract or franchise or otherwise doing business with the Company, to
terminate, reduce or alter business with or from the Company.
8.3 NON-SOLICITATION. The Employee agrees that for the Term of
Employment and for the period described in subsection 9.1 above, except when
acting on behalf of the Company or any affiliate of the Company, he shall not
induce any persons in the employment of the Company to (a) terminate such
employment, (b) accept employment with anyone other than the Company or an
affiliate of the Company or (c) interfere with the business of the Company in
any material manner.
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8.4 The Employee agrees that the provisions of this Section shall
survive the termination of this Agreement and the termination of the Employee's
employment.
9. COVENANTS TO PROTECT CONFIDENTIAL INFORMATION.
9.1 CONFIDENTIAL INFORMATION. The Employee shall not, during the Term
of Employment or for a period of one year thereafter, without the prior written
consent of the Company, divulge, disclose or make accessible to any other
person, firm, partnership or corporation confidential information except while
employed by the Company in the business of and for the benefit of the Company or
when required to do so by a court of competent jurisdiction.
9.2 NOTES, MEMORANDA AND OTHER ITEMS. Except as may be otherwise
consented to in writing by the Company, the Employee shall proffer to an
appropriate officer of the Company, at the termination of his employment, all
memoranda, diaries, notes, records, cost information, customer lists, marketing
plans and strategies, and any other documents relating or referring to any
Confidential Information made available to the Employee by the Company in his
possession at such time.
10. EFFECT OF AGREEMENT ON OTHER BENEFITS. Nothing in this Agreement
shall curtail the Employee's entitlement to full participation in the Employee
compensation, employee benefit and other plans or programs in which senior
Employees of the Company are eligible to participate.
11. BENEFICIARIES/REFERENCES. The Employee shall be entitled to select
(and change) a beneficiary or beneficiaries to receive any compensation or
benefit payable hereunder following the Employee's death, and may change such
election, in either case by giving the Company written notice thereof. In the
event of the Employee's death or a judicial determination of his incompetence,
reference in this Agreement to the Employee shall be deemed, where appropriate,
to refer to his beneficiary, estate or other legal representative. Any reference
to the masculine gender in this Agreement shall include, where appropriate, the
feminine.
12. SURVIVORSHIP. The respective rights and obligations of the Parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section are in addition to the survivorship provisions of any
other section of this Agreement.
13. REPRESENTATION. The Company represents and warrants that it is
fully authorized and empowered to enter into this Agreement and that the
performance of its obligations under this Agreement will not violate any
agreement between the Company and any other person, firm or organization.
14. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the Parties concerning the subject matter hereof and supersedes all
prior agreements, understandings, discussions, negotiations and undertakings,
whether written or oral, between the Parties with respect thereto.
15. ASSIGNABILITY; BINDING NATURE. This Agreement shall be binding
upon and inure to the benefit of the Parties and their respective successors,
heirs and assigns. No rights or obligations of the Company under this Agreement
may be assigned or transferred by the Company except that such rights or
obligations may be assigned or transferred pursuant to a merger or consolidation
in
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which the Company is not the continuing entity, or the sale or liquidation of
all or substantially all of the assets of the Company, provided that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law.
16. AMENDMENT OR WAIVER. No provision in this Agreement may be amended
or waived unless such amendment or waiver is agreed to in writing, signed by the
Employee. No waiver by the Employee of any breach by the other Party of any
condition or provision of this Agreement to be performed by such other Party
shall be deemed a waiver of a similar or dissimilar condition or provision at
the same or any prior or subsequent time.
17. SEVERABILITY. In the event that any provision or portion of this
Agreement, except Section 7, 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. If Section 8 is determined to be invalid or
unenforceable for any reason, in whole or in part, the Employee may terminate
his employment with the Company and he shall immediately be released by the
Company from any obligations or duties under this Agreement and the Company
shall immediately be released by the Employee from any obligations or duties
under this Agreement.
18. HEADINGS. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
19. NOTICES. Any notice given to either Party shall be in writing and
shall be deemed to have been given when delivered personally or sent by
certified or registered mail, postage prepaid, return receipt requested, duly
addressed to the Party concerned at the address indicated below or to such
changed address as such Party may subsequently give notice of:
If to the Company:
NetGateway
000 Xxxxxxxxx, Xxx. 000
Xxxx Xxxxx, XX 00000
Attn: Xxxxxx X. Corlias, Jr.
(Fax: (000) 000-0000)
With a required copy to:
Nida & Xxxxxxx, P.C.
000 Xxxxxxx Xxxxxx
Xxxxx Xxxxxxx, XX 00000
(Fax: (000) 000-0000)
If to the Employee:
With a copy to:
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20. GOVERNING LAW. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of California without reference to
principles of conflict of laws.
21. HEADINGS. The headings of the section contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original, and all of
which counterparts taken together shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
Company:
NETGATEWAY,
a Nevada corporation
By: /s/ Xxxxxx X. Xxxxxxx, Xx.
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Name: Xxxxxx X. Xxxxxxx, Xx.
Title: President
Employee:
/s/ X. Xxxxxx
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XXXX XXXXXXX XXXXXX
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