Exhibit 10.4
EMPLOYMENT AGREEMENT
BETWEEN XXXXXXX.XXX, INC., SURPLUS SOFTWARE,
INC. AND XXXXXXXX X. XXXXXXX
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made effective the 25th day
of October, 1999 (the "Effective Date"), by and among Xxxxxxx.xxx, Inc., a
corporation organized under the laws of the state of Washington (the "Company"),
Surplus Software, Inc., a wholly owned subsidiary of the Company and
corporation organized under the laws of the state of Oregon ("Surplus
Software"), and Xxxxxxxx X. Xxxxxxx ("Employee"). Employee is currently serving
as an officer of Surplus Software and employee of the Company. The parties now
wish to secure their future relationship. Accordingly, and in consideration of
the mutual covenants and conditions set forth in this Agreement, the parties
agree as follows:
ARTICLE 1 - TERM
1.1 Term
This Agreement will extend from the Effective Date through Janaury 22, 2001;
provided that this Agreement will be renewed automatically for a period of three
(3) years following its termination unless, prior to the date six months from
the end of any such three-year period, either party provides notice to the other
of its desire not to renew the Agreement.
ARTICLE 2 - COMPENSATION
2.1 Salary
Employee will receive an annual gross salary not less than the annual gross
salary Employee was receiving immediately prior to the Effective Date.
2.2 Additional Benefits
During the term of this Agreement, the Company will provide Employee with
insurance, vacation, sick leave and other benefits as are approved by the
Company's Board of Directors and as are generally provided to management-level
employees holding similar positions with the Company.
ARTICLE 3 - DUTIES OF EXECUTIVE
3.1 Duties
During the term of this Agreement a.) Employee's title shall be at least
commensurate in all material respects with the most significant of those held at
any time during the 90-day period immediately preceding the Effective Date and
b.) Employee's status, duties and responsibilities shall be reasonably
commensurate with title; Employee will serve as an officer of Surplus Software
or the Company or both, as determined by the Company in its sole discretion, and
shall perform such duties as lawfully assigned to Employee. The Employee shall
report to the Chief Executive Officer of the Company.
ARTICLE 4 - TERMINATION
4.1 Termination Prior to the End of Term
a) Either the Company, on the one hand, or the Employee, on the other hand
may terminate this Agreement without cause.
(i) In the event that Employee exercises his right under this
subsection, he shall provide notice of his intent to terminate the Agreement not
less than one (1) month before the effective date of the termination.
Regardless of whether the Company elects to have Employee work through the
notice period, or elects to make Employee's resignation effective prior to the
end of that notice period, Employee shall be paid all compensation and benefits
earned through the notice period.
(ii) In the event that the Company exercises its right under this
subsection, the termination shall be effective immediately, or at such later
time as set forth in the notice (but in no event more than thirty days after the
date of the notice) and the Company shall pay to Employee the Severance Benefits
specified in Section 4.2.
The Company may, at its option, terminate this Agreement prior to the end of the
term for Cause. For purposes of this Agreement, "Cause" means the occurrence of
one or more of the following events: (a) failure or refusal to carry out any
lawful duties assigned to him by the Board of Directors of the Company or
Surplus Software or the Chief Executive Officer of the Company or any directions
of the Board of Directors of the Company or Surplus Software reasonably
consistent with such duties; (b) the conviction of the Employee of, or the
entrance by or on behalf of the Employee of a plea of nolo contendere with
respect to, violation of a state or federal criminal law (excluding non-felony
driving or traffic offenses) or other criminal act involving moral turpitude;
(c) any fraud, dishonesty or deception by the Employee that is related
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to his duties for the Company; (d) any incident materially compromising the
Employee's ability to represent the Company with the public; (e) current illegal
use of drugs by the Employee; (f) any act or omission by the Employee which
substantially impairs the Company's business, goodwill or reputation; or (g) any
other material violation by the Employee of any provision of this Agreement. In
the event of a termination under this paragraph, Employee shall be paid all
compensation and benefits earned through the date of termination, but shall not
be entitled to receive any further compensation or benefits other than payments
already due him as of that date. Upon notice by the Company of any action or
failure to act constituting Cause under any of clauses (a), (d) or (f) or (g) of
the second sentence of this paragraph (but excluding notice of Cause pursuant to
clause (g) based on any violation of Section 5 of this Agreement, for which
there is no cure period), the Company will provide the Employee a reasonable
opportunity to cure such act or failure to act, which period shall be ten (10)
work days.
b) Employee may, at his option, terminate this Agreement prior to the end
of the term for Good Reason. For purposes of this subsection, Employee will
have Good Reason to terminate this Agreement if the Company violates Section 3.1
above; the Employee is relocated to a facility of the Company that is not within
fifty miles of Portland, Oregon; or the Company has materially breached its
obligations under the Agreement (provided that the Company has been given
warning and notice of its alleged material breach and a reasonable opportunity
to correct the alleged material breach).
c) This Agreement shall terminate in the event that Employee dies, or is
unable to perform his duties as a result of a physical or mental disability at
any time during the term of this Agreement. In the event of a termination under
this subsection, Employee or his estate shall be paid all compensation and
benefits earned through the date of such termination, but shall not be entitled
to receive any compensation or benefits other than payments already due him as
of that date; provided that Employee's right to exercise any stock option
awarded pursuant to the XXXXXXX.XXX, INC. 1997 NONOFFICER EMPLOYEE STOCK OPTION
PLAN, as amended or restated from time to time (the "EGGHEAD PLAN"), shall be
governed by the terms of the EGGHEAD PLAN and the letter agreement evidencing
such option. For purposes of this Agreement, Employee will be considered unable
to perform his duties as a result of a physical or mental disability if that
disability exists, or is reasonably expected to exist, for more than ninety (90)
days in any twelve consecutive calendar months.
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4.2 Severance Benefits
In the event that the Company exercise its rights under Section 4.1(a)(ii)
(termination without Cause) or Employee exercises his rights under Section
4.1(b) (resignation for Good Reason), Employee will receive the following
severance benefits:
a) Commencing on the date of termination or resignation (the "Termination
Date"), the Company shall pay the Employee his then current base salary for a
period of twelve months, less any lawful withholding (such amount of twelve
months' salary, in aggregate, the "Initial Severance Amount"). The Initial
Severance Amount shall be paid in a lump sum payment within ten days of the
Termination Date.
b) If the Employee has failed to commence alternative employment at any
time prior to the first anniversary of the Termination Date (such period, the
"Initial Period"), then from the end of the Initial Period, the Company will
continue to pay the Employee at the rate of his base salary as of the
Termination Date, less any lawful withholding, in monthly installments for a
period (the "Extension Period") that will terminate on the earlier of: (i) the
end of the sixth month after the end of the Initial Period, or (ii) the date
that the Employee commences alternative employment. From time to time during
the Extension Period, but in no event more frequently than monthly, the Employee
will be available by telephone to update the Chief Executive Officer of the
Company on the status of his efforts to obtain alternative employment, and he
will notify the Company in writing within ten days after accepting alternative
employment. Upon accepting new employment, the Employee will not unreasonably
delay commencing work for his new employer in order to continue receiving
payments during the Extension Period. For purposes of this Agreement,
"alternative employment" is defined as any business relationship (excluding
consulting relationships of less than one month) from which the Employee
receives monthly W-2/1099 wages of at least 50% of his monthly salary as of the
Termination Date.
c) Continued coverage under the Company's medical, dental and vision
benefit programs at the same level that Employee received prior to the
termination for a period of eighteen months, or until Employee finds employment
which provides comparable benefits, whichever comes first. This period of paid
benefits will be in addition to any COBRA rights Employee may have under
applicable law.
d) The Company and Employee shall enter into a Pledge Agreement in
substantially the form of Attachment B for the purposes of holding any sum that
may become payable pursuant to Section 4.2(a) in the event of a termination or
resignation.
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ARTICLE 5 - RESTRICTIVE AGREEMENTS
5.1 Confidentiality
The Employee agrees not to use or disclose any confidential information except
as required to fulfill his duties and responsibilities as an employee of the
Company. As used herein, "confidential information" means all trade secrets,
non-public information, methods, strategies, practices, computer programs and
systems, research and related documentation, customer lists and other data,
marketing plans, financial information, and all other compilations of
information that relate in any matter to the business of the Company or any of
the direct or indirect subsidiaries of the Company (such subsidiaries,
including, but not limited to, Surplus Software, the "Affiliate Entities") or
any of them. The Employee acknowledges that all confidential information is the
proprietary and confidential property of the Company or the Affiliate Entities.
The Employee further agrees to return all tangible items containing such
confidential information, wherever located and in whatever form, in addition to
all other property belonging to the Company or the Affiliate Entities, on or
before the Termination Date.
5.2 Non-Solicitation
The Employee agrees that during the Initial Period and Extension Period (if any)
he will not individually, or in conjunction with any other person, corporation
or other entity, in any capacity, directly or indirectly, (i) solicit or recruit
any employee of or consultant to the Company or any of the Affiliate Entities or
(ii) cause or seek to cause (A) any employee of or consultant to the Company or
any of the Affiliate Entities to terminate his or her employment or consulting
relationship with the Company or any of the Affiliate entities or (B) any
customer, client or vendor of the Company or any of the Affiliate Entities to
alter or terminate any business relationship with the Company or any Affiliate
Entities.
5.3 Non-Competition
For a period of eighteen months from the Termination Date, the Employee shall
not, directly or indirectly, be employed by, own, manage, join, control or
participate in the ownership, management, operation or control of or be
connected with (as that phrase is described below) any person or entity engaged
in any operations in competition with the Company or any of the Affiliate
Entities in the retail sale of computer software or computer hardware, or both,
through stores, mail order, telephonic means or electronic commerce, including,
without limitation, through the Internet. For purposes of this Section 5.3, the
following shall be deemed to be persons or entities not engaged in operations in
competition with the Company or any of its Affiliated Entities: any
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person or entity if the sale of computer software and computer hardware
generates less than ten (10) percent of its total annual revenue, and less than
ten (10) percent of the total annual revenue of the division of such person or
entity, if any, which Employee is connected with. The Board of Directors of the
Company may, in its sole discretion, release the Employee from any or all of his
obligations pursuant to this Section 5.3, provided that such release shall not
be effective unless in writing. The Employee shall be deemed to "be connected
with" such business if such business is carried on by a partnership, corporation
or association of which he is an officer, director, employee, partner, member,
consultant or agent; provided, however, that nothing herein shall prevent the
purchase or ownership by the Employee of shares which constitute less than 2% of
the outstanding equity securities of a publicly or privately held corporation.
5.4 Violation
The Employee acknowledges that his confidentiality, nonsolicitation and non-
competition obligations under this Article 5 are material inducements to the
Company entering into this Agreement, that his violation thereof shall
constitute a material breach of this Agreement and that any disclosure or action
by the Employee in violation of this Article 5 will cause serious and
irreparable injury to the Company for which there is no adequate remedy at law.
If, upon investigation, the Company determines that the Employee is in violation
of this Article 5, then the Company will give the Employee written notice of the
violation, and if the Employee shall not have cured such violation within four
business days of such notice, then the Company may retain as liquidated damages
the balance of the payments coming due to the Employee under Sections 4.2
hereof, if any, and may obtain immediate and permanent injunctive relief in any
court of competent jurisdiction. The rights and remedies set forth in this
Article 5 are in addition to all other legal, equitable and contractual rights
and remedies available to the Company.
ARTICLE 6 - GENERAL
6.1 Further Assurances
Each party will, at its own expense and without expense to the other parties,
execute and deliver such further agreements and other documents and do such
further acts and things as any of the other parties reasonably requests to
evidence, carry out or give full force and effect to the intent of this
Agreement.
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6.2 Severability
If any provision of this Agreement is unenforceable or invalid for any reason it
will be severable from the remainder of this Agreement and, in its application
at that time, this Agreement will be construed as though such provision was not
contained herein and the remainder will continue in full force and effect and be
construed as if this Agreement had been executed without the invalid or
unenforceable provision.
6.3 Waiver and Consent
No consent or waiver, express or implied, by any party to or of any breach or
default by any other party of any or all of its obligations under this Agreement
will be valid unless it is in writing and stated to be a consent or waiver
pursuant to this section.
6.4 Notice
Every notice to be given pursuant to this Agreement by one party to another
party will be in writing and will be delivered or sent by registered or
certified mail or by personal delivery. Notices shall be effective upon
receipt.
6.5 Binding Effect
This Agreement will inure to the benefit of and be binding upon the respective
legal representatives and successors.
6.6 Counterparts
This Agreement may be executed in any number of counterparts with the same
effect as if all parties to this Agreement or such other writing had signed the
same document and all counterparts will be construed together and will
constitute one and the same instrument.
6.7 Headings
The section headings in this Agreement are for reference and shall not by
themselves determine the construction or interpretation of the Agreement.
6.8 Arbitration
All disputes between the parties relating to this Agreement shall be submitted
to binding arbitration in the City of Vancouver, Washington. Any party hereto
may commence the arbitration by delivery of a written notice to the other
parties hereto, describing the issue in dispute and its position with regard to
the issue. If the parties
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are unable to agree on an arbitrator within thirty (30) days following delivery
of such notice, the arbitrator shall be selected by using the selection
procedures established by the American Arbitration Association. Discovery shall
be allowed in connection with any such arbitration to the same extent permitted
by the Washington Rules of Civil Procedure but any party may petition the
arbitrator to limit the scope of such discovery, in which event the arbitrator
shall determine the extent of discovery allowable in connection with the dispute
in question. Except as otherwise provided in this Agreement, the arbitration
shall be conducted in accordance with the rules of the American Arbitration
Association then in effect. The award of the arbitrator shall be final and
binding, and judgment upon an award may be entered in any court of competent
jurisdiction
6.9 Governing Law
This Agreement shall be governed by and construed in accordance with the laws of
the State of Washington without application of the principles of conflicts of
laws.
6.10 Effect on Other Agreements
In consideration of the mutual agreements herein, the Amended and Restated
Employment Agreement, between Employee and Surplus Software, dated May 15, 1996,
as amended by the Employment Agreement Amendment (the "Amendment"), between
Employee and Surplus Software, effective April 30, 1997, is hereby terminated in
all respects, except that Section 8 of the Amendment is not terminated and
remains in full force and effect provided that in the event of any conflict
between the terms and provisions of Section 5.1 hereof and the confidentiality
provisions of that certain Assignment of Inventions and Confidentiality
Agreement referenced in Section 8 of the Amendment, the provisions of Section
5.1 hereof shall control. Except as set forth in the foregoing sentence, this
Agreement constitutes the entire agreement between the parties with respect to
the subject matter covered herein and all prior understandings and agreements
with respect to such subject matter, whether oral or written, are hereby
superseded and nullified. This Agreement does not in any manner supersede or
affect that certain Rescission Agreement between the Company and Employee,
entered into as of July 13, 1999, or that certain Retention Bonus Agreement
between the Company and Employee, entered into as of July 13, 1999.
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EXECUTED as of the day and year first written above.
XXXXXXX.XXX, INC.
By /s/ XXXXXX X. XXXXX /s/ XXXXXXXX X. XXXXXXX
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Its CEO EMPLOYEE
---------------------------- 10/25/99
SURPLUS SOFTWARE, INC.
By /s/ XXXXX X. XXXXXX /s/ XXXXXXXX X. XXXXXXX
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Its Xxxxx Xxxxxx, Secretary 10/25/99
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