DETTO TECHNOLOGIES, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of November
18, 2005 (the "Effective Date") by and between Detto Technologies, Inc., a
Delaware corporation ("Company") and Xxxxx Xxxxx (the "Executive"), based on the
following facts:
A. Executive was a founder and employee of Channel Access, a Utah corporation
("TARGET").
B. The Company, the Executive and TARGET have entered into a Purchase Agreement
("Purchase Agreement") to which the form of this Employment Agreement is
attached as Exhibit C
C. Company desires to employ Executive as an employee.
D. Part of the purchase price in the Purchase Agreement is an Earnout (as
defined in the Purchase Agreement), which is delineated below.
Based on the foregoing facts and circumstances and for good and valuable
consideration, Company and Executive agree as follows:
1. Employment.
1.1 Company hereby employs Executive at its location in Orem, Utah, on a
full time basis to perform duties as Vice-President and General Manager and
Executive shall perform services as reasonably assigned by the President or the
Board of Directors of Company consistent therewith.
1.2 Executive shall perform his duties on a full time basis and shall
render his services to the Company in a faithful, diligent and competent manner.
1.3 Unless sooner terminated pursuant to the provisions of this Agreement,
Company shall employ Executive commencing on the Closing Date (as defined in the
Purchase Agreement) which term shall continue until the one year anniversary of
the Closing Date (the "Initial Term"); provided however this Agreement shall be
automatically renewed on the second anniversary of the Closing Date unless
either party gives notice otherwise at lease 90 days prior to such anniversary
of the Closing Date. This Agreement may be sooner terminated as provided herein.
1.4 The term of employment shall be terminated by the death or disability
of Executive. Disability shall mean the inability of Executive to provide the
services specified in this Section 1 for a period of four (4) consecutive
months. In the event of termination pursuant to this Section 1.4, Company shall
pay to Executive (or his estate): (a) any accrued Base Salary as of the
termination date to the extent not theretofore paid; (b) any accrued vacation
pay as of the termination date to the extent not theretofore paid; and (c) any
unreimbursed business expenses of Executive.
1.5 In the event that the employment of Executive is terminated by the
Company without Cause, the Company shall pay to Executive: (a) any accrued Base
Salary as of the termination date to the extent not theretofore paid; (b) any
accrued vacation pay as of the termination date to the extent not theretofore
paid; (c) any unreimbursed business expenses of Executive; and (d) if such
termination occurs during the Initial Term, his salary from such termination
date until the end of the Initial Term (e) if such termination occurs during the
Term, his Earnout that was earned as of the termination date (the (d ) and (e)
collectively "Severance Compensation"). The Severance Compensation is the only
amount which Executive shall receive in the event Executive's employment is
terminated without Cause.
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1.6 As used in this Agreement, the term "Cause" shall mean and refer to a
belief by Company, founded upon fair and honest reasons, that good cause exists
for Executive's termination including, but not limited to, a good faith belief
that any of the following events have taken place:
(a) the breach of this Agreement, after written notice specifying
the breach and the failure of Executive to cure such breach within 30 days of
the receipt of such written notice;
(b) the commission of any unlawful job related act or wrongful act
involving moral turpitude by Executive;
(c) the refusal or failure of Executive to perform his duties as an
employee of the Company consistent with this Agreement, so long as the Company
shall have first given Executive a written notice specifying the refusal or
failure, and Executive shall have failed to cure such refusal or failure within
30 days of the receipt of such written notice;
(d) continuing insubordination by Executive for a period of more
than 7 days after written notice specifying such insubordination with respect to
the direction of Executive by the President or the Board of Directors of the
Company.
1.7 In the event of termination for Cause or voluntary termination by
Executive, Company shall pay to Executive (a) any accrued Base Salary as of the
termination date to the extent not theretofore paid; (b) any accrued vacation
pay as of the termination date to the extent not theretofore paid; and (c) any
unreimbursed business expenses of Executive.
2. Compensation and Expenses.
2.1 As compensation for all services rendered by Executive to Company,
Executive shall receive an annual salary of $72,000 (the "Base Salary"), paid on
the regular pay dates of Company during the period of his employment
2.2 As part of the purchase price as defined in the Purchase Agreement,
Executive will receive Earnouts quarterly based on the following goals. In
addition, Executive shall Earnouts upon achieving goals of financial performance
per Exhibit A.
2.3 Upon presentation of properly completed expense statements on the
Company's expense report forms, Company shall pay or reimburse Executive for all
reasonable expenses incurred or paid by his during his employment pursuant to
this Agreement. As used in this Section 2.3, the term "reasonable" shall mean
that such expenses are consistent with those of executives in comparable
positions with the Company pursuant to the company's employee manual.
2.4 Executive shall be entitled to the same benefits as other executives
in comparable positions with the Company, including paid vacation and such other
benefits as Company in its sole discretion provides. For purposes of determining
the level of benefits, Executive shall be credited with Executive's years of
service with TARGET.
3. Restrictive Covenants.
3.1 Introductory Facts.
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(a) Executive was President and a major shareholder of TARGET which
was acquired by the Company pursuant to the Purchase Agreement (the
"Acquisition"). Executive received consideration for such acquisition. In
conjunction with the Acquisition, the Company acquired all of TARGET's assets,
including its goodwill. Executive acknowledges that TARGET was engaged in the
business of selling software into retail channels (the "Business"). Executive
further acknowledges that TARGET has customers throughout the United States and
Canada, and that the production, promotion, marketing and sales of the Business
were conducted in the United States and Canada.
(b) The covenants set forth herein are an integral part of the
consideration for the transactions contemplated by the Purchase Agreement and
the Company would not enter into the Purchase Agreement but for Executive
entering into an employment agreement containing the covenants set forth in
Section 3 of this Agreement (the "Covenants"). Executive acknowledges that his
receipt of consideration for the Acquisition contemplated by the Purchase
Agreement is adequate consideration for Executive entering into this Agreement
and the Covenants set forth herein. Executive further acknowledges that
Executive's entry into this Agreement and the Covenants set forth herein are a
required part of the Acquisition contemplated by the Purchase Agreement. The
Covenants are intended to protect the goodwill of TARGET's Business. Executive
acknowledges and agrees that the sale of all of his shares in TARGET as part of
the Acquisition constituted a "sale of goodwill" as defined by California
Business & Professions Code ss. 16601. As such, Executive acknowledges and
agrees that the Covenant Not to Compete set forth in Section 3.2 below is exempt
from the restriction set forth in California Business & Professions Code ss.
16600.
(c) Executive, together with the other selling shareholders, have
owned and controlled TARGET and Executive has intimate knowledge of the Trade
Secrets and Confidential Information (as defined below) of TARGET. In addition,
as an executive of the Company, Executive will be provided or will develop
certain Trade Secrets and Confidential Information of the Company. All such
Trade Secrets and Confidential Information shall be owned exclusively by the
Company following the date hereof. "Confidential Information" is non-public
information pertaining to the Business of TARGET being transferred to the
Company, which has been known to Executive as a result of his ownership interest
in and employment of TARGET and information about the Company which is provided
to Executive or other employees or agents of the Company by the Company, or
developed by Executive or other employees or agents of the Company in the scope
of their employment or agency, and obtained by Executive as a result of
employment. To the fullest extent consistent with the foregoing and permitted by
law, Confidential Information also (a) includes, without limitation, the terms
of this Agreement, any and all data or information relating to the Business as
conducted by TARGET, financial affairs of TARGET, information not generally
known to the public concerning the identity of TARGET's customers and
prospective customers, needs of TARGET's customers, TARGET's product
specifications, names of key employees of TARGET, future development of the
business of TARGET and the Company, TARGET's methods of operation, TARGET's
marketing techniques, TARGET's sale prices and profit margins, TARGET's business
plans, TARGET's financial statements, TARGET's personnel data, and TARGET's
business projections, and (b) does not include matters which constitute Trade
Secrets. The term "Trade Secrets" shall have the broadest meaning as defined by
applicable law Notwithstanding anything to the contrary above in this subsection
(c), Executive may use any technical or scientific know-how of Executive solely
in a manner which is not competitive with the Company, provided that such use
will not cause the Company to lose or waive any of its rights in or to any
Confidential Information or Trade Secrets but so long as Executive uses the
know-how in a manner which maintains its confidentiality such use shall not
constitute a loss or waiver.
(d) TARGET's sales occur throughout the United States and Canada.
These introductory facts are a part of the Covenants and shall be
used in construing and interpreting it. Based on the foregoing facts, Executive
agrees as set forth in this Section 3.
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3.2 Covenant Not to Compete.
During the term of employment with the Company and for a period of
two years after the termination of employment with the Company, Executive will
not, directly or indirectly (including in association with his family members or
relatives), as an employee, sole proprietor, partner, equity holder, officer,
director, agent, consultant or other advisor, member or otherwise, carry on any
activities competitive with the Company with respect to the Business in the
United States and Canada.
3.3. Covenant Not to Solicit Customers.
During the term of employment with the Company and for a period of
two years after the termination of employment with the Company, Executive will
not, other than for or on behalf of the Company, solicit, approach or sell any
products or services competitive with the Business to any customer on the list
of customers of TARGET attached as Exhibit B and incorporated by reference; such
list to be amended from time to time by the Company to include new customers.
For avoidance of doubt, nothing contained in this Section 3 shall prohibit
Executive from providing consulting services to customers of TARGET in fields or
product lines other than the Business.
3.4 Covenant Not to Disclose or Use Confidential Information & Trade
Secrets.
During the term of employment with the Company and for the longest
period permitted by applicable law, Executive will not disclose or use for the
benefit of herself or any other person or entity, other than the Company or its
designees, any Trade Secret or Confidential Information of TARGET or the
Company, except as otherwise known to the public at the time of such use, or
except to the extent that such Confidential Information or Trade Secret
constitutes a general body of knowledge about the Business.
3.5 Covenant Against Derogatory Remarks and Interference.
During the term of employment with the Company and for a period of
two years after the termination of employment with the Company, Executive will
not, directly or indirectly, as an employee, sole proprietor, partner,
shareholder, officer, director, agent, consultant or other advisor, member or
otherwise, make any derogatory comments concerning the business of the Company.
3.6 Irreparable Injury.
Executive acknowledges that the violation by Executive of any of the
provisions of Sections 3.2, 3.3, 3.4 and 3.5 of this Agreement will result in
irreparable injury to the Company and that the Company shall be entitled to (i)
the issuance of a temporary restraining order, (ii) a preliminary injunction and
(iii) a permanent injunction to prohibit either the continuation or another
breach of Sections 3.2, 3.3, 3.4 or 3.5 of this Agreement.
3.7 Monetary Damages.
Notwithstanding any provision of this Agreement, the Company may
seek and obtain monetary damages according to proof for any breach of the
Covenants by Executive.
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3.8 Inventions.
All inventions (including any contribution, improvement, ideas and
discoveries, whether or not subject to patent protection) made by Executive
during his employment by the Company, and which are related to the business of
the Company, shall belong to the Company. Executive shall promptly disclose such
inventions to the Company and perform all actions reasonably requested by the
Company in support of his invention and of the ownership thereof by the Company.
4. Notices.
All notices, requests, consents and communications required or permitted
to be given hereunder, shall be in writing and shall be given by commercial
courier service providing proof of delivery to the parties at the following
address (and all such notices shall be effective upon receipt):
If to the Company:
Detto Technologies, Inc.
00000 XX 00xx Xxxxxx, Xxxxx 00
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxx
Fax:
with a copy to:
Xxxxxxxxxx & Xxxxx LLP
00000 Xxxxxxxx Xxxx. Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx
If to Executive:
Channel Access, Inc.
000 Xxxx 0000 Xxxxx
Xxxx, Xxxx 00000
5. Severability. If a judicial determination is made that any of the provisions
of this Agreement constitute an unreasonable or otherwise unenforceable
restriction against Executive, said provision shall be rendered void without
rendering unenforceable any other restrictions under this Agreement. Moreover,
the Company shall be entitled to recover monetary damages as a result of the
breach of any provision hereof by Executive. The time period during which the
prohibitions set forth in this Agreement shall apply shall be tolled and
suspended for a period equal to the aggregate quantity of time during which
there is pending litigation over the enforceability or applicability of this
Agreement.
6. Indemnification. Executive hereby agrees to indemnify and defend the Company
and to hold the Company harmless from and against any and all actual losses,
liabilities, damages, deficiencies, costs (including, without limitation, court
costs), and expenses (including, without limitation, attorneys' fees) incurred
by the Company and arising out of or due to any breach of any representation,
warranty, covenant or agreement of Executive contained in this Agreement. The
Company hereby agrees to indemnify and defend Executive and to hold Executive
harmless from and against any and all actual losses, liabilities, damages,
deficiencies, costs (including, without limitation, court costs), and expenses
(including, without limitation, attorneys' fees) incurred by Executive and
arising out of or due to any breach of any representation, warranty, covenant or
agreement of Company contained in this Agreement.
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7. Miscellaneous
7.1 Binding Effect. This Agreement shall inure to the benefit of and shall
be binding upon Executive and his personal representatives, heirs, beneficiaries
and assigns and the Company and its successors and assigns.
7.2 Governing Law. This Agreement shall be deemed to be made in, and in
all respects shall be interpreted, construed and governed by and in accordance
with, the laws of the State of Washington.
7.3 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
7.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
7.5 Entire Agreement. This Agreement is intended by the parties hereto to
be the final expression of their agreement with respect to the subject matter
hereof and is the complete and exclusive statement of the terms thereof
notwithstanding any representation, statement or agreement to the contrary
heretofore made. This Agreement may be modified only in writing, signed or
initialed by each of the parties hereto.
7.6 Gender. Whenever the context so requires, the gender of any pronoun
shall be deemed to include the other genders.
7.7 CERTIFICATION OF EXECUTIVE. EXECUTIVE CERTIFIES THAT HE (1) HAS
RECEIVED A COPY OF THIS AGREEMENT FOR REVIEW AND STUDY BEFORE BEING ASKED TO
EXECUTE IT; (2) HAS READ THIS AGREEMENT CAREFULLY; (3) HAS HAD SUFFICIENT
OPPORTUNITY BEFORE THE AGREEMENT WAS EXECUTED TO ASK QUESTIONS ABOUT THE
PROVISIONS OF THE AGREEMENT AND RECEIVED SATISFACTORY ANSWERS; (4) HAS HAD
SUFFICIENT OPPORTUNITY BEFORE THE AGREEMENT WAS EXECUTED TO SEEK INDEPENDENT
COUNSEL; (5) HAS RECEIVED A COPY OF THE AGREEMENT; AND (6) UNDERSTANDS HIS
RIGHTS AND OBLIGATIONS UNDER THE AGREEMENT.
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IN WITNESS WHEREOF, Executive and Company have executed this Agreement as
of the date stated above.
"Company" "Executive"
Detto Technologies, Inc.,
a Delaware corporation By:
--------------------------------
By:
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Xxxxx Mana'o
Chief Executive Officer
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EXHIBIT A
EARNOUTS
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EXHIBIT B
CUSTOMER LIST
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