EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, effective as of December 31, 1999 by and among
Casino Resource Corporation, a Minnesota corporation ("CRC"),
XxxxxxXxxxXxxxx.xxx, Inc., a Nevada corporation and wholly owned subsidiary of
CRC (the "Company"), and Xxxxx Xxxxx, an individual residing in the State of
California (the "Executive").
WHEREAS, this Agreement is entered into in connection with, and as a
condition precedent to, the purchase by the Company of substantially all of the
assets of Digital Development & Distribution, LLC, a California limited
liability company wholly owned by Executive, all as set forth in that certain
Asset Purchase Agreement dated of even date herewith (the "Asset Purchase
Agreement");
WHEREAS, following such purchase, the Company shall be engaged in the
design, manufacture, marketing and distribution of CD cards and related
products; and
WHEREAS, the Company desires to employ Executive on the terms and
subject to the conditions set forth herein, and Executive is willing to accept
such employment on such terms and conditions;
NOW THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. Position and Responsibilities. On the terms and subject to the
conditions set forth in this Agreement, the Company shall employ Executive to
serve as the Chief Executive Officer of the Company. Executive shall perform,
and shall have the requisite authority to perform, all duties customarily
attendant to such position and shall use his best efforts, during reasonable
business hours, to meet the business requirements and goals set by the board of
directors of the Company. Executive shall perform the services hereunder at
Company's offices, which shall be located in the Silicon Valley region of
California, and shall do such traveling as may be reasonably required of him in
the performance of his duties. Executive shall report to the chairman of the
board of directors of the Company.
2. Term. Executive shall be employed for a two-year term commencing on
the effective date hereof ("Commencement Date"), and ending on the second
anniversary of the Commencement Date, unless sooner terminated in accordance
with the provisions of Section 5 below.
3. Compensation.
3.1 As compensation for Executive's services rendered hereunder,
Company shall pay to Executive an annual base salary of one hundred thousand
dollars ($100,000) payable in accordance with the Company's regular payroll
practices in effect from time to time. If at any time hereafter the Company
shall adopt a bonus program, an option program or any other form of equity
participation for senior executives of the Company, Executive shall be eligible
to participate in such program in a manner and capacity commensurate with his
position and duties.
3.2 As additional consideration for Executive's services
hereunder, Executive shall be entitled to the customary fringe benefits which
are afforded generally to executive employees
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of the Company. Executive shall also be entitled to participate in employee
benefit plans now or hereafter provided or made available to employees of the
Company generally, such as group medical, life and disability insurance, and
pension plans.
3.3 Executive shall be entitled to vacation time and holidays as
are provided in general to executive employees of the Company.
3.4 Upon such time that Executive establishes his residence in the
Silicon Valley region of California and for the remaining the term of this
Agreement, the Company shall pay to Executive a living allowance of $2,500 per
month.
3.5 Each payment to Executive under this Agreement shall be
reduced by any amounts required to be withheld by Company from time to time
under applicable laws and regulations then in effect.
4. Expenses. The Company shall reimburse Executive or otherwise provide
for or pay for all reasonable expenses incurred by Executive in furtherance of
or in connection with the business of the Company, as pre-authorized by the
chairman of the board of directors of the Company or pre-approved budget line
item. Executive agrees that he will furnish the Company with adequate records
and other documents for the substantiation of each such business expense.
5. Termination.
5.1 Termination by the Company for Cause. Company shall have the
right to terminate this Agreement "for cause" by giving Executive written notice
to that effect, describing in reasonable detail the reasons for such
termination. For the purpose of this Agreement, "for cause" shall mean (i)
commission by Executive of a willful act of dishonesty in the course of his
duties hereunder, (ii) conviction of Executive of a felony or other serious
crime, (iii) Executive's continued, habitual intoxication or performance under
the influence of controlled substances during working hours; (iv) any fraud,
embezzlement or misappropriation by Executive of any of the assets of the
Company, including the Confidential Information (as defined below); or (v)
significant failure by Executive to perform duties and obligations under this
Agreement (except as a result of disability or death). Termination "for cause"
shall be effective on the date specified in the notice given by the Company,
provided that no termination hereunder shall be effective unless a reasonable
period (not to exceed 30 days) following receipt by Executive of such notice
shall have lapsed and the matters which constitute or give rise to such
termination shall not have been cured or eliminated by Executive. In the event
of termination for cause, the Company shall promptly pay to Executive all
amounts earned and payable as of the effective date of termination and
reimbursement of any unpaid business expenses accrued through that date (upon
presentation of adequate documentation), and the Company shall have no further
obligation hereunder.
5.2 Termination by the Company in the event of Disability or
Death. In the event that Executive is unable by reason of physical or mental
disability from substantially performing his duties hereunder for either one
continuous period of two months or a total of four months out of any twelve
consecutive months, the Company shall have the right to terminate this Agreement
by giving Executive 30 days written notice to that effect, with the effective
date of such termination being on the 30th day following receipt of such notice
by Executive. In the event of
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Executive's death, the Company shall have the right to terminate this Agreement
effective immediately as of the date of death. In the event of termination for
disability or death, the Company shall promptly pay to Executive or his
beneficiaries all amounts earned and payable as of the effective date of
termination and reimbursement of any unpaid business expenses accrued through
that date (upon presentation of adequate documentation), and the Company shall
have no further obligation hereunder.
5.3 Termination by the Company without Cause. The Company shall have
the right to terminate this Agreement for any reason effective upon the 60th day
following delivery to Executive of notice of the Company's intent to terminate.
In the event the Company terminates this Agreement without cause, the Company
shall pay to Executive, within 60 days of the effective date of termination, all
compensation and other benefits payable to Executive under Section 3 above
through the entire remaining term of this Agreement, and shall reimburse
Executive for any unpaid business expenses accrued through the effective date of
termination, (upon presentation of adequate documentation), and the Company
shall have no further obligation hereunder.
5.4 Termination by Executive for Good Reason. Executive shall have the
right to terminate this Agreement for "good reason," by giving the Company
written notice to that effect describing in reasonable detail the reasons for
such termination. For the purpose of this Agreement, "for good reason" shall
mean (i) failure by the Company to pay any compensation by the Company to
Executive or failure to perform any other material obligation under this
Agreement; (ii) filing of any receivership or bankruptcy proceeding, voluntary
or involuntary, the subject of which is the Company; (iii) material diminishment
or alteration of Executive's duties so as to be inconsistent Executive's
position, authority or responsibilities as provided hereunder; (iv) Executive's
salary is materially diminished; or (v) CRC fails to fund the Company with a
minimum of $100,000 in working capital by February 1, 2000 or a cumulative
minimum of $500,000 in working capital by December 31, 2000. Termination "for
good reason" shall be effective on the date specified in the notice given by
Executive, provided that no termination hereunder shall be effective unless a
period of 30 days following receipt by the Company of such notice shall have
lapsed and the matters which constitute or give rise to such termination shall
not have been cured or eliminated by the Company. In the event Executive
terminates this Agreement for good reason, the Company shall pay to Executive,
within 60 days of the effective date of termination, all compensation and other
benefits payable to Executive under Section 3 above through the entire remaining
term of this Agreement, and shall reimburse Executive for any unpaid business
expenses accrued through the effective date of termination (upon presentation of
adequate documentation), and the Company shall have no further obligation
hereunder.
6. Confidential Information.
6.1 Definition. Executive hereby agrees and acknowledges that all
information and materials directly relating to the business and finances of the
Company (collectively, the "Confidential Information"), in whatever form and
whether now existing or developed or created during the period of Executive's
employment with the Company, excepting information and materials already known
or possessed by Executive as of the date hereof or obtained by Executive from
general or public sources, are proprietary to the Company and are highly
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confidential in nature. The Confidential Information includes, but is not
limited to, (i) marketing and development plans, forecasts, forecast
assumptions, forecast volumes, future plans and potential strategies of the
Company; (ii) cost objectives, pricing policies and procedures, quoting policies
and procedures, and unpublished price lists; (iii) licensing policies,
strategies and techniques; (iv) customer lists, names of past, present and
prospective customers and their representatives; (v) data and other business
information about or provided by past, present and prospective customers; (vi)
names of past, present and prospective vendors and their representatives, data
and other information about or provided by past, present and prospective
vendors; (vii) purchasing information, orders, invoices, xxxxxxxx, and payment
of xxxxxxxx; (viii) types of products, supplies, materials and services
purchased, leased, licensed and/or sold by the Company; (ix) past, present and
future research and development arrangements; (x) customer service information;
(xi) information pertaining to joint ventures, mergers and/or acquisitions;
(xii) the Company's personnel policies and procedures, the Company's personnel
files, and the compensation of officers, directors and employees of the Company;
(xiii) all other confidential business records and trade secrets of the Company;
(xiv) any and all Confidential Information not generally known to the public or
within the industries or trades in which the Company competes; and (xv) any and
all information and materials in the Company's possession or under its control
from any other person or entity which the Company is obligated to treat as
confidential or proprietary.
6.2 General Skills and Knowledge. The general skills and
experience gained by Executive during Executive's employment with the Company,
and information publicly available or generally known within the industries or
trades in which the Company competes, is not considered Confidential
Information.
6.3 Executive's Obligations as to Confidential Information.
Executive shall not at any time before or after termination of his employment
hereunder willfully use, disclose or divulge any Confidential Information or
data to any person, except (i) in connection with the discharge of Executive's
duties hereunder; (ii) with the prior written consent of the Company; or (iii)
to the extent necessary to comply with law or the valid order of a court of
competent jurisdiction, in which event Executive shall notify Company as
promptly as practicable (and, if possible, prior to making such disclosure).
Executive shall use his best efforts to prevent any such disclosure by others.
7. Covenants not to Compete or Solicit. In consideration for the
compensation paid to Executive pursuant to Section 3 above, and as a condition
to the performance by the Company of all obligations under this Agreement,
Executive agrees that during the term of this Agreement and for the period of
two years following the date of termination of this Agreement, Executive shall
not (i) within the Territory (as defined below in this Section 7), directly or
indirectly through any other person, firm or corporation compete with or be
engaged in the same business or "participate in" any other business or
organization which during such period competes with or is engaged in the same
business as the Company; (ii) solicit (or attempt to solicit) the employment,
consulting or other services of any other employee of the Company or otherwise
induce (or attempt to induce) any of such employees to leave the Company's
employment or to breach an employment agreement or understanding with the
Company; or (iii) solicit (or attempt to solicit) business patronage from or
call on any existing or prospective customer of the Company or interfere (or
attempt to interfere) with any relationship between the Company
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and any of its existing or prospective customers. For the purpose of this
Section 7, "existing or prospective customers" of the Company include all
customers (A) who have purchased, or have agreed to purchase, goods or services
from the Company at any time during the two years prior to the date of
termination; or (B) with whom the Company has had discussions regarding a
prospective sale of goods and services by the Company. For the purpose of this
Section 7, the term "participate in" shall mean: directly or indirectly, for
Executive's own benefit or for, with, or through any other person, firm, or
corporation, own, manage, operate, control, loan money to, or participate in the
ownership, management, operation, or control of, or be connected as a director,
officer, employee, partner, consultant, agent, independent contractor, or
otherwise with, or acquiesce in the use of Executive's name. Notwithstanding the
foregoing, it shall not be a breach of the provisions of this Section 7 if,
during or after the term of this Agreement, Executive is a passive investor in
any publicly held entity and Executive owns 1% or less of the equity interests
therein. For the purpose of this Section 7, the "Territory" means the geographic
territory in which the Company has customers or sales during the term of this
Agreement.
7.1 Restrictive Covenants Necessary and Reasonable. Executive
agrees that the provisions of this Section 7 are necessary and reasonable to
protect the Company in the conduct of its business. If any restriction contained
in this Section 7 shall be deemed to be invalid, illegal, or unenforceable by
reason of the extent, duration or geographical scope thereof, or otherwise, then
the court making such determination shall have the right to reduce such extent,
duration, geographical scope, or other provisions hereof and in its reduced form
such restriction shall then be enforceable in the manner contemplated hereby.
7.2 Injunctive Relief. Executive, recognizing that irreparable
injury shall result to the Company in the event of Executive 's breach of the
terms and conditions of this Agreement, agrees that in the event of his breach
or threatened breach, the Company shall be entitled to injunctive relief
restraining Executive, and any and all persons or entities acting for or with
him, from such breach or threatened breach. Nothing herein contained, however,
shall be construed as prohibiting the Company from pursuing any other remedies
available to it by reason of such breach or threatened breach.
8. Ideas and Inventions. Executive agrees that all right, title and
interest in or to any and all Inventions are the property of the Company. For
the purposes of this Agreement, "Inventions" shall mean all ideas, concepts,
know-how, techniques, processes, methods, inventions, discoveries, developments,
innovations and improvements (i) conceived or made by Executive, whether alone
or with others, in the course of Executive's employment by the Company, or (ii)
conceived or made by Executive, whether alone or with others, in the course of
Executive's employment, but which reach fruition within the period from the date
of termination of Executive's employment through the second anniversary of such
date, and which either (A) involve or are reasonably related to the business of
the Company or to the Company's actual or demonstrably anticipated research or
development; or (B) incorporate or are derived from, in whole or in part, any of
the Confidential Information. Executive agrees to promptly disclose all
Inventions to the Company, and to provide all assistance reasonably requested by
the Company in the preservation of its interests in the Inventions, such as by
executing documents, testifying, etc. Executive agrees to execute, acknowledge
and deliver any instruments confirming the complete ownership by the Company of
such Inventions. Such assistance shall be provided at the Company's expense
without any additional compensation to Executive.
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9. Issuance of Options.
9.1 Issuance. For the purpose of inducing Executive to enter into
this Agreement and the Asset Purchase Agreement, CRC agrees to issue options to
purchase an aggregate of 1,000,000 shares of CRC common stock at an exercise
price of seventeen cents per share (the "Options"). The Options shall be issued
to such employees of the Company as determined by Executive, provided that no
more than 820,000 of the Options shall be issued to Executive. The Options shall
vest and become exercisable as follows: (i) if, as of January 1, 2001, the
Company had revenues for the year ending December 31, 2000 of at least
$2,000,000, then one-third (and only one-third) of the outstanding Options shall
immediately vest and become exercisable; and (ii) if, as of January 1, 2002, the
Company had cumulative revenues for the two years ending December 31, 2001 of at
least $4,000,000, then an additional one-third (and only one-third) of the
outstanding Options shall immediately vest and become exercisable.
Notwithstanding anything herein to the contrary, all unvested Options shall
immediately vest and become exercisable in the event that the Company achieves,
at any time prior to December 31, 2002, cumulative revenues of at least
$8,000,000. Notwithstanding anything herein to the contrary, (A) upon the
termination of this Agreement due to Executive's death, all unvested Options
held by Executive (but not any other holder of the Options) shall immediately
vest and become exercisable; and (B) upon the termination of this Agreement
under Section 5.3 or Section 5.4 above, the unvested Options held by Executive
shall vest and become exercisable (if at all) in accordance with the provisions
set forth above in this Section 9.1. Except as expressly provided otherwise
herein, any unvested Options shall be terminated and canceled upon such time
that the employee to whom such Options were issued ceases to be employed by the
Company. The Options shall be evidenced by separate Option Issuance Agreements,
in the form adopted for such purpose by the Company's board of directors, which
shall be executed and delivered by the Company as soon as practicable following
the date hereof.
9.2 Registration Rights. Within six months following the first
date on which any of the Options shall vest and become exercisable in accordance
with Section 9.1 above, CRC shall, at its own expense, file a registration
statement with the Securities and Exchange Commission (the "SEC") for the
purpose of registering under the Securties Act of 1933 all of the shares of CRC
common stock underlying the vested and unvested Options (the "Option Shares")
and shall use its best efforts to cause such registration statement to be
declared effective by the SEC. CRC's obligation to register the Option Shares
shall be subject to (i) a pending material financing, acquisition or disposition
transaction by CRC and (ii) any such reasonable requirements that CRC's
underwriter may make in connection with a public offering by CRC. The
registration rights described in this Section 9.2 shall be more fully set forth
in separate Registration Rights Agreements, in the form adopted for such purpose
by the Company's board of directors, which shall be executed and delivered by
the Company as soon as practicable following the date hereof.
10. CRC Guarantee. CRC hereby guarantees the Company's performance
pursuant to this Agreement.
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11. Miscellaneous.
11.1 Amendments. No amendment or modification of this Agreement
shall be valid or binding unless made in writing and signed by the party against
whom enforcement thereof is sought.
11.2 Notices. Any and all notices, demands, requests or other
communication required or permitted by this Agreement or by law to be served on,
given to, or delivered to any party hereto by any other party to this Agreement
shall be in writing and shall be deemed duly served, given, or delivered when
personally delivered to the party to be notified, or in lieu of such personal
delivery, when confirmed as received if delivered by United States registered or
certified mail, return receipt requested, or when confirmed as received if
delivered by a nationally-recognized overnight courier service, addressed to the
to the party to be notified, at the addresses set forth below. Either of the
parties hereto may at any time and from time to time change the address to which
notice shall be sent hereunder by notice to the other party given under this
Section.
If to Executive to: Xx. Xxxxx Xxxxx
0000 Xxxxx Xxxxxxx
Xxxxxx, XX 00000
With a copy to: A. Xxxxx Xxxxxx III, Esq.
Motschiedler, Xxxxxxxxxxx & Xxxxxx LLP
0000 Xxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
If to the Company or
CRC to: 000 Xxxxxxxxx Xxxx.
Xxxxx Xxxxxxx, XX 00000
With a copy to : Xxxxxx X. Xxxxxx, Esquire
Mesirov Xxxxxx Xxxxx Xxxxxx & Xxxxxxxx, LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
11.3 Enforceability. If any provision of this Agreement shall be
invalid or unenforceable, in whole or in part, then such provision shall be
deemed to be modified or restricted to the extent and in the manner necessary to
render the same valid and enforceable, or shall be deemed excised from this
Agreement, as the case may require, and this Agreement shall be construed and
enforced to the maximum extent permitted by law, as if such provision had been
originally incorporated herein as so modified or restricted, or as if such
provision had not been originally incorporated herein, as the case may be.
11.4 Waivers. No waiver of any default or breach of this Agreement
shall be deemed a continuing waiver or a waiver of any other breach or default.
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11.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Nevada without regard to
principles of conflicts of law.
11.6 Assignment. Executive may not assign any rights (other than
the right to receive income hereunder and upon death to his estate) under this
Agreement without the prior written consent of Company. If Company, or any
entity resulting from any merger or consolidation with or into Company, is
merged with or consolidated into or with any other entity or entities, or if
substantially all of the assets of any of the aforementioned entities is sold or
otherwise transferred to another entity, the provisions of this Agreement shall
be binding upon and shall inure to the benefit of the continuing entity in, or
the entity resulting from, such merger or consolidation, or the entity to which
such assets are sold or transferred.
11.7 Entire Agreement. This Agreement constitutes the sole and
only agreement of the parties hereto respecting the subject matter hereof. Any
prior agreements, promises, negotiations, or representations concerning its
subject matter not expressly set forth in this Agreement, are of no force or
effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Employment
Agreement to be duly executed as of the day and year first above written.
XxxxxxXxxxXxxxx.xxx, Inc. Executive
by: __________________________ __________________________
Xxxx X. Xxxxxx, President Xxxxx Xxxxx
Casino Resource Corporation
by: __________________________
Xxxx X. Xxxxxx, President
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