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EXHIBIT 10.1
MANAGEMENT AGREEMENT
THIS AGREEMENT effective as of the 1 day of February, 1998.
BETWEEN:
SMARTIRE SYSTEMS INC., a company duly incorporated pursuant to the laws of
the Province of British Columbia, having an office at 150 - 13151 Xxxxxx
Xxxxx, Xxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
(hereinafter referred to as the "Company")
OF THE FIRST PART
AND:
XXXXXX XXXXXX, businessman, of 40 - 0000 Xxxxxxxx Xxxx,
Xxxxxxxx, Xxxxxxx Xxxxxxxx, X0X 0X0
(hereinafter referred to as the "Manager")
OF THE SECOND PART
RECITALS
WHEREAS the Company has requested the assistance of the Manager
in providing certain management services, as hereinafter described;
WHEREAS the Manager has agreed to provide such assistance and
services to the Company in accordance with the terms and conditions herein set
forth;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants set forth below, the parties hereto agree as follows:
1. DUTIES AND DEVOTION OF TIME
1.1 Duties. During the terms of this Agreement the Manager
shall be responsible for the duties contained in Schedule "A" attached hereto
and incorporated herein by this reference (the "Duties").
1.2 Devotion of Time. The parties hereto acknowledge and agree
that the work of the Manager is and shall be of such a nature that regular hours
are insufficient and impractical and occasions may arise whereby the Manager
shall be
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required to work other than eight (8) hours per day and/or five (5) days per
week. It is also anticipated that the Manager may be required to work during
evenings, Saturdays, Sundays and Public Holidays. The Manager agrees that the
consideration set forth herein shall be in full and complete satisfaction for
such work and services, regardless of when and where such work and services are
performed. The Manager further releases the Company from any claims for overtime
pay or other such compensation which may accrue to the Manager by reason of any
existing or future legislation or otherwise. Notwithstanding the foregoing, the
Company agrees that so long as the Manager properly discharges its duties
hereunder, the Manager may devote the remainder of its time and attention to
other non-competing business pursuits.
1.3 Location of Company Headquarters. The parties hereto
acknowledge that the effective strategic direction of the Company and its
subsidiaries does not require that the headquarters of the Company be or remain
in the City of Vancouver, in the Province of British Columbia, and agree that
the Company's location has no effect on the Duties of the Manager.
1.4 Business Opportunities the Property of the Company. The
Manager agrees to communicate immediately to the Company all business
opportunities, inventions and improvements in the nature of the business of the
Company which, during the term of this Agreement, the Manager may conceive, make
or discover, become aware of, directly or indirectly, or have presented to it in
any manner which relates in any way to the Company, either as it is now or as it
may develop, and such business opportunities, inventions or improvements shall
become the exclusive property of the Company without any obligation on the part
of the Company to make any payments therefor in addition to the salary and
benefits herein described to the Manager.
1.5 No Personal Use. The Manager shall not use any of the work
the Manager shall perform for the Company for any personal purposes without
first obtaining the prior written consent of the Company.
2. SALARY, BONUSES AND BENEFITS
2.1 Salary. In consideration of the Manager providing the
services referred to herein, the Company agrees to pay the Manager an annual
base salary of one hundred fifty thousand U.S. dollars ($150,000) less
applicable deductions, payable bi-weekly, plus the performance bonus as set out
below, subject to increase as from time to time approved by the Board of
Directors of the Company.
2.2 Benefits. The Company shall provide, maintain and pay for:
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(a) medical insurance for the Manager and his immediate
family as is provided by the Company's Medical Services Plan;
(b) such extended health and other benefits for the
Manager and his immediate family as are provided to senior management employees
of the Company, subject to the eligibility of the Manager; and
(c) an appropriate car for the Manager's use or a car
allowance as set by the Company.
2.3 Bonuses. The Company may pay bonuses (the "Bonuses") to the
Manager at any time, and from time to time, and for the realization of any of
the Performance Objectives, as initially defined in Schedule "B" attached hereto
and incorporated hereinafter by this reference, and as amended from time to time
in writing by both parties. The amount of the Bonuses shall be determined by the
Directors of the Company and shall be based on the nature of the Performance
Objectives and other significant corporate objectives attained by the Manager.
2.4 Performance Bonus. In addition to any bonus that may be
paid pursuant to clause 0 herein, the Company will pay to the Manager a
performance bonus (the "Performance Bonus") based upon the annual revenues of
the Company on an audited, consolidated basis. During the term of this
Agreement, the first time the Company meets or exceeds the revenue targets
listed below, the Manager shall be granted Company shares, in the amounts
indicated below:
(a) if the Company's revenues for a fiscal year exceed
$10,000,000 Cdn, the Manager shall receive 25,000 shares as a performance bonus
for that year; and
(b) if the Company's revenues for a fiscal year exceed
$25,000,000 Cdn, the Manager shall receive an additional 25,000 shares as a
performance bonus for that year; and
(c) if the Company's revenues for a fiscal year exceed
$50,000,000 Cdn, the Manager shall receive an additional 25,000 shares as a
performance bonus for that year; and
(d) if the Company's revenues for a fiscal year exceed
$100,000,000 Cdn, the Manager shall receive an additional 25,000 shares as a
performance bonus for that year.
In the event that the Common Shares of SmarTire are consolidated or subdivided,
the number of shares to be issued pursuant hereto will be adjusted in the same
ratio as the subdivision or consolidation.
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2.5 Registration of Performance Bonus Shares. To ensure that
any shares issued to the Manager under paragraph 0 of this Agreement are freely
tradable, SmarTire shall register with the SEC any such shares issued. Upon or
as soon as is practical after the issuance of such shares, SmarTire shall file a
form S-8 or other appropriate form with the SEC to effect registration.
2.6 Payment in Cash or Shares. All payments payable by the
Company to the Manager, including the salary, Bonuses, and reimbursement of
expenses under Section 0 hereof, shall be payable in cash or, at the election of
the Manager, and subject to the approval of the regulatory authorities, such
will be paid in whole or in part in free-trading shares in the capital stock of
the Company ("Free-Trading Shares").
3. VACATION
3.1 Entitlement to Vacation. The Company acknowledges that the
Manager shall be entitled to an annual vacation of six (6) weeks. The Manager
shall use its best efforts to ensure that such vacation is arranged with the
Company in advance such that it does not unduly affect the operations of the
Company.
3.2 Increase in Vacation. The period set out in Section 0 above
may be increased from time to time as mutually agreed to by the Manager and the
Board of Directors.
4. REIMBURSEMENT OF EXPENSES
4.1 Reimbursement of Expenses. The Manager shall be reimbursed
for all reasonable out-of-pocket expenses incurred by the Manager in or about
the execution of the Duties contained herein, including without limitation the
generality of the foregoing, all reasonable travel and promotional expenses
payable or incurred by the Manager in connection with the Duties under this
Agreement. All payments and reimbursements shall be made within three (3) days
of submission by the Manager of vouchers, bills or receipts for such expenses.
5. CONFIDENTIAL INFORMATION
5.1 Confidential Information. The Manager shall not, either
during the term of this Agreement or at any time thereafter, without specific
consent in writing, disclose or reveal in any manner whatsoever to any other
person, firm or corporation, nor will it use, directly or indirectly, for any
purpose other than the purposes of the Company, the private affairs of the
Company or any confidential information which it may acquire during the term of
this Agreement with relation to the business and affairs of the directors and
shareholders of the Company, unless the
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Manager is ordered to do so by a court of competent jurisdiction or unless
required by any statutory authority.
5.2 Non-Disclosure Provisions. The foregoing provision shall be
subject to the further non-disclosure provisions contained in Schedule "C"
attached hereto and incorporated hereinafter by this reference.
5.3 Provisions Survive Termination. The provisions of this
section shall survive the termination of this Agreement.
6. TERM
6.1 Term. Subject to the termination provisions contained
hereunder, this Agreement shall remain in effect for a period of five (5) years
from February 1, 1998. Thereafter the parties shall renew this Agreement if they
mutually agree upon the terms and conditions of such renewed agreement.
7. TERMINATION
7.1 Termination by Manager. Notwithstanding any other provision
contained herein, the parties hereto agree that the Manager may terminate this
Agreement, with or without cause, by giving ninety (90) days written notice of
such intention to terminate.
7.2 Resignation or Cessation of Duties. In the event that the
Manager ceases to perform all of the Duties contained herein, other than by
reason of the Manager's death or disability, or if the Manager resigns
unilaterally and on his own initiative from all of his positions this Agreement
shall be deemed to be terminated by the Manager as of the date of such cessation
of Duties or such resignation, and the Company shall have no further obligations
under Section 0 hereof.
7.3 Termination by Company. The Company may terminate this
agreement at any time for just cause. The parties further agree that except for
termination for just cause, the Company may not terminate this Agreement without
payment, at that time, to the Manager of a termination allowance equivalent to
twice the annual salary and Bonuses payable by the Company to the Manager,
regardless of the date of termination. The Performance Bonuses will be paid to
the Manager in any event that the Company achieves the revenues set out in
clause 0 during the 5 years from the date of closing unless this agreement is
terminated for just cause.
7.4 Termination if Change of Control. Notwithstanding any other
provision of this Agreement, in the event of a change in control of the Company
at the option of the Manager this Agreement shall be deemed to be terminated by
the
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Company, and the Manager shall be entitled to the termination allowance stated
in Section 0 hereof. For the purposes hereof, a change in control of the Company
shall be deemed to occur if a transaction or series of transactions takes place
whereby, directly or indirectly:
(a) any person or combination of persons (other than any
person or persons who are controlling shareholders of the Company) obtains a
sufficient number of securities of the Company to affect materially the control
of the Company; for the purposes of this Agreement, a person or combination of
persons holding shares or other securities in excess of the number which,
directly or following conversation thereof, would entitle the holder thereof to
cast 30% or more of the vote attaching to all shares of the Company which may be
cast to elect directors of the Company, shall be deemed to be in a position to
affect materially the control of the Company; or
(b) the Company shall consolidate or merge with or into,
amalgamate with, or enter into a statutory arrangement with, any other person
(other than a subsidiary of the Company), or any other person (other than a
subsidiary of the Company) shall consolidate or merge with or into or
amalgamated with or enter into a statutory arrangement with, the Company, and,
in connection therewith, all or part of the outstanding voting shares shall be
changed in any way, reclassified or converted into, exchanged or otherwise
acquired for shares or other securities of the Company or any other person or
for cash or any other property (other than a transaction which has been approved
by a majority of the directors of the Company holding office at the effective
date of this Agreement); or
(c) the Company shall sell or otherwise transfer,
including by way of the grant of a leasehold interest (or one or more of its
subsidiaries shall sell or otherwise transfer, including by way grant of a
leasehold interest) property or assets (A) aggregating more than 50% of the
consolidated assets (measured by either book value or fair market value) of the
Company and its subsidiaries as at the end of the most recently completed
financial year of the Company, or (B) which during the most recently completed
financial year of the Company generated, or during the then current financial
year of the Company are expected to generate, more than 50% of the consolidated
operating income or cash flow of the Company and its subsidiaries, to any other
person or persons (other than the Company or one of its subsidiaries).
7.5 Termination if Change in Reporting Structure. In the event
of a change in the reporting structure of the Manager's position as officer and
director of the Company ("Change in Reporting Structure"), or in the event that
the Manager is removed from his position, or is not re-elected when he stands
for election to the position of director and officer, this Agreement shall be
deemed to be terminated by the Company as of the date of such Change in
Reporting Structure or such removal from office, and the Manager shall be
entitled to the termination allowance stated in
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Section 0 hereof. For the purposes hereof, a Change in Reporting Structure shall
be deemed to occur if there occurs, directly or indirectly, but not limited to,
any reduction of duties or reduction of responsibility for the day-to-day
operations of the Company as currently practised by the Manager in its present
activities as director and officer of the Company.
7.6 Election by the Manager. Notwithstanding any other
provision of this Agreement, including Schedule "A" hereto, the Manager may
voluntarily relinquish one or more of the positions in the Company held by him,
provided he maintains at least one of the positions stated in Section 0 hereof,
and in such an event the terms of this Agreement shall not be affect thereby.
7.7 Death. In the event of the death of the Manager during the
term of this Agreement, this Agreement shall be terminated as of the date of
such death, and the Manager shall be entitled to the termination allowance
stated in Section 0 hereof.
7.8 Disability. In the event that the Manager will during the
term of this Agreement by reason of illness or mental or physical disability or
incapacity be prevented from or incapable of performing the Duties hereunder,
then the Manager shall be entitled to receive the remuneration provided for
herein at the rate specified hereinbefore for the period during which such
illness, disability or incapacity will continue, but not exceeding six (6)
successive months. If such illness, disability or incapacity continues or will
continue for a period longer than six (6) successive months, then this Agreement
may, at the option of the Director of the Company, forthwith be terminated, and
the Manager shall be entitled to the termination allowance stated in Section 0
hereof.
7.9 Termination Payments. Any payments made by the Company to
the Manager upon the termination of this Agreement shall, be made in cash in a
lump sum payment, or, if the Company does not have available funds, in equal
monthly cash installments over one year with interest at 8% per annum, in
Free-Trading Shares, or in a combination of cash and Free-Trading Shares,
subject to regulatory approval. All payments required to be made by the Company
to the Manager pursuant to Section 0 hereof shall be made in full, irrespective
of the amount of the term remaining under this Agreement.
8. RIGHTS AND OBLIGATIONS UPON TERMINATION
8.1 Rights and Obligations. Upon termination of this Agreement,
the Manager shall deliver up to the Company all documents, papers, plans,
materials and other property of or relating to the affairs of the Company, other
than the Manager's personal papers in regard to his role in the Company, which
may then be in its or the Manager's possession or under her/his control.
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9. REGULATORY APPROVAL
9.1 Performance Bonus Subject to Regulatory Approval. While the
Company's shares are listed for trading on the VSE, the Performance Bonus
included herein will not be paid until the Company has obtained VSE approval
thereto. The Company will use all reasonable efforts to obtain such approval. In
the event that the Company is unable to obtain approval from the V.S.E. for
payment of the Performance Bonus within a reasonable period of time, then the
Company will delist from the V.S.E. if it is necessary to allow the Company to
pay any Performance Bonus that would otherwise be payable hereunder.
10. NOTICES AND REQUESTS
10.1 Notices and Requests. All notices and requests in
connection with this Agreement shall be deemed given as of the day they are
received either by messenger, delivery service, or mailed by registered or
certified mail with postage prepaid and return receipt requested and addressed
as follows:
(a) if to the Company:
SmarTire Systems Inc.
000-00000 Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
with a copy to:
XXXXX, XXXXXX
Xxxxx 000-000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
Attention: Xxxxxxx Xxxxxx
(b) If to the Manager:
Xxxxxx Xxxxxx
00-0000 Xxxxxxxx Xxxx
Xxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0
or to such other address as the party to receive notice or request so designates
by written notice to the other.
11. INDEPENDENT PARTIES
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11.1 Independent Parties. This Agreement is intended solely as a
management services agreement and no partnership, agency, joint venture,
distributorship or other form of agreement is intended.
12. AGREEMENT VOLUNTARY AND EQUITABLE
12.1 Agreement Voluntary. The parties acknowledge and declare
that in executing this Agreement they are each relying wholly on their own
judgment and knowledge and have not been influenced to any extent whatsoever by
any representations or statements made by or on behalf of the other party
regarding any matters dealt with herein or incidental thereto.
12.2 Agreement Equitable. The parties further acknowledge and
declare that they each have carefully considered and understand the provisions
contained herein, including, but without limiting the generality of the
foregoing, the Manager's rights upon termination and the restrictions on the
Manager after termination and agree that the said provisions are mutually fair
and equitable, and that they executed this Agreement voluntarily and of their
own free will.
13. CONTRACT NON-ASSIGNABLE; INUREMENT
13.1 Contract Non-Assignable. This Agreement and all other
rights, benefits and privileges contained herein may not be assigned by the
Manager.
13.2 Inurement. The rights, benefits and privileges contained
herein, including without limitation the benefits of Sections 0 and 0 hereof,
shall inure to the benefit of and be binding upon the respective parties hereto,
their heirs, executors, administrators and successors.
14. ENTIRE AGREEMENT
14.1 Entire Agreement. This Agreement represents the entire
Agreement between the parties and supersedes any and all prior agreements and
understandings, whether written or oral, between the parties. The Manager
acknowledges that it was not included to enter into this Agreement by any
representation, warranty, promise or other statement, except as contained
herein.
14.2 Previous Agreements Cancelled. Save and except for the
express provisions of this Agreement, any and all previous agreements, written
or oral, between the parties hereto or on their behalf relating to the services
of the Manager for the Company are hereby terminated and cancelled and each of
the parties hereby releases and further discharges the other of and from all
manner of actions, causes of action, claims and demands whatsoever under or in
respect of any such Agreement.
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15. WAIVER
15.1 Waiver. No consent or waiver, express or implied, by either
party to or of any breach or default by the other party in the performance by
the other of its obligations herein shall be deemed or construed to be a consent
or waiver to or of any breach or default of the same or any other obligation of
such party. Failure on the part of any party to complain of any act or failure
to act, or to declare either party in default irrespective of how long such
failure continues, shall not constitute a waiver by such party of its rights
herein or of the right to then or subsequently declare a default.
16. SEVERABILITY
16.1 Severability. If any provision contained herein is
determined to be void or unenforceable in whole or in part, it is to that extent
deemed omitted. The remaining provisions shall not be affected in any way.
17. AMENDMENT
17.1 Amendment. This Agreement shall not be amended or otherwise
modified except by a written notice of even date herewith or subsequent hereto
signed by both parties.
18. HEADINGS
18.1 Headings. The headings of the sections and subsections
herein are for convenience only and shall not control or affect the meaning or
construction of any provisions of this Agreement.
19. GOVERNING LAW
19.1 Governing Law. This Agreement shall be construed under and
governed by the laws of the Province of British Columbia and the laws of Canada
applicable therein.
20. EXECUTION
20.1 Execution in Several Counterparts. This Agreement may be
executed by facsimile and in several counterparts, each of which shall be deemed
to be an original and all of which shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the ______ day of _______________, 1998.
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SMARTIRE SYSTEMS INC.
Per:
----------------------------------
Authorized Signatory
SIGNED, SEALED AND DELIVERED by )
XXXXXX XXXXXX in the presence of: )
)
-------------------------------------- )
Name )
-------------------------------------- ) ------------------------
Address ) XXXXXX XXXXXX
)
-------------------------------------- )
Occupation )
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SCHEDULE "A"
MANAGER'S DUTIES
1. To create value for the Company's shareholders by leading
the establishment of a profitable business for the Company.
2. The Manager shall be appointed by the Company as the full
time president, a director on the Board of Directors of the Company and each of
the Company's subsidiaries, and the Manager shall faithfully, honestly and
diligently serve the Company and each of the Company's subsidiaries in these
capacities.
3. The Manager shall be responsible for leading in the
strategic management and direction of the Company and each of the Company's
subsidiaries and for the supervision and delegation of such duties and
responsibilities as the Company deems appropriate to other officers and the
employees of the Company and its subsidiaries.
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SCHEDULE "B"
PERFORMANCE OBJECTIVES
Build the Company into a leader in the manufacture and sales of tire monitoring
systems for vehicles of all types in North America. Achieve the financial
projections as prepared by management and approved by the Company's directors.
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SCHEDULE "C"
NON-DISCLOSURE PROVISIONS
1. CONFIDENTIAL INFORMATION AND MATERIALS
(a) "Confidential Information" shall mean, for the purposes of
this Agreement, non-public information which the Company designates as being
confidential or which, under the circumstances surrounding disclosure ought
reasonably to be treated as confidential. Confidential Information includes,
without limitation, information, whether written, oral or communicated by any
other means, relating to released or unreleased the Company software or hardware
products, the marketing or promotion of any product of the Company, the Company
business policies or practices, and information received from others which the
Company is obliged to treat as confidential. Confidential Information disclosed
to the Manager by any subsidiary and/or agents of the Company is covered by this
Agreement.
(b) Confidential Information shall not include that information
defined as Confidential Information hereinabove which the Manager can
exclusively establish:
(i) is or subsequently becomes publicly available without
breach of any obligation of confidentiality owed by the Company;
(ii) became known to the Manager prior to disclosure by
the Company to the Manager;
(iii) became known to the Manager from a source other than
the Company other than by the breach of any obligations of confidentiality
owed to the Company; or
(iv) is independently developed by the Manager.
(c) Confidential Materials shall include all tangible materials
containing Confidential Information, including, without limitation, written or
printed documents and computer disks or tapes, whether machine or user readable.
2. RESTRICTIONS
(a) The Manager shall not disclose any Confidential Information
to third parties for a period of three (3) years following the termination of
this Agreement, except as provided herein. However, the Manager may disclose
Confidential Information during bona fide execution of the Duties or in
accordance with judicial or other governmental order, provided that the Manager
shall give
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reasonable notice to the Company prior to such disclosure and shall comply with
any applicable protective order or equivalent.
(b) The Manager shall take reasonable security precautions, at
least as great as the precautions it takes to protect its own confidential
information, to keep confidential the Confidential Information, as defined
hereinabove.
(c) Confidential Information and Materials may be disclosed,
reproduced, summarized or distributed only in pursuance of the business
relationship of the Manager with the Company, and only as provided hereunder.
The Manager agrees to segregate all such Confidential Materials from the
materials of others in order to prevent co-mingling.
3. RIGHTS AND REMEDIES
(a) The Manager shall notify the Company immediately upon
discovery of any unauthorized use or disclosure of Confidential Information or
Materials, or any other breach of this Agreement by the Manager, and shall
cooperate with the Company in every reasonable manner to aid the Company to
regain possession of said Confidential Information or Materials and prevent all
such further unauthorized use.
(b) The Manager shall return all originals, copies,
reproductions and summaries of or relating to the Confidential Information at
the request of the Company or, at the option of the Company, certify destruction
of the same.
(c) The parties hereto recognize that a breach by the Manager of
any of the provisions contained herein would result in damages to the Company
and that the Company could not be compensated adequately for such damages by
monetary award. Accordingly, the Manager agrees that in the event of any such
breach, in addition to all other remedies available to the Company at law or in
equity, the Company shall be entitled as a matter of right to apply to a court
of competent jurisdiction for such relief by way of restraining order,
injunction, decree or otherwise, as may be appropriate to ensure compliance with
the provisions of this Agreement.
4. MISCELLANEOUS
(a) All Confidential Information and Materials are and shall
remain the property of the Company. By disclosing information to the Manager,
the Company does not grant any express or implied right to the Manager to or
under any and all patents, copyrights, trademarks, or trade secret information
belonging to the Company.
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(b) All obligations created herein shall survive change or
termination of any and all business relationships between the parties.
(c) The Company may from time to time request suggestions,
feedback or other information from the Manager on Confidential Information or on
released or unreleased software belonging to the Company. Any suggestions,
feedback or other disclosures made by the Manager are and shall be entirely
voluntary on the party of said Manager and shall not create any obligations on
the part of the Company or a confidential agreement between the Manager and the
Company. Instead, the Company shall be free to disclose and use any suggestions,
feedback or other information from the Manager as the Company sees fit, entirely
without obligation of any kind whatsoever to the Manager.
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