EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of November, 1999 by and between
eAcceleration Corp. , a Delaware corporation (the "Company") and Xxxxx X.
Xxxxxxx, an individual with an address at X.X. Xxx 0000, Xxxxxxxxxx, Xxxxxxxxxx
00000 (hereinafter called the "Employee").
W I T N E S S E T H:
WHEREAS, this Agreement is intended to supersede and replace all prior
agreements, understandings and arrangements between or among the Company and the
Employee relating to the employment of the Employee.
NOW, THEREFORE, it is agreed as follows:
1. Retention of Services. The Company hereby retains the services of
Employee, and Employee agrees to furnish such services, upon the terms and
conditions hereinafter set forth.
2. Term. Subject to earlier termination on the terms and conditions
hereinafter provided, and further subject to certain provisions hereof which
survive the term hereof, the term of this Agreement shall be comprised of a five
(5) year period of employment commencing on the date of the first closing of the
proposed public offering of shares of common stock pursuant to a registration
statement on form SB-2 filed with the Securities and Exchange Commission in
November 1999, and shall be extended thereafter for additional one-year periods
unless or until the Company or the Employee provides sixty (60) days' notice to
the other party of the termination of this Agreement.
3. Duties and Extent of Services During Period of Employment.
(a) During the term of employment, Employee shall be employed by the
Company as Chairman of the Board or in such other equivalent positions with the
Company and its affiliates, as may be determined by the Board of Directors of
the Company, and shall also serve as a director of the Company. In such
capacity, Employee agrees that he shall devote Employee's full time business
efforts to serving the Company and its affiliates under the direction of the
Board of Directors of the Company, shall perform all duties incident to
Employee's position on behalf of the Company to the best of Employee's ability
and shall perform such other duties as may from time to time be assigned to him
by the Board of Directors of the Company.
(b) The Company and Employee agree that Employee shall perform
Employee's basic responsibilities and duties hereunder at the office of the
Company in Kitsap County, Washington, or at Employee's home office consistent
with past practice; subject, however, to the travel requirements of Employee's
position, including that Employee may be required to perform services on a
temporary basis at the offices of the Company and its affiliates outside Kitsap
County, Washington and travel to visit certain customers of the Company, in
connection with the Company acquiring the rights or license to market and sell
certain products or otherwise in connection with the business and investor
relations of the Company.
4. Remuneration. During the period of employment, Employee shall be
entitled to receive the following compensation for Employee's services:
(a) The Company shall pay to Employee a salary at the rate of $104,000
per annum, payable in equal bi-weekly installments, or in such other manner as
shall be consistent with the Company's payroll practices.
(b) In addition to the salary provided in clause (a) above, not later
than one hundred ten (110) days after the end of each fiscal year of the
Company, the Company shall pay to Employee, as incentive compensation, an amount
equal to two and one-half percent (2.5%) of the Company's Pre-Tax Income (as
defined
below) for such immediately preceding fiscal year. For purposes of this
Agreement, "Pre-Tax Income" shall mean an amount equal to the net income of the
Company before taxes, depreciation, amortization, and extraordinary items, in
each case computed in accordance with United States generally accepted
accounting principles, consistently applied. The Company agrees to furnish to
Employee a copy of the Company's financial statements not later than one hundred
and five (105) days after the end of each fiscal year of the Company during the
term of this Agreement. In the event that this Agreement is terminated other
than pursuant to Section 9(a), the Employee shall be entitled to receive the
amount which would be payable under this clause (b) for each fiscal quarter of
any fiscal year in which Employee was employed by the Company at the date of
such termination.
5. Employee Benefits; Expenses.
(a) During the term of this Agreement, the Company shall provide to
the Employee the right to participate in the Company's then existing medical and
dental insurance and other employee benefit plans and policies on the same terms
as are then generally available to the Company's executive and managerial
employees.
(b) Employee shall be entitled to paid vacation each year during the
term of this Agreement at the rate of four (4) weeks per annum. Vacation shall
be taken each year and, if not taken, shall be carried over for one (1) year
and, if not taken during such carry-over period, shall be forfeited.
(c) The Corporation shall reimburse Employee, in accordance with the
practice followed from time to time for other executive and managerial officers
of the Company, for all reasonable and necessary business and traveling
expenses, and other disbursements incurred by Employee for or on behalf of the
Corporation in the performance of Employee's duties hereunder, upon presentation
by Employee to the Company of an appropriate accounting or documentation of
such.
6. Disability. If Employee, during the period of employment, becomes unable
for any 120 days in any twelve-month period due to ill health or other physical
or mental incapacity, to perform Employee's services hereunder, the Company may
thereafter, upon at least 100 days' written notice to Employee, place him on
disability status. After such action by the Company, Employee shall no longer be
entitled to receive any compensation hereunder until the Employee returns to
full-time status.
7. Confidential Information.
(a) In the course of Employee's employment by the Company, Employee
will have access to and possession of valuable and important confidential or
proprietary data or information of the Company and its operations. Employee will
not during Employee's employment by the Company or at any time for a period of
five (5) years thereafter divulge or communicate to any person nor shall
Employee direct any employee, representative or agent of the Company or its
affiliates to divulge or communicate to any person or entity (other than to a
person or entity bound by confidentiality obligations similar to those contained
herein and other than as necessary in performing Employee's duties hereunder) or
use to the detriment of the Company or for the benefit of any other person or
entity, including without limitation any competitor, supplier, licensor,
licensee or customer of the Company , any of such confidential or proprietary
data or information or make or remove any copies thereof, whether or not marked
or otherwise identified as "confidential" or "secret." Employee shall take all
reasonable precautions in handling the confidential or proprietary data or
information within the Company to a strict need-to-know basis and shall comply
with any and all security systems and measures adopted from time to time by the
Company to protect the confidentiality of confidential or proprietary data or
information.
(b) The term "confidential or proprietary data or information" as used
in this Agreement shall mean information not generally available to the public,
including, without limitation, all database information, personnel information,
financial information, customer lists, account lists or other account
information, names, telephone numbers or addresses, supplier lists, trade
secrets, patented or proprietary information, forms,
2
information regarding products, operations, systems, methods, financing,
services, know how, computer and any other processed or collated data, computer
programs, pricing, marketing, media and advertising data.
(c) Employee will at all times promptly disclose to the Company in
such form and manner as the Company may reasonably require, any inventions,
improvements or procedural or methodological innovations, including without
limitation relating to programs, methods, forms, systems, services, designs,
marketing ideas, products or processes (whether or not capable of being
trademarked, copyrighted or patented) conceived or developed or created by
Employee during or in connection with Employee's employment hereunder and which
relate to the business of the Company ("Intellectual Property"). Employee agrees
that all such Intellectual Property shall be the sole property of the Company.
Employee further agrees that Employee will execute such instruments and perform
such acts as may reasonably be requested by the Company to transfer to and
perfect in the Company all legally protectable rights in such Intellectual
Property.
(d) In accordance with RCW 49.44.140, any assignment of inventions
required by this Agreement does not apply to an invention for which no
equipment, supplies, facility or trade secret information of the Company was
used and which was developed entirely on the Employee's own time, unless (a) the
invention relates (i) directly to the business of the Company or (ii) to the
Company's actual or demonstrably anticipated research or development or (b) the
invention results from any work performed by the Employee for the Company.
(e) As a matter of record Employee attaches hereto as Exhibit A a
complete list of all inventions (including patent applications and patents)
relevant to the subject matter of Employee's engagement pursuant to this
Agreement which have been made, conceived, developed or first reduced to
practice by Employee, alone or jointly with others, prior to Employee's
engagement with Company pursuant to this Agreement that Employee desires to
remove from the operation of this Agreement, and Employee covenants that such
list is complete. If no such list is attached to this Agreement, Employee
represents that it has no such inventions at the time of signing this Agreement.
(f) All written materials, books, records and documents made by
Employee or coming into Employee's possession during Employee's employment by
the Company concerning any products, processes or equipment manufactured, used,
developed, investigated, purchased, sold or considered by the Company or
otherwise concerning the business or affairs of the Company, including without
limitation any files, customer records such as names, telephone numbers and
addresses, lists, firm records, brochures and literature, shall be the sole
property of the Company, shall not be removed from the Company's premises by the
Employee, and upon termination of Employee's employment by the Company, or upon
request of the Company during Employee's employment by the Company, Employee
shall promptly deliver the same to the Company. In addition, upon termination of
Employee's employment by the Company, Employee will deliver to the Company all
other Company property in Employee's possession or under Employee's control,
including, but not limited to, financial statements, marketing and sales data,
customer and supplier lists, account lists and other account information,
database information and other documents, and any Company credit cards.
(g) The Employee acknowledges that the covenants contained in this
Section 7 are fair and reasonable in order to protect the Company's business and
were a material and necessary inducement for the Company to agree to the terms
of this Agreement. The Employee further acknowledges that any remedy at law for
any breach or threatened or attempted breach of the covenants contained in this
Section 7 may be inadequate and that the violation of any of the covenants
contained in this Section 7 will cause irreparable and continuing damage to the
Company. Accordingly, the Company shall be entitled to specific performance or
any other mode of injunctive and/or other equitable relief to enforce its rights
hereunder, including without limitation an order restraining any further
violation of such covenants, or any other relief a court might award, without
the necessity of showing any actual damage or irreparable harm or the posting of
any bond or furnishing of other security, and that such injunctive relief shall
be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. The covenants in this Section 7 shall run in favor of
the Company and its successors and assigns. In addition, to the extent the
Company is successful on the merits in any proceeding to enforce the terms of
this
3
Section 7, the Employee agrees to pay the Company the costs it incurs,
including reasonable attorneys' fees and expenses, in bringing and prosecuting
any such proceeding.
(h) The provisions of this Section 7 shall survive the termination of
this Employment Agreement.
8. Non-Competition.
(a) During the term of this Agreement and for one year thereafter (the
"Restricted Period"), the Employee shall not, without the written consent of the
Company, directly or indirectly,
(i) become associated with, render services to, invest in,
represent, advise or otherwise participate in as an officer, employee, director,
stockholder, partner, promoter, agent of, consultant for or otherwise, any
business which is conducted in any of the jurisdictions in which the Company's
business is conducted and which is competitive with the business conducted by
the Company ; provided, that this Section 8(a)(i) shall not prohibit the
Employee from purchasing or owning up to one percent (1%) of the outstanding
capital stock of a company which is listed or authorized for trading on any
national securities exchange, Nasdaq or the OTC Electronic Bulletin Board or is
a company with a class of securities registered under Section 12 of the
Securities Act of 1934, as amended;
(ii) for the Employee's own account or for the account of any other
person or entity (A) interfere with the Company's relationship with any of its
suppliers, customers, accounts, brokers, representatives or agents or (B)
contact, telephone, meet, solicit or transact any business with any material
customer, account or supplier of the Company who or which transacts or has
transacted business with the Company at any time during the term of this
Agreement; or
(iii) employ or otherwise engage, or solicit, entice or induce on
behalf of the Employee or any other person or entity, the services, retention or
employment of any person who has been an employee, principal, partner,
stockholder, sales representative, trainee, consultant to or agent of the
Company within one year of the date of such offer or solicitation.
(b) Nothing herein contained shall be construed as prohibiting the
Company from pursuing any other remedies available to it for such violation,
including but not limited to any injunctive or other equitable relief or the
recovery of damages from the Employee.
(c) The Employee acknowledges that the covenants contained in this
Section 8 are fair and reasonable in order to protect the Company's business and
were a material and necessary inducement for the Company to agree to the terms
of this Agreement. The Employee further acknowledges that any remedy at law for
any breach or threatened or attempted breach of the covenants contained in this
Section 8 may be inadequate and that the violation of any of the covenants
contained in this Section 8 will cause irreparable and continuing damage to the
Company. Accordingly, the Company shall be entitled to specific performance or
any other mode of injunctive and/or other equitable relief to enforce its rights
hereunder, including without limitation an order restraining any further
violation of such covenants, or any other relief a court might award, without
the necessity of showing any actual damage or irreparable harm or the posting of
any bond or furnishing of other security, and that such injunctive relief shall
be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. The covenants in this Section 8 shall run in favor of
the Company and its successors and assigns. In addition, to the extent the
Company is successful on the merits in any proceeding to enforce the terms of
this Section 8, the Employee agrees to pay the Company the costs it incurs,
including reasonable attorneys' fees and expenses, in bringing and prosecuting
any such proceeding.
(d) In case any one or more of the terms or provisions contained in
this Section 8 shall for any reason be held invalid, illegal or unenforceable,
such invalidity, illegality or unenforceability shall not affect any
4
other terms or provisions hereof, but such term or provision shall be
deemed modified or deleted as or to the extent required by applicable law, and
such modification or deletion shall not affect the validity of the other terms
or provisions of this Section 8. In addition, if any one or more of the
restrictions contained in this Section 8 shall for any reason be held to be
unreasonable with regard to time, duration, geographic scope or activity, the
parties contemplate and hereby agree that such restriction shall be modified and
shall be enforced to the full extent compatible with applicable law. The parties
hereto intend that the covenants contained in this Section 8 shall be deemed a
series of separate covenants for each country, state, county and city. If, in
any judicial proceeding, a court shall refuse to enforce all the separate
covenants deemed included in this Section 8 because, taken together, they cover
too extensive a geographic area, the parties intend that those of such covenants
(taken in order of the cities, counties, states and countries therein which are
lease populous) which if eliminated would permit the remaining separate
covenants to be enforced in such proceeding shall, for the purpose of such
proceeding, be deemed eliminated from the provisions of this Section 8.
(e) The provisions of this Section 8 shall survive the termination of
this Employment Agreement.
9. Termination.
(a) The Company may terminate the Employee's services hereunder "for
cause" by delivering to Employee not less than ten (10) days prior to the date
on which the termination is to be effective, a written notice of termination for
cause specifying the act, acts or failure to act that constitute the cause. For
the purposes of this agreement, "for cause" shall mean; (i) any act of fraud or
embezzlement which materially adversely affects the financial or market
interests of the Company or any affiliate thereof, (ii) in the event of a
conviction of the Employee for any violent felony or other serious crime or any
knowing violation of any federal or state securities law or regulation, (iii)
repeated failure to perform Employee's duties hereunder after notice and
opportunity to cure, (iv) any material breach by the Employee of this Agreement,
or (v) the death of the Employee.
(b) If the Company terminates Employee's employment hereunder for any
reason other than "for cause" as set forth in Section 9(a) hereof, the Company
shall pay to the Employee compensation pursuant to Sections 4(a) and 4(b) hereof
at the time and in the manner provided for herein, and no other compensation
payable hereunder shall be payable to the Employee. If the Company terminates
Employee's employment hereunder "for cause" as set forth in Section 9(a) hereof
or if Employee resigns voluntarily from Employee's employment by the Company,
Employee shall be paid the compensation pursuant to Sections 4(a) and 4(b)
hereof through the date of such termination but shall not be entitled to receive
any further compensation hereunder. Employee and the Company acknowledge that
the foregoing provisions of this paragraph 9(b) are reasonable and are based
upon the facts and circumstances of the parties at the time of entering into
this Agreement, and with due regard to future expectations.
10. Notices. Any notice to be given to the Company hereunder shall be
deemed sufficient if addressed to the Company in writing and delivered or mailed
by certified or registered mail to it at 0000 XX Xxxx Xxxx Xxxx, Xxxxxxx
Xxxxxxxxxx 00000, Attention: President, or to such other address as the Company
may hereafter designate, and a copy to Xxxx X. Xxxxxxx, Esq., Xxxxxxx &
Xxxxxxxx, LLC, 00 Xxxxxxx Xxxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxx
Xxxx 00000. Any notice to be given to Employee hereunder shall be delivered or
mailed by certified or registered mail to her at the address set forth at the
head of this Agreement or such other address as he may hereafter designate.
11. Change of Control. (a) In the event that at any time after any
securities of the Company are publicly traded there shall be a change in the
control of the Company, as hereinafter defined, or in any person directly or
indirectly presently controlling the Company, as hereinafter defined, Employee
shall have the option, exercisable within six (6) months of Employee's becoming
aware of such event, to terminate Employee's employment by the Company pursuant
to this Employment Agreement forthwith. Upon such termination, Employee shall
have the right to immediately receive as a lump sum payment an amount equal to
three (3) times the average of
5
the total annual compensation paid by the Company to Employee, with respect
to the five fiscal years of the Company prior to the change of control, minus
$1.00.
(b) For purposes of this Agreement, a change in control of the Company,
or in any person directly or indirectly controlling the Company, shall mean:
(i) A change in control as such term is presently defined in
Regulation 240.12b-2 under the Securities Exchange Act of 1934 ("Exchange Act);
or
(ii) if any "person" (as such term is used in Section 13(d) and 14(d)
of the Exchange Act) other than the Company or any "person" who on the date of
this Agreement is a director or officer of the Company, becomes the "beneficial
owner" (as defined in Rule 13(d)-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing twenty (20%) percent of
the voting power of the Company's then outstanding securities, unless such
person becomes such a beneficial owner as a result of a transaction approved by
a majority of the board of directors of the Company; or
(iii) if during any period of two (2) consecutive years during the
term of this Agreement, individuals who at the beginning of such period
constitute the Board of Directors cease for any reason to constitute at least a
majority thereof, unless the election of each director who is not a director at
the beginning of such period has been approved in advance by directors
representing at least two-thirds (2/3) of the directors then in office who were
directors at the beginning of the period.
12. Successors and Assigns; Third Party Beneficiaries. This Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company, and unless clearly inapplicable, all references herein to the Company
shall be deemed to include any such successor. In addition, this Agreement shall
be binding upon and inure to the benefit of the Employee and Employee's heirs,
executors, legal representatives and assigns; provided, however, that the
obligations of Employee hereunder may not be delegated without the prior written
approval of the Board of Directors of the Company. In the event of any
consolidation or merger of the Company into or with any other corporation during
the term of this Agreement, or the sale of all or substantially all of the
assets of the Company to another corporation, person or entity during the term
of this Agreement, such successor corporation shall assume this Agreement and
become obligated to perform all of the terms and provisions hereof applicable to
the Company, and Employee's obligations hereunder shall continue in favor of
such successor corporation.
13. Amendments. This Agreement may not be altered, modified, amended or
terminated except by a written instrument signed by each of the parties hereto.
14. Prior Agreements Superseded. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
any other agreements, oral or written, entered into between Employee and the
Company prior to the date of this Agreement relating thereto.
15. Applicable Law. This Agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Washington, without regard
to conflicts of laws.
16. Severability. If any provision of this Agreement shall be held by a
court of competent jurisdiction to be contrary to law or public policy, the
remaining provisions shall remain in full force and effect.
17. Waiver. No term or provision hereof shall be deemed waived and no
breach consented to or excused, unless such waiver, consent or excuse shall be
in writing and signed by the party claimed to have waived, consented or excused.
A consent, waiver or excuse of any breach shall not constitute a consent to,
waiver or, or excuse of any other or subsequent breach whether or not of the
same kind of the original breach.
6
18. Counterparts. This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one and the same
agreement.
19. Acknowledgment. Employee acknowledges that he has carefully read this
Agreement, has had an opportunity to consult counsel regarding this Agreement
and hereby represents and warrants to the Company that Employee's entering into
this Agreement, and the obligations and duties undertaken by Employee hereunder,
will not conflict with, constitute a breach of or otherwise violate the terms of
any other agreement to which Employee is a party and that Employee is not
required to obtain the consent of any person, firm, corporation or other entity
in order to enter into and perform Employee's obligations under this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
eAcceleration Corp.
By: /s/ Xxxxx Xxxxxxx
---------------------------------
Name: Xxxxx Xxxxxxx
Title: President and Chief Executive
Officer
/s/ Xxxxx X. Xxxxxxx
--------------------------------------
Xxxxx X. Xxxxxxx
7
EXHIBIT A
Inventions
1. The following is a complete list of all inventions or improvements
relevant to the subject matter of services pursuant to this Agreement that
have been made or conceived or first reduced to practice by Employee, alone
or jointly with others, prior to the first effective date of this Agreement
that Employee desires to remove from the operation of this Agreement
entered into between the Company and Employee.
(a) No inventions or improvements.
(b) Any and all inventions regarding: Nothing
2. Employee proposes to bring to this relationship the following materials
and documents of a former employer.
(a) No materials or documents.
/s/ Xxxxx X. Xxxxxxx
----------------------------
Xxxxx X. Xxxxxxx
Xxxxx X. Xxxxxxx
X.X. Xxx 0000
Xxxxxxxxxx, Xxxxxxxxxx 00000
February 15, 2000
eAcceleration Corp.
0000 XX Xxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxxxxx 00000
Re: Employment Agreement between eAcceleration Corp.
and Xxxxx X. Xxxxxxx
------------------------------------------------
Ladies and Gentlemen:
Reference is made to that certain Employment Agreement, dated as of
November 1, 1999 (the "Employment Agreement"), between the undersigned and
eAcceleration Corp. (the "Company"). All capitalized terms not otherwise defined
herein shall have the meanings set forth in the Employment Agreement. In order
to clarify certain terms of the Employment Agreement, the undersigned agrees to
the following terms:
1. The incentive compensation referred to in Section 4(b) of the
Employment Agreement is based on prospective earnings by the Company
during the term of the Employment Agreement only. Accordingly,
no incentive compensation will be payable to the undersigned
under Section 4(b) of the Employment Agreement with respect to the
Company's 1999 Pre Tax Income.
2. This letter agreement may be executed in counterparts, each of
which shall be deemed to be an original, and such counterparts, taken
together, shall constitute one and the same agreement.
3. This letter agreement shall be governed by, construed and
enforced in accordance with the laws of the State of Washington,
without regard to conflicts of laws.
Sincerely yours,
/s/ Xxxxx X. Xxxxxxx
---------------------------
Xxxxx X. Xxxxxxx
Confirmed and Agreed to by:
eAcceleration Corp.
By: /s/ Xxxxx Xxxxxxx
---------------------------
Xxxxx Xxxxxxx
President
