Exhibit 10.3
EMPLOYMENT AGREEMENT
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THIS AGREEMENT is made and entered into as of the date set forth below
by and between IPS PUBLISHING, INC., a Washington corporation (the "Company"),
and XXXXXXX XXXXX (the "Executive").
BACKGROUND:
As of the date hereof, under the terms of an Asset Purchase
Agreement dated as of August 1, 1996 (the "Purchase Agreement"), the Company
(formerly known as IPS Acquisition, Inc.) has acquired substantially all of the
assets and business of IPS Publishing, Inc. ("OldCo"), and has changed its name
to "IPS Publishing, Inc." Executive was the principal shareholder and Chief
Executive Officer of OldCo and the Company and the Executive desire to provide
for Executive's continued employment by the Company.
NOW, THEREFORE, the Company and the Executive, in consideration of the
foregoing and the mutual promises hereinafter set forth, promise and agree as
follows:
ARTICLE I
General Terms of Employment
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1.1. General Duties. During the terms hereof, the Company shall
employ Executive and the Executive shall serve the Company in the capacity of
Chief Executive Officer. In such capacity, subject to the supervision and
control of the Company's Chairman, the Executive shall perform such duties and
render such services consistent with his experience and previous duties with
OldCo as the Company's Chairman may determine after consultation with Executive.
1.2. Fulltime Duties. During the Executive's employment hereunder,
the Executive shall devote his best efforts on a full-time basis to the business
and affairs of the Company and shall not, without the prior approval of the
Company's Chairman, directly or indirectly, engage in outside business
activities in such a manner as to interfere with his performance of services for
the Company. The Company hereby acknowledges that the Executive is involved with
Curriculum Technologies, Inc. and agrees that Executive may provide services to
Curriculum Technologies, Inc. at home, on weekends and evenings, without
interfering with his duties hereunder.
1.3. Board of Directors. For so long as he is employed hereunder,
the Executive shall, subject to election
by such corporation's shareholders, serve as a member of the Company's Board of
Directors and as a member of the Board of Directors of the Company's affiliate,
Advantage Learning Systems, Inc.
ARTICLE II
Compensation; Employee Benefits
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2.1. Salary. The Company shall pay Executive an initial salary of
One Hundred Twenty-Five Thousand Dollars ($125,000.00) per year. Executive's
salary will be reviewed annually and may be increased (but not decreased) over
such initial annual salary from time to time in the sole discretion of the
Company's Board of Directors. Executive's salary shall be paid to him in equal
installments at such intervals as other executive employees of the Company
receive payment for their employment services.
2.2. Incentive Plans. In addition to the salary set forth in Section
2.1, above, Executive shall also be entitled to receive deferred compensation
under the phantom stock plans adopted by the Company affiliates, Advantage
Learning Systems, Inc. and Institute for Academic Excellence, Inc., in
accordance with the terms of such plans. Effective as of the date hereof,
Executive shall be awarded 25 shares and effective as of January 1, 1997
Executive shall be awarded an additional 25 shares of "phantom stock" under the
terms of each of such plans. Executive's rights to deferred compensation under
such plans shall be as provided in such plans and subject to the terms and
conditions thereof. In addition, if and when the Company and its affiliates are
merged and an initial public offering completed, the Company, or its successor,
shall cause the Executive to participate in such stock based incentive plans as
the Company, or its successor, may adopt from time to time on a basis comparable
to executives of the Company, or its successor, having similar responsibilities.
2.3. Expenses. During the Executive's employment hereunder, the
Company shall pay or reimburse the Executive for all reasonable out-of-pocket
expenses incurred by the Executive in connection with rendering services
hereunder, including, without limitation, reasonable out-of-pocket travel, meal
and lodging expenses incurred by the Executive in connection with overnight
travel on Company business, cellular and other telephone expenses incurred in
connection with the business of the Company and, subject to approval in advance
by the Company's Chairman, entertainment expenses. The Executive shall be
required to submit an itemized account of such expenditures and
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such proof thereof as the Company customarily requires of its executive
employees generally. In addition, through December, 1996, the Company shall
make the monthly lease payments of $648.18 each on the Ford Explorer currently
utilized by Executive. Executive shall reimburse the Company for the reasonable
costs of Executive's personal use thereof as agreed to from time to time by
Executive and the Company.
2.4. Vacation. Executive shall be entitled to six (6) weeks of
vacation per year or such greater amount as the Board of Directors of the
Company may from time to time establish. Vacation time shall be noncumulative,
but Executive shall be entitled to reimbursement for vacation time not taken in
any year in accordance with the vacation reimbursement policies from time to
time established by the Company for its employees generally, provided Executive
shall not be reimbursed for more than four (4) weeks of unused vacation with
respect to any year.
2.5. Other Benefits. In addition to the benefits expressly set forth
herein, Executive shall also be entitled during the term hereof to receive such
other fringe benefits and to participate in such benefit programs as the Company
may from time to time determine to make available to its executive employees
generally, including, but not limited to, health insurance, life insurance and
401(k) plan participation to the extent offered by the Company. Executive
acknowledges that he shall have no vested rights under any such benefit programs
except as expressly provided by the terms thereof and that such programs may be
terminated or enhanced at any time without obligation to Executive.
ARTICLE III
Termination of Employment
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3.1. Term. Unless otherwise terminated as provided in Section 3.2,
hereof, the Executive's employment shall commence as of the date hereof and
shall continue for a period of two (2) years. Thereafter, either the Company or
the Executive may terminate the Executive's employment hereunder at any time by
thirty (30) days' prior written notice to the other.
3.2. Causes for Termination. Notwithstanding the term set forth in
Section 3.1, above, the Executive's employment hereunder shall terminate upon
the occurrence of any of the following events:
3.2.1. Upon the Executive's death.
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3.2.2. At the option of the Company upon notice to the Executive
in the event of the Executive's disability. For purposes hereof, the
Executive shall be considered to be disabled if he has been, or if it is
apparent to a reasonable degree of medical certainty that he will be,
unable to perform the regular duties of his employment hereunder for a
continuous period of sixty (60) days be reason of physical or mental
illness or incapacity. If there is any dispute as to whether the Executive
is or was disabled, such question shall be submitted to a licensed
physician reasonably designated by the Company and the determination of
such physician shall be conclusive. The Executive shall submit to such
examinations and provide such information as any such physician may
request.
3.2.3. By the Company forthwith upon notice to the Executive, if
the Executive shall commit any act or omission constituting "Cause" for the
termination of his employment. For purposes hereof, the Company shall be
deemed to have "Cause" for the termination of the Executive's employment
if the Executive should: (i) breach any provision of this Agreement and
fail to cure such breach within ten (10) days written notice to Executive
from the Company; (ii) commit any act of dishonesty or disloyalty involving
the Company; (iii) or commit any act or omission which, in the reasonable
judgement of the Company's Board of Directors, is likely to have a material
adverse effect upon the business or reputation of the Executive or the
Company.
3.3. Consequences of Termination. Except as provided in Section 3.4,
in the event of the termination of Executive's employment, the Company's sole
obligation shall be to pay to Executive (or his estate) his salary at the annual
rate then in effect prorated through the date of termination.
3.4. Additional Voluntary Termination. Section 3.1, hereof,
notwithstanding: (i) the Executive may, at any time, terminate the Executive's
employment hereunder upon thirty (30) days' prior written notice to the Company
if the Company moves its headquarters from the Vancouver, Washington area; and
(ii) the Company may, at any time, terminate Executive's employment hereunder
upon thirty (30) day's prior written notice to the Executive; provided that, if
any such termination occurs before that date six (6) months after the date
hereof the Company shall continue until that date six (6) months after the date
hereof to: (i) pay the Executive when and as the same would otherwise have been
payable hereunder, his salary at the annual rate then in effect; and (ii)
provide the Executive when and as the same would
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otherwise have been provided hereunder, the health and life insurance benefits
specified in Section 2.5, hereof.
3.5. Benefits. In addition to any other payments set forth in this
Article III to which the Executive may be entitled upon termination of his
employment, the Executive shall also be entitled to receive upon or following
the termination of his employment any payments, benefits or rights due or
exercisable by him under any life or disability policies, 401(k) or phantom
stock plans or other benefit programs or incentive compensation plans
established by the Company and in which the Executive is a participant at the
time of his termination and in accordance with the terms of such plans.
ARTICLE IV
Covenant Not to Compete; Confidentiality
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4.1. Noncompetition. Executive agrees that he shall not, without the
prior written consent of the Company, at any time while he is employed by the
Company or at any time during the period of two (2) years following the
termination of his employment for any reason, either directly or indirectly, as
employee, consultant, representative, trustee, partner, owner, proprietor or
otherwise: (i) acquire an interest in, work for, render advice or assistance to
or otherwise participate or engage in the business of, any "Competing Business"
(as defined below); (ii) divert or attempt to divert any business from, or
persuade or attempt to persuade, any Customer (as defined below) not to do
business with the Company; or (iii) induce or attempt to induce any employee of
or consultant engaged by the Company or any of its Affiliates (as defined below)
to leave the employ of the Company or any of its Affiliates or in any way
interfere with the relationship between the Company or any of its Affiliates and
any employee or consultant thereof. Notwithstanding the foregoing: (i) nothing
herein shall prevent the Executive from acquiring for investment up to one
percent (1%) of the outstanding shares of any Competing Business provided that
he does not render advice or assistance to such entity; and (ii) the Company
acknowledges that the Executive's engagement in business ventures relating to CD
roms for Classic Comics and software for non-native English speakers and his
services on the Board of Directors of Assessment Training Institute will not be
considered to be in violation of the restrictions set forth in this Section 4.1.
For purposes hereof, the term "Competing Business" shall mean any business which
is engaged in the development, sale, licensing, use and/or publication of any
software or other products of the type sold or licensed by the Company or any of
its Affiliates while Executive is employed by the Company or, in the case of the
termination of
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his employment, during the six (6) month period prior to such termination,
including any software designed to teach, assess or improve reading skills and
any software, algorithms and/or authoring tools designed to create mathematics
and/or science problems or tests and/or useful for mathematics and/or science
performance assessment or instruction, or otherwise to teach, develop or improve
mathematics and/or science knowledge and skills. For purposes hereof, a
"Customer" shall mean, while Executive is employed by the Company, any
person who has been an actual or potential customer of the Company or any of its
Affiliates and, in the case of the termination of Executive's employment, any
person who has been a customer of the Company or any of its Affiliates within
the period of six months prior to the termination of Executive's employment or a
potential customer with whom the Company or any of its Affiliates has engaged in
negotiations within such six month period. For purposes hereof, "Affiliate" of
the Company shall mean any corporation or other entity which directly or
indirectly through one or more subsidiaries or other intermediaries is
controlled by, is under common control with or which controls the Company. For
purposes hereof, the term "control" shall mean, in the case of a corporation,
ownership of 50% or more of the shares of such corporation which have the power
to elect a majority of the Board of Directors or, in the case of any other
entity, the power to direct the affairs of such corporation or to elect a
majority of the persons having such power. As of the date hereof, the Affiliates
of the Company include Advantage Learning Systems, Inc., a Wisconsin
corporation, and Institute for Academic Excellence, Inc,. a Wisconsin
corporation.
4.2. Confidentiality and Assignment of Rights. Simultaneously with the
execution hereof, Executive shall execute and deliver to the Company a
Confidential Information and Business Ideas Assignment Agreement (the
"Confidentiality Agreement") in the form attached hereto, the terms of which are
hereby incorporated by reference.
EXECUTIVE ACKNOWLEDGES AND REPRESENTS THAT THE SCOPE OF THE RESTRICTIONS IN
SECTIONS 4.1 AND 4.2 HEREOF, INCLUDING THE RESTRICTIONS SET FORTH IN THE
CONFIDENTIALITY AGREEMENT, ARE APPROPRIATE, NECESSARY AND REASONABLE FOR THE
PROTECTION OF THE BUSINESS, GOODWILL AND PROPERTY RIGHTS OF THE COMPANY AND THE
COMPANY AND WILL NOT PREVENT EXECUTIVE FROM EARNING A LIVING IN THE EVENT OF,
AND AFTER, TERMINATION OF HIS EMPLOYMENT BY THE COMPANY.
4.3. Injunction. Executive recognizes that irreparable and
incalculable injury may result to Company, its business and property, in the
event of a breach by him of any of the
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restrictions imposed by this Article IV and agrees that if he shall engage in
any acts in violation of the provisions hereof, Company shall be entitled, in
addition to such other remedies and damages as may be available, to an
injunction prohibiting him from engaging in such acts.
4.4. Subsequent Employment. In the event of the expiration or
termination of Executive's employment with the Company, Executive agrees, prior
to the commencement of any new employment, to advise any new employer who is or
subsequently becomes a Competing Business of the terms of this Agreement and the
Confidentiality Agreement and to furnish such new employer with a copy of such
agreements. Executive further agrees that the Company may furnish copies of this
Agreement and the Confidentiality Agreement to any such new employer.
ARTICLE V
Miscellaneous
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5.1. Withholding Taxes. The Company shall deduct from all payments
to the Executive under this Agreement any federal, state or local withholding or
other taxes or charges which the Company is from time to time required to deduct
under applicable law, and all amounts payable to the Executive hereunder are
stated herein before any such deductions.
5.2. Notices. Any notice required or permitted to be given or made
by either party to the other hereunder shall be sufficient if hand delivered,
mailed postage prepaid, sent by prepaid express or courier service or sent by
facsimile transmission and actually received to the parties at their respective
addresses set forth opposite the signatures hereto or to such changed address as
either party shall designate by proper notice to the other.
5.3. Waiver of Breach. The waiver by the Company of the breach of
any provisions of this Agreement or the Confidentiality Agreement by the
Executive shall not be deemed a waiver by the Company of any subsequent breach.
5.4. Assignment. The Company may not assign this Agreement without
the written consent of the Executive, except that if the Company shall
liquidate, merge, or consolidate with or into, or transfer substantially all of
its assets, including, goodwill, to another corporate or other form of business
organization, this Agreement shall be binding upon and inure to the benefit of
the successor corporation in such liquidation, merger, consolidation or
transfer. The Executive may not assign,
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pledge or encumber any interest in this Agreement or any part thereof without
the prior written consent of the Company.
5.5. Governing Law. This Agreement and all questions of its
interpretation, performance, enforceability and the rights and remedies of the
parties hereto, shall be governed by and determined in accordance with
the internal laws of Washington.
5.6. Noncompetition; Confidentiality. The Executive hereby
acknowledges that he has agreed, on the terms and conditions set forth in the
Purchase Agreement, not to compete with the Company for a period of five (5)
years from the date hereof, and not to disclose proprietary or other
confidential information of the Company, and that his agreement set forth in
Article IV, hereof, and the Confidentiality Agreement are in addition to, and
not by way of limitation to, his agreements in the Purchase Agreement.
5.7. Severability. The parties agree that if any provision of this
Agreement shall under any circumstances by deemed invalid or inoperative, this
Agreement shall be construed with the invalid or inoperative provision deleted,
and the rights and obligations of the parties shall be construed and enforced
accordingly.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
this 1st day of August, 1996.
Address for Notice: COMPANY:
c/o Xxxxxxxx X. Xxxx IPS PUBLISHING, INC.
Advantage Learning
Systems, Inc.
0000 Xxxxxxxxxx Xxxxxx
X.X. Xxx 0000 By: /s/ Xxxxxxxx X. Xxxx, VP/Sec
Xxxxxxxxx Xxxxxx, XX 00000 ----------------------------
fax No. 000-000-0000 (Title)
Address for Notice: EXECUTIVE:
c/o/ IPS Publishing, Inc.
00000 X.X. 00xx Xxxxxx /s/ Xxxxxxx Xxxxx
C-110 Xxxxxxxxx, XX 00000 ------------------------------
fax No. 000-000-0000 Xxxxxxx Xxxxx
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By this Agreement you are agreeing that you will transfer to the Companies
all rights you may have or acquire in copyrights, inventions and
discoveries, protect the Companies' trade secrets and keep information
confidential. If you have questions about your obligations or rights, you
should seek independent legal advice.
CONFIDENTIAL INFORMATION AND BUSINESS IDEAS
ASSIGNMENT AGREEMENT
This Agreement is made and entered into as of the date set forth below
by the undersigned Employee of IPS PUBLISHING, INC., ADVANTAGE LEARNING SYSTEMS,
INC., INSTITUTE FOR ACADEMIC EXCELLENCE, INC. and/or their Affiliates
(collectively called herein, the "Companies"). As a condition to my employment,
I agree that:
1. Trade secrets and confidential information about the Companies'
business which may be disclosed to me or of which I may learn during the course
of my employment are not to be disclosed. One of my important duties as an
employee, and even after my employment terminates, is to use my best efforts to
safeguard the Companies' trade secrets and to keep information about the
Companies confidential. Unless I am expressly authorized to do so in writing, I
will not disclose any of the Companies' trade secrets or any confidential
information about the Companies other than to other employees of the Companies
who have a need to know such secrets or information. I will assume any
particular information about the Companies' business is confidential until I am
informed it is not or until it has been published or is generally or publicly
known outside the Companies. I understand that "confidential information",
includes, without limitation, (i) all source codes, algorithms and other
programming data and technical information relating to the Companies' software
products; (ii) any information concerning any product under development or being
tested by any of the Companies but not yet offered for sale; (iii) any
information concerning the pricing policies of the Companies, the prices charged
by any of the Companies to any customer, the volume of orders of any customer
and all other information concerning the transactions of the Companies with any
customer or proposed customer; (iv) any information concerning the marketing
programs or strategies of any of the Companies; (v) any financial information
concerning any of the Companies; and (vi) any information concerning the
salaries or wages to be paid to, the work records of or any other personnel
information relating to any employee of any of the Companies other than the
undersigned.
2. The Companies will own, and I hereby assign to the Companies, all
rights in all Business ideas (as hereafter defined) which I originate or develop
either alone or working with others while I am employed by any of the Companies.
All Business
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Ideas which are or form the basis for copyrightable works shall be considered
"works for hire" as that term is defined by U.S. Copyright Law and are hereby
assigned to the Companies.
3. While I am employed by any of the Companies and after my employment
terminates:
(a) I will promptly disclose all Business Ideas to the Companies;
and
(b) I will promptly execute all documents which any of the
Companies may reasonably require to perfect its patent, copyright and other
rights to such Business Ideas throughout the world.
4. The term "Business Ideas" as used in this Agreement means all
ideas, inventions, data, software, developments and copyrightable works, whether
or not patentable or registerable, which I originate or develop, either alone or
jointly with others while I am employed by any of the Companies and which are
either (i) related to any business known to me to be engaged in or contemplated
by any of the Companies, (ii) originated or developed during my working hours,
or (iii) originated or developed in whole or in part using materials, labor,
facilities or equipment furnished by any of the Companies. Notwithstanding the
foregoing, the term "Business Ideas" as used in this Agreement, shall not
include inventions for which no equipment, supplies, facility or trade secret
information of the Companies was used and which was developed entirely on my own
time, unless (a) the invention relates (i) directly to the business of the
Companies, or (ii) to the Companies' actual or demonstrably anticipated research
or development, or (b) the invention results from any work performed by me for
the Companies.
Nothing in this Agreement will prevent me, after my employment
terminates, from using general skills and knowledge I gained while employed by
any of the Companies.
Dated this 1st day of August, 1996.
/s/ Xxxxxxx Xxxxx
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(Employee)
The foregoing is hereby accepted as of its date.
IPS PUBLISHING, INC.
By: /s/ Xxxxxxxx Xxxx VP/Sec
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(Title)
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