1
Exhibit 10.67FT
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into effective July 15, 1999, by and
between Xxxxxxx X. Xxxxxxx ("Employee") and Futech Interactive Products, Inc.,
an Arizona corporation ("Employer").
R E C I T A L S:
A. Employer desires to hire the services of Employee, and Employee is
willing to provide those services to Employer, on the terms and conditions
hereinafter set forth.
T E R M S:
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties agree as follows:
1. Employment. Employer hereby hires and employs Employee for the
position of President of e-commerce. Employee shall be vested which such powers
and responsibilities as Employer shall assign to Employee. Employee shall
perform such functions and duties as Employer shall from time to time prescribe.
Employee will devote on an exclusive basis Employee's full time, energy
and skill to the performance of Employee's duties for Employer and for the
benefit of Employer. Employee shall at all times faithfully, industriously, and
to the best of Employee's ability, experience and talent, and to the reasonable
satisfaction of Employer, perform Employee's duties under this Agreement.
Employee will exercise due diligence and care in the performance of Employee's
duties to Employer under this Agreement.
2. Employment Period. The period of employment shall commence on July
15, 1999, and end on the date which is three years thereafter, unless sooner
terminated in accordance with the provisions of this Agreement. The period of
time commencing on Employee's first day of employment with Employer, and ending
on the effective date of the termination of employment of Employee under this
Agreement, is sometimes referred to herein as the "Employment Period."
3. Compensation. As compensation for services rendered by Employee under
this Agreement, Employer shall pay Employee as follows, and Employee agrees
that said payments shall be in full payment for Employee's services and
promises to Employer (specifically including the covenant not to compete as set
out in Section 8 below and the proprietary information provisions in Section 9
below):
(a) Base Salary. Compensation installments based on an annual salary
of One Hundred Twenty Five Thousand Dollars ($125,000.00). Employee's
salary under this subparagraph (a) shall be payable in equal periodic
installments in accordance with Employer's usual practice.
(b) Common Stock Options. Employee may purchase up to 2,500,000
shares of Employer's Common Stock at any time between the date hereof and
July 15, 2009. The purchase
2
price shall be $.05 per share, payable in full in cash at the time the option
is exercised. The option may be exercised only by written notice given to
Employer, or Employer's successors and assigns.
If Employee has been continuously employed by Futech between July 15, 1999
and July 15, 2000, and has not been in default under the terms of this
Agreement, then Employee shall as of July 15, 2000 have the right to purchase
up to 666,666 shares of Employer's common stock.
If Employee has been continuously employed by Futech between July 15, 1999
and July 15, 2001, and has not been in default under the terms of this
Agreement, then Employee shall as of July 15, 2001 have the right to purchase
up to 666,667 shares of Employer's common stock.
If Employee has been continuously employed by Futech between July 15, 1999
and July 15, 2002, and has not been in default under the terms of this
Agreement, then Employee shall as of July 15, 2002 have the right to purchase
up to 666,667 shares of Employer's common stock.
The purchase price of common stock purchased under the three preceding
paragraphs shall be $.25 per share, payable in full in cash at the time the
option is exercised. The options may be exercised only by written notice given
to Employer, or Employer's successors and assigns. The options specified above
shall respectively expire on July 15, 2010, 2011 and 2012 if not exercised by
those dates.
Employer's common stock shall be subject to all of the terms and
restrictions of said stock. No representation, warranty or guaranty is made by
Employer as to the value of the stock to be issued pursuant to this
subparagraph, and Employee takes full risk and responsibility as to said value.
Employee hereby makes the representations and warranties set out in Exhibit
"A" attached hereto and hereby made part hereof. On said Exhibit "A" Employee is
referred to as the "Subscriber," Employer is referred as the Corporation, and
the shares of stock to be acquired by Employee under this Section are referred
to as the "Shares." Employee acknowledges and understands the meaning and legal
consequences of the representations and warranties contained herein and agrees
to indemnify and defend and hold harmless the other parties hereto, and
Employer's directors, officers, agents, employees, and attorneys, from and
against any and all claims, loss, damage, liability, cost or expense, including
attorneys' fees and court costs, due to or arising out of or connected directly
or indirectly with or to any breach of any such representation or warranty made
by Employee. Employee's representations and warranties appearing herein are made
as of the date hereof and as of the date of issuance of stock pursuant to this
subparagraph (c) and/or subparagraph (b) above. Employee's acceptance of stock
under this Section 3 shall constitute Employee's confirmation of the
representations and warranties appearing herein as of the date of acceptance.
Employee shall be entitled to have Employer issue Employee stock under
this Section
2
3
3. not more than twice in any calendar year.
(d) Vacation and Fringe Benefit Programs. During the term of this
Agreement, Employee shall be entitled to the following:
(i) Three (3) weeks of vacation per full year worked, to be taken
in accordance with the policies and directives of Employer.
(ii) Participation in any benefit programs adopted from time to
time by Employer for the benefit of its employees. Employee shall
receive such other fringe benefits as may be granted to Employee from
time to time by Employer. Employee's participation in such employee
benefits of Employer shall be based upon Employee's tenure
classification under rules established by Employer from time to time,
and unless contrary to the law shall be terminable by Employer at any
time in Employer's sole discretion.
(e) Payroll Taxes. Employee's compensation and other benefits shall be
subject to all payroll and withholding deductions as may be required by
law.
4. Disability. If during the term of this Agreement, Employee fails to
perform Employee's duties hereunder because of physical or mental illness or
other incapacity for 30 consecutive days, or for 45 days during any 120-day
period, Employer shall the right to terminate this Agreement without further
obligation hereunder, except for any amounts payable pursuant to disability or
workers' compensation insurance plans generally applicable to Employer's
employees. Employer shall provide Employee with notice of commencement of the
disability period, which period cannot commence more than 14 days prior to the
date of the notice. If there is any dispute as to whether Employee is or was
physically or mentally disabled under this Agreement, whether Employee's
disability has ceased or whether Employee is able to resume Employee's duties,
such question shall be submitted to a licensed physician agreed upon by
Employer and Employee. Employee shall submit to such examinations and provide
information as such physician may request, and the determination of such
physician as to Employee's physical or mental condition shall be binding and
conclusive on the parties. Employer agrees to pay the cost of any such
physician's services, tests and examinations.
5. Death. If the Employee dies during the term of this Agreement, this
Agreement shall terminate immediately, and the Employee's legal representatives
or estate shall be entitled to receive the base salary due to Employee through
the last day of the calendar month in which Employee's death occurs and any
other death benefits generally applicable to Employer's employees.
6. Termination by Employer.
(a) With Cause. Employer may terminate this Agreement at any time for
cause. Cause for discharge shall exist when: (i) Employee materially
breaches this Agreement, or (ii) Employee commits any act or engages in a
course of conduct involving moral turpitude that adversely affects the
reputation of Employer.
3
4
(b) Without Cause, Severance Pay. Employer may terminate this
Agreement without Cause with a written notice to Employee. If Employer
terminates this Agreement before the end of the term of the Agreement for
any reason other than those described in section 6(a) above, then Employer
shall pay to Employee, as the same shall become due, Employee's base
salary, less applicable withholdings (the "Severance Pay").
7. Termination by Employee. Employee shall have the right to terminate
this Agreement at any time after at least ninety (90) days prior written notice
given to Employer. Employee agrees to provide Employer with ninety (90) days
prior written notice of any such termination.
8. Effect of Termination. Upon proper termination of this Agreement by
Employer or Employee, any amounts payable between the parties for periods prior
to termination shall remain payable, and the covenant not to compete set forth
in Section 9 below, and the proprietary information provisions of Section 9
below, shall survive any said termination and shall continue to bind Employee
for the period of time stated therein.
9. Restrictive Covenants. Employee acknowledges that Employee will have
access to confidential information about Employer and Employer's customers and
that Employee will have access to other "proprietary information" (as defined
in Section 10 below) acquired by Employer at the expense of Employer for use in
Employer's business. Accordingly, by execution of this Agreement.
(a) Employee agrees that commencing the date of this Agreement, and
continuing for two (2) years following Employee's termination of
employment with Employer for any reason (whether such termination shall be
voluntary or involuntary), Employee shall not violate the provisions of
subparagraph 9(b) below. Employee agrees that the two-year period referred
to in the preceding sentence shall be extended by the number of days
included in any period of time during which Employee is or was engaged in
activities constituting a breach of subparagraph 9(b).
(b) During the time period specified in subparagraph (a) above,
Employee shall not:
(i) Directly or indirectly induce, encourage or assist any other
individual who was employed by Employer during Employee's employment
with Employer, or during the two (2) year period referred to in
subparagraph (a) above, to leave Employer's employ. If Employee has
any control over, or responsibility with respect to, the hiring of
employees, agents or consultants at any other facility or with any
other employer, Employee shall do everything in Employee's power to
preclude the hiring or retention by such other employer or facility
of any individual who was employed by Employer during Employee's
employment period with Employer or during the two (2) year period
referred to in subparagraph (a) above.
(ii) Directly or indirectly solicit (or take other actions which
could reasonably have the same effect as such solicitation) any
individual or entity who is or was a customer of Employer during
Employee's employment with Employer to obtain services from Employee
or any other individual or entity, if such services are similar to,
or the same as, the services provided to such individual or entity by
Employer during Employee's employment with Employer.
4
5
(iii) Directly or indirectly own, manage, operate, control,
participate in, or be connected in any manner with the ownership,
management, operation, or control of any business offering services in
competition with those of Employer and located anywhere in the world,
except that Employee may own not more than ten percent of such a company
which is publicly traded.
(c) Employee agrees, prior to employment, to provide a copy of this
Section 8 to each and every other employer or facility at which Employee is
retained or employed during the period specified in subparagraph 9(a) above.
(d) Employee expressly agrees and acknowledges that these restrictive
covenants are necessary for Employer's protection because of the nature and
scope of Employer's business, the highly technological-intensive nature of
Employer's business, and Employee's position with and services rendered for
Employer, Employee expressly agrees and acknowledges that this covenant not to
compete is reasonable as to time, scope of activities restricted, and
geographical area, does not place any unreasonable burden upon Employee, and
does not prevent Employee from earning a living. Employee and Employer agree
that the general public will not be harmed as a result of enforcement of this
covenant not to compete.
(e) If the scope of any restriction in this Section is too broad to
permit enforcement of such restriction to its fullest extent, then such
restriction shall be enforced to the maximum extent permitted by law, and the
parties hereto consent and agree that such scope may be modified judicially or
by arbitration in any proceeding brought to enforce such restriction. Further,
Employee acknowledges that any breach of this covenant not to compete would
result in irreparable damage to Employer. Employee acknowledges and agrees that
remedies at law for any breach or violation of the provisions of this Section
would alone be inadequate, and agrees and consents that temporary and permanent
injunctive relief may be granted in connection with such violations, without
the necessity of proof of actual damage, and such remedies shall be in addition
to other remedies and right Employer may have at law or in equity. Employee
agrees that Employer shall not be required to give notice or post any bond in
connection with applying for or obtaining any such injunctive relief.
(f) In the event of Employee's actual or threatened breach of the
provisions of this Section 8, in addition to and not in limitation of any other
rights Employer may have, Employee shall forfeit any amounts due to Employee
under this Agreement. Such remedy shall be in addition to any other remedies
available to Employer at law or in equity.
(g) Employee agrees that the covenants in this Section 9 shall be
construed as an agreement independent of any other provision of this Agreement
so that the existence of any claim or cause of action by Employee against
Employer, whether predicated on this Section or otherwise, shall not constitute
a defense to the enforcement of this Section.
(h) Employee acknowledges that Employee has had the opportunity to have
Employee's personal legal counsel review these restrictive covenants, and all
of the other provisions in this Agreement.
5
6
(i) Employee acknowledges that Employee understands and hereby agrees
to each and every term and condition of these restrictive covenants.
10. Proprietary Information. It is understood and agreed that, in the
course of Employee's employment hereunder and through Employee's activities for
and on behalf of Employer, Employee will receive, deal with and have access to
Employer's "proprietary information," defined below, and that Employee holds
and is to hold Employer's proprietary information in trust and confidence for
Employer. Employee agrees that Employee shall not, during the term of this
Agreement or thereafter, in any fashion, form or manner, directly or
indirectly, retain, make copies of, divulge, disclose or communicate to any
person, in any manner whatsoever, or authorize anyone else to take such
actions, except when necessary or required in the normal course of Employee's
employment hereunder and for the benefit of Employer, or with the express
written consent of Employer, any of Employer's proprietary information or any
information of any kind, nature or description whatsoever concerning any
matters affecting or relating to Employer's business.
For purposes of this Agreement, "proprietary information" means and
includes the following: the identity of customers or potential customers of
Employer; any written, typed or printed lists or other materials identifying
the customers of Employer; any information supplied by customers of Employer;
any and all data or information involving the techniques, programs, methods or
contacts employed by Employer in the conduct of its business; any lists,
documents, manuals, records, forms, or other materials used by Employer in the
conduct of its business; any descriptive materials describing the methods and
procedures employed by Employer in the conduct of its business; any other
secret or confidential information concerning Employer's business or affairs.
The terms "list," "document," or their equivalent, as used in this paragraph,
are not limited to a physical writing or compilation but also include any and
all information whatsoever regarding the subject matter of the "list" or
"document" whether or not such compilation has been reduced to writing.
The parties hereby stipulate as between themselves that this requirement
of confidentiality is vital to the effective and successful operation of
Employer's business, and that any breach of the terms of this Section 10 shall
be a material breach of this Agreement. In the event of Employee's actual or
threatened breach of this Section 10, Employer shall be entitled, in addition
to any and all available remedies for such breach or threatened breach, to the
recovery of damages from Employee and to injunctive relief.
If during the term of Employee's employment with Employer Employee
develops or discovers any innovative technique, method, or process, or receives
any patents, then such techniques, methods, processes and patents shall be the
property of Employer.
Upon termination of this Agreement for any reason, Employee shall
immediately turn over to Employer any proprietary information. Employee shall
have no right to retain any copies of any material qualifying as proprietary
information for any reason whatsoever after termination of Employee's
employment hereunder without the express prior written consent of Employer.
Employee agrees that the covenants in this Section 10 shall be construed
as an agreement independent of any other provision of this Agreement so that
the existence of any claim or cause of action by Employee against Employer,
whether predicated on this Section or otherwise, shall not constitute a defense
to the enforcement of this Section.
6
7
11. Termination of Prior Agreements. This Agreement terminates and
supersedes any and all prior agreements and understandings between the parties
with respect to employment or with respect to the compensation of Employee by
Employer.
12. Successors; Benefit. This Agreement is personal in its nature and
Employee shall not, without the express written consent of Employer, assign,
transfer or delegate this Agreement or any rights or obligations hereunder. The
rights and obligations of Employer hereunder shall inure to the benefit of and
shall be binding upon the successors and assigns of Employer.
13. Governing Law. This Agreement and the legal relations thus created
between the parties hereto shall be governed by and construed and enforced under
and in accordance with the laws of the State of Arizona.
14. Jurisdiction. The courts of the State of Arizona shall have the sole
and exclusive jurisdiction in any case or controversy arising under this
Agreement or by reason of this Agreement. The parties agree that any litigation
or arbitration arising from the interpretation or enforcement of this Agreement
shall be either in Maricopa County Superior Court or in the United States
Federal Court for the District of Arizona, and for this purpose each party to
this Agreement (and each person who shall become a party) hereby expressly and
irrevocably consents to the jurisdiction of such courts.
15. Entire Agreement; Modification. This Agreement embodies the entire
agreement of the parties respecting the matters within its scope. Except as
otherwise expressly set forth in this Agreement, this Agreement contains all the
terms and conditions agreed to by the parties hereto with respect to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, whether oral or written, of the parties, if any, with respect
thereto. This Agreement may not be amended or modified except by an agreement in
writing duly executed by Employee and by Employer. The parties do not intend to
confer any benefit hereunder on any person or firm other than the parties
hereto. No representation or warranty herein may be relied upon by any person
not a party to this Agreement.
16. Waiver. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a waiver of such term,
covenant or condition, nor shall any waiver or relinquishment of, or failure to
insist upon strict compliance with, any right or power hereunder at any one or
more times be deemed a waiver or relinquishment of such right or power at any
other time or times.
17. Attorney's Fees. Employee and Employer agree that in any arbitration
or legal proceeding arising out of this Agreement the prevailing party shall be
entitled to its reasonable attorney's fees and costs of litigation, determined
by the judge and not the jury in which the action is brought, in addition to any
other relief granted.
18. Severability. In the event that any court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute or
public policy, then only the portions of this Agreement that violate such
statute or public policy shall be stricken. All portions of this Agreement that
do not violate any statute or public policy shall continue in full force and
effect. Further, any court order striking any portion of this Agreement shall
modify the stricken terms as narrowly as possible to give as much effect as
possible to the intentions of the parties under this Agreement.
7
8
19. Notices. Any notice or other communication given under the terms of
this Agreement ("Notice") shall be in writing and shall be delivered in person
or mailed by certified mail, return receipt requested, in the United States
mail, postage pre-paid, addressed as follows:
If to Employer: Futech Interactive Products, Inc.
Attention: Xxxxxxx X. Xxxxx
0000 Xxxxx 00xx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000-0000
If to Employee: Xxxxxxx X. Xxxxxxx
X.X. Xxx 000000
Xxxxxxxx, Xxxxxxxxxx 00000-0000
or at such other address as a party may from time to time designate by Notice
hereunder. Notice shall be effective upon delivery in person, or if mailed, at
midnight on the third business day after the date of mailing.
20. Miscellaneous. The parties agree to do such further acts and things
and execute and deliver such additional agreements and instruments as either
party may reasonably require to consummate, evidence, or confirm any agreement
contained herein in the manner contemplated hereby. This Agreement shall be
construed according to its fair meaning, and neither for nor against the
drafting party. The titles and headings of sections of this Agreement are for
the convenience of reference only, are not intended to define, limit, or
describe the scope or intent of any provision of this Agreement, and shall not
affect the construction of any provision of this Agreement.
DATED the date first hereinabove written.
EMPLOYER: Futech Interactive Products, Inc.,
an Arizona corporation
By: /s/ Xxxxxxx X. Xxxxx
-------------------------------
Xxxxxxx X. Xxxxx, CEO
EMPLOYEE: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxx
List of Exhibits:
Representations and Warranties Regarding Stock "A"
8
9
EXHIBIT "A"
SUBSCRIBER REPRESENTATIONS AND WARRANTIES
Subscriber hereby represents, warrants and acknowledges to the Corporation
as follows:
1. The Shares will be acquired by Subscriber for Subscriber's own account
and not with the view to, or for resale in connection with, any distribution,
public offering or transfer thereof within the meaning of the Securities Act of
1933, as amended (the "1933 Act"), and Subscriber is not, directly or
indirectly, participating in an underwriting of any such distribution,
offering, or transfer.
2. Subscriber understands that the Shares have not been registered under
the 1933 Act by reason of issuance in transactions exempt from the registration
and prospectus delivery requirements of the 1933 Act pursuant to section 4(2)
thereof.
3. Subscriber understands that the Shares have not been registered under
the 1933 Act or any state securities laws, that they are "restricted
securities" in the hands of Subscriber with the meaning of the Act, and that
any future sale of the Shares will be regulated by the Act and applicable state
securities laws. Subscriber understands that the Shares may not be sold,
transferred or otherwise disposed of without registration under the 1933 Act or
an exemption therefrom, and that in the absence of an effective registration
statement covering the Shares, or an available exemption from registration
under the 1933 Act, the Shares must be held indefinitely.
4. Subscriber will not sell or otherwise transfer or dispose of any of the
Shares: (A) except in strict compliance with (1) the provisions of the
Agreement to which this Exhibit is attached, and (2) the restrictions on
transfer described herein, and (B) unless such securities are (X) registered
under the 1933 Act, and any applicable state securities laws, or (Y) Subscriber
represents that such securities may be sold in reliance on an exemption from
such registration requirements.
5. No federal or state agency, including the Securities and Exchange
Commission or the securities regulatory agency of any state, has approved or
disapproved the Shares, passed upon or endorsed the merits of the Shares, or
made any finding or determination as to the fairness of the Shares for private
investment.
6. The investment in the Shares is being made in reliance on specific
exemptions from the registration requirements of federal and state securities
laws, and the Corporation is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgements and understandings
set forth herein in order to establish such exemptions.
7. Subscriber agrees to deliver to the Corporation, if requested by the
Corporation, an
10
investment letter in customary form.
8. Based on personal knowledge and experience in financial and business
matters in general, Subscriber understands the nature of this investment, is
fully aware of and familiar with the business operations of the Corporation, and
is able to evaluate the merits and risks of an investment in the Shares.
9. Subscriber has been given the opportunity to ask questions about the
Corporation and has been granted access to all information, financial and
otherwise, with respect to the Corporation that has been requested, has
examined such information, and is satisfied with respect to the same.
10. Subscriber has been encouraged to rely upon the advice of
Subscriber's legal counsel and accountants or other financial advisors with
respect to the tax and other considerations relating to the acquisition of the
Shares.
11. Subscriber, in determining to acquire the Shares, has relied solely
upon: (A) the advice of Subscriber's legal counsel and accountants or other
financial advisers with respect to the tax, economic and other consequences
involved in acquiring the Shares, and (B) Subscriber's own independent
evaluation of the business, operations and prospects of the Corporation and the
merits and risks of the acquisition of the Shares.
12. Subscriber has been advised and understands that this investment is,
by its nature, very speculative.
13. Subscriber has sufficient income and net worth such that Subscriber
does not contemplate being required to dispose of any portion of the investment
in the Shares to satisfy any existing or expected undertaking or indebtedness.
Subscriber is able to bear the economic risks of an investment in the Shares,
including, without limiting the generality of the foregoing, the risk of losing
all or any part of the investment and probable inability to sell or transfer
the Shares for an indefinite period of time.
14. Subscriber is an "accredited investor" within the meaning of Rule 501
of Regulation D promulgated by the Securities and Exchange Commission, as
presently in effect.
15. The investment in the Shares has been privately proposed to
Subscriber without the use of general solicitation or advertising.
16. Subscriber understands that the certificates representing the Shares
may bear restrictive legends as to the restricted nature of such securities and
may bear a legend substantially in the following form, and agrees to will hold
the Shares subject thereto:
2
11
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY PORTION HEREOF OR INTEREST HEREIN MAY BE SOLD, ASSIGNED,
TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED
UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE AND THE COMPANY SHALL HAVE RECEIVED, AT THE
EXPENSE OF THE HOLDER HEREOF, EVIDENCE OF SUCH EXEMPTION REASONABLY
SATISFACTORY TO THE COMPANY (WHICH MAY INCLUDE, AMONG OTHER THINGS, AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY).
3
