Exhibit 10.6
Employment Agreement
AGREEMENT dated 26th day of October 1999, between CathayOnline Inc. of Nevada
("CathayOnline" or "Employer"), and Xx. Xxxxx X. Xxxxxx, a Canadian citizen
("Xx. XXXXXX" or the "Executive").
WHEREAS:
I. Employer desires to retain the services of Xx. XXXXXX as the Chief
Executive Officer and President of the company on terms and conditions
provided in this Agreement;
II. Xx. XXXXXX desires to render such services to the Employer on the terms
and conditions provided in this Agreement;
III. XxxxxXxxx.xxx, Inc. is a wholly owned subsidiary of CathayOnline Inc..
THEREFORE it is agreed as follows:
1. Employment and Duties. During the Term (as defined hereinafter) of this
Agreement, Xx. XXXXXX agrees to serve as Chief Executive Officer and
President of CathayOnline, performing such duties and services during
the Term and such other duties and servies as the Board of Directors of
CathayOnline (the "Board") may reasonably request. Xx. XXXXXX hereby
accepts such engagement, all upon and subject to the terms and
conditions hereinafter set forth.
During the Term, Xx. XXXXXX shall devote reasonable attention, time
during normal business hours (exclusive of normal holidays, vacations
and periods of sickness or disability) and energy to providing the
services requested by CathayOnline pursuant to this Section 1 hereof.
During the Term it shall not be a violation of this Agreement for Xx.
XXXXXX to service on corporate, civic or charitable boards, committees
and manage personal investments, so long as such activities do not
significantly interfere with the performance of Xx. XXXXXX'x
responsibilities as an employee of CathayOnline in accordance with this
Agreement.
2. Term. Subject to earlier termination as provided hereinafter, and also
subject to 3.b) below, the term of Xx. XXXXXX'x employmentthis
Agreement shall begin on the 26th day of October, 1999 and shall be on
a 2 (two) year renewable basis as agreed by both parties.
3. Compensation. In exchange for the services that Xx. XXXXXX provides to
CathayOnline and its subsidiaries, Xx. XXXXXX shall be remunerated in
the following manner:
a) Annual compensation equal to US$60,000 paid monthly in equal
installments, to be retroactive from the 1st of July;
b) To, upon the resale of 35,000 Seats, a Seat being defined as
an individual web based professional messaging email account
as provided by XXX.XXX, and up to the resale of 99,999 Seats
by XxxxxXxxx.xxx, Inc. ("TorchMail"), CathayOnline and
TorchMail shall pay to Xx. XXXXXX US$0.01 per Seat per month
for each and every Seat. Upon the resale of 100,000 Seats and
up to the resale of 199,999 Seats by TorchMail, CathayOnline
and TorchMail shall pay to Xx. XXXXXX US$0.03 per Seat per
month for each and every Seat. Upon the resale of 200,000
Seats and up to the resale of 299,999 Seats by TorchMail,
CathayOnline and TorchMail shall pay to Xx. XXXXXX $0.05 per
Seat per month for each and every Seat. Upon the resale of
300,000 Seats and up to the resale of 399,999 Seats by
TorchMail, CathayOnline and TorchMail shall pay to Xx. XXXXXX
$0.07 per Seat per month for each and every Seat. Upon the
resale of 400,000 or more Seats by TorchMail, CathayOnline and
TorchMail shall pay to Xx. XXXXXX $0.10 per Seat per month for
each and every Seat. Such payments by CathayOnline and
TorchMail shall be made to Xx. XXXXXX no later than the 10th
day after the month end. Such benefits will continue beyond
the Term of Xx. XXXXXX'x employment with CathayOnline and
shall continue to be paid to Xx. XXXXXX or per the direction
of Xx. XXXXXX.
c) Issue issue to the Employee a warrant (s), in such names and
denominations as Employees reasonably shall request, the form
of which is attached hereto as Exhibit A ("Warrant"), to
purchase up to an aggregate of 15,000,000 shares (the "Warrant
Shares") of the Company's common stock, par value $.001 per
share ("Common Stock").
i) Provisions Governing the Warrant and the Warrant Shares. The following
provisions shall govern the Warrant and the Warrant Shares:
(a) Neither the Warrant nor the Warrant Shares have been
registered under the Act, or registered or qualified under any
state securities laws and that such Warrant and Warrant Shares
are and will be restricted securities as such term is defined
under the Act and that the Warrant and the Warrant Shares are
being and will have been issued in a transaction exempt from
the registration requirements of the Act and the registration
or qualification requirements of applicable state securities
laws. The Warrant and the Warrant Shares are being and will
have been acquired by the Employee for investment purposes
only and not with a view to distribution or resale and may not
be made subject to a security interest, pledged, hypothecated,
sold or otherwise transferred unless such Warrant and Warrant
Shares are subsequently registered under the Act and qualified
or registered under applicable state securities laws or an
exemption from registration and qualification is available,
and that, except as otherwise provided in this Agreement, the
Company is under no obligation to register or qualify the
Shares. The Company may require an opinion of the Employee's
counsel prior to authorizing the registration of any transfer
of the Warrant or the Warrant Shares in reliance on an
exemption from registration or qualification to the effect
that such transfer is exempt from such registration or
qualification. Certificates evidencing the Warrant and the
Warrant Shares, if and when issued (and if such Warrant Shares
have not been registered at the time of issuance), shall bear
a Securities and Exchange Commission ("SEC") restrictive
legend and any such other legends as required by applicable
federal and state laws and the transfer agent for the
Company's class of Common Stock shall be instructed to place a
stop transfer order on the stock books of the Company
restricting the transfer of the Warrant Shares.
(b) The Company has agreed to register the Warrant Shares as
provided in the Warrant and the Employee agrees to abide by
all terms of the Warrant with respect to the resale of the
Warrant Shares after registration thereof under the Act.
(c) The Employee and the Company agree to execute such other
documents and instruments as counsel for the Company
reasonably deems necessary to effect the compliance of the
issuance of the Shares with federal and state laws.
(d) The Company covenants and agrees that the Warrant shall, upon
issuance, in accordance with the terms hereof, be legally and
validly issued and outstanding and fully-paid and
non-assessable securities of the Company.
d) To receive other such bonuses and compensation as the Board may so
dictate.
4. Disclosure of information. Xx. XXXXXX acknowledges that the list of
CathayOnline's customers, as CathayOnline may determine from time to
time, is a valuable, special, and unique asset of CathayOnline's
business. Xx. XXXXXX shall not, during and after the term of his
employment, disclose all or any part of CathayOnline's customer list to
any person, firm, corporation, association, or other entity unless so
required by law.
5. Expenses. Xx. XXXXXX may incur reasonable budgeted expenses for
promoting CathayOnline's business, including expenses for
entertainment, travel, telephone, and similar items, including business
class air travel and first class hotel accommodations. CathayOnline
will reimburse Xx. XXXXXX for all such expenses upon Xx. XXXXXX 's
periodic presentation of an itemized account of such expenditures. Xx.
XXXXXX shall participate in the budgeting process and CathayOnline
shall have final discretion as to the reasonableness of expenses
incurred.
6. Termination without cause. CathayOnline may, without cause, terminate
this Agreement at any time by giving 60 days' written notice to Xx.
XXXXXX . In that event, Xx. XXXXXX, if requested by CathayOnline, shall
continue to render his services, and shall be paid his regular
compensation up to the date of termination. Xx. XXXXXX may, without
cause, terminate this Agreement by giving 60 days' written notice to
CathayOnline. In such event, Xx. XXXXXX shall continue to render his
services and shall be paid his regular compensation up to the date of
termination. This clause 7 is subject to clause 3 (b).
7. Death during employment. If Xx. XXXXXX dies during the term of
employment, CathayOnline shall pay to Xx. XXXXXX 's estate the
compensation that would otherwise be payable to Xx. XXXXXX up to the
end of the month in which his death occurs. This clause 7 is subject to
clause 3 (b).
8. Disability. In the event of disability of the Executive, the Company
will continue to pay the Executive, the Company will continue to pay
the Executive the period of his disability; provided, however, that if
the disability continues for a period of three (3) months, the Company
may terminate this Agreement. Following such termination, the company
will continue to pay the Base Salary for a period of six (6) months,
but shall not be obligated to pay any other compensation, except for
earned but unpaid Annual Incentive Compensation awards and any accrued
amounts under all compensation of employee benefit plans which shall be
payable on a pro-rated basis for the year in which the disability
occurs, through the date of termination in accordance with the
applicable provisions of any then existing plan, practice, policy or
program established by the Company for employees. "Disability" shall be
defined as any illness of injury which prevents Executive from
performing the essential functions of his employment with reasonable
accommodation. The Company shall be responsible for determining the
essential functions of Executive's employment consistent with the terms
of this Agreement. In the event the Company determines that Executive
cannot safely perform one or more essential functions of employment,
Executive may request an accommodation that would allow Executive to
safely perform the essential functions of Executive's employment
despite the disability. The Company shall determine whether or not the
accommodation requested is reasonable and whether an alternative
reasonable accommodation could be made that would allow Executive to
safely perform the essential functions of employment. In the event the
Company cannot reasonably accommodate Executive's disability so
Executive can safely perform the essential functions of employment,
Executive's employment and Corporation's obligations under this
Agreement will terminate pursuant to the terms of this provision. The
meaning of the terms "essential functions: and "reasonable
accommodation" shall be defined in 29 CFR Part 1630 and related
regulations, if any. During the period the Executive is physically and
mentally able to do son, the Executive will furnish information and
assistance to the Company and from time to time will make himself
available to the company to undertake assignments consistent with his
prior position with the company and his physical and mental health.
This clause 8 is subject to clause 3 (b).
9. Code Section 280G. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment
or distribution by the company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement of otherwise, but determined without regard
to any additional payments required under this Section 9 (a "Payment")
would be subject to the exercise tax imposed by Section 4999 of the
Code or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such
interest and penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payments.
(ii) Subject to the provisions of Section 9 (iii), all
determinations required to be made under this Section 9,
including whether and when the Gross-Up Payment is required
and the amount of such Gross-Up Payment is required and the
amount of such Gross-Up payment and the assumptions to be
utilized in arriving at such determination, shall be made, at
the Executive's sole discretion, by the Company's independent
auditor's of such other certified public accounting firm as
may be designated by the Executive (the "Accounting Firm"),
which shall provide detailed supporting calculations both to
the Company and the Executive within fifteen (15) business
days of the receipt of notice from the Executive that there
has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving
as accountant or auditor for the individual, entity or group
effecting the Change in Control, the Executive shall appoint
another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely
by the company. Any Gross-Up Payment, as determined pursuant
to this Section 9, shall be paid by the company to the
Executive within five(5) days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm
shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999
of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should
have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that
the Company exhausts its remedies pursuant to this Section
6(e) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive.
(iii) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would
require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but
not later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such
claim is requested to be paid. the Executive shall not pay
such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to
the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If
the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such
claim, the Executive shall:
(A) give the Company any information reasonably requested
by the Company relating to such claim,
(B) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
(C) cooperate with the Company in good faith in order
effectively to contest such claim and
(D) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 9, the Company
shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forge any and all administrative
appeals, proceedings, hearing and conferences with the taxing authority
in respect of such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute
such contest to a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate courts ad the
Company shall determine; provided, however, that if the Company directs
the Executive to pay such claim and xxx for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free
basis and shall indemnify and hold the Executive harmless, on an
after-tax basis from any Excise Tax or income tax (including interest of
penalties with respect thereto) imposed with respect to such advance; and
provided, further, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(iv) If, after the receipt of the Executive of an amount
advance by the Company pursuant to Section 9, the
Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject
to the company's complying with the requirements of
Section 9) promptly pay to the Company the amount of
such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9, a
determination is made that the Executive shall not be
entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing
of its intent to contest such denial of refund prior
to the expiration of thirty (30) days after such
determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration
in accordance with the commercial arbitration rules and supplementary
procedures for international commercial arbitration of the American
Arbitration Association, and judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. The
governing law shall be the laws of the United States, state of Nevada,
and said Agreement shall be construed and governed in accord with such
laws. The Arbitration shall take place in the state of Nevada, U.S.A.
and the Arbitration shall be conducted in English.
11. Notices. Any notice required or desired to be given under this
Agreement shall be deemed given if in writing and sent by certified
mail, return receipt requested, to Xx. XXXXXX 's residence or to
CathayOnline's principal office, as the case may be.
12. Waiver of breach. CathayOnline's waiver of a breach of any provision of
this Agreement by Xx. XXXXXX shall not operate or be construed as a
waiver of any subsequent breach by Xx. XXXXXX. No waiver shall be valid
unless in writing and signed by an authorized officer of CathayOnline.
Xx. XXXXXX'x waiver of a breach of any provision of this Agreement by
CathayOnline shall not operate or be construed as a waiver of any
subsequent breach by CathayOnline. No waiver shall be valid unless in
writing and signed by Xx.
XXXXXX.
13. Assignment. CathayOnline's rights and obligations, including those
obligations of CathayOnline's subsidiary XxxxxXxxx.xxx, Inc., under
this Agreement shall inure to the benefit of, and shall be binding
upon, CathayOnline's successors and assigns. Xx. XXXXXX may, if such
direction is made to CathayOnline in writing, assign, transfer and/or
sell any benefits that he is entitled to receive to any entity or
person that he may so choose at any time or from time to time.
14. Entire agreement. This Agreement contains the entire understanding of
the parties. It may not be changed orally but only by an agreement in
writing signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
15. Headings. Headings in this Agreement are for convenience only and shall
not be used to interpret or construe its provisions.
16. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
IN WITNESS HEREOF the parties have executed this Agreement effective the date
first above written.
CathayOnline Inc. Xx. Xxxxx X. Xxxxxx
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Duly Authorized Representative
XxxxxXxxx.xxx, Inc.
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Duly Authorized Representative
