EMPLOYMENT AGREEMENT
Exhibit
10.13
THIS
EMPLOYMENT AGREEMENT is made as of the 1st day of April 2004, between Smart
Online, Inc. (the “Company”) and Xxxxx Xxxxxxxx (the “Employee”).
W
I T
N E S S E T H:
WHEREAS,
the Company is engaged in the business of providing web-hosted applications
and
technology infrastructure syndication;
WHEREAS,
the Company and the Employee wish to contract for the employment by the Company
of the Employee, and the Employee wishes to serve the Company, in the capacities
and on the terms and conditions set forth in this Agreement; and
WHEREAS,
the Company is an enterprise whose success is attributable largely to the
creation and maintenance of certain Confidential Data (as defined below)
and
during the period of employment Employee will be situated to have access
to and
be knowledgeable with respect to the Confidential Data as well as the customers
of the Company; and
WHEREAS,
Company has a legitimate protectible business interest in the creation and
maintenance of its Confidential Data and the protection of the identity of,
and
related information concerning, its customers and the Company’s customer lists;
and
WHEREAS,
the Company wishes to protect its Confidential Data from disclosure by Employee
by means of the restrictive covenants contained in this Agreement and Employee
agrees to such covenants in exchange for the Company’s commitment to continue to
employ Employee and for other additional consideration agreed to between
the
parties;
THEREFORE,
it is hereby agreed as follows:
1. POSITION
AND DUTIES.
(a) Employee
shall serve as a part-time employee of the Company in the role of Controller
or
in such other capacity as may be designated by the Company from time to time
by
the CFO, CEO, President or the Board of Directors or the officers of the
Company.
(b) Employee
shall devote all of his loyalty, attention, time, skill and energies to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Employee under this Agreement, use the
Employee’s best efforts to carry out such responsibilities faithfully and
efficiently.
2. COMPENSATION.
(a) Salary.
The Employee’s base salary shall be $45,000 per annum, which salary shall be
reevaluated annually and is subject to such increases as the Board of Directors
approves. The term “Annual Base Salary” shall refer to the base salary
prevailing during the applicable period until such time of any increase in
base
salary whereupon it shall thereafter refer to such increased
amount.
(b) Stock.
Concurrently with the execution of this Agreement, the Company and Employee
shall execute a Stock Option Agreement dated as of April 1, 2004 whereby
the
Company grants options to purchase 25,000 shares of the Company’s Common Stock
to Employee.
(c) Fringe
Benefits. Employee shall be entitled to all of the non-wage benefits the
Company
provides from time to time to all other full-time employees.
(d) Withholding.
All compensation paid pursuant to this Section 3 shall be subject
to withholding of taxes and other amounts as shall be required by
law.
3. EXPENSES.
Company
agrees to reimburse Employee for reasonable and necessary expenses incurred
by
Employee in the furtherance of the Company’s business in accordance with such
procedures as the Company may from time to time establish.
4. TERMINATION
OF EMPLOYMENT.
(a) By
the
Company.
The
Company may terminate the Employee’s employment at any time with immediate
effect for Cause or without Cause.
(i) “For
Cause,” means unacceptable conduct, including:
A. participation
in a fraud or act of dishonesty against the Company;
B. any
chemical dependence which affects the performance of his duties and
responsibilities to the Company;
C. breach
of
Employee’s fiduciary obligations to the Company;
D. Employee
willfully fails to perform his duties;
E. breach
of
the Company’s policies or any material provision of this Agreement;
F. misconduct
resulting in loss to the Company or damage to the reputation of the Company;
or
G. conduct
by the Employee which, in the determination of the Company’s Board of Directors,
demonstrates unfitness to serve.
(ii)
“Without
cause” means termination of Employee’s employment for some reason other than
that listed in Paragraph 4(b)(i) above. A termination of the Employee’s
employment Without Cause shall be effective when communicated to the Employee
by
verbal or written notice.
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(b) By
the
Employee. The Employee may signify his intention to terminate his employment
at
any time upon the giving of two (2) weeks notice (“Notice Period”) to the
Company of his intent to do so. Upon expiration of the Notice Period the
termination will be effective and the Date of Termination will be effective
as
referred to below. The Company reserves the right to accelerate the effective
“Date of Termination” in its discretion after the inception of the Notice
Period.
(c) Date
of
Termination. The “Date of Termination” means the date on which the termination
of the Employee’s employment by the Company for Cause or without Cause is
effective, or the date on which the termination of the Employee’s employment by
the Employee is effective, as the case may be.
5. REPRESENTATIONS
AND WARRANTIES OF EMPLOYEE.
Employee
represents and warrants that:
(a) Employee
is under no contractual or other restriction or obligation which is inconsistent
with the execution of this Agreement, the performance of duties hereunder
or
other rights of the Company hereunder; and
(b) To
the
best of Employee’s knowledge, Employee is under no physical or mental disability
render him incapable of performing the essential functions involved in his
anticipated duties or that would otherwise hinder the performance of duties
under this Agreement.
6. COVENANT
NOT TO COMPETE.
Employee
covenants that during the “Noncompetition Period,” as defined in
paragraph 12, and within the “Noncompetition Area,” as defined in
paragraph 13, he shall not, directly or indirectly, as principal, agent,
consultant, trustee or through the agency of any corporation, partnership,
association, or agency engage in the “Business,” as defined in
paragraph 14. Specifically, but without limiting the foregoing, Employee
agrees that during such period and within such area, he shall not do any
of the
following: (a) be the owner of the outstanding capital stock of any corporation
which conducts a business of a like or similar nature to the “Business” (other
than stock of a corporation traded on a national securities exchange or
automated quotation system); (b) be an officer or director of any corporation
which conducts a business of a like or similar nature to the “Business”; (c) be
a member of any partnership which conducts a business of a like or similar
nature to the “Business”; or (d) be a consultant to, an owner of or an employee
of any other business which conducts a business of a like or similar nature
to
the Business.
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7. NONDISCLOSURE
COVENANT.
(a) The
parties acknowledge that the Company is an enterprise whose success is
attributable largely to the ownership, use and development of certain valuable
confidential and proprietary information (the “Confidential Data”), and that
Employee’s employment with the Company will involve Employee’s access to and
work with such information. Employee acknowledges that his relationship with
the
Company is a confidential relationship. Employee covenants and agrees that
(i)
he shall keep and maintain the Confidential Data in strictest confidence,
and
(ii) he shall not, either directly or indirectly, use any Confidential Data
for
his own benefit, or divulge, disclose, or communicate any Confidential Data
in
any manner whatsoever to any person or entity other than employees or agents
of
the Company having a need to know such Confidential Data, and only to the
extent
necessary to perform their responsibilities on behalf of the Company, and
other
than in the performance of Employee’s duties in the employment by the Company.
Employee’s agreement not to disclose Confidential Data shall apply to all
Confidential Data, whether or not Employee participated in the development
thereof. Upon termination of employment for any reason, Employee will return
to
the Company all documents, notes, programs, data and any other materials
(including any copies thereof) in his/her possession.
(b) For
purposes of this Agreement, the term “Confidential Data” shall include any and
all information related to the business of the Company, or to its products,
sales or businesses which is not general public knowledge, specifically
including (but without limiting the generality of the foregoing) all financial
and accounting data; computer software; processes; formulae; inventions;
methods; trade secrets; computer programs; engineering or technical data,
drawings, or designs; manufacturing techniques; patents, patent applications,
copyrights and copyright applications (in any such case, whether registered
or
to be registered in the United States of America or elsewhere) applied for,
issued to or owned by the Company; information concerning pricing and pricing
policies; marketing techniques; suppliers; methods and manner of operations;
and
information relating to the identity, needs and location of all past, present
and prospective customers. The parties stipulate that as between them the
above-described matters are important and confidential and gravely affect
the
successful conduct of the business of the Company and that any breach of
the
terms of this paragraph shall be a material breach of this
Agreement.
8. NONSOLICITATION/INTERFERENCE.
(a) The
Employee covenants that during the Noncompetition Period and in the
Noncompetition Area, he shall not directly or indirectly, on behalf of himself
or on behalf of any other person, firm, partnership, corporation, association
or
other entity, call upon any of the customers or clients of the Company for
the
purpose of soliciting or providing any product or service similar to that
provided by the Company nor will he, in any way, directly or indirectly,
for
himself, or on behalf of any other person, firm, partnership, corporation,
association, or other entity solicit, divert or take away, or attempt to
solicit, divert, or
take
away any of the customers, clients, business, or patrons of the Company.
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(b) The
Employee covenants that during the Noncompetition Period and in the
Noncompetition Area, he shall not directly or indirectly, on behalf of himself
or on behalf of any other person, firm, partnership, corporation, association
or
entity, contract with, induce or attempt to influence, any individual or
entity
who is an employee, contractor, agent or representative of the Company to
terminate or otherwise impair his/her employment or relationship with the
Company.
9. INVENTIONS.
All
inventions, designs, improvements and developments made by Employee, either
solely or in collaboration with others, during his employment with the Company,
whether or not during working hours, and relating to any methods, apparatus
or
products which are manufactured, sold, leased, used or developed by the Company
or which pertain to the Business (the “Developments”), shall become and remain
the property of the Company. Employee shall disclose promptly in writing
to the
Company all such Developments. Employee acknowledges and agrees that all
Developments shall be deemed “works made for hire” within the meaning of the
United States Copyright Act, as amended. If, for any reason, such Developments
are not deemed works made for hire, Employee shall assign, and hereby assigns,
to the Company, all of Employee’s right, title and interest (including, but not
limited to, copyright and all rights of inventorship) in and to such
Developments. At the request and expense of the Company, whether during or
after
employment hereunder, Employee shall make, execute and deliver all application
papers, assignments or instruments, and perform or cause to be performed
such
other lawful acts as the Company may deem necessary or desirable in making
or
prosecuting applications, domestic or foreign, for patents (including reissues,
continuations and extensions thereof) and copyrights related to such
Developments or in vesting in the Company full legal title to such Developments.
Employee shall assist and cooperate with the Company or its representatives
in
any controversy or legal proceeding relating to such Developments, or to
any
patents, copyrights or trade secrets with respect thereto. If for any reason
Employee refuses or is unable to assist the Company in obtaining or enforcing
its rights with respect to such Developments, Employee hereby irrevocably
designates and appoints the Company and its duly authorized agents as Employee’s
agents and attorneys-in-fact to execute and file any documents and to do
all
other lawful acts necessary to protect the Company’s rights in the Developments.
Employee expressly acknowledges that the special foregoing power of attorney
is
coupled with an interest and is therefore irrevocable and shall survive (i)
Employee’s death or incompetency and (ii) any termination of this
Agreement.
10.
INDEPENDENT
COVENANTS.
Each
of
the covenants on the part of Employee contained in paragraphs 6, 7, 8, and
9 of
this Agreement shall be construed as an agreement independent of each other
such
covenant. The existence of any claim or cause of action of Employee against
the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of any such covenant.
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11.
REASONABLENESS;
INJUNCTION.
Employee
acknowledges that the covenants contained in this agreement are reasonably
necessary and designed for the protection of the Company and its business,
and
that such covenants are reasonably limited with respect to the activities
prohibited, the duration thereof, the geographic area thereof, the scope
thereof
and the effect thereof on Employee and the general public. Employee further
acknowledges that violation of the covenants would immeasurably and irreparably
damage the Company, and by reason thereof Employee agrees that for violation
or
threatened violation of any of the provisions of this Agreement, the Company
shall, in addition to any other rights and remedies available to it, at law
or
otherwise, by entitled to any injunction to be issued by any court of competent
jurisdiction enjoining and restraining Employee from committing any violation
or
threatened violation of this Agreement. Employee consents to the issuance
of
such injunction.
12.
NONCOMPETITION
PERIOD.
This
Agreement shall remain enforceable during Employee’s employment with the Company
and for a period of one year after termination of Employee’s employment for any
reason (such period not to include any period(s) of violation or period(s)
of
time required for litigation to enforce the covenants set forth
herein).
13.
NONCOMPETITION
AREA.
(a) Employee
acknowledges and agrees that the Company does business on an international
basis
and that Employee will assist Company in developing Company’s business in both
the United States and Europe, with customers throughout the United States
and
additionally existing in Europe, particularly servicing France, Spain, United
Kingdom and Germany, and that any breach of Employee’s covenants contained
herein would materially damage the Company, regardless of the area of the
world
in which the activities constituting such breach were to occur. Accordingly,
the
terms and provisions of this Agreement shall apply in the following
Noncompetition Area:
(i)
The
State
of North Carolina;
(ii)
Any
state
other than North Carolina where Company conducts the “Business” and in or for
which Employee assists or performs services assisting Company;
(iii)
Any
political subdivision of foreign countries where Company does “Business” or will
do “Business” during the period of employment; and
(iv)
Any
other
state, country, or political subdivision where Company does “Business” and in or
for which Employee assists or performs services assisting Company.
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14. BUSINESS.
For
the
purposes of this Agreement, the “Business” shall include any business, service,
or product engaged in, provided, or produced by the Company from the date
of
this Agreement to the date of the termination of the employment, including,
but
not limited to: (i) the business of development, production, marketing, design,
manufacturing, leasing or selling software related to business plans, legal
services, whether for use by professionals or consumers; (ii) providing
web-hosted applications and technology infrastructure syndication and/or
(iii)
any other business conducted by the Company immediately prior to the date
of
termination of Employee’s employment or in which the Company shall at the time
of termination of Employee’s employment with the Company be actively preparing
to enter.
15. MISCELLANEOUS.
(a) This
Agreement shall be subject to and governed by the substantive laws of the
State
of North Carolina, without giving effect to the conflicts of laws provisions
thereof. The Employee hereby submits to the jurisdiction and venue of the
state
and federal courts of North Carolina, and Employee agrees that the Company
may,
at its option, enforce its rights hereunder in such courts.
(b) Company’s
failure to insist upon strict compliance with any provision of this Agreement
shall not be deemed a waiver of such provision or any other
provision.
(c) This
Agreement may not be modified except by an agreement in writing executed
by the
parties. The parties expressly waive their right to orally modify this
provision.
(d) The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision.
(e) This
Agreement shall not be assignable without the written consent of the Company
and
Employee.
(f) This
Agreement expresses the whole and entire Employment Agreement between the
parties and supersedes and replaces any prior employment Agreement,
understanding or arrangement between Company and Employee.
16. This
Agreement terminates the Employment Agreement dated May 31, 2001, as amended
to
date. Except for that agreement, all other agreements between the Company
and
Employee remain in full force and effect.
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IN
WITNESS WHEREOF, the parties executed this Agreement as of the day and year
first above written.
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SMART
ONLINE, INC.
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By:
/s/ Xxxxxxx Xxxxx
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Title:
CEO
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WITNESS:
/s/ Xxxxx Xxxxxxx
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EMPLOYEE:
/s/ Xxxxx Xxxxxxxx
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