EXHIBIT 10.3
DATAWAVE SYSTEMS INC.
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "AGREEMENT") is entered into as of the
___ day of ________, 1998 between DataWave Systems Inc., a corporation organized
under the laws of British Columbia, Canada (the "COMPANY") and Xxxxx Xxxxxx, an
individual (the "EXECUTIVE").
In consideration of the mutual benefits derived from this Agreement
and of the agreements, covenants and provisions hereof, the parties hereto agree
as follows:
1. Employment.
----------
1.1. Position. During the Term (as hereinafter defined) of this
--------
Agreement and subject to the terms and conditions set forth herein, the Company
agrees to employ the Executive as its Chief Executive Officer and President,
reporting only to the Board of Directors of the Company (the "Board").
1.2. Election to Office. During the Term, the Company shall use its
------------------
best efforts to sustain and continue the Executive's position and designation as
set forth in SECTION 1 hereof.
1.3. Fulfillment of Duties. As long as the Company sustains and
---------------------
continues the Executive's position and designation as set forth in SECTION 1
hereof, the Executive shall (i) devote his full-time efforts during normal
business hours to the performance of his services hereunder, except during
vacation periods and periods of illness or incapacity and except that nothing in
this Agreement shall preclude the Executive from devoting reasonable periods
required for serving as a director of, or member of a committee of, or holding
other positions in, any organization involving no conflict of interest with the
interests of the Company and (ii) perform his services hereunder faithfully,
diligently and to the best of his skill and ability.
1.4. Location. During the Term, the Executive will perform his
--------
duties and services at the Company's principal executive offices and any other
locations as may be reasonable and necessary in the performance of his services
hereunder.
2. Compensation and Benefits.
-------------------------
2.1. Salary. In consideration of and as compensation for the
------
services agreed to be performed by the Executive hereunder, the Company agrees
to pay the Executive during the Term a base salary (the "BASE SALARY") of not
less than USD Two Hundred Thousand Dollars (USD200,000) (CD285,000) per year,
payable semi-monthly in accordance with the Company's regular payroll practices.
The Company may review the Executive's Base Salary and other compensation
(including bonuses and incentive compensation) from time to time during the Term
and, at the recommendation of the Compensation Committee of the Board (the
"COMMITTEE"), may increase his Base Salary or other compensation (including
bonuses and incentive compensation) from time to time. Any increase in Base
Salary or other compensation (including bonuses or incentive compensation) shall
in no way limit or reduce any other obligation of the Company hereunder and,
once established at an increased rate, the Executive's Base Salary hereunder
shall not be reduced.
2.2 Incentive Compensation. During each year of the Term, in
----------------------
addition to the Base Salary provided in SECTION 2.1 above, the Executive shall
be eligible to receive additional incentive compensation, in an amount not to
exceed One Hundred Percent (100%) of the Executive's then applicable Base
Salary, upon achievement of the performance goals set forth on EXHIBIT A
attached hereto, upon the terms and conditions set forth therein.
2.3 Stock Options. The Executive shall receive, within forty-five
-------------
(45) days following execution of this Agreement, an option (the "OPTION") to
purchase not less than One Hundred Thousand (100,000) shares of the Company's
common stock at an exercise price equal to fair market value on the date of
grant. The Option (which shall be granted in addition to and not in lieu of
stock options previously issued to the Executive) shall vest in equal
installments, on a monthly basis, over a three-year period following the date of
grant and shall be subject to such other terms and conditions as shall be
determined by the Committee. During the second and third years of the Term, the
Executive shall be entitled to receive such additional option grants as may be
determined by the Committee, subject to a minimum annual grant of One Hundred
Thousand (100,000) shares.
2.4. Participation in Benefit Plans. During the Term, the Executive
------------------------------
shall be entitled to participate in any pension plans, profit-sharing plans and
group insurance, medical, hospitalization, disability and other benefit plans
presently in effect or hereinafter adopted, which plans are generally applicable
to the most senior executives of the Company and to the extent he is eligible
under the general provisions thereof.
2.5. Reimbursement of Expenses. The Company will reimburse the
-------------------------
Executive for all business expenses, including, without limitation, traveling,
entertainment and similar expenses, incurred by the Executive on behalf of the
Company during the Term if such expenses are ordinary and necessary business
expenses incurred on behalf of the Company pursuant to the Company's standard
expense reimbursement policy, provided that the Executive shall provide the
Company with such itemized accounts, receipts or documentation for such expenses
as are required under the Company's policy regarding the reimbursement of such
expenses.
2.6. Vacation and Sick Leave. During the Term, the Executive will
-----------------------
be entitled to five weeks of paid vacation per year. The Executive shall also
be entitled to paid sick leave in accordance with the policy applicable to the
other senior executives of the Company.
3. Term. The "TERM" of employment under this Agreement means the
----
period commencing on the date hereof and expiring on the third anniversary of
this Agreement or the earlier termination hereof pursuant to SECTION 4.1 hereof.
4. Termination of Employment.
-------------------------
4.1. Events of Termination. Upon the occurrence of any of the events
---------------------
described in this SECTION 4.1 during the Term, the Executive's employment
hereunder shall terminate and the Executive shall be entitled to the benefits
provided in SECTION 4.2 hereof.
(i) Termination of the Executive's employment with the Company due
to the Executive's death.
(ii) If, as a result of the Executive's incapacity due to physical or
mental illness, injury or disability, the Executive shall have been absent from
his duties with the Company on a full-time basis for three (3) consecutive
months, and within thirty (30) days after the receipt of written Notice of
Termination (as hereinafter defined) he shall not have returned to the full-time
performance of his duties, the Company may terminate the Executive's employment
for "DISABILITY". "ABSENT FROM HIS DUTIES" means, for the purposes of this
SECTION 4.1(II), that the Executive is devoting less than forty (40) hours per
week to his duties under this Agreement.
(iii) The Company shall be entitled to terminate the Executive's
employment for Cause. For purposes of this Agreement, "CAUSE" shall mean:
(A) the willful and continued failure by the Executive to
substantially perform his duties with the Company in good faith (other than any
such failure resulting from his incapacity due to physical or mental illness,
injury or disability or any such actual or anticipated failure resulting from
his termination for Good Reason (as hereinafter defined)), after a demand for
substantial performance is delivered to him by the Board of Directors of the
Company which identifies, in reasonable detail, the
manner in which the Board of Directors believes that the Executive has not
substantially performed his duties in good faith;
(B) the willful engaging by the Executive in conduct which
causes material harm to the Company, monetarily or otherwise; or
(C) the Executive's conviction of a crime which is a felony
offense in the United States or an indictable offense in Canada.
For purposes of this SECTION 4.1(III), no act, or failure to act, on the
Executive's part shall be considered "WILLFUL" unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company or its shareholders.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than two-
thirds of the entire membership of the Board of Directors at a meeting of the
Board of Directors called and held for such purpose (after ten (10) days notice
to him and an opportunity for him, together with his counsel, to appear before
the Board of Directors), finding that the Executive was guilty of conduct set
forth above in CLAUSES (A), (B) OR (C) of this SECTION 4.1(III) and setting
forth, in reasonable detail, the basis for such finding.
(iv) The Executive shall be entitled to terminate his employment for
Good Reason. For purposes of this Agreement, "GOOD REASON" shall, without the
Executive's express written consent, mean:
(A) the assignment to the Executive of any duties substantially
inconsistent with his status as set forth in SECTION 1.1 hereof;
(B) a reduction by the Company in the Executive's Base Salary as
in effect on the date hereof or as the same may be increased from time to time;
(C) the relocation of the Company's principal executive offices
to a location not approved by the Executive or the Company's requiring the
Executive to be based in a location not approved by the Executive;
(D) the failure by the Company to continue in effect any
pension, health, compensation or other benefit plan in which the Executive
participates or any similar plans hereafter adopted, unless an equitable
arrangement (as determined by an employee benefit consultant of national
standing selected by the Company and reasonably satisfactory to the Executive),
embodied in an ongoing substitute or alternative plan, has been made with
respect to such plan, or the failure by the Company to continue his
participation therein, or the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or deprive the
Executive of any material fringe benefit presently enjoyed by him;
(E) the failure of the Company to obtain a satisfactory
agreement from any successor (by means of merger, consolidation, sale of assets
or otherwise) to assume and agree to perform this Agreement as contemplated by
SECTION 5 hereof; or
(F) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of SECTION 4.1(V) hereof (and, if applicable, SECTION 4.1(III)
hereof); and for purposes of this Agreement, no such purported termination shall
be effective.
The Executive's right to terminate his employment pursuant to this SECTION
4.1(IV) shall not be affected by his incapacity due to physical or mental
illness, injury or disability. The Company may, solely during the period of
such incapacity, make arrangements for the discharge of any of the Executive's
duties hereunder by another officer of the Company, but any such arrangement
shall not affect or in any way diminish the Executive's rights hereunder.
(v) Any purported termination by the Company or by the Executive
shall be communicated by written Notice of Termination to the other party hereto
in accordance with SECTIONS 4.3 AND 8.1 hereof.
(vi) Notwithstanding the pendency of a Notice of Dispute (as
hereinafter defined), the Company will continue to pay the Executive his full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, Base Salary) and continue his participation in
all incentive compensation, bonus, option, benefit and insurance plans in which
he was participating when the notice giving rise to the dispute was given (or
provide the Executive with benefits substantially similar, as determined by an
employee benefit consultant of national standing selected by the Company and
reasonably satisfactory to the Executive, to those under such plans), until the
dispute is finally resolved. Amounts paid under this SECTION 4.1(VI) are in
addition to all other amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement or otherwise. If it
is finally determined that the Executive terminated his employment for other
than Good Reason or the Company rightfully terminated the Executive's employment
for Cause, the Executive shall reimburse the Company for all amounts paid to him
under this SECTION 4.1(VI) (less any amounts determined to be owing to the
Executive under any other provision of this Agreement), with interest thereon
calculated at a rate of six percent per annum.
4.2. Effect of Termination.
---------------------
(i) Upon the termination of the Executive's employment as a result of
his Disability, the Executive shall be entitled to receive:
(A) for an additional twenty-four months after the date of such
termination, his Base Salary and any and all benefits to which he is entitled on
the date of such termination under the Company's pension, life, disability,
accident and health and other benefit plans in accordance with the provisions of
such plans; and (B) one hundred percent (100%) of the maximum amount of
incentive compensation for which the Executive could have become eligible during
the year in which such termination occurs.
(B) the Option, together with any other options to purchase
Common Stock in the Company granted pursuant to any plan or otherwise, or any
equivalent or similar rights which appreciate or tend to appreciate as the value
of the Company's stock appreciates, shall become immediately accelerated and
fully vested and any restrictions on such options or equivalent or similar
rights shall, to the extent permissible under applicable securities laws, fully
lapse; and the Company shall endeavor to cause any restrictions on such options
or equivalent or similar rights not lapsed by operation of this clause to so
lapse.
(ii) Upon the termination of the Executive's employment as a result
of his death, the Executive's heirs, devisees, executors or other legal
representatives shall receive:
(A) for an additional twenty-four months from the date of such
termination, his Base Salary and any and all benefits to which he is entitled on
the date of such termination under the Company's pension, life, disability,
accident and health and other benefit plans in accordance with the provisions of
such plans; and (B) one hundred percent (100%) of the maximum amount of
incentive compensation for which the Executive could have become eligible during
the year in which such termination occurs.
(B) the Option, together with any other options to purchase
Common Stock in the Company granted pursuant to any plan or otherwise, or any
equivalent or similar rights which appreciate or tend to appreciate as the value
of the Company's stock appreciates, shall become immediately accelerated and
fully vested and any restrictions on such options or equivalent or similar
rights shall, to the extent permissible under applicable securities laws, fully
lapse; and the Company shall endeavor to cause any restrictions on such options
or equivalent or similar rights not lapsed by operation of this clause to so
lapse.
(iii) Subject to SECTION 4.L(VI) hereof: (a) if the Executive's
employment shall be terminated for Cause as described in SECTION 4.1(III)(A),
(B) OR (C) hereto, the Company shall pay the Executive his full Base Salary and
other benefits to which he is entitled, through the Date of Termination at the
rate in effect at the time the Notice of Termination is given, and the Company
shall have no further obligations to him under this Agreement.
(iv) If the Executive's employment by the Company shall be terminated
(a) by the Company other than for Cause, Death or Disability, or (b) by the
Executive for Good Reason, then the Executive shall be entitled to the benefits
provided below:
(A) the Company shall pay the Executive, not later than the
fifth day following the Date of Termination, a lump sum in cash equal to the sum
of (i) twenty-four months of Base Salary, at the rate of the Executive's Base
Salary on the Date of Termination, discounted to the then present value at a
discount rate of five percent per annum applied to each future payment from the
time it would have become payable; and (ii) one hundred percent (100%) of the
maximum amount of incentive compensation for which the Executive could have
become eligible during the year in which such termination occurs; and
(B) the Option, together with any other options to purchase
Common Stock in the Company granted pursuant to any plan or otherwise, or any
equivalent or similar rights which appreciate or tend to appreciate as the value
of the Company's stock appreciates, shall become immediately accelerated and
fully vested and any restrictions on such options or equivalent or similar
rights shall, to the extent permissible under applicable securities laws, fully
lapse; and the Company shall endeavor to cause any restrictions on such options
or equivalent or similar rights not lapsed by operation of this clause to so
lapse.
(v) The Executive shall not be required to mitigate the amount of any
payment provided for in this SECTION 4.2 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
SECTION 4.2 be subject to set-off or reduced by any compensation earned by him
as the result of employment by another employer or by benefits after the Date of
Termination, or otherwise.
4.3. Certain Definitions. For the purposes of this SECTION 4, the
-------------------
following terms shall have the meanings set forth in this SECTION 4.3:
(i) "NOTICE OF TERMINATION" means a written notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision so indicated.
(ii) "DATE OF TERMINATION" means (i) if employment is terminated for
Disability, thirty days after Notice of Termination is given (provided that the
Executive shall not have returned to the performance of his duties on a full-
time basis during such thirty-day period), and (ii) if employment is terminated
pursuant to SECTION 4.1(III) OR (IV) hereof or for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination
pursuant to SECTION 4.1(III) hereof, shall not be less than ten days and, in the
case of a termination pursuant to SECTION 4.1(IV) hereof, shall not be more than
sixty days, respectively, from the date such Notice of Termination is given);
provided that if within thirty days after any Notice of
Termination is given, the party receiving such Notice of Termination notifies
the other party that a dispute exists concerning the termination (a "NOTICE OF
DISPUTE"), the Date of Termination shall be the date on which the dispute is
finally determined, either by mutual written agreement of the parties, by a
binding arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom having expired and no
appeal having been perfected); and provided further that the Date of Termination
shall be extended by a Notice of Dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence.
5. Successors.
----------
5.1. Assumption by Successors. The Company shall require any
------------------------
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the Company
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive to compensation from
the Company in the same amount and on the same terms as he would be entitled
hereunder if he terminates his employment for Good Reason, except that for
purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
6. Non-Competition and Confidentiality.
-----------------------------------
6.1 Non-Competition. During the Executive's employment by the
---------------
Company hereunder and during the period of one year after the termination of the
Executive's employment hereunder by the Company for Cause or by the Executive
for other than Good Reason:
(i) the Executive will not directly or indirectly (as a
director, officer, employee, manager, consultant, independent contractor,
advisor or otherwise) engage in competition with, or own any interest in or
perform any services for any business or organization which directly or
indirectly engages in competition in any material respect with the Company.
(ii) the Executive will not directly or indirectly employ or
solicit for employment any person whom he knows to be an employee of the Company
or any subsidiary of the Company.
6.2. Confidential Information.
------------------------
(a) The Executive agrees and acknowledges that the Confidential
Information of the Company (as hereinafter defined) is valuable, special and
unique to its business; that such business depends on such Confidential
Information; and that the Company wishes to protect such Confidential
Information by keeping it confidential for the use and benefit of the Company.
Based on the foregoing, the Executive agrees to undertake the following
obligations with respect to such Confidential Information:
(i) The Executive agrees to keep any and all Confidential
Information in trust for the use and benefit of the Company;
(ii) The Executive agrees that, except as required by the
Executive's duties hereunder or authorized in writing by the Company, he will
not at any time during and for three years after the termination of his
employment with the Company (or, if later, until the termination of any
applicable Confidentiality Agreement, as defined below), disclose or use,
directly or indirectly, any Confidential Information of the Company;
(iii) The Executive agrees to take all reasonable steps
necessary, or reasonably requested by the Company, to ensure that all
Confidential Information of the Company is kept confidential for the use and
benefit of the Company; and
(iv) The Executive agrees that, upon termination of his
employment by the Company or at any other time the Company may in writing so
request, he will promptly deliver to the Company all materials constituting
Confidential Information (including all copies thereof) that are in the
possession of or under the control of the Executive. the Executive further
agrees that, if requested by the Company
to return any Confidential Information pursuant to this SECTION 6.2(A)(IV), he
will not make or retain any copy of or extract from such materials.
(b) For purposes of this SECTION 6.2, "CONFIDENTIAL INFORMATION"
means any and all information (i) developed by or for the Company or its
subsidiaries of which the Executive gained knowledge by reason of his employment
by the Company prior the date hereof or his employment under this Agreement that
is not generally known in any industry in which the Company is or may become
engaged or (ii) provided to the Company or its subsidiaries by third parties
pursuant to written obligations of confidentiality (a "Confidentiality
Agreement"). Confidential Information includes, but is not limited to, any and
all information developed by or for the Company concerning plans, marketing and
sales methods, materials, processes, business forms, procedures, devices used by
the Company, contractors and customers with which the Company has dealt prior to
the Executive's termination of employment with the Company, plans for
development of new products, services and expansion into new areas or markets,
internal operations, and any trade secrets and proprietary information of any
type owned by the Company or its subsidiaries together with all written, graphic
and other materials relating to all or any part of the same.
In the event that the Executive is, in the opinion of his legal counsel (which
counsel shall be acceptable to the Company acting reasonably), required to
disclose any Confidential Information to any federal, state, local or foreign
judicial, legislative, administrative or other authority, agency or
instrumentality or is required to disclose such Confidential Information by
reason of his fiduciary duties to the Company or its shareholders or by any
federal, state, local or foreign securities, blue-sky or other similar laws,
rules, regulations or ordinances, then, notwithstanding anything in this SECTION
6.2 to the contrary, the Executive may disclose such Confidential Information to
the extent, and to the persons and entities, so required without any liability
hereunder, without constituting a breach hereunder and without giving rise to a
right of the Company to terminate the Executive's employment (for Cause or
otherwise) hereunder. The Executive shall notify the Company of any disclosure
required to be made in connection with the preceding sentence as soon as
practicable after the Executive becomes aware of such required disclosure.
7. Remedies.
--------
7.1. Injunctive Relief. The Executive acknowledges and agrees that
-----------------
the covenants and obligations contained in SECTIONS 6.1 AND 6.2 hereto relate to
special, unique and extraordinary matters and that a violation of any of the
terms of such sections will cause the Company irreparable injury for which
adequate remedy at law is not available. Therefore, the Executive agrees that
the Company shall be entitled to an injunction, restraining order, or other
equitable relief from any court of competent jurisdiction, restraining the
Executive from committing any violation of the covenants and obligations set
forth in SECTIONS 6.1 AND 6.2 hereof, in addition to any other rights and
remedies the Company may have at law or in equity.
7.2. Arbitration. Except as provided in Section 7.1, all disputes
-----------
arising out of or in connection with this Agreement, or in respect of any
defined legal relationship associated therewith or derived therefrom, shall be
referred to and finally resolved by arbitration under the Rules of the British
Columbia International Commercial Arbitration Centre. The appointing
authorities shall be the British Columbia International Commercial Arbitration
Centre. The case shall be administered by the British Columbia International
Commercial Arbitration Centre in accordance with its "Procedures for Cases Under
the BCICAC Rules." The place of arbitration shall be Vancouver, British
Columbia, Canada.
8. Miscellaneous.
-------------
8.1. Notices. Any written notice, required or permitted under this
-------
Agreement, shall be deemed sufficiently given if either hand delivered or if
sent by fax or overnight courier. Written notices must be delivered to the
receiving party at his or its address on the signature page of this Agreement.
The parties may change the address at which written notices are to be received
in accordance with this section.
8.2. Assignment. Subject to Section 5.1, neither the Company nor the
----------
Executive may assign, transfer, or delegate its or his rights or obligations
hereunder and any attempt to do so shall be void. This Agreement shall be
binding upon and shall inure to the benefit of the Company and its successors
and assigns.
8.3. Entire Agreement. This Agreement contains the entire agreement
----------------
of the parties with respect to the subject matter hereof, and all
other prior agreements, written or oral, are hereby merged herein and are of no
further force or effect. This Agreement may be modified or amended only by a
written agreement that is signed by the Company and the Executive. No waiver of
any section or provision of this Agreement will be valid unless such waiver is
in writing and signed by the party against whom enforcement of the waiver is
sought. The waiver by the Company of any section or provision of this Agreement
shall not apply to any subsequent breach of this Agreement. Captions to the
various sections in this Agreement are for the convenience
of the parties only and shall not affect the meaning or interpretation of this
Agreement. This Agreement may be executed in several counterparts, each of which
shall be deemed an original, but together they shall constitute one and the same
instrument.
8.4. Severability. The provisions of this Agreement shall be deemed
------------
severable, and if any part of any provision is held illegal, void, or invalid
under applicable law such provision may be changed to the extent reasonably
necessary to make the provision, as so changed, legal, valid and binding. If any
provision of this Agreement is held illegal, void, or invalid in its entirety,
the remaining provisions of this Agreement shall not in any way be affected or
impaired but shall remain binding in accordance with their terms.
8.5. Continuing Obligations. SECTIONS 4.2, 6.1 AND 6.2 of this
----------------------
Agreement shall continue and survive the termination of this Agreement.
8.6 Applicable Law. This Agreement and the rights and obligations
--------------
of the Company and the Executive hereunder shall be governed by and construed
and enforced under the laws of British Columbia, without giving effect to
principles of conflicts of laws. The Company and the Executive irrevocably
submit to and accept generally and unconditionally the exclusive jurisdiction of
the courts and the appellate courts of British Columbia with respect to any
legal action or proceeding which may be brought at any time relating in any way
to this Agreement. Each of the Executive and the Company irrevocably waives any
objection it may now or in the future have to the venue of any such action or
proceeding, and any claim it may now or in the future have that any such action
or proceeding has been brought in an inconvenient forum.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
DataWave Systems Inc.
By: _______________________________
Title: _______________________________
Address: 000 Xxxx 0xx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx
Xxxxxx X0X IH9
______________________________________
Xxxxx Xxxxxx
Address:
EXHIBIT A
PERFORMANCE GOALS
[TO BE DEFINED]
