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EXHIBIT 10.6
EXHIBIT B
EMPLOYMENT AND NON-COMPETITION AGREEMENT
Employment and Non-Competition Agreement ("Agreement") entered into
as of this 25th day of March 1998 ("Effective Date"), by and between ITC
Learning Corporation, a Maryland Corporation ("Employer") and Xxxxxx X. Xxxxxxx,
a resident of the State of Michigan ("Employee").
Employee currently serves as President of Turn-Key Training Technologies,
Inc. ("T3"). Pursuant to that Stock Purchase Agreement dated March 25th, 1998,
by and among Employer, Employee, and the other stockholders of T3 ("Purchase
Agreement"), Employer will acquire all of the outstanding stock of T3. The Board
of Directors of Employer believes it is in the best interests of Employer to
enter into this Agreement with Employee in order to assure continuity with
respect to certain operations of T3. Accordingly, Employer and Employee, each
intending to be legally bound hereby, agree as follows:
1. Term.
The term of this Agreement and Employee's employment hereunder shall
commence on March 25th, 1998 ("Commencement Date") and shall continue for a
period of three (3) years from the Commencement Date ("Term"), unless terminated
earlier in accordance with Section 5 of this Agreement or extended by mutual
written agreement of Employer and Employee (such term to be designated the
"Employment Period"). The provisions of Sections 6, 7 and 8 shall survive any
termination of this Agreement and shall remain in full force and effect and
shall be binding upon Employee and his estate, legal representatives, heirs,
successors and assigns.
2. Duties.
(a) General Duties. Employee shall be employed by Employer and report to
the Chief Executive Officer or such other executive
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as Employer may designate, on the terms and conditions set forth in this
Agreement. Employee shall be responsible for (i) management of the day to day
operations of T3 including, but not limited to, the production, marketing,
distribution and sale of software programs designed or functioning to monitor
training programs for businesses and other organizations (collectively, the
"Business") and/or (ii) such other duties and responsibilities reasonably
prescribed by the Board of Directors of Employer. Employee agrees to (i) devote
substantially all of his time, attention, skill and energies to the business of
Employer; (ii) faithfully and diligently perform such duties and exercise such
powers as may from time to time be assigned to him; (iii) comply with all
policies and procedures from time to time adopted by Employer; (iv) use all
reasonable efforts to promote the interest, reputation, business and welfare of
Employer; and (v) follow the reasonable and lawful directions given to him by
the Chief Executive Officer or the Board of Directors of Employer.
(b) Corporate Opportunities. Employee agrees that he will not take
personal advantage of any business opportunities that arise during his
employment with Employer and which may be of benefit to Employer. All material
facts regarding such opportunities must be promptly reported to the Chief
Executive Officer for consideration by Employer.
(c) Exception for CAMEO Multimedia Productions, Inc. Employee is a 33%
shareholder and chairman of the board of directors, but not an employee, of
CAMEO Multimedia Productions, Inc. ("CAMEO"). CAMEO is in the business of (i)the
design, development, promotion, marketing and sale of educational and
entertainment software intended for the consumer retail market, including
current products as follows: "Dream Venture," "Caring for Planet Earth Series,"
and "NASA Space Adventure," (ii) the custom design and sale of software products
and related materials for use by an individual customer. The foregoing to the
contrary notwithstanding, Employee is and shall be permitted during the Term of
the Agreement to consult with and provide services to CAMEO and its successors
and assigns, either directly or indirectly, as an employee, independent
contractor, officer, shareholder, agent, representative or in any like or
similar capacity, but only if the CAMEO's business and such activities do not
materially interfere with the performance of the Employee's substantially full
time obligations to the Employer. For the purposes of this section, the CAMEO's
business shall also include
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any expansion of the business described in (i) and (ii), above, provided that
the expansion does not then compete with the Employer, unless the Employer
otherwise consents, which consent will not unreasonably be withheld. Moreover,
Employee shall be permitted during the four year period following the Term that
is referred to in Section 6(a)(ii) to consult with and provide services, as and
to the extent described above, to CAMEO or any like or similar business. Nothing
herei8n shall be construed as expanding the restrictions in section 6(a)(ii) of
this Agreement.
3. Compensation.
(a) Salary and Expenses.For the services to be rendered by Employee under
this Agreement, Employee shall be paid a base annual salary of one hundred ten
thousand dollars ($110,000). Salary payments shall be made on Employer's
regularly scheduled payroll dates. Employer will review salary increases to
Employee's base salary annually consistent with Employer's policy. Upon
submission of appropriate documentation or receipts, Employee shall also be
entitled to reimbursement for any reasonable and necessary business expenses he
incurs, in accordance with, and subject to, Employer's policies and procedures
regarding expense reimbursement.
(b) Further Consideration and Consideration for Non-Competition. In
consideration of accepting employment pursuant to this Agreement and the
agreement not to compete as set forth in section 6 below, Employer shall pay
Employee (i) upon execution of this Agreement, $600,000 in cash ("Cash
Consideration"); (ii) upon execution of this Agreement, 50,000 shares of common
stock of Employer, $.10 par value per share ("Common Stock") and (iii) on the
first anniversary of the date of execution of this Agreement, subject to the
Right of Setoff set forth in section 5.06 of the Purchase Agreement, an
additional 50,000 shares of Common Stock. The Common Stock referred to in
section 3(b)(i)and (ii) above shall be referred to herein collectively as the
"Stock Consideration."
(c) Revenue Based Compensation. Employee shall be eligible to receive
compensation during the Term based upon Employer's revenues from license and
maintenance fees (but not including fees from implementation services and
contract service fees) attributable to (i) products initially designed and
introduced by
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T3 (including without limitation, the AdminSTAR product) and any products
developed therefrom and (ii) any additional products developed by T3 subsequent
to Employer's purchase of T3 that were created under the direction or management
of Employee ("T3 Products"), as follows: (a) promptly after the end of each
month during the Term, Employer shall calculate the cumulative year to date
revenues from T3 Products less reasonable reserves for product returns and
non-payment ("T3 Product Revenues"); (b) Employee shall receive on a monthly
basis Revenue Based Compensation equal to (i) 2% of the first $500,000 of T3
Product Revenues, (ii) 3% of the next $500,000 of T3 Product Revenues; (iii) 4%
of the following $500,000 of T3 Product Revenues and (iv) 1% of any additional
T3 Product Revenues over $1,500,000.
4. Additional Benefits.
(a) Participation in Retirement and Benefit Plans. Employee shall be
entitled to participate in all Employer plans relating to pension, thrift,
bonus, stock options, stock ownership, deferred profit-sharing, group life
insurance, medical or disability coverage, education or other retirement or
employee benefits that Employer may adopt or maintain for the benefit of its
employees generally, and the Company's chief executive officer shall annually
consider and make recommendations regarding the award of any such discretionary
benefits and any salary increases; provided, however, that neither the chief
executive officer nor the Company shall be obligated to make any such
recommendation or award. If and to the extent that any such plans or programs
provide for waiting periods or length of service requirements or vesting
requirements or level of benefits based upon length of service, service by
Employee with T3 shall be deemed to have been service with Employer for purposes
of such plans or programs.
(b) Other Benefits. Employer shall be eligible to participate in any other
benefits that may be or become applicable to Employer's employees generally. In
addition, Employee shall be reimbursed for reasonable costs associated with (i)
a company automobile (up to $500 per month); (ii) a cellular telephone for
Business use; (iii) a laptop computer for Business use and (iv) a corporate
credit card for Business related expenses.
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5. Termination.
(a) Termination Other Than For Cause. (i) Employer may terminate
Employee's employment under this Agreement without cause at any time; and (ii)
Employee may terminate Employee's employment under this Agreement without cause
by giving Employer sixty (60) days written notice.
(b) Termination for Cause. Employer may terminate Employee's employment
effective immediately upon written notice or on any other date specified in such
notice in the event that Employee: (i) has been convicted of a felony; (ii) has
engaged in fraudulent or dishonest conduct in connection with the business of
Employer or any of its affiliates; (iii) has breached his fiduciary duty to
Employer; (iv) has not performed, has neglected or has engaged in irresponsible
actions with respect to his duties and responsibilities hereunder such that his
job performance has substantially deteriorated to the detriment of the Employer
and such conduct continues for more than ten (10) days following Employee's
receipt of written notice thereof; (v) has committed a material breach of any of
the provisions of this Agreement; or (vi) has engaged in a continuing course of
conduct or any repeated omissions that reflect adversely on the integrity and
reputation for honesty and fair dealing of Employer or its affiliates, any one
of which shall be deemed "Cause" for dismissal.
(c) Death or Disability. This Agreement shall terminate upon the death or
permanent disability of Employee. For purposes of this Agreement, permanent
disability shall be deemed to have occurred if Employee is prevented from
performing the essential duties of his position by reason of illness or injury
for a continuous period of ninety (90) days or for a total of one hundred twenty
(120) days in any twelve-month period.
(d) Effect of Termination. Upon termination of this Agreement by either
party pursuant to this Section 5, Employee shall be entitled to receive only the
compensation and benefits accrued but unpaid as of the date of termination and
shall not be entitled to additional compensation or benefits; provided, however,
that if Employee is terminated pursuant to section 5(a)(i), Employer shall pay
Employee at the rate of $144,000 per annum as severance for the remainder of the
Term ("Severance Pay"). Employer shall be entitled to deduct from any sums owed
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to Employee any sums due to Employer from Employee, and Employee hereby consents
to that deduction.
6. Non-Competition and Non-Solicitation.
(a) Non-Competition.
(i) Except to the extent contemplated in Section 2(c), Employee shall
not, during the Term, have any other employment except with the prior approval
of the Board of Directors and that without the written consent of the Board of
Directors, Employee agrees that during the Term he will not be affiliated with
any competitor, supplier or customer of Employer, as an officer, director,
partner, employee, agent, consultant (or similar capacity) or more than a 1%
stockholder. For all purposes of this Agreement, the term "affiliate" and the
concept of "an affiliate" shall have the same meaning as in Rule 405 under the
Securities Act of 1933.
(ii) Employee further agrees that during the Term and for a period of
four years following the Term, he will not, within North America, directly or
indirectly, as proprietor, partner, shareholder, director, officer, employee,
agent, consultant, or in any other capacity or manner whatsoever, engage in the
development or sales of (A) software programs designed or functioning to monitor
training programs, (B) products currently sold or marketed by Employer or any
subsidiary or affiliate of Employer or (C) any products developed, marketed or
sold by Employer or any subsidiary or affiliate of Employer during the Term. If
any court of competent jurisdiction shall determine this covenant to be
unenforceable as to either the term or scope imposed above, then this covenant
nevertheless shall be enforceable by such court as to such shorter term or such
lesser scope as may be determined by the court to be reasonable and enforceable.
(iii) Employee further agrees that during the Term and for a period
of two years following the Term he will not, directly or indirectly, participate
(on his own behalf or on behalf of any other corporation, venture or enterprise
engaged in commercial activities) in any matters that were the subject of
outstanding bids or solicitations by Employer or any subsidiary or affiliate of
Employer or of bids or solicitations in preparation by Employer or any
subsidiary or affiliate of Employer during the Term.
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(iv) Employee further agrees that during the Term (other than in the
ordinary course of business) and following the Term, he will not, directly or
indirectly, take with him or use any property, such as drawings, reports, data
or proposals, design or manufacturing information, research or development of
other activities, wage and salary information, customer lists or prospect lists,
records or the like of Employer or any subsidiary or affiliate of Employer
relating or peculiar to Employer or any such subsidiary or affiliate, or their
business or products, nor disclose to any others information of a proprietary or
privileged nature, without prior written consent of the Chief Executive Officer
or Board of Directors.
(v) Employee and Employer agree that during and after the Term, they
will not, directly or indirectly, disparage or cause others to disparage
Employer or Employee, as the case may be, or the management, personnel, products
or prospects of Employer.
(b) Non-Solicitation.
(i) Employee further agrees that during the Term he will not,
directly or indirectly, without the prior approval of the Chief Executive
Officer or Board of Directors, encourage any employees of Employer (including
any employees of any subsidiary or affiliate of Employer now existing or
hereafter formed) to leave the employ of Employer or any subsidiary or affiliate
of Employer for the purpose of seeking or obtaining employment in any other
activity with which Employee intends to become affiliated.
(ii) Employee further agrees that during the Term and for a period of
two years following the Term, regardless of the reasons for Employee's
termination, he will not, directly or indirectly, hire, attempt to hire or
encourage any employee of Employer to leave his or her employ with Employer or
any subsidiary or affiliate of Employer.
(c) Reasonableness. Employee further agrees that the provisions of this
section 6 are reasonable and of vital importance to Employer and incorporate
crucial policies and are a means of safeguarding Employer's valuable proprietary
rights and interests. Accordingly, Employee agrees that Employer shall be
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entitled to injunctive relief, in addition to all other remedies permitted by
law, to enforce the provisions of this section 6.
7. Confidentiality.
Employee shall not (for his own benefit or the benefit of any person or entity
other than Employer) use or disclose any of the trade secrets or other
confidential information of Employer or its affiliates, including T3. The term
"trade secrets or other confidential information" includes, by way of example,
matters of a technical nature, "know-how, " inventions, computer programs
(including documentation of such programs) and research projects, and matters of
a business nature, such as proprietary information about costs, profits,
markets, sales, lists of customers, vendor lists, designs, plans, financial
reserves, and other information related to Employer's current or future business
activities to the extent not available to the public, and all information to
which Employee has access during his employment with Employer which belongs or
relates to a third party and which would constitute "trade secrets or other
confidential information" if it belonged or related to Employer. After
termination of this Agreement, Employee shall not use or disclose trade secrets
or other confidential information unless such information becomes a part of the
public domain other than through a breach of this Agreement or is disclosed to
Employee by a third party who is entitled to receive and disclose such
information. Upon termination of this Agreement, or earlier at the request of
the Chief Executive Officer of Employer, Employee shall return to Employer all
documents, files, diskettes and other information storage media containing trade
secrets or confidential information of Employer, and shall not retain any copies
of those materials.
8. Performance of Employee Obligations.
In the event that Employee breaches any of his obligations set forth in Sections
6 or 7 of this Agreement, Employer shall have the right to obtain an injunction
or decree of specific performance from any court of competent jurisdiction to
restrain him from violating those obligations or to compel him to perform those
obligations, in addition to any other rights Employer may have against Employee.
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9. Representations and Warranties of Employee.
Employee represents and warrants that he has been advised by Employer to consult
an attorney in connection with the execution of this Agreement and that Employee
has done so. Employee further represents and warrants that:
(a) General. Employee is able to enter this Agreement and that such
ability is not limited or restricted by any agreements or understandings between
him and other persons or organizations.
(b) Investment Purpose. Employee is acquiring the Stock Consideration for
investment, and not with a view to the sale or other distribution thereof within
the meaning of the Securities Act of 1933, as amended ("Securities Act").
Employee has no present intention of selling or otherwise disposing of all or
any portion of the Stock Consideration.
(c) Securities Representations. Employee (i) has such knowledge,
sophistication and experience in business and financial matters that he is
capable of evaluating the merits and risks of ownership of Employer's Common
Stock, (b) fully understands the nature, scope and duration of the limitations
on transfer contained in this Agreement and (c) can bear the economic risk of
ownership of Employer's Common Stock and a complete loss of the value of the
Common Stock to be received pursuant to this Agreement. Employee has had an
adequate opportunity to ask questions and receive answers from the officers of
Employer concerning the business, operations and financial condition of
Employer. Employee does not have any contract, undertaking, agreement, written
or oral, with any other person to transfer or grant participations in the Common
Stock to be acquired by Employee hereunder.
10. Restrictions on Transfer.
The Common Stock received by Employee pursuant to this Agreement may not
be sold, assigned, pledged, hypothecated or transferred, or any interest therein
conveyed to any other person, except in accordance with the registration
provisions of the federal and state securities laws or applicable exemptions
therefrom. Employer shall use its reasonable efforts to make on a timely basis
all periodic filings required under the Securities
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Exchange Act of 1934 in order to facilitate, when permissible, sales of the
Common Stock received by the Employee pursuant to this Agreement.
11. Piggyback Registration Rights.
(a) At any time within two (2) years of the date of execution of this
Agreement, in the event that Employer registers (including for this purpose a
registration effected by Employer for persons other than Employee) any shares of
its Common Stock under the Securities Act for sale within such two-year period
(other than registration of Common Stock for issuance or sale in connection with
(A) employee or non-employee director compensation or benefit programs, (B) an
exchange offer or an offering of securities solely to the existing shareholders
or employees of Employer, or (C) an acquisition, merger or other business
combination using a registration statement on Form S-4 or any successor or other
appropriate form), Employer shall give prompt written notice (which, in any
event, shall be given no less than 10 days prior to the filing of a registration
statement with respect to such offering) to Employee of Employer's intention to
do so and, upon the written request of Employee sent within 10 days after the
effective date of any such notice, Employer shall use its reasonable best
efforts to cause the Common Stock not otherwise saleable in accordance with Rule
144 under the Securities Act as to which Employer shall have so requested
registration, to be registered under the Securities Act, all to the extent
necessary to permit the sale in such offering of the Common Stock so registered
on behalf of Employee in the same manner as Employer (or persons other than
Employee, as the case may be) proposes to offer its shares of Common Stock.
(b) Employer shall use its reasonable best efforts to cause the managing
underwriter or underwriters of a proposed underwritten offering to permit the
Common Stock requested by Employee to be included in the registration for such
offering on the same terms and conditions as the shares of Common Stock of
Employer included therein. Notwithstanding the foregoing, if the managing
underwriter of underwriters of such offering deliver an opinion to Employer that
the total number of shares of Common Stock that Employer, and any other person,
intend to include in such offering will in the good faith opinion of such
managing underwriter or underwriters materially and adversely affect the success
of such offering, then the number of shares of Common
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Stock to be offered for the account of Employee shall be reduced to the extent
necessary to reduce the total number of shares of Common Stock to be included in
such offering to the number of shares recommended by such managing underwriter.
(c) Registration Expenses. All expenses incurred in connection with a
registration, filing or qualification pursuant to Section 11(a) hereof,
including, without limitation, registration, filing and qualification fees,
printers' and accounting fees, and the fees and disbursements of counsel for
Employer, shall be borne and paid by Employer, with the exception of fees and
disbursements of Employee's counsel, which shall be borne by Employee. In
addition, Employee shall bear and pay all underwriting discounts and selling
commissions attributable to sales of the Common Stock as to which Employee has
requested registration.
12. Miscellaneous.
(a) Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to be properly delivered when
sent by first class registered or certified mail, postage prepaid and return
receipt requested, or delivered in person, addressed as follows:
If to Employer: ITC Learning Corporation
00000 Xxxxxx Xxxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxxxxx X. Xxxx
If to Employee: Xxxxxx X. Xxxxxxx
0000 Xxxxxxx X.X.
Xxxxx Xxxxxx, Xxxxxxxx 00000
with copy to:
Xxxxx Xxxxx, Esq.
Rhoades, McKee, Boer,
Xxxxxxxx & Titta
000 Xxxxxx Xxxxxx X.X.
Xxxxx Xxxxxx, Xxxxxxxx 00000
(b) Waiver. The waiver by any party to this Agreement of a breach of any
of the provisions of this Agreement shall not constitute a waiver of any
subsequent breach.
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(c) Severability. This Agreement shall be construed according to its fair
meaning and not strictly for or against either party. In the event that any
provision of this Agreement conflicts with the law under which this Agreement is
to be construed or if any such provision is held invalid by a court with
jurisdiction over the parties to this Agreement, such provision shall be deemed
to be restated to reflect as nearly as possible the original intentions of the
parties in accordance with applicable law, and the remainder of this Agreement
shall remain in full force and effect. If it is not possible to restate the
provision in a valid or legal manner, then that invalid or illegal portion shall
be deemed not a part of the Agreement and the remaining parts, terms and
provisions shall remain in full force and effect.
(d) Governing Law. This Agreement shall be governed by the laws of the
State of Maryland, without regard to its conflict of laws provisions. Employee
hereby irrevocably consents to, and waives any objection to the exercise of,
personal jurisdiction by the state and federal courts located in Maryland with
respect to any action or proceeding arising out of this Agreement.
(e) Assignment. This Agreement is not assignable by either party without
the written consent of the other; provided, however, that the provisions of this
Agreement shall be assignable to and shall inure to the benefit of and be
binding upon any affiliate or successor of Employer, whether by merger,
consolidation, or transfer of all or substantially all of its assets or
otherwise.
(f) Complete Agreement; Amendment. This Agreement supersedes any and all
prior discussions and understandings, whether written or oral, and represents
the complete agreement between the parties. This Agreement may not be amended,
modified or supplemented except by a written document signed by both parties.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first hereinabove written.
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ITC LEARNING CORPORATION
By: /s/Xxxxxxxxxxx X. Xxxx
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Xxxxxxxxxxx X. Xxxx
Chief Financial Officer
XXXXXX X. XXXXXXX
By: /s/Xxxxxx X. Xxxxxxx
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