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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This employment agreement is entered into and is effective as of July
18, 1997 between Sonic Jet Performance, LLC, a California Limited Liability
Company ("Employer") and Xxxxxx Xxxxxxxxx ("Executive") with respect to the
following facts:
A. Executive is and has been employed by Employer or its predecessors
for a total of more than ten years in various capacities. Through such
experience, he has acquired outstanding and special skills and abilities and an
extensive background in and knowledge of Employer's business and the industry in
which it is engaged.
B. Employer desires assurance of the continued association and services
of Executive in order to retain his experience, skills, abilities, background,
and knowledge, and is therefore willing to engage his services on the terms and
conditions set forth below.
C. Executive desires to continue in the employ of Employer and is
willing to do so on those terms and conditions.
NOW, THEREFORE, in consideration of the above recitals and of the mutual
promises and conditions in this agreement, it is agreed as follows:
1. Employment. Employer shall employ Executive as its Chief Designer in
charge of new product development and research and development and/or in such
other position or in such other capacity or capacities as Employer's board of
directors may from time to time prescribe. Until such time as the Managers of
Employer appoint a full time chief executive officer, Executive shall be the
president, general manager, and chief executive officer of Employer, with full
power and authority to hire and fire all employees of Employer, other than the
officers, and to manage and conduct all the business of Employer subject to
expenditure policies set by the Managers. During his employment, Executive shall
devote his full energies, interest, abilities, and productive time to the
performance of this agreement and shall not, without Employer's prior written
consent, render to others services of any kind for compensation, or engage in
any other business activity that would materially interfere with the performance
of his duties under this agreement; provided, however, that Executive may
continue to serve as manager, officer, or director, and to receive compensation
for that service from any family controlled business entity.
2. Non-Competition and Non-Disclosure. Executive agrees that he will not
during the employment term directly or indirectly engage in, or have any
interest in any person, firm, corporation, or business (whether as an employee,
officer, director, agent, security holder, creditor, consultant, or otherwise)
that engages in, any activity, which activity is the same as, or competitive
with Employer's business designing, manufacturing and selling personal water
craft, boats and trailers. Executive understands and agrees that direct
competition means design, development, production, promotion, or sale of
products or services competitive with those of employer. Indirect competition
means employment by any competitor or third party providing products competing
with Employer's products, for whom Executive will perform the
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same or similar function as he performs for Employer. In the course of his
employment, Executive may have access to confidential information and trade
secrets relating to Employer's business. Except as required in the course of his
employment by Employer, Executive will not, without Employer's prior consent,
during his employment by Employer, directly or indirectly disclose to any third
person any such confidential information or trade secrets.
3. Executive as Advisor and Consultant. If, during the term of this
agreement, Executive shall not be vested by employer with the responsibilities
of acting as its Chief Designer, or chief executive officer, Executive shall be
employed as an advisor and consultant to Employer so that employer may benefit
from Executive's experience. It is expressly agreed that Executive's services as
an advisor and consultant will be required at such times and places as will
result in the least inconvenience to Executive, having in mind his other
business commitments during that period which may obligate him to perform his
services under such other commitments before performing the advisory services
under this agreement. While Executive is employed as an advisor and consultant
by Employer, Employer shall pay Executive all compensation benefits provided for
in this agreement. During the course of his employment as an advisor and
consultant, Executive shall not compete, directly or indirectly, with Employer
in the field of design and manufacture of personal water craft.
4. Term, Rate of Compensation and Payment. Subject to earlier
termination as provided in this agreement, Executive shall be employed for a
term beginning July 18, 1997, and ending July 18, 2002. Unless the parties agree
otherwise in writing, during the employment term Executive shall perform the
services he is required to perform under this agreement at Employer's offices,
located in Huntington Beach, California; provided, however, that Employer may
from time to time require Executive to travel temporarily to other locations on
Employer's business. Employer shall pay a base salary to Executive at the rate
of $100,000 per year (the "Basic Salary"), payable bi-monthly. Until January 18,
1999 Executive's Basic Salary shall accrue, but not be paid. The accrued, but
unpaid, salary ("Accrued Salary") shall be a liability of Employer and be paid
to Executive, in addition to his then current salary, commencing January 18,
1999 in equal bi-monthly amounts over the 18 month period beginning January 18,
1999 and ending July 18, 2000. During the employment term, Executive shall be
entitled to receive all other benefits of employment generally available to
Employer's other executive and managerial employees when and as he becomes
eligible for them, including group health and life insurance benefits and an
annual vacation.
5. Incentive Compensation Bonus. In addition to the basic salary
provided for above, Employer shall pay to Executive as incentive compensation
for each fiscal year of Employer, promptly after the determination thereof, a
sum equal to five percent (5%) of Employer's net profits as shown in Employer's
year-end statement of income, as such income is determined in the sole judgment
of Employer's chief financial officer, but without regard to nonrecurring items
of income or expense (including gain or loss on disposition of capital assets or
assets used in Employer's business) appearing separately on Employer's financial
statements and before deduction of any federal taxes on or measured by income
("Incentive Bonus"). The Incentive Bonus payable to Executive under this
Paragraph 5.b. shall be prorated for any partial fiscal year that occurs during
the employment term. The Incentive bonus shall be prorated by multiplying the
total net profits for the fiscal year within which such
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partial fiscal year occurs by (a) the decimal equivalent of the above-mentioned
percentage and b (b) a number equal to the number of months during any such
partial fiscal year in which Executive is employed by Employer within the
meaning of this agreement, divided by twelve.
6. Executive's Expenses, Automobile. During the employment term,
Employer shall reimburse Executive for reasonable out-of-pocket expenses
incurred in connection with Employer's business, including travel expenses,
food, and lodging while away from home, subject to such policies as Employer may
from time to time reasonably establish for its employees. During the employment
term, Employer shall furnish to Executive an automobile owned by Employer. The
terms and conditions of Executive's use of such automobile and the extent to
which Employer shall defray the costs of its operation shall be the same as
those pertaining to automobiles presently being furnished to other executive and
managerial personnel of Employer. If any part of the salary or other
compensation paid by employer to Executive, or of any amount paid by Employer
for travel or entertainment expenses incurred by Executive, is finally
determined not to be allowable as a federal or state income tax deduction to
Employer, the part disallowed shall be repaid to Employer by Executive.
7. Inventions, Patents, etc.
a. Definitions. For purposes of this Paragraph 7, the following
definitions shall be used:
(i) "Royalty Agreement Patent and Design Rights" shall
mean those certain patents and design rights licensed to Employer by Executive
pursuant to (a) that certain Royalty Agreement with Executive as Patent Owner
and Employer as Licensee of even date hereof, and (b) that certain Assignment of
royalty Agreements with Executive as Assignor and Employer as Assignee of even
date hereof.
(ii) "Related Royalty Agreement Patent and Design
Rights" shall mean any patents, design rights, development rights and other
intangible rights developed by Executive during the course of his employment
with Employer, either alone or with others that are related to, or improvements
to the Royalty Agreement Patent and Design rights.
(iii) "New Design and Patent Rights" shall mean any
completely new and different patents and design rights, and other intangible
rights developed by Executive during the course of his employment with Employer,
either alone or with others that are un-related to, and qualitatively different
from, the Royalty Agreement Patent and Design Rights and Related royalty
Agreement Patent and Design Rights.
(iv) "Royalty Agreements" shall mean the two (2) Royalty
Agreements first referred to in Paragraph 7.a.(i), above.
b. Period From July 18, 1998 to January 18, 1999. From July 18,
1998 to January 18, 1999, that is from the commencement of this Agreement and
during the time
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period during which Executive is not paid, all designs, processes, inventions,
patents, copyrights, trademarks, and other intangible rights that may be
conceived or developed by Executive, either alone or with others, during the
term of Executive's employment, whether or not conceived or developed during
Executive's working hours, and with respect to which the equipment, supplies,
facilities, or trade secret information of Employer was used, or that relate at
the time of conception or reduction to practice of the invention to the business
of the Employer or to Employer's actual or demonstrably anticipated research and
development, or that result from any work performed by Executive for Employer,
whether classified as Related Royalty Agreement Patent and Design Rights or New
Design and Patent Rights, shall be the sole property of Executive, provided,
however, that Executive shall license any Related Royalty Agreement Patent and
Design Rights to Employer under the same terms and conditions as Executive
licenses the Royalty Agreement Patent and Design Rights to Employer for no
additional consideration, other than that which is provided for in the Royalty
Agreements.
c. From and After January 18, 1999. From and after January 18,
1998 all designs, processes, inventions, patents, copyrights, trademarks, and
other intangible rights that may be conceived or developed by Executive, either
alone or with others, during the term of Executive's employment, whether or not
conceived or developed during Executive's working hours, and with respect to
which the equipment, supplies, facilities, or trade secret information of
Employer was used, or that relate at the time of conception or reduction to
practice of the invention to the business of the Employer or to Employer's
actual or demonstrably anticipated research and development, or that result from
any work performed by Executive for Employer resulting in New Design and Patent
Rights shall be the sole property of Employer, except that such work classified
as Related Royalty Agreement Patent and Design Rights shall be the sole property
of Executive provided, however, that Executive shall license any Related Royalty
Agreement Patent and Design Rights to Employer under the same terms and
conditions as Executive licenses the Royalty Agreement Patent and Design Rights
to Employer for no additional consideration, other than that which is provided
for in the Royalty Agreements.
d. Failure to Pay Executive's Compensation. Should any part of
Executive's compensation not be paid within thirty (3) days of its due date
("Delinquency Date"), as determined under Paragraphs 4 and 5, above, subsequent
to January 18, 1999, then any work of Executive resulting in New Design and
Patent Rights from and after the Delinquency Date, and for the term of this
Agreement, shall be the sole property of Executive.
e. Disclosure, Execution of Documents. Executive shall disclose
to Employer all inventions conceived during the term of employment, whether or
not the property of Employer under the terms of the preceding, provided that
such disclosure shall be received by Employer in confidence. Executive and
Employer shall execute all documents, including patent applications and
assignments, required by Employer or Executive, as the case may be, to establish
Employer's or Executive's rights under this Paragraph 7.
8. Indemnification. Employer shall, to the maximum extent permitted by
law, indemnify and hold Executive harmless against expenses, including
reasonable attorney's fees
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judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding arising by reason of Executive's
employment by Employer. Employer shall advance to Executive any expense incurred
in defending any such proceeding to the maximum extent permitted by law.
Employer shall purchase and maintain indemnity insurance, if available, on
behalf of Executive in the amount of $5,000,000 against any liability asserted
against or incurred by Executive arising out of his employment by Employer.
9. Termination of Agreement. This Agreement may be terminated as
follows:
a. Business Combination or Dissolution. In the event of a merger
in which employer is not the surviving legal entity, or of a sale of all or
substantially all of Employer's assets, Employer may, at its sole option (1)
assign this Agreement and all rights and obligations under it to any business
entity that succeeds to all or substantially all of the Employer's business
through that merger or sale of assets, or (2) on at least sixty (60) days' prior
written notice to Executive, terminate this agreement effective on the date of
the merger or sale of assets. Should Employer assign this Agreement to a
successor business entity, Executive, at any time during the ninety (90) day
period following the effective date of the merger or sale give written notice to
the successor business entity of termination of this Agreement to be effective
sixty (60) days from the date of notice.
b. Material Breach by Employer. In the event of any material
breach of this agreement on the part of Employer, Executive at his sole option,
may terminate his employment under this agreement and, at his sole option, shall
be entitled to receive as liquidated damages, at Executive's option, either of
the amounts set forth in the following subsections (i) and (ii). The liquidated
damages so received by Executive shall not be limited or reduced by amounts that
Executive might otherwise earn or be able to earn during the period between
termination of his employment under this agreement and payment of those
liquidated damages. The provisions of this Paragraph shall be in addition to any
and all rights Executive may have in equity or at law to require Employer to
comply with or to prevent the breach of this agreement.
(i) The present value on the payment date (as defined in
this Paragraph) of the full amount of his, Basic Salary as provided for in this
agreement for ten (10) years following the payment date, discounted to the
payment date at a rate (for quarterly periods) based on the prime interest rate
charged by Bank of America in Los Angeles, California for short term commercial
loans on the payment date. The amount payable to Executive under this subsection
shall be due and payable in full on the date of notification of Employer by
Executive of the exercise of his option to terminate his employment under this
agreement (the "payment date") and shall accrue interest at the rate of ten
percent (10%) per annum until paid.
(ii) The full amount of the Basic Salary provided for in
Paragraphs 4 and 5, above for seven (7) years following Executive's exercise of
his option to terminate his employment under this agreement. The amounts payable
to Executive under this subsection shall be payable in annual installments on
the first day of January of each year.
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c. Definition of Material Breach. A material breach of this
Agreement includes, but is not limited to, (i) the failure of Employer to pay,
within thirty (30) days of its due date, any amounts due Executive for Basic
Salary, Accrued Salary and Incentive Bonus under Paragraphs 4 and 5, above, and
(ii) termination of this Agreement by Employer in the absence of the commission
by Executive of any material act of dishonesty, disclosure of confidential
information, gross carelessness or misconduct, or unjustifiable neglecting of
his duties under this agreement, or commission of an act that has a direct,
substantial, and adverse effect on Employer's reputation.
d. Resignation of Executive. Executive may terminate this
agreement by giving Employer six months' prior written notice of resignation.
e. Employer's Termination of Executive. Employer may terminate
this agreement, subject to the provisions of Paragraph 9.b., above, concerning
compensation in event of separation without cause, on the last day of any month
on twelve (12) months' prior written notice.
f. Termination For Cause. Employer may terminate this agreement
at any time without notice if Executive commits any material act of dishonesty,
discloses confidential information, is guilty of gross carelessness or
misconduct, or unjustifiably neglects his duties under this agreement, or acts
in any way that has a direct, substantial, and adverse effect on Employer's
reputation.
g. Disability. If, at the end of any calendar month during the
initial term or any renewal term of this agreement, Executive is and has been
for the four consecutive full calendar months then ending, or for 80% or more of
the normal working days during the six (6) consecutive full calendar months then
ending, unable due to mental or physical illness or injury to perform his duties
under this agreement in his normal and regular manner, this agreement shall be
then terminated.
h. Relief of Executive's Duties. If Executive gives notice of
termination of this agreement or if it becomes known that this agreement will
otherwise terminate in accordance with its provisions, Employer may, in its sole
discretion and subject to its other obligations under this agreement, relief
Executive of his duties under this agreement and assign Executive other
reasonable duties and responsibilities to be performed until the termination
becomes effective.
10. General Provisions.
a. Injunctive Relief. Executive is obligated under this
agreement to render services of a special, unique, unusual, extraordinary, and
intellectual character, which give this agreement peculiar value. The loss of
these services cannot be reasonably or adequately compensated in damages in an
action at law. Accordingly, in addition to other remedies provided by law or
this agreement, Employer shall have the right during the term or any
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renewal term of this agreement to obtain injunctive relief against the breach of
this contract by Executive or the performance of services elsewhere by
Executive, or both.
b. Entire Agreement. This agreement contains the entire agreement
between the parties and supersedes all prior oral and written agreements,
understandings, commitments, and practices between the parties, including all
prior employment agreements, whether or not fully performed by Executive before
the date of this agreement. No amendments to this agreement may be made except
by a writing signed by both parties.
c. Applicable Law. The formation, construction, and performance
of this agreement shall be construed in accordance with the laws of California.
d. Notices. Any notice to Employer required or permitted under
this agreement shall be given in writing to Employer, either by personal service
or by registered or certified mail, postage prepaid, addressed to Manager of
Employer at its then principal place of business. Any such notice to Executive
shall be given in a like manner and, if mailed, shall be addressed to Executive
at his home address then shown in Employer's files. For the purpose of
determining compliance with any time limit in this agreement, a notice shall be
deemed to have been duly given (a) on the date of service, if served personally
on the party to whom notice is to be given, or (b) on the second business day
after mailing, if mailed to the party to whom the notice is to be given in the
manner provided in this section.
e. Counterparts. This Agreement may be executed in several
counterparts and all so executed shall constitute one Second Amendment, binding
on all of the parties hereto, notwithstanding that all of the parties are not
signatories to the original or the same counterpart.
f. Successors and Assigns. Subject to the restrictions on
transferability contained in this Agreement, all its provisions shall be binding
on and inure to the benefit of the successors and assigns of the parties hereto.
g. Void Provisions. In the event any sentence, or section of this
Agreement is declared by a court of competent jurisdiction to be void, such
sentence, or section shall be deemed severed from the remainder of the Agreement
and the balance of the Agreement shall remain in effect.
h. Titles or Captions. Paragraph or section titles or captions
contained in this Agreement are inserted only as a matter of convenience and for
reference. Such titles and captions in no way define, limit, extend or describe
the scope of this Agreement nor the intent of any provision hereof.
i. Gender, Plurals. Whenever required by the context hereof, the
singular shall include the plural, and vice-versa; the masculine gender shall
include the feminine and neuter genders, and vice-versa.
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j. Attorneys' Fees. In any dispute between the parties hereto
arising out of this Agreement, whether or not resulting in litigation, the
party substantially prevailing shall be entitled to recover from the other party
all reasonable costs, including, without limitation, reasonable attorneys' fees.
k. Cross-References. All cross-references in the Second
Amendment, unless specifically directed to another document, refer to provisions
within the Agreement and shall not be considered to be references to the overall
transaction or to any other document.
l. Construction. Every covenant, term, and provision of this
Agreement shall be construed simply according to its fair meaning and not
strictly for or against any party hereto.
m. No Waiver by Failure To Enforce Strictly. A parties failure to
insist on the strict performance of any covenant or duty required by this
Agreement, or to pursue any remedy under this Agreement, shall not constitute a
waiver of the breach or the remedy.
n. Cumulative Remedies. The remedies of the parties hereto under
the Agreement are cumulative and shall not exclude any other remedies to which
the parties may be lawfully entitled.
IN WITNESS hereof the parties hereto execute this Agreement on the day
and year first above written.
"EMPLOYER"
Sonic Jet Performance, LLC
a California Limited Liability Company
By: /s/ Xxxxxx Xxxxxxxxx
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Xxxxxx Xxxxxxxxx, Manager
"EXECUTIVE"
/s/ Xxxxxx Xxxxxxxxx
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Xxxxxx Xxxxxxxxx
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FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement ("Agreement") is entered
into this 19th day of June 1998 by and between Xxxxxx Xxxxxxxxx ("Executive")
and Boulder Capital Opportunities III, Inc., a Colorado Corporation ("Employer")
with respect to the following facts:
A. Executive entered into that certain Employment Agreement with Sonic
Jet Performance, LLC, a California Limited Liability Company ("Sonic LLC") on
July 18, 1997.
B. On June 18, 1998 Sonic LLC completed a business reorganization
wherein Sonic LLC transferred all its assets to Employer and Employer assumed
all of Sonic LLC's liabilities and other obligations solely in exchange for
common stock in Employer. From June 18, 1998 Sonic LLC ceased to do business and
became a shareholder only in Employer.
C. Pursuant to Paragraph 9 of the Employment Agreement, upon a sale of
all the assets of Sonic LLC and the assignment of the Employment Agreement to
Sonic LLC's successor, Employer herein, Executive may, upon proper notice,
terminate the Employment Agreement.
D. Executive desires to continue his employment with Sonic LLC's
successor, Employer herein, and not terminate the Employment Agreement, provided
his Basic Salary, as defined in the Employment Agreement is increased over the
term of the Employment Agreement as provided herein.
E. Employer desires to retain the services of Executive under the terms
of the Employment Agreement as modified herein.
NOW THEREFORE in consideration of the above recitals and of the mutual
promises and conditions in this agreement, it is agreed as follows:
1. Amount of Basic Salary. Executive's Basic Salary under Paragraph 4 of
the Employment Agreement is changed to provide the following Basic Salary for
the periods indicated:
Period Basic Salary (annual)
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Jan. 1, 1999 - Dec. 31, 1999 $ 120,000
Jan. 1, 2000 - Dec. 31, 2000 $ 140,000
Jan. 1, 2001 - Dec. 31, 2001 $ 175,000
Jan. 1, 2002 - Jul. 18, 2002 $ 200,000
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2. Payment of Basic and Accrued Salary. Provisions for
payment of Basic and Accrued Salary under Paragraph 4 of the
Employment Agreement are changed to read as follows: Until June 19,
1998 Executive's Basic Salary shall accrue, but not be paid.
Commencing June 19, 1998 Executive shall be paid his Basic Salary on
a bi-monthly basis on the 15th and the last day of each month, with
any partial pay period prorated. The accrued, but unpaid, salary
("Accrued Salary") shall be a liability of Employer and be paid to
Executive, in addition to his then current salary, commencing
January 1, 1999 in equal bi-monthly amounts over calendar year 1999.
All other terms and conditions of the Employment Agreement are
hereby confirmed by the parties hereto.
"EMPLOYER"
Boulder Capital Opportunities III, Inc.,
a Colorado Corporation
By: /s/ Xxxx X. Xxxxxxxxx
----------------------------------------
Xxxx X. Xxxxxxxxx, Vice-President
"EXECUTIVE"
/s/ Xxxxxx Xxxxxxxxx
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Xxxxxx Xxxxxxxxx
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