CONSULTING AND NON-COMPETITION AGREEMENT
THIS CONSULTING AND NON-COMPETITION AGREEMENT (this "Agreement") is
entered into as of July 1, 1998 by and between XXX XXXXXX ("Xxxxxx") on the
one hand, and JENKON INTERNATIONAL, INC., a Delaware corporation (the
"Company"), with respect to the following facts:
X. Xxxxxx is a co-founder of the Company and is currently an employee
and a director of the Company and/or its direct or indirect subsidiaries (the
"Subsidiaries"), including Jenkon International, Inc., a Washington
corporation, and Summit V, Inc., a Washington corporation.
X. Xxxxxx and the Company have agreed that Xxxxxx'x employment with
the Company will terminate as of July 1, 1998, and that simultaneously with
such termination, Xxxxxx will resign and cease to serve as an officer or
employee of the Company or as a director, officer or employee of each of the
Subsidiaries.
C. The Company and Xxxxxx desire to settle and resolve any and all
controversies between them including, but not limited to any differences or
claims that might also arise out of Xxxxxx'x employment with the Company or
any Subsidiaries and Xxxxxx'x termination therefrom, to bring these matters
to a conclusion and to avoid incurring costs and expenses which would be
incident to the prosecution and defense of claims arising from disputed
matters, if any.
D. Following the effective date of this Agreement, the Company and
Xxxxxx desire that the Company retain Xxxxxx as a consultant and that the
Xxxxxx agree to a covenant not to compete with the Company or its
Subsidiaries on the terms described in this Agreement.
NOW, THEREFORE, in consideration for the covenants and agreements
contained herein, and other good and valuable consideration, the parties
hereto agree as follows:
1. TERMINATION AS AN EMPLOYEE AND ACKNOWLEDGMENT OF PAYMENT. Xxxxxx
and the Company hereby agree that Xxxxxx'x employment with the Company shall
terminate at 12:01 a.m., Pacific Daylight Time, on July 1, 1998 (the
"Termination Date") and effective on the Termination Date, Xxxxxx shall, by
execution of this Agreement and by no further action on the part of the
Company, any Subsidiary or Xxxxxx, be deemed to have resigned as (i) an
employee and officer of the Company and each of its Subsidiaries, and (ii) as
a director of each of the Subsidiaries. Xxxxxx shall remain as a director of
the Company. Simultaneously with the termination of Xxxxxx'x employment with
the Company as set forth herein, Xxxxxx agrees to serve as a consultant to
the Company upon the terms detailed below. Except as otherwise specifically
set forth in this Agreement, Company shall have no further obligations to
Xxxxxx and all compensation and benefits payable to him shall cease as of the
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Termination Date. Xxxxxx hereby acknowledges that he has been paid all
accrued compensation, wages, bonus or vacation pay, benefits and other
compensation owed to him by the Company or to which he may be entitled up to
and through the Termination Date and hereby releases the Company of any
further obligations to pay any such amounts except as specifically
contemplated by this Agreement.
2. CONSULTING SERVICES AND COMPENSATION.
2.1 CONSULTING SERVICES. Effective on the Termination Date, and
for a period of three years thereafter, Xxxxxx shall serve as a consultant of
the Company and shall provide such consulting services as may be reasonably
be requested by the Chief Executive Officer of the Company from time to time;
provided that unless otherwise agreed by the parties hereto, Xxxxxx shall not
be required to travel or provide services at any location other than from
Xxxxxx'x home or, at the reasonable request of the Company, at the Company's
headquarters in Vancouver, Washington. The relationship of Xxxxxx to the
Company following the Termination Date shall be that of an independent
contractor. The Company shall pay Xxxxxx consulting fees hereunder directly
and without payroll deductions of any kind whatsoever. Nothing contained
herein shall be construed to create the relationship between the Company and
Xxxxxx of employer and employee for any period subsequent to the Termination
Date.
2.2 PAYMENT OF TAXES. Xxxxxx, at his sole cost and expense, shall
be fully and solely liable and responsible to report his income and expenses
and to pay and withhold any and all payroll, withholding, Social Security or
other taxes on any compensation or other payments made pursuant to the terms
of this Agreement (collectively, "Taxes") to the extent required by
applicable law. It is understood and agreed that, since following the
Termination Date, Xxxxxx shall not be an employee of the Company, the Company
shall not withhold any taxes from amounts paid to Xxxxxx. It is also
understood and agreed that, except as specifically provided for in this
Agreement, Xxxxxx shall not be eligible to participate in any benefits or
programs sponsored or financed by the Company for its employees, including,
but not limited to, any insurance, workers' compensation, retirement,
vacation, sick, or holiday programs and benefits. Xxxxxx assumes full
responsibility for and agrees to indemnify and hold harmless the Company and
each of its officers, employees, directors, agents, and affiliates from any
claims relating to the failure of Xxxxxx to pay or properly withhold any
Taxes.
2.3 COMPENSATION FOR CONSULTING SERVICES. In consideration of
Xxxxxx'x consulting services, the Company shall make the following payments
to Xxxxxx: (i) a monthly fee of $3,000, payable on or before the first day of
each month commencing August 1, 1998 until January 31, 1999, and (ii) a
monthly fee of $2,000, payable on or before the first day of each month
commencing February 1, 1999 until July 31, 2001.
2.4 ADDITIONAL BENEFITS. In addition to the payments set forth
above, the Company agrees to:
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(i) transfer ownership to Xxxxxx of the Lexus automobile
presently owned by the Company and used by Xxxxxx in consideration for the
payment by Xxxxxx to the Company or its designee of $15,000, which may be
offset against any consulting payments otherwise due or payable to Xxxxxx
pursuant to the terms of this Agreement. The Company shall continue to
provide insurance for such automobile until the current policy for such
automobile expires at which time Xxxxxx shall be required to apply for and
maintain insurance coverage,
(ii) install an ISDN line at Xxxxxx'x home for Internet
connection, but only to the extent that the Company deems the costs of such
installation to be reasonable;
(iii) provide Xxxxxx a PCS Nextel phone for use by Xxxxxx until
the expiration of the contract period on such phone (October 31, 1998). All
non-business related telephone calls from such telephone shall be borne by
Xxxxxx; and
(iv) pay all premiums necessary to continue Xxxxxx'x health
insurance coverage under COBRA for the maximum period permitted by COBRA and
other applicable laws.
2.5 EXPENSES. Other than long distance phone charges that are
made from Xxxxxx'x home and are reasonably related to the provision of
services by Xxxxxx pursuant to this Agreement, any and all expenses to be
incurred by Xxxxxx in connection with his consulting services shall be
subject to the prior written approval of the Company. Reimbursement of such
expenses shall be made in accordance with the Company's ordinary expense
reimbursement policies, including the requirement that Xxxxxx submit
appropriate receipts or other documentation evidencing any reimbursable
expenses.
2.6 COMPLIANCE WITH AGREEMENT. Xxxxxx acknowledges and agrees
that all payments and other benefits provided to him under this Agreement are
contingent upon his complete compliance with all of the terms and conditions
of this Agreement.
3. RETURN OF COMPANY PROPERTY. Xxxxxx warrants and represents that he
has or will, within five (5) business days of the Termination Date, return to
the Company all property of the Company and/or its Subsidiaries in the
possession, custody and/or control of Xxxxxx, his spouse or any affiliate(s)
thereof. Such Company property shall include any written records or computer
files containing Confidential Information, as such term is defined in Section
6.2 of this Agreement.
4. RELEASE OF CLAIMS BY XXXXXX.
4.1 RELEASE. As a material inducement to the Company to enter
into this Agreement, Xxxxxx does hereby covenant not to xxx and fully and
forever waives, releases, and discharges, on his own behalf and on behalf of
any dependents, heirs, affiliates, successors and assigns, the Companies and
any entity or individual affiliated with the organization,
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including, without limitation, any of its attorneys, accountants,
predecessors, successors, agents, directors, officers and employees ("COMPANY
RELEASED PARTIES") from all rights, claims, actions and suits of all kinds
and descriptions that Xxxxxx may have against the Company Released Parties
including, but not limited to, claims, actions, suits or charges arising out
of his employment with the Company and/or his resignation or termination
therefrom, including, but not limited to any claim that the Company
discriminated against Xxxxxx on the basis of his race, sex, religion,
national origin, handicap, ancestry or age, that the Company violated any
promise or agreement either express or implied with Xxxxxx, or that the
Company has terminated him for any illegal reason or in an illegal fashion,
including specifically without limiting the generality of the foregoing any
claim under the Employee Retirement Income Security Act, Title VII of the
Civil Rights Act of 1964, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, or any claim for employment discrimination,
defamation, liable, interference with contract, business relationships, or
prospective economic advantage, emotional distress, wrongful termination,
wages, severance pay, deferred compensation, stock options, bonus, sick
leave, holiday pay, vacation pay, life insurance, health and medical
insurance, or any other fringe benefit or commissions.
4.2 NO PRIOR ASSIGNMENT. Xxxxxx represents and warrants that he
has not heretofore assigned, transferred, or granted, or purported to assign,
transfer or grant, any of the claims, demands, and cause or causes of action
released pursuant to this Agreement. Xxxxxx represents that he is the owner
of the claims, demands and cause or causes of action that he is releasing,
and shall indemnify, defend, and hold the Company Released Parties free and
harmless from and against all claims, demands, and cause or causes of action
made or asserted by any other person, firm or entity purporting to be the
owner of any claims, demands, and cause or causes of action so released.
5. NO ADMISSION. The Company and Xxxxxx understand and agree that
neither this Agreement nor the consideration referenced above is to be
construed as an admission on the part of the Company Released Parties, or any
of them, of any liability whatsoever.
6. CONFIDENTIALITY AND NON-COMPETITION COVENANTS.
6.1 NON-COMPETITION. For a period of three (3) years following
the Termination Date, Xxxxxx agrees not to compete with the business of the
Company. The phrase "compete with the business of the Company" shall be
deemed to include engaging or being interested, directly or indirectly, as an
owner, employee, director, officer, general partner, member, consultant,
through stock ownership, investment of capital, or rendering of services,
either alone or in association with others, in the ownership, operation,
management or supervision of any type of business or enterprise that designs,
develops, or sells software solutions for or to, or provides consulting
services relating to the design, development or sale of software solutions
for or to, the network marketing or direct sales industry. The foregoing
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shall not prevent Xxxxxx from owning up to 5% of the outstanding securities
of a publicly held corporation which may compete with the business of the
Company.
6.2 CONFIDENTIALITY.
(A) CONFIDENTIAL INFORMATION. The term "Confidential
Information" as used in this Agreement shall include all ideas, materials,
information, data, records, technology, software, operating methods or
systems or plans developed, used or employed by the Company its customers or
suppliers other than information which has properly and lawfully become
generally known to the public other than as a result of the act or omission
of Xxxxxx or his representatives or agents. "Confidential Information" also
includes, but is not limited to, all information regarding the financial
affairs of the Company, or their customers or suppliers, accounts, customer
or supplier lists, marketing plans, business or acquisition strategies,
development plans, software code or design, pricing, products, properties,
processes, rate structures, services, employee names, addresses, employment
histories, or compensation policies.
(B) IMPORTANCE OF CONFIDENTIAL INFORMATION. Xxxxxx
acknowledges and agrees that the Company's Confidential Information is a
valuable, special and unique asset of the Company which is extremely
important in a highly competitive business such as software development.
Xxxxxx acknowledges that the disclosure of any Confidential Information may
cause substantial injury and loss to the Company. Xxxxxx acknowledges that
the Company retains a proprietary interest in its Confidential Information
that persists beyond the termination of Xxxxxx'x employment by the Company.
Xxxxxx further acknowledges that the preservation and protection of the
Confidential Information is an essential part of Xxxxxx'x employment by and
business relationship with the Company and that Xxxxxx has a duty of fidelity
and trust to the Company in handling the Confidential Information.
(C) NON-DISCLOSURE OR USE. Xxxxxx shall not for a period of
three (3) years following the Termination Date, without the prior written
consent of the Company in each instance or as otherwise may be required by
law or legal process, disclose to anyone any Confidential Information of the
Company, or utilize such Confidential Information for Xxxxxx'x own benefit,
or for the benefit of any third party.
6.3 NON-SOLICITATION. Xxxxxx agrees that it is reasonable and
necessary for the protection of the goodwill and business of the Companies
that Xxxxxx make the covenants contained herein and that the Company is
relying upon and is induced by the agreements made by Xxxxxx in this
paragraph. Accordingly, Xxxxxx agrees that for a period of three (3) years
following the Termination Date, Xxxxxx shall not, directly or indirectly (i)
attempt in any manner to persuade any third party to cease to do business, or
to reduce the amount of business which any such party customarily has done or
contemplates doing, with any of the Companies, whether or not the
relationship was originally established in whole or in part through Xxxxxx'x
efforts; or (ii) on Xxxxxx'x own behalf or otherwise, hire, solicit, seek to
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hire, or offer employment to any person who is, during any such time period,
an Xxxxxx of or independent contractor with the Company, or in any other
manner attempt, directly or indirectly, to influence, induce or encourage any
such person to leave the employ of, or terminate or diminish such person's
business relationship with, any of the Companies.
6.4 CONSIDERATION FOR COVENANTS. In consideration of the
covenants of Xxxxxx set forth in this Section 6, the Company agrees to make
the following payments to Xxxxxx which shall be in addition to any payments
required pursuant to Section 2 of this Agreement: (i) a lump sum payment of
$30,000 on the date of this Agreement, (ii) a lump sum payment of $50,000
within three business days following completion of an initial public offering
by the Company, (iii) a monthly fee of $9,000, payable on or before the first
day of each month commencing August 1, 1998 until January 31, 1999, (iv) a
monthly fee of $6,000, payable on or before the first day of each month
commencing February 1, 1999 until January 31, 2000, (v) a monthly fee of
$2,000, payable on or before the first day of each month commencing February
1, 2000 until July 31, 2001, and (vi) a lump sum payment of $75,000 on or
before July 31, 2001.
7. MATERIAL BREACH. In the event any party breaches any of the
provisions, covenants or promises set forth in Sections 4, 5 and 6 or other
provisions of this Agreement, the injured party will be entitled, in addition
to damages, to injunctive relief from a court of competent jurisdiction,
enjoining the party which committed the breach, or any of them, their agents,
attorneys, and all others acting on his or its behalf from any further
disclosure or dissemination of information or any activity in breach of
Sections 4, 5 and 6 of this Agreement.
8. COSTS. Each party shall bear her or its own costs and attorneys'
fees in connection with the negotiation and preparation of this Agreement.
9. ENTIRE AGREEMENT. This Agreement contains the sole and entire
agreement and understanding of the parties with respect to the entire subject
matter hereof, and any and all prior discussions, negotiations, commitments
or understandings related thereto, if any are hereby merged herein and
therein. No representations, oral or otherwise, express or implied, other
than those specifically referred to in this Agreement have been made by any
party hereto. No other agreements not specifically contained or referenced
herein, oral or otherwise, shall be deemed to exist or to bind any of the
parties hereto.
10. WAIVER, MODIFICATION AND AMENDMENT. No provision hereof may be
waived unless in writing signed by all parties hereto. Waiver of any one
provision herein shall not be deemed to be a waiver of any provision herein.
This Agreement may be amended or modified only by a written agreement
executed by all of the parties hereto.
11. BINDING ON PARTIES. This Agreement, and all the terms and
provisions hereof, shall be binding on the parties and their respective
heirs, legal representatives, successors and assigns, and shall inure to the
benefit of the parties and their respective heirs,
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legal representatives, successors and assigns. The parties shall defend,
indemnify and hold the other parties harmless from any claim or action
brought by any third party related to this Agreement or any claim or matter
released herein.
12. VOLUNTARY AGREEMENT. This Agreement in all respects has been
voluntarily and knowingly executed by the parties after each party has had
the opportunity to review it with their respective legal counsel. All
parties have participated in the drafting of this Agreement. Accordingly, no
rule of construction shall apply against any party or in favor of any party,
and any uncertainty or ambiguity shall not be interpreted against any party
and in favor of another.
13. ACKNOWLEDGMENT. Xxxxxx acknowledges that he has been given a
reasonable period of time to study this Agreement before signing it. Xxxxxx
certifies that he has fully read, has received an explanation of, and
completely understands the terms, nature and effect of this Agreement. Xxxxxx
further acknowledges that he is executing this Agreement freely, knowingly
and voluntarily and that his execution of this Agreement is not the result of
any fraud, duress, mistake or undue influence whatsoever. In executing this
Agreement, Xxxxxx does not rely on any inducements, promises or
representations by the Companies or any person other than the terms and
conditions of this Agreement.
14. NO RELIANCE. The parties acknowledge that they have read this
Agreement, that they are relying solely upon the contents of this Agreement,
and are not relying upon any other representations, warranties, or
inducements whatsoever as an inducement to enter into this Agreement, other
than those referenced herein, and acknowledge that no representations,
warranties, or covenants have been made which are not referenced in this
Agreement.
15. NO WAIVER. Failure to insist on compliance with any term,
covenant, or condition contained in this Agreement shall not be deemed a
waiver of that term, covenant, or condition, nor shall any waiver or
relinquishment of any right or power contained in this Agreement at any one
time or more times be deemed a waiver or relinquishment of any right or power
at any other time or times.
16. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Washington.
17. ARBITRATION AND WAIVER OF JURY TRIAL. Any and all disputes which
may arise from or relate to this Agreement or the employment of Xxxxxx or the
termination of such employment shall be subject to final and binding
arbitration to be held in Vancouver, Washington. All such disputes shall be
arbitrated under the auspices and rules of the American Arbitration
Association pursuant to its Expedited Labor Arbitration Rules in effect at
the time the claim or dispute arises. There shall be one arbitrator, who
shall be a retired superior court or federal court judge. The arbitrator
shall have the authority only to enforce the legal and contractual rights of
the parties and shall not add to, modify, disregard or refuse
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to enforce any contractual provision. The arbitrator shall have no right,
power or jurisdiction to award Xxxxxx any punitive or exemplary damages of
any kind. XXXXXX AND THE COMPANY RECOGNIZE AND AGREE THAT BY ENTERING INTO
THIS AGREEMENT, THEY ARE WAIVING ANY AND ALL RIGHTS TO A TRIAL BY JURY.
Notwithstanding any of the foregoing, this provision for arbitration shall
not prevent the Companies, or any of them, from seeking injunctive relief for
violation of the provisions of Section 4, 5 and 6 hereof. The prevailing
party in any arbitration or in any action or proceeding involving injunctive
relief shall be entitled to recover her or its reasonable attorneys' fees and
costs.
18. SEVERABILITY. Should any portion, word, clause, phrase, sentence
or paragraph of this Agreement be declared void or unenforceable, such
portion shall be considered independent of and severable from the remainder,
the validity of which shall remain unaffected.
19. TITLES AND CAPTIONS. Paragraph titles or captions contained in
this Agreement are inserted only as a matter of convenience and for reference
and in no way define, limit, extend or describe the scope of this Agreement
or the intent of any provisions hereof.
20. COUNTERPARTS. This Agreement may be executed in counterparts, and
when each party has signed and delivered at least one such counterpart, each
counterpart shall be deemed an original, and, when taken together with the
other signed counterparts, shall constitute one agreement, which shall be
binding and effective as to the parties. This Agreement shall be effective
on the date last executed by one of the parties hereto if so executed in
counterparts.
21. FURTHER ASSURANCES; COOPERATION IN LITIGATION. Xxxxxx hereby
agrees that from time to time at the reasonable request of the Company, and
without further consideration, Xxxxxx will (i) execute and deliver such
additional instruments and take such other actions as the Company may
reasonably require to carry out the terms of this Agreement, (ii) cooperate
with the Company in connection with preparing for, defending, and testifying
in connection with any pending or future litigation or other proceeding or
dispute between any of the Companies and any third party, and (iii) cooperate
with the Company in connection with any financial audit of the Companies.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first set forth above.
"COMPANY"
JENKON INTERNATIONAL, INC.
By:
-------------------------------------
Xxxxx Xxxxxxx, Chief Executive Officer
"XXXXXX"
----------------------------------------
XXX XXXXXX
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