EXHIBIT 10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made
and entered into as of March 1, 2001, by and between XXX
X. XXXXXXXX Xxxxxx X. Xxxx ("Employee") an individual
resident of the State of California, and CHAPEAU, INC., a
Utah corporation (the "Employer") located at 0000 Xxxxxxxx
Xxxx, Xxxxxxx Xxx, XX, based on the following:
Premises
Employee wishes to be employed by the Company and the
Company desires to provide employment to Employee, all on
the terms and conditions set forth in this Agreement.
Agreement
NOW, THEREFORE, based on the foregoing premises,
which are incorporated herein by this reference, and for
and in consideration of the mutual covenants and
agreements hereinafter set forth and the mutual benefit to
the parties to be derived from herein, it is hereby agreed
as follows:
1. Employment and Term.
(a) The Company hereby employs Employee and Employee
hereby accepts employment upon the terms and conditions
set forth herein. The initial term of Employee's
employment shall be for a three (3) year period beginning
on the date of this Agreement. After the first
anniversary, this Agreement shall be automatically renewed
so that it always has an unexpired term of one (1) year,
unless action is taken by one of the parties to terminate
this Agreement in accordance with the other provisions of
this Agreement. The initial term, plus the automatic
extension, is hereinafter referred to as the "Employment
Period." At any time during the Employment Period, the
Company may terminate the automatic renewal feature of
this Agreement by providing written notice to Employee,
and Employee may terminate the automatic renewal feature
of this Agreement by providing written notice to the
Company
(b) During the Employment Period, Employee will
serve as the Chief Executive Officer of the Company.
Employee also agrees to serve in such comparable positions
for the Company and its subsidiaries as shall, from time
to time, be determined by the Company's board of directors
or authorized officers. Employee agrees to perform such
duties as are appropriate for an employee of the Company
and as may be assigned to him from time to time by the
Company. The job responsibilities of Employee shall not be
materially changed without the prior written mutual
consent of the Company and Employee. Employee shall comply
with the reasonable employee policies of the Company.
2. Performance of Services.
(a) During the Employment Period, Employee agrees to
perform faithfully the duties assigned to him by the
Company, to devote his full and undivided business time,
attention, and services to the business of the Company and
not to engage in any other substantial business
activities; provided, however, that nothing herein shall
restrict Employee from conducting other business that does
not conflict with his obligations under the terms of this
Agreement.
(b) All duties hereunder shall be rendered in Placer
County, California, and Washoe County, Nevada, on a
temporary basis, at such other places as the interests,
needs, business, and opportunities of the Company shall
require; provided, however, that (i) Company shall pay all
reasonable expenses incurred by Employee as a result of
such temporary duties, and (ii) Employee shall not be
required to relocate his residence without the prior
written mutual consent of the Company and Employee.
(c) Employee shall observe and comply with the
commercially reasonable rules and regulations of the
Company respecting its business and shall carry out and
perform such commercially reasonable orders, directions,
and policies of the Company as they may be from time to
time communicated to Employee either orally or in writing.
Employee shall give precedence to all applicable rules,
regulations, and laws governing the business of the
Company known to Employee.
3. Exclusivity of Services and Nondisclosure of
Confidential Information.
(a) Employee agrees that for a period ending one (1)
year after the termination of the Employment Period, or
for a period ending two (2) years after the termination of
the Employment Period if the Company continues to pay
Employee's salary as of termination during said period of
one (1) year, he will not:
(i) engage in any activity competitive with the
business of the Company or any of its affiliates, directly
or indirectly, in the market defined in subparagraph 3(c),
whether as employer, proprietary owner, partner,
stockholder (other than the holder of less than five
percent (5%) of the stock of an entity, the securities of
which are traded on a national securities exchange or in
the over-the-counter market), director, officer, employee,
consultant, or agent;
(ii) solicit, in competition with the Company, any
person who is a customer of the business conducted by the
Company at the date hereof or a customer of the business
conducted by the Company at any time during the Employment
Period; and
(iii) induce or attempt to persuade any employee
of the Company to terminate his or her employment
relationship in order to enter into employment with any
party in competition with the Company.
(b) Employee further agrees that he will not, at any
time during the Employment Period or at any time after the
termination of this Agreement, irrespective of the time,
manner, or cause of termination, use in a competitive way
against the Company during the non-compete period of
subparagraph 3(a), disclose, copy, or assist any other
person or firm in the use, disclosure, or copying of any
trade secrets or other confidential proprietary
information of the Company, except to the extent
authorized in writing by the Company. Upon termination of
his employment hereunder, Employee will surrender to the
Company all records and other documents obtained by him or
entrusted to him during the course of his employment by
the Company (together with all copies thereof); provided,
however, that Employee may retain copies of such documents
as are necessary for Employee's personal records for
income tax purposes. For purposes of this subparagraph
3(b), proprietary information about the business of the
Company shall be treated as confidential until it has been
published or is generally or publicly known outside the
Company or has been recognized as standard practice
outside the Company or has been required by law to be
disclosed or has been lawfully received by Employee from a
third party not obligated to keep such information
confidential. The provisions of this paragraph 3(b) shall
remain in effect for a period of three (3) years
subsequent to the termination of the Employment Period.
(c) The following provisions shall apply to the
covenants of Employee contained in this section 3:
(i) The covenants contained in clauses (i) and (ii)
of subparagraph 3(a) shall apply to those markets in which
the Company is doing business at the termination of the
Employment Period and those markets in which the Company
has publicly issued written plans to enter prior to the
termination of the Employment Period.
(ii) Employee agrees that a breach or threatened
breach on his part of any covenant contained in this
section 3 will cause such damage to the Company as will be
irreparable. Therefore, without limiting the right of the
Company to pursue all other legal and equitable remedies
available for violation by Employee of the covenants
contained in this section 3, it is expressly agreed that
remedies other than injunctive relief cannot fully
compensate the Company for such a violation and that the
Company shall be entitled to injunctive relief to prevent
any such violation or continuing violation thereof.
(iii) It is the intent and understanding of each
party hereto that if, in any action before any court or
agency legally empowered to enforce the covenants
contained in this section 3, any term, restriction,
covenant, or promise contained therein is found to be
unreasonable and for that reason unenforceable, then such
term, restriction, covenant, or promise shall be deemed
modified to the extent necessary to make it enforceable by
such court or agency.
4. Business Ideas.
(a) Employee acknowledges that the Company will own
all rights in all "Business Ideas" (as hereinafter
defined) which are originated or developed by Employee,
either alone or with employees or consultants of the
Company, during the Employment Period.
(b) Employee agrees that, during the Employment
Period, he will:
(i) assign to the Company all Business Ideas and
promptly execute all documents which the Company may
reasonably require to protect its patent, copyright, and
other rights to such Business Ideas throughout the world;
and
(ii) promptly disclose to the Company all information
concerning all material Business Ideas originated by
Employee or any employee of the Company, which come to his
attention and which concern the business of the Company.
(c) For purposes of this section 4, "Business Ideas"
shall mean all ideas, whether or not patentable, which are
originated or developed by Employee in connection with his
employment by the Company and which relate to the business
of the Company.
5. Compensation and Benefits. For all services
rendered by Employee pursuant to this Agreement, the
Company shall compensate Employee as follows:
(a) As annual compensation for Employee's services
hereunder, in accordance with its normal and commercially
reasonable payroll practices, the Company agrees to pay
Employee bi-monthly during the Employment Period an
initial base salary of $175,000 per annum payable in
arrears on the 15th and last day of each month at a rate
of $14,583.33 per month.
(b) Employee shall be entitled to participate in any
bonus program or other incentive compensation or
retirement programs established by the Company. The
amount of any bonus shall be determined in the sole
discretion of the board of directors or compensation
committee, taking into consideration the growth and
profitability of the Company, the contribution of Employee
to the business and operations of the Company, the
performance of Employee measured against budgets and
performance goals established by the Company, and other
factors deemed relevant.
(c) Employee shall be entitled to vacation and sick
leave in accordance with the general policy of the Company
for executive level employees, but in any case not less
than eight (8) paid Federal Holidays, twelve fifteen (15)
paid vacation days per annum, and up to five (5) personal
days for use as sick days or for other personal
obligations per annum. Vacations shall be taken by
Employee at a time and with starting and ending dates
mutually convenient to the Company and Employee. Any
Federal Holiday which Employee does not take shall be
converted into an additional vacation day. Vacation days
or portions of vacation days not used in one employment
year shall carry over to the succeeding employment year,
but shall thereafter expire if not used within such
succeeding year.
(d) The Company shall promptly reimburse Employee
for all proper expenses incurred by him on behalf of the
Company in the performance of his duties hereunder in
accordance with the commercially reasonable policies and
procedures established by the Company prior to Employee
incurring said expenses. In any event, the Employee shall
be authorized and as such, limited to incur or expense a
maximum of $5,000.00 for any single item or expenditure.
Any expenditure exceeding $5,000.00 shall require the
approval of the Board of Directors or Chief Financial
Officer of the Employer.
(e) The Company shall provide Employee with health
and medical insurance policies, including dental, vision,
short term disability, and long term disability, and other
benefits on no worse terms than those offered to any other
person by the Company. The Company shall additionally
provide to Employee incentive, retirement, pension, profit
sharing, stock option, or other employee benefit plans,
which are consistent with and similar to such plans
provided by the Company to its directors, officers, and
executive level employees generally.
(f) The Company shall withhold from Employee's
compensation hereunder all proper federal and state
payroll and income taxes on compensation paid to Employee
and shall in every pay period provide an accounting to
Employee for such amounts withheld. The Company
acknowledges that Employee is a resident alien and a
resident of California, and the Company will comply with
all federal and state rules and regulations concerning
employees with this status.
(g) To the extent the Company offers benefits to the
spouses of employees, the Company shall offer the same
benefits to the Employee.
(h) Employee shall receive options to purchase EIGHT
HUNDRED THOUSAND (800,000) shares of the Company's common
stock, of which options to purchase 266,666 shares at a
strike price of $.50 per shares shall vest immediately
upon execution hereof. The option to purchase the
additional 533,334 shares, of which one-half (1/2) shall
be at a strike price of $1.50 per share and one-half (1/2)
shall be at a strike price of $2.50 per share, shall be
exercisable and vest monthly over a three-year period
coinciding with the Employer's annual operating year.
Such incentive stock options shall be exercisable for
three (3) years from the date of issuance, and one hundred
percent (100%) of unvested options shall vest immediately
upon the consummation of a Change of Control, as such term
is defined in the immediately following sentence. As used
in this Agreement, the term "Change of Control" shall
mean (i) any transaction or series of transactions in
which any person or group (within the meaning of Rule 13d-
5 under the Exchange Act and Sections 13(d) and 14(d) of
the Exchange Act) becomes the direct or indirect
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), by way of a stock issuance, tender offer,
merger, consolidation, other business combination or
otherwise, of greater than 50% of the total voting power
entitled to vote in the election of directors of Company
(including any transaction in which Company becomes a
wholly owned or majority owned subsidiary of another
corporation), (ii) any merger or consolidation or
reorganization in which Company does not survive, (iii)
any merger or consolidation in which Company survives,
but the shares of Company's Common Stock outstanding
immediately prior to such merger or consolidation
represent 50% or less of the voting power of Company after
such merger or consolidation, and (iv) any transaction in
which more than 50% of Company's assets are sold.
(i) In the event that any payment or benefit
received or to be received by Employee in connection with
a Change of Control, whether payable pursuant to the terms
of this Agreement or any other plan, arrangement or
agreement (collectively, the "Total Payments") is deemed
to be an "Excess Parachute Payment" (in whole or in part)
to Employee as a result of Section 280G and/or 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), as
in effect at such time, no change shall be made to the
Total Payments to be made in connection with the Change of
Control, except that, in addition to all other amounts to
be paid to Employee by Company hereunder, Company shall,
within thirty (30) days of the date on which any Excess
Parachute Payment is made, pay to Employee, in addition to
any other payment, coverage or benefit due and owing
hereunder, an amount such that Employee's net after-tax
position will be identical to that which would have
obtained had Sections 280G and 4999 not been part of the
Code. For purposes of implementing this Section, no
portion, if any, of the Total Payments, the receipt or
enjoyment of which Employee shall have effectively waived
in writing prior to the date of payment of the Total
Payments, shall be taken into account..
6. Termination of Agreement.
(a) Termination by the Company for Cause. The
Company shall have the right, without further obligation
to Employee other than for compensation previously
accrued, to terminate this Agreement for cause ("Cause")
by showing that (i) Employee has materially breached the
terms hereof, but only if the Employee fails to reasonably
cure such breach within twenty (20) days following the
receipt of notice by Company setting forth the conditions
giving rise to such breach; (ii) Employee, in the
reasonable determination of the board of directors of the
Company by majority vote at a duly called meeting of the
board at which Employee shall have a right to be present
and represented by legal counsel and at least ten (10)
days prior to which Employee shall have received notice of
the alleged basis for such proposed termination, has
materially and consistently failed to perform Employee's
duties, been materially and consistently negligent in the
performance of Employee's duties, or has engaged in
material willful or gross misconduct in the performance of
his duties, but only if the Employee fails to cure such
breach within twenty (20) days following the receipt of
notice by Company setting forth the conditions giving rise
to such breach; or (iii) Employee has been convicted of
fraud, embezzlement, theft, or dishonesty or other
criminal conduct against the Company.
(b) Termination upon Death or Disability of
Employee. This Agreement shall terminate immediately upon
Employee's death. This Agreement shall also terminate on
the continued disability of Employee for a consecutive
period of ninety (90) days. For purposes of this
paragraph "disability" shall be defined as the inability
of Employee to substantially perform his duties under this
Agreement after the Company has made commercially
reasonable efforts to accommodate such disabilities or
offered Employee suitable alternative employment
(c) Termination by Employee for Good Reason.
Employee shall have the right without further obligation
to the Company to terminate this Agreement for good reason
("Good Reason") in the event of (i) the Company's breach
of any covenant or term of this Agreement, (ii) a
determination by Employee that the Company is engaged in
any activity which Employee reasonably believes, upon the
advice of counsel, constitutes a violation of applicable
federal or state law, or (iii) the material alteration or
restriction of Employee's authority, duties and
responsibilities in a manner inconsistent with Employee's
position and status with the Company, but only if the
Company fails to cure such breach within twenty (20) days
following the receipt of notice by Employee setting forth
the conditions giving rise to such breach.
(d) Voluntary Termination by Employee. Employee may
voluntarily resign his employment at any time by giving 30
days written advance notice to Company.
(e) Termination Payments.
(i) Termination for Any Reason. In the event that
Employee is terminated for any reason, the Company shall
deliver to Employee within thirty (30) days following the
effective date of such termination all amounts accrued
through the date of termination, any unreimbursed expenses
incurred pursuant to this Agreement, any other benefits
specifically provided to Employee under any benefit plan,
and any other benefits called for under this Agreement or
by operation of law.
(ii) Termination by the Company for Other Than Cause
or Voluntary Termination by Employee. In the event that
Employee is terminated other than by the Company for Cause
or voluntary termination, the Company shall within thirty
(30) days following the effective date of such termination
pay to Employee the annual amount of Employee's base
salary in the event of termination prior to the first
anniversary of this Agreement, or one half of the annual
amount of Employee's base salary in the event of
termination thereafter.
(f) Options Held by Employee. Any options held by
Employee at the time of termination of this Agreement
shall be treated as follows:
(i) In the event of voluntary termination or
termination by the Company for Cause, all unvested options
shall immediately terminate and be unexercisable and all
vested options may be exercised for a period of six-months
or, if shorter, the unexpired term of the options;
(ii) In the event of termination for any other
reason, all unvested options shall vest immediately upon
termination and shall remain exercisable for the unexpired
term of the options.
(iii) Notwithstanding the above, any initial
options granted to Employee at the commencement of his
employment with the Company shall, in the event of
termination for reasons other than Cause or voluntary
resignation, vest immediately upon termination and shall
remain exercisable for the unexpired term of the option.
However, restricted stock shall be issued in connection
with any such exercise restricting the sale of stock until
one year after the date of this Agreement.
(g) Exit Interview. To insure a clear understanding
of this Agreement, including but not limited to the
protection of the business interests of the Company,
Employee agrees, upon termination of this Agreement for
any reason, or the expiration of the Employment Period, at
no additional expense to Employee, to engage in an exit
interview with the Company at a time and place designated
by the Company.
7. Indemnification. The Company shall indemnify
Employee and hold Employee harmless from liability for
acts or decisions made by Employee while performing
services for the Company to the greatest extent permitted
by applicable law. The Company shall use its best efforts
to obtain coverage for Employee under any insurance policy
now in force or hereafter obtained during the term of this
Agreement and for six (6) years thereafter insuring
officers and directors of the Company against such
liability. For the term of this Agreement and for six (6)
years thereafter, the Company shall (i) provide in its
charter and bylaws for mandatory indemnification of
directors and officers to the maximum extent permitted by
law, (ii) provide in its charter and bylaws that the
personal liability of directors and officers for monetary
damages shall be limited to the maximum extent permitted
by law, and (iii) carry directors and officer liability
insurance in amounts and with terms appropriate to the
Company and its business as determined in the reasonable
judgment of the board of directors. Upon request by
Employee the Company shall advance within 10 business days
of such request any and all expenses, including reasonable
attorneys' fees and the cost of any investigation and
preparation incurred in connection with any matter for
which Employee is or may be entitled to indemnification
hereunder. Company shall also indemnify Employee from and
against any and all Liabilities and Costs incurred in
connection with any claim or action brought to enforce
Employee's rights under this Section 7 or under applicable
law or Company's charter or bylaws now or hereafter in
effect relating to indemnification, or for recovery under
directors' and officers' liability insurance policies
maintained by Company, such Liabilities and Costs to be
reimbursed to the Company within ninety days in the event
Employee is not successful in such attempt to enforce
asserted rights. The Company's reimbursement and
indemnity obligations shall be in addition to any
liability the Company may otherwise have at law or under
any other agreement. Employee agrees to indemnify and to
hold the Company harmless from any and all damages,
losses, claims, liabilities, costs, or expenses arising
from Employee's acts or omissions in violation of his
duties under this Agreement which constitute fraud, gross
negligence, material willful misconduct, or material
willful and knowing violations of the terms of this
Agreement.
8. Notice. Any notice or request required or
permitted to be given hereunder shall be sufficient if in
writing and delivered personally, sent by facsimile
transmission, or sent by registered mail, return receipt
requested, to the addresses hereinabove set forth or to
any other address designated by either of the parties
hereto by notice similarly given. Such notice shall be
deemed to have been given upon such personal delivery,
facsimile transmission, or mailing, as the case may be, to
the addresses set forth below:
If to Employee, to: Xxx X. Xxxxxxxx
0000 Xxxxxxxx Xxxx
Xxxxxxx Xxx, XX 00000
Fax: (000) 000-0000
Confirmation: (916) 780-
6764
If to the Company, to: Board of
Directors______________________
Chapeau,
Inc.________________________
0000 Xxxxxxxx Xxxx
XxxxxxxXxx,XX
95746__________________
Fax: (000) 000-0000____
Confirmation: (916) 780-
6764_____
With a copy to: Xxxxx X. Xxxxxxxxxxx
Xxxxxxxxxxx and Xxxxxx
0000 Xxxxxxx Xxxx. #000
Xxxxxxxxx, XX 00000
________________________________ Fax: (916) 786-
9977____
Confirmation: (916) 786-
9900_____
9. Assignment. Except to any successor or assignee
of the Company as provided in subparagraph 6(c), neither
this Agreement nor any rights or benefits hereunder may be
assigned by either party hereto without the prior written
consent of the other party.
10. Arbitration. In the event of any dispute under
the terms of this Agreement, the parties shall use their
good faith efforts to resolve such dispute. In the event
that the parties cannot resolve the dispute, it shall be
submitted to binding arbitration in Reno, Nevada under the
rules of the American Arbitration Association.
11. Validity of Provisions and Severability. If any
provision of this Agreement is, or becomes, or is deemed
invalid, illegal, or unenforceable in any jurisdiction,
such provision shall be deemed amended to conform to the
applicable jurisdiction, or if it cannot be so amended
without materially altering the intention of the parties,
it will be stricken. However, the validity, legality, and
enforceability of any such provisions shall not in any way
be affected or impaired thereby in any other jurisdiction
and the remainder of this Agreement shall remain in full
force and effect.
12. Entire Agreement. This Agreement constitutes
the entire agreement and understanding between the parties
pertaining to the subject matter of this Agreement. This
Agreement supersedes all prior agreements, if any, any
understandings, negotiations, and discussions, whether
oral or written. No supplement, modification, waiver, or
termination of this Agreement shall be binding unless
executed in writing by the party to be bound thereby.
13. Governing Law. This Agreement shall be governed
by and construed and interpreted in accordance with the
laws of the state of California.
14. Attorneys' Fees. In the event that either party
institutes any action or suit to enforce this Agreement or
to secure relief from any default hereunder or breach
hereof, the breaching party shall reimburse the non-
breaching party for all costs, including reasonable
attorneys' fees, incurred in connection therewith and in
enforcing or collecting any judgment rendered therein.
15. Costs. Each of the parties shall bear its
respective costs associated with this Agreement and the
transactions contemplated hereby, including legal fees,
and other costs and expenses.
16. Amendment or Waiver. Every right and remedy
provided herein shall be cumulative with every other right
and remedy, whether conferred herein, at law, or in
equity, and may be enforced concurrently herewith, and no
waiver by any party of the performance of any obligation
by the other shall be construed as a waiver of the same or
any other default then, theretofore, or thereafter
occurring or existing. This Agreement shall only be
amended by a writing signed by all parties hereto, with
respect to any of the terms contained herein, and any term
or condition of this Agreement may be waived, or the time
for performance thereof may be extended, by a writing
signed by the party or parties for whose benefit the
Provision is intended.
17. Successors and Assigns. This Agreement shall
inure to the benefit of and be binding on the parties and
their successors, assigns, heirs, executors, and
administrators.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be signed by its duly authorized officer and
Employee has signed this Agreement as of the date first
above written.
The Employer:
CHAPEAU, INC.
A Utah corporation
By /s/ Xxx X. Xxxxxxxx
Employee:
/s/ Xxx X. Xxxxxxxx
XXX X. XXXXXXXX
