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Exhibit: 10.3FT
EMPLOYMENT AGREEMENT
THIS AGREEMENT (the "Agreement") effective as of December 31, 1997 is
by and between Futech Educational Products, Inc., an Arizona corporation,
("EMPLOYER"), and Xxxxxxx Xxxxx, an individual ("EMPLOYEE").
A. EMPLOYER is engaged in the business of designing,
manufacturing, distributing and marketing books, greeting cards, electronic
devices and toys.
B. EMPLOYEE has been working for EMPLOYER pursuant to a certain
employment agreement dated August 7, 1996 between EMPLOYEE and EMPLOYER, and the
parties now desire to redefine the nature, terms and conditions of their
employment relationship.
In consideration of the recitals and mutual agreements hereinafter set
forth, the parties agree as follows:
1. Employment. EMPLOYER agrees to continue to employ
EMPLOYEE on a full-time basis, in accordance with the terms and conditions set
forth herein, and EMPLOYEE agrees to accept such continued full-time employment
in accordance with said terms and conditions. EMPLOYEE's title shall be
"President and Chief Executive Officer." EMPLOYEE's title and duties may be
changed from time to time in the discretion of EMPLOYER's Board of Directors
(the "Board"), President or Chief Executive Officer. EMPLOYEE agrees to devote
his full time, skill, knowledge and attention to the business of EMPLOYER and
the performance of his duties under this Agreement.
2. Term. The term of employment under this Agreement
shall commence on December 31, 1997 (the "Effective Date") and shall continue
for a period of five years, unless earlier terminated as set forth in Section 7
below. Thereafter, this Agreement shall automatically renew for additional
one-year periods unless either party gives the other written notice of
non-renewal at least 30 days prior to the expiration of the initial term or any
renewal term.
3. Duties. EMPLOYEE shall be responsible for all of the
duties of a President and Chief Executive Officer, including without limitation:
(a) Develop short and long term strategic
objectives for EMPLOYER with the assistance of the Board;
(b) Pursue and evaluate business opportunities
that may be beneficial to the financial growth and
profitability of EMPLOYER;
(c) Initiate business alliances with industry
leaders as required to attain EMPLOYER's objectives;
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(d) Interface with executive management of
EMPLOYER to assure performance of EMPLOYER's operations are in
accordance with EMPLOYER's established objectives; and
(e) Such other duties as may be determined by
EMPLOYER.
4. Compensation.
(a) Base Salary. EMPLOYER agrees to pay EMPLOYEE
a base salary, before deducting all applicable withholdings,
at the rate of not less than $200,000 per year in the first
year of the Agreement and $350,000 per year in the second year
of the Agreement, which shall be payable in accordance with
EMPLOYER's standard payroll policies, which policies may be
revised from time to time. At the end of the second year of
the Agreement and each year thereafter, EMPLOYEE's base salary
shall be reviewed by the Board and increased by no less than
10%.
(b) Deductions. EMPLOYER shall deduct from the
payments made to EMPLOYEE hereunder any federal, state or
local withholding or other taxes or charges which EMPLOYER is
required to deduct under applicable law, and all amounts
payable to EMPLOYEE under this Agreement are stated before any
such deductions. EMPLOYER shall have the right to rely upon
written opinion of counsel if any questions arise as to any
deductions.
(c) Bonus. From time to time, EMPLOYEE may be
eligible for a bonus at EMPLOYER's sole discretion.
(d) Stock Options. For past and future services
rendered by EMPLOYEE to EMPLOYER, EMPLOYER shall issue to
EMPLOYEE options to purchase 7,000,000 shares of common stock
of EMPLOYER at an exercise price of $0.10 per share, according
to the following vesting schedule:
Vesting Date Number of Options Vested Expiration Date
------------ ------------------------ ---------------
12/31/98 2,000,000 12/31/08
12/31/99 2,000,000 12/31/09
12/31/00 1,000,000 12/31/10
12/31/01 1,000,000 12/31/11
12/31/02 1,000,000 12/31/12
5. Benefits.
(a) Insurance. In addition to the compensation
described above, while EMPLOYEE is employed hereunder,
EMPLOYER shall pay for and provide EMPLOYEE and EMPLOYEE's
dependents with the same amount and type of life,
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health and disability insurance as is provided from time to
time to EMPLOYER's executive employees during the term of this
Agreement.
(b) Expense Reimbursement. In addition to the
compensation and benefits provided above, EMPLOYER shall, upon
receipt of appropriate documentation, reimburse EMPLOYEE each
month for EMPLOYEE's reasonable travel, lodging and other
ordinary and necessary business expenses consistent with
EMPLOYER's policies as in effect from time to time.
(c) Retirement. EMPLOYEE shall be entitled to
participate in any retirement savings or benefits plan offered
by EMPLOYER to its employees, as revised by EMPLOYER from time
to time.
6. Vacation. EMPLOYEE shall be entitled to up to eight
weeks of vacation with full pay per calendar year, in addition to such holidays
as EMPLOYER may approve for its employees.
7. Termination. EMPLOYER may terminate EMPLOYEE's
employment prior to the expiration of the initial term of employment or any
extension thereof, in the manner provided in Section 7(a). Additionally, if
EMPLOYEE's employment is terminated by EMPLOYER without Cause (as defined
below), EMPLOYEE shall be entitled to compensation as provided in Section 7(d).
(a) For Cause. EMPLOYER may terminate this
Agreement for Cause upon a unanimous vote of disinterested
directors of the Board and a subsequent written notice to the
EMPLOYEE stating the facts constituting such Cause, provided
that EMPLOYEE shall have 10 days following such notice to cure
any conduct or act, if curable, alleged to provide grounds for
termination for Cause hereunder. In the event of termination
for Cause, EMPLOYER shall be obligated to pay the EMPLOYEE
only the salary due him through the date of termination
pursuant to Section 4(a). "Cause" shall include material
neglect of duties; wilful failure to abide by instructions or
policies from, or set by, EMPLOYER in good faith; conviction
of a felony or serious misdemeanor offense or pleading guilty
or nolo contendere to same; the commission by EMPLOYEE of an
act of dishonesty or moral turpitude involving EMPLOYER;
EMPLOYEE's material breach of this Agreement; EMPLOYEE's
breach of any other material obligation to EMPLOYER; or upon
the bankruptcy, receivership, dissolution or cessation of
business of EMPLOYER.
(b) Disability. If during the term of this
Agreement, EMPLOYEE fails to perform his duties hereunder
because of physical or mental illness or other incapacity for
30 consecutive days, or for 45 days during any 120-day period,
EMPLOYER shall have the right to terminate this Agreement
without further obligation hereunder, except for any bonus
amount payable in accordance with Section 4(c) and any amounts
payable pursuant to disability or workers'
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compensation insurance plans generally applicable to
EMPLOYER's employees. EMPLOYER shall provide EMPLOYEE with
notice of commencement of the disability period, which period
cannot commence more than 14 days prior to the date of the
notice. If there is any dispute as to whether EMPLOYEE is or
was physically or mentally disabled under this Agreement,
whether his disability has ceased or whether he is able to
resume his duties, such question shall be submitted to a
licensed physician agreed upon by EMPLOYER and EMPLOYEE.
EMPLOYEE shall submit to such examinations and provide
information as such physician may request, and the
determination of such physician as to EMPLOYEE's physical or
mental condition shall be binding and conclusive on the
parties. EMPLOYER agrees to pay the cost of any such
physician's services, tests and examinations.
(c) Death. If the EMPLOYEE dies during the term
of this Agreement, this Agreement shall terminate immediately,
and the EMPLOYEE's legal representatives or estate shall be
entitled to receive the base salary due to EMPLOYEE through
the last day of the calendar month in which EMPLOYEE's death
occurs and any other death benefits generally applicable to
EMPLOYER's employees.
(d) Termination Without Cause; Severance Pay.
EMPLOYER may terminate this Agreement without Cause upon a
unanimous vote of disinterested directors of the Board and a
subsequent written notice to EMPLOYEE. If EMPLOYER terminates
this Agreement before the end of the term of the Agreement for
any reason other than those described in Sections 7(a), 7(b)
or 7(c), EMPLOYER shall pay to EMPLOYEE an amount equal to one
year of EMPLOYEE's base salary, less applicable withholdings
(the "Severance Pay").
(e) Termination by Employee; Severance Pay. If
EMPLOYEE terminates this Agreement prior to the end of the
term hereof, EMPLOYEE shall give written notice to EMPLOYER at
least 30 days prior to termination. EMPLOYEE shall not be
entitled to the Severance Pay if EMPLOYEE terminates this
Agreement for any reason other than EMPLOYER's material breach
thereof, or if EMPLOYEE's employment is terminated for the
reasons described in Sections 7(a), 7(b) Or 7(c).
8. Confidential Information; Exclusivity of EMPLOYEE's
Services.
(a) Confidential Information. EMPLOYEE
acknowledges that EMPLOYEE may receive, or contribute to the
production of, Confidential Information. For purposes of this
Agreement, EMPLOYEE agrees that "Confidential Information"
shall mean information or material proprietary to EMPLOYER or
designated as Confidential Information by EMPLOYER or its
clients or customers and not generally known by non-EMPLOYER
personnel, which EMPLOYEE develops or of, or to, which
EMPLOYEE may obtain knowledge or access through, or as a
result of, EMPLOYEE's relationship with EMPLOYER (including
information conceived, originated, discovered or developed in
whole or in part by EMPLOYEE).
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Confidential Information includes, but is not limited to, the
following types of information and other information of a
similar nature (whether or not reduced to writing) related to
EMPLOYER's business: discoveries, inventions, ideas, concepts,
research, development, processes, procedures, "know-how",
formulae, marketing techniques and materials, marketing and
development plans, business plans, customer names, employee
names and other information related to customers, price lists,
pricing policies, financial information, employee
compensation, and computer programs and systems. Confidential
Information also includes any information described above
which EMPLOYER obtains from another party and which EMPLOYER
treats as proprietary or designates as Confidential
Information, whether or not owned by or developed by EMPLOYER.
EMPLOYEE acknowledges that the Confidential Information
derives independent economic value, actual or potential, from
not being generally known to, and not being readily
ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use. Information
publicly known without breach of this Agreement that is
generally employed by the trade at or after the time EMPLOYEE
first learns of such information, or generic information or
knowledge which EMPLOYEE would have learned in the course of
similar employment or work elsewhere in the trade, shall not
be deemed part of the Confidential Information. EMPLOYEE
further agrees:
i) To furnish EMPLOYER on demand, at
any time during or after employment, a complete list
of the names and addresses of all present, former and
potential customers and other contacts gained while
an EMPLOYEE of EMPLOYER in EMPLOYEE's possession,
whether or not in the possession or within the
knowledge of EMPLOYER.
ii) That all notes, memoranda,
documentation and records in any way incorporating or
reflecting any Confidential Information shall belong
exclusively to EMPLOYER, and EMPLOYEE agrees to turn
over all copies of such materials in EMPLOYEE's
control to EMPLOYER upon request or upon termination
of EMPLOYEE's employment with EMPLOYER.
iii) That while employed by EMPLOYER and
thereafter EMPLOYEE will hold in confidence and not
directly or indirectly reveal, report, publish,
disclose or transfer any of the Confidential
Information to any person or entity, or utilize any
of the Confidential Information for any purpose,
except in the course of EMPLOYEE's work for EMPLOYER.
iv) That any idea in whole or in part
conceived of or made by EMPLOYEE during the term of
his employment, consulting, or similar relationship
with EMPLOYER which relates directly or indirectly to
EMPLOYER's current or planned lines of business and
is made through the use of any of the Confidential
Information of EMPLOYER or any of EMPLOYER's
equipment, facilities, trade secrets or time, or
which results
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from any work performed by EMPLOYEE for EMPLOYER,
shall belong exclusively to EMPLOYER and shall be
deemed a part of the Confidential Information for
purposes of this Agreement. EMPLOYEE hereby assigns
and agrees to assign to EMPLOYER all rights in and to
such Confidential Information whether for purposes of
obtaining patent or copyright protection or
otherwise. EMPLOYEE shall acknowledge and deliver to
EMPLOYER, without charge to EMPLOYER (but at its
expense) such written instruments and do such other
acts, including giving testimony in support of
EMPLOYEE's authorship or inventorship, as the case
may be, necessary (in the opinion of EMPLOYER) to
obtain patents or copyrights or to otherwise protect
or vest in EMPLOYER the entire right and title in and
to the Confidential Information.
(b) Exclusivity of EMPLOYEE's Services. During
the EMPLOYEE's employment by EMPLOYER and for a period of two
years thereafter [but with regard to the two years thereafter,
this Section 8(b) shall apply only if this Agreement is
terminated for Cause pursuant to Section 7(a) or due to
EMPLOYEE resigning or otherwise terminating his employment
before the end of term of this Agreement], EMPLOYEE agrees
that he shall not, except as an owner of less than two percent
of a publicly-traded corporation's stock, enter into or
engage, directly or indirectly, whether on his own account or
as a shareholder, partner, joint venturer, employee,
consultant, advisor, and/or agent, of any person, firm,
corporation, or other entity other than EMPLOYER, in any or
all of the following activities:
i) Engaging in the business of
designing, manufacturing, distributing and marketing
books, greeting cards, electronic devices and toys in
the entire world.
ii) Soliciting the past or existing
joint venturers, partners, customers, clients,
suppliers, or business patronage of EMPLOYER or any
of its predecessors, affiliates or subsidiaries.
iii) Soliciting the employment of any
employees of EMPLOYER or any of its affiliates or
subsidiaries.
iv) Promoting or assisting, financially
or otherwise, any person, firm, association,
corporation, or other entity engaged in the business
of designing, manufacturing, distributing and
marketing books, greeting cards, electronic devices
and toys in the entire world.
v) Using any Confidential Information
[as defined in Section 8(a)] for the purpose of, or
which results in, direct competition with EMPLOYER or
any of its affiliates or subsidiaries.
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(c) Injunctions. EMPLOYER and EMPLOYEE agree
that the restrictions contained in this Section 8 are
reasonable, but it is recognized that damages in the event of
the breach of any of the restrictions will be difficult or
impossible to ascertain; and, therefore, EMPLOYEE agrees that,
in addition to and without limiting any other right or remedy
EMPLOYER may have, EMPLOYER shall have the right to an
injunction against EMPLOYEE issued by a court of competent
jurisdiction enjoining any such breach without showing or
proving any actual damage to EMPLOYER.
(d) EMPLOYEE also agrees, acknowledges,
covenants, represents and warrants as follows:
i) that he has read and fully
understands the foregoing restrictions and that he
has been advised to consult with a competent attorney
regarding the uses and enforceability of restrictive
covenants;
ii) that he is aware that there may be
defenses to the enforceability of the foregoing
restrictive covenants based on time or territory
considerations, and that he knowingly, consciously,
intentionally and entirely voluntarily, irrevocably
waives any and all such defenses and will not assert
the same in any action or other proceeding brought by
EMPLOYER for the purpose of enforcing the restrictive
covenants or in any other action or proceeding
involving him and EMPLOYER;
iii) that he is fully and completely
aware that, and further understands that, the
foregoing restrictive covenants are an essential part
of the consideration for EMPLOYER entering into this
Agreement and has entered into this Agreement in full
reliance on these acknowledgments, covenants,
representations and warranties; and
iv) that the existence of any claim or
cause of action by EMPLOYEE against EMPLOYER, if any,
whether predicated upon this Agreement or otherwise,
shall not constitute a defense to the enforcement by
EMPLOYER of the foregoing restrictive covenants which
shall be litigated separately, except when EMPLOYEE's
employment is terminated pursuant to Section 7(a)
herein and a court of competent jurisdiction
determines subsequently that EMPLOYEE was not
terminated for Cause.
(e) If any of the provisions of this Section 8
should ever be deemed by a court of competent jurisdiction to
exceed the temporal, geographic or occupational limitations
permitted by applicable laws, those provisions shall be and
are hereby reformed to the maximum temporal, geographic,
and/or occupational limitations permitted by law.
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(f) The obligations described in Sections 8(a),
(c), (d) and (e), above, shall survive any termination of this
Agreement or any termination of the employment relationship
created hereunder.
(g) After EMPLOYEE's employment terminates, the
covenant not to compete in Section 8(b) shall be enforced at
the sole option of EMPLOYER. This option shall be exercised by
notice to the EMPLOYEE within 15 business days after
termination of EMPLOYEE's employment. In the absence of such
notice, said covenant not to compete shall be void. In the
event employer elects to exercise this option, the employer
shall pay employee, as additional compensation therefor, a sum
of $350,000 (the "Noncompete Payment"). The Noncompete Payment
shall be paid to employee in twelve equal monthly
installments, without interest, monthly in arrears, beginning
on the first day of the month following EMPLOYER's exercise of
said option. Provided that, if the covenant not to compete in
Section 8(b) is modified or reduced by a court of competent
jurisdiction, the Noncompete Payment to EMPLOYEE pursuant to
this Section 8(g) shall be reduced accordingly. For example,
if the duration or geographic area of the covenant not to
compete in Section 8(b) is reduced from two years to one year,
the Noncompete Payment shall be reduced by 50%.
9. Inventions and Creations.
(a) EMPLOYEE agrees that all inventions,
discoveries, developments, improvements, ideas, distinctive
marks, symbols or phrases, copyrightable creations, works of
authorship, mask works and other contributions including but
not limited to software, advertising, design, art work,
manuals and writings (collectively referred to as
"Creations"), whether or not protected by statute, which have
been, or are in the forfeiture conceived, created, made,
developed or acquired by EMPLOYEE, either individually
or jointly, while EMPLOYEE is retained by EMPLOYER and relate
in any manner to EMPLOYEE's work for EMPLOYER, the research or
business of EMPLOYER or fields into which the business of
EMPLOYER may extend, belong to and are the property of
EMPLOYER.
(b) EMPLOYEE agrees and warrants that the
Creations will be EMPLOYEE's original work and will not
improperly or illegally incorporate any material created by or
belonging to others.
(c) EMPLOYEE hereby sells, assigns and transfers
to EMPLOYER exclusively and irrevocably, without further
compensation, all ownership, title and rights in and to all of
the Creations. EMPLOYEE further agrees to promptly and fully
disclose the Creations to EMPLOYER in writing, if requested by
EMPLOYER, and to deliver promptly to EMPLOYER whenever
reasonably requested and also upon completion of this
Agreement, any and all originals and copies of manuscripts,
programs, writings, pictorial materials, drafts and notes of
the Creations, regardless
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of the media in which they might exist. EMPLOYEE agrees to
execute and deliver any and all lawful applications,
assignments and other documents which EMPLOYER requests for
protecting the Creations in the United States or any other
country. EMPLOYER shall have the full and sole power to
prosecute such applications and to take all other actions
concerning the Creations, and EMPLOYEE agrees to cooperate
fully, at the expense of EMPLOYER, in the preparation and
prosecution of all such applications and any legal-actions and
proceedings concerning the Creations.
(d) Without diminishing in any way the rights
granted to EMPLOYER above, if a Creation is described in a
patent, copyright or trademark application, or is disclosed to
a third party by EMPLOYEE within two years after EMPLOYEE's
employment with EMPLOYER is terminated, EMPLOYEE agrees that
it is to be presumed that the Creation was conceived, created,
made, developed or acquired by EMPLOYEE during the period of
his employment with EMPLOYER, unless EMPLOYEE can prove
otherwise by clear and convincing evidence.
10. Governing Law and Venue. Arizona law shall govern the
construction and enforcement of this Agreement and the parties agree that any
claim or cause of action pertaining to this Agreement shall lie only in courts
of competent jurisdiction located in Maricopa County, Arizona.
11. Construction. The language in all parts of this
Agreement shall in all cases be construed as a whole according to its fair
meaning and not strictly for nor against any party. The parties agree that each
party has reviewed this Agreement and that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
apply in the interpretation of this Agreement or any amendment or any exhibits
thereof.
12. Nondelegability of EMPLOYEE's Rights: EMPLOYER
Assignment Rights. The obligations, rights and benefits of EMPLOYEE hereunder
are personal and may not be delegated, assigned or transferred in any manner
whatsoever, nor are such obligations, rights or benefits subject to involuntary
alienation, assignment or transfer. Upon reasonable notice to EMPLOYEE, EMPLOYER
may transfer EMPLOYEE to an affiliate of EMPLOYER, which affiliate shall assume
the obligations of EMPLOYER under this Agreement. This Agreement shall be
assigned automatically to any entity merging with or acquiring EMPLOYER or its
business.
13. Severability. If any term or provision of this
Agreement is declared by a court of competent jurisdiction to be invalid or
unenforceable for any reason, this Agreement shall remain in full force and
effect, and either (a) the invalid or unenforceable provision shall be modified
to the minimum extent necessary to make it valid and enforceable or (b) if such
a modification is not possible, this Agreement shall be interpreted as if such
invalid or unenforceable provision were not a part hereof.
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14. Attorneys' Fees. Except as otherwise provided herein,
if any party hereto institutes an action or other proceeding to enforce any
rights arising out of this Agreement, the party prevailing in such action or
other proceeding shall be paid all reasonable costs and attorneys' fees by the
non-prevailing party, such fees to be set by the court and not by a jury and to
be included in any judgment entered in such proceeding.
15. Consideration. It is expressly understood and agreed
that this document sets forth the entire consideration for this Agreement, and
that said consideration for this Agreement is contractual and not a mere
recital.
16. Gender and Number. All terms used in one number or
gender shall be construed to include any other number or gender as the context
may require.
17. Counterparts. This Agreement may be executed in any
number of counterparts, all such counterparts shall be deemed to constitute one
and the same instrument, and each of said counterparts shall be deemed an
original hereof.
18. Section Headings. The section headings used in this
Agreement are inserted for convenience only and shall not affect the meaning or
construction of this Agreement.
19. Notices. All notices required or permitted hereunder
shall be in writing and shall be deemed duly given upon receipt if either
personally delivered, sent by certified mail, return receipt requested, sent by
telefacsimile with a copy by first-class U.S. mail, or sent by a
nationally-recognized overnight courier service, addressed to the parties as
follows:
If to EMPLOYER: Futech Educational Products, Inc.
0000 X. 00xx Xxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Gretsch
Fax: 000-000-0000
With a copy to: Xxxxxxx & Xxxxx
Xxx Xxxx Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000-0000
Attention: Xxxx X. Xxxxxx
Fax: 000-000-0000
If to EMPLOYEE: Xxxxxxx Xxxxx
0000 Xxxxx 00xx Xxxxxx
Xxxxxxxx Xxxxxx, XX 00000
Fax: 000-000-0000
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