EXHIBIT 10.5
EXECUTIVE EMPLOYMENT AGREEMENT
This agreement ("Agreement") is made effective as of September 1, 1999
between OnLine Entertainment, Inc., (the "Company") and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (the
"Executive"). The Executive has been employed and is continuing to serve the
Company as Vice President-Engineering, Research and Development.
In consideration of the mutual benefits and obligations in this
Agreement, and intending to be legally bound hereby, the Company and the
Executive agree as follows:
1. OFFICE AND DUTIES
The Executive shall be employed as an executive officer of OnLine Power
Supply, Inc., ("OPS"), which as of the date of this Agreement is a subsidiary
corporation of the Company. At such time as the Company changes its name to
"OnLine Power Supply, Inc." the Executive's position shall continue to be
Vice-President-Engineering, Research and Development for the Company, with
primary duties in the power supply division. The Executive shall have the duties
specified in the Bylaws of the Company, and such duties as may be lawfully
assigned by the Board of Directors, either directly or through his supervisor.
The Company may reassign the Executive to serve in other divisions or for other
subsidiaries, consistent with his abilities and the needs of the Company. The
Company reserves the right to designate his place of work.
Executive agrees to devote substantially all of his normal workday time
and energy to the performance of the duties of his position. Notwithstanding the
above, Executive shall be permitted to have interests in other businesses that
do not compete with the Company or its subsidiaries, or otherwise are in
violation of this Agreement, and he may render services for such other business
interests, provided such service does not prevent Executive from performing his
duties under this Agreement. The Executive agrees with the Company that any and
all inventions or designs or improvements to electronic or electrical devices or
systems which he creates alone or with others, during the term of this Agreement
(hereafter, the "OTHER INVENTIONS"), shall be presented and disclosed first to
the Company, for its decision to take up and exploit the Other Inventions even
if it is or they are outside of the line of products then being worked on by any
employees or consultants to the Company. The Executive agrees with the Company
that any and all intellectual rights to such Other Inventions shall belong
exclusively to the Company, until it is or they are presented and disclosed to
the Company by the Executive. If the Company decides to take up and exploit such
Other Inventions, the Company shall thereafter own any and all intellectual
rights to it or them forever, provided that the Company proceeds in good faith
and uses its best efforts to exploit it or them. The Company shall make its
decision in a commercially reasonable period of time, not to exceed six months
after full presentation and disclosure to the Company by the Executive. If after
a reasonable period of time, the Company and the Executive agree that the
Company cannot proceed
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further with such exploitation, then the Company shall assign the rights to the
Other Inventions back to the Executive.
2. TERM OF EMPLOYMENT
The Company shall employ the Executive and he accepts such employment
for a term beginning on the date of this Agreement and ending September 1, 2004,
upon the terms and conditions set forth in this Agreement. Notwithstanding the
foregoing, if this Agreement shall not have terminated in accordance with the
provisions herein on or before September 1, 2004, the Company consents to the
renewal of this Agreement for an additional term of five years, unless on or
after September 30, 2003, but before March 31, 2004 the Board of Directors
notifies the Executive in writing of its determination to have this Agreement
expire six months from the date of such notification. If that notification is
given, then this Agreement shall expire on the six-month anniversary of the date
when notification is given to the Executive.
3. DEFINITIONS.
For the purposes of this Agreement, these terms shall have the meaning
set forth in this paragraph:
"BASE COMPENSATION " shall mean an amount per annum equal to the sum of:
(a) The annual Base Salary in effect for Executive immediately
preceding the termination of employment. The Base Salary for the
Executive as of the date of this Agreement is stated in Section 4
below.
(b) Continued participation in all basic and supplemental life,
accident, disability, and other Company-sponsored insurance benefits
provided to the Executive immediately preceding the date of this
Agreement (assuming the Executive is insurable). Life insurance, if
available for the Executive, will provide for a split of benefits in
the event of death equally between his estate and the Company. If this
Agreement is terminated other than for cause, then the Company will
continue to provide the same insurance benefits for so long as Base
Salary is paid to him or his estate; if continued participation in one
or more of these benefits is not possible, the Company will continue
him in benefits which are substantially similar to those which
Executive would have been entitled to if he had continued as an
employee of the Company at the same compensation level which was in
effect immediately prior to his termination.
(c) Continuance of vesting and benefit accrual under any
Company-sponsored retirement programs in effect for Executive
immediately prior to termination (or, if continued participation in
such programs is not possible, benefits substantially similar to those
which Executive would have been entitled to if he had continued as an
employee of the Company at the same compensation level immediately
prior to termination). However, the terms of
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any incentive stock options granted to the Executive pursuant to this
Agreement or otherwise shall be controlling with respect to the vesting
and benefit accrual provisions of such options.
"BOARD " means the Board of Directors of the Company.
"CAUSE" shall mean (i) willful refusal by the Executive to follow a
lawful written demand signed by the Board; (ii) the Executive's willful
and continued failure to perform his duties under this Agreement (but
not his failure to perform due to physical or mental illness) after a
written demand is delivered to the Executive by the Board specifically
identifying the manner in which the Board believes the Executive has
failed to perform his duties; (iii) the Executive's willful engagement
in conduct materially injurious to the Company; (iv) the Executive's
conviction of any felony; or (v) the Executive's breach of any
provisions of this Agreement. For purposes of clauses (i), (ii) or
(iii) of this definition, no act, or failure to act on the Executive's
part shall be deemed 'willful' unless done, or omitted to be done, by
Executive not in good faith and without reasonable belief that
Executive's act or failure to act was in the best interests of the
Company.
"CONSTRUCTIVE TERMINATION" shall mean the Executive's voluntary
termination of employment within ninety (90) days following the
occurrence of one or more of the following events, unless such event is
approved by the Executive in advance of such event.
A failure by the Company to perform any part of this Agreement that is
not remedied within ten (10) business days of notification by Executive
of such failure, including any violation of Executive's rights as
described in this Agreement unless such rights are replaced by
alternative rights of approximately equal value;
A reduction of Executive's title or responsibilities below positions
specified in or pursuant to this Agreement; or
A relocation of Executive's primary place of business more than fifty
(50) miles from its location as of the date of this Agreement.
"DISABILITY" shall be deemed to have occurred if the Executive is
unable to substantially perform the normal duties of his position with
the Company, or if the Executive makes application for disability
benefits under any Company-sponsored long-term disability program
covering the Executive and he qualifies for such benefits.
"RETIREMENT" shall mean the Executive's voluntary termination of
service with the Company at any time after he reaches age 55, where the
Executive retires from substantially full time employment generally.
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4. COMPENSATION
For all services rendered by the Executive in any capacity to the
Company or any subsidiary or successor during the term of this Agreement, the
Executive shall be compensated with the Base Compensation as defined in this
Agreement (including the Base Salary, options, performance cash compensation
bonus, and automobile allowance as they are specified below):
BASE SALARY. The minimum base salary payable to the Executive upon
commencement of this Agreement shall be $60,000. The Board or its Compensation
Committee (if one is designated) will review the Executive's Base Salary at
least annually to determine the amount of any increase. Upon any increase in the
Executive's Base Salary, such increased rate shall thereafter constitute the
Executive's annual Base Salary for all purposes of this Agreement, except that
the Company may reduce the Executive's Base Salary during any year by not more
than 10% below the Base Salary in effect at the beginning of the year as part of
any general salary reduction which applies to all officers of the Company and
its subsidiaries. Such a reduction shall not constitute a termination of this
Agreement.
INCENTIVE STOCK OPTIONS. In recognition of the significant
contributions to the Company by the Executive up to the date of this Agreement,
the Company shall issue to the Executive options to purchase 523,000 shares of
the Company's common stock (the "BONUS OPTIONS"). All of these options shall be
issued as fully vested as of the date of this Agreement. The exercise price per
share shall be the average of the bid and ask prices of the common stock on
September 1, 1999. The options shall be issued under the Incentive Stock Option
Plan. All of these options shall expire on September 1, 2009.
In addition, as an incentive for continued contributions to the
Company, the Company shall issue to the Executive options to purchase an
additional 500,000 shares of the Company's common stock (the "PERFORMANCE
OPTIONS") with the same exercise price per share (the average of the bid and ask
prices of the common stock on September 1, 1999). Subject to the terms of the
Incentive Stock Option Plan, the vesting of these options shall be twenty
percent (20%), or 125,000 shares, on each anniversary of this Agreement. Each
vested portion of the options shall have a term of five (5) years, but such term
shall be shortened in the event of termination of employment, for any reason,
and in that event the Bonus Options and the Performance Options all shall expire
when the covenant not to compete (elsewhere stated in this Agreement) expires.
Provided that the Company's common stock is registered with the
Securities and Exchange Commission under section 12(g) of the Securities Act of
1934, then, as soon as practicable after such registration is effective, the
Company will use its best efforts to file with and have declared effective by
the Securities and Exchange Commission a registration statement on Form S-8 (or
comparable form for the registration of employee compensation plans), under
section 5 of the Securities Act of 1933, so as to allow the resale into the
public markets by the Executive of the shares of common stock acquired on
exercise of the Bonus and Performance Options. Such
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registration also shall cover any shares issued in payment of the Performance
Bonus, as provided below.
If there shall be a combination of the Company with another company
where the Company is not the surviving entity, and as a result thereof the
Executive does not continue his employment under this Agreement, or this
Agreement is not accepted and continued by the surviving entity, then the
Executive shall be immediately fully vested in all Performance Options.
PERFORMANCE BONUS. In order to promote goals that may increase
shareholder value, the Executive shall be paid Performance Bonuses during the
term of this Agreement as follows: For the Company's fiscal year ending December
31, 2000 and for each subsequent fiscal year during the term of this Agreement,
an amount equal to fifty percent (50%) of Base Salary if the Company achieves
audited consolidated gross revenue of $2,000,000 or more for the fiscal year
ending December, 2000. Each Performance Bonus shall be payable either 30 days
following the date the Company's audited consolidated financial statements for
the fiscal year are delivered to the Company or on March 15 following the end of
the fiscal year, whichever is later. At the election of the Executive, the
Performance Bonus may be paid in cash or in shares of common stock valued at the
average bid and ask prices of the common stock; shares issued in payment will be
restricted from transfer in accordance with the Securities Act of 1933.
VACATION. Executive shall receive paid vacation per year in accordance
with the regular policies of the Company in effect for all employees, or classes
of employees, as established from time to time.
VEHICLE ALLOWANCE. The Executive shall be paid a nonaccountable vehicle
expense allowance of $500.00 per month, to be used at his discretion for
operating expenses, vehicle purchase or lease, or insurance, or any combination
thereof.
EXPENSE REIMBURSEMENT. The Company shall reimburse the Executive for
all reasonable expenses incurred by Executive in connection with performance of
his duties upon submission of itemized expense vouchers, subject to such
guidelines and policies as may be promulgated by the Company for senior
executives or employees from time to time.
LIFE INSURANCE. In addition to any coverage required by the Company,
the Executive shall be provided with a life insurance policy in the amount of
$250,000 (provided he is insurable and can meet the medical conditions for such
coverage), with the policy proceeds payable one-half to the Company and one-half
to such beneficiaries as he shall designate.
TAX MATTERS. If any payments due to the Executive under this Agreement
result in the Executive's liability for an excise tax ("parachute tax") under
the Internal Revenue Code, the Company will pay to Executive, after deducting
any Federal, state, or local income tax imposed on the payment, an amount
sufficient to fully satisfy the "parachute tax" liability. Such payment shall be
made to the Executive not later than thirty (30) days prior to the due date of
the "parachute tax."
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To the extent required by law, the Company shall withhold from any payments
under this Agreement any applicable federal, state, or local withholding taxes.
5. TERMINATION. If this Agreement is terminated:
(a) By the Company without cause, or if the Employee voluntarily leaves
the employment of the Company, or if the Employee is terminated through
Constructive Termination (provided in any event that the Executive does not
breach the other provisions of this Agreement concerning covenants not to
compete and observing the Trade Secrets of the Company), or if the Executive
dies or becomes disabled, then the Company will continue to pay the Executive
(or his estate) his Base Salary under this Agreement until the expiration of the
term of this Agreement. The Company also shall pay him any Performance Bonus to
which he otherwise would be entitled because of the audited consolidated gross
revenues of the Company during the fiscal year when he is terminated; such
payment shall be made when the audited financial statements are delivered to the
Company for that year. Termination without cause under this Section 5(a) shall
not affect either the Bonus Options or the vested Performance Options, and the
remaining unvested Performance Options shall continue to vest as provided in
this Agreement. However, upon termination of employment, all of such options
which have not been exercised shall become "nonqualified" stock options under
federal income tax law. In addition, all of the Bonus Options and all of the
Performance Options which are vested on the third anniversary of the termination
of this Agreement, shall expire and thereafter be unexercisable. Upon
termination under this Section 5(a), all payments of the other compensation and
benefits shall terminate unless otherwise provided by law with respect to health
insurance coverage.
(b) By the Company for cause, all payments of all Base Compensation and
all of the other compensation and benefits shall cease (except for those health
insurance benefits which the Company is required to pay by law), but the Company
shall be obligated to pay the Performance Bonus to which he otherwise would be
entitled because of the audited consolidated gross revenues of the Company
during the fiscal year when he is terminated (such Performance Bonus shall be
paid when the audited financial statements are delivered to the Company for that
year). There shall be no further vesting of Performance Options, and all of the
vested unexercised Performance Options shall become "nonqualified" stock options
under federal income tax law. In addition, all of the Bonus Options and all of
the vested Performance Options shall expire on the third anniversary of
termination of this Agreement and thereafter be unexercisable.
(c) Should the Executive exercise his right to terminate employment
voluntarily for Constructive Termination, the Company shall continue to employ
him as an advisor and consultant ("CONSULTING EMPLOYMENT") for a period of five
years. During the period of Consulting Employment, the Executive shall at
reasonable times but not full time, be available to consult with and advise the
Company. The Executive shall be entitled to all benefits under this Agreement,
including base salary, performance and incentive bonuses during the term of the
Consulting Employment, which term shall be negotiated between the Company and
the individual. During the period of Consulting Employment, the individual shall
be permitted to engage in any business so
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long as such business practice is not in competition with the Company and does
not violate the Trade Secrets provisions of this Agreement.
(d) In the event of termination of employment of the Executive for any
reason, the Company shall immediately release the Executive, and obtain the
release of Executive by third parties, from any and all personal guarantees and
other credit obligations the Executive has incurred or undertaken on behalf of
the Company, and shall cause the immediate repayment of indebtedness owed to the
Executive or members of his family or trusts set up by him or by members of his
family.
6. COVENANT NOT TO DISCLOSE TRADE SECRETS; COVENANT NOT TO COMPETE, OR
INTERFERE.
The parties hereto recognize that the Company must preserve its
specialized knowledge, Trade Secrets, and other confidential information
concerning its business. The disclosure of this information, Trade Secrets and
knowledge to any competitors would be detrimental to the Company and cause it
irreparable harm. By reason of his position with the Company, the Executive has
or will have access to, and has obtained or will obtain, specialized knowledge,
Trade Secrets and confidential information about the Company's operations and
the operations of its subsidiaries. Therefore, the Executive hereby agrees as
follows, recognizing that the Company is relying on these agreements in entering
into this Agreement with him:
(a) DEFINITIONS. As of the date of this Agreement, the COMPANY'S
BUSINESS is the following: The design and marketing of power supply systems and
devices, and the design and marketing of products related to improved power
supply performance and continuity through power surges and interruptions
(hereafter, the "GOODS"). As of the date of this Agreement, the Company's
Business is being conducted predominantly in the United States, and may also be
conducted in Europe and Asia. Therefore, for purposes of this Agreement, Areas
shall be defined to be the United States (and its Territories), and the European
Union, and in Taiwan and Thailand.
The TRADE SECRETS of the Company include: Recipes and techniques for
power supply systems and devices and power supply performance and supply
protection devices, and all of the data, know-how, formulae, compositions,
processes, samples, inventions and ideas; the data and results of all past,
current and planned (as well as unplanned as of the date of this Agreement)
research and development work; all current and planned marketing and
distribution strategies; all past, current and future customer lists; all
write-ups of current and anticipated customer (and prospective customer)
requirements; all price lists, market studies, and business plans of the
Company; and all notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Company containing or based, in whole or in
part, on any information included in the foregoing. Trade Secrets shall further
include any and all intellectual property associated with the preceding,
including without limitation state and federal and common law copy rights, and
all patent rights. In addition, Trade Secrets shall include any Trade Secrets
which are developed after the date of this Agreement and during its term, and
also any Other Inventions which the Executive develops on his own time and which
the Company elects to take up and exploit.
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(b) COVENANT NOT TO DISCLOSE TRADE SECRETS. The Executive acknowledges
and agrees that all Trade Secrets known or obtained by the Executive, whether
before or after the date hereof, are the property of the Company. Therefore, in
consideration of entering into this Agreement, the Executive agrees that he will
not, at any time, disclose to any unauthorized persons or use for his own
account or for the benefit of any third party any Trade Secret, whether the
Executive has such information in his memory or embodied in writing or other
physical form, without the Company's written consent, unless and to the extent
that the information which constitutes the Trade Secret becomes generally known
and available for use by the public other than as a result of Executive's breach
of this Agreement. The Executive agrees to deliver to the Company at any time
the Company may request while this Agreement is in effect, all of the documents,
memoranda, notes, plans, records, reports, and other documentation relating to
the Trade Secrets that the Executive may then possess or have under his control.
In the event of termination of this Agreement, the Executive agrees to deliver
immediately to the Company all of the documents, memoranda, notes, plans,
records, reports, and other documentation relating to the Trade Secrets that he
may then possess or have under his control.
(c) COVENANT NOT TO COMPETE, OR INTERFERE.
(i) In further consideration of entering into this Agreement with the
Company, the Executive agrees that if this Agreement is terminated either by the
Executive or by the Company, then, for a period of three years after such
termination, the Executive will not, either directly or indirectly, engage or
invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation, or control of, or be employed by, associated
with, or consult with, any business whose products or activities compete in
whole or in part with the Company's Business, anywhere in the Areas. The
Executive agrees that this covenant is reasonable with respect to its duration,
geographical area, and scope. Further, the Executive agrees not to (i) induce or
attempt to induce, directly or indirectly, either for himself or any other
person, any employee of the Company to leave the employ of the Company; (ii) in
any way interfere with the relationship between the Company and any employee of
or consultant to or independent contractor of the Company; (iii) employ, or
otherwise engage as an employee, independent contractor, consultant or
otherwise, any employee, consultant or independent contractor of the Company; or
(iv) induce or attempt to induce any customer, supplier, or business relation of
the Company to cease doing any business with the Company, or expand its business
in the Goods to include any similar goods dealt in or handled by another
company.
(ii) If this Agreement is terminated without cause under Section 5(a),
then the foregoing covenant not to compete, or interfere, shall continue to be
applied to the Executive, and the Executive shall be free to provide consulting
services to the Company, or to any other person or organization, but the
Executive shall not be free to compete with the Company, and he shall continue
to observe the Trade Secrets of the Company and not use the Company's Trade
Secrets without its prior written consent.
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The covenant under subsection (i) not to compete, or interfere, shall
not be construed to prevent the Employee from owning not more than 5% of any
entity which files reports with the Securities and Exchange Commission as a
"public company." Notwithstanding the provisions of this paragraph, the
Executive shall continue to be subject to, and agrees to comply with, the
provisions with respect to Trade Secrets of the Company.
In the event that a court finds any clause of this subsection (c) to be
overly broad, and therefore not enforceable, the court shall modify this
subsection (c) in order to reflect the maximum restraint allowable, and shall
then enforce such subsection, as so modified.
The Company and the Executive agree that except as otherwise expressly
provided therein, all provisions of Section 6 (and of Section 7 below) of this
Agreement shall survive termination of this Agreement, and such provisions shall
remain in effect until three years after termination of this Agreement.
7. INJUNCTIVE RELIEF. In the event of any violation of Section 6 (which
shall constitute a breach of this Agreement), the Company shall be entitled to
injunctive relief to the extent allowable, and shall then be entitled to
continue to enforce such relief ordered. The Company shall not be required to
post any bond in such injunctive proceedings.
In the event of any arbitration, litigation or other proceeding arising
as a result of the breach of this Agreement, including without limitation any
injunctive or other proceeding with respect to the rights of the Company under
Sections 6 or 7, the party or parties prevailing in such arbitration, litigation
or proceeding shall be entitled to collect the costs and expenses of bringing or
defending such arbitration, litigation or proceeding, including reasonable
attorney's fees, from the party or parties not prevailing. The preceding shall
be interpreted so as to entitle the party prevailing in any arbitration to
collect the costs and expenses of litigation or other proceeding incurred by
such party, which litigation or other proceeding occurred prior to the dispute
being heard in arbitration.
8. OTHER PROVISIONS. With respect to the matters specified herein, this
Agreement contains the entire agreement between the parties and supersedes all
prior oral of written agreements, understandings and commitments between the
parties. In the event that any provision of this Agreement is held to be
invalid, void or unenforceable, the same shall not affect, in any respect
whatsoever, the validity of any other provision of the Agreement. Any notice or
demand required or permitted to be given under this Agreement shall be made in
writing and shall be deemed effective upon the personal delivery thereof if
delivered or, if by express delivery service, 24 hours after placing in the
control of an express delivery service; or if mailed, 72 hours after having been
deposited in the United States mail, postage prepaid, and addressed in the case
of the Company to its, and in the case of the Executive to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Either party may change the address
to which such notices are to be addressed by giving the other party notice in
the manner herein set forth.
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This Executive Employment Agreement has been signed by the parties
effective as of the date first stated above.
ONLINE ENTERTAINMENT, INC.
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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EXECUTIVE
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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