EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into as of December
1, 2001 ("Effective Date") between INSYNQ, INC., a Delaware corporation with its
principal offices located at 1127 Broadway Plaza, Suite 10, Tacoma, Washington
98402 (the "Company"), and Donald M. Kaplan, (the "Employee"), subject to the
provisions of Schedule `A2' hereto.
In consideration of the promises and the terms and conditions set forth in
this Agreement, the parties agree as follows:
1. POSITION. During the term of this Agreement, the Company will employ the
Employee, and the Employee will serve the Company in the capacity of
President. The Employee will report directly to John P. Gorst, the
Company's Chief Executive Officer.
2. DUTIES. The Employee will perform duties described in Exhibit "A," attached
to this Agreement and incorporated by this reference, together with such
additional duties assigned by the Board or Chief Executive Officer.
3. EXCLUSIVE SERVICE. The Employee will devote substantially all his working
time and efforts to the business and affairs of the Company. The foregoing
shall not, however, preclude the Employee: (a) from engaging in appropriate
civic, charitable or religious activities; (b) from serving on the boards
of directors of other entities, with the consent of the Company, which
consent shall not be unreasonably withheld; or (c) from providing
incidental assistance to family members on matters of family business, so
long as the foregoing activities and service do not conflict with the
Employee's responsibilities to the Company.
4. TERM OF AGREEMENT.
4.1 INITIAL TERM. The Company agrees to continue the Employee's employment
pursuant to the terms of this Agreement for a period of three (3)
years after the Effective Date, unless the Employee's employment is
earlier terminated pursuant to the provisions of this Agreement.
4.2 RENEWAL. The term of this Agreement shall be extended automatically,
without further action of either party, as of three (3) years after
the Effective Date and on each succeeding anniversary of that date,
for terms of two (2) years, unless on or before ninety (90) days prior
to the last day of the term of this Agreement or any extension
thereof, the Company or the Employee shall notify the other in writing
of its intention not to renew this Agreement, in which case the
Employee's employment shall terminate at the end of the original term
or any extension thereof. If either party notifies the other of its
intention not to renew this Agreement less than ninety (90) days prior
to the end of the term of this Agreement or any extension thereof,
then such termination shall be effective ninety (90) days from such
notice. Notice of non-renewal may not be given by either party after a
renewal term has commenced. Any such renewal shall be upon such terms
and conditions set forth in this Agreement, unless otherwise agreed
between the Company and the Employee. The notice of non-renewal by
either party shall in no way constitute a breach of this Agreement.
5. COMPENSATION AND BENEFITS.
5.1 BASE SALARY. The Employee's initial base annual salary will be no less
than US$180,000 or US$15,000 per month for the first year of his
employment with the Company. The Employee's base salary will be
reviewed by the Chief Executive Officer and/or the Board of Directors
at least annually, but in no event will be diminished as a result of
said review. Employee's salary will be payable as earned in accordance
with the Company's customary payroll practice, except for the
provisions in Schedule `A-1' hereto.
5.2 ADDITIONAL BENEFITS. The Employee will be eligible to participate in
the Company's employee benefit plans of general application, including
without limitation pension and profit-sharing plans, stock option,
incentive or other bonus plans, paid vacations and sabbatical leave
plans, and similar plans or programs, in accordance with the rules
established for individual participation in any such plan. The
Employee will also be entitled to reasonable holidays and illness days
with full pay in accordance with the Company's policy from time to
time in effect, but in any event will be entitled to four weeks
holidays per year.
5.3 STOCK GRANT. Within thirty (30) days of the Effective Date, the
Employee, or such other entity controlled by the Employee as may be
designated by the Employee as set out in Schedule `A-2' hereto, will
receive a stock grant of four million (4,000,000) shares of the
Company's Common Stock, which shares shall be subject to the standard
restrictions applied to stock held by employees and officers of public
companies.
5.4 ADDITIONAL STOCK OPTIONS. On the Effective Date, the Employee shall be
granted a compensatory Non-Qualified Stock Option for one million
(1,000,000) shares of the Company's Common Stock at an exercise price
per share of fair market value (at market close of the Effective Date
of this Agreement) (the "Initial Option"). The Initial Option shall be
vested as to one million (1,000,000) shares on the Effective Date of
this Agreement. The Initial Option cannot be transferred or caused to
be transferred by the Employee except in the event of his death, and
must be exercised by the Employee (or in the event of his death, by
his estate or such other designee) within ten (10) years from the
Effective Date. Forms of permissible consideration to purchase the
shares of common stock on exercise of the Initial Option shall be
cash, cashless exercise (also called net zero transaction), recourse
promissory note and such other forms of consideration with which other
senior management have or are given the opportunity to purchase
shares. In the event that the number of outstanding shares of the
Company's common stock is changed by a stock dividend,
recapitalization, stock split or similar change in the capital
structure of the Company without consideration, then the number of
shares subject to the Initial Option will be proportionately adjusted.
5.5 EXPENSES. The Company will reimburse (monthly) the Employee for all
reasonable and necessary expenses incurred by the Employee in
connection with the Company's business.
6. TERMINATION.
6.1 EVENTS OF TERMINATION. The Employee's employment with the Company
shall terminate upon any one of the following:
(a) Thirty (30) days after the date of a written notice sent to the
Employee stating the Company's determination made in good faith
that it is terminating the Employee for "Cause" as defined under
Section 6.2 below ("Termination for Cause"); or
(b) Thirty (30) days after the date of a written notice sent to the
Employee stating the Company's determination made in good faith
that, due to a mental or physical incapacity, the Employee has
been unable to perform his duties under this Agreement for a
period of not less than six (6) consecutive months ("Termination
for Disability"); or
(c) Upon the Employee's death ("Termination Upon Death"); or
(d) Upon the date of a written notice sent to the Company stating the
Employee's determination made in good faith of "Constructive
Termination" by the Company, as defined under Section 6.3 below
("Constructive Termination"); or
(e) Thirty (30) days after the date of a notice sent to the Employee
stating that the Company is terminating his employment, without
Cause, which notice can only be given by the Company at any time
after the Effective Date at the Company's sole discretion, for
any reason or for no reason ("Termination Without Cause"); or
(f) The date of a notice sent to the Company from the Employee
stating that the Employee is electing to terminate his employment
with the Company ("Voluntary Termination").
6.2 "CAUSE" DEFINED. For purposes of this Agreement, "Cause" for the
Employee's termination will exist at any time after the occurrence of
one or more of the following events:
(a) Any willful act or acts of dishonesty undertaken by the Employee
intended to result in substantial gain or personal enrichment of
the Employee at the expense of the Company; or
(b) Any willful act of gross misconduct which is materially and
demonstrably injurious to the Company. No act, or failure to act,
by the Employee shall be considered "willful" if done, or omitted
to be done, by him in good faith and in the reasonable belief
that his act or omission was in the best interest of the Company
and/or required by applicable law.
6.3 "CONSTRUCTIVE TERMINATION" DEFINED. "Constructive Termination" shall
mean:
(a) A material reduction in the Employee's salary or benefits not
agreed to by the Employee;
(b) A material change in the Employee's responsibilities not agreed
to by the Employee;
(c) The Company's failure to comply in any material respect with any
material term of this Agreement after thirty (30) days written
notice of the Employee's claim of such failure; or
6.4 "TERMINATION WITHOUT CAUSE" shall mean:
(a) Termination of the Employee's employment with the Company for any
reason other than Cause; or
(b) Termination of the Employee's employment with the Company for any
reason following a Change in Control. "Change in Control" shall
mean the occurrence of any of the following events: (i) a merger
or consolidation involving the Company in which the shareholders
of the Company immediately prior to such merger or consolidation
own less that fifty percent (50%) of the voting power of the
surviving corporation; (ii) the sale of all, or substantially
all, of the assets of the Company; (iii) any "person" or "group"
(as defined in the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) becoming the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act) directly or indirectly of
securities representing more than fifty percent (50%) of the
voting power of the Company then outstanding; or (iv) less than a
majority of the Board of Directors are persons who were either
nominated for election by the Board of Directors or were elected
by the Board of Directors.
7. EFFECT OF TERMINATION.
7.1 TERMINATION FOR CAUSE OR VOLUNTARY TERMINATION. In the event of any
termination of the Employee's employment pursuant to Section 6.1(a) or
Section 6.1(f), the Company shall immediately pay to the Employee the
compensation and benefits accrued and otherwise payable to the
Employee under Section 5 through the date of termination. The
Employee's rights under the Company's benefit plans of general
application shall be determined under the provisions of those plans.
7.2 TERMINATION FOR DISABILITY. In the event of termination of employment
pursuant to Section 6.1(b):
(a) The Company shall immediately pay to the Employee the
compensation and benefits accrued and otherwise payable to the
Employee under Section 5.1 through the date of termination;
(b) For twelve (12) months after the termination of the Employee's
employment, the Company shall pay the Employee his salary under
Section 5.1 above at the Employee's then-current salary, less
applicable withholding taxes, payable on the Company's normal
payroll dates during that period;
(c) The Employee shall receive other benefit payments as provided in
the Company's standard benefit plans, and
(d) The Employee shall become fully and immediately vested in the
entire balance of his Initial Option under Section 5.3 above.
7.3 TERMINATION UPON DEATH. In the event of termination of employment
pursuant to Section 6.1(c), all obligations of the Company and the
Employee shall cease, except the Company shall immediately pay to the
Employee (or to the Employee's estate) the compensation and benefits
accrued and otherwise payable to the Employee under Section 5.1
through the date of termination, and the Employee shall become fully
and immediately vested in the entire balance of his Initial Option
under Section 5.3 above.
7.4 CONSTRUCTIVE TERMINATION OR TERMINATION WITHOUT CAUSE. In the event of
any termination of this Agreement pursuant to Section 6.1(d) or
Section 6.1(e):
(a) The Company shall immediately pay to the Employee the
compensation and benefits accrued and otherwise payable to the
Employee under Section 5 through the date of termination;
(b) For twenty four (24) months after the termination of the
Employee's employment, the Company shall pay the Employee his
salary under Section 5.1 above at the Employee's then-current
salary, less applicable withholding taxes, payable on the
Company's normal payroll dates during that period.
(c) If the termination occurs for any reason after a Change in
Control, then in addition to the foregoing benefits, the
remainder of the Initial Option provided in Section 5.3 shall, as
of the date of employment termination, be immediately vested in
full and shall remain exercisable for the periods specified in
Section 5.3; provided, that if the total amount of the benefits
available to the Employee under this Section 7.4, either alone or
together with other payments which the Employee has the right to
receive from the Company, would constitute a "parachute payment"
as defined in Section 280G of the Internal Revenue Code (the
"Code"), then the Employee will receive whichever provides him
with the greater economic benefit: (i) the total amount of such
benefits; or (ii) the largest amount that would result in no
portion of such benefits being subject to the excise tax imposed
by Section 4999 of the Code. The determination of which of the
foregoing would provide the greatest economic benefit to the
Employee shall be made by an independent accounting firm the fees
for which determination shall be paid by the Company.
8. NONDISCLOSURE. The Employee acknowledges that during the course of his
employment by the Company, the Company will provide, and the Employee will
acquire, knowledge of special and unique value with respect to the
Company's business operations, including, by way of illustration, the
Company's existing and contemplated product line, trade secrets,
compilations, business and financial methods or practices, plans, hardware
and software technology products, systems, programs, projects and know-how,
pricing, cost of providing service and equipment, operating and maintenance
costs, marketing and selling techniques and information, customer data,
customer names and addresses, customer service requirements, supplier
lists, and confidential information relating to the Company's policies,
employees, and/or business strategy (all of such information herein
referenced to as the "Confidential Information"). The Employee recognizes
that the business of the Company is dependent upon Confidential Information
and that the protection of the Confidential Information against
unauthorized disclosure or use is of critical importance to the Company.
The Employee agrees that, without prior written authorization of the Chief
Executive Officer of the Company, the Employee will not, during his
employment, divulge to any person, directly or indirectly, except to the
Company or its officers and agents or as reasonably required in connection
with the Employee's duties on behalf of the Company, or make any
independent use of, except on behalf of the Company, any of the Company's
Confidential Information, whether acquired by the Employee during his
employment or not. The Employee further agrees that the Employee will not,
at any time after his employment has ended, use or divulge to any person
directly or indirectly any Confidential Information, or use any
Confidential Information in subsequent employment of any nature. If the
Employee is subpoenaed, or is otherwise required by law to testify
concerning Confidential Information, the Employee agrees to notify the
Company upon receipt of a subpoena, or upon belief that such testimony
shall be required. This nondisclosure provision shall survive the
termination of this Agreement for any reason. The Employee acknowledges
that the Company would not employ the Employee but for his covenants and
promises contained in this Section 8.
9. RETURN OF DOCUMENTS. The Employee agrees that if the Employee's
relationship with the Company is terminated (for whatever reason), the
Employee shall not remove or take with the Employee, but will leave with
the Company or return to Company, all Confidential Information, records,
files, data, memoranda, reports, customer lists, customer information,
product information, price lists, documents and other information, in
whatever form (including on computer disk), and any and all copies thereof,
or if such items are not on the premises of the Company, the Employee
agrees to return such items immediately upon the Employee's termination or
the request of the Company. The Employee acknowledges that all such items
are and remain the property of the Company.
10. NO INTERFERENCE OR SOLICITATION. The Employee agrees that during his
employment, and for a period of six (6) months following the termination of
his employment (for whatever reason), that neither he nor any individual,
partner(s), limited partnership, corporation or other entity or business
with which he is in any way affiliated, including, without limitation, any
partner, limited partner, director, officer, shareholder, employee, or
agent of any such entity or business, will: (i) request, induce or attempt
to influence, directly or indirectly, any employee of the Company to
terminate their employment with the Company; or (ii) employ any person who
as of the date of this Agreement was, or after such date is or was, an
employee of the Company. The Employee further agrees that during the period
beginning with the commencement of the Employee's engagement with the
Company and ending six (6) months after the termination of the Employee's
employment with the Company (for whatever reason), he shall not, directly
or indirectly, as an employee, agent, consultant, stockholder, director,
partner or in any other individual or representative capacity of the
Company or of any other person, entity or business, solicit or encourage
any present or future customer, supplier, contractor, partner or investor
of the Company to terminate or otherwise alter his, his or its relationship
with the Company. This provision shall survive the termination of this
Agreement for any reason.
11. NON-COMPETITION. In consideration of the numerous mutual promises contained
in the Agreement between the Company and the Employee, including, without
limitation, those involving Confidential Information, and in order to
protect the Company's Confidential Information and to reduce the likelihood
of irreparable damage which would occur in the event such information is
provided to or used by a competitor of the Company, the Employee agrees
that during his employment and for an additional period of six (6) months
immediately following the termination of his employment, whether voluntary
or involuntary (the "Non-Competition Term"), not to, directly or
indirectly, either through any form of ownership or as a director, officer,
principal, agent, employee, employer, adviser, consultant, shareholder,
partner, or in any individual or representative capacity whatsoever,
without the prior written consent of the Company (which consent may be
withheld in its sole discretion): (i) compete for or solicit business
related to application service provider services for or on behalf of any
person or business entity with a place of business in the United States or
Canada; (ii) own, operate, participate in, undertake any employment with or
have any interest in any entity with a place of business in the United
States or Canada in the business of marketing and selling of application
service provider services to persons or business entities, except owning
publicly traded stock for investment purposes only in which the Employee
owns less than 5%; (iii) compete for or solicit application service
provider services business from any customer of the Company (or its
successors by merger); or (iv) use in any competition, solicitation, or
marketing effort any Confidential Information, any proprietary list, any
information concerning customers of the Company.
If, during any period within the Non-Competition Term, the Employee is not
in compliance with the terms of this Section 11, the Company shall be
entitled to, among other remedies, compliance by the Employee with the
terms of this Section 11 for an additional period equal to the period of
such noncompliance. For purposes of this Agreement, the term
"Non-Competition Term" shall also include this additional period. The
Employee hereby acknowledges that the geographic boundaries, scope of
prohibited activities and the time duration of the provisions of this
Section 11 are reasonable and are no broader than are necessary to protect
the legitimate business interests of the Company.
This non-competition provision shall survive the termination of the
Employee's employment and can only be revoked or modified by a writing
signed by the parties which specifically states an intent to revoke or
modify this provision. The Employee acknowledges that the Company would not
employ him but for his covenants or promises contained in this Section
12. REFORMATION OF SECTION 11. The Company and the Employee agree and stipulate
that the agreements and covenants not to compete contained in Section 11
hereof are fair and reasonable in light of all of the facts and
circumstances of the relationship between the Employee and the Company;
however, the Employee and the Company are aware that in certain
circumstances courts have refused to enforce certain agreements not to
compete. Therefore, in furtherance of, and not in derogation of the
provisions of Section 11, the Company and the Employee agree that in the
event a court should decline to enforce the provisions of Section 11, that
Section 11 shall be deemed to be modified or reformed to restrict the
Employee's competition with the Company or its affiliates to the maximum
extent, as to time, geography and business scope, which the court shall
find enforceable; provided, however, in no event shall the provisions of
Section 11 be deemed to be more restrictive to the Employee than those
contained herein.
13. INJUNCTIVE RELIEF. The Employee acknowledges and agrees that the agreements
and covenants contained in this Agreement are essential to protect the
Confidential Information, business, and goodwill of the Company. The
Employee further acknowledges that the breach of any of the agreements
contained herein, including, without limitation, the confidentiality
covenants specified in Section 8, the non-solicitation covenants specified
in Section 10, and the non-competition covenants contained in Section 11,
will give rise to irreparable injury to the Company, inadequately
compensable in damages. Accordingly, the Company shall be entitled to
injunctive relief to prevent or cure breaches or threatened breaches of the
provisions of this Agreement and to enforce specific performance of the
terms and provisions hereof in any court of competent jurisdiction, in
addition to any other legal or equitable remedies which may be available.
The Employee further acknowledges and agrees that in the event of the
termination of the Employee's employment with the Company, whether
voluntary or involuntary, that the enforcement of a remedy hereunder by way
of injunction shall not prevent the Employee from earning a reasonable
livelihood. The Employee further acknowledges and agrees that the covenants
contained herein are necessary for the protection of the Company's
legitimate business interests and are reasonable in scope and content.
14. MISCELLANEOUS
14.1 INDEMNIFICATION AND ERRORS AND OMISSIONS INSURANCE. The Company agrees
to indemnify and defend the Employee on terms no less favorable than
any indemnification agreement the Company has at any time during the
term of this Agreement with an executive or officer of the Company.
14.2 ARBITRATION. The Employee and the Company shall submit to mandatory
binding arbitration in any controversy or claim arising out of, or
relating to, this Agreement or any breach hereof. Such arbitration
shall be conducted in accordance with the commercial arbitration rules
of the American Arbitration Association in effect at that time, and
judgment upon the determination or award rendered by the arbitrator
may be entered in any court having jurisdiction thereof. The
arbitrator is hereby authorized to award to the prevailing party the
costs (including reasonable attorneys' fees and expenses) of any such
arbitration.
14.3 SEVERABILITY. If any provision of this Agreement shall be found by any
arbitrator or court of competent jurisdiction to be invalid or
unenforceable, then the parties hereby waive such provision to the
extent that it is found to be invalid or unenforceable and to the
extent that to do so would not deprive one of the parties of the
substantial benefit of its bargain. Such provision shall, to the
extent allowable by law and the preceding sentence, be modified by
such arbitrator or court so that it becomes enforceable and, as
modified, shall be enforced as any other provision hereof, all the
other provisions continuing in full force and effect.
14.4 NO WAIVER. The failure by either party at any time to require
performance or compliance by the other of any of its obligations or
agreements shall in no way affect the right to require such
performance or compliance at any time thereafter. The waiver by either
party of a breach of any provision hereof shall not be taken or held
to be a waiver of any preceding or succeeding breach of such provision
or as a waiver of the provision itself. No waiver of any kind shall be
effective or binding, unless it is in writing and is signed by the
party against whom such waiver is sought to be enforced.
14.5 ASSIGNMENT. This Agreement and all rights hereunder are personal to
the Employee and may not be transferred or assigned by the Employee at
any time. The Company may assign its rights, together with its
obligations hereunder, to any parent, subsidiary, affiliate or
successor, or in connection with any sale, transfer or other
disposition of all or substantially all of its business and assets,
provided, however, that any such assignee assumes the Company's
obligations hereunder.
14.6 WITHHOLDING. All sums payable to the Employee hereunder shall be
reduced by all federal, state, local and other withholding and similar
taxes and payments required by applicable law.
14.7 ENTIRE AGREEMENT. This Agreement constitutes the entire and only
agreement between the parties relating to employment of the Employee
with the Company, and this Agreement supersedes and cancels any and
all previous contracts, arrangements or understandings with respect
thereto.
14.8 AMENDMENT. This Agreement may be amended, modified, superseded,
cancelled, renewed or extended only by an agreement in writing
executed by both parties hereto.
14.9 NOTICES. All notices and other communications required or permitted
under this Agreement shall be in writing and hand delivered, sent by
telecopier, sent by registered first class mail, postage pre-paid, or
sent by nationally recognized express courier service. Such notices
and other communications shall be effective upon receipt if hand
delivered or sent by telecopier, five (5) days after mailing if sent
by mail, and one (l) day after dispatch if sent by express courier, to
the following addresses, or such other addresses as any party shall
notify the other parties:
If to the Company:
INSYNQ, INC.
Attn: John P. Gorst
1127 Broadway Plaza, Suite 10
Tacoma, Washington 98402
If to the Employee:
Donald Kaplan
2100 Western Avenue Suite 73
Seattle, WA 98121
14.10 BINDING NATURE. This Agreement shall be binding upon, and inure to
the benefit of, the successors and personal representatives of the
respective parties hereto.
14.11 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall in no way affect the meaning or interpretation
of this Agreement. In this Agreement, the singular includes the
plural, the plural included the singular, the masculine gender
includes both male and female referents, and the word "or" is used in
the inclusive sense.
14.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all
of which, taken together, constitute one and the same agreement.
14.13 GOVERNING LAW. This Agreement and the rights and obligations of the
parties hereto shall be construed in accordance with the laws of the
State of Washington, without giving effect to the principles of
conflict of laws.
14.14 ATTORNEYS' FEES. In the event of any claim, demand or suit arising
out of or with respect to this Agreement, the prevailing party shall
be entitled to reasonable costs and attorneys' fees, including any
such costs and fees upon appeal.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Agreement as of the date first above written.
"THE COMPANY" "EMPLOYEE"
INSYNQ, INC.
By:/s/ John P. Gorst /s/ donald M. Kaplan
--------------------------------- -----------------------------------
John P. Gorst Donald M. Kaplan
Chief Executive Officer & Chairman
EXHIBIT "A"
TO
EMPLOYMENT AGREEMENT
DUTIES OF EMPLOYEE
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Schedule `A-1'
The Employee shall be disbursed US$10,000 per month from the inception of
employment on January 1, 2002, and the difference between said disbursement and
the monthly portion of the annual salary of the Employee determined as set out
in the Agreement, of which this Schedule `A1' forms an integral part, shall
accrue without interest, and the full monthly portion of the annual salary as
aforesaid shall begin to be disbursed, the accrued differences as set out above
shall be paid in a lump sum, and the Employee shall receive a signing bonus of
US$66,667, all such upon the earlier of the date upon which the CEO of the
Company deems that such is necessary and prudent, or the date upon which the
Company receives the first or only tranche of more than US$1,000,000 in
additional financing, whether by way of debt or equity, and whether directly or
into a vehicle, in which the Company owns more than or exactly 20% of the
equity.
Schedule `A-2'
The Employee has the option at any time to assign the benefits and obligations
of the Agreement, including all payments, stock grants and stock options
hereunder to his personal management company or other entity of his choosing.