.
SERVICE AGREEMENT
THIS AGREEMENT made and entered into as of May 1, 1999;
BETWEEN:
DR. SCOTT A. VANSTONE
10140 Pineview Trail
P.O. Box 490
Campbellville, Ontario
LOP 1B0
(the "Chief Cryptographer")
OF THE FIRST PART
-and-
CERTICOM CORP.
200 Matheson Boulevard West, Suite 200
Mississauga, Ontario L5R 3L7
(the "Corporation")
OF THE SECOND PART
THIS AGREEMENT WITNESSES that in consideration of the covenants and agreements
herein contained the parties hereto agree as follows:
1. Services
1.1 Description
(a) The Chief Cryptographer will provide the following services:
(i) provision of and responsibility for research and
development, in the leadership role of Chief
Cryptographer, of cryptographic and information
security systems on an exclusive basis to the
Corporation;
(ii) provision of technical support for marketing and
strategy development;
(iii) provision of product development support;
(iv) the overseeing and training of the Corporation's
cryptographers;
(v) the identification of strategic intellectual property
initiatives;
-1-
(vi) provision of support for patent activity;
(vii) responsibility for providing research and development
of the Corporation's products relating to
cryptographic and security information systems; and
(viii) such other services as are mutually agreed upon
between the Chief Cryptographer and the Corporation
from time to time.
(b) The Chief Cryptographer shall commit himself on a full-time
basis and provide active service in person at the offices of
the Corporation or such other appropriate site as the
Corporation may agree to for an average three (3) days per
week. At all times, the Chief Cryptographer will use his best
efforts to respond in a reasonably timely fashion to all
e-mail and voicemail messages relating to the services to be
provided by him under this Agreement.
(c) The parties agree that they will discuss and mutually agree
upon the extent of the Chief Cryptographer's involvement in
such other activities and his time commitments relating
thereto.
(d) Subject to shareholder approval, the Chief Cryptographer may
be appointed as a member of the Corporation's board of
directors during the term of this Agreement or, in the
alternative, may attend meetings of such board of directors
as an observer.
1.2 Term and termination
Unless otherwise terminated as provided for in this Agreement, this
Agreement shall be for a term of five (5) years, and may be renewed upon mutual
written consent of the parties for successive additional periods of one (1) year
each. This Agreement may be terminated by either party upon receipt of written
notice at least ninety (90) days in advance of the annual anniversary date of
this Agreement. Further, if either party is in breach of any of its obligations
under this Agreement, the other party may give notice in writing of the breach
to the defaulting party and request the latter to remedy such breach. If the
party in breach fails to remedy the breach within thirty (30) days after the
date of written notice, then the Agreement may be terminated immediately by
written notice of termination given by the complaining party.
1.3 Non-Competition
The Chief Cryptographer agrees that during the term of this Agreement,
and for twelve (12) months following the termination of this Agreement, without
the prior written approval of the Chief Financial Officer of the Corporation, he
will not become engaged, directly or indirectly as an employee, consultant,
partner, principal, agent, proprietor, shareholder (other than a holding of
shares listed on a stock exchange that does not exceed 2% of the outstanding
shares so listed) or advisor, in a business in
-2-
(a) Canada;
(b) the United States; or
(c) anywhere else in the world where the Corporation markets its
products or services during the term of this Agreement;
that
(i) develops or markets software competitive with the software
owned or marketed by the Corporation, or
(ii) provides consulting, maintenance, support or training
services that are competitive with the consulting,
maintenance, support or training services provided by the
Corporation,
provided if, with respect to the period after the termination of this Agreement,
such business has two or more divisions located at different addresses, then
this Section 1.3 will not prohibit the Chief Cryptographer from becoming engaged
in a division that neither develops nor markets software competitive with the
software owned or marketed by the Corporation nor provides services that are
competitive with the services provided by the Corporation (provided further that
in such case all the other obligations of this Agreement shall continue to
apply). The Corporation recognizes that the Chief Cryptographer is the owner and
principal of SVI Consulting Inc. and that the corporation excludes SVI
Consulting Inc. from the terms of this non-compete clause.
SAV.
2. Remuneration
2.1 Fees
The Corporation shall pay to the Chief Cryptographer an amount that
will provide him with total annual compensation including all amounts paid to
the Chief Cryptographer by the University of Waterloo, other than publishing
royalties, as follows:
May 1, 1999 - April 30, 2000 $275,000.00;
May 1, 2000 - April 30, 2001 $300,000.00;
May 1, 2001 - April 30, 2002 $325,000.00;
May 1, 2002 - April 30, 2003 $350,000.00;
May 1, 2003 - April 30, 2004 $375,000.00.
Such amounts will be paid monthly in advance.
2.2 Compensation Disclosure
The Chief Cryptographer will provide the Corporation with full and
timely disclosure of his compensation from the University of Waterloo in order
that the fees to be paid as outlined in Section 2.1 above may be calculated.
-3-
2.3 Stock Options
During the term of this Agreement, the Chief Cryptographer shall be
entitled to participate in the Corporation's 1997 Stock Option Plan ("1997 SOP")
and any additional stock option plans or stock purchase plans established by the
Corporation. The grant of any options or other benefits under such plans shall
be in the discretion of the Corporation, however, the Corporation acknowledges
that the contribution of each of the Chief Cryptographer and Philip C. Deck is
fundamental to the success of the Corporation and declares that subject to
satisfactory performance, it is the intention of the Corporation to treat the
Chief Cryptographer and Philip C. Deck similarly under the foregoing plans.
2.4 Auto Allowance
In addition to the amounts outlined in section 2.1, the Chief
Cryptographer will receive a monthly auto allowance in the amount of $800.
2.5 Expenses
The Chief Cryptographer shall be reimbursed at the Corporation's cost
for all authorized travelling and other out-of-pocket expenses actually and
properly incurred by him in connection with his duties hereunder. For all such
expenses the Chief Cryptographer shall furnish to the Corporation statements and
vouchers as and when required by the Corporation.
2.6 Issuance of Shares
In the event of a take-over bid, an amalgamation, a plan of
arrangement or other form of business transaction pursuant to which holders of
Common Shares cease to own at least 33% of the voting securities of the
Corporation or surviving entity resulting from such transaction (an
"Acquisition"), the Corporation will issue to the Chief Cryptographer 50,000
Common Shares. Such shares, if issued to the Chief Cryptographer, will vest as
to 16,667 of such shares on the first anniversary following the completion of
the Acquisition and a further 16,666 of such shares on each of the second and
third anniversary of the completion of the Acquisition. Notwithstanding the
foregoing, in the event that this Agreement is terminated by the Corporation
subsequent to the completion of the Acquisition, then all of the foregoing
shares that have not yet vested will vest immediately upon the termination of
this Agreement.
3. Proprietary Rights Agreement
The Chief Cryptographer confirms he has executed and is bound by the
Proprietary Rights Agreement attached hereto. The Chief Cryptographer's
obligations under such Proprietary Rights Agreement shall continue both before
and after he has used any Confidential Information for the purposes of such
Proprietary Rights Agreement and both before and after the services of the Chief
Cryptographer with the Corporation cease, and shall continue until such time as
the Chief Cryptographer is expressly released therefrom by the Corporation in
writing. The obligations of the Chief Cryptographer under this Agreement shall
be binding on the executors, administrators or other legal representatives
-4-
of the Chief Cryptographer. Any breach by the Chief Cryptographer of this
Agreement or the above Proprietary Rights Agreement shall cause irreparable
damage to the Corporation and any such breach shall entitle the Corporation to
immediate injunctive relief from a court of competent jurisdiction.
4. Confidentiality
All confidential data and information concerning the Corporation and
obtained by the Chief Cryptographer during the performance of his services under
this Agreement shall be maintained confidential by the Chief Cryptographer.
5. Exclusive Contract
Subject to what is hereinafter stated, the Chief Cryptographer agrees
that it is a condition of the Corporation utilizing the services of the Chief
Cryptographer, that the Chief Cryptographer shall not provide similar services
to any other person, other than the performance of his duties as a Professor at
the University of Waterloo. For the purposes of clarity, it is agreed that the
Chief Cryptographer shall not provide services directly or indirectly during the
term of this Agreement to a competitor of the Corporation in the cryptographic
or information security systems fields or in any closely related field of study.
The Corporation shall be entitled to retain the services of any persons without
restriction during the term of this Agreement.
6. Assignment
Neither this Agreement nor any interest may be assigned in any manner
by either party.
7. Entire Agreement
This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and cancels and supersedes any prior
understandings and agreements between the parties hereto with respect thereto.
There are no representations, warranties, forms, conditions, undertakings or
collateral agreements, express, implied or statutory between the parties other
than as expressly set forth in this Agreement.
8. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the laws of Canada applicable therein.
-5-
IN WITNESS WHEREOF the parties have executed this Agreement.
)
/s/ Bruce MacInnis ) /s/ Scott A. Vanstone
- ---------------------------------) -------------------------------------
Witness ) Dr. Scott A. Vanstone
Name: Bruce MacInnis )
Address: 1513 Sturgeon Court )
Pickering, ON )
L1V 5P6 )
CERTICOM CORP.
By: /s/ Philip C. Deck
----------------------------------
Philip C. Deck
Chief Executive Officer
-6-