EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made effective as of the
effective date of the Company's Registration Statement on Form SB-2 (File No.
333-56023), by and between Jenkon International, Inc., a Delaware corporation
(the "Company"), and Steve McKeag, an individual ("Employee").
In consideration of the mutual promises herein contained and other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Employee and the Company agree as follows:
1. TERM. Subject to the terms and conditions herein contained, the
Company hereby employs Employee, and Employee hereby accepts such employment,
for a period of one (1) year beginning as of the effective date of this
Agreement. This contract may be renewed by the mutual agreement of the
Company and Employee on an annual basis.
2. DESCRIPTION OF DUTIES. During Employee's employment hereunder,
Employee will report to the President of the Company and will hold the
position of Chief Financial Officer and/or such other management position(s)
as the Board of Directors may determine in its sole discretion.
Employee shall perform his duties hereunder primarily in the
Vancouver, Washington area, it being understood that Employee's duties
hereunder may require travel. Employee shall not be required to relocate
without his consent.
3. COMPENSATION.
(a) BASE COMPENSATION. All services shall be deemed to be
services required hereby and in consideration of the compensation provided
for herein and Employee shall not be entitled to any additional compensation
for serving in any other office or for serving as a director or officer of
the Company or any of its subsidiaries. For all services which Employee may
render to the Company or its subsidiaries in any capacity during the term
hereof, Employee will receive and the Company hereby agrees to pay Employee
base compensation ("Base Compensation") at the annual rate of One Hundred
Fifty Thousand Dollars ($150,000.00) per year commencing on the date of this
Agreement. Upon each yearly anniversary of the date of this Agreement,
Employee's Base Compensation automatically shall be increased by five percent
of the previous year's Base Compensation (the "Automatic Annual Increase").
The Base Compensation, as adjusted by any Automatic Annual Increase, is
payable in arrears in twenty-six (26) equal bimonthly installments, subject
to any deductions or withholdings required by applicable law.
(b) DISCRETIONARY BONUS. Employee shall also be entitled to
receive from the Company with respect to each fiscal year during the term of
this Agreement, such bonus ("Bonus") as the Company's Board of Directors or
the Compensation Committee of
such Board shall determine; provided, however, that nothing herein shall be
deemed to require that a Bonus be paid with respect to any given fiscal year.
Employee's Base Compensation, as increased by any Automatic Annual
Increase, and Bonus are hereinafter collectively referred to as
"Compensation."
4. BENEFITS; EXPENSES; AND VACATION. In addition to the Compensation,
Company will be entitled to receive the following additional benefits during
the term of this Agreement:
(a) Company-paid health, life, disability and/or dental insurance
(all on such terms and with such insurers as the Company shall offer to its
other executive officers); and
(b) such other fringe benefits and perquisites, if any, as the
Company shall from time to time make generally available to employees of the
Company.
In addition, Employee shall be entitled to reimbursement for all normal and
reasonable expenses necessarily incurred by him in the performance of his
obligations hereunder in accordance with the Company's expense reimbursement
policies and upon submission of appropriate documentation that such expenses
have been incurred. In addition, Employee shall be entitled to a minimum of
four (4) weeks paid vacation each year of his employment by the Company.
Such vacation time shall not be cumulative. If the Employee is employed by
the Company during only a portion of any year, the amount of fully-paid
vacation time shall be prorated.
5. FULL-TIME EMPLOYMENT. During the term hereof, Employee will devote
his full time and best efforts to the business of the Company.
6. NON-COMPETITION.
(a) For the period of this Agreement and for a two (2) year period
thereafter, Employee agrees not to compete with the business of the Company
anywhere in the United States. The phrase "compete with the business of"
shall be deemed to include engaging or being interested, directly or
indirectly, as an owner, employee, general partner, consultant, through stock
ownership, investment of capital, or rendering of services, either alone or
in association with others, in the ownership, operation, management or
supervision of any type of business or enterprise involving the design,
development, or sale of software or related products for or to the direct
sales industry. The foregoing shall not prevent Employee from owning up to
5% of the outstanding securities of a publicly held corporation which may
compete with the business of the Company.
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(b) CONFIDENTIALITY.
(1) CONFIDENTIAL INFORMATION. The term "Confidential
Information" as used in this Agreement shall include all ideas, materials,
information, data, records, software code, methods or plans developed, used
or employed by the Company or customers and not generally known to the
public. "Confidential Information" also includes, but is not limited to, all
information regarding the Company's or customers' financial affairs,
accounts, customer lists, marketing plans, business or acquisition
strategies, pricing, products, properties, processes, rate structure,
services, employee names, addresses, employment histories, compensation;
provided, however, that Confidential Information shall not include
information which properly and lawfully has become generally known to the
public other than as a result of the act or omission of Employee.
(2) IMPORTANCE OF CONFIDENTIAL INFORMATION. Employee
acknowledges and agrees that the Company's Confidential Information is a
valuable, special and unique asset of the Company which is extremely
important in a highly competitive business such as the software industry.
Employee acknowledges that the disclosure of any Confidential Information may
cause substantial injury and loss to the Company. Employee acknowledges that
the Company retains a proprietary interest in its Confidential Information
that persists beyond the termination of Employee's employment by the Company.
Employee further acknowledges that the preservation and protection of the
Confidential Information is an essential part of Employee's employment by and
business relationship with the Company and that Employee has a duty of
fidelity and trust to the Company in handling the Confidential Information.
(3) NON-DISCLOSURE OR USE. Employee shall not, during the
term of this Agreement and for a two (2) year period thereafter, without the
prior written consent of the Company in each instance or as otherwise may be
required by law or legal process, disclose to anyone any Confidential
Information of the Company, or utilize such Confidential information for
Employee's own benefit, or for the benefit of any third party, until such
time, if ever, as such Confidential Information becomes general public
knowledge (unless caused by any act of Employee in violation of this
Agreement), and all memoranda, records or other documents compiled by
Employee or made available during the term of this Agreement pertaining to
the business of the Company or any Confidential Information shall be the
property of the Company and shall be delivered to the Company on the
termination of Employee's employment or at any other time, immediately upon
request by the Company.
(b) NON-SOLICITATION. Employee agrees and acknowledges that
Employee's services hereunder are of a special, unique, extraordinary
character, that Employee's employment with the Company places Employee in a
position of confidence and trust and that Employee's services hereunder
necessarily will require the disclosure to Employee of Confidential
Information of the Company. Employee consequently agrees that it is
reasonable and necessary for the protection of the goodwill and business of
the Company that Employee make the covenants contained herein and that
Company is relying upon and is
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induced by the agreements made by Employee in this paragraph. Accordingly,
Employee agrees that during the term of this Agreement and for a two (2) year
period thereafter, Employee shall not, except on behalf of the Company,
directly or indirectly, and regardless of the reason for the cessation of
Employee's employment (i) attempt in any manner to persuade any third party
to cease to do business, or to reduce the amount of business which any such
party customarily has done or contemplates doing, with the Company, whether
or not the relationship between the Company and such third party was
originally established in whole or in part through Employee's efforts; or
(ii) on Employee's own behalf or otherwise, hire, solicit, seek to hire, or
offer employment to any person who is, during any such time period, an
employee of or independent contractor with the Company, or in any other
manner attempt, directly or indirectly, to influence, induce or encourage any
such person to leave the employ of, or terminate or diminish such person's
business relationship with, the Company. As used in this paragraph, the verb
'employ' shall include its variations, for example, retain or engage; and the
"Company" shall include Jenkon International, Inc. and each of its direct or
indirect subsidiaries.
The covenants of Employee set forth in this Section 6 are made in
consideration of the payments made to Employee pursuant to this Agreement,
the receipt, adequacy and sufficiency of which are acknowledged by Employee,
and such covenants have been made by Employee to induce the Company to enter
into this Agreement.
7. TERMINATION. Notwithstanding any other provision of this
Agreement, the Company shall have the right to terminate Employee's
employment during the term hereof for "cause" upon one (1) week's written
notice. In the event of termination for cause, and without limiting any
rights or remedies of the Company, Employee shall be entitled to receive, and
the Company shall be obligated to pay, only Employee's Compensation accrued
through the effective date of such termination. For the purposes hereof,
"cause" shall be limited to the following: (i) conviction of a felony; (ii)
commission of any intentional and material act involving fraud or
misappropriation of funds, properties or assets of the Company; (iii) chronic
alcoholism, drug addiction or substance abuse; (iv) gross negligence in the
performance of Employee's duties hereunder; (v) negligence in the performance
of Employee's duties hereunder which the Board of Directors of the Company
determines to have a material adverse effect on the Company; (vi) any
material violation of any written policies of the Company which, to the
extent curable, are not cured within thirty (30) days of Employee's receipt
of notice thereof; (vii) death of Employee; or (viii) Employee's physical or
mental disability or incapacity. For purposes hereof, "physical or mental
disability or incapacity" shall mean the failure of Employee to perform his
assigned duties in a manner reasonably satisfactory to the Company, where
such failure shall be by reason of physical or mental disability or
incapacity, and where Employee shall have so failed for a period of ninety
(90) consecutive days or more during any period of twelve (12) consecutive
months or less.
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8. EFFECT OF TERMINATION.
(a) TERMINATION FOR "CAUSE". In the event of Employee's
termination for "cause" pursuant to Section 7(i) through (vi) of this
Agreement, Employee or Employee's legal representatives shall be entitled to
receive, and the Company shall be obligated to pay, only an amount equivalent
to Employee's Base Compensation, accrued through the date of such termination.
(b) TERMINATION WITHOUT "CAUSE". In the event of termination (i)
without "cause" as defined by Section 7, or (ii) for "cause" as a result of
the death or physical or mental disability or incapacity of Employee pursuant
to Section 7(vii) or (viii) of this Agreement,, Employee shall be entitled to
receive, and the Company shall be obligated to pay, only an amount equivalent
to Employee's Base Compensation accrued through the date of such termination,
plus an amount equivalent to one year's Base Compensation at the annual rate
in effect on the date of termination, to be paid in accordance with the
ordinary payroll practices of the Company.
9. SURVIVAL. Upon the expiration or other termination of this
Agreement, all obligations of the parties shall forthwith terminate, except
that the provisions of Section 6, 8 and 10 through 16 shall continue in full
force and effect in accordance with its terms, such Section containing
independent agreements and obligations.
10. EQUITABLE REMEDIES. The agreements of the parties contained in
Section 6 are of a special, unique and extraordinary character; the
obligations contained therein shall therefore be enforceable both at law and
in equity, by injunction and otherwise; and the rights and remedies of the
Company and the Employee hereunder with respect thereto shall be cumulative
and not alternative and shall not be exhausted by any one or more uses
thereof.
11. ENTIRE AGREEMENT; WAIVERS AND AMENDMENTS. This Agreement sets
forth the entire agreement between the parties with respect to the terms and
conditions of Employee's employment and any and all matters related thereto,
and any and all prior agreements with respect to any thereof, whether oral or
written, are superseded hereby. Neither this Agreement nor any term or
condition hereof, including, without limitation, the terms and conditions of
this paragraph, may be waived or modified in whole or in part as against the
Company or Employee, as the case may be, except by written instrument signed
by an authorized officer of the Company or by Employee, as the case may be,
expressly stating that it is intended to operate as a waiver or modification
of this Agreement, and any such written waiver by either party of a breach of
any provision of this Agreement shall not operate or be construed as a waiver
of any subsequent breach hereof.
12. NOTICE. Any notice hereunder shall be in writing and shall be
deemed given or delivered two (2) business days after it has been mailed by
registered or certified
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mail, postage prepaid, or one (1) business day after being sent by
a recognized national courier service, in each case addressed as follows:
(a) Notices to the Employee:
Steve McKeag
7600 N.E. 41st Street, Suite 350
Vancouver, Washington 98662
(b) Notices to the Company:
Jenkon International, Inc.
7600 N.E. 41st Street, Suite 350
Vancouver, WA 98662
except that either party may from time to time by written notice to the
other, designate another address which shall thereupon become his effective
address for the purposes of this Section.
13. SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any person, property or circumstance shall to any
extent be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to persons, property or circumstances
other than those as to which it is invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be
valid and enforced to the fullest extent permitted by law.
14. NO ASSIGNMENT. This Agreement is personal in nature and the
obligations hereunder may not be assigned by the Company or by Employee
without the prior written consent of the other party hereto; provided,
however, that the provisions hereof shall inure to the benefit of, and be
binding upon each successor of the Company, whether by merger, consolidation,
transfer of all or substantially all of its assets, or otherwise.
15. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Washington.
16. ARBITRATION; VENUE.
(a) Subject to the provisions of Section 11 hereof, any dispute,
controversy or claim arising out of, relating to, or in connection with, this
Agreement or the agreements or transactions contemplated hereby shall be
finally settled by arbitration conducted in accordance with the provisions of
this Section 16. The arbitrator shall be a retired judge or practicing
attorney and the arbitration shall be conducted and the arbitrator chosen in
accordance with the rules of the American Arbitration Association (the "AAA")
in effect at the time of the arbitration, except as they may be modified
herein or by mutual agreement of the parties hereto (the "Parties"). If the
Parties are unable to agree on the location of the arbitration within five
(5) business days after the date of delivery of the request of arbitration,
the Parties agree the arbitration will be conducted in Vancouver, Washington.
Each Party
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hereby irrevocably submits to the jurisdiction of the arbitrator in Portland,
Oregon and waives any defense in an arbitration based upon any claim that
such Party is not subject personally to the jurisdiction of such arbitrator,
that such arbitration is brought in an inconvenient forum or that such venue
is improper.
(b) The arbitral award shall be in writing and shall be final and
binding on the Parties. The award may include an award of costs, including
reasonable attorneys' fees and disbursements. Judgment upon the award may be
entered by any court having jurisdiction thereof or having jurisdiction over
the Parties or their assets.
17. EFFECTIVE DATE OF AGREEMENT. Notwithstanding anything to the
contrary contained in this Agreement, this Agreement shall not be effective
and shall be of no force and effect unless and until the Company's
Registration Statement on Form SB-2 (SEC file no. 333-56023) shall have been
declared effective by the Securities and Exchange Commission.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the 8th day of July, 1998.
"Company"
Jenkon International, Inc.,
a Delaware corporation
By:
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David Edwards
President & Chief Executive Officer
"Employee"
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Steve McKeag
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