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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period from June 29, 1997 to September 27, 1997
------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------ --------------
Commission File Number 0-16930
EGGHEAD, INC.
-------------
(Exact name of registrant as specified in its charter)
Washington 91-1296187
---------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
East 22705 Mission
Liberty Lake, Washington 99019
------------------------ -----
(Address of principal executive offices) (Zip Code)
(509) 922-7031
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
YES x NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock:
Outstanding at
Class October 25, 1997
----- ----------------
Common Stock 23,001,671
$.01 par value shares
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ITEM 1. Financial Statements and Supplementary Data
EGGHEAD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
ASSETS
September 27, March 29,
1997 1997
------------- ---------
Current assets:
Cash and cash equivalents $ 54,131 $ 83,473
Accounts receivable, net of allowance for
doubtful accounts of $4,438 and $4,680,
respectively 10,532 13,917
Receivable from Joint Venture - 4,000
Merchandise inventories, net 63,268 49,087
Prepaid expenses and other current assets 3,768 4,116
Property held for sale 7,852 7,692
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Total current assets 139,551 162,285
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Property and equipment, net 12,922 12,018
Goodwill, net 34,153 -
Other assets 430 1,217
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$187,056 $175,520
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--------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 36,991 $ 43,027
Accrued liabilities 11,805 12,996
Liabilities related to disposition of CGE division 5,860 7,754
Reserves and liabilities related to restructuring 7,870 11,258
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Total current liabilities 65,526 75,035
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Other long-term liabilities 243 438
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Total liabilities 67,479 75,473
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Commitments and contingencies - -
Shareholders' equity :
Common stock, $.01 par value:
50,000,000 shares authorized; 22,953,851 and
17,591,052 shares issued and outstanding,
respectively 230 176
Additional paid-in capital 157,206 124,457
Retained earnings (deficit) (33,149) (24,586)
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Total shareholders' equity 124,287 100,047
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$187,056 $175,520
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SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
2
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CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
13 WEEKS ENDED 26 WEEKS ENDED
------------------------ ------------------------
(UNAUDITED) (UNAUDITED)
September September September September
27, 28, 27, 28,
1997 1996 1997 1996
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Net sales:
Egghead Computer $54,967 $79,971 $111,128 $158,617
Surplus Direct 8,323 - 8,323 -
--------- --------- --------- ----------
Net sales 63,290 79,971 119,451 158,617
Cost of sales, including certain buying,
occupancy, and distribution costs 55,875 71,786 106,261 143,822
--------- --------- --------- ----------
Gross margin 7,415 8,185 13,190 14,795
Selling, general, and
administrative expense 12,020 15,015 21,502 32,949
Depreciation and amortization expense, net
of amounts included in cost of sales 1,022 1,766 1,979 3,513
--------- --------- --------- ----------
Operating loss (5,627) (8,596) (10,291) (21,667)
Other income (expense) 722 960 1,728 1,615
--------- --------- --------- ----------
Loss from continuing operations before income taxes,
effects of discontinued operations and cumulative
effect of change in accounting principle (4,905) (7,636) (8,563) (20,052)
--------- --------- --------- ----------
Income tax benefit - 2,978 - 7,820
--------- --------- --------- ----------
Net loss from continuing operations before effects
of discontinued operations and cumulative
effect of change in accounting principle (4,905) (4,658) (8,563) (12,232)
--------- --------- --------- ----------
Discontinued operations:
Income (loss) from discontinued
operations, net of tax - - - (14,548)
Gain on disposal of discontinued
operations, net of tax - - - 22,286
--------- --------- --------- ----------
Income (loss) from discontinued operations - - - 7,738
--------- --------- --------- ----------
Net loss before cumulative effect of
change in account principles (4,905) (4,658) (8,563) (4,494)
Cumulative effect of change in
account principles net of tax - (711)
--------- --------- --------- ----------
Net loss $(4.905) $(4,658) $(8,563) $(5,205)
--------- --------- --------- ----------
--------- --------- --------- ----------
Loss per share:
Continuing operations $(0.24) $(0.25) $(0.45) $(0.70)
Discontinued operations:
Loss from discontinued
operations - - - (0.83)
Gain on disposal of discontinued
operations - - - 1.27
Change in accounting principle - - - (0.04)
--------- --------- --------- ----------
Loss per share $(0.24) $(0.27) $(0.45) $ (0.30)
--------- --------- --------- ----------
--------- --------- --------- ----------
Weighted average common shares and common
equivalent shares outstanding 20,127 17,567 18,859 17,561
--------- --------- --------- ----------
--------- --------- --------- ----------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
3
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock Additional
------------ Paid-in Retained
Shares Amount Capital Earnings Total
--------------------- ---------- --------- -----
<S> <C> <C> <C> <C>
Balance, March 29, 1997 17,591 $ 176 $ 124,457 $ (24,586) $100,047
Stock issued for cash, pursuant
to employee stock purchase
plan 23 - 78 78
Stock issued for cash, pursuant
to stock option plan 29 1 149 150
Stock issued for acquisition of
Surplus Software, Inc. 5,311 53 32,522 32,575
Net loss (8,563) (8,563)
------ ------ ----------- ----------- ---------
Balance, September 27, 1997 22,954 $ 230 $ 157,206 $ (33,149) $124,287
------ ------ ----------- ----------- ---------
------ ------ ----------- ----------- ---------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
4
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
26 Weeks Ended
------------------------
(UNAUDITED)
September 27, September 28,
1997 1996
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (8,563) $ (5,205)
---------- ----------
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Depreciation and amortization 2,276 4,300
Deferred rent (195) (194)
Deferred income taxes - (753)
Cumulative effect of change in accounting principle - 1,163
(Gain) loss on disposition of assets (1) 2,730
(Gain) on sale of CGE, before taxes - (36,535)
Reserves recorded in connection with CGE disposal (1,788) 8,465
Changes in assets and liabilities:
Accounts receivable, net 7,385 6,545
Merchandise inventories (18,891) (14,520)
Prepaid expenses and other current assets (151) (3,674)
Other assets (727) 56
Accounts payable 510 (36,682)
Accrued liabilities 1,309 (2,581)
Income taxes payable - -
Discontinued Operations (3,761) 67,049
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Total adjustments (14,034) (4,631)
---------- ----------
Net cash (used) provided by operating activities (22,597) (9,836)
---------- ----------
Cash flows from investing activities:
Additions to property and equipment (793) (2,845)
Proceeds from sale of equipment 7 28
Proceeds from sale of CGE - 45,000
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Net cash (used) provided by investing activities (786) 42,183
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Cash flows from financing activities:
Payments on capital lease obligations (125) (173)
Payments on notes payable (6,000)
Proceeds from stock issuances 166 191
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Net cash (used) provided by financing activities (5,959) 18
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Effect of exchange rates on cash - (35)
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Net increase (decrease) in cash (29,342) 32,330
Cash and cash equivalents at beginning of period 83,473 49,590
---------- ----------
Cash and cash equivalents at end of period $ 54,131 $ 81,920
Supplemental disclosures of cash paid:
Interest $ 24 $ 22
Income taxes $ - $ 67
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. While these statements reflect the
adjustments which are, in the opinion of management, necessary to fairly
state the results of the interim periods, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. These adjustments are of a
normal and recurring nature. For further information, refer to the annual
financial statements and footnotes thereto, for the 52 week period ended
March 29, 1997, contained in the Company's Form 10-K, filed pursuant to
the Securities Exchange Act of 1934. The reader is further cautioned that
operating results for the 13 and 26 weeks ended September 27, 1997, are
not necessarily indicative of the results that may be expected for the
full year.
The Company uses a 52/53 week fiscal year, ending on the Saturday nearest
March 31 of each year. Each fiscal quarter consists of 13 weeks.
NOTE 2 EARNINGS (LOSS) PER SHARE
Net earnings (loss) per share amounts are computed using the weighted
average number of common shares and dilutive common equivalent shares
outstanding during each period using the treasury stock method. Common
equivalent shares result from the assumed exercise of stock options and
from the conversion of cash related to the employee stock purchase plan
into common shares based upon the terms of the plan. Common equivalent
shares had no effect on the computation of the loss per share amount for
the 13 and 26 week periods ended September 27, 1997, and September 28,
1996, because it was anti-dilutive.
NOTE 3 DISCONTINUED OPERATIONS
Effective May 13, 1996, the Company sold its CGE division to Software
Spectrum, Inc. (SSI), a Texas Corporation for $45 million in cash pursuant
to the terms of an asset purchase agreement entered into on March 23,
1996. The asset purchase agreement required Egghead to provide SSI with
certain support services for a period not to exceed 120 days on Egghead's
behalf, SSI's collection of Egghead's CGE related accounts receivable for
a period not to exceed 150 days and a lease to SSI for a minimum period of
three years of a portion of Egghead's Liberty Lake corporate facility.
Gain on disposition of the discontinued operation was $36.5 million ($22.3
million after tax). The sale price for the CGE division was $45 million,
which did not include the accounts receivable, which were collected during
fiscal 1997. The reported gain is net of fixed assets and lease write-
offs of $1.2 million, transaction, legal and accounting fees of $2.0
million, transition period employment costs of $1.8 million and costs
related to the fulfillment of post-sale obligations as noted above.
The net liabilities relating to discontinued operations have been
segregated on the consolidated balance sheet from their historic
classifications. Liabilities related to the disposition of the CGE
division at September 27, 1997 and March 29, 1997 included
6
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liabilities from CGE activities and additional reserves deemed necessary
to complete the disposition of remaining CGE assets, including the
settlement of any remaining claims.
Information related to the effects of the discontinued operation on the
consolidated statements of income are reflected in the income statement as
income(loss) from discontinued operations. Discontinued operations for
the fiscal year-to-date period ended September 28, 1996, resulted in a
loss, net of tax, of $14.5 million. This loss includes accounts receivable
and inventory write-offs, equipment lease buyouts and write-offs, warehouse
closing costs, severance, operating costs and other expenses.
NOTE 4 INCOME TAXES
Egghead determines its income tax accounts in accordance with Statement of
Financial Accounting Standards No. 109 (SFAS No. 109). Deferred income
taxes result primarily from temporary differences in the recognition of
certain items for income tax and financial reporting purposes.
Given the recent losses, Egghead determined that its deferred tax assets
no longer meet the realization criteria of SFAS No. 109. Under SFAS 109,
the realization of the deferred tax assets depends on generating future
taxable income. Until Egghead has determined that all of its existing net
operation losses, which expire 15 years after origination, are realizable,
it will not record a tax charge or benefit for future operating results.
NOTE 5 LEASES
The Company leases retail stores and a distribution facility under
operating leases with remaining lives on most leases ranging from one to
five years. As of September 27, 1997 the future minimum rental payments
under these noncancelable operating leases for continuing retail stores,
the distribution facility and equipment were as follows (in thousands):
Fiscal Year
-----------
1998 $3,241
1999 4,484
2000 2,481
2001 1,555
2002 502
Thereafter 1,280
------
Total minimum payments $13,543
------
------
7
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Notes to Consolidated Financial Statements (CONTINUED)
(UNAUDITED)
NOTE 6 RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." This new standard required that long-lived assets and certain
identifiable intangible assets be evaluated to determine whether the
carrying amount is recoverable based on estimated future cash flows
expected from the use of the assets and cash to be received upon disposal
of the assets. Egghead adopted this standard at the beginning of the
first quarter of fiscal 1997. The cumulative effect of the change in
accounting principle, which was recognized in the first quarter of fiscal
1997, was a charge of $0.7 million, after tax, or $0.04 per share,. This
charge represents the writedown of Egghead's property held for sale in
Kalispell, Montana and the related goodwill. In connection with its
adoption of SFAS No. 121, Egghead also recorded a pretax charge of
approximately $0.1 million related to retail assets, the carrying amounts
of which were not likely to be recovered through future cash flows.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128 (SFAS 128), "Earnings Per Share." SFAS 128 establishes
new standards for computing and presenting earnings per share and
supersedes Accounting Principles Board Opinion No. 15, "Earnings Per
Share." SFAS 128 will be adopted by Egghead in the third quarter of
fiscal 1998. Management does not believe the adoption of this new
standard would have a material effect on earnings (loss) per share as
currently reported.
NOTE 7 STOCK OPTION REPRICING
On April 4, 1997, the Compensation Committee of the Egghead Board approved
a plan pursuant to which employees other than executive officers were
offered an opportunity to exchange options having per share exercise
prices in excess of the then current fair market value per share of
Egghead common stock for new options having an exercise price of $4.375
per share of Egghead stock. The Compensation Committee approved a similar
option repricing for certain executive officers on April 23, 1997.
Recipients of the repriced replacement options received credit for vesting
under the original options, but cannot exercise the new options for a one-
year period following the date of grant of the new options. The total
number of options repriced under the option repricing described above was
465,014.
8
<PAGE>
Notes to Consolidated Financial Statements (CONTINUED)
(UNAUDITED)
NOTE 8 ACQUISITION
On August 14, 1997, the Company acquired Surplus Software, Inc. d/b/a Surplus
Direct, of Hood River, Oregon, by issuing 5,310,888 shares of common stock and
289,112 options to purchase common stock of Egghead, Inc. The transaction
included payment of $6.0 million of Surplus Direct debt. Surplus Direct is
engaged in the direct marketing of previous version computer hardware and
software. This acquisition was recorded under the purchase method of
accounting and operating results of Surplus Direct are included in the
statement of operations from the date of acquisition. An excess purchase price
of approximately $34.3 million has been determined based on the fair values of
assets acquired and liabilities assumed. A final allocation of purchase price
to goodwill will be made during fiscal 1998 when appraisals and other studies
are completed. Amortization of goodwill will be over a period not to exceed 20
years.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
GENERAL
RESULTS OF OPERATIONS
OVERVIEW
Egghead, Inc. ("Egghead") is a national reseller of personal computer ("PC")
hardware, software, peripherals and accessories through 85 retail stores, two
Internet catalog sites an Internet auction site and two direct response
divisions (1-800EGGHEAD and 1-800SURPLUS). Egghead markets its products
primarily through two subsidiaries DJ&J Software d/b/a/ Egghead Computer and
Surplus Software, Inc. d/b/a/ Surplus Direct. Egghead began operations in
1984 primarily as a software reseller, but has recently expanded its product
offerings to include a greater percentage of hardware, other non-software
products, electronic software downloads, as well as off-price and previous
version merchandise, build to order computers and liquidation items.
On August 14, 1997, Egghead acquired Oregon based Surplus Direct for 5.6
million newly issued shares of Egghead common stock (the "Merger"). The
transaction included repayment of $6.0 million of Surplus Direct debt. Surplus
Direct specializes in sales of previous version computer hardware and software.
Egghead believes this Merger will create synergies through the combination of
surplus Direct's hardware purchasing expertise, access to the surplus PC
products channel, entrepreneurial management and Internet commerce development
capabilities with Egghead's greater software product procurement expertise and
seasoned retail management. Nevertheless, there can be no assurance that these
benefits will be achieved.
Egghead's profitability over its early operating history was mixed; however,
over its last five fiscal years, Egghead has reported increasing losses from
continuing operations. Egghead's losses over the last five fiscal years are
attributable primarily to an increased number of competitors selling PC
products through a greater variety of channels, severe price competition among
PC product resellers, a trend toward lower margins on computer and related
software products, Egghead's relatively high headquarters expenses and other
factors. Egghead has taken a number of steps intended to reduce or eliminate
Egghead's losses. These steps include divesting a non-retail business segment,
focusing its retail operations in certain geographic markets, closing
unprofitable stores, upgrading existing stores, experimenting with new store
formats and implementing new Internet commerce sites.
For example, in May 1996, Egghead sold its Corporate, Government and Education
("CGE") division to generate cash and to allow management to focus on retail
operations. The sale resulted in a net gain of $22.3 million, offset by a
related net loss from the CGE operations of $12.3 million. During the fourth
quarter of fiscal 1997, Egghead substantially restructured and reorganized its
operations by (i) closing 70 of its worst performing retail stores,
(ii) substantially reducing its headquarters personnel, (iii) closing its
Lancaster, Pennsylvania distribution center, and (iv) offering for sale certain
real estate assets, including its administrative headquarters building located
in Liberty Lake, Washington. Egghead intends to close an additional seven
poorly performing retail stores as part of the restructuring and
reorganization. The restructuring and reorganization concentrated Egghead's
retail stores into fewer geographic markets and is expected to reduce
headquarters and distribution expenses for continuing operations. Overall,
Egghead's selling, general and administrative expenses have decreased $14.4
million during the first half of fiscal 1998, offset by the addition of $1.4
million of Surplus Direct operating expenses, $1.0 million of acquisition
expenses and an increase of $0.5 million in development expenses of its Elekom
Corporation subsidiary. Egghead also opened the first Egghead Computer Surplus
warehouse format store in Portland, Oregon in November 1996 and expanded the
Spokane, Washington store to accommodate the
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warehouse format product mix in August 1997. The warehouse store format is
approximately 12,000 square feet and carries a product mix of new and
off-price computer hardware and software. These stores have demonstrated
positive sales revenues with the Spokane location recording a 69% increase in
sales since the expansion. The product mix in this format provides for a
larger offering of hardware and computer accessories. The Portland and
Spokane stores second quarter results were 86% non-software products.
Egghead plans to open at least two new warehouse stores prior to the 1997
Holiday selling season.
The Company's year-to-date pretax operating losses as of September 27, 1997
have decreased $11.5 million from the prior year comparable period. Although
the fiscal 1997 restructuring and reorganization have reduced headquarters
and distribution expenses, further reductions in operating expenses may be
necessary. Closure of poorly performing stores should improve retail store
operating performance and inventory turn ratios for the remaining stores, but
results from its the warehouse store format are still new. Egghead Computer
will continue to evaluate the performance of its larger format stores and
expects that further refinement of its store format and locations may be
required. Egghead Computer and Surplus Direct's Internet sites are
relatively new and the long-term growth of this industry has not yet been
proven. Accordingly, it is not yet clear that Egghead has developed a
business strategy that will accomplish the goal of further reducing and
eliminating its losses, and there can be no assurance that it will be able to
do so.
Egghead uses a 52/53-week fiscal year, ending on the Saturday nearest March 31
of each year. Each fiscal quarter consists of 13 weeks. Information contained
in this report excludes, unless otherwise stated, any data relative to the
discontinued operations of the CGE division.
When used in this report and elsewhere by management, from time to time, the
words "believes,: "anticipates" and "expects" and similar expressions are
intended to identify forward-looking statements. Certain important factors
could cause actual result to differ materially from those expressed in the
forward-looking statements. These factors are detailed in Egghead's Annual
Report on From 10-K for the fiscal year ended March 29, 1997, and include, but
are not limited to, risks associated with the fluctuations in, and the
uncertainty of, future operating results, the intensely competitive nature of
the business of selling PC software, hardware and related products, Egghead's
dependence on certain supply sources, and Egghead's limited experience, and
risks associated, with Internet commerce. Readers are cautioned not to place
undue reliance on the forward-looking statements, which speak only as of the
date made. The Company undertakes no obligation to publicly release the
results of any revision to the forward-looking statements that may be made to
reflect subsequent events or circumstances or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
Egghead reported a total net loss for the quarter ended September 27, 1997 of
$4.9 million compared to a total net loss of $4.7 million for the quarter ended
September 28, 1996. On a pretax basis, the loss from continuing operations for
the second quarters of fiscal 1998 and 1997 were $4.9 million and $7.6 million,
respectively. The pretax loss from continuing operations for the six months
ended September 27, 1997 and September 28, 1996 were $8.6 million and $20.1
million, respectively.
During the second quarter of fiscal 1998, the pretax loss for Egghead computer
was $2.6 million compared to a pretax loss of $7.3 million last year. Elekom
Corporation lost $0.8 million versus $0.3 million for the prior year comparable
quarter. In addition, Egghead incurred one-time costs associated with the
acquisition of Surplus Direct of $1.0 million and Surplus Direct incurred an
operating loss of $0.5 million during the quarter.
Had the company recorded comparable tax benefits for the quarters, the net loss
from continuing operations after tax would have been $3.0 million for the
second quarter of fiscal
11
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1998 as compared to $4.7 million for the second quarter of fiscal 1997.
Until Egghead has determined that all of its existing net operating loss
carryforwards are realizable. It will not record a tax charge or benefit for
future operating results. For comparative purposes, Egghead's results of
operations are discussed below on a pretax basis.
CONTINUING OPERATIONS
PRETAX LOSS. Loss from continuing operations includes the results of Egghead
Computer's retail stores, 1-800EGGHEAD direct response unit, Internet catalog
operations and ELEKOM as well as selling, general, and administrative expenses
related to these operations. In addition, the fiscal 1998 second quarter
results include the operations of Surplus Direct from the date of acquisition.
The pretax net loss for the second quarter from continuing operations was $4.9
million compared to the net loss of $7.6 million for the same period of the
previous year. The following table shows the relationship of certain items
relating to continuing operations included in Egghead's Consolidated Statements
of Operations expressed as a percentage of net sales:
PERCENTAGE OF NET SALES
Second Quarter Year to Date
13 Weeks Ended 26 Weeks Ended
Sept. 27, Sept. 28, Sept. 27, Sept. 28,
1997 1996 1997 1996
-------- ------- --------- ------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including certain
buying, occupancy, and
distribution costs 88.3 89.8 89.0 90.7
Gross margin 11.7 10.2 11.0 9.3
Selling, general, and
administrative expense 19.0 18.8 18.0 20.8
Depreciation and amortization
expense, net of amounts
included in cost of sales 1.6 2.2 1.7 2.2
Operating loss (8.9) (10.8) (8.7) (13.7)
Loss from continuing operations
before income taxes (7.8) (9.6) (7.2) (12.7)
NET SALES. Net sales for the second quarter of fiscal 1998 were $63.3 million,
a decrease of 20.9% from the $80.0 million in revenue for the same period of
the previous year. Surplus Direct contributed $8.3 million in sales for the
six weeks after the acquisition date of August 14, 1997. Surplus Direct's
sales increase approximately 103% over the prior year comparable period. The
sales results reflect a 31% decline in Egghead computer's sales primarily due
to the decrease in the average number of stores open to 86 from 162 in the
second quarter of fiscal 1997. The decreases in the second quarter and year-
to-date sales reflect the previously announced closure of 70 stores in the
February 1997. Comparable store sales for the second quarter and six months
ended September 27, 1997 decreased 5.6% and 2.2%, respectively, from the same
periods last year. Comparable store sales measure sales for stores that were
open in both periods being evaluated.
GROSS MARGIN. Consolidated gross margins (net sales minus cost of sales,
including certain buying, occupancy, and distribution costs) grew from 10.2 %
of sales for the second quarter of fiscal 1997 to 11.7% for the second quarter
of fiscal 1998. Gross margin dollars declined to $7.4 million for the second
quarter of fiscal 1998, compared to $8.2 million for the prior year
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comparable period. The gross margin percentage increases for the
second quarter and six-months ended September 27, 1997 were primarily due to
an increase in initial margin and decreases in retail occupancy costs and
inventory shrinkage. These improvements were partially offset by an increase
in shipping costs and a reduction in vendor rebates.
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSE. Selling, General and
administrative expenses declined to $12.0 million and $21.5 million for the
three-month and six-month periods ended September 27, 1997 compared to $15.0
million and $32.9 million for the prior year periods. The improvements are
primarily attributable to reductions in Egghead Computer's retail operating
costs, headquarters costs and advertising expense, partially offset by the
second quarter addition of Surplus Direct operating and headquarters expenses
of $1.4 million, one-time acquisition costs of $1.0 million and an increase
in administrative costs incurred by Elekom Corporation.
DEPRECIATION AND AMORTIZATION EXPENSE, NET OF AMOUNTS INCLUDED IN COST OF
SALES. Depreciation and amortization was $1.0 million or 1.6% of net sales in
the second quarter of fiscal 1998, compared to $1.8 million or 2.2% of net
sales for the prior year comparable period. The decrease in depreciation and
amortization expense is primarily attributable to the reduction in the average
number of stores open during the quarter, partially offset by the amortization
of goodwill associated with the acquisition of Surplus Direct.
DISCONTINUED OPERATIONS
All results for the operations of the CGE division are reported as a
discontinued operation. Certain general, administrative and distribution areas
have traditionally supported all of Egghead's business lines. The expenses
included in the results of the discontinued operations reflect only those
activities directly related to only the CGE division.
GAIN ON THE DISPOSITION OF THE DISCONTINUED OPERATION during the six months
ended September 28, 1996, was $36.5 million ($22.3 million after tax). The
sales price for the CGE division was $45.0 million in cash, which did not
include the accounts receivable, which were collected during fiscal 1997. The
reported gain is net of fixed assets and lease write-offs of $1.2 million,
transaction, legal, and accounting fees of $2.0 million, transition period
employment costs of $1.8 million and costs of $3.4 million related to the
fulfillment of post-sale obligations.
LOSS FROM THE DISCONTINUED OPERATION was $23.8 million ($14.5 million after
tax) for the six months ended September 28, 1996. The major components of the
loss were inventory write-offs of $6.9 million, accounts receivable write-offs
of $5.1 million, fixed asset dispositions and equipment lease buyouts of $3.2
million, warehouse closing costs of $1.9 million and operating losses,
severance and other costs of $6.7 million.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE was a charge of $0.7
million, after tax or $0.04 per share for the six months ended September 28,
1996. This charge represents the adoption of SFAS 121 and the related
writedown of Egghead's property held for sale in Kalispell, Montana property
and the related goodwill.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased $29.4 million from $83.5 million at March
29, 1997, to $54.1 million at September 27, 1997. The decrease in the cash
balance was primarily due to the increase in inventory and the net loss.
The receivable from Joint Venture decreased with the acquisition of Surplus
Direct and the dissolution of the joint venture between Egghead and Surplus
Direct.
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Merchandise inventory, net increased $14.2 million from March 29, 1997 due to
preparation for the Holiday shopping season. This increase includes $5.4
million of primarily prepaid inventory acquired with Surplus Direct on
August 14, 1997. Despite the increase in inventory, accounts payable decreased,
primarily due to the acquired Surplus Direct prepaid inventory.
Reserves and liabilities related to the CGE division and the restructuring
decreased $1.9 million and $3.4 million, respectively, from March 29, 1997 with
the ongoing settlement of these liabilities.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Egghead, Inc.'s Annual Meeting of Shareholders was held on September 4,
1997 ("Meeting"), at which the directors below were elected to
three-year terms, except for Jonathan Brodeur who was elected to a
two-year term. The votes were cast as set forth below:
Nominee For Withheld
------- --- --------
Gregory J. Boudreau 14,739,613 732,725
Jonathan W. Brodeur 14,740,488 731,850
George P. Orban 14,740,434 731,904
Eric P. Robinson 14,743,048 729,290
At the meeting the proposal to amend the Egghead, Inc. 1993 Stock Option
Plan received the following votes:
For 13,934,019
Against 1,360,955
Abstain 53,180
Broker non-votes 124,184
Unvoted 2,142,004
A Special Meeting of Shareholders of Egghead, Inc. was held on August 14,
1997 to approve issuance of common stock pursuant to an Agreement and Plan
of Merger dated April 30, 1997, as amended, by and among Egghead, Inc.,
North Face Merger Sub, Inc., Surplus Software, Inc. and the principal
shareholders of Surplus Software., and the following votes were received:
For 10,602,709
Against 760,885
Abstain 2,391
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
10.1 Egghead, Inc. Amended 1993 Stock Option Plan (filed herewith).
10.2 Agreement And Plan of Merger, dated April 30, 1997, among Egghead,
Inc. ("Egghead"), North Face Merger Sub, Inc ("North Face") and Surplus
Software, Inc. ("Surplus Direct"), and certain shareholders of Surplus Direct,
and amendment thereto dated May 23, 1997 (Incorporated by reference to, and
previously filed with, Egghead's Registration Statement on Form S-4
(Registration No. 333-31251) as Exhibit 2.1, filed with the SEC on July 14,
1997).
10.3 Employment Agreement between Surplus Software, Inc. and Gregory
Boudreau, dated May 15, 1996 (filed herewith).
10.4 Employment Agreement Amendment, effective April 30, 1997. between
Surplus Software, Inc. and Gregory Boudreau (Incorporated by reference to, and
previously filed as part of, Egghead's Registration Statement of Form S-4
(Registration No. 333-31251) as Annex III to the Proxy Statement/Prospectus
contained in the Registration Statement, filed with the SEC on July 14, 1997).
10.5 Employment Agreement between Surplus Software, Inc. and Jonathan
Brodeur, dated May 15, 1996 (filed herewith).
10.6 Employment Agreement Amendment, effective April 30, 1997, between
Surplus Software, Inc. and Jonathan Brodeur (Incorporated by reference to, and
previously filed as part of, Egghead's Registration Statement on Form S-4
(Registration No. 333-31251) as Annex III to the Proxy Statement/Prospectus
contained in the Registration Statement, filed with the SEC on July 14, 1997).
27 Financial Data Schedule.
b. Reports on Form 8-K
A Form 8-K was filed by the Company on August 29, 1997 to report, under
Item 5 of Form 8-K, the acquisition of closely held Surplus Software,
Inc. for 5.6 million newly issued shares of Egghead, Inc. Common Stock.
The transaction was completed on August 14, 1997.
15
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized, in the
city of Liberty Lake, State of Washington, on November 10, 1997.
EGGHEAD, INC.
By /s/ George P. Orban
----------------------------------------------
George P. Orban
Chief Executive Officer, Chairman of the Board
/s/ Brian W. Bender
----------------------------------------------
Brian W. Bender
Chief Accounting Officer, Chief Financial
Officer
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EGGHEAD, INC.
AMENDED 1993 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of the 1993 Stock Option Plan (this "Plan") is to provide a
means whereby selected employees, directors, officers, agents, consultants,
advisors and independent contractors of Egghead, Inc. (the "Company"), or of
any parent or subsidiary (as defined in subsection 5.8 and referred to
hereinafter as "related corporations") thereof, may be granted incentive
stock options and/or nonqualified stock options to purchase the Common Stock
(as defined in Section 3) of the Company, in order to attract and retain the
services or advice of such employees, directors, officers, agents,
consultants, advisors and independent contractors and to provide added
incentive to such persons by encouraging stock ownership in the Company.
SECTION 2. ADMINISTRATION
This Plan shall be administered by the Board of Directors of the Company
(the "Board") or a committee or committees (which term includes
subcommittees) appointed by, and consisting of two or more members of, the
Board. The administrator of this Plan shall hereinafter be referred to as
the "Plan Administrator." So long as the Common Stock is registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Board shall consider, in selecting the Plan
Administrator and the membership of any committee acting as the Plan
Administrator of this Plan with respect to any persons subject or likely to
become subject to Section 16 under the Exchange Act, the provisions regarding
(a) "outside directors," as contemplated by Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), and (b) "nonemployee
directors," as contemplated by Rule 16b-3 under the Exchange Act. The Board
may delegate the responsibility for administering this Plan with respect to
designated classes of eligible participants to different committees, subject
to such limitations as the Board deems appropriate. Committee members shall
serve for such term as the Board may determine, subject to removal by the
Board at any time.
2.1 RESPONSIBILITIES
Except for the terms and conditions explicitly set forth in this Plan, the
Plan Administrator shall have the authority, in its discretion, to determine
all matters relating to the options to be granted under this Plan, including
selection of the individuals to be granted options, the number of shares to
be subject to each option,
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the exercise price, and all other terms and conditions of the options.
Grants under this Plan need not be identical in any respect, even when made
simultaneously. The interpretation and construction by the Plan
Administrator of any terms or provisions of this Plan or any option issued
hereunder, or of any rule or regulation promulgated in connection herewith,
shall be conclusive and binding on all interested parties, so long as such
interpretation and construction with respect to incentive stock options
correspond to the requirements of Section 422 of the Code, the regulations
thereunder and any amendments thereto.
2.2 SECTION 16
Notwithstanding anything in this Plan to the contrary, the Board, in its
absolute discretion, may bifurcate this Plan so as to restrict, limit or
condition the use of any provision of this Plan to participants who are
officers and directors subject to Section 16 of the Exchange Act without so
restricting, limiting or conditioning this Plan with respect to other
participants.
SECTION 3. STOCK SUBJECT TO THIS PLAN
The stock subject to this Plan shall be the Company's Common Stock (the
"Common Stock"), presently authorized but unissued or subsequently acquired
by the Company. Subject to adjustment as provided in Section 7, the
aggregate amount of Common Stock to be delivered upon the exercise of all
options granted under this Plan shall not exceed (a) 2,000,000 shares as such
Common Stock was constituted on or about June 16, 1993, plus (b) to the
extent that additional options are not granted under the Company's 1986
Combined Incentive and Non-Qualified Stock Option Plan, as amended (the "1986
Plan"), an additional number of shares of Common Stock equal to the number of
shares which are currently reserved for issuance under the 1986 Plan and
which (i) are available for options not yet granted under the 1986 Plan as of
June 16, 1993, or (ii) would become available for issuance thereafter under
the 1986 Plan as a result of the cancellation, expiration or other
termination of outstanding options. If any option granted under this Plan
shall expire or be surrendered, exchanged for another option, canceled or
terminated for any reason without having been exercised in full, the
unpurchased shares subject thereto shall thereupon again be available for
purposes of this Plan.
SECTION 4. ELIGIBILITY
An incentive stock option may be granted only to any individual who, at
the time the option is granted, is an employee of the Company or any related
corporation. A nonqualified stock option may be granted to any employee,
director, officer, agent,
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consultant, advisor or independent contractor of the Company or any related
corporation, whether an individual or an entity.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
Options granted under this Plan shall be evidenced by written agreements
which shall contain such terms, conditions, limitations and restrictions as
the Plan Administrator shall deem advisable and which are not inconsistent
with this Plan. Notwithstanding the foregoing, options shall include or
incorporate by reference the following terms and conditions:
5.1 NUMBER OF SHARES AND PRICE
The maximum number of shares that may be purchased pursuant to the
exercise of each option and the price per share at which such option is
exercisable (the "Exercise Price") shall be as established by the Plan
Administrator; provided that the maximum number of shares with respect to
which an option or options may be granted to any Optionee in any one fiscal
year of the Company shall not exceed 300,000 shares, except that the Company
may make one-time grants of options for up to 750,000 shares per individual
to newly hired individuals (the "Maximum Annual Optionee Grants"); and
provided, further, that the Plan Administrator shall act in good faith to
establish the Exercise Price which shall be not less than the fair market
value per share of the Common Stock at the time the option is granted with
respect to incentive stock options; and provided, further, that, with respect
to incentive stock options granted to greater than 10% shareholders, the
exercise price shall be as required by subsection 6.1.
5.2 TERM AND MATURITY
The term of each option shall be as established by the Plan Administrator
and, if not so established, shall be 10 years. To ensure that the Company or
related corporation will achieve the purpose and receive the benefits
contemplated in this Plan, any option granted to any eligible person
hereunder ("Optionee") on or after October 29, 1997 shall, unless the
condition of this sentence is waived or modified in the agreement evidencing
the option or by resolution adopted at any time by the Plan Administrator, be
exercisable according to the following schedule:
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Period of Optionee's
Continuous Relationship
With the Company or Related
Corporation From the Date Portion of Total Option
the Option Is Granted That Is Exercisable
---------------------------- -----------------------
After one year 25%
Each month thereafter an additional 1/36
After four years 100%
and any option granted to any Optionee prior to October 29, 1997 shall,
unless the condition of this sentence is waived or modified in the agreement
evidencing the option or by resolution adopted at any time by the Plan
Administrator, be exercisable according to the following schedule:
Period of Optionee's
Continuous Relationship
With the Company or Related
Corporation From the Date Portion of Total Option
the Option Is Granted That Is Exercisable
---------------------------- -----------------------
After one year 16-2/3%
After two years 50%
After three years 100%"
5.3 EXERCISE
Subject to the vesting schedule described in subsection 5.2, each option
may be exercised in whole or in part at any time and from time to time;
provided, however, that no fewer than 100 shares (or the remaining shares
then purchasable under the option, if less than 100 shares) may be purchased
upon any exercise of option rights hereunder and that only whole shares will
be issued pursuant to the exercise of any option. Options shall be exercised
by delivery to the Company of notice of the number of shares with respect to
which the option is exercised, together with payment of the Exercise Price.
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5.4 PAYMENT OF EXERCISE PRICE
Payment of the option Exercise Price shall be made in full at the time the
notice of exercise of the option is delivered to the Company and shall be in
cash, bank certified or cashier's check or personal check (unless at the time
of exercise the Plan Administrator in a particular case determines not to
accept a personal check) for the Common Stock being purchased.
The Plan Administrator can determine at any time before exercise that
additional forms of payment will be permitted. Unless the Plan Administrator
in its sole discretion determines otherwise, either at the time the option is
granted or at any time before it is exercised, and to the extent permitted by
applicable laws and regulations (including, but not limited to, federal tax
and securities laws and regulations and state corporate law), an option may
be exercised by a combination of cash and/or check (if any) and one or more
of the following alternative forms:
(a) tendering (either actually or by attestation) shares of stock of
the Company held by an Optionee having a fair market value equal to the
Exercise Price, such fair market value to be determined in good faith by the
Plan Administrator; provided, however, that, with respect to options granted
after July 11, 1997, payment in stock held by an Optionee shall not be made
unless the stock shall have been owned by the Optionee for a period of at
least six months (or any shorter period necessary to avoid a charge to the
Company's earnings for financial accounting purposes);
(b) delivery of a full-recourse promissory note executed by the
Optionee; provided that (i) such note delivered in connection with an
incentive stock option shall, and such note delivered in connection with a
nonqualified stock option may, in the sole discretion of the Plan
Administrator, bear interest at a rate specified by the Plan Administrator
but in no case less than the rate required to avoid imputation of interest
(taking into account any exceptions to the imputed interest rules) for
federal income tax purposes, and (ii) the Plan Administrator in its sole
discretion shall specify the term and other provisions of such note at the
time an incentive stock option is granted or at any time prior to exercise of
a nonqualified stock option, and (iii) the Plan Administrator may require
that the Optionee pledge the Optionee's shares to the Company for the purpose
of securing the payment of such note and may require that the certificate
representing such shares be held in escrow in order to perfect the Company's
security interest, and (iv) the Plan Administrator in its sole discretion may
at any time restrict or rescind this right upon notification to the Optionee;
or
(c) delivery of a properly executed exercise notice, together with
irrevocable instructions to a broker, all in accordance with the regulations
of the Federal Reserve Board, to promptly deliver to the Company the amount
of sale or loan
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proceeds to pay the Exercise Price and any federal, state or local
withholding tax obligations that may arise in connection with the exercise.
5.5 WITHHOLDING TAX REQUIREMENT
The Company or any related corporation shall have the right to retain and
withhold from any payment of cash or Common Stock under this Plan the amount
of taxes required by any government to be withheld or otherwise deducted and
paid with respect to such payment. At its discretion, the Company may
require an Optionee receiving shares of Common Stock to reimburse the Company
for any such taxes required to be withheld by the Company and withhold any
distribution in whole or in part until the Company is so reimbursed. In lieu
thereof, the Company shall have the right to withhold from any other cash
amounts due or to become due from the Company to the Optionee an amount equal
to such taxes. The Company may also retain and withhold or the Optionee may
elect, subject to approval by the Company at its sole discretion, to have the
Company retain and withhold a number of shares having a market value not less
than the amount of such taxes required to be withheld by the Company to
reimburse the Company for any such taxes and cancel (in whole or in part) any
such shares so withheld.
5.6 HOLDING PERIODS
If an individual subject to Section 16 of the Exchange Act sells shares of
Common Stock obtained upon the exercise of a stock option within six months
after the date the option was granted, such sale may result in short-swing
profit liability under Section 16(b) of the Exchange Act.
5.7 NONTRANSFERABILITY OF OPTIONS
Options granted under this Plan and the rights and privileges conferred
hereby may not be transferred, assigned, pledged or hypothecated in any
manner (whether by operation of law or otherwise) other than by will or by
the applicable laws of descent and distribution, and shall not be subject to
execution, attachment or similar process. During an Optionee's lifetime, any
options granted under this Plan are personal to him or her and are
exercisable solely by such Optionee or a permitted assignee or transferee of
such Optionee (as provided below). Any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any option under this Plan or of any
right or privilege conferred hereby, contrary to the Code or to the
provisions of this Plan, or the sale or levy or any attachment or similar
process upon the rights and privileges conferred hereby shall be null and
void. Notwithstanding the foregoing, to the extent permitted by Section 422
of the Code, the Plan Administrator may permit an Optionee to (i) during the
Optionee's lifetime, designate a person who may exercise the option
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after the Optionee's death by giving written notice of such designation to
the Plan Administrator (such designation may be changed from time to time by
the Optionee by giving written notice to the Plan Administrator revoking any
earlier designation and making a new designation) or (ii) transfer the option
and the rights and privileges conferred hereby; provided, however, that any
option so assigned or transferred shall be subject to all the same terms and
conditions contained in the instrument evidencing the option.
5.8 TERMINATION OF RELATIONSHIP
The Plan Administrator shall determine the terms and conditions under
which an option may be exercised following termination of an Optionee's
relationship with the Company or any related corporation.
As used herein, the term "related corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company)
in, at the time of the granting of the option, an unbroken chain of
corporations ending with the Company, if stock possessing 50% or more of the
total combined voting power of all classes of stock of each of the
corporations other than the Company is owned by one of the other corporations
in such chain. When referring to a parent corporation, the term "related
corporation" shall mean any corporation in an unbroken chain of corporations
ending with the Company if, at the time of the granting of the option, each
of the corporations other than the Company owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
5.9 NO STATUS AS SHAREHOLDER
Neither the Optionee nor any party to which the Optionee's rights and
privileges under the option may pass shall be, or have any of the rights or
privileges of, a shareholder of the Company with respect to any of the shares
issuable upon the exercise of any option granted under this Plan unless and
until such option has been exercised.
5.10 CONTINUATION OF RELATIONSHIP
Nothing in this Plan or in any option granted pursuant to this Plan shall
confer upon any Optionee any right to continue in the employ or other
relationship of the Company or of a related corporation, or to interfere in
any way with the right of the Company or of any such related corporation to
terminate his or her employment or other relationship with the Company at any
time.
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5.11 LIMITATION ON VALUE FOR INCENTIVE STOCK OPTIONS
As to all incentive stock options granted under the terms of this Plan, to
the extent that the aggregate fair market value of the stock (determined at
the time the incentive stock option is granted) with respect to which
incentive stock options are exercisable for the first time by the Optionee
during any calendar year (under this Plan and all other incentive stock
option plans of the Company, a related corporation or a predecessor
corporation) exceeds $100,000, such options shall be treated as nonqualified
stock options. The previous sentence shall not apply if the Internal Revenue
Service issues a public rule, issues a private ruling to the Company, any
Optionee or any legatee, personal representative or distributee of an
Optionee or issues regula tions changing or eliminating such annual limit.
SECTION 6. GREATER THAN 10% SHAREHOLDERS
6.1 EXERCISE PRICE AND TERM OF INCENTIVE STOCK OPTIONS
If incentive stock options are granted under this Plan to employees who
own more than 10% of the total combined voting power of all classes of stock
of the Company or any related corporation, the term of such incentive stock
options shall not exceed five years and the exercise price shall be not less
than 110% of the fair market value of the Common Stock at the time the
incentive stock option is granted. This provision shall control
notwithstanding any contrary terms contained in an option agreement or any
other document.
6.2 ATTRIBUTION RULE
For purposes of subsection 6.1, in determining stock ownership, an
employee shall be deemed to own the stock owned, directly or indirectly, by
or for his or her brothers, sisters, spouse, ancestors and lineal
descendants. Stock owned, directly or indirectly, by or for a corporation,
partnership, estate or trust shall be deemed to be owned proportionately by
or for its shareholders, partners or beneficiaries. If an employee or a
person related to the employee owns an unexercised option or warrant to
purchase stock of the Company, the stock subject to that portion of the
option or warrant which is unexercised shall not be counted in determining
stock ownership. For purposes of this Section 6, stock owned by an employee
shall include all stock actually issued and outstanding immediately before
the grant of the incentive stock option to the employee.
SECTION 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
The aggregate number and class of shares for which options may be granted
under this Plan, the Maximum Annual Optionee Grants set forth in subsection
5.1, the
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number and class of shares covered by each outstanding option and the
exercise price per share thereof (but not the total price) shall all be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock of the Company resulting from a split-up or
consolidation of shares or any like capital adjustment, or the payment of any
stock dividend.
7.1 EFFECT OF LIQUIDATION OR REORGANIZATION
7.1.1 CASH, STOCK OR OTHER PROPERTY FOR STOCK
Except as provided in subsection 7.1.2, upon a merger (other than a merger
of the Company in which the holders of Common Stock immediately prior to the
merger have the same proportionate ownership of Common Stock in the surviving
corporation immediately after the merger), consolidation, acquisition of prop
erty or stock, separation, reorganization (other than a mere reincorporation
or the creation of a holding company) or liquidation of the Company, as a
result of which the shareholders of the Company receive cash, stock or other
property in exchange for or in connection with their shares of Common Stock,
any option granted hereunder shall terminate, but the Optionee shall have the
right immediately prior to any such merger, consolidation, acquisition of
property or stock, separation, reorganization or liquidation to exercise such
Optionee's option in whole or in part whether or not the vesting requirements
set forth in the option agreement have been satisfied.
7.1.2 CONVERSION OF OPTIONS ON STOCK FOR STOCK EXCHANGE
If the shareholders of the Company receive capital stock of another
corporation ("Exchange Stock") in exchange for their shares of Common Stock
in any transaction involving a merger, consolidation, acquisition of property
or stock, separation or reorganization, all options granted hereunder shall
be converted into options to purchase shares of Exchange Stock unless the
Company and the corporation issuing the Exchange Stock, in their sole
discretion, de termine that any or all such options granted hereunder shall
not be converted into options to purchase shares of Exchange Stock but
instead shall terminate in accordance with the provisions of subsection
7.1.1; provided, however, that all options granted hereunder shall be
converted automatically into Exchange Stock in (i) a merger of the Company in
which the holders of Common Stock immediately prior to the merger have the
same proportionate ownership of Common Stock in the surviving corporation
immediately after the merger, (ii) a mere reincorporation, or (iii) the
creation of a holding company. The amount and price of converted options
shall be determined by adjusting the amount and price of the options granted
hereunder in the same proportion as used for determining the number of shares
of Exchange Stock the holders of the Common Stock receive in such merger,
consolidation, acquisition of property or stock, separation
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or reorganization. The converted options shall retain the vesting
requirements applicable to the options granted hereunder, unless the Company
and the corporation issuing the Exchange Stock, in their sole discretion,
determine otherwise.
7.2 FRACTIONAL SHARES
In the event of any adjustment in the number of shares covered by any
option, any fractional shares resulting from such adjustment shall be
disregarded and each such option shall cover only the number of full shares
resulting from such adjustment.
7.3 DETERMINATION OF BOARD TO BE FINAL
All Section 7 adjustments shall be made by the Board, and its
determination as to what adjustments shall be made, and the extent thereof,
shall be final, binding and conclusive. Unless an Optionee agrees otherwise,
any change or adjustment to an incentive stock option shall be made in such a
manner so as not to constitute a "modification" as defined in Code Section
425(h) and so as not to cause his or her incentive stock option issued
hereunder to fail to continue to qualify as an incentive stock option as
defined in Code Sec tion 422(b).
SECTION 8. SECURITIES REGULATION
Shares shall not be issued with respect to an option granted under this
Plan unless the exercise of such option and the issuance and delivery of such
shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, any applicable state securities laws, the
Securities Act of 1933, as amended, the Exchange Act, the rules and
regulations promulgated thereunder, and the requirements of any stock
exchange upon which the shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance, including the availability, if applicable, of an exemption from
registration for the issuance and sale of any shares hereunder.
SECTION 9. AMENDMENT AND TERMINATION
9.1 BOARD ACTION
The Board may amend, suspend or terminate this Plan at any time, provided
that no such amendment shall be made without the approval of the Company's
shareholders if such approval is required to comply (a) with respect to
incentive stock options, Section 422 of the Code or any successor provision
or (b) any other law or regulation.
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9.2 TERM OF THIS PLAN
Unless sooner terminated by the Board, this Plan shall terminate ten years
from the earlier of (a) the date on which this Plan is adopted by the Board
or (b) the date on which this Plan is approved by the shareholders of the
Company. No option may be granted after such termination or during any
suspension of this Plan. The amendment or termination of this Plan shall
not, without the consent of the option holder, alter or impair any rights or
obligations under any option theretofore granted under this Plan.
SECTION 10. EFFECTIVENESS OF THIS PLAN
This Plan shall become effective upon adoption by the Board so long as it
is approved by a majority of stock represented by shareholders voting either
in person or by proxy at a duly held shareholders' meeting any time within 12
months before or after the adoption of this Plan.
Plan adopted by the Board of Directors on June 16, 1993 and approved by
the shareholders on September 15, 1993. Amended and restated by the Board on
July 11, 1997 and approved by the shareholders on September 4, 1997.
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") between SURPLUS SOFTWARE,
INC., an Oregon corporation ("Employer"), and GREGORY BOUDREAU ("Employee")
is dated and entered into as of May 15, 1996.
In consideration of the mutual covenants and promises contained herein,
Employer and Employee agree as follows:
1. EMPLOYMENT
Employer shall employ Employee and Employee shall accept employment by
Employer in the position of Chief Executive Officer. Employee shall perform
such duties as may be assigned to him from time to time by the Employer's
Board of Directors (the "Board") which relate to the business of Employer,
its subsidiaries, its parent corporation, or any business ventures in which
Employer, its subsidiaries or its parent corporation may participate.
2. ATTENTION AND EFFORT
Employee shall devote Employee's full time, attention and effort to
Employer's business and shall skillfully serve its interests.
3. EMPLOYMENT AT WILL
Employee understands and agrees that his employment with Employer is at
will, and that either party may terminate such employment at any time
pursuant to Section 7.
4. COMPENSATION
4.1 BASE SALARY
Employee's starting annual base salary shall be one hundred twenty-five
thousand dollars ($125,000), before all customary payroll deductions. At no
time shall Employee's annual base salary be below $125,000. Such annual base
salary shall be paid in substantially equal installments at the same
intervals as other employees of Employer are paid. The Board shall determine
any increases in the annual base salary in future years.
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4.2 BONUS
In addition to the base salary provided in Section 4.1, Employee shall
be entitled to an annual bonus based upon attainment of budgeted income
before income tax ("Annual Target") as set forth in the annual budget
approved by the Board. Such bonus shall be paid within ninety (90) days of
year-end based on the following schedule:
BONUS
EMPLOYER PERFORMANCE (% OF BASE SALARY)
-------------------- ------------------
Equal to or greater than 70% of 10%
Annual Target
For each additional increment of 6.7% additional for each such 10%
10% above 70% of Annual Target increment
5. BENEFITS
During the term of this Agreement, Employee shall be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in such fringe benefit programs as may be provided from time to
time by the Employer and shall be reimbursed for reasonable and necessary
travel and other expenses incurred in connection with Employer's business in
accordance with Employer's reimbursement policy.
6. LIFE INSURANCE POLICY
Employer shall apply and pay for a life insurance policy in the amount
of $2 million on the life of Employee; provided, however, that Employer shall
not be required to obtain such insurance if Employer is required to pay
unreasonably high premiums for such insurance due to any unusual risks
associated with insuring Employee. Employee shall be the owner of this life
insurance policy and shall have the right to designate the beneficiary of
such policy. Employee agrees to pay any and all federal and state taxes
which may be required to be paid with respect to payment of insurance
premiums by Employer under this Section 6.
7. TERMINATION
7.1 BY EMPLOYER
Employer may terminate the employment of Employee, with or without
cause, (as defined below) at any time during the term of employment upon
giving thirty (30) days' prior notice to Employee. Employer may also
terminate this Agreement for cause at any time without notice.
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7.2 BY EMPLOYEE
Employee may terminate Employee's employment at any time upon giving
thirty (30) days' prior notice to Employer.
7.3 AUTOMATIC TERMINATION
Employment shall terminate automatically upon death or total disability
of Employee. The term "total disability" as used herein shall mean an
inability to perform the duties set forth in Section 1 of this Agreement
because of illness or physical or mental disability for a period or periods
aggregating ninety (90) calendar days in any 12-month period, unless Employee
is granted a leave of absence by the Board. The parties hereto acknowledge
that Employee's ability to perform the duties specified in Section 1 hereof
is of the essence of this Agreement. Termination hereunder shall be deemed
to be effective thirty (30) days following Employee's death or immediately
upon a determination by the Board of Employee's total disability, as defined
herein.
7.4 NOTICE
In the event that Employee's employment is terminated upon thirty (30)
days' prior notice as provided for in Sections 7.1 or 7.2 of this Agreement,
the parties agree that Employee's employment and performance of services
shall continue for the duration of such notice period; PROVIDED, HOWEVER,
that Employer may, at its own election and without reducing Employee's
compensation during such period, excuse Employee from any or all of
Employee's duties during such period. The effective date of the termination
of Employee's employment hereunder shall be the date on which such thirty
(30) day period expires, unless Employer and Employee agree in writing to a
different date.
7.5 CAUSE
Wherever reference is made in this Agreement to termination being with
or without cause, "cause" means cause given by Employee to Employer and
includes the following: (a) failure or refusal to carry out the directions
of the Board, which directions are reasonably consistent with the duties
herein set forth to be performed by Employee; (b) violation of a state or
federal criminal law involving the commission of a crime against Employer or
a felony; (c) misuse of alcohol or controlled substances; (d)
misrepresentation, deception, fraud or dishonesty; (e) any incident
compromising Employee's reputation or ability to represent Employer with the
public; (f) any act or omission which substantially impairs Employer's
business, good will or reputation; or (g) any other material breach of this
Agreement. The parties hereto agree that a
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determination of cause pursuant to this paragraph shall be committed solely
to the discretion of Employer.
7.6 TERMINATION PAYMENTS
In the event of termination of the employment of Employee by Employer
without cause, Employee shall be paid, upon delivery to Employer of a general
release of liability by Employee, in a form acceptable to Employer, 75
percent of his annual base monthly salary for a period of eighteen (18)
months from the date of termination, payable in substantially equal
installments at the same intervals as other employees of the Employer are
paid. During such eighteen (18) month period, the Employer shall continue to
provide health insurance coverage for Employee at Employer's cost. In the
event of termination of the employment of Employee for any other reason, all
salary, bonuses, benefits and other compensation set forth in this Agreement
shall cease as of the effective date of such termination; PROVIDED, HOWEVER,
that if the employment of Employee is automatically terminated due to death
or disability pursuant to Section 7.3 hereof, Employee or Employee's personal
representative shall receive termination payments in the form of Employee's
annual base salary through the conclusion of the calendar month of the
termination of employment because of such death or disability.
8. ASSIGNMENT OF INVENTIONS AND CONFIDENTIALITY AGREEMENT
Employee agrees to execute the Assignment of Inventions and
Confidentiality Agreement attached hereto as Exhibit A.
9. CONFLICTING AGREEMENTS
Employee is not a party to any existing or proposed agreements that may
adversely affect Employee's ability to render services to the Employer
hereunder.
10. GENERAL PROVISIONS
10.1 NO WAIVER
No provision of this Agreement shall be deemed to have been waived
unless such waiver is in writing signed by the waiving party. No failure by
any party to insist upon the strict performance of any provision of this
Agreement, or to exercise any right or remedy consequent upon a breach
thereof, shall constitute a waiver of any such breach, of such provision or
of any other provision. No waiver of any provision of this Agreement shall
be deemed a waiver of any other provision of this Agreement or a waiver of
such provision with respect to any subsequent breach, unless expressly
provided in writing.
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10.2 NOTICES
All notices required or permitted to be given under this Agreement shall
be in writing. Notices may be served by certified or registered mail,
postage paid with return receipt requested; by private courier, prepaid; by
telex, facsimile, or other telecommunication device capable of transmitting
or creating a written record; or personally. Mailed notices shall be deemed
delivered two (2) days after mailing, properly addressed. Couriered notices
shall be deemed delivered on the date that the courier warrants that delivery
will occur. Telex, facsimile or telecommunication notices shall be deemed
delivered when receipt is either confirmed by confirming transmission
equipment or acknowledged by the addressee or its office. Personal delivery
shall be effective when accomplished. Unless a party changes its address by
giving notice to the other party as provided herein, notices shall be
delivered to the parties at the following addresses:
Surplus Software, Inc.
489 North 8th Street
Hood River, OR 97031
Attn: President
Gregory Boudreau
2645 Kingsley Rd.
Hood River, OR 97031
10.3 INTEGRATION; AMENDMENT
This Agreement constitutes the entire agreement of the parties relating
to the subject matter hereof. There are no promises, terms, conditions,
obligations, or warranties other than those contained in this Agreement.
This Agreement supersedes all prior communications, representations, or
agreements, verbal or written, among the parties relating to the subject
matter hereof. This Agreement may not be amended except in a writing
executed by the parties.
10.4 SEVERABILITY
Any provision of this Agreement that is deemed invalid or unenforceable
shall be ineffective to the extent of such invalidity or unenforceability,
without rendering invalid or unenforceable the remaining provisions of this
Agreement. Furthermore, in lieu of each such invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such invalid or unenforceable provision as
may be possible and be valid and enforceable.
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10.5 ASSIGNMENT
Employee shall not assign, sell, subcontract, delegate or otherwise
transfer his rights or obligations under this Agreement without the prior
written consent of the Employer, and any attempted assignment or delegation
shall be void and without effect.
10.6 GOVERNING LAW, SERVICE OR PROCESS AND VENUE
The parties hereto intend that this Agreement shall be governed by and
construed in accordance with the laws of the State of Oregon applicable to
contracts made and wholly performed within Oregon by persons domiciled in
Oregon.
10.7 ATTORNEYS' FEES AND COURT COSTS
If any suit or action arising out of or related to this Agreement is
brought by any party, the prevailing party or parties shall be entitled to
recover the costs and fees (including without limitation reasonable attorney
fees, the fees and costs of experts and consultants, copying, courier and
telecommunication costs, and deposition costs and all other costs of
discovery) incurred by such party or parties in such suit or action,
including without limitation any post-trial or appellate proceeding.
10.8 COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement binding on all the
parties, notwithstanding that all parties are not signatories to the same
counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
EMPLOYER SURPLUS SOFTWARE, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
EMPLOYEE
----------------------------------------
Gregory Boudreau
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EXECUTIVE OFFICER
ASSIGNMENT OF INVENTIONS AND
CONFIDENTIALITY AGREEMENT
This EXECUTIVE OFFICER ASSIGNMENT OF INVENTIONS AND CONFIDENTIALITY
AGREEMENT ("Agreement") is entered into as of May 25, 1996 between Surplus
Software, Inc., an Oregon corporation (the "Company") and Gregory Boudreau
("Employee").
RECITAL
WHEREAS, Employee desires to obtain a position with the Company, and the
Company desires to obtain the services of Employee, but only expressly
subject to and conditioned upon Employee's agreeing to certain inventions and
confidentiality provisions set forth herein;
AGREEMENT
NOW, THEREFORE, in consideration of the Company's agreement to employ
Employee, the agreements herein expressed, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties agree
as follows:
1. NONCOMPETE
Employee covenants that during the period of his or her employment and
for the next two (2) years following termination of employment, Employee
shall not, directly or indirectly, either as a principal, agent, employee,
employer, consultant, stockholder, partner or in any other personal or
representative capacity whatsoever, be connected with in any manner, any
business whose products or services are in competition with, or may in the
future be in competition with, products then being produced or marketed or
services then being provided or marketed by the Company, or products or
services the feasibility of which the Company is actually studying, and shall
not, directly or indirectly, divert any customer of the Company or induce any
employee or consultant of the Company to terminate his or her employment or
relationship with the Company; provided however, that nothing contained in
this Section 1 shall prevent Employee from buying and selling at wholesale or
retail, products similar to those marketed and sold by the Company, provided
that Employee shall not market or sell such products through catalogues,
direct mail or any on-line services. The covenant contained in this Section 1
is intended to be a series of
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separate covenants, one set for the State of Oregon and for each country,
state or foreign country in which the Company shall be engaged in any
definable business in which Employee shall have been involved on any date
during the period of his or her employment. Employee agrees that the
restraints imposed in this Section 1 are necessary for the reasonable and
proper protection of the Company and that each and every one of the
restraints is reasonable in terms of duration and geographic scope.
2. ASSIGNMENT OF INVENTIONS
Employee hereby assigns and transfers to the Company his or her entire
right, title and interest in and to all inventions, including but not be
limited to, products, ideas, improvements, designs and discoveries, including
computer software programs, internet applications and other intellectual
property, or improvements or enhancements to any of the forgoing, whether or
not patentable or copyrightable and whether or not reduced to practice
("Inventions"), made or conceived by Employee (whether made solely by
Employee or jointly with others) during the period of his or her employment
with the Company which relate in any manner to the actual or demonstrably
anticipated business, work, or research and development of the Company and
its affiliates, or result from or are suggested by any task assigned to him
or her or any work performed by him or her for or on behalf of the Company.
Employee agrees that all such Inventions and all associated United States and
foreign patent, copyright, trademark, trade secret and any other proprietary
rights, including, but not limited to, all rights of registrations and
renewal are the sole property of the Company.
3. DISCLOSURE OF INVENTIONS, PATENTS
Employee agrees that in connection with any Invention as defined in
Section 2 above:
3.1 Employee will disclose such Invention promptly in writing to his or
her immediate superior at the Company in order to permit the Company to claim
rights to which it may be entitled under this Agreement. Such disclosure
shall be received in confidence by the Company.
3.2 Employee will, at the Company's request, promptly execute a written
assignment of title to the Company for any Invention required to be assigned
by Section 2 ("Assignable Invention") and Employee will preserve any such
Assignable Invention as confidential information of the Company.
3.3 Upon request, Employee agrees to assist the Company or its nominee
(at the Company's expense) during and at any time subsequent to his or her
employment in every reasonable way to obtain for the Company's own benefit
patents and
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copyrights for such Assignable Invention in any and all countries, which
Assignable Invention shall be and remain the sole and exclusive property of
the Company or its nominee whether or not patented or copyrighted. Employee
agrees to execute such papers and perform such lawful acts as the Company
deems to be necessary to allow it to exercise all rights, title and interest
in such patents and copyrights.
4. EXECUTION OF DOCUMENTS
In connection with Section 3.3, Employee further agrees to execute,
acknowledge and deliver to the Company or its nominee upon request and at its
expense all such documents, including applications for patents and copyrights
and assignments of Inventions, patents and copyrights to be issued therefor,
as the Company may determine necessary or desirable to apply for and obtain
patents and copyrights on such Assignable Inventions in any and all countries
and/or to protect the interest of the Company or its nominee in such
Inventions, patents and copyrights and to vest title thereto in the Company
or its nominees. In the event that the Company is unable for any reason
whatsoever to secure Employee's signature to any lawful necessary document
required to apply for or execute any patent, copyright or other application
with respect to such Assignable Inventions, patents and copyrights, including
renewals, extensions, continuations, divisions or continuations in part
thereof, Employee hereby irrevocably constitutes and appoints the Company and
its duly authorized officers and agents, any one of them, as his or her
lawful and true attorneys-in-fact in his or her name, place and stead, to
execute and file any such application and do all other lawfully permitted
acts to further the prosecution and issue of patents, copyrights or other
rights thereon with the same legal force and effect as if executed by
Employee.
5. PROPRIETARY INFORMATION
Employee agrees that all Proprietary Information of which Employee may
acquire knowledge is the sole and exclusive property of the Company, and that
the Company shall retain all right, title and interest to the Proprietary
Information. Employee further agrees that Employee is not entitled to use
Proprietary Information for his or her own benefit or for the benefit of
others during or after the period of his or her employment, without the prior
written consent of the Company. As used herein, "Proprietary Information"
shall include, without limitation, information that has been created,
discovered, developed, or otherwise become known to the Company and/or in
which property rights have been assigned or otherwise conveyed to the
Company, which information has commercial value in the Company's business or
proposed business, including any trade secrets, confidential information,
knowledge, data or other information of the Company relating to products,
processes, know-how, designs, research, formulae, test procedures and
results, improvements, inventions or
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techniques, finances, customers, vendors, services, business plans, marketing
plans and strategies, pricing strategies, or other subject matter pertaining
to any business of the Company for any of its clients, customers,
consultants, licensees or affiliates. Employee further agrees not to
reproduce or in any way allow any such Proprietary Information, knowledge,
data or other information, or any documentation relating thereto, to be
delivered or used by any third party without specific direction or consent of
a duly authorized representative of the Company. In the event of the
termination of Employee's employment for any reason whatsoever, Employee
shall promptly return all records, materials, equipment, drawings and the
like pertaining to any Proprietary Information and Employee shall not take
any description or documents containing or pertaining to any Proprietary
Information, which Employee may have produced or obtained during the course
of employment with the Company. In the event of termination of employment,
Employee agrees to promptly sign and deliver to the Company a certificate
acknowledging the return of such Proprietary Information and such other
information as the Company requests.
6. CONFIDENTIAL RELATIONSHIP
Employee understands that his or her employment creates a relationship
of confidence and trust between Employee and the Company with respect to any
information: (a) applicable to the business of the Company; or (b) applicable
to the business of any supplier, consultant, independent contractor,
licensor, licensee, client, customer or affiliate of the Company, which
information may be made known to Employee by the Company or by any supplier,
consultant, independent contractor, licensor, licensee, client, customer or
affiliate of the Company, or information learned by Employee during the
period of his or her employment. Employee agrees to keep confidential, and
not disclose or make any use of, except for the benefit of the Company, at
any time either during or subsequent to Employee's employment, any
Proprietary Information of which Employee may acquire knowledge. Employee
also agrees to employ all reasonable measures to prevent the unauthorized use
of the Proprietary Information. Employee agrees that, in the event that
Employee is served with a subpoena or other compulsory judicial or
administrative process calling for production of Proprietary Information,
Employee will immediately notify the Company in order that the Company may
take such action as it deems necessary to protect its interests.
7. MAINTENANCE OF RECORDS
Employee agrees to keep and maintain adequate and current written
records of all Inventions made by him or her (in the form of notes, sketches,
drawings and as may be specified by the Company), which records shall be
available to and remain the sole property of the Company at all times.
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8. PRIOR INVENTIONS
It is understood that all Inventions, if any, patented or unpatented or
copyrighted or uncopyrighted, which Employee made prior to his or her
employment by the Company or its affiliates, are excluded from the scope of
this Agreement. To preclude any possible uncertainty, Employee has set forth
on Exhibit A attached hereto a complete list of all of his or her prior
Inventions, including numbers of all patents and patent applications, and a
brief description of all unpatented Inventions which are not the property of
a previous employer. Employee represents and covenants that the list is
complete and that, if no items are on the list, Employee has no such prior
Inventions. Employee agrees to notify the Company in writing before Employee
makes any disclosure or performs any work on behalf of the Company which
appears to threaten or conflict with proprietary rights Employee claims in
any Invention or idea. In the event of his or her failure to give such
notice, Employee agrees that he or she will make no claim against the Company
with respect to any such Inventions or ideas.
9. TRADE SECRETS OF OTHERS
Employee represents and warrants that his or her performance of all of
the terms of this Agreement and as an employee of the Company does not and
will not breach any agreement to keep in confidence Proprietary Information,
knowledge or data acquired by him or her in confidence or in trust prior to
his or her employment with the Company, and Employee will not disclose to the
Company, or induce the Company to use, any confidential or proprietary
information or material belonging to any previous employer or others.
Employee agrees not to enter into any agreement either written or oral in
conflict herewith.
10. BUSINESS OPPORTUNITIES
Employee will promptly disclose to the Company any business opportunity
of which Employee becomes aware of during his or her employment with the
Company which relates (i) to any products or services planned, under
development, developed, produced or marketed by the Company or (ii) of which
Employee becomes aware in the course of or as a result of his or her
employment with the Company. Employee will not take advantage of or divert
any such opportunity for the gain, profit or benefit of himself or herself or
any other person or entity without the written consent of the Company.
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11. GENERAL PROVISIONS
11.1 GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Oregon applicable to contracts made
and wholly performed within Oregon by persons domiciled in Oregon.
11.2 ENTIRE AGREEMENT
This Agreement sets forth the entire agreement and understanding of the
parties relating to the subject matter hereof. No representation, promise or
inducement has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any alleged
representation, promise or inducement not so set forth.
11.3 ASSIGNABILITY
This Agreement, and Employee's rights and obligations hereunder, may not
be assigned or delegated by Employee. The Company may assign its rights
hereunder in connection with any sale, transfer or other disposition of all or
substantially all of its business or assets.
11.4 MODIFICATION
This Agreement may be amended, modified, superseded, canceled, renewed
or extended, and the terms or covenants hereof may be waived, only by a
written instrument executed by the Company. The failure of the Company at
any time or times to require performance of any provision hereof shall in no
manner affect the right at a later time to enforce the same. No waiver by
the Company of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances
shall be deemed to be, or construed as, a further or continuing waiver of any
such breach, or a waiver of the breach of any other term or covenant
contained in this Agreement.
11.5 ATTORNEYS' FEES
If any suit or action is instituted to enforce any of the terms of this
Agreement, or if any appeal is taken from any decision rendered hereunder,
the prevailing party shall be entitled to recover from the other party the
costs and fees (including, without limitation, attorneys' fees, the fees and
costs of experts and consultants, copying, courier and telecommunication
costs and deposition costs and all other costs of
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discovery) incurred by such party in such suit or action, including without
limitation, any post-trial or appellate proceeding.
11.6 SPECIFIC PERFORMANCE
Employee is obligated to render services of a special, unique, unusual,
extraordinary, and intellectual character to the Company pursuant to his or
her employment with the Company, thereby giving this Agreement which is
executed in connection with such employment obligations peculiar value so
that the loss of any obligations under this Agreement could not be reasonably
or adequately compensated in damages in an action at law. Therefore, in
addition to other remedies provided by law, the Company shall have the right
to compel specific performance hereof by Employee and/or to obtain injunctive
relief or other equitable relief to prevent or curtail any breach of this
Agreement.
11.7 SEVERANCE
If any provision of this Agreement is or become invalid, illegal or
unenforceable, the remaining provisions shall remain in full force and
effect, and for the invalid, illegal or unenforceable provision shall be
substituted a valid, legal and enforceable provision which shall be as
similar as possible in economic and business objectives as intended by the
parties.
11.8 TERMINATION
This Agreement shall remain in full force and effect and survive
termination, for whatever reason, of Employee's employment with the Company.
11.9 COUNTERPARTS
This Agreement may be executed in counterparts, all of which when taken
together shall constitute one Agreement binding on all parties,
notwithstanding that all parties are not signatories to the same counterpart.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first written above.
SURPLUS SOFTWARE, INC.
By: /s/ JONATHAN BRODEUR
----------------------------------
Name: Jonathan Brodeur
-------------------------------
Title: President
-------------------------------
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/s/ GREGORY BOUDREAU
----------------------------------
Gregory Boudreau
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EXHIBIT A
LIST OF PRIOR INVENTIONS
Identifying Number of Brief
Title Date Descriptions
- ------------------------ -------------- ----------------------------
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") between
SURPLUS SOFTWARE, INC., an Oregon corporation ("Employer"), and JONATHAN
BRODEUR("Employee") is dated and entered into as of May 15, 1996.
RECITALS
WHEREAS, Employer and Employee entered into that certain employment
agreement dated as of June 12, 1995 (the "Employment Agreement");
WHEREAS, Employer and Employee wish to amend, restate and supersede the
Employment Agreement; provided, however, that the noncompete agreement
contained in Section 7(b) of the Employment Agreement shall continue herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, Employer and Employee agree as follows:
1. EMPLOYMENT
Employer shall employ Employee and Employee shall accept employment by
Employer in the position of President, effective July 5, 1995. Employee
shall perform such duties as may be assigned to him from time to time by the
Employer's Board of Directors (the "Board") which relate to the business of
Employer, its subsidiaries, its parent corporation, or any business ventures
in which Employer, its subsidiaries or its parent corporation may participate.
2. ATTENTION AND EFFORT
Employee shall devote Employee's full time, attention and effort to
Employer's business and shall skillfully serve its interests.
3. EMPLOYMENT AT WILL
Employee understands and agrees that his employment with Employer is at
will, and that either party may terminate such employment at any time
pursuant to Section 6.
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4. COMPENSATION
4.1 BASE SALARY
Employee's starting annual base salary shall be one hundred thousand
dollars ($100,000), before all customary payroll deductions. At no time
shall Employee's annual base salary be below $100,000. Such annual base
salary shall be paid in substantially equal installments at the same
intervals as other employees of Employer are paid. The Board shall determine
any increases in the annual base salary in future years.
4.2 BONUS
In addition to the base salary provided in Section 4.1, until May 31,
1996, Employee shall be entitled to receive any and all bonus payments
accrued pursuant to the provisions set forth in Section 3 of the Employment
Agreement, thereafter Employee shall be entitled to an annual bonus based
upon attainment of budgeted income before income tax ("Annual Target") as set
forth in the annual budget approved by the Board. Such bonus shall be paid
within ninety (90) days of year-end based on the following schedule:
BONUS
EMPLOYER PERFORMANCE (% OF BASE SALARY)
- -------------------- ------------------
Equal to or greater than 70% of
Annual Target 10%
For each additional increment of 6.7% additional for each
10% above 70% of Annual Target such 10% increment
5. BENEFITS
During the term of this Agreement, Employee shall be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in such fringe benefit programs as may be provided from time to
time by the Employer and shall be reimbursed for reasonable and necessary
travel and other expenses incurred in connection with Employer's business in
accordance with Employer's reimbursement policy.
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6. TERMINATION
6.1 BY EMPLOYER
Employer may terminate the employment of Employee, with or without cause,
(as defined below) at any time during the term of employment upon giving
thirty (30) days' prior notice to Employee. Employer may also terminate this
Agreement for cause at any time without notice.
6.2 BY EMPLOYEE
Employee may terminate Employee's employment at any time upon giving
thirty (30) days' prior notice to Employer.
6.3 AUTOMATIC TERMINATION
Employment shall terminate automatically upon death or total disability of
Employee. The term "total disability" as used herein shall mean an inability
to perform the duties set forth in Section 1 of this Agreement because of
illness or physical or mental disability for a period or periods aggregating
ninety (90) calendar days in any 12-month period, unless Employee is granted
a leave of absence by the Board. The parties hereto acknowledge that
Employee's ability to perform the duties specified in Section 1 hereof is of
the essence of this Agreement. Termination hereunder shall be deemed to be
effective thirty (30) days following Employee's death or immediately upon a
determination by the Board of Employee's total disability, as defined herein.
6.4 NOTICE
In the event that Employee's employment is terminated upon thirty (30)
days' prior notice as provided for in Sections 6.1 or 6.2 of this Agreement,
the parties agree that Employee's employment and performance of services
shall continue for the duration of such notice period; PROVIDED, HOWEVER,
that Employer may, at its own election and without reducing Employee's
compensation during such period, excuse Employee from any or all of
Employee's duties during such period. The effective date of the termination
of Employee's employment hereunder shall be the date on which such thirty-day
period expires, unless Employer and Employee agree in writing to a different
date.
6.5 CAUSE
Wherever reference is made in this Agreement to termination being with or
without cause, "cause" means cause given by Employee to Employer and includes
the
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following: (a) failure or refusal to carry out the directions of the
Board or officers of Employer, which directions are reasonably consistent
with the duties herein set forth to be performed by Employee; (b) violation
of a state or federal criminal law involving the commission of a crime
against Employer or a felony; (c) misuse of alcohol or controlled substances;
(d) misrepresentation, deception, fraud or dishonesty; (e) any incident
compromising Employee's reputation or ability to represent Employer with the
public; (f) any act or omission which substantially impairs Employer's
business, good will or reputation; or (g) any other material breach of this
Agreement. The parties hereto agree that a determination of cause pursuant
to this paragraph shall be committed solely to the discretion of Employer.
6.6 TERMINATION PAYMENTS
In the event of termination of the employment of Employee by Employer
without cause, Employee shall be paid, upon delivery to Employer of a general
release of liability by Employee, in a form acceptable to Employer, an amount
equal to his annual base monthly salary for a period of twelve (12) months
from the date of termination, payable in substantially equal installments at
the same intervals as other employees of the Company are paid. In the event
of termination of the employment of Employee for any other reason, all
salary, bonuses, benefits and other compensation set forth in this Agreement
shall cease as of the effective date of such termination; PROVIDED, HOWEVER,
that if the employment of Employee is automatically terminated due to death
or disability pursuant to Section 6.3 hereof, Employee or Employee's personal
representative shall receive termination payments in the form of Employee's
annual base salary through the conclusion of the calendar month of the
termination of employment because of such death or disability.
7. NONCOMPETITION AND NONSOLICITATION AGREEMENT
7.1 NONCOMPETE
Employee agrees that during the period of his employment and for a period
of two years following termination of employment, Employee shall not directly
or indirectly, invest or engage in any business which is competitive with the
business of Employer, or accept employment with or render services to a
competitor of Employer, as a director, officer, employee, partner, agent or
consultant, or take any action inconsistent with the Employee's fiduciary
relationship as an officer or employee of Employer. The Employee further
agrees that this covenant not to compete applies whether the Employee acts as
an individual for his own account, or as a director, officer, employee,
partner, agent, consultant, representative or shareholder of any person, firm
or corporation. Notwithstanding the foregoing, this Section 7 shall not be
deemed to have been breached by investments of the Employee whereby the
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Employee owns less than 5 percent of the voting stock or other securities or
evidences of ownership of any business (regardless of legal form) whose stock
or securities are traded on one of the national securities exchanges or is
quoted on the NASDAQ system or successors thereto.
7.2 NONSOLICITATION
The Employee agrees that, except as provided in this Section 7, during his
term of employment and for a period of two years following termination of
employment, Employee shall not (a) interfere with Employer's business
relationships, (b) solicit, for products competitive with any of Employer's
products, any customers which are, at the time of such termination, customers
of Employer, or (c) solicit for employment any employees of Employer.
7.3 BEST INTEREST
The Employee agrees to act in the best interest of Employer. The
obligations of the Employee contained in this Section 7 shall survive the
termination of this Agreement.
8. ASSIGNMENT OF INVENTIONS AND CONFIDENTIALITY AGREEMENT
Employee agrees to execute the Assignment of Inventions and
Confidentiality Agreement attached hereto as Exhibit A.
9. CONFLICTING AGREEMENTS
Employee is not a party to any existing or proposed agreements that may
adversely affect Employee's ability to render services to the Employer
hereunder.
10. GENERAL PROVISIONS.
10.1 NO WAIVER
No provision of this Agreement shall be deemed to have been waived unless
such waiver is in writing signed by the waiving party. No failure by any
party to insist upon the strict performance of any provision of this
Agreement, or to exercise any right or remedy consequent upon a breach
thereof, shall constitute a waiver of any such breach, of such provision or
of any other provision. No waiver of any provision of this Agreement shall
be deemed a waiver of any other provision of this Agreement or a waiver of
such provision with respect to any subsequent breach, unless expressly
provided in writing.
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10.2 NOTICES
All notices required or permitted to be given under this Agreement shall
be in writing. Notices may be served by certified or registered mail,
postage paid with return receipt requested; by private courier, prepaid; by
telex, facsimile, or other telecommunication device capable of transmitting
or creating a written record; or personally. Mailed notices shall be deemed
delivered two (2) days after mailing, properly addressed. Couriered notices
shall be deemed delivered on the date that the courier warrants that delivery
will occur. Telex, facsimile or telecommunication notices shall be deemed
delivered when receipt is either confirmed by confirming transmission
equipment or acknowledged by the addressee or its office. Personal delivery
shall be effective when accomplished. Unless a party changes its address by
giving notice to the other party as provided herein, notices shall be
delivered to the parties at the following addresses:
Surplus Software, Inc.
489 North 8th Street
Hood River, OR 97031
Attn: President Jonathan Brodeur
16 Prospect Avenue
Hood River, OR 97031
10.3 INTEGRATION; AMENDMENT
This Agreement constitutes the entire agreement of the parties relating to
the subject matter hereof. There are no promises, terms, conditions,
obligations, or warranties other than those contained in this Agreement.
This Agreement supersedes all prior communications, representations, or
agreements, verbal or written, among the parties relating to the subject
matter hereof. This Agreement may not be amended except in a writing
executed by the parties.
10.4 SEVERABILITY
Any provision of this Agreement that is deemed invalid or unenforceable
shall be ineffective to the extent of such invalidity or unenforceability,
without rendering invalid or unenforceable the remaining provisions of this
Agreement. Furthermore, in lieu of each such invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such invalid or unenforceable provision as
may be possible and be valid and enforceable.
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10.5 ASSIGNMENT
Employee shall not assign, sell, subcontract, delegate or otherwise
transfer his rights or obligations under this Agreement without the prior
written consent of the Employer, and any attempted assignment or delegation
shall be void and without effect.
10.6 GOVERNING LAW, SERVICE OR PROCESS AND VENUE
The parties hereto intend that this Agreement shall be governed by and
construed in accordance with the laws of the State of Oregon applicable to
contracts made and wholly performed within Oregon by persons domiciled in
Oregon.
10.7 ATTORNEYS' FEES AND COURT COSTS
If any suit or action arising out of or related to this Agreement is
brought by any party, the prevailing party or parties shall be entitled to
recover the costs and fees (including without limitation reasonable attorney
fees, the fees and costs of experts and consultants, copying, courier and
telecommunication costs, and deposition costs and all other costs of
discovery) incurred by such party or parties in such suit or action,
including without limitation any post-trial or appellate proceeding.
10.8 COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement binding on all the parties,
notwithstanding that all parties are not signatories to the same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
EMPLOYER SURPLUS SOFTWARE, INC.
By: /s/ JONATHAN BRODEUR
-----------------------
Name: Jonathan Brodeur
---------------------
Title: President
-------------------
EMPLOYEE /s/ JONATHAN BRODEUR
-----------------------
Jonathan Brodeur
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EXHIBIT A
ASSIGNMENT OF INVENTIONS AND
CONFIDENTIALITY AGREEMENT
Page A-1
<PAGE>
ASSIGNMENT OF INVENTIONS AND
CONFIDENTIALITY AGREEMENT
This ASSIGNMENT OF INVENTIONS AND CONFIDENTIALITY AGREEMENT ("Agreement")
is entered into as of May 15, 1996 between Surplus Software, Inc., an Oregon
corporation (the "Company") and Jonathan Brodeur ("Employee").
RECITAL
WHEREAS, Employee desires to obtain a position with the Company, and the
Company desires to obtain the services of Employee, but only expressly
subject to and conditioned upon Employee's agreeing to certain inventions and
confidentiality provisions set forth herein;
AGREEMENT
NOW, THEREFORE, in consideration of the Company's agreement to employ
Employee, the agreements herein expressed, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
1. ASSIGNMENT OF INVENTIONS
Employee hereby assigns and transfers to the Company his or her entire
right, title and interest in and to all inventions, including but not be
limited to, products, ideas, improvements, designs and discoveries, including
computer software programs, internet applications and other intellectual
property, or improvements or enhancements to any of the foregoing, whether or
not patentable or copyrightable and whether or not reduced to practice
("Inventions"), made or conceived by Employee (whether made solely by
Employee or jointly with others) during the period of his or her employment
with the Company which relate in any manner to the actual or demonstrably
anticipated business, work, or research and development of the Company and
its affiliates, or result from or are suggested by any task assigned to him
or her or any work performed by him or her for or on behalf of the Company.
Employee agrees that all such Inventions and all associated United States and
foreign patent, copyright, trademark, trade secret and any other proprietary
rights, including, but not limited to, all rights of registrations and
renewal are the sole property of the Company.
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2. DISCLOSURE OF INVENTIONS. PATENTS
Employee agrees that in connection with any Invention as defined in
Section 1 above:
2.1 Employee will disclose such Invention promptly in writing to his or her
immediate superior at the Company in order to permit the Company to claim
rights to which it may be entitled under this Agreement. Such disclosure shall
be received in confidence by the Company.
2.2 Employee will, at the Company's request, promptly execute a written
assignment of title to the Company for any Invention required to be assigned by
Section 1 ("Assignable Invention") and Employee will preserve any such
Assignable Invention as confidential information of the Company.
2.3 Upon request, Employee agrees to assist the Company or its nominee
(at the Company's expense) during and at any time subsequent to his or her
employment in every reasonable way to obtain for the Company's own benefit,
patents and copyrights for such Assignable Invention in any and all
countries, which Assignable Invention shall be and remain the sole and
exclusive property of the Company or its nominee whether or not patented or
copyrighted. Employee agrees to execute such papers and perform such lawful
acts as the Company deems to be necessary to allow it to exercise all rights,
title and interest in such patents and copyrights.
3. EXECUTION OF DOCUMENTS
In connection with Section 2.3, Employee further agrees to execute,
acknowledge and deliver to the Company or its nominee upon request and at its
expense all such documents, including applications for patents and copyrights
and assignments of Inventions, patents and copyrights to be issued therefor,
as the Company may determine necessary or desirable to apply for and obtain
patents and copyrights on such Assignable Inventions in any and all countries
and/or to protect the interest of the Company or its nominee in such
Inventions, patents and copyrights and to vest title thereto in the Company
or its nominees. In the event that the Company is unable for any reason
whatsoever to secure Employee's signature to any lawful necessary document
required to apply for or execute any patent, copyright or other application
with respect to such Assignable Inventions, patents and copyrights, including
renewals, extensions, continuations, divisions or continuations in part
thereof, Employee hereby irrevocably constitutes and appoints the Company and
its duly authorized officers and agents, any one of them, as his or her
lawful and true attorneys-in-fact in his or her name, place and stead, to
execute and file any such application and do all other lawfully permitted
acts to further the prosecution and
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issue of patents, copyrights or other rights thereon with the same legal
force and effect as if executed by Employee.
4. PROPRIETARY INFORMATION
Employee agrees that all Proprietary Information of which Employee may
acquire knowledge is the sole and exclusive property of the Company, and that
the Company shall retain all right, title and interest to the Proprietary
Information. Employee further agrees that Employee is not entitled to use
Proprietary Information for his or her own benefit or for the benefit of
others during or after the period of his or her employment, without the prior
written consent of the Company. As used herein, "Proprietary Information"
shall include, without limitation, information that has been created,
discovered, developed, or otherwise become known to the Company and/or in
which property rights have been assigned or otherwise conveyed to the
Company, which information has commercial value in the Company's business or
proposed business, including any trade secrets, confidential information,
knowledge, data or other information of the Company relating to products,
processes, know-how, designs, research, formulae, test procedures and
results, improvements, inventions or techniques, finances, customers,
vendors, services, business plans, marketing plans and strategies, pricing
strategies, or other subject matter pertaining to any business of the Company
for any of its clients, customers, consultants, licensees or affiliates.
Employee further agrees not to reproduce or in any way allow any such
Proprietary Information, knowledge, data or other information, or any
documentation relating thereto, to be delivered or used by any third party
without specific direction or consent of a duly authorized representative of
the Company. In the event of the termination of Employee's employment for any
reason whatsoever, Employee shall promptly return all records, materials,
equipment, drawings and the like pertaining to any Proprietary Information
and Employee shall not take any description or documents containing or
pertaining to any Proprietary Information, which Employee may have produced
or obtained during the course of employment with the Company. In the event
of termination of employment, Employee agrees to promptly sign and deliver to
the Company a certificate acknowledging the return of such Proprietary
Information and such other information as the Company requests.
5. CONFIDENTIAL RELATIONSHIP
Employee understands that his or her employment creates a relationship of
confidence and trust between Employee and the Company with respect to any
information: (a) applicable to the business of the Company; or (b)
applicable to the business of any supplier, consultant, independent
contractor, licensor, licensee, client, customer or affiliate of the Company,
which information may be made known to Employee by the Company or by any
supplier, consultant, independent contractor,
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licensor, licensee, client, customer or affiliate of the Company, or
information learned by Employee during the period of his or her employment.
Employee agrees to keep confidential, and not disclose or make any use of,
except for the benefit of the Company, at any time either during or
subsequent to Employee's employment, any Proprietary Information of which
Employee may acquire knowledge. Employee also agrees to employ all
reasonable measures to prevent the unauthorized use of the Proprietary
Information. Employee agrees that, in the event that Employee is served with
a subpoena or other compulsory judicial or administrative process calling for
production of Proprietary Information, Employee will immediately notify the
Company in order that the Company may take such action as it deems necessary
to protect its interests.
6. MAINTENANCE OF RECORDS
Employee agrees to keep and maintain adequate and current written records
of all Inventions made by him or her (in the form of notes, sketches,
drawings and as may be specified by the Company), which records shall be
available to and remain the sole property of the Company at all times.
7. PRIOR INVENTIONS
It is understood that all Inventions, if any, patented or unpatented or
copyrighted or uncopyrighted, which Employee made prior to his or her
employment by the Company or its affiliates, are excluded from the scope of
this Agreement. To preclude any possible uncertainty, Employee has set forth
on Exhibit A attached hereto a complete list of all of his or her prior
Inventions, including numbers of all patents and patent applications, and a
brief description of all unpatented Inventions which are not the property of
a previous employer. Employee represents and covenants that the list is
complete and that, if no items are on the list, Employee has no such prior
Inventions. Employee agrees to notify the Company in writing before Employee
makes any disclosure or performs any work on behalf of the Company which
appears to threaten or conflict with proprietary rights Employee claims in
any Invention or idea. In the event of his or her failure to give such
notice, Employee agrees that he or she will make no claim against the Company
with respect to any such Inventions or ideas.
8. TRADE SECRETS OF OTHERS
Employee represents and warrants that his or her performance of all of the
terms of this Agreement and as an employee of the Company does not and will
not breach any agreement to keep in confidence Proprietary Information,
knowledge or data acquired by him or her in confidence or in trust prior to
his or her employment with the Company, and Employee will not disclose to the
Company, or induce the
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Company to use, any confidential or proprietary information or material
belonging to any previous employer or others. Employee agrees not to enter
into any agreement either written or oral in conflict herewith.
9. BUSINESS OPPORTUNITIES
Employee will promptly disclose to the Company any business opportunity of
which Employee becomes aware of during his or her employment with the Company
which relates (i) to any products or services planned, under development,
developed, produced or marketed by the Company or (ii) of which Employee
becomes aware in the course of or as a result of his or her employment with
the Company. Employee will not take advantage of or divert any such
opportunity for the gain, profit or benefit of himself or herself or any
other person or entity without the written consent of the Company.
10. GENERAL PROVISIONS
10.1 GOVERNING LAW
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Oregon applicable to contracts made
and wholly performed within Oregon by persons domiciled in Oregon.
10.2 ENTIRE AGREEMENT
This Agreement sets forth the entire agreement and understanding of the
parties relating to the subject matter hereof. No representation, promise or
inducement has been made by either party that is not embodied in this
Agreement, and neither party shall be bound by or liable for any alleged
representation, promise or inducement not so set forth.
10.3 ASSIGNABILITY
This Agreement, and Employee's rights and obligations hereunder, may not
be assigned or delegated by Employee. The Company may assign its rights
hereunder in connection with any sale, transfer or other disposition of all
or substantially all of its business or assets.
10.4 MODIFICATION
This Agreement may be amended, modified, superseded, canceled, renewed or
extended, and the terms or covenants hereof may be waived, only by a written
instrument executed by the Company. The failure of the Company at any time
or times to require performance of any provision hereof shall in no manner
affect the
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right at a later time to enforce the same. No waiver by the Company of the
breach of any term or covenant contained in this Agreement, whether by
conduct or otherwise, in any one or more instances shall be deemed to be, or
construed as, a further or continuing waiver of any such breach, or a waiver
of the breach of any other term or covenant contained in this Agreement.
10.5 ATTORNEYS' FEES
If any suit or action is instituted to enforce any of the terms of this
Agreement, or if any appeal is taken from any decision rendered hereunder,
the prevailing party shall be entitled to recover from the other party the
costs and fees (including, without limitation, attorneys' fees, the fees and
costs of experts and consultants, copying, courier and telecommunication
costs and deposition costs and all other costs of discovery) incurred by such
party in such suit or action, including without limitation, any post-trial or
appellate proceeding.
10.6 SPECIFIC PERFORMANCE
Employee is obligated to render services of a special, unique, unusual,
extraordinary, and intellectual character to the Company pursuant to his or
her employment with the Company, thereby giving this Agreement which is
executed in connection with such employment obligations peculiar value so
that the loss of any obligations under this Agreement could not be reasonably
or adequately compensated in damages in an action at law. Therefore, in
addition to other remedies provided by law, the Company shall have the right
to compel specific performance hereof by Employee and/or to obtain injunctive
relief or other equitable relief to prevent or curtail any breach of this
Agreement.
10.7 SEVERANCE
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable, the remaining provisions shall remain in full force and
effect, and for the invalid, illegal or unenforceable provision shall be
substituted a valid, legal and enforceable provision which shall be as
similar as possible in economic and business objectives as intended by the
parties.
10.8 TERMINATION
This Agreement shall remain in full force and effect and survive
termination, for whatever reason, of Employee's employment with the Company.
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10.9 COUNTERPARTS
This Agreement may be executed in counterparts, all of which when taken
together shall constitute one Agreement binding on all parties,
notwithstanding that all parties are not signatories to the same counterpart.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
SURPLUS SOFTWARE, INC.
By: /s/ JONATHAN BRODEUR
---------------------
Name: Jonathan Brodeur
-------------------
Title: President
------------------
/s/ JONATHAN BRODEUR
-------------------------
Jonathan Brodeur
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EXHIBIT A
LIST OF PRIOR INVENTIONS
Title Date Identifying Number or Brief Description
- ------------------------- --------- ---------------------------------------
