LOTO INC. EMPLOYMENT AGREEMENT

 

WHEREAS, the Company desires to engage the Executive to serve the Company as the Chief Executive Officer and Chief Financial Officer and the Executive desires to serve as the Chief Executive Officer and Chief Financial Officer of the Company;

NOW THEREFORE, in consideration of the premises and the mutual agreements made herein, the Company and the Executive agree as follows:

1.           Employment; Duties.  The Company shall engage the Executive to serve as Chief Executive Officer and Chief Financial Officer of the Company.  The Executive shall serve the Company in such capacity for the “Employment Period” as defined in Section 2.  The Executive agrees that during the term of his employment hereunder, he shall devote substantially all of his professional working time, attention, knowledge and experience and give his best effort, skill and abilities to promote the business and interests of the Company as directed by the Board of Directors of the Company or a committee of the Board of Directors to which the Board of Directors has duly delegated authority thereof (collectively, the “Board”).

2.           Employment Period.  This Agreement shall have an initial term of one year to be effective commencing as of the date hereof and ending on the first anniversary of thereof (the “Initial Employment Period”), unless sooner terminated in accordance with the provisions of Section 7 or Section 8.  This Agreement shall automatically renew and continue to remain in effect after the Initial Employment Period for successive one year periods (each, a “Renewal Employment Period”), until terminated as provided herein, unless either party provides the other party with written notice of non-renewal not later than ten business days prior to the expiration of the Initial Period or the anniversary of such date in any subsequent Renewal Employment Period.  The Initial Employment Period and each Renewal Employment Period of this Agreement is referred to herein as the “Employment Period.”

3.           Compensation.

 

 

 

(b)           Options. The Executive shall be granted such options to purchase shares of the Company’s common stock, subject to the terms and conditions set forth in the Stock Option Agreement attached hereto as Exhibit A.

(c)           Expense Reimbursement. The Executive shall be entitled to reimbursement of reasonable out-of-pocket expenses incurred in connection with travel and matters related to the Company's business and affairs if made in accordance with written Company policy as in effect from time to time as determined by the Board.

(d)           Place of Employment. The parties agree that the principal place of services to be rendered to the Company by Executive shall be in Toronto, Canada, unless otherwise agreed to by the parties hereto, and all compensation shall be paid to Executive in such jurisdiction.  The Company acknowledges and agrees that Executive may reside from time to time in other jurisdictions and may travel to any and all other jurisdictions related to services to be rendered to the Company and Executive, none of which shall have the effect of changing the deemed principal place of services rendered by Executive to the Company unless otherwise required by the laws of such other jurisdictions.

4.           Trade Secrets.  The Executive agrees that it is in the Company's legitimate business interest to restrict his disclosure or use of Trade Secrets and Confidential Information relating to the Company or its affiliates as provided herein, and agrees not to disclose or use the Trade Secrets and/or Confidential Information relating to the Company or its affiliates for any purpose other than in connection with his performance of his duties to the Company.  For purposes of this Agreement, “Trade Secrets” shall mean all confidential and proprietary information belonging to the Company (including prospective client lists, ideas, formulas, compositions, inventions (whether patentable or unpatentable and whether or not reduced to practice), know-how, manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial and marketing plans and customer and supplier lists and information). For purposes of this Agreement, “Confidential Information” shall mean all information other than Trade Secrets belonging to, used by, or which is in the possession of the Company and relating to the Company’s business or assets specifically including, but not limited to, information relating to the Company’s products, services, strategies, pricing, customers, representatives, suppliers, distributors, technology, finances, employee compensation, computer software and hardware, inventions, developments, in each case to the extent that such information is not required to be disclosed by applicable law or compelled to be disclosed by any governmental authority.  Notwithstanding the foregoing, the terms “Trade Secrets” and “Confidential Information” do not include information that (i) is or becomes generally available to or known by the public (other than as a result of a disclosure by the Executive), provided, that the source of such information is not known by the Executive to be bound by a confidentiality agreement with the Company; or (ii) is independently developed by the Executive without violating this Agreement. In addition to the provisions set forth above, the Executive shall execute the Proprietary Information and Invention Agreement (the “Proprietary Information and Invention Agreement”) attached hereto as Exhibit B, and shall agree to the terms and conditions set forth therein.  In the event of any conflict between the terms of this Agreement and the terms of the Proprietary Information and Invention Agreement, the terms of the Proprietary Information and Invention Agreement shall govern.

 

 

 

 

5.           Return of Documents and Property.  Upon the expiration or termination of the Executive's employment with the Company, or at any time upon the request of the Company, the Executive (or his heirs or personal representatives) shall deliver to the Company (a) all documents and materials (including, without limitation, computer files) containing Trade Secrets and Confidential Information relating to the business and affairs of the Company or its affiliates, and (b) all documents, materials, equipment and other property (including, without limitation, computer files, computer programs, computer operating systems, computers, printers, scanners, pagers, telephones, credit cards and ID cards) belonging to the Company or its affiliates, which in either case are in the possession or under the control of the Executive (or his heirs or personal representatives).

6.           Discoveries and Works.  All Discoveries and Works made or conceived by the Executive during his employment by the Company, solely, jointly or with others, that relate to the Company's present or anticipated activities, or are used or useable by the Company shall be owned by the Company.  For the purposes of this Section 6, (including the definition of “Discoveries and Works”) the term “Company” shall include the Company and its affiliates.  The term “Discoveries and Works” includes, by way of example but without limitation, Trade Secrets and other Confidential Information, patents and patent applications, service marks, and service mark registrations and applications, trade names, copyrights and copyright registrations and applications.  The Executive shall (a) promptly notify, make full disclosure to, and execute and deliver any documents requested by the Company, as the case may be, to evidence or better assure title to Discoveries and Works in the Company, as so requested, (b) renounce any and all claims, including but not limited to claims of ownership and royalty, with respect to all Discoveries and Works and all other property owned or licensed by the Company, (c) assist the Company in obtaining or maintaining for itself at its own expense United States and foreign patents, copyrights, trade secret protection or other protection of any and all Discoveries and Works, and (d) promptly execute, whether during his employment with the Company or thereafter, all applications or other endorsements necessary or appropriate to maintain patents and other rights for the Company and to protect the title of the Company thereto, including but not limited to assignments of such patents and other rights.  Any Discoveries and Works which, within one year after the expiration or termination of the Executive's employment with the Company, are made, disclosed, reduced to tangible or written form or description, or are reduced to practice by the Executive and which pertain to the business carried on or products or services being sold or delivered by the Company at the time of such termination shall, as between the Executive and, the Company, be presumed to have been made during the Executive's employment by the Company.  The Executive acknowledges that all Discoveries and Works shall be deemed “works made for hire” under the U.S. Copyright Act of 1976, as amended 17 U.S.C. Sect. 101.

7.           Termination.

(a)           Manner of Termination. The Company and the Executive may terminate this Agreement, with or without cause, in accordance with the provisions of this Section 7.

 

(b)           Termination.  The Company may terminate this Agreement with or without cause upon ten business days notice during the Employment Period, in which case the Company shall continue to pay the Executive’s Base Salary during the ten business day notice period, plus reimbursement of any and all reasonable and pre-approved expenses incurred by Executive as of the date of notice of such date, and all of such payments shall completely and fully discharge any and all obligations and liabilities of the Company to the Executive.

(c)           Termination by Executive. The Executive may terminate this Agreement with or without cause at any time during the Employment Period upon ten business days prior written notice of termination to the Company.

(d)           Effect of Termination.  Except as otherwise provided herein with respect to a termination pursuant to Section 7(b), in the event this Agreement is terminated pursuant to this Section 7, the Executive's rights and the Company's obligations hereunder shall cease as of the effective date of the termination, including, without limitation, the right to receive Base Salary, options and all other compensation or benefits provided for in this Agreement, and the Executive shall not be entitled to any further compensation, options, or severance compensation of any kind, and shall have no further right or claim to any compensation, options, benefits or severance compensation under this Agreement or otherwise against the Company or its affiliates, from and after the date of such termination, except as required by applicable law.  Any termination under this Section 7 is subject to the provisions of Sections 18 and 20 hereof.

(e)           Relinquishment of Authority.  Notwithstanding anything to the contrary set forth herein, upon written notice to the Executive, the Company may immediately relieve the Executive of all his duties and responsibilities hereunder and may relieve the Executive of authority to act on behalf of, or legally bind, the Company.

(f)           Transition Services and Certifications. Following any termination for any reason, the Executive shall render any and all services reasonably necessary for the Company to facilitate proper transition of the Company’s books and records and the Executive shall certify to the Company that any and all books and records maintained during the period of Executive’s services to the Company were true and complete and did not contain any material misstatements or omissions or any misleading information of any nature or kind, and that all controls and procedures of the Company under the management authority of Executive during the period of employment were properly observed during the period of service of the Executive.

8.           Disability: Death.

(a)           If, prior to the expiration of any applicable Employment Period, the Executive shall be unable to perform his duties hereunder by reason of physical or mental disability, the Company shall have the right to terminate this Agreement and the remainder of the Employment Period by giving written notice to the Executive to that effect.  A determination of the Executive’s ability to perform his duties shall be made by the Company’s Board of Directors.  Immediately upon the giving of such notice, the Employment Period shall terminate.

 

 

 

(b)           Upon termination of this Agreement pursuant to Section 8(a), the Executive shall be paid his Base Salary through the effective date of such termination.  All other compensation and benefits provided for in Section 3 of this Agreement shall cease upon termination pursuant to Section 8(a), except as otherwise required by applicable law.

(c)           If, prior to the expiration of the Employment Period or the termination of this Agreement, the Executive shall die, the Executive's estate shall be paid his Base Salary and other compensation due through such date of death.  Except as otherwise provided in this Section 8(d), upon the death of the Executive, the Employment Period shall terminate without further notice and the Company shall have no further obligations hereunder, including, without limitation, obligations with respect to compensation and benefits provided for in Section 3 of this Agreement, other than as set forth in the immediately preceding sentence or as otherwise required by law.  Any termination under this Section 8 is subject to the provisions of Section 18 hereof.

9.           No Conflicts.  The Executive has represented and hereby represents to the Company and its affiliates that the execution, delivery and performance by the Executive of this Agreement do not conflict with or result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default under any contract, agreement or understanding, whether oral or written, to which the Executive is a party or of which the Executive is or should be aware and that there are no restrictions, covenants, agreements or limitations on his right or ability to enter into and perform the terms of this Agreement, and agrees to indemnify and save the Company and its affiliates harmless from any liability, cost or expense, including attorney’s fees, based upon or arising out of any such restrictions, covenants, agreements, or limitations that may be found to exist.  For purposes of this Agreement, “affiliate” shall include any subsidiary in the case of the Company, and any person or entity directly or indirectly controlled by or controlling the Company.

10.           Non-competition.   Except as authorized by the Board of Directors, during the Executive’s employment by the Company and for a period of one year thereafter, Executive will not (except as an officer, director, stockholder, employee, agent or consultant of the Company or any subsidiary or affiliate thereof) either directly or indirectly, whether or not for consideration, (i) in any way, directly or indirectly, solicit, divert, or take away the business of any person who is or was a customer of the Company, or in any manner influence such person to cease doing business in part or in whole with Company; (ii) engage in a Competing Business; (iii) except for investments or ownership in public entities, mutual funds and similar investments, none of which constitute more than 5% of the ownership or control of such entities, own, operate, control, finance, manage, advise, be employed by or engaged by, perform any services for, invest or otherwise become associated in any capacity with any person engaged in a Competing Business in the United States; or (iv) engage in any practice the purpose or effect of which is to intentionally evade the provisions of this covenant. For purposes of this section, “Competing Business” means any company or business which is engaged directly or indirectly in any business carried on or planned to be carried on by the Company or any of its subsidiaries or affiliates.

 

 

11.           Non-Solicitation.  During the Executive’s employment by the Company and for a period of one year thereafter (the “Restricted Period”), the Executive, directly or indirectly, whether for his account or for the account of any other individual or entity, shall not solicit or canvas the trade, business or patronage of, or sell to, any individuals or entities that were either customers of the Company during the time the Executive was employed by the Company, or prospective customers with respect to whom a sales effort, presentation or proposal was made by the Company or its affiliates, during the one year period prior to the termination of the Executive’s employment.  The Executive further agrees that during the Restricted Period, he shall not, directly or indirectly, (i) solicit, induce, enter into any agreement with, or attempt to influence any individual who was an employee or consultant of the Company at any time during the time the Executive was employed by the Company, to terminate his or her employment relationship with the Company or to become employed by the Executive or any individual or entity by which the Executive is employed or (ii) interfere in any other way with the employment, or other relationship, of any employee or consultant of the Company or its affiliates.

12.           Enforcement.  The Executive agrees that any breach of the provisions of this Agreement would cause substantial and irreparable harm, not readily ascertainable or compensable in terms of money, to the Company for which remedies at law would be inadequate and that, in addition to any other remedy to which the Company may be entitled at law or in equity, the Company shall be entitled to temporary, preliminary and other injunctive relief in the event the Executive violates or threatens to violate the provisions of this Agreement, as well as damages, including, without limitation consequential damages, and an equitable accounting of all earnings, profits and benefits arising from such violation, in each case without the need to post any security or bond.  Nothing herein contained shall be construed as prohibiting the Company from pursuing, in addition, any other remedies available to the Company for such breach or threatened breach.  A waiver by the Company of any breach of any provision hereof shall not operate or be construed as a waiver of a breach of any other provision of this Agreement or of any subsequent breach by the Executive.

13.           Determinations by the Company.  All determinations and calculations with respect to this Agreement shall be made by the Board or any committee thereof to which the Board has delegated such authority, in good faith in accordance with applicable law, the certificate of incorporation and by-laws of the Company, in its sole discretion, and shall be final, conclusive and binding on all persons, including the Executive and the personal representative of his estate.

14.           Successors and Assigns.  This Agreement shall inure to the benefit of and shall be binding upon (i) the Company, its successors and assigns, and any company with which the Company may merge or consolidate or to which the Company may sell substantially all of its assets, and (ii) Executive and his executors, administrators, heirs and legal representatives.  Since the Executive’s services are personal and unique in nature, the Executive may not transfer, sell or otherwise assign his rights, obligations or benefits under this Agreement.

 

 

15.           Notices.  Any notice required or permitted under this Agreement shall be deemed to have been effectively made or given if in writing and personally delivered, or sent properly addressed in a sealed envelope postage prepaid by certified or registered mail, or delivered by a reputable overnight delivery service.  Unless otherwise changed by notice, notice shall be properly addressed to the Executive if addressed to the address of record on file with the Company; and properly addressed to the Company if addressed to:

Loto Inc.

Suite 502, 25 Adelaide Street

Toronto, Ontario, Canada M5C 3A1

Telephone:   ###-###-####

Attention:  Donald Ziraldo

With a copy to:

Wuersch & Gering LLP

100 Wall Street, 21st Floor

New York, New York 10005

Telephone:   ###-###-####

Telecopier:   ###-###-####

Attention:  Travis L. Gering, Esq.

 

16.           Severability.  It is expressly understood and agreed that although the Company and the Executive consider the restrictions contained in this Agreement to be reasonable and necessary for the purpose of preserving the goodwill, proprietary rights and going concern value of the Company, if a final determination is made by arbitration or any court having jurisdiction that any provision contained in this Agreement is invalid, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such arbitral body or court may determine or indicate to be reasonable.  Alternatively, if the arbitrable body or court finds that any provision or restriction contained in this Agreement or any remedy provided herein is unenforceable, and such restriction or remedy cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained therein or the availability of any other remedy.  The provisions of this Agreement shall in no respect limit or otherwise affect the Executive's obligations under any other agreements with the Company.

17.           Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.  Signatures hereto may be facsimiles or electronically scanned copies which shall have the same full force and effect as a manually signed original thereof.

18.           Effects of Termination.  Notwithstanding anything to the contrary contained herein, if this Agreement is terminated pursuant to Section 7 or Section 8 or expires by its terms, the provisions of Sections 4-20 of this Agreement shall survive and continue in full force and effect.

 

 

19.           Arbitration.  All disputes and controversies arising out of or relating to this Agreement shall be finally settled and binding under the Rules of International Commercial Dispute Resolution of the American Arbitration Association (“ICDR”).  The place of arbitration shall be New York.  The Arbitration shall be conducted in English by a single arbitrator appointed in accordance with the ICDR rules.  Any award, verdict or settlement issued under such arbitration may be entered by any party for order of enforcement by any court of competent jurisdiction.  The arbitrator shall have no power to take interim measures he or she deems necessary, including injunctive relief and measures for the protection or conservation of property.

20.           Miscellaneous.  This Agreement constitutes the entire agreement, and supersedes all prior agreements, of the parties hereto relating to the subject matter hereof, and there are no written or oral terms or representations made by either party other than those contained herein.  This Agreement cannot be modified, altered or amended except by a writing signed by both parties.  No waiver by either party of any provision or condition of this Agreement at any time shall be deemed a waiver of such provision or condition at any prior or subsequent time or of any other provision or condition at the same or any prior or subsequent time.

 

 

 

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.