Exhibit 10.6
EXECUTIVE EMPLOYMENT AGREEMENT
Effective May 8 , 2008
(this “Agreement”)
B E T W E E N:
Corel Inc.
(the “Corporation”)
- and -
Kris Hagerman
(the “Executive”)
     WHEREAS the Corporation wishes to employ the Executive and the Executive
wishes to become an employee of the Corporation;
     AND WHEREAS the Corporation and the Executive agree that it is desirable to
enter into this Agreement to specify the terms and conditions of the Executive’s
employment with the Corporation;
     NOW THEREFORE in consideration of the mutual covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the Corporation and the Executive
agree as follows.

1.   Interpretation

1.1   Definitions. In this Agreement, the following capitalized terms have the
following meanings:

  (a)   “Affiliate” means an affiliated entity and as defined in Ontario
Securities Commission Rule 45-501 and “controlled” has the meaning given in that
Rule, as amended or replaced from time to time, and “affiliated” has a
corresponding meaning.     (b)   “Base Grant” has the meaning set out in
Section 3.4.     (c)   “Board” means the board of directors of Corel
Corporation.     (d)   “EBITDA” has the meaning set out in Section 3.2.     (e)
  “Plan” means the 2006 Corel Corporation Equity Plan as amended from time to
time.     (f)   “Salary” has the meaning set out in Section 3.1.     (g)  
“Shares” means Class A common shares of the Corporation.     (h)   “Term” means
the period from the Start Date to the Termination Date.     (i)   “Termination
Date” means the date set out in Section 2.1 and is the Executive’s last day of
active employment and does not include any period of statutory or reasonable

 

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Corel Corporation Executive Employment Agreement   Page 2 of 9

      notice or any period of deemed employment and “terminate” and “terminated”
have corresponding meanings.

1.2   Headings, Sections and Plural. The inclusion of headings in this Agreement
is for convenience of reference only and shall not affect its construction or
interpretation. Throughout this Agreement, whenever required by context, words
importing the singular include the plural and vice versa. In this Agreement,
references to “Sections” or to “Schedules” are references to sections in or
schedules to this Agreement, unless expressly stated otherwise.   1.3  
Deductions and Withholdings. The payments to the Executive set out in this
Agreement are subject to applicable deductions and withholdings.   1.4   Benefit
Contributions and Participation. The Corporation’s contributions to, the
Executive’s participation in, and any conversion of, the group benefit plans as
set out in this Agreement are subject to the terms and conditions of the benefit
plans, and changes to or cancellations of such plans over time, as may be made
with such notice to the Executive as is practical in the circumstances, and in
the sole discretion of the Corporation.   1.5   Currency. Unless otherwise
indicated, all dollar amounts referred to in this Agreement are in United States
currency.   1.6   Prevailing Agreement. In the event of any inconsistencies
between this Agreement and the Plan, the provisions in this Agreement supersede
the Plan to the extent of such inconsistencies.   2.   Term and Duties   2.1  
Start Date and Term. The Corporation agrees to employ the Executive and the
Executive agrees to become employed with the Corporation on the terms and
conditions set out in this Agreement commencing on May 8, 2008 (the “Start
Date”). The Executive’s employment ends on the earliest of: (i) the date his
employment is terminated pursuant to this Agreement; (ii) the first anniversary
of the Start Date (unless the parties enter into a written agreement to extend
this date); or (iii) the date a new Chief Executive Officer of the Corporation
commences employment (the “Termination Date”).   2.2   Position. The Executive
will serve in an executive capacity as the Interim Chief Executive Officer of
Corel Corporation and in such other capacities as may be agreed upon by the
Corporation and the Executive from time to time.   2.3   Duties. The Executive
will perform the duties customarily performed in his position including, without
limitation, regularly reporting his activities and the results thereof to the
Board. The Executive agrees to serve as a director of the Corporation and its
Affiliates if an as requested by the Corporation in good faith and without
compensation other than as set out in Section 3.   2.4   Good Faith. The
Executive shall devote his full business time and attention to the affairs of
the Corporation and will use his best efforts, skills and abilities to honestly,
faithfully, diligently and in good faith promote the Corporation’s best
interests, and he shall not have any interests that conflict with those of the
Corporation. The Executive shall observe and abide by the policies of the
Corporation in effect from time to time.

 

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Corel Corporation Executive Employment Agreement   Page 3 of 9

2.5   Third Party Obligations. The Executive represents and warrants that he
honestly and reasonably believes after proper enquiry, that his obligations
under this Agreement will not breach any obligations the Executive owes to third
parties, including any of the Executive’s former employers and the Executive
represents and warrants that he has provided to the Corporation all documents,
agreements and correspondence relating to any such obligations and that at the
date hereof, he is not aware of any claims or threatened claims that he has
breached any such obligations in connection with his obligations under this
Agreement.   3.   Compensation   3.1   Base Salary. The Corporation agrees to
pay the Executive an annual base salary of US $600,000.00, payable in accordance
with the Corporation’s payroll practices in effect from time to time, subject to
annual review and to increase as determined by the Board (“Salary”).   3.2  
Discretionary Bonus. The Executive will be eligible to participate in the
Corporation’s annual bonus plan with a target bonus of $400,000 of Salary for
the achievement of all targets. Any bonus payment is subject to achievement by
the Executive of the performance targets established by the Board. The
Executive’s bonus targets, linearity and acceleration will be consistent with
those established for other executives of the Corporation. Currently, the
performance targets are based on a combination of revenue targets and target
earnings before interest, tax, depreciation and amortization (“EBITDA”). To be
eligible for the bonus payment, the Executive must have been actively employed
throughout the fiscal year in respect of which his performance was assessed,
unless provided otherwise in this Agreement. Notwithstanding the above, the
Executive’s bonus for the period from the Start Date to August 31, 2008 will be
paid out at the 100% payout level.   3.3   Share Based Compensation Plan
Participation. The Executive will be eligible to participate in the Plan and
such other share based incentive plans or similar plans as may be established
for senior executives by the Corporation. All options granted to the Executive
are governed by the terms and conditions of the Plan, including any restrictions
on exercise of options and any requirements to agree to conditions, restrictions
or agreements set out in the Plan, except as expressly provided otherwise in
this Agreement.   3.4   Grant of Options. On the Start Date, the Corporation
will grant to the Executive options to acquire 326,760 Shares (equivalent to
1.25% of the Company) of Corel Corporation (the “Base Grant”), subject to the
terms and conditions set out in this Agreement and the Plan. The Base Grant of
options will have an exercise price of equal to fair market value as at the
Start Date. The Base Grant of options will be exercisable as to 8.33% on and
after the end of each month after the Start Date.   3.5   Payments for
Distributions on Base Grant of Options. If dividends or other distributions are
paid on Shares of the Corporation at a time when the Executive holds unexercised
options under the Base Grant of options, the Corporation will provide the
Executive with a payment equivalent to distributions the Executive would have
been eligible to receive had the Base Grant of options been exercised.   4.  
Expenses, Benefits and Vacation   4.1   General Expenses. The Corporation will
reimburse the Executive for his reasonable and approved business expenses,
including travel expenses, incurred by him in connection with the performance of
his duties under this Agreement, upon providing appropriate receipts

 

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Corel Corporation Executive Employment Agreement   Page 4 of 9

    satisfactory to the Corporation and in accordance with the Corporation’s
policies in effect from time to time.   4.2   Benefit Plans. The Executive will
be eligible to participate in the group benefit plans available to employees of
the Corporation from time to time, subject to Section 1.4. To the extent
permitted by the insurers, the Corporation will request the waiver of the
waiting periods for participating in the benefit plans, subject to the
Executive’s pre-existing conditions.   4.3   Vacation. The Executive will be
entitled to four weeks of vacation time per year to be taken at times that are
consistent with the business interests of the Corporation, and in accordance
with the Corporation’s vacation policies. The Executive may not carry forward
vacation time to subsequent vacation years except to the extent required by law.
  5.   Termination   5.1   Termination by Executive. The Executive may terminate
his employment with the Corporation at any time by providing the Corporation
with one month’s notice in writing. If, upon receipt of the Executive’s
resignation, the Corporation terminates the Executive’s employment before the
date the resignation was to be effective, the Corporation will, in full
satisfaction of its obligations to the Executive: (a) pay the Executive’s Salary
and vacation pay accrued until the date the resignation was to be effective;
(b) reimburse the outstanding expenses properly incurred by the Executive until
the date his employment ceases; (c) continue its contributions to the group
benefit plans until the date the resignation was to be effective, subject to
Section 1.4; and (d) pay the Executive a bonus pro-rated to the date his
employment ceases (in the event that employment ceases other than at the end of
a fiscal quarter or year end, any bonus component that is dependent on a target
achievement measured at a fiscal quarter or year end shall be calculated at the
100% payout level pro-rated for the applicable period).   5.2   Termination by
Corporation for Cause. The Corporation may terminate the Executive’s employment
at any time with cause and without prior notice or any further obligations by
the Corporation, and the Executive will be ineligible for any bonus or pro-rated
bonus payment. On the termination of the Executive’s employment for cause, the
Corporation will, in full satisfaction of its obligations to the Executive, pay
the Executive’s Salary and vacation pay accrued until the Termination Date, and
reimburse the outstanding expenses properly incurred by the Executive until the
Termination Date.   5.3   Termination by Corporation without Cause or at the End
of the Term. The Corporation may terminate the Executive’s employment at any
time, without cause on providing written notification; the Executive’s
employment will terminate automatically on the first anniversary of the Start
Date; and the Executive’s employment will terminate automatically on the
appointment of a Chief Executive Officer. In any such case the Corporation will:
(a) pay the Executive’s Salary and vacation pay accrued until the Termination
Date; (b) reimburse outstanding expenses properly incurred by the Executive
until the Termination Date; and (c) pay the Executive a bonus pro-rated to the
date his employment ceases (in the event that employment ceases other than at
the end of a fiscal quarter or year end, any bonus component that is dependent
on a target achievement measured at a fiscal quarter or year end shall be
calculated at the 100% payout level pro-rated for the applicable period). All
vested stock options as at the Termination Date shall expire six (6) months
following the Termination Date. All unvested stock options as at the Termination
Date shall expire at the close of business on the Termination Date.

 

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Corel Corporation Executive Employment Agreement   Page 5 of 9

5.4   Death of the Executive. Upon the death of the Executive, this Agreement
automatically terminates without notice or any further obligations by the
Corporation. Upon the death of the Executive, the Corporation will, in full
satisfaction of its obligations: (a) pay the outstanding accrued salary and
vacation pay accrued until the date of the Executive’s death; (b) reimburse the
expenses properly incurred by the Executive up to the date of his death; (c) pay
a bonus pro-rated to the date of the Executive’s death (in the event that such
occurs other than at the end of a fiscal quarter or year end, any bonus
component that is dependent on a target achievement measured at a fiscal quarter
or year end shall be calculated at the 100% payout level pro-rated for the
applicable period); and (d) the share based compensation awarded to the
Executive shall, to the extent not otherwise vested, vest so that 50% of all
such vested share based compensation shall be vested and such vested share based
compensation shall be exercisable for a period of 90 days following the
Executive’s death.   5.5   Consequences of Termination. The termination of the
Executive’s employment for any reason, including resignation and termination
with cause and without cause, terminates any officer positions the Executive may
hold with the Corporation or any of its Affiliates and the Executive agrees to
immediately resign as a director of the Corporation and any of its Affiliates
and to sign any documentation necessary to give effect to this Section 5.5.  
5.6   Conversion of Benefits on Termination. On the earlier of the termination
of Executive’s participation in the group benefit plans or the cessation of his
employment for any reason, the Executive may be eligible to convert the group
insured benefits to private coverage within 30 days, without evidence of
insurability. The Executive is responsible for promptly arranging for any
conversion options he may have or obtaining alternate benefits if he chooses to
do so.   5.7   Compliance with Laws. The Executive’s entitlements under this
Section 5 are provided in full satisfaction of the Executive’s entitlements to
notice of termination, pay in lieu of notice, and severance pay, if any, under
any applicable laws.   6.   Confidential Information and Return of Property  
6.1   Confidentiality Obligation. The Executive covenants and agrees that he
shall not, at any time during his employment with the Corporation or any time
thereafter, without the prior written consent of the Corporation, directly or
indirectly, communicate, reveal or disclose, in any manner, to anyone, or use
for any purpose other than in carrying out his duties under this Agreement in
furtherance of the Corporation’s business interests, any confidential or
proprietary information concerning, or learned as a result of his employment
with, the Corporation or its predecessors, successors, Affiliates or related
companies including, without limitation, information concerning their assets,
businesses, affairs, pricing, costs, technical information, financial
information, plans or opportunities, manufacturing, processes, sales and
distribution, marketing, research and development, customers, suppliers or
employees.   6.2   Return of Property. Upon ceasing to be employed by the
Corporation or upon request of the Corporation at any time, the Executive shall
return to the Corporation all property belonging to the Corporation or its
predecessors, successors, Affiliates or related companies including, without
limitation, all documents in any format whatsoever including electronic format,
that is in his possession or control, and the Executive agrees not to retain any
copies of such property in any format whatsoever including electronic format.

 

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Corel Corporation Executive Employment Agreement   Page 6 of 9

7.   Non-Solicitation   7.1   Employee and Contractor Non-Solicitation. The
Executive covenants and agrees that, while employed with the Corporation and for
12 months thereafter, the Executive shall not induce or solicit or attempt to
induce or solicit, or assist any person to induce or solicit any employee of the
Corporation or its Affiliates or any contractor who regularly provides services
to the Corporation or its Affiliates, or assist or encourage any employee of the
Corporation or its Affiliates or any contractor who regular who regularly
provides services to the Corporation or its Affiliates to accept employment or
engagement elsewhere that competes with the business of the Corporation or its
Affiliates.   8.   Proprietary and Moral Rights   8.1   Proprietary Rights. The
Executive recognizes the Corporation’s proprietary rights in the tangible and
intangible property of the Corporation and acknowledges that Executive has not
obtained or acquired and shall not obtain or acquire any rights, title or
interest, in any of the property of the Corporation or its predecessors,
successors, Affiliates or related companies including, without limitation, any
writing, communications, manuals, documents, instruments, contracts, agreements,
files, literature, data, technical information, know-how, secrets, formulas,
products, methods, procedures, processes, devices, apparatuses, trademarks,
trade names, trade styles, service marks, logos, copyrights, patents,
inventions, discoveries, whether or not protected by patent or copyright, which
the Executive may have conceived or made, or may conceive or make, either alone
or in conjunction with others, and related to the business of the Corporation or
its predecessors, successors, Affiliates or related companies (collectively, the
“Materials”). The Executive agrees that during his employment with the
Corporation and any time afterwards all Materials shall be the sole and
exclusive property of the Corporation.   8.2   Waiver of Moral Rights. The
Executive irrevocably waives to the greatest extent permitted by law, for the
benefit of and in favour of the Corporation, all the Executive’s moral rights
whatsoever in the Materials including, without limitation, any right to the
integrity of any Materials, any right to be associated with any Materials and
any right to restrict or prevent the modification or use of any Materials in any
way whatsoever. The Executive irrevocably transfers to the Corporation all
rights to restrict any violations of moral rights in any of the Materials
including, without limitation, any distortion, mutilation or other modification.
  8.3   Assignment of Rights. If the Executive has acquired or does acquire,
however, any right, title or interest in any of the Materials or in any
intellectual property rights relating to the Materials, the Executive
irrevocably assigns all such right, title and interest throughout the world
exclusively to the Corporation including, without limitation, any renewals,
extensions or reversions relating thereto and any right to bring an action or to
collect compensation for past infringements.   8.4   Registrations. The
Corporation will have the exclusive right to obtain copyright registrations,
letters patent, industrial design registrations, trade-mark registrations or any
other protection in respect of the Materials and the intellectual property
rights relating to the Materials anywhere in the world. At the expense and
request of the Corporation, the Executive shall, both during and after the
Executive’s employment with the Corporation, execute all documents and do all
other acts necessary in order to enable the Corporation to protect its rights in
any of the Materials and the intellectual property rights relating to the
Materials.

 

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Corel Corporation Executive Employment Agreement   Page 7 of 9

9.   Remedies   9.1   Defences. The Executive agrees that all restrictions in
Sections 6, 7 and 8 are necessary and fundamental to the protection of the
business carried on by the Corporation and that all such restrictions are
reasonable and valid, and, to the extent permitted by applicable law, the
Executive waives all defences of the Executive to the strict enforcement thereof
by the Corporation.   9.2   Injunctive Relief. The Executive acknowledges that a
breach by the Executive of any of his obligations in Sections 6, 7 and 8 will
result in the Corporation suffering irreparable harm, which cannot be calculated
or fully or adequately compensated by recovery of damages alone. Accordingly,
the Executive agrees that the Corporation shall be entitled to interim and
permanent injunctive relief without proof of actual damages, specific
performance and other equitable remedies, in addition to any other relief to
which the Corporation may become entitled.   10.   Obligations Not Exhaustive  
10.1   Fiduciary. The Executive acknowledges that the obligations contained in
Sections 6, and 7 are in addition to any obligations that the Executive may now
or hereafter owe to the Corporation, at law, in equity or otherwise. Nothing
contained in this Agreement is a waiver, release or reduction of any fiduciary
obligations that the Executive owes to the Corporation.   11.   General   11.1  
Survival. Sections 6, 7, 8, and 9, and this Section 11.1 survive the termination
of this Agreement and the Executive’s employment for any reason whatsoever.  
11.2   Severability. If any provision of this Agreement is declared void or
unenforceable, such provision shall be deemed severed from this Agreement to the
extent of the particular circumstances giving rise to such declaration, and such
provision as it applies to other persons and circumstances and the remaining
terms and conditions of this Agreement shall remain in full force and effect.  
11.3   Entire Agreement. This Agreement, including the attached Schedules and
the documents referenced therein, constitutes the entire agreement between the
Corporation and the Executive on the subject-matter herein and it supersedes all
prior agreements and understandings, whether written or oral. There are no
representations, warranties or collateral agreements on the subject-matter
herein that exist outside of this Agreement.   11.4   Amendments. This Agreement
may only be amended by written agreement executed by the Corporation and the
Executive. However, changes to the Executive’s position, duties, vacation,
benefits and compensation, over the course of time, do not affect the validity
or enforceability of Sections 5, 6, and 7.   11.5   Governing Law. This
Agreement shall be governed by, and construed and interpreted in accordance with
the laws of the State of California. The Corporation and the Executive each
irrevocably attorns to the exclusive jurisdiction of the courts of California
and the courts of California shall have the sole and exclusive jurisdiction to
entertain any action arising under this Agreement.

 

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Corel Corporation Executive Employment Agreement   Page 8 of 9

11.6   Assignment. The Corporation may assign this Agreement, and it enures to
the benefit of the Corporation, its successors or assigns.   11.7   Independent
Legal Advice. The Executive acknowledges that he has been encouraged to obtain
independent legal regarding the execution of this Agreement, and that he has
either obtained such advice or voluntarily chosen not to do so, and hereby
waives any objections or claims he may make resulting from any failure on his
part to obtain such advice.   11.8   Waiver. No waiver of any of the provisions
of this Agreement shall be effective or binding, unless made in writing and
signed by the party purporting to give the same. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions, whether or not similar, nor shall such waiver constitute a
continuing waiver, unless expressly stated otherwise.

 

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Corel Corporation Executive Employment Agreement   Page 9 of 9

11.9   Effective Date. This Agreement is effective the date it is made.

     IN WITNESS WHEREOF this executive employment agreement has been executed by
the Corporation and the Executive on the dates below.
COREL INC.
Per: /s/ Christopher Difrancesco                                              
Title: Secretary
/s/ Kris Hagerman                                                       
Kris Hagerman