Document:

exv10wg

 

Exhibit 10(g)

     This Compensation Settlement and Employment Agreement (the “Agreement “)
made as of this 15th day of November 2003, by and between e-Smart Technologies,
Inc., a Nevada corporation with an office at 7225 Bermuda Road, Suite C, Las Vegas,
Nevada 89119 (the “Company”) and Mary A. Grace, residing at 117 east 57th
Street, Apt 24G, New York, New York 10022 (“Grace”). The Company and Grace are
sometimes hereinafter individually referred to as a “Party” or collectively as
the “Parties”.

W I T N E S S E T H :

        WHEREAS, Grace has been serving as the Company’s President and Chief
Executive Officer since January 1, 2001, without the benefit of a written
employment agreement and without regular salary or other compensation payments
against her agreed upon annual salary; and

     WHEREAS, the Company is indebted to Grace in the sum of Seven Hundred and
Fifty Thousand ($750,000) Dollars for accrued salary less $150,000 of personal
expenses paid by the Company on grace’s behalf for the three years ended
December 31, 2003 (the “Debt”); and

     WHEREAS, the Company and Grace desire to settle the Debt and memorialize
the parameters of Grace’s employment by the Company as its President and Chief
Executive Officer on the terms and subject to the conditions hereinafter set
forth.

     NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the receipt and adequacy of which is
hereby acknowledged and accepted, the Parties hereby agree as follows:

     1. Settlement of the Debt. The Debt is hereby settled and compromised on
the following terms and conditions:

        A. Grace, for herself and her heirs, estate and personal representatives
hereby releases the Company from any and all obligation to pay the Debt. In
consideration for such release, the Company hereby agrees to pay to Grace an
amount equal to fifty (50%) percent of any net profit earned by the Company in
any year during the term of this Agreement until Grace shall have received an
aggregate of $600,000. The annual payment(s) to Grace shall be in preference to
dividends and other distributions to any class of the Company’s stockholders;
and

B. Solely in consideration for the Company’s return to Grace of a
certificate or certificates representing an aggregate of 2,500,000 restricted
(i.e., unregistered) shares of Common Stock, $.001 par value per share, of
Telpac Industries, Inc., a publicly owned and traded Nevada corporation, the
receipt and adequacy of which is hereby acknowledged by Grace, Grace hereby
releases the Company from any and all duty or obligation the Company may be
deemed to have to Grace under and pursuant to a contemplated agreement by the
Company to purchase such shares from Grace.

 

 

     2. Employment. The Company hereby employs Grace as the Company’s
President and Chief executive Officer and Grace hereby accepts such employment
by the Company. Grace hereby represents and warrants that neither her entry
into this Agreement nor the performance of her obligations hereunder will
conflict with or result in a breach of the terms, conditions or provisions of
any other agreement or obligation of any nature to which Grace is a party or by
which Grace is bound, including without limitation, any non-competition
agreement or confidentiality agreement previously entered into by Grace. Grace
agrees that she shall provide her exclusive full time to the Company and the
obligations of the Company hereunder shall be conditioned upon the continuing
availability of Grace’s services as provided herein.

     3. Term. The term of Grace’s employment hereunder, subject to earlier
termination as set forth in Section 7 hereof, shall be for a five (5) year
period commencing as of the date hereof (the “Term”).

     4. Duties. Grace shall provide services as necessary to supervise, manage
and oversee the general operations of the Company within and pursuant to the
goals and policies established by the Board of Directors of the Company. Grace
shall perform her duties hereunder faithfully and to the best of her ability.
Grace shall follow and implement the directives of the Board of Directors of
the Company regarding the day-to-day operations of the Company.

     5. Compensation. The Company shall provide Grace with the following
compensation as payment in full for the services to be rendered by Grace under
this Agreement:

        A. Salary. During the first and/or second year of the Term, or until the
Company achieves profitable operations, whichever sooner occurs, the Company
shall pay and Grace hereby accepts, a salary at the rate of Two Hundred and
Fifty Thousand ($250,000) Dollars per annum, payable in accordance with the
payroll practices of the Company, Grace’s monthly compensation shall be earned
each month by the performance of services hereunder for the prior month, and
the statement herein of the total of such compensation for the Term shall not
imply that said compensation is payable in advance or that it is earned prior
to the performance of the services provided hereunder. All amounts payable to
Grace under this Agreement will be subject to applicable withholding and other
taxes imposed by any governmental body with jurisdiction. Grace shall be
solely responsible for all taxes or other charges imposed upon her by any
taxing authority with respect to her compensation hereunder and hereby
indemnifies and holds the Company free and harmless of and from any and all
such taxes or other charges or any claims, liabilities, costs and expenses,
including reasonable attorneys’ fees, arising from and in connection with any
such matters and to the extent that any such taxes, charges, claims,
liabilities or costs are imposed on the Company for which Grace is responsible
due to any payment of compensation to Grace. The Company may offset any such
claimed amounts against any amounts otherwise due to Grace hereunder.

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        As soon as practicable following the end of the first fiscal quarter in
which the Company’s unaudited quarterly financial statements reflect a net
profit from operations, the Company’s Board of Directors shall convene a
special meeting of the Compensation Committee for the purpose of making an
upward adjustment to the annual compensation payable to Grace under this
Agreement (the “Adjustment”). The Adjustment shall be comprised of two
components. The first component shall bring Grace’s annual salary reasonably
in line with the salary payable to Chief Executive Officers of other publicly
owned companies with approximately equal market capitalizations as that of the
Company at the time of the Adjustment. The second component shall establish
numerical milestones and monetary rewards for incentive compensation payable in
the event Grace is responsible for securing major contracts for the Company’s
Super Smart cardTM technology. Grace shall have the option, exercisable on
written notice to the Company, to have her incentive compensation payable in
the form of a bonus.

        B. Other Non-Salary Benefits. Grace shall be entitled to receive the same
non-salary benefits generally made available to the executive officers of the
Company as a group, which may include, but not be limited to, vacation and
holiday time, life insurance, medical coverage, disability plan, and any other
employee benefit plan; provided, however, that Grace shall pay the employee
contribution of any such benefit and shall bear the appropriate deductible
portion of any such benefit, in each case, to the extent applicable to all of
the members of the group.

        C. Stock Option. As additional compensation, and subject to the terms
and conditions hereinafter set forth, the Company hereby grants to Grace and
Grace hereby accepts the exclusive and non-transferable right and option for a
term of five years from the December 1, 2003, date of grant (the “Option”) to
purchase an aggregate of 17,000,000 shares of the Company’s Common Stock, $.001
par value per share (the “Option Shares”) under and pursuant to the Company’s
2003 Long Term Incentive Plan (the “Plan”). The Option shall be subject to the
following terms and conditions:

                  (i) Finalization of Stockholder Approval. Grace hereby acknowledges that
the Plan was adopted by written consent of a majority of the Company’s
stockholders. Accordingly, Grace hereby agrees and consents that the Company’s
ability to grant the Option to her as well as her ability to exercise the same
is and shall continue to be subject to the Company’s preparation and filing of
an Information Statement pursuant to Section 14(c) of the Securities Exchange
Act of 1934, as amended, and the mailing thereof to the Company’s stockholders
(the “Compliance”).

            (ii) Exercise. After Compliance, Grace shall be entitled to exercise
the Option with respect to 3,400,000 Option Shares during each year of the term
of this Agreement in increments of not less than 500,000 Option Shares. Grace
hereby agrees and accepts that the Option may only be exercised by Grace while
she is employed by the Company and this Agreement is in full force and effect
or as otherwise provided in the Plan. The per share exercise price shall not
be less than One Hundred (100%) percent of the fair market value of the
Company’s Common Stock at the time of the exercise of the Option. Grace shall
have the right to accumulate non-exercised Options over the five year term of
this Agreement (i.e. if only 400,000 Option Shares are exercised during year
one, 6,400,000 Option Shares may be exercised during year two);

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            (iii) Exercise Procedure. After Compliance, the Option may be exercised
only with respect to the maximum number of Option Shares provided herein by
Grace’s giving the Company notice in writing to that effect (the “Exercise
Notice”) which notice shall specify the permitted number of Option Shares
intended to be purchased, shall designate where the Option Shares are to be
delivered; and shall be accompanied by a certified, cashier’s, bank check, bank
letter of credit or note receivable as set forth in sub paragraph (iv) below,
representing the Exercise Price for the number of Option Shares so purchased
together with the cost of any applicable revenue stamp, stock transfer taxes or
other similar obligations imposed under applicable law. Upon receipt of the
Exercise Notice, the Company shall forthwith (within a period of five days)
either: (1) cause a certificate or certificates representing the number of
Option Shares so purchased to be delivered to Grace or her designee(s) at the
address specified in the Exercise Notice; or (2) commence appropriate
procedures and practices with the Company’s transfer agent, including the
issuance of any opinion of counsel as may be required, and designed to cause
the transfer to the name of Grace or her nominee(s) or designee(s) of the
number of Option Shares so purchased.

                  (iv) Loan Account. The Company may establish a loan account with Grace
whereby Grace will be advanced funds to exercise the Option. In the event
funds are advanced to Grace, Grace hereby agrees to repay the same together
with accrued interest at the rate of five (5%) percent per annum on the earlier
of: (i) the sale of the Option Shares; or (ii) the second anniversary of the
advance of funds.

     6. Expenses. Upon submission of proper vouchers and receipts in accordance
with the Company’s policies, the Company will pay or reimburse Grace for
reasonable transportation, hotel, travel and related expenses incurred by Grace
on business trips, and for other reasonable and necessary business and
entertainment expenses incurred by her in connection with the performance of
her duties on behalf of the Company hereunder during the Term, all subject to
such limitations as may from time to time be prescribed by Company policy.

     7. Termination. This Agreement and Grace’s employment may be terminated as
follows:

        A. Termination for Cause. The Company shall have the right, effective
immediately upon written notice to Grace, to terminate Grace’s employment with
the Company hereunder forthwith and to discharge Grace for “cause”. For
purposes of this Agreement, termination for “cause” shall mean termination of
Grace’s employment by the Company if any one of the following events shall
occur: (i) Grace’s conviction in a court of law of any felony; (ii) any breach
by Grace of her fiduciary duties to the Company; (iii) any material breach by
Grace of the terms or provisions of this Agreement which breach is not cured
within thirty calendar days after notice from the Company, provided, however,
that the Company shall have the right to immediately terminate Grace’s
employment in the event that Grace breaches any of her obligations under
Sections 9 or 10 hereof; (iv) Grace’s failure or refusal to perform her duties
hereunder, and which failure or refusal is not remedied by Grace within
fifteen (15) calendar days after prior notice from the Company; or (v) any
act of dishonesty or disloyalty by Grace which materially adversely affects the
business of the Company.

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        B. Death. Grace’s employment with the Company pursuant to this Agreement
shall automatically terminate effective on the date of Grace’s death.

        C. Termination Due to Disability. The Company may, in its sole
discretion, terminate Grace’s employment with the Company hereunder in the
event Grace should become physically or mentally disabled so that she is unable
to perform her material duties hereunder for a period of (i) sixty (60)
consecutive days, or (ii) an aggregate of ninety (90) days during any six (6)
consecutive months.

     8. Rights Upon Termination. Upon her termination, Grace shall have the
following rights under this Agreement:

        A. If this Agreement is terminated pursuant to Section 7 hereof, the
Company shall pay Grace, or her legal representatives or estate, as the case
may be, within thirty (30) days from the effective date of termination (i) any
unpaid salary accrued to the effective date of termination, (ii) reimbursement
for any expenses reasonably incurred with respect to periods prior to the
effective date of termination, and (iii) any benefits required to be paid by
the Company pursuant to the Company’s plans, inclusive of disability, death or
pension benefits, to which Grace is entitled at the effective date of
termination (in the case of death or disability, payment, if any, shall be made
within thirty (30) days of termination or as soon as practicable thereafter),
the aggregate of the aforesaid payments being collectively referred to
hereinafter as the “Termination Payments.”

        B. In the event of a termination of this Agreement, Grace shall remain
bound by the provisions of Sections 9, 10 and 11 hereof, provided that such
termination was effected pursuant to Section 7A, Section 7C or by voluntary
termination.

        C. Grace acknowledges that all records and documents containing
Proprietary Information (as that term is hereinafter defined) prepared by Grace
or coming into her possession by virtue of her services to the Company are and
will remain the property of the Company. Upon termination of this Agreement,
Grace shall immediately return to the Company all such items in her possession
and all copies of such items.

     9. Exposure to Proprietary Information

        A. As used in this Agreement, “Proprietary Information” means all
information of a business or technical nature that relates to the business of
the Company including, without limitation, all information about corporate
structure and organization. Company personnel, products, whether currently
released or in development, all inventions, discoveries, improvements,
copyrightable work, source code, know-how, processes, designs, algorithms,
computer programs and routines, formulae and techniques, customer lists and any
information regarding the business and plans of any customer, supplier or
contractor of the Company, marketing or sales techniques, methods, plans or any
other information that the Company discloses to Grace in confidence.
Notwithstanding the preceding sentence, the term “Proprietary Information” does
not include specific information that is or becomes
publicly available through no fault of Grace.

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        B. In recognition of the special nature of Grace’s services under this
Agreement, including her special access to the Proprietary Information, and in
consideration of her retention pursuant to this Agreement, Grace agrees to the
covenants and restrictions set forth in Section 10.

     10. Use of Proprietary Information; Restrictive Covenants.

        A. Grace acknowledges that the Proprietary Information constitutes a
protectible business interest of the Company, and covenants and agrees that
during the Term, whether under this Agreement or otherwise, and after the
termination of this Agreement, she will not, directly or indirectly, disclose,
furnish, make available or utilize any of the Proprietary Information, other
than in the proper performance of her services for the Company. Grace’s
obligations under this Section 10 with respect to particular Proprietary
Information will survive expiration or termination of this Agreement, and will
terminate only at such time (if any) as the specific and detailed Proprietary
Information in question becomes generally known to the public other than
through a breach of Grace’s obligations under this Agreement.

        B. Grace covenants and agrees that during the Term and until one year
following such time as she ceases to be employed by the Company or any
successor thereto, whether pursuant to a written agreement or otherwise (the
“Restricted Period”), in any country in which the Company has customers at any
time during the Restricted Period (the “Restricted Territory”), she shall not,
directly or indirectly (either as principal, agent, consultant, proprietor,
creditor, director, officer, employee or owner of more than five (5%) percent
of the capital stock of any entity having a class of capital stock which is
traded on any national stock exchange or in the over-the-counter market): (i)
perform services for, or engage in, any business that develops or sells
products or services that are competitive with those provided by the Company
including the design, development, manufacture and distribution of multi-level
memory chips (the “Competitive Products or Services”) or any other products or
services sold or developed by the Company or for which Grace has provided any
assistance in planning, development, marketing, training, support, or
maintenance; (ii) except on behalf of the Company, solicit any person or
entity who is, or was at any time during the twelve (12) month period
immediately prior to the termination of Grace’s services to the Company, a
customer of the Company for the sale of Competitive Products or Services, or
for any product or service of a type then sold by the Company, or for which
Grace provided any assistance in planning, development, marketing, training,
support, or maintenance; or (iii) solicit for employment any person who is, or
was at any time during the twelve (12) month period immediately prior to the
termination of Grace’s services to the Company, an employee of the Company.

Grace acknowledges and agrees that it is reasonable to prohibit Grace from
competing with the Company in the manner set forth above. As previously
indicated, this Section shall not apply to Grace’s ownership of less than five
(5%) percent of the capital stock of any entity having a class of capital stock
which is traded on any national stock exchange or in the over-the-counter
market.

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        C. The Parties acknowledge that the business of the Company is and will be
international in scope and thus the covenants in this Section 10 would be
particularly ineffective if the covenants were to be limited to a particular
geographic area. If any court of competent jurisdiction at any time deems the
Restricted Period unreasonably lengthy, or the Restricted Territory
unreasonably extensive, or any of the covenants set forth in Section 10A or B
not fully enforceable, the other provisions of this Section 10, and this
Agreement in general, will nevertheless stand and to the full extent consistent
with law continue in full force and effect, and it is the intention and desire
of the Parties that the court treat any provisions of this Agreement which are
not fully enforceable as having been modified to the extent deemed necessary by
the court to render them reasonable and enforceable and that the court enforce
them to such extent (for example, that the Restricted Period be deemed to be
the longest period permissible by law, but not in excess of the length provided
for in Section 10(b) and the Restricted Territory be deemed to comprise the
largest territory permissible by law under the circumstances).

        D. Grace’s services are of a special, unique and extraordinary nature, the
loss of which may not be reasonably or adequately compensated in damages in an
action at law, and a breach of the provisions of this Section 10 and/or Section
9 by Grace will cause the Company irreparable injury and damage. Grace
acknowledges that the consequences of any breach of this Section 10 and/or
Section 9 may not be fully compensable in damages and that, accordingly, the
Company shall be entitled, to seek injunctive and other equitable relief to
prevent a breach or threatened breach of any provision of this Section 10
and/or Section 9 (without being required to post a bond or other security),
without waiving any of the rights the Company may have for damages or
otherwise.

     11. Representations and Warranties of Grace. By virtue of her
execution hereof, and in order to induce the Company to enter into this
Agreement, Grace hereby represents and warrants as follows:

        A. She is not presently actively engaged in any business, employment or
venture which is or may be in conflict with the business of the Company;

        B. She has full power and authority to enter this Agreement, to enter into
the employ of the Company and to otherwise perform this Agreement in the time
and manner contemplated;

        C. She is in good health and is not aware of any material medical
conditions that will act as a bar to the Company’s obtaining a key man and/or
disability income insurance policy on her life;

        D. Her compliance with the terms and conditions of this Agreement in the
time and manner contemplated herein will not conflict with any instrument or
agreement pertaining to the transaction contemplated herein; and will not
conflict in, result in a breach of, or constitute a default under any
instrument to which she is a party; and

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        E. Grace has been advised, and by the execution of this Agreement, accepts
and acknowledges that none of the shares of the Company’s Common Stock
comprising the Option shall have been registered under the Securities Act of
1933, as amended (the “Act”) or under any state securities law; and that in
granting the Option to Grace, the Company is relying upon an exemption from
registration under the Act based upon Grace’s investment representations.
Accordingly, and if and when she exercises the Option after the Compliance: (i)
she will acquire the Option Shares for investment purposes only and without a
view to the transfer or resale thereof; (ii) she will hold the Option Shares
for a minimum of two years or as otherwise required or permitted by law; (iii)
any sale of the Option Shares underlying the Option will be accomplished only
in accordance with the Act and the rules and regulations of the Securities and
Exchange Commission adopted thereunder. Furthermore, Grace hereby consents to
the imposition of a standard restrictive legend on and the issuance of a stop
transfer order against any and all certificates representing the Option Shares.

     12. Representations and Warranties of the Company. By virtue of
the execution of this agreement, the Company hereby represents and warrants to
Grace as follows:

        A. The Company is a corporation duly incorporated and validly existing
under the laws of the State of Nevada;

        B. The Company has full power, right and authority to execute and
perform this Agreement in the time and manner contemplated; and, subject to the
compliance with applicable law as hereinabove indicated, to grant the option
and deliver the Option Shares made the subject thereof;

        C. The execution and performance of this Agreement and the delivery of
the Option Shares referred to herein will not result in a breach of or violate
the provisions of any contract or agreement to which the Company is a party or
to which the Option Shares are the subject;

        D. Following the Compliance, the Company shall reserve the Option Shares
for issuance upon Grace’s exercise of the Option;

        E. The Company has all requisite power and authority to enter into this
Agreement and to carry out the transaction contemplated hereby. When executed
and delivered to Grace, this Agreement will be a binding obligation of the
Company enforceable in accordance with its terms; and

        F. The Option Shares will be, when originally issued and delivered to
Grace, duly and validly issued, fully paid and non-assessable with no personal
liability attaching to the ownership thereof.

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     13. Expenses. Regardless of whether or not the transaction
contemplated herein is consummated, each Party shall be responsible for its own
share of all costs and expenses incurred in connection with this Agreement and
transactions contemplated hereby.

     14. Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the Parties hereto.

     15. Binding Effect. All of the terms and provisions of this
Agreement shall be binding upon and shall inure to the benefit of and be
enforceable by and against the successors and assigns of the Parties hereto.

     16. Assignment. Neither Party shall assign or transfer any rights or
obligations hereunder, except that the Company may assign or transfer this
Agreement to a successor or parent corporation in the event of a merger,
consolidation, or transfer or sale of all or substantially all of the assets of
the Company, provided that no such further assignment shall relieve the Company
from liability for the obligations assumed by it hereunder.

     17. Entire Agreement. Each of the Parties hereby covenants that this
Agreement is intended to and does contain and embody herein all of the
understandings and agreements, both written and oral, of the Parties hereby
with respect to the subject matter of this Agreement, and that there exists no
oral agreement or understanding, express or implied, whereby the absolute,
final and unconditional character and nature of this Agreement shall be in any
way invalidated, empowered or affected. There are no representations,
warranties or covenants other than those set forth herein.

     18. Laws of the State of Nevada. This Agreement shall be deemed to be
made, executed and delivered in, governed by and interpreted under and
construed in all respects in accordance with the laws of the State of Nevada,
irrespective of the place of domicile or residence of any Party.

     19. Arbitration. The Parties agree that in the event of a controversy
arising out of the interpretation, construction, performance or breach of the
Agreement, any and all claims arising out of or relating to this Agreement
shall be settled by arbitration according to the Commercial Arbitration Rules
of the American Arbitration Association located in the City of New York before
a single arbitrator, except as provided below. The decision of the arbitrator
will be enforceable in any court of competent jurisdiction. The Parties agree
and consent that service of process in any such arbitration proceeding outside
the City of New York shall be tantamount to service in person within City of
New York and shall confer personal jurisdiction on the American Arbitration
Association. In resolving all disputes between the Parties, the arbitrator
will apply the law of the State of Nevada. The arbitrator is, by this
Agreement, directed to conduct the arbitration hearing no later than three (3)
months from the service of the statement of claim and demand for arbitration
unless good cause is shown establishing that the hearing cannot fairly and
practically be so convened. The arbitrators will resolve any discovery disputes
by such pre-hearing conferences as may be needed. All Parties hereby agree and
consent that the arbitrator and any counsel of record to the proceeding will
have the power of subpoena process as provided by law. Notwithstanding
the foregoing, if a dispute arises out of or related to this Agreement, or
the breach thereof, before resorting to arbitration the Parties agree first to
try in good faith to settle the dispute by mediation under the Commercial
Mediation Rules of the American Arbitration Association.

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     20. Originals. This Agreement may be executed in counterparts, each of
which so executed shall be deemed an original and constitute one of the same
Agreement.

     21. Notices. All notices that are required to be or may be sent pursuant
to the provisions of this Agreement shall be sent by certified mail, return
receipt requested, or by overnight package delivery service to the President or
Chief Executive Officer of each of the Parties at the address appearing herein,
and shall count from the date of mailing or the date following the date of the
airbill.

     22. Modification and Waiver. A modification or waiver of any of the
provisions of this Agreement shall be effective only if made in writing and
executed with the same formality of this Agreement. The failure of any Party
to insist upon strict performance of any of the provisions of this Agreement
shall not be construed as a waiver of any subsequent default of the same or
similar nature or of any other nature or kind.

     23. Severability. If any provision or any portion of any provision of
this Agreement, or the application of such provision or any portion thereof to
any person or circumstance shall be held invalid or unenforceable, the
remaining portions of such provision and the remaining provisions of this
Agreement or the application of such provision or portion of such provision as
is held invalid or unenforceable to persons or circumstances other than those
to which it is held invalid or unenforceable, shall not be affected thereby.

     24. Indemnification. The following indemnification provisions shall be
applicable to this Agreement:

        A. Each Party hereby irrevocably agrees to indemnify and hold the other
Party harmless from any and all liabilities and damages (including legal or
other expenses incidental thereto), contingent, current, or inchoate to which
that Party may become subject as a direct, indirect or incidental consequence
of any action by the indemnifying Party or as a consequence of the failure of
the indemnifying Party to act, whether pursuant to requirements of this
Agreement or otherwise; and

        B. In the event it becomes necessary to enforce this indemnity through an
attorney, with or without litigation, the successful Party shall be entitled to
recover from the indemnifying Party all costs incurred including reasonable
attorneys’ fees throughout any negotiations, trials or appeals, whether or not
any suit is instituted.

     25. Taxes. Each Party shall be responsible for all taxes which are
based on its own net income. All sales, value added, and use taxes arising out
of transactions occurring under this Agreement shall be the responsibility of
the Party conducting such transaction and each Party hereby indemnifies and
holds the other harmless from any and all claims relating to sales or use taxes
collected or due by the Party conducting each of the transactions hereof.

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     IN WITNESS WHEREOF, each of the Parties has executed this Agreement on the
date first written above.

e -Smart Technologies, Inc.

	 	 	 
	By:
	 	 
	

	 	

Tamio Saito, Chief Technology

Officer

	 
	

Mary A. Grace

11exv10wh

 

Exhibit 10(h)

Research and Development Services Agreement (the “Agreement”) dated as of
January 1, 2001 (the “Effective Date”), and reduced to writing on May 29, 2003,
by and between Big Bang Technologies, Inc., a California corporation with an
office at 1810 Old Oakland Road, Suite F, San Jose, California 95131 (“BBT”)
and e-Smart Technologies, Inc., a Nevada corporation with an office at 7225
Bermuda Road, Suite C, Las Vegas, Nevada 89119 (the “Company”). The Company
and BBT are sometimes hereinafter individually referred to as a “Party” and
collectively as the “Parties”.

W I T N E S S E T H:

     WHEREAS, the Company is a development stage entity engaged in the research
and development of smart card technology and multi-application smart card
solutions licensed from IVI Smart Technologies, Inc., a Delaware corporation
and parent of the Company; and

     WHEREAS, BBT is a privately owned company engaged in research and
development and other specialized activities at its facilities in San Jose,
California founded by the co-inventor of the Super Smart CardTM technology
licensed to the Company; and

     WHEREAS, the Company desires to engage BBT to provide research and
development and other specialized services to the Company; and

     WHEREAS, BBT has provided services to the Company since the Effective Date
and is willing to continue to provide services to the Company on the terms and
subject to the conditions set forth in this Agreement.

     NOW THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby mutually acknowledged and accepted, the
Parties hereby agree as follows:

        1. Engagement. The Company hereby engages and retains BBT to perform
and supply the Services (as that term is hereinafter defined in Section 3) on
behalf of the Company; and BBT hereby accepts such appointment and agrees to
perform and render the Services for and on behalf of the Company on the terms
and subject to the conditions hereinafter set forth.

        2. Term and Termination.

            A. This Agreement commences on the Effective Date and shall continue in
full force and effect for a period of three years thereafter (the “Initial
Term”), unless sooner terminated in accordance with the provisions hereof.
After the Initial Term, this Agreement shall be automatically renewed for
successive one year terms unless sooner terminated in accordance with the
provisions hereof.

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            B. This Agreement may be terminated as follows: (i) at any time upon
written agreement between the Parties; or (ii) by the Company without cause
upon giving not less than 90 days written notice to BBT, together with payment
of any outstanding invoices and an amount equal to all fees, costs and expenses
that shall, in the ordinary course of the Agreement, become due and payable by
the Company during the period after delivery of such notice and the effective
date of termination specified therein; (iii) by either Party at any time
without prior notice to the other Party if the other Party is in breach or
default of any of its covenants, obligations or agreements hereunder, which
breach or default continues for a period of ten days following written
notification from the non-defaulting Party of such breach or default and such
breach or default has not been fully and effectively remedied within such ten
day period; (iv) by BBT at any time without prior notice to the Company if the
Company becomes bankrupt or if a receiver or trustee is appointed to oversee
the Company or its assets, or if the Company makes any proposal to its
creditors or is otherwise insolvent or ceases carrying on business; or (v) on
the first day of the second month following the month when the Company receives
either permanent capital or an advance from a material contract.

            C. Upon the effective date of termination or expiration of this Agreement
for any reason without prejudice to any other rights which the Parties may
have, and subject to the provisions of this Section: (i) BBT shall immediately
discontinue the Services under this Agreement; (ii) BBT shall retain all
payments made to it up to the effective date of termination as payment in full
in respect of the Services in which such payments were made; and (iii) if and
only if BBT is not the defaulting party, the Company shall pay to BBT the full
amount of any outstanding invoices and expenses as well as such other expenses
reasonably incurred by BBT arising from the termination.

        3. Description of the Services. The Services shall be comprised as
follows:

            BBT hereby agrees to provide the Company with research and development
services including overseeing and advising the Company with respect to all
aspects of the development of the Super Smart CardTM technology including but
not limited to the following: (i) a unique silicon-based, monolithic imaging
device design in an executable package for the purpose of capturing fingerprint
images from a statically placed finger(s); (ii) system layout schematic
detailing CMOS drive and sense electronics definition, method of direct
connection of CMOS metallurgy and MEMS metallurgy; (iii) definition of process
flow and logistics; study of process compatibility between CMOS and MEMS fabs;
(iv) modeling and simulation, re-layout of CMOS circuitry including complete
system level modeling, re-definition of blocks and logic based on integrated
system and verification of compatibility with MEMS process flow and final tape;
(v) complete MEMS simulation, process flow testing and test structure
definition, “short toop” definitions for process flow and material
compatibility, mask set drawing definition, layout and verification, and final
tape-out; (vi) trained professional staff necessary to carry out and conduct
the Company’s research and development activities; (vii) state of the art
software and hardware testing facilities; and (viii) its advisory efforts to
elevate and broaden the commercial and functional attributes of the Super Smart
CardTM technology. The foregoing are collectively referred to as the
“Services”. The Services will be undertaken by BBT pursuant to the
instructions of the Company from time to time provided to and agreed upon in
writing by BBT.

It is understood and agreed that the Services may include advice and
recommendations, but all decisions made in connection with the implementation
of such advice and recommendations shall be the sole responsibility of, and
shall be made and implemented by the Company’s executives and its Board of
Directors.

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     4. Performance of the Services.

            The Company shall designate the personnel to perform the Services and
shall set the parameters of the Services subject to BBT’s approval, which
approval shall not be unreasonably withheld. The Company may reasonably request
removal of any employee or subcontractor of BBT and in such event, the Company
shall provide notice thereof to BBT specifying in reasonable detail the basis
of the request and in the event that the Company desires BBT to provide a
replacement employee or subcontractor, BBT will use its best diligent efforts
to provide a replacement as soon as reasonably practicable. The Company shall
not unreasonably or unlawfully invoke its rights hereunder.

        5. Compensation.

            As compensation for the Services, the Company hereby agrees to make
monthly payments to BBT as follows: $5,000 during 2001; $         during 2002; and
$         during 2003. The Company also agrees to reimburse BBT for expenses
incurred on the Company’s behalf including extraordinary expenses such as
airfare, out of town travel, litigation, etc. BBT hereby agrees to seek
pre-approval from the Company for any such expenses in excess of $1,000. Any
and all expenses will be invoiced by BBT to the Company as soon as practicable
and will be due upon receipt.

        6. Representations Warranties, and Covenants. In order to implement the
operation of this Agreement, the Parties hereby jointly and severally
represent, warrant, covenant, agree and consent as follows:

            A. Good Standing. The Company and BBT are corporations duly formed,
validly existing and in good standing under the laws of the States of Nevada
and California, respectively, with full power and authority to conduct their
respective business and to deliver and perform this Agreement in the time and
manner contemplated;

            B. No Breach. The execution, delivery and performance of this Agreement,
in the time and manner herein specified, will not conflict with, result in a
breach of, or constitute a default under any existing agreement, indenture, or
other instrument to which either BBT or the Company is a party or by which
either entity may be bound or affected;

            C. Authority. Both BBT and the Company have full legal authority to enter
into this Agreement and to perform the same in the time and manner
contemplated;

            D. Approval. This Agreement has been submitted to, ratified and approved
by the respective Boards of Directors of BBT and the Company. Except for the
foregoing, no action or proceeding on the part of BBT or the Company is
necessary to authorize this Agreement and the transactions contemplated hereby.
No filing with, authorization, consent or approval of any public body or
authority is necessary for the consummation by BBT and the Company of the
transaction contemplated by this Agreement; and

            E. The Company’s Performance. BBT represents and warrants that it has the
professional expertise and experience to conduct the Services; and that the
Services will be provided and performed in a professional and workmanlike
manner.

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        7. Confidential Data. The following confidentiality provisions shall be
applicable to this Agreement:

            A. The Company shall not divulge to others, any secret or confidential
information, knowledge, or data concerning or pertaining to the business and
affairs of BBT, obtained by it as a result of its employment, unless
authorized, in writing, by BBT; and

            B. BBT shall not divulge to others, any secret or confidential
information, knowledge, or data concerning or pertaining to the business and
affairs of the Company, obtained by it as a result of its employment, unless
authorized, in writing, by the Company; and

            C. Neither Party shall be required in the performance of its duties to
divulge to the other Party or any officer, director, agent or employee of the
other Party, any secret or confidential information, knowledge, or data
concerning any other person, firm or entity (including, but not limited to, any
such persons, firm or entity which may be competitor or potential competitor of
one Party) which either Party may have or be able to obtain otherwise than as a
result of the relationship established by this Agreement.

        8. Independent Contractor. BBT is and shall be deemed to be, an
independent contractor in the performance of its duties hereunder, any law of
any jurisdiction to the contrary notwithstanding. BBT shall not, by reason of
this Agreement or the performance of its duties hereunder, be, or be deemed to
be, an employee, agent, partner, co-venturer or controlling person of the
Company; and BBT shall have no power to enter into any agreement on behalf of
or otherwise bind the Company. Except with respect to the compliance with the
non-disclosure and secrecy provisions of this Agreement, BBT shall not have, or
be deemed to have, any fiduciary obligations or duties to the Company and shall
be free to pursue, conduct and carry on for its own account (or for the account
of others) such activities, employments, ventures, businesses and other
pursuits as BBT in its sole, absolute and unfettered discretion, may elect.

        9. Rights and Obligations Subsequent to Closing. The representations,
warranties, agreements, covenants and obligations of each Party contained
herein are material, shall be deemed to have been relied upon by the other
Party and shall survive execution of this Agreement for one year, regardless of
any investigation, and shall not merge in the performance of any obligation by
any Party hereto.

        10. Expenses. Regardless of whether or not the transaction contemplated
herein is consummated, each Party shall be responsible for its own share of all
costs and expenses incurred in connection with this Agreement and transactions
contemplated hereby.

        11. Amendment. This Agreement may be amended by the Parties hereto by
action taken by their respective Board of Directors at any time. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the Parties hereto.

        12. Binding Effect. All of the terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of and be enforceable by
and against the successors and assigns of the Parties hereto.

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        13. Assignment. This Agreement is binding upon and shall inure to the
benefit of the Parties hereto and their respective successors and assigns.
Notwithstanding the foregoing, neither party shall assign or transfer any
rights or obligations hereunder, except that: (i) the Company may assign or
transfer this Agreement to a successor corporation in the event of a merger,
consolidation, or transfer or sale of all or substantially all of the assets of
the Company, provided that no such further assignment shall relieve the Company
from liability for the obligations assumed by it hereunder; and (ii) BBT may
assign or transfer this Agreement to any firm which is an affiliate of BBT,
provided that no such assignment shall relieve BBT from liability for its
obligations hereunder.

        14. Entire Agreement. Each of the Parties hereby covenants that this
Agreement is intended to and does contain and embody herein all of the
understandings and agreements, both written and oral, of the Parties hereby
with respect to the subject matter of this Agreement, and that there exists no
oral agreement or understanding, express or implied, whereby the absolute,
final and unconditional character and nature of this Agreement shall be in any
way invalidated, empowered or affected. There are no representations,
warranties or covenants other than those set forth herein.

        15. Laws of the State of Nevada. This Agreement shall be deemed to be
made, executed and delivered in, governed by and interpreted under and
construed in all respects in accordance with the laws of the State of Nevada,
irrespective of the place of domicile or residence of any Party. In the event
of controversy arising out of the interpretation, construction, performance or
breach of this Agreement, the Parties hereby agree and consent to the
jurisdiction and venue of the United States District Court for the District of
Nevada and further agree and consent that personal service or process in any
such action or proceeding outside of the State of Nevada and in the City of Las
Vegas shall be tantamount to service in person or within the State of Nevada
and in the City Las Vegas of and shall confer personal jurisdiction and venue
on the said court.

        16. Originals. This Agreement may be executed in counterparts, each of
which so executed shall be deemed an original and constitute one of the same
Agreement.

        17. Notices. All notices that are required to be or may be sent pursuant
to the provisions of this Agreement shall be sent by certified mail, return
receipt requested, or by overnight package delivery service to the President or
Chief Executive Officer of each of the Parties at the address appearing
herein, and shall count from the date of mailing or the date following the date
of the airbill.

        18. Modification and Waiver. A modification or waiver of any of the
provisions of this Agreement shall be effective only if made in writing and
executed with the same formality of this Agreement. The failure of any Party
to insist upon strict performance of any of the provisions of this Agreement
shall not be construed as a waiver of any subsequent default of the same or
similar nature or of any other nature or kind.

        19. Severability. If any provision or any portion of any provision of
this Agreement, or the application of such provision or any portion thereof to
any person or circumstance shall be held invalid or unenforceable, the
remaining portions of such provision and the remaining provisions of this
Agreement or the application of such provision or portion of such provision
as is held invalid or unenforceable to persons or circumstances other than
those to which it is held invalid or unenforceable, shall not be affected
thereby.

5

 

        20. Indemnification. The following indemnification provisions shall be
applicable to this Agreement:

            A. Each Party hereby irrevocably agrees to indemnify and hold the other
Party harmless from any and all liabilities and damages (including legal or
other expenses incidental thereto), contingent, current, or inchoate to which
that Party may become subject as a direct, indirect or incidental consequence
of any action by the indemnifying Party or as a consequence of the failure of
the indemnifying Party to act, whether pursuant to requirements of this
Agreement or otherwise; and

            B. In the event it becomes necessary to enforce this indemnity through an
attorney, with or without litigation, the successful Party shall be entitled to
recover from the indemnifying Party all costs incurred including reasonable
attorneys’ fees throughout any negotiations, trials or appeals, whether or not
any suit is instituted.

        21. Taxes. Each Party shall be responsible for all taxes which are based
on its own net income. All sales, value added, and use taxes arising out of
transactions occurring under this Agreement shall be the responsibility of the
Party conducting such transaction and each Party hereby indemnifies and holds
the other harmless from any and all claims relating to sales or use taxes
collected or due by the Party conducting each of the transactions hereof; and

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
the undersigned duly authorized respective officers, effective as of the day
and year first set forth above.

E-SMART TECHNOLOGIES, INC.

	 	 	 
	By:
	 	 
	

	 	

Mary A. Grace, President

BIG BANG TECHNOLOGIES, INC.

	 	 	 
	By:
	 	 
	

	 	

Tamio Saito, President

6

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