Document:

EXHIBIT 10.1

 

HARDINGE INC.

 

Amended and Restated
Executive Supplemental Pension Plan

 

(Effective August 9, 2005)

 

This Amended and Restated Executive Supplemental
Pension Plan (the “Plan”), effective August 9, 2005, is designed to
provide a benefit which, when added to other retirement income, will ensure the
payment of a competitive level of retirement income in order to attract, retain
and motivate selected executives of Hardinge Inc. (“Hardinge”).  The Compensation Committee of the Board of
Directors of Hardinge shall serve as the Supplemental Pension Plan Committee (“Committee”)
and shall have the authority to administer the Plan.  The Committee’s decision in any matter
involving the interpretation and application of the Plan shall be final and
binding.  All terms used in the Plan and
not otherwise defined herein shall have the same meaning as such terms are used
in the Hardinge Inc. Pension Plan (“Pension Plan”).

 

1.                                       Eligibility.   From time to time Hardinge’s
Board of Directors may select executives as Participants in the Plan as of
dates designated by the Committee.  In no
event shall a Participant or a Participant’s Beneficiary be eligible for, or
receive a benefit under the Plan unless and until the Participant is entitled
to a benefit under the Pension Plan.

 

2.                                       Benefits.   Unless otherwise specified by
written agreement between Hardinge and the Participant, the benefits which
Hardinge shall pay to a Participant or his Beneficiary under the Plan shall
equal the excess, if any, of (a) over (b) where:

 

(a)                                  is the benefit which would have been paid to
the Participant or to his Beneficiary under the terms of the Pension Plan as in
effect on the date of the Participant’s termination of employment, computed,
however, as if:

 

(i)                                     the Pension Plan benefit formula as presently
set forth in Section 4.1 thereof, were adjusted to provide a Normal
Pension each year for life equal to 1-1/4% of the Participant’s Final Average
Annual Compensation 

 

 

times the number of years and fractions thereof of
Credited Service to the date of termination of employment.  For the purposes hereof, Annual Compensation
shall mean base salary received plus cash bonuses earned for services rendered
in a calendar year whether or not actually received in that year (provided,
however, the amount of cash bonuses in any year for the purposes hereof shall
be limited to 50% of the base salary for said year) and Final Average Annual
Compensation shall mean the average of the Participant’s highest Annual
Compensation received in any three of the five full calendar years immediately
preceding the date of termination of employment.

 

Minimum Benefit.   In
no case shall the benefit earned hereunder be less than the benefit computed in
accordance with the terms of the Pension Plan, provided however, that in
computing this minimum benefit there shall be substituted with respect to the
Pension Plan’s past service benefit formula 1-1/2% for each year of Credited
Service in place of the present 1-1/4% (or such other percentage as may be in
effect from time to time under the Pension Plan), and

 

(ii)                                  the basic Pension Plan benefit formula and
all benefits under the Pension Plan were administered and payable without
regard to the special benefit limitations as set forth in Section 7.2 of
the Pension Plan as amended from time to time to comply with the provisions of Section 415
of the Internal Revenue Code (as amended to date and as may hereafter be
amended) limiting benefits payable under tax-qualified retirement plans, and

 

(b)                                 is the benefit which is payable to the
Participant or to his Beneficiary under the terms of the Pension Plan as in
effect on

 

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the date of the Participant’s termination of
employment, or if later, the date benefits commence to the Participant or his
Beneficiary, as the case may be.

 

Payments
of benefits under the Plan shall be coincident in time and form with the
payment of the pension benefits made to, or on behalf of, a Participant or his
Beneficiary under the Pension Plan, provided however that (i) the joint
and survivor election which shall apply to the benefits payable under this Plan
shall be the Participant’s joint and survivor election (if any) under this
Plan, which election shall be made within thirty (30) days following eligibility
for participation in this Plan and may be changed after the initial election
only in accordance with the provisions of Section 409A of the Internal
Revenue Code of 1986 and the regulations thereunder as amended from time to
time, (ii) the Pension Plan’s provisions under Section 4.8 providing
an unreduced joint and survivor participant benefit for five (5) years
shall not be applicable under this Plan, and (iii) should a Participant’s
spouse at the time of the Participant’s joint and survivor election die prior
to the Participant’s entitlement to benefits under this Plan, the Participant’s
joint and survivor election shall be null and void.

 

Subject to the right of Hardinge to discontinue the
Plan, in whole or in part and as to any one or all of the Participants, a
Participant shall have a nonforfeitable interest in benefits payable under the
Plan to the same extent as benefits are vested under Article IV of the
Pension Plan.

 

The benefits provided under the Plan shall not apply
to a Participant’s service following his sixty-fifth (65th)
birthday.  If a Participant continues
employment with Hardinge after reaching age sixty-five (65), no further
benefits of any kind shall accrue under the Plan for service after said date
and benefits under the Plan shall be payable only upon the Participant’s
subsequent termination of employment.  In
the event of such continued employment, the benefit payable under the Plan
shall be frozen on the Participant’s sixty-fifth (65th) birthday,
and thereafter reduced by benefits earned under the Pension Plan following
attainment of age sixty-five (65).

 

Except as to withholding of
any tax under the laws of the United States or any state or locality, no
benefit payable at any time under the Plan shall be subject in any manner to alienation,
sale, transfer, assignment, pledge,

 

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attachment, or other legal process, or encumbrance
of any kind. Any attempt to alienate, sell, transfer, assign, pledge or
otherwise encumber any such benefits, whether currently or thereafter payable,
shall be void. No benefit shall, in any manner, be liable for or subject to the
debts or liabilities of any person entitled to such benefits. If any person
shall attempt to, or shall alienate, sell, transfer, assign, pledge or
otherwise encumber his or her benefits under the Plan, or if by reason of his
or her bankruptcy or other event happening at any time, such benefits would
devolve upon any other person or would not be enjoyed by the person entitled
thereto under the Plan, then Hardinge, in its discretion, may terminate the
interest in any such benefits of the person entitled thereto under the Plan and
hold or apply them to or for the benefit of such person entitled thereto under
the Plan or his or her spouse, children or other dependents, or any of them, in
such manner as Hardinge may deem proper.

 

3.                                       Indemnification.   To
the full extent authorized or permitted by law, Hardinge shall indemnify any
person who brings an action or proceeding, whether civil or criminal, or is
made, or threatened to be made, a party to an action or proceeding, whether
civil or criminal, by reason of the fact that he, his testator or intestate, is
or shall be entitled to benefits under this Plan and Hardinge has failed to
make payments hereunder when due or has otherwise failed to follow the terms of
the Plan or such person has reasonable cause to believe Hardinge shall or
intends to so fail to perform its future obligations hereunder arising within a
reasonable time thereof, or with respect to any other matter directly or
indirectly related to this Plan, unless a judgment or other final adjudication
adverse to such person establishes that Hardinge was or is legally entitled to
fail to so perform its obligations hereunder. 
Without limitation of the foregoing, such indemnification shall include
indemnification against all costs of whatsoever nature or kind, including
attorneys’ fees and costs of investigation or defense, incurred by any such
person with respect to any such action or proceeding and any appeal therein,
and which judgments, fines, amounts and expenses have not been recouped by him
in any other manner.  All expenses
incurred by a person in connection with an actual or threatened action or
proceeding with respect to which such person is or may be entitled to
indemnification under this Section, shall, in the absence of a final
adjudication adverse to such person as described above, be promptly paid by
Hardinge to him, upon receipt of an undertaking by him to repay the portion of
such advances, if any, to which he may finally be determined not to be
entitled.  This Section may not
without the consent of such a person be amended or changed

 

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in any manner adverse to such person.  The indemnification provided by this Section shall
not be deemed exclusive of any other rights to which a person may be entitled
other than pursuant to this Section.

 

4.                                       Miscellaneous.  
Hardinge expects to continue the Plan indefinitely but reserves the right
at any time and from time to time by action of the Committee to amend, suspend
or discontinue it, in whole or in part and with respect to any one or all of
the Participants and beneficiaries hereunder, if in the Committee’s sole
discretion and judgment, such a change is deemed necessary or desirable.  However, no such amendment, suspension or
termination shall affect a Participant’s or beneficiary’s right to receive the
benefits accrued in accordance with this Plan as in effect immediately prior to
such amendment, suspension or termination. 
Neither the adoption of the Plan by Hardinge nor any action of Hardinge
or the Committee under the Plan shall be held or construed to confer upon any
person any legal right to be continued as an employee of Hardinge.  All Participants shall be subject to
discharge to the same extent as they would have been if the Plan had never been
adopted.  The Plan shall be binding on
Hardinge’s successors and assigns and is established under and shall be
construed according to the laws of the State of New York.

 

IN WITNESS WHEREOF, Hardinge Inc. has caused this
instrument to be executed by its officers thereunto duly authorized and its
corporate seal to be hereunto affixed as of August 9, 2005.

 

 

	
   

  	
  HARDINGE INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
    /s/ J. Patrick Ervin

  	
   

  
	
   

  	
   

  	
  Its Chairman of the Board,

  
	
   

  	
   

  	
       Chief Executive Officer

  
	
   

  	
   

  	
       and President

  
	
   

  	
   

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  
	
    /s/ J. Philip Hunter

  	
   

  	
   

  
	
  Its
  Secretary

  	
   

  	
   

  

 

5Exhibit 10.1

 

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

 

AGREEMENT
made as of the 15th day of August, 2005 by and between eAcceleration
Corp., a Delaware corporation (the “Company”) and Clinton L. Ballard, an
individual with an address at P.O. Box 3546, Silverdale, Washington 98383
(hereinafter called the “Employee”).

 

W
I T N E S S E T H:

 

WHEREAS, this Agreement
is intended to supersede and replace all prior agreements, understandings and
arrangements between or among the Company and the Employee relating to the
employment of the Employee.

 

NOW, THEREFORE, it is
agreed as follows:

 

1.             Retention
of Services.  The Company hereby
retains the services of Employee, and Employee agrees to furnish such services,
upon the terms and conditions hereinafter set forth.

 

2.             Term.  Subject to earlier termination on the terms
and conditions hereinafter provided, and further subject to certain provisions
hereof which survive the term hereof, the term of this Agreement (the “Term”)
shall be comprised of a five (5) year period of employment commencing on January 1,
2003, and shall be extended thereafter for additional one-year periods unless
or until the Company or the Employee provides sixty (60) days’ notice to the
other party of the termination of this Agreement.

 

3.             Duties
and Extent of Services During Period of Employment.

 

(a)           During
the term of employment, Employee shall be employed by the Company as President,
Chairman of the Board and Chief Executive Officer or in such other equivalent
positions with the Company and its affiliates, as may be determined by the
Board of Directors of the Company, and shall also serve as a director of the
Company.  In such capacity, Employee
agrees that he shall devote Employee’s full time business efforts to serving
the Company and its affiliates under the direction of the Board of Directors of
the Company, shall perform all duties incident to Employee’s position on behalf
of the Company to the best of Employee’s ability and shall perform such other
duties as may from time to time be assigned to him by the Board of Directors of
the Company.

 

(b)           The
Company and Employee agree that Employee shall perform Employee’s basic
responsibilities and duties hereunder at the office of the Company in Kitsap
County, Washington, or at Employee’s home office consistent with past practice;
subject, however, to the travel requirements of Employee’s position, including
that Employee may be required to perform services on a temporary basis at the
offices of the Company and its affiliates outside Kitsap County, Washington and
travel to visit certain customers of the Company, in connection with the
Company acquiring the rights or license to market and sell certain products or
otherwise in connection with the business and investor relations of the
Company.

 

4.             Remuneration.  During the period of employment, Employee
shall be entitled to receive the following compensation for Employee’s
services:

 

 

(a)           The
Company shall pay to Employee a salary at the rate of $260,000 per annum,
payable in equal bi-weekly installments, or in such other manner as shall be
consistent with the Company’s payroll practices.

 

(b)           In
addition to the salary provided in clause (a) above, not later than one
hundred ten (110) days after the end of the 2002 fiscal year of the Company,
the Company shall pay to Employee, as incentive compensation, an amount equal
to four percent (4%) of the Company’s Cash Flow (as defined below) for such
fiscal year. For all quarterly periods during the Term, beginning with the
first quarter of the Company’s 2003 fiscal year, the Company, not later than
sixty (60) days after the end of each such quarterly period, shall pay to
Employee an amount equal to four percent (4%) of the Company’s Cash Flow for
such quarterly period; provided, however, that for the fourth quarter of each
fiscal year, such amounts are required to be paid not later than one hundred
ten (110) days after the end of such quarterly period. For purposes of this
Agreement, “Cash Flow” shall mean, for the period for which the bonus is being
calculated, an amount equal to the net income of the Company, before taxes,
depreciation, amortization, and extraordinary items, in each case computed in
accordance with United States generally accepted accounting principles,
consistently applied, plus (i) an amount equal to the Company’s non-cash
expenses less its non-cash gains or income (other than those removed from the
calculation of net income as set forth above), plus (ii) an amount equal
to the Company’s deferred revenues less its deferred expenses, in each case as
reflected on the Company’s statement of cash flows with respect to operating
activities.  In the event that this
Agreement is terminated other than pursuant to Section 9(a), the Employee
shall be entitled to receive the amount which would be payable under this
clause (b) for each fiscal quarter of any fiscal year in which Employee
was employed by the Company at the date of such termination.  The Company agrees to furnish to Employee a
copy of the Company’s annual audited financial statements not later than one
hundred and five (105) days after the end of each fiscal year of the Company,
and quarterly unaudited financial statements not later than fifty-five (55)
days after the end of each fiscal quarter during the term of this Agreement.

 

(c)           In
addition to the amounts payable to Employee under clauses (a) and (b) above,
not later than one hundred ten (110) days after the end of the 2005 fiscal year
of the Company (the “Bonus Payment Date”), the Company shall pay to Employee as
incentive compensation a cash bonus in an amount of up to $122,200 provided
that either (A) all amounts payable to Agility Capital, LLC (“Agility”)
under such financing arrangement(s) as the Company may enter into with Agility
have been paid in full as of the Bonus Payment Date or (B) the maturity
date of the amounts due to Agility under such financing arrangement(s) has been
extended for an additional period of six (6) months; and further provided
that the amount payable under this clause (c) when added to the amounts
payable under clauses (a) and (b) above shall not exceed a total
amount, calculated on an annualized basis for the period beginning on July 11,
2005 and ending on December 31, 2005, of $520,000.

 

5.          Employee
Benefits; Expenses.

 

(a)           During
the term of this Agreement, the Company shall provide to the Employee the right
to participate in the Company’s then existing medical and dental insurance 

 

 

and other employee benefit plans and policies on the same terms as are
then generally available to the Company’s executive and managerial employees.

 

(b)           Employee
shall be entitled to paid vacation each year during the term of this Agreement
at the rate of four (4) weeks per annum. Vacation shall be taken each year
and, if not taken, shall be carried over for one (1) year and, if not
taken during such carry-over period, shall be forfeited.

 

(c)           The
Company shall reimburse Employee, in accordance with the practice followed from
time to time for other executive and managerial officers of the Company, for
all reasonable and necessary business and traveling expenses, and other
disbursements incurred by Employee for or on behalf of the Corporation in the
performance of Employee’s duties hereunder, upon presentation by Employee to
the Company of an appropriate accounting or documentation of such.

 

6.          Disability.  If Employee, during the period of employment,
becomes unable for any 120 days in any twelve-month period due to ill health or
other physical or mental incapacity, to perform Employee’s services hereunder,
the Company may thereafter, upon at least 100 days’ written notice to Employee,
place him on disability status.  After
such action by the Company, Employee shall no longer be entitled to receive any
compensation hereunder until the Employee returns to full-time status.

 

7.          Confidential
Information.

 

(a)           In
the course of Employee’s employment by the Company, Employee will have access
to and possession of valuable and important confidential or proprietary data or
information of the Company and its operations. 
Employee will not during Employee’s employment by the Company or at any
time for a period of five (5) years thereafter divulge or communicate to
any person nor shall Employee direct any employee, representative or agent of
the Company or its affiliates to divulge or communicate to any person or entity
(other than to a person or entity bound by confidentiality obligations similar
to those contained herein and other than as necessary in performing Employee’s
duties hereunder) or use to the detriment of the Company or for the benefit of
any other person or entity, including without limitation any competitor,
supplier, licensor, licensee or customer of the Company, any of such
confidential or proprietary data or information or make or remove any copies
thereof, whether or not marked or otherwise identified as “confidential” or “secret.”  Employee shall take all reasonable
precautions in handling the confidential or proprietary data or information
within the Company to a strict need-to-know basis and shall comply with any and
all security systems and measures adopted from time to time by the Company to
protect the confidentiality of confidential or proprietary data or information.

 

(b)           The
term “confidential or proprietary data or information” as used in this
Agreement shall mean information not generally available to the public,
including, without limitation, all database information, personnel information,
financial information, customer lists, account lists or other account
information, names, telephone numbers or addresses, supplier lists, trade
secrets, patented or proprietary information, forms, information regarding
products, 

 

 

operations, systems, methods, financing, services, know how, computer
and any other processed or collated data, computer programs, pricing,
marketing, media and advertising data.

 

(c)           Employee
will at all times promptly disclose to the Company in such form and manner as
the Company may reasonably require, any inventions, improvements or procedural
or methodological innovations, including without limitation relating to
programs, methods, forms, systems, services, designs, marketing ideas, products
or processes (whether or not capable of being trademarked, copyrighted or
patented) conceived or developed or created by Employee during or in connection
with Employee’s employment hereunder and which relate to the business of the
Company (“Intellectual Property”). 
Employee agrees that all such Intellectual Property shall be the sole
property of the Company.  Employee
further agrees that Employee will execute such instruments and perform such
acts as may reasonably be requested by the Company to transfer to and perfect
in the Company all legally protectable rights in such Intellectual Property.

 

(d)           In
accordance with RCW 49.44.140, any assignment of inventions required by this
Agreement does not apply to an invention for which no equipment, supplies,
facility or trade secret information of the Company was used and which was
developed entirely on the Employee’s own time, unless (a) the invention
relates (i) directly to the business of the Company or (ii) to the
Company’s actual or demonstrably anticipated research or development or (b) the
invention results from any work performed by the Employee for the Company.

 

(e)           As
a matter of record Employee attaches hereto as Exhibit A a complete
list of all inventions (including patent applications and patents) relevant to
the subject matter of Employee’s engagement pursuant to this Agreement which
have been made, conceived, developed or first reduced to practice by Employee,
alone or jointly with others, prior to Employee’s engagement with Company
pursuant to this Agreement that Employee desires to remove from the operation
of this Agreement, and Employee covenants that such list is complete.  If no such list is attached to this
Agreement, Employee represents that it has no such inventions at the time of
signing this Agreement.

 

(f)            All
written materials, books, records and documents made by Employee or coming into
Employee’s possession during Employee’s employment by the Company concerning
any products, processes or equipment manufactured, used, developed,
investigated, purchased, sold or considered by the Company or otherwise
concerning the business or affairs of the Company, including without limitation
any files, customer records such as names, telephone numbers and addresses,
lists, firm records, brochures and literature, shall be the sole property of
the Company, shall not be removed from the Company’s premises by the Employee,
and upon termination of Employee’s employment by the Company, or upon request
of the Company during Employee’s employment by the Company, Employee shall
promptly deliver the same to the Company. 
In addition, upon termination of Employee’s employment by the Company,
Employee will deliver to the Company all other Company property in Employee’s
possession or under Employee’s control, including, but not limited to,
financial statements, marketing and sales data, customer and supplier lists,
account lists and other account information, database information and other
documents, and any Company credit cards.

 

 

(g)           The
Employee acknowledges that the covenants contained in this Section 7 are
fair and reasonable in order to protect the Company’s business and were a
material and necessary inducement for the Company to agree to the terms of this
Agreement.  The Employee further
acknowledges that any remedy at law for any breach or threatened or attempted
breach of the covenants contained in this Section 7 may be inadequate and
that the violation of any of the covenants contained in this Section 7
will cause irreparable and continuing damage to the Company. Accordingly, the
Company shall be entitled to specific performance or any other mode of
injunctive and/or other equitable relief to enforce its rights hereunder,
including without limitation an order restraining any further violation of such
covenants, or any other relief a court might award, without the necessity of
showing any actual damage or irreparable harm or the posting of any bond or
furnishing of other security, and that such injunctive relief shall be
cumulative and in addition to any other rights or remedies to which the Company
may be entitled. The covenants in this Section 7 shall run in favor of the
Company and its successors and assigns. 
In addition, to the extent the Company is successful on the merits in
any proceeding to enforce the terms of this Section 7, the Employee agrees
to pay the Company the costs it incurs, including reasonable attorneys’ fees
and expenses, in bringing and prosecuting any such proceeding.

 

(h)           The
provisions of this Section 7 shall survive the termination of this
Employment Agreement.

 

8.          Non-Competition.

 

(a)           During
the term of this Agreement and for one year thereafter (the “Restricted Period”),
the Employee shall not, without the written consent of the Company, directly or
indirectly,

 

(i)            become
associated with, render services to, invest in, represent, advise or otherwise
participate in as an officer, employee, director, stockholder, partner,
promoter, agent of, consultant for or otherwise, any business which is
conducted in any of the jurisdictions in which the Company’s business is
conducted and which is competitive with the business conducted by the Company;
provided, that this Section 8(a)(i) shall not prohibit the Employee
from purchasing or owning up to one percent (1%) of the outstanding capital
stock of a company which is listed or authorized for trading on any national
securities exchange, Nasdaq or the OTC Electronic Bulletin Board or is a
company with a class of securities registered under Section 12 of the
Securities Act of 1934, as amended;

 

(ii)           for
the Employee’s own account or for the account of any other person or entity (A) interfere
with the Company’s relationship with any of its suppliers, customers, accounts,
brokers, representatives or agents or (B) contact, telephone, meet,
solicit or transact any business with any material customer, account or
supplier of the Company who or which transacts or has transacted business with
the Company at any time during the term of this Agreement; or

 

(iii)          employ
or otherwise engage, or solicit, entice or induce on behalf of the Employee or
any other person or entity, the services, retention or employment of any 

 

 

person who has been an employee, principal, partner,
stockholder, sales representative, trainee, consultant to or agent of the
Company within one year of the date of such offer or solicitation.

 

(b)           Nothing
herein contained shall be construed as prohibiting the Company from pursuing
any other remedies available to it for such violation, including but not
limited to any injunctive or other equitable relief or the recovery of damages
from the Employee.

 

(c)           The
Employee acknowledges that the covenants contained in this Section 8 are
fair and reasonable in order to protect the Company’s business and were a
material and necessary inducement for the Company to agree to the terms of this
Agreement.  The Employee further
acknowledges that any remedy at law for any breach or threatened or attempted
breach of the covenants contained in this Section 8 may be inadequate and
that the violation of any of the covenants contained in this Section 8
will cause irreparable and continuing damage to the Company. Accordingly, the
Company shall be entitled to specific performance or any other mode of
injunctive and/or other equitable relief to enforce its rights hereunder,
including without limitation an order restraining any further violation of such
covenants, or any other relief a court might award, without the necessity of showing
any actual damage or irreparable harm or the posting of any bond or furnishing
of other security, and that such injunctive relief shall be cumulative and in
addition to any other rights or remedies to which the Company may be entitled.
The covenants in this Section 8 shall run in favor of the Company and its
successors and assigns.  In addition, to
the extent the Company is successful on the merits in any proceeding to enforce
the terms of this Section 8, the Employee agrees to pay the Company the costs
it incurs, including reasonable attorneys’ fees and expenses, in bringing and
prosecuting any such proceeding.

 

(d)           In
case any one or more of the terms or provisions contained in this Section 8
shall for any reason be held invalid, illegal or unenforceable, such
invalidity, illegality or unenforceability shall not affect any other terms or
provisions hereof, but such term or provision shall be deemed modified or
deleted as or to the extent required by applicable law, and such modification
or deletion shall not affect the validity of the other terms or provisions of
this Section 8. In addition, if any one or more of the restrictions
contained in this Section 8 shall for any reason be held to be
unreasonable with regard to time, duration, geographic scope or activity, the
parties contemplate and hereby agree that such restriction shall be modified
and shall be enforced to the full extent compatible with applicable law.  The parties hereto intend that the covenants
contained in this Section 8 shall be deemed a series of separate covenants
for each country, state, county and city. 
If, in any judicial proceeding, a court shall refuse to enforce all the
separate covenants deemed included in this Section 8 because, taken
together, they cover too extensive a geographic area, the parties intend that
those of such covenants (taken in order of the cities, counties, states and
countries therein which are lease populous) which if eliminated would permit
the remaining separate covenants to be enforced in such proceeding shall, for
the purpose of such proceeding, be deemed eliminated from the provisions of
this Section 8.

 

(e)           The
provisions of this Section 8 shall survive the termination of this
Employment Agreement.

 

 

9.          Termination.

 

(a)           The
Company may terminate the Employee’s services hereunder “for cause” by
delivering to Employee not less than ten (10) days prior to the date on
which the termination is to be effective, a written notice of termination for
cause specifying the act, acts or failure to act that constitute the
cause.  For the purposes of this
agreement, “for cause” shall mean;  (i) any
act of fraud or embezzlement which materially adversely affects the financial
or market interests of the Company or any affiliate thereof, (ii) in the
event of a conviction of the Employee for any violent felony or other serious
crime or any knowing violation of any federal or state securities law or
regulation, (iii) repeated failure to perform Employee’s duties hereunder
after notice and opportunity to cure, (iv) any material breach by the
Employee of this Agreement, or (v) the death of the Employee.

 

(b)           If
the Company terminates Employee’s employment hereunder for any reason other
than “for cause” as set forth in Section 9(a) hereof, the Company
shall pay to the Employee compensation pursuant to Sections 4(a) and 4(b) hereof
at the time and in the manner provided for herein, and no other compensation
payable hereunder shall be payable to the Employee. If the Company terminates
Employee’s employment hereunder “for cause” as set forth in Section 9(a) hereof
or if Employee resigns voluntarily from Employee’s employment by the Company,
Employee shall be paid the compensation pursuant to Sections 4(a) and 4(b) hereof
through the date of such termination but shall not be entitled to receive any
further compensation hereunder.  Employee
and the Company acknowledge that the foregoing provisions of this paragraph 9(b) are
reasonable and are based upon the facts and circumstances of the parties at the
time of entering into this Agreement, and with due regard to future
expectations.

 

10.        Notices.  Any notice to be given to the Company
hereunder shall be deemed sufficient if addressed to the Company in writing and
delivered or mailed by certified or registered mail to it at 1050 NE Hostmark
Street, Suite 100B, Poulsbo, Washington 98730, Attention: President, or to
such other address as the Company may hereafter designate, and a copy to Joel
N. Bodansky, Hillis Clark Martin & Peterson, P.S., 500 Galland
Building, 1221 Second Avenue, Seattle, Washington 98101-2925.  Any notice to be given to Employee hereunder
shall be delivered or mailed by certified or registered mail to him at the
address set forth at the head of this Agreement or such other address as he may
hereafter designate.

 

11.        Change
of Control.

 

(a)           In
the event that at any time after any securities of the Company are publicly
traded there shall be a change in the control of the Company, as hereinafter
defined, or in any person directly or indirectly presently controlling the Company,
as hereinafter defined, Employee shall have the option, exercisable within six (6) months
of Employee’s becoming aware of such event, to terminate Employee’s employment
by the Company pursuant to this Employment Agreement forthwith.  Upon such termination, Employee shall have
the right to immediately receive as a lump sum payment an amount equal to three
(3) times the average of the total annual compensation paid by the Company
to Employee, with respect to the five fiscal years of the Company prior to the
change of control, minus $1.00.

 

(b)           For
purposes of this Agreement, a change in control of the Company, or in any
person directly or indirectly controlling the Company, shall mean:

 

 

(i)            a
change in control as such term is presently defined in Regulation 240.12b-2
under the Securities Exchange Act of 1934 (“Exchange Act”); or

 

(ii)           if
any “person” (as such term is used in Section 13(d) and 14(d) of
the Exchange Act) other than the Company or any “person” who on the date of
this Agreement is a director or officer of the Company, becomes the “beneficial
owner” (as defined in Rule 13(d)-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing twenty percent (20%) of
the voting power of the Company’s then outstanding securities, unless such
person becomes such a beneficial owner as a result of a transaction approved by
a majority of the board of directors of the Company; or

 

(iii)          if
during any period of two (2) consecutive years during the term of this
Agreement, individuals who at the beginning of such period constitute the Board
of Directors cease for any reason to constitute at least a majority thereof,
unless the election of each director who is not a director at the beginning of
such period has been approved in advance by directors representing at least
two-thirds (2/3) of the directors then in office who were directors at the
beginning of the period.

 

12.        Successors
and Assigns; Third Party Beneficiaries. 
This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the Company, and unless clearly inapplicable, all
references herein to the Company shall be deemed to include any such
successor.  In addition, this Agreement
shall be binding upon and inure to the benefit of the Employee and Employee’s
heirs, executors, legal representatives and assigns; provided, however, that
the obligations of Employee hereunder may not be delegated without the prior
written approval of the Board of Directors of the Company.  In the event of any consolidation or merger
of the Company into or with any other corporation during the term of this
Agreement, or the sale of all or substantially all of the assets of the Company
to another corporation, person or entity during the term of this Agreement, such
successor corporation shall assume this Agreement and become obligated to
perform all of the terms and provisions hereof applicable to the Company, and
Employee’s obligations hereunder shall continue in favor of such successor
corporation.

 

13.        Amendments.  This Agreement may not be altered, modified,
amended or terminated except by a written instrument signed by each of the
parties hereto.

 

14.        Prior
Agreements Superseded.  This
Agreement contains the entire agreement of the parties relating to the subject
matter hereof and supersedes any other agreements, oral or written, entered
into between Employee and the Company prior to the date of this Agreement
relating thereto.

 

15.        Applicable
Law.  This Agreement shall be
governed by, construed and enforced in accordance with the laws of the State of
Washington, without regard to conflicts of laws.

 

16.        Severability.  If any provision of this Agreement shall be
held by a court of competent jurisdiction to be contrary to law or public
policy, the remaining provisions shall remain in full force and effect.

 

17.        Waiver.  No term or provision hereof shall be deemed
waived and no breach consented to or excused, unless such waiver, consent or
excuse shall be in writing and signed by 

 

 

the party claimed to have waived, consented or excused. A consent,
waiver or excuse of any breach shall not constitute a consent to, waiver of, or
excuse of any other or subsequent breach whether or not of the same kind of the
original breach.

 

18.        Counterparts.  This Agreement may be executed in two or more
counterparts, all of which taken together shall constitute one and the same
agreement.

 

19.        Acknowledgment.   Employee acknowledges that he has carefully
read this Agreement, has had an opportunity to consult counsel regarding this
Agreement and hereby represents and warrants to the Company that Employee’s
entering into this Agreement, and the obligations and duties undertaken by
Employee hereunder, will not conflict with, constitute a breach of or otherwise
violate the terms of any other agreement to which Employee is a party and that
Employee is not required to obtain the consent of any person, firm, corporation
or other entity in order to enter into and perform Employee’s obligations under
this Agreement.

 

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

 

 

	
   

  	
  eAcceleration Corp.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/  E. Edward Ahrens

  	
   

  
	
   

  	
   

  	
  Name:  E. Edward Ahrens

  
	
   

  	
   

  	
  Title:  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  /s/ Clinton L. Ballard

  	
   

  
	
   

  	
  Clinton L. Ballard

  
					

 

 

EXHIBIT A

 

Inventions

 

1.             The
following is a complete list of all inventions or improvements relevant to the
subject matter of services pursuant to this Agreement that have been made or
conceived or first reduced to practice by Employee, alone or jointly with
others, prior to the first effective date of this Agreement that Employee
desires to remove from the operation of this Agreement entered into between the
Company and Employee.

 

(a)           No
inventions or improvements.

 

(b)           Any
and all inventions regarding:   Nothing

 

2.             Employee
proposes to bring to this relationship the following materials and documents of
a former employer.

 

(a)           No
materials or documents.

 

 

	
   

  	
  /s/ Clinton L. Ballard

  
	
   

  	
  Clinton L. Ballard

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