EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective this 17th day of
June, 1998 (the "Effective Date"), is entered into by and between Xxxx Xxxxxx
("Executive") and RockShox, Inc., a Delaware corporation (the "Company").
WHEREAS, the Company desires to establish its right to the services of
Executive, in the capacity described below, on the terms and conditions
hereinafter set forth, and Executive is willing to serve the Company on such
terms and conditions.
NOW, THEREFORE, in consideration of the mutual agreements hereinafter
set forth, Executive and the Company have agreed and do hereby agree as follows:
1. EMPLOYMENT. The Company does hereby employ Executive and
Executive does hereby accept employment as Vice-President and Chief Financial
Officer of the Company. Executive shall do and perform all services and acts
necessary or reasonably advisable to fulfill the duties and responsibilities of
his position and shall render such services on the terms set forth herein and
shall report to the Company's President and Chief Executive Officer. In
addition, Executive shall have such other executive and managerial powers and
duties with respect to the Company as may reasonably be assigned to him by the
President and Chief Executive Officer, to the extent consistent with his
positions and status as set forth above. Executive agrees to devote to the
Company his full business time to the conduct of his duties hereunder.
2. TERM OF AGREEMENT. The term of this Agreement ("Term") shall
commence on the Effective Date and shall continue until the earlier of (i) three
(3) years after the Effective Date of the Agreement or (ii) such earlier date
upon which this Agreement is terminated as otherwise provided herein.
3. COMPENSATION.
(a) BASE SALARY. During the Term, the Company shall pay
Executive an initial annual base salary at the rate of $200,000 per year or
such higher amount as the Company's Board of Directors may from time to time
determine (the "Base Salary"), payable in equal biweekly installments.
(b) BONUS. In addition to his Base Salary, Executive shall
participate in the Company annual bonus plan as described below.
(i) For the balance of the 1999 fiscal year (9 1/2 months),
Executive shall be guaranteed a bonus equal to the
greater of $60,000 or that amount Executive earns
as a participant in the Company bonus plan.
(ii) In future years Executive shall participate in the
Company's annual bonus plan.
Each such annual bonus shall be payable in accordance with the terms and
conditions of the Company's annual bonus plan.
4. OTHER COMPENSATION
(a) STOCK OPTIONS. Subject to the approval by the Compensation
Committee of the Board (as to which the Company shall use its best efforts to
obtain), the Company shall grant Executive stock options (the "Options") to
purchase 100,000 shares of Common Stock under the RockShox, Inc. 1996 Stock Plan
(the "Plan"). The per share exercise price of such Options shall equal the fair
market value of the stock on the date of grant and shall vest and become
exercisable pro rata on the first, second, third and fourth anniversary dates of
the date of grant. The vesting of all the Options shall accelerate upon the
occurrence of a Transaction (as defined below). Such Options shall qualify as
Incentive Stock Options, to the extent permitted under the Plan and Section 422
of the Internal
Revenue Code of 1986, as amended.
A "Transaction" means any recapitalization, sale of stock or
assets, dissolution, or merger that occurs during the period beginning with
the Effective Date and ending on the date of Executive's termination of
employment for Cause or by reason of his voluntary termination and results in
the delivery of cash, stock or other property to the holders of a majority of
the then outstanding common stock of the Company on a fully diluted basis
(I.E., including shares issuable upon exercise of then outstanding options).
(b) FRINGE BENEFITS. Executive shall be entitled to participate
in the following fringe benefits:
(i) PARTICIPATION IN RETIREMENT/WELFARE PLANS. Executive
shall be eligible to participate in all savings, retirement, and welfare
plans, practices, policies and programs applicable generally to senior
executive officers of the Company.
(ii) VACATION. Executive shall be entitled to accrue up
to a maximum of four weeks of paid vacation days in each year of
employment. If Executive has accrued four weeks of vacation, Executive
shall cease to accrue vacation days until the amount of such accrued
vacation is less than four weeks. The timing of paid vacations shall
be scheduled in a reasonable manner by Executive.
(iii) HEALTH INSURANCE. Executive shall be eligible to
participate in all RockShox' benefits programs available from time to time.
5. REIMBURSEMENT FOR BUSINESS EXPENSES. The Company shall reimburse
Executive for all reasonable and necessary expenses incurred by Executive in
performing his duties for the Company, including the following business
expenses:
(a) TRAVEL. The Company shall reimburse Executive for expenses
incurred in connection with customary business travel in accordance with Company
policy. RockShox will also reimburse Executive for upgrade coupons purchased
for U.S. travel, which Executive may utilize with reasonable discretion.
6. RELOCATION.
(a) The Company shall reimburse Executive for reasonable
out-of-pocket expenses incurred by Executive for temporary living for up to 2
months in the San Xxxx area.
(b) The Company shall reimburse Executive for the relocation
of Executive and his family from Kansas to the San Xxxx area including (i)
all packing and moving of personal effects, furniture, and three cars, (ii)
the cost of air fare for Executive's family to move from Kansas to the San
Xxxx area, (iii) legal, bank and realtor costs of selling his home in Kansas
and buying a home in the San Xxxx area, (iv) a maximum of two house hunting
trips, and (v) bridge financing or a home buyout if necessary. The Company
shall provide Executive with a one-time payment of $35,000 to assist
Executive with relocation incidentals. All relocation costs will be grossed
up to pay applicable taxes (I.E., full federal, state, FICA and medicare).
7. TERMINATION OF EXECUTIVE'S EMPLOYMENT. Upon termination of
Executive's employment, Executive shall be entitled to receive the following
benefits:
(a) DEATH. In the event Executive's employment hereunder is
terminated by reason of Executive's death, Executive's estate (or other
appropriate payee or beneficiary) shall be entitled to receive (i) all
benefits payable to Executive through his date of termination from the
Company under the terms of those Company benefit plans, programs or
arrangements provided to Executive as "Other Compensation" in Section 4 of
this Agreement and (ii) any bonus to which Executive would have been entitled
pursuant to Section 3(b) with respect to the twelve month period ending on
the March 31 immediately following Executive's death, provided that such
bonus is prorated for the portion of the fiscal year during which Executive
was employed by the Company.
(b) DISABILITY. If, as a result of Executive's incapacity
due to physical or mental illness ("Disability"), Executive shall have been
absent from the full-time performance of his duties with the Company for
sixty (60) days during any one-hundred and eighty (180) day period,
Executive's employment under this Agreement may be terminated by the Company
or
Executive for Disability. During any period prior to such termination during
which Executive is absent from the full-time performance of his duties with
the Company due to Disability, the Company shall continue to pay Executive
his Base Salary at the rate in effect at the commencement of such period of
Disability. Upon termination of Executive's employment for Disability, (i)
the Company shall continue to pay Executive his Base Salary for a period of
twelve months (subject to offset for disability insurance benefits received
by Executive or his designee on a tax adjusted basis) and (ii) the Company
shall pay all benefits payable to Executive through his date of termination
under the terms of those Company benefit plans, programs or arrangements
provided to Executive as "Other Compensation" in Section 4 of this Agreement.
(c) TERMINATION FOR CAUSE OR RESIGNATION. The Company may
terminate Executive's employment under this Agreement for Cause at any time
prior to expiration of the Term. As used herein, termination for "Cause"
shall mean termination upon (1) the material failure by Executive to perform
any of his duties with the Company or to follow the good faith instructions
of the President and Chief Executive Officer (other than any such failure
resulting from his incapacity due to physical or mental illness), provided
that Executive has failed to cure such breach within 10 days of receipt of
written notice thereof from the Company, (2) the willful engaging by
Executive in conduct that is materially injurious to the Company, monetarily
or otherwise, (3) the conviction of Executive of (or the pleading by
Executive of NOLO CONTENDRE to) any felony, fraud or embezzlement or (4) any
material breach by Executive of the terms of this Agreement, which Executive
has failed to cure within 10 days of receipt of written notice of such breach
from the Company.
In the event of termination for Cause or resignation by Executive,
this Agreement shall terminate without further obligation by the Company,
except for payment of amounts of Base Salary and any fringe benefits accrued
through the date of such termination for Cause or resignation by Executive.
(d) TERMINATION BY THE COMPANY OTHER THAN FOR DEATH, DISABILITY,
CAUSE OR RESIGNATION. If Executive's employment is terminated by the Company on
or before December 17, 1998, for any reason other than Executive's death,
Disability, resignation, or for Cause, Executive shall receive as severance (i)
his Base Salary at the rate then in effect for a period of six months ("Six
Month Severance Period"), (ii) continuation
of health benefits during the Six Month Severance Period substantially
similar to the health benefits provided to Executive immediately prior to
termination and (iii) all outstanding equity incentive awards (including
without limitation stock options granted) that would have become vested
during such Six Month Severance Period, shall immediately vest and remain
exercisable for a period of ninety (90) days following Executive's
termination of employment.
If Executive's employment is terminated by the Company after
December 17, 1998, for any reason other than Executive's death, Disability,
resignation, or for Cause, Executive shall receive as severance (i) his Base
Salary at the rate then in effect for a period of twelve months (such period,
the "Severance Period"), (ii) continuation of health benefits during the
Severance Period substantially similar to those provided to Executive
immediately prior to termination, (iii) all outstanding equity incentive
awards (including without limitation stock options granted) that would have
become vested during the Severance Period, shall immediately vest and remain
exercisable for a period of ninety (90) days following Executive's
termination of employment.
The Base Salary payments provided to Executive during the Severance
Period pursuant to Section 7(d)(i) hereof shall be reduced by an amount equal
to the Consulting Fee (as defined below) payable by the Company to Executive
pursuant to Section 10(a) of this Agreement.
8. CONFIDENTIAL INFORMATION AND NON-SOLICITATION.
(a) CONFIDENTIALITY. Executive acknowledges that in his
employment hereunder, and during prior periods of employment with the
Company, he has occupied and will continue to occupy a position of trust and
confidence. Executive shall not, except as may be required to perform his
duties hereunder or as required by court order or applicable law, without
limitation in time or until such information shall have become public other
than by Executive's unauthorized disclosure, disclose to others or use,
whether directly or indirectly, any Confidential Information regarding the
Company. "Confidential Information" shall mean information about the
Company, and their respective clients and customers that is not disclosed by
the Company for financial reporting purposes and that was learned by
Executive in the course of his employment by the Company, including (without
limitation) any proprietary knowledge, trade secrets,
data, formulae, information and client and customer lists and all papers,
resumes, and records (including computer records) of the documents containing
such Confidential Information. Executive acknowledges that such Confidential
Information is specialized, unique in nature and of great value to the
Company and that such information gives the Company a competitive advantage.
Executive agrees to deliver or return to the Company, at the Company's
request at any time or upon termination or expiration of his employment or as
soon thereafter as possible, all documents, computer tapes and disks,
records, lists, data, drawings, prints, notes and written information (and
all copies thereof) furnished by the Company or prepared by Executive during
the term of his employment by the Company.
(b) NON-SOLICITATION OF CUSTOMERS AND SUPPLIERS. During the
period in which he is employed by the Company (and, in the event Executive's
employment is terminated by the Company for Cause, for a period of one (1) year
beyond the expiration of the Term), Executive shall not, directly or indirectly,
influence or attempt to influence customers or suppliers of the Company to
divert their business to any business, individual, partner, firm, corporation,
or other entity that is then a direct competitor of the Company with respect to
the manufacture and sale of bicycle components or non-automotive suspension
products (each such competitor a "Competitor of the Company").
(c) NON-SOLICITATION OF EMPLOYEES. Executive recognizes that
he possesses and will possess confidential information about other employees
of the Company relating to their education, experience, skills, abilities,
compensation and benefits, and inter-personal relationships with customers of
the Company. Executive recognizes that the information he possesses and will
possess about these other employees is not generally known, is of substantial
value to the Company and its subsidiaries in developing its business and in
securing and retaining customers, and has been and will be acquired by him
because of his business position with the Company. Executive agrees that,
during the period in which he is employed by the Company (and, in the event
Executive's employment is terminated by the Company for Cause, for a period
of one (1) year beyond the expiration of the Term), he will not, directly or
indirectly, solicit or recruit any employee of the Company for the purpose of
being employed by him or by any Competitor of the Company on whose behalf he
is acting as an agent, representative or employee and that he will not convey
any such confidential information or trade secrets about other employees of
the Company to any other person.
9. NONCOMPETITION/CONSULTING ARRANGEMENT; SURVIVAL OF PROVISIONS.
(a) NONCOMPETE/CONSULTING. For a period of one year
following termination of employment, Executive shall be a non-employee
consultant of the Company and shall provide consulting services to the
Company, as the Company reasonably requests. Executive shall not, during
such period, directly or indirectly, for his own account or for the account
of others, either as an officer, director, stockholder, owner, partner,
promoter, employee, consultant, adviser, agent, manager, or in any other
capacity assist or provide services to any person or entity that is then in
competition with the Company or its affiliates in the manufacturing and sale
of bicycle components or non-automotive suspension products. In consideration
of Executive's consulting and non-competition obligations provided herein,
Executive shall receive an annual consulting fee of $25,000 (the "Consulting
Fee"), payable at regular payroll intervals. At the Company's discretion,
after a period of twelve months, the Consulting Fee shall be terminated.
(b) SURVIVAL OF PROVISIONS. The obligations contained in
Sections 8 and 9 shall, to the extent provided in Sections 8 and 9, survive
the termination or expiration of Executive's employment with the Company and,
as applicable, shall be fully enforceable thereafter in accordance with the
terms of this Agreement. If it is determined by a court of competent
jurisdiction in any state that any restriction in Sections 9 or 10 is
excessive in duration or scope or is unreasonable or unenforceable under the
laws of that state, it is the intention of the parties that such restriction
may be modified or amended by the court to render it enforceable to the
maximum extent permitted by the law of that state.
10. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by fax, first-class mail,
certified or registered with return receipt requested, or overnight courier
service, and shall be deemed to have been duly given three (3) days after
mailing or twenty-four (24) hours after transmission of a fax or by overnight
courier service to the respective persons named below:
If to Company: RockShox, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
ATTENTION: Corporate Secretary
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Executive:
Xxxx Xxxxxx
000 Xxx Xxxxx Xxxx
Xxx Xxxxx, XX 00000
Phone: (000) 000-0000
Either party may change such party's address for notices by notice duly given
pursuant hereto.
11. DISPUTE RESOLUTION; ATTORNEYS' FEES. The Company and
Executive agree that any dispute, other than with respect to Sections 9 or
10, about the validity, interpretation, effect or alleged violation of this
Agreement (an "Arbitrable Dispute") must be submitted to confidential
arbitration. Arbitration shall take place before an experienced employment
arbitrator licensed to practice law and selected in accordance with the Model
Employment Arbitration Procedures of the American Arbitration Association.
Arbitration shall be the exclusive remedy of any Arbitrable Dispute. Should
any party to this Agreement pursue any Arbitrable Dispute by any method other
than arbitration, the other party shall be entitled to recover from the party
initiating the use of such method all damages, costs, expenses and attorneys'
fees incurred as a result of the use of such method. Each party shall have
the right, in addition to any other relief granted by such arbitrator (or by
any court with respect to relief granted with respect to Sections 8 or 9), to
attorneys' fees based on a determination by the arbitrator (or, with respect
to Sections 8 or 9, the court) of the extent to which each party has
prevailed as to the material issues raised in determination of the dispute.
12. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates
and supersedes any and all prior agreements and understandings between the
parties with respect to Executive's employment and compensation by the
Company, but only with respect to the matters expressly addressed herein.
13. ASSIGNMENT; SUCCESSORS. This Agreement is personal in its
nature and neither of the parties hereto shall, without the consent of the
other, assign or transfer this Agreement or any rights or obligations
hereunder; provided that, in the event of the merger, consolidation,
transfer, or sale of all or substantially all of the assets of the Company
with or to any other individual or entity, this Agreement shall, subject to
the provisions hereof, be binding upon and inure to the benefit of such
successor and such successor shall discharge and perform all the promises,
covenants, duties, and obligations of the Company hereunder.
14. GOVERNING LAW. This Agreement and the legal relations thus
created between the parties hereto shall be governed by and construed under
and in accordance with the laws of the State of Delaware.
15. WITHHOLDING. The Company shall make such deductions and
withhold such amounts from each payment made to the Executive hereunder as
may be required from time to time by law, governmental regulation or order.
16. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
17. WAIVER; MODIFICATION. Failure to insist upon strict
compliance with any of the terms, covenants, or conditions hereof shall not
be deemed a waiver of such term, covenant, or condition, nor shall any waiver
or relinquishment of, or failure to insist upon strict compliance with, any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times. This
Agreement shall not be modified in any respect except by a writing executed
by each party hereto.
18. SEVERABILITY; POOLING.
(a) In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute
or public policy, only the portions of this Agreement that violate such
statute or public policy shall be stricken. All portions of this Agreement
that do not violate any statute or public policy shall continue in full force
and effect. Further, any court order striking any portion of this Agreement
shall modify the stricken terms as narrowly as possible to give as much
effect as possible to the intentions of the parties under this Agreement.
(b) In the event that the Company is party to a transaction
which is otherwise intended to qualify for "pooling of interests" accounting
treatment then (1) this Agreement shall, to the extent practicable, be
interpreted so as to permit such accounting treatment, and (2) to the extent
that the application of clause (1) of this Section 20(b) does not preserve
the availability of such accounting treatment, then, to the extent that any
provision of the Agreement disqualifies the transaction as a "pooling"
transaction (including, if applicable, the entire Agreement), such provision
shall be null and void as of the date hereof. All determinations under this
Section 20(b) shall be made by the accounting firm whose opinion with respect
to "pooling of interests" is required as a condition to the consummation of
such transaction. The Company shall use its best efforts to maintain the
effectiveness of all provisions of the Agreement (or to give Executive the
economic benefit thereof) without adversely affecting "pooling of interests"
treatment of a transaction.
19. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has hereunto signed
this Agreement, as of the date first above written.
ROCKSHOX, INC.
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By: Xxxxxx Xxxxxx
Its: President and Chief Executive Officer
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Xxxx Xxxxxx
