Contract
Exhibit 10.3
This
Employment Agreement (the “Agreement”) is entered into as of this 8th day of
April, 2008 (the “Effective Date”) by and between InfoSonics Corporation, a
Maryland corporation (the “Company”), and Xxxxxxx Xxxxxxxx (“Employee”).
Employee and Company are sometimes referred to individually as a “Party” and
collectively as the “Parties.”
In
consideration of the mutual covenants, promises and agreements herein contained,
the Company and Employee hereby covenant, promise and agree to and with each
other as follows:
1. Employment.
The
Company shall employ Employee and Employee shall perform services for and
on
behalf of the Company upon the terms and conditions set forth in this Agreement.
2. Positions
and Duties of Employment.
Employee
shall be required to devote his full energy, skill and best efforts as required
to the furtherance of his managerial duties with the Company as the Company's
Chief Financial Officer. While serving in such capacity, Employee shall have
the
responsibilities, duties, obligations, rights, benefits and requisite authority
as is customary for his position and as may be determined by the Board of
Directors (the “Board”) of the Company.
Employee
understands that his employment as Chief Financial Officer of the Company
involves a high degree of trust and confidence, that he is employed for the
purpose of furthering the Company's reputation and improving the Company's
operations and profitability, and that in executing this Agreement he undertakes
the obligations set forth herein to accomplish such objectives. Employee
agrees
that he shall serve the Company fully, diligently, competently, and to the
best
of his ability. Employee certifies that he fully understands his right to
discuss this Agreement with his attorney, that he has availed himself of
this
right to the extent that he desires, that he has carefully read and fully
understands this entire Agreement, and that he is voluntarily entering into
this
Agreement.
3. Duties.
Employee
shall perform the following services for the Company:
3.1 Employee
shall serve as Chief Financial Officer of the Company, or in such other position
as determined by the Board, and in that capacity shall work with the Company
to
pursue the Company's plans as directed by the Board.
3.2 Employee
shall perform duties with the functions of a Chief Financial Officer, subject
to
the direction of the Board of Directors (the “Board”) of the Company.
3.3 During
the term of this Agreement, Employee shall devote substantially all of
Employee's business time to the performance of Employee's duties under this
Agreement. Without limiting the foregoing, Employee shall perform services
on
behalf of the Company for at least 40 hours per week, and Employee shall be
available at the request of the Company at other times, including weekends
and
holidays, to meet the needs and requests of the Company's customers.
3.4 During
the term of this Agreement, Employee will not engage in any other activities
or
undertake any other commitments that conflict with or take priority over
Employee's responsibilities and obligations to the Company and the Company's
customers, including without limitation those responsibilities and obligations
incurred pursuant to this Agreement.
4. Term.
Unless
terminated earlier as provided for in this Agreement, the term of this Agreement
shall be for four years, commencing on the Effective Date and ending on April
8,
2012 (the “Term”). If the employment relationship is terminated by either Party,
Employee agrees to cooperate with the Company and with the Company's new
management with respect to the transition of the new management in the
operations previously performed by Employee. Upon Employee's termination,
Employee agrees to return to the Company all Company documents (and all copies
thereof), any other Company property in Employee's possession or control,
and
any materials of any kind that contain or embody any proprietary or confidential
material of the Company.
5. Compensation. Employee
shall receive the following as compensation:
(a) A
salary
at an annual rate of $175,000, subject to periodic review by the Board or
the
Compensation Committee of the Board, payable in accordance with the Company's
customary payroll practices.
(b) At
the
discretion of the Board or the Compensation Committee of the Board, a
performance-based bonus.
(c) Employer
shall include Employee, if otherwise eligible, in any profit sharing plan,
executive stock option plan, pension plan, retirement plan, medical and/or
hospitalization plan, and/or any and all other benefit plans, except for
disability and life insurance, which may be placed in effect by Employer
for the
benefit of Employer's executives during the Term. Except for the fact that
Employer at all times shall provide Employee with all or at least a portion
of
Employee's medical and/or hospitalization insurance, which shall not be less
than that afforded to Employer's other executives, nothing in this Agreement
shall limit (i) Employer's ability to exercise the discretion provided to
it under any such benefit plan, or (ii) Employer's discretion to adopt, not
adopt, amend or terminate any such benefit plan at any time.
2
(d) The
Company shall provide Employee with four weeks vacation leave per each year
of
Employee's employment (which vacation leave may carry over and accrue up
to an
aggregate of twelve weeks at any time), sick leave, medical and dental insurance
coverage, and any other benefits consistent with Company plans and policies
in
effect for executive Employees from time to time. The Company may modify
in its
sole and absolute discretion such benefits from time to time as it considers
necessary or appropriate, provided that any such modification shall not affect
or modify Employee's then existing rights with respect to any previously
accrued
vacation.
(e) Any
payments which the Company shall make to Employee pursuant to this Agreement
shall be reduced by standard withholding and other applicable payroll
deductions, including but not limited to federal, state or local income or
other
taxes, Social Security and Medicare Taxes, State Unemployment Insurance,
State
Disability Insurance, and the like.
(f) During
the term of his employment, Employee shall be reimbursed for reasonable expenses
that are authorized by the Company and that are incurred by Employee for
the
benefit of the Company in accordance with the standard reimbursement practices
of the Company; provided, however, that, with respect to reimbursements,
if any,
not otherwise excludible from the Employee’s gross income, to the extent
required to comply with the provisions of Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”), no reimbursement of expenses incurred by
the Employee during any taxable year shall be made after the last day of
the
following taxable year, and the right to reimbursement of such expenses shall
not be subject to liquidation or exchange for another benefit. Any direct
payment or reimbursement of expenses shall be made only upon presentation
of an
itemized accounting conforming in form and content to standards prescribed
by
the Internal Revenue Service relative to the substantiation of the deductibility
of business expenses.
6. Confidentiality.
Employee
hereby warrants, covenants and agrees that, without the prior express written
approval of Employer or unless required by law or court order, Employee shall
hold in the strictest confidence, and shall not disclose to any person, firm,
corporation or other entity, any and all of Employer's data, including but
not
limited to (a) information, drawings, sketches, plans or other documents
concerning Employer's business or development plans, customers or suppliers,
(b) Employer's development, design, construction or sales and marketing
methods or techniques, or (c) Employer's trade secrets and other “know-how”
or information not of a public nature, regardless of how such information
came
to the custody of Employee. For purposes of this Agreement, such information
shall include, but not be limited to, information, including a formula, pattern,
compilation, program, device, method, technique or process, that
(i) derives independent economic value, present or potential, from not
being generally known to, and not being readily ascertainable by proper means
by, other persons who can obtain economic value from its disclosure or use,
and
(ii) is the subject of efforts that are reasonable under the circumstances
to maintain its secrecy. The warranty, covenant and agreement set forth in
this
paragraph shall not expire, shall survive this Agreement, and shall be binding
upon Employee without regard to the passage of time or other events.
3
7. Non-Compete.
Employee
acknowledges and recognizes the highly competitive nature of the Company's
business and that Employee's duties hereunder justify restricting Employee's
further employment following any termination of employment. The Employee
agrees
that so long as the Employee is employed by the Company, and (i) for a
period of two years following the termination of this Agreement, Employee,
except when acting at the request of the Company on behalf of or for the
benefit
of the Company, will not induce customers, agents or other sources of
distribution of the Company's business under contract or doing business with
the
Company to terminate, reduce, alter or divert business with or from the Company,
and (ii) for a period of one year following the termination of this
Agreement, Employee shall not, directly or indirectly, either as a principal,
agent, employee, employer, consultant, partner, member or manager of a limited
liability company, shareholder of a company that does not have securities
registered under the Securities Exchange Act of 1934 (the “1934 Act”), or
shareholder in excess of one percent of a company that has securities registered
under the 1934 Act, corporate officer or director, or in any other individual
or
representative capacity, engage or otherwise participate in any manner or
fashion in any business that is in competition in any manner whatsoever with
the
business activities of Employer, in or about any market in which Employer
has,
or has publicly announced a plan for doing business. Employee further covenants
and agrees that the restrictive covenant set forth in this paragraph is
reasonable as to duration, terms, and geographical area and that the same
protects the legitimate interests of Employer, imposes no undue hardship
on
Employee, and is not injurious to the public. The covenant set forth under
(ii) above shall not apply if Employee's employment is terminated within
twelve months of a Change in Control as defined in of this Agreement. Ownership
by Employee, for investment purposes only, of less than one percent of any
class
of securities of a corporation if said securities are listed on a national
securities exchange or registered under the 1934 Act shall not constitute
a
breach of the covenant set forth under (ii) above. It is the desire and
intent of the Parties that the provisions of this paragraph be enforced to
the
fullest extent permissible under the laws and public policies applied in
each
jurisdiction in which enforcement is sought. Accordingly, if any particular
portion of paragraph shall be adjudicated to be invalid or unenforceable,
this
paragraph shall be deemed amended to apply in the broadest allowable manner
and
to delete therefrom the portion adjudicated to be invalid or unenforceable,
such
amendment and deletion to apply only with respect to the operation of paragraph
in the particular jurisdiction in which that adjudication is made.
4
8. Termination.
(a) If
Employee's employment is terminated by the Company without Cause (as defined
below), or if Employee terminates his employment for Reasonable Basis (as
defined below), then the Company shall, in exchange for Employee's execution
within 45 days of the termination date of a general release and waiver of
claims
against the Company as of the termination date in a form reasonably acceptable
to the Company, continue to pay as severance Employee's salary for
18 months or one-half the remaining term of the Agreement, whichever is
greater. Such payments shall be made in accordance with the Company's customary
payroll practices and shall be subject to applicable withholding and payroll
deductions. Each such payment shall be treated as a separate payment for
purposes of Section 409A of the Code. In the event of any such termination
set
forth in this section 8(a), Employee will not be entitled to any additional
compensation or benefits beyond what is provided in the first sentence of
this
section 8(a).
(i) For
purposes of this Agreement, “Cause” shall mean that the Board, acting in good
faith based upon the information then known to the Company, determines that
Employee has engaged in or committed any of the following: willful misconduct,
gross negligence, theft, fraud, or other illegal conduct; refusal or
unwillingness to perform Employee's duties; performance by Employee of
Employee's duties determined by the Board to be inadequate in a material
respect; breach of any applicable non-competition, confidentiality or other
proprietary information or inventions agreement between Employee and the
Company; inappropriate conflict of interest; insubordination; failure to
follow
the directions of the Board or any committee thereof; or any other material
breach of this Agreement. Indictment or conviction of any felony, or any
entry
of a plea of nolo contendre, under the laws of the United States or any State
shall also be considered “Cause” hereunder. “Cause” shall be specified in a
notice of termination to be delivered by the Company no later than the date
as
of which termination is effective.
(ii) For
purposes of this Agreement, “Reasonable Basis” shall mean (A) a material
breach of this Agreement by the Company, provided that Employee shall have
first
given written notice of such default to the Company and if within thirty
days
after receipt of such notice, the Company has not cured such default; or
(B) termination of Employee's employment by the Company without Cause
during the term hereof; or (C) reduce Employee's job from Chief Financial
Officer to a lesser position and employ another individual as, or to perform
the
functions of, Chief Financial Officer; or (D) a reduction in Employee's
salary, except to the extent that a majority of the other executive officers
of
the Company incur reductions of salary that average no less than the percentage
reduction incurred by Employee; or (E) termination of the Employee's
employment by the Employee within 12 months after a “Change Of Control,”
with Change Of Control being defined as follows:
5
“Change
in Control” shall mean any of the following:
(1) any
consolidation or merger of Employer in which Employer is not the continuing
or
surviving corporation, other than a merger of Employer in which the holders
of
Employer common stock immediately prior to the merger own a majority of the
voting common stock of the surviving corporation immediately after the merger;
(2) any
sale,
lease, exchange or other transfer(in one transaction or a series of related
transactions)of all or substantially all the assets of Employer;
(3) any
approval by the stockholders of Employer of any plan or proposal for the
liquidation or dissolution of Employer;
(4) the
acquisition by any person or entity, or any group of persons and/or entities
of
a majority of the stock entitled to elect a majority of the directors of
the
Company; or
(5) subject
to applicable law, in a Chapter 11 bankruptcy proceeding, the appointment
of a
trustee or the conversion of a case involving Employer to a case under a
Chapter
7 bankruptcy proceeding.
(b) In
the
event that Employee's employment with the Company is terminated for Cause,
by
reason of Employee's death or disability, or due to Employee's resignation
or
voluntary termination (other than for Reasonable Basis), then all compensation
and benefits will cease as of the effective date of such termination, and
Employee shall receive no severance benefits, or any other compensation;
provided that Employee shall be entitled to receive all compensation earned
and
all benefits and reimbursements due through the effective date of termination.
(c) Employee
agrees that the payments contemplated by this Agreement shall constitute
the
exclusive and sole remedy for any termination of employment, and Employee
covenants not to assert or pursue any other remedies, at law or in equity,
with
respect to any termination of employment.
(d) Any
party
terminating this Agreement shall give prompt written notice (“Notice of
Termination”) to the other party hereto advising such other party of the
termination of this Agreement stating in reasonable detail the basis for
such
termination. The Notice of Termination shall indicate whether termination
is
being made for Cause (if Employer has terminated the Agreement) or for
Reasonable Basis (if the Employee has terminated the Agreement).
6
(e) Notwithstanding
anything herein to the contrary, this Agreement is intended to be interpreted
and operated to the extent possible so that the payments set forth herein
either
shall be exempt from the requirements of Section 409A of the Code or shall
comply with the requirements of such provision; provided however that in
no
event shall the Company be liable to the Employee for or with respect to
any
taxes, penalties or interest which may be imposed upon the Employee pursuant
to
Section 409A. To the extent that any amount payable pursuant to this
Agreement constitutes a “deferral of compensation” subject to Section 409A (a
“409A Payment”), then, if on the date of the Employee’s “separation from
service,” as such term is defined in Treas. Reg. Section 1.409A-1(h)(1), from
the Company (his “Separation from Service”), the Employee is a “specified
employee,” as such term is defined in Treas. Reg. Section 1.409-1(i), as
determined from time to time by the Company, then such 409A Payment shall
not be
made to the Employee earlier than the earlier of (i) six (6) months after
the
Employee’s Separation from Service; or (ii) the date of his
death. The 409A Payments under this Agreement that would otherwise be
made during such period shall be aggregated and paid in one lump sum, without
interest, on the first business day following the end of the six (6) month
period or following the date of the Employee’s death, whichever is earlier, and
the balance of the 409A Payments, if any, shall be paid in accordance with
the
applicable payment schedule provided in this Section 8. The Employee
hereby acknowledges that he has been advised to seek and has sought the advice
of a tax advisor with respect to the tax consequences to the Employee of
all
payments pursuant to this Agreement, including any adverse tax consequences
or
penalty taxes under Code Section 409A and applicable State tax
law. Employee hereby agrees to bear the entire risk of any such
adverse federal and State tax consequences and penalty taxes in the event
any
payment pursuant to this Agreement is deemed to be subject to Code Section
409A,
and that no representations have been made to the Employee relating to the
tax
treatment of any payment pursuant to this Agreement under Code Section 409A
and
the corresponding provisions of any applicable State income tax laws. If
payments under this Section 8 constitute 409A Payments, references within
this
Section 8 to termination of employment shall mean Employee's "separation
from
service" as defined in Treas. Reg. Section 1.409A-1(h), including the default
presumptions thereunder.
9. Remedies.
If there
is a breach or threatened breach of any provision of Section 6 or
Section 7 of this Agreement, the Company will suffer irreparable harm and
shall be entitled to an injunction restraining Employee from such breach.
Nothing herein shall be construed as prohibiting the Company from pursuing
any
other remedies for such breach or threatened breach.
10. Severability.
It is
the clear intention of the Parties to this Agreement that no term, provision
or
clause of this Agreement shall be deemed to be invalid, illegal or unenforceable
in any respect, unless such term, provision or clause cannot be otherwise
construed, interpreted, or modified to give effect to the intent of the Parties
and to be valid, legal or enforceable. The Parties specifically charge the
trier
of fact to give effect to the intent of the Parties, even if in doing so,
information of a specific provision of this Agreement is required consistent
with the foregoing stated intent. In the event that such a term, provision,
or
clause cannot be so construed, interpreted or modified, the validity, legality
and enforceability of the remaining provisions contained herein and other
application(s) thereof shall not in any way be affected or impaired thereby
and
shall remain in full force and effect.
7
11. Waiver
of Breach.
The
waiver by the Company or Employee of the breach of any provision of this
Agreement by the other Party shall not operate or be construed as a waiver
of
any subsequent breach by that Party.
12. Entire
Agreement.
This
document contains the entire agreement between the Parties and supersedes
all
prior oral or written agreements, if any, concerning the subject matter hereof
or otherwise concerning Employee's employment by Employer (except for options
to
purchase shares of Employer's restricted stock previously granted to Employee).
This Agreement may not be changed orally, but only by agreement in writing
signed by the Parties.
13. Governing
Law.
This
Agreement, its validity, interpretation and enforcement, shall be governed
by
the laws of the State of Maryland, excluding conflict of laws principles.
Employee hereby expressly consents to personal jurisdiction in the state
and
federal courts located in San Diego, California for any lawsuit filed there
against him by the Company arising from or relating to this Agreement.
14. Notices.
Any
notice pursuant to this Agreement shall be validly given or served if that
notice is made in writing and delivered personally or sent by certified mail
or
registered, return receipt requested, postage prepaid, to the following
addresses:
|
If
to Company:
|
|
InfoSonics
Corporation
0000
Xxxxxxxxx Xxxxx,
Xxxxx 000, Xxx Xxxxx, XX 00000 Attention:
Chief
Executive Officer |
|
If
to Employee:
|
|
To
the address for
Employee set forth below his signature. |
All
notices so given shall be deemed effective upon personal delivery or, if
sent by
certified or registered mail, five business days after date of mailing. Either
party, by notice so given, may change the address to which his or its future
notices shall be sent.
15. Assignment
and Binding Effect.
This
Agreement shall be binding upon Employee and the Company and shall benefit
the
Company and its successors and assigns. This Agreement shall not be assignable
by Employee.
8
16. Headings.
The
headings in this Agreement are for convenience only; they form no part of
this
Agreement and shall not affect its interpretation.
17. Construction.
Employee
represents he has (a) read and completely understands this Agreement and
(b) had an opportunity to consult with such legal and other advisers as he
has desired in connection with this Agreement. This Agreement shall not be
construed against any one of the Parties.
18. Insurance.
The
Company is to maintain directors' and officers' insurance in an amount
determined reasonably by the Board of Directors of the Company.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed the
day
and year first above written.
|
EMPLOYEE
|
INFOSONICS
CORPORATION
|
||
|
Xxxxxxx
Xxxxxxxx, Individually
|
Xxxxxx
Ram, Chief Executive Officer
|
||
|
Address:
|
|||
|
QuickLinks
|
|||
9
