EXHIBIT 10.3
CELEBRATE EXPRESS, INC.
SEVERANCE AND CHANGE IN CONTROL AGREEMENT
This Severance Agreement (the "Agreement") is dated as of September 18,
2006, by and between Xxxxx Xxxxx ("Employee") and Celebrate Express, Inc., a
Washington corporation (the "Company").
1. AT-WILL EMPLOYMENT. The Company and Employee acknowledge that
Employee's employment is and shall continue to be at-will, as defined under
applicable law, and that Employee's employment with the Company may be
terminated by either party at any time for any or no reason upon thirty (30)
days advance notice (or the Company may pay Employee salary for such thirty (30)
days in lieu of notice). If Employee's employment terminates for any reason,
Employee shall not be entitled to any payments, benefits, damages, award or
compensation other than as provided in this Agreement.
The rights, benefits and obligations set forth herein supercede and
replace any and all agreements between the Company and Employee regarding
severance benefits and any other benefits or payments to Employee from the
Company in connection with the termination of employment.
2. NONCOMPETITION.
(a) During the term of employment by the Company, except on behalf
of the Company, Employee will not, without the prior written consent of the
Board, directly or indirectly, whether as an officer, director, shareholder,
partner, proprietor, associate, representative, consultant, or in any capacity
whatsoever engage in, become financially interested in, be employed by or have
any business connection with any other person, corporation, firm, partnership or
other entity whatsoever that competes with the products or services being
developed or exploited by the Company during Employee's employment; provided,
however, that anything above to the contrary notwithstanding, Employee may own,
as a passive investor, securities of any entity, so long as Employee's direct
holdings in any one such corporation do not in the aggregate constitute more
than one percent (1%) of the voting stock of such corporation.
(b) If Employee's employment with the Company is terminated by
Employee for any reason, for one year following the termination of employment
Employee will not, without the prior written consent of the Board, directly or
indirectly, whether as an officer, director, shareholder, partner, proprietor,
associate, representative, consultant, or in any capacity whatsoever engage in,
become financially interested in, be employed by or have any business connection
with any other person, corporation, firm, partnership or other entity whatsoever
that competes with the Business of the Company; provided, however, that anything
above to the contrary notwithstanding, (i) Employee may own, as a passive
investor, securities of any entity, so long as Employee's direct holdings in any
one such corporation do not in the aggregate constitute more than one percent
(1%) of the voting stock of such corporation, (ii) Employee may work for a
division, entity or subgroup of any of such companies that engage in the
Business so long as such particular division, entity or subgroup does not engage
in the Business,
or (iii) Employee may work for a company that engages in the Business if the
Company (or its subsidiaries) ceases to engage in the Business. For purposes of
this Section 2(b), "Business" means the designing, manufacturing or selling of
party products, costumes or any other product category (or business line)
representing greater than ten percent (10%) of the Company's revenues.
3. SEVERANCE BENEFITS. Employee shall be entitled to receive severance
benefits upon termination of employment only as set forth in this Section 3:
(a) VOLUNTARY TERMINATION. If Employee terminates his employment at
any time, without Good Reason (as defined below), Employee will not be entitled
to severance pay, pay in lieu of notice or any other such compensation other
than payment of accrued salary and vacation and such other benefits as expressly
required in such event by applicable law or the terms of applicable benefit
plans. The continued vesting of any stock options held by Employee will cease on
the termination date, and Employee's right to exercise vested option shares will
be governed by the terms of the Company's applicable equity incentive plans and
the corresponding stock option agreements.
(b) TERMINATION WITHOUT CAUSE. If the Company terminates Employee's
employment without Cause or Employee resigns for Good Reason (defined below),
Employee will receive his regular salary, benefits and other compensation
through the termination date, including any bonus earned for the prior fiscal
year that is unpaid as of the termination date. In addition, Employee will
receive an additional six (6) months of his base salary in effect as of such
termination date and any performance bonus (or portion thereof) payable to
Employee for the current fiscal year for objectives or business results actually
achieved as of the termination date, if any, as determined by the Compensation
Committee. This base salary will be paid according to the Company's payroll
procedures during the six (6) month period following the termination date.
Employee's receipt of any severance benefits under this Section 3(b) is
contingent upon Employee signing and not revoking the Release Agreement
(attached as Exhibit A) and Employee signing and not revoking a "Separation
Agreement" in a form reasonably acceptable to Employee and the Company. The
Separation Agreement will include (i) a mutual obligation to maintain the
Separation Agreement in confidence, subject to disclosure by the Company as
reasonably necessary to implement the terms of the Separation Agreement,
disclosure by Employee to Employee's spouse, legal counsel and accountant; and
disclosure by either party in response to a subpoena, order or as otherwise
required by law; (ii) a mutual obligation for non-disparagement; (iii) an
obligation for Employee's future cooperation with Company in response to
investigations, administrative claims, or judicial proceedings (provided that
the Company will pay Employee reasonable expenses and will pay Employee a
reasonable hourly rate for Employee's time after the time period encompassed by
Employee's salary continuation (maximum of two years and minimum of one year)
has expired); (iv) an obligation to promptly notify the Company in the event
Employee is requested and/or subpoenaed to testify in any administrative and/or
judicial proceeding concerning the Company and/or Employee's employment with the
Company; (v) an obligation to reasonably cooperate with the Company and its
legal counsel with respect to testimony in civil matters, and testimony in
administrative and/or criminal matters in which Employee's penal interests are
not potentially affected; (vi) an obligation not to solicit or encourage any
current and/or former employee of the Company to
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become adverse to and/or commence legal proceedings against the Company; and
(vii) such other matters as the Company's counsel and Employee's counsel
reasonably agree are reasonable to be incorporated into an employee separation
agreement with executive employees.
(c) TERMINATION FOR CAUSE, DEATH OR DISABILITY. If the Company
terminates Employee's employment at any time for Cause (as defined below) or if
Employee's employment is terminated by reason of Employee's death or Disability
(as defined below) Employee's salary will cease on the date of termination and
Employee will not be entitled to severance pay, pay in lieu of notice or any
other such compensation other than payment of accrued salary and vacation and
such other benefits as expressly required in such event by applicable law or the
terms of applicable benefit plans.
(d) TERMINATION BY REASON OF DEATH. In the event that Employee's
employment with the Company terminates as a result of Employee's death,
Employee's estate or beneficiaries will receive all salary and unpaid vacation
accrued as of the date of Employee's death and any other benefits payable under
the Company's then existing benefit plans and policies in accordance with such
plans and policies in effect on the date of death and in accordance with
applicable law.
(e) TERMINATION RESULTING FROM A CHANGE IN CONTROL.
(i) If, in connection with or within two (2) months following
a Change in Control, (A) Employee's employment is terminated without Cause or
(B) Employee resigns for Good Reason ((A) and (B) collectively being referred to
as an "Change in Control Termination"), in lieu of the benefits set forth in
Section 3(b) above, Employee will receive his regular salary, benefits and other
compensation through the termination date, including any bonus earned for the
prior fiscal year that is unpaid as of the termination date. In addition,
Employee will receive an additional twelve (12) months of his base salary in
effect as of such termination date and any performance bonus (or portion
thereof) payable to Employee for the current fiscal year for objectives or
business results actually achieved as of the termination date, if any, as
determined by the Compensation Committee.
(ii) If a Change in Control Termination occurs after two (2)
months following a Change in Control, Employee shall receive severance as
described in Section 3(e)(i) less one (1) month base salary for each two (2)
months of continued employment. By way of example, if a Change in Control
Termination occurs in the fourth (4th) month after a Change in Control, Employee
will receive an additional eleven (11) months of his base salary in effect as of
such termination date and any performance bonus (or portion thereof) payable to
Employee for the current fiscal year for objectives or business results actually
achieved as of the termination date, if any, as determined by the Compensation
Committee. If a Change in Control Termination occurs any time after twelve (12)
months following a Change in Control, Employee shall receive severance payments
as described in Section 3(b).
The base salary will be paid according to the Company's
payroll procedures during the applicable months following the termination date.
Employee's receipt of any severance benefits under this Section 3(e) is
contingent upon Employee signing and not
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revoking the Release Agreement (attached as Exhibit A) and Employee signing and
not revoking a "Separation Agreement" as described in Section 3(b).
4. DEFINITIONS.
(a) CAUSE. For purposes of this agreement, "Cause" means the
occurrence of any one or more of the following: (i) Employee's conviction of, or
plea of no contest with respect to, any felony; (ii) Employee's participation in
a fraud or act of dishonesty that results, or is likely to result, in material
harm to the Company; (iii) Employee's violation of a fiduciary duty owed to the
Company; (iv) Employee's material violation of any contract or agreement between
Employee and the Company, including but not limited to this agreement or
Employee's Proprietary Information and Inventions Agreement; or (v) Employee's
willful and deliberate non-performance of Employee's job duties (other than by
reason of Employee's physical or mental illness, incapacity or disability) or
failure to comply with the direct instructions of the Board (unless such
instructions are illegal), or Employee's commission of an act involving willful
misconduct or gross negligence that results, or is reasonably likely to result,
in material harm to the Company, or any action taken by Employee without
adequate authority from the Board; provided that, with respect to Section
4(a)(iv) or (v), the Board has given Employee written notice specifying the
nature of the violation, failure or action and a reasonable opportunity of not
less than fifteen (15) days to cure the condition giving rise to the alleged
violation, failure or action
(b) GOOD REASON. For purposes of this Agreement, "Good Reason" will
mean any one of the following events that occurs without Employee's consent: (i)
the material reduction in Employee's responsibilities, authorities or functions
as an employee of the Company; (ii) a reduction in Employee's level of
compensation (including base salary, fringe benefits and target bonuses under
any corporate-performance based bonus or incentive programs, other than in
connection with a commensurate across-the-board reduction); (iii) a relocation
of Employee's place of employment resulting in an increase of Employee's commute
to work by more than fifty (50) miles; (iv) the Company files any petition or
action for relief under any bankruptcy, reorganization, insolvency or moratorium
law or any other law for the relief of, or relating to, debtors, now or
hereafter in effect, or makes any assignment for the benefit of creditors or
takes any corporate action in furtherance of any of the foregoing; or (v) the
Company's material breach of this Agreement. Notwithstanding the foregoing,
Employee must provide the Company with thirty (30) days' advance written notice
of Company's conduct giving rise to Good Reason (the "Cure Period") and during
the Cure Period, the Company may attempt to rescind or correct the matter giving
rise to Good Reason. If the Company does not rescind or correct the conduct
giving rise to Good Reason to Employee's reasonable satisfaction by the
expiration of the Cure Period, Employee's employment will then terminate with
Good Reason.
(c) CHANGE OF CONTROL. For purposes of this Agreement, "Change of
Control" shall mean (a) any consolidation or merger of the Company with or into
any other corporation or other entity or person, or any corporate reorganization
in which the shareholders of the Company immediately prior to such
consolidation, merger or reorganization, own less than fifty percent (50%) of
the voting power of the surviving entity immediately after such consolidation,
merger or reorganization, (b) any transaction or series of related transactions
to
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which the Company is a party in which in excess of fifty percent (50%) of the
Company's voting power is transferred, excluding (i) any consolidation or merger
effected exclusively to change the domicile of the Company or (ii) any
transaction or series of transactions principally for bona fide equity financing
purposes, or (c) a sale of all or substantially all of the assets of the
Company.
(d) DISABILITY. For purposes of this Agreement, "Disability" shall
mean the Employee's inability, in the opinion of a qualified physician
acceptable to the Company, because of illness or physical or mental incapacity
or disability to perform the essential functions of Employee's position, whether
with or without reasonable accommodations, for a continuous period of more than
90 days.
5. SUCCESSORS. Any successor to the Company (whether direct or indirect
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agrees expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
6. TAX MATTERS. The Employee is responsible for payment of all taxes
(including any interest and penalties) legally imposed upon him in connection
with benefits provided under this Agreement and the Company shall have no
liability to the Employee or any other party with respect to any such tax or
amount. All benefits and payments provided hereunder are subject to applicable
tax and other withholdings required by law, and, to the extent such payments are
to be made in cash, they will be made net of such withholding amounts.
Notwithstanding anything to the contrary in this Agreement, if as of the
relevant date(s), the Company in good faith determines that Employee is a
"specified employee" and that the benefits hereunder constitute "deferred
compensation" (in each case as such terms are defined under Section 409A of the
Internal Revenue Code of 1986, as amended (the "Code") or other later-issued IRS
or Treasury guidance), no severance amount shall be payable to Employee pursuant
hereto prior to the earlier of (i) Employee's death following termination of
employment, or (ii) the date that is six months following the date of Employee's
"separation from service" with the Company (within the meaning of Code Section
409A); provided however that if final Section 409A regulations (or other
later-issued IRS or Treasury guidance) provide an exemption for severance
amounts to be paid hereunder from being subject to Section 409A or a means for
complying with Section 409A that does not involve a delay of payment as provided
above, then this sentence shall be automatically reformed to provide for payment
in the manner otherwise specified in this Agreement or in a manner that complies
with such alternative method of compliance, as applicable. In addition, to the
extent that (and notwithstanding the execution of the preceding sentences in
this Section 6, if applicable) this Agreement and the benefits it provides are
or become subject to Section 409A(a)(1), Employee and the Company agree to
cooperate to make such amendments to the terms of this Agreement as may be
necessary to avoid the imposition of penalties and additional taxes under
Section 409A of the Code; provided however, that Employee and the Company agree
that any such amendment shall not (i) materially increase the
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cost to, or liability of, the Company with respect to any payments under this
Agreement, or (ii) materially decrease the value of benefits provided to
Employee under this Agreement.
7. MISCELLANEOUS PROVISIONS.
(a) NO DUTY TO MITIGATE. Employee shall not be required to mitigate
the amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor, except as otherwise provided in this
Agreement, shall any such payment be reduced by any earnings that Employee may
receive from any other source.
(b) AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended or waived only with the written consent of the parties.
(c) SOLE AGREEMENT. This Agreement, including all exhibits hereto,
constitute the sole agreement of the parties and supersede all oral negotiations
and prior writings with respect to the subject matter hereof.
(d) NOTICES. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or 48 hours after being deposited in the U.S. mail as certified
or registered mail with postage prepaid, if such notice is addressed to the
party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(e) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Washington, without giving effect to the principles of conflict of laws.
(f) SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(g) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(h) ARBITRATION. Any dispute or claim arising out of or in
connection with this Agreement will be finally settled by binding arbitration in
Seattle, Washington in accordance with the rules of the American Arbitration
Association by one arbitrator appointed in accordance with said rules. The
arbitrator shall apply Washington law, without reference to rules of conflicts
of law or rules of statutory arbitration, to the resolution of any dispute.
Judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Notwithstanding the foregoing, the parties may
apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this
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paragraph, without breach of this arbitration provision. This Section 6(h) shall
not apply to the Confidentiality Agreement.
(i) ADVICE OF COUNSEL. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK
THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE
TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED
AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
[Signature page follows]
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The parties have executed this Agreement the date first written above.
CELEBRATE EXPRESS, INC.
/s/ Xxxxx Xxxxx
----------------------------------
Xxxxx Xxxxx, President and CEO
Address: 00000 000xx Xxxxxx XX
Xxxxxxxx, XX 00000
XXXXX XXXXX
Signature: /s/ Xxxxx Xxxxx
Address:
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EXHIBIT 10.3
EXHIBIT A
CONFIDENTIAL RESIGNATION AGREEMENT
AND GENERAL RELEASE OF CLAIMS
1. _____________ ("Employee") is currently employed by Celebrate Express,
Inc. (the "Company") as its _________________________________. Employee and the
Company are parties to a Severance Agreement (the "Severance Agreement") dated
August __, 2006, which specifies certain separation benefits to be provided to
Employee by the Company in the event that Employee's employment with the Company
terminates under certain circumstances. It is now the desire of the Company and
Employee to confirm the termination of their employment relationship, to confirm
Employee's rights under the Severance Agreement and to release any claims that
Employee has or may have against the Company as required by Section 3 of the
Severance Agreement. Accordingly, Employee and the Company agree as set forth
below.
2. Employee hereby resigns from his employment with the Company, and from
any positions which he holds as an officer or director of the Company and from
all positions which he holds as a director or officer of any Company subsidiary,
effective as of ___________ (the "Resignation Date").
3. The Company and Employee agree that Employee's resignation pursuant to
this Agreement constitutes an Involuntary Termination for purposes of the
Severance Agreement, and thus Employee shall be entitled to receive the
severance benefits set forth in Section 3 of the Severance Agreement when this
Agreement becomes effective. The parties further agree that Section 5 of the
Severance Agreement shall remain in full force and effect notwithstanding their
execution of this Agreement.
Employee acknowledges and agrees that he has been paid all wages and
accrued, unused paid time off benefits that Employee earned during his
employment with the Company through the Resignation Date. Employee understands
and acknowledges that he shall not be entitled to any payments or benefits from
the Company other than those expressly described in this paragraph 3.
4. Employee and his/her successors release the Company and its
shareholders, investors, directors, officers, employees, agents, attorneys,
legal successors and assigns of and from any and all claims, actions and causes
of action, whether now known or unknown, which Employee now has, or at any other
time had, or shall or may have against the released parties based upon or
arising out of any matter, cause, fact, thing, act or omission whatsoever
occurring or existing at any time up to and including the date on which this
Agreement becomes effective, including, but not limited to, any claims of breach
of contract, wrongful termination, fraud, defamation, infliction of emotional
distress or national origin, race, age, sex, sexual orientation, disability or
other discrimination or harassment under the Civil Rights Act of 1964, the Age
Discrimination In Employment Act of 1967, the Americans With Disabilities Act,
the Fair Employment and Housing Act, Chapter 49.60 of the Revised Code of
Washington or any other applicable law. Provided, that the foregoing release of
claims shall not impair Employee's right to be indemnified to the fullest extent
allowed by contract, law or statute against any claims that
are based upon or arise out of any acts or omissions by Employee in the course
and scope of his employment with the Company. Provided further, that the
foregoing release of claims shall not apply to any claims made to enforce any
right arising out of this Agreement, Employee's existing indemnification
agreement or the provisions of the Severance Agreement referred to in paragraph
3 above.
5. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior negotiations
and agreements, whether written or oral, with the exception of those sections of
the Severance Agreement and the Confidentiality Agreement specified above, any
agreements described in paragraph 5, and any agreements concerning indemnity of
Employee by the Company. This Agreement may not be modified or amended except by
a document signed by an authorized officer of the Company and Employee.
EMPLOYEE UNDERSTANDS THAT HE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO SIGNING
THIS AGREEMENT AND THAT HE IS GIVING UP ANY LEGAL CLAIMS HE HAS AGAINST THE
PARTIES RELEASED ABOVE BY SIGNING THIS AGREEMENT. EMPLOYEE FURTHER UNDERSTANDS
THAT HE MAY HAVE UP TO 21 DAYS TO CONSIDER THIS AGREEMENT, THAT HE MAY REVOKE IT
AT ANY TIME DURING THE 7 DAYS AFTER HE SIGNS IT, AND THAT IT SHALL NOT BECOME
EFFECTIVE UNTIL THAT 7-DAY PERIOD HAS PASSED. EMPLOYEE ACKNOWLEDGES THAT HE IS
SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE
BENEFITS DESCRIBED IN PARAGRAPH 3.
Dated: _____________, ____ ____________________________________
CELEBRATE EXPRESS, INC.
Dated: _____________, ____ By:_________________________________
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