EXHIBIT 99.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT, effective as of December 10. 2005, is made by and between
Salton, Inc., a Delaware corporation (hereinafter the "Company"), and Xxxxxxx
Xxxx (the "Executive"), a resident of the State of Missouri; and
WHEREAS, the Company desires to obtain the services of the Executive and
Executive is willing to render such services, in accordance with the terms
herein set forth; and
NOW, THEREFORE, in consideration of the mutual undertakings of the parties
hereto, the Company and the Executive agree as follows:
Article I.
DEFINITIONS
1.1 "Accrued Annual Base Salary" means that portion of the Executive's
Annual Base Salary which is accrued but unpaid as of the Date of Termination.
1.2 "Affiliate" means any corporation or other entity which directly or
through intervening entities owns more than thirty five percent (35%) of the
combined power or value of all shares of stock of a corporation or more than
thirty five percent (35%) of the capital and profits interest of an
unincorporated entity, and any corporation or other entity so owned by an
Affiliate.
1.3 "Annual Base Salary" means that term as defined in Section 4.1.
1.4 "Beneficiary" means that term as defined in Section 9.4.
1.5 "Board" means that term as defined in Section 2.1.
1.6 "Cause" means (a) the Executive's committing any felony or other crime
involving dishonesty (b) willful or intentional material breach of this
Agreement including but not limited to intentionally or willfully wrongful
conduct in performing or refusing to perform the duties under this Agreement;
provided that Cause as defined in Clause (b) shall not constitute Cause unless
Executive is provided with written notice ("Notice to Cure") of such cause and
fails to cure it within a reasonable period (not less than 15 nor more than 30
days) after receipt of the Notice to Cure, except that Executive will not be
entitled to a Notice to Cure and opportunity to cure if the Executive knew that
the wrongful conduct would result in material harm to the Company; and provided
further that the Company shall not be required to provide the Notice to Cure in
cases of repeated acts or omissions (provided that notice with respect to such
act shall have been given at least once); and provided further that Cause as
defined in clause (b) shall not mean:
(i) bad judgment;
(ii) negligence;
(iii) any act or omission believed by the Executive in good faith to
have been in or not opposed to the interest of the Company (without intent
of the Executive to gain therefrom, directly or indirectly, a profit to
which the Executive was not legally entitled); or
(iv) any act or omission with respect to which notice of termination
of employment of the Executive is given more than twelve (12) months after
the earliest date on which any member of the Board who is not a party to
the act or omission, knew of such act or omission.
1.7 "Change of Control" shall be deemed to have occurred upon any of the
following events:
(a) any person (as such term is used in Rule 13d-5 of the Securities
Exchange Act of 1934 (the "1934 Act") or group (as such term is defined in
Section 13(d) of the 1934 Act), other than a Subsidiary or any employee
benefit plan (or any related trust) of the Company becomes the beneficial
owner of thirty-five percent (35%) or more of the Common Stock of the
Company or of securities of the Company that are entitled to vote generally
in the election of directors of the Company ("Voting Securities")
representing thirty-five percent (35%) or more of the combined voting power
of all Voting Securities of the Company;
(b) within a period of 24 months or less, the individuals who, as of
any date on or after December 1, 2005, constitute the Board (the "Incumbent
Directors") cease for any reason to constitute at least seventy five
percent (75%) of the Board unless at the end of such period, seventy five
percent (75%) of individuals then constituting the Board are persons who
are Incumbent Directors or were nominated upon the recommendation of
seventy five percent (75%) of the Incumbent Directors.
(c) approval by the stockholders of the Company of either of the
following:
(i) a merger, reorganization or consolidation ("Merger") with
respect to which the individuals and entities who were the respective
beneficial owners of Common Stock and Voting Securities of the Company
immediately before such Merger do not, after such Merger, beneficially
own, directly or indirectly, more than fifty percent (50%) of,
respectively, the common stock and the combined voting power of the
Voting Securities of the corporation resulting from such Merger in
substantially the same proportion as their ownership immediately
before such Merger, or
(ii) the sale or other disposition of all or substantially all of
the assets of the Company.
Notwithstanding the foregoing, there shall not be a Change in Control if, in
advance of such event, Executive agrees in writing that such event shall not
constitute a Change in Control.
1.8 "Common Stock" means common stock of the Company.
1.9 "Commencement Date" means that term as defined in Section 3.1.
1.10 "Company" has the meaning specified in the recitals to this Agreement.
1.11 "Compensation Committee" means the Company's compensation committee as
formed, elected and reelected by the Board.
1.12 "Contract Term" has the meaning specified in Section 3.1 of this
Agreement.
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1.13 "Date of Termination" means the date as of which the Executive's
employment with the Company is terminated by the Company or by the Executive for
any reason including, but not limited to, death or Disability.
1.14 "Disability" means a mental or physical condition which, in the
opinion of the Board, renders Executive unable or incompetent to carry out the
job responsibilities which such Executive held or the duties to which Executive
was assigned at the time the disability was incurred, which has existed for at
least three (3) months and which in the opinion of a physician mutually agreed
upon by the Company and Executive (provided that neither party shall
unreasonably withhold his agreement to the appointment of such physician) is
expected to be permanent or to last for an indefinite duration or a duration in
excess of six (6) months.
1.15 "Executive" has the meaning specified in the recitals to this
Agreement.
1.16 "Fiscal Year" means the 52-53 week period ending on the Saturday
closest to June 30.
1.17 "Good Reason" means the occurrence of any one of the following events
unless Executive specifically agrees in writing that such event shall not be
Good Reason:
(a) any material breach of the Agreement by the Company including, but
not limited to:
(i) the failure of the Company to comply with the provisions of
Articles IV, V or VI of the Agreement;
(ii) causing or requiring Executive to report to anyone other
than the Chief Executive Officer, the President and/or the Chief
Operating Officer and/or the Board of Directors.
(iii) assignment of duties materially inconsistent with his
position and duties described in this Agreement.
(b) the failure of the Company to assign this Agreement to a successor
to the Company or failure of a successor to the Company to explicitly
assume and agree to be bound by the Agreement,
(c) the Company's requiring the Executive to be based at any office or
location more than 50 miles from the Company's offices as of the date of
execution of this Agreement in Columbia, Missouri or in Lake Forest,
Illinois
(d) a Termination of Employment by Executive for any reason during the
period beginning on the date of a Change of Control and ending on the
one-year anniversary of the Change of Control; provided, however, that this
Subsection 1.25(d) shall not be treated as Good Reason for purposes of
Section 8.1 hereof.
Notwithstanding the foregoing, no act or omission by the Company shall
constitute Good Reason as defined above in subparagraph, 1.25 (a) or (b) hereof
unless the Executive gives the Company thirty (30) days prior written notice of
the act or omission which constitutes Good Reason and the Company fails to cure
such act or omission within the thirty (30) day period (provided that Executive
shall not be
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required to provide the foregoing notice in cases of repeated acts or omissions
(provided that notice with respect to such act shall have been given at least
once) or intentional acts or omissions by the Company); and such notice of
Termination of Employment for Good Reason is given within twelve (12) months
after Executive had actual knowledge of such act or omission.
1.18 "Incumbent Directors" means that term as defined in this Section 1..
1.19 "Merger" means that term as defined in this Section 1..
1.20 "1934 Act" means that term as defined in this Section 1.
1.21 Permitted Transferee" means the spouse of the Executive, a lineal
descendent of the Executive or a spouse of a lineal descendent of the Executive
or a trust, limited partnership or other entity principally benefiting all or a
portion of such individuals.
1.22 "Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
1.23 "Subsidiary" means, with respect to any Person, (a) any corporation or
other entity of which an aggregate of more than fifty percent (50%) of the
outstanding capital stock having ordinary voting power to elect a majority of
the board of directors of such corporation (irrespective of whether, at the
time, Stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned legally or beneficially by such Person
and/or one or more Subsidiaries of such Person, and (b) any partnership in which
such Person and/or one or more Subsidiaries of such Person shall have an
interest (whether in the form of voting or participation in profits or capital
contribution) of more than fifty percent (50%).
1.24 "Termination of Employment" occurs the first day on which an
individual is for any reason no longer employed by the Company.
1.25 "Termination of Employment Without Cause" means a termination of the
Executive's employment by the Company for any reason other than Cause.
Article II.
DUTIES
2.1 Duties. The Executive shall be the Chief Financial Officer of the
Company. Executive shall direct and supervise all accounting and financial
operations of the Company. Executive shall report to the President and Chief
Operating Officer of the Company and to the Chief Executive Officer of the
Company. During the Contract Term, and excluding any periods of vacation, sick
leave or disability to which the Executive is entitled, the Executive agrees to
devote the Executive's full attention and time to the business and affairs of
the Company and to use the Executive's best efforts to perform faithfully and
efficiently the duties and responsibilities of the Executive's positions as
described herein.
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2.2 Other Activities. During the Contract Term, it shall not be a violation
of this Agreement for the Executive to (a) serve on civic or charitable boards
or committees or (c) manage personal investments, so long as such activities do
not significantly interfere with the performance of the Executive's duties in
accordance with this Agreement.
Article III.
TERM OF AGREEMENT
Section 3.01 Term.
(a) Initial Term. The term (the "Contract Term") shall mean the
initial term of this Agreement plus any extensions thereto. Subject to the
extension and termination provisions hereinafter provided, the initial term
of this Agreement shall begin on December 10, 2005 (the "Commencement
Date") and end on December 31, 2006, or such later date to which the
Contract Term is extended under the following sentence. Commencing on
December 10, 2005, the Contract Term shall automatically be extended each
day by one day to create a new one-year term, until, at any time after July
1, 2006, the Company delivers written notice (an "Expiration Notice") to
Executive or Executive delivers an Expiration Notice to the Company, in
either case that the Agreement shall expire on a date specified in the
Expiration Notice (the "Expiration Date") that is not less than twelve (12)
months after the date the Expiration Notice is delivered to the Company or
Executive, as applicable, subject to subsections (a) and (b) below. Except
as provided in Article VII, the employment of Executive by the Company
shall not be terminated prior to the end of the Contract Term.
(b) Expiration Notice After a Change in Control. If an Expiration
Notice is given by the Company after a Change in Control, the Agreement
shall expire on the Expiration Date specified in the Expiration Notice,
which shall in no event be earlier than one (1) year after the Change in
Control.
Article IV.
COMPENSATION
4.1 Salary. Commencing with the Commencement Date hereof, the Company shall
pay to the Executive in accordance with the normal payroll practices of the
Company an annual salary at a rate of $225,000 per year (the "Annual Base
Salary").
4.2 Bonus. The Company may, but shall not be obligated to pay, to the
Executive, during the Contract Term an annual cash bonus in accordance with the
terms hereof for the Contract Term
Article V.
OTHER BENEFITS
5.1 Incentive, Savings and Retirement Plans. In addition to Annual Salary,
the Executive shall be entitled to participate during the Contract Term in all,
savings and retirement plans, practices, policies and programs applicable to
other peer executives of the Company (subject to the eligibility requirements of
such plans), and other perquisites which are available to other executives of
the
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Company or which hereafter are made available to other executive employees of
the Company by the Board.
5.2 Welfare Benefits. During the Contract Term, the Executive and/or the
Executive's family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices, policies
and programs provided by the Company (including, and without limitation,
medical, prescription, dental, disability, employee life, group life, dependent
life, accidental death and travel accident insurance plans and programs)
applicable to other executive employees of the Company.
5.3 Fringe Benefits. During the Contract Term, the Executive shall be
entitled to fringe benefits applicable to other peer executives of the Company.
5.4 Vacation. During the Contract Term, the Executive shall be entitled to
paid vacation time in accordance with the plans, practices, policies, and
programs applicable to other peer executives of the Company, but in no event
shall such vacation time be less than three (3) weeks per calendar year. Any
vacation not taken within three (3) months after the end of the calendar year
shall be canceled and shall not accumulate to subsequent years unless the
Compensation Committee for good business reasons determines otherwise.
5.5 Expenses. During the Contract Term, the Executive shall be entitled to
receive prompt reimbursement for all reasonable employment-related expenses
incurred by the Executive upon the Company's receipt of accounting in accordance
with practices, policies and procedures applicable to other executive employees
of the Company.
5.6 Office and Support Staff. During the Contract Term, the Executive shall
be entitled to an office and with furnishings and other appointments reasonably
satisfactory to him, and to a personal secretary/ assistant.
Article VI.
TERMINATION BENEFITS
6.1 Termination of Employment by Company for Cause or by Employee Other
Than for Good Reason. If, before the end of the Contract Term, the Company
terminates the Executive's employment for Cause or the Executive terminates
employment other than for Good Reason, or his employment is terminated by reason
of death or Disability, the Company shall pay immediately after the Date of
Termination to the Executive an amount equal to the Executive's Accrued Annual
Salary. The Company may not terminate the Executive's employment for Cause
unless:
(a) no fewer than sixty (60) days prior to the Date of Termination,
the Company provides the Executive with written notice of its intent to
consider termination of the Executive's employment for Cause, including a
detailed description of the specific reasons which form the basis for such
consideration (the "Notice of Consideration");
(b) if, after providing Notice of Consideration, the Board by
three-quarters (3/4) majority (excepting any member of the Board alleged to
be involved in the events leading the Board to terminate the Executive for
Cause) so determines, the Board may suspend Executive with pay until a
final determination pursuant to this Section 6.1 has been made;
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(c) for a period ending thirty (30) days after the date Notice of
Consideration is provided, the Executive shall have an opportunity to
appear before the Board, with or without legal representation, at the
Executive's election, to present arguments on his own behalf;
(d) following the presentation to the Board as provided in (c) above,
the Executive shall be terminated for Cause only if (i) the members of the
Board by three-quarters (3/4) majority (excepting any member of the Board
alleged to be involved in the events leading the Board to terminate the
Executive for Cause) determines that the actions of the Executive
constituted Cause and that the Executive's employment should accordingly be
terminated for Cause; and (ii) the Board provides the Executive with a
written determination setting forth in full specificity the basis of such
termination of employment which shall be consistent with the reasons set
forth in the Notice of Consideration; and
(e) the Company shall provide the Executive with not less than thirty
(30) days advance written notice of termination, including a statement of
the Date of Termination and the specific detailed basis for such
termination which shall be consistent with the reasons set forth in the
Notice of Consideration.
If Executive is terminated by the Company without full compliance with the
substantive and procedural requirements of this Section 6.1 prior to the
termination, the termination shall be deemed a Termination Without Cause for all
purposes of the Agreement.
6.2 Termination of Employment for Death or Disability. If, before the end
of the Contract Term, the Executive's employment terminates due to death or
Disability, the Company shall pay to the Executive, the beneficiaries designated
in writing by the Executive, or the Executive's estate, as the case may be, in
installments as such installments would be normally due, the remainder of the
Executive's Annual Base Salary for the remainder of the Contract Year, and any
accrued and unpaid bonus, if any, when due which may hereafter be awarded to the
Executive and which remains unpaid as of the Date of Termination
6.3 Termination of Employment By The Company Without Cause Or By the
Executive for Good Reason. If there is a Termination of Employment Without Cause
or a Termination of Employment by the Executive for Good Reason, the Executive
shall receive the following: (a) immediately after the Date of Termination in a
lump-sum in immediately available funds, an amount equal to the sum of (i)
accrued and unpaid salary owing to the Executive up to the date of Termination
and (ii) any then accrued bonus, if any, which may have theretofore awarded to
the Executive; and (b) following the Date of Termination, the Company shall pay
as such payment would have normally fallen due if the Executive had continued to
work for the remainder of the Contract Year, the remaining unpaid installments
of the Executive's Annual Base Salary; and (c) within sixty (60) days after the
Date of Termination in a lump-sum in immediately available funds, the total
amount (if any) of the Executive's unvested benefits (if any) under any Company
sponsored plan or program which is forfeited on account of the Executive's
employment being terminated; and (d) the benefits (or if not available the
economic equivalent of the benefits) described in Sections 5.1, 5.2 and 5.3 to
which Executive is entitled as of the Date of Termination shall be continued for
the period described in clause (b)(i) above.
6.4 Termination Benefits upon a Change of Control. If within the Contract
Term: (i) there occurs a Change of Control and (ii) the Company terminates the
employment of the Executive or the
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Executive terminates his Employment for Good Reason, then Executive shall
receive the payments required by Section 6.3.
Article VII.
RESTRICTIVE COVENANTS
7.1 Non-Solicitation of Employees; Confidentiality; Non-Competition. The
Executive covenants and agrees that at no time during the Executive's employment
by the Company nor during the one-year period immediately following Termination
of Employment for Cause, or Termination of Employment by Executive for other
than Good Reason will the Executive (i) directly or indirectly employ or seek to
employ any person or entity employed at that time by the Company or otherwise
encourage or entice any such person or entity to leave such employment; (ii)
become employed by, enter into a consulting arrangement with or otherwise agree
to perform personal services for a Competitor (as defined below); (iii) acquire
an ownership interest in a Competitor, or (iv) solicit any customers or vendors
of the Company on behalf of or for the benefit of a Competitor. Executive
further covenants and agrees that at no time during the Executive's employment
by the Company nor at any time following Termination of Employment with the
Company will the Executive communicate, furnish, divulge or disclose in any
manner to any person or entity confidential business information or trade
secrets of the Company, without the prior express written consent of the
Company. For purposes of this Section 8.1, "Competitor" means any entity which
engages in the design or distribution to department stores or catalogue vendors
of household products which directly compete with those sold by the Company.
7.2 Injunction. The Executive acknowledges that the Company relies on the
provisions of this Article VII and that monetary damages will not be an adequate
remedy to a breach of this Article, and that it would be impossible for the
Company to measure damages in the event of such a breach. Therefore, the
Executive agrees that, in addition to other rights that the Company may have,
the Company is entitled to an injunction preventing the Executive from doing any
act that would be in breach of this Article VII.
Article VIII
MISCELLANEOUS
8.1 Full Settlement. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including without limitation, set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive or others provided, however, that if the
Company causes the Executive to have a Termination of Employment for Cause
pursuant to this Agreement on account of theft or embezzlement, the Company may
offset against the amounts due under this Agreement the amounts taken from the
Company by the Executive through theft or embezzlement. In no event shall the
Executive be obligated to seek other employment or take any other action by way
of mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement, nor shall the amount of any payment hereunder be
reduced, except as otherwise specifically provided herein, by any compensation
earned by the Executive as result of employment by another employer.
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8.2 Enforcement.
(a) If the Executive incurs legal or other fees and expenses in an
effort to establish entitlement to fees and benefits rightfully owing under
this Agreement, the Company shall reimburse the Executive for such fees and
expenses regardless of the outcome of such effort ..
(b) If Executive does not prevail (after exhaustion of all available
judicial remedies), and a court of competent jurisdiction determines that
the Executive had no reasonable basis for bringing an action hereunder or
there was an absence of good faith for bringing an action hereunder, no
further reimbursement for legal fees and expenses shall be due to the
Executive and Executive shall refund any amounts previously reimbursed
hereunder with respect to such action.
(c) If the Company fails to pay any amount provided under this
Agreement when due, the Company shall pay interest on such amount at a rate
equal to (i) the rate of interest on the Company's revolving credit charged
by the Company's principal lender plus three percent (3%), or (ii) in the
absence of such revolving credit, 300 basis points over the prime
commercial lending rate announced by Bank of America N.A. on the date such
amount is due or, if no such rate shall be announced on such date, the
immediately prior date on which the Bank of America announced such a rate.
8.3 Assignment, Successors. The Company may freely assign its respective
rights and obligations under this Agreement to a successor of the Company's
business, without the prior written consent of the Executive. This Agreement
shall be binding upon and inure to the benefit of the Executive and the
Executive's estate and the Company and any assignee of or successor to the
Company.
8.4 Nonalienation of Benefits. Benefits payable under this Agreement shall
not be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, charge, garnishment, execution or levy of any
kind, either voluntary or involuntary, prior to actually being received by the
Executive, and any such attempt to dispose of any right to benefits payable
hereunder shall be void.
8.5 Severability. If all or any part of this Agreement is declared by any
court or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of this Agreement not
declared to be unlawful or invalid. Any paragraph or part of a paragraph so
declared to be unlawful or invalid shall, if possible, be construed in a manner
which will give effect to the terms of such paragraph or part of a paragraph to
the fullest extent possible while remaining lawful and valid.
8.6 Amendment and Waiver. This Agreement shall not be altered, amended,
extended or modified except by written instrument executed by the Company and
Executive. A waiver of any term, covenant, agreement or condition contained in
this Agreement shall not be deemed a waiver of any other term, covenant,
agreement or condition, and any waiver of any default in any such term,
covenant, agreement or condition shall not be deemed a waiver of any later
default thereof or of any other term, covenant, agreement or condition.
8.7 Notices. All notices and other communications hereunder shall be in
writing and shall be only effective when actually delivered on a business day
during business hours only by one of the
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following methods: (i) by hand (ii) by first class registered or certified mail,
return receipt requested, postage prepaid, or by a national overnight commercial
messenger service such as, but not limited to FedEx, UPS or DHL, addressed as
follows:
If to the Company: Salton, Inc.
0000 X. Xxxxx Xxxxx
Xxxx Xxxxxx, I 60045
Attention: President
If to the Executive: Xxxxxxx Xxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Either party may from time to time designate a new address by notice given in
accordance with this Section. Notice and communications shall be effective when
actually received by the addressee.
8.8 Counterpart Originals. 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.
8.9 Entire Agreement. This Agreement forms the entire agreement between the
parties hereto with respect to any severance payment and with respect to the
subject matter contained in the Agreement.
8.10 Effect on Other Agreements. This Agreement shall supersede all prior
agreements, promises and representations regarding severance or other payments
contingent upon termination of employment, whether in writing or otherwise.
8.11 Applicable Law. The provisions of this Agreement shall be interpreted
and construed in accordance with the laws of the State of Illinois, without
regard to its choice of law principles.
8.12 Survival of Executive's Rights. All of the Executive's rights
hereunder, including but not limited to his rights to compensation and benefits,
and his obligations under this Section 8.1 hereof, shall survive the termination
of the Executive's employment and/or the termination of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
SALTON, INC.
By:
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Its:
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XXXXXXX XXXX
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