Exhibit 10.29
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into by and between Oak
Technology Inc. (the "Company") and Xxxxx Xxxx ("Xxxx") as of February 22,
1999 (the "Effective Date").
1. POSITION AND DUTIES. Xxxx shall be employed by the Company as its
President and Chief Executive Officer ("CEO") reporting to the Company's
Board of Directors (the "Board"). Xxxx'x employment shall commence February
26, 1999 (the "Employment Date"). As its President and CEO, Xxxx agrees to
devote his full business time, energy and skill to his duties at the Company.
These duties shall include all those duties customarily performed by the
President and CEO.
2. TERM OF EMPLOYMENT. Xxxx'x employment with the Company will be for
no specified term, and may be terminated by Xxxx or the Company at any time,
with or without cause.
3. COMPENSATION. Xxxx shall be compensated by the Company for his
services as follows:
(a) BASE SALARY. As President and CEO, Xxxx shall be paid a
monthly Base Salary of $37,500 per month ($450,000 on an annualized basis),
subject to applicable withholding, in accordance with the Company's normal
payroll procedures.
(b) BENEFITS. Xxxx shall have the right, on the same basis as
other members of senior management of the Company, to participate in and to
receive benefits under any of the Company's employee benefit plans, as such
plans may be modified from time to time. In addition, Xxxx shall be entitled
to the benefits afforded to other members of senior management under the
Company's vacation, holiday and business expense reimbursement policies.
(c) PERFORMANCE BONUS. Xxxx shall have the opportunity to earn a
Performance Bonus beginning with the Fiscal Year commencing July 1, 1999.
This Performance Bonus shall be based upon the achievement of certain fiscal
and performance-based objectives as agreed to by Xxxx and the Board. The
target amount for the Performance Bonus shall be 60% of base salary with a
maximum bonus of 120% of base salary (less applicable withholding).
(d) SPECIAL BONUS. Subject to the provisions of this Agreement,
Xxxx shall receive a Special Bonus in the amount of Two Million Dollars
($2,000,000) plus an inflation adjustment. The Special Bonus shall be paid in
three installments of Six Hundred Sixty-Six Thousand Six Hundred Sixty-Six
Dollars and Sixty-Seven Cents ($666,666.67) plus the inflation adjustment,
less applicable withholding, on the first three anniversaries ("Anniversary
Date") of Xxxx'x Employment Date, provided Xxxx is continuously employed from
the Employment Date until such Anniversary Date. For purposes of this
Paragraph 3(d), the inflation adjustment for each Special Bonus payment shall
be an amount equal to $2,000,000 less the amount of the
1
Special Bonus which has been paid prior to the Anniversary Date for which the
inflation adjustment is being calculated multiplied by 4.62%.
(e) LOAN. As of the Effective Date, the Company will loan Xxxx
Two Million Dollars ($2,000,000) (the "Loan") which shall bear interest at
the minimum federal rate, and shall be payable in three annual installments
of principal and interest on the anniversaries of Xxxx'x Employment Date. The
Loan shall be subject to Xxxx'x execution of a Promissory Note in the form
attached hereto as EXHIBIT A. Except as otherwise provided in this Agreement,
the balance outstanding on the Loan shall be due and payable upon Xxxx'x
termination of employment. In the event Xxxx'x employment is terminated by
the Company for any reason within one year of his Employment Date, at Xxxx'x
election, the Loan may be paid, in whole or in part, with shares of the
Company's stock acquired upon exercise of the Option. Any stock used to repay
the Loan shall be valued at the price paid by Xxxx for such stock upon
exercise of the Option.
4. STOCK OPTION As of the Effective Date, Xxxx shall be granted an
option to purchase 2,000,000 shares of the Common Stock of the Company (the
"Option"), with an exercise price equal to the fair market value of the
Company's stock on the date of grant. Except as provided herein, the Option
shall be subject to the terms of the Company's Executive Stock Option Plan
and the option agreement provided pursuant to the plan. Subject to compliance
with applicable securities law, the Option shall be exercisable in full on
the date of grant, provided that any shares acquired upon exercise which have
not vested (as described below) are subject to a right of repurchase (at
original cost) in favor of the Company. The shares subject to the Option
shall vest and become "Vested Shares" as follows:
(a) Except as otherwise provided herein, for each full month of
Xxxx'x continuous employment with the Company (or any parent or subsidiary of
the Company) after his Employment Date, 1/48 of the shares subject to the
Option shall become Vested Shares. In no event shall the number of Vested
Shares exceed the total number of shares subject to the Option.
(b) In the event that the Company's Common Stock has an average
closing price of at least $20 per share (the "Trading Value") for a period of
thirty (30) consecutive calendar days, 1/2 of the shares subject to the
Option which are not Vested Shares as of such date (as determined without
regard to this paragraph (b)) shall become Vested Shares. Subject to the
Xxxx'x continued employment with the Company (or any parent or subsidiary of
the Company), the remaining unvested shares shall become Vested Shares in
equal monthly increments over the period commencing on the date of such
acceleration and ending on the date four (4) years after the Employment Date.
(c) In the event of a Change of Control (as defined below), all
shares subject to the Option shall become Vested Shares as of the effective
date of the Change of Control, subject to paragraph 8, below.
2
(d) In the event that Xxxx'x employment with the Company (or any
parent or subsidiary of the Company) is involuntarily terminated by the
Company (or any parent or subsidiary of the Company) during Xxxx'x first year
of employment, the number of Vested Shares shall be increased to the greater
of (i) a total of 1/4 of the shares subject to the Option, or (ii) the number
of Vested Shares calculated pursuant to the other provisions of this
paragraph 4 plus 1/8 of the total number of shares subject to the Option.
Such acceleration of vesting is effective as of the date of Xxxx'x
termination of employment.
(e) In the event that Xxxx'x employment with the Company (or any
parent or subsidiary of the Company) is involuntarily terminated by the
Company (or any parent or subsidiary of the Company) after Xxxx'x first year
of employment other than For Cause, the number of Vested Shares shall be
increased to such number of Vested Shares calculated pursuant to the other
provisions of this paragraph 4 plus 1/8 of the total number of shares subject
to the Option.
5. BENEFITS UPON INVOLUNTARY TERMINATION OR RESIGNATION FOR GOOD
REASON AFTER CHANGE OF CONTROL.
(a) INVOLUNTARY TERMINATION OR RESIGNATION FOR GOOD REASON AFTER
A CHANGE OF CONTROL. Within twelve (12) months after the occurrence of any
Change of Control, if Xxxx'x employment is involuntarily terminated, or if
Xxxx resigns for Good Reason, Xxxx shall be entitled to the following
separation benefits:
(i) continued payment of Xxxx'x salary at his Base Salary
rate, less applicable withholding, for twelve (12) months following his
termination; and
(ii) 100% of Xxxx'x target Performance Bonus, less
applicable withholding, payable in a lump sum within thirty (30) days
following his termination;
(iii) if Xxxx elects continued medical insurance coverage in
accordance with the applicable provisions of federal law (commonly referred
to as "COBRA"), the Company shall pay Xxxx'x COBRA premium contributions for
twelve (12) months. Notwithstanding the above, in the event Xxxx becomes
covered under another employer's group health plan during the period provided
for herein, the Company shall cease payment of the COBRA premiums.
(b) DEFINITIONS.
(i) CHANGE OF CONTROL: For purposes of this Agreement, a
"Change of Control" shall be deemed to have occurred in the event any of the
following occurs with respect to the Company:
(A) the direct or indirect sale or exchange by the
stockholders of the Company of all or substantially all of the stock of the
Company where the stockholders of the Company before such sale or exchange do
not retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Company after such sale or exchange.
3
(B) a merger or consolidation in which the Company is
a party where the stockholders of the Company before such merger or
consolidation do not retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the Company after such merger
or consolidation.
(C) the sale, exchange, or transfer of all or
substantially all of the assets of the Company other than a sale, exchange,
or transfer to one (1) or more subsidiaries of the Company.
(D) a liquidation or dissolution of the Company.
(ii) "GOOD REASON". For purposes of this Agreement, "Good
Reason" means any of the following conditions, which condition(s) remain(s)
in effect 30 days after written notice to the Board from Xxxx of such
condition(s).
(A) a decrease in Xxxx'x Base Salary and/or a
material decrease in Xxxx'x Performance Bonus Plan or employee benefits; or
(B) any change in Xxxx'x title, authority,
responsibilities or duties, so that any of them are not substantially
equivalent to Xxxx'x title, authority, responsibilities or duties as
determined immediately prior to the Change of Control.
(c) In the event of Xxxx'x involuntary termination or Resignation
for Good Reason within twelve (12) months after a Change Of Control, Xxxx
shall be entitled to the separation benefits provided in this Paragraph 5,
and shall not be entitled to benefits under Paragraph 7, below.
6. BENEFITS UPON VOLUNTARY TERMINATION. In the event of Xxxx'x
voluntary termination from employment with the Company other than his
resignation for Good Reason within twelve (12) months after a Change of
Control as provided in paragraph 5, above, Xxxx shall be entitled to no
compensation or benefits from the Company other than those earned under
paragraph 3 above through the date of his termination or in the case of any
stock options, vested through the date of his termination.
7. BENEFITS UPON OTHER TERMINATION. Xxxx agrees that his employment
may be terminated by the Company at any time, with or without cause. In the
event of the termination of Xxxx'x employment by the Company for the reasons
set forth below, he shall be entitled to the following:
(a) TERMINATION FOR ANY REASON DURING THE FIRST YEAR OF
EMPLOYMENT. If Xxxx'x employment is terminated by the Company for any reason
prior to the first anniversary of the Employment Date, Xxxx shall be entitled
to the following separation benefits:
(i) continued payment of Xxxx'x salary at his Base Salary
rate, less applicable withholding, for twelve (12) months following his
termination;
4
(ii) 50% of Xxxx'x target Performance Bonus, less applicable
withholding payable in a lump sum within thirty (30) days following his
termination;
(iii) payment of the first installment of the Special Bonus,
plus an inflation adjustment, less applicable withholding. The inflation
adjustment shall be prorated for the number of days from the Employment Date
until the termination date (or, if later, until the date such Special Bonus
is paid) over 365 days; provided, however, that no payment of the first
installment of the Special Bonus shall be made in the event that Xxxx'x
termination results from death or Disability as that term is defined in
paragraph 7(e), below.
(iv) if Xxxx elects continued medical insurance coverage in
accordance with the applicable provisions of federal law (commonly referred
to as "COBRA"), the Company shall pay Xxxx'x COBRA premium contributions for
twelve (12) months. Notwithstanding the above, in the event Xxxx becomes
covered under another employer's group health plan during the period provided
for herein, the Company shall cease payment of the COBRA premiums; and
(v) Additional vesting of the Option as provided in
Paragraph 4.
(b) TERMINATION WITHOUT CAUSE AFTER THE FIRST YEAR OF EMPLOYMENT.
If Xxxx'x employment is terminated by the Company for any reason other than
For Cause after the first anniversary of the Employment Date, Xxxx shall be
entitled to the following separation benefits:
(i) continued payment of Xxxx'x salary at his Base Salary
rate, less applicable withholding, for six (6) months following his
termination;
(ii) 50% of Xxxx'x target Performance Bonus, less applicable
withholding payable in a lump sum within thirty (30) days following his
termination;
(iii) if Xxxx elects continued medical insurance coverage in
accordance with the applicable provisions of federal law (commonly referred
to as "COBRA"), the Company shall pay Xxxx'x COBRA premium contributions for
twelve (12) months. Notwithstanding the above, in the event Xxxx becomes
covered under another employer's group health plan during the period provided
for herein, the Company shall cease payment of the COBRA premiums; and
(iv) additional vesting of the Option as provided in
Paragraph 4.
(c) TERMINATION FOR CAUSE AFTER FIRST YEAR OF EMPLOYMENT. If
Xxxx'x employment is terminated after the first anniversary of the Employment
Date For Cause as defined below, Xxxx shall be entitled to no compensation or
benefits from the Company other than those earned under paragraph 3, or in
the case of any stock options, vested through the date of his termination.
5
(d) DEFINITION OF FOR CAUSE.
(i) For purposes of this Agreement, a termination "For
Cause" occurs if Xxxx is terminated for any of the following reasons:
(A) commission of any crime involving moral turpitude;
(B) repeated insobriety or substance abuse at the
workplace;
(C) theft of material Company assets;
(D) Xxxx'x causing the Company to be convicted of a
crime or to incur criminal penalties; or
(E) Xxxx'x refusal to perform duties reasonably given
to him by the Board of Directors which duties are within the scope of the
normal duties of a CEO, which refusal continues after receiving notice
thereof and a reasonable opportunity to cure.
(e) TERMINATION DUE TO DEATH OR DISABILITY. For purposes of this
Agreement, Xxxx'x termination due to death or Disability shall be considered
his involuntary termination other than for Cause on the date of his death or
Disability and benefits shall be paid to Xxxx or his estate accordingly. In
addition, notwithstanding anything to the contrary in the Promissory Note,
the full amount of the principal and interest outstanding on the Promissory
Note at the time of death or Disability shall be forgiven and the Promissory
Note shall be canceled. For purposes of this Agreement, Disability means the
permanent incapacity of Xxxx by reason of physical or mental illness, injury
or condition, to perform his usual duties for the Company
8. 280G LIMITATIONS. To the extent that any of the payments and
benefits provided for in this Agreement, including, without limitation,
acceleration of option vesting under Paragraph 4, or otherwise payable to
Xxxx constitute "parachute payments" within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the "Code"), and, but for this
Paragraph 8, would be subject to the excise tax imposed by Section 4999 of
the Code or any similar or successor provision, the aggregate amount of such
payments and benefits shall be reduced, but only to the extent necessary so
that none of such payments are subject to excise tax pursuant to Section 4999
of the Code (the "Excise Tax"). In the event that any such reduction shall be
required, Xxxx shall determine, in his sole discretion, which benefits
(option acceleration or cash payments) shall be reduced to avoid the Excise
Tax.
9. TAX WITHHOLDING. All payments under this Agreement shall be subject
to withholding for all applicable state and federal income and employment
taxes. At the time the Promissory Note is canceled or any payment thereunder
is forgiven, in whole or in part, or at any time thereafter as requested by
the Company, Xxxx hereby authorizes withholding from payroll and any other
amounts payable to him, and otherwise agrees to make adequate provision for
any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Company, which may arise in connection with
such forgiveness or cancellation. Xxxx
6
acknowledges that, notwithstanding any other provision of this Agreement, no
obligations under the Promissory Note shall be forgiven or canceled unless
the tax withholding obligations of the Company are satisfied.
10. BONUS OFFSET. Notwithstanding any other provision herein to the
contrary, the Company may offset any payments of the Special Bonus which may
be due under this Agreement, net of applicable withholding, against any
payments owed by Xxxx pursuant to the Promissory Note and Xxxx, by his
execution of this Agreement, expressly consents to such offset.
11. CONFIDENTIALITY AGREEMENT. Xxxx agrees to abide by the terms and
conditions of the Company's standard Confidentiality Agreement as executed by
Xxxx and attached hereto as EXHIBIT B.
12. DISPUTE RESOLUTION. In the event of any dispute or claim relating
to or arising out of this Agreement (including, but not limited to, any
claims of breach of contract, wrongful termination or age, sex, race or other
discrimination), Xxxx and the Company agree that all such disputes shall be
fully and finally resolved by binding arbitration conducted by the American
Arbitration Association in San Jose, California in accordance with its
National Employment Dispute Resolution rules, as those rules are currently in
effect (and not as they may be modified in the future). Xxxx acknowledges
that by accepting this arbitration provision he is waiving any right to a
jury trial in the event of such dispute. Provided, however, that this
arbitration provision shall not apply to any disputes or claims relating to
or arising out of the misuse or misappropriation of trade secrets or
proprietary information.
13. NON-SOLICITATION. Xxxx agrees that for a period of one year after
the date of the termination of his employment for any reason, he shall not,
either directly or indirectly, solicit the services, or attempt to solicit
the services, of any employee of the Company to any other person or entity.
14. INTERPRETATION. Xxxx and the Company agree that this Agreement
shall be interpreted in accordance with and governed by the laws of the State
of California.
15. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of and be binding upon the Company and its successors and assigns. In view of
the personal nature of the services to be performed under this Agreement by
Xxxx, he shall not have the right to assign or transfer any of his rights,
obligations or benefits under this Agreement, except as otherwise noted
herein.
16. ENTIRE AGREEMENT. This Agreement constitutes the entire employment
agreement between Xxxx and the Company regarding the terms and conditions of
his employment, with the exception of (i) the Promissory Note described in
Paragraph 3(d) and attached hereto as Exhibit A; (ii) the agreement described
in Paragraph 11 and attached hereto as Exhibit B; and (iii) any stock option
agreements between Xxxx and the Company. This Agreement (including the
documents described in (i), (ii) and (iii) herein) supersedes all prior
negotiations, representations
7
or agreements between Xxxx and the Company, whether written or oral,
concerning Xxxx'x employment by the Company.
17. VALIDITY. If any one or more of the provisions (or any part
thereof) of this Agreement shall be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions (or any part thereof) shall not in any way be affected or impaired
thereby.
18. MODIFICATION. This Agreement may only be modified or amended by a
supplemental written agreement signed by Xxxx and the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date set forth above.
OAK TECHNOLOGY, INC.
Date: By:
----------------------- ---------------------------------------
Its:
--------------------------------------
Date:
----------------------- ------------------------------------------
Xxxxx Xxxx
8
