EXHIBIT 10.1
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
This Second Amended and Restated Employment Agreement ("Agreement") is
dated effective as of February 9, 2005, between Xxxxxxx.xxx, Inc., a Delaware
corporation ("Company"), and Xxxxxx Xxxxxxx ("Executive"). In consideration of
the mutual covenants and agreements set forth herein, the parties hereto agree
as follows:
ARTICLE I
EMPLOYMENT
1.1 Term. The Company hereby employs Executive, and Executive hereby
accepts such employment, for a term commencing as of December 18, 2001 and
ending on the fifth anniversary of such date, unless sooner terminated in
accordance with the provisions of Article IV.
1.2 Duties. During the Term, Executive shall be employed by the Company as
its Chief Executive Officer (and the Company's highest ranking officer), and as
such, Executive shall faithfully perform for the Company the duties and have the
powers customary for such position. The Executive shall devote substantially all
of his business time and effort to the performance of Executive's duties
hereunder, and shall work primarily at the Company's main business offices.
1.3 Termination of Prior Agreement. Immediately upon execution of this
Agreement, that certain First Amended and Restated Employment Agreement by and
between Executive and the Company dated as of August 16, 2004 shall terminate
and shall be of no further force or effect.
ARTICLE II
COMPENSATION
2.1 Salary. The Company shall pay Executive during the Term a salary at
the rate of Four Hundred Thousand Dollars ($400,000) per annum (the "Annual
Salary"), in accordance with the customary payroll practices of the Company
applicable to senior executives, provided the payments are no less frequent than
semi-monthly. The Annual Salary shall be reviewed annually by the Board of
Directors of the Company (the "Board") or such committee of the Board as they
shall designate for such purpose from time to time for possible increases and,
in the event of a "going private" transaction or a material equity financing by
the Company, the Board will review Executive's total compensation package, and
consult with Executive and his representatives, and adjust it appropriately to
ensure it remains equitable. Any increased Annual Salary shall thereupon be the
"Annual Salary" for the purposes hereof. The Executive's Annual Salary shall not
be decreased without his prior written consent at any time during the Term.
2.2 Incentive Compensation. During the Term, Executive shall be eligible
to receive, in addition to his Annual Salary, an annual bonus (the "Bonus") of
up to fifty percent (50%) of Executive's Annual Salary. The performance
standards or goals required to be attained in order to receive such Bonus shall
be set by the Board, or such committee of the Board as they shall designate for
such purpose from time to time, with input from Executive, and all such
standards or goals shall be based on reasonable performance metrics for the
Company. The Bonus shall be calculated on or before January 31 and paid not
later than the end of the first quarter following the year for which the Bonus
is being paid.
2.3 Supplemental Retirement Plan. During the Term, the Company shall
contribute the following amounts, on the anniversaries of December 18, 2001
indicated, to a supplemental retirement plan for the benefit of Executive:
First Anniversary $ 50,000
Second Anniversary $ 75,000
Third Anniversary $100,000
Fourth Anniversary $125,000
Fifth Anniversary $150,000
Except as otherwise provided in Section 4.4(e) hereof, if Executive ceases to be
employed by the Company for any reason prior to the date a contribution to the
supplemental retirement plan is due as provided for above, the Company's
obligation to make any further contributions to the supplemental retirement plan
shall terminate and ownership of the supplemental retirement plan shall be
transferred to Executive.
2.4 Stock Options. On December 18, 2001, Executive will be granted stock
options to purchase an aggregate of 600,000 shares of the Company's Common
Stock, vesting with respect to 150,000 shares on December 18, 2001 with the
balance vesting quarterly over a four year period. All stock options to purchase
shares of the Company's Common Stock granted to Executive prior to December 18,
2001 and all stock options granted to Executive during the Term of this
Agreement shall accelerate and become fully vested immediately upon a Change of
Control, as that term is defined in Article IV, during the Term.
2.5 Benefits. Except otherwise provided herein, during the Term Executive
shall participate in any group life, medical or disability insurance plans,
health programs, retirement plans, fringe benefit programs and similar benefits
that may be available to other senior executives of the Company generally, on
the same terms as such other executives, to the extent that Executive is
eligible under the terms of such plans or programs as they may be in effect from
time to time.
2.6 Expenses. The Company shall pay or reimburse Executive for all
ordinary and reasonable out-of-pocket expenses actually incurred (and, in the
case of reimbursement, paid) by Executive during the Term in the performance of
Executive's services under this Agreement, provided that Executive submits
reasonable proof of such expenses, with the properly completed forms as
prescribed from time to time by the Company.
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2.7 Vacations and Holidays. During the Term, Executive shall be entitled
to an annual vacation leave of four (4) weeks at full pay, or such greater
vacation benefits as may be provided for by the Company's vacation policies
applicable to senior executives. Executive shall be entitled to such holidays as
are established by the Company for all employees.
2.8 Automobile Allowance. During the Term, the Company shall provide
Executive with an automobile allowance of $750 per month (the "Automobile
Allowance").
ARTICLE III
NONDISCLOSURE AND NON-SOLICITATION
3.1 Proprietary Information.
(a) The Executive recognizes that Executive's relationship with the
Company is one of high trust and confidence by reason of Executive's access to
and contact with the trade secrets and confidential and proprietary information
of the Company including, without limitation, information not previously
disclosed to the public regarding current and projected revenues, expenses,
costs, profit margins and any other financial and budgeting information;
marketing and distribution plans and practices; business plans, opportunities,
projects and any other business and corporate strategies; product information;
names, addresses, terms of contracts and other arrangements with customers,
suppliers, agents and employees of the Company; confidential and sensitive
information regarding other employees, including information with respect to
their job descriptions, performance strengths and weaknesses, and compensation;
and other information not generally known regarding the business, affairs and
plans of the Company (collectively, the "Proprietary Information"). The
Executive acknowledges and agrees that Proprietary Information is the exclusive
property of the Company and that Executive shall not at any time, either during
Executive's employment with the Company or thereafter disclose to others, or
directly or indirectly use for Executive's own benefit or the benefit of others,
any of the Proprietary Information. For purposes of this Article III, the
"Company" shall mean the Company and each of its subsidiaries.
(b) The Executive acknowledges that the unauthorized use or
disclosure of Proprietary Information would be detrimental to the Company and
would reasonably be anticipated to materially impair the Company's value.
(c) The Executive's undertakings and obligations under this Section
3.1 will not apply, however, to any Proprietary Information which: (i) is or
becomes generally known to the public through no action on Executive's part,
(ii) is generally disclosed to third parties by the Company without restriction
on such third parties, (iii) is approved for release by written authorization of
the Board, (iv) is known to Executive other than as a result of work performed
for the Company, or (v) is required to be disclosed by law or governmental or
court process or order.
(d) Upon termination of Executive's employment with the Company or
at any other time upon reasonable request, Executive will promptly deliver to
the Company all notes, memoranda, notebooks, drawings, records, reports, written
computer code, files and other
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documents (and all copies or reproductions of such materials) in Executive's
possession or under Executive's control, whether prepared by Executive or
others, which contain Proprietary Information. The Executive acknowledges that
this material is the sole property of the Company.
3.2 Absence of Restrictions upon Disclosure and Competition.
(a) The Executive hereby represents that, except as Executive has
disclosed in writing to the Company on Exhibit A attached hereto, Executive is
not bound by the terms of any agreement with any previous employer or other
party to refrain from using or disclosing any trade secret or confidential or
proprietary information in the course of Executive's employment with the Company
or to refrain from competing, directly or indirectly, with the business of such
previous employer or any other party.
(b) The Executive further represents that Executive's performance of
all the terms of this Agreement and as an employee of the Company does not and
will not breach any agreement to keep in confidence proprietary information,
knowledge or data acquired by Executive in confidence or in trust prior to his
employment with the Company, and Executive will not disclose to the Company or
induce the Company to use any confidential or proprietary information or
material belonging to any previous employer or others.
3.3 Prohibition on Solicitation of Customers. During the Term and for a
period of eighteen (18) months thereafter, Executive agrees not to, directly or
indirectly, either for Executive or for any other person or entity, solicit any
person or entity to terminate such person's or entity's contractual and/or
business relationship with the Company, nor will Executive interfere with or
disrupt or attempt to interfere with or disrupt any such relationship. None of
the foregoing shall be deemed a waiver of any and all rights and remedies the
Company may have under applicable law.
3.4 Prohibition on Solicitation of Employees, Agents or Independent
Contractors. During the Term and for a period of eighteen (18) months
thereafter, Executive agrees not to solicit any of the employees, agents or
independent contractors of the Company to leave the employ of the Company for a
competitive company or business. However, Executive may solicit any employee,
agent or independent contractor who voluntarily terminates his or her employment
with the Company after a period of ninety (90) days have elapsed since the
termination date of such employee, agent or independent contractor. None of the
foregoing shall be deemed a waiver of any and all rights and remedies the
Company may have under applicable law.
3.5 Other Obligations. The Executive acknowledges that the Company from
time to time may have agreements with other persons, which impose obligations or
restrictions on the Company regarding inventions made during the course of work
under such agreements or regarding the confidential nature of such work. The
Executive agrees to be bound by all such obligations and restrictions which are
made known to Executive and to take all reasonable action necessary to discharge
the obligations of the Company under such agreements.
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3.6 Rights and Remedies upon Breach. The Executive acknowledges and agrees
that any material breach by him of any of the provisions of Article III (the
"Restrictive Covenants") would result in irreparable injury and damage for which
money damages may not provide an adequate remedy. Therefore, if Executive
materially breaches any of the provisions of Article III, the Company shall have
the following rights and remedies, each of which rights and remedies shall be
independent of the other and severally enforceable, and all of which rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or in equity (including, without
limitation, the recovery of damages): the right and remedy to have the
Restrictive Covenants specifically enforced (without posting bond and without
the need to prove damages) by any court having equity jurisdiction, including,
without limitation, the right to an entry against Executive of restraining
orders and injunctions (preliminary, mandatory, temporary and permanent) against
violations, threatened or actual, and whether or not then continuing, of such
covenants.
ARTICLE IV
TERMINATION
4.1 Definitions. For purposes of this Agreement, the following definitions
shall apply to the terms set forth below:
(a) Cause. "Cause" shall mean:
(i) habitual neglect or insubordination (defined as a refusal
to execute or carry out directions from the Board which are consistent with
Executive's title and position) where Executive has been given written notice of
the acts or omissions constituting such neglect or insubordination and Executive
has failed to cure such conduct, where susceptible to cure, within thirty (30)
days following notice;
(ii) conviction of any felony or any crime involving moral
turpitude;
(iii) participation in any fraud against the Company;
(iv) willful breach of Executive's material duties to the
Company, including but not limited to theft from the Company and failure to
fully disclose personal pecuniary interest in a transaction involving the
Company;
(v) intentional damage to any property of the Company;
(vi) conduct by Executive which in the good faith, reasonable
determination of the Board demonstrates gross unfitness to serve including, but
not be limited to, gross neglect, non-prescription use of controlled substances,
any abuse of controlled substances whether or not by prescription, or habitual
drunkenness, intoxication, or other impaired state induced by consumption of any
drug, including alcohol; or
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(vii) material breach by the Executive of the Restrictive
Covenants.
(b) Change in Control. "Change in Control" means a change in
ownership or control of the Company effected through any of the following
transactions:
(i) a merger, consolidation or other reorganization unless
securities representing 50% or more of the total combined voting power of the
voting securities of the successor corporation are immediately thereafter
beneficially owned, directly or indirectly and in substantially the same
proportion, by the persons who beneficially owned the Company's outstanding
voting securities immediately prior to such transaction;
(ii) a sale, transfer or other disposition of all or
substantially all of the Company's assets; or
(iii) a transaction or series of related transactions approved
or recommended by the Board of Directors of the Company (or a committee of the
Board) resulting in the acquisition, directly or indirectly, by any person or
related group of persons (other than (a) a person that directly or indirectly
controls, is controlled by, or is under common control with, the Company or (b)
General Atlantic Partners, LLC or any affiliate thereof), of beneficial
ownership (within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934, as amended) of either (A) securities possessing more than 50% of the total
combined voting power of the Company's outstanding securities or (B) securities
possessing total combined voting power sufficient to elect a majority of the
Board of Directors of the Company, from a person or persons; provided, however,
if the transaction or series of related transactions approved or recommended by
the Board of Directors of the Company (or a committee of the Board) includes a
proposed tender offer to be followed by a second-step merger to acquire any
shares that were not tendered, then a "Change in Control" for purposes of this
Agreement shall only be deemed to have occurred if and when one of the following
has also occurred: (1) the consummation the second-step merger of the Company
with the other entity, (2) sixty (60) days have passed since the closing of the
tender offer or (3) ten (10) days have passed since the proposed tender offer
has been abandoned or terminated pursuant to its terms.
(c) Good Reason. "Good Reason" shall mean, unless otherwise
consented to in writing by Executive:
(i) assignment of the Executive to a position,
responsibilities or duties of a materially lesser status or degree of
responsibility than his position, responsibilities or duties as of December 18,
2001;
(ii) relocation of the Executive outside of the Orange County
area;
(iii) a reduction by the Company of the Executive's Annual
Salary below the initial Annual Salary or, following a Change in Control, below
Executive's Annual Salary at the time of the Change in Control;
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(iv) a failure by the Company to continue in effect, without
substantial change, any benefit plan or arrangement in which the Executive was
participating or the taking of any action by the Company which would adversely
affect the Executive's participation in or materially reduce his benefits under
any benefit plan (unless such failure, action or changes apply equally to
substantially all other management employees of Company);
(v) any material breach by the Company of any provision of
this Agreement without the Executive having committed any material breach of
Executive's obligations hereunder; or
(vi) a Change in Control.
Notwithstanding the foregoing, (x) Good Reason shall not be deemed to exist
unless notice of termination on account thereof (specifying a termination date
no later than thirty (30) days from the date of such notice or ninety (90) days
in the case of a Change in Control) is given no later than sixty (60) days after
the time at which the event or condition purportedly giving rise to Good Reason
first occurs or arises (or when Executive first becomes aware of such
circumstances); and (y) the Company shall have thirty (30) days from the date
notice of such a termination is given to cure such event or condition if curable
and, if the Company does so fully cure such event or condition, such event or
condition shall not constitute Good Reason hereunder.
4.2 Termination upon Death or Disability. If Executive dies during the
Term, the Term shall terminate as of the date of death, and the obligations of
the Company to or with respect to Executive shall terminate in their entirety
upon such date except as otherwise provided under this Section 4.2. If Executive
becomes disabled for purposes of the long-term disability plan of the Company
for which Executive is eligible, or, in the event that there is no such plan, if
Executive by virtue of ill health or other disability is unable to perform
substantially and continuously the material duties assigned to him for more than
180 consecutive or non-consecutive days out of any consecutive 12-month period,
then the Company shall have the right, to the extent permitted by law, to
terminate the employment of Executive upon notice in writing to Executive. If
Executive is given such notice of termination for disability, the Term shall
terminate as of the date of such notice, and the obligations of the Company to
Executive shall terminate in their entirety upon such date except as otherwise
provided under this Section 4.2. Upon termination of employment due to death or
disability, Executive (or Executive's estate or beneficiaries in the case of the
death of Executive) shall be entitled to receive:
(a) any Annual Salary and other benefits earned and accrued under
this Agreement prior to the date of termination (and reimbursement under this
Agreement for expenses incurred prior to the date of termination), including,
but not limited to a pro-rata Bonus for the year of termination (calculated by
measuring target performance levels against actual performance at the time of
termination) to be paid at such time as Bonuses are ordinarily paid;
(b) his Annual Salary and Automobile Allowance payable in accordance
with the Company's customary payroll practices for twelve (12) months following
such termination;
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(c) reimbursement for COBRA payments equal to Executive's regular
monthly contributions toward Executive's health insurance benefits for the
twelve (12) months following such termination date if Executive elects COBRA
benefits;
(d) acceleration and immediate vesting of all stock options to
purchase shares of the Company's Common Stock granted to Executive which would
have vested and become exercisable pursuant to the scheduled vesting for such
options had Executive continued as an employee of the Company for twelve (12)
months following such termination; and
(e) the right to exercise any and all vested stock options for a
period of twelve (12) months following such termination (after which they shall
expire and no longer be exercisable); provided, however, that in no event shall
the exercise period extend later than the expiration term of such option as set
forth in the applicable Notice of Grant.
Executive (or, in the case of Executive's death, Executive's estate and
beneficiaries) shall have no further rights to any other compensation or
benefits hereunder on or after the termination of employment, or any other
rights hereunder, except as otherwise provided in the plans and policies of the
Company.
4.3 Termination for Cause; Termination of Employment by Executive without
Good Reason. The Company may terminate Executive's employment hereunder for
Cause immediately, and Executive may terminate his employment for any or no
reason on at least thirty (30) days' and not more than sixty (60) days' written
notice given to the Company. If during the Term the Company terminates Executive
for Cause, or Executive terminates his employment and the termination by
Executive is not covered by Section 4.2 or 4.4, Executive shall receive any
Annual Salary and other benefits earned and accrued under this Agreement prior
to the termination of employment (and reimbursement under this Agreement for
expenses incurred prior to the termination of employment) and Executive shall
have no further rights to any other compensation or benefits hereunder on or
after the termination of employment, or any other rights hereunder, except as
otherwise provided in the plans and policies of the Company. In addition, in the
event Executive is terminated hereunder for Cause, all stock options to purchase
shares of the Company's Common Stock granted to Executive, vested or unvested,
shall immediately cease to be exercisable and shall terminate upon the effective
date of such termination.
4.4 Termination by the Company without Cause; or by Executive for Good
Reason. The Company may terminate Executive's employment at any time for any
reason or no reason and Executive may terminate Executive's employment with the
Company for Good Reason. If during the Term the Company terminates Executive's
employment and the termination is not covered by Section 4.2 or 4.3, or
Executive terminates his employment for Good Reason, Executive shall receive:
(a) any Annual Salary and other benefits earned and accrued under
this Agreement prior to the termination of employment (and reimbursement under
this Agreement for expenses incurred prior to the termination of employment);
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(b) a lump sum severance payment upon termination equal to eighteen
(18) months Annual Salary and Automobile Allowance;
(c) a pro-rata portion of any bonus Executive would have received
pursuant to Section 2.2 had Executive remained employed for the full calendar
year during which such termination occurred, based on the number of days
Executive was actually employed by the Company during the applicable year.
(d) reimbursement for COBRA payments equal to Executive's regular
monthly contributions toward Executive's health insurance benefits for the
eighteen (18) months following such termination date if Executive elects COBRA
benefits;
(e) continuation of the contributions to a supplemental retirement
plan as provided by Section 2.3 hereof which would have been required had
Executive continued as an employee of the Company for a period of eighteen (18)
months following such termination pro rated for any partial year (e.g., if
Executive is terminated on March 18, 2005, Executive will continue to receive
the full Fourth Anniversary payment of $125,000 on December 18, 2005 and
three-quarters of the Fifth Anniversary payment of $150,000, or $112,500, on
December 18, 2006);
(f) acceleration and immediate vesting of all stock options to
purchase shares of the Company's Common Stock granted to Executive which would
have vested and become exercisable pursuant to the scheduled vesting for such
options had Executive continued as an employee of the Company for eighteen (18)
months, and following such termination; and
(g) the right to exercise any and all vested stock options to
purchase shares of the Company's Common Stock then held by Executive for a
period of twelve (12) months following such termination or, if such termination
occurs within twenty-four (24) months following a corporate transaction or
change in control (as those terms are defined in the applicable stock option
agreements and not as defined herein), then for a period of eighteen (18) months
following such termination (after which they shall expire and no longer be
exercisable); provided, however, that in no event shall the exercise period
extend later than the expiration term of such option as set forth in the
applicable Notice of Grant.
Notwithstanding the foregoing, in the event Executive terminates his
employment for Good Reason as a result of a Change in Control pursuant to
Section 4.1(c)(vi), the effective date of the termination of his employment
shall be three (3) months following receipt of notice thereof to the Company (or
such earlier date as the Company shall elect) and during such period Executive
shall continue as Chief Executive Officer of the Company and to provide
substantially all of his business time and effort to the Company. In the event
that the Company elects not to have Executive continue his employment as Chief
Executive Officer for the full three (3) month period following receipt of such
notice, Executive agrees to make himself reasonably available for any remaining
portion of such three (3) months period to perform such acts and consult with
the Company regarding such matters as reasonably requested by the Company to
ensure the orderly and efficient transition of Executive duties.
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If Executive is re-employed by the Company or any successor of the Company
following his termination for Good Reason as a result of a Change in Control
within one (1) year of the Change of Control, Executive shall reimburse the
Company for any payments made to Executive pursuant to Section 4.4 (b) and (e)
above.
In order to be eligible to receive the benefits specified under Sections
4.4(b)-(g), Executive must execute a general release of claims in a form
reasonably acceptable to the Company and Executive and signed by Executive.
Executive shall have no further rights to any other compensation or benefits
hereunder on or after the termination of employment, or any other rights
hereunder, except as otherwise provided in the plans and policies of the
Company.
In the event Executive is terminated by the Company pursuant to this
Section 4.4, Executive shall not have a duty to seek substitute employment and
the Company shall not have the right to offset any compensation due Executive
against any compensation or income received by Executive after the date of such
termination.
4.5 Benefit Limit. In the event that any payment or benefit (including
salary continuation payments, accelerated option vesting or continued health
care coverage) received or to be received by Executive pursuant to this
Agreement (collectively the `Payments") would constitute a parachute payment
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), then the following limitation shall apply:
The aggregate present value of those Payments shall be limited in amount
to the greater of the following dollar amounts (the "Benefit Limit"):
(a) 2.99 times Executive's Average Compensation, or
(b) the amount which yields Executive the greatest after-tax amount
of Payments under this Agreement after taking into account any excise tax
imposed under Code Section 4999 on those Payments.
The present value of the Payments will be measured as of the date of the
Change in Control and determined in accordance with the provisions of Code
Section 280G(d)(4).
Average Compensation means the average of Executive's W-2 wages from the
Company for the five (5) calendar years (or such fewer number of calendar years
of employment with the Company) completed immediately prior to the calendar year
in which the Change of Control is effected. Any W-2 wages for a partial year of
employment will be annualized, in accordance with the frequency which such wages
are paid during such partial year, before inclusion in Average Compensation.
4.6 Resolution Procedure. For purposes of the foregoing Benefit Limit, the
following provisions will be in effect:
(a) In the event there is any disagreement between Executive and the
Company as to whether one or more Payments to which Executive becomes entitled
under this
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Agreement constitute parachute payments under Code Section 280G or as to the
determination of the present value thereof, such dispute will be resolved as
follows:
(i) In the event temporary, proposed or final Treasury
Regulations in effect at the time under Code Section 280G (or applicable
judicial decisions) specifically address the status of any such Payment or the
method of valuation therefor, the characterization afforded to such Payment by
the Regulations (or such decisions) will, together with the applicable valuation
methodology, be controlling.
(ii) In the event Treasury Regulations (or applicable judicial
decisions) do not address the status of any Payment in dispute, the matter will
be submitted for resolution to a nationally-recognized independent accounting
firm mutually acceptable to Executive and the Company ("Independent
Accountant"). The resolution reached by the Independent Accountant will be final
and controlling; provided, however, that if in the judgment of the Independent
Accountant the status of the payment in dispute can be resolved through the
obtainment of a private letter ruling from the Internal Revenue Service, a
formal and proper request for such ruling will be prepared and submitted, and
the determination made by the Internal Revenue Service in the issued ruling will
be controlling. All expenses incurred in connection with the retention of the
Independent Accountant and (if applicable) the preparation and submission of the
ruling request shall be borne by the Company.
4.7 Reduction of Benefits. To the extent the aggregate present value of
the Payments would exceed the Benefit Limit, the salary continuation payments
will first be reduced, and then the accelerated vesting of the options (based on
their parachute value under Code Section 280G) will be reduced, to the extent
necessary to assure that such Benefit Limit is not exceeded.
ARTICLE V
GENERAL PROVISIONS
5.1 Severability. The Executive acknowledges and agrees that (i) he has
had an opportunity to seek advice of counsel in connection with this Agreement
and (ii) the Restrictive Covenants are reasonable in geographical and temporal
scope and in all other respects. If it is determined that any of the provisions
of this Agreement, including, without limitation, any of the Restrictive
Covenants, or any part thereof, is invalid or unenforceable, the remainder of
the provisions of this Agreement shall not thereby be affected and shall be
given full effect, without regard to the invalid portions.
5.2 Duration and Scope of Covenants. If any court or other decision-maker
of competent jurisdiction determines that any of Executive's covenants contained
in this Agreement, including, without limitation, any of the Restrictive
Covenants, or any part thereof, is unenforceable because of the duration or
geographical scope of such provision, then, after such determination has become
final and unappealable, the duration or scope of such provision, as the case may
be, shall be reduced so that such provision becomes enforceable and, in its
reduced form, such provision shall then be enforceable and shall be enforced.
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5.3 Arbitration.
(a) Except as provided in Section 3.6, any controversy, dispute, or
claim between the parties to this Agreement, including any claim arising out of,
in connection with, or in relation to the formation, interpretation, performance
or breach of this Agreement shall be settled exclusively by arbitration, before
a single arbitrator experienced in employment matters, in accordance with this
section and the then most applicable rules of the American Arbitration
Association. Judgment upon any award rendered by the arbitrator may be entered
by any state or federal court having jurisdiction thereof. Such arbitration
shall be administered by the American Arbitration Association. Arbitration shall
be the exclusive remedy for determining any such dispute, regardless of its
nature. Notwithstanding the foregoing, either party may in an appropriate matter
apply to a court pursuant to California Code of Civil Procedure Section 1281.8,
or any comparable provision, for provisional relief, including a temporary
restraining order or a preliminary injunction, on the ground that the award to
which the applicant may be entitled in arbitration may be rendered ineffectual
without provisional relief.
(b) In the event the parties are unable to agree upon an arbitrator,
the parties shall select a single arbitrator from a list of nine arbitrators
drawn by the parties at random from the "Independent" (or "Gold Card") list of
retired judges or, at Executive's option, from a list of nine persons from the
Employment Panel provided by the American Arbitration Association. If the
parties are unable to agree upon an arbitrator from the list so drawn, then the
parties shall each strike names alternately from the list, with the first to
strike being determined by lot. After each party has used four strikes, the
remaining name on the list shall be the arbitrator. If such person is unable to
serve for any reason, the parties shall repeat this process until an arbitrator
is selected.
(c) This agreement to resolve any disputes by binding arbitration
shall extend to claims against any parent, subsidiary or affiliate of each
party, and, when acting within such capacity, any officer, director,
shareholder, employee or agent of each party, or of any of the above, and shall
apply as well to claims arising out of state and federal statutes and local
ordinances as well as to claims arising under the common law. In the event of a
dispute subject to this paragraph the parties shall be entitled to reasonable
discovery subject to the discretion of the arbitrator. The remedial authority of
the arbitrator shall be the same as, but no greater than, would be the remedial
power of a court having jurisdiction over the parties and their dispute. The
arbitrator shall, upon an appropriate motion, dismiss any claim without an
evidentiary hearing if the party bringing the motion establishes that he, she or
it would be entitled to summary judgment if the matter had been pursued in court
litigation. In the event of a conflict between the applicable rules of the
American Arbitration Association and these procedures, the provisions of these
procedures shall govern.
(d) Any filing or administrative fees shall be borne initially by
the party requesting arbitration. The Company shall be initially responsible for
the costs and fees of the arbitrator, unless Executive wishes to contribute (up
to 50%) of the costs and fees of the arbitrator. The prevailing party in such
arbitration, as determined by the arbitrator, and in any enforcement or other
court proceedings, shall be entitled, to the extent permitted by law, to
reimbursement from the other party for all of the prevailing party's costs
(including but not limited to the arbitrator's compensation), expenses, and
attorneys' fees.
12
(e) The arbitrator shall render an award and written opinion, and
the award shall be final and binding upon the parties. If any of the provisions
of this Section 5.3, or of this Agreement, are determined to be unlawful or
otherwise unenforceable, in whole or in part, such determination shall not
affect the validity of the remainder of this Agreement, and this Agreement shall
be reformed to the extent necessary to carry out its provisions to the greatest
extent possible and to insure that the resolution of all conflicts between the
parties, including those arising out of statutory claims, shall be resolved by
neutral, binding arbitration. If a court should find that this Section's
arbitration provisions are not absolutely binding, then the parties intend any
arbitration decision and award to be fully admissible in evidence in any
subsequent action, given great weight by any finder of fact, and treated as
determinative to the maximum extent permitted by law.
(f) Unless mutually agreed by the parties otherwise, any arbitration
shall take place in Orange County, California.
5.4 Proprietary Information and Inventions. Contemporaneously with the
execution of this Agreement, Executive shall execute a Proprietary Information
and Inventions Agreement with the Company. The terms of said agreement are
incorporated by reference in this Agreement, and Executive agrees to be bound
thereby.
5.5 Covenant to Notify Management. Executive agrees to abide by the ethics
policies of the Company as well as the Company's other rules, regulations,
policies and procedures which he has received in writing. Executive agrees to
comply in full with all governmental laws and regulations as well as ethics
codes applicable to the business or profession. In the event that Executive is
aware or suspects the Company, or any of its officers or agents, of violating
any such laws, ethics codes, rules, regulations, policies or procedures,
Executive agrees to bring all such actual and suspected violations to the
attention of the Company immediately so that the matter may be properly
investigated and appropriate action taken.
5.6 Notices. All notices or deliveries authorized or required pursuant to
this Agreement shall be deemed to have been given when in writing and when (i)
deposited in the U.S. mail, certified, return receipt requested, postage
prepaid, or (ii) otherwise delivered by hand or by overnight delivery, against
written receipt, by a common carrier or commercial courier or delivery service
addressed to the parties at the following addresses or to such other addresses
as either may designate in writing to the other party:
to the Company: Xxxxxxx.xxx, Inc.
000 Xxxxx Xxxx., 00xx Xxxxx
Xxxxx Xxxx, XX 00000
Attn: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
to Executive: Xxxxxx Xxxxxxx
000 Xxxxxxxxx Xxxxx
Xx Xxxxxx, XX 00000
13
with a copy to: Xxxx Xxxx, Esq.
Xxxxxxxxx Xxxxxxx, LLP
0000 Xxxxxxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
5.7 Entire Agreement. This Agreement, along with the Proprietary
Information and Inventions Agreement by and between Executive and Company of
even date herewith and the stock option agreements described in Section 2.3,
contain the entire agreement between the parties with respect to the subject
matter hereof and thereof and supersedes all prior agreements, written or oral,
with respect thereto.
5.8 Waivers and Amendments. This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by the parties or, in the case of a waiver, by the
party waiving compliance. No delay on the part of any party in exercising any
right, power or privilege hereunder shall operate as a waiver thereof, nor shall
any waiver on the part of any party of any such right, power or privilege nor
any single or partial exercise of any such right, power or privilege, preclude
any other or further exercise thereof or the exercise of any other such right,
power or privilege.
5.9 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD TO CONFLICTS
OF LAWS PRINCIPLES.
5.10 Assignment. This Agreement, and Executive's rights and obligations
hereunder, may not be assigned by Executive; any purported assignment by
Executive in violation hereof shall be null and void. In the event of any sale,
transfer or other disposition of all or substantially all of the Company's
assets or business, whether by merger, consolidation or otherwise, the Company
may assign this Agreement and its rights hereunder; provided that such
assignment shall not limit the Company's liability under this Agreement to
Executive.
5.11 Withholding. The Company shall be entitled to withhold from any
payments or deemed payments any amount of tax withholding required by law.
5.12 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors, permitted assigns,
heirs, executors and legal representatives.
5.13 Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original but all such counterparts together shall constitute one and the same
instrument. Each counterpart may consist of two copies hereof each signed by one
of the parties hereto.
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5.14 Survival. Anything contained in this Agreement to the contrary
notwithstanding, the provisions of Article III, Sections 5.2, 5.3, 5.5, 5.9 and
5.16, and the other provisions of this Section 5 (to the extent necessary to
effectuate the survival of Article III, Sections 5.2, 5.3, 5.5, 5.9 and 5.16),
shall survive termination of this Agreement and any termination of Executive's
employment hereunder.
5.15 Headings. The headings in this Agreement are for reference only and
shall not affect the interpretation of this Agreement.
5.16 Indemnification; Directors and Officers Insurance. To the fullest
extent permitted by law, the Company shall indemnify, defend and hold harmless
Executive from and against all actual or threatened actions, suits or
proceedings, whether civil or criminal, administrative or investigative,
together with all attorneys' fees and costs, fines, judgments or settlements
imposed upon or incurred by Executive in connection therewith, that arise from
Executive's employment by, or serving as an officer of, the Company, so long as
Executive acted or refrained from acting legally and in good faith or reasonably
believed that his actions or refraining from acting were legal and performed or
omitted in good faith. Company currently has directors and officers liability
insurance and will use reasonable efforts to maintain such insurance coverage
and Executive's coverage thereunder during the Term and for a period of three
(3) years thereafter. The Company will notify Executive within three (3)
business days of the termination of its directors and officers liability
insurance.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
"EMPLOYER"
XXXXXXX.XXX, INC., a Delaware
corporation
By: /s/ Xxxxxxxxx X. Xxxxx
------------------------------------
Xxxxxxxxx Xxxxx
Chief Financial Officer
"EXECUTIVE"
/s/ Xxxxxx Xxxxxxx
------------------------------------
Xxxxxx Xxxxxxx
15
EXHIBIT A
NON-DISCLOSURE AND NON-COMPETITION AGREEMENT
Please list terms of any agreements with any previous employer or other
party which restrains you from using or disclosing any trade secret or
confidential or proprietary information in the course of your employment with
Xxxxxxx.xxx, Inc. or restrains you from competing directly or indirectly with
the business of such previous employer or any other party.
Date Signed by
Executive:
_____________________________________ ___________________________
Signature of Executive
___________________________
Printed Name of Executive
Reviewed and accepted by
_____________________________________
On __________________________________
By: _________________________________
A-1
