Exhibit 10.40
To: Xxxxxx Xxxxx
From: Xxx Xxxxxxxx
Date: February 3, 2004 (revised February 11, 2004)
RE: AMENDMENT TO JUNE 12, 2002 EMPLOYMENT AGREEMENT
Reebok International Ltd. (the "Company" or "Reebok" or "RIL"), has
decided to move in a different direction with the leadership of the Reebok Brand
and has accepted your resignation. As a result, your employment will end
effective today, February 3, 2004 (the "Separation Date"). I refer you to the
Employment Agreement effective as of June 12, 2002 (the "Employment Agreement")
between you and the Company, and each of the Employment Agreement exhibits. Your
separation shall be deemed a termination of employment pursuant to Section 10F
("Any Other Reasons") of the Employment Agreement. As such, the Company is
providing you severance period benefits in accordance with the provisions of
Section 11C of the Employment Agreement as supplemented and modified by the
terms and conditions of this letter agreement (the "Amendment"). Except as
expressly modified or amended by this Amendment, the Employment Agreement (and
each of the exhibits) shall remain in full force and effect. Terms used in this
Amendment and not defined herein shall have the meaning as defined in the
Employment Agreement (and each of the exhibits).
SEVERANCE PERIOD BENEFITS
A. SALARY CONTINUATION. For good and valuable consideration, including
but not limited to, the provisions of Paragraph J herein, Reebok agrees to pay
your present base salary (which is $600,000 on an annualized basis) on a
bi-weekly basis for up to eighteen (18) months beginning as of February 9, 2004,
and continuing until August 5, 2005, or the date you secure new employment,
whichever occurs first (the "Severance Period"). These payments will be subject
to all applicable federal and state taxes and other employment related
deductions.
Subject to your compliance with the provisions of Paragraph J herein, if
you obtain new employment before August 5, 2005, the Company will pay you,
within two weeks of being notified of such new employment, a lump sum cash
amount equal to one-half of the remaining portion of your pay continuation. For
the avoidance of doubt, the term "new employment," in this Amendment and the
Employment Agreement shall not refer to a start-up enterprise of which you are
at least a 25% owner, to the extent that such enterprise does not yield revenue
to you equivalent to a substantial portion of your previous compensation at
Reebok. Notwithstanding the foregoing, if you are re-hired by Reebok or re-hired
by any Reebok subsidiary or affiliated organization, your severance will cease
on the date of such re-employment and you will not be entitled to any lump sum
or other payment. You should understand, however, that the Company and its
affiliated organizations have no obligation to rehire you as an employee. You
will also be paid for any and all previously accrued, but unused, vacation time
determined as of the Separation Date in your next paycheck.
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B. BONUSES AND PROFIT-SHARING. Although under no obligation to do so, in
exchange for signing this Amendment with a Release of All Claims, you will also
receive a bonus of $438,461 before taxes and deductions (the "Bonus Payment").
The Bonus Payment will be paid at the same time as bonuses are generally paid to
employees of the Company (expected to be in mid-March of 2004). Finally, because
you were actively employed by Reebok as of December 31, 2003, you will receive
the profit-sharing contribution to the same extent and at the same time that
such contributions are generally given to employees of the Company (expected to
be in or about March 2004).
C. MEDICAL AND DENTAL BENEFITS. To the same extent you are currently
enrolled in such programs, Reebok will continue your participation in its
medical and dental insurance programs through the end of August 2005, or the
last day of the month in which you obtain other employment or secure other
comparable medical insurance coverage, whichever is earlier. Thereafter, you
will be eligible for continuation of these benefits under the federal law known
as COBRA. You will receive detailed information about COBRA, and how to elect
coverage, upon reaching the end of the Severance Period. If you elect COBRA,
your qualifying start date will be the last day of the Severance Period. You
agree that, except as provided in the Employment Agreement or in this Amendment,
your participation in all other Company benefit programs will terminate on the
Separation Date.
D. RETIREMENT BENEFITS AND DEFERRED BONUS AMOUNTS. Please be aware that
any money you have in the Reebok Savings and Profit-Sharing Retirement Plan,
Executive Deferred Compensation Plan and/or Executive Deferred Bonus Plan will
be treated according to the provisions of the applicable plans. For your
information, as of December 31, 2003, your current vested balance in the
Executive Deferred Compensation Plan is $0. You should contact Xxxxxx Xxxxxxxxxx
or Xxxxx Held-Xxxxx in the Benefits Department to discuss the distribution of
any amounts that may be added after that date or any questions you may have on
retirement benefit issues.
E. OTHER INSURANCE. In addition, Reebok will continue your participation
in its life and supplemental life insurance and AD&D programs through the last
day of the Severance Period, or the last day for which you obtain other
employment or secure other insurance coverage, or twelve (12) months from the
Separation Date, whichever is earlier (the "Other Insurance End Date"). During
the 30 day period following the Other Insurance End Date you may elect to
convert the life insurance to an individual policy. You agree that, with the
exception of the foregoing, your participation in all other Company benefit
programs unless specifically referenced herein will terminate on the Separation
Date. Reebok will be obligated to provide such continued coverage only to the
extent that such continued coverage can be made available through Reebok's group
insurance contracts covering active employees.
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F. LOAN REPAYMENT. In connection with your moving your family and
household goods from California to Massachusetts, you entered into a Revolving
Promissory Note dated August 12, 2002 (the "Note"), for the principal amount of
$300,000. You agreed that if your employment with the Company was terminated for
any reason (other than death) prior to June 30, 2005, you would repay to the
Company the entire principal amount plus accrued interest on the Note. As part
of this Amendment, and in recognition of your dedicated work during your time
with Reebok and the cessation of your employment relationship before June 30,
2005, we will forgive a pro-rata share of the Note based on your months of
service. Thus, you now owe $150,000, which includes payments still due on the
Note, plus all accrued interest to date. You will bear full responsibility for
the tax impact of any imputed income based on the partial forgiveness of the
Note. We will deduct this $150,000 from the Bonus Payment discussed in Paragraph
B.
G. OUTPLACEMENT. The Company will also arrange for outplacement services
to be provided to you by the outplacement firm of Xxx Xxxxx Xxxxxxxx for a
period of twelve (12) months. The services will be available starting upon the
effective date of this Agreement, but must be commenced within sixty (60) days
of starting the Severance Period.
H. STOCK OPTIONS. As of the Separation Date, you have 62,500 vested, but
unexercised, options to purchase Reebok Common Stock. All outstanding unvested
stock options held by you will automatically be cancelled as of the Separation
Date. A listing of the vested, but unexercised, options and option exercise
price are set forth in EXHIBIT A. In order to exercise these options you must
contact our option administrator, Xx. Xxxxx Xxxxxxxx at Xxxxxxx Xxxxx. His phone
number is 617/000-0000. Please note that the terms of the stock options and the
1994 Equity Incentive Plan or 2001 Equity Incentive and Director Deferred
Compensation Plan, as applicable, provide that all such vested, but unexercised,
options which are not exercised within ninety (90) days after the Separation
Date will expire. Notwithstanding such terms, because you are now restricted
from trading in Company stock from the Separation Date until the end of February
2004, pursuant to the Company's Trading Window Policy and your possession of
material, non-public information, such currently vested options will not expire
until May 30, 2004.
I. ALLOWANCES. Any applicable personal allowances will end as of the
Separation Date, except for your use of The Colony Group for financial and tax
planning. You will be reimbursed for any services of The Colony Group already
provided in 2003, and Reebok will pay for up to $10,000 of their services on
your behalf in 2004.
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J. NON-COMPETE AND NON-RECRUITMENT. As provided for in Section I.B of the
Non-Competition Agreement entered into and signed in connection with the
execution of the Agreement as Exhibit C (the "Non-Competition Agreement"),
Reebok hereby waives, EXCEPT in the case of and/or as regards Nike, Converse,
Adidas, Timberland, K Swiss, Puma, Stride Rite, and New Balance and their
subsidiaries, successors and affiliates (the "Prohibited Companies"), its option
to extend the Non-Competition Requirement past the Separation Date.
Notwithstanding that waiver, or anything else contained in this Amendment or in
the Non-Competition Agreement and/or in the Employment Agreement, Reebok, as
provided for in Section I.B.(1) of the Non-Competition Agreement, elects hereby
to extend the duration of the Non-Competition Requirement for twelve (12) months
from the Separation Date, or until and including February 3, 2005, as regards
and for each and all of the Prohibited Companies. By way of example only, but in
no way limiting or modifying the forgoing, you shall be permitted to immediately
seek and obtain employment with any company that is not a Prohibited Company,
but you are not permitted and shall not, directly or indirectly, own, manage,
operate, control, invest in, make loans or advances to, be employed by, act as
an officer, director, agent or consultant for, or be in any other way connected
with, any of the Prohibited Companies.
Notwithstanding the forgoing and/or anything contained in this Amendment
and/or in the Non-Competition Agreement and/or in the Employment Agreement, the
remaining provisions of the Non-Competition Agreement shall remain in force and
effect, including but not limited to the prohibitions contained in paragraph II
of the Non-Competition Agreement and Paragraph 6 of the Company's Standard
Employee Agreement (which is Exhibit B to the Employment Agreement, and an
earlier version dated December 4, 2001 and signed upon your initial hire) that
prohibits you from soliciting, hiring, attempting to hire, or assisting in
hiring any employee of Reebok or any of its subsidiaries or affiliates, or
otherwise persuading or attempting to persuade any such employee to discontinue
his/her employment relationship with Reebok or any of its subsidiaries or
affiliates (the "Prohibited Hiring Activities"), for a period of eighteen (18)
months following the Separation Date. By way of example, but in no way limiting
or modifying the forgoing, you may immediately seek and obtain employment with
any company that is not a Prohibited Company, but may not, under any
circumstances engage in the Prohibited Hiring Activities.
Without limiting or in any way modifying the forgoing, Employee may in
good faith request that Reebok further waive the Non-Competition Requirement as
regards one or more of the Prohibited Companies; PROVIDED, HOWEVER, that, as
provided for in the Non-Competition Agreement, it shall remain throughout the
Non-Competition Requirement in Reebok's sole discretion to decide whether and/or
to what extent to grant any such waiver and you, by signing this Amendment,
acknowledge the same.
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K. CONTINUING OBLIGATIONS. In addition to your obligations as set forth
in the Employment Agreement, you agree to cooperate with the Company to provide
information and services (including without limitation, responding to inquiries
by and providing relevant information to, the Legal Department, and testifying
both in court and at depositions as to facts related to your employment) for no
additional compensation. These services, however, shall not exceed sixteen (16)
hours per week during the Severance Period. The Company will reimburse you for
any reasonable out of pocket costs incurred by you in connection with your
cooperation hereunder.
You agree that you will comply with the obligations set forth in the
Employee Agreement, as modified by this Amendment and that after the Separation
Date, you will comply with the post-termination obligations of that Employee
Agreement, as modified by this Amendment. Furthermore, you agree, as a condition
of this Amendment, not to discuss with any third party, other than prospective
employers, your attorney or other advisor or family members, anything related to
the termination of that employment or the terms of the Employment Agreement, as
modified by this Amendment. You also agree that you will not disparage the
Company or any of its employees, products, policies, decisions, advertising,
marketing or other programs. The Company will not issue any public statements or
respond to any employment verification requests that in any way disparages you
personally or professionally. We also agree that our executive officers will not
make any disparaging remarks about you or your employment history with the
Company.
Your signature below also authorizes the Company to deduct any amounts
owed to it by you (other than 401(k) loans) from the salary continuation or
bonus payments. You agree that your obligations under the Employment Agreement,
as modified by this Amendment, will survive the termination of this Amendment.
You recognize that any material violation of these post-termination obligations
may result, in the Company's sole discretion, in the cessation of your pay and
health benefit continuation and the forfeiture by you of all benefits under the
Employment Agreement, as modified by this Amendment.
Reebok wants to be certain that the payment and provision of the
severance benefits set forth in the Employment Agreement, as modified by this
Amendment, will resolve any and all dissatisfactions that you might have and, in
that regard, requests that you carefully consider the following Release of All
Claims. The provision of these financial and other benefits is conditioned upon
your signing this Amendment, which includes the following Release of All Claims.
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RELEASE OF ALL CLAIMS
This Agreement shall be in complete and final settlement of, and releases
the Company and all those connected with it from any and all causes of action,
claims, demands or liabilities (whether or not currently known or suspected to
exist by you) that you have had, now have or may now have, in any way related to
your employment, events or actions occurring during the course of your
employment, and the termination of your employment, or pursuant to any federal,
state or local law or regulation, including, but not limited to: any alleged
violation of The National Labor Relations Act, as amended; Title VII of the
Civil Rights Act of 1964, as amended; Sections 1981 through 1988 of Title 42 of
the United States Code, as amended; the Fair Labor Standards Act, 29 U.S.C. sec.
201, ET SEQ., the Age Discrimination in Employment Act of 1967, 29 U.S.C.
Section 623, ET SEQ. as amended, the Employee Retirement Income Security Act of
1974, 29 U.S.C. sec 1001, ET SEQ., the Immigration Reform Control Act, as
amended; the Occupational Safety and Health Act, as amended; the Civil Rights
Act of 1866, 29 U.S.C. sec 1981, ET SEQ., the Rehabilitation Act of 1973, 29
U.S.C. sec 701, ET SEQ., the Americans with Disabilities Act, as amended; The
Family Medical Leave Act; the Civil Rights Act of 1991, the Massachusetts Wage
and Hour Laws, G.L. cs.149 and 151; the Massachusetts Law Against
Discrimination, X.X. x. 151B; the Massachusetts Equal Rights Act, X.X. x. 93;
the Massachusetts Civil Rights Act, X.X. x. 12 sec 11H and 11I; the
Massachusetts Privacy Statute, X.X. x. 214, sec 1B as amended; The Massachusetts
Sexual Harassment Statute, X.X. x. 214 sec 1C; any other federal, state or local
civil or human rights law, or any other local, state or federal law, regulation,
or ordinance; any public policy, contract, tort, or common law; or any
allegation for costs, fees, or other expenses including attorneys' fees incurred
in these matters excepting only claims in the nature of workers' compensation,
claims for vested benefits, and claims to enforce this agreement.
You also agree that you will never institute any claim, suit or action
against the Company or those connected with it in any court or agency that
relates to your employment or the termination of your employment; provided,
however, that nothing herein is intended to or shall preclude you from seeking a
judicial determination of the validity of the agreement under the ADEA or from
filing a complaint and/or charge with any government agency or cooperating with
said agency in its investigation. However, you shall not be entitled to receive
any recovery or monies in connection with any charge against the Company
regardless of who brought the charge.
This Agreement, with its attachment, will constitute the entire agreement
between you and the Company with respect to all matters discussed in this
Agreement, and will supersede any and all other prior agreements between you and
the Company with respect to matters relating to your employment by the Company,
the termination of your employment, or any other matters covered in this
Agreement. You acknowledge that you have been advised by Reebok to seek the
advice of an attorney before signing this Agreement, afforded sufficient time to
do so, in fact, spoken with an attorney and that you fully understand the terms
of this Agreement. Your signature below also certifies that your agreement is
made voluntarily,
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knowingly and without duress, and that neither Reebok nor its agents have made
any statements or representations inconsistent with the written provisions of
this Agreement. Should any provision of this Agreement be determined by any
court or other body to be illegal or invalid, the validity of the remaining
provisions shall not be affected thereby.
Reebok and you hereby acknowledge that because you are over 40 years of
age, you are granted specific rights under the Older Workers Benefit Protection
Act ("OWBPA"), which prohibits discrimination on the basis of age. The Release
of all Claims above is intended to release any right that you may have to file a
claim against Reebok alleging discrimination on the basis of age. Consistent
with the provisions of the OWBPA, Reebok will provide you with up to twenty-one
(21) to consider and accept the terms of this Agreement. You have the right to
consult with an attorney concerning this Agreement and you may choose to do so.
You will also have seven (7) days after signing this Agreement to revoke your
acceptance of its terms by delivering notice of the same in writing to the
attention of the General Counsel at Reebok. To be effective, such notice must be
hand delivered, or postmarked within the seven day period and sent by certified
mail, return receipt requested, to the attention of General Counsel, Reebok
International Ltd., Legal Department, 1895 X.X. Xxxxxx Boulevard, Canton, MA
02021. If the Agreement is not so revoked, its terms will become fully effective
and binding on the eighth day following your execution of the Agreement.
XXXXXX XXXXX REEBOK INTERNATIONAL LTD.
/s/ Xxxxxx Xxxxx /s/ Xxxxxx X. Xxxxx
--------------------------------- -----------------------------------
Signature Signature
2.14.04 2.18.04
---------------------------------- -----------------------------------
Date Date
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EXHIBIT A
OPTIONS VESTED AS OF SEPARATION DATE
NUMBER OF SHARES OPTION EXERCISE PRICE
OPTION GRANT DATE EXERCISABLE PER SHARE
----------------------------------------------------------
1/14/02 25,000 $ 25.48
----------------------------------------------------------
6/12/02 12,500 $ 26.77
----------------------------------------------------------
12/10/02 25,000 $ 28.57
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