EXECUTIVE RETENTION AGREEMENT
This Executive Retention Agreement ("Agreement") is made and entered
into by and between Savoir Technology Group, Inc. (the "Company") and P. Xxxxx
Xxxxx ("Xxxxx") as of May 10, 1999 (the "Effective Date").
R E C I T A L S
X. Xxxxx is the president and chief executive officer of Savoir Technology
Group, Inc. who possesses valuable knowledge of the Company, its
business and operations and the markets in which the Company competes.
B. The Company draws upon the knowledge, experience and objective advice
of Xxxxx in order to manage its business for the benefit of the
Company's stockholders.
X. Xxxxx and the Company have entered into a letter agreement dated May 1,
1998 setting forth the terms and conditions of Xxxxx'x employment (the
"May 1998 Letter Agreement").
D. In January, 1999, the Compensation Committee of the Board of Directors
agreed to supplement Xxxxx'x compensation arrangements so as to
compensate Xxxxx for his contributions to the Company, to encourage his
retention and to create incentives for strategic alliances or other
transactions that maximize stockholder value.
1. GENERAL.
(a) NO EMPLOYMENT AGREEMENT. Xxxxx is employed by the Company as its
president and chief executive officer ("CEO"). This Agreement does not obligate
the Company to continue to employ Xxxxx for any specific period of time, or in
any specific role or geographic location. Subject to the terms of this Agreement
and the May 1998 Letter Agreement, either Xxxxx or Company may terminate Xxxxx'x
employment at any time for any reason.
(b) DEFINED TERMS. Capitalized terms used in this Agreement shall have
the meanings set forth in Section 2, unless the context clearly requires a
different meaning.
2. DEFINITIONS. For purposes of this Agreement,
(a) "CAUSE" for the termination of Xxxxx'x employment by the Company
shall mean:
(i) theft; a material act of dishonesty or fraud; intentional
falsification of any employment or Company records; or the commission of any
criminal act which impairs Xxxxx'x ability to perform his duties as the
Company's president and CEO;
(ii) improper disclosure or use of the Company's confidential,
business or proprietary information; or
-1-
(iii) the conviction (including any plea of guilty or nolo
contendere) for a crime involving moral turpitude causing material harm to the
reputation and standing of the Company, as determined by the Company in good
faith.
(b) "CHANGE OF CONTROL" shall mean the occurrence of any of the
following events:
(i) 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;
(ii) 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;
(iii) 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; or
(iv) a liquidation or dissolution of the Company.
(c) "COMPANY" shall mean Savoir Technology Group, Inc. and following
a Change of Control, any successor thereto that agrees to assume or otherwise
becomes bound to, by operation of law, this Agreement.
(d) "PERMANENT DISABILITY" shall mean Xxxxx'x disability as
determined under the Company's long term disability plan.
(e) "GOOD REASON" means the occurrence of any of the following
conditions following a Change of Control, without Xxxxx'x informed written
consent, which condition(s) remain(s) in effect ten (10) days after written
notice to the Company from Xxxxx of such condition(s):
(i) a material decrease in Xxxxx'x base salary or target bonus
amount;
(ii) any change in Xxxxx'x title, authority, responsibilities,
duties or reporting, so that any of them are not substantially equivalent to
Xxxxx'x title, authority, responsibilities, duties or reporting immediately
prior to the Change of Control.
(iii) the relocation of Xxxxx'x work place for the Company to a
location more than 50 miles from the location of the work place prior to the
Change of Control;
(iv) consummation of a Change of Control transaction in which
outstanding stock options granted and restricted stock issued by the Company
prior to the transaction are not fully assumed by the Successor, or replaced by
fully equivalent substitute options or restricted stock; or
-2-
(v) any material breach of this Agreement by Company.
(f) "TERMINATION AFTER A CHANGE OF CONTROL" means:
(i) any termination of the employment of Xxxxx by the Company
without Cause within twelve (12) months after the occurrence of a Change of
Control;
(ii) any resignation by Xxxxx for Good Reason with twelve (12)
months after the occurrence of a Change of Control;
(iii) "Termination After a Change of Control" shall not include
any termination of the employment of Xxxxx (1) by the Company for Cause; (2) by
the Company as a result of the Permanent Disability of Xxxxx; (3) as a result of
the death of Xxxxx; or (4) as a result of the voluntary termination of
employment by Xxxxx for reasons other than Good Reason.
3. STOCK OPTIONS. Upon a Termination After a Change of Control, Xxxxx
shall be entitled to acceleration of vesting for stock options and restricted
stock as provided under the stock option agreements and the May 1998 Letter
Agreement.
4. LOANS.
(a) As of the Effective Date of this Agreement, the Company will
loan Xxxxx the sum of Two Million Five Hundred Twelve Thousand Seven Hundred
Twenty-Nine Dollars ($2,512,729) (the "Loan") which shall bear interest at the
minimum federal rate and which shall be due and payable on May 9, 2002, except
as otherwise provided in this Agreement. The Loan shall be subject to the terms
and conditions of the promissory note attached hereto as EXHIBIT 1 (the
"Promissory Note"). After the Effective Date and before May 9, 2002, the Company
will make one or more loans to Xxxxx in a total amount of up to One Million
Eighty-Seven Thousand Two Hundred Seventy-One Dollars ($1,087,271) (the
"Subsequent Loans"). The Subsequent Loans shall bear interest at the minimum
federal rate and shall be due and payable on May 9, 2002, except as otherwise
provided in this Agreement. The Subsequent Loans shall be subject to the terms
and conditions of one or more promissory notes substantially in the form of the
promissory note attached hereto as EXHIBIT 1 (the "Subsequent Promissory
Notes").
(b) Notwithstanding any other provisions in the Promissory Note or
Subsequent Promissory Notes to the contrary, and provided Xxxxx remains
continuously employed through the date specified below for such forgiveness,
principal and interest on the Loan and the Subsequent Loans shall be forgiven as
follows:
(i) Eight hundred thousand dollars ($800,000) of the principal
balance of the Loan and the interest that has accrued on such amount through
such date shall be forgiven by the Company on January 1, 2000.
(ii) On May 9, 2002, Xxxxx'x obligation to pay the then
outstanding balance of the Loan and Subsequent Loans (including unpaid principal
and accrued interest thereon) shall be forgiven and the Promissory Note and
Subsequent Promissory Notes shall be canceled.
-3-
(iii) Upon the occurrence of a Change of Control, Xxxxx'x
obligation to pay the then outstanding balance of the Loan and the Subsequent
Loans (including unpaid principal and accrued interest thereon) shall be
forgiven and the Promissory Note and Subsequent Promissory Notes shall be
canceled.
(iv) The Company's Board of Directors may, in its sole discretion,
forgive any portion of the Loan and the Subsequent Loans at any time during
Xxxxx'x employment based upon Xxxxx'x performance or such other considerations
as it may deem appropriate.
(c) Notwithstanding any other provision in the Promissory Note to
the contrary, in the event Xxxxx'x employment is terminated by the Company for
any reason other than for Cause, an amount equal to Xxxxx'x original purchase
price of any shares of restricted stock which are unvested as of the date of
such termination (the "Unvested Shares") may, at Xxxxx'x option, be repaid by
delivery to the Company of the Unvested Shares and the outstanding balance of
the Loan, including principal and accrued interest, shall be forgiven and the
Promissory Note shall be canceled.
5. TERMINATION AFTER A CHANGE IN CONTROL. In the event of Xxxxx'x
Termination After a Change in Control, Xxxxx shall be entitled to the following
cash severance benefits:
(a) CASH SEVERANCE BENEFITS:
(i) Xxxxx shall receive a severance payment in an amount equal to
two hundred percent (200%) of the sum of his annual base salary plus his
annualized target incentives as in effect immediately prior to such Termination
After a Change of Control, less applicable withholding, payable in a lump sum
within fifteen (15) days of the Termination of employment; and
(ii) if Xxxxx elects continued medical insurance coverage in
accordance with the applicable provisions of federal law (commonly referred to
as "COBRA"), the Company shall pay COBRA premium contributions for Xxxxx and the
members of his immediate family for eighteen (18) months following the date of
Xxxxx'x termination of employment. Notwithstanding the foregoing, in the event
Xxxxx becomes covered under another employer's group health plan during the
period provided for herein, the Company shall cease payment of the COBRA
premiums for Xxxxx and the members of his immediate family.
(b) BASIC SEVERANCE BENEFITS. The severance benefits provided under
this Section 5 shall be in addition to payment of all salary and vacation earned
or accrued through the date of Xxxxx'x termination of employment, payment of any
bonuses earned through the date of termination of employment, reimbursement of
any expenses incurred prior to termination of employment pursuant to the
Company's expense reimbursement policy, and any and all benefits as may be
payable as a result of termination of employment under the Company's 401(k)
plan, and any other compensation or benefit programs.
6. 280G. To the extent that any of the payments and benefits provided
for in this Agreement constitute "parachute payments" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and,
but for this Section 6 would be subject to the excise tax imposed by Section
4999 of the Code or any similar or successor provision, the
-4-
Company agrees that Xxxxx shall either (i) receive the full parachute payment
subject to the excise tax, or, if a reduced parachute would result in an
increase to Xxxxx'x after-tax income, (ii) receive a parachute payment that is
reduced to the extent necessary to maximize Xxxxx'x after-tax income. Unless the
Company and Xxxxx otherwise agree in writing, any calculation required under
this Section 6 shall be made in writing by independent public accountants agreed
to by the Company and Xxxxx (the "Accountants"), whose calculation shall be
conclusive and binding upon Xxxxx and the Company for all purposes. For purposes
of calculating the value of Xxxxx'x options under this Section 6, the
Accountants may rely on reasonable, good faith interpretations concerning the
application of Sections 280G and 4999 of the Code. The Company and Xxxxx shall
furnish to the Accountants such information and documents as the Accountants may
reasonably request in order to make a determination under this Section 6. The
Company shall bear all costs the Accountants may reasonably incur in connection
with any calculations contemplated by this Section 6.
7. 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, Xxxxx 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. Xxxxx 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.
8. SOLE REMEDY FOR TERMINATION AFTER CHANGE OF CONTROL. The payments
and benefits provided for in this Agreement shall constitute Xxxxx'x sole and
exclusive remedy for any alleged injury or other damages arising out the
cessation of the employment relationship between Xxxxx and the Company in the
event of Xxxxx'x Termination After a Change of Control.
9. RELEASE OF CLAIMS. The Company may condition the benefits payable
upon a Termination After a Change of Control described in Sections 4 and 5 of
this Agreement upon the delivery by Xxxxx of a signed release of claims in a
form reasonably satisfactory to the Company.
10. CONFIDENTIALITY AGREEMENT. Xxxxx agrees to abide by the terms and
conditions of the Company's standard Confidentiality Agreement that Xxxxx
previously executed.
11. DISPUTE RESOLUTION. In the event of any dispute or claim relating
to or arising out of this Agreement, Xxxxx 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). Xxxxx 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
-5-
claims relating to or arising out of the misuse or misappropriation of trade
secrets or proprietary information.
12. COVENANT NOT TO COMPETE UNFAIRLY. During Xxxxx'x employment with
the Company and for a period of two (2) years after any Termination After a
Change of Control pursuant to which Xxxxx is entitled to benefits under Sections
4 and 5 of this Agreement, Xxxxx agrees not to, directly or indirectly,
individually or as an owner, partner, stockholder, joint venturer, investor,
corporate officer, employee, consultant, principal, agent, trustee or licensor,
or in any other similar capacity whatsoever of or for any person, firm,
partnership, company or corporation (other than the Company),
(a) own, manage, consult with, operate, sell, control or participate
in the ownership, management, operation, sales or control of any business that
competes with the business of the Company now existing or pursued by the Company
prior to Xxxxx'x termination; or
(b) request or advise any of the customers, suppliers or other
business contacts of the Company to withdraw, curtail, cancel or refrain from
increasing their business with the Company.
13. NONSOLICITATION. During Xxxxx'x employment with the Company and for
a period of two (2) years thereafter, after any Termination After a Change of
Control, Xxxxx agrees not to, directly or indirectly, individually or as an
owner, partner, stockholder, joint venturer, corporate officer, employee,
consultant, principal, agent, trustee or licensor, or in any other similar
capacity whatsoever of or for any person, firm, partnership, company or
corporation (other than the Company),
(a) interfere with, impair, disrupt or damage the Company's
relationship with any of its clients or prospective clients by soliciting or
encouraging or causing others to solicit or encourage, any of them for the
purpose of diverting or taking away the business such clients have with the
Company; or
(b) interfere with, impair, disrupt or damage the Company's business
by soliciting, encouraging or causing others to solicit or encourage any of the
Company's employees to discontinue their employment relationship with the
Company.
14. INTERPRETATION. Xxxxx 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.
(a) The Company will require any successor or assign (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, expressly,
absolutely and unconditionally to assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform it if no such succession or assignment had taken place. Failure of the
Company to obtain such agreement shall be a material breach of this Agreement.
-6-
(b) If after a Change of Control the Company (or any Successor)
fails to reasonably confirm that it has performed the obligation described in
this Section 15 within ten (10) days after written notice from Xxxxx, Xxxxx
shall be entitled to terminate Xxxxx'x employment with the Company for Good
Reason, and to receive the benefits provided under this Agreement in the event
of Termination Upon Change of Control.
16. ENTIRE AGREEMENT.
(a) This Agreement constitutes the entire agreement between Xxxxx
and the Company regarding the matters described herein, with the exception of
(i) the Promissory Note described in Section 4 and attached hereto as EXHIBIT 1;
(ii) the May 1998 Letter Agreement; (iii) the Confidentiality Agreement
described in Section 10; and (iii) any stock option agreements between Xxxxx and
the Company, including all amendments thereto. This Agreement (including the
documents described in (i) through (iv) herein) supersedes all prior
negotiations, representations or agreements between Xxxxx and the Company,
whether written or oral, concerning Xxxxx'x employment by the Company.
(b) In the event of a Termination After a Change of Control, this
Agreement shall supersede the provisions of paragraph 6(c) of the May 1998
Letter Agreement, except for the last sentence of paragraph 6(c) of the May 1998
Letter Agreement which shall remain in effect. Except as otherwise expressly
provided herein, the May 1998 Letter Agreement shall remain in effect in
accordance with its terms.
(c) This Agreement is not intended to and shall not affect, limit or
terminate any plans, programs, or arrangements of the Company that are regularly
made available to a significant number of employees or officers of the company,
including, without limitation, the Company's stock option plans.
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.
-7-
18. MODIFICATION. This Agreement may only be modified or amended by a
supplemental written agreement signed by Xxxxx and the Company.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date set forth above.
SAVOIR TECHNOLOGY GROUP, INC.
By: /s/ Xxxxxx Xxxxxxxx
------------------------------
Its: Director
-----------------------------
/s/ P. Xxxxx Xxxxx
---------------------------------
P. Xxxxx Xxxxx
-8-
EXHIBIT 1
FORM OF PROMISSORY NOTE
$ 2,512,729 Campbell, California
May 10, 1999
The undersigned, P. Xxxxx Xxxxx ("Borrower"), hereby unconditionally
promises to pay to the order of Savoir Technology Group, Inc., a Delaware
corporation (the "Lender"), the sum of Two Million Five Hundred Twelve Thousand
Seven Hundred Twenty-Nine Dollars ($2,512,729) plus interest.
The outstanding principal balance of this Note, together with all
accrued and unpaid interest hereon, shall be due and payable on May 9, 2002.
Interest shall accrue on unpaid principal from the date hereof until maturity at
a rate of 4.9%, compounded semiannually. If any payment of principal or interest
on this Note shall become due on a Saturday, Sunday, or public holiday under the
laws of the State of California, such payment may be made on the next succeeding
business day with the same force and effect as if made on such date.
This Note may be prepaid, in whole or in part, at any time or from time
to time, without penalty or premium. Any prepayment of principal must be
accompanied by then accrued but unpaid interest. Interest shall cease to accrue
on amounts of principal so prepaid. Any prepayment of interest shall include all
interest accrued to the date of payment, but need not include any payment of
principal.
All payments of principal or interest shall be made in lawful money of
the United States of America to the Lender at the offices of the Lender, or at
such other address as the Lender shall specify to Borrower in writing. Any
payment shall be deemed made upon receipt by Lender.
Upon payment in full of all principal and interest payable hereunder,
this Note shall be surrendered to Borrower for cancellation.
Borrower waives its rights to impose any defense (other than payment),
set-off, counterclaim or cross-claim in any action brought on this Note.
Borrower waives presentment, demand for performance, notice of performance,
protest, notice of protest, and notice of dishonor.
If the indebtedness represented by this Note or any part hereof is
collected at law or in equity or in bankruptcy, receivership or other judicial
proceedings, or if this Note is placed in the hands of attorneys for collection
after default, Borrower agrees to pay, in addition to the principal and interest
payable hereon, reasonable attorneys' and collection fees and costs.
This Note is being delivered in and shall be construed in accordance
with the laws of the State of California.
IN WITNESS WHEREOF, Borrower has executed this Note as of the day and
year first above written.
----------------------------------
P. Xxxxx Xxxxx
2
