Exhibit 10.11
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of the _____ day of June, 2005, by and
between RONCO CORPORATION (formerly known as Fi-Tek VII, Inc.), a Delaware
corporation, with principal offices in Chatsworth, California (the "Company"),
and XXXXXXX X. XXXXX, XX., a resident of the State of California ("Executive").
1. Employment. The Company hereby agrees to employ Executive, and
Executive hereby accepts such employment, upon the terms and conditions set
forth in this Agreement.
2. Term. The term of Executive's employment under this Agreement (the
"Term") shall commence on the date of the Closing, as defined in that certain
Asset Purchase Agreement, dated December 10, 2004, by and among Ronco Marketing
Corporation, a Delaware corporation ("RMC"), and Ronco Inventions, LLC, Popeil
Inventions, Inc., RP Productions, Inc., RMP Family Trust, Xxxx Xxxxxxx and
Xxxxxx Xxxxxx as co-Trustees of RMP Family Trust, and Xxxxxx X. Xxxxxx (the
"Effective Date"), and, subject to the terms hereof, shall terminate on the
fourth anniversary of the Effective Date (the "Termination Date"); provided
that, the term of this Agreement will automatically renew for successive
one-year periods thereafter (in which case the Termination Date shall be
extended accordingly), unless, at least thirty days prior to the applicable
Termination Date, either party gives the other written notice of nonrenewal.
Upon the Effective Date, Ronco Acquisition Corp., a Delaware corporation and
wholly-owned subsidiary of the Company (formerly known as Fi-Tek VII, Inc.), a
Delaware corporation, shall have merged with and into RMC pursuant to that
certain Agreement and Plan of Merger, dated as of June _____, 2005, by and among
RMC, the Company, certain stockholders of the Company prior to the merger, and
Ronco Acquisition Corp., and Fi-Tek VII, Inc. will have been renamed Ronco
Corporation, such that RMC shall have become a wholly-owned subsidiary of Ronco
Corporation.
3. Position and Duties. Executive will serve as the President and Chief
Executive Officer of the Company. Executive shall be elected or appointed a
member of the Company's Board of Directors ("Board") as of the Effective Time,
and from and after the Effective Time until the expiration of the Term, the
Company shall nominate the Executive for appointment or election as a member of
the Board and shall use commercially reasonable efforts to cause the Executive
to be appointed or elected a member of the Board. Executive will report directly
to the Board. Except as otherwise specifically provided herein, the duties which
may be assigned to Executive will be the usual and customary duties of the
offices of president and chief executive officer and will be consistent with the
provisions of the Company's Articles or Certificate of Incorporation, By-laws
and applicable law. At the request of the Board, Executive will serve as an
officer or director of the Company's subsidiaries and other affiliates without
additional compensation. Executive will devote all of his business time and
attention to the performance of his obligations, duties and responsibilities
under this Agreement. Executive may engage in personal, charitable, and passive
investment activities to the extent such activities do not conflict or interfere
with his obligations to, or his ability to perform the duties and
responsibilities of his employment by, the Company hereunder, as determined by
the Board in its discretion.
4. Annual Compensation.
(a) Base Salary. The Company will pay salary to Executive at an annual
rate of $250,000, in accordance with its regular payroll practices. The Board
will review Executive's salary at least annually. The Board, acting in its
discretion, may increase (but may not decrease) the annual rate of Executive's
salary in effect at any time.
(b) Bonus. For each fiscal year of the Company during the Term, Executive
will have an opportunity to earn a performance bonus ranging from $0 to
$600,000, determined in the sole discretion of the Board based upon such
criteria as it deems appropriate. It is anticipated that by or as soon as
practicable after the beginning of each year, the Board will communicate
performance criteria that it may take into account, in whole or in part, for
determining bonuses for that year. Annual incentive compensation, if any, will
be determined by the Board, in its sole discretion, and paid as soon as
practicable after the end of the year.
5. Additional Compensation.
(a) Transaction Bonus. The Company will pay Executive a bonus equal to
$315,000 in consideration of Executive's efforts in assisting the Company with
respect to the transactions and financing required to effect the Closing. The
Transaction Bonus will become payable in cash on the Effective Date.
(b) Grant of Restricted Shares. On the Effective Date, the Company will
issue and sell to Executive 800,313 shares of the Company's common stock at a
price of $0.01 per share pursuant to a Restricted Stock Purchase Agreement in
substantially the form attached hereto as Schedule III (the "Grant Shares")
which shares shall be issued in increments as outlined herein below:
1) On the Effective Date, the Company will issue 480,188 of such Grant
Shares to Executive
2) On the first anniversary of the Effective Date the Company will issue
160,063 of such Grant Shares to Executive
3) On the second anniversary of the Effective Date, the Company will issue
160,062 of such Grant Shares to Executive.
(c) This grant of Grant Shares to Executive is subject to a repurchase
option of the Company at a price of $0.01 per share regardless of its value
under the following conditions:
1) The Executive leaves the Company's employment voluntarily prior
the completion of the third anniversary of the Effective Date.
2) There is no increase in the Company's net earnings for each of
the following three (3) years: 2005, 2006 and 2007, over net
earnings for year 2004 as computed by the Company's outside
accountants under GAAP.
3) In accordance with Section 7(c).
6. Employee Benefit Programs and Perquisites.
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(a) General. Executive will be entitled to participate in such qualified
and nonqualified employee pension plans, group health, long term disability and
group life insurance plans, and any other welfare and fringe benefit plans,
arrangements, programs and perquisites sponsored or maintained by the Company
from time to time for the benefit of its employees generally or its senior
executives generally.
(b) Reimbursement of Business Expenses. Executive is authorized to incur
reasonable expenses in carrying out his duties and responsibilities under this
Agreement and the Company will promptly reimburse him for all expenses that are
so incurred upon presentation of appropriate vouchers or receipts, subject to
the Company's expense reimbursement policies applicable to senior executive
officers generally.
(c) Automobile-Related Expenses. During the term of this Agreement, the
Company will provide Executive with the use of an automobile of Executive's
choice The Company will cover the reasonable "drive-off" costs, monthly lease
payments of up to $1,000 per month, registration fees, fuel, maintenance and
insurance costs of such automobile. Executive will have the option to purchase
the automobile at the end of the lease term per the purchase provision within
the lease contract.
(d) Location of Employment. Executive's place of employment during the
Term will be at the principal office of the Company, which is presently in the
Los Angeles, California metropolitan area, subject to the need for business
travel in connection with Company business.
7. Termination of Employment.
(a) Death. If Executive's employment with the Company terminates before
the end of the then current Term by reason of his death, then (1) as soon as
practicable thereafter, the Company will pay to his estate an amount equal to
his "Accrued Compensation" (defined below) through the date of death, and (2)
the Company will pay or reimburse Executive's spouse and covered dependents for
the cost of the first six months of continuing group health plan coverage which
they receive pursuant to COBRA. For the purposes of this Agreement, the term
"Accrued Compensation" means, as of any date, the amount of any unpaid salary
earned by Executive through that date, plus any additional amounts and/or
benefits payable to or in respect of Executive under and in accordance with the
provisions of any employee plan, program or arrangement under which Executive is
covered. The Company agrees to provide Executive with a one (1) million dollar
term life insurance policy for the death of Executive during the term of this
employment agreement. Executive's spouse or heirs will to be the beneficiary.
(b) Disability. Company agrees to assist Executive in meeting the
contingency of disability. The Company deems it to be in its best interest to
establish a sick pay or disability plan to provide Executive's salary
continuation or sick pay benefits in the event of absence from work due to
accident, injury, or sickness by way of paying the premium of an insurance
policy, which will pay Executive no less than Executive's then-base salary per
month for the duration of the remaining portion of the Term of this Agreement.
If the Company terminates Executive's employment by reason of Executive's
"Disability" (defined below), then (1) as soon as practicable thereafter,
Executive will be entitled to receive his Accrued Compensation through the date
his employment terminates, and (2) the Company will pay or reimburse Executive
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for the cost of the first twelve months of continuing group health plan coverage
which he and his covered dependents receive pursuant to COBRA. For purposes of
this Agreement, the term "Disability" means the inability of Executive to
substantially perform the customary duties and responsibilities of his
employment by the Company for a period of at least 120 consecutive days by
reason of a physical or mental illness or incapacity which is expected to result
in death or last indefinitely.
(c) Termination by the Company for Cause or Voluntary Termination by
Executive. If the Company terminates Executive's employment for "Cause" (defined
below) or if Executive terminates his employment voluntarily for any reason
before the end of the then-current Term, Executive will be entitled to receive
his Accrued Compensation through the date his employment terminates in addition
to his pro rata bonus. In the event the Company terminates Executive's
employment for Cause any time on or prior to the second anniversary of the
Effective Date, the Company's right to repurchase Grant Shares issued to
Executive shall be limited to Grant Shares issued to Executive pursuant to
Section 5(b) (2) and Section 5 (b) (3) as herein above mentioned. For purposes
of this Agreement, the Company may terminate Executive's employment for "Cause"
if: (1) Executive is engaged in misconduct which is materially injurious to the
Company or its affiliates; (2) perpetration by Executive of an intentional and
knowing fraud against or affecting the Company or any customer, client, agent or
employee of the Company or any of its affiliates; or (3) Executive's commission
of a felony or a crime involving fraud, dishonesty or moral turpitude. In order
for Executive to terminate his employment voluntarily Executive must provide
sixty (60) calendar days written notice to the Company of such termination
pursuant to Section 18 hereof.
(d) Termination by the Company Without Cause. If Executive's employment is
terminated by the Company without "Cause" then Executive will be entitled to
receive (1) Accrued Compensation through the termination date; (2) a single sum
payment equal to one million dollars ($1,000,000); and (3) reimbursement for the
cost of up to the first twelve months of continuing group health plan coverage
which Executive and his covered dependents receive pursuant to COBRA.
8. Restrictive Covenants.
(a) Nondisclosure of Confidential Information. Executive acknowledges
that, during the course of his employment hereunder, he will have access to
confidential and proprietary information, documents and other materials relating
to the Company and its affiliates which are not generally known to persons
outside the Company or its affiliates (whether conceived or developed by
Executive or others) and confidential information, documents and other materials
entrusted to the Company or its affiliates by third parties, including, without
limitation, financial information, trade secrets, techniques, know-how,
marketing and other business plans, data, strategies and forecasts, and the
substance of arrangements and agreements with customers, suppliers and others
(collectively, "Confidential Information"). Any Confidential Information
conceived or developed by Executive during the period of his employment will be
the exclusive property of the Company. Except as specifically authorized by the
Company, Executive will not (during or after his employment hereunder) disclose
Confidential Information to any third person, firm or entity or use Confidential
Information for his own purposes or for the benefit of any third person, firm or
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entity other than (1) as may be legally required in response to any summons,
order or subpoena issued by a court or governmental agency, or (2) Confidential
Information which is or becomes available to the general public through no act
or failure to act by Executive.
(b) Non-Competition. During Executive's employment by the Company
hereunder and during a period of three (3) years following the date of
termination of his employment with the Company , the Executive will not,
directly or indirectly, whether as an owner, partner, shareholder, consultant,
agent, employee, co-venturer or otherwise, or through any other "person" (which,
for purposes of this subsection, shall mean an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, any unincorporated
organization, or a government or political subdivision thereof), compete in any
state or territory of the United States or any geographic area outside of the
United States with the Company in any business involving products similar in
nature to those designed, manufactured or sold by the Company
(c) Non-Solicitation. During Executive's employment by the Company
hereunder and during a period of two (2) years following the date of termination
of his employment with the Company, Executive will not, directly or indirectly,
whether as an owner, partner, shareholder, consultant, agent, employee,
co-venturer or otherwise, or through any other "person" (which, for purposes of
this subsection, shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, any unincorporated organization, or
a government or political subdivision thereof), (1) hire or attempt to hire any
employee of the Company or any affiliate of the Company or any person who was an
employee of the Company or any affiliate of the Company at any time during the
twelve months immediately prior to the termination of Executive's employment
with the Company, assist in such hiring by any other person, encourage any such
employee to terminate his relationship with the Company or any affiliate of the
Company; (2) directly or indirectly, request or cause customers, suppliers or
other parties with whom the Company or any of its affiliates has a business
relationship to cancel or terminate any such business relationship with the
Company or any of its affiliates; and (3) solicit from a customer of the Company
or its affiliates any business which is competing with or related to the
business of the Company or its affiliates, or with the products or services of
the Company or its affiliates.
(d) No Other Remuneration; No Disparagement. Executive covenants and
agrees that during his employment by the Company he will not directly or
indirectly receive any remuneration from the Company or anyone connected with
the Company except as provided pursuant to the terms of this Agreement or
otherwise approved by the Board of Directors in writing. Executive further
covenants and agrees that at no time during or after his employment by the
Company will the Executive disparage the Company or any of its Affiliates,
shareholders, directors, officers, employees, or agents.
(e) Reasonableness of Restrictive Covenants. Executive acknowledges that
the covenants contained in the preceding subsections of this Section 8 are
reasonable in the scope of the activities restricted, the geographic area
covered by the restrictions, and the duration of the restrictions, and that such
covenants are reasonably necessary to protect the Company's legitimate interests
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in its Confidential Information and in its relationships with its employees,
customers and suppliers. Executive further acknowledges such covenants are
essential elements of this Agreement and that, but for such covenants, the
Company would not have entered into this Agreement.
9. Company Property. All records, files, lists, including computer
generated lists, drawings, documents, equipment and similar items related to the
Company's business that Executive shall prepare or receive from the Company
shall remain the Company's sole and exclusive property. Executive will not copy
or cause to be copied, print out, or cause to be printed out any software,
documents or other materials originating with or belonging to the Company other
than in connection with performing his duties. Upon termination of his
employment with the Company, Executive shall promptly return to the Company all
property of the Company in his possession or control and will not retain in his
possession or control any software, documents or other materials originating
with or belonging to the Company.
10. Intellectual Property. The Company has hired Executive to work full
time so anything Executive produces during the period of his employment with the
Company and applicable to the business of the Company is the property of the
Company. Any writing, invention, design, system, process, development or
discovery conceived, developed, created or made by Executive, alone or with
others, during the period of his employment with the Company and applicable to
the business of the Company, whether or not patentable, registerable or
copyrightable, shall become the sole and exclusive property of the Company.
Executive shall disclose the same promptly and completely to the Company, and
shall, during the period of his employment with the Company, and any time and
from time to time thereafter, (1) execute all documents reasonably requested by
the Company for the purpose of vesting in the Company the entire right, title
and interest in and to the same, (2) execute all documents reasonably requested
by the Company for filing such applications for and procuring all patents,
trademarks, service marks or copyrights as the Company, in its sole discretion,
may desire to prosecute, and (3) give the Company all assistance it may
reasonably require, including the giving of testimony in any suit, action,
investigation or other proceeding, in order to obtain, maintain, and protect the
Company's right therein and thereto. If such assistance is requested after
Executive's employment has terminated, the Company shall pay Executive
reasonable compensation in respect of, and reimburse Executive for Executive's
reasonable expenses incurred in connection with, rendering such assistance and
performing such acts. Executive shall not have or claim any right, title or
interest in any trade name, trademark, copyright or other similar rights
belonging to or used by the Company.
11. Litigation Assistance. Executive will cooperate with the Company,
during the term of his employment and thereafter by making himself reasonably
available to testify on behalf of the Company or any subsidiary or affiliate of
the Company in any action, suit, or proceeding, whether civil, criminal,
administrative, or investigative, and to reasonably assist the Company or any
such subsidiary or affiliate in any such action, suit, or proceeding by
providing information and meeting and consulting with the Board or its
representatives or counsel, or representatives or counsel to the Company or any
such subsidiary or affiliate, as reasonably requested; provided, however, that
the same does not materially interfere with his then current professional
activities. The Company will reimburse Executive for all expenses reasonably
incurred by him in connection with his provision of testimony or assistance.
12. Severability and Enforcement.
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(a) If any one or more of the provisions (or portions thereof) of this
Agreement shall for any reason be held by a final determination of a court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provisions (or portions of the provisions) of this Agreement, and the invalid,
illegal or unenforceable provisions shall be deemed replaced by a provision that
is valid, legal and enforceable and that comes closest to expressing the
intention of the parties hereto.
(b) Without limiting the generality of Section 12(a), to the extent that
any court shall hold that any of the covenants set forth in Section 8 are
unenforceable because they are unreasonable as to scope and/or duration, then
the parties intend that such covenant(s) be reduced in scope and/or duration to
the extent required to be held enforceable.
(c) Executive confirms and agrees that only a monetary remedy for a breach
of any of the covenants set forth in Section 8 would be inadequate, and may be
impracticable and difficult to prove, and further agrees that any such breach
would cause the Company irrevocable harm and damage. Accordingly, Executive
hereby specifically agrees that Company shall be entitled to temporary and
permanent injunctive relief without the necessity of proving actual damages as a
result of any material breach of Section 8 by Executive.
13. Resolution of Disputes.
(a) Agreement to Arbitrate; Injunctive Relief. THE PARTIES HERETO AGREE
THAT ANY CLAIM, DEMAND, DISPUTE, ACTION OR CAUSE OF ACTION ARISING UNDER OR
RELATING TO THE TERMS OF THIS EMPLOYMENT AGREEMENT, WHETHER SOUNDING IN CONTRACT
OR TORT OR OTHERWISE (COLLECTIVELY, THE "PARTIES' DISPUTES"), SHALL BE DECIDED,
UNLESS OTHERWISE SPECIFICALLY INDICATED HEREIN, BY ARBITRATION PURSUANT TO THE
NATIONAL RULES FOR THE RESOLUTION OF EMPLOYMENT DISPUTES OF THE AMERICAN
ARBITRATION ASSOCIATION ("AAA RULES") AS MODIFIED HEREBY, AND THAT ANY PARTY TO
THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT
INCLUDING THIS SECTION WITH THE AMERICAN ARBITRATION ASSOCIATION (THE "AAA") AS
WRITTEN EVIDENCE OF THE AGREEMENT OF THE PARTIES TO SO ARBITRATE. THE PARTIES
HERETO ACKNOWLEDGE THAT THEY HAVE HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL
REGARDING THIS SECTION, THAT THEY FULLY UNDERSTAND ITS TERMS, CONTENT AND
EFFECT, AND THAT THEY VOLUNTARILY AND KNOWINGLY AGREE TO THE TERMS OF THIS
SECTION AND AGREE TO ARBITRATE ALL PARTIES' DISPUTES.
(b) Any arbitration pursuant to this Agreement shall take place in Los
Angeles, California, before a panel of three commercially experienced
arbitrators appointed in accordance with the AAA Rules or, if the parties to the
arbitration agree, a single retired judge. Notice of any demand for arbitration
shall be provided in writing to the other party and to the AAA (the "Arbitration
Notice"). For the purposes of this Agreement, an arbitration shall be deemed to
have been commenced at such time as the Arbitration Notice has been delivered to
all the other parties pursuant to the provisions hereof. The parties shall be
entitled to discovery in conjunction with such arbitration (with the scope of
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discovery to be co-extensive with discovery rights applicable to an arbitration
pursuant to California Code of Civil Procedure 1280 et seq.). Any award rendered
by the arbitrators (or, if applicable, retired judge) shall be final and may be
enforced in the Superior Court for the State of California for the County of Los
Angeles. Each party shall pay half of the fees and expenses of the arbitrators.
(c) Notwithstanding any other provision of this Section or any other
provision of this Agreement, any party hereto may bring an action for injunctive
or other extraordinary relief pursuant to Section 1281.8 of the California Code
of Civil Procedure based upon a breach by another party hereto of this
Agreement.
14. Indemnification. To the extent permitted by its Certificate of
Incorporation and By-laws and subject to applicable law, the Company will
indemnify, defend and hold Executive harmless from and against any claim,
liability or expense (including reasonable attorneys' fees) made against or
incurred by Executive as a result of his employment with the Company or any
subsidiary or other affiliate of the Company, including service as an officer or
director of the Company or any subsidiary or other affiliate of the Company.
15. Assignment; Binding Nature. The services and duties to be performed by
Executive hereunder are personal and may not be assigned. This Agreement shall
be binding upon and inure to the benefit of the Company, its successors and
assigns and Executive and his heirs and representatives.
16. No Impediment to Agreement. Executive covenants that except as
otherwise disclosed herein, he is not, as of the date hereof, and will not be,
during the period of his employment hereunder, employed under contract, oral or
written, by any other person, firm or entity, and is not and will not be bound
by the provisions of any other restrictive covenant or confidentiality
agreement, and is not aware of any other circumstance or condition (legal,
health or otherwise) which would constitute an impediment to, or restriction
upon, his ability to enter into this Agreement and to perform the duties and
responsibilities of his employment hereunder.
17. Amendment or Waiver. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by Executive and an
authorized officer of the Company. Except as set forth herein, no delay or
omission to exercise any right, power or remedy accruing to any party shall
impair any such right, power or remedy or shall be construed to be a waiver of
or an acquiescence to any breach hereof. No waiver by either party of any breach
by the other party of any condition or provision contained in this Agreement to
be performed by such other party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent time.
Any waiver must be in writing and signed by Executive or an authorized officer
of the Company, as the case may be.
18. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of Executive's employment to the extent
necessary to the intended preservation of such rights and obligations.
19. Governing Law. This Agreement shall be governed by, construed and
interpreted in accordance with the laws of California.
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20. Notices. Any notice given to a party shall be in writing and shall be
deemed to have been given when delivered personally or sent by certified or
registered mail, postage prepaid, return receipt requested, or express mail to
the recipient at his or its last known address.
21. Withholding. Employer may deduct and withhold from the payments to be
made to Employee hereunder any amounts required to be deducted and withheld by
Employer under the provisions of any statute, law, regulation or ordinance now
or hereafter enacted.
22. Entire Agreement. This Agreement contains the entire understanding and
agreement between the parties concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the parties with respect thereto.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
date first above written.
RONCO CORPORATION
By:
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Date: __________________________________
XXXXXXX X. XXXXX, XX.
By:
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Date: __________________________________
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Schedule I
Private Placement Memorandum
Schedule II
Restricted Stock Purchase Agreement
