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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This AGREEMENT is entered into as of November 10, 2000 (the "Effective
Date"), by and between Xxxxxx X. Xxxxxxxx ("Executive") and 3dfx Interactive,
Inc., a California corporation (the "Company"). In consideration of the mutual
covenants and agreements hereinafter set forth, the parties agree as follows:
1. Duties and Scope of Employment.
(a) Position and Duties. For the term of his employment under this
Agreement, the Company agrees to employ Executive as its Senior Vice President
of Operations, reporting directly to the Chief Executive Officer ("CEO"), or
person designated by the CEO. Executive shall have such duties and authority as
are commensurate with one employed in his position, as may be customarily
incident to such position, and as may be assigned to Executive from time to
time. Executive shall diligently, to the best of his ability, and with the
highest degree of good faith and loyalty, perform all such duties incident to
his position and use his best efforts to promote the interests of the Company.
(b) Obligations to the Company. During the Employment Term,
Executive shall devote his full time and energy to the business of the Company
and shall not be engaged in any competitive business activity without the
express written consent of the CEO. Executive shall comply with the Company's
policies and rules, as they may be in effect from time to time during the term
of his employment.
(c) No Conflicting Obligations. Executive represents and warrants
to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. Executive represents and warrants that he will not use or disclose,
in connection with his employment by the Company, any trade secrets or other
proprietary information or intellectual property in which Executive or any other
person has any right, title or interest and that his employment by the Company
as contemplated by this Agreement will not infringe or violate the rights of any
other person or entity. Executive represents and warrants to the Company that he
has returned all property and confidential information belonging to any prior
employers.
2. Term of Employment.
(a) Basic Rule. The Company agrees to continue Executive's
employment, and Executive agrees to remain in employment with the Company, from
the Effective Date until the date when Executive's employment terminates
pursuant to Subsection 2(b) below (the "Employment Period"). Executive's
employment with the Company shall be "at will," which means that either
Executive or the Company may terminate Executive's employment at any time, for
any reason, with "Cause" or "Without Cause." Any contrary representations, which
may have been made to Executive shall be superseded by this Agreement. This
Agreement shall constitute the full and complete agreement between Executive and
the
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Company regarding the "at will" nature of Executive's employment, which may only
be changed in an express written agreement signed by Executive and the Chief
Executive Officer.
(b) Termination. The Company or Executive may terminate
Executive's employment at any time for any reason (or no reason), and with
"Cause" or "Without Cause," by giving the other party fourteen (14) days' notice
in writing. Executive's employment shall terminate automatically in the event of
his death.
3. Cash and Incentive Compensation.
(a) Base Salary. The Company shall pay Executive as compensation
for his services an annualized base salary of One Hundred Ninety Thousand
Dollars ($190,000), less applicable deductions and withholdings, payable in
accordance with the Company's standard payroll schedule. The compensation
specified in this Subsection (a), together with any increases in such
compensation that the Company may grant from time to time, are referred to in
this Agreement as "Base Salary." The Base Salary will be reviewed at least
annually and shall be subject to change from time-to-time at the sole discretion
of the Chief Executive Officer and/or the Compensation Committee of the Board of
Directors (the "Board").
(b) Bonus. Executive will be eligible to earn an annualized bonus
(the "Target Bonus") for each fiscal year equal to at least thirty percent (30%)
of his Base Salary, less applicable deductions and withholdings. The Target
Bonus shall be based upon performance criteria to be established by the CEO, in
consultation with Executive, and approved by the Compensation Committee of the
Board. If any part of the Target Bonus is earned for a given fiscal year, it
will be paid on or before March 31 of the following fiscal year.
(c) Stock Options. As of the Effective Date of this Agreement,
Executive has been granted stock options pursuant to the Company's Stock Option
Plan (the "Plan"), which are summarized in Exhibit A to this Agreement (the
"Options"). Executive's Options shall continue to vest in accordance with the
Plan and the stock option agreements between the Company and Executive
evidencing such Options.
(d) Vacation and Executive Benefits. During the term of his
employment, Executive shall be eligible for vacation each year, in accordance
with the Company's standard policy for senior executives, as it may be amended
from time to time. Executive shall be eligible during his employment term to
participate in any employee benefit plans generally available to the other
senior executives of the Company, subject in each case to the generally
applicable terms and conditions of the plan in question and to the
determinations of any person or committee administering such plan. The Company
reserves the right to amend, modify or terminate any employee benefits at any
time for any reason.
(e) Business Expenses. During the term of his employment,
Executive shall be authorized to incur necessary and reasonable travel and other
business expenses in connection with his duties hereunder, pursuant to and
consistent with policies and procedures as established by the Company and as may
be modified from time-to-time. The Company shall reimburse Executive for such
expenses upon presentation of an itemized account and appropriate supporting
documentation, in accordance with Company policy and procedures.
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4. Payments, Benefits and Acceleration Following Termination.
(a) Termination Following Change of Control. If, within one year
following a "Change of Control," Executive resigns for "Good Reason" or the
Company terminates Executive's employment "Without Cause," then Executive shall
receive:
(i) A lump sum severance payment equal to one hundred percent
(100%) of Executive's Base Salary, less applicable deductions and
withholdings;
(ii) The full amount of Executive's Target Bonus for the
fiscal year in which Executive is terminated, less applicable
deductions and withholdings;
(iii) Immediate vesting of the unvested shares under all
outstanding stock options then held by Executive; and
(iv) Should Executive be eligible for and elect to continue
his health insurance pursuant to COBRA, payment of COBRA premiums for
twelve (12) months following the termination date of Executive's
employment.
(b) Termination Outside Change of Control. Subject to Section 4(e)
of this Agreement, if the Company terminates Executive's employment "Without
Cause" when no Change of Control has occurred in the prior year, then Executive
shall receive:
(i) Base Salary continuation payments in accordance with the
Company's standard payroll practices until the earlier of (a) twelve
(12) months following the termination of Executive's employment; or (b)
the date on which Executive commences full-time employment for any
person, venture, partnership or corporate entity (the "Continuation
Period");
(ii) Immediate vesting of all then unvested shares, if any,
under Executive's "October 2000 Option"; and
(iii) Should Executive be eligible for and elect to continue
his health insurance pursuant to COBRA following the termination date,
payment of COBRA premiums during the Continuation Period.
(c) Resignation or Termination for "Cause." In the event that: (i)
Executive's employment is terminated by the Company at any time for "Cause;"
(ii) Executive resigns his employment for any reason when no Change of Control
has taken place within the prior twelve (12) months; or (iii) Executive resigns
his employment without "Good Reason" within twelve (12) months following a
Change of Control; then upon the termination of Executive's employment,
Executive will be paid his Base Salary and for all unused vacation earned
through the date of termination, but nothing else, and all stock vesting and
benefits will cease on Executive's date of termination.
(d) Release Required. As a prior condition to Executive receiving
any payment, benefit or stock acceleration under Sections 4(a) and/or 4(b) of
this Agreement, Executive shall execute a full release of known and unknown
claims against the Company, its
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successors, affiliates, employees, agents, advisors and representatives, in a
form designated by the Company.
(e) Condition of Non-competition.
(i) Termination Following a Change of Control. In required by
a successor company, Executive will not engage in any Competitive
Activity for a period of one (1) year following a Change in Control.
(ii) Termination Outside a Change of Control. During the
Continuation Period Executive shall not engage in any "Competitive
Activity" without first notifying the Company of the contemplated
activity. Executive agrees that if there is any reasonable question
regarding whether or not a contemplated activity would be a Competitive
Activity, Executive will consult with the Board before engaging in the
contemplated activity. The Compensation Committee of the Board will
determine in its sole discretion whether the activity contemplated by
Executive is a Competitive Activity and, if it so determines, Executive
will forfeit his right to any and all continued payments and benefits
under Section 4(b) of this Agreement if he proceeds to engage in the
Competitive Activity during the Continuation Period.
(f) Termination Due to Death or Disability. If Executive's
employment is terminated due to death or Disability, then Executive, or
Executive's estate, will receive: (i) payment for all Base Salary and accrued
but unused vacation earned through the date of termination; and (ii) a lump-sum
payment equal to the pro-rata portion of Executive's full Target Bonus, based on
Executive's length of service during the year in which Executive's employment is
terminated due to death or Disability.
(g) Definitions.
(i) "Change of Control." For all purposes under this
Agreement, "Change of Control" shall mean (1) a merger or consolidation
in which securities possessing at least fifty percent (50%) of the
total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from the persons holding
those securities immediately prior to such transaction, or (2) the
sale, transfer or other disposition of all or substantially all of the
Company's assets in complete liquidation or dissolution of the Company.
(ii) "Good Reason." For all purposes under this Agreement,
"Good Reason" for Executive's resignation will exist if he resigns
within sixty (60) days of any of the following events: (1) any
reduction in his Base Salary; (2) a change in his position with the
Company or a successor company which substantially reduces his duties
or level of responsibility; (3) any requirement that he relocate his
place of employment by more than fifty (50) miles from his then current
office, provided such reduction, change or relocation is effected by
the Company without his written consent. A resignation by Executive
under any other circumstance or for any other reason will be a
resignation without "Good Reason."
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(iii) Termination for "Cause." For all purposes under this
Agreement, a termination for "Cause" shall mean a termination of
Executive's employment for any of the following reasons: (1)
misconduct; (2) misappropriation of the assets of the Company; (3)
conviction of, or a plea of "guilty" or "no contest" to a felony under
the laws of the United States or any state thereof; (4) committing an
act of fraud against, or the misappropriation of property belonging to,
the Company; (5) a material breach of any confidentiality or
proprietary information agreement between Executive and the Company; or
(6) continued unsatisfactory performance after being given a written
warning and at least thirty (30) days to improve performance. A
termination of Executive's employment in any other circumstance or for
any other reason will be a termination "Without Cause."
(iv) "Disability." For all purposes under this Agreement,
"Disability" means Executive's inability to carry out his material
duties under this Agreement for more than six (6) months in any twelve
(12) consecutive month period as a result of incapacity due to mental
or physical illness or injury.
(v) "Competitive Activity." For the purposes of this
Agreement, a "Competitive Activity" means any activity in which
Executive directly or indirectly provides services of any kind or
nature (whether or not Executive is compensated for such services),
including, but not limited to, Executive working in an employment,
advisory or consulting capacity, for any Competitor of the Company.
(vi) "Competitor." For purposes of this Agreement,
"Competitor" is defined as any company involved in the design and
creation of 3D graphics, animation and/or effects for use in
entertainment, or educational. Currently, the Competitor's list
includes, but is not limited to, 3d Labs, ATI, Nvidia, S3, Maxtrox and
any of their successors or affiliates. During the Continuation Period,
the Company may reasonably add other companies to the Competitors list.
(vii) "October 2000 Option". For the purposes of this
Agreement, Executive's "October 2000 Option" refers solely to that
particular option to purchase 50,000 shares of Company Common Stock
which was granted by the Board to Executive on October 13, 2000.
5. Non-Solicitation and Non-Disclosure.
(a) Non-Solicitation. During the period commencing on the
Effective Date of this Agreement and continuing until the second anniversary of
the date when Executive's employment terminates for any reason, Executive shall
not directly or indirectly, personally or through others, solicit or encourage,
or attempt to solicit or encourage (on Executive's own behalf or on behalf of
any other person or entity) for hire any employee or consultant of the Company
or any of the Company's affiliates.
(b) Non-Disclosure. As a condition of employment, Executive will
execute the Company's standard Proprietary Information Agreement, a copy of
which is attached.
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6. Successors.
(a) Company's Successors. This Agreement shall be binding upon any
successor (whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.
(b) Executive's Successors. This Agreement and all rights of
Executive hereunder shall inure to the benefit of, and be enforceable by,
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
7. Arbitration. Executive and the Company agree to arbitrate before a
neutral arbitrator any and all disputes or claims arising from or relating to
Executive's employment with the Company, or the termination of that employment,
including disputes or claims against any current or former agent or employee of
the Company.
(a) Arbitrable Claims. Arbitrable disputes or claims include those
which arise in tort, contract, or pursuant to a statute, regulation, or
ordinance now in existence or which may in the future be enacted or recognized,
including, but not limited to, the following claims:
(i) claims for fraud, promissory estoppel, fraudulent
inducement of contract or breach of contract or contractual obligation,
whether such alleged contract or obligation be oral, written, or
express or implied by fact or law;
(ii) claims for wrongful termination of employment, violation
of public policy and constructive discharge, infliction of emotional
distress, misrepresentation, interference with contract or prospective
economic advantage, defamation, unfair business practices, and any
other tort or tort-like causes of action relating to or arising from
the employment relationship or the formation or termination thereof;
(iii) claims of discrimination, harassment, or retaliation
under any and all federal, state, or municipal statutes, regulations,
or ordinances that prohibit discrimination, harassment, or retaliation
in employment, as well as claims for violation of any other federal,
state, or municipal statute, regulation, or ordinance, except as set
forth herein; and
(iv) claims for non-payment or incorrect payment of wages,
commissions, bonuses, severance, employee fringe benefits, stock
options and the like, whether such claims be pursuant to alleged
express or implied contract or obligation, equity, the California Labor
Code, the Fair Labor Standards Act, the Employee Retirement Income
Securities Act, and any other federal, state, or municipal laws
concerning wages, compensation or employee benefits.
(b) Non-Arbitrable Claims. Executive and the Company further
understand and agree that the following disputes and claims are not covered by
the arbitration
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agreement contained in this Section 7 and shall therefore be resolved as
required by the law then in effect:
(i) claims for workers' compensation benefits, unemployment
insurance, or state or federal disability insurance;
(ii) claims concerning the validity, infringement,
enforceability, or misappropriation of any trade secret, patent right,
copyright, trademark, or any other intellectual or confidential
property held or sought by Employee or the Company; and
(iii) any other dispute or claim that has been expressly
excluded from arbitration by statute.
(c) Relief and Review. The Arbitrator shall have the authority to
award any relief authorized by law in connection with the asserted claims or
disputes and shall issue a written Award that sets forth the essential findings
and conclusions on which the Award is based. The Arbitrator's Award shall be
final and binding on both the Company and Employee and it shall provide the
exclusive remedy(ies) for resolving any and all disputes and claims subject to
arbitration under this Agreement. The Arbitrator's Award shall be subject to
correction, confirmation, or vacation, as provided by California Code of Civil
Procedure Section 1285.8 et seq and any applicable California case law setting
forth the standard of judicial review of arbitration Awards.
(d) Location and Rules. The arbitration shall be conducted in
Santa Xxxxx County, California, or such location as is mutually agreeable to the
parties, in accordance with the National Rules for the Resolution of Employment
Disputes of the American Arbitration Association; provided, however, that the
Arbitrator shall allow the discovery authorized by California Code of Civil
Procedure Section 1283.05 or any other discovery required by California law.
Also, to the extent that any of the National Rules for the Resolution of
Employment Disputes or anything in this Agreement conflicts with any arbitration
procedures required by California law, the arbitration procedures required by
California law shall govern.
(e) Costs and Attorneys' Fees. The Company will bear the
arbitrator's fee and any other type of expense or cost that Executive would not
be required to bear if he were free to bring the dispute(s) or claim(s) in court
as well as any other expense or cost that is unique to arbitration. Executive
and the Company shall each bear their own attorneys' fees incurred in connection
with the arbitration, and the arbitrator will not have authority to award
attorneys' fees unless a statute or contract at issue in the dispute authorizes
the award of attorneys' fees to the prevailing party, in which case the
arbitrator shall have the authority to make an award of attorneys' fees as
required or permitted by applicable law. If there is a dispute as to whether the
Company or Executive is the prevailing party in the arbitration, the Arbitrator
will decide this issue.
(F) WAIVER OF RIGHT TO JURY. EXECUTIVE AND THE COMPANY UNDERSTAND
AND AGREE THAT THE ARBITRATION OF DISPUTES AND CLAIMS UNDER THIS AGREEMENT SHALL
BE INSTEAD OF A TRIAL BEFORE A COURT OR JURY OR A HEARING BEFORE A GOVERNMENT
AGENCY.
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8. Miscellaneous Provisions.
(a) Notice. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by overnight courier, U.S. registered
or certified mail, return receipt requested and postage prepaid. Mailed notices
shall be addressed to Executive at the home address which he most recently
communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
(b) Modifications and Waivers. No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by Executive and by an authorized
officer of the Company (other than Executive). No waiver by either party of any
breach of, or of compliance with, any condition or provision of this Agreement
by the other party shall be considered a waiver of any other condition or
provision or of the same condition or provision at another time.
(c) Whole Agreement. No other agreements, representations or
understandings (whether oral or written) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter of this Agreement. This Agreement, the Proprietary
Information Agreement, and applicable stock option agreements and stock plans,
contain the entire understanding of the parties with respect to the subject
matter hereof.
(d) Taxes. All payments made under this Agreement shall be subject
to reduction to reflect taxes or other charges required to be withheld by law.
(e) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California (except provisions governing the choice of law).
(f) Severability. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) No Assignment. This Agreement and all rights and obligations
of Executive hereunder are personal to Executive and may not be transferred or
assigned by Executive at any time. The Company may assign its rights under this
Agreement to any entity that assumes the Company's obligations hereunder in
connection with any sale or transfer of all or a substantial portion of the
Company's assets to such entity.
(h) 280G. Executive understands and acknowledges that certain
benefits provided for under this Agreement may constitute "parachute payments"
within the meaning of Section 280G of the Internal Revenue Code of 1986, as
amended, (the "Code"). Such parachute payments may be subject to the excise tax
imposed by Section 4999 of the Code. Executive acknowledges and agrees that he
has and will review any tax consequences which may arise as the result of any
such parachute payments with his own tax advisors and that he is relying and
will rely solely on such advisors and not on any representations of the Company
or any of its
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agent with regard to the possible tax implications of receiving such parachute
payments. Executive further acknowledges and agrees that he is responsible for
his own tax liability which may arise as the result of any such payments.
(i) Headings. The headings of the paragraphs contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of any provision of this Agreement.
(j) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
EXECUTIVE
/s/ XXXXXX X. XXXXXXXX
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Xxxxxx X. Xxxxxxxx
3DFX INTERACTIVE, INC.
By: /s/ XXXX X. XXXXX
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Title: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
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