EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
EGGHEAD, INC.
DJ & J SOFTWARE CORPORATION
XXXXXX X. XXXXX
Dated as of January 31, 1997
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EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement (this "Agreement") between Egghead, Inc.
("Egghead"), a Washington corporation, DJ & J Software Corporation ("DJ& J"), a
Washington corporation, and Xxxxxx X. Xxxxx ("Executive") is dated and entered
into as of January 31, 1997. Egghead and DJ& J are hereinafter referred to
collectively as the "Company".
In consideration of the mutual covenants and promises contained herein, the
Company and the Executive agree as follows:
1. EMPLOYMENT
The Company will employ the Executive and the Executive will accept employment
by the Company as its Chairman and Chief Executive Officer, with duties and
responsibilities customarily associated with such position. The Executive will
perform such additional duties as may be assigned from time to time by the Board
of Directors of the Company which relate to the business of the Company, its
subsidiaries or any business ventures in which the Company or its subsidiaries
may participate. Subject to and consistent with the Company's Articles of
Incorporation and Bylaws and subject to and consistent with its responsibilities
under law, the Board of Directors of the Company, during the Term, will include
the Executive as a part of the appropriate slate of directors for whom it
solicits proxies in connection with the annual meeting of shareholders.
2. ATTENTION AND EFFORT
The Executive will devote his full business time, attention and effort to the
Company's business and will use his skills and render services to the best of
his ability to serve the interests of the Company.
3. TERM
Unless otherwise terminated as provided in Section 6 of this Agreement, the
Executive's term of employment under this Agreement shall commence on the date
hereof and shall expire on August 31, 1998 (the "Term").
4. COMPENSATION
4.1 BASE SALARY
The Executive's compensation shall consist, in part, of an annual base salary of
$300,000 before all customary payroll deductions (the "Base Salary"). The Base
Salary shall be paid in substantially equal installments at the same intervals
as other officers of the Company are paid.
5. BENEFITS AND EXPENSES
5.1 EXPENSES
The Company shall promptly reimburse the Executive for all reasonable and
necessary business expenses incurred and advanced by him in carrying out his
duties under this Agreement. The Executive shall present to the Company from
time to time an itemized account of such expenses in such form as may be
required by the Company.
5.2 BENEFITS
During the term of employment hereunder, the Executive shall be entitled to
participate fully in any benefit plans, programs, policies and any fringe
benefits which may be made available to the senior executives of the Company
generally (except incentive and other bonus plans other than as specifically
contemplated in this Agreement), including but not limited to medical, dental,
disability, pension and retirement benefits, life insurance and other death
benefits.
5.3 REIMBURSEMENT OF LIFE INSURANCE PREMIUM
The Company shall reimburse the Executive for an amount of up to $3,000 per year
in 1997, 1998 and 1999 for premiums paid by the Executive for an insurance
policy providing for the payment of insurance proceeds to the Executive's spouse
and dependents in the amount of $1.3 million in the event of the Executive's
death or disability on or prior to April 1, 1999. Such reimbursement shall
occur promptly after receipt by the Company of evidence reasonably satisfactory
to the Company of payment by the Executive of such life insurance premiums.
6. TERMINATION
Employment of the Executive pursuant to this Agreement may be terminated as
follows, but in any case, the provisions of Sections 9 and 10 shall survive the
termination of the Executive's employment:
6.1 BY THE COMPANY
With or without Cause (as defined below), the Board of Directors may terminate
the employment of the Executive at any time during the Term upon giving Notice
of Termination (as defined below).
6.2 BY THE EXECUTIVE
The Executive may terminate his employment at any time during the Term for any
reason upon giving Notice of Termination.
6.3 AUTOMATIC TERMINATION
Employment shall terminate automatically upon death or total disability of the
Executive. The term "total disability" as used herein, shall mean an inability
to perform the duties set forth in Section 1 because of illness or physical or
mental disability for a period or periods aggregating 90 calendar days in any
12-month period, unless the Executive is granted a leave of absence by the Board
of Directors of the Company. Executive and the Company hereby acknowledge that
the Executive's ability to perform the duties specified in Section 1 is of the
essence of this Agreement. Termination hereunder shall be deemed to be
effective immediately upon the Executive's death or 30 days following a Notice
of Termination based upon a determination by the Board of Directors of the
Company of the Executive's total disability, as defined herein.
6.4 NOTICE
The term "Notice of Termination" shall mean written notice of termination of the
Executive's employment. At the election of the Company, as set forth in the
Notice of Termination, the Executive's employment and performance of services
may continue for a period of 30 days following the Notice of Termination.
Otherwise the Executive's employment shall terminate effective upon receipt of
the Notice of Termination, provided that the Executive shall be entitled to
termination payments in accordance with Section 7.
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6.5 CAUSE
Wherever reference is made in this Agreement to termination being with or
without Cause, "Cause" means cause given by the Executive to the Company and is
limited to the following:
(i) Conviction of a felony or of a crime involving moral turpitude;
(ii) Continued misuse of alcohol or controlled substances; or
(iii) The willful misconduct or gross negligence of the Executive
which results in a material adverse effect on the Company.
7. TERMINATION PAYMENTS
In the event of termination of the employment of the Executive during the Term,
all compensation and benefits set forth in this Agreement shall terminate except
as specifically provided in this Section 7:
7.1 TERMINATION BY THE COMPANY
If the Board of Directors terminates the Executive's employment during the Term,
the Executive shall be entitled to receive (i) any unpaid Base Salary which has
accrued for services already performed as of the date termination of the
Executive's employment becomes effective, and (ii) the sum of $1,600,000,
payable in a lump sum within 30 days after termination; provided, however, that
if the Executive is terminated by the Board of Directors for Cause, the
Executive shall not be entitled to receive the benefits set forth in
clause (ii).
7.2 TERMINATION BY THE EXECUTIVE
If the Executive terminates his employment during the Term, the Executive shall
not be entitled to receive any payments hereunder other than any unpaid Base
Salary which has accrued for services already performed as of the date
termination of the Executive's employment becomes effective.
7.4 TERMINATION BECAUSE OF DEATH OR TOTAL DISABILITY
In the event of a termination of the Executive's employment during the Term
because of his death or total disability, the Executive or his personal
representative shall not be entitled to receive any payments hereunder other
than any unpaid Base Salary which has accrued for services already performed as
of the date termination of the Executive's employment becomes effective.
7.5 TERMINATION IN CONNECTION WITH LIQUIDATION
If the Company liquidates its business during the Term, either through the sale
of substantially all of its assets for cash, stock or other property or through
a merger or other business combination in which the holders of voting stock of
the Company before such transaction own less than 50% of the voting stock of the
combined or surviving company following such transaction, the Executive shall be
entitled to receive the payments set forth in Section 7.1, provided that the
Executive continues his employment and carries out his responsibilities under
this Agreement in connection with, and through the completion of, such
liquidation or business combination.
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8. RETENTION AND CONSULTING; ESCROW ARRANGEMENT
8.1 RETENTION AND CONSULTING
If the Executive's employment shall not have terminated for any reason prior to
the end of the Term and the Executive shall not be entitled to the payment of
the amount set forth in Section 7.1(ii) (either directly or through
Section 7.5), then the Executive shall be entitled to the following payments:
(a) The Executive shall receive and the Company shall pay to the Executive a
retention incentive bonus of $750,000 on August 31, 1998.
(b) The Executive shall, at the election of the Executive, be retained by the
Company as a consultant for the period from September 1, 1998 through
March 31,1999 (the "Consulting Period") and shall receive for such consulting
services the sum of $550,000, payable on April 1, 1999. During the Consulting
Period, the Executive shall make himself available to the Company for
consultation by telephone, for up to a maximum of ten hours per week, regarding
the Company's current and future business, plans developed under the authority
of the Executive during employment, information and knowledge of the Company and
its operations obtained during the period of Executive's employment and the
Executive's general experience, judgment and expertise in the Company's
industry.
8.2 PLEDGE AND ESCROW
Prior to August 31, 1997, the Executive and the Company shall enter into a
pledge and escrow agreement ("Pledge Agreement") on mutually agreeable terms,
providing for the pledge and escrow of Company funds in the amount of
$1,600,000 (the "Pledge Amount") to secure the payment obligations of the
Company under Sections 7.1, 7.5 and 8.1. If payment under Section 7.1 or 7.5
becomes due and is made, then the Pledge Agreement shall terminate and the
Pledge Amount shall be returned to the Company. If no payment becomes due
under Section 7.1 or 7.5 and payment becomes due and is made under Section
8.1(a), then the Pledge Amount shall be reduced to $550,000 and shall
continue to secure the payment obligations of the Company under Section
8.1(b). If payment under Section 8.1 (b) becomes due and is made, then the
Pledge Agreement shall terminate and the remaining balance of the Pledge
Amount shall be returned to the Company. Interest on the Pledge Amount shall
be paid to the Company.
9. NONCOMPETITION AND NONSOLICITATION
9.1 APPLICABILITY
This Section 9 shall survive the termination of the Executive's employment
with the Company or the expiration of the term of this Agreement.
9.2 SCOPE OF COMPETITION
The Executive agrees that he will not, directly or indirectly, during his
employment and for a period of two years after the expiration of the Term or the
date on which his employment with the Company terminates, whichever is later, be
employed by, own, manage, operate, join, control or participate in the
ownership, management, operation or control of or be connected with, in any
manner, any person or entity engaged in any operations in competition with the
Company in the computer software resale market in the United States, unless
released from such obligation in writing by the Company's Board of Directors.
The Executive shall be deemed to be connected with such business if such
business is carried on by a partnership, corporation or association of which he
is an
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employee, member, consultant or agent; provided, however, that nothing herein
shall prevent the purchase or ownership by the Executive of shares which
constitute less than 2% of the outstanding equity securities of a publicly or
privately held corporation.
9.3 SCOPE OF NONSOLICITATION
The Executive shall not, in addition, directly or indirectly (i) solicit,
influence or entice any employee or consultant of the Company to cease his
relationship with the Company or (ii) solicit, entice or in any way divert any
customer or supplier of the Company to do business with an entity described
herein. This Section 9.3 shall apply during the time period and geographical
area described in Section 9.2 hereof.
9.4 EQUITABLE RELIEF
The Executive acknowledges that the provisions of this Section 9 are essential
to the Company, that the Company would not enter into this Agreement if it did
not include covenants not to compete or solicit and that damages sustained by
the Company as a result of a breach of such covenants cannot be adequately
remedied by damages, and the Executive agrees that the Company, notwithstanding
any other provision of this Agreement, in addition to any other remedy it may
have under this Agreement or at law, shall be entitled to injunctive and other
equitable relief to prevent or curtail any breach of any provision of this
Agreement, including without limitation this Section 9. The Executive
acknowledges that the covenants in this Agreement are reasonable and that
compliance with such covenants will not prevent him from pursuing his
livelihood.
9.5 EFFECT OF VIOLATION
The Executive and the Company agree that additional consideration has been given
for the Executive entering into the noncompetition and nonsolicitation
provisions of this Agreement and the Nondisclosure Agreement described in
Section 10, such additional consideration including, without limitation certain
provisions for termination payments pursuant to Section 7 and other payments
pursuant to Section 8 of this Agreement. Violation by the Executive of such
noncompetition and nonsolicitation provisions or the Nondisclosure Agreement
shall relieve the Company of any obligation it may have to make such termination
payments and other payments, but shall not relieve the Executive of his
obligation hereunder not to compete or solicit.
9.6 DEFINITION OF THE COMPANY
For purposes of Sections 9.2 and 9.3 hereof, "the Company" shall include all
subsidiaries of the Company, the Company's parent corporation and any business
ventures in which the Company, its subsidiaries or its parent corporation may
participate.
10. NONDISCLOSURE
As a condition of his employment hereunder, the Executive has executed and
delivered to the Company an agreement addressing the nondisclosure of
confidential information (the "Nondisclosure Agreement") in the form attached
hereto as Exhibit B and incorporated herein by reference as if set forth in full
herein, which Nondisclosure Agreement shall survive the termination of the
Executive's employment.
11. FORM OF NOTICE
Every notice required by the terms of this Agreement shall be given in writing
by serving the same upon the party to whom it was addressed personally, by
courier, by facsimile transmission (with hard copy delivered by overnight
courier) or by registered or certified
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mail, return receipt requested, at the address set forth below or at such other
address as may hereafter be designated by notice given in compliance with the
terms hereof:
If to the Executive: Xxxxxx X. Xxxxx
-------------------------
-------------------------
If to the Company: Egghead, Inc.
00000 X. Xxxxxxx
Xxxxxxx Xxxx, XX 00000
Copy to: Xxxxxxx X. Xxxxxxxxx
Xxxxxxx Coie
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
or such other address as shall be provided in accordance with the terms hereof.
Notice shall be effective upon personal delivery, delivery by courier, receipt
of facsimile transmission or three days after mailing.
12. ASSIGNMENT
The Executive agrees that this Agreement may be transferred or assigned by the
Company to (a) any corporation resulting from any merger, consolidation or other
reorganization to which the Company is a party or (b) any corporation,
partnership, association or other person to which the Company may transfer all
or substantially all of the assets and business, and such assignee or transferee
shall succeed to the rights and obligations of the Company hereunder. This
Agreement is not assignable by the Executive.
13. WAIVER
No waiver of any of the provisions hereof shall be valid unless in writing,
signed by the party against whom such claim or waiver is sought to be enforced,
nor shall failure to enforce any right hereunder constitute a continuing waiver
of the same or a waiver of any other right hereunder.
14. AMENDMENTS IN WRITING
No amendment, modification, waiver, termination or discharge of any provision of
this Agreement, nor consent to any departure therefrom by either party hereto,
shall in any event be effective unless the same shall be in writing,
specifically identifying this Agreement and the provision intended to be
amended, modified, waived, terminated or discharged and signed by the Company
and the Executive, and each such amendment, modification, waiver, termination or
discharge shall be effective only in the specific instance and for the specific
purpose for which given. No provision of this Agreement shall be varied,
contradicted or explained by any oral agreement, course of dealing or
performance or any other matter not set forth in an agreement in writing and
signed by the Company and the Executive.
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15. APPLICABLE LAW
This Agreement shall be governed by the substantive laws of the state of
Washington, without regard to its conflicts of laws provisions.
16. SEVERABILITY
All provisions of this Agreement are severable, and the unenforceability or
invalidity of any single provision hereof shall not affect the remaining
provisions.
17. HEADINGS
All headings or titles in this Agreement are for the purpose of reference only
and shall not in any way affect the interpretation or construction of this
Agreement.
18. ATTORNEYS
In any action or proceeding brought by any party against the other arising out
of or relating in any way to this Agreement, the prevailing party shall, in
addition to other allowable costs, be entitled to an award of reasonable
attorneys' fees.
IN WITNESS WHEREOF, the parties have executed and entered into this Agreement on
the date set forth above.
EXECUTIVE:
Xxxxxx X. Xxxxx
-------------------------
Xxxxxx X. Xxxxx
COMPANY:
EGGHEAD, INC.
By Xxxxx X. Xxxxxx
---------------------
Its Vice President, Chief Financial
Officer and Secretary
DJ & J SOFTWARE CORPORATION
By Xxxxx X. Xxxxxx
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Its Vice President, Chief Financial
Officer and Secretary
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