EMPLOYMENT AGREEMENT
EXHIBIT 10.3
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is dated as of January 30, 2006, by and between X-RITE, INCORPORATED, a Michigan corporation with its principal office located at 0000 00xx Xxxxxx, X.X., Xxxxxxxxxx, Xxxxxxxx 00000 (“X-Rite”), and Xxxxxxx Xxxx, an individual resident at Xxxxxxx 00, 0000 Xxxxxxxx, Xxxxxxxxxxx (“Executive”).
PREAMBLE:
X-Rite desires to employ Executive and to obtain the benefits of the covenants by, and restrictions imposed on, Executive contained herein; and
Executive desires to be employed by X-Rite and is willing to be bound by the covenants and restrictions imposed on Executive herein, all on the terms and conditions set forth herein.
THEREFORE, X-Rite and Executive hereby agree as follows:
| 1. | Employment. X-Rite hereby employs Executive, and Executive hereby accepts employment, on the terms and subject to the conditions set forth herein. |
| 2. | Employment Period. Executive’s employment hereunder shall commence as of the completion of the acquisition by X-Rite of a majority of the issued shares of Amazys Holding AG (“Amazys”) pursuant to the Transaction Agreement between X-Rite and Amazys dated January 30, 2006 (the “Commencement Date”) and shall continue until terminated as provided in this Agreement (the “Employment Period”). |
| 3. | Place of Work. Executive’s Place of Work shall be Regensdorf, Switzerland. |
| 4. | Compensation. During the Employment Period, Executive shall be paid an annual salary, annual performance bonuses, incentive compensation, stock options and other fringe benefits, as determined from time to time by the Board of Directors of X-Rite (the “Board of Directors”) or the Compensation Committee thereof (the “Compensation Committee”), subject to the following: |
| (a) | Base Salary. During the Employment Period, X-Rite shall pay to Executive a gross salary at the annual rate of Three Hundred Twenty-Five Thousand Swiss Francs (CHF 325,000.00) (the “Base Salary”), subject to increase in the discretion of the Compensation Committee. Executive’s Base Salary shall be paid in accordance with X-Rite’s normal payroll practices in respect of its employees working in Switzerland. |
| (b) | Short-Term Incentive (Bonus). Executive will be entitled to participate in any bonus plan or other incentive compensation program now or hereafter applicable to X-Rite’s executives. Executive’s annual performance bonus potential shall initially be forty-eight percent (48%) of his Base Salary if X-Rite achieves |
| “Average Performance” and seventy-two percent (72%) of his Base Salary if X-Rite achieves “Excellent Performance,” each as defined in Exhibit A attached hereto. |
| (c) | Long-Term Incentive. Executive will be entitled to participate in any long-term incentive compensation program now or hereafter applicable to X-Rite’s executives. Sixty percent (60%) of Executive’s total long-term incentive compensation amount shall consist of restricted stock awards granted pursuant to the terms and conditions of the X-Rite, Incorporated Restricted Stock Agreement substantially in the form attached hereto as Exhibit B and forty percent (40%) of Executive’s total long-term incentive compensation amount shall consist of stock option awards granted pursuant to the terms and conditions of the X-Rite, Incorporated Employee Stock Option Plan Officer Stock Option Agreement substantially in the form attached hereto as Exhibit C. |
| (d) | Health Insurance Allowance. Executive shall be entitled to CHF 32,500.00 per year as a contribution to Executive’s personal health insurance. |
| (e) | Expense Reimbursement; Expense Allowance. Executive shall be entitled to payment and/or reimbursement for all reasonable expenses incurred by Executive in the course of performing his duties and responsibilities hereunder which are consistent with X-Rite’s policies in effect from time to time with respect to travel, entertainment and other business expenses, subject to X-Rite’s expense reimbursement policy, including requirements with respect to reporting and documentation of such expenses. In addition, Executive will be entitled to a CHF 20,000.00 per year allowance for expenses incurred by Executive consistent with performing the duties and responsibilities of an officer of X-Rite. |
| (f) | Miscellaneous Allowance. Executive will be entitled to CHF 5,000.00 per year for obtaining tax consulting advice associated with being an officer of a U.S. based corporation. |
| (g) | Pension Scheme. X-Rite will provide Executive with a pension scheme in accordance with the applicable provisions of Swiss law, the premiums for which shall be apportioned between X-Rite and Executive in accordance with the contribution levels provided for in the pension scheme of Gretag-Macbeth AG (“Gretag-Macbeth”) in existence as of the date hereof. X-Rite and Executive agree that, for a period of at least twelve (12) months from the Commencement Date, X-Rite shall maintain the pension scheme of Gretag-Macbeth and the status of Executive thereunder shall not be changed. After such twelve (12)-month period, X-Rite shall have the right in its sole and absolute discretion to change the pension scheme, provided that the new or modified pension scheme as applicable to Executive is substantially equivalent to the Gretag-Macbeth pension scheme. Any cost associated with any pension scheme change shall be borne by X-Rite. |
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| (h) | Daily Allowance and Accident Insurance. Executive shall be covered by the daily allowance insurance (Krankentaggeldversicherung) and the occupational and non-occupational accident insurance, the premiums for which will be paid by X-Rite. Executive shall be responsible for obtaining and paying the premiums for any sickness insurance. |
Any employee portion of the social security contributions required under the laws of Switzerland (AHV (old-age and surviving dependents insurance), IV (disability insurance), EO (wage compensation), ALV (unemployment insurance), UV (accident insurance)) shall be deducted from the applicable components of Executive’s compensation payable hereunder. No additional compensation or time off shall be payable or granted to Executive by reason of the number of hours worked or any hours worked on Saturdays, Sundays or holidays, by reason of special responsibilities assumed, special projects completed, or otherwise.
Notwithstanding anything to the contrary contained in this Section 4, all of X-Rite’s practices, policies, and exhibits referenced are subject to change or amendment in accordance with X-Rite’s historic practice or as provided therein.
| 5. | Vacation. Executive will be eligible for a minimum of thirty (30) business days annual holiday leave. Executive shall not be obliged to work on federal and cantonal holidays at the Place of Work. |
| 6. | Duties. Executive’s duties shall be to serve as Vice President and Chief Technology Officer of X-Rite, and to perform such duties consistent with those positions as the Board of Directors, Chief Executive Officer, or Chief Operating Officer of X-Rite directs from time to time. During the Employment Period, Executive shall report to the Chief Executive Officer of X-Rite or his designee, shall devote substantially all his business time and energy to the business and affairs of X-Rite and shall use his best efforts to perform his duties as an executive of X-Rite. Executive shall obtain prior approval before accepting a seat, or serving, on the board of directors or advisory board of any other entity or organization, whether for profit or nonprofit. |
| 7. | Loyalty. Executive agrees that during the Employment Period he will not, without the prior approval of the Board of Directors, either for himself or on behalf of any other person, firm or corporation, directly or indirectly divert or attempt to divert from X-Rite any business opportunity or business whatsoever, or attempt to negatively influence any X-Rite customers or potential X-Rite customers with whom Executive may have dealings. |
| 8. | Termination. Executive’s employment may be terminated as follows: |
| (a) | Death. If Executive dies during the Employment Period, this Agreement shall terminate upon Executive’s death. If the Employment Period is terminated as a result of Executive’s death, Executive’s heirs or estate shall be entitled to receive his Base Salary accrued up to the date of termination of employment but shall not |
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| be entitled to receive any further salary, bonus, severance, compensation or benefits from X-Rite. If Executive leaves a spouse, or minor children, or other persons to whom he fulfilled an obligation of support, X-Rite will pay the Base Salary for one (1) further month and, after five years of employment, two (2) further months, calculated from the day of death. Such termination of this Agreement shall not, however, affect Executive’s rights under any stock option incentive programs or agreements, or restricted stock plans or agreements in which Executive participates or to which Executive is a party, and all unvested stock options and restricted shares held by Executive at the time of his death will vest upon such termination of employment. |
| (b) | Disability. For purposes of this Agreement, “Disability” means a physical or mental infirmity which impairs Executive’s ability to perform his duties under this Agreement which continues for a period of at least one hundred eighty (180) consecutive days. In the event of Executive’s Disability, this Agreement may be terminated after the end of such one hundred eighty (180) days by X-Rite under observance of a notice period of at least three (3) months. If the Employment Period is terminated as a result of Executive’s Disability, Executive shall be entitled to receive his Base Salary accrued up to the date of termination of employment but shall not be entitled to receive any further salary, bonus, severance, compensation or benefits from X-Rite except for any benefits under applicable disability insurance. Such termination of this Agreement shall not, however, affect Executive’s rights under any stock option incentive programs or agreements, or restricted stock plans or agreements in which Executive participates or to which Executive is a party, and all unvested stock options and restricted shares held by Executive at the time of his Disability will vest upon such termination of employment. |
| (c) | Termination by X-Rite for Cause. X-Rite shall have the right to terminate Executive’s employment for “Cause.” For purposes of this Agreement, “Cause” shall be limited to Executive: |
| (i) | engaging in conduct involving dishonesty or fraud or being convicted of a crime involving moral turpitude; |
| (ii) | engaging in conduct which is intentionally injurious to X-Rite, monetarily or otherwise; or |
| (iii) | failing to perform assigned duties consistent with Section 6 above (other than any failure resulting from an illness or other similar incapacity or disability), provided that failing to achieve X-Rite’s business objectives shall not solely by itself constitute Cause, or to comply with policies applicable to all X-Rite executives, after a demand for performance or compliance is made in writing to Executive which specifically identifies the manner in which it is alleged that Executive has not substantially performed or complied, and, provided, that Executive has not, in the reasonable judgment of X-Rite, cured the failure described in the notice within ninety (90) days of such notice. |
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If the Employment Period is terminated by X-Rite for Cause, Executive shall be entitled to receive his Base Salary accrued up to the date of termination of employment and the pro rated portion of any allowances payable pursuant to Sections 4(d), (e) and (f) as of the date of termination of employment but shall not be entitled to receive any further salary, bonus, severance, compensation or benefits from X-Rite.
| (d) | Termination by Executive for Good Reason. Executive shall have the right to terminate his employment with X-Rite for “Good Reason” by providing written notice of the termination to X-Rite within thirty (30) days of the occurrence of any of the following: |
| (i) | without Executive’s express written consent, the assignment to Executive of duties materially inconsistent with Executive’s position, responsibilities and status with X-Rite as of the Commencement Date; |
| (ii) | a reduction by X-Rite in Executive’s Base Salary as of the Commencement Date greater than ten percent (10%); or |
| (iii) | a material breach by X-Rite of its obligations under this Agreement. |
| (e) | Termination by Notice. X-Rite and Executive shall each have the right to terminate their employment relationship for reasons other than those provided above in this Section 8 by giving written notice to the other party specifying any date of termination (which need not be the end of a month), provided such notice is given at least three (3) months prior to the specified date of termination. If X-Rite terminates this Agreement pursuant to this Section 8(e), X-Rite shall have the obligations set forth in Section 9(b). If the Employment Period is terminated by Executive other than for “Good Reason”, Executive shall be entitled to receive his Base Salary accrued up to the date of termination of employment and the pro rated portion of any allowances payable pursuant to Sections 4(d), (e) and (f) as of the date of termination of employment but shall not be entitled to receive any further salary, bonus, severance, compensation or benefits from X-Rite. |
| 9. | Severance Pay and Benefits. |
| (a) | Severance Pay After Change In Control. Concurrently with the execution of this Agreement, Executive and X-Rite are entering into the Employment Arrangement Effective Upon a Change in Control substantially in the form attached hereto as Exhibit D. |
| (b) | Severance Pay and Benefits After Termination by X-Rite Notice or by Executive for “Good Reason”. If the Employment Period is terminated by X-Rite by written notice under Section 8(e) of this Agreement, or by Executive under Section 8(d) |
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| of this Agreement, provided that Executive is not in breach of any of the provisions of Section 10, 11 or 12 of this Agreement, X-Rite shall provide to Executive: |
| (i) | severance pay equal to Executive’s monthly Base Salary for the last full month immediately preceding his termination for each of the twelve (12) months following the date of termination of employment; |
| (ii) | the pro rata portion (based on the number of full months of service by Executive in the year in which the Employment Period is terminated) of any annual performance bonus to which Executive is entitled for the year in which the Employment Period is terminated by X-Rite under Section 8(e) or by Executive under Section 8(d), payable within ninety (90) days following the end of such year; provided, that if the Employment Period is terminated in the first six (6) months of any year in which any annual performance bonus is payable, Executive shall be entitled to receive a pro rata portion of such bonus based on six (6) months of service during such year; |
| (iii) | the health insurance allowance described in Section 4(d), payable over the twelve (12) months following the date of termination of employment; and |
| (iv) | immediate vesting of all stock options and restricted stock held by Executive, which options will remain exercisable to the extent provided for in the stock option and restricted stock agreements to which they relate. |
| (c) | No Mitigation of Severance Benefits. Executive shall not be required to mitigate the amount of any severance benefits provided in this Section 9 by seeking other employment or otherwise, nor shall the amount of any payment provided in this Section 9 be reduced by any compensation earned by Executive as a result of his employment with another employer after termination. |
| 10. | Confidentiality and Proprietary Information. Executive shall forever hold in strictest confidence and shall not use or disclose any confidential information, technique, process, development, or experimental work, trade secret, customer lists, or other secret and confidential matter relating to the products, services, sales, employees, or business of X-Rite. In addition, Executive agrees that he will not use such information for his benefit or the benefit of any third party. Executive also agrees that X-Rite owns and retains all rights to any inventions, innovations, ideas, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information (whether or not patentable) which pertain to X-Rite’s historical, current, or prospective businesses and that Executive may have developed by himself or with others while employed by X-Rite (collectively, “Work Product”). Executive hereby assigns all rights and interests that he may have in such Work Product to X-Rite, and agrees to cooperate with X-Rite with respect to, and to sign documents necessary to, perfect any of X-Rite’s intellectual |
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| property rights or protections such as domestic or foreign copyrights or patents. In addition, Executive and X-Rite have entered into the X-Rite Confidential and Proprietary Information Agreement which shall remain in full force and effect, notwithstanding execution of this Agreement. |
| 11. | Non-Competition; Non-Solicitation. Executive agrees that during the Employment Period and for a period of two (2) years thereafter, Executive shall not: (i) participate directly or indirectly, in the ownership, management, financing or control of any business which is, or is about to become, a competitor of X-Rite or its subsidiaries; (ii) provide consulting services or serve as an officer or director for any such business; or (iii) solicit for employment or other services or employ or engage as a consultant or otherwise any person who is or was an employee of X-Rite, or encourage or facilitate any person who is or was an employee of X-Rite to terminate his or her employment with X-Rite. Notwithstanding the foregoing, Executive shall not be prohibited from owning stock of any corporation whose shares are publicly traded so long as that ownership is in no case more than five percent (5%) of such shares of the corporation. The time period for the restrictions set forth in this Section shall be extended by the number of days in which Executive is in breach of such restrictions. |
| 12. | Non-Disparagement and Non-Interference. Executive covenants and agrees that from the Commencement Date and thereafter, Executive will not disparage, criticize, condemn, or impugn X-Rite, its related and affiliated companies, their products nor its or their former or current owners, directors, officers, employees, agents, insurers, and representatives. X-Rite covenants and agrees that from the Commencement Date and thereafter, X-Rite will not disparage, criticize, condemn, or impugn Executive or his service for X-Rite. Executive also agrees that he will not directly or indirectly interfere with or adversely affect X-Rite’s business relationships, reputation, contracts, pricing or other relationships that X-Rite has with its former, current, or prospective customers, suppliers, clients, employees, businesses, financial institutions, shareholders, or others persons or entities with whom X-Rite interacts or relates. |
| 13. | Injunctive Relief and Other Remedies. In the event of the breach or threatened breach by Executive of any of the provisions of Sections 10, 11 or 12 of this Agreement, X-Rite shall be entitled to specific performance and/or injunctive or other equitable relief from a court of competent jurisdiction in order to enforce or prevent any violations of the provisions hereof (without posting a bond or other security) in addition and supplementary to any other rights and remedies existing in X-Rite’s favor, such as to request the elimination of such breach or threatened breach and demand compensation for damages for such breach or threatened breach. |
| 14. | Indemnification. Each party agrees to indemnify the other party and any and all affiliates of the other party for any costs, expenses, and damages resulting from a party’s breach of this Agreement. Such costs, expenses, and damages include, but are not limited to, actual attorneys’ fees. |
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| 15. | Executive Liability Insurance Coverage and Indemnification. Nothing in this Agreement shall deprive Executive, both during and subsequent to the termination of his employment pursuant to this Agreement, of the benefits of X-Rite’s existing or hereafter obtained executive liability insurance coverage, subject to the terms and conditions of such coverage, nor of any right to indemnification under X-Rite’s Articles of Incorporation and Bylaws or under any indemnification agreement between X-Rite and Executive, subject to the limitations on indemnification set forth therein. |
| 16. | Binding Agreement. This Agreement is intended to bind and inure to the benefit of and be enforceable by X-Rite, Executive and their respective heirs, successors and assigns. Executive may not assign his rights or delegate his duties or obligations hereunder without the prior written consent of X-Rite. X-Rite may assign its rights and obligations hereunder, without obtaining the consent of Executive, to any affiliate or subsidiary or to any person or entity that acquires X-Rite or its business or assets, provided that X-Rite will furnish Executive with notice of any such assignment. |
| 17. | Notice. All notices and other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered by registered mail, return receipt requested, postage prepaid, addressed to Executive at the address set forth on the first page of this Agreement, or to X-Rite at its principal executive offices to the attention of the Secretary, or to such other address as either party may have furnished to the other in writing in accordance herewith. |
| 18. | Modification or Waiver. No provisions of this Agreement may be amended, modified, supplemented, waived, or discharged unless such waiver, modification, supplement, or discharge is agreed to in writing signed by Executive and such officer (other than Executive) as may be specifically designated by the Board of Directors. No waiver by either party to this Agreement at any time of any breach by the other party hereto of any condition or provision of this Agreement to be performed by such other party, nor any compliance with any such condition or provision by the party not required to so perform, shall be deemed a waiver of similar or dissimilar provisions or conditions at that time or at any prior or subsequent time. Failure to insist upon strict compliance with any of the terms, covenants or conditions of this Agreement shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment of any right or power hereunder at any one or more times be deemed waiver or relinquishment of such right or power at any other time. |
| 19. | Governing Law and Place of Jurisdiction. This Agreement shall be construed and interpreted in accordance with the laws of Switzerland as applied to employment contracts made and to be performed in Switzerland. Any action arising out of or to enforce this Agreement must be brought in courts of Regensdorf, Switzerland. |
| 20. | Severability. Whenever possible, each provision and term of this Agreement will be interpreted in a manner to be effective and valid but if any provision or term of this Agreement is held by a court of competent jurisdiction to be prohibited or invalid, then such provision or term will be ineffective only to the extent of such prohibition or |
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| invalidity, without invalidating or affecting in any manner whatsoever the remainder of such provisions or terms or the remaining provisions or terms of this Agreement. If any of the covenants set forth in this Agreement are held by a court of competent jurisdiction to be unreasonable, arbitrary, or against public policy, such covenants will be considered divisible with respect to scope, time, and geographic area, and in such lesser scope, time and geographic area, will be effective, binding, and enforceable against Executive. The rights and remedies under this Agreement are cumulative and not alternative. |
| 21. | Miscellaneous. No agreements or representations, oral or otherwise, express or implied, with respect to the specific subject matter hereof have been made by either party except as set forth expressly in this Agreement. This Agreement is intended to supersede and override any other agreement between the parties with respect to the subject matter hereof. |
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, X-Rite has caused this Agreement to be executed by a duly authorized corporate officer and Executive has executed this Agreement as of the date and year first above written.
| X-RITE: | EXECUTIVE: | |||||
| X-RITE, INCORPORATED | ||||||
| By: | /s/ Xxxxxxx X. Xxxxxxx |
/s/ Xxxxxxx Xxxx | ||||
| Name: | Xxxxxxx X. Xxxxxxx | Xxxxxxx Xxxx | ||||
| Title: | CEO | |||||
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