EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement"), dated as of May 17, 1999,
is entered into between Itron, Inc., a Washington corporation ("Itron"), and
Xxxxxxx Xxxxxxx ("Executive").
1. Employment
Itron will employ Executive and Executive will accept employment by
Itron as its chief executive officer, beginning June 7, 1999. Executive will
have the authority, subject to Itron's Articles of Incorporation and Bylaws, as
may be granted from time to time by the Board of Directors of Itron. Executive
will perform the duties customarily performed by the chief executive officer of
a corporation which is, in all respects, similar to Itron and such other duties
as may be assigned from time to time by the Board of Directors of Itron, which
relate to the business of Itron, its subsidiaries, its parent corporation (if
any), or any business ventures in which Itron, its subsidiaries or its parent
corporation may participate. Executive will be appointed to the Board of
Directors of Itron promptly following the commencement of his employment
hereunder, and Executive will serve as a member of Itron's Board of Directors,
subject to shareholder approval, for so long as he continues to serve as Itron's
chief executive officer.
2. Attention and Effort
Executive will devote all of his entire productive time, ability,
attention and effort to Itron's business and will skillfully serve its interests
during the term of this Agreement; provided, however, that Executive may devote
reasonable periods of time to (a) engaging in personal investment activities,
(b) serving on the Board of Directors of other corporations, if such service
would not otherwise be prohibited by Section 8 hereof, and (c) engaging in
charitable or community service activities, so long as none of the foregoing
additional activities materially interfere with Executive's duties under this
Agreement.
3. Term
Unless otherwise terminated pursuant to Section 6 of this Agreement,
Executive's term of employment under this Agreement shall expire on June 6,
2002, after which time Executive's employment will be terminable at will, and
the provisions of Section 6 of this Agreement will have no further force or
effect.
4. Compensation, Stock Options and Relocation Allowance
During the term of this Agreement, Itron agrees to pay or cause to be
paid to Executive, and Executive agrees to accept in exchange for the services
rendered hereunder by him, the following compensation:
4.1 Base Salary
Executive's compensation shall consist, in part, of an annual base
salary of $400,000 before all customary payroll deductions. Such annual base
salary shall be paid in substantially equal installments and at the same
intervals as other officers of Itron are paid. The Board of Directors of Itron
or the Compensation Committee thereof shall determine any increases in the
amount of the annual base salary in future years.
4.2 1999 Bonus
Executive will be eligible to receive, in addition to the annual base
salary described above, an annual bonus under Itron's Executive Incentive
Compensation Plan (the "EIC Plan") for 1999 (based on the objectives that have
been established under the EIC Plan of Itron's executive officers, or such other
objectives as may be agreed to by Executive and the Compensation Committee of
Itron's Board of Directors). Upon achievement of EIC Plan targets at the 100%
level, Executive will be entitled to receive 60% of his annual base salary for
the period of 1999 during which he was employed by Itron (which is $138,500,
assuming Executive's employment commences on June 7, 1999 and continues through
at least the end of 1999). Depending on the extent to which established EIC Plan
targets are met, Executive will be entitled to receive up to 150% of his
targeted bonus award.
4.3 EVA Bonus Plan
Itron agrees that it will adopt and institute an Economic Value Added
Bonus Plan (the "EVA Bonus Plan") for its officers, including Executive,
effective at the beginning of calendar year 2000, subject to shareholder
approval if necessary. The parameters of the EVA Bonus Plan are to be approved
by Itron's Board of Directors.
4.4 Stock Options
Executive will be granted an award of options to purchase 200,000
shares of Itron common stock upon commencement of Executive's employment
hereunder. The exercise price of the options will be the average of the high and
low sales prices of Itron common stock at the date Executive's employment
hereunder commences. Such options will be ISOs issued pursuant to Itron's 1989
Restated Stock Option Plan to the extent permitted by the tax code, and the
balance will be nonqualified options. All of such options will vest in equal
annual installments over a three-year period.
The option letter agreements evidencing these options will provide that
in the event of a Change of Control (as defined in the Change of Control
Agreement referenced in Section 7.4 hereof), the vesting of such options will
accelerate so that they are exercisable as follows:
Duration of Employment Exercisable Portion of Option
less than 6 months 33%
at least 6 months 66%
at least 12 months 100%
Notwithstanding anything in the Change of Control Agreement to the contrary, the
acceleration of vesting of any portion of the 200,000 options contemplated by
this Section 4.4 will not be taken into account in calculating the "Option
Acceleration Value" under Section 6.2 of the Change of Control Agreement, and
accordingly the amount otherwise payable to Executive in accordance with Section
6.1 of the Change of Control Agreement will not be reduced by virtue of the
acceleration of vesting of any of these options.
4.5 Relocation and Moving Expenses
Itron shall pay or reimburse Executive for the following expenses
incurred by Executive in connection with his relocation to the Spokane,
Washington area:
(a) reasonable temporary living expenses, for a period of up to 180
days, incurred by Executive and his family for food, lodging and other
incidentals, including a rental or leased car if necessary;
(b) reasonable costs incurred by Executive for trips between Lynnwood,
New Jersey and Spokane, Washington during the temporary living period;
(c) reasonable expenses (including airfare, lodging and meals) incurred
by Executive's spouse in connection with homefinding trips to Spokane,
Washington;
(d) reasonable moving expenses incurred by Executive and his family in
connection with the moving of their household goods, personal possessions and
cars (mileage or moving expense) from Lynnwood, New Jersey to the Spokane,
Washington area (moving company to be selected by Executive from three bids);
(e) if Executive sells his home in Lynnwood, New Jersey, reasonable
expenses associated with that sale, including commissions; if Executive is
unable with reasonable effort to sell his home in Lynnwood, New Jersey by
September 1, 1999, the costs associated with purchase and resale of said home
through an executive relocation home purchase firm; and
(f) a lump sum payment equal to two months of Executive's base salary
to cover incidental expenses associated with the relocation of Executive and his
family to Spokane, Washington.
5. Benefits
During the term of this Agreement, Executive will be entitled to
participate, subject to and in accordance with applicable eligibility
requirements, in fringe benefit programs, including, but not limited to, health,
dental and vision insurance, group life insurance and such other programs as
shall be provided from time to time by, to the extent required, action of
Itron's Board of Directors (or any person or committee appointed by the Board of
Directors to determine fringe benefit programs and other emoluments). Executive
shall also be entitled to four weeks vacation per year.
6. Termination
Employment of Executive pursuant to this Agreement may be terminated as
follows, but in any case, the provisions of Section 8 hereof shall survive the
termination of this Agreement and the termination of Executive's employment
hereunder:
6.1 By Itron
With or without Cause (as defined below), Itron may terminate the
employment of Executive at any time during the term of employment upon giving
Notice of Termination (as defined below).
6.2 By Executive
Executive may terminate his employment at any time, for any reason,
upon giving Notice of Termination.
6.3 Automatic Termination
This Agreement and Executive's employment hereunder shall terminate
automatically upon the death or total disability of Executive. The term "total
disability" as used herein shall mean Executive's inability to perform the
duties set forth in Section 1 hereof for a period or periods aggregating 120
calendar days in any 12-month period as a result of physical or mental illness,
loss of legal capacity or any other cause beyond Executive's control, unless
Executive is granted a leave of absence by the Board of Directors of Itron.
Executive and Itron hereby acknowledge that Executive's ability to perform the
duties specified in Section 1 hereof is of the essence of this Agreement.
Termination hereunder shall be deemed to be effective (a) at the end of the
calendar month in which Executive's death occurs or (b) immediately upon a
determination by the Board of Directors of Itron of Executive's total
disability, as defined herein.
6.4 Notice
The term "Notice of Termination" shall mean at least 30 days' written
notice of termination of Executive's employment, during which period Executive's
employment and performance of services will continue; provided, however, that
Itron may, upon notice to Executive and without reducing Executive's
compensation during such period, excuse Executive from any or all of his or her
duties during such period. The effective date of the termination of Executive's
employment hereunder shall be the date on which such 30-day period expires.
7. Termination Payments
In the event of termination of the employment of Executive, all
compensation and benefits set forth in this Agreement shall terminate except as
specifically provided in this Section 7:
7.1 Termination by Itron
If Itron terminates Executive's employment without Cause prior to the
end of the term of this Agreement, Executive shall be entitled to receive (a)
termination payments equal to twenty-four (24) months' annual base salary and
(b) any unpaid annual base salary which has accrued for services already
performed as of the date termination of Executive's employment becomes
effective. If Executive is terminated by Itron for Cause, Executive shall not be
entitled to receive any of the foregoing benefits, other than those set forth in
clause (b) above.
7.2 Termination by Executive
In the case of the termination of Executive's employment by Executive,
Executive shall not be entitled to any payments hereunder, other than those set
forth in clause (b) of Section 7.1 hereof.
7.3 Expiration of Term
In the case of a termination of Executive's employment as a result of
the expiration of the term of this Agreement, Executive shall not be entitled to
receive any payments hereunder, other than those set forth in clause (b) of
Section 7.1 hereof.
7.4 Termination in Connection With a Change in Control
Concurrent with the commencement of Executive's employment hereunder,
Executive and Itron shall enter into a Change of Control Agreement with Itron, a
copy of which is attached hereto as Exhibit A. Notwithstanding Sections 7.1 and
7.2 of this Agreement and in full substitution therefor, if Executive's
employment terminates under circumstances described in the Change of Control
Agreement, Executive's rights upon termination will be governed by terms of the
Change of Control Agreement and his right to termination payments under this
Employment Agreement shall cease.
7.5 Payment Schedule
All payments under this Section 7 shall be made to Executive at the
same interval as payments of salary were made to Executive immediately prior to
termination.
7.6 Cause
Wherever reference is made in this Agreement to termination being with
or without Cause, "Cause" shall include, without limitation, the occurrence of
one or more of the following events:
(a) Failure or refusal to carry out the lawful duties of
Executive described in Section 1 hereof or any directions of the Board
of Directors of Itron, which directions are reasonably consistent with
the duties herein set forth to be performed by Executive;
(b) Violation by Executive of a state or federal criminal law
involving the commission of a crime against Itron or a felony;
(c) Current use by Executive of illegal substances; deception,
fraud, misrepresentation or dishonesty by Executive; any incident
materially compromising Executive's reputation or ability to represent
Itron with the public; any act or omission by Executive which
substantially impairs Itron's business, good will or reputation; or any
other misconduct; or
(d) Any other material violation of any provision of this
Agreement.
8. Noncompetition and Nonsolicitation
8.1 Applicability
This Section 8 shall survive the termination of Executive's employment
with Itron or the expiration of the term of this Agreement.
8.2 Scope of Competition
Executive agrees that he will not, directly or indirectly, during his
employment and for a period of two years from the date on which his employment
with Itron terminates for any reason, whether before or after the expiration of
this Agreement, be employed by, consult with or otherwise perform services for,
own, manage, operate, join, control or participate in the ownership, management,
operation or control of or be connected with, in any manner, any Competitor. A
"Competitor" shall include any entity which, directly or indirectly, competes
with Itron or produces, markets, distributes or otherwise derives benefit from
the production, marketing or distribution of products or services which compete
with products then produced or services then being provided or marketed, by
Itron or the feasibility for production of which Itron is then actually
studying, or which is preparing to market or is developing products or services
that will be in competition with the products or services then produced or being
studied or developed by Itron, in each case within the global marketplace in
which Itron does business, unless released from such obligation in writing by
Itron's Board of Directors. Executive shall be deemed to be related to or
connected with a Competitor if such Competitor is (a) a partnership in which he
is a general or limited partner or employee, (b) a corporation or association of
which he is a shareholder, officer, employee or director, or (c) a partnership,
corporation or association of which he is a member, consultant or agent;
provided, however, that nothing herein shall prevent the purchase or ownership
by Executive of shares which constitute less than five percent of the
outstanding equity securities of a publicly or privately held corporation, if
Executive had no other relationship with such corporation.
8.3 Scope of Nonsolicitation
Executive shall not directly or indirectly solicit, influence or
entice, or attempt to solicit, influence or entice, any employee or consultant
of Itron to cease his or her relationship with Itron or solicit, influence,
entice or in any way divert any customer, distributor, partner, joint venturer
or supplier of Itron to do business or in any way become associated with any
Competitor. This Section 8.3 shall apply during the time period and geographical
area described in Section 8.2 hereof.
8.4 Assignment of Intellectual Property
All concepts, designs, machines, devices, uses, processes, technology,
trade secrets, works of authorship, customer lists, plans, embodiments,
inventions, improvements or related work product (collectively "Intellectual
Property") which Executive develops, conceives or first reduces to practice
during the term of his employment hereunder or within one year after the
termination of his employment hereunder or the expiration of this Agreement,
whether working alone or with others, shall be the sole and exclusive property
of Itron, together with any and all Intellectual Property rights, including,
without limitation, patent or copyright rights, related thereto, and Executive
hereby assigns to Itron all of such Intellectual Property. "Intellectual
Property" shall include only such concepts, designs, machines, devices, uses,
processes, technology, trade secrets, customer lists, plans, embodiments,
inventions, improvements and work product which (a) relate to Executive's
performance of services under this Agreement, to Itron's field of business or to
Itron's actual or demonstrably anticipated research or development, whether or
not developed, conceived or first reduced to practice during normal business
hours or with the use of any equipment, supplies, facilities or trade secret
information or other resource of Itron or (b) are developed in whole or in part
on Itron's time or developed using Itron's equipment, supplies, facilities or
trade secret information, or other resources of Itron, whether or not the work
product relates to Itron's field of business or Itron's actual or demonstrably
anticipated research.
8.5 Disclosure and Protection of Inventions
Executive shall disclose in writing all concepts, designs, processes,
technology, plans, embodiments, inventions or improvements constituting
Intellectual Property to Itron promptly after the development thereof. At
Itron's request and at Itron's expense, Executive will assist Itron or its
designee in efforts to protect all rights relating to such Intellectual
Property. Such assistance may include, without limitation, the following: (a)
making application in the United States and in foreign countries for a patent or
copyright on any work products specified by Itron; (b) executing documents of
assignment to Itron or its designee of all of Executive's right, title and
interest in and to any work product and related intellectual property rights;
and (c) taking such additional action (including, without limitation, the
execution and delivery of documents) to perfect, evidence or vest in Itron or
its designee all right, title and interest in and to any Intellectual Property
and any rights related thereto.
8.6 Nondisclosure; Return of Materials
During the term of his employment by Itron and following termination of
such employment, he will not disclose (except as required by his duties to
Itron), any concept, design, process, technology, trade secret, customer list,
plan, embodiment, or invention, any other Intellectual Property or any other
confidential information, whether patentable or not, of Itron of which Executive
becomes informed or aware during his employment, whether or not developed by
Executive. In the event of the termination of his employment with Itron or the
expiration of this Agreement, Executive will return all documents, data and
other materials of whatever nature, including, without limitation, drawings,
specifications, research, reports, embodiments, software and manuals to Itron
which pertain to his employment with Itron or to any Intellectual Property and
shall not retain or cause or allow any third party to retain photocopies or
other reproductions of the foregoing.
8.7 Equitable Relief
Executive acknowledges that the provisions of this Section 8 are
essential to Itron, that Itron would not enter into this Agreement if it did not
include this Section 8 and that damages sustained by Itron as a result of a
breach of this Section 8 cannot be adequately remedied by damages, and Executive
agrees that Itron, notwithstanding any other provision of this Agreement,
including, without limitation, Section 15 hereof, and 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 8.
8.8 Effect of Violation
Executive and Itron acknowledge and agree that additional consideration
has been given for Executive entering into this Section 8, such additional
consideration including, without limitation, relocation allowances, bonus
eligibility and certain provisions for termination payments pursuant to Section
7 of this Agreement. Violation by Executive of this Section 8 shall relieve
Itron of any obligation it may have to make any further such payments, but shall
not relieve Executive of his obligations, as required hereunder, not to compete.
8.9 Definition of Itron
For purposes of Section 8.2 and Section 8.3 hereof, "Itron" shall
include all subsidiaries of Itron, Itron's parent corporation, if any, and any
business ventures in which Itron, its subsidiaries or its parent corporation may
participate.
9. Representations and Warranties
In order to induce Itron to enter into this Agreement, Executive
represents and warrants to Itron as follows:
9.1 No Violation of Other Agreements
Neither the execution nor the performance of this Agreement by
Executive will violate or conflict in any way with any other agreement by which
Executive may be bound, or with any other duties imposed upon Executive by
corporate or other statutory or common law.
9.2 Patents, Etc.
Executive has prepared and attached hereto as Schedule 1 a list of all
inventions, patent applications and patents made or conceived by Executive prior
to the date hereof, which are subject to prior agreement or which Executive
desires to exclude from this Agreement, or, if no such list is attached,
Executive hereby represents and warrants to Itron that there are no such
inventions, patent applications or patents.
10. Indemnification
Concurrent with the commencement of Executive's employment hereunder,
Executive and Itron shall enter into an Indemnification Agreement in the form
attached hereto as Exhibit B.
11. Notice and Cure of Breach
Whenever a breach of this Agreement by either party is relied upon as
justification for any action taken by the other party pursuant to any provision
of this Agreement, other than pursuant to the definition of "Cause" set forth in
Section 7.6 hereof, before such action is taken, the party asserting the breach
of this Agreement shall give the other party at least twenty (20) days' prior
written notice of the existence and the nature of such breach before taking
further action hereunder and shall give the party purportedly in breach of this
Agreement the opportunity to correct such breach during the 20-day period.
12. Form of Notice
All notices given hereunder shall be given in writing, shall
specifically refer to this Agreement and shall be personally delivered or sent
by telecopy or other electronic facsimile transmission or by registered or
certified 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 Executive: Xxxxxxx Xxxxxxx
If to Itron: Itron, Inc.
Attn: Chairman of the Board
0000 X. Xxxxxxxx Xx.
Xxxxxxx, XX 00000
Copy to: Xxxxx X. Xxxxxxxxxx
Xxxxxxx Coie
0000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000-0000
If notice is mailed, such notice shall be effective upon mailing, or if notice
is personally delivered or sent by telecopy or other electronic facsimile
transmission, it shall be effective upon receipt.
13. Assignment
This Agreement is personal to Executive and shall not be assignable by
Executive. Subject to the provisions of Section 7.4 hereof, Itron may assign its
rights hereunder to (a) any corporation resulting from any merger, consolidation
or other reorganization to which Itron is a party or (b) any corporation,
partnership, association or other person to which Itron may transfer all or
substantially all of the assets and business of Itron existing at such time. All
of the terms and provisions of this Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns.
14. Waivers
No delay or failure by any party hereto in exercising, protecting or
enforcing any of its rights, titles, interests or remedies hereunder, and no
course of dealing or performance with respect thereto, shall constitute a waiver
thereof. The express waiver by a party hereto of any right, title, interest or
remedy in a particular instance or circumstance shall not constitute a waiver
thereof in any other instance or circumstance. All rights and remedies shall be
cumulative and not exclusive of any other rights or remedies.
15. Arbitration
Subject to the provisions of Section 8.7 hereof, any controversies or
claims arising out of or relating to this Agreement shall be fully and finally
settled by arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association then in effect (the "AAA Rules"), conducted
by one arbitrator either mutually agreed upon by Itron and Executive or chosen
in accordance with the AAA Rules, except that the parties thereto shall have any
right to discovery as would be permitted by the Federal Rules of Civil Procedure
for a period of 90 days following the commencement of such arbitration and the
arbitrator thereof shall resolve any dispute which arises in connection with
such discovery. The prevailing party shall be entitled to costs, expenses and
reasonable attorneys' fees, and judgment upon the award rendered by the
arbitrator may be entered in any court having jurisdiction thereof.
16. 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 Itron and
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 Itron and Executive.
17. Applicable Law
This Agreement shall in all respects, including all matters of
construction, validity and performance, be governed by, and construed and
enforced in accordance with, the laws of the state of Washington, without regard
to any rules governing conflicts of laws.
18. Severability
If any provision of this Agreement shall be held invalid, illegal or
unenforceable in any jurisdiction, for any reason, including, without
limitation, the duration of such provision, its geographical scope or the extent
of the activities prohibited or required by it, then, to the full extent
permitted by law (a) all other provisions hereof shall remain in full force and
effect in such jurisdiction and shall be liberally construed in order to carry
out the intent of the parties hereto as nearly as may be possible, (b) such
invalidity, illegality or unenforceability shall not affect the validity,
legality or enforceability of any other provision hereof, and (c) any court or
arbitrator having jurisdiction thereover shall have the power to reform such
provision to the extent necessary for such provision to be enforceable under
applicable law.
19. Headings
All headings used herein are for convenience only and shall not in any
way affect the construction of, or be taken into consideration in interpreting,
this Agreement.
20. Counterparts
This Agreement, and any amendment or modification entered into pursuant
to Section 16 hereof, may be executed in any number of counterparts, each of
which counterparts, when so executed and delivered, shall be deemed to be an
original and all of which counterparts, taken together, shall constitute one and
the same instrument.
21. Entire Agreement
This Agreement, including exhibits hereto incorporated by reference, on
and as of the date hereof constitutes the entire agreement between Itron and
Executive with respect to the subject matter hereof and all prior or
contemporaneous oral or written communications, understandings or agreements
between Itron and Executive with respect to such subject matter are hereby
superseded and nullified in their entireties.
IN WITNESS WHEREOF, the parties have executed and entered into this
Agreement on the date set forth above.
Xxxxxxx Xxxxxxx:
/s/ Xxxxxxx Xxxxxxx
----------------------
Itron, Inc.:
/s/ Xxxxxx Xxxxxxxxx
----------------------
By
Its: Chairman of the Board
