EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), effective this 1st day of
November, 1997 (the "Effective Date"), is entered into by and between Xxxxxx
Xxxxxx ("Executive") and RockShox, Inc., a Delaware corporation (the
"Company").
WHEREAS, the Company desires to establish its right to the services
of Executive, in the capacity described below, on the terms and conditions
hereinafter set forth, and Executive is willing to serve the Company on such
terms and conditions.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, Executive and the Company have agreed and do hereby
agree as follows:
1. EMPLOYMENT. The Company does hereby employ Executive and
Executive does hereby accept employment as Chief Executive Officer and
President of the Company. Executive shall do and perform all services and
acts necessary or reasonably advisable to fulfill the duties and
responsibilities of his position and shall render such services on the terms
set forth herein and shall report to the Company's Board of Directors
(together with any duly authorized committee thereof, the "Board"). In
addition, Executive shall have such other executive and managerial powers and
duties with respect to the Company as may reasonably be assigned to him by
the Board, to the extent consistent with his positions and status as set
forth above. Executive agrees to devote to the Company his full business
time to the conduct of his duties hereunder. During the Term, Executive shall
continue to serve on the Board, but shall not receive any director fee for
such service. Upon termination of employment for any reason, at the request
of the Company, Executive shall resign as a director of the Company. During
the Term, without the prior consent of the Board, Executive shall not serve
on the board of directors of any other corporation, PROVIDED, that Executive
may continue to serve on the boards of directors of Stroheim & Romann and
Dimensions in Sport.
2. TERM OF AGREEMENT. The term of this Agreement ("Term") shall
commence on the Effective Date and shall continue until the earlier of (i)
three (3) years after the Effective Date of the Agreement or (ii) such
earlier date upon which this Agreement is terminated as otherwise provided
herein.
3. PLACE OF EMPLOYMENT. Executive shall spend at least three
weeks of every month at the Company's offices in San Jose, California, unless
Executive is away from such offices of the Company on official business of
the Company, excluding normal vacations and holidays. The Company shall
reimburse Executive for travel expenses incurred in connection with
Executive's weekly commute between the Company's offices and Executive's
current residence.
4. COMPENSATION.
(a) BASE SALARY. During the Term, the Company shall pay
Executive an initial annual base salary at the rate of $300,000 per year or
such higher amount as the Board may from time to time determine (the "Base
Salary"), payable in equal biweekly installments or at such other time or
times as Executive and the Board shall agree.
(b) ADDITIONAL PAYMENT. In addition to his Base Salary,
Executive shall receive a one-time $50,000 cash payment if Executive is
continuously employed by the Company from the Effective Date through May 1,
1998.
(c) BONUS. In addition to his Base Salary, the Company shall
pay Executive the following bonus compensation (the "Bonus") during the Term:
(ii) For the twelve month period ending March 31, 1999,
$300,000, provided that the Company and Executive have
achieved certain objectives during such period to be
mutually agreed to, and negotiated in good faith, in
advance by Executive and the Board on or about the
first day of such period.
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(iii) For the twelve month period ending March 31, 2000,
$300,000, provided that the Company and Executive have
achieved certain objectives during such period to be
mutually agreed to, and negotiated in good faith, in
advance by Executive and the Board on or about the
first day of such period.
(iv) For the twelve month period ending March 31, 2001, a
pro rata portion of $300,000 based on the number of
days Executive is employed by the Company during such
fiscal year, provided that the Company and Executive
have achieved certain objectives during such period to
be mutually agreed to, and negotiated in good faith, in
advance by Executive and the Board on or about the
first day of such period.
With respect to each twelve month period, the Bonus may be adjusted
upward or downward based upon the extent to which targeted performance
objectives have been met, as agreed to by the Board and Executive and
provided in a Company bonus plan. Each such bonus shall be payable within
thirty (30) days after the issuance of the Company's audited statements with
respect to the Company's applicable fiscal year.
5. OTHER COMPENSATION
(a) LIFE INSURANCE. The Company shall reimburse Executive
for the cost of purchasing and maintaining a term life insurance policy with
a face value of $2 million on Executive's life (the "Life Insurance Policy"),
plus any federal, state or local income or other taxes imposed on Executive
by reason of such reimbursement; up to a maximum annual amount of seven
thousand dollars. The owner and beneficiary of such policy shall be
designated by Executive.
(b) STOCK OPTIONS. Subject to the approval by the
Compensation Committee of the Board (as to which the Company shall use its
best efforts to obtain), the Company shall grant Executive stock options (the
"Options")
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to purchase 300,000 shares of Common Stock under the RockShox, Inc. 1996
Stock Plan (the "Plan"). The per share exercise price of such Options shall
equal the fair market value of the stock on the date of grant and shall vest
and become exercisable pro rata on the first, second and third anniversary
dates of the date of grant. The vesting of the Options shall accelerate upon
the occurrence of a Transaction (as defined below). Such Options shall
qualify as Incentive Stock Options, to the extent permitted under the Plan
and Section 422 of the Internal Revenue Code of 1986, as amended.
Subject to the approval by the Compensation Committee of the Board
(as to which the Company shall use its best efforts to obtain), the Company
shall also grant Executive Options to purchase an additional 100,000 shares
of Common Stock. The terms and provisions relating to such Options shall be
substantially similar those of options granted generally under the RockShox,
Inc. 1996 Stock Plan, provided that (i) the per share exercise price of such
Options shall be equal to the fair market value of the stock on the date of
grant, (ii) the Options shall vest pro rata on the first, second and third
anniversary dates of the date of grant, (iii) such Options shall become
exercisable only at such time that Executive ceases to be a named executive
officer of the Company and (iv) the vesting of the Options shall accelerate
upon the occurrence of a Transaction (as defined below).
A "Transaction" means any recapitalization, sale of stock or
assets, dissolution, or merger that (i) occurs during the period beginning
six months after the Effective Date and ending (A) on the date of Executive's
termination of employment for Cause or by reason of his voluntary termination
or (B) six months after Executive's termination of employment other than for
Cause or by reason of his voluntary termination and (ii) results in the
delivery of cash, stock or other property to the holders of a majority of the
then outstanding common stock of the Company on a fully diluted basis (I.E.,
including shares issuable upon exercise of then outstanding options).
(c) FRINGE BENEFITS. Executive shall be entitled to
participate in the following fringe benefits:
(1) PARTICIPATION IN RETIREMENT/WELFARE PLANS. Executive
shall be eligible to participate in all savings, retirement, and welfare
plans, practices, policies and programs applicable generally to senior
executive officers of the Company.
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(2) VACATION. Executive shall be entitled to accrue up to
a maximum of four weeks of paid vacation days in each year of employment.
If Executive has accrued four weeks of vacation, Executive shall cease to
accrue vacation days until the amount of such accrued vacation is less than
four weeks. The timing of paid vacations shall be scheduled in a reasonable
manner by Executive.
(3) HEALTH INSURANCE. Executive, his spouse and children
shall receive (and the Company shall be responsible for the payment
therefor) coverage under health insurance substantially similar to the
health insurance provided to Executive, his spouse and children immediately
prior to his employment with the Company.
6. REIMBURSEMENT FOR BUSINESS EXPENSES. The Company shall reimburse
Executive for all reasonable and necessary expenses incurred by Executive in
performing his duties for the Company, including the following business
expenses:
(a) TRAVEL. The Company shall reimburse Executive for expenses
incurred in connection with customary business travel in accordance with Company
policy and Executive's reasonable discretion, including but not limited to,
business-class travel expenses.
(b) RENTAL CAR. The Company shall reimburse Executive for
expenses incurred in renting an automobile during the first six months of
Executive's employment with the Company.
7. RENTAL APARTMENT. The Company shall reimburse Executive for
reasonable out-of-pocket expenses incurred by Executive for a month-to-month
rental apartment in the San Xxxx area. During the six month period following
the Effective Date of this Agreement, the Board and Executive shall develop a
policy regarding Executive's permanent relocation to the San Xxxx area, which
would include reimbursement of the costs of renting a home for Executive and
his family in the San Xxxx area for so long as Executive maintains a home in
Connecticut. In the event any payment, property or benefit that is received
by Executive or paid by the Company on his behalf with respect to his
relocation to the San Xxxx area (including travel and rental car expenses, to
the extent not treated
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as business or moving expenses) is subject to federal, state, or local income
taxes, the Company shall reimburse Executive for such taxes.
8. TERMINATION OF EXECUTIVE'S EMPLOYMENT. Upon termination of
Executive's employment, Executive shall be entitled to receive the following
benefits:
(a) DEATH. In the event Executive's employment hereunder is
terminated by reason of Executive's death, Executive's estate (or other
appropriate payee or beneficiary) shall be entitled to receive (i) all
benefits payable to Executive through his date of termination from the
Company under the terms of those Company benefit plans, programs or
arrangements provided to Executive as "Other Compensation" in Section 5 of
this Agreement and (ii) any bonus to which Executive would have been entitled
pursuant to Section 4(c) with respect to the twelve month period ending on
the March 31 immediately following Executive's death, provided that such
bonus is prorated for the portion of the fiscal year during which Executive
was employed by the Company.
(b) DISABILITY. If, as a result of Executive's incapacity
due to physical or mental illness ("Disability"), Executive shall have been
absent from the full-time performance of his duties with the Company for
sixty (60) days during any one-hundred and eighty (180) day period,
Executive's employment under this Agreement may be terminated by the Company
or Executive for Disability. During any period prior to such termination
during which Executive is absent from the full-time performance of his duties
with the Company due to Disability, the Company shall continue to pay
Executive his Base Salary at the rate in effect at the commencement of such
period of Disability. Upon termination of Executive's employment for
Disability, (i) the Company shall continue to pay Executive his Base Salary
for a period of twelve months (subject to offset for disability insurance
benefits received by Executive or his designee on a tax adjusted basis) and
(ii) the Company shall pay all benefits payable to Executive through his date
of termination under the terms of those Company benefit plans, programs or
arrangements provided to Executive as "Other Compensation" in Section 5 of
this Agreement.
(c) TERMINATION FOR CAUSE OR RESIGNATION. The Company may
terminate Executive's employment under this Agreement for Cause at any time
prior to expiration of the Term. As used herein, termination for "Cause"
shall mean termination upon (1) the material failure by Executive to
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perform any of his duties with the Company or to follow the good faith
instructions of the Board (other than any such failure resulting from his
incapacity due to physical or mental illness), including, but not limited to,
the "Place of Employment" obligations set forth in Section 3 of the
Agreement, provided that Executive has failed to cure such breach within 10
days of receipt of written notice thereof from the Company, (2) the willful
engaging by Executive in conduct that is materially injurious to the Company,
monetarily or otherwise, (3) the conviction of Executive of (or the pleading
by Executive of NOLO CONTENDRE to) any felony, fraud or embezzlement or (4)
any material breach by Executive of the terms of this Agreement, which
Executive has failed to cure within 10 days of receipt of written notice of
such breach from the Company.
In the event of termination for Cause or resignation by Executive,
this Agreement shall terminate without further obligation by the Company,
except for payment of amounts of Base Salary and any fringe benefits accrued
through the date of such termination for Cause or resignation by Executive.
(d) TERMINATION BY THE COMPANY OTHER THAN FOR DEATH,
DISABILITY, CAUSE OR RESIGNATION. If Executive's employment is terminated by
the Company on or before April 30, 1998, for any reason other than
Executive's death, Disability, resignation, or for Cause, Executive shall
receive as severance (i) his Base Salary at the rate then in effect for a
period of six months and (ii) continuation of health benefits for a period of
six months substantially similar to the health benefits provided to Executive
immediately prior to termination.
If Executive's employment is terminated by the Company after April
30, 1998, for any reason other than Executive's death, Disability,
resignation, or for Cause, Executive shall receive as severance (i) his Base
Salary at the rate then in effect for a period of twelve months (such period,
the "Severance Period"), (ii) continuation of health benefits during the
Severance Period substantially similar to those provided to Executive
immediately prior to termination, (iii) continuation of payments with respect
to premiums on the life insurance policy through the end of the Severance
Period, (iv) reimbursement (including income taxes due thereon) of the
reasonable cost of relocating Executive's family back to Executive's current
Connecticut residence, and (v) all outstanding equity incentive awards
(including without limitation stock options granted) that would have become
vested during the Severance Period, shall
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immediately vest and remain exercisable for a period of ninety (90) days
following Executive's termination of employment.
The Base Salary payments provided to Executive during the Severance
Period pursuant to Section 8(d)(i) hereof shall be reduced by an amount equal
to the Consulting Fee (as defined below) payable by the Company to Executive
pursuant to Section 10(a) of this Agreement.
9. CONFIDENTIAL INFORMATION AND NON-SOLICITATION.
(a) CONFIDENTIALITY. Executive acknowledges that in his
employment hereunder, and during prior periods of employment with the
Company, he has occupied and will continue to occupy a position of trust and
confidence. Executive shall not, except as may be required to perform his
duties hereunder or as required by court order or applicable law, without
limitation in time or until such information shall have become public other
than by Executive's unauthorized disclosure, disclose to others or use,
whether directly or indirectly, any Confidential Information regarding the
Company. "Confidential Information" shall mean information about the
Company, and their respective clients and customers that is not disclosed by
the Company for financial reporting purposes and that was learned by
Executive in the course of his employment by the Company, including (without
limitation) any proprietary knowledge, trade secrets, data, formulae,
information and client and customer lists and all papers, resumes, and
records (including computer records) of the documents containing such
Confidential Information. Executive acknowledges that such Confidential
Information is specialized, unique in nature and of great value to the
Company and that such information gives the Company a competitive advantage.
Executive agrees to deliver or return to the Company, at the Company's
request at any time or upon termination or expiration of his employment or as
soon thereafter as possible, all documents, computer tapes and disks,
records, lists, data, drawings, prints, notes and written information (and
all copies thereof) furnished by the Company or prepared by Executive during
the term of his employment by the Company.
(b) NON-SOLICITATION OF CUSTOMERS AND SUPPLIERS. During the
period in which he is employed by the Company (and, in the event Executive's
employment is terminated by the Company for Cause, for a period of one (1)
year beyond the expiration of the Term), Executive shall not, directly or
indirectly, influence or attempt to influence customers or suppliers of the
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Company to divert their business to any business, individual, partner, firm,
corporation, or other entity that is then a direct competitor of the Company
with respect to the manufacture and sale of bicycle components or
non-automotive suspension products (each such competitor a "Competitor of the
Company").
(c) NON-SOLICITATION OF EMPLOYEES. Executive recognizes that
he possesses and will possess confidential information about other employees
of the Company relating to their education, experience, skills, abilities,
compensation and benefits, and inter-personal relationships with customers of
the Company. Executive recognizes that the information he possesses and will
possess about these other employees is not generally known, is of substantial
value to the Company and its subsidiaries in developing its business and in
securing and retaining customers, and has been and will be acquired by him
because of his business position with the Company. Executive agrees that,
during the period in which he is employed by the Company (and, in the event
Executive's employment is terminated by the Company for Cause, for a period
of one (1) year beyond the expiration of the Term), he will not, directly or
indirectly, solicit or recruit any employee of the Company for the purpose of
being employed by him or by any Competitor of the Company on whose behalf he
is acting as an agent, representative or employee and that he will not convey
any such confidential information or trade secrets about other employees of
the Company to any other person.
10. NONCOMPETITION/CONSULTING ARRANGEMENT; SURVIVAL OF PROVISIONS.
(a) NONCOMPETE/CONSULTING. For a period of one year
following termination of employment, Executive shall be a non-employee
consultant of the Company and shall provide consulting services to the
Company, as the Company reasonably requests. Executive shall not, during
such period, directly or indirectly, for his own account or for the account
of others, either as an officer, director, stockholder, owner, partner,
promoter, employee, consultant, adviser, agent, manager, or in any other
capacity assist or provide services to any person or entity that is then in
competition with the Company or its affiliates in the manufacturing and sale
of bicycle components or non-automotive suspension products. In consideration
of Executive's consulting and non-competition obligations provided herein,
Executive shall receive an annual consulting fee of $25,000 (the "Consulting
Fee"), payable at regular payroll intervals. At the
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Company's discretion, after a period of twelve months, the Consulting Fee
shall be terminated.
(b) SURVIVAL OF PROVISIONS. The obligations contained in
Sections 9 and 10 shall, to the extent provided in Sections 9 and 10, survive
the termination or expiration of Executive's employment with the Company and,
as applicable, shall be fully enforceable thereafter in accordance with the
terms of this Agreement. If it is determined by a court of competent
jurisdiction in any state that any restriction in Sections 9 or 10 is
excessive in duration or scope or is unreasonable or unenforceable under the
laws of that state, it is the intention of the parties that such restriction
may be modified or amended by the court to render it enforceable to the
maximum extent permitted by the law of that state.
11. MITIGATION/OFFSET. Executive shall be required to mitigate
the amount of any payment provided for under Section 8(d)(i) or 8(d)(ii) of
this Agreement by seeking other employment. The amount of any payment or
benefit provided for in Section 8 of this Agreement shall be reduced by any
similar compensation or benefits earned by him as a result of employment by
another employer.
12. NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by fax, first-class mail,
certified or registered with return receipt requested, or overnight courier
service, and shall be deemed to have been duly given three (3) days after
mailing or twenty-four (24) hours after transmission of a fax or by overnight
courier service to the respective persons named below:
If to Company: RockShox, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxxxxxxxxx 00000
ATTENTION: Corporate Secretary
Phone: (000) 000-0000
Fax: (000) 000-0000
If to Executive: Xxxxxx Xxxxxx
00 Xxxxxxxxx Xxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxx 00000
Phone: (000) 000-0000
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Either party may change such party's address for notices by notice duly given
pursuant hereto.
13. DISPUTE RESOLUTION; ATTORNEYS' FEES. The Company and
Executive agree that any dispute, other than with respect to Sections 9 or
10, about the validity, interpretation, effect or alleged violation of this
Agreement (an "Arbitrable Dispute") must be submitted to confidential
arbitration. Arbitration shall take place before an experienced employment
arbitrator licensed to practice law and selected in accordance with the Model
Employment Arbitration Procedures of the American Arbitration Association.
Arbitration shall be the exclusive remedy of any Arbitrable Dispute. Should
any party to this Agreement pursue any Arbitrable Dispute by any method other
than arbitration, the other party shall be entitled to recover from the party
initiating the use of such method all damages, costs, expenses and attorneys'
fees incurred as a result of the use of such method. Each party shall have
the right, in addition to any other relief granted by such arbitrator (or by
any court with respect to relief granted with respect to Sections 9 or 10),
to attorneys' fees based on a determination by the arbitrator (or, with
respect to Sections 9 or 10, the court) of the extent to which each party has
prevailed as to the material issues raised in determination of the dispute.
14. TERMINATION OF PRIOR AGREEMENTS. This Agreement terminates
and supersedes any and all prior agreements and understandings between the
parties with respect to Executive's employment and compensation by the
Company, but only with respect to the matters expressly addressed herein.
15. ASSIGNMENT; SUCCESSORS. This Agreement is personal in its
nature and neither of the parties hereto shall, without the consent of the
other, assign or transfer this Agreement or any rights or obligations
hereunder; provided that, in the event of the merger, consolidation,
transfer, or sale of all or substantially all of the assets of the Company
with or to any other individual or entity, this Agreement shall, subject to
the provisions hereof, be binding upon and inure to the benefit of such
successor and such successor shall discharge and perform all the promises,
covenants, duties, and obligations of the Company hereunder.
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16. GOVERNING LAW. This Agreement and the legal relations thus
created between the parties hereto shall be governed by and construed under
and in accordance with the laws of the State of Delaware.
17. WITHHOLDING. The Company shall make such deductions and
withhold such amounts from each payment made to the Executive hereunder as
may be required from time to time by law, governmental regulation or order.
18. HEADINGS. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
19. WAIVER; MODIFICATION. Failure to insist upon strict
compliance with any of the terms, covenants, or conditions hereof shall not
be deemed a waiver of such term, covenant, or condition, nor shall any waiver
or relinquishment of, or failure to insist upon strict compliance with, any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times. This
Agreement shall not be modified in any respect except by a writing executed
by each party hereto.
20. SEVERABILITY; POOLING.
(a) In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute
or public policy, only the portions of this Agreement that violate such
statute or public policy shall be stricken. All portions of this Agreement
that do not violate any statute or public policy shall continue in full force
and effect. Further, any court order striking any portion of this Agreement
shall modify the stricken terms as narrowly as possible to give as much
effect as possible to the intentions of the parties under this Agreement.
(b) In the event that the Company is party to a transaction
which is otherwise intended to qualify for "pooling of interests" accounting
treatment then (1) this Agreement shall, to the extent practicable, be
interpreted so as to permit such accounting treatment, and (2) to the extent
that the application of clause (1) of this Section 20(b) does not preserve
the availability of such accounting treatment, then, to the extent that any
provision of the Agreement disqualifies the transaction as a "pooling"
transaction (including, if applicable, the
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entire Agreement), such provision shall be null and void as of the date
hereof. All determinations under this Section 20(b) shall be made by the
accounting firm whose opinion with respect to "pooling of interests" is
required as a condition to the consummation of such transaction. The Company
shall use its best efforts to maintain the effectiveness of all provisions of
the Agreement (or to give Executive the economic benefit thereof) without
adversely affecting "pooling of interests" treatment of a transaction.
21. INDEMNIFICATION. The Company shall indemnify and hold
Executive harmless for acts and omissions in his capacity as an officer,
director or employee of the Company to the maximum extent permitted under
applicable law.
22. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
23. BOARD APPROVAL. This Agreement shall take effect upon the
Effective Date, but shall be subject to the approval of the Board.
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IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has hereunto
signed this Agreement, as of the date first above written.
ROCKSHOX, INC.
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By:
Its:
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Xxxxxx Xxxxxx
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