EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made as of the 1st day
of November, 1998, by and between THE MAJESTIC COMPANIES, LTD., a Delaware
corporation (the "Company"), and XXXXXXX X. XXXXXXXXX (the "Employee").
RECITALS
A. The Employee was employed prior to the date hereof as the President
and Chief Executive Officer of The Majestic Companies, Ltd., a Delaware
corporation ("Majestic") under an Executive Employment Agreement dated June 1,
1997 (the "Prior Agreement") by and between Majestic and the Executive.
B. On or about the date of this Agreement, Majestic was merged into the
Company pursuant to the terms, conditions and agreements of an Agreement and
Plan of Merger, dated October 8, 1998 (the "Merger Agreement"), which Merger
Agreement calls for the entry by the Company and the Employee into an employment
arrangement whereby the Employee will be the President and Chief Executive
Officer of the Company.
C. The Company therefore wishes to obtain the services of the Employee
as the Chief Executive Officer and President of the Company and the Employee
desires to render such services to the Company, all upon the terms and
conditions set forth in this Agreement, and
D. In order to formalize this relationship the Employee, the Company
and the Employee wish to execute and enter into this Agreement.
NOW THEREFORE, in consideration of mutual covenants herein contained, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
1. Employment of Employee.
The Company hereby employs the Employee in the capacity hereafter set forth
and the Employee hereby accepts such employment with the Company, all upon the
terms and conditions set forth in this Agreement.
2. Term.
Unless sooner terminated or extended as provided for in this Agreement, the
term of employment of the Employee by the Company under this Agreement shall be
for an initial term of five (5) years. For purposes of this Agreement, an
Employment Year begins on November 1 in each year and ends on October 31 in each
year.
3. Employment Services.
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3.1. The Employee shall serve as the Chief Executive Officer and President of
the Company, supervising such functions as are assigned by the Board of
Directors of the Company to the Employee. The Employee shall have such specific
duties and powers and shall assume such duties and responsibilities as may be
customarily incident to his employment.
3.2. During the term of this Agreement, the Employee shall serve the Company
faithfully and to the best of the Employee's ability, and shall devote his full
time, attention, skill and efforts to the performance of the duties required by
or appropriate to the employment of the Employee. The Employee shall not, during
the term of employment hereunder, engage in any business activity other than
those required by or incident to employment under this Agreement without the
prior written consent of the Company. Notwithstanding the foregoing prohibition
against other business activities set forth above, the Employee shall be
permitted to engage in and manage personal investments and to participate in
community and charitable affairs, so long as such activities do not interfere
with the duties of the Employee under this Agreement. The Employee shall
immediately notify the Company of any illness, disability or other condition
which will cause the Employee to be absent from work.
4. Compensation.
4.1. In consideration of the services to be rendered by the Employee
hereunder the Company shall pay to the Employee, and the Employee agrees to
accept as full compensation for such services, a salary at the rate of One
Hundred Eighty Thousand Dollars ($180,000.00) for the first year of this
Agreement, payable in accordance with the normal payroll practices of the
Company. Thereafter, the annual salary of the Employee shall increase at a
rate of 10% per year for the remaining four (4) years.
4.2. In addition to his salary, the Employee may be entitled to receive an
annual bonus, in an amount determined at the discretion of the Board of
Directors of the Company, payable within ninety (90) days after the end of each
Employment Year.
4.3. The Employee shall be granted stock options (the "Options") exercisable
for two hundred fifty thousand (250,000) shares of common stock by the Company
for each year of Employee's employment under this Agreement. The exercise price
for such Options shall be (i) One Dollar ($1.00) per share for Options vesting
in the first year of Employee's employment, (ii) One Dollar and twenty-five
cents ($1.25) per share for Options vesting in the second year of Employee's
employment, (iii) One Dollar and fifty cents ($1.50) per share for Options
vesting in the third year of Employee's employment, (iv) One Dollar and
seventy-five cents ($1.75) per share for Options vesting in the fourth year of
Employee's employment, and (v) Two Dollars ($2.00) per share for Options vesting
in the fifth year of Employee's employment and in each successive year of
Employee's employment. The Options shall be granted on the date this Agreement
is executed by the Company. The Options for each Employment Year, as set forth
above, shall vest annually on the first day of each year of Employee's
employment under this Agreement. The Options shall be subject to equitable
adjustment for any stock split, stock dividend or other similar event to protect
the Employee from dilution of the Options.
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4.4. The Employee shall receive (i) an automobile allowance of One Thousand
Dollars ($1,000.00) per month, (ii) at the election of the Company, a health
insurance allowance of Five Hundred Dollars ($500.00) per month or medical
insurance coverage, and (iii) a term life insurance policy in the face amount of
One Million Dollars ($1,000,000.00) payable to the beneficiaries of the
Employee. The Employee shall receive standard Company health and related
benefits and other standard employee fringe benefits, as offered by the Company
from time to time, and as more fully described in the Company's employee manual.
4.5. The Employee shall receive all statutory benefits including, but not
limited to, worker's compensation, as are proved under applicable laws, rules
and regulations.
4.6. Subject to approval of classes or categories of reimbursable expenses
and Company policies regarding same, as established by the Company from time to
time, the Employee shall receive reimbursement for all actual and necessary
business expenses upon the presentation of documentation in form sufficient to
permit the Company to determine the necessity and reasonableness of the expense,
to comply with all governmental reporting requirements and to substantiate the
Company's right to claim income tax deductions for such expenses.
5. Termination.
5.1. In the event the Employee, due to physical or mental injury, illness,
disability, or incapacity, shall fail to render the services provided for in
this Agreement for a consecutive period of ninety (90) days, the Company may, at
its option, terminate the Employee's employment hereunder by thirty (30) days
prior written notice to the Employee or his legal representative, provided that
such incapacity is judged to be of permanent nature as confirmed by a medical
doctor mutually selected by the Company and the Employee or his legal
representative.
5.2. If the employment of the Employee terminates for any reason (including
death, disability, or voluntary resignation), the Employee, in the event of his
death, the Employee's estate) shall be entitled to receive from the Company a
termination benefit (the "Termination Benefit") equal to the payments due by the
Company to the Employee under this Agreement for (ii) the balance of the Term of
this Agreement. The Termination Benefit will be payable in monthly installments
on the first day of each month for period of payments comprising the
Termination Benefit. Notwithstanding the foregoing, the Termination Benefit to
be paid to the Employee under this Paragraph A shall be reduced by the total
payments received by the Employee during the ninety (90) day period preceding
the Employee's termination of employment as disability payments under this
Agreement.
6. Non-Disclosure of Confidential Information.
6.1. The Employee acknowledges that it is the policy of the Company to
maintain as secret and confidential all Confidential Information as hereinafter
defined. "Confidential Information" shall mean any information, not generally
known in the Company's industry, which gives the Company a competitive
advantage in the industry, heretofore or hereafter acquired, discovered,
developed, conceived, originated, used or prepared by the Company or by an
employee of the Company as the result of employment with the Company and which
falls within the following categories:
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(i) information to trade secrets of the Company or any supplier, customer,
distributor, independent representative or consultant of the Company;
(ii) information relating to existing or contemplated products, services,
technology, designs, processes, manuals, formulas, computer systems and/or
software, and any research or development of the Company or any supplier or
customer of the Company;
(iii) information relating to business plans, sales or marketing methods,
methods of doing business, distributor or independent representative lists or
information, customer lists, customer usage and/or requirements, and supplier or
customer information of the Company or any supplier or customer of the Company.
(iv) information relating to work products in general or as described in
Section 8 of this Agreement; and
(v) any other Confidential Information that either the Company or any
supplier, licensor or customer of the Company may wish to protect by patent,
copyright or by keeping it secret and confidential.
6.2. The Employee recognizes that the services to be performed by the
Employee are special and unique, and that by reason of his duties, he will
acquire Confidential Information. The Employee recognizes that all such
Confidential Information is the property of the Company. In consideration of
the Company's entering into this Agreement, the Employee agrees that:
(i) the Employee shall never, during the term of employment or thereafter,
directly or indirectly, use, publish, disseminate or otherwise disclose any
Confidential Information obtained in connection with his employment by the
Company without prior written consent of the Company;
(ii) during the term of his employment by the Company, the Employee shall
exercise all due and diligent precautions to protect the integrity of the
Company's Confidential Information and, upon termination of his employment,
Employee shall return all documents containing any Confidential Information and
any copies thereof, in his possession or control; and
(iii) during the Non-Competition Period as described hereinafter, Employee
shall exercise all due and diligent precautions to protect any Confidential
Information and shall never, directly or indirectly, use, publish, disseminate
or otherwise disclose any Confidential Information obtained in connection with
his employment.
6.3. Upon termination or expiration of this Agreement, the Employee shall
immediately deliver to the Company all books, records, memoranda, reports,
software data and documents relating to the Company's business, suppliers,
customers and other assets of the Company in the possession, custody or under
the control of the Employee, whether or not such material contains Confidential
Information.
6.4. The Employee agrees that the provisions of this Section 6 are reasonably
necessary to protect the proprietary rights of the Company in Confidential
Information and its trade secrets, goodwill and reputation. The provisions of
this Section 6 shall survive any termination of this Agreement.
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7. Non-Competition Covenant.
7.1. During the Non-Competition Period (as hereinafter defined), the Employee
covenants and agrees that the Employee shall not in any way be engaged, either
directly or indirectly, anywhere within the United States, whether as an
employee, consultant, agent or representative of any corporation or any other
form of business entity, in the business of developing, marketing or selling
products or services which are competitive to the products or
services of the Company, nor will the Employee solicit or cause to be solicited
for or on behalf of the Employee or any third party, any business which is
competitive with the business of the Company.
7.2. During the Non-Competition Period the Employee further covenants and
agrees that the Employee shall not seek to persuade, directly or indirectly, any
director, officer, employee, agent, consultant or any person who receives
compensation from the Company, or any person who has served in any such capacity
during the twelve (12) months prior to any such action, to discontinue that
individual's status, relationship or employment with the Company, nor to become
employed or engaged in any activity similar to or competitive with the
activities of the Company, nor will the Employee, directly or indirectly, hire
or retain any such person.
7.3. During the Non-Competition Period, the Employee further covenants and
agrees that the Employer shall not, directly or indirectly, approach, contact,
solicit, sell to or deal with any supplier or service provider to the Company,
or any customer, consultant, or any person who receives compensation from the
Company, for the purpose of offering, obtaining, selling, diverting or
receiving sales, quotations or orders for any products which are in competition
with those of the Company.
7.4. The Employee acknowledges that any breach by the Employee of the
provisions of this Section 7 can cause irreparable harm to the Company for
which the Company would have no adequate remedy at law. In the event of a
breach or threatened breach or alleged breach or threatened alleged breach of
any such provisions, the Company, in addition to any and all other rights and
remedies it may have under this Agreement or otherwise, and may immediately
seek any judicial action that the Company may deem necessary including, without
limitation, the obtaining of temporary and preliminary injunctive relief.
7.5. The provisions of this Section 7 shall survive any termination of this
Agreement.
8. Work Product.
8.1 In the event that, during or subsequent to his employment the Employee's
assistance is needed in regard to securing, defending or enforcing any patent or
copyright of which the Employee is the inventor, co-inventor, author, designer,
etc., the Employee shall comply with reasonable requests to assist the Company.
If such assistance is required during employment by the Company, no additional
compensation shall be paid for such assistance. In the event that assistance is
required after the termination of employment, it is understood that requirements
for compensation may be outside the control of the Employee and shall therefore
be negotiated or arbitrated as required with the Employee or his new employer.
9. Notices.
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Any notice, request, instruction or other document to be given under this
Agreement to any party hereunder shall be in writing and delivered personally,
by overnight courier delivery service or by certified mail, postage prepaid, to
the following addresses:
If to the Company:
The Majestic Companies, Ltd.
0000 Xxx Xxx Xxxxx Xxxxx
0xx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxx, XX
Fax No.: (000) 000-0000
If to the Employee:
Xxxxxxx X. Xxxxxxxxx
000 Xxxxxxx Xxxxx, Xxxxx X
Xxxxxxxxx, Xxxxxxxxxx
or to such other addresses as a party hereto may hereafter designate in writing
to the other party and shall be deemed delivered as of the date of hand
delivery, as of the date following delivery to an overnight courier delivery
service or as of three (3) days following mailing by certified mail.
10. Benefit and Assignment.
This Agreement shall be binding upon and shall inure to the benefit of the
Company and the Employee and their respective heirs, legal representatives,
successors and assigns. Neither the Employee or the Company may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other parties hereto.
11. Amendment and Entire Agreement.
This Agreement cannot be modified or changed except by an instrument in
writing, signed by both parties to the Agreement. This Agreement contains the
entire understanding between the Company and the Employee with respect to the
matters referenced herein.
12. Severability.
In the event of invalidity or unenforceability of any one or more provisions
of this Agreement, such invalidity or unenforceability shall not affect the
validity or enforceability of the other provisions hereof and such provisions
shall be deemed to remain in full force and effect.
13. Survival of Provisions.
The provisions of this Agreement set forth in 6, 7, 8 and 9 hereof shall
survive the termination of the Employee's employment under this Agreement.
14. Governing Law.
This Agreement shall be construed and governed in accordance with the laws
of the State of California.
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15. Consent to Suit.
Any legal proceeding arising out of or relating to this Agreement shall be
instituted in the United States District Court for the District of San Diego, or
if such court does not have jurisdiction or will not accept jurisdiction, in any
court of general jurisdiction in the State of California, and the Employee
hereby consents to the personal and exclusive jurisdiction of such court and
hereby waives any objection that the Employee may have as to the venue of any
such proceeding and any claim or defense of inconvenient forum.
16. Waiver of Breach.
The waiver by either party hereto of a breach of any provisions of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
by either party.
17. Execution in Counterparts.
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the date noted below and to be in effect from and after the date
first set forth above, in accordance with the terms set forth in this Agreement.
WITNESS: The Company:
THE MAJESTIC COMPANIES, LTD.,
a Delaware corporation
/s/ XXXXXX X. XXXXX By: /s/ XXXXXXXXX XXXXX (SEAL)
------------------------------------ ------------------------
Xxxxxxxxx Xxxxx
Secretary/Treasurer
Date: 12/11/98
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The Employee:
/s/ XXXXXX X. XXXXX By: /s/ XXXXXXX X. XXXXXXXXX (SEAL)
------------------------------------- -------------------------
Xxxxxxx X. Xxxxxxxxx
Chief Executive Officer &
President
Date: 12/11/98
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