EMPLOYMENT AGREEMENT
EXHIBIT 99.1
EMPLOYMENT AGREEMENT made as of the 26th day of December 2006 (“Effective Date”) by
and between Corgi International Limited, a corporation organized under the laws of Hong Kong (the
“Corporation”), and Xxxxxxx X. Xxxxxxx, a citizen and resident of California, United States of
America (the “Executive”).
WHEREAS, the Corporation desires to employ Executive, and Executive desires to be employed by
the Corporation, upon the terms and conditions set forth in this Agreement;
NOW, THEREFORE, the Corporation and Executive (together, the “Parties”) agree as follows:
PART
ONE — EMPLOYMENT & SERVICES
1. Definitions. Terms that are capitalized, but not immediately defined herein, are
defined in Exhibit A hereto.
2. Employment Period. Executive’s employment with the Corporation shall be governed
by the provisions of this Agreement for the period commencing with the Effective Date and
continuing through the three (3) year anniversary of the Effective Date (“Initial Term”).
Notwithstanding the foregoing, Executive’s employment shall be “at-will” which means that either
the Executive or Corporation may terminate Executive’s employment at any time and for any reason
subject to the terms of this Agreement. The termination or expiration of this Agreement does not
by itself terminate the Executive’s employment.
A. Renewals. The term of Executive’s employment pursuant to this Agreement shall
automatically be extended for successive one-year periods thereafter (“Renewal Term”), unless
either the Corporation acting by majority vote of the Board or Executive elects, by written notice
delivered to the other not later than sixty (60) days prior to expiration of the Initial Term or
any Renewal Term, not to renew the term of this Agreement. In no event, however, may the
Corporation exercise its election not to renew the term of this Agreement for a Renewal Term (i) if
the Corporation is at the time a party to an agreement, understanding or letter of intent
pertaining to a transaction that would, if consummated, constitute a Change in Control or (ii)
during the twelve (12) month period following a Change in Control.
B. Earlier Termination. The period during which Executive’s employment is governed by
the provisions of this Agreement, whether during the Initial Term or any Renewal Term, shall
constitute the “Employment Period” hereunder. This Agreement may be terminated at any time during
the Employment Period in accordance with the provisions of Part Two hereof. Notwithstanding such
termination, one or more provisions of this Agreement shall survive any termination of this
Agreement to the extent expressly provided herein.
3. Position. During the Employment Period, the Corporation shall employ Executive,
and Executive shall be employed by the Corporation, as the Chief Executive Officer of the
Corporation (“CEO”) and shall in such capacity report directly to the Board.
A. Duties & Responsibilities. As CEO, Executive shall have primary responsibility for
the formulation, implementation and execution of strategic policies relating to the Corporation’s
business operations, financial objectives and market growth and shall accordingly have overall
responsibility for the formulation of the business plan for each fiscal year to be submitted for
Board approval. Executive agrees to perform in good faith and to the best of his ability all
services that may be required of Executive hereunder and to be available to render services at all
reasonable times and places in accordance with reasonable directions and requests made by the
Corporation acting by majority vote of the Board (or committee thereof).
B. Regular Places of Employment. Executive shall maintain one or more offices at any
of the Corporation’s (or any of its subsidiaries’) offices as Executive determines from time to
time, including an office in the United Kingdom, Northern California and/or Hong Kong. Executive
may be required from time to time to travel to other geographic locations in connection with the
performance of his duties hereunder.
C. Confidential/Proprietary Information. Executive shall sign the Corporation’s
customary Proprietary Information and Inventions Agreement (“PIIA”) which shall become Exhibit B
hereto and, throughout the Employment Period and thereafter, remain subject to the terms and
conditions of the PIIA in accordance with its terms. Nothing in this Agreement shall operate to
supersede, modify or affect Executive’s obligations, duties and responsibilities under the PIIA.
D. Restrictive Covenants. During the Employment Period, Executive shall not directly
or indirectly provide services to any person, firm or other entity, nor shall he conduct (or
otherwise participate in) any business or financial enterprise for his own account or for the
benefit of any other person, firm or entity without obtaining the Board’s advance written consent.
As of the Effective Date, Executive is serving as a member of the Board of Directors or as an
advisor to the following entities, Tommy’s Margaritas, Inc., Next Sport, Inc. and Happitat, Inc.,
and shall be permitted to continue to do so during the Employment Period, in the absence of a
future, good faith determination by the Board that such other services conflicts with the
Corporation’s interests.
4. Compensation, Benefits & Equity
A. Cash Compensation
(1) Salary. Executive shall be paid a base salary at an annualized rate of not less than Two
Hundred Fifty Thousand US Dollars ($250,000 USD). Executive’s base salary shall be paid at
periodic intervals in accordance with the Corporation’s payroll practices for salaried employees,
but no less frequently than once per calendar month for that entire month. Such base salary rate
shall be subject to annual review by the Board and may be adjusted at the Board’s discretion,
subject to the provisions applicable to an Involuntary Termination of Executive’s employment as set
forth herein.
(2) Annual Management Bonus. For each fiscal year of the Corporation during the Employment
Period, beginning with the fiscal year commencing in 2007, the Corporation shall establish a
Management Bonus Pool equal to twenty percent (20%) of the
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Corporation’s earnings before interest and taxes (“EBIT”) if the Corporation meets or exceeds
the financial objectives and performance milestones approved by the Board (or its committee) for
such fiscal year. Such financial objectives and performance milestones shall be set by the Board
(or a committee of independent Board members) within the first ninety (90) days of each fiscal
year, and any bonus earned by Executive for each fiscal year shall be paid within two-and-one-half
months after the close of that year. Executive shall be eligible to receive an annual Management
Bonus (“Management Bonus”) in an amount not less than twenty-five percent (25%) of the Management
Bonus Pool for each fiscal year overlapping with the Initial Term that the Corporation attains its
financial objectives and performance milestones for that year, but any actual bonus amount to be
paid to Executive in excess of twenty-five percent (25%) of the Management Bonus Pool shall be
determined in the sole discretion of the Board or its delegated committee. For each fiscal year
overlapping the Initial Term that the Corporation does not attain its financial objectives and
performance milestones for that year, the amount of bonus (if any) to be paid to Executive shall be
determined in the sole discretion of the Board or its delegated committee.
(3) Withholdings & Deductions. The Corporation shall deduct and withhold from any
compensation payable to Executive under this Agreement any and all applicable federal, state and
local income and employment withholding taxes and any other amounts required to be deducted or
withheld by the Corporation under applicable statutes, regulations, ordinances or orders. The
Corporation shall deduct such additional amounts from Executive’s cash compensation as designated
in writing by Executive to the extent permitted by applicable law.
B. Benefits
(1) Benefit Plans. Executive shall, throughout the Employment Period, be eligible to
participate in all pension, profit-sharing and fringe benefit plans, such as group term life
insurance plans, group health plans, accidental death and dismemberment plans, short-term and
long-term disability programs, and any other benefit programs which are made available to any of
the Corporation’s executives and for which Executive otherwise qualifies.
(2) Paid Vacation Time. Executive shall accrue paid vacation benefits during the Employment
Period in accordance with the vacation policies of the Corporation applicable to executives and may
take his accrued vacation at such times as are mutually convenient to Executive and the
Corporation.
(3) Taxes. Commencing in 2007, Executive shall be entitled to reimbursement for tax and
financial planning services and for legal services relating to such tax and financial planning
services for each calendar year (other than 2006) included, in whole or in part, within the
Employment Period up to a maximum $15,000 total reimbursement for all such services for each
calendar year. The reimbursement shall be paid to Executive within ten (10) business days
following his submission of the invoices for such services to the Corporation, but in no event
later than two-and-one-half months following the close of the calendar year in which such services
were performed (provided Executive has timely submitted the requisite invoices).
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C. Equity
(1) Initial Option. In January 2007, the Board (or a committee of the Board) shall approve an
option grant to Executive to purchase five hundred fifty thousand (550,000) ordinary shares (on a
post Reverse Stock Split basis) as represented by the Corporation’s American Depositary Shares
(“ADS”) (“Initial Option”). The Initial Option shall be awarded under the Corporation’s Plan. The
Initial Option shall have an exercise price per share equal to the fair market value per ADS on the
grant date as determined under the Plan. The Initial Option shall be governed by an option
agreement which the Executive must execute as a condition of the grant. The Initial Option
Agreement shall provide all terms and conditions including without limitation vesting,
exercisability and forfeiture.
(2) Performance Options. As of the Effective Date, the Corporation’s market capitalization
was US$65,000,000 (the “Base Market Cap”). During the Employment Period, after the close of each
fiscal year, the Board shall compare the FYMC to the Base Market Cap. If the FYMC exceeds the Base
Market Cap by at least seventy-five million US dollars (US$75,000,000), then the Board (or its
committee), shall consider granting Executive under the Plan an additional stock option
(“Performance Option”). For each seventy-five million dollars that the FYMC exceeds the Base
Market Cap, a Performance Option grant may be issued for that number of ADSs of up to one percent
(1%) of the total outstanding ADSs of the Corporation on the applicable grant date, calculated on a
fully-diluted basis taking into account all outstanding options, warrants and other securities
convertible into or otherwise exercisable for such shares (but excluding for this purpose the
Performance Option), up to a maximum of 4.0% and if at the time of such grant, the Plan does not
permit such grant in full, then the excess options shall be subject to shareholder approval in
increasing the Plan to permit such grant. Each Performance Option shall have an exercise price per
ADS equal to the fair market value per ADS on the date the Board approves that Performance Option,
as determined under the Plan. For purposes of this paragraph, the market capitalization on each
relevant date shall be determined by multiplying the number of ADSs outstanding on such date by the
average of the closing selling prices per ADS for the immediately preceding ten (10) trading days.
The Performance Option shall be governed by an option agreement which the Executive must execute as
a condition of the grant. The Performance Option Agreement shall provide all terms and conditions
including without limitation vesting, exercisability and forfeiture. If Performance Options are
awarded, then for purposes of future year comparisons, the Base Market Cap shall be increased to
the Corporation’s market capitalization as of the end of the last completed fiscal year immediately
preceding the grant of any such Performance Option.
(3) Discretionary Options. The Executive shall be eligible to receive one or more additional
Options (“Discretionary Options”) or other Stock Awards during the Employment Period, as the Board
may deem appropriate in its sole discretion.
(4) All Options. The Initial Option, each Performance Option and Discretionary Option shall
vest and become exercisable over a four (4) year period measured from the applicable grant date (or
the Effective Date for the Initial Option) as follows: twenty-five percent (25%) of the underlying
ADSs shall vest upon the first anniversary of the applicable grant date (or the Effective Date for
the Initial Option) and, thereafter, as to 1/48th of the underlying ADSs over each of the 36 months
following such first anniversary. However, the
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Initial Option, each Performance Option and Discretionary Option shall vest in full on an
accelerated basis: (i) immediately upon an Involuntary Termination of Executive’s employment, or
(ii) immediately upon Executive’s death during his period of Service to the Corporation. The
Initial Option, each Performance Option and Discretionary Option shall have a maximum term of ten
(10) years, subject to earlier termination following the termination of Executive’s “Continuous
Status as an Employee, Director or Consultant” (as defined in the Plan). Any other Stock Award
shall vest in accordance with the same vesting schedule set forth in this Paragraph 4.C.(4). In
the event of any ambiguity or conflict between the provisions of this Agreement pertaining to any
Option or Stock Award and the provisions of any notice of stock option grant, notice of stock
award, stock option agreement or stock award agreement, it is the intent of Executive and the
Corporation that any such ambiguity or conflict be resolved so as to give full force and effect to
their intent as set forth in this Agreement.
(5) Sale of Shares. Subject to any SEC limitation and establishment of an acceptable SEC Rule
10b5-1 trading plan, during each rolling three (3)-month period within the Employment Period,
Executive shall have the right to sell up to that number of ADSs equal to four percent (4%) of
Executive’s total holdings of the Corporation’s capital stock, including outstanding shares held by
Executive and shares subject to outstanding options held by Executive (whether or not the options
are at time vested and exercisable for those shares), as adjusted from time to time for stock
splits, stock dividends, recapitalizations, spin-offs or other similar transactions affecting the
outstanding shares of Common Stock as a class without the Corporation’s receipt of consideration,
provided that each such sale is made (i) during an open trading window for the Corporation’s
executive officers, provided Executive is not otherwise at the time aware of material nonpublic
information concerning the Corporation, or (ii) pursuant to the express provisions of a SEC Rule
10b5-1 plan established at a time when Executive is not otherwise aware of material nonpublic
information concerning the Corporation and where such 10b5-1 plan has been pre-cleared by the
Corporation. All such sales by Executive must be effected in compliance with the applicable
registration requirements of the Securities Act of 1933, as amended, or any applicable exemption
from such requirements, including (without limitation) SEC Rule 144. Following the termination of
Executive’s Service, Executive may sell his shares of the Corporation’s common stock subject only
to compliance with the applicable registration requirements of the Securities Act of 1933, as
amended, or any applicable exemption from such requirements, while not aware of material nonpublic
information concerning the Corporation, and the Corporation’s Xxxxxxx Xxxxxxx Policy as such policy
existed as of the date Executive’s Service terminated. Notwithstanding the foregoing, the
Corporation shall not have an independent duty to register Executive’s ADSs.
D. Business & Travel Expenses. Executive shall be entitled, in accordance with the
Corporation’s reimbursement policies in effect from time to time for its executives, to receive
reimbursement from the Corporation for all reasonable business, business travel and entertainment
expenses incurred by Executive in the performance of his duties hereunder, including costs of
overnight accommodations incurred by Executive while performing work from any of the Corporation’s
offices, provided that Executive furnishes the Corporation with vouchers, receipts and other
details of such expenses in the form consistent with its expense reimbursement policies and
practices applicable to its executives, and as required by the Corporation to substantiate a
deduction for such business expenses under all applicable rules and regulations of federal and
state taxing authorities.
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E. Indemnification. Executive shall be entitled to indemnification from the
Corporation pursuant to the provisions of the Corporation’s Amended and Restated Articles of
Association relating to the indemnification of the Corporation’s officers and Board members and
California Labor Code section 2802, and the Corporation hereby agrees that it assumes the
obligations of Master Replicas Inc. under the indemnification agreement existing as of the
Effective Date between Master Replicas Inc. and Executive. In addition, Executive shall be
entitled to full coverage under any Directors and Officers Liability Insurance Policy maintained by
the Corporation for one or more other officers of the Corporation or Board members.
(1) The indemnification obligations hereunder shall remain in full force and effect throughout
the Employment Period, shall survive any termination of this Agreement and shall continue during
the period following any termination of Executive’s employment, whether or not in connection with a
Change in Control, with respect to all matters, events or transactions occurring or effected during
Executive’s period of Service to the Corporation.
(2) To the extent that the following does not expressly conflict with any indemnification
agreement between Executive and Master Replicas Inc. or the Corporation, the following procedures
shall be effect at all times for the payment of such indemnification:
(a) Within forty-five (45) days after Executive incurs any expense for which Executive is
entitled to indemnification, Executive shall notify the Corporation in writing of the nature and
dollar amount that expense, and the Corporation shall reimburse Executive for that expense as soon
as practicable. Executive may also seek advance payments from the Corporation for any
indemnifiable expenses that Executive reasonably expects to incur, subject to any repayment
obligation if any expense is subsequently found not to be so indemnifiable or to be less than
originally anticipated at the time of the advance payment.
(b) Within forty-five (45) days after Executive becomes subject to any judgment, fine,
penalty, settlement amount or other assessment for which Executive is entitled to indemnification
(each a “Liability”), Executive shall notify the Corporation of the nature of that Liability and
the dollar amount thereof, and the Corporation shall pay Executive the amount thereof for which
Executive is entitled to indemnification as soon as practicable.
PART
TWO — TERMINATION & SEVERANCE
Upon termination of Executive’s employment for any reason, the Executive shall be deemed to have
concurrently voluntarily resigned from all offices and positions with the Corporation and its
affiliates (including without limitation any board positions) unless the Board requests otherwise
in writing.
1. Death. Upon Executive’s death during the Employment Period, the employment
relationship created by this Agreement shall immediately and automatically terminate.
2. Termination by the Corporation. The Corporation, acting by majority vote of the
Board, may terminate Executive’s employment under this Agreement at any time for any
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reason, for or without Cause, during the Employment Period by giving at least fifteen (15)
days advance written notice of such termination to Executive.
A. For Cause. If the Corporation terminates Executive’s employment under this
Agreement for Cause during the Employment Period, the written notice to Executive must so state, as
well as disclose the specific reason and facts constituting Cause so that, if possible, Executive
may cure the circumstances constituting the Cause within the 15-day notice period and, if cured,
Executive’s employment shall not terminate for Cause.
B. Without Cause. If the Corporation terminates Executive’s employment under this
Agreement during the Employment Period due to Executive’s Disability or for any reason other than
for Cause, the written notice to Executive must so state. The Corporation may, if it so desires,
immediately relieve Executive of some or all of his duties, responsibilities and authorities,
although Executive shall continue to be entitled to compensation, benefits and equity in accordance
with the provisions of Section 4 of Part One of this Agreement, as if Executive was fully and
actively working throughout the 15-day notice period.
3. Termination by Executive. The Executive may terminate his employment under this
Agreement at any time by giving the Corporation at least fifteen (15) days prior written notice of
such termination. However, in the event of a Change in Control, such fifteen (15)-day notice
requirement shall be reduced to ten (10) days prior written notice with respect to any resignation
by Executive for one or more reasons constituting grounds for an Involuntary Termination.
4. Obligations Upon Termination of Executive’s Employment.
A. Obligations of the Corporation
(1) Any Termination. Upon any termination of Executive’s employment for any reason, the
Corporation shall within the time period prescribed by applicable law provide the following to
Executive (or to his estate in the event his employment terminates due to his death): (i) payment
of any unpaid base salary earned through the effective date of termination and any accrued but
unused paid vacation time and (ii) any Management Bonus for one or more fiscal years (and any other
bonus amount) actually earned but not previously paid to Executive by the effective date of
termination. In addition, any vested deferred compensation to which the Executive is entitled
shall be paid to him in accordance with the terms of the applicable deferred compensation
arrangement and any payment elections made by the Executive thereunder.
(2) Involuntary Termination. In addition to the payments required under Paragraph 4.A.(1) of
this Part Two, upon Executive’s death or upon any Involuntary Termination of Executive’s employment
during the Employment Period, the Corporation shall provide Executive with the Severance Benefits
set forth in Paragraph 4.C., of this Part Two, provided that such Severance Benefits are
conditioned on Executive having timely signed (and not revoked) a general release agreement, in the
form substantially similar to Exhibit C hereto, (“General Release”) that becomes effective and
enforceable in accordance with its terms.
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B. Obligations of Executive. Upon any termination of Executive’s employment for any
reason, Executive shall do the following no later than fifteen (15) days after the effective date
of termination: (i) return to the Corporation all items of property owned by the Corporation and
provided for Executive’s use during Executive’s employment with the Corporation; (ii) return to the
Corporation or destroy, as the Corporation shall direct, all documents and materials belonging to
the Corporation pursuant to the terms of the PIIA; and (iii) submit to the Corporation a written
request for reimbursement of all unpaid business and travel expenses in accordance with the
requirements of Paragraph 4.D. of Part One. Executive shall cooperate with the Corporation, as
reasonably requested by the Corporation, to effect a transition of Executive’s responsibilities and
to ensure that the Corporation is aware of active matters of significance being handled by
Executive at the time of his termination. Executive also shall, upon reasonable notice, furnish to
the Corporation such information as is within his personal knowledge as well as other assistance
pertaining to such knowledge, as may be reasonably needed by the Corporation in connection with any
dispute or litigation in which it or any of its subsidiaries or affiliates is, or may become a
party; provided, however, that such information and assistance following termination of Executive’s
employment shall be furnished at mutually agreeable times.
X. Xxxxxxxxx Benefits. The Severance Benefits payable pursuant to this Paragraph 4.C
shall consist of the following, conditioned on and subject to Executive having timely signed (and
not revoked) the General Release which becomes effective and enforceable in accordance with its
terms.
(1) Salary Continuation. For a period of six (6) months following the date Executive dies or
the effective date of his Involuntary Termination: Executive (or his spouse or estate if Executive
dies) shall be entitled to continued payment of Executive’s base salary, at the monthly rate in
effect under Paragraph 4.A.(1) of Part One at the time of his death or Involuntary Termination,
subject to the provisions of Paragraph 4.A.(3) of Part One.
(2) Continued Group Health Plan Coverage. For the greater of (i) the six-month period
measured from the last date of the calendar month during which Executive dies or his Involuntary
Termination occurs, or (ii) the number of months between such date and the expiration date of the
Initial Term or the Renewal Term, as applicable, but not to exceed eighteen (18) months: Executive
shall be entitled to continued coverage for Executive and his eligible dependents under the
Corporation’s group health plans, without charge to Executive or his eligible dependents, provided
and to the extent that Executive and his eligible dependents timely elect to receive such continued
group health plan coverage under Code Section 4980B (“COBRA”). This continued group health plan
coverage is subject to immediate cessation to the extent Executive and his dependents are offered
comparable group health plan coverage, without charge and without exclusion for any existing
pre-existing conditions of Executive and his dependents, in connection with new employment of
Executive. Executive shall provide advance written notice to the Corporation informing the
Corporation when the Executive and his dependents are offered such group health plan coverage with
a new employer. In addition, if periodically requested by the Corporation, Executive will provide
the Corporation with written confirmation that he has not been offered such group health plan
coverage with a new employer. Any additional period of group health plan coverage to which
Executive and/or his dependents
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may be entitled under COBRA following the period of such Corporation-paid coverage shall be at
Executive’s sole cost and expense.
(3) Pro-Rated Annual Management Bonus. For each full month of employment (with any partial
month of fifteen (15) days or more treated as a full month) that Executive completes in the fiscal
year in which his Involuntary Termination occurs, Executive (or his spouse or estate if Executive
dies) shall be entitled to receive a lump sum cash payment equal to one-twelfth (1/12th) of his
Management Bonus opportunity for that fiscal year, as determined in accordance with Paragraph
4.A(2) of Part One but irrespective of whether the Corporation attains its financial objectives and
performance milestones for that year. Such payment shall be made no later than ten (10) calendar
days after the date the General Release becomes effective and enforceable.
(4) Extension of the Post-Termination Exercise Period. In the event of Involuntary
Termination of Executive’s employment and conditioned on Executive having timely signed (and not
revoked) the General Release that becomes effective and enforceable in accordance with its terms,
each Option and Stock Award shall remain outstanding and exercisable for the underlying shares
until the expiration date of the maximum term of that Option or Stock Award.
(5) Exclusive Severance. The Severance Benefits provided under this Paragraph 4.C. of Part
Two shall be in lieu of any other severance to which Executive might otherwise be entitled, by
reason of any termination of his employment, under any other severance plan, program or arrangement
of the Corporation.
PART THREE— LIMITATION ON BENEFITS
1. Delayed Commencement of Benefits. Notwithstanding any provision to the contrary in
this Agreement, no payment or distribution under this Agreement, to the extent such payment or
distribution constitutes an item of deferred compensation under Section 409A of the Code which
becomes payable by reason of Executive’s termination of Service with the Corporation, will be made
to Executive prior to the earlier of (i) the expiration of the six (6)-month period measured from
the date of Executive’s “separation from service” (as such term is defined in Treasury Regulations
issued under Code Section 409A) or (ii) the date of Executive’s death, if Executive is deemed at
the time of such separation from service to be a “key employee” within the meaning of that term
under Code Section 416(i) and such delayed commencement is otherwise required in order to avoid a
prohibited distribution under Code Section 409A(a)(2). Upon the expiration of the applicable Code
Section 409A(a)(2) deferral period, all payments and benefits deferred pursuant to this Paragraph 1
(whether they would have otherwise been payable in a single sum or in installments in the absence
of such deferral) shall be paid or reimbursed to Executive in a lump sum, and any remaining
payments due under the Agreement will be paid in accordance with the normal payment dates specified
for them herein. The Executive will be entitled to interest on the deferred benefits and payments
for the period the commencement of those benefits and payments is delayed by reason of Code Section
409A(a)(2), with such interest to accrue at the short-term semi-annual applicable federal rate then
in effect upon Executive’s separation of service, and to be paid in a lump sum upon the expiration
of the deferral period. In addition, the Executive consents to the Corporation’s adoption of such
conforming amendments
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as the Corporation deems advisable or necessary, in its sole discretion, to comply with section
409A of the Code.
2. Benefit Limit. The benefit limitations of this Part Three shall be applicable in
the event Executive receives any benefits under this Agreement which are deemed to constitute
parachute payments under Code Section 280G.
A. In the event that any payments to which Executive becomes entitled in accordance with the
provisions of this Agreement would otherwise constitute a parachute payment under Code Section
280G, then such payments will be subject to reduction to the extent necessary to assure that
Executive receives only the greater of (i) the amount of those payments which would not constitute
such a parachute payment or (ii) the amount which yields Executive the greatest after-tax amount
of benefits after taking into account any excise tax imposed on the payments and benefits provided
to Executive under this Agreement (or on any other benefits to which Executive may become entitled
in connection with any change in control or ownership of the Corporation or the subsequent
termination of his employment with the Corporation) under Code Section 4999.
B. Should a reduction in benefits be required to satisfy the benefit limit of this Section 2,
then the salary continuation payments shall accordingly be proportionately reduced to the extent
necessary to comply with such benefit limit. Should such benefit limit still be exceeded following
such reduction, then the number of shares which would otherwise be purchasable under the
vesting-accelerated portion (if any) of each Option and Stock Award (based on the amount of the
parachute payment attributable to such Option or Stock Award under Code Section 280G) shall be
reduced to the extent necessary to eliminate such excess.
C. All mathematical determinations and analyses under this Section 2 shall be made by the
independent auditors retained by the Corporation most recently prior to the change in control (or
another qualified independent accounting firm selected by the Corporation) (the “Accountants”), who
shall provide their determination, together with detailed supporting calculations regarding the
amount of any relevant matters, both to the Corporation and to the Executive. The Corporation
shall pay the fees and costs of the Accountants which are incurred in connection with this Section
2.
PART
FOUR — MISCELLANEOUS
1. No Mitigation Duty. Except as provided in Paragraph 4.C.(2) of Part Two, the
Corporation shall not be entitled to set off any of the following amounts against the payments or
benefits to which Executive may become entitled under Part Two of this Agreement: (i) any amounts
or benefits that Executive may subsequently earn through other employment or service following the
termination of his employment hereunder, or (ii) any amounts or benefits that Executive might have
potentially earned in other employment or service had he sought such other employment or service.
2. Death. Should Executive die before he receives the full amount of payments and
benefits to which he may become entitled under this Agreement, then the balance of such
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payments shall be made, on the due dates hereunder had Executive survived, to the executors or
administrators of his estate.
3. Successors and Assigns. The provisions of this Agreement shall inure to the
benefit of, and shall be binding upon, (i) the Corporation and its successors and assigns,
including any successor entity by merger, consolidation or transfer of all or substantially all of
the Corporation’s assets (whether or not such transaction constitutes a Change in Control), and
(ii) Executive, the personal representative of his estate and his heirs and legatees.
4. Notices. Any and all notices, demands or other communications required or desired
to be given hereunder by any party shall be in writing and shall be validly given or made to
another party if delivered either personally or if deposited in the United States mail, certified
or registered, postage prepaid, return receipt requested. If such notice, demand or other
communication shall be delivered personally, then such notice shall be conclusively deemed give at
the time of such personal delivery. If such notice, demand or other communication is given by
mail, such notice shall be conclusively deemed given forty-eight (48) hours after deposit in the
United States mail addressed to the party to whom such notice, demand or other communication is to
be given as hereinafter set forth. Any party may change its address for the purpose of receiving
notices, demands and other communications by providing written notice of such change consistent
with the requirements of Paragraph 4 of this Part Four.
A. To the Corporation: To the Chairman of the Board and Compensation Committee, at
their offices as set forth at the time in the records of the Corporation with a copy to the then
corporate counsel of the Corporation.
B. To Executive: To Executive addressed to his home address as set forth at the time
in the records of the Corporation.
5. Governing Law. The provisions of Agreement shall be construed and interpreted
under the laws of the State of California, without regard to its choice of law principles, as an
Agreement executed and wholly performed within the State of California.
6. Severability. If any provision of this Agreement as applied to any party or to any
circumstance is determined by a court of competent jurisdiction or arbitrator to be void or
unenforceable for any reason, the invalidity of that provision shall in no way affect (to the
maximum extent permissible by law) the application of such provision under different circumstances,
and shall in no way affect the validity of any other provision of this Agreement which shall remain
valid and enforceable.
7. Arbitration. This Section 7 shall survive any termination of this Agreement and
Executive’s Services to the Corporation.
A. Claims. Any and all controversies, claims or disputes between the Parties, arising
from or relating to Executive’s employment with the Corporation, this Agreement or the termination
of Executive’s employment, shall be resolved through binding arbitration which shall be instead of
any civil litigation, except as allowed by applicable law. Each of the Parties hereby waives their
respective right to a jury trial as to such controversies, claims and disputes,
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and understands and agrees that the arbitrator’s decision shall be final and binding to the
fullest extent permitted by law and enforceable by any court having jurisdiction thereof.
B. Procedures. Arbitration shall be conducted in San Francisco, California, before a
single arbitrator and conducted in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association (“AAA Rules”) then in effect and to the
extent consistent with applicable law, although the arbitrator shall be selected by mutual
agreement of the Parties and need not be a panel member of the American Arbitration Association.
It is the Parties’ intent that, prior to initiating arbitration proceedings, they shall mediate
their disputes with one another in a good faith attempt to avoid the necessity of arbitration
proceedings.
C. Fees and Costs of Arbitration. Each party to the arbitration shall bear their own
respective attorneys’ fees and costs incurred in connection with the arbitration proceedings,
although the Corporation shall bear the entire cost of (i) the arbitrator’s fees, and (ii) any
other type of expense or cost that is unique to arbitration and that Executive would not be
required to bear if the controversy, claim or dispute was to be resolved through civil litigation.
D. Arbitrator’s Award. The arbitrator shall issue a written award that sets forth the
essential findings of fact and conclusions of law on which the award is based. The arbitrator
shall have the authority to award any relief authorized by applicable law in connection with the
asserted claims or disputes. The arbitrator may award reasonable attorneys’ fees to the prevailing
party and, if there is a dispute as to which of the Parties is the prevailing party, the arbitrator
will decide this issue. The arbitrator’s award shall be subject to correction, confirmation, or
vacation, as provided by any applicable law setting forth the standard of judicial review of
arbitration awards.
8. Attorney Fees. The Corporation shall reimburse, as promptly as practicable, in
accordance with its standard Corporation payroll practices, after its receipt of documentation
therefor, all of Executive’s reasonable and documented attorneys’ fees and expenses in connection
with the preparation, negotiation, and execution of this Agreement, up to Fifteen Thousand US
Dollars ($15,000 USD).
9. Counterparts. This Agreement may be executed in more than one counterpart, each of
which shall be deemed an original, but all of which together shall constitute but one and the same
instrument.
10. Complete Agreement. This Agreement, and the existing agreements expressly
referenced herein, shall constitute the entire agreement and understanding of the Corporation and
Executive with respect to the terms and conditions of Executive’s employment with the Corporation
on and after the Effective Date and shall replace and supersede all prior and contemporaneous
written or verbal agreements and understandings between Executive and the Corporation relating to
such subject matter.
A. Subject to the October 4, 2006 the merger agreement by and between Master Replicas Inc.,
LightSaber Acquisition Corp. and the Corporation, nothing contained in this Agreement is intended
to replace and supersede any pre-existing agreement and obligation
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of Master Replicas Inc. with respect to any grant of stock options or stock awards to
Executive, made or approved by the Master Replicas Inc. Board of Directors prior to the Effective
Date hereof.
B. This Agreement may only be amended by a subsequent written agreement signed by Executive
and an authorized officer of the Corporation.
IN WITNESS WHEREOF, the Parties have executed this Employment Agreement as of the day and year
written above.
| CORGI INTERNATIONAL LIMITED | ||||||
| By: | /s/ Xxxxxxxx Xxxxx | |||||
| Title: | Chief Financial Officer | |||||
| EXECUTIVE: /s/ Xxxxxxx X. Xxxxxxx |
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| Xxxxxxx X. Xxxxxxx |
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EXHIBIT A
DEFINITIONS
For purposes of the Employment Agreement, dated December 26, 2006, the following definitions
shall be in effect until and unless changed in accordance with Paragraph 10.B. of Part Four of the
Employment Agreement:
Board means the Corporation’s Board of Directors.
Cause means any of the following reasons: (i) Executive’s conviction of a felony or his
commission of any material act of intentional dishonesty involving the business, property, assets
on operations of the Corporation, (ii) a material breach by Executive of one or more of his
obligations under this Agreement, (iii) any gross misconduct by Executive that has a material
adverse effect upon the Corporation’s business or reputation, (iv) Executive’s material dereliction
of the major duties, functions and responsibilities of his position, or (v) a material breach by
Executive of any of Executive’s fiduciary obligations as an officer of the Corporation.
Change in Control means the definition of “Change in Control” provided in Section 14(b) of the
Plan.
Code means the Internal Revenue Code of 1986, as amended.
Common Stock means the Corporation’s ordinary shares.
Disability means a physical or mental condition or impairment that, either with or without
reasonable accommodation, prevents Executive from performing the essential duties of the Chief
Executive Officer of the Corporation. Executive shall be deemed to have incurred a Disability if
(i) a physician selected by the Corporation and reasonably satisfactory to Executive advises the
Corporation that Executive’s physical or mental condition or impairment will render him unable to
perform his essential job duties under this Agreement, either with or without reasonable
accommodation, for a continuous period exceeding six (6) consecutive months.
Exchange Act means the Securities Exchange Act of 1934, as amended from time to time.
FYMC means the Corporation’s market capitalization measured at the end of each Corporation
fiscal year.
Involuntary Termination means any of the following:
(i) the Corporation’s termination of Executive’s employment for any reason other than for
Cause;
(ii) the termination of Executive’s employment by reason of his Disability; or
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(iii) Executive’s resignation within ninety (90) days following (A) a material reduction in
the scope of Executive’s duties and responsibilities, (B) a change in Executive’s level of
reporting so that he no longer directly reports to the Board, (C) a reduction in the aggregate
dollar amount of Executive’s base salary and Annual Management Bonus opportunity by more than ten
percent (10%), (D) a relocation of the Corporation’s Walnut Creek, California, office by more than
fifty (50) miles without his written consent, (E) failure by the Corporation to obtain the
assumption of its obligations under this Agreement by any successor entity, or (F) a material
breach by the Corporation of any of its obligations under this Agreement and the failure of the
Corporation to cure such breach within fifteen (15) days after receipt of written notice from
Executive in which the actions or omissions constituting such material breach are specified.
Option means any option to purchase ADSs granted by the Corporation to Executive during the
Employment Period.
Plan means the Corporation’s Amended and Restated 1997 Equity Incentive Plan.
Reverse Stock Split means the Corporation’s six-for-one reverse stock split of its Common
Stock that was effected in December 2006.
SEC means the Securities and Exchange Commission.
Service means Executive’s performance of services for the Corporation (or any parent or
subsidiary corporation) as (i) an employee subject to the control and direction of the employer
entity, (ii) a non-employee member of the Board or (iii) an independent consultant.
Stock Award means any restricted stock, restricted stock unit, performance share or other
ADS-based awards (other than Options) granted by the Corporation to Executive during the Employment
Period.
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EXHIBIT B
PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
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EXHIBIT C
POST-TERMINATION GENERAL RELEASE AGREEMENT
In consideration of the Severance to be received by me pursuant to Paragraph 4.C. of Part Two
of the Employment Agreement between me and Corgi International Limited, dated December 26, 2006
(the “Employment Agreement), I, Xxxxxxx X. Xxxxxxx, hereby make the following agreements on
behalf of myself, my heirs, executors, administrators and assigns.
1. General Waiver & Release. Except as described in Sections 4 and 5, below, I hereby waive and
release any and all claims, whether or not now known to me, against the Corporation, its parent,
subsidiary and affiliated companies, and all of their past and present officers, directors,
employees, agents and assigns (collectively, “Releasees”), arising from or relating to any and all
acts, events and omissions occurring prior to the date I sign this Post-Termination General Release
Agreement (“GRA”).
2. Included Claims. I understand and agree that the claims I am waiving and releasing include,
without limitation,
a. any and all claims arising from or relating to my employment and termination of employment
with the Corporation;
b. any and all claims of wrongful discharge, emotional distress, defamation,
misrepresentation, fraud, detrimental reliance, breach of contractual obligations, promissory
estoppel, negligence, assault and battery, violation of public policy;
c. any and all claims of unlawful discrimination, harassment and retaliation under applicable
federal, state and local laws and regulations, including claims under the federal Age
Discrimination in Employment Act, as amended;
d. any and all claims of violation of any federal, state and local law relating to terms and
conditions of employment and termination of my employment; and
e. any and all claims for monetary damages and any other form of personal relief.
3. Unknown Claims. In waiving and releasing any and all claims against the Releasees, whether
or not now known to me, I understands that this means that, if I later discover facts different
from or facts in addition to those facts I currently know or believe to be true, the waivers and
releases of this GRA will remain effective in all respects — despite such different or additional
facts and my later discovery of such facts, even if I would not have agreed to this GRA if I had
prior knowledge of such facts. In order to waive and release any and all claims against the
Releasees, whether or not now known to me, I hereby expressly waive and release all rights under
California Civil Code section 1542 which states (language in parentheses added):
A general release does not extend to claims which the creditor (e.g., Employee) does
not know or suspect to exist in his or her favor at the time of executing the
release, which, if known by him or her, must have materially affected his settlement
with the debtor (e.g., the Corporation).
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4. Exceptions. The only claims that I am not waiving and releasing against the Releasees
under this GRA are claims I may have for:
a. unemployment, state disability, paid family leave and workers’ compensation insurance
benefits pursuant to the terms of California law;
b. continuation of my existing participation and my dependents’ participation in the
Corporation-sponsored group health plans, at my full expense, under the federal law known as
“COBRA” and/or , if applicable, under Cal-COBRA;
c. any benefit entitlements that are vested as of the effective date of my termination
pursuant to the terms of a Corporation-sponsored benefit plan governed by the federal law known as
“ERISA;”
d. vested stock and/or vested option shares pursuant to the written terms and conditions of my
Employment Agreement and my stock option and stock award agreements existing as of the effective
date of my termination;
e. violation of any federal, state or local statutory and/or public policy right or
entitlement that, by the terms of applicable law, is not waivable, including my rights of
indemnification under California Labor Code section 2802;
f. indemnity and other rights that survive the termination of my employment per my Employment
Agreement; and
g. any wrongful act or omission by any Releasee occurring after the date I sign this GRA.
5. Government Agency Claims Exception. I understand that nothing in this GRA prevents or
prohibits me from filing a claim with a government agency, such as the U.S. Equal Employment
Opportunity Commission, that is responsible for enforcing a law on behalf of the public or the
government. However, I understand that, because I am waiving and releasing all claims “for
monetary damages and any other form of personal relief” (per Section 2.e., above), I may only seek
and receive non-personal forms of relief through any such claim.
6. Consideration & Revocation Periods; Effective Date. I have been given twenty-one (21)
calendar days after the date I received this GRA from the Corporation on or after termination of my
employment within which to review and consider it, to discuss it with an attorney of my own
choosing, and to decide whether or not to sign it, and I have consulted with an attorney of my own
choosing during that period.
a. In addition, for the period of seven (7) calendar days after the date I sign this GRA
(“Revocation Period”), I understand that I may revoke this GRA by delivering written notice
of revocation to the Corporation by hand-delivery or by facsimile or e-mail transmission (and
retaining proof of successful transmission) using the street, facsimile or e-mail address for the
Corporation stated in Section 6.c. below.
b. I understand that, because of this Revocation Period, this GRA will not become effective
and enforceable until the eighth day after the date I have signed it, provided that I have
delivered it to the Corporation and I do not revoke this GRA during the Revocation Period.
c. I understand that I should provide my signature to this GRA, and any notice of revocation,
to the Corporation as follows:
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| Facsimile: | ||||||
| |
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| E-Mail: | @ | |||||
7. No Admission. Nothing about the fact or content of this GRA shall be considered to be, or
be treated as, an admission of any wrongdoing, liability or violation of law by me or by any
Releasee.
8. No Payments Due. I acknowledge and agree that I have received all salary, accrued
vacation, commissions, bonuses, wages, compensation or other such sums due to me as of my
termination of employment, other than amounts, if any, to be paid after such termination pursuant
to my Employment Agreement and this GRA. Therefore, I acknowledge and agree that California Labor
Code Section 206.5 is not applicable. That Section provides in pertinent part as follows: NO
EMPLOYER SHALL REQUIRE THE EXECUTION OF ANY RELEASE OF ANY CLAIM OR RIGHT ON ACCOUNT OF WAGES DUE,
OR TO BECOME DUE, OR MADE AS AN ADVANCE ON WAGES TO BE EARNED, UNLESS PAYMENT OF SUCH WAGES HAS
BEEN MADE.
9. Nondisparagement. I agree that I will not disparage the Corporation, its products or any
of its officers and directors, existing as such during my employment with the Corporation, in any
written or oral communications to any third party.
10. Nonsolicitation. I agree that, for twelve (12) months after the date my employment with
the Corporation terminates, I will not, directly or indirectly, either as an individual or as an
employee, agent, consultant, advisor, independent contractor, general partner, officer, director,
stockholder, investor, lender, or in any other capacity whatsoever, of any person, firm,
corporation or partnership solicit, induce, recruit or encourage any of the Corporation’s employees
or consultants to terminate their relationship with the Corporation, or attempt to solicit, induce,
recruit, encourage any of the Corporation’s employees or consultants to terminate their
relationship with the Corporation.
11. Confidential/Proprietary Information. I understand that, even if I did not sign this GRA
and allow it to become effective and enforceable, I would still have ongoing obligations under the
Corporations’s Proprietary Information and Inventions Agreement (“PIIA”) in accordance with
its terms, and that this GRA do not affect my continuing obligations under the PIIA.
Dated: , 20 |
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