AMENDMENT
TO
EMPLOYMENT AGREEMENT
This Amendment dated as of December 5, 2004 (the "Amendment") to the
Employment Agreement (the "Agreement") dated as of February 2, 2004 by and
between SOLA International Inc., a Delaware corporation (the "Company"), and
Xxxxx Xxxxx, an individual (the "Executive"), is made and entered into by and
between the Company and the Executive. Unless otherwise defined herein,
capitalized terms have the same meanings as in the Agreement.
WHEREAS, the Company may from time to time consider transactions that could
result in a change of control of the Company;
WHEREAS, the Board of Directors of the Company, at its meeting on July 21,
2004, determined that it was advisable and in the best interest of the Company
to amend the Agreement to provide for the payment of certain compensation to the
Executive in the event such a transaction is consummated;
WHEREAS, the Board of Directors, at its meeting on August 16, 2004,
determined the amount of compensation that should be paid to the Executive in
the event of a change of control transaction;
WHEREAS, the Board of Directors, at its meeting on December 5, 2004,
determined that certain gross-up payments should be paid to the Executive if the
Executive incurs an excise tax in connection with payments following a change of
control of the Company, and that certain changes should be made in the Executive
covenants, non-disparagement provisions and arbitration provisions of the
Agreement; and
WHEREAS, the Company and the Executive desire to amend the Agreement to
reflect the intention of the Board of Directors as set forth herein.
NOW, THEREFORE, in consideration of the mutual premises and agreements set
forth herein, the Company and the Executive agree that the Agreement is hereby
amended as follows:
1. Section 7 is amended to read in its entirety as follows:
"7. Executive Covenants.
(a) Unauthorized Disclosure. The Executive recognizes that the services to
be performed during the Employment Term by the Executive are special, unique,
and extraordinary and that by reason of the Executive's employment with the
Company the Executive has acquired and will acquire confidential information and
trade secrets concerning the Company's operations ("Company Confidential
Information") and the operations of its affiliates ("Affiliate Confidential
Information"). Accordingly, it is agreed that:
(i) The Executive shall not divulge to any entity or person, other
than the Company or its affiliates, or, in the event of an assignment of
this Agreement pursuant to Section 14 hereof, the assignee and its
affiliates, if any, whether during the Employment Term or after the
termination of his employment for any reason (including without limitation
by reason of expiration of the Employment Term), any Company Confidential
Information concerning the Company's customer lists, research or
development programs or plans, processes, methods or any other of its trade
secrets, except information which is then available to the public in
published literature and became publicly available through no fault of the
Executive.
(ii) The Executive shall not divulge to any person or entity,
including an assignee of this Agreement and its affiliates, but excepting
the Company and its affiliates, whether during the Employment Term or after
the termination of his employment for any reason (including without
limitation by reason of expiration of the Employment Term), any Affiliate
Confidential Information acquired by the Executive concerning the customer
lists, research or development programs or plans, processes, methods or any
other trade secrets of the Company or any affiliate, except information
which is then available to the public in published literature and became
publicly available through no fault of the Executive.
(iii) The Executive acknowledges that all information the disclosure
of which is prohibited hereby is of a confidential and proprietary
character and of great value to the Company and its affiliates. Upon the
termination of his employment for any reason (including without limitation
by reason of expiration of the Employment Term), the Executive shall
forthwith deliver up to the Company all records, memoranda, data and
documents of any description which refer or relate in any way to Company
Confidential Information or Affiliate Confidential Information and return
to the Company any of its equipment and property which may then be in the
Executive's possession or under the Executive's personal control. Upon the
assignment of this Agreement, pursuant to Section 14, the Executive shall
forthwith deliver up to the Company all records, memoranda, data and
documents of any description which refer or relate in any way to Affiliate
Confidential Information and return to the Company any of its equipment and
property which may then be in the Executive's possession or under the
Executive's personal control.
(b) Non-competition. By and in consideration of the Company's entering into
this Agreement and the payments to be made and benefits to be provided by the
Company hereunder, and in further consideration of the Executive's exposure to
the Company Confidential Information and Affiliate Confidential Information, it
is agreed that during the Employment Term the Executive will not, directly or
indirectly, as an officer, director, stockholder, partner, associate, owner,
employee, consultant or otherwise, become or be interested in or associated with
any other corporation, firm or business engaged in the same or a similar or
competitive business with the Company or any of its affiliates in any
geographical area in which the Company or any of its affiliates are then engaged
in business, provided that the Executive's ownership, directly or indirectly, of
not more than one percent of the issued and outstanding stock of a corporation
the shares of which are regularly traded on a national securities exchange or in
the over-the-counter market shall not, in any event, be deemed to be a violation
of this Subsection.
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(c) Non-solicitation. The Executive agrees not to solicit any person
employed by the Company or its affiliates during the Employment Term and for a
period of eighteen months following the termination of his employment for any
reason (including without limitation by reason of expiration of the Employment
Term). As used herein, "solicit" or "soliciting" means any direct or indirect
approach or appeals to such an employee to leave the Company. Indirect
solicitation includes but is not limited to, acting through a third party or
parties or characterizing job advertisements or opportunities in such a fashion
so as to entice any employee. The Executive agrees that, if approached by a
Company employee during the Employment Term and for a period of eighteen months
following the termination of his employment for any reason (including without
limitation by reason of expiration of the Employment Term), the Executive will:
(i) Inform the employee of the Executive's obligations set forth in
this subparagraph;
(ii) Refer the employee to the relevant Company Human Resources
personnel; and
(iii) Request that the employee confirm in writing to the Company that
he has approached the Executive and confirm that request in a memorandum to
such Human Resources organization.
(d) Remedies. The Company shall be entitled, in addition to any other right
or remedy that it may have at law or in equity with respect to a breach of this
Agreement by the Executive (including the right to terminate payments pursuant
to Section 6 hereof), to an injunction, without the posting of a bond or other
security, enjoining or restraining the Executive from any violation or
threatened violation of this Section 7 and Sections 8 and 9 hereof and the
Executive hereby consents to the issuance of such an injunction."
2. Section 9 is amended to read in its entirety as follows:
"9. Non-Disparagement. In the event of a termination of the Executive's
employment for any reason (including without limitation by reason of the
expiration of the Employment Term), both the Executive and the Company agree
that neither of them will disparage the other in any manner."
3. Section 17 is amended to read in its entirety as follows:
"17. Arbitration. Except for actions by the Company or the Executive
seeking injunctive relief (including any such actions pursuant to Section 7(d)
hereof), with respect to any controversy arising out of or relating to this
Agreement, or the subject matter thereof, such controversy shall be settled by
final and binding arbitration in San Diego, California or such other location as
the Company may determine, in accordance with the then existing rules ("the
Rules") of the American Arbitration Association ("AAA") and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof; provided, however, that the law applicable to any
controversy shall be the law of California, regardless of its or any
jurisdiction's choice of law principle. Arbitration shall be the sole and
exclusive remedy for the resolution of the disputes described above. In any such
arbitration, the award or decision shall be ren-
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dered by a majority of the members of a board of arbitration consisting of three
members, one of whom shall be appointed by each party and the third of whom
shall be the chairman of the panel and be appointed by mutual agreement of said
two party appointed arbitrators. In the event of the failure of said two
arbitrators to agree, within five working days after the commencement of the
arbitration, upon appointment of the third arbitrator, the third arbitrator
shall be appointed by the AAA in accordance with the Rules. In the event that
either party shall fail to appoint an arbitrator within five days after the
commencement of the arbitration proceeding, such arbitrator and the third
arbitrator shall be appointed by the AAA in accordance with the Rules. The
arbitrators are empowered but not limited in making an award in favor of the
Executive to require any act or acts which they believe necessary to effectuate
the intent of this Agreement. The arbitrator shall allow the discovery that the
arbitrator deems necessary for the parties to vindicate their respective claims
or defenses. The arbitrator's decision shall be written and must include the
findings of fact and law that support the decision. The parties will share the
costs of arbitration equally except that the Company will bear the cost of the
arbitrator's fee and any other type of expense or cost that the Executive would
not be required to bear if the Executive were to bring the dispute or claim in
court. The Company and the Executive will each be responsible for their own
attorney's fees, except that the Company shall pay the Executive's reasonable
attorney's fees to the extent attributable to issues upon which the Executive
prevails on the merits."
4. Section 18 is amended to read in its entirety as follows:
"18. Gross-Up Provision.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment, award, benefit or distribution
(or any acceleration of any payment, award, benefit or distribution) by the
Company (or any of its affiliated entities) or any entity which effectuates a
change in ownership or control described in Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code") (or any of its affiliated entities) to or
for the benefit of the Executive (whether pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 18) (the "Payments") would be subject to the excise
tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Company shall pay to the Executive an
additional payment (a "Gross-Up Payment") in an amount such that after payment
by the Executive of all taxes (including any Excise Tax) imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the sum of (x) the Excise Tax imposed upon the Payments and (y) the product
of any deductions disallowed because of the inclusion of the Gross-Up Payment in
the Executive's adjusted gross income and the highest applicable marginal rate
of federal income taxation for the calendar year in which the Gross-Up Payment
is to be made. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to (i) pay federal income taxes at the highest
marginal rates of federal income taxation for the calendar year in which the
Gross-Up Payment is to be made, (ii) pay applicable state and local income taxes
at the highest marginal rate of taxation for the calendar year in which the
Gross-up Payment is to be made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes and
(iii) have otherwise allowable
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deductions for federal income tax purposes at least equal to those which could
be disallowed because of the inclusion of the Gross-Up Payment in the
Executive's adjusted gross income.
(b) Subject to the provisions of Section 18(a), all determinations required
to be made under this Section 18, including whether and when a Gross-Up Payment
is required, the amount of such Gross-Up Payment, and the assumptions to be
utilized in arriving at such determinations, shall be made by a public
accounting firm selected by the Executive which is one of the five largest
public accounting firms in the United States (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Executive
within fifteen (15) business days of the receipt of notice from the Company or
the Executive that there has been a Payment, or such earlier time as is
requested by the Company (collectively, the "Determination"). All fees and
expenses of the Accounting Firm shall be borne solely by the Company and the
Company shall enter into any agreement requested by the Accounting Firm in
connection with the performance of the services hereunder. The Gross-Up Payment
under this Section 18 with respect to any Payments shall be made no later than
thirty (30) days following such Payment. If the Accounting Firm determines that
no Excise Tax is payable by the Executive, it shall furnish the Executive with a
written opinion to such effect, and to the effect that failure to report the
Excise Tax, if any, on the Executive's applicable federal income tax return will
not result in the imposition of a negligence or similar penalty. The
Determination by the Accounting Firm shall be binding upon the Company and the
Executive. As a result of the uncertainty in the application of Section 4999 of
the Code at the time of the Determination, it is possible that Gross-Up Payments
which will not have been made by the Company should have been made
("Underpayment") or Gross-Up Payments are made by the Company which should not
have been made ("Overpayment"), consistent with the calculations required to be
made hereunder. In the event that the Executive thereafter is required to make
payment of any Excise Tax or additional Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code and any penalties payable by the Executive) shall be
promptly paid by the Company to or for the benefit of the Executive. In the
event the amount of the Gross-up Payment exceeds the amount necessary to
reimburse the Executive for his Excise Tax, the Accounting Firm shall determine
the amount of the Overpayment that has been made and any such Overpayment
(together with interest at the rate provided in Section 1274(b)(2) of the Code)
shall be promptly paid by the Executive (to the extent he has received a refund
if the applicable Excise Tax has been paid to the Internal Revenue Service) to
or for the benefit of the Company. The Executive shall cooperate, to the extent
his expenses are reimbursed by the Company, with any reasonable requests by the
Company in connection with any contests or disputes with the Internal Revenue
Service in connection with the Excise Tax."
5. A new Section 23 is hereby added to the Agreement to read as follows:
"23. Change of Control
(a) Definition of Change of Control Transaction. As used in this Section
23, the term "Change of Control Transaction" means the purchase or other
acquisition by any person, entity or group of persons, within the meaning of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934 (the "Exchange
Act") or any comparable successor provisions, of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
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of 50% or more of either the outstanding shares of common stock or the combined
voting power of the Company's then outstanding voting securities entitled to
vote generally; the consummation of a reorganization, merger, or consolidation,
in each case, with respect to which persons who were stockholders of the Company
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of the combined voting power entitled
to vote generally in the election of directors of the reorganized, merged or
consolidated Company's then outstanding securities; a liquidation or dissolution
of the Company; or the sale of all or substantially all of the Company's assets.
(b) Change of Control Payment. Immediately following the occurrence of any
Change of Control Transaction during the Employment Term and without regard to
the effect of the Change of Control Transaction on the status of the Executive's
employment by the Company or its successor, the Company or its successor shall
pay to the Executive as compensation an amount equal to one and one-half (1.5)
times the sum of (i) the annual base salary of the Executive as in effect
immediately prior to the occurrence of the Change of Control Transaction, plus
(ii) the average of the amount of earnings accrued by the Executive pursuant to
the Company's Management Incentive Plan (the "MIP") in each of the last three
(3) fiscal years completed immediately prior to the occurrence of the Change of
Control Transaction (the "Change of Control Payment").
(c) Effect on Termination Payments. If the Executive receives a Change of
Control Payment pursuant to Section 23(b) hereof and the Executive's employment
terminates pursuant to either Section 5(c) or Section 5(d) of the Agreement (a
"Severance Event") during the twelve-month period immediately following the
Change of Control Transaction resulting in the Change of Control Payment, then
the Executive shall not be entitled to receive the continuation of Base Salary
and the MIP payment that would otherwise be payable pursuant to clauses (b) and
(c) of the second sentence of Section 6 of the Agreement, but shall be entitled
to receive the other benefits provided for in clauses (a), (d) and (e) of the
second sentence of Section 6 of the Agreement. If the Executive receives a
Change of Control Payment pursuant to Section 23(b) hereof and a Severance Event
occurs after the twelve-month period immediately following the Change of Control
Transaction resulting in the Change of Control Payment, then the Executive shall
be entitled to receive the continuation of Base Salary and the MIP payment
payable pursuant to clauses (b) and (c) of the second sentence of Section 6 of
the Agreement, as well as the other benefits provided for in clauses (a), (d)
and (e) of the second sentence of Section 6 of the Agreement."
6. This Amendment supplements and modifies the Agreement, and all of the
terms, conditions and agreements therein contained are, to the extent not
explicitly modified herein, hereby reaffirmed and agreed to and shall remain in
full force and effect except as herein modified.
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IN WITNESS WHEREOF, the Company and the Executive have duly executed this
Amendment as of the date first set forth above.
SOLA INTERNATIONAL INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------
Xxxxxx X. Xxxxxx
Its: President and Chief Executive
Officer
EXECUTIVE:
/s/ Xxxxx Xxxxx
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Xxxxx Xxxxx
