EXHIBIT 10.4(2) FORM OF EMPLOYMENT AGREEMENT WITH XXXXX X. XXXXXX DATED
MARCH 28, 2001.
EMPLOYMENT AGREEMENT
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This EMPLOYMENT AGREEMENT is dated as of March 28, 2001 (this "Agreement"), by
and between FOTOBALL USA, INC., a Delaware corporation (the "Company"), and
Xxxxx X. Xxxxxx ("Executive").
W I T N E S S E T H :
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WHEREAS, the Company and Executive desire to enter into an employment
relationship upon the terms set forth in this Agreement;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged, the parties agree as follows:
1. Employment. (a) The Company hereby employs (the "Employment")
Executive as the President and Chief Operating Officer of the Company. Executive
shall have authority to control the day-to-day operations of the Company,
subject to the general supervision, control and guidance of the Chief Executive
Officer (the "CEO") and the Board of Directors of the Company (the "Board").
Executive hereby accepts the Employment and agrees to (i) render such executive
services, (ii) perform such executive duties and (iii) exercise such executive
supervision and powers to, for and with respect to the Company, as may be
reasonably established by the CEO or the Board, for the period and upon the
terms set forth in this Agreement. Other than the CEO, Executive shall be the
most senior executive officer of the Company during the Term.
(b) Executive shall devote substantially all of his business
time and attention during the normal business day to the business and affairs of
the Company consistent with his executive positions with the Company, except for
vacations permitted pursuant to Section 3.5 and Disability (as defined in
Section 6.2). This Agreement shall not be construed as preventing Executive from
engaging in charitable and community affairs, or giving attention to his passive
investments, provided that such activities do not interfere with the regular
performance of his duties and responsibilities under this Agreement.
2. Term. Except as otherwise specifically provided in Section 6
below, the term of this Agreement (the "Term") shall commence on April 2, 2001
and shall continue until April 1, 2003, subject to the terms and conditions of
this Agreement.
3. Compensation.
3.1. Base Salary. Executive shall be paid a base salary (the
"Base Salary") at an annual rate of two hundred thousand dollars ($200,000),
payable in equal payments at such intervals as the other executive officers of
the Company are paid, but in any event at least on a monthly basis.
3.2. Bonus.
(a) General. In addition to the Base Salary,
Executive shall be entitled to such bonus compensation ("Bonus Compensation") as
may be determined on a calendar year basis from time to time by the Compensation
Committee of the Board and subject to a budget to be agreed upon by the Board.
The Bonus Compensation for each calendar year shall be paid by the Company to
Executive no later than the date on which similar year-end bonuses are paid to
other senior executive officers of the
Company.
(b) First Calendar Year. The Company shall cause
the Board to work with Executive to establish in good faith on or prior to May
1, 2001 a bonus compensation plan for Executive for the period from the date
hereof through and including December 31, 2001 (the "First Year Plan Period").
Such plan shall provide for (a) "net income before taxes" targets (determined in
accordance with generally accepted accounting principles applied on a consistent
basis ("GAAP")) at least three separate levels, which, if achieved by the
Company during such period, would entitle Executive to Bonus Compensation of
fifty percent (50%), seventy-five percent (75%) and one hundred percent (100%),
respectively, of Base Salary earned by Executive during the First Year Plan
Period and (b) minimum Bonus Compensation for Executive for such First Year Plan
Period of $37,500.
(c) Subsequent Calendar Years. The Board shall
establish a bonus compensation plan for senior executive officers of the Company
(including, the Executive, the CEO, and the chief financial officer of the
Company) for each calendar year on or prior to the commencement of such calendar
year. Such plan shall provide for "net income before taxes" targets (determined
in accordance with GAAP) at least three separate levels, which, if achieved by
the Company during such period, would entitle Executive to Bonus Compensation of
fifty percent (50%), seventy-five percent (75%) and one hundred percent (100%),
respectively, of Base Salary earned by Executive during such calendar year.
3.3. Stock Options.
(a) Upon the date hereof, the Company shall cause the
issuance to Executive of non-qualified options (the "First Options") to purchase
not less than 125,000 shares of common stock, $.01 par value (the "Common
Stock"), of the Company at a per share exercise price equal to the closing
market price of the Common Stock on the date hereof on the Nasdaq Stock Market
(the "Initial Closing Price"), subject to vesting pursuant to Section 3.3(c)
hereof and subject to and in accordance with the terms of the 1998 Stock Option
Plan of the Company or any successor stock option plan (the "Plan").
(b) The Company shall cause the Board to recommend to the
stockholders of the Company to approve the amendment (the "Amendment") of the
Plan to allow the Company to issue options to purchase up to an aggregate of
175,000 shares of Common Stock to a Plan participant within one fiscal year at
the meeting of stockholders of the Company to be held as soon as reasonably
practicable (the "Stockholders Meeting").
(i) If stockholders approve the Amendment at the
Stockholders Meeting, on the date of the Stockholders Meeting (the "Meeting
Date"), the Company shall cause the issuance to Executive of non-qualified
options (together with the First Options, the "Options") under the Plan to
purchase up to an aggregate number of shares of Common Stock equal to the
greater of (a) 25,000, and (b) 25,000, multiplied by a fraction, the numerator
of which is the closing market price of the Common Stock on the Meeting Date on
the Nasdaq Stock Market (the "Second Closing Price) and the denominator of which
is the Initial Closing Price (the "Adjustment Fraction"), at a per share
exercise price equal to the Second Closing Price, subject to vesting pursuant to
Section 3.3(c) hereof and subject to and in accordance with the terms of the
Plan; provided, that, the Adjustment Fraction shall not exceed 2.
(ii) If stockholders do not approve the Amendment at
the Stockholders Meeting, on the Meeting Date, the Company shall cause the
issuance to Executive of the same number of non-qualified options as would be
issuable under the Plan pursuant to clause (i) above as if stockholders approval
was duly obtained, except that such options shall not be issued under the Plan
(together with the
First Options, the "Options"), and the Company shall provide Executive with
unlimited "piggyback registration rights" on customary terms and conditions at
the Company's expense. Such Options shall be subject to vesting pursuant to
Section 3.3(c) hereof and subject to and in accordance with the terms of the
Plan.
(c) Fifty percent (50%) of the Options shall vest on and be
exercisable as of April 1, 2002, and the remaining Options shall vest on and be
exercisable as of April 1, 2003. Such Options shall provide for "cashless"
exercise rights. Executive's vested Options shall be exercisable for a period of
ten years from the date of issuance. Upon termination of Executive's Employment
with the Company or any of its affiliates, any unvested Options shall lapse,
except as otherwise provided in Section 6 below, and Executive shall have ninety
(90) days from the date of termination in accordance with the terms of this
Agreement to exercise any vested Options (one year in the case of termination by
reason of death or Disability of Executive).
3.4. Employee Benefits. In addition to the Base Salary and
the Bonus Compensation, Executive shall be entitled (i) to receive the fringe
benefits now or hereafter provided by the Company to its executive officers,
including, but not limited to, life, hospitalization, surgical, major medical
and disability insurance and sick leave, (ii) to be a full participant in all of
the Company's other benefit plans, pension plans, retirement plans and
profit-sharing plans which may be in effect from time to time or may hereafter
be adopted by the Company, (iii) to all costs and expenses for the maintenance,
including insurance, and operation of Executive's automobile; provided, however,
that such costs and expenses shall not exceed $500 in any month, (iv) to a
reasonable relocation allowance, payable by the Company upon receipt of
appropriate substantiation of expenses and (v) to a housing allowance not to
exceed $3,000 per month, payable by the Company during the first two (2) months
of the Term.
3.5. Vacation. During the Term, Executive shall be entitled
to such vacation with pay during each calendar year of his Employment hereunder
consistent with his position as an executive officer of the Company, but in no
event less than three (3) weeks in any such calendar year (pro-rated as
necessary for partial calendar years during the Term). Such vacation may be
taken, in Executive's discretion, at such time or times as are not inconsistent
with the reasonable business needs of the Company. Executive shall not be
entitled to any additional compensation in the event that Executive, for
whatever reason, fails to take such vacation during any year of his Employment
hereunder. Executive shall also be entitled to all paid holidays given by the
Company to its executive officers.
4. Indemnification. Executive shall be entitled at all times to the
benefit of the maximum indemnification and advancement of expenses available
from time to time under the laws of the State of Delaware.
5. Expenses. During the Term, the Company shall reimburse Executive
upon presentation of appropriate vouchers or receipts in accordance with the
Company's expense reimbursement policies for executive officers, for all
out-of-pocket business travel and entertainment expenses incurred or expended by
Executive in connection with the performance of his duties under this Agreement.
6. Consequences of Termination of Employment.
6.1. Death. In the event of the death of Executive during the
Term, Executive's Employment hereunder shall be terminated as of the date of his
death and Executive's designated beneficiary, or, in the absence of such
designation, the estate or other legal representative of Executive
(collectively, the "Estate") shall be paid, Executive's unpaid Base Salary
through the month in which the death occurs and any unpaid Bonus Compensation
for any fiscal year which has ended as of the date of
such termination or which was at least one half (1/2) completed as of the date
of death. In the case of such incomplete fiscal year, the Bonus Compensation
shall be pro-rated and all such Bonus Compensation payable as a result of this
Section 6.1 shall be otherwise payable as determined by the Compensation
Committee of the Board, in its sole discretion. The Estate shall be entitled to
all other death benefits in accordance with the terms of the Company's benefit
programs and plans.
6.2. Disability. In the event Executive shall be unable to
render the services or perform his duties hereunder by reason of illness, injury
or incapacity (whether physical, mental, emotional or psychological) (any of the
foregoing shall be referred to herein as a "Disability") for a period of either
(i) ninety (90) consecutive days or (ii) one hundred eighty (180) days in any
consecutive three hundred sixty-five (365) day period, the Company shall have
the right to terminate this Agreement by giving Executive ten (10) days prior
written notice. If Executive's Employment hereunder is so terminated, Executive
shall be paid, in addition to payments under any disability insurance policy in
effect, Executive's unpaid Base Salary through the month in which the
termination occurs, plus Bonus Compensation on the same basis as is set forth in
Section 6.1 above.
6.3. Termination of Employment of Executive by the Company
for Cause.
(a) Nothing herein shall prevent the Company from
terminating Executive's Employment for Cause (as defined below). From and after
the date of such termination, Executive shall no longer be entitled to receive
Base Salary and Bonus Compensation and the Company shall no longer be required
to pay premiums on any life insurance or disability policy for Executive. Any
rights and benefits which Executive may have in respect of any other
compensation or any employee benefit plans or programs of the Company, whether
pursuant to Section 3.4 or otherwise, shall be determined in accordance with the
terms of such other compensation arrangements or plans or programs. The term
"Cause," as used herein, shall mean that: (i) Executive shall embezzle funds or
misappropriate other property of the Company or any subsidiary; or (ii)
Executive shall willfully disobey a lawful directive of the CEO or the Board,
whether through commission or omission; or (iii) Executive shall breach this
Agreement in a material manner or engage in fraudulent conduct as regards the
Company.
(b) The Company shall provide Executive with written notice
stating that it intends to terminate Executive's Employment for Cause under this
Section 6.3 and specifying the particular act or acts on the basis of which the
Board intends to so terminate Executive's Employment. Executive shall then be
given the opportunity, within fifteen (15) days of his receipt of such notice,
to have a meeting with the Board to discuss such act or acts (other than with
respect to an action described in Section 6.3(a)(i) above as to which the Board
may immediately terminate Executive's Employment for Cause. Other than with
respect to an action described in Section 6.3(a)(i) above, Executive shall be
given seven (7) days after his meeting with the Board to take reasonable steps
to cease or correct the performance (or nonperformance) giving rise to such
written notice. In the event the Board determines that Executive has failed
within such seven-day period to take reasonable steps to cease or correct such
performance (or nonperformance), Executive shall be given the opportunity,
within ten (10) days of his receipt of written notice to such effect, to have a
meeting with the Board to discuss such determination. Following that meeting, if
the Board believes that Executive has failed to take reasonable steps to cease
or correct his performance (or nonperformance) as above described, the Board may
thereupon terminate the Employment of Executive for Cause.
6.4. Involuntary Termination. In the event the Company
terminates Executive's Employment hereunder, other than for Cause or on account
of death or Disability, or Executive terminates his Employment hereunder for
Good Reason, the Company shall promptly pay Executive a lump sum payment equal
to Executive's unpaid Base Salary for the remainder of the Term hereof and all
Options shall automatically become fully vested and exercisable. For purposes of
this Agreement, "Good Reason" shall be deemed to exist if: (1) Executive is
assigned any duties inconsistent in any respect with Executive's position
(including status, offices, titles, and reporting requirements), authorities,
duties, or other responsibilities as in effect immediately prior to such
assignment or any other action of the Company which results in a diminishment in
such position, authorities, duties, or responsibilities, (2) the Company
requiring Executive to be based at a location outside of Southern California, or
(3) a breach by the Company of its obligations hereunder after notice in writing
from Executive and a reasonable opportunity for the Company to correct such
conduct.
7. Confidential Information.
7.1. Executive covenants and agrees that he will not at any
time, either during the Term or thereafter, use, disclose or make accessible to
any other person, firm, partnership, corporation or any other entity any
Confidential Information (as defined below) pertaining to the business of the
Company except (i) while employed by the Company, in the business of and for the
benefit of the Company or (ii) when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority over the
business of the Company, or by any administrative body or legislative body
(including a committee thereof) with jurisdiction to order the Company to
divulge, disclose or make accessible such information. For purposes of this
Agreement, "Confidential Information" shall mean non-public information
concerning the Company's financial data, statistical data, strategic business
plans, product development (or other proprietary product data), customer and
supplier lists, customer and supplier information, information relating to
practices, processes, methods, trade secrets, marketing plans and other
non-public, proprietary and confidential information of the Company; provided,
however, that Confidential Information shall not include any information which
(x) is known generally to the public other than as a result of unauthorized
disclosure by Executive, (y) becomes available to the Executive on a
non-confidential basis from a source other than the Company or (z) was available
to Executive on a non-confidential basis prior to its disclosure to Executive by
the Company. It is specifically understood and agreed by Executive that any
Confidential Information received by Executive during his Employment by the
Company is deemed Confidential Information for purposes of this Agreement. In
the event Executive's Employment is terminated hereunder for any reason, he
immediately shall return to the Company all Confidential Information in his
possession.
7.2. Executive and the Company agree that this covenant
regarding Confidential Information is a reasonable covenant under the
circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction, such covenant is not reasonable in any respect, such
court shall have the right, power and authority to excise or modify such
provision or provisions of this covenant as to the court shall appear not
reasonable and to enforce the remainder of the covenant as so amended. Executive
agrees that any breach of the covenant contained in this Section 7 would
irreparably injure the Company. Accordingly, Executive agrees that the Company,
in addition to pursuing any other remedies it may have in law or in equity, may
obtain an injunction, without the necessity of obtaining a bond or other
security, against Executive from any court having jurisdiction over the matter,
restraining any further violation of this Section 7.
8. Non-Solicitation.
8.1. During the Term and for a period of six (6) months
following the termination of this Agreement, Executive agrees that, without the
prior written consent of the Company (and other than on behalf of the Company),
Executive shall not, on his own behalf or on behalf of any person or entity,
directly or indirectly hire or solicit the employment of any employee who has
been employed by the Company at any time during the six (6) months immediately
preceding such date of hiring or solicitation.
8.2. Executive and the Company agree that the covenants of
non-solicitation are reasonable covenants under the circumstances, and further
agree that if, in the opinion of any court of competent jurisdiction such
covenants are not reasonable in any respect, such court shall have the right,
power and authority to excise or modify such provision or provisions of these
covenants as to the court shall appear not reasonable and to enforce the
remainder of these covenants as so amended. Executive agrees that any breach of
the covenants contained in this Section 8 would irreparably injure the Company.
Accordingly, Executive agrees that the Company, in addition to pursuing any
other remedies it may have in law or in equity, may obtain an injunction,
without the necessity of obtaining a bond or other security, against Executive
from any court having jurisdiction over the matter, restraining any further
violation of this Section 8.
9. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given if delivered
personally or sent by facsimile transmission, overnight courier, or certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally or sent by facsimile transmission (provided
that a confirmation copy is sent by overnight courier), one day after deposit
with an overnight courier, or if mailed, five (5) days after the date of deposit
in the United States mails, as follows:
If to the Company, to: Fotoball USA, Inc.
0000 Xxxxx Xxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
If to Executive, to: Xx. Xxxxx Xxxxxx
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Telecopy:
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10. Entire Agreement. This Agreement and the Plan (as amended by
the Amendment) contain the entire agreement between the parties hereto with
respect to the matters contemplated herein and supersede all prior agreements or
understandings among the parties related to such matters.
11. Binding Effect. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the Company and its
successors and assigns and upon Executive. "Successors and assigns" shall mean,
in the case of the Company, any successor pursuant to a merger, consolidation,
or sale, or other transfer of all or substantially all of the assets or Common
Stock of the Company.
12. No Assignment. Except as contemplated by Section 11 above, this
Agreement shall not be assignable or otherwise transferable by either party.
13. Amendment or Modification; Waiver. No provision of this
Agreement may be amended or waived unless such amendment or waiver is authorized
by the Board and is agreed to in writing, signed by Executive and by a duly
authorized officer of the Company (other than Executive). Except as otherwise
specifically provided in this Agreement, no waiver by either party hereto of any
breach by the other party hereto of any condition or provision of this Agreement
to be performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.
14. Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the internal
laws of the State of Delaware, without regard to its conflicts of law rules.
15. Titles. Titles to the Sections in this Agreement are intended
solely for convenience and no provision of this Agreement is to be construed by
reference to the title of any Section.
16. Counterparts. This Agreement may be executed in one or more
counterparts, which together shall constitute one agreement. It shall not be
necessary for each party to sign each counterpart so long as each party has
signed at least one counterpart.
17. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms and
provisions of this Agreement in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first set forth above.
FOTOBALL USA, INC.
By: /s/ Xxxxxxx Xxxxxx
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Name: Xxxxxxx Xxxxxx
Title: Chairman and Chief Executive
Officer
/s/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
