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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as
of the 1st day of January, 1999, by and between XXXX'X INTERNATIONAL, INC., a
Delaware corporation with its principal offices in Orange, California
("Corporation"), and XXXX X. XXXXX, an individual residing in Coto de Caza,
California ("Executive").
W I T N E S S E T H :
WHEREAS, Executive presently serves as President and Chief Operating
Officer of Corporation pursuant to an employment agreement dated as of December
11, 1996 between Corporation and Executive (the "Prior Employment Agreement");
and
WHEREAS, Corporation desires to continue to retain the services of
Executive, whose experience, knowledge and abilities with respect to the
business and affairs of Corporation and its subsidiaries are extremely valuable
to Corporation; and
WHEREAS, the Board of Directors of Corporation (the "Board of
Directors") and the Compensation Committee (the "Committee") of the Board of
Directors recognize that the continuing possibility of an unsolicited tender
offer or other takeover bid for Corporation will be unsettling to Executive and
other senior executives of Corporation and, therefore, to enhance the value of
Corporation for the benefit of its stockholders, desire to make arrangements to
help assure the dedication by Executive to Executive's duties to Corporation,
notwithstanding the occurrence of a tender offer or takeover bid; and
WHEREAS, in particular, the Board of Directors and the Committee believe
it is important, should Corporation receive proposals from third parties with
respect to its future, to enable Executive, without being influenced by the
uncertainties of Executive's own situation, to assess and advise the Board of
Directors whether such proposals would be in the best interests of Corporation
and its stockholders, and to take such other action regarding such proposals as
the Board of Directors might determine to be appropriate; and
WHEREAS, the Board of Directors and the Committee also wish to
demonstrate to Executive and other senior executives of Corporation that
Corporation is concerned with the welfare of its executives and intends to see
that loyal executives are treated fairly; and
WHEREAS, in view of the foregoing and in further consideration of
Executive's employment with Corporation, the Board of Directors and the
Committee have determined that it is in the best interests of Corporation and
its stockholders for Corporation to agree to pay Executive termination
compensation in the event Executive should leave the employ of Corporation under
certain circumstances;
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NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements and promises of the parties set forth below, the parties hereby agree
as follows:
1. Duties.
(a) Corporation hereby employs Executive as President and Chief
Operating Officer of Corporation during the term of this Agreement, with
powers and duties consistent with such positions. Executive, during the
term of this Agreement, shall perform such additional or different
duties, and accept the election or appointment to such other offices or
positions, as may be mutually agreeable to Executive and the Board of
Directors. Executive agrees to serve in such executive offices and
directorships in other subsidiaries or affiliated companies of
Corporation as he may be requested to do throughout the term of this
Agreement without additional fixed compensation.
(b) Executive shall be employed at Corporation's headquarters in
Orange County, California, and shall devote substantially his full time
and efforts to perform his duties faithfully, diligently and to the best
of his ability to advance the interests of Corporation; subject,
however, to reasonable working hours, conditions and vacations as are
consistent with his position and with due regard to the preservation of
his good health. Nothing herein shall be deemed to preclude or prohibit
Executive from performing during regular business hours services within
the business and civic community which are customary for persons in
similar capacities, including, without limitation, serving on boards of
other companies, advisory groups, committees and panels, but only in
furtherance of and not to the detriment of his principal duties
hereunder. Further, Corporation shall give Executive a reasonable
opportunity to perform his duties and shall not expect Executive to
devote more time hereunder, nor assign duties or functions to Executive,
other than as may be customary and reasonable for an executive in
Executive's position.
2. Compensation.
(a) Effective as January 1, 1999, and during the entire term of
this Agreement, Corporation shall pay to Executive an annual salary of
not less than Three Hundred Eighty-Six Thousand Nine Hundred Dollars
($386,900.00), payable in equal installments on Corporation's regular
payroll dates, for any and all services which Executive may render to
Corporation.
(b) The Board of Directors annually shall review the amount of
Executive's salary, and shall, when the Board of Directors in its sole
judgment deems it appropriate, make adjustments in the amount of such
salary. Any such adjustments shall take effect on the date established
by the Board of Directors. Nothing herein shall be construed to
authorize or empower any reduction of Executive's salary below his then
current rate of salary by the Board of Directors
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or otherwise during the term of this Agreement. The Committee, in
accordance with customary policy, shall make such recommendations to the
Board of Directors as it believes are appropriate with respect to salary
adjustments hereunder.
3. Expenses. Corporation will reimburse Executive for all usual,
reasonable and necessary expenses paid or incurred by him in the performance of
his duties hereunder, subject to the right of Corporation at any time to place
reasonable limitations on expenses thereafter to be incurred or reimbursed.
4. Employee Benefits. Executive shall be entitled to and shall receive
all other benefits of employment generally available to other executives of
Corporation, including, among other things, participation in any hospital,
surgical, medical or other group health and accident benefit plans, life
insurance benefits, and Corporation's annual vacation plan. In addition,
Executive will be entitled to participate in all incentive compensation, stock
option, profit sharing, pension, retirement or bonus plans as from time to time
may be in existence during the term of this Agreement in accordance with their
respective terms and provisions, but, to the extent participation or the amount
of participation is at the discretion of the Board of Directors or any committee
thereof, then Executive's participation shall likewise be solely subject to such
discretion.
5. Term and Termination.
(a) The term of this Agreement shall commence on the date hereof
and shall terminate upon the first to occur of the following events:
(i) December 31, 2001 (the "Last Day of the Stated
Term");
(ii) The death or permanent disability of Executive;
(iii) The 30th day following written notice from
Corporation to Executive; or
(iv) Executive is discharged for Cause.
(b) If Executive dies or becomes permanently disabled during the
term of this Agreement, this Agreement shall terminate on the last day
of the month during which his death or permanent disability, as the case
may be, occurred. Commencing thirty (30) days after the date of such
termination, there shall be paid to Executive or Executive's
representative in the event of permanent disability, or to his executor
or estate in the event of death, an amount equal to one year of
Executive's then current salary, payable in twelve (12) equal monthly
installments. If Executive is absent from employment or unable to render
services hereunder on a full-time basis by reason of physical or mental
illness or disability for six (6) months or more in the aggregate in any
twelve (12) month period
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during the term of this Agreement, Executive shall be considered
permanently disabled.
(c) If Corporation should terminate this Agreement pursuant to
Section 5(a)(iii):
(i) Executive shall immediately cease to be President and
Chief Operating Officer of Corporation, and such other office or
position Executive then holds, and if requested by a majority of
the Board of Directors of Corporation, shall immediately resign
from the Board of Directors and from any of the Boards of
Directors of any of Corporation's subsidiaries of which Executive
may be a member.
(ii) Corporation shall be obligated and shall continue to
pay Executive an amount equal to his then current salary but at a
rate of not less than Three Hundred Eighty-Six Thousand Nine
Hundred Dollars ($386,900.00) per annum from the date of such
termination until the Last Day of the Stated Term. Such payments
shall be made in installments payable as provided in Section 2(a)
hereof. Corporation also immediately shall pay Executive in a
lump sum an amount equal to the amount of the remaining unpaid
portion of any yearly incentive compensation award, and the
amount, if any, of any forfeiture of Executive's interest in any
profit sharing plan in which Executive is a participant.
(iii) For the purposes of participation in any hospital,
surgical, medical or other group health and accident insurance
and group life insurance plans maintained by Corporation,
Executive shall continue to be an employee of Corporation through
the Last Day of the Stated Term. Except for such purposes, unless
the Board of Directors otherwise determines by resolution,
Executive shall not continue to be an employee of Corporation for
any other purposes and shall not be entitled to continue to
participate in Corporation's Retirement Plan or 401(k) Plan, or
in any other plans, programs and benefits of Corporation;
provided, however, nothing herein shall preclude Executive from
any vested rights or benefits he may have in such plans on the
effective date of termination. If a contrary determination is
made by the Board of Directors, the duties of Executive shall be
only as mutually agreed upon by Executive and Corporation, and
may be refused by Executive without penalty hereunder.
(iv) If termination shall be without Cause under Section
5(a)(iii), all stock options granted to Executive prior to the
date of this Agreement under any stock option plan of Corporation
(other than Corporation's Employee Stock Purchase Plan),
notwithstanding the provisions of any stock option plan or
agreement, shall vest immediately and become exercisable by
Executive. Nothing herein shall otherwise
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affect the obligations of Corporation or Executive under the
terms of such stock option agreement, which, except for the
provisions hereof, shall be otherwise enforceable in accordance
with its terms.
(v) Any benefits of indemnification provided by the
By-Laws of Corporation or in any Indemnification Agreement
between Corporation and Executive shall be continued for the
benefit of Executive, and any officers' and directors' liability
insurance which may be maintained by Corporation and outstanding
on the date of termination shall be continued for the benefit of
Executive for such reasonable period of time as may be determined
by the Board of Directors to afford protection to Executive.
(d) Corporation agrees that its obligations for the continuation
of Executive's salary and other benefits in accordance with Sections
5(c)(ii) through 5(c)(v) above shall be absolute and unconditional, and
the amounts due under Sections 5(c)(ii) and 5(c)(iii) above or Section
15 shall not be subject to offset, reduction or mitigation for any
reason whatsoever; provided, however, that if Executive should breach
any other provision of this Agreement while he is receiving benefits
pursuant to Sections 5(c)(ii) through 5(c)(v) above, all obligations of
Corporation hereunder shall cease to be effective on the actual date of
such breach.
(e) "Cause" as used in Section 5(a)(iv) shall mean only gross
negligence, dishonesty, incompetence, a willful breach of this
Agreement, or violation of any reasonable rule or regulation of the
Board of Directors, the violation of which results in significant damage
to Corporation and with respect to which, except in the case of
incompetence or dishonesty, Executive fails to correct or make
reasonable efforts to correct within a reasonable time after receipt of
written notice thereof. "Cause" shall be determined only by the
affirmative vote of a majority of the authorized number of the Board of
Directors (excluding, for this purpose, Executive) at a meeting for
which notice has been given that it is proposed to consider the issue of
"Cause" or at a meeting occurring not less than seven (7) days after a
meeting at which one or more directors indicate an intention to present
a motion to such effect.
(f) If Corporation should terminate this Agreement pursuant to
Section 5(a)(iv), this Agreement shall terminate immediately or at such
later date as shall be designated by the Board of Directors and all of
Executive's rights hereunder shall terminate effective upon such
termination. Except as otherwise specified in any notice of termination,
Executive shall not continue thereafter to be an employee of Corporation
for any purpose and all rights Executive might thereafter have as an
employee pursuant to any plan or understanding shall cease.
6. Confidential Information. Executive agrees that he will not at any
time, both during and after the term of this Agreement, divulge, furnish or make
accessible to
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any party (except to an entity which shall succeed to the business of
Corporation or its subsidiaries, and except as may be required in the conduct of
the regular course of business of Corporation or its subsidiaries, or as
specifically authorized by the Board of Directors or as may be required by law)
any trade secrets, patents, patent applications, inventions or customers of
Corporation or of any subsidiary of Corporation until such time as such
information has been disclosed to the public otherwise than by Executive.
7. Restrictive Covenant During Term. Executive agrees that until the
Last Day of the Stated Term, he will neither directly nor indirectly engage in a
business competing with any of the businesses conducted by Corporation or any of
its subsidiaries, nor without the prior written consent of the Board of
Directors, directly or indirectly, have any interest in, own, manage, operate,
control, be connected with as a stockholder, joint venturer, officer, employee,
partner or consultant, or otherwise engage, invest or participate in any
business which shall be competitive with any of the businesses conducted by
Corporation, or by any subsidiary of Corporation; provided, however, nothing
contained in this Section 7 shall prevent Executive from investing or trading in
stocks, bonds, commodities, securities, real estate, or other forms of
investment for his own benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and, to the extent that such investment activities
would, but for this proviso, be prohibited hereby, would not be material either
to Executive or the concern in which such investment is made.
8. Approval by Corporation. This Agreement has been approved by the
Board of Directors in accordance with the authority granted and restrictions
imposed by action of the Board of Directors. It shall be executed by the Chief
Executive Officer or other duly qualified officer.
9. Waiver or Modification. Any waiver, alteration or modification of any
of the provisions of this Agreement or cancellation or replacement of this
Agreement shall not be valid unless made in writing and signed by the parties
hereto.
10. Construction. Except as to matters of internal corporate policy and
regulation, which shall be governed by the laws of the State of Delaware (the
state of incorporation of Corporation), this Agreement shall be governed by the
laws of the State of California. If any litigation shall occur between Executive
and Corporation which litigation arises out of or as a result of this Agreement
or the acts of the parties hereto pursuant to this Agreement, or which seeks an
interpretation of this Agreement, the prevailing party shall be entitled to
recover all costs and expenses of such litigation, including reasonable
attorneys' fees and costs.
11. Binding Effect.
(a) The rights and obligations of Corporation under this
Agreement shall be binding upon any successor or assigns of Corporation.
In the event of any consolidation or merger of Corporation into or with
another corporation, such
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other corporation shall assume this Agreement and shall become
obligated to perform all of the terms and conditions hereof, and
Executive's obligations hereunder shall continue in favor of such other
corporation.
(b) If Corporation shall adopt a plan of liquidation or be or
become a party to any action which has the substantive effect of finally
terminating its business and affairs, all sums which would have been
payable to Executive during the remaining term of this Agreement
(assuming the continuation of Executive's then salary through the Last
Day of the Stated Term) shall become due and payable to Executive not
later than the effective date of such plan or action; except in the case
of a liquidation of Corporation into an acquiring company or subsidiary
of such acquiring company after a consolidation or merger of Corporation
into or with another corporation, and the rights and obligations of
Corporation under this Agreement are expressly assumed by the acquiring
company as part of the plan of liquidation.
(c) This Agreement supersedes all prior and contemporaneous
agreements, amendments, memoranda or understandings, express or implied
and written or oral, between Corporation and Executive.
12. Waiver. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of any other provision of this Agreement.
13. Counterparts. This Agreement may be executed in any number of
identical counterparts, each of which shall be construed as an original for all
purposes, but all of which taken together shall constitute one and the same
Agreement.
14. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to be effective (i) upon
receipt if delivered in person, (ii) upon receipt if sent by registered or
certified United States mail, return receipt requested and postage and fees
prepaid, to the addresses of the parties set forth below, or such other address
as shall be furnished by notice hereunder by any such party or (iii) twenty-four
hours after having been sent by Federal Express or other overnight delivery
service to such address:
Corporation: 000 Xxxxx Xxxxx Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Executive: 0 Xxxxxx Xxxx
Xxxx xx Xxxx, XX 00000
No failure or refusal to accept delivery of any envelope containing such notice
shall affect the validity of such notice or the giving thereof.
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15. Termination After Change in Control.
(a) Cumulative to any other provision of the Employment
Agreement, if, within two years after a change in control of
Corporation, Executive's employment with Corporation terminates for any
reason, either voluntarily or involuntarily, other than by death,
permanent disability or retirement at or after Executive's normal
retirement date under Corporation's Retirement Plan, Corporation
promptly will pay Executive, upon Executive's request, as termination
compensation, a lump sum amount, determined as provided in subsection
(b) of this Section 15, and such other amounts as are provided in
subsection (c) of this Section 15. For purposes of this Section, a
"change in control of Corporation" shall mean a change in control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"); provided that, without
limitation, such a change in control of Corporation shall be deemed to
have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial
owner, directly or indirectly, of securities of Corporation representing
40% or more of the combined voting power of Corporation's then
outstanding securities; or (ii) during any period of two consecutive
years, individuals who at the beginning of such period constitute the
Board of Directors of Corporation cease for any reason to constitute at
least a majority thereof unless the election of each new director was
approved by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period.
(b) The lump sum compensation payable to Executive (the
"Severance Payment") shall be equal to the average annual compensation
(including salary and bonuses under the Corporate Management Incentive
Compensation Plan or any predecessor or successor annual incentive
compensation plan) paid or payable by Corporation to Executive during
the five most recent calendar years ending before the date of the change
in control of Corporation (the "Base Amount") multiplied by 2.99;
provided, however, if Executive voluntarily terminates his employment
with Corporation, except after (i) any material adverse change in
Executive's duties, location of employment or benefits, or (ii) any
material adverse change to Executive in the application of the formula
of the Corporate Management Incentive Compensation Plan or any
modification in Corporation's accounting methods or practices materially
adverse to Executive, including the assessment of a management fee, then
the Severance Payment shall be equal to the highest annual compensation
(including salary and bonuses under the Corporate Management Incentive
Compensation Plan or any successor annual incentive compensation plan)
paid or payable by Corporation to Executive for services rendered in any
one of the three calendar years ending with the year of such
termination.
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(c) In addition, if Executive's employment with Corporation so
terminates within two (2) years after such a change in control of
Corporation:
(i) any bonus awards previously made to Executive and not
previously paid immediately shall vest upon such termination and
shall be paid;
(ii) Executive's participation in, and terminating
distributions and vested rights under, any applicable retirement
plan, profit sharing plan and stock incentive plan of Corporation
or any of its subsidiaries shall be governed by the terms of
those respective plans; and
(iii) In the event of termination of employment under the
circumstances described in subsection (a) of this Section 15, the
arrangements provided for by this Section 15, by any stock option
or other agreement between Corporation and Executive in effect at
the time and by any other applicable plan of Corporation shall
constitute the entire obligation of Corporation to Executive and
performance thereof shall constitute full settlement of any claim
that Executive might otherwise assert against Corporation on
account of such termination, provided, however, that this
provision and this Agreement shall have no impact on the
obligations of Corporation under that certain Indemnification
Agreement dated as of the date hereof between Corporation and
Executive.
(d) Notwithstanding any provision in this Agreement to the
contrary, in the event that any payment or benefit received or to be
received by Executive in connection with a change in control of
Corporation or the termination of Executive's employment, whether
payable pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with Corporation (collectively the "Total
Payments"), would not be deductible (in whole or part) as a result of
Section 280G of the Code, the Severance Payment shall be reduced until
no portion of the Total Payments is not deductible as a result of
Section 280G of the Code, or the Severance Payment is reduced to zero.
For purposes of this limitation, (i) no portion of the Total Payments,
the receipt or enjoyment of which Executive shall have effectively
waived in writing prior to the date of payment of the Severance Payment,
shall be taken into account, (ii) no portion of the Total Payments shall
be taken into account which, in the opinion of tax counsel selected by
Corporation's independent auditors and acceptable to Executive, does not
constitute a "parachute payment" within the meaning of Section
280G(b)(2) of the Code, (iii) the Severance Payment shall be reduced
only to the extent necessary so that the Total Payments (excluding
payments referred to in clause (i) or (ii)) in their entirety constitute
reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code, in the opinion of the tax
counsel referred to in clause (ii); and (iv) the value of any non-cash
benefit or any deferred payment or benefit included in the Total
Payments shall be determined
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by Corporation's independent auditors in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CORPORATION:
XXXX'X INTERNATIONAL, INC.
By /s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx
Chairman of the Board and Chief
Executive Officer
EXECUTIVE:
/s/ Xxxx X. Xxxxx
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Xxxx X. Xxxxx
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