EMPLOYMENT AGREEMENT
Exhibit 10.1
This Employment Agreement (the “Agreement”) is effective as of September 12, 2005 (the
“Effective Date”), and is entered into by and between Xxxx X. Xxxxxxxxxxxx (“Xxxxxxxxxxxx”) and
Xxxxxxxx, Inc., a Delaware corporation (the “Company”).
1. Employment. As of the Effective Date, the Company hereby employs Xxxxxxxxxxxx to
serve in the capacity of Executive Vice President of Sales and Marketing (“EVP-S&M”). The
Company’s Board of Directors (the “Board”) and/or the Company’s Chief Executive Officer (the “CEO”)
may provide such additional designations of title to Xxxxxxxxxxxx as the Board and/or CEO, in its
discretion, may deem appropriate.
Xxxxxxxxxxxx agrees to perform the executive duties and functions customarily associated with
the offices of EVP-S&M and as specified from time to time by the Board and/or the CEO. Except for
legal holidays, vacations and absences due to temporary illness, Xxxxxxxxxxxx shall devote his
time, attention and energies to the business of the Company on a full-time basis. Xxxxxxxxxxxx
represents and warrants to the Company that he is under no restriction, limitation or other
prohibition to perform his duties as described herein.
2. Employment Compensation And Benefits.
a. Base Salary. Xxxxxxxxxxxx’x initial base salary shall be at the annual rate
of three hundred thousand dollars ($300,000). This salary level shall be reviewed at least
annually by the Board’s Compensation Committee on the basis of Xxxxxxxxxxxx’x performance
and the Company’s financial success and progress.
b. Annual Bonus and Stock Options. Xxxxxxxxxxxx will be entitled to receive an
option for a minimum of 20,000 shares for each of fiscal years 2005, 2006 and 2007 with the
options for fiscal year 2005 to be granted on September 12, 2005 and vesting on the first
anniversary of the date of grant. Option grants for fiscal years 2006 and 2007 will be
granted and will vest on the first anniversary of the date of grant. Xxxxxxxxxxxx will also
be eligible to earn an annual bonus on a Earnings Before Taxes (“EBT) in accordance with the
executive bonus plan, and according to the following schedule:
| Xxxxxxxx Bonus Plan | ||||
| Target is 50% of base | ||||
| % of Xxxxxxxx’x | salary | |||
| Plan | Bonus % of Target | |||
150% |
165 | % | ||
125% |
135 | % | ||
110% |
115 | % | ||
100% |
100 | % | ||
95% |
75 | % | ||
90% |
60 | % | ||
85% |
50 | % | ||
Less than 85% |
Discretionary | |||
1 of 8
Under this plan, for example, Xxxxxxxxxxxx’x “Target” bonus at 100% of Plan will equal 50%
of his annual base salary, $150,000. The annual bonus will be paid following the close of
final accounting records for the previous fiscal year.
c. Non-compete/Retention Payment. Xxxxxxxxxxxx acknowledges that the Company
has offered upon certain conditions described herein to provide him with a
non-compete/retention payment in the form of guaranteed minimum annual payments.
Xxxxxxxxxxxx understands and agrees that any portion of the payments described below that
exceeds the bonus payment to which he would otherwise be entitled pursuant to Paragraph 2(b)
of this Agreement shall be deemed vested and earned only upon the condition that
Xxxxxxxxxxxx remain with the Company from the effective date of this Agreement through the
end of fiscal year 2006.
Xxxxxxxxxxxx will receive three guaranteed minimum non-compete/retention payments as
follows. The first payment of $85,000 shall be made on September 12, 2005. The second
payment of $85,000 shall be made on November 24, 2005. The third payment, in the amount of
$40,000, shall be paid following the close of final accounting records for 2006. Each of
these payments will be applied against any cash bonus award earned during the relevant
fiscal year (as described in Paragraph 2(b)). Any portion of the payment amount that exceeds
the actual amount Xxxxxxxxxxxx earned according to the cash bonus plan will be considered an
“advanced non-compete/retention payment”, and constitute the amount to be repaid by
Xxxxxxxxxxxx if he leaves the Company prior to the end of the 2006 fiscal year. For
example, if the Company’s 2006 fiscal year performance for purposes of the executive cash
bonus plan is less than 85% of Plan, and Xxxxxxxxxxxx’x discretionary bonus is determined to
be $30,000, Xxxxxxxxxxxx’x advanced non-compete/retention payment would be $10,000.
If Xxxxxxxxxxxx does not fulfill the conditions for receiving the non-compete/retention
payment by remaining with the Company through the end of fiscal year 2006, the Company will
not have received the benefit of its bargain with regard to the non-compete/retention
payment, in which case Xxxxxxxxxxxx will not be entitled to the payment, and further,
Xxxxxxxxxxxx will be indebted to the Company for the amount advanced to him by the Company.
Furthermore, in the event that Xxxxxxxxxxxx fails to remain with the Company through the end
of fiscal year 2006, Xxxxxxxxxxxx agrees to repay the Company the full amount advanced to
him by the Company by no later than 30 days after the date of his departure. Xxxxxxxxxxxx
further understands that if he refuses or is unable to repay to the Company the advanced
funds, the Company may seek appropriate legal remedies to recoup the full amount of the
outstanding debt, or offset any advanced funds against other payments owed, including but
not limited to severance payments.
d. Automobile Allowance. The Company shall pay Xxxxxxxxxxxx an automobile
expense allowance of one thousand dollars ($1,000) per month to defray the cost of business
automobile expense.
e. Vacation. Xxxxxxxxxxxx shall be entitled to annual vacations in a manner
commensurate with his status as a key executive and in accordance with the Company’s
vacation policies in effect during the term of this Agreement.
f. Expense Reimbursement. The Company shall reimburse Xxxxxxxxxxxx for all
reasonable amounts actually expended by Xxxxxxxxxxxx in the course of performing his duties
for the Company and in accordance with any Company-established guidelines
where Xxxxxxxxxxxx tenders receipts or other documentation reasonably substantiating
the amounts as required by the Company.
2 of 8
g. Club Membership. On September 12, 2005, the Company will pay Xxxxxxxxxxxx
up to $45,000 (grossed up for any applicable income taxes) to purchase a Club Membership at
a Club of Xxxxxxxxxxxx’x choosing. Xxxxxxxxxxxx will be entitled to make use of such
membership and the Company will pay the monthly dues of $630 beginning September 12, 2005
for the term of Xxxxxxxxxxxx’x employment. Xxxxxxxxxxxx agrees that at the end of his
employment, he will reimburse the membership cost (current market value at the time of sale
minus the club fee) to Xxxxxxxx.
h. Other Benefits. Except as otherwise provided in this Agreement,
Xxxxxxxxxxxx shall be entitled to receive all of the rights, benefits and privileges of an
executive officer of the Company under any retirement, pension, profit-sharing, group
medical insurance, group dental insurance, group-term life insurance, and disability
insurance, and other employee benefit plans which may be now in effect or hereafter adopted.
3. Non-compete. Xxxxxxxxxxxx agrees that during the term of this Agreement
Xxxxxxxxxxxx will not, directly or indirectly, own, manage, operate, control, be employed by,
participate in, or be connected in any manner with the ownership, management, operation, or control
of any business which manufactures or sells golf-inspired sportswear which is substantially the
same as that of the Company and which is distributed in the same channels of distribution as the
then current channels of distribution of the Company, provided, however, that if Xxxxxxxxxxxx’x
employment is terminated for reasons which provide for severance compensation, the non-compete term
shall be extended to the period for which he receives such severance compensation.
4. Termination.
a. At Will. The Company shall employ Xxxxxxxxxxxx at will, and either
Xxxxxxxxxxxx or the Company may terminate Xxxxxxxxxxxx’x employment with the Company at any
time and for any reason, with or without cause.
x. Xxxxxxxxx Payment and Benefits. If Xxxxxxxxxxxx’x employment is terminated
as a result of a Qualifying Termination, as defined below, and if Xxxxxxxxxxxx delivers a
fully executed release and waiver of all claims against the Company in the form attached
hereto as Exhibit A, then, upon expiration of any applicable revocation period contained in
the Release Agreement, the Company shall pay or provide Xxxxxxxxxxxx the following severance
payment and benefits:
x. Xxxxxxxxxxxx shall receive the equivalent of twelve(12) months of his
then-current base salary (the “Severance Payment”), which shall be payable in equal
monthly installments beginning on the first day of the first full month following
Xxxxxxxxxxxx’x Qualifying Termination and continuing on the first day of each month
thereafter until fully paid. The Severance Payment is in lieu of any severance payment
benefits which otherwise may at that time be available under the Company’s applicable
policies; provided, however, that nothing in this Agreement is intended
to modify or supercede the “Agreement re: Change In Control” entered into between
Xxxxxxxxxxxx and the Company as of September 12, 2005, and Xxxxxxxxxxxx shall be
entitled to receive whatever additional severance pay
benefits, if any, for which he may qualify according to the terms of his Agreement
re: Change in Control with the Company.
3 of 8
ii. For the twelve-month period following the Qualifying Termination of his
employment, Xxxxxxxxxxxx shall be entitled to continue to participate in the following
executive benefit programs which had been made available to him (including his family)
before the Qualifying Termination: group medical insurance, group dental insurance,
group-term life insurance, and disability insurance. The programs shall be continued in
the same way and at the same level as immediately prior to the Qualifying Termination.
Xxxxxxxxxxxx’x participation in each of such executive benefit programs shall be earlier
terminated or reduced, as applicable, if and to the extent Xxxxxxxxxxxx receives
benefits as a result of concurrent coverage through another program.
iii. Xxxxxxxxxxxx will also be entitled to receive an additional cash payment of
$50,000.
iv. Xxxxxxxxxxxx’x unvested stock options, as described in Paragraph 2(b) of this
Agreement, shall immediately become fully vested and exercisable. This provision only
applies to stock options Xxxxxxxxxxxx has been granted pursuant to this Agreement, and
does not apply to options provided from any other source or Xxxxxxxx.
c. Qualifying Termination. Xxxxxxxxxxxx’x termination shall be considered a
“Qualifying Termination” unless:
x. Xxxxxxxxxxxx voluntarily terminates his employment with the Company and its
affiliated companies. Xxxxxxxxxxxx, however, shall not be considered to have
voluntarily terminated his employment with the Company and its affiliated companies if
he elects to terminate his employment because his overall compensation plan is reduced
or adversely modified in any material respect or his authority or duties are materially
changed. For such purposes, Xxxxxxxxxxxx’x authority or duties shall be considered to
have been “materially changed” if, without Xxxxxxxxxxxx’x express and voluntary written
consent, there is any substantial diminution or adverse modification in his title,
status, overall position, or responsibilities.
ii. The termination is on account of Xxxxxxxxxxxx’x death or Disability. For such
purposes, “Disability” shall mean a physical or mental incapacity as a result of which
Xxxxxxxxxxxx becomes unable to continue the performance of his responsibilities for the
Company and its affiliated companies for a period of three (3) months.
iii. Xxxxxxxxxxxx is involuntarily terminated for “Cause.” For this purpose,
“Cause” shall mean:
1. Xxxxxxxxxxxx’x willful and deliberate refusal to comply with a lawful,
instruction of the CEO or Board of Directors, which refusal is not remedied by
Xxxxxxxxxxxx within a reasonable period of time after his receipt of written notice
from the Company identifying the refusal, so long as the instruction is consistent
with the scope and responsibilities of Xxxxxxxxxxxx’x position;
2. Xxxxxxxxxxxx’x act or acts of personal dishonesty;
4 of 8
3. Xxxxxxxxxxxx’x conviction of a felony;
4. Xxxxxxxxxxxx’x violation of the Company’s policies and/or code of conduct;
5. Xxxxxxxxxxxx’x violation of any confidentiality or non-competition agreement
with the Company or any Affiliate of the Company; or
6. The willful engaging by Xxxxxxxxxxxx in misconduct which is injurious to the
Company.
d. Return of Materials. In the event of any termination of Xxxxxxxxxxxx’x
employment for any reason whatsoever, Xxxxxxxxxxxx shall promptly deliver to the Company all
Company property, including, but not limited to, documents, data, and other information
pertaining to Confidential Information, as defined below. Xxxxxxxxxxxx shall not take with
him any documents or other information, or any reproduction, summary or excerpt thereof,
electronic or otherwise, containing or pertaining to any Confidential Information.
5. Nondisclosure of Confidential Information. Xxxxxxxxxxxx acknowledges that during
the term of his employment with the Company, he will have access to and become acquainted with
information of a confidential, proprietary or secret nature which is or may be either applicable
to, or related in any way to, the present or future business of the Company, the research and
development or investigation of the Company, or the business of any customer of the Company
(“Confidential Information”). For example, Confidential Information includes, but is not limited
to, devices, secret inventions, processes and compilations of information, records, specifications,
designs, plans, proposals, software, codes, marketing and sales programs, financial projections,
cost summaries, pricing formula, and all concepts or ideas, materials or information related to the
business, products or sales of the Company and its customers and vendors. Xxxxxxxxxxxx shall not
disclose any of Confidential Information, directly or indirectly, or use them in any way, either
during the term of this Agreement or at any time thereafter, except as required in the course of
employment with the Company. Xxxxxxxxxxxx also agrees to comply with the Company’s policies and
regulations, as established from time to time for the protection of its Confidential Information,
including, for example, executing the Company’s standard confidentiality agreements. This section
shall survive termination of this Agreement.
6. Non-Solicitation. Xxxxxxxxxxxx agrees that so long as he is employed by the
Company and for a period of two (2) years after termination of his employment for any reason, he
shall not (a) directly or indirectly solicit, induce or attempt to solicit or induce any Company
employee to discontinue his or her employment with the Company; (b) usurp any opportunity of the
Company of which Xxxxxxxxxxxx became aware during his tenure at the Company or which is made
available to him on the basis of the belief that Xxxxxxxxxxxx is still employed by the Company; or
(c) directly or indirectly solicit or induce or attempt to influence any person or business that is
an account, customer or client of the Company to restrict or cancel the business of any such
account, customer or client with the Company. This section shall survive termination of this
Agreement.
7. Successors.
a. This Agreement is personal to Xxxxxxxxxxxx, and without the prior written consent of
the Company shall not be assignable by Xxxxxxxxxxxx other than by will or
the laws of descent and distribution. This Agreement shall inure to the benefit of and
be enforceable by Xxxxxxxxxxxx’x legal representatives.
5 of 8
b. The rights and obligations of the Company under this Agreement shall inure to the
benefit of and shall be binding upon the successors and assigns of the Company.
8. Governing Law. This Agreement is made and entered into in the State of California,
and the internal laws of California shall govern its validity and interpretation in the performance
by the parties hereto of their respective duties and obligations hereunder.
9. Modifications. This Agreement may be amended or modified only by an instrument in
writing executed by all of the parties hereto.
10. Entire Agreement. Except as otherwise set forth herein, this Agreement, together
with the exhibits attached hereto, supersedes any and all prior written or oral agreements between
Xxxxxxxxxxxx and the Company, and contains the entire understanding of the parties hereto with
respect to the terms and conditions of Xxxxxxxxxxxx’x employment with the Company;
provided, however, that this Agreement is not intended to supercede the Agreement
re: Change in Control between Xxxxxxxxxxxx and the Company, which they entered into as of September
12, 2005, or any agreements which Xxxxxxxxxxxx may previously have entered into regarding the
protection of trade secrets and confidential information.
11. Dispute Resolution. Xxxxxxxxxxxx and the Company will utilize a system of binding
arbitration to resolve all disputes that may arise out of the employment context. Both the Company
and Xxxxxxxxxxxx agree that any claim, dispute, and/or controversy that either Xxxxxxxxxxxx may
have against the Company (or its owners, directors, officers, managers, employees, agents, and
parties affiliated with its employee benefit and health plans) or the Company may have against
Xxxxxxxxxxxx, arising from, related to, or having any relationship or connection whatsoever with
Xxxxxxxxxxxx’x seeking employment with, employment by, or other association with the Company, shall
be submitted to and determined exclusively by binding arbitration under the Federal Arbitration
Act, in conformity with the procedures of the California Arbitration Act (Cal. Code Civ. Proc. sec
1280 et seq., including section 1283.05 and all of the Act’s other mandatory and permissive rights
to discovery). Included within the scope of this Agreement are all disputes, whether based on
tort, contract, statute (including, but not limited to, any claims or discrimination and
harassment, whether they be based on the California Fair Employment and Housing Act, Title VII of
the Civil Rights Act of 1964, as amended, or any other state or federal law or regulation),
equitable law, or otherwise. However, nothing herein shall prevent Executive from filing and
pursuing proceedings before the California Department of Fair Employment and Housing, or the United
States Equal Employment Opportunity Commission (although if Xxxxxxxxxxxx chooses to pursue a claim
following the exhaustion of such administrative remedies, that claim would be subject to the
provisions of this Agreement). In addition to any other requirements imposed by law, the
arbitrator selected shall be a retired California Superior Court Judge and shall be subject to
disqualification on the same grounds as would apply to a judge of such court. To the extent
applicable in civil actions in California courts, the following shall apply and be observed: all
rules of pleading (including the right of demurrer), all rules of evidence, and all rights to
resolution of the dispute by means of motions for summary judgment, judgment on the pleadings, and
judgment under Code of Civil Procedure Section 631.8. Resolution of the dispute shall be based
solely upon the law governing the claims and defenses pleaded, and the arbitrator may not invoke
any basis (including but not limited to, notions of “just cause”) other than such controlling law.
The arbitrator shall have the immunity of a judicial officer from civil liability when acting in
the capacity of an arbitrator, which immunity supplements any other existing immunity. Likewise,
all communications during or in
6 of 8
connection with the arbitration proceedings are privileged in accordance with Cal. Civil Code
Section 47(b). As reasonably required to allow full use and benefit of this agreement’s
modification to the Act’s procedures, the arbitrator shall extend the times set by the Act for the
giving of notices and setting of hearings. Awards shall include the arbitrator’s written reasoned
opinion. Notwithstanding the foregoing, the parties acknowledge and agree that this provision
shall not preclude either party from requesting temporary and/or preliminary injunctive relief to
enforce Paragraphs 3, 5 or 6 of this Agreement until such time as an arbitrator can assume
jurisdiction and render a decision over any such claims or requests.
12. Notices. Any notice or communications required or permitted to be given to the
parties hereto shall be delivered personally or be sent by United States registered or certified
mail, postage prepaid and return receipt requested, and addressed or delivered as follows, or at
such other addresses the party addressed may have substituted by notice pursuant to this Section:
Xxxxxxxx, Inc.
|
Xxxx X. Xxxxxxxxxxxx | |
0000 Xxxxx Xxxxxx Xxxx
|
00 Xxxxxxxxx | |
Xxxxxxxx, Xxxxxxxxxx 00000
|
Xxxxxx Xxxxxx, XX 00000 | |
Attn: President |
13. Captions. The captions of this Agreement are inserted for convenience and do not
constitute a part hereof.
14. Severability. In case any one or more of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision of this Agreement,
but this Agreement shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein and there shall be deemed substituted for such invalid, illegal or
unenforceable provision such other provision as will most nearly accomplish the intent of the
parties to the extent permitted by the applicable law. In case this Agreement, or any one or more
of the provisions hereof, shall be held to be invalid, illegal or unenforceable within any
governmental jurisdiction or subdivision thereof, this Agreement or any such provision thereof
shall not as a consequence thereof be deemed to be invalid, illegal or unenforceable in any other
governmental jurisdiction or subdivision thereof.
15. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall together constitute one in the same
Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and
delivered effective as of the day and year first written above in Carlsbad, California.
| XXXXXXXX, INC. | ||||
| By: | /s/ Xxxxxxx X. Xxxxxx, Xx. | |||
| Xxxxxxx X. Xxxxxx, Xx. | ||||
| Title: CEO and President | ||||
| XXXX X. XXXXXXXXXXXX |
||||
| By: | /s/ Xxxx X. Xxxxxxxxxxxx | |||
| Xxxx X. Xxxxxxxxxxxx | ||||
7 of 8
EXHIBIT A — RELEASE AGREEMENT
I, Xxxx X. Xxxxxxxxxxxx, hereby enter into this Release Agreement (this “Agreement”), pursuant
to Paragraph 4(b) of my Employment Agreement with Xxxxxxxx, Inc., a Delaware corporation (the
“Company”), in consideration for which the Company shall make the Severance Payment as described in
my Employment Agreement entered into effective as of September 12, 2005.
1. The date of my Qualifying Termination is , and I have received a final
paycheck for all wages due, including all accrued vacation, through that date. Other than the
Severance Payment as described in my Employment Agreement and whatever additional severance pay
benefits, if any, for which I may qualify according to the terms of my Agreement re: Change in
Control with the Company, the foregoing payments are the only amounts which I am entitled to
receive from the Company, and I hereby waive all other payments or claims for payments.
2. As consideration for the Severance Payment as described in my Employment Agreement, I
hereby release the Company, its successors, affiliates, directors, employees and agents from any
and all claims or lawsuits (including but not limited to any and all claims or demands relating to
salary, wages, bonuses, commissions, stock, stock options, vacation pay, fringe benefits, expense
reimbursements, any and all tort claims, contract claims (express or implied), wrongful termination
claims, public policy claims, whistleblower claims, implied covenant of good faith and fair dealing
claims, retaliation claims, personal injury claims, emotional distress claims, invasion of privacy
claims, defamation claims, fraud claims, attorneys’ fees claims, all claims arising under any
federal, state or other governmental statue, law, regulation or ordinance including, but not
limited to, Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities
Act, the Family and Medical Leave Act, the California Fair Employment & Housing Act, the California
Labor Code, the Age Discrimination in Employment Act of 1967 (“ADEA”), the Older Workers’ Benefit
Protection Act (“OWBPA”)) which I may have based either on my employment, my termination, or any
other event occurring prior to the date of this Agreement. This Release is intended to settle any
and all claims that I may have against the Company. Accordingly, I waive any and all rights
conferred under Section 1542 of the California Civil Code, which provides: “A general release does
not extend to claims which the creditor does not know or suspect to exist in his favor at the time
of executing the release which if known by him must have materially affected his settlement with
the debtor.”
3. I acknowledge and understand my continuing obligation (a) to maintain the confidentiality
of the Company’s trade secrets, confidential and proprietary information and (b) not to solicit the
Company’s customers or employees, as set forth in Paragraphs 3, 5 and 6 of my Employment Agreement.
I also warrant and represent that I have returned all Company materials as required in Paragraph
4(d) of my Employment Agreement.
4. I acknowledge that I fully understand my right to discuss this Agreement with an attorney,
and I have carefully read and fully understand this entire Agreement, and I am entering into this
Agreement voluntarily.
5. I understand that I shall have twenty-one (21) days from the date of receipt of this
Agreement to consider this Agreement, I shall have seven (7) days following the signing of this
Agreement to revoke it in writing, and this Agreement shall not be effective or enforceable until
this revocation period has expired.
| Dated: | XXXX X. XXXXXXXXXXXX | |||||||
| By: | ||||||||
| Dated: | XXXXXXXX, INC. | |||||||
| By: | ||||||||
| Title: | ||||||||
8 of 8
