EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of November ___, 1996 by and between TEARDROP
GOLF COMPANY, a Delaware corporation, with its principal offices located at 00
Xxx Xxxxxx, Xxxxxxxx #0, Xxxxxx Xxxx, Xxxxx Xxxxxxxx 00000 (the "Company"), and
XXXX X. XXXXXXX, having an address at 00 Xxxxxxxx Xxxxx, Xxxxx Xxxxxx, Xxx
Xxxxxx 00000 (the "Executive").
R E C I T A L S:
WHEREAS, the Executive has performed and will continue to perform
valuable services for the Company;
WHEREAS, the Executive is willing to serve as the Chairman of the
Board, Chief Executive Officer and President of the Company; and
WHEREAS, the Company desires to retain the Executive as the Chairman
of the Board and Chief Executive Officer and President of the Company on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the meanings set
forth below:
1.1 "BASIC SALARY" shall have the meaning assigned to that term in Section
5.1 of this Agreement.
1.2 "BOARD" shall mean the Board of Directors of the Company as duly
constituted from time to time.
1.3 "BUSINESS" shall mean the business of designing, developing and
marketing premium golf clubs conducted by the Company.
1.4 "CAUSE" shall mean any of the following:
(a) If the Executive engages in fraud or embezzlement; or
(b) The commission by the Executive of a material breach of any of
the provisions of this Agreement, on his part to be performed (including
material breach of the representation and warranty of Section 9); or
(c) The continuing willful failure of the Executive to perform the
Duties to the Company (other than any such failure resulting from the
Executive's incapacity due to
Disability) after written notice thereof (specifying the particulars thereof in
reasonable detail) and a reasonable opportunity to be heard and cure such
failure are given to the Executive by the Board.
For purposes of this subparagraph, no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interests of the Company.
1.5 "CODE" shall mean the Internal Revenue Code of 1986, as amended, and
the rules, regulations and interpretations issued thereunder.
1.6 "COMMENCEMENT DATE" shall be the date that the Company's registration
statement on Form SB-2 is declared effective by the United States Securities and
Exchange Commission.
1.7 "CONFIDENTIAL INFORMATION" shall include, without limitation by reason
of specification, any information, including, without limitation, trade secrets,
vendor and customer lists, pricing policies, operational methods, methods of
doing business, technical processes, formulae, designs and design projects,
inventions, research projects, strategic plans, product information,
manufacturing and advertising know-how, possible acquisition information and
other business affairs of the Company, which (i) is or are designed to be used
in, or are or may be useful in connection with the Business, or which results
from any of the research or development activities of the Business, or (ii) is
private or confidential in that it is not generally known or available to the
public, except as the result of unauthorized disclosure by or information
supplied by the Executive, or (iii) gives the Company an opportunity or the
possibility of obtaining an advantage over competitors who may not know or use
such information or who are not lawfully permitted to use the same.
1.8 "DISABILITY" shall mean the inability of the Executive to perform the
Executive's Duties for the Company pursuant to the terms of this Agreement,
because of physical or mental disability, where such disability shall have
existed for a period of more than 180 days in any 365 day period. The existence
of a Disability means that the Executive's mental and/or physical condition
substantially interferes with the Executive's performance of his Duties for the
Company as specified in this Agreement. The fact of whether or not a Disability
exists hereunder shall be determined by appropriate medical experts selected by
the Board.
1.9 "DUTIES" shall have the meaning assigned to that term in Section 2.1
of this Agreement.
1.10 "EMPLOYMENT YEAR" shall mean each twelve-month period, or part
thereof, during which the Executive is employed hereunder, commencing on the
Commencement Date and ending on the same day of the subsequent calendar year.
1.11 "TERM DATE" shall be the date on which the Term expires if during the
period of the initial Term or the date that the Renewal Term expires if during
the period of the Renewal Term.
- 2 -
1.12. "PERSON" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
1.13 "TERM" shall have the meaning assigned to that term in Section 3 of
this Agreement and any renewals thereof as provided for in Section 7 of this
Agreement.
1.14 "RENEWAL TERM" shall have the meaning assigned to that term in
Section 7 of this Agreement.
Wherever from the context it appears appropriate, each word or phrase
stated in either the singular or the plural shall include the singular and the
plural, and each pronoun stated in the masculine, feminine or neuter gender
shall include the masculine, feminine and neuter.
2. EMPLOYMENT AND DUTIES OF THE EXECUTIVE
The Company agrees to employ the Executive, and the Executive agrees
to be employed by the Company upon the terms and conditions hereinafter
provided. During the Term, the Executive agrees to serve as President, Chief
Executive Officer and Chairman of the Board of Directors of the Company and
will have such powers and duties as are commensurate with such position and as
may be conferred upon him by the Board. The Executive shall devote
substantially all of his business time, attention, skill and efforts to his
duties of Chairman of the Board, Chief Executive Officer and President of the
Company and to such other duties as are assigned to him from time to time by the
Board except to the extent specifically authorized by Board.
3. TERM OF EMPLOYMENT
The employment of the Executive pursuant to this Agreement shall be for the
period of three (3) years (the "Term") commencing on the Commencement Date,
unless renewed pursuant to Section 7 or sooner terminated pursuant to Section 8.
4. COMPENSATION AND BENEFITS
The Company shall pay the Executive, as compensation for all of the
services to be rendered by him hereunder during the Term, and in consideration
of the various restrictions imposed upon the Executive during the Term, the
Basic Salary and other benefits as provided for and determined pursuant to
Sections 5 and 6, inclusive, of this Agreement; provided, however, that no
compensation shall be paid to the Executive under this Agreement for any period
subsequent to the termination of employment of the Executive for any reason
whatsoever, except as provided in Section 8.
- 3 -
5. BASIC SALARY/BONUS
5.1 BASIC SALARY. The Company shall pay the Executive, as compensation
for all of the services to be rendered by him hereunder during each Employment
Year, a salary of $175,000 per Employment Year (as adjusted upward by the
Company from time to time) (the "Basic Salary"), payable in substantially equal
payments no less frequently than monthly, less such deductions or amounts as are
required to be deducted or withheld by applicable laws or regulations,
deductions for the Executive contributions to welfare benefits provided by the
Company to the Executive and such other deductions or amounts, if any, as are
authorized by the Executive. The Basic Salary shall be prorated for the month
in which employment by the Company commences or terminates, and for any
Employment Year which is less than twelve (12) months in duration. The Basic
Salary may be increased from time to time by the Company and, once increased,
shall not thereafter be reduced.
5.2 BONUSES.
(a) The Executive shall be entitled to a performance bonus
payable upon the completion of the Company's audited year-end financial
statements for each fiscal year commencing with the year ended December 31,
1997, equal to 10% of the Company's net income for such year before income tax
and before giving effect to any bonuses paid hereby. This bonus shall be paid
by (a) multiplying .10 by the pretax net income of the Company (the "Bonus
Amount") without giving effect to the bonus, (b) paying in cash to Executive an
amount subtracting that amount necessary to pay the income tax liability that
Executive will incur as a result of receiving such bonus, and paying such amount
(the "Cash Payment") equal to fifty (50%) of the Bonus Amount in cash to
Executive and (c) issuing to Executive that number of shares of Common Stock
derived by dividing (i) the remaining fifty (50%) percent of the Bonus Amount
less the amount of the Cash Payment by (ii) the lowest last sale price of the
Common Stock as reported on Nasdaq during the final three months of the fiscal
year. At the discretion of the Board, the entire Bonus Amount may be paid in
cash. The Executive shall be entitled to receive such other bonuses at the
discretion of the Board, which bonuses shall be based on performance criteria
established by the Board.
(b) In the event that there is a sale of the Company or
substantially all of the assets of the Company or a merger in which the Company
is not the surviving corporation or in which the then current Board of Directors
does not continue to control a majority of seats on the Board of Directors (a
"Capital Transaction") which involves aggregate consideration equal to or
greater than Twenty-Five Million ($25,000,000) Dollars, the Executive shall be
entitled to a bonus equal to the greater of (i) Two Hundred and Fifty Thousand
($250,000) Dollars and (ii) 10% of the excess consideration over Twenty-Five
Million ($25,000,000) Dollars.
(c) In the event that any payment or benefit received or to be
received by the Executive in connection with a Capital Transaction of the
Company ("Total Payments") would not be deductible (in whole or in part) as a
result of Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code") and the regulations thereunder by the Company, an affiliate or other
person making such payment or providing such benefit, at the sole discretion
of the Executive the payments and benefits hereunder may be reduced until no
portion of the Total Payments is not deductible, or the payments and benefits
hereunder are reduced to zero. Such reduction may be effected by extending
the date the payment would otherwise be due by not more than one year or by
decreasing the amount of the payment or benefit otherwise due and payable. No
portion of the Total Payments shall be taken into account which, in the opinion
of tax counsel selected by the Executive and acceptable to the Company's
independent auditors, is not likely to constitute a "parachute payment" within
the meaning of Section 280G(b)(2) of the Code and the payments hereunder shall
be reduced only to the extent necessary so that, in the opinion of tax counsel
referred to above, the Total Payments in their entirety are likely to
constitute reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code or are otherwise not likely to be
subject to disallowance as deductions; and the value of any non-cash benefit or
any deferred payment or benefit included in the Total Payments shall be
determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
- 4 -
6. ADDITIONAL BENEFITS AND REIMBURSEMENT FOR EXPENSES
6.1 ADDITIONAL BENEFITS. The Company shall provide the following
additional benefits to the Executive during the Term:
(i) all benefits consistent with current benefits of executives of
the Company;
(ii) the lease by the Company for use by the Executive (or the Company
shall reimburse the Executive for these payments if the lease is
in his name) of an automobile such lease payments not to exceed
$1,000 a month (in addition to the payment by the Company of
insurance and other expenses relating thereto) and
(iii) such other benefits as the Board shall lawfully adopt and approve
for the Executive.
6.2 REIMBURSEMENT FOR EXPENSES. The Company shall pay or reimburse the
Executive for all reasonable business expenses actually incurred or paid by him
during the Term in the performance of his services under this Agreement, upon
presentation of such bills, expense statements, vouchers or such other
supporting information as the Board may reasonably require. In the event the
Company requires the Executive to travel on business during the Term, the
Executive shall be reimbursed for any travel expenses in accordance with this
Section 6.2.
7. RENEWAL OF TERM
If the Executive's employment hereunder has not previously been terminated
in accordance with Section 8 hereof, then the Term shall be extended for
additional periods of one (1) year (the "Renewal Term"), unless either the Board
or the Executive provides written notice ninety (90) days or more prior to the
end of the Term that this Agreement will not be extended. The rights of
termination set forth in Section 8 shall be applicable during any such extended
term.
8. TERMINATION OF EMPLOYMENT
8.1 DEATH. If the Executive dies during the Term, his employment under
this Agreement shall automatically terminate on the date of his death and no
further compensation shall be due hereunder to the Executive or the Executive's
estate.
8.2 DISABILITY. If, during the Term, the Executive has a Disability, the
Company may, at any time after the Executive has a Disability, terminate the
Executive's employment by written notice to him. In the event that the
Executive's employment is terminated as a result of a Disability, the Executive
shall cease to receive any further compensation hereunder, except to the extent
provided under the benefit plans of the Company.
- 5 -
8.3 VOLUNTARY TERMINATION. If the Executive terminates his employment
with the Company at any time during the term of this Agreement, he shall be
deemed to have been terminated by the Company for Cause and shall be subject
to the provisions of Section 8.4 hereof.
8.4 TERMINATION FOR CAUSE. The Company may terminate the Executive's
employment hereunder for Cause at any time by written notice given to the
Executive by the Board. If the Executive's employment is terminated for Cause,
he shall be entitled to receive only the portion of his Basic Salary accrued and
not theretofore paid to him and reimbursement for any expenses properly incurred
by the Executive and supported by appropriate vouchers, which expenses have been
incurred prior to the date of such termination and not theretofore reimbursed.
Except as set forth in the immediately preceding sentence, all of the
Executive's rights to compensation hereunder shall be terminated.
8.5 TERMINATION WITHOUT CAUSE. The Company may terminate the
Executive's employment hereunder without Cause upon written notice to the
Executive within ninety (90) days of the Term Date. The Executive shall be
entitled to receive, in lieu of any other compensation hereunder, any cash
bonus which had been awarded to the Executive by the Board but had not yet
been paid. If the Company terminates the Executive's employment hereunder
without Cause at any time prior to the Term Date, the Executive shall be
entitled to receive the Basic Salary unpaid through the Term Date, payable in
such installments as set forth in Section 5.1 and any bonuses to which the
executive may have been entitled under Section 5.2 during the term of this
Agreement (inclusive of the fiscal year ending December 31, 1999), whether or
not executive is employed by the Company at the relevant time of any event or
milestone that triggers the payment of the bonus. In addition, the Company
shall reimburse the Executive for any expenses properly incurred by the
Executive and supported by proper vouchers, which expenses have been incurred
prior to the date of such termination and not theretofore reimbursed.
- 6 -
9. REPRESENTATION AND WARRANTY BY THE EXECUTIVE
The Executive hereby represents and warrants to the Company, the same being
part of the essence of this Agreement, that, as of the Commencement Date, he is
not a party to any agreement, contract or understanding, and that no facts or
circumstances exist, which would in any way restrict or prohibit him in any
material way from undertaking or performing any of his obligations under this
Agreement. The foregoing representation and warranty shall remain in effect
throughout the Term.
10. CONFIDENTIAL INFORMATION AND PROPRIETARY INTERESTS
10.1 ACKNOWLEDGMENT OF CONFIDENTIALITY. The Executive understands and
acknowledges that he may obtain Confidential Information during the course of
his employment by the Company. The Executive further acknowledges that the
services to be rendered by him are of a special, unique and extraordinary
character and that, in connection with such services, he will have access to
Confidential Information vital to the Company. Accordingly, the Executive
agrees that he shall not, during the Term or for three years thereafter, (i) use
or disclose any such Confidential Information outside the Company, (ii) publish
any works, speeches or articles with respect thereto; or (iii) except as
required in the proper performance of his services hereunder, remove or aid in
the removal of any Confidential Information or any property or material relating
thereto from the premises of the Company.
The foregoing confidentiality provisions shall cease to be applicable
to any Confidential Information which becomes generally available to the public
(except by reason of or as a consequence of a breach by the Executive of his
obligations under this Section 10).
In the event the Executive is required by law or a court order to
disclose any such Confidential Information, he shall promptly notify the Company
of such requirement and provide the Company with a copy of any court order or of
any law which in his opinion requires such disclosure and, if the Company so
elects, to the extent that he is legally able, permit the Company an adequate
opportunity, at its own expense, to contest such law or court order.
10.2 DELIVERY OF MATERIAL. The Executive shall promptly, and without
charge, deliver to the Company on the termination of his employment hereunder,
or at any other time the Company may so request, all memoranda, notes, records,
reports, manuals, computer disks, videotapes, drawings, blueprints and other
documents (and all copies thereof) relating to the Business, and all property
associated therewith, which he may then possess or have under his control.
10.3 CUSTOMER AND VENDOR LISTS. The Executive acknowledges that (i) all
lists of customers and vendors of the Company developed during the course of the
Executive's employment and/or by the Company are and shall be the sole and
exclusive property of the Company and the Executive further acknowledges and
agrees that he neither has nor shall have any personal right, title or interest
therein; (ii) such lists are and must continue to be confidential; and (iii)
such lists are not readily accessible to competitors of the Company.
- 7 -
10.4 IDEAS, PROGRAMS, ETC. If, during the Term, the Executive invents or
develops any ideas, vendor lists or the like, relating to or useful in
connection with the Business, the same are and shall remain the property of the
Company, and the Executive shall promptly deliver all copies of the same to the
Company, assign his interest therein to the Company and execute such documents
as the Company's counsel may request to convey title thereof to the Company.
The Executive shall not be entitled to any compensation, other than as provided
in this Agreement, for carrying out his obligations to the Company under this
Section 10.4 or any other subsection of this Section 10.
10.5 EXTENSION OF SECTION 10. All of the provisions of Section 10 shall
be deemed to be applicable to all Confidential Information and to all ideas,
programs, etc., as referred to in Section 10.4, to which the Executive may have
obtained access or which he may have invented or developed during his employment
by the Company.
11. COMPETITIVE ACTIVITY
The Executive shall not engage, directly or indirectly in any Competitive
Activity for a period of two (2) years after the termination of Executive's
employment with the Company, provided however, that if the Executive is
terminated without cause as defined in Section 8.5 hereof, he will not be
subject to the provisions of this Section 11. For purposes of this Agreement,
Executive shall be considered to have engaged in a "Competitive Activity" if
Executive:
(i) directly or indirectly, takes any action or engages, or participates
in or within or becomes interested in or associated with any Person that is
engaged or becomes engaged in a business which is similar to the Business;
(ii) retains as an employee, consultant or otherwise, or hires or offers
employment to, any person whom the Company engages as an employee,
consultant or otherwise, where such engagement by the Company relates to
the Business.
(iii) otherwise interferes with the relationships between the Company and
its employees, customers or suppliers.
12. DISPUTES AND REMEDIES
12.1 WAIVER OF JURY TRIAL. The Executive and the Company hereby waive the
right to a trial by jury in the event of any dispute which arises under this
Agreement.
12.2 INJUNCTIVE RELIEF. If the Executive commits a breach, or threatens
to commit a breach, of any of the provisions of Sections 8.4 or 10, the Company
shall have the following rights and remedies (each of which shall be independent
of the other, and shall be severally enforceable, and all of which shall be in
addition to, and not in lieu of, any other rights and remedies available to the
Company at law or in equity):
(i) the right and remedy to have the provisions of this Agreement
specifically enforced by any court having equity jurisdiction, it
being acknowledged by the Executive that any such breach or threatened
breach will or may cause irreparable injury to the Company and that
money damages will or may not provide an adequate remedy to the
Company; and
(ii) the right and remedy to require the Executive to account for and
pay over to the Company all compensation, profits, monies, increments,
things of value or other benefits, derived or received by the
Executive as the result of any acts or transactions constituting a
breach of any of the provisions of Sections 8.4 or 10 of this
Agreement, and the
- 8 -
Executive hereby agrees to account for and pay over all such
compensation, profits, monies, increments, things of value or other
benefits to the Company.
12.3 PARTIAL ENFORCEABILITY. If any provision contained in Sections 8.4
or 10, or any part thereof, is construed to be invalid or unenforceable, the
same shall not affect the remainder of the Executive's agreements, covenants and
undertakings, or the other restrictions which he has accepted, in Sections 8.4
or 10, and the remaining such agreements, covenants, undertakings and
restrictions shall be given the fullest possible effect, without regard to the
invalid parts.
12.4 INTENTION OF PARTIES. It is distinctly understood and agreed that
the confidentiality, proprietary right and restrictive covenant provisions of
this Agreement have been accepted and agreed to by the Executive in
contemplation of this Agreement. It is therefore the specific intention of the
parties, any general considerations of public policy to the contrary
notwithstanding, that the provisions of Sections 8.4 or 10 of this Agreement
shall be enforced as written and to the fullest extent possible.
12.5 ADJUSTMENT OF RESTRICTIONS. Despite the prior provisions of this
Section 11, if any covenant or agreement contained in Sections 8.4 or 10, or any
part thereof, is held by any court of competent jurisdiction to be unenforceable
because of the duration of such provision or the geographic area covered
thereby, the court making such determination shall have the power to reduce the
duration or geographic area of such provision and, in its reduced form, such
provision shall be enforceable.
13. SURVIVAL
The provisions of Sections 8, 9, 10, 11, 12 and this Section 13 shall
survive termination of this Agreement and remain enforceable according to their
terms.
14. SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement shall
in no way affect the validity or enforceability of any other provisions hereof.
15. NOTICES
All notices, demands and requests required or permitted to be given under
the provisions of this Agreement shall be deemed duly given if made in writing
and delivered personally or mailed by postage prepaid certified or registered
mail, return receipt requested, accompanied by a second copy sent by ordinary
mail, which notices shall be addressed as follows:
- 9 -
IF TO THE COMPANY:
TearDrop Golf Company
00 Xxx Xxxxxx, Xxxxxxxx # 0
Xxxxxx Xxxx Xxxxxx, Xxxxx Xxxxxxxx 00000
IF TO THE EXECUTIVE:
Xxxx X. Xxxxxxx
00 Xxxxxxxx Xxxxx
Xxxxx Xxxxxx, Xxx Xxxxxx 00000
By notifying the other parties in writing, given as aforesaid, any party
may from time to time change his or its address or the name of any person to
whose attention notice is to be given, or may add another person to whose
attention notice is to be given, in connection with notice to any party.
16. ASSIGNMENT AND SUCCESSORS
Neither this Agreement nor any of his rights or Duties hereunder may be
assigned or delegated by the Executive. This Agreement may not be assigned by
the Company without the consent of the Executive except to any successor in
interest which takes over all or substantially all of the business of the
Company as it is conducted at the time of such assignment. Any corporation into
or with which the Company is merged or consolidated or which takes over all or
substantially all of the business of the Company shall be deemed to be a
successor of the Company for purposes hereof. This Agreement shall be binding
upon and, except as aforesaid, shall inure to the benefit of the parties and
their respective successors and permitted assigns.
17. ENTIRE AGREEMENT, WAIVER AND OTHER
17.1. INTEGRATION. This Agreement contains the entire agreement of the
parties hereto on its subject matter and supersedes all previous agreements
between the parties hereto, written or oral, express or implied, covering the
subject matter hereof. No representations, inducements, promises or agreements,
oral or otherwise, not embodied herein, shall be of any force or effect.
17.2. NO WAIVER. No waiver or modification of any of the provisions of
this Agreement shall be valid unless in writing and signed by or on behalf of
the party granting such waiver or modification. No waiver by any party of any
breach or default hereunder shall be deemed a waiver of any repetition of such
breach or default or shall be deemed a waiver of any other breach or default,
nor shall it in any way affect any of the other terms or conditions of this
Agreement or the enforceability thereof. No failure of the Company to exercise
any power given it hereunder or to insist upon strict compliance by the
Executive with any obligation hereunder, and no custom or practice at variance
with the terms hereof, shall constitute a waiver of the right of the Company to
demand strict compliance with the terms hereof.
- 10 -
The Executive shall not have the right to sign any waiver or
modification of any provisions of this Agreement on behalf of the Company, nor
shall any action taken by the Executive reduce his obligations under this
Agreement.
This Agreement may not be supplemented or rescinded except by
instrument in writing signed by the parties hereto after the date hereof.
Neither this Agreement nor any of the rights of any of the parties hereunder may
be terminated except as provided herein. No waiver of any provision of this
Agreement or any amendment of this Agreement shall be binding upon the Company
unless approved by the Board.
18. GOVERNING LAW
This Agreement shall be governed by and construed, and the rights and
obligations of the parties hereto enforced, in accordance with the laws of the
State of New Jersey, without regard to conflicts of laws principles.
19. HEADINGS
The Section and subsection headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above, to be effective as of the Commencement Date.
TEARDROP GOLF COMPANY
By:
-------------------------
Name:
Title:
-----------------------------
Xxxx X. Xxxxxxx
- 11 -
