GOLF ONE INDUSTRIES, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made and entered into
as of May 31, 1998 by and between Golf One Industries, Inc., a Delaware
corporation (the "Company"), and Xxxxxx X. Xxxxx ("Employee").
1. Engagement and Responsibilities
(a) Upon the terms and subject to the conditions set forth in this
Agreement, the Company hereby employs Employee as an officer of the Company.
Employee hereby accepts such employment. Employee shall have the title of Chief
Executive Officer.
(b) Employee's duties and responsibilities shall be those incident to
the position described in Section 1(a) as set forth in the Bylaws of the Company
and those which are normally and customarily vested in such office(s) of a
corporation. In addition, Employee's duties shall include those duties and
services for the Company and its affiliates as the Board shall, in its sole and
absolute discretion, from time to time reasonably direct which are not
inconsistent with Employee's position described in Section 1(a).
(c) Employee agrees to devote all of Employee's business time, energy
and efforts to the business of the Company and will use Employee's best efforts
and abilities faithfully and diligently to promote the Company's business
interests. For so long as Employee is employed by the Company, Employee shall
not, directly or indirectly, either as an employee, employer, consultant, agent,
investor, principal, partner, stockholder (except as the holder of less than 1%
of the issued and outstanding stock of a publicly held corporation), corporate
officer or director, or in any other individual or representative capacity,
engage or participate in any business that is in competition in any manner
whatsoever with the business of the Company Group, as such businesses are now or
hereafter conducted.
2. Definitions
"Board" shall mean the Board of Directors of the Company.
"Change of Control" of the Company shall be deemed to have occurred if,
following the IPO, (i) a Person or group of Persons (within the meaning of Rule
13d-5 under the Securities Exchange Act of 1934, as amended) acquires more than
50% of the outstanding voting securities of the Company, or (ii) the Company
sells all or substantially all of its assets.
"Company Group" shall mean the Company and each Person which the
Company directly or indirectly Controls.
"Control" shall mean, with respect to any Person, (i) the beneficial
ownership of more than 50% of the outstanding voting securities of such Person,
or (ii) the power, directly or indirectly, by proxy, voting trust or otherwise,
to elect a majority of the outstanding directors, trustees or other managing
persons of such Person.
"Disability," with respect to Employee, shall mean that, for physical
or mental reasons, Employee is unable to perform the essential functions of
Employee's duties under this Agreement for 30 consecutive days, or 60 days
during any one six month period. Employee agrees to submit to a reasonable
number of examinations by a medical doctor advising the Company as to whether
Employee shall have suffered a disability and Employee hereby authorizes the
disclosure and release to the Company and its agents and representatives all
supporting medical records. If Employee is not legally competent, Employee's
legal guardian or duly authorized attorney-in-fact will act in Employee's stead
for the purposes of submitting Employee to the examinations, and providing the
authorization of disclosure.
"Effective Date" shall have the meaning set forth in Section 10 of this
Agreement.
"Employee Handbook" shall mean the Company's Employee Handbook, as from
time to time in effect.
"For Cause" shall mean, in the context of a basis for termination of
Employee's employment with the Company, that:
(a) Employee breaches any obligation, duty or agreement under this
Agreement, which breach is not cured or corrected within 15 days of written
notice thereof from the Company (except for breaches of Sections 1(c), 6 or 7 of
this Agreement, which cannot be cured and for which the Company need not give
any opportunity to cure); or
(b) Employee is grossly negligent in the performance of services to the
Company Group, or commits any act of personal dishonesty, fraud, embezzlement,
breach of fiduciary duty or trust against the Company Group; or
(c) Employee is indicted for, or convicted of, or pleads guilty or nolo
contendere with respect to, theft, fraud, a crime involving moral turpitude, or
a felony under federal or applicable state law; or
(d) Employee commits any act of personal conduct that, in the
reasonable opinion of the Board, gives rise to any member of the Company Group
of a material risk of liability under federal or applicable state law for
discrimination or sexual or other forms of harassment or other similar
liabilities to subordinate employees; or
(e) Employee commits continued and repeated substantive violations of
specific written directions of the Board, which directions are consistent with
this Agreement and Employee's position as a senior or executive officer, or
continued and repeated substantive failure to perform duties assigned by or
pursuant to this Agreement; or
2
(f) Employee continues to neglect his duties after receipt of notice
thereof from the Company (and the Company need give such notice only once).
"IPO" shall mean the Company's initial public offering of Common Stock
pursuant to a registration statement under the Securities Act of 1933, as
amended.
"Person" shall mean an individual or a partnership, corporation, trust,
association, limited liability company, governmental authority or other entity.
"Relocation Expenses" shall mean: (i) reasonable costs of air travel
(coach class) and other expenses in relocating Employee's family to a residence
within 100 miles of the Company's principal offices in Santa Maria, California;
(ii) reasonable expenses of moving Employee's household goods and possessions in
relocating from South Carolina to California, based upon three competitive
estimates from nationally recognized moving companies submitted to the Company
for review and approval by the Company prior to incurring such expenses; and
(iii) reasonable closing costs, real estate transfer taxes and real estate
brokerage commission (not to exceed 6% of the gross sales price) in connection
with the sale of Employee's family residence in Greenville, South Carolina.
"Term" shall mean the period commencing on the Effective Date and
ending at the close of business on the business day immediately preceding the
second annual anniversary of the Effective Date.
3. Compensation and Benefits
For so long as Employee shall be employed by the Company, Employee
shall receive the compensation and benefits set forth in this Section 3.
(a) Salary. The Company shall pay Employee a base salary at an annual
rate of $165,000 for the first year following the Effective Date and $181,500
thereafter. The Board may, but shall not be obligated to, increase Employee's
base salary from time to time. The base salary shall be payable in installments
in the same manner and at the same times the Company pays base salaries to other
executive officers of the Company, but in no event less frequently than equal
monthly installments.
(b) Bonus. If the Effective Date occurs, within 10 days following the
date Employee commences services as Chief Executive Officer at the Company's
offices, the Company shall pay to Employee a bonus of $25,000. In addition,
Employee shall be entitled to a bonus of 10% of the pre-tax earnings of the
Company in excess of the Base Amount for each of years ended March 31, 1999 and
2000, up to a maximum of $33,000 for the year ended March 31, 1999 and $36,000
for the year ended March 31, 2000; provided, however, that Employee shall not be
entitled to such bonus for such year if his employment shall have been
terminated by the Company For Cause during such year or he shall have terminated
his employment in breach of this Agreement during such year, and provided,
further, however, that if his employment terminates during such year for any
other reason, the bonus shall be prorated based on the number of days during
such year that Employee shall have been employed by the Company. The bonus for
any year shall be payable
3
within 10 days following the receipt to the independent auditor's report on the
Company's financial statements for such year. The "Base Amount" shall be (i)
$3,000,000 for the year ended March 31, 1999 and (ii) for the year ended March
31, 2000, the greater of $5,000,000 or 150% of pre-tax earnings of the Company
for the year ended March 31, 1999.
(c) Expense Reimbursement. Employee shall be entitled to reimbursement
from the Company for the reasonable out-of-pocket costs and expenses which
Employee incurs in connection with the performance of Employee's duties and
obligations under this Agreement in a manner consistent with the Company's
practices and policies therefor.
(d) Employee Benefit Plans. Employee shall be entitled to participate
in any pension, savings and group term life, medical, dental, disability, and
other group benefit plans which the Company makes available to its employees
generally. If the Company does not maintain long-term disability insurance for
Employee, the Company will pay on behalf of Employee up to $2,000 per year for
the purchase of a long-term disability insurance policy for Employee.
(e) Vacation. Employee shall be entitled to four weeks paid vacation,
which shall accrue in accordance with, and be subject to limitations under, the
Employee Handbook.
(f) Golf Country Club Membership. The Company shall pay on behalf of
Employee (i) up to $25,000 towards the initiation fee for a corporate membership
in a golf country club within the vicinity of the Company's executive offices,
selected by Employee and approved by the Company (which approval shall not be
unreasonably withheld); and (ii) up to $250 of the monthly dues of such golf
country club. If the corporate membership is an equity membership, Employee
shall reimburse the Company for the initiation fee paid by the Company for such
membership no later than the earlier to occur of: (i) two years from termination
of employment (30 days if Employee's employment is terminated by Employee prior
to the end of the Term or by the Company For Cause) and (ii) the sale of such
membership by Employee.
(g) Automobile. Employee shall be entitled to an automobile allowance
of $1,000 per month, payable in a manner consistent with the Company's practices
and policies therefor.
(h) Relocation Expenses. Upon submission of appropriate bills, invoices
and other documentation as may reasonably be requested by the Company, the
Company shall pay all Relocation Expenses incurred by Employee within 30 days of
written request for payment of such Expenses; provided, however, that at the
time of such request, Employee's employment shall not have been terminated by
(i) Employee or (ii) the Company For Cause.
(i) Options. Effective as of the Effective Date, Employee shall receive
an option under the Company's 1998 Stock Option Plan to purchase up to 300,000
shares of Common Stock (such number, and the number set forth below, to be
adjusted for any stock splits, dividends or reverse stock splits effected after
the date hereof and on or prior to the Effective Date), on the following terms:
(i) the exercise price shall be the initial public offering price of the Common
Stock in the IPO; (ii) the option shall vest on the first annual anniversary of
the Effective Date (with accelerated vesting in the event of a sale of the
Company or termination of employment by the Company pursuant to Section 4(e) of
this Agreement); and (iii) the option shall terminate on the
4
earlier to occur of: (A) the fifth annual anniversary of the Effective Date and
90 days following termination of Employee's employment (or the date of
termination of employment if termination is by the Company For Cause or one year
following termination of employment if termination is by reason of death or
Disability); and (B) a sale of the Company. The option shall be evidenced by an
agreement in the standard form in effect as of the Effective Date, as approved
by the Board of Directors in connection with the Plan.
(j) Disability. In the event of any Disability, if Employee shall
receive payments as a result of such Disability under any disability plan
maintained by the Company or from any government agency, the Company shall be
entitled to deduct the amount of such payments received from base salary payable
to Employee during the period of such Disability.
(k) Withholding. The Company may deduct from any compensation payable
to Employee (including payments made pursuant to Section 5 of this Agreement in
connection with or following termination of employment) amounts it believes are
required to be withheld under federal and state law, including applicable
federal, state and/or local income tax withholding, old-age and survivors' and
other social security payments, state disability and other insurance premiums
and payments.
4. Term of Employment
Employee's employment pursuant to this Agreement shall commence on the
Effective Date and shall terminate on the earliest to occur of the following:
(a) upon the date set forth in a written notice of termination from
Employee to the Company (which date shall be after the Term and at least 30 days
after the delivery of that notice); provided, however, that in the event
Employee delivers such notice to the Company, the Company shall have the right
to accelerate such termination by written notice thereof to Employee (and such
termination by the Company shall be deemed to be a termination of employment
pursuant to this Section 4(a), and not a termination pursuant to Section 4(d) or
4(e) hereof);
(b) upon the death of Employee;
(c) upon delivery to Employee of written notice of termination by the
Company if Employee shall suffer a Disability;
(d) upon delivery to Employee of written notice of termination by the
Company For Cause;
(e) upon delivery to Employee of written notice of termination by the
Company without cause; or
(f) upon the date set forth in a written notice of termination from
Employee to the Company delivered no later than 10 days following the occurrence
of a Change of Control of the Company, which date shall be after the Change of
Control and at least 30 days after delivery of that notice; provided, however,
that in the event Employee delivers such notice to the Company,
5
the Company shall have the right to accelerate such termination by written
notice thereof to Employee (and such termination by the Company shall be deemed
to be a termination of employment pursuant to this Section 4(f), and not a
termination pursuant to Section 4(d) or 4(e) hereof).
5. Severance Compensation
(a) If Employee's employment is terminated pursuant to Section 4(e) (by
the Company without cause) prior to the end of the Term, the Company shall: (i)
continue to pay to Employee the salary which Employee would have earned through
the end of the Term as if Employee's employment had not terminated; (ii) shall
pay for Employee's (and his immediate family's) participation in group medical,
life, dental, disability and similar plans through the end of the Term, to the
extent permitted by the plan; and (iii) pay to Employee any unpaid bonus or
incentive compensation which has been earned by Employee at the time of
termination of employment.
(b) If Employee's employment is terminated by Employee pursuant to
Section 4(f) prior to the end of the Term, the Company shall: (i) within five
days following termination, pay to Employee an amount equal to the amount of
salary which Employee would have earned from the date of termination through the
end of the Term had Employee's employment not terminated (which payment shall be
a lump sum without discount); (ii) pay for Employee's (and his immediate
family's) participation in group medical, life, dental, disability and similar
plans through the end of the Term, to the extent permitted by the plan; and
(iii) pay to Employee any unpaid bonus or incentive compensation which has been
earned by Employee at the time of termination of employment.
(c) If Employee's employment is terminated for any reason other than by
the Company without cause prior to the end of the Term or by Employee pursuant
to Section 4(f), the Company shall pay to Employee (or Employee's estate or
beneficiary, as the case may be): (i) any unpaid base salary through the date of
termination of employment, and (ii) any unpaid bonus or incentive compensation
which has been earned by Employee at the time of termination of employment. All
rights and benefits which Employer or his estate may have under employee benefit
plans in which Employee shall be participating at the date of termination of
employment shall be determined in accordance with such plans.
(d) If Employee's employment is terminated by the Company pursuant to
Section 4(d) (by the Company For Cause), and subject to applicable law and
regulations, the Company shall be entitled to offset against any payments due
Employee any loss or damage which the Company shall suffer as a result of the
acts or omissions of Employee giving rise to termination under Section 4(d).
(e) Employee acknowledges that the Company has the right to terminate
Employee's employment without cause and that such termination shall not be a
breach of this Agreement or any other express or implied agreement between the
Company and Employee. Accordingly, in the event of such termination, Employee
shall be entitled only to those benefits specifically provided in this Section
5, and shall not have any other rights to any compensation or damages from the
Company for breach of contract.
6
(f) Employee acknowledges that in the event of termination of
Employee's employment for any reason, neither Employee (nor Employee's estate,
heirs, beneficiaries or others claiming through Employee) shall not be entitled
to any severance or other compensation from the Company except as specifically
provided in this Section 5. Without limitation on the generality of the
foregoing, this Section supersedes any plan or policy of the Company which
provides for severance to its officers or employees, and Employee shall not be
entitled to any benefits under any such plan or policy.
6. Covenant Not To Solicit
Employee acknowledges and agrees that: (i) due to Employee's previous
experience in the industry in which the Company operates, being employed by the
Company will allow Employee to acquire valuable knowledge not otherwise
available to the public regarding the nature, requirements and character of, and
the design, manufacturing, processes and methods of pricing used in, the Company
Group's business and regarding the names and requirements of, and the Company's
course of dealing with, the Company Group's customers; (ii) as a result of
employment with the Company, Employee will be brought in personal contact with
the Company Group's customers and as a result Employee will establish business
goodwill, which is a valuable asset of the Company; (iii) having this knowledge
of the Company Group's business and its customers and this acquaintance with the
Company Group's customers places Employee in an unfair competitive position as
to the Company Group if Employee engages in a competing business in his own
behalf or for another; (iv) the Company Group is engaged in the sale and
distribution of golf equipment, golf apparel and related products to customers;
and (v) the provisions of this Section 6 are reasonable as to time, scope and
territory and in all other respects, and such provisions are reasonably
necessary to secure the protection of the business or goodwill of the Company
and do not prevent Employee from supporting himself and his dependents upon
termination of his employment with the Company. Accordingly, Employee covenants
and agrees that while in the Company's employ and for a period expiring one year
after the termination for any reason of Employee's employment with the Company:
(a) Employee will not, directly or indirectly, own any interest in,
manage, operate, control, be employed by, render consulting or advisory services
to, or participate in or be connected with the management or control of any
business in any state or territory in which the Company Group sells or markets
its products at the time of the termination of Employee's employment, which
business is engaged principally in the direct marketing of any golf equipment,
golf apparel or related products of the general type sold and distributed by the
Company Group at the time of termination of Employee's employment (and the
Company agrees that employment with Xxxx Xxxxxx Group shall not be a violation
of this section);
(b) Employee will not, directly or indirectly, influence or attempt to
influence any customer of the Company Group to reduce or discontinue its
purchases of any products from the Company Group or to divert such purchases to
any Person other than the Company Group.
(c) Employee will not, directly or indirectly, interfere with, disrupt
or attempt to disrupt the relationship, contractual or otherwise, between the
Company Group and any of its respective suppliers, principals, distributors,
lessors or licensors; and
7
(d) Employee will not, directly or indirectly, solicit any employee of
the Company Group to work for any Person.
For purposes of this Section 6, "competition with the Company Group"
shall mean direct competition for customers who are purchasers or users of golf
equipment, apparel, or related products of the type sold and distributed by the
Company Group.
7. Confidentiality.
Employee agrees not to disclose or use at any time (whether during or
after Employee's employment with the Company) for Employee's own benefit or
purposes or the benefit or purposes of any other Person any trade secrets,
information, data, or other confidential information relating to customers,
development programs, costs, marketing, trading, investment, sales activities,
promotion, credit and financial data, financial methods, plans, or the business
and affairs of the Company Group generally, provided that the foregoing shall
not apply to information which is not unique to the Company Group or which is
generally known to the industry or the public other than as a result of
Employee's breach of this covenant. Employee agrees that upon termination of his
employment with the Company for any reason, he will return to the Company
immediately all memoranda, books, papers, plans, information, letters and other
data, and all copies thereof or therefrom, in any way relating to the business
of the Company Group except that he may retain personal notes, notebooks,
diaries, rolodexes and addresses and phone numbers. Employee further agrees that
he will not retain or use for his account at any time any trade names, trademark
or other proprietary business designation used or owned in connection with the
business of any member of the Company Group.
8. Loan
If Employee shall be unable to sell his principal place of residence
(the "Old Residence") in Greenville, South Carolina, by October 21, 1998, and
provided that Employee shall then be employed by the Company, the Company will
pay the interest accruing after such date on a loan obtained by Employee to
purchase a new principal residence within 100 miles of the Company's principal
executive offices in Santa Maria, California, subject to the following: (a) the
Company will only pay the interest up to 10% per annum; (b) the principal amount
of the loan on which the Company pays interest may not exceed $400,000; (c)
Employee must actively market the Old Residence and must accept an offer from a
qualified purchaser which is substantially on market terms and conditions; and
(d) the Company will pay the interest until the earliest to occur of: (i)
termination of Employee's employment; (ii) sale of the Old Residence; and (iii)
the last day of the Term.
9. Miscellaneous
(a) Notices. All notices, requests, demands and other communications
(collectively, "Notices") given pursuant to this Agreement shall be in writing,
and shall be delivered by personal service, courier, facsimile transmission or
by United States first class, registered or certified mail, addressed to the
following addresses:
8
If to the Company, to:
Golf One Industries, Inc.
0000 Xxxxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attn: Board of Directors
If to Employee, to:
Employee's address as set forth on the books
and records of the Company
Any Notice, other than a Notice sent by registered or certified mail, shall be
effective when received; a Notice sent by registered or certified mail, postage
prepaid return receipt requested, shall be effective on the earlier of when
received or the third day following deposit in the United States mails. Any
party may from time to time change its address for further Notices hereunder by
giving notice to the other party in the manner prescribed in this Section.
(b) Entire Agreement. This Agreement contains the sole and entire
agreement and understanding of the parties with respect to the entire subject
matter of this Agreement, and any and all prior discussions, negotiations,
commitments and understandings, whether oral or otherwise, related to the
subject matter of this Agreement are hereby merged herein. No represen tations,
oral or otherwise, express or implied, other than those contained in this
Agreement have been relied upon by any party to this Agreement.
(c) Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
(d) Governing Law. This Agreement has been made and entered into in the
State of California and shall be construed in accordance with the laws of the
State of California.
(e) Captions. The various captions of this Agreement are for reference
only and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
(g) Attorneys' Fees. If any action or proceeding is brought to enforce
or interpret any provision of this Agreement, the prevailing party shall be
entitled to recover as an element of its costs, and not its damages, its
reasonable attorneys' fees, costs and expenses. The prevailing party is the
party who is entitled to recover its costs in the action or proceeding. A party
not entitled to recover its costs may not recover attorneys' fees. No sum for
attorneys' fees shall be counted
9
in calculating the amount of a judgment for purposes of determining whether a
party is entitled to recover its costs or attorneys' fees.
10. Effective Date
This Agreement shall become effective upon the closing of the Company's
initial public offering pursuant to a registration statement filed by the
Company with the Securities and Exchange Commission under the Securities Act of
1933, as amended (the "Effective Date"). This Agreement shall terminate without
becoming effective: (i) by written notice from the Company to Employee, or by
Employee to the Company, given prior to the effectiveness of the registration
statement in connection with IPO if the IPO shall not be completed by August 31,
1998; (ii) if Employee shall die or suffer a Disability prior to the Effective
Date; or (iii) by written notice from the Company if Employee shall take or omit
any action which, if Employee was then employed by the Company, would be the
basis for termination of employment by the Company For Cause.
In Witness Whereof, the parties have executed this Agreement as of the
date first above written.
Golf One Industries, Inc.
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------
Xxxxxxx X. Xxxxxxxxx,
President
/s/ Xxxxxx X. Xxxxx
--------------------------------
Xxxxxx X. Xxxxx
10
