EMPLOYMENT AGREEMENT
Exhibit 10.40
THIS AGREEMENT is made by and between Nitches, Inc., a California corporation (“Company”), and Xxxx X. Xxxxxx (“Executive”), an individual residing in the State of California, with reference to the following:
WHEREAS, the relative rights and obligations of employers and employees in California may be, in the absence of agreement or policy, subject to the uncertainties of future changes in California law and judicial decisions; and
1. |
|
|
|
|
|
|
(a) |
“Affiliate” shall mean any Person that controls or is controlled by or under common control with the Company, whether now or hereafter formed. |
|
|
|
|
(b) |
“Agreement” means this Employment Agreement and any amendments hereto complying with Section 15(f) hereof. |
|
|
|
|
(c) |
“Board” means the Board of Directors of the Company unless the context otherwise requires. |
|
|
|
|
(d) |
“Cause” means (1) Executive’s conviction of any criminal act constituting fraud with respect to or embezzlement or theft of funds or property from the Company, or conviction of a felony involving dishonesty or moral turpitude; or (2) bad faith by Executive in the performance of his duties, consisting of a course of conduct evidencing gross negligence or gross incompetence (which is intended to be far beyond failure to meet performance goals) provided, with respect to this clause(2), if the effect of each such act or omission resulting from such course of conduct is curable that the Board shall have given written notice to Executive with respect to such course of conduct, and Executive shall have failed to terminate such course of conduct and cure the effects of each such act or omission within 30 days of the receipt by Executive of such written notice. |
1
|
(e) |
“Change in Control” means any of the following events: |
|
(i) |
An acquisition (other than directly from the Company) of any voting securities of the Company (“Voting Securities”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “1934 Act”)), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the 0000 Xxx) of 50.1% or more of the combined voting power of the Company’s then outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred, Voting Securities which are acquired in a “Non-Control Acquisition” (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (x) the Company and/or its affiliates (collectively, the “Company”) or (y) any corporation or other Person of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company (a “Subsidiary”), (ii) the Company or any Subsidiary or (iii) any Person in connection with a “Non-Control Transaction” (as hereinafter defined). |
|
|
|
|
(ii) |
Approval by the Company’s shareholders of: |
|
(1) |
A merger, consolidation or reorganization involving the Company, if the shareholders of the Company, immediately before such merger, consolidation or reorganization, fail to own, directly or indirectly, immediately following such merger, consolidation or reorganization, at least 50.1% of the combined voting power of the outstanding Voting Securities of the entity resulting from such merger or consolidation or reorganization (“Surviving Corporation”) in substantially the same proportion as their ownership of the Voting Securities immediately before such merger, consolidation or reorganization. (A merger, consolidation or reorganization involving the Company that fails to satisfy the these conditions shall herein be referred to as a “Non-Control Transaction.”); |
|
|
|
|
(2) |
A complete liquidation or dissolution of the Company; or |
|
|
|
|
(3) |
An agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than to an entity of which the Company directly or indirectly owns at least 50.1% of the voting shares). |
2
|
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (“Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the outstanding Voting Securities as a result of the Company’s acquisition of Voting Securities which, by reducing the number of Voting Securities outstanding, increases the proportional number of shares Beneficially Owned by the Subject Person, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the Company’s acquisition of Voting Securities, and after such Company share acquisition, the Subject Person becomes the Beneficial Owner of any additional Voting Securities which increases the percentage of the then outstanding Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur. |
|
(f) |
“Compensation Committee” is the committee of the Board appointed as such to act on behalf of the full Board in matters of executive compensation and benefits. |
|
|
|
|
(g) |
“Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the Company, as applicable, whether through the ownership of voting securities, by contract or otherwise. |
|
|
|
|
(h) |
“Disability” means physical or mental illness resulting in Executive’s absence on a full-time basis from Executive’s duties with the Company or its Affiliates for one hundred twenty (120) consecutive calendar days, as determined by the written medical opinion of an independent physician acceptable to Executive and the Company, subject to the procedure referenced in Section 9(a). If the Company and Executive cannot agree as to such an independent physician, each shall appoint one physician and those two physicians shall appoint a third physician who shall make such determination. In no event shall Executive be considered disabled for the purposes of this Agreement unless Executive is deemed disabled pursuant to any disability insurance coverage applicable to him. |
|
|
|
|
(i) |
“Expiration” means the termination of this Agreement, including Executive’s employment hereunder, and of any further obligations of the parties, except as specified in the Agreement, upon completion of the Term. |
|
|
|
|
(j) |
“Fiscal Year” means the year ending August 31. |
|
|
|
|
(k) |
“Good Reason” means, without the Executive’s written consent: (a) a material adverse change in the Executive’s title or the assignment of duties to the Executive materially and adversely inconsistent with the Executive’s position; (b) any material failure of the Company to comply with its covenants and agreements contained in this agreement; (c) any Change in Control; (d) any purported termination of the Executive’s employment by the Company for a reason or in a manner not expressly permitted by this Agreement; or (e) any requirement by the Company that the Executive’s primary office location be other than in the San Diego Metropolitan Area. In the event the Executive determines that Good Reason exists, Executive must notify the Company in writing of his determination that an event described in clause (a) through (e) has occurred, within thirty (30) days following the Executive’s knowledge of such event which the Executive determines constitutes Good Reason, or such event shall not constitute Good Reason under this Agreement. Following receipt of such notice, if the Company remedies such event within thirty (30) days following notice, the Executive may not terminate employment for Good Reason as a result of such event. |
3
|
(l) |
“Person” means an individual, a group acting in concert, a corporation, a partnership, an association, a joint stock company, a trust, a limited liability corporation, any unincorporated organization or a government or political subdivision thereof. |
|
|
|
|
(m) |
“Retirement” or “Retire” means the Termination by Executive of his employment with the Company and its Affiliates based upon retirement in accordance with the Retirement Plan. |
|
|
|
|
(n) |
“Retirement Plan” means any retirement plans of the Company applicable to Executive in effect on the date of Executive’s Termination or resignation. |
|
|
|
|
(o) |
“Term” means the initial term of this Agreement and any extensions hereof, as provided in Section 4. |
|
|
|
|
(p) |
“Termination” and “Terminate(d)” means the termination of this Agreement and of Executive’s employment hereunder for any of the following reasons unless the context indicates otherwise: (i) Retirement, (ii) Death of Executive, (iii) Disability, (iv) Expiration, (v) resignation by Executive, (vi) liquidation of the Company, (vii) Termination for Cause, (viii) Termination Without Cause, and (ix) by Executive for Good Reason. |
The Company agrees to continue Executive in its employ, and Executive agrees to remain in the employ of the Company, for the period stated in Section 4 hereof subject to and upon the terms and conditions herein provided.
3. Position and Responsibilities.
The Company shall employ Executive as President with the Company, and Executive shall be elected to the Board. Executive shall serve as such for the Term and on the conditions hereinafter set forth. Executive agrees to perform such services not materially inconsistent with Executive’s position as shall from time to time be assigned to Executive by the Board or its designee. No other employee of the Company other than the Chairman of the Board and the Chief Executive Officer shall have authority or responsibilities that are equal to or greater than those of Executive. Executive shall report solely and directly to the Chief Executive Officer.
Subject to the provisions and conditions of this Agreement, the term of Executive’s employment under this Agreement shall commence as of April 1, 2006 and shall continue for a term of five (5) years. A Change of Control will cause the term ending date to be extended for three (3) years from the effective date of the Change of Control if the Change of Control occurs anytime after March 31, 2008.
In the event the Company retains Executive as an employee following the expiration of the Term, such employment, absent a written agreement to the contrary, will be month-to-month on an at-will basis with such compensation to which the parties may then agree, subject to termination at any time with or without cause, and without liability except as provided for in this Agreement.
4
If the Company does not retain Executive as an employee after expiration of the Term, Executive’s employment shall cease without further liability to Executive except as provided for in this Agreement. Executive’s employment shall also terminate, and the Term of this Agreement will expire, upon Executive’s Resignation, Retirement, Death or Disability, the liquidation of the Company, the Termination by the Executive for Good Cause, or upon Executive’s Termination for Cause.
|
(a) |
The Company and Executive hereby agree that, subject to the provisions of this Agreement, the Company shall employ Executive, and Executive shall serve the Company as an executive for the Term of this Agreement. The specific executive position(s) in which Executive will serve will be designated from time to time by the Board, with his initial position(s) to be as set forth in this Agreement. |
|
|
|
|
(b) |
The Executive will obtain advance written approval from the Board of Directors’ or Chairman of the Board before (i) signing any real estate purchase or lease; signing any employment agreements or hiring any employee with a annual salary in excess of $60,000; (ii) approving any capital expenditure exceeding $10,000; or (iii) committing the Company to any liability for more than one year. |
|
|
|
|
(c) |
In the event that Executive is assigned to a position involving different responsibilities and duties of office than those he is currently exercising or is provided with a different title than that stipulated in this Agreement, then such changed position and title shall at a minimum be equivalent to Executive’s then current position and title including but not limited to his reporting relationship within the Company. |
|
|
|
|
(d) |
During the Term hereof, Executive shall devote the majority of his business time, attention, skill and efforts to the faithful performance of the business of the Company to the fullest extent necessary to properly discharge his duties and responsibilities hereunder, whether such business is operated directly by the Company or through one or more of its Affiliates. Executive’s position and duties with Affiliates, if any, shall be as identified from time to time by the Board of Directors of such Affiliate(s) and agreed by Executive, provided that Executive’s principal duties; whether with the Company or any Affiliates, shall be as set forth in Section 3. Further, with the approval of the Board, Executive may serve, or continue to serve, on the boards of directors of, and hold any other offices or positions in, companies or charitable, political or civic organizations, which, in the Board’s judgment, will not present any material conflict of interest with the Company or its Affiliates, and will not unfavorably affect the performance of Executive’s duties pursuant to this Agreement. |
Executive shall be furnished with a private office, necessary secretarial or clerical assistance, and such other facilities, amenities and services as are presently or may hereafter be furnished to similarly situated executives of the Company, and as are appropriate for Executive’s position and adequate for the performance of his duties hereunder.
5
The Company shall provide and the Executive shall maintain an office located in the San Diego Metropolitan Area or such other location as the Company and the Executive shall mutually agree upon.
8. Salary, Expenses, Benefits, & Bonus.
|
(a) |
|
|
|
|
|
(b) |
|
|
|
|
|
(c) |
Vacation Leave. Executive shall be entitled to four (4) weeks vacation time each year. |
|
|
|
|
(d) |
Holidays, Leave Days, Etc. Executive shall be entitled to such holidays, sick leave, leaves of absence and other absences in accordance with normal Company policy. |
|
|
|
|
(f) |
|
|
|
|
|
(g) |
|
|
|
|
|
(h) |
This Agreement and Executive’s employment may be ended by the Board, its designee, or by Executive, as herein provided, without further obligation or liability except as expressly provided herein:
|
(a) |
6
|
(b) |
|
|
|
|
|
(c) |
|
|
|
|
|
(d) |
Good Reason. Executive shall have the right to terminate his employment for Good Reason. |
|
|
|
|
(e) |
Without Cause. |
|
|
|
|
(f) |
Liquidation of the Company. |
10. Payments to Executive upon Termination.
|
(a) |
|
|
|
|
|
(b) |
|
|
|
|
|
(c) |
Expiration or Liquidation of the Company. Upon Expiration or Liquidation of the Company, neither the Company nor any Affiliate shall have any further obligation to Executive under this Agreement or otherwise, except as may be expressly required by law, except to pay through date of termination all earned compensation, bonus, reimbursement for expenses and accrued vacation, and a transition payment of Salary equal to one (1) month for each year of completed and partial employment. If for Expiration and the Executive’s employment continues on as an at-will basis, the transition payment may be deferred upon mutual agreement in writing by the Company and the Executive. |
|
|
|
|
(d) |
7
|
(e) |
|
|
|
|
|
|
The receipt of the amounts and benefits provided by this Section 10(e) shall constitute the sole remedy of Executive against the Company, its Affiliates and their respective past, present and future officers, directors, shareholders, employees and agents, in the event of a Termination for Good Reason or Without Cause, unless specified to the contrary herein. |
|
(1) |
|
|
|
|
|
(2) |
During the Term of this Agreement and thereafter, Executive shall not, to the detriment of the Company or its Affiliates, disclose or reveal to any unauthorized person any confidential information relating to the Company or its Affiliates, or to any of the businesses operated by them, and Executive confirms that such information constitutes the exclusive property of the Company and its Affiliates.
12. Federal Income Tax Withholding.
The Company may withhold from any compensation or benefits payable under this Agreement, including amounts payable under Section 10, all federal, state, city or other taxes or deductions as shall be required pursuant to any law, governmental regulation or ruling.
13. Effect of Prior Agreements.
This Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and supersedes any prior or contemporaneous agreements, representations or understandings, whether oral or written, express or implied, between the Company, its Affiliates, and Executive with respect to Executive’s employment by the Company. The parties do not intend for this Agreement to supersede or invalidate the terms of any written employee benefit or welfare plans with the Company covering Executive, unless necessary to carry out the purposes of this Agreement.
8
Any controversy between the parties hereto, including the construction, application or breach of any of the terms, covenants or conditions of this Agreement, and all claims relating to or arising from Executive’s employment or termination, including all statutory claims (including but not limited to all statutes dealing with employment discrimination), shall on timely written request of one party served upon the other, be submitted to confidential arbitration and be governed by the laws of the State of California. The arbitration shall take place in the City of San Diego, CA. The parties may agree upon one arbitrator, but in the event they cannot agree the arbitrator shall be a retired judge designated by the then Presiding Judge of the California Superior Court, San Diego County. Arbitration shall be the exclusive remedy of Executive and the Company and the award of the arbitrator shall be final and binding upon the parties.
|
(a) |
|
|
|
|
|
(b) |
|
|
|
|
|
(c) |
|
|
|
|
|
(d) |
|
|
|
|
|
(e) |
9
|
(f) |
Amendment or Augmentation of Agreement. This agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. Unless expressly agreed to in writing by the parties hereto, no additional rights or compensation, even if given or accepted, shall be deemed to modify or otherwise affect the express terms and conditions of this Agreement. |
|
|
|
|
(g) |
|
|
|
|
|
(h) |
|
|
|
|
|
(i) |
|
To: |
Nitches, Inc. |
|
|
00000 Xxxxxx Xxxxx Xx |
|
|
Xxx Xxxxx, XX 00000 |
|
|
Attention: Chairman |
|
|
|
|
To: |
Executive at the last known address |
|
|
contained in the Personnel Records |
|
|
of the Company |
10
|
(j) |
|
|
|
|
|
(k) |
Governing Law. This Agreement has been executed and delivered in the State of California, and its validity, interpretation, performance, and enforcement shall be governed by the laws of said State, without regard to principles of conflicts of law. |
|
|
|
|
(l) |
|
EXECUTIVE |
|
|
|
|
|
|
|
/s/ Xxxxxxx Xxxxxxx |
|
/s/ Xxxx X. Xxxxxx |
|
|
|
For the Compensation Committee |
|
Xxxx X. Xxxxxx |
11