BRODERBUND SOFTWARE, INC.
EMPLOYMENT AGREEMENT
This Agreement is made by and between Broderbund Software, Inc. (the
"Company"), and Xxxxxx X. Xxxxxxx ("Executive"). The Agreement memorializes the
agreement upon which the Company employed the Executive beginning October 1,
1996, the Executive's first date of employment.
1. Duties and Scope of Employment.
(a) Position; Employment Commencement Date. The Company shall employ
the Executive as the Chief Executive Officer of the Company reporting to the
Board of Directors (the "Board") of the Company; provided, however, that the
Board shall have the right to revise employee's duties, consistent with such
position, from time to time as the Board may deem necessary or appropriate.
Executive's employment with the Company pursuant to this Agreement commenced
October 1, 1996. Additionally, it is intended that Executive serve as a member
of the Board during the period of his employment hereunder, subject to election
by shareholders of the Company. Executive shall not receive any additional
compensation for his service as a Board member while he remains an employee of
the Company.
(b) Obligations. Executive shall devote his full business efforts and
time to the Company. Executive agrees not to actively engage in any other
employment, occupation or consulting activity for any direct or indirect
remuneration without the prior approval of the Board; provided, however, that
Executive may serve in any capacity with any civic, educational or charitable
organization without the approval of the Board, so long as such activities do
not interfere with his duties and obligations under this Agreement.
2. Employee Benefits. During his employment hereunder, Executive and his
family shall be eligible to participate in the employee benefit plans maintained
by the Company to the full extent provided for under those plans and except as
otherwise specifically provided for herein.
3. At-Will Employment. Executive and the Company understand and
acknowledge that Executive's employment with the Company constitutes "at-will"
employment. Executive and the Company acknowledge that this employment
relationship may be terminated at any time, with or without good cause or for
any or no cause, at the option either of the Company or Executive.
4. Compensation, Fringe Benefits and Stock Options.
(a) Base Salary. While employed by the Company pursuant to this
Agreement, the Company shall pay the Executive as compensation for his services
a bi-weekly base salary of Fifteen Thousand Three Hundred Eighty-Four and 62/100
Dollars ($15,384.62) (annualized rate of $400,000) (the "Base Salary"). Such
salary shall be paid periodically in accordance with normal Company payroll
practices and subject to the usual, required withholding. Executive's salary
shall be reviewed yearly for possible raises and/or bonuses in light of
Executive's performance of his duties, as determined by the Board. Executive
understands and agrees that neither his job performance nor promotions,
commendations, bonuses or the like from the Company give rise to or in any way
serve as the basis for modification, amendment, or extension, by implication or
otherwise, of this Agreement.
(b) Stock Options.
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(i) Initial Grant Subject to Board approval, Executive has been granted a
stock option, which shall be, to the extent possible under the $100,000 rule of
Section 422(d) of the Internal Revenue Code of 1986, as amended (the "Code") an
"incentive stock option" (as defined in Section 422 of the Code) to purchase a
total of 300,000 shares of Company Common Stock with a per share exercise price
equal to 100% of the fair market value of such stock on the date of grant, which
was October 1, 1996; the stock price on such date was $28.375. This option shall
vest over five years as follows: 20% of the shares originally subject to the
option shall vest one year from the date of hire and 20% of the shares
originally subject to the option shall vest each year thereafter, conditioned
upon Executive's continued employment with the Company as of each vesting date.
This option grant is in all respects subject to the terms, definitions and
provisions of the Company's Stock Option Plan (the "Option Plan") and the stock
option agreement by and between Executive and the Company (the "Option
Agreement"), both of which documents are incorporated herein by reference.
(ii) Future Stock Grants. The current stock option program recommends an
additional annual grant of a stock option for 50,000 shares of Company Common
Stock, with a per share exercise price equal to 100 percent of the fair market
value of such stock on the date of grant, to Executive after one year of
employment. This grant may occur on an annual basis, typically in October, is
subject to Board approval, and is conditioned upon Executive's continued
employment with the Company. Such grants are in all respects subject to the
terms, definitions and provisions of the Company's Stock Option Plan and any
stock option agreement by and between Executive and the Company.
(c) Incentive Bonus. Executive shall be eligible for an incentive bonus
under the Company's Executive Bonus Plan. The bonus is scaled at 50% of base
salary if the Company attains an annual growth rate of 30% on pretax income, net
of bonuses and contributions. This bonus rate scales up (and down) if the
Company exceeds (or falls short) of the planned growth rate. This bonus plan is
reviewed by the Compensation Committee of the Company's Board each October. To
be eligible to receive the bonus, Executive must be employed by the Company
through the last day of the Company's fiscal year. This bonus, to the extent
payable, shall be paid to Executive within ninety days of the end of the
Company's fiscal year.
(d) Relocation Expense Reimbursement. Executive agrees to maintain his
principal residence within reasonable commuting distance of the Company's
headquarters in Novato, California. The Company will reimburse Executive for all
reasonable costs associated with Executive's relocation to California (including
moving of household goods, house hunting trips for Executive and his family, and
temporary housing arrangements for up to six months). Executive will be fully
"grossed-up" by the Company for these reimbursements so that the economic effect
to Executive is the same as if these reimbursements were provided to Executive
on a non-taxable basis.
5. Expenses. The Company will pay or reimburse Executive for reasonable
travel, entertainment or other expenses incurred by Executive in the furtherance
of or in connection with the performance of Executive's duties hereunder in
accordance with the Company's established policies. This shall include a
one-time lump sum payment of One Hundred Thousand Dollars ($100,000), subject to
applicable withholding, upon commencement of Executive's employment for the
purpose of covering temporary living expenses and travel expenses for Executive
and Executive's family to and from the East Coast.
6. Severance Benefits. If Executive's employment with the Company
terminates other than voluntarily, or for "Cause" (as defined herein), or as a
result of a change in control (as defined herein), then (i) Executive shall be
entitled to receive continuing payments of severance pay (less applicable
withholding taxes) at a rate equal to his base salary rate, as then in effect
(but not less than $400,000 per year) for a period of 12 months from the date of
such termination, and (ii) a bonus, scaled at 50% of base salary, for the year
Executive is terminated. For this purpose, "Cause" is defined as (i) an act of
dishonesty made by Executive in connection with Executive's responsibilities as
an employee and intended to result in Executive's substantial personal
enrichment, (ii) Executive's conviction of a felony, (iii) an act by Executive
which constitutes gross misconduct and which is injurious to the Company, or
(iv) Executive's continued substantial violations of his employment duties after
Executive has received a written demand for performance from the Company which
specifically sets forth the factual basis for the Company's belief that
Executive has not substantially performed his duties.
7. Total Disability of Executive. Upon Executive's becoming totally
disabled during the term of this Agreement, employment hereunder shall
automatically terminate and all payments of compensation by the Company to
Executive hereunder shall immediately terminate. Executive shall be deemed to be
"totally disabled" ninety (90) days following written notice by the Company to
Executive of such determination by an independent physician acceptable to the
Board and Executive (which acceptance will not be unreasonably withheld);
provided, however, that if Executive resumes work on a regular basis prior to
the end of such 90 day period, Executive shall not be deemed to be "totally
disabled."
8. Death of Executive. If Executive dies during the term of this
Agreement, this Agreement shall terminate immediately.
9. Change of Control. In the event of a change of control of the
Company, Executive's granted but unvested options will vest 100% subject, during
the first six months of employment, to a total cap of appreciated value of One
Million Dollars ($1,000,000) for each full month of employment prior to the
effective date of the change of control. For purposes of this Agreement, "change
of control of the Company" is defined as:
a. Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 30% or more of the total
voting power represented by the Company's then outstanding voting securities; or
b. A change in the composition of the Board of Directors of
the Company occurring within a two-year period, as a result of which fewer than
a majority of the directors are Incumbent Directors. "Incumbent Directors" shall
mean directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board of Directors
of the Company with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination (but shall not
include an individual whose election or nomination is in connection with an
actual or threatened proxy contest relating to the election of directors to the
Company); or
c. The date of the consummation of a merger or consolidation
of the Company with any other corporation that has been approved by the
stockholders of the Company, other than a merger or consolidation which would
result in the voting securities of the Company outstanding immediately prior
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thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least fifty percent
(50%) of the total voting power represented by the voting securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation, or the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets.
10. Enforcement. The Parties agree that any and all disputes arising
out of the terms of this Agreement, their interpretation, and any of the matters
herein released, shall be subject to binding arbitration in Marin County before
the American Arbitration Association under its Commercial Rules, or by a judge
to be mutually agreed upon. The Parties agree that the prevailing party in any
arbitration shall be entitled to injunctive relief in any court of competent
jurisdiction to enforce the arbitration award. The Parties agree that the
prevailing party in any arbitration shall be awarded its reasonable attorney's
fees and costs.
11. Assignment. This Agreement shall be binding upon and inure to the
benefit of (a) the heirs, executors and legal representatives of Executive upon
Executive's death and (b) any successor of the Company. Any such successor of
the Company shall be deemed substituted for the Company under the terms of this
Agreement for all purposes. As used herein, "successor" shall include any
person, firm, corporation or other business entity which at any time, whether by
purchase, merger or otherwise, directly or indirectly acquires all or
substantially all of the assets or business of the Company. None of the rights
of Executive to receive any form of compensation payable pursuant to this
Agreement shall be assignable or transferable except through a testamentary
disposition or by the laws of descent and distribution upon the death of
Executive following termination without cause. Any attempted assignment,
transfer, conveyance or other disposition (other than as aforesaid) of any
interest in the rights of Executive to receive any form of compensation
hereunder shall be null and void.
12. Notices. All notices, requests, demands and other communications
called for hereunder shall be in writing and shall be deemed given if delivered
personally or three (3) days after being mailed by registered or certified mail,
return receipt requested, prepaid and addressed to the parties or their
successors in interest at the following addresses, or at such other addresses as
the parties may designate by written notice in the manner aforesaid:
If to the Company: Broderbund Software, Inc.
000 Xxxxxxx Xxxxxxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxx, XX 00000-0000
Attention: General Counsel
If to Executive: Xxxxxx X. Xxxxxxx
at the last residential address
known by the Company.
13. Severability. In the event that any provision hereof becomes or is
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
14. Entire Agreement. This Agreement, the Stock Option Plan, the Option
Agreement, and the Proprietary Information Agreement represent the entire
agreement and understanding between the Company and Executive concerning
Executive's employment relationship with the Company, and supersede and replace
any and all prior agreements and understandings concerning Executive's
employment relationship with the Company. To the extent there is any conflict
among the agreements referenced herein, the terms of this Agreement govern.
15. No Oral Modification, Cancellation or Discharge. This Agreement may
only be amended, canceled or discharged in writing signed by Executive and the
Company.
16. Governing Law. This Agreement shall be governed by the laws of the
State of California.
17. Effective Date. This Agreement is effective immediately after it
has been signed.
18. Acknowledgment. Executive acknowledges that he has had the
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
respective dates set forth below.
BRODERBUND SOFTWARE, INC.
By: __________________________ _______________________________________
Signature
Title: _______________________
Date: ________________________
XXXXXX X. XXXXXXX
_______________________________________
Signature
Date: ________________________
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