XXXXXXX TECHNOLOGIES, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of this 30th day
of April, 1999, by and between XXXXXXX TECHNOLOGIES, INC. a Delaware
corporation, ("Company") and XXXXXX X. XXXXXX ("Executive"). The parties
agree with each other as follows:
1. TERM OF EMPLOYMENT. Subject to the terms and conditions set forth
in this Agreement, the Company hereby agrees to employ Executive, and
Executive agrees to be employed by the Company, for the period commencing on
April 1, 1999 and ending on the first to occur of (i) the date on which
Executive first qualifies for or elects to receive retirement benefits in
accordance with the Company's normal retirement policies and (ii) the date on
which this Agreement is terminated by either the Company or Executive
pursuant to any subsection of Section 4 hereof.
2. DUTIES OF EXECUTIVE.
(a) Executive shall serve as the President and Chief Executive
Officer of the Company and serve in such additional positions as the
Company's Board of Directors (the "Board") shall reasonably determine from
time to time. In such capacities, Executive shall report to the Board and
Executive shall perform the duties and render the services for and on
behalf of the Company associated with the positions he shall hold and as
may be set forth from time to time in resolutions of, or other directives
issued by, the Board or authorized delegate of the Board.
(b) Executive agrees to perform such duties and render such services
to the best of his ability, devoting thereto his entire professional time,
attention and energy exclusively to the business and affairs of the
Company and its affiliates, as its business and affairs now exist and as
they hereafter maybe changed, and shall not during the term of his
employment hereunder be engaged in any other business activity, whether or
not such business activity is pursued for gain or profit; provided,
however, that Executive may serve on (i) civic or charitable boards or
committees and (ii) with the prior approval of the Board, boards of
corporations or other business enterprises, in each case so long as such
activities do not interfere with the performance of Executive's
obligations under this Agreement.
(c) The Company agrees that Executive shall be included in the slate
of nominees proposed by the Board in the Company's proxy statements
delivered to its shareholders for election to the Board for as long as
this Agreement is in effect.
3. COMPENSATION OF EXECUTIVE. As compensation for the services to be
performed under this Agreement:
(a) BASE SALARY. Effective April 1, 1999, Executive shall be paid a
base salary at the initial annual rate of $350,000, payable in installments
consistent with the Company's payroll practices, and subject to normal
withholding. Executive's base salary shall be reviewed annually prior to
each anniversary of this Agreement by the Board or its Compensation
Committee and if the Board or Committee determines, in its discretion, that
Executive's base salary is to be increased, such increase shall be
effective as of such anniversary date;
(b) ANNUAL BONUS. Executive shall be entitled to an annual bonus
which shall be determined as provided in this subsection (b):
(i) For the Company's fiscal year ending July 31, 1999,
Executive's bonus will be determined in accordance with the bonus
program previously established for Executive for such fiscal year, but
the amount thereof shall be prorated - one half to be based on the
level of Executive's annual base salary as in effect through March 31,
1999 and one half to be based on an annual base salary of $350,000.
(ii) For each subsequent fiscal year of the Company, the Board
will set specific financial and non-financial performance targets and
the amount of Executive's bonus will range $0 to a maximum amount
equal to Executive's annual base salary as in effect for such fiscal
year (with a target bonus of 70% of the then effective base salary)
depending on the Board's determination of Executive's success in
achieving the specified targets.
(iii) The bonus payable to Executive for each fiscal year, if any
is due, shall be paid to Executive, subject to normal withholding,
promptly after the completion of the audit of the Company's financial
statements for such fiscal year.
(c) OPTIONS. Upon execution of this Agreement, Executive will be
granted options under the Company's 1995 Stock Option Plan to purchase
227,890 shares of the Company's common stock at an exercise price of $25
per share (the "Options"). The Options shall be "non-qualified" stock
options, shall be subject to the other terms and conditions specified in
the stock option agreement evidencing the same, shall have a term of four
years from the date of grant, and shall vest at the rate of 1/48 of the
total number thereof on the last day of each month commencing with the
month of April, 1999 so long as Executive remains employed with the
Company. The Board or its Stock Option Committee will from time to time
consider making additional grants to Executive, but the Company shall not
be obligated to make any particular grant or grants thereof.
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(d) BENEFITS. Executive shall be entitled to participate in the
Company's insurance, health, life insurance, long term disability,
dental and medical, and automobile programs as the same may exist from
time to time on the terms and conditions applicable to other senior
officers of the Company. Nothing in this Agreement shall preclude the
Company from terminating or amending any employee benefit plan or
program from time to time. The Company will reimburse Executive for the
reasonable cost of an annual physical examination, if Executive elects
to have the same.
(e) VACATION. Executive shall be entitled to four weeks vacation
per year. Such vacation shall be taken at such times as the Company and
Executive shall mutually agree, acting reasonably, having regard to the
performance of Executive's essential duties to the Company pursuant to
the terms of this Agreement. Executive may accumulate unused vacation
time from year to year to the extent permitted under the Company's
vacation policy for executives as in effect from time to time.
(f) EXPENSES. Executive shall be reimbursed for all travel and
other reasonable out-of-pocket expenses actually incurred by him in
connection with the performance of his duties hereunder, subject the
Company's expense reimbursement policies as in effect from time to time
and to the receipt by the Company of receipts and statements in a form
reasonably satisfactory to it.
4. TERMINATION.
(a) TERMINATION BY THE COMPANY FOR CAUSE. Notwithstanding anything
to the contrary herein contained, the Company may terminate immediately
the employment of Executive without notice and without pay in lieu of
notice:
(i) if Executive commits an act of theft, fraud or material
dishonesty or misconduct involving the property or affairs
of the Company or the carrying out of Executive's duties;
or
(ii) if Executive is guilty of a material breach or material
non-observance of any of the terms or conditions of this
Agreement provided that Executive is given written notice
of any such breach or non-observance and fails to remedy
the same within 15 days of receipt of such notice; or
(iii) if Executive is convicted of a felony; or
(iv) if there is a repeated and demonstrated failure on the
part of the Executive to perform his duties in a competent
manner and Executive fails to remedy the failure within 15
days of receipt of written notice of such failure; or
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(v) if Executive or any member of his family makes any
personal profit arising out of or in connection with a
transaction to which the Company or any of its
subsidiaries is a party or with which it is associated
without making disclosure to and obtaining prior written
consent of the Company.
Upon the termination of Executive's employment pursuant to this Subsection
(a), this Agreement and the employment of Executive hereunder shall be
wholly terminated. Upon any such termination, Executive shall have no
claim against the Company in respect of his employment for damages or
otherwise except in respect of payment of base salary earned, due and
owing and unused vacation time to the date of termination.
(b) TERMINATION BY THE COMPANY WITHOUT CAUSE. Notwithstanding
anything herein to the contrary, the Company may terminate Executive's
employment hereunder at any time, for any reason or no reason, on not less
than 15 days' prior written notice. In the event of termination pursuant
to this Subsection (b), Executive will be paid:
(i) if the termination occurs prior to the second anniversary
of the date of this Agreement, an amount equal to two
times his annual base salary at the rate in effect on the
date of his termination; and
(ii) if the termination occurs thereafter, an amount equal to
the average of the total annual compensation (annual base
salary plus bonuses earned, if any, for such years) earned
by Executive for the preceding two full fiscal years of
the Company prior to the date of termination.
In addition, if Executive is terminated under this subsection
(b) prior to the second anniversary of the date of this Agreement,
notwithstanding anything to the contrary contained herein or in the
applicable stock option agreements, all of the stock options then held by
Executive (including the Options) shall continue to vest in accordance
with their terms through the second anniversary of the date of this
Agreement and shall be exercisable to the extent so vested by Executive on
or prior to the 60th day following the second anniversary date of this
Agreement.
(c) TERMINATION BY EXECUTIVE. Executive may terminate his
employment hereunder at any time, for any reason, upon the giving of not
less than 15 days' prior written notice to the Board. In the event of
termination by Executive under this clause (c), Executive shall be
entitled to receive only his base salary and unused vacation time due him
through the effective date of termination. Upon the termination of
Executive's employment pursuant to this Subsection (a), this Agreement and
the employment of Executive hereunder shall be wholly terminated. Upon
any such termination, Executive shall have no claim against the Company in
respect of his employment for damages or
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otherwise except in respect of payment of base salary earned, due and
owing and unused vacation time to the date of termination.
(d) TERMINATION BY THE COMPANY DUE TO DEATH OR DISABILITY. The
employment of Executive shall, at the option of the Company, terminate
immediately in the event of his death or permanent disability, in which
case notice in writing from the Company shall be sent to Executive or his
legal representative. In the event of termination under this clause (d),
in addition to any disability benefit coverage to which he may be entitled
under any disability insurance programs maintained by the Company in which
he is a participant, Executive will be paid an amount equal to the
difference between (i) six months salary at Executive's annual base salary
rate as in effect on the date of the termination under this clause (d) and
(ii) the amount of disability benefits for a six-month period payable to
Executive under the Company's long-term disability program in which he is
a participant. Except as provided in the preceding sentence, Executive
shall be entitled to no additional compensation under this Agreement
following the date of termination under this clause (d), other than base
salary earned but not paid, and unused vacation time accrued, through the
date of termination. For purposes of this Agreement "permanent
disability" shall mean an illness, disease, mental or physical disability
or other causes beyond Executive's control which makes Executive incapable
of discharging his duties or obligations hereunder, or causes Executive to
fail in the performance of his duties hereunder, for six consecutive
months, as determined in good faith by the Board based on a report of a
physician selected in good faith by the Board.
(e) TERMINATION BY EXECUTIVE UPON A CHANGE OF CONTROL. In the event
that (x) a Change of Control (as hereinafter defined) occurs and (y) at
any time after such Change of Control a Triggering Event (as hereinafter
defined) shall occur, then unless the Executive shall have given his
express written consent to the contrary, Executive may, upon 30 days
written notice to the Company, terminate his employment hereunder. In
such event Executive shall be entitled to the following:
(i) Following the date of the Triggering Event, Executive
shall be paid two cash payments each to be equal to Executive's
annual base salary in effect on the date of the Triggering Event, the
first of such payments to be paid within 30 days of the Triggering
Event and the second of such payments to be paid on the first
anniversary of the date of the Triggering Event, in each case subject
to normal withholding.
(ii) As of the date of the Triggering Event, notwithstanding
the vesting schedule set out in Subsection 3(c) above, all of the
Options shall thereupon become fully vested; and
(iii) For a one year period following the date of the Triggering
Event, Executive shall be provided with employee benefits
substantially identical to those to which Executive was entitled
immediately prior to the Triggering Event, subject
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to any changes or modifications (including reductions or
terminations) to the Company's employee benefit and welfare plans
that are made generally for all of the Company's senior executives.
In the event that the benefits provided for in this
Subsection 4(e) to be paid Executive constitute "parachute payments"
within the meaning of section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), and will be subject to the excise tax
imposed by Section 4999 of the Code, then Executive shall receive
(a) a payment from the Company sufficient to pay such excise tax and
(b) an additional payment from the Company sufficient to pay the
Federal and California income tax arising from the payment made under
clause (a) of this sentence. Unless the Company and Executive
otherwise agree, the determination of Executive's excise tax
liability and the Federal and California income tax resulting from
the payment under clause (a) above shall be made by the Company's
independent accountants (the "Accountants"), whose determination
shall be conclusive and binding upon the Company and Executive for
all purposes. For purposes of making the calculations required by
this Subsection 4(e), the Accountants may make reasonable assumptions
and approximations concerning applicable taxes and may rely on
interpretations of the Code for which there is a "substantial
authority" tax reporting position. The Company and Executive shall
furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make the
determinations required by this Subsection 4(e). The Company shall
bear the expenses of the Accountants under this Subsection 4(e).
For purposes of this Subsection 4(e):
(a) Change of Control" means the occurrence of any one of
the following: (i) any transaction or series of transactions
(as a result of a tender offer, merger, consolidation or
otherwise) that results in any person, entity or group acting in
concert, acquiring "beneficial ownership" (as defined in rule
13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of such percentage of the aggregate voting power of
all classes of common equity stock of the Company as shall
exceed 50% of such aggregate voting power; or (ii) a merger or
consolidation of the Company, other than a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) at least 50% of
the voting power represented by the voting securities of the
Company or such entity outstanding immediately after such merger
or consolidation; or (iii) the shareholders 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, of
the Company's assets (other than in connection
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with a sale or disposition to subsidiaries of the Company or in
connection with a reorganization or restructuring of the
Company); or (iv) there occurs a change in the composition of
the Board as a result of which fewer than a majority of the
directors are Incumbent Directors (as hereinafter defined).
"Incumbent Directors" shall mean directors who either (A)
are directors of the Company as of the Commencement Date or
(B) are elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of the
Incumbent Directors casting votes at the time of such
election or nomination.
(b) "Triggering Event" means any of the following: (i) the
termination by the Company without Cause of Executive's
employment pursuant to Subsection 4(a) hereof; (2) the reduction
of Executive's annual base salary or annual incentive bonus
formula from that in effect on the date of the Change of
Control; (3) the removal of Executive as the Company's President
and Chief Executive Officer or a material reduction in his
duties and responsibilities; or (4) the relocation of
Executive's principal place of employment to a location outside
San Diego County, California.
(f) PAYMENTS. Any amounts payable to Executive under this Section 4
shall be paid, unless otherwise specified hereunder, within 30 days of the
date the payment obligation accrues and shall be subject to normal
withholding.
(g) EXCLUSIVE RIGHTS. In connection with any termination under
Subsection 4(b) or 4(e), Executive shall have no claim against the Company
in respect of his employment for damages or otherwise except in respect of
the payments and other provisions specified in such Subsections.
(h) COOPERATION. Upon any termination of employment by the Company
or by Executive hereunder, Executive shall cooperate with the Company, as
reasonably requested by the Company, to effect a transition of Executive's
responsibilities and to ensure that the Company is aware of all matters
being handled by Executive.
5. RESOLUTION OF DISPUTES. The parties recognize that claims,
controversies and disputes may arise out of this Agreement with respect to
Executive's employment, termination of employment, or other terms of this
Agreement or based on common law or statute, either during the existence of
the employment relationship or afterwards. The parties agree that should any
such claim, controversy or dispute arise, the parties will use their best
efforts to resolve such dispute informally, between them. In the event that
any such claim, controversy or dispute between Company and Executive cannot
be resolved within thirty (30) days after either party first gives notice in
writing that any such claim, controversy or dispute exists, either party may
then refer the matter to arbitration before JAMS/ENDISPUTE pursuant to its
rules for resolution of employment disputes.
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The parties hereby agree that referral to arbitration shall be the sole
recourse of either party under this Agreement with respect to any such claim,
controversy or dispute and that the decision of the arbitrator shall be
binding on the parties in accordance with applicable law; provided, however,
that nothing in this Section 5 shall be construed as precluding either party
from bringing an action for injunctive relief or other equitable relief. The
parties shall keep confidential the existence of each such the claim,
controversy or dispute from third parties (other than arbitrator), and the
determination thereof, unless otherwise required by law. Except as provided
in the following sentence, such decision rendered by the arbitrator shall be
final and conclusive and may be entered in any court having jurisdiction
thereof as a basis of judgment and of the issuance of execution for its
collection. In rendering his or her decision, the arbitrator shall be bound
to follow California or Federal law, as applicable, in the same manner as
would a court of law. Any claim that the arbitrator made a mistake or error
in determining or applying the appropriate law shall be subject to judicial
review.
The parties further agree that the party prevailing in the arbitration
shall be entitled to its reasonable attorney's fees and that the arbitration
itself shall take place within the County of San Diego, California, and that
the internal laws of the State of California shall apply.
6. GENERAL OBLIGATIONS OF EXECUTIVE.
(a) Executive agrees and acknowledges that he owes a duty of
loyalty, fidelity and allegiance to act at all times in the best interests
of the Company, to not knowingly become involved in a conflict of interest
and to not knowingly do any act or knowingly make any statement, oral or
written, which would injure the Company's business, its interest or its
reputation unless required to do so in any legal proceeding by a competent
court with proper jurisdiction.
(b) Executive agrees to comply at all times with all applicable
policies, rules and regulations of the Company, including, without
limitation, the Company's policy regarding trading in the Common Stock, as
is in effect from time to time.
7. NO SOLICITATION. Executive agrees that in the event he is no
longer employed by the Company, for any reason, he shall not hire, solicit or
otherwise cause to be solicited for employment elsewhere, either directly or
indirectly, for a period of one year from his termination of employment, any
employee, officer or director of the Company or any individual who chooses
not to join the Company, provided that Executive participated actively in the
recruiting of such individual.
8. NONCOMPETITION. Executive agrees that for a period of one year
following termination of his employment with the Company for any reason, he
will not, nor will he permit any entity or other person under his control to,
directly or indirectly, own, manage, operate or control, or participate in
the ownership, management, operation or control of, or be connected with or
have any interest in, as a shareholder, director, officer, employee, agent,
consultant, partner, creditor or otherwise, any business or activity which is
competitive with any business or
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activity engaged in by the Company or any of its subsidiaries or affiliates
anywhere within (i) the State of California, or (ii) any other state of the
United States and the District of Columbia in which the Company engages in or
has engaged in business during the past five years.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties and contains all agreements between them with the
exception of the 1995 Stock Option Plan (and any stock option agreements
issued thereunder) the other employee benefit and welfare programs maintained
by the Company, and the Invention and Secrecy Agreement dated July 1, 1996
previously signed by Executive, which are supplementary to this Agreement and
are each deemed to be incorporated herein by reference. Each party to this
Agreement acknowledges that no representations, inducements, promises or
agreements, orally or otherwise, have been made by any party, or anyone
acting on behalf of any party, which are not embodied in this Agreement, and
that no agreement, statement or promise not contained in this Agreement shall
be valid or binding. Except for the other agreements, plans and programs
referred to in this Section 9, this Agreement also supersedes any and all
other agreements and contracts whether verbal or in writing relating to the
subject matter hereof.
10. AMENDMENT. Except as otherwise specifically provided herein, the
terms and conditions of this Agreement may be amended at any time by mutual
agreement of the parties; provided that before any amendment shall be valid
or effective, it shall have been reduced to writing and signed by the
Chairman of the Board on behalf of the Company and by Executive.
11. INVALIDITY. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect its other provisions, and this
contract shall be construed in all respects as if such invalid or
unenforceable provision has been omitted.
12. BINDING NATURE. Executive's rights and obligations under this
Agreement shall not be assignable, transferable or delegable by assignment or
otherwise, and any purported assignment, transfer or delegation thereof shall
be void. This Agreement shall inure to the benefit of, and be enforceable
by, any purchaser of substantially all of the Company's assets, any corporate
successor to the Company or any assignee thereof.
13. ASSISTANCE IN LITIGATION. Executive shall, during and after
termination of employment, upon reasonable notice, furnish such information
and proper assistance to the Company as may reasonably be required by the
Company in connection with any litigation in which it or any of its
subsidiaries or affiliates is, or may become a party. Except where Executive
is a named defendant, Executive shall be paid a reasonable hourly fee to be
mutually agreed upon.
14. INDEMNIFICATION. The Company shall indemnify Executive in
accordance with its standard indemnification policy for offices and directors
of the Company and as required by applicable law.
15. NO DUTY TO MITIGATE. Executive shall not be required to mitigate
the amount of any payment contemplated by this Agreement (whether by seeking
new employment or in any
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other manner), nor shall any such payment be reduced by any earnings that
Executive may receive from any other source not paid for by the Company.
16. CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California except for Sections 7 and 8 hereof which shall be governed by, and
interpreted and construed in accordance with, the internal laws (without
giving effect to choice of law principles) of the jurisdiction in which
either of said Sections is being sought to be enforced.
17. NOTICES. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall
be in writing and, if given by telegram, telecopy or telex, shall be deemed
to have been validly served, given or delivered when sent, if given by
personal delivery, shall be deemed to have been validly served, given or
delivered upon actual delivery and, if mailed, shall be deemed to have been
validly served, given or delivered three business days after deposit in the
United States mail, as registered or certified mail, with proper postage
prepaid and addressed to the party or parties to be notified, at the
following addresses:
If to Executive to:
Xxxxxx X. Xxxxxx
0000 Xxxxxxxx Xxx
Xx Xxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Fax:
--------------------------
If to the Company to:
Xxxxxxx Technologies Inc.
0000 Xxx Xxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Telephone: (000) 000-0000
Fax: (000) 000-0000
18. INJUNCTIVE RELIEF. The Company and Executive agree that a breach
of any term of this Agreement by Executive would cause irreparable damage to
the Company and that, in the event of such breach, the Company shall have, in
addition to any and all remedies of law, the right to any injunction,
specific performance and other equitable relief to prevent or to redress the
violation of Executive's duties or responsibilities hereunder.
19. RELEASE. If Executive's employment hereunder shall terminate under
Subsection 4(b) or 4(e), Executive agrees, as a condition to his entitlement
to receive the amounts specified in such Subsections to be due to him, to
execute and deliver to the Company a release in the form
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attached hereto as EXHIBIT A. Such release shall be delivered by Executive at
the time of termination, but shall become effective only after Executive has
received all payments specified in this Agreement to be due to him from the
Company in respect of his termination.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and either of the parties to this Agreement may execute this
Agreement by signing any such counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 30th day of April, 1999.
"Company"
XXXXXXX TECHNOLOGIES, INC.
By:/s/ Xxxxxxx X. Xxxx
Director
"Executive"
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
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