EXHIBIT 10.20
EMPLOYMENT AGREEMENT
I, Xxxxx Xxxxxxx, agree to the terms and conditions of employment with
Viper Motorcycle Company, a Minnesota Corporation, (Company) set forth in this
Employment Agreement (Agreement).
1. TERM OF EMPLOYMENT. My employment under this Agreement shall
commence on June 3, 2004. The term of my employment shall be for three years,
subject to Section 5 of this Agreement.
2. NATURE OF DUTIES. I shall be the Company's Chief Executive Officer.
My duties, privileges, obligations and limitations as CEO are set forth, in
part, in Appendix A of this Agreement. I shall report directly to the Company's
Board of Directors.
3. PLACE OF PERFORMANCE. I shall be based at Castle Rock, Colorado, or
at any other location at which I elect to establish my personal residence, but
agree to travel to locations designated by the Company's Board of Directors as
set forth in Appendix A of this Agreement,
4. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. The Company shall pay me base salary at an annual
rate of $100.00 (One Hundred Dollars) per year, payable in
advance on the first day of each contract year, or such higher
rate as it elects to pay me
(b) SIGNING BONUS. Upon the commencement of my employment, the
Company shall grant me 100,000 common shares of Company stock,
which shall immediately and irrevocably become my property
regardless of the duration of my employment with the Company. At
the time of this grant, these shares shall vest immediately but
be "restricted" within the meaning of Appendix A of this
Agreement.
(c) EQUITY COMPENSATION. Subject to Section 5 of this Agreement, I
shall be granted and have conveyed to me a total of 300,000
common shares of Company stock, which shall vest in thirty-six
(36) equal monthly installments, on the 15th day of each
calendar month during the three-year duration of this Agreement,
but shall remain "restricted." Upon termination for cause or
upon resignation without good reason, all then unvested shares
under Section 4(c) of this Agreement shall be forfeited by me.
Until the shares of common stock granted to me are vested, I
understand I am prohibited from transferring, assigning,
conveying, pledging, hypothecating or otherwise encumbering such
shares.
(d) YEAR-END BONUS. The Company may elect to pay me a year-end bonus
in an amount determined at the discretion of the Company's Board
of Directors.
(e) STANDARD BENEFITS. During my employment, I shall be entitled to
participate in all employee benefit plans and programs to the
same extent generally available to other Company officers.
(f) HOME OFFICE ALLOWANCE. I shall receive a monthly home office
allowance in the amount of $500.00, payable on the last day of
each month, which represents the Company's best estimate of the
actual cost to me of the use of my home office for Company
business.
(g) INDEMNIFICATION. The Company agrees to fully indemnify me for
any costs, legal expenses, fees, fines, judgments or other
expenses of any kind that I may incur as a result of any actions
I take (or am alleged to have taken) in the course and scope of
my employment with the Company subject to the limitations of
Minnesota Statutes 302A.521.
(h) DIRECTORS AND OFFICERS LIABILITY. Furthermore, the Company shall
obtain and maintain a Directors and Officers liability policy,
providing coverage in such amount as the Board of Directors
determines to be fiscally prudent and no less than that provided
to any other Director or Officer. Such indemnity coverage shall
effectively cover any acts that occurred during my employment,
even after I am no longer employed.
(i) EXPENSES. I shall be entitled to receive prompt reimbursement
for all reasonable and customary travel and business expenses I
incur in connection with my employment in accordance with the
Company's policies. In addition, I shall be reimbursed for my
attorney fees and accounting fees for the initial negotiation of
this Agreement, up to a maximum of $5,000.00.
(j) LIFE INSURANCE. Within 30 days of the execution of this
Agreement, the Company shall make its best efforts to obtain a
term life insurance policy at standard premium rates (not to
exceed an annual premium of $3,000.00) which, in the event of my
death, shall pay a benefit of $500,000 (or other amount as
agreed, depending on insurability and premium limitation) to my
beneficiaries.
(k) LONG TERM DISABILITY INSURANCE. Within 60 days of the execution
of this Agreement, the Company shall make its best efforts to
obtain, on my behalf, a long-term disability insurance policy,
providing I am insurable at standard premium rates, in the
amount of the lesser of: (i) the maximum benefit that can be
obtained based on my annual compensation or; (ii) $150,000
annually.
(l) CONFLICT OF INTEREST. I hereby represent that I have no
conflicts of interest or contractual obligations that restrict
me in any way or prevent me from entering into this Agreement.
5. TERMINATION.
(a) RIGHTS AND DUTIES. If my employment is terminated, I shall be
entitled to the amounts or benefits shown in the applicable row
in the following table, subject to the balance of this Section
5. The Company and I shall have no further obligations to each
other, except the Company's ongoing indemnification obligation
under Section 4 and my confidentiality, etc. obligations under
Section 6, 7 and 8.
2
--------------------------------------------------------------------------------
DISCHARGE FOR CAUSE; RESIGNATION Prompt conveyance of (1) any
WITHOUT GOOD REASON then-vested but unconveyed equity
compensation owed me under Section
4(c) of this agreement, (2) any
outstanding expense reimbursements,
and (3) any other unpaid vested
amounts or benefits then due me under
any Company compensation, incentive,
or benefit plan.
--------------------------------------------------------------------------------
DISABILITY Same as for "Discharge for Cause"
EXCEPT that if the Company has failed
to obtain the long-term disability
policy set forth in Section 4(k), it
shall be treated as a "Discharge
other than for Cause."
--------------------------------------------------------------------------------
DISCHARGE OTHER THAN FOR CAUSE OR Same as for "Discharge for Cause"
DISABILITY; ESIGNATION WITH EXCEPT within 21 R days of the end of
GOOD REASON my employment, the company shall
convey to me a grant of Company stock
equal to 300,000 common shares less
any shares previously granted and
conveyed to me in accordance with
Section 4(c) of this Agreement;
--------------------------------------------------------------------------------
DEATH Same as for "Discharge for Cause"
EXCEPT that any such payments and any
benefits under Company employee
benefit plans or programs payable
upon my death shall be made to my
designated beneficiary.
--------------------------------------------------------------------------------
(b) DISCHARGE FOR CAUSE. The Company may terminate my employment at
any time if it has Cause to terminate me. "Cause" shall mean:
i. my conviction of a felony or a willful, criminal act of
fraud or dishonesty or other felonious act, the purpose
or effect of which materially and adversely affects the
Company; or
ii. I have engaged in conduct that constitutes willful
gross neglect or willful gross misconduct with regard
to my employment duties, such gross misconduct or gross
neglect resulting in economic harm or loss to the
Company, provided that (1) for purposes of determining
whether conduct constitutes willful gross misconduct,
no act on my part shall be considered "willful" unless
done by me in bad faith or without reasonable belief
that my action was in the best interests of the company
and (2) I have been given written notice by the Board
of Directors of my violation of this section and a
reasonable opportunity to cure my violation. My
unwillingness to give up the residence and travel
privileges set forth in Appendix A of this agreement
shall not under any circumstances constitute "Cause."
If I am discharged for Cause, I will only receive the benefits to which I am
entitled under Section 5(a).
(c) TERMINATION FOR DISABILITY. Except as prohibited by applicable
law, the Company may terminate my employment on account of
Disability, or may
3
transfer me to inactive employment status, which shall have the
same effect under this Agreement as a termination for
Disability. "Disability" means a physical or mental illness,
injury, or condition that prevents me from performing
substantially all of my duties under this Agreement for at least
120 consecutive calendar days or for at least 150 calendar days,
whether or not consecutive, in any 365 calendar day period.
(d) DISCHARGE OTHER THAN FOR CAUSE OR DISABILITY. The Company may
terminate my employment at any time for any reason, and without
advance notice. If I am terminated by the Company other than for
Cause under Section 5(b) or for Disability under Section 5(c), I
will receive the benefits provided for in Section 5(a) for a
discharge other than for cause.
(e) RESIGNATION FOR GOOD REASON. "Good Reason" means that, without
my express written consent, one or more of the following events
has occurred:
i. DEMOTION. My job duties are substantially
diminished.
ii. PAY CUT. My guaranteed equity compensation is
reduced. Decline in the value of the equity shall
not constitute a pay cut.
iii. RELOCATION/TRAVEL/VACATION REQUIREMENTS. The Company
fails to honor the relocation, travel and vacation
provisions of Appendix A of this Agreement, or if I
consent to relocation, the Company fails to pay (or
reimburse me) for all reasonable moving expenses I
incur in changing my principal residence in
connection with the relocation.
iv. BREACH OF PROMISE. The Company materially breaches
this Agreement or fails to deliver to me any cash or
equity compensation within 30 days after it is due.
v. DISCONTINUANCE OF BENEFITS. The Company stops
providing me with life insurance, health insurance,
disability insurance or other benefits that, in the
aggregate, are guaranteed by this Agreement.
vi. NOTICE OF PROSPECTIVE ACTION. I am officially
notified (or it is officially announced) that the
Company will take any of the actions listed above
during the term of this Agreement.
viii. CHANGE IN CONTROL. There is a Change in Control as
defined in Appendix B to this Agreement.
However, an event that is or would constitute Good Reason shall cease to be Good
Reason if: (1) I do not terminate employment within 60 days after the event
occurs; or (2) the Company reverses the action or cures the default that
constitutes Good Reason within 14 days after I notify it in writing that Good
Reason exists before I terminate employment.
(f) DEATH. If I die while employed under this Agreement, the
payments required by Section 5(a) in the event of my death shall
be made.
4
6. CONFIDENTIALITY. I acknowledge that I currently possess or will
acquire secret, confidential, or proprietary information or trade secrets
concerning the operations, future plans, or business methods of the Company. I
agree that the Company would be irreparably harmed if I used or disclosed this
information. To prevent this harm, I am making the promises set forth in this
Section.
(a) PROMISE NOT TO DISCLOSE. I promise never to use or disclose any
such information before it has become generally known within the
relevant industry through no fault of my own.
(b) RETURN OF CONFIDENTIAL INFORMATION. When my employment with the
Company ends, I will promptly deliver to the Company or, at its
written instruction, destroy all documents, data, drawings,
manuals, letters, notes, reports, electronic mail, recordings,
and copies thereof, in my possession or control.
(c) ENFORCEMENT OF THIS SECTION. This section shall survive the
termination of this Agreement for any reason.
7. NON-SOLICITATION OF COMPANY CUSTOMERS OR CLIENTS. I agree and
understand that the information disclosed to me by the Company for purposes of
my employment is unique and special and requires that the Company protect itself
and its confidential information from disclosure upon the termination of this
Agreement. I agree that for a period of one (1) year following the termination
of this Agreement, I will not directly or indirectly (as owner, consultant or
employee) solicit any employees or customers of the Company.
8. NON-COMPETITION. I will not do or attempt to do any of the
following, either directly or indirectly, during the period I am employed by the
Company or during the period of one year after my agreement terminates, within
the Company's market area, either for myself or for any other person, firm or
company: (a) compete against the Company; (b) carry on a business similar to
Company's business; (c) engage in a business similar to Company's business; (d)
take any action or perform any services which are similar to the actions taken
or services performed by me for the Company during said time which actions or
services are designed to, or in fact call upon, compete for, solicit, divert, or
take away, or attempt to divert or take away, any of the customers, suppliers,
endorsers, prospects targeted or contacted, or advertisers of Company whom I
knew to be customers, suppliers, endorsers, prospects targeted or contacted, or
advertisers of Company; (e) or own, manage, be employed by, work for, consult
for, be an officer or director of, advise, represent, engage in, or carry on any
business engaged in any other business similar to the type of business engaged
in by Company. "Similar business" or "business similar to company business" for
purposes of this section shall be defined as the manufacture of two-wheel
motorcycles with engines above 750cc.
9. NOTICE.
(a) TO THE COMPANY. I will send all communications to the Company in
writing, addressed as follows (or in any other manner the
Company notifies me to use):
If Mailed: Viper Motorcycle Company
Attention: Xxxx Xxx
0000 Xxxxxxxxxxxxx Xxxxxxx
Xxx Xxxx, XX 00000
5
If Faxed: Viper Motorcycle Company
Attention: Xxxx Xxx
Fax: (000) 000-0000
Tel.: (000) 000-0000
(b) TO ME. All communications from the Company to me relating to
this Agreement must be sent to me in writing to my home address,
000 Xxxxxxxxxxxxx Xxxx Xxxxx, Xxxxxx Xxxx, XX, 00000, or in any
other manner I notify the Company to use.
(c) TIME NOTICE DEEMED GIVEN. Notice shall be deemed to have been
given when delivered or, if earlier (1) when mailed by United
States certified or registered mail, return receipt requested,
postage prepaid, or (2) faxed with confirmation of delivery, in
either case, addressed as required in this section.
10. GOLDEN PARACHUTE GROSS-UP.
(a) If my aggregate payments and benefits under this Agreement and
all other contracts, arrangements, or programs exceed the
maximum amount that may be paid to me without triggering golden
parachute penalties under Section 280G and related provisions of
the Internal Revenue Code, as determined in good faith by the
Company's independent auditors, I will receive a gross-up
payment. The gross-up amount will be an amount that, after
payment by me of all income, payroll, and excise taxes on the
gross-up payment, equals the excise taxes I must pay under
Internal Revenue Code Section 4999.
(b) All determinations needed to apply this section shall be made in
good faith by the Company's independent auditors. The
independent auditors will assume that I pay federal, state, and
local income taxes at the highest marginal tax rate in the
calendar year in which the gross-up payment is to be made, net
of the maximum reduction in federal income taxes that could be
obtained from deduction of those state and local taxes.
(c) If my gross-up payment turns out to have been insufficient (for
example, because I receive payments that were not expected when
the gross-up payment was calculated), the Company will pay me an
additional gross-up payment that, on an after tax basis, is
sufficient to cover both the extra Internal Revenue Code Section
4999 excise taxes I owe and any interest, penalties, or
additions I must pay because of the miscalculation of my excise
tax liability. If I receive a gross-up payment that turns out to
have been excessive, I must pay the Company the excise tax
included in the gross-up that I did not, in fact, have to pay,
the federal, state and local income and payroll tax gross-up I
received with respect to that excise tax amount (to the extent
that I am allowed a federal, state, or local income tax
deduction with respect to the repayment), and interest on the
amount I must repay at the rate provided in Internal Revenue
Code Section 1274(b)(2)(B).
6
(d) I and the Company agree to cooperate with each other to resolve
any administrative or judicial proceedings concerning the
existence or amount of golden parachute penalties with respect
to payments or benefits I receive.
11. AMENDMENT. No provisions of this Agreement may be modified, waived,
or discharged except by a written document signed by me and a Company officer
duly authorized by the Board of Directors. A waiver of any conditions or
provisions of this Agreement in a given instance shall not be deemed a waiver of
such conditions or provisions at any other time.
12. INTERPRETATION. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the State of
Minnesota (excluding any that mandate the use of another jurisdiction's laws).
13. SUCCESSORS. This Agreement shall be binding upon, and shall inure
to the benefit of me and my estate, but I may not assign or pledge this
Agreement or any rights arising under it.
14. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
15. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute the same instrument.
16. ENTIRE AGREEMENT. All oral or written agreements or
representations, express or implied, with respect to the subject matter of this
Agreement are set forth in this Agreement. However, this Agreement does not
override other written agreements I have executed relating to specific aspects
of my employment.
I ACKNOWLEDGE THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND ME
RELATING TO THE SUBJECTS COVERED IN THIS AGREEMENT ARE CONTAINED IN IT AND THAT
I HAVE ENTERED INTO THIS AGREEMENT VOLUNTARILY AND NOT IN RELIANCE ON ANY
PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS
AGREEMENT ITSELF.
I FURTHER ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT, THAT I
UNDERSTAND ALL OF IT, AND THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS
AGREEMENT WITH MY PRIVATE LEGAL COUNSEL AND HAVE AVAILED MYSELF OF THAT
OPPORTUNITY TO THE EXTENT I WISHED TO DO SO.
Viper Motorcycle Company Xxxxx Xxxxxxx
By: /s/ Xxxxx Xxxxxxxxx /s/ Xxxxx Xxxxxxx
--------------------------- -------------------------------
Its: Chief Financial Officer
-------------------------------
Date: 3 June 2004 Date: June 3, 2004
------------------------------- -------------------------------
7
APPENDIX A
JOB DESCRIPTION, DUTIES, PRIVILEGES, RESTRICTIONS
1. CHIEF EXECUTIVE OFFICER. In my capacity as CEO of the Company:
(a) I shall report directly to the Company's Board of Directors.
(b) During the term of this Agreement, the Company and/or the
Nominating/Governance Committee of the Board of Directors shall
nominate me and one other person of my choosing reasonably
acceptable to the Company and the Company will use its best
efforts to cause such person to be elected as a director at any
and all meetings of shareholders at which directors are required
to be elected under Minnesota law during the term of this
Agreement.
(c) I shall perform the ordinary and customary duties of Chief
Executive Officer as designated by the Board of Directors,
including, but not limited to, completion of the Company's
strategic plans, formulation and approval of its sales and
marketing plan, approval of its annual budget and service as
director of product planning. I agree to comply with all
guidelines approved by the Board of Directors.
2. TRAVEL ON COMPANY BUSINESS. Although my employment is considered to be
full time, I agree that I shall operate at the Company's corporate
headquarters or another location away from my principal residence for a
minimum of one week per calendar month during the term of this
Agreement. The remainder of the time I agree to work from my home
office or other location I designate. If I elect to bring one guest
with me on any travel on behalf on the Company (including to
headquarters), the Company agrees to reimburse me for the cost of my
guest's coach-class commercial air travel up to a maximum of $4000 per
year.
3. VACATION. In addition to taking vacation time in accordance with the
Company's standard vacation policy, I may elect to take any amount of
additional vacation time within the calendar month of January each
year, however I agree to make myself available by telephone and/or
email, or personally (if I determine it to be necessary) during this
time if business requires it.
4. RESTRICTED STOCK. I agree and understand that the 400,000 common shares
of the Company that constitute my Signing Bonus and Equity Compensation
under Section 4 of this Agreement constitute "restricted securities" as
defined under rules and regulations of the Securities Act of 1933, as
amended. I intend to accept these common shares for my own account, for
long-term investment, and with no present intention to resell, transfer
or otherwise dispose of such 400,000 shares. I further agree that I
will accept certificates for such 400,000 shares with a legend
restricting further resale, transfer or disposition thereof unless
registered under applicable securities laws or satisfying an exemption
from such registration. I further agree that all of such 400,000 shares
shall be subject to the "lock-up" provisions of the
underwriter of our pending IPO on the same terms and conditions as the
shares awarded to other Company executives as a portion of their
compensation.
5. USE OF MOTORCYCLE. I understand that the Company will provide a Viper
motorcycle for my use during the period of my employment under this
Agreement.
Doc# 1894393\8
APPENDIX B
CHANGE IN CONTROL
1. "Change in Control" means one of the following events, except as
provided in Section 2 of this Appendix:
(a) ACQUISITION OF CONTROLLING INTEREST. Any Person becomes
the Beneficial Owner, directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power of the
Company's then outstanding securities in connection with a merger or
otherwise; provided, however, this shall not apply to securities issued
in connection with, or pursuant to, securities of the Company
outstanding as of the date hereof.
(b) CHANGE IN BOARD CONTROL. Individuals who constituted the
Board when this Agreement is executed (or their approved replacements,
as defined in the next sentence) cease for any reason to constitute a
majority of the Board. A new Director shall be considered an "approved
replacement" Director if his or her election (or nomination for
election) was approved by a vote of at least two-thirds of the
Directors then still in office who either were Directors when this
Agreement was executed or were themselves approved replacement
Directors, but in either case excluding any Director whose initial
assumption of office occurred as a result of an actual or threatened
solicitation of proxies or consents by or on behalf of any Person other
than the Board.
(c) MERGER APPROVED. The stockholders of the Company approve a
merger or consolidation of the Company with any other corporation
unless the voting securities of the Company outstanding immediately
before the merger or consolidation would continue to represent (either
by remaining outstanding or by being converted into voting securities
of the surviving entity) at least 51% of the combined voting power of
the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation.
(d) SALE OF ASSETS. The stockholders of the Company approve an
agreement or series of agreements for the Company's sale or disposition
to one or more Persons of at least 40% of the Company's assets.
(e) LIQUIDATION OR DISSOLUTION. The stockholders of the
Company approve a plan or proposal for liquidation or dissolution of
the Company.
2. "Change in Control" shall not include:
(a) Any acquisition of the Company by me or a group of which I
am a member.
(b) The completion of the Company's initial public offering
relating to the offer and sale of approximately 1,265,000 shares of
common stock and redeemable warrants to purchase 1,265,000 shares of
common stock (including the underwriter's over-allotment), and any
subsequent initial public offering of securities of the Company if,
after the consummation of such public offering, the stockholders of the
Company immediately prior to the public offering continue to own not
less than 20% of the outstanding shares of Common Stock of the Company.
3. As used in this Appendix B,
"Beneficial Owner" has the meaning set forth in Rule 13d-3 under the
Securities Act.
"Board" means the Board of Directors of the Company.
"Company" means Viper Motorcycle Company
"Person" has the meaning given in Securities Act Section 3(a)(9), as
modified and used in Securities Act Section 13(d), and shall include a
"group," as defined in Rule 13d-5 promulgated thereunder. However, a
"person" shall not include: (i) the Company or its Parent,
Subsidiaries, or Affiliates; (ii) a trustee or other fiduciary holding
securities under this Plan or any employee benefit plan of the Company,
its Parent, Subsidiaries, and Affiliates (iii) an underwriter
temporarily holding securities pursuant to an offering; or (iv) a
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
shares of the Company.
"Securities Act" means the Securities Exchange Act of 1934.
