1
EXHIBIT 10.26
AGREEMENT
THIS AGREEMENT is made as of the 12th day of August, 1998 by and between
Universal Electronics Inc., a Delaware corporation, including its subsidiaries
and affiliates (collectively, "UEI") and Xxxxx X. Xxxxxxxxxx ("Xxxxxxxxxx").
WHEREAS, UEI is engaged, on a worldwide basis, in the business of
designing, developing and manufacturing, selling, distributing, licensing,
and/or maintaining (a) certain electronic products that emit, via infra-red and
other methods, pulse codes which can be used to operate original equipment
manufacturer ("OEM") device(s) (such as televisions, video cassette recorders,
cable and satellite set-top boxes, home theater systems, and the like),
including, without limitation, a battery-operated, hand-held remote control (the
"Remote Control"), (b) software to operate the Remote Control which can be used
to operate OEM device(s), electronic device(s) for the "home bus" market (as
defined by the Electronics Industry Association) and integrated system digital
networks ("ISDN"), electronic device(s) for use in the receipt and/or
transmission of data and/or software over multiple media, and other derivations
of such device(s) (the "Software"), and (c) a library of the devices' pulse
codes and such updates, enhancements and new releases of such library as UEI may
from time to time develop (the "Database") ("collectively, the "Business"); and
WHEREAS, Xxxxxxxxxx and UEI are parties to that certain Salary
Continuation Agreement dated June 29, 1995, and amended effective December 1,
1996, and further interpreted on November 25, 1997, copies of which are attached
hereto (the "SCA"); and
WHEREAS, the latest UEI restructuring is considered a triggering event
under the SCA, causing the SCA to become an employment agreement; and
WHEREAS, Xxxxxxxxxx believes he has the right to resign as an employee
of UEI for "good reason" (as such term is defined within the SCA); and
WHEREAS, Xxxxxxxxxx is the Chairman of the Board and Chief Executive
Officer of UEI and is not presently encumbered with a noncompetition agreement
in favor of UEI, and UEI wishes to avoid a controversy with Xxxxxxxxxx regarding
his termination of employment with UEI by agreeing to terminate Xxxxxxxxxx'x
employment without cause and pay Xxxxxxxxxx in accordance with the terms of the
SCA in exchange for which Xxxxxxxxxx will agree to not compete with UEI; and
WHEREAS, by virtue of such termination all of the options granted to
Xxxxxxxxxx to acquire shares of UEI's common stock shall become immediately
fully vested.
NOW THEREFORE, in consideration of the premises and the mutual promises
set forth below, the parties hereto, intending to be legally bound, agree as
follows:
2
1. TERMINATION OF EMPLOYMENT. Effective upon the execution of this
Agreement by both parties hereto, Xxxxxxxxxx'x employment with UEI shall cease
and Xxxxxxxxxx and UEI agree that such termination is without cause.
2. NON-COMPETITION AND NON-SOLICITATION BY XXXXXXXXXX. Xxxxxxxxxx
covenants and agrees that, for a period of five (5) years from the date hereof
(the "Non-Compete Period") he shall not, directly or indirectly, either alone or
in partnership or jointly or in conjunction with any person or persons, firm,
association, syndicate, company or corporation as principal, agent, employee,
director, shareholder or in any other manner whatsoever (i) carry on or be
engaged in the Business or any other business which is in competition with the
Business as existing on the date hereof, (ii) solicit Business from or transact
Business with any person, firm or corporation to whom UEI has done business in
the past three (3) years prior to the date of this Agreement, (iii) directly or
indirectly solicit for employment, offer employment to, hire any person (as an
employee or consultant), or otherwise engage in business any person or persons
who is or are employed by UEI on the date of this Agreement or during the
Non-Compete Period, or (iv) take any action which might divert from UEI any
opportunity which would be within the scope of the Business, except with the
prior written consent of UEI.
3. EXCEPTIONS TO NON-COMPETE; NON-SOLICITATION. Nothing within
Section 2 above shall prohibit Xxxxxxxxxx from being an owner of not more than
five percent (5%) of the issued and outstanding stock of any class of a publicly
traded corporation whose principal business is competitive with the Business so
long as Xxxxxxxxxx has no active participation in the business of such
corporation.
4. PAYMENTS DUE XXXXXXXXXX.
(i) Compensation Amounts. UEI shall pay Xxxxxxxxxx, within five
(5) business days after the date both parties sign this Agreement, in
one lump sum, an amount equal to $30,320.39, less all applicable and
authorized withholdings and deductions. This amount represents
Xxxxxxxxxx'x accrued but unpaid compensation through his last day of
employment with UEI and which includes $18,397.31 representing 123.44
hours of accrued but unused vacation through his termination date.
(ii) Non-compete/Non-solicitation Amounts. Within five (5)
business days after this Agreement has been signed by both parties, UEI
shall pay to Xxxxxxxxxx, in one lump sum, an amount equal to $948,653,
less all applicable and authorized withholdings and deductions, which
amount represents payment in full for Xxxxxxxxxx'x agreements contained
within this Agreement.
Xxxxxxxxxx acknowledges and agrees that, upon receipt of such amounts, he shall
have received all amounts due him by virtue of his employment to which he is
entitled, including without limitation, all compensation, salary, vacation pay,
bonuses, profit sharing, and life insurance
2
3
gross-up, except for expense reports that he has submitted and, so long as he
remains a director of UEI, will submit from time to time in accordance with UEI
policies and procedures.
5. TERMINATION OF SCA. The parties hereto agree that the SCA is
hereby immediately terminated in its entirety and such agreement shall be of no
force and effect and neither party hereto shall claim any right or entitlement
to any amounts or other things due them thereunder.
6. STOCK OPTION AGREEMENTS. Xxxxxxxxxx represents, warrants and
agrees that this Section 6 accurately sets forth all options previously granted
to him and that there are no other options which have been granted to him, and
that he has not exercised any of the options granted him by UEI:
(i) On March 20, 1995, UEI, pursuant to one of its Stock Option
Plans and a related Stock Option Agreement between UEI and Xxxxxxxxxx
dated March 20, 1995 and the attached Stock Option Certificate of even
date therewith, a copy of which is attached hereto as Exhibit A, granted
to Xxxxxxxxxx the option to purchase up to 50,000 shares of common stock
of UEI at an exercise price of $4.31 per share. Immediately prior to the
date of this Agreement, Xxxxxxxxxx was vested in 75% of the option, none
of which have been exercised; and
(ii) On December 15, 1995, UEI, pursuant to one of its Stock
Option Plans and a related Stock Option Agreement between UEI and
Xxxxxxxxxx dated December 15, 1995 and the attached Stock Option
Certificate of even date therewith, a copy of which is attached hereto
as Exhibit B, granted to Xxxxxxxxxx the option to purchase up to 10,000
shares of common stock of UEI at an exercise price of $7.6875 per share.
Immediately prior to the date of this Agreement, Xxxxxxxxxx was vested
in 50% of the option, none of which have been exercised; and
(iii) On January 1, 1996, UEI, pursuant to one of its Stock
Option Plans and a related Stock Option Agreement between UEI and
Xxxxxxxxxx dated January 1, 1996 and the attached Stock Option
Certificate of even date therewith, a copy of which is attached hereto
as Exhibit C, granted to Xxxxxxxxxx the option to purchase up to 50,000
shares of common stock of UEI at an exercise price of $7.6875 per share.
Immediately prior to the date of this Agreement, Xxxxxxxxxx was vested
in 50% of the option, none of which have been exercised; and
(iv) On December 1, 1996, UEI, pursuant to one of its Stock
Option Plans and a related Stock Option Agreement between UEI and
Xxxxxxxxxx dated December 1, 1996 and the three (3) attached Stock
Option Certificates of even date therewith, a copy of which is attached
hereto as Exhibit D, granted to Xxxxxxxxxx the option to purchase up to
150,000 shares of common stock of UEI as follows:
3
4
110,000 at an exercise price of $5.6875 per share;
20,000 at an exercise price of $7.50 per share; and
20,000 at an exercise price of $8.50 per share.
Immediately prior to the date of this Agreement, Xxxxxxxxxx was vested
in 66.6666% of each portion of the option, none of which have been
exercised.
In accordance with each of the above referenced Stock Option Agreements, by
virtue of Xxxxxxxxxx'x termination of employment without cause as set forth
herein, he shall immediately be vested in 100% of each option and the parties
agree that he shall have the continuing right to exercise the above options, in
full or any portion thereof, at anytime during the thirty (30) month period
following the date of this Agreement after which time these options shall
terminate and be of no further force and effect and to the extent unexercised at
the end of business on the last day of the thirtieth (30th) month, Xxxxxxxxxx
shall have forfeited all rights to such options.
UEI and Xxxxxxxxxx further agree that from the date of this Agreement
and continuing until the end of business on January 31, 1999, Xxxxxxxxxx shall
have the continuing right to cause UEI to purchase from Xxxxxxxxxx from time to
time all or any portion (but in no event fractional shares) of the shares of UEI
common stock acquired by him as a result of his exercise of the options
described above; provided, however, that (a) the price per share to be paid by
UEI for such shares of stock shall be equal to the lesser of the fair value (as
determined in accordance with the applicable plan under which the stock option
was granted) or $18.00 and (b) UEI shall not be obligated to acquire such shares
of stock in the event that its currently existing credit facility or facilities
is or, after including funds to be used to purchase such shares, will be in
excess of $8,000,000 at the time UEI purchases any such shares and (c) the
aggregate number of shares that UEI shall be obligated to purchase from
Xxxxxxxxxx shall not exceed 125,000 shares.
8. INSURANCE. UEI will provide you (as set forth below) with up to
twenty-four (24) months (commencing on the date of this Agreement and ending at
the end of business on August 31, 2000) of continuing insurance to the extent
you had such insurance as of the date of this Agreement. You had both life and
health (including medical, dental, AD&D, and LTD) insurance.
(i) During the first eighteen (18) months following your
termination as an employee of UEI, UEI, on your behalf, will elect COBRA
which will cause your health insurance coverage to remain the same and
UEI will pay the premiums for this COBRA continuance. Xxxxxxxxxx agrees
that he will be responsible for all deductibles and co-pays as in the
past in accordance with the terms of the policy. After this initial
eighteen (18) month period, Xxxxxxxxxx may elect to convert the policy
to an individual policy, which converted individual policy would not be
substantially equivalent to the coverage previously provided you. If
converted, except as provided below, Xxxxxxxxxx shall be solely
responsible for all cost and expense, including without limitation
payment of premiums, deductibles and co-pays. If at the time of
conversion, Xxxxxxxxxx does not have
4
5
other health insurance available which, in Xxxxxxxxxx'x sole discretion,
is acceptable (that is, for example through a current employer or
spouse's employer or otherwise), UEI will pay Xxxxxxxxxx a one-time,
lump sum amount equal to the estimated (a) cost of such continued health
insurance (exclusive of deductibles and co-pays for which Xxxxxxxxxx has
been responsible in the past in accordance with the terms of the policy)
for six (6) months, plus (b) difference of the cost of the health
insurance as converted for eighteen (18) months over the cost of the
COBRA continued health insurance which UEI paid for the first eighteen
(18) months. Such payment shall be made at or near the time Xxxxxxxxxx
elects to convert the COBRA continued health insurance to an individual
policy. To convert, Xxxxxxxxxx must contact the UEI's Human Resources
Department in California (714-820-1000) at lease two (2) months prior
the expiration of the initial eighteen (18) month period set forth in
subsection 6(i) above. It is understood and agreed that it is
Xxxxxxxxxx'x sole responsibility to contact the UEI's Human Resources
Department to effect the conversion and his failure to do so will cause
the insurance to lapse at the end of the initial eighteen (18) month
period.
(ii) For the twenty-four (24) month period following your
termination as an employee of UEI, UEI, on your behalf, will cause your
life insurance coverage to remain the same and UEI will pay the premiums
for this continuance.
8. RETURN OF UEI PROPERTY. All computers and related peripherals,
notes, reports, sketches, plans, books, credit cards, calling cards, keys,
keycards, cellular telephones and related equipment, computer passwords,
unpublished memoranda or other documents or property which were created,
developed, generated or held or controlled by Xxxxxxxxxx and which are owned by,
paid for by, concern or are related to UEI's business, whether containing or
relating to Confidential Information as defined below or not, are the property
of UEI and have been or shall be returned to UEI immediately, except that
Xxxxxxxxxx may continue using the laptop computer and cellular telephone
currently in his possession so long as he continues as a member of UEI's Board
of Directors and within ten (10) business days after Xxxxxxxxxx ceases being a
member of UEI's Board of Directors, he shall return such computer and cellular
telephone in good working order. Xxxxxxxxxx acknowledges that he has received
all of his personal property which was located at UEI's offices. In the event
that UEI or Xxxxxxxxxx shall discover any other property of the other in its or
his possession, UEI or Xxxxxxxxxx, as the case may be, shall immediately return
such property to the other.
9. CONFIDENTIAL INFORMATION.
(i) Definitions
(a) "Confidential Information" shall mean all information,
including but not limited to trade secrets, disclosed to Xxxxxxxxxx or
known by him as a consequence of or through his employment by UEI,
concerning UEI's business and services and including, but not limited
to: software; computer programs; unpatented inventions, discoveries or
5
6
improvements; marketing or financial research and development of
business plans; sales forecasts; personnel information, including the
identity of other employees of UEI, their responsibilities, competence,
abilities, and compensation; pricing and financial information;
information concerning financial and contractual arrangements between
UEI and its customers or its suppliers including, without limitation,
the identity of suppliers and products supplied; market research and
attendant databases and libraries; current and prospective customer
lists and information about customers, their accounts, their product
preferences, terms or their finances; the volume of business transacted
by UEI and/or its customers; telephone numbers of customers; selling
techniques; research resources information concerning planned or pending
expansions, acquisitions or divestitures; and information concerning
leasing or purchases of major equipment or property; and which:
(1) generally has not been made available to the public; and
(2) is useful or of value to UEI's current or anticipated
business, research or development activities or those of
any customer or supplier of UEI; or
(3) has been identified to Xxxxxxxxxx as confidential by
UEI, either orally or in writing.
Confidential Information shall not include information which:
(4) is in or hereafter enters the public domain through no
fault of Xxxxxxxxxx;
(5) is obtained by Xxxxxxxxxx from a third party having the
legal right to use and disclose the same; or
(6) is in the possession of Xxxxxxxxxx prior to receipt from
UEI (as evidenced by Xxxxxxxxxx'x written records
per-dating the date of his employment with UEI.)
Confidential Information also does not include Xxxxxxxxxx'x
general skills and experience as defined under the governing law of this
Agreement.
(ii) Xxxxxxxxxx acknowledges and agrees that unauthorized disclosure or
use of UEI's Confidential Information may cause UEI irreparable harm.
Consequently, Xxxxxxxxxx shall maintain in confidence at all times and shall not
divulge to any unauthorized person or corporation or other entity, or use in any
manner, or knowingly allow another to use, without UEI's written consent, either
during the Non-Compete Period thereafter, UEI's Confidential Information.
Xxxxxxxxxx agrees, therefore, that UEI is entitled to protection from any
unauthorized disclosure or use, or threatened disclosure or use of any
Confidential Information, including protection by injunctive relief, in addition
to other remedies available under the law. Xxxxxxxxxx further
6
7
acknowledges agrees that UEI intends to operate and compete throughout the
world, and that UEI will be harmed by unauthorized disclosure or use of its
Confidential Information within such area.
10. REMEDIES. Xxxxxxxxxx acknowledges and agrees that the covenants
and agreements which he has made in this Agreement are reasonable and are
required for the reasonable protection of UEI's investment in the Business.
Xxxxxxxxxx agrees that the material breach of any covenant or agreement
contained herein may result in irreparable injury to UEI, and that in addition
to all other remedies provided by law or in equity with respect to the breach by
Xxxxxxxxxx of any provision of this Agreement, UEI and its successors and
assigns will be entitled to enforce the specific performance by Xxxxxxxxxx of
his obligations hereunder and to enjoin him from engaging in any activity in
violation hereof, all without the need of posting bond or any other security,
and that no claim by Xxxxxxxxxx against UEI or its successors or assigns will
constitute a defense or bar to the specific enforcement of such obligations. In
the event of a breach or a violation by Xxxxxxxxxx of any of the provisions of
this Agreement, the running of the Non-Compete Period shall be tolled during the
period of the continuance of any actual breach or violation.
11. PARTIAL INVALIDITY. The various covenants and provisions of this
Agreement are intended to be severable and to constitute independent and
distinct binding obligations each of the parties hereto. Should any covenant or
provision of this Agreement be determined to be void and unenforceable, in whole
or in part, it shall not be deemed to affect or impair the validity of any other
covenant or provision or part thereof, and such covenant or provision or part
thereof shall be deemed modified to the extent required to permit enforcement.
Without limiting the generality of the foregoing, if the scope of any covenant
contained in this Agreement is too broad to permit enforcement to its full
extent, such covenant shall be enforced to the maximum extent permitted by law,
and the parties hereto hereby agree that such scope may be judicially modified
accordingly.
12. ASSIGNMENT. Xxxxxxxxxx agrees that this Agreement may be
assigned by UEI to any entity controlled by, or under direct or indirect common
control with, UEI and to any person to whom UEI sells its business or assets,
and that upon any such assignment, such assignee shall acquire all of UEI's
rights under this Agreement, including without limitation the right of
assignment set out in this Section 12. Xxxxxxxxxx acknowledges that his
obligations hereunder are personal in nature and therefore incapable of being
performed by another; consequently, Xxxxxxxxxx agrees that he may not assign or
delegate all or any part of this Agreement and any attempt on his part to so
assign or delegate shall be void and with effect whatsoever.
13. NO STRICT CONSTRUCTION. The language used in this Agreement will
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party hereto.
14. NOTICE. Any notice or other communication required or permitted
to be given hereunder shall be in writing and shall be deemed to have been duly
given to any party (i) upon delivery to the address of such party specified
below if delivered in person or by courier, or if sent
7
8
by certified or registered mail (return receipt requested), postage prepaid,
(ii) upon dispatch if transmitted by telecopy or other means of facsimile, in
any case to the parties at the following address(es) or telecopy number(s), as
the case may be:
If to UEI:
Universal Electronics Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: President
Facsimile No.: (000) 000-0000
With required copies to:
Universal Electronics Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: General Counsel
Facsimile No.: (000) 000-0000
If to Xxxxxxxxxx:
Xx. Xxxxx X. Xxxxxxxxxx
0000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxx 00000
Facsimile No.: (000) 000-0000
or to such address(es) or telecopy number(s) as any party may designate by
written notice in the aforesaid manner.
15. WAIVER OF BREACH. The waiver by any party hereto of a breach of
any provision of this Agreement by any other party shall not operate or be
construed as a waiver of any subsequent breach.
16. ENTIRE UNDERSTANDING. This Agreement and the agreements referred
to herein constitute the entire understanding and shall not be changed, altered,
modified or discharged, except in writing consented to by all parties.
17. BINDING EFFECT. This Agreement shall be binding upon the
administrators, legal representatives, heirs and legatees and the successors and
permitted assigns of Xxxxxxxxxx and UEI.
8
9
18. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the laws of the State of Ohio.
19. COUNTERPARTS. This Agreement shall be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one in the same agreement.
20. INQUIRIES AND REFERENCES. The parties hereto agree that should
inquiry be made as to the circumstances and reasons surrounding Xxxxxxxxxx'x
departure from the employ of UEI, the parties shall respond by saying that Xx.
Xxxxxxxxxx'x employment was terminated by UEI without cause upon the mutual
understanding of the parties and providing the inquiring party with the dates of
his employment and positions held and, except as may be required by law, nothing
further shall be stated, including discussing Xxxxxxxxxx'x employment at UEI in
a demonstrably disparaging manner. Within five (5) days after this agreement has
been signed by both parties, the parties will prepare a press release regarding
this matter, which UEI will cause to be disseminated.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
UNIVERSAL ELECTRONICS INC.
By: /s/ XXXXXXX XXXXX
--------------------------------------
Xxxxxxx Xxxxx, President
I HEREBY ACKNOWLEDGE THAT I HAVE READ IN ITS ENTIRETY AND UNDERSTAND THE
FOREGOING AGREEMENT, INCLUDING BUT NOT LIMITED TO THE PROVISIONS WITH RESPECT TO
CONFIDENTIAL INFORMATION, NON-COMPETITION, INVENTIONS, AND REMEDIES AND THAT I
HAVE RECEIVED A FULLY SIGNED COPY OF THIS AGREEMENT FOR MY RECORDS.
By: /s/ XXXXX X. XXXXXXXXXX
--------------------------------------
Xxxxx X. Xxxxxxxxxx
9
