EXHIBIT 10.3
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement ("Agreement") is made and
entered into as of the 1st day of January, 2004, between DIRECTED ELECTRONICS,
INC., a California corporation (the "Company"), and XXXXX X. XXXXXXX (the
"Executive").
RECITALS
A. The Company is engaged in the business of designing and marketing
consumer car security and convenience systems, under brand names that include
Viper(R), Python(R), Sidewinder(R), Hornet(R), Wasp(R), AC Delco(R), Xxxxxxxx(R)
and Avital(R), as well as the marketing of a complete line of car audio speakers
and amplifiers, and installation products (collectively, and as may be modified
by the Company from time to time, the "Business").
B. The Company and the Executive are parties to that certain Employment
Agreement, dated as of October 24, 2000, as heretofore amended (the "Prior
Agreement").
C. The Company desires to continue to employ the Executive and the
Executive desires to continue to be employed by the Company, upon the terms and
conditions set forth in this Agreement.
AGREEMENT
NOW THEREFORE, in consideration of (i) the Executive's employment with the
Company, (ii) the compensation paid to the Executive and the benefits provided
to the Executive in connection with such employment, (iii) the Executive's use
of the equipment, supplies, facilities and other resources of the Company, and
(iv) the opportunity provided to the Executive by the Company to acquire or use
information relating to or based on the Business and to work and develop in the
field for which the Executive is employed, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
INTERPRETATION OF THIS AGREEMENT
1.1. Defined Terms. As used herein, the following terms when used in this
Agreement have the meanings set forth below:
1.1.1. "Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
1.1.2. "Base Salary" shall have the meaning given to it under
Section 2.2 of this Agreement.
1.1.3. "Base Year" means calendar year 2003.
1.1.4. "Board" means the Board of Directors of the Company.
1.1.5. "Cause" means (i) the failure by the Executive to perform the
Executive's duties with the Company, as determined by the Board (other than any
such failure resulting from the Executive's incapacity due to physical or mental
illness), which failure to perform is not cured within 60 days after a written
demand for substantial performance is delivered to the Executive by the Board,
(ii) the Executive's conviction of a felony involving deceit, fraud or moral
turpitude or with respect to which public knowledge thereof could result in a
Material Adverse Effect or materially affect the Executive's ability to perform
his duties, (iii) the engaging by the Executive in conduct which the Board
determines is injurious to the Company, monetarily or otherwise, or which could
result in a Material Adverse Effect, (iv) the commission by the Executive of an
act or acts involving fraud, embezzlement, misappropriation, theft, breach of
fiduciary duty or dishonesty against the property or personnel of the Company or
any of its Affiliates, (v) the breach by the Executive of any of the terms of
this Agreement (other than a breach of the terms of Article 3 of this
Agreement), which breach is not cured within 15 days after written demand to
cure such breach is delivered to the Executive by the Board, or (vi) a breach of
the terms of Article 3 of this Agreement.
1.1.6. "Change of Control" means (i) any Person (other than the
Company, any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, or any affiliate of Trivest, Inc.) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended), directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of the Company's then
outstanding securities eligible to vote, (ii) the merger or consolidation of the
Company with any other corporation or other business entity, 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) more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no Person acquires more than 50% of the combined voting power of the
Company's then outstanding securities shall not constitute a Change of Control,
or (iii) the sale or disposition by the Company of all or substantially all of
its assets.
1.1.7. "Company" shall have the meaning given to it in the first
sentence of this Agreement.
1.1.8. "Company Information" means Confidential Information and
Trade Secrets.
1.1.9. "Confidential Information" means confidential data and
confidential information relating to the business of the Company (which does not
rise to the status of a Trade Secret under applicable law) which is or has been
disclosed to the Executive or of which the Executive became aware as a
consequence of or through his employment with the Company and which has value to
the Company and is not generally known to the competitors of the Company.
Confidential Information does not include any data or information that (i) has
been voluntarily disclosed to the general public by the Company (other than by
any act or omission of the Executive without the approval of the Board), or (ii)
otherwise enters the public domain through lawful means.
1.1.10. "Disability" means the Executive's inability to perform his
normal duties as a result of incapacity due to physical or mental illness, for
any 90 consecutive calendar day period or any 60 business days (whether or not
consecutive) during any 365 calendar day period.
1.1.11. "Employment Period" shall have the meaning given to it in
Section 2.1 hereof.
1.1.12. "Executive" shall have the meaning given to it in the first
sentence of this Agreement.
1.1.13. "Incentive Compensation" shall have the meaning given to it
in Section 2.5 of this Agreement.
1.1.14. "Initial Public Offering" means the initial public sale of
common stock of Parent pursuant to a registration statement which has become
effective under the Securities Act of 1933.
1.1.15. "Liquidity Event" means any one or more of the following
events: (a) the sale of all, or substantially all, of the Company's consolidated
assets in any single transaction or series of related transactions; (b) the
sale, or series of related sales, of common stock of Parent or the Company
possessing the ordinary voting power (on a fully-diluted basis) to elect a
majority of the board of directors of Parent or the Board, as the case may be,
to an independent third party or a group of affiliated independent third
parties; (c) the consummation of an Initial Public Offering; or (d) any merger
or consolidation of Parent or the Company with or into another corporation or
other business entity
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(regardless of which entity is the surviving corporation) if, after giving
effect to such merger or consolidation the holders of Parent's or the Company's,
as the case may be, voting securities (on a fully-diluted basis) immediately
prior to the merger or consolidation own voting securities of the surviving or
resulting corporation or other business entity representing less than a majority
of the ordinary voting power to elect directors of the surviving or resulting
corporation (on a fully-diluted basis).
1.1.16. "Material Adverse Effect" shall mean a material adverse
effect on the business, assets, properties, results of operations, financial
condition or prospects of the Company or any of its Affiliates.
1.1.17. "Non-Solicitation Period" shall mean a period of time equal
to (i) the Severance Period, if the Executive is terminated without Cause, or
(ii) a period of 12 months after the Termination Date if the Executive resigns
or if the Employment Period terminates for any reason other than termination by
the Company without Cause.
1.1.18. "Notice of Termination" shall have the meaning given to it
in Section 2.1 hereof.
1.1.19. "Parent" means DEI Holdings, Inc. a Florida corporation.
1.1.20. "Person" means an individual, a partnership, a corporation,
a limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
1.1.21. "Significant Competitor" has the meaning given to it in
Section 3.6 hereof.
1.1.22. "Significant Customer" has the meaning given to it in
Section 3.6 hereof.
1.1.23. "Subsidiary" when used with respect to any Person means any
other Person, whether incorporated or unincorporated, of which (i) more than 50%
of the securities or other ownership interests or (ii) securities or other
interests having by their terms ordinary voting power to elect more than 50% of
the board of directors or others performing similar functions with respect to
such corporation or other organization, is directly owned or controlled by such
Person or by any one or more of its Affiliates.
1.1.24. "Termination Date" shall have the meaning given to it in
Section 2.1 hereof.
1.1.25. "Trade Secrets" means information of the Company including,
but not limited to, technical or nontechnical data, formulas, patterns,
compilations, programs, financial data, financial plans, product or service
plans, business plans or lists of actual or potential customers or suppliers
that (i) derives economic value, actual or potential, from not being generally
known to, and not being readily ascertainable by proper means by, other persons
who can obtain economic value from its disclosure or use, and (ii) is the
subject of efforts that are reasonable under the circumstances to maintain its
secrecy.
1.1.26. "Welfare Plan Benefits" shall have the meaning given to it
in Section 2.4 hereof.
1.2. Interpretation. The words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole, as the same from
time to time may be amended or supplemented and not any particular section,
paragraph, subparagraph or clause contained in this Agreement. Wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in
masculine, feminine or neuter gender shall include the masculine, feminine and
the neuter.
ARTICLE II
EMPLOYMENT
2.1. Duration. The Company agrees to continue to employ the Executive and
the Executive agrees to be so employed until the first to occur of (i) December
31, 2006, (ii) the date specified in a Notice of Termination given by the
Executive in connection with his voluntary resignation (which shall not be less
than 60 days from the date such Notice of Termination is given), (iii) the date
specified in a Notice
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of Termination stating that the Board has determined that the Executive's
employment be terminated for Cause, (iv) the date specified in a Notice of
Termination given by the Company stating that the Board has determined that the
Executive's employment with the Company is no longer in the best interest of the
Company (in which event, the Executive will be entitled to severance pay as
described in Section 2.4 below) (termination pursuant to this clause (iv) is
sometimes referred to in this Agreement as "termination without Cause"), (v) the
date of the Executive's death, or (vii) the date specified in a Notice of
Termination given by the Company in connection with a termination of the
Executive's employment by reason of his Disability. For purposes of this
Agreement, the term "Employment Period" shall mean such period of employment and
the term "Termination Date" shall mean the date on which the Employment Period
terminates. Any purported termination of the Executive's employment by the
Company or by the Executive shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 4.1 below,
which notice shall indicate the specific termination provision in this Section
2.1 relied upon (a "Notice of Termination").
2.2. Salary and Benefits. During the Employment Period, the Company will
pay the Executive a base salary at the rate of $450,000 per annum or at such
higher rate as the Board designates in its sole discretion from time to time
("Base Salary"), payable in installments consistent with the Company's normal
payroll schedule, subject to applicable withholding and other taxes. Base Salary
for each calendar year after calendar 2004 shall be increased by $25,000 over
the previous calendar year so long as the Company achieves EBITDAM equal to or
greater than the Company's EBITDAM for the prior calendar year (i. in other
words, (i) 2005 Base Salary shall be $475,000 if 2004 EBITDAM is at least equal
to 2003 EBITDAM, and (ii) 2006 Base Salary shall be increased by $25,000 from
2005 Base Salary if 2005 EBITDAM is at least equal to 2004 EBITDAM). The Base
Salary shall also be reviewed, at least annually, for additional merit increases
and may, by action and in the discretion of the Board, be increased at any time
and from time to time. During the Employment Period, the Executive shall also be
entitled to participate in the following programs and receive the following
benefits:
2.2.1. the Executive will be entitled to participate in all medical
and hospitalization, group life insurance, retirement and any and all other
fringe benefit plans as are from time to time provided by the Company to its
executives, subject to the provisions of such plans, including, without
limitation, eligibility criteria and contribution requirements, as the same may
be in effect from time to time;
2.2.2. the Executive will be entitled to a maximum of four weeks
vacation each year with salary; provided, however, that in no event may a
vacation be taken at a time when to do so could, in the reasonable judgment of
the Chairman of the Board, materially adversely affect the business of the
Company;
2.2.3. the Executive will be entitled to reimbursement for
reasonable business expenses incurred by the Executive (subject to submission of
appropriate substantiation by the Executive);
2.2.4. the Executive will be entitled to reimbursement (subject to
submission of appropriate substantiation by the Executive) for reasonable
expenses incurred in attending trade association meetings and shows for the
Executive where such attendance is appropriate for a particular meeting or
show);
2.2.5. the Executive will be entitled to reimbursement (subject to
submission of appropriate substantiation by the Executive) for the cost of
annual membership dues to one country club, provided, however, that the
Executive will not be entitled to reimbursement of annual dues pursuant to this
Subsection in an amount in excess of $10,000 annually;
2.2.6. the Company will, promptly after the end of each calendar
year during the Employment Term, make a payment of $12,000 ($15,000 for calendar
2005 and 2006) in deferred salary to the deferred compensation plan previously
established for Executive's benefit;
2.2.7. the Company shall (i) provide the Executive with the use of a
car (at a lease cost of no more than $1,250 per month) and related automobile
insurance, (ii) reimburse the Executive for
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maintenance and gasoline expenses attributable to such automobile (subject to
submission of appropriate substantiation by the Executive), and (iii) upon
expiration of Executive's current automobile lease and submission of appropriate
substantiation, reimburse Executive for applicable excess mileage charges;
2.2.8. the Company shall promptly pay to Executive a
non-accountable, domicile-related expense allowance of $100,000; and
2.2.9. the Executive will be entitled to reimbursement (subject to
submission of appropriate substantiation by the Executive) for the cost of
low-cost lodging in the Vista, California region, to the extent such expenses
are reasonable and necessary business expenses.
2.3. Services. During the Employment Period, the Executive will serve as
the President and Chief Executive Officer of the Company and will render such
services of an executive and administrative character to the Company as the
Board or the Chairman of the Board may from time to time direct. The Executive
will devote his best efforts and substantially all of his business time and
attention (except for vacation periods and reasonable periods of illness or
other incapacity) to the business of the Company. During the Employment Period,
Executive will serve as a member of the Board. Nothing in this Agreement shall
prohibit the Executive from engaging in trade association activities, including
serving as a board member or committee member to trade associations or, after
the first anniversary of the date hereof, serving on the boards of directors of
other companies which do not engage in business activities that are competitive
with those of the Company, provided that none of such activities materially
interfere with the performance of the Executive's duties and responsibilities to
the Company under this Agreement.
2.4. Severance Pay.
2.4.1. If, as a result of or following a Change of Control, the
Executive's employment is terminated without Cause pursuant to Section 2.1(iv),
the Company will pay to the Executive all amounts due to the Executive as Base
Salary pursuant to Section 2.2 above for a period of 24 months after the
Termination Date. If the Executive's employment is terminated without Cause
pursuant to Section 2.1(iv) other than as a result of or following a Change of
Control, or if, after the third anniversary of the date hereof, the Company and
the Executive have not either extended the Employment Period or entered into a
new employment agreement, the Company will pay to the Executive all amounts due
to the Executive as Base Salary pursuant to Section 2.2 above for a period of 12
months after the Termination Date. Such payments shall be made in installments,
and on the payment dates, on which such Base Salary would have been paid if the
Employment Period had continued for such applicable period. Upon the making of
the last of such payments, except as otherwise provided this Section 2.4, the
Company will have no further obligation to the Executive.
2.4.2. In addition, for so long as the Company is making the
payments described in Section 2.4.1 (the "Severance Period"), the Company will
(i) arrange to provide the Executive with benefits substantially similar to
those which the Executive was receiving or entitled to receive under the
Company's life, disability, accident and group health insurance plans or any
similar plans in which the Executive was participating immediately prior to the
Termination Date ("Welfare Plan Benefits") at a cost to the Executive which is
not substantially greater than the cost to him in effect at the Termination
Date; provided, however, that to the extent any such coverage is prohibited by
any judicial or legislative authority, the Company shall make alternative
arrangements to provide the Executive with Welfare Plan Benefits, including, but
not limited to, providing the Executive with a payment in an amount equal to his
cost of purchasing the Welfare Plan Benefits, and (ii) if the termination is as
a result of or following a Change of Control, continue during the Severance
Period to provide Executive with the automobile-related benefits described in
Section 2.2.7 hereof. Benefits otherwise receivable by the Executive pursuant to
the preceding sentence shall be reduced to the extent comparable benefits are
actually received on the Executive's behalf during the Severance Period, and
such benefits actually received by the Executive shall be reported by him to the
Company.
2.5. Incentive Compensation. The Executive shall also be entitled to
receive incentive annual compensation of up to 100% of Base Salary, as set forth
on Exhibit A hereto (the "Incentive Compensation"). Incentive Compensation shall
be calculated as promptly as practicable after the end of
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each calendar year. Executive shall be entitled to 100% of Incentive
Compensation with respect to any calendar year if, as of December 31 of such
calendar year, the Employment Period has not terminated. If the Employment
Period terminates prior to June 30 of any calendar year, Executive shall not be
entitled to any Incentive Compensation in respect of such calendar year. If the
Employment Period is terminated without Cause after June 30 of any calendar
year, the Executive shall be entitled to a portion of the Incentive
Compensation, determined by multiplying the Incentive Compensation to which the
Executive would be entitled if he had been employed for an entire calendar year
by a fraction, the numerator of which is the number of full months during such
calendar year that the Executive was employed by the Company, and the
denominator of which is 12.
2.6. Equity Participation. The Executive has heretofore entered into a
Subscription and Shareholders' Agreement with Parent pursuant to which Executive
acquired common stock of Parent and a convertible note of Parent. The Executive
also entered into an equity participation right agreement with Parent, pursuant
to which the Executive acquired a right to equity based compensation upon a
Liquidity Event, as described therein.
ARTICLE III
PROPERTY AND BUSINESS OF THE COMPANY
3.1. Nondisclosure. During the Employment Period and during the periods
described in the last sentence of this Section 3.1 the Executive (a) will
receive and hold all Company Information in trust and in strictest confidence,
(b) will protect the Company Information from disclosure and will in no event
take any action causing, or fail to take any action reasonably necessary to
prevent, any Company Information to lose its character as Company Information,
and (c) except as required by the Executive's duties in the course of his
employment by the Company or by applicable law, will not, directly or
indirectly, use, disseminate or otherwise disclose any Company Information to
any third party without the prior written consent of the Board, which may be
withheld in the Board's absolute discretion. The provisions of this Section 3.1
shall survive the termination of the Executive's employment (i) for a period of
five years with respect to Confidential Information, and (ii) with respect to
Trade Secrets, for so long as any such information qualifies as a Trade Secret
under applicable law.
3.2. Books and Records. All books, records, reports, writings, notes,
notebooks, computer programs, sketches, drawings, blueprints, prototypes,
formulas, photographs, negatives, models, equipment, chemicals, reproductions,
proposals, flow sheets, supply contracts, customer lists and other documents
and/or things relating in any manner to the business of the Company (including
but not limited to any of the same embodying or relating to any Confidential
Information or Trade Secrets), whether prepared by the Executive or otherwise
coming into the Executive's possession, shall be the exclusive property of the
Company and shall not be copied, duplicated, replicated, transformed, modified
or removed from the premises of the Company except pursuant to and in
furtherance of the business of the Company and shall be returned immediately to
the Company on the Termination Date or on the Company's request at any time.
3.3. Inventions and Patents. Subject to the provisions of Sections 2870
through 2872 of the California Labor Code, the Executive agrees that all
inventions, innovations or improvements in the Company's method of conducting
its business (including new contributions, improvements, ideas and discoveries,
whether patentable or not) conceived or made by him during his employment with
the Company belong to the Company and the Executive hereby assigns all of such
contributions, improvements, ideas and discoveries to the Company. The Executive
will promptly disclose such inventions, innovations and improvements to the
Board and perform all actions reasonably requested by the Board to establish and
confirm such ownership.
3.4. Other Businesses. Except as provided in Section 2.3, the Executive
shall not, without the express written consent of the Board, during the
Employment Period, become engaged in, render services for, or permit his name to
be used in connection with, any business other than the business of the Company.
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3.5. Non-Solicitation of Employees. During the Employment Period and for a
period of time equal to the Non-Solicitation Period, the Executive will not,
directly or indirectly, (i) solicit for employment or employ (or attempt to
solicit for employment or employ), for himself or on behalf of any sole
proprietorship, partnership, corporation, limited liability company or business
or any other Person (other than the Company or any of its Subsidiaries), any
employee of the Company or any Person who was an employee during the one year
period preceding the date of such solicitation, employment or attempted
solicitation or employment, or (ii) encourage any such employee to leave his or
her employment with the Company. To the extent that the covenant provided for in
this Section 3.5 may later be deemed by a court to be too broad to be enforced
with respect to its duration or with respect to any particular activity or
geographic area, the court making such determination shall have the power to
reduce the duration or scope of the provision, and to add or delete specific
words or phrases to or from the provision. The provision as modified shall then
be enforced.
3.6. Non-Solicitation of Customers. During the Employment Period and for a
period of time equal to the Non-Solicitation Period, the Executive will not,
directly or indirectly, (i) solicit sales from any Significant Customer (as
defined below) on behalf of any Significant Competitor (as defined below), or
(ii) encourage any Significant Customer to cease its business relationship with
the Company. To the extent that the covenant provided for in this Section 3.6
may later be deemed by a court to be too broad to be enforced with respect to
its duration or with respect to any particular activity, the court making such
determination shall have the power to reduce the duration or scope of the
provision, and to add or delete specific words or phrases to or from the
provision. The provision as modified shall then be enforced. A "Significant
Customer" is any customer of the Company or any of its Subsidiaries that during
the 12 month period immediately prior to the Termination Date accounted for
$1,000,000 or more of revenue to the Company and its Subsidiaries. A
"Significant Competitor" is any sole proprietorship, partnership, corporation,
limited liability company or business or any other Person (other than the
Company or any of its Subsidiaries) that designs, manufactures, sells, markets
or distributes products or services in the vehicle security or convenience
category, but only if annual revenues of such sole proprietorship, partnership,
corporation, limited liability company or business or any other Person with
respect to any such products or services exceeds $10 million.
ARTICLE IV
MISCELLANEOUS
4.1. Notices. Any notice, request, demand, claim or other communication
hereunder that is required to be made in writing shall be deemed duly given on
the second business day after if it is sent by registered or certified mail,
return receipt requested, postage prepaid, or, on the next business day after if
sent by a reputable overnight courier such as Federal Express, and addressed to
the intended recipient as set forth below:
If to the Executive:
c/o Directed Electronics, Inc.
Xxx Xxxxx Xxx
Xxxxx, Xxxxxxxxxx 00000
With copies to (which shall not constitute notice to the Executive):
R. Xxxxx Xxxxx, Esq.
Executive Law Group
0 Xxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
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If to the Company:
c/o Trivest, Inc.
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxx 000
Xxxxx, Xxxxxxx 00000
Attention: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
E-mail: xxxxxxxxxx@xxxxxxx.xxx
With copies to (which shall not constitute notice to the Company):
Xxxxxxxxx Xxxxxxx, LLP
0000 X. Xxxxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxxx
Facsimile: (000) 000-0000
E-mail: xxxxxxxxxxx@xxxxx.xxx
Either party hereto may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, messenger service, telecopy,
telex, ordinary mail or electronic mail), but no such notice, request, demand,
claim or other communication shall be deemed to have been duly given unless and
until it actually is received by the intended recipient. Either party hereto may
change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other party notice in
the manner herein set forth.
4.2. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein. This Section
4.2 shall be read consistently with Sections 3.5 and 3.6 as the parties intend
that such provisions may be modified by a court of competent jurisdiction only
to the extent necessary to allow for enforcement thereof.
4.3. Complete Agreement. This Agreement embodies the complete agreement
and understanding among the parties and supersedes and preempts any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way,
including the Prior Agreement.
4.4. Counterparts. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement. Any telecopied signature shall
be deemed a manually executed and delivered original.
4.5. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by the Executive and the Company and their
respective successors and assigns (and, in the case of the Executive, heirs and
personal representatives), except that Executive may not assign any of his
rights or delegate any of his obligations hereunder.
4.6. Equitable Remedies. The Executive acknowledges and agrees that the
Company would not have an adequate remedy at law in the event any of the
provisions of Article 3 of this Agreement are not performed in accordance with
their specific terms or are breached. Accordingly, the Executive agrees that the
Company shall be entitled to an injunction or injunctions to prevent breaches of
Article 3 of this
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Agreement and to enforce specifically the terms and provisions thereof in any
action instituted in any court of competent jurisdiction, in addition to any
other remedies which may be available to it.
4.7. Choice of Law. This Agreement shall be governed and construed in
accordance with the laws of the State of California without regard to conflicts
of laws principles thereof and all questions concerning the validity and
construction hereof shall be determined in accordance with the laws of said
state. Subject to the last sentence of this Section 4.7, by execution and
delivery of this Agreement, each Party irrevocably submits to the personal and
exclusive jurisdiction of any federal or state court of competent jurisdiction
located in the County of San Diego, State of California, for himself or herself
to enforce this Agreement. Each party agrees that venue would be proper in any
of such courts, and hereby waives any objection that any such court is an
improper or inconvenient forum for the resolution of any such action. The
parties further agree that the mailing by certified or registered mail, return
receipt requested, to the addresses specified for notice in this Agreement, of
any process or summons required by any such court shall constitute valid and
lawful service of process against them, without the necessity for service by any
other means provided by statute or rule of court. Nothing in this Agreement
shall affect or limit any right to serve process in any other manner permitted
by law or shall be construed to prevent the Company from bringing and pursuing,
or in any way limit, the right of the Company to bring or pursue, any action
arising out of or in connection with Article 3 in any jurisdiction where the
Executive is subject to personal jurisdiction and venue is proper.
4.8. Dispute Resolution. Subject to the last sentence of this Section 4.8,
if any dispute arises over the terms of this Agreement between the parties to
this Agreement, either Executive or Company may submit the dispute to binding
arbitration within 30 days after such dispute arises, to be governed by the
evidentiary and procedural rules of the American Arbitration Association
(Commercial Arbitration). Executive and Company shall mutually select one
arbitrator within 10 days after a dispute is submitted to arbitration. In the
event that the parties do not agree on the identity of the arbitrator within
such period, the arbitrator shall be selected by the American Arbitration
Association. The arbitrator shall hold a hearing on the dispute in San Diego,
California within 30 days after having been selected and shall issue a written
opinion within 15 days after the hearing. The arbitrator shall also decide on
the allocation of the costs of the arbitration to the respective parties, but
Executive and Company shall each be responsible for paying the fees of their own
legal counsel, if legal counsel is obtained. Either Executive or Company, or
both parties, may file the decision of the arbitrator as a final, binding and
nonappealable judgment in a court of appropriate jurisdiction. Notwithstanding
the foregoing provisions of this Section 4.8 to the contrary, matters in which
an equitable remedy or injunctive relief is sought by a party, including but not
limited to the remedies referred to in Section 4.6 hereof, shall not be required
to be submitted to arbitration, if the party seeking such remedy or relief
objects thereto, but shall instead be subject to the provisions of Section 4.7
hereof.
4.9. Amendments and Waivers. No provision of this Agreement may be amended
or waived without the prior written consent of the parties hereto. The waiver by
either party to this Agreement of a breach of any provision of this Agreement
shall not be construed or operate as a waiver of any preceding or succeeding
breach of the same or any other term or provision or as a waiver of any
contemporaneous breach of any other term or provision or as a continuing waiver
of the same or any other term or provision.
4.10. Business Days. Whenever the terms of this Agreement call for the
performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
4.11. No Third Party Beneficiary. Except for the parties to this Agreement
and their respective successors and assigns, nothing expressed or implied in
this Agreement is intended, or will be construed, to confer upon or give any
person other than the parties hereto and their respective successors and assigns
any rights or remedies under or by reason of this Agreement.
SIGNATURES APPEAR ON FOLLOWING PAGE
9
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
DIRECTED ELECTRONICS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------------------
Xxxx X. Xxxxxxxxx, Chairman of the Board
/s/ Xxxxx X. Xxxxxxx
-----------------------------------------------
Xxxxx X. Xxxxxxx
10
EXHIBIT A
TO DIRECTED ELECTRONICS / XXXXX XXXXXXX
EMPLOYMENT AGREEMENT
Incentive Compensation
I. PRELIMINARY MATTERS:
- This Exhibit A sets forth the Incentive Compensation referred to in Section
2.5 of the Employment Agreement between Xxxxx Xxxxxxx and Directed
Electronics, Inc. In order to be eligible for Incentive Compensation in
respect of any calendar year, the criteria set forth below under "Measurement
Criteria" must be satisfied.
- "EBITDAM" means the Company's Net Income for any period, plus (i) income
taxes deducted in determining Net Income for that period, (ii) any interest
on indebtedness for borrowed money deducted in determining Net Income for
that period, (iii) any charges for depreciation and amortization deducted in
determining Net Income for the period, and (iv) any management fees incurred
by the Company to Trivest II, Inc. and deducted in determining Net Income for
that period. EBITDAM shall be determined by the Board, and such determination
shall be final and binding on the Executive.
- "NET INCOME" means, for any period, the consolidated net income (or loss) of
the Company and its Subsidiaries, determined in accordance with generally
accepted accounting principles, consistently applied with past practices.
II. MAXIMUM ANNUAL INCENTIVE COMPENSATION:
- 100% of Base Salary.
MEASUREMENT CRITERIA:
- Attainment of consolidated EBITDAM for any fiscal year in excess of
consolidated EBITDAM for the preceding fiscal year. 62.5% of Maximum Annual
Incentive Compensation is based on this criterion.
- Reduction of debt (i.e., revolver, term debt and subordinated debt) as of the
end of any fiscal year from debt at the beginning of such fiscal year. 18.75%
of Maximum Annual Incentive Compensation is based on this criterion.
- Discretionary component as determined by the Company's Chairman in his sole
discretion based on his personal, subjective review of Executive's overall
performance utilizing the Company's standard executive review format. 18.75%
of Maximum Annual Compensation is based on this criterion.
INCENTIVE COMPENSATION CALCULATION:
- The EBITDAM hurdle is outlined on Annex 1. The bonus amount is calculated
based on achieving EBITDAM for a fiscal year between 100% and 115% of prior
year EBITDAM (110% in the case of Inactive Compensation for fiscal 2004).
- To the extent that EBITDAM for a fiscal year exceeds 115% of prior year
EBITDAM (110% in 2004), additional Incentive Compensation may be paid at the
discretion of the Board.
- The reduction of debt component of Incentive Compensation is based on
achieving net debt (i.e., reduction of debt plus increase/decreased in cash)
for a fiscal year between $10.5 million and $15.0 million.
A-1
TERMS AND CONDITIONS:
- Executive shall be entitled to 100% of Incentive Compensation with respect to
any calendar year if, as of December 31 of such calendar year, the Employment
Period has not terminated. If the Employment Period terminates prior to June
30 of any calendar year, Executive shall not be entitled to any Incentive
Compensation in respect of such calendar year. If the Employment Period is
terminated without Cause after June 30 of any calendar year, the Executive
shall be entitled to a portion of the Incentive Compensation, determined by
multiplying the Incentive Compensation to which the Executive would be
entitled if he had been employed for an entire calendar year by a fraction,
the numerator of which is the number of full months during such calendar year
that the Executive was employed by the Company, and the denominator of which
is 12.
- In the event the Company completes an add-on acquisition, the Board shall
re-set EBITDAM and Debt Reduction hurdles accordingly.
A-2
