EXHIBIT 10.3
EXECUTIVE RETENTION AGREEMENT
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THIS EXECUTIVE RETENTION AGREEMENT ("Agreement") is made this 24th day of
January, 2002 (the "Effective Date"), by and between RockShox, Inc., a Delaware
corporation (the "Corporation"), and Xxxxx Xxxxx (the "Employee").
EXPLANATORY STATEMENT
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A. The Corporation is exploring various corporate transactional
alternatives, one of which could involve a "Change of Control" (as defined
below) of the Corporation.
B. The Corporation desires to retain the Employee in its
employment during any transition period that may be required in connection with
any such Change of Control and the Employee is willing to remain in such
employment in consideration of the payments to be made by the Corporation, upon
the terms and conditions hereinafter provided.
C. This Agreement does not affect the terms and provisions of any
separate employment agreement between the Employee and the Corporation which
shall remain in effect in accordance with its terms.
NOW, THEREFORE, in consideration of the Explanatory Statement, which
shall be deemed to be a substantive part of this Agreement, and the mutual
covenants, promises, agreements, representations and warranties hereinafter set
forth, the parties hereto do hereby covenant, promise, agree, represent and
warrant as follows:
1. EMPLOYMENT.
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1.1 Period of Services. The Employee hereby agrees, in
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consideration of the payments to be made in accordance with Section 3 below, to
remain in the employment of the Corporation in his current position and at his
current rate of pay (or such higher rate as may be authorized by the
Corporation) from the period beginning on the date hereof and terminating upon
the earlier of (x) the later to occur of June 30, 2002 and three months
following the closing of a Change of Control (as defined below), should a Change
of Control occur on or before June 30, 2002 (the "Retention Period"), (y) the
written notice from the Corporation to the Employee that his services are no
longer required by the Corporation and that his employment will terminate on the
date specified in such notice
1.2 Services. The Executive shall continue to perform the
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duties and responsibilities of his current position with the Corporation (unless
such duties are altered by the Corporation or the Corporation terminates the
employment of the Employee) during the Retention Period and shall provide such
reasonable transition assistance in connection with the Change of Control as may
be requested from time to time by the Corporation.
1.3 Change of Control. For purposes of this Agreement, a
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"Change of Control" shall mean, after the Effective Date, the following
(excluding any such transaction, event or occurrence in connection with, or as a
result of, the bankruptcy of the Corporation):
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 50% or more of either (i) the then-outstanding shares of common stock of the
Corporation (the "Outstanding Common Stock") or (ii) the combined voting power
of the then-outstanding voting securities of the Corporation entitled to vote
generally in the election of directors (the "Outstanding Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Corporation, (ii) any acquisition by the Corporation, (iii)
any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the Corporation,
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 1.3 or (v)
any acquisition of beneficial ownership or voting power that remains subject to
divestiture upon the occurrence of stated events; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Corporation's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Corporation (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Common Stock and Outstanding Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly, more than
50% of, respectively, the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Common Stock
and Outstanding Voting Securities, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Corporation or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 50% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination, or the combined voting power of the
then-outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Corporation's stockholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(d) Approval by the respective stockholders of the
Corporation, or the completion of any other required approval process, for a
complete liquidation or dissolution of the Corporation.
2. TERM. The term of this Agreement (the "Term") shall commence
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on the Effective Date and shall remain in effect until the last day of the
Retention Period, provided, however, that certain provisions contained herein
shall remain in full force and effect after the end of the Term in accordance
with their specific terms.
3. PAYMENT OF RETENTION BONUS. Subject to the provisions of
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Section 4 hereof, in the event that a Change of Control occurs on or prior to
June 30, 2002, in return for Employee's agreements hereunder, the Corporation
shall pay the Employee on the date of closing of such Change of Control an
amount equal to $500,000.00 (the "Retention Bonus"). The payment of the
Retention Bonus shall be subject to all required withholdings of tax and other
items.
4. EFFECT OF TERMINATION OF EMPLOYMENT PRIOR TO END OF RETENTION
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PERIOD. In the event that a Change of Control occurs on or prior to June 30,
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2002:
(a) If the Employee voluntarily terminates employment prior
to the end of the Retention Period, the Employee shall not be entitled to the
payment of any portion of the Retention Bonus and shall be obligated to return
promptly all of such Retention Bonus to the Company.
(b) If the Corporation terminates the employment of the
Employee for "cause" at any time prior to the end of the Retention Period, the
Employee shall only be entitled to a prorated portion of the Retention Bonus
(based on the number of days during the Retention Period before Employee's
termination divided by the total number of days in the Retention Period) and
shall be obligated to return promptly the remainder (i.e., not including such
prorated portion) of such Retention Bonus to the Company. For this purpose,
"Cause" shall mean (i) the willful and continued failure of the Employee to
perform substantially the Employee's duties with the Corporation or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), which failure shall continue for ten days after a
written demand for substantial performance is delivered to the Employee by the
Board of Directors of the Corporation (the "Board") or the Chief Executive
Officer of the Corporation which specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Employee has not
substantially performed the Employee's duties, or (ii) the willful engaging by
the Employee in illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Corporation. For purposes of this provision, no
act or failure to act, on the part of the Employee, shall be considered
"willful" unless it is done, or omitted to be done, by the Employee in bad faith
or without reasonable belief that the Employee's action or omission was in the
best interests of the Corporation. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the Board or upon the
instructions of the Chief Executive Officer or based upon the advice of counsel
for the Corporation shall be conclusively presumed to be done, or omitted to be
done, by the Employee in good faith and in the best interests of the
Corporation. A determination of termination "for cause" may only be made by a
unanimous vote of the full Board of Directors of the Corporation (excluding, if
applicable, the Employee) acting in good faith at an actual meeting in person of
such Board.
(c) If the Employee's employment with the Corporation is
terminated by the Corporation during the Retention Period other than for Cause,
the Employee shall be entitled to retain the Retention Bonus in full.
(d) If the Employee's employment with the Corporation
terminates prior to the end of the Retention Period because of his death or
"disability," he shall be entitled to retain the Retention Bonus in full. The
Employee shall be deemed to be "disabled" if he meets the definition of
disability (as reasonably determined by the Corporation) for long-term
disability benefits under the Corporation's long-term disability employee
welfare benefit plan.
5. CONFIDENTIAL INFORMATION.
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5.1 Scope of Confidential Information. The Employee
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acknowledges that in the Employee's employment hereunder, the Employee will be
making use of, acquiring and adding to the Corporation's trade secrets and its
confidential and proprietary information of a special and unique nature and
value relating to such matters as, but not limited to, the Corporation's
business operations, internal structure, financial affairs, programs, software,
systems, procedures, manuals, plans, products, services, confidential reports,
lists of clients and prospective clients and sales and marketing methods, as
well as the amount, nature and type of services, equipment and methods used and
preferred by the Corporation's clients and the fees paid by such clients, all of
which shall be deemed to be confidential information. The Employee acknowledges
that such confidential information has been and will continue to be of central
importance to the business of the Corporation and that disclosure of it to or
its use by others could cause substantial loss to the Corporation. In
consideration of employment by the Corporation, the Employee agrees that during
the Term and upon and after leaving the employ of the Corporation for any reason
whatsoever, the Employee shall not, for any purpose whatsoever, directly or
indirectly, divulge or disclose to any person or entity any of such confidential
information which was obtained by the Employee as a result of the Employee's
employment with the Corporation or any trade secrets of the Corporation, but
shall hold all of the same confidential and inviolate.
5.2 Scope of Confidential Records. All contracts,
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agreements, financial books, records, instruments and documents; client lists;
memoranda; data; reports; programs; software; tapes; Rolodexes; telephone and
address books; letters; research; card decks; listings; programming; and any
other instruments, records or documents relating or pertaining to clients
serviced by the Corporation or the Employee, the Services rendered by the
Employee, or the business of the Corporation (collectively, the "Records") shall
at all times be and remain the property of the Corporation. Upon termination of
the Employee's employment with the Corporation for any reason whatsoever, the
Employee shall return to the Corporation all Records (whether furnished by the
Corporation or prepared by the Employee), and the Employee shall neither make
nor retain any copies of any of such Records after such termination.
6. RESTRICTIVE COVENANTS.
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6.1 Scope of Non-Compete. The Corporation and the Employee
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acknowledge and agree that the Employee's Services are of a special and unusual
character which have a unique value to the Corporation, the loss of which cannot
be adequately compensated by damages in an action at law and if used in
competition with the Corporation could cause serious harm to the Corporation.
Further, the Employee and the Corporation also recognize that an important part
of the Employee's duties will be to develop good will for the Corporation
through his personal contact with customers and others having business
relationships with the Corporation, and that there is a danger that this good
will, a proprietary asset of the Corporation, may follow the Employee if and
when his relationship with the Corporation is terminated. Accordingly, the
Employee covenants that for a period of one year after the Employee ceases to be
employed by the Corporation for any reason whatsoever, the Employee shall not,
without the prior written consent of the Corporation, directly or indirectly
within any state or foreign country in which the Corporation sells or markets in
products:
6.1.1 Offer to render any services or solicit the
rendition of any services which were rendered by the Corporation during the two
year period immediately preceding such cessation of the Employee's employment
with the Corporation to any suppliers or customers of the Corporation.
6.1.2 Solicit for employment or employ to or for the
benefit or account of the Employee or to or for the benefit or account of any
other person or entity any employee of the Corporation, nor shall the Employee
urge, directly or indirectly, any suppliers or customers of the Corporation to
discontinue, in whole or in part, business with the Corporation or not to do
business with the Corporation.
6.1.3 Engage, either as a consultant, independent
contractor, proprietor, stockholder (of more than 5% of the company in
question), partner, officer, director, employee or otherwise, in the business of
manufacturing, marketing or selling mountain bicycle shock absorbers, if such
activity will directly compete with the Corporation in the same line of business
conducted by the Corporation in the applicable state or foreign country.
6.2 Severability of Non-Compete. The Employee agrees that
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the covenants contained in Section 6.1 and its sub-paragraphs are reasonable
with respect to its duration, geographical area and scope. However, the parties
hereto agree that to the extent that any provision or portion of Section 6 of
this Agreement shall be held, found or deemed to be unreasonable, unlawful or
unenforceable by an arbitrator pursuant to Section 8.1, then any such provision
or portion thereof shall be deemed to be modified to the extent necessary in
order that any such provision or portion thereof shall be legally enforceable to
the fullest extent permitted by applicable law.
6.3 Equitable Remedies. As the violation by the Employee of
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the provisions of Sections 5 and 6 of this Agreement would cause irreparable
injury to the Corporation, and there is no adequate remedy at law for such
violation, the Corporation shall have the right, in addition to any other
remedies available at law or in equity, to enjoin the Employee in a court of
equity from violating such provisions.
6.4 Condition Precedent. The provisions of Sections 6.1.1,
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6.1.2, 6.1.3 and 6.1.4 of this Agreement are cumulative. Compliance with
Sections 6.1.1, 6.1.2, 6.1.3 and 6.1.4 of this Agreement is a condition
precedent to the Corporation's obligation to make any payments of any nature to
the Employee, whether under this Agreement or otherwise. Nothing in this
Agreement shall be construed as prohibiting the Corporation from pursuing any
other remedies available to it for a breach or threatened breach of Sections 5
and 6 of this Agreement.
6.5 Inter-relationship with Other Provisions. Nothing in
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Section 6 shall reduce or abrogate the Employee's obligations under Section 1
during the term of this Agreement.
7. NOTICES. All notices and other communications required or
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permitted to be given by this Agreement shall be in writing and shall be given
and shall be deemed received if and when either hand delivered and a signed
receipt is given therefor or mailed by registered or certified U.S. mail, return
receipt requested, postage prepaid, and if to the Corporation to:
and if to the Employee to:
or at such other address as either party hereto shall notify the other of in
writing.
8. MISCELLANEOUS.
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8.1 Formal Arbitration. Any controversy or claim arising out
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of or relating to this Agreement, or the breach thereof, shall be settled by
final and binding arbitration pursuant to the Commercial Arbitration Rules
("Rules") of the American Arbitration Association ("AAA"). The arbitration
shall be conducted in Denver, Colorado with a single arbitrator selected by both
parties in accordance with the AAA Rules. Judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. The
completion of binding arbitration shall be a condition precedent to the
commencement of any civil action in any court of competent jurisdiction to enter
the final decision of the arbitrator.
8.2 Successors and Assigns. This Agreement shall be binding
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upon and inure to the benefit of the Corporation, its successors and assigns.
The Corporation will require any successor, whether direct or indirect, by
purchase, merger, consolidation or otherwise, to all or substantially all of the
business and/or assets of the Corporation to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession had taken
place. As used in this Agreement, "Corporation" shall mean the Corporation as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise. This Agreement shall be binding upon the Employee and his
heirs, personal and legal representatives, and guardians, and shall inure to the
benefit of the Employee. Neither this Agreement nor any part hereof or interest
herein shall be assigned by the Employee.
8.3 Modifications. The terms and provisions of this
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Agreement may not be modified except by written instrument duly executed by each
party hereto.
8.4 Governing Law. This Agreement shall be governed by and
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enforced and construed in accordance with the laws of the State of Colorado,
without reference to principles of conflict of laws.
8.5 Entire Agreement. This Agreement sets forth the entire,
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integrated understanding and agreement of the parties hereto with respect to the
subject matter hereof.
8.6 Headings. The headings of this Agreement are included
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for the convenience of reference and shall be given no effect in the
construction of this Agreement.
8.7 Specific Performance/Waiver. In the event of a breach of
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this Agreement, the non-breaching party hereto may maintain an action for
specific performance against the party hereto who is alleged to have breached
any of the terms, conditions, representations, warranties or agreements, herein
contained. Anything contained herein to the contrary notwithstanding, this
Section shall not be construed to limit in any manner whatsoever any other
rights or remedies an aggrieved party may have by virtue of any breach of this
Agreement. Each of the parties hereto shall have the right to waive compliance
with or the fulfillment, satisfaction or enforcement of any warranty,
representation, covenant, promise, agreement or condition herein set forth, but
the waiver by any party of such right shall not be deemed a waiver of compliance
with or fulfillment, satisfaction or enforcement of any other warranty,
representation, covenant, promise, agreement or condition herein set forth or to
seek redress for any breach thereof on any subsequent occasion, nor shall any
such waiver be deemed effective unless in writing and signed by the party so
waiving.
8.8 Survival. The Employee agrees that the covenants made in
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Sections 5 and 6 of this Agreement shall survive the termination of this
Agreement.
8.9 Expenses. Except as otherwise set forth in this
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Agreement, each party shall pay its own expenses in connection with this
Agreement and the performance of the transactions and obligations contemplated
by this Agreement.
8.10 Arbitration. Any controversy or claim (including, without
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limitation, whether any controversy or claim is subject to arbitration ) arising
out of or relating to this Agreement, or the breach thereof (whether, in any
case, involving (x) a party hereto, (y) their transferees or (z) such party's or
transferee's directors, officers, partners, members, managers, employees,
representatives or agents), shall be settled by binding arbitration administered
by the American Arbitration Association (the "AAA") under its Commercial
Arbitration Rules ("Rules"), and shall be held in Colorado Springs, Colorado.
The Colorado rules of evidence shall control the admission of evidence into the
arbitration proceeding. Any dispute submitted for arbitration shall be referred
to a single arbitrator mutually selected by the parties If no such agreement is
reached, a neutral arbitrator shall be appointed by the AAA in accordance with
the Rules. The parties agree that they shall consent to an expedited proceeding
under the Rules, to the full extent the AAA can accommodate such a request.
IN WITNESS WHEREOF, the parties have executed, acknowledged, sealed
and delivered this Agreement the day and year first hereinabove set forth.
CORPORATION
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ATTEST:
By: /s/ Xxxxx Xxxxxxx
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Chief Financial Officer and Company Secretary
WITNESS: EMPLOYEE
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/s/ Xxxxx Xxxxx
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AMENDMENT TO EXECUTIVE RETENTION AGREEMENT
ROCKSHOX, INC (the "Corporation") and Xxxxx Xxxxx ("Executive") have entered
into an Executive Retention Agreement dated January 24th, 2002 (the
"Agreement").
WHEREAS, the Corporation and Executive desire to make it clear that the payment
of the Retention Bonus under the Agreement will suffice as full severance for
Executive in the event that Executive's employment is terminated without cause
during the Retention Period (as defined under the Agreement);
NOW, THEREFORE the following amendments be made:
1.1 Severance - The Agreement shall be amended to add the following new
sentence at the end of Section 3 thereof:
"The payment of the Retention Bonus shall be (in addition to serving
the purposes set forth herein) in lieu of any severance benefits
otherwise due to the Executive as a result of any termination without
cause of the Executive during the Retention Period."
Except as expressly modified hereby, all of the terms and conditions of the
Agreement remain intact.
ROCKSHOX, INC:
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/s/ Xxxxx Xxxxxxx
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Xxxxx Xxxxxxx, Chief Financial Officer
Date: February 21, 2002
EXECUTIVE:
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/s/ Xxxxx Xxxxx
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Xxxxx Xxxxx
Date: February 21, 2002
