AMENDED and RESTATED
EMPLOYMENT AGREEMENT
dated as of November 4, 1996
by and between
MICROAGE, INC.
and
XXXXXX X. X'XXXXXX
TABLE OF CONTENTS
ARTICLE I--DUTIES AND TERM................................................... 1
1.1 Employment................................................. 1
1.2 Position and Responsibilities.............................. 1
1.3 Term....................................................... 2
1.4 Location................................................... 2
ARTICLE II--COMPENSATION..................................................... 2
2.1 Base Salary................................................ 2
2.2 Bonus Payment.............................................. 3
2.3 Stock Options.............................................. 3
2.4 Additional Benefits........................................ 3
ARTICLE III--TERMINATION OF EMPLOYMENT....................................... 4
3.1 Death or Retirement of Executive........................... 4
3.2 By Executive............................................... 4
3.3 By Company................................................. 5
ARTICLE IV--COMPENSATION UPON TERMINATION OF EMPLOYMENT...................... 5
4.1 Upon Termination for Death or Disability................... 5
4.2 Upon Termination by Company for Cause or
by Executive Without Good Reason........................... 6
4.3 Upon Termination by the Company Without
Cause or by Executive for Good Reason
Prior to a Change in Control............................... 6
4.4 Upon Termination by the Company Without
Cause Following a Change in Control or by
Executive for Good Reason Following a
Change in Control or Pursuant to a Change
in Control Resignation..................................... 7
ARTICLE V--RESTRICTIVE COVENANTS............................................. 8
5.1 Confidential Information and Materials..................... 8
5.2 General Knowledge.......................................... 9
5.3 Executive Obligations as to Confidential
Information and Materials.................................. 9
5.4 Inform Subsequent Employers................................ 10
5.5 Ideas and Inventions....................................... 10
5.6 Inventions and Patents..................................... 10
5.7 Copyrights................................................. 11
5.8 Conflicting Obligations and Rights......................... 11
5.9 Non-Competition............................................ 11
5.10 Non-Disparagement.......................................... 13
5.11 Remedies................................................... 13
5.12 Scope of Article........................................... 13
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ARTICLE VI--MISCELLANEOUS.................................................... 14
6.1 Definitions................................................ 14
6.2 Key Man Insurance.......................................... 18
6.3 Mitigation of Damages; No Set-Off; Dispute
Resolution................................................. 18
6.4 Successors; Binding Agreement.............................. 19
6.5 Modification; No Waiver.................................... 19
6.6 Severability............................................... 19
6.7 Notices.................................................... 20
6.8 Assignment................................................. 20
6.9 Entire Understanding....................................... 20
6.10 Executive's Representations................................ 20
6.11 Liability of Company with Respect to
Insurance Policy........................................... 20
6.12 Governing Law.............................................. 20
EXHIBIT A--SPLIT DOLLAR AGREEMENT
EXHIBIT B--EXECUTIVE'S RIGHTS
EXHIBIT C--EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
EXHIBIT D--DISPUTE RESOLUTION PROCEDURES
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EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") made and
entered into as of November 4, 1996, by and between MICROAGE, INC., a Delaware
corporation (the "Company"), and XXXXXX X. X'XXXXXX ("Executive").
R E C I T A L S:
- - - - - - - -
WHEREAS, the Company and Executive entered into an Employment Agreement
on September 1, 1995 (the "Employment Agreement"); and
WHEREAS, pursuant to Section 6.5 of the Employment Agreement, the
Employment Agreement may be amended only by a written document signed by each of
the parties thereto; and
WHEREAS, the Company and Executive desire to amend and restate the
Employment Agreement.
NOW, THEREFORE, in consideration of the premises, and for other
valuable consideration, the sufficiency of which is hereby acknowledged by each
of the parties hereto, the parties hereby agree as follows:
A G R E E M E N T:
- - - - - - - - -
ARTICLE I
DUTIES AND TERM
1.1 Employment. In consideration of their mutual covenants and other
good and valuable consideration, the receipt, adequacy and sufficiency of which
is hereby acknowledged, the Company agrees to hire Executive, and Executive
agrees to remain in the employ of the Company, upon the terms and conditions
herein provided.
1.2 Position and Responsibilities.
(a) Executive shall serve as President of MicroAge, Inc. (or
in a capacity and with a title of at least substantially equivalent quality)
reporting directly to the Chief Executive Officer of the Company. Executive
agrees to perform services not inconsistent with his position as shall from time
to time be assigned to him by the Chief Executive Officer.
(b) Executive further agrees to serve, if elected, as a
director of the Company and as an officer or director of any subsidiary or
affiliate of the Company.
(c) During the period of his employment hereunder, Executive
shall devote substantially all of his business time, attention, skill and
efforts to the faithful performance of his duties hereunder.
1.3 Term. The term of Executive's employment under this Agreement shall
commence on the date first above written and shall continue, unless sooner
terminated, until November 1, 1998; provided, however, that commencing on
November 4, 1996 and on each subsequent day thereafter, the Executive's term of
employment shall automatically be extended without further action by the Company
or Executive for the twenty-four (24) month period commencing on each such day.
1.4 Location. During the period of his employment under this Agreement,
Executive shall not be required, except with his prior written consent, to
relocate his principal place of employment outside Maricopa County, Arizona.
Required travel on the Company's business shall not be deemed a relocation so
long as Executive is not required to provide his services hereunder outside of
Maricopa County, Arizona, for more than fifty (50%) percent of his working days
during any consecutive six (6) month period.
ARTICLE II
COMPENSATION
For all services rendered by Executive in any capacity during his
employment under this Agreement, including, without limitation, services as a
director, officer or member of any committee of the Board of the Company or of
the board of directors of any subsidiary or affiliate of the Company, the
Company shall compensate Executive as follows:
2.1 Base Salary. The Company shall pay to Executive an annual base
salary of not less that $340,000 (such amount, less any salary waivers under the
1994 Management Equity Program or any subsequent management equity or other
waiver program adopted by the Company is hereinafter referred to as the "Base
Salary") during the term hereof; provided, however, that in the event the
Company institutes a salary reduction program which affects all exempt employees
(as defined by standard Company policies in compliance with the Fair Labor
Standards Act) by the same percentage, then Executive's Base Salary may be
reduced by such percentage (and the term "Base Salary" as used in this Agreement
shall refer to Base Salary as so adjusted). Executive's Base Salary shall be
paid in equal semi-monthly installments. The Base Salary shall be reviewed
annually by the Board or a committee designated by the Board and the Board or
such committee may, in its discretion, increase the Base Salary.
2.2 Bonus Payments.
(a) During the period of Executive's employment under this
Agreement, the Company shall pay to Executive annually a fixed cash bonus equal
to $ and, in addition, such amount as may be necessary after payment by the
Executive of all taxes, including, without limitation, any federal or state
income taxes, on such fixed cash bonus payment, so that Executive shall have
remaining, on a grossed-up basis, the amount of $ (the "Annual Fixed Cash
Bonus").
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(b) During the period of Executive's employment under this
Agreement, Executive shall, in addition to the Annual Fixed Cash Bonus, be
entitled to bonus payments, if any shall be due, pursuant to the Executive Bonus
Plan which has been established by resolution of the Board for fiscal year 1996
(the "1996 Executive Bonus Plan"). The Company shall use all reasonable efforts
to cause the Board or a committee thereof to establish in each fiscal year
during the term hereof an executive bonus plan that is similar to the 1996
Executive Bonus Plan in providing for incentive compensation to Executive based
on a formula related to the Company's profits during such fiscal year. Any bonus
under the 1996 Executive Bonus Plan or any such subsequent plan, less any bonus
waivers under the 1994 Management Equity Program or any subsequent management
equity or other waiver program adopted by the Company, is referred to herein as
the "Annual Incentive Bonus."
2.3 Stock Options. The Company shall use all reasonable efforts to
establish and maintain one or more stock option plans in which Executive shall
be entitled to participate to the same extent as other Senior Executives (as
such term is defined in Section 6.1 hereof). The terms and conditions of such
plan(s) shall be determined and administered by the Board or a committee
thereof.
2.4 Additional Benefits. Executive shall be entitled to participate in
all employee benefit and welfare programs, plans and arrangements (including,
without limitation, pension, profit sharing, supplemental pension and other
retirement plans, insurance, hospitalization, medical and group disability
benefits, travel or accident insurance plans) and to receive fringe benefits,
such as dues and fees of professional organizations and associations, which are
from time to time available to the Company's executive personnel; provided,
however, there shall be no duplication of termination or severance benefits, and
to the extent that such benefits are specifically provided by the Company to
Executive under other provisions of this Agreement, the benefits available under
the foregoing plans and programs shall be reduced by any benefit amounts paid
under such other provisions. Executive shall during the period of his employment
hereunder continue to be provided with benefits at a level which shall in no
event be less in any material respect than the benefits made available to
Executive by the Company as of the date of this Agreement. Notwithstanding the
foregoing, the Company may terminate or reduce benefits under any benefit plans
and programs to the extent such reductions apply uniformly to all Senior
Executives entitled to participate therein, and Executive's benefits shall be
reduced or terminated accordingly. Specifically, without limitation, Executive
shall receive the following benefits:
(a) Death Benefit. The Company and Executive have entered into
a Split Dollar Insurance Agreement, dated as of September 1, 1995, a copy which
is attached hereto as Exhibit A.
(b) Short-Term Disability Benefits. In the event of
Executive's failure substantially to perform his duties hereunder on a full-time
basis for a period not exceeding 180 consecutive days or for periods aggregating
not more than 180 days during any twelve-month period as a result of incapacity
due to physical or mental illness, the Company shall continue to pay the Base
Salary to Executive during the period of such incapacity, but only in the
amounts and to the
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extent that disability benefits payable to Executive under Company-sponsored
insurance policies are less than Executive's Base Salary.
(c) Relocation Expenses. In the event Executive's principal
place of employment is relocated by mutual consent of the parties outside
Maricopa County, Arizona, the Company shall reimburse Executive for all usual
relocation expenses incurred by Executive and his household in moving to the new
location, including, without limitation, moving expenses and rental payments for
temporary living quarters in the area of relocation for a period not to exceed
six months.
(d) Reimbursement of Business Expenses. The Company shall, in
accordance with standard Company policies, pay, or reimburse Executive for, all
reasonable travel and other expenses incurred by Executive in performing his
obligations under this Agreement.
(e) Vacations. Executive shall be entitled to 20 business
days, excluding Company holidays, of paid vacation during each year of
employment hereunder which he shall earn in arrears (i.e., Executive shall be
entitled to no vacation days during his first year of employment). Executive may
accrue and carry forward no more than five unused vacation days from any
particular year of his employment under this Agreement to the next.
ARTICLE III
TERMINATION OF EMPLOYMENT
3.1 Death or Retirement of Executive. Executive's employment under this
Agreement shall automatically terminate upon the death or Retirement (as defined
in Section 6.1) of Executive.
3.2 By Executive. Executive shall be entitled to terminate his
employment under this Agreement by giving Notice of Termination (as defined in
Section 6.1) to the Company:
(a) for Good Reason (as defined in Section 6.1);
(b) at any time commencing with the date six (6) months
following the date of a Change in Control (as defined in Section 6.1) and ending
with the date twelve months after the date of such Change in Control (a "Change
in Control Resignation"); and
(c) at any time without Good Reason.
3.3 By Company. The Company shall be entitled to terminate Executive's
employment under this Agreement by giving Notice of Termination to Executive:
I in the event of Executive's Total Disability (as defined in Section
6.1);
(a) for Cause (as defined in Section 6.1); and
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(b) at any time without Cause.
ARTICLE IV
COMPENSATION UPON TERMINATION OF EMPLOYMENT
If Executive's employment hereunder is terminated in accordance with
the provisions of Article III hereof, except for any other rights or benefits
specifically provided for herein following his period of employment, the Company
shall be obligated to provide compensation and benefits to Executive only as
follows, subject to the provisions of Section 5.11 hereof:
4.1 Upon Termination for Death or Disability. If Executive's employment
hereunder is terminated by reason of his death or Total Disability, the Company
shall:
(a) pay Executive (or his estate) or beneficiaries any Base Salary which has
accrued but not been paid as of the termination date (the "Accrued Base
Salary");
(b) pay Executive (or his estate) or beneficiaries for unused
vacation days accrued as of the termination date in an amount equal to his Base
Salary multiplied by a fraction the numerator of which is the number of accrued
unused vacation days and the denominator of which is 360 (the "Accrued Vacation
Payment");
(c) reimburse Executive (or his estate) or beneficiaries for
expenses incurred by him prior to the date of termination which are subject to
reimbursement pursuant to this Agreement (the "Accrued Reimbursable Expenses");
(d) provide to Executive (or his estate) or beneficiaries any
accrued and vested benefits required to be provided by the terms of any
Company-sponsored benefit plans or programs (the "Accrued Benefits"), together
with any benefits required to be paid or provided in the event of Executive's
death or Total Disability under applicable law;
(e) pay Executive (or his estate) or beneficiaries any Annual
Incentive Bonus with respect to a prior fiscal year which has accrued but has
not been paid; and in addition,
(f) Executive (or his estate) or beneficiaries shall have the
right to exercise all vested unexercised stock options and warrants outstanding
at the termination date in accordance with terms of the plans and agreements
pursuant to which such options or warrants were issued.
4.2 Upon Termination by Company for Cause or by Executive Without Good
Reason. If Executive's employment is terminated by the Company for Cause, or if
Executive terminates his employment with the Company other than (x) upon
Executive's death or Total Disability, (y) for Good Reason, or (z) pursuant to a
Change in Control Resignation (as defined in Section 3.2(b)), the Company shall:
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(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive any accrued Annual Fixed Cash Bonus and
Annual Incentive Bonus with respect to a prior year which has accrued but has
not been paid (together, such bonus payments are referred to herein as the
"Accrued Annual Bonus Payments"); and in addition
(f) Executive shall have the right to exercise vested options
and warrants in accordance with Section 4.1(f).
4.3 Upon Termination by the Company Without Cause or by Executive for
Good Reason Prior to a Change in Control. If Executive's employment is
terminated by the Company without Cause or by Executive for Good Reason, the
Company shall:
(a) pay Executive the Accrued Base Salary;
(b) pay Executive the Accrued Vacation Payment;
(c) pay Executive the Accrued Reimbursable Expenses;
(d) pay Executive the Accrued Benefits, together with any
benefits required to be paid or provided under applicable law;
(e) pay Executive the Accrued Annual Bonus Payments;
(f) pay Executive commencing on the thirtieth day following
the termination date twenty-four monthly payments equal to one-twelfth of the
sum of (1) Executive's Base Salary in effect immediately prior to the time such
termination occurs, plus (2) if Executive is employed with Company for more than
twelve (12) months prior to his termination by the Company without Cause or by
Executive for Good Reason prior to a Change in Control, the Annual Incentive
Bonus paid to Executive for the fiscal year (or if more than one Annual
Incentive Bonus has been paid to Executive, the average of the Annual Incentive
Bonuses paid to Executive for the two (2) fiscal years) immediately preceding
the fiscal year in which the termination occurs; provided, however, should
Executive attain alternative employment during the twenty-four month payment
period, the Company's obligations under this Section 4.3(f) will be reduced by
the amount of Executive's compensation from his new employer. For example, if
Executive were entitled to receive $____ per month for twenty-four (24) months
under this Section 4.3(f), and eight (8) months following his termination date
he finds alternative employment that pays him $____ per month, the Company
6
would be obligated to pay Executive seven (7) monthly payments of $ , and
seventeen (17) monthly payments of $____ under this Section 4.3(f).
(g) maintain in full force and effect, for Executive's and his
eligible beneficiaries' continued benefit, until the first to occur of (x) his
attainment of alternative employment or (y) twenty-four (24) months following
the termination date of his employment hereunder the employee benefits provided
pursuant to Company-sponsored benefit plans, programs or other arrangements in
which Executive was entitled to participate as a full-time employee immediately
prior to such termination in accordance with Section 2.4 hereof, subject to the
terms and conditions of such plans and programs (the "Continued Benefits"). If
Executive's continued participation is not permitted under the general terms and
provisions of such plans, programs and arrangements, the Company shall arrange
to provide Executive with Continued Benefits substantially similar to those
which Executive would have been entitled to receive under such plans, programs
and arrangements; and in addition
(h) Executive shall have the right to exercise all vested
unexercised stock options and warrants in accordance with Section 4.1(f).
4.4 Upon Termination by the Company Without Cause Following a Change in
Control or by Executive for Good Reason Following a Change in Control or
Pursuant to a Change in Control Resignation. If following a Change in Control,
Executive's employment is terminated by the Company without Cause or by
Executive for Good Reason or pursuant to a Change in Control Resignation, the
Company shall:
(a) make the payments and provide to Executive the benefits
under Section 4.3 other than under Section 4.3(f) hereof; and in addition
(b) pay to Executive a lump sum payment on or prior to the
thirtieth day following the termination date of Executive's employment hereunder
in an amount equal to 200% of Executive's aggregate total compensation under
Sections 2.1 and 2.2 hereof for the fiscal year immediately prior to the fiscal
year in which the Change in Control occurs; provided, however, the total
payments received by Executive under this Section 4.4(b) plus (i) any payments
received by Executive under Section 4.4(a) which would be classified as
parachute payments and (ii) any payments or value received by Executive from
stock options which would be classified as parachute payments determined in
accordance with Prop. Reg. ss. 1.280G-1A-24(e) Examples (7) and (8) may not
exceed 299% of Executive's "Base Amount" as such term is defined in Section 280G
of the Internal Revenue Code of 1986, as amended ("Code") and the regulations
promulgated thereunder ("Regulations"). Company and Executive agree that for
purposes of making any present value calculation under this Agreement, the
Applicable Federal Rate in effect on the date this Agreement is executed shall
control as permitted by Q&A 32 of Treas. Reg. ss. 1.280G-1.
ARTICLE V
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RESTRICTIVE COVENANTS
5.1 Confidential Information and Materials. Executive hereby agrees and
acknowledges that the following ideas, information and materials in written,
oral, magnetic, photographic, optical or other form and whether now existing or
developed or created during the period of Executive's employment or engagement
with the Company (the "Confidential Information") are proprietary to the Company
and are highly sensitive in nature:
(a) Hardware. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to the design,
development, engineering, invention, patent, patent application, manufacture or
improvement of any and all equipment, components, devices, techniques, processes
or formulas (including, without limitation, mask works, semi-conductor chips,
processors, memories, disc drives, tape heads, computer terminals, keyboards,
storage devices, printers, and optical storage media) and any and all
components, devices, techniques or circuitry incorporated in any of the above
which is or are constructed, designed, improved, altered or used by the Company
and which is or are not generally known to the public or within the industries
in which the Company competes.
(b) Software. Any and all ideas, concepts, know-how,
techniques, structures, information and materials relating to existing computer
software or firmware products and computer software or firmware in various
stages of research and development including without limitation source code,
object and load modules, requirements specifications, design specifications,
design notes, flow charts, coding sheets, annotations, documentation, technical
and engineering data, laboratory studies, benchmark test results, and the
structures, organization, designs, formulas and algorithms which reside in the
software and which are not generally known to the public or within the
industries or trades in which the Company competes.
(c) Business Procedures. Internal business procedures and
business plans, including analytical methods and procedures, licensing
techniques, manufacturing information and procedures such as formulations,
processes and equipment, technical and engineering data, vendor names, other
vendor information, purchasing information, financial information, service and
operational manuals and documentation therefor, ideas for new products and
services and other such information which relates to the way the Company
conducts its business and which is not generally known to the public.
(d) Legal Rights. All patents, copyrights, trade secrets,
trademarks and service marks, and the like.
(e) Marketing Plans and Customers Lists. Any and all customer
and marketing information and materials, such as (i) strategic data, including
marketing and development plans, forecasts and forecast assumptions and volumes,
and future plans and potential strategies of the Company which have been or are
being discussed; (ii) financial data, price and cost objectives, price lists,
pricing policies and procedures, and estimating and quoting policies and
procedures; and (iii) customer data, including customer lists, names of
existing, past or prospective customers and their representatives, data about or
provided by prospective, existing or past customers, customer service
8
information and materials, data about the terms, conditions and expiration dates
of existing contracts with customers and the type, quantity and specifications
of products and services purchased, leased or licensed by customers of the
Company.
(f) Not Generally Known. Any and all information not generally
known to the public or within the industries or trades in which the Company
competes.
5.2 General Knowledge. The general skills and experience gained by
Executive during Executive's employment or engagement by the Company, and
information publicly available or generally known within the industries or
trades in which the Company competes, is not considered Confidential
Information. Following the Non-Competition Period (as defined in Section 5.9),
Executive is not restricted from working with a person or entity which has
independently developed information or materials similar to the Confidential
Information, but in such a circumstance, Executive agrees not to disclose the
fact that any similarity exists between the Confidential Information and the
independently developed information and materials, and Executive understands
that such similarity does not excuse Executive from the non-disclosure and other
obligations in this Agreement.
5.3 Executive Obligations as to Confidential Information and Materials.
During Executive's employment or engagement by the Company, Executive will have
access to the Confidential Information and will occupy a position of trust and
confidence with respect to the Confidential Information and the Company's
affairs and business. Executive agrees to take the following steps to preserve
the confidential and proprietary nature of the Confidential Information:
(a) Non-Disclosure. During and after Executive's Employment or
engagement by the Company, Executive will not use, disclose or otherwise permit
any person or entity access to any of the Confidential Information other than as
required in the performance of Executive's duties with the Company. Executive
understands that Executive is not allowed to sell, license, market or otherwise
exploit any products or services (including software or firmware in any form)
which embody in whole or in part any Confidential Information.
(b) Prevent Disclosure. Executive will take all reasonable
precautions to prevent disclosure of the Confidential Information to
unauthorized persons or entities.
(c) Abide by the Company's Restrictions. Executive will treat
as confidential and proprietary any information or materials from outside the
Company which the Company is obligated to treat as confidential or proprietary,
in accordance with the Company's reasonable instructions to Executive.
(d) Return All Materials. Upon termination of Executive's
employment or engagement by the Company for any reason whatsoever, Executive
will deliver to the Company all tangible materials embodying the Confidential
Information, including any documentation, records, listings, notes, data,
sketches, drawings, memoranda, models, accounts, reference materials, samples,
machine-readable media and equipment which in any way relate to the Confidential
Information. Of course, Executive agrees not to retain any copies of any of the
above materials.
9
5.4 Inform Subsequent Employers. Executive covenants and agrees that,
for a period of twenty-four (24) months following termination of the
Non-Competition Period, prior to accepting subsequent employment with an
employer engaged in substantially the same line of work as the Company,
Executive shall: (a) inform any such subsequent employer in writing that this
Agreement exists; and (b) provide the Company with a copy of such writing.
5.5 Ideas and Inventions. Executive agrees to assign to the Company all
of Executive's right, title and interest in or to any and all ideas, concepts,
know-how, techniques, processes, inventions, discoveries, developments, works of
authorship, innovations and improvements ("Inventions") conceived or made by
Executive, whether alone or with others, whether patentable or not, except those
that the Executive developed entirely on Executive's own time without using the
Company's equipment, supplies, facilities, or trade secret information and which
neither (1) relate at the time of conception or reduction to practice of the
invention to the Company's business, or actual or demonstrably anticipated
research or development of the Company nor (2) result from any work performed by
the Executive for the Company. Executive agrees to disclose all Inventions to
the Company promptly, and to provide all assistance reasonably requested by the
Company in the preservation of its interests in the Inventions (such as by
executing documents, testifying, etc.), such assistance to be provided at the
Company's expense but without any additional compensation to Executive.
5.6 Inventions and Patents. Executive agrees that from this date until
Executive leaves the Company's employment, Executive shall keep the Company
informed of any Inventions made by Executive, in whole or in part, or conceived
by Executive, alone or with others, which result from any work Executive may do
for, or at the request of, the Company, or which relate to the Company's
activities, investigations, or obligations.
(a) Assertion of Rights. Executive shall, at the expense of
the Company, assist the Company or its nominees to obtain patents for such
Inventions in any countries throughout the world. Such Inventions shall be the
property of the Company or its nominees, whether patented or not. Executive
shall and does, without charge to the Company, assign to the Company, all of
Executive's right, title, and interest in and to such Inventions, including
patents and patent applications and reissues thereof. Executive agrees to
execute, acknowledge, and deliver any instruments confirming the complete
ownership by the Company of such Inventions. Such assignments shall include the
right to xxx for infringement.
(b) Reserved Inventions. Descriptions of all ideas, concepts,
know-how, techniques, processes, inventions, discoveries, developments,
innovations and improvements which Executive made, conceived or acquired prior
to Executive's employment by the Company and all patents and patent applications
relating thereto (collectively referred to as "Executive's Rights") are attached
hereto in Exhibit B, and Executive's Rights shall be excluded from this
Agreement. Executive represents that the absence of any Executive's Rights in
Exhibit B shall indicate that Executive owns no such Executive's Rights at the
time of signing this Agreement.
5.7 Copyrights. Executive agrees that any work prepared by Executive
during the course of Executive's employment or engagement hereunder which is
eligible for United States copyright
10
protection or protection under the Universal Copyright Convention, the Berne
Copyright Convention and/or the Buenos Aires Copyright Convention shall be a
work made for hire. In the event any such work is deemed not to be a work made
for hire, Executive hereby assigns all right, title and interest in and to the
copyright in such work to the Company, and agrees to provide all assistance
reasonably requested by the Company in the establishment, preservation and
enforcement of its copyright in such work, such assistance to be provided at the
Company's expense but without any additional compensation to Executive.
5.8 Conflicting Obligations and Rights. Executive agrees to inform the
Company in writing of any apparent conflict between Executive's work for the
Company and (i) any obligations Executive may have to preserve the
confidentiality of another's proprietary information or materials, or (ii) any
rights Executive claims to any patents, copyrights, trade secrets, or other
inventions, ideas or similar rights, before performing that work. Otherwise, the
Company may conclude that no such conflict exists and Executive agrees
thereafter to make no such claim against the Company. The Company shall receive
such disclosures in confidence. All such existing obligations and claims of
Executive, if any, as of the date of this Agreement are listed on Exhibit C
attached hereto.
5.9 Non-Competition.
(a) Non-competition. By execution of this Agreement, Executive
agrees that during his employment with the Company and for a period of
twenty-four (24) months following the date of expiration or termination of his
employment hereunder (the "Non-Competition Period") for any reason (whether such
termination shall be voluntary or involuntary), Executive will not, within the
United States (in which territory Executive acknowledges that the Company has
sold or marketed its products or services and conducted its Business, as defined
in Section 5.9(d) as of the date hereof), directly or indirectly, compete with
the Company by carrying on a business that is substantially similar to the
Business. Executive agrees that the two (2) year period referred to in the
preceding sentence shall be extended by the number of days included in any
period of time during which he is or was engaged in activities constituting a
breach of this Section 5.9.
(b) Definition of "Compete". For the purposes of this Section
5.9, the term "compete" shall mean with respect to the Business: (i) managing,
supervising, or otherwise participating in a management or sales capacity; (ii)
calling on, soliciting, taking away, accepting as a client or customer, or
attempting to call on, solicit, take away, or accept as a client or customer,
any individual partnership, corporation, company, association, or other entity
that was a client or customer of the Company as of immediately prior to the date
hereof; (iii) hiring, soliciting, taking away, or attempting to hire, solicit,
or take away, either on Executive's behalf or on behalf of any other person or
entity, any person serving immediately prior to the date hereof or during the
term hereof as an employee in connection with the Business; or (iv) entering
into or attempting to enter into any business substantially similar to the
Business, either alone or with any individual, partnership, corporation,
company, association, or other entity.
(c) Direct or Indirect Competition. For the purposes of this
Section 5.9, the words "directly or indirectly" as they modify the word
"compete" shall mean (i) acting as an agent, representative, consultant,
officer, director, member, independent contractor, or employee of any
11
entity or enterprise that is competing (as defined in Section 5.9(b) hereof)
with the Business, (ii) participating in any such competing entity or enterprise
as an owner, partner, limited partner, joint venturer, member, creditor, or
stockholder (except as a stockholder holding less than a one percent (1%)
interest in a corporation whose shares are actively traded on a regional or
national securities exchange or in the over-the-counter market), and (iii)
communicating to any such competing entity or enterprise the names or addresses
or any other information concerning any past, present, or identified prospective
client or customer of the Company or any entity having title to the goodwill of
the Company with respect to the Business.
(d) Business. For purposes of this Agreement, the term
"Business" shall mean the delivery of systems integration services and master
distribution of information technology products and services, as conducted by
the Company immediately prior to the date hereof and/or developed during the
term of this Agreement.
(e) Executive expressly agrees and acknowledges that:
(i) it will require at least twenty-four (24) months
for the Company to locate, hire and train an appropriate individual to
perform the functions and duties that Executive is performing
hereunder;
(ii) the Company has protected business interests
throughout the United States and that competition with and against such
business interests would be harmful to the Company;
(iii) this covenant not to compete is reasonable as
to time and geographical area and does not place any unreasonable
burden upon him;
(iv) the general public will not be harmed as a
result of enforcement of this covenant not to compete;
(v) his personal legal counsel has reviewed this
covenant not to compete; and
(vi) he understands and hereby agrees to each and
every term and condition of this covenant not to compete (including,
without limitation, the provisions of Section 5.11).
5.10 Non-Disparagement. During the term of this Agreement and the
Non-Competition Period, neither Executive nor the Company shall disparage the
other, and neither shall disclose to any third party the conditions of
Executive's employment with the Company except as may be required (i) pursuant
to applicable law or regulations, including the rules and regulations of the
Securities and Exchange Commission, (ii) to effectuate the provisions of
employee plans or programs and insurance policies, or (iii) as may be otherwise
contemplated herein or unless such information becomes publicly available
without fault of the party making such disclosure.
12
5.11 Remedies. Executive expressly agrees and acknowledges that the
covenants set forth in Sections 5.1 through 5.10 are necessary for the
protection of the interests of the Company and its affiliates because of the
nature and scope of their business and his position with the Company. Further,
Executive acknowledges that any breach of such covenants would result in
irreparable damage to the Company, and that money damages will not sufficiently
compensate the Company for its injury caused thereby, and that the remedy at law
for any breach or threatened breach of any of such covenants will be inadequate
and, accordingly agrees, that the Company shall, in addition to all other
available remedies (including without limitation, seeking such damages as it can
show it has sustained by reason of such breach), be entitled to injunctive
relief or specific performance and that in addition to such money damages he may
be restrained and enjoined from any continuing breach of this covenant not to
compete without any bond or other security being required of any court.
Executive further acknowledges and agrees that if such covenants, or any of
them, are deemed to be unenforceable and/or the Executive fails to comply with
this Article V, the Company has no obligation to provide any compensation or
other benefits described in Article IV hereof. The remedies set forth in this
Section 5.11 shall be included in any award in favor of the Company under
Exhibit D hereto.
5.12 Scope of Article. For purposes of this Article V, unless the
context otherwise requires, the term "Company" includes MicroAge, Inc., its
direct and indirect subsidiaries, and its affiliates.
ARTICLE VI
MISCELLANEOUS
6.1 Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "Accrued Base Salary" - as defined in Section 4.1(a);
(b) "Accrued Benefits" - as defined in Section 4.1(d);
(c) "Accrued Annual Bonus Payment" - as defined in Section 4.2(e);
(d) "Accrued Reimbursable Expenses" - as defined in Section 4.1(c);
(e) "Accrued Vacation Payment" - as defined in Section 4.1(b);
(f) "Annual Fixed Cash Bonus" - as defined in Section 2.2(a);
(g) "Annual Incentive Bonus" - as defined in Section 2.2(b);
(h) "Base Amount" - as defined in Section 4.4(b);
(i) "Base Salary" - as defined in Section 2.1;
13
(j) "Board" - shall mean the Board of Directors of the Company;
(k) "Cause" shall mean the occurrence of any of the following:
(i) Executive's gross and willful misconduct which is
injurious to the Company;
(ii) Executive's engaging in fraudulent conduct with
respect to the Company's business or in conduct of a criminal nature
that may have an adverse impact on the Company's standing and
reputation;
(iii) the continued and unjustified failure or
refusal by Executive to perform the duties required of him by this
Agreement which failure or refusal shall not be cured within fifteen
(15) days following (A) receipt by Executive of written notice from the
Board specifying the factors or events constituting such failure or
refusal, and (B) a reasonable opportunity for Executive to correct such
deficiencies;
(iv) Executive's use of drugs and/or alcohol in
violation of then current Company policy; or
(v) Executive's breach of his obligation under
Section 1.2(c) hereof which shall not be cured within fifteen (15) days
after written notice thereof to Executive.
(l) "Change in Control" shall mean and shall be deemed to have
occurred if:
(i) After the date of this Agreement, any "person"
(as such term is used in Section 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision thereto) shall become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act or any successor provision
thereto) directly or indirectly of securities of the Company
representing 15% or more of the combined voting power of the Company's
then outstanding securities ordinarily having the right to vote at an
election of directors; provided, however, that, for purposes of this
subparagraph, "person" shall exclude the Company, its subsidiaries, any
person acquiring such securities directly from the Company, any
employee benefit plan sponsored by the Company or from Executive or any
stockholder owning 15% or more of the combined voting power of the
Company's outstanding securities as of the date of this Agreement; or
(ii) Any stockholder of the Company owning 15% or
more of the combined voting power of the Company's outstanding
securities as of the date of this Agreement shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act)
directly or indirectly of securities of the Company (other than through
the acquisition of securities directly from the Company or from
Executive) representing 25% or more of the combined voting power of the
Company's then outstanding securities ordinarily having the right to
vote at an election of directors; or
14
(iii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any reason to
constitute at least 80% of the Board; provided, however, that any
person becoming a member of the Board subsequent to the date hereof
whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least 80% of the members
then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to
the election of directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the Exchange Act or any
successor provision thereto) shall be, for purposes of this Agreement,
considered as though such person were a member of the Incumbent Board;
or
(iv) Approval by the stockholders of the Company and
consummation of (A) a reorganization, merger, consolidation, or sale or
other disposition of all or substantially all of the assets of the
Company, in each case, with or to a corporation or other person or
entity of which persons who were the stockholders of the Company
immediately prior to such transaction do not, immediately thereafter,
own more than 60% of the combined voting power of the outstanding
voting securities entitled to vote generally in the election of
directors of the reorganized, merged, consolidated or purchasing
corporation (or, in the case of a non-corporate person or entity,
functionally equivalent voting power) and 80% of the members of the
Board of which corporation (or functional equivalent in the case of a
non-corporate person or entity) were not members of the Incumbent Board
at the time of the execution of the initial agreement providing for
such reorganization, merger consolidation or sale, or (B) a liquidation
or dissolution of the Company.
(m) "Change in Control Resignation" - as defined in Section
3.2(b);
(n) "Code" - as defined in Section 4.4(b);
(o) "Common Stock" - shall mean shares of the common stock,
par value $.01 per share, of the Company;
(p) "Confidential Information" - as defined in Section 5.1;
(q) "Continued Benefits" - as defined in Section 4.3(g);
(r) "Expiration" shall mean the expiration of Executive's
employment hereunder in accordance with Section 1.3;
(s) "Good Reason" shall mean the occurrence of any of the
following:
(i) The Company's failure to elect or reelect or to
appoint or reappoint Executive to offices, titles or positions carrying
comparable authority, responsibilities, dignity and importance to that
of Executive's offices and positions as of November 4, 1996 or in the
case of a Change in Control, involving duties of a scope comparable to
those of
15
Executive's most significant offices or positions held at any time
during the 90 day period immediately preceding the date such Change in
Control occurs;
(ii) Material change by the Company in Executive's
function, duties or responsibilities (including report
responsibilities) which would cause Executive's position with the
Company to become of less dignity, responsibility and importance than
those associated with his functions, duties or responsibilities as of
November 4, 1996, or in the case of a Change in Control, involving
duties of a scope less than that associated with Executive's most
significant position with the Company during the 90 day period
immediately preceding the date such Change in Control occurs;
(iii) Executive's Base Salary is reduced by the
Company (unless such reduction is pursuant to a salary reduction
program as described in Section 2.1 hereof) or there is a material
reduction in the benefits that are in effect for the Executive on
November 4, 1996 in accordance with Section 2.4 (unless such reduction
is pursuant to a uniform reduction in benefits for all Senior
Executives);
(iv) Except with Executive's prior written consent,
relocation of Executive's principal place of employment to a location
outside of Maricopa County, Arizona, or requiring Executive to travel
on the Company's business more than is required by Section 1.4 hereof;
(v) The failure by the Company to obtain the
assumption by operation of law or otherwise of this Agreement by any
entity which is the surviving entity in any merger or other form of
corporate reorganization involving the Company or by any entity which
acquires all or substantially all of the Company's assets; or
(vi) Other material breach of this Agreement by the
Company, which breach is not cured within fifteen (15) days after
written notice thereof is received by the Company.
(t) "Incumbent Board" - as defined in Section 6.1(k)(iii);
(u) "1996 Executive Bonus Plan" - as defined in Section 2.2.
(v) "Non-Competition Period" - as defined in Section 5.9(a);
(w) "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision of this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Executive's employment under the provision so
indicated. Each Notice of Termination shall be delivered at least 30 days prior
to the effective date of termination;
(x) "Retirement" shall mean normal retirement at age 65;
16
(y) "Senior Executives" shall mean the chief executive officer
and the four most highly compensated executive officers of the Company
determined in accordance with the rules and regulations of the Securities and
Exchange Commission under the Exchange Act;
(z) "Termination" shall mean the termination of Executive's
employment hereunder other than upon expiration of the term of such employment
in accordance with Section 1.3;
(aa) "Total Disability" shall mean Executive's failure
substantially to perform his duties hereunder on a full-time basis for a period
exceeding 180 consecutive days or for periods aggregating more than 180 days
during any twelve-month period as a result of incapacity due to physical or
mental illness. If there is a dispute as to whether Executive is or was
physically or mentally unable to perform his duties under this Agreement, such
dispute shall be submitted for resolution to a licensed physician agreed upon by
the Board and Executive, or if an agreement cannot be promptly reached, the
Board and Executive shall promptly select a physician, and if these physicians
cannot agree, the physicians shall promptly select a third physician whose
decision shall be binding on all parties. If such a dispute arises, Executive
shall submit to such examinations and shall provide such information as such
physician(s) may request, and the determination of the physician(s) as to
Executive's physical or mental condition shall be binding and conclusive.
Notwithstanding the foregoing, if Executive participates in any group disability
plan provided by the Company which offers long-term disability benefits, "Total
Disability" shall mean total disability as defined therein.
6.2 Key Man Insurance. The Company shall have the right, in its sole
discretion, to purchase "key man" insurance on the life of Executive. The
Company shall be the owner and beneficiary of any such policy. If the Company
elects to purchase such a policy, Executive shall take such physical
examinations and supply such information as may be reasonably requested by the
insurer.
6.3 Mitigation of Damages; No Set-Off; Dispute Resolution. (a)
Executive shall be required to mitigate the amount of any payment provided for
in this Agreement (other than payments received pursuant to Section 4.4 hereof)
by seeking other employment.
(b) If there shall be any dispute between the Company and
Executive (i) in the event of any termination of Executive's employment by the
Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by Executive, whether Good Reason existed, or (iii)
otherwise arising out of this Agreement, the dispute shall be resolved in
accordance with the dispute resolution procedures set forth in Exhibit D hereto,
the provisions of which are incorporated as a part hereof, and the parties
hereto hereby agree that such dispute resolution procedures shall be the
exclusive method for resolution of disputes under this Agreement; provided
however, that (1) either party may seek preliminary judicial relief if, in its
judgment, such action is necessary to avoid irreparable injury during the
pendency of such procedures, and (2) nothing in Exhibit D shall prevent either
party from exercising the rights of termination set forth in this Agreement. In
the event of a dispute hereunder as to whether a termination by the Company was
for Cause or by the Executive for Good Reason, until there is a resolution and
award as provided in
17
Exhibit D, the Company shall pay all amounts, and provide all benefits, to
Executive and/or Executive's family or other beneficiaries, as the case may be,
that the Company would be required to pay or provide hereunder as though such
termination were by the Company without Cause or by Executive for Good Reason
and shall pay the reasonable legal fees and expenses of counsel for Executive in
connection with such dispute resolution; provided, however, that the Company
shall not be required to pay any disputed amounts or any legal fees and expenses
pursuant to this subparagraph (b) except upon receipt of a written undertaking
by or on behalf of Executive (and/or Executive's family or other beneficiaries,
as the case may be) to repay, without interest or penalty, as soon as
practicable after completion of the dispute resolution (A) all such amounts to
which Executive (or Executive's family or other beneficiaries, as the case may
be) is ultimately adjudged not be entitled with respect to the payment of such
disputed amount(s) and (B) in addition, in the case of legal fees and expenses,
a proportionate amount of legal fees and expenses attributable to any of
Executive's claim(s) (or any of Executive's defenses or counter-claims(s)), if
any, which shall have been found by the dispute resolver to have been frivolous
or without merit. IT IS EXPRESSLY UNDERSTOOD THAT BY SIGNING THIS AGREEMENT,
WHICH INCORPORATES BINDING ARBITRATION, THE COMPANY AND EXECUTIVE AGREE, EXCEPT
AS SPECIFICALLY PROVIDED OTHERWISE IN SECTION 5.11 AND THIS SECTION 6.3(b), TO
WAIVE COURT OR JURY TRIAL AND TO WAIVE PUNITIVE, STATUTORY, CONSEQUENTIAL AND
ANY DAMAGES OTHER THAN COMPENSATORY DAMAGES.
6.4 Successors; Binding Agreement. This Agreement shall be binding upon
any successor to the Company and shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, beneficiaries,
designees, executors, administrators, heirs, distributees, devisees and
legatees.
6.5 Modification; No Waiver. This Agreement may not be modified or
amended except by an instrument in writing signed by the parties hereto. No term
or condition of this Agreement shall be deemed to have been waived, nor shall
there be any estoppel against the enforcement of any provision of this
Agreement, except by written instrument by the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate only as to the
specific term or condition waived and shall not constitute a waiver of such term
or condition for the future or as to any other term or condition.
6.6 Severability. The covenants and agreements contained herein are
separate and severable and the invalidity or unenforceability of any one or more
of such covenants or agreements, if not material to the employment arrangement
that is the basis for this Agreement, shall not affect the validity or
enforceability of any other covenant or agreement contained herein. If, in any
judicial proceeding, a court shall refuse to enforce one or more of the
covenants or agreements contained herein because the duration thereof is too
long, or the scope thereof is too broad, it is expressly agreed between the
parties hereto that such duration or scope shall be deemed reduced to the extent
necessary to permit the enforcement of such covenants or agreements.
6.7 Notices. All the notices and other communications required or
permitted hereunder shall be in writing and shall be delivered personally or
sent by registered or certified mail, return receipt requested, to the parties
hereto at the following addresses:
18
If to the Company, to it at:
MicroAge, Inc.
0000 Xxxxx 00xx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attn: Chief Executive Officer
With a copy to:
Xxxxxxx X. Xxxxxx
Xxxxx & Xxxxxx L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
If Executive, to him at:
Xxxxxx X'Xxxxxx
0000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxxx Xxxxxx, Xxxxxxx 00000
6.8 Assignment. This Agreement and any rights hereunder shall not be
assignable by either party without the prior written consent of the other party
except as otherwise specifically provided for herein.
6.9 Entire Understanding. This Agreement (together with the Exhibit
incorporated as a part hereof) constitutes the entire understanding between the
parties hereto and no agreement, representation, warranty or covenant has been
made by either party except as expressly set forth herein.
6.10 Executive's Representations. Executive represents and warrants
that neither the execution and delivery of this Agreement nor the performance of
his duties hereunder violates the provisions of any other agreement to which he
is a party or by which he is bound.
6.11 Liability of Company with Respect to Insurance Policy. Executive
has selected the insurer and policy referred to in Section 2.4(a) hereof, and
the Company shall not have any liability to Executive (or his beneficiaries)
should the insurance company which issues the policy referred to therein fail or
refuse to pay (whether voluntarily or by reason of any order, injunction or
otherwise) thereunder or if any rights or elections otherwise available to
Executive thereunder are restricted or eliminated.
6.12 Governing Law. This Agreement shall be construed in accordance
with and governed for all purposes by the laws of the State of Arizona
applicable to contracts executed and wholly performed within such state.
19
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
Company:
MICROAGE, INC.
By: /s/ Xxxxxxx X. XxXxxxxx
----------------------------------
Name: Xxxxxxx X. XxXxxxxx
--------------------------------
Title: Chairman and CEO
-------------------------------
Executive:
XXXXXX X. X'XXXXXX
/s/ Xxxxxx X. X'Xxxxxx
------------------------------------
20
EXHIBIT A
---------
SPLIT DOLLAR AGREEMENT
----------------------
EXHIBIT B
---------
EXECUTIVE'S RIGHTS
------------------
None
EXHIBIT C
---------
EXECUTIVE'S EXISTING OBLIGATIONS AND CLAIMS
-------------------------------------------
None
EXHIBIT D
---------
DISPUTE RESOLUTION PROCEDURES
-----------------------------
A. If a controversy should arise which is covered by Section 6.3 of
Article VI, then not later than twelve (12) months from the date of the event
which is the subject of dispute either party may serve on the other a written
notice specifying the existence of such controversy and setting forth in
reasonably specific detail the grounds thereof ("Notice of Controversy");
provided that, in any event, the other party shall have at least thirty (30)
days from and after the date of the Notice of Controversy to serve a written
notice of any counterclaim ("Notice of Counterclaim"). The Notice of
Counterclaim shall specify the claim or claims in reasonably specific detail. If
the Notice of Controversy or the Notice of Counterclaim, as the case may be, is
not served within the applicable period, the claim set forth therein will be
deemed to have been waived, abandoned and rendered unenforceable.
B. Following receipt of the Notice of Controversy (or the Notice of
Counterclaim, as the case may be), there shall be a three week period during
which the parties will make a good faith effort to resolve the dispute through
negotiation ("Period of Negotiation"). Neither party shall take any action
during the Period of Negotiation to initiate arbitration proceedings.
C. If the parties should agree during the Period of Negotiation to
mediate the dispute, then the Period of Negotiation shall be extended by an
amount of time to be agreed upon by the parties to permit such mediation. In no
event, however, may the Period of Negotiation be extended by more than five
weeks or, stated differently, in no event may the Period of Negotiation be
extended to encompass more than a total of eight weeks.
D. If the parties agree to mediate the dispute but are thereafter
unable to agree within a week on the format and procedures for the mediation,
then the effort to mediate shall cease, and the Period of Negotiation shall
terminate four weeks from the Notice of Controversy (or the Notice of
Counterclaim, as the case may be).
E. Following the termination of the Period of Negotiation, the dispute
(including the main claim and counterclaim, if any) shall be settled by
arbitration, governed by the Federal Arbitration Act, 9 U.S.C. ss. 1 et seq.
("FAA"), and judgment upon the award may be entered in any court having
jurisdiction thereof. The format and procedures of the arbitration are set forth
below (referred to below as the "Arbitration Agreement").
F. A notice of intention to arbitrate ("Notice of Arbitration") shall
be served within 45 days of the termination of the Period of Negotiation. If the
Notice of Arbitration is not served within this period, the claim set forth in
the Notice of Controversy (or the Notice of Counterclaim, as the case may be)
will be deemed to have been waived, abandoned and rendered unenforceable.
G. The arbitration, including the Notice of Arbitration, will be
governed by the Commercial Rules of the American Arbitration Association ("AAA")
in effect on the date of the
Notice of Arbitration, except that the terms of this Arbitration Agreement shall
control in the event of any difference or conflict between such Rules and the
terms of this Arbitration Agreement.
H. The arbitrator shall reach a decision on the merits on the basis of
applicable legal principles as embodied in the law of the State of Arizona. The
arbitration hearing shall take place in Phoenix, Arizona.
I. There shall be one arbitrator, regardless of the amount in
controversy. The arbitrator selected, in order to be eligible to serve, shall be
a lawyer in Phoenix, Arizona with at least 15 years specializing in either
general commercial litigation or general corporate and commercial matters. In
the event the parties cannot agree on a mutually acceptable single arbitrator
from the list submitted by the AAA, the AAA shall appoint the arbitrator who
shall meet the foregoing criteria.
J. At the time of appointment and as a condition thereto, the
arbitrator will be apprised of the time limitations and other provisions of this
Arbitration Agreement and shall indicate such dispute resolver's agreement to
the Tribunal Administrator to comply with such provisions and time limitations.
K. During the 30 day period following appointment of the arbitrator,
either party may serve on the other a request for limited numbers of documents
directly related to the dispute. Such documents will be produced within seven
(7) days of the request.
L. Following the thirty-day period of document production, there will
be a forty-five day period during which limited depositions will be permissible.
Neither party will take more than 5 depositions, and no deposition will exceed
three hours of direct testimony.
M. Disputes as to discovery or prehearing matters of a procedural
nature shall be promptly submitted to the arbitrator pursuant to telephone
conference call or otherwise. The arbitrator shall make every effort to render a
ruling on such interim matters at the time of the hearing (or conference call)
or within five business days thereafter.
N. Following the period of depositions, the arbitration hearing shall
promptly commence. The arbitrator will make every effort to commence the hearing
within thirty days of the conclusion of the deposition period and, in addition,
will make every effort to conduct the hearing on consecutive business days to
conclusion.
O. An award will be rendered, at the latest, within nine months of the
date of the Notice of Arbitration and within thirty days of the close of the
arbitration hearing. The award shall set forth the grounds for the decision
(findings of fact and conclusions of law) in reasonably specific detail and
shall also specify whether any claim (or defense or counter-claim) of Executive
is found to be frivolous or without merit and what proportion, if any, of his
legal fees and expenses which have been paid by the Company Executive shall be
required to repay to the Company in accordance with Section 6.3(b). The award
shall be final and nonappealable except as provided in the FAA and except that a
court of competent jurisdiction shall have the power to review whether, as a
matter of law, based upon the findings of fact by the arbitrator, the award
should be confirmed or should be
modified or vacated in order to correct any errors of law made by the
arbitrator. Such judicial review shall be limited to issues of law, and the
parties agree that the findings of fact made by the arbitrator shall be final
and binding on the parties and shall serve as the facts to be relied upon by the
court in determining the extent to which the award should be confirmed, modified
or vacated.
The award may only be made for compensatory damages, and if any other
damages (whether exemplary, punitive, consequential, statutory or other) are
included, the award shall be vacated and remanded, or modified or corrected, as
appropriate to promote this damage limitation; provided, however, that an award
in favor of the Company shall include the relief set forth in Section 5.11.
