Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of June 28, 2002, (the "Agreement") between
Excelligence Learning Corporation, a Delaware corporation (the "Company"), and
Xxx Xxxxxxx ("Executive").
The Company desires to employ Executive as its President and Chief
Executive Officer upon the terms and subject to the conditions set forth herein,
and the Board of Directors of the Company has approved the terms and conditions
of the employment of Executive as set forth in this Agreement and has authorized
the execution and delivery of this Agreement.
In consideration of the premises and the mutual agreements contained
herein, the Company and Executive hereby agree as follows:
Article I.
DEFINITIONS
The terms set forth below have the following meanings (such meanings to be
applicable to both the singular and plural forms, except where otherwise
expressly indicated):
1.1 "Accountants" has the meaning set forth in Section 5.9(b).
1.2 "Accrued Annual Bonus" means the amount of any Annual Bonus earned but
not yet paid with respect to the Year ended prior to the Date of Termination.
1.3 "Accrued Base Salary" means the amount of Executive's Base Salary
which is accrued but not yet paid as of the Date of Termination.
1.4 "Affiliate" means any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, the Company. For
the purposes of this definition, the term "control" when used with respect to
any Person means the power to direct or cause the direction of management or
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise.
1.5 "Agreement" has the meaning set forth in the Preamble.
1.6 "Anniversary Date" means any annual anniversary of the Effective Date.
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1.7 "Annualized Total Compensation" means, as of any date, the sum of (i)
an amount equal to the greater of (a) the Severance Amount and (b) Executive's
then current Base Salary plus (ii) an amount equal to the average Annual Bonus
paid to Executive for the previous two (2) calendar Years during the Employment
Period.
1.8 "Annual Bonus" has the meaning set forth in Section 4.2.
1.9 "Base Salary" has the meaning set forth in Section 4.1.
1.10 "Beneficiary" has the meaning set forth in Section 7.3.
1.11 "Board" means the Board of Directors of the Company.
1.12 "Cause" means any of the following:
(a) Executive's material breach of the provisions of this Agreement;
(b) Executive's conviction of, or plea of nolo contendere to, any
felony or to a crime causing substantial harm to the Company or any of its
Affiliates (whether or not for personal gain) or involving acts of theft,
fraud, embezzlement, moral turpitude or similar conduct;
(c) misuse or diversion of the Company's or any of its Subsidiaries'
funds, embezzlement or fraudulent misrepresentations or concealments on any
written reports submitted by Executive to the Company or any of its
Affiliates;
(d) Executive's misconduct, failure to perform the duties of his
employment or Executive's habitual neglect thereof; or
(e) Executive's failure to follow or comply with the lawful directives
of the Board,
provided, however, that in the case of the foregoing clauses (a), (d) and
(e), if any such breach, misconduct or failure is capable of cure, as determined
in the Board's reasonable discretion, "Cause" shall mean any continuation of
such breach, misconduct or failure after a period of (x) in the case of the
foregoing clauses (a) and (d), 30 calendar days, and (y) in the case of the
foregoing clause (e), 10 calendar days, in each case from the date on which
Executive shall first have been informed in writing thereof.
1.13 "Change of Control" mean any of the following events:
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(a) the acquisition, directly or indirectly, by any "person" or
"group" (as those terms are defined in Sections 3(a)(9), 13(d) and 14(d) of
the Exchange Act, of "beneficial ownership" (as determined pursuant to Rule
13d-3 under the Exchange Act) of 40% or more of the combined voting power
of the Company's then outstanding Voting Securities other than an
acquisition by (i) any stockholder of the Company which, on the date
hereof, owns more than 30% of the combined voting power of the Company's
outstanding Voting Securities (or any "group" of which any such stockholder
is a part), (ii) a Subsidiary or (iii) any employee benefit plan (or any
related trust) sponsored or maintained by the Company or a Subsidiary;
(b) individuals who, as of the Effective Date, constitute the Board
(the "Incumbent Directors") cease for any reason to constitute a majority
of the members of the Board; provided, however, that any individual who
becomes a director after the Effective Date whose election, or nomination
for election by the Company's stockholders, was approved by a vote of at
least a majority of the members of the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any individual whose initial assumption of
office occurs as a result of an actual or threatened election contest
relating to the election or removal of the directors of the Company or
other actual or threatened solicitation of proxies or consents by or on
behalf of a person other than the Board; or
(c) consummation by the Company of (i) a merger, reorganization,
consolidation or similar transaction (any of the foregoing, a "Merger") in
which the beneficial owners of the Company's Voting Securities immediately
before such Merger beneficially own, immediately after such Merger,
directly or indirectly, less than 50% of the combined voting power of the
Voting Securities of the corporation resulting from such Merger or (ii) the
sale or other disposition of all or substantially all of the assets of the
Company; or
(d) approval by the stockholders of the Company of a plan of
liquidation or dissolution of the Company.
Notwithstanding the foregoing, there shall not be a Change in Control if, in
advance of such event, the Company and Executive agree in writing that such
event shall not constitute a Change in Control for purposes of this Agreement.
1.14 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
1.15 "Common Stock" means the outstanding shares of Common Stock of the
Company, par value $.01 per share.
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1.16 "Date of Termination" means the effective date of a Termination of
Employment for any reason, including death or Disability.
1.17 "Deferred Compensation Agreement" means the Deferred Compensation
Agreement by and between the Company and Executive dated January 4, 2002, as
amended from time to time.
1.18 "Determination" has the meaning set forth in Section 5.9(b).
1.19 "Disability" means a mental or physical condition which, in the
opinion of at least a majority of the Board, renders Executive unable or
incompetent to carry out the material job responsibilities which such Executive
held or the material duties to which Executive was assigned at the time the
disability was incurred, which has existed for at least three months and which
in the opinion of a physician mutually agreed upon by the Company and Executive
(provided that neither party shall unreasonably withhold his agreement) is
expected to be permanent or to last for an indefinite duration or a duration in
excess of six months.
1.20 "Effective Date" means May 6, 2002.
1.21 "Employment Period" has the meaning set forth in Section 3.2.
1.22 "Excise Tax" has the meaning set forth in Section 5.9(a).
1.23 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
1.24 "Good Reason" means the occurrence of any one or more of the following
events, unless Executive specifically agrees in writing that such event shall
not be Good Reason:
(a) the assignment of Executive without his consent to a position,
responsibilities or duties of a materially lesser status or degree of
responsibility than his position, responsibilities or duties in effect
pursuant to this Agreement, including, without limitation, causing or
requiring Executive to report to anyone other than the Board;
(b) any failure of the Board to nominate Executive as a member of the
Board, other than for Cause; provided, however, that, the failure of
Executive to be nominated as a member of the board of directors of the
surviving corporation in a transaction constituting a Change of Control
shall not constitute Good Reason;
(c) failure to pay Executive the Base Salary at a rate or in an amount
at least equal to the amount or rate paid to him pursuant to this
Agreement;
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(d) failure to pay Executive the Annual Bonus he has earned in
accordance with the terms of this Agreement;
(e) any material diminution in Executive's aggregate benefits provided
for in Article V hereof; and
(f) the Company requiring Executive to be principally based at any
office or location more than 50 miles from the current offices of the
Company in Monterey, California,
provided, however, that if the Company is capable of curing any of the
foregoing, as determined in the Board's reasonable discretion, "Good Reason"
shall mean the failure to cure within 15 business days, in each case from the
date on which Executive shall first have notified the Board in writing thereof.
1.25 "Gross-Up Payment" has the meaning set forth in Section 5.9(a).
1.26 "Payment" has the meaning set forth in Section 5.9(a).
1.27 "Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity or government instrumentality,
division, agency, body or department.
1.28 "Release Agreement" means the Release Agreement substantially in the
form of Exhibit A hereto.
1.29 "Severance Amount" means two hundred eighty-four thousand six hundred
and eighty-four dollars ($284,684).
1.30 "Severance Period" means two years from the Date of Termination.
1.31 "Subsidiary" means, with respect to any Person, (a) any corporation or
limited liability company of which more than 50% of the outstanding capital
stock having ordinary voting power to elect a majority of the board of directors
of such corporation (irrespective of whether, at the time, stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency) or, in the case of a limited
liability company, of which more than 50% of the outstanding membership
interests, is at the time, directly or indirectly, owned by such Person, and (b)
any partnership in which such Person has a direct or indirect interest (whether
in the form of voting or participation in profits or capital contribution) of
more than 50%.
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1.32 "Taxes" means the incremental United States federal, state and local
income, excise and other taxes payable by Executive with respect to any
applicable item of income.
1.33 "Termination For Good Reason" means a Termination of Employment by
Executive for a Good Reason during the Employment Period or any extension
thereof pursuant to Section 3.3.
1.34 "Termination of Employment" means a termination by the Company or by
Executive of Executive's employment with the Company.
1.35 "Termination Without Cause" means a Termination of Employment by the
Company for any reason other than Cause or Executive's death or Disability,
during the Employment Period or any extension thereof pursuant to Section 3.3.
1.36 "Underpayment" has the meaning set forth in Section 5.9(c).
1.37 "Voting Securities" means the Common Stock of the Company, together
with any other securities of the Company that are entitled to vote generally in
the election of directors of the Company.
1.38 "Year" means a calendar year period ending on December 31.
Article II.
DUTIES
2.1 Duties. The Company shall employ Executive during the Employment Period
as its President and Chief Executive Officer. It is contemplated that, in
connection with each annual meeting of stockholders of the Company during the
Employment Period, the Board will nominate Executive for election as a member of
the Board. During the Employment Period, Executive shall perform the duties
properly assigned to him hereunder, shall devote substantially all of his
business time, attention and effort to the affairs of the Company and its
Subsidiaries, and shall use his reasonable best efforts to promote the interests
of the Company and its Subsidiaries. During the Employment Period, and excluding
any periods of disability, vacation, or sick leave to which Executive is
entitled, Executive agrees to devote his full attention and time to the business
and affairs of the Company and its Subsidiaries. During the term of this
Agreement, there shall be no material change in the duties and responsibilities
of the Executive otherwise than as provided herein, unless the parties otherwise
agree in writing. During the term of this Agreement, the Executive shall not be
required to relocate to an area more than 50 miles away from the Company's
current principal office in Monterey, California in order to perform the
services contemplated hereunder.
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2.2 Other Activities. Except with the prior written approval of at least a
majority of the Board (which the Board may grant or withhold in its sole
discretion), Executive, during the term of this Agreement or any renewal
thereof, will not (i) accept any other employment, (ii) serve on the board of
directors or similar body of any other business entity, (iii) engage, directly
or indirectly, in any other business activity (whether or not pursued for
pecuniary advantage) that is or may be competitive with, or that might place him
in a competing position to, that of the Company or any of its Affiliates. For
this purpose, "Affiliate" or "Affiliates" shall mean any partnership, joint
venture, limited liability company or corporation that, directly or indirectly
through one or more intermediaries Controls, or is Controlled by, or is under
common Control with, the Company. For this purpose, the term "Control" includes,
without limitation, the possession, directly or indirectly, of the power to
direct the management and policies of a partnership, joint venture, limited
liability company or corporation, whether through the ownership of voting
securities, by contract or otherwise.
Article III.
EMPLOYMENT PERIOD
3.1 Employment. Effective as of the Effective Date, the Company hereby
employs Executive to serve in the capacities described in this Agreement and
Executive hereby accepts such employment and agrees to perform the services
described in this Agreement upon the terms and conditions set forth in this
Agreement.
3.2 Employment Period. Subject to Section 3.3 and the termination
provisions hereinafter provided, the term of Executive's employment under this
Agreement (the "Employment Period") shall begin on the Effective Date and end on
the Anniversary Date which is three (3) years after such date. The employment of
Executive by the Company shall not be terminated other than in accordance with
Article VII.
3.3 Extensions of Employment Period. On each Anniversary Date commencing on
the second Anniversary Date, if on or before that date the Company has not
delivered to Executive, and/or Executive has not delivered to the Company, a
written notice (a "Notice of Non-Renewal") that the Employment Period will not
be extended, the Employment Period will be automatically extended for an
additional year until either party delivers a Notice of Non-Renewal. Any Notice
of Non-Renewal must be delivered by the Company, or the Executive, as the case
may be, no later than 60 days prior to the Anniversary Date on which the then
current Employment Period is scheduled to expire.
Article IV.
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COMPENSATION
4.1 Salary. For services rendered by Executive pursuant to this Agreement,
the Company agrees to pay Executive a base salary ("Base Salary") commencing as
of the Effective Date at the rate of two hundred fifty-six thousand ($256,000)
per annum, which amount shall initially be subject to the Deferred Compensation
Agreement. Subject to the Deferred Compensation Agreement and any other deferred
compensation arrangement entered into between the Company and Executive, the
Base Salary shall be payable in equal installments in accordance with the
Company's normal payroll practices for officers (but not less frequently then
monthly). During the Employment Period, the Base Salary shall be reviewed no
less frequently than annually (commencing with the second Contract Year) by the
Board after consultation with Executive and may from time to time be increased
as determined by the Board in its sole discretion. This annual review shall be
conducted in conjunction with Executive's regularly scheduled performance
review. Effective as of the date of any such increase, the Base Salary as so
increased shall be considered the new Base Salary for purposes of this Agreement
and may not thereafter be reduced unless agreed to in writing between the
Company and Executive. Any increase in Base Salary shall not limit or reduce any
other obligation of the Company to Executive under this Agreement.
4.2 Annual Bonus. In addition to Base Salary, Executive shall be eligible
during the term of this Agreement, upon the terms and subject to the conditions
set forth herein, to receive a bonus for each calendar year in an amount to be
determined in the sole discretion of the Board ("Annual Bonus"). Executive's
Annual Bonus shall be determined and, if appropriate, awarded, based upon
meeting certain performance objectives which will be set by the mutual agreement
of the Board and Executive. Such performance objectives each year shall be fixed
at the beginning of each calendar year (or another date agreed upon by Executive
and the Board) and shall be subject to any adjustments thereof from time to time
as agreed upon by Executive and the Board.
Article V.
OTHER BENEFITS
5.1 Incentive, Savings and Retirement Plans. In addition to the Base Salary
and Annual Bonus eligibility, Executive shall be entitled to participate during
the Employment Period in all incentive, savings and retirement plans, practices,
policies and programs that are from time to time applicable to other senior
executives of the Company.
5.2 Welfare Benefits. During the Employment Period, Executive and/or his
family, as the case may be, shall be eligible for participation in and shall
receive all
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benefits under welfare benefit plans, practices, policies and programs provided
by the Company (including medical, prescription, dental, disability, salary
continuance, employee life, group life, dependent life, accidental death and
travel accident insurance plans and programs) applicable to other senior
executives of the Company.
5.3 Fringe Benefits. During the Employment Period, Executive shall be
entitled to all fringe benefits that are from time to time available to other
senior executives of the Company.
5.4 Vacation. During the Employment Period, Executive shall be entitled
to paid vacation time in accordance with the plans, practices, policies, and
programs applicable to other senior executives of the Company, but in no event
shall such vacation time be more than six (6) weeks per calendar year, unless
otherwise agreed to in writing by Executive and the Company.
5.5 Automobile. In addition to the Base Salary, as an executive
benefit, the Company shall provide Executive with an automobile allowance of an
amount up to eight hundred dollars ($800) per month payable in the normal manner
of wage payment.
5.6 T-1 Line. The Company shall pay for maintenance, repair, monthly
service fees and all other costs associated with a T-1 line to be located at
Executive's residence to enable Executive to share the Company's internet
bandwidth.
5.7 Personal Assistant. The Company shall employ an individual to
provide personal services to Executive during the Employment Period. Such
individual shall be eligible to participate in any and all benefit plans and
retirement plans (including, without limitation, medical, dental, disability,
life insurance and 401(k) plans) that are from time to time available to
employees of the Company, subject to the terms and conditions thereof.
5.8 Expenses. During the Employment Period, Executive shall be entitled
to receive prompt reimbursement for all reasonable employment-related expenses
incurred by Executive upon the receipt by the Company of an accounting of such
expenses in accordance with practices, policies and procedures applicable to
other senior executives of the Company. Such expenses shall include reasonable
expenses incurred by Executive in connection with travel on business relating to
the Company or any of its Subsidiaries. For any international air travel over
six hours in flight time reasonable expenses shall be deemed to include business
class seating.
5.9 Tax Gross-Up Payment.
(a) In the event that any payment or benefit (within the meaning of
Section 280G(b)(2) of the Code), to Executive or for Executive's benefit
paid or
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payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment" or "Payments"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties
are incurred by Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then Executive will be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
the net amount of the Payment and the Gross-Up Payment retained by
Executive after the calculation and deduction of all Excise Taxes
(including any interest or penalties imposed with respect to such taxes,
other than interest and penalties imposed by reason of Executive's failure
to file timely a tax return or pay taxes shown due on his return) on the
payment and all federal, state and local income tax, employment tax and
Excise Tax (including any interest or penalties imposed with respect to
such taxes, other than interest and penalties imposed by reason of
Executive's failure to file timely a tax return or pay taxes shown due on
his return) on the Gross-Up Payment, and taking into account any lost or
reduced tax deductions on account of the Gross-Up Payment, shall be equal
to the Payment.
(b) An initial determination as to whether a Gross-Up Payment is
required pursuant to this Agreement and the amount of such Gross-Up Payment
shall be made at the Company's expense by the Accountants. For the purposes
of this Section 5.9 (b), "Accountants" shall mean the Company's independent
certified public accountants serving immediately prior to a Change in
Control. In the event that the Accountants are also serving as accountant
or auditor for the individual, entity or group effecting the Change in
Control, Executive shall appoint another nationally recognized public
accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accountants hereunder).
The Accountants shall provide its determination (the "Determination"),
together with detailed supporting calculations and documentation to the
Company and the Executive as soon as practicable following the date of
termination if applicable, or such other time as requested by the Company
or by the Executive (provided the Executive reasonably believes that any of
the Payments may be subject to the Excise Tax). The Gross-Up Payment, if
any, as determined pursuant to this Section 5.9(b) shall be paid by the
Company to Executive on the later of (i) 15 business days following the
receipt of the Accountants' determination or (ii) 15 business days
preceding the date the Excise Tax becomes payable. The Determination shall
be binding, final and conclusive upon the Company and Executive.
(c) As a result of uncertainity in the application of Section 4999 of
the Code at the time of the Determination, it is possible that the Gross-Up
Payment made will have been an amount less than the Company should have
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paid pursuant to this Section 5.9 (the "Underpayment"). In the event that
the Company exhausts its remedies with the Internal Revenue Service and
Executive is required to make a payment of any Excise Tax, the Underpayment
shall be promptly paid by the Company to or for Executive's benefit.
5.10 Tax Services. The Company agrees to engage KPMG, or such other
nationally recognized independent certified public accounting firm as the
Company may select, to prepare Executive's United States income tax returns for
each year of employment hereunder.
5.11 Legal Fees. The Company shall reimburse Executive for legal fees
incurred in connection with the preparation and negotiation of this Agreement in
an amount not to exceed Ten Thousand Dollars ($10,000). The Company shall
reimburse Executive for legal fees incurred for services provided to or for the
Executive's benefit in connection with Company business during the Employment
Period or any extension thereof in amount not to exceed $2,500 per calendar
year.
Article VI.
TERMINATION/TERMINATION BENEFITS
6.1 Termination.
(a) Executive's employment hereunder shall or may be terminated, as
the case may be, under the following circumstances:
(i) Cause. The Company may terminate Executive's employment
hereunder for Cause by delivery of a written notice to Executive
setting forth the reasons for such termination. Any termination for
Cause pursuant to this Agreement shall be determined by the
affirmative vote of at least a majority of the Board (excluding
Executive if he is a member of the Board and any other member of the
Board reasonably believed by the Board to be involved in the events
leading the Board to terminate Executive for Cause).
(ii) Death or Disability. Executive's employment hereunder shall
terminate upon the death of Executive. In addition, the Company may
terminate Executive's employment hereunder as a result of Executive's
Disability.
(iii) Termination Without Cause. Notwithstanding anything to the
contrary contained herein, Executive's employment with the Company may
be terminated by the Company at any time, for any reason, with or
without Cause, and without liability except with
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respect to the payments provided for by Section 6.2(c). Executive
understands and acknowledges and hereby agrees that the Company may
terminate Executive's employment by delivery from the Company to
Executive of written notice of such termination.
(iv) Voluntary Resignation. Executive may voluntarily resign his
position and terminate his employment with the Company at any time by
delivery of a written notice of resignation to the Company (a "Notice
of Resignation"). The Notice of Resignation shall set forth the date
such resignation shall become effective, which date shall, in any
event, be no more than 30 days from the date the Notice of Resignation
is delivered to the Company; provided, however, that the Company
shall, in its discretion and by sending written notice to Executive,
be entitled to deem Executive's resignation effective at any time
within such 30 day period and such date specified by the Company shall
then become the date of resignation.
(v) Termination for Good Reason. Executive may terminate his
employment pursuant to this Agreement for Good Reason by delivery of a
written notice to the Company at least 30 days prior to the Date of
Termination stating the events that gave rise to the Termination for
Good Reason and that Executive has a good faith believe that such
events constitute grounds for a Termination for Good Reason. Such
notice shall also set forth the date on which such termination shall
become effective (which date shall, in any event, be no more than 30
days from the date such notice is delivered to the Company); provided,
however, that the Company shall, in its discretion and by sending
written notice to Executive, be entitled to deem Executive's
resignation effective at any time within such 30 day period and such
date specified by the Company shall then become the Date of
Termination.
(b) Compensation Upon Termination.
(i) Termination for Cause. If the Company terminates Executive's
employment for Cause pursuant to Section 6.1(a)(i), the Company shall
pay to Executive immediately after the Date of Termination an amount
equal to the sum of Executive's Accrued Base Salary and Accrued Annual
Bonus, together with reimburseable business expenses actually and
reasonably incurred by Executive prior to the Date of Termination.
Upon a termination for Cause, Executive shall not be entitled to
receive any payment other than the payments provided for pursuant to
this Section 6.1(b)(i).
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(ii) Termination for Death or Disability. If Executive's
employment is terminated pursuant to Section 6.1(a)(ii) during the
Employment Period due to his death or Disability, the Company shall
pay to Executive or his Beneficiaries, as the case may be, subject to
the execution, delivery and non-revocation by Executive, or his
Beneficiaries, as the case may be, of the Release Agreement, an amount
which is equal to the sum of Executive's Accrued Base Salary and
Accrued Annual Bonus. Thereafter, the Company shall pay an amount
equal to Executive's then current Base Salary, multiplied by the
greater of (a) the number of months remaining in the term of the
Agreement or (b) six (6) months. All such payments under this Section
6.1(b)(ii) shall be payable in six (6) equal, monthly payments
beginning on the first day of the month following the date of
Executive's Date of Termination.
(iii) Termination Without Cause or for Good Reason. In the event
of a Termination Without Cause or a Termination for Good Reason
pursuant to Section 6.1(a)(iii) or 6.1(a)(v), respectively, during the
Employment Period, or any extension thereof, subject to the execution,
delivery and non-revocation by Executive of the Release Agreement,
Executive shall receive the following:
(A) immediately after the Date of Termination, a lump-sum
amount in immediately available funds equal to the sum
of Executive's Accrued Base Salary and Accrued Annual
Bonus;
(B) an amount equal to Executive's Annualized Total
Compensation multiplied by two (2), such payments to be
made in quarterly installments for the duration of the
Severance Period beginning on the first day of the
month following the date of Executive's Date of
Termination;
(C) all options to purchase Common Stock held by Executive
immediately prior to the Date of Termination shall be
vested and immediately exercisable and Executive shall
have six (6) months from the Date of Termination to
exercise such options, at which time the options shall
terminate and be of no further force or effect;
(D) the continuation of the benefits specified in Section
5.2 to which Executive is entitled as of the Date of
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Termination for the entire duration of the Severance Period, it being
understood that, in the event any benefit plan specified in Section
5.2 (or any applicable law, rule or regulation) does not provide for
the continuation of benefits for the entire duration of the Severance
Period, the Company shall provide Executive (at no additional cost to
Executive) with substantially similar benefits from and after the date
on which such benefits cease under such plan for the remainder of the
Severance Period;
(E) the right to continue, at Executive's option, to participate for the
entire duration of the Severance Period in any Company pension plan or
other benefit plan (other than the plans specified in Section 5.2, the
participation in which is governed by subsection (D) above) that is in
effect on the Date of Termination; provided, that (i) Executive was
eligible to, and was participating in, such plan as of the Date of
Termination and (ii) the terms of such plan specifically provide for
the continued participation in such plan by persons no longer employed
with the Company or its Subsidiaries; and
(F) a payment equal to the amount of any unvested employer matching
contributions credited to Executive's account as of the Date of
Termination under the Company's 401(k) plan or any other similar plan
adopted by the Company during the Employment Period to which Executive
is eligible to, and is participating in, as of the Date of Termination
(in any case after taking into account any accelerated vesting of
employer matching contributions that may occur in connection with a
Termination without Cause or a Termination for Good Reason under any
such plan), such payment to be made in equal quarterly installments
for the duration of the Severance Period beginning on the first day of
the month following the date of Executive's Date of Termination.
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(iv) Voluntary Resignation. If Executive terminates his
employment with the Company pursuant to Section 6.1(a)(iv), then the
Company shall pay Executive the Base Salary through the Date of
Termination, together with reimbursable expenses actually and
reasonably incurred by Executive prior to the Date of Termination.
(c) Termination After a Change of Control. If a Termination Without
Cause or a Termination for Good Reason occurs within two years after a
Change of Control, then Executive shall receive (i) a lump-sum payment
equal to the sum of Executive's Accrued Base Salary and Accrued Annual
Bonus, (ii) a multiple of his Annualized Total Compensation equal to two
(2.0), payable in four equal quarterly installments and (ii) the benefits
specified in Section 6.1(b)(iii)(C), (D), (E) and (F).
6.2 Failure of Company to Renew Agreement. In the event Executive's
employment terminates following the election of the Company to give notice of
non-renewal of this Agreement pursuant to Section 3.2, the Company shall
continue to pay to Executive his then current Base Salary for a one-year period
following the Date of Termination.
6.3 Other Termination Benefits. In addition to any amounts or benefits
payable upon a Termination of Employment hereunder, Executive shall, except as
otherwise specifically provided herein, be entitled to any payments or benefits
provided hereunder or under the terms of any plan, policy or program of the
Company or as otherwise required by applicable law.
Article VII.
MISCELLANEOUS
7.1 Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances including set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against Executive or others. In no event shall Executive be
obligated to seek other employment or take any other action to mitigate the
amounts payable to Executive under any of the provisions of this Agreement, nor
shall the amount of any payment hereunder be reduced by any compensation earned
as result of Executive's employment by another employer, except that any
continued welfare benefits provided for by Section 6.1(b)(ii) shall not
duplicate any benefits that are provided to Executive and his family by such
other employer and shall be secondary to any coverage provided by such other
employer.
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7.2 Late Payments. If the Company fails to pay any amount provided under
this Agreement when due, the Company shall pay interest on such amount at a rate
equal to (i) the highest rate of interest charged by the Company's principal
lender plus 200 basis points, or (ii) in the absence of such a lender, 300 basis
points over the prime commercial lending rate announced by Xxxxx Fargo Bank on
the date such amount is due or, if no such rate shall be announced on such date,
the immediately prior date on which Xxxxx Fargo Bank announced such a rate;
provided, however, that if the interest rate determined in accordance with this
Section exceeds the highest legally-permissible interest rate, then the interest
rate shall the highest legally-permissible interest rate.
7.3 Beneficiary. If Executive dies prior to receiving all of the amounts
payable to him in accordance with the terms of this Agreement, such amounts
shall be paid to one or more beneficiaries (each, a "Beneficiary") designated by
Executive in writing to the Company during his lifetime, or if no such
Beneficiary is designated, to Executive's estate. Such payments shall be made,
in accordance with the terms of this Agreement. Executive, without the consent
of any prior Beneficiary may change his designation of Beneficiary or
Beneficiaries at any time or from time to time by a submitting to the Company a
new designation in writing.
7.4 Arbitration and Equitable Relief.
(a) Arbitration. In the event that there shall be a dispute between
the Company (including any employee, officer, director, stockholder or
benefit plan of the Company in their capacity as such or otherwise) and
Executive, the Company and Executive agree that such dispute shall be
resolved by a final and binding arbitration under the arbitration rules set
forth in California Code of Civil Procedure section 1280 through 1294.2,
including section 1283.05 (the "Rules") and pursuant to California law.
Unless otherwise prohibited by applicable law, this Section 7.4 constitutes
a waiver of Executive's and Company's right to a trial by jury and relates
to all disputes between Executive and the Company, including, but not
limited to:
(i) any and all claims for wrongful discharge of employment,
breach of contract, both express and implied, breach of the covenant
of good faith and fair dealing, both express and implied, negligent or
intentional infliction of emotional distress, negligent or intentional
misrepresentation, negligent or intentional interference with contract
or prospective economic advantage, and defamation;
(ii) any and all claims for violation of any federal, state
or local statute, including but not limited to, Title VII of the Civil
Rights Act of 1964, as amended, the Civil Rights Act of 1866, as
amended, the Civil Rights Act of 1991, as amended, the Equal Pay Act,
as amended,
16
the Labor Management Relations Act, as amended, the National Labor
Relations Act, as amended, the Federal False Claims Act, as amended,
the Fair Credit Reporting Act, as amended, the Age Discrimination in
Employment Act, as amended, the Americans with Disabilities Act, as
amended, the Fair Labor Standards Act, as amended, the California Fair
Employment and Housing Act, as amended, the California Labor Code, as
amended, and any applicable collective bargaining agreements; and
(iii) any and all claims arising out of any other laws and
regulations relating to employment or employment discrimination.
(b) Procedure. Any arbitration will be administered by the Judicial
Arbitration and Mediation Service (JAMS) in the county of Monterey,
California and a single arbitrator will be selected in a manner consistent
with its national rules for the resolution of employment disputes. The
arbitrator shall have the power to decide any motions brought by any party
to the arbitration, including motions for summary judgment and/or
adjudication and motions to dismiss and demurrers, prior to any arbitration
hearing. The arbitrator shall have the power to award any remedies,
including attorneys' fees and costs, available under applicable law. The
Company and Executive agree to request a reasoned written award from JAMs
setting forth and explaining any final and binding arbitration decision.
The Company will pay for standard fees charged by JAMs for arbitration
services. The arbitrator shall administer and conduct any arbitration in a
manner consistent with the Rules and to the extent that JAMs national rules
for the resolution of employment disputes conflict with the Rules, the
Rules shall take precedence. Any award issued as a result of such
arbitration shall be enforceable by any court having jurisdiction over the
party against whom enforcement is sought.
(c) Remedy. Except as provided by the Rules, arbitration shall be the
sole, exclusive and final remedy for any dispute between Executive and the
Company, subject to any appeals allowed under the Rules. Accordingly,
except as provided for by the Rules, neither Executive nor the Company will
be permitted to pursue court action regarding claims that are subject to
arbitration. Notwithstanding, the arbitrator will not have the authority to
disregard or refuse to enforce any lawful Company policy, and the
arbitrator shall not order or require the Company to adopt a policy not
otherwise required by law which the Company has not adopted.
(d) Availability of Injunctive Relief. In addition to the right under
the Rules to petition the court for provisional relief, any party may also
petition the court for injunctive relief where either party alleges or
claims a violation of the Agreement or any agreement regarding trade
secrets,
17
confidential information, non-solicitation or Labor Code ss.2870. In the
event either party seeks injunctive relief, the prevailing party shall be
entitled to recover reasonable costs and attorneys fees, to the extent
permitted under law.
(e) Administrative Relief. The Agreement does not prohibit Executive
from pursuing an administrative claim with a local, state or federal
administrative body such as the Department of Fair Employment and Housing,
the Equal Employment Opportunity Commission or the Workers' Compensation
Board.
(f) The Company and Executive understand that each party's promise to
resolve claims by arbitration in accordance with the provisions of this
Agreement, rather than through the courts, is consideration for the other
party's like promise.
7.5 Non-Solicitation; Confidentiality; Non-Disparagement.
(a) Non-Solicitation of Employees. During the term of this Agreement,
and for a period of twelve (12) months following the last day of employment
hereunder, Executive will not, on his own account or jointly with or as an
advisor, director, agent, representative, officer, manager, employee,
principal, partner, joint venturer or owner or on behalf of another Person,
solicit any employee of the Company or any of its Subsidiaries to obtain
employment with another employer or otherwise attempt to induce any such
employee to leave their employment with the Company or any of its
Subsidiaries.
(b) Non-Solicitation of Specified Customers. For a period of twelve
(12) months, commencing on the last day of employment hereunder, Executive
will not, directly or indirectly, solicit business for purposes of
providing products or services provided by the Company or any of its
Subsidiaries from any customer of the Company or any of its Subsidiaries.
(c) Confidentiality. In accordance with the Confidentiality Agreement
dated as of December 31, 2001 by and between the Company and Executive, (a
copy of which is attached hereto as Exhibit B) Executive agrees not to use
or disclose any Confidential Information (as defined therein) of the
Company or any of its Subsidiaries and Executives expressly acknowledges
that this obligation survives any Termination of Employment.
(d) Non-Disparagement. Executive agrees that, following any
Termination of Employment, he will refrain from making any statements about
the Company and its Subsidiaries or any of their respective officers,
18
directors or employees that would disparage, or reflect unfavorably upon
the image or reputation of the Company, its Subsidiaries or any such
officer, director or employee. Similarly, the Company and its Subsidiaries
agree to refrain from making any statements about Executive that would
disparage, or reflect unfavorably upon the image or reputation of
Executive.
(e) Notification of New Employer. In the event Executive leaves the
employ of the Company, Company may notify Executive's new employer about
Executive's rights and obligations under this Agreement.
7.6 Representation of Executive. Executive represents and acknowledges
that he has consulted with such tax, legal and other professional advisors whom
Executive deems advisable in connection with this Agreement and the compensation
and benefits provided hereunder, and that he is not relying on the Company for
any tax advice. In addition, Executive represents and acknowledges that he has
had an opportunity to obtain the advice of counsel prior to executing this
Agreement and fully understands all provisions contained herein.
7.7 Assignment; Successors. The Company may not assign its rights and
obligations under this Agreement without the prior written consent of Executive
except to a successor of the Company's business which expressly assumes the
Company's obligations hereunder in writing. This Agreement shall be binding upon
and inure to the benefit of Executive, his estate and Beneficiaries, the Company
and the successors and permitted assigns of the Company.
7.8 Nonalienation. Benefits payable under this Agreement shall not be
subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution or levy of any kind, either
voluntary or involuntary, prior to actually being received by Executive or a
Beneficiary, as applicable, and any such attempt to dispose of any right to
benefits payable hereunder shall be void.
7.9 Severability. If one or more parts of this Agreement are declared by
any court or governmental authority to be unlawful or invalid, such unlawfulness
or invalidity shall not invalidate any part of this Agreement not declared to be
unlawful or invalid. Any part so declared to be unlawful or invalid shall, if
possible, be construed in a manner which will give effect to the terms of such
part to the fullest extent possible while remaining lawful and valid.
7.10 Captions. The names of the Articles and Sections of this Agreement are
for convenience of reference only and do not constitute a part hereof.
7.11 Amendment; Waiver. This Agreement shall not be amended or modified
except by written instrument executed by the Company and Executive. A
19
waiver of any term, covenant or condition contained in this Agreement shall not
be deemed a waiver of any other term, covenant or condition, and any waiver of
any default in any such term, covenant or condition shall not be deemed a waiver
of any later default thereof.
7.12 Notices. All notices hereunder shall be in writing and delivered by
hand, by nationally-recognized delivery service that guarantees overnight
delivery, or by first-class, registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Company, to: Excelligence Learning Corporation
0 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Board of Directors
If to Executive, to: Xxx Xxxxxxx
President and Chief Executive Officer
Excelligence Learning Corporation
0 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
With copy to: Holland & Knight LLP
00 Xxxxxxxxxx Xxxxxx
00/xx/ Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Either party may from time to time designate a new address by notice given in
accordance with this Section. Notice shall be effective when actually received
by the addressee.
7.13 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
7.14 Entire Agreement. This Agreement forms the entire agreement between
the parties hereto with respect to the subject matter contained in this
Agreement and, except as otherwise provided herein, shall supersede all prior
agreements, promises and representations regarding employment, compensation,
severance or other payments contingent upon termination of employment, whether
in writing or otherwise.
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7.15 Applicable Law. This Agreement shall be interpreted and construed in
accordance with the laws of the State of California, without regard to its
choice of law principles.
7.16 Survival of Executive's Rights. All of Executive's rights hereunder,
including his rights to compensation and benefits as set forth herein shall
survive the termination of Executive's employment and/or the termination of this
Agreement in accordance with the terms of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
EXCELLIGENCE LEARNING CORPORATION
By: /s/ Xxxxxx X. XxXxxxx
--------------------------------
Its: SVP/COO
-------------------------------
EXECUTIVE
/s/ Xxx Xxxxxxx
-----------------------------------
Xxx Xxxxxxx
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EXHIBIT A
FORM OF RELEASE AGREEMENT
This RELEASE AGREEMENT (this "Agreement") dated this ___ day of _____,
20__, is by and between Xxx Xxxxxxx ("Executive") and Excelligence Learning
Corporation, a Delaware corporation (the "Company").
WHEREAS, Executive and the Company previously have entered into an
Employment Agreement, dated as of May 6, 2002 (the "Employment Agreement"); and
WHEREAS, Section 6.1(b)(ii) and 6.1(b)(iii) of the Employment Agreement
provide that, in consideration for Executive's receipt of the compensation
specified therein upon Executive's termination as a result of his death or
disability or without cause or for good reason, Executive shall execute and
deliver this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in consideration of the mutual
covenants and obligations herein contained, the parties hereto agree as follows:
1. Severance Payments Upon Termination. In exchange for Executive's
execution of this Agreement, the Company agrees to compensate Executive as
specified by, and in accordance with, Section 6.1(b)(ii) and 6.1(b)(iii) of the
Employment Agreement.
2. Release by Executive Upon Termination.
(a) Executive hereby releases, discharges and covenants not to xxx the
Company, Earlychildhood LLC, a California limited liability company, Educational
Products, Inc., a Texas corporation, or XxxxxxxXxxx.xxx, Inc., a Delaware
corporation, or, as applicable, their respective divisions, subsidiaries,
parent(s), affiliated corporations, partnerships or limited liability companies,
past and present, and each of them, as well as their directors, officers,
shareholders, members, representatives, assignees, successors, agents and
employees, past and present, and each of them (individually and collectively,
the "Releasees") from any and all actions or causes of action, suits, claims,
complaints, contracts, liabilities, obligations, agreements, promises, debts,
damages, judgments, rights and demands, whether existing or contingent, known or
unknown, including, but not limited to: (i) any and all claims arising out of or
in connection with Executive's employment, change in employment status and/or
termination of employment from the Company; (ii) any and all claims based on any
federal, state or local law, constitution or regulation dealing with either
employment or employment discrimination such as those laws or regulations
concerning discrimination on the basis of age, race, color,
23
creed, religion, sex, sexual harassment, sexual orientation, national origin,
ancestry and disability; and/or (iii) any and all claims arising out of or in
connection with any contract, whether oral or written, express or implied, any
tort, and/or any other statutory or common law claim of any nature whatsoever.
This provision is intended by the parties hereto to be all encompassing and to
act as a full and total release of any claims, whether specifically enumerated
herein or not, that Executive has, may have or has had against the Releasees
prior to the date of execution of this Agreement.
(b) Since Executive is 40 years of age or older, he has been informed
that he has or might have specific rights and/or claims under the Age
Discrimination in Employment Act of 1967 (the "ADEA"), and he agrees and
understands that: (i) in consideration for the payments described in Section 1,
he specifically waives his rights and/or claims under the ADEA to the extent
that such rights and/or claims arose prior to or on the date this Agreement is
executed; (ii) he is advised of his right to consult with an attorney of his
choice or any other person of his choosing prior to executing this Agreement and
that he has not been subject to any undue or improper influence interfering with
the exercise of his free will in deciding whether to execute this Agreement; and
(iii) he is hereby informed that he has at least 21 days from the date he is
presented with this Agreement within which to consider the terms of this
Agreement, and seven days after execution of this Agreement within which to
revoke this Agreement.
(c) Executive acknowledges that he has been advised by legal counsel and
is familiar with the provisions of California Civil Code Section 1542, which
provides as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
this release, which if known by him must have materially affected his
settlement with the debtor."
Executive, being aware of California Civil Code Section 1542, hereby expressly
waives any rights he may have thereunder, as well as under any other statutes or
common law principles of similar effect.
3. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
the principles of conflicts of law thereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date set forth above.
EXCELLIGENCE LEARNING CORPORATION
By: ______________________________
Name _______________________
Title: _______________________
__________________________________
Xxx Xxxxxxx
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