EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 8, 1996 between Faroudja
Laboratories, Inc., a California corporation with offices at 000 Xxxxxxx Xxxxxx,
Xxxxxxxxx, XX 00000 (the "Company") and Xxxxxxx X. Xxxxx, residing at 000 Xxxxx
Xxxx, Xxxxxxxx, XX 00000 ("Employee").
The Company desires to engage Employee to perform services for the Company
and Employee desires to perform such services, on the terms and conditions
hereinafter set forth.
1. TERM. The Company agrees to employ Employee, and Employee agrees to
serve, on the terms and conditions of this Agreement for a period commencing on
July 8, 1996 and ending four years from such starting date, or such shorter
period as may be provided for herein. The period during which Employee is
employed hereunder is hereinafter referred to as the "Employment Period."
2. DUTIES AND SERVICES. During the Employment Period, Employee shall be
employed in the business of the Company as President and Chief Executive
Officer. Employee shall serve as a member of the Company's Board of Directors
and be a member of the Company's Executive Committee. In performance of his
duties, Employee shall be subject to the direction of the Board of Directors of
the Company. Employee agrees to his employment as described in this Section 2
and agrees to devote all of his working time and efforts to the performance of
his duties under this Agreement, excepting disabilities, illness, and vacation
time as provided by Section 3(d). In performing his duties hereunder, Employee
shall be available for reasonable travel as the needs of the business require.
3. COMPENSATION AND OTHER BENEFITS
(a) As Compensation for his services hereunder, the Company shall pay
Employee, during the Employment Period, a salary payable in equal semi-monthly
installments at the annual rate of $175,000.
(b) Employee's salary rate shall be reviewed annually by the Board of
Directors. Upon such review, Employee's salary may be adjusted upwards to such
rate as shall be considered appropriate and fixed by the Board of Directors,
taking into account economic conditions, competitive conditions within the
industry, the financial condition, operations, and prospects of the Company, and
Employee's performance and salary. In addition, Employee shall be entitled to
receive such bonuses as the Board of Directors of the Company may, in its sole
discretion, award from time to time, based upon specific criteria and
achievements (including but not limited to profit, cash flow, growth,
achievement of specific business objectives, etc.).
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(c) Employee shall be entitled to participate in all group health and
insurance programs and all other fringe benefit or retirement plans or
additional compensation which the Company may hereafter, in its sole and
absolute discretion, elect to make available to its employees generally,
provided Employee meets the qualifications therefor, but the Company shall not
be required to establish any such program or plan or otherwise to pay any such
additional compensation. The Company currently has a 401K Plan in effect and
covers approximately 80% of the monthly premium of the Employee's Blue Cross
medical and dental insurance policy.
(d) Employee shall be entitled to 10 days of vacation per year of the
Employment Period and 5 days period sick leave.
(e) Employee shall be granted 500,000 stock options in the Company's
Stock Option Plan at an exercise price of $2.65 per share. Employee shall also
be granted 500,000 stock options in Faroudja Images, Inc. Stock Option Plan at
an exercise price of $1.00 per share. Both option plans are "qualified" plans
and vest over a four year period in equal installments.
4. EXPENSES. Employee shall be entitled to reimbursement for all
reasonable travel and other out-of-pocket expenses necessarily incurred in the
performance of his duties hereunder, upon submission and approval of written
statements and bills in accordance with the then regular procedures of the
Company.
5. REPRESENTATIONS AND WARRANTIES OF EMPLOYEE. Employee represents and
warrants to the Company that (a) Employee is under no contractual or other
restriction or obligation which is inconsistent with the execution of this
Agreement, the performance of his duties hereunder, or the other rights of the
Company hereunder and (b) Employee is under no physical or mental disability
that would hinder his performance of duties under this Agreement.
6. NON-COMPETITION. In view of the unique and valuable services it is
expected Employee will render to the Company, Employee's knowledge of the
customers, trade secrets, and other proprietary information relating to the
business of the Company and its customers and suppliers and similar knowledge
regarding the Company it is expected Employee will obtain, and in consideration
of the compensation to be received hereunder and at the shares of stock of the
Company being sold to Employee, Employee agrees that he will not during the
period he is employed full-time by the Company under this Agreement or otherwise
Participate in (hereinafter defined in this Section 6) any other business or
organization, whether or not such business or organization now is or shall then
be competing with or of a nature similar to the business of the Company;
provided, however, that the provisions of this Section 6 will not be deemed
breached merely because Employee owns not more than 1% of the outstanding common
stock of a corporation, if, at the time its acquisition by Employee, such stock
is listed on a national securities exchange, is reported on NASDAQ, or is
regularly traded in the over-the-counter market
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by a member of a national securities exchange. The term "Participate In" shall
mean: "directly or indirectly, for his own benefit or for, with or through any
other person, firm, or corporation, own, manage, operate, control, loan money
to, or participate in the ownership, management, operation, or control of, or be
connected as a director, officer, employee, partner, consultant, agent,
independent contractor, or otherwise with, or acquiesce in the use of his name
in." Employee will not directly or indirectly reveal the name of, solicit or
interfere with, or endeavor to entice away from the Company any of its
suppliers, customers, or employees. Employee will not directly or indirectly
employ any person who was an employee of the company within a period of one year
after such person leaves the employ of the Company. Since a breach of the
provisions of this Section 6 could not adequately be compensated by money
damages, the Company shall be entitled, in addition to any other right and
remedy available to it, to an injunction restraining such breach or a threatened
breach, and in either case no bond or other security shall be required in
connection therewith. Employee agrees that the provisions of this Section 6 are
necessary and reasonable to protect the Company in the conduct of its business.
If any restriction contained in this Section 6 shall be deemed to be invalid,
illegal, or unenforceable by reason of the extent, duration, or geographical
scope hereof, or otherwise, then the court making such determination shall have
the right to reduce such extent, duration, geographical scope, or other
provisions hereof, and in its reduced from such restriction shall then be
enforceable in the manner contemplated hereby.
7. PATENTS, ETC. Any interest in patents, patent applications,
inventions, technological innovations, copyrights, copyrightable works,
developments, discoveries, designs, and processes which Employee now or
hereafter during the period he is employed by the Company under this
Agreement or otherwise and for six months thereafter may own, conceive of, or
develop and either relating to the fields in which the Company may then be
engaged or contemplates (as demonstrated by the records of the Company) being
engaged or conceived of or developed utilizing the time, material,
facilities, or information of the Company ("Such Inventions") shall belong to
the Company; as soon as Employee owns, conceives of, or develops any Such
Invention, he agrees immediately to communicate such fact in writing to the
Secretary of the Company, and without further compensation, but at the
Company's expense (except as noted in clause (a) of this Section 7),
forthwith upon request of the Company, Employee shall execute all such
assignments and other documents (including applications for patents,
copyrights, trademarks, and assignments thereof) and take all such other
action as the Company may reasonably request in order (a) to vest in the
Company all Employee's right, title, and interest in and to Such Inventions,
free and clear of liens, mortgages, security interests, pledges, charges, and
encumbrances arising from the acts of Employee ("Liens") (Employee to take
such action, at his expense, as is necessary to remove all such Liens) and
(b) if patentable or copyrightable, to obtain patents or copyrights
(including extensions and renewals) therefor in any and all countries in such
name as the company shall determine.
8. CONFIDENTIAL INFORMATION. All confidential information which Employee
may now possess, may obtain during or after the Employment Period, or may create
prior to the
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end of the period he is employed by the Company under this Agreement or
otherwise relating to the business of the Company or of any customer or supplier
of the Company shall not be published, disclosed, or made accessible by him to
any other person, firm, or corporation either during or after the termination of
his employment or used by him except during the Employment Period in the
business and for the benefit of the Company, in each case without the prior
written permission of the Company. Employee shall return all physical evidence
of such confidential information to the Company prior to or at the termination
of his employment. As used in this Section 8, "confidential information" shall
mean any information except that information competitors or which is generally
available to the public.
9. LIFE INSURANCE. If requested by the Company, Employee shall submit to
such physical examinations and otherwise take such actions and execute and
deliver such documents as may be reasonably necessary to enable the Company, at
its expense and for its own benefit, to obtain life insurance on the life of
Employee. Employee has no reason to believe that his life is not insurable with
a reputable insurance company at prevailing rates.
10. TERMINATION. Notwithstanding anything herein contained, if on or
after the date hereof and prior to the end of the Employment Period:
(a) Either (i) Employee shall be physically or mentally incapacitated
or disabled or otherwise unable fully to discharge his duties hereunder for a
period of three months, as determined by the Board of Directors, (ii) Employee
shall be convicted of a crime of moral turpitude or a felony, (iii) Employee
shall breach any fiduciary duty to the Company, or (iv) Employee shall breach
any material term of this Agreement and fail to correct such breach within 10
days after notice by the Company to Employee of his commission of the same,
then, and in each such case, the Company shall have the right to give notice of
termination of Employee's services hereunder as of a date (not earlier than 10
days from such notice) to be specified in such notice and this Agreement shall
terminate on the date so specified, or
(b) If the Employee shall die, then this Agreement shall terminate
on the date of Employee's death, whereupon Employee or his estate, as the
case may be, shall be entitled to receive only his compensation at the rate
then provided pursuant to Sections 3(a) and 3(b) to the date on which
termination shall take effect; provided, however, that if this Agreement is
terminated as a result of Employee's death, and if the Company shall not at
the date of such death be providing life insurance coverage for the benefit
of Employee's estate, Employee's estate shall be entitled to receive a
payment in the amount of three months' compensation at the rate then provided
pursuant to Section 3(a) and 3(b). Nothing contained in this Section 10
shall be deemed to limit any other right the Company may have to terminate
Employee's employment hereunder upon any ground permitted by law.
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11. SURVIVAL. The covenants, agreements, representations, and warranties
contained in or made pursuant to this Agreement shall survive Employee's
termination of employment as provided herein.
12. ENTIRE AGREEMENT: MODIFICATION. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof,
supersedes all existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by each party.
13. NOTICES. Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or delivered against receipt to the party to whom it
is to be given at the address of such party set forth in the preamble to this
Agreement (or to such other address as the party shall have furnished in writing
in accordance with the provisions of this Section 14). Notice to the estate of
Employee shall be sufficient if addressed to Employee as provided in this
Section 14. Any notice or other communication given by certified mail shall be
deemed given three days after the time of certification thereof, except for a
notice changing a party's address which shall be deemed given at the time of
receipt thereof.
14. WAIVER. Any waiver by either party of a breach of any provision of
this Agreement shall not operate as or be construed to be a waiver of any other
breach of such provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence to any term
of this Agreement on one or more occasions shall not be considered a waiver or
deprive that party of the right thereafter to insist upon strict adherence to
that term or any other term of this Agreement. Any waiver must be in writing,
signed by the party giving such waiver.
15. BINDING EFFECT. Employee's rights and obligations under this
Agreement shall not be transferable by assignment or otherwise, such rights
shall not be subject to commutation, encumbrance, or the claims of Employee's
creditors, and any attempt to do any of the foregoing shall be void. The
provisions of this Agreement shall be binding upon and inure to the benefit of
Employee and his heirs and personal representatives, and shall be binding upon
and inure to the benefit of the Company and its successors and those who are its
assigns under Section 11.
16. NO THIRD PARTY BENEFICIARIES. This Agreement does not create, and
shall not be construed as creating, any rights enforceable by any person not a
party to this Agreement (except as provided in Section 16).
17. HEADINGS. The headings in this Agreement are solely for the
convenience of reference and shall be given no effect in the construction or
interpretation of this Agreement.
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18. COUNTERPARTS; GOVERNING LAW. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall be
governed by and construed in accordance with the laws of the State of
California, without giving effect to the conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
FAROUDJA LABORATORIES, INC.
By: /s/ Xxxxxxx X. Xxxxx
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August 23, 1996
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