ASHWORTH, INC. SECOND AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT OF RANDALL L. HERREL
Exhibit 10.1
This Second First Amended and Restated Executive Employment Agreement (“Agreement”) is
effective as of February 28, 2006, and amends and restates the Executive Employment Agreement made
and entered into by and between XXXXXXXX, INC. (the “Company”) and XXXXXXX X. XXXXXX (“Xxxxxx”)
dated October 10, 1996, and amended and restated by that certain First Amended and Restated
Executive Employment Agreement, dated February 22, 1999.
1. Employment. The Company hereby employs Xxxxxx, and Xxxxxx hereby accepts
employment upon the terms and conditions hereinafter set forth.
2. Term. Xxxxxx shall be employed by the Company at-will, and will serve at the
pleasure of the Company’s board of directors, subject to the severance compensation described in
Section 15.
3. Compensation. For all services rendered by Xxxxxx under this Agreement, the
Company shall pay Xxxxxx as follows:
(a) Starting Bonus: A starting bonus, in lieu of relocation expenses, equal to
Seventy-Five Thousand Dollars ($75,000), to be paid on or before October 31,1996;
(b) Annual Base Salary: An annual base salary no less than Three Hundred Twenty-Five
Thousand ($325,000) Dollars, payable in bi-weekly installments, such compensation to be
reviewed annually in the sole discretion of the Board’s Compensation Committee on the basis
of Xxxxxx’x performance and the Company’s financial success and progress.
(c) Annual Bonus: An annual bonus to be paid on January 15 following the 1997 fiscal
year end based on the Company’s earnings per share and Xxxxxx’x then current annual base
salary as of such fiscal year end, as follows:
| Earnings | % of Annual | |||
| Per Share | Base Salary | |||
$0.46 |
15 | % | ||
$0.48 |
35 | % | ||
$0.50 |
50 | % | ||
$0.52 |
65 | % | ||
$0.54 |
85 | % | ||
Such bonus shall be included in the calculation of the respective earnings per share. The
Company and Xxxxxx agree to engage in good faith negotiations to determine the terms of an
annual bonus for fiscal years after 1997.
(d) Initial Stock Options: Initial options to purchase Three Hundred Thousand
(300,000) shares of the Company’s Common Stock at an exercise price of $6.00 per share,
exercisable by Xxxxxx until January 1, 2006, subject to the following vesting dates (such
options to be subject to the terms and conditions of the Company’s Incentive Stock Option
Plan attached hereto):
| No. of Shares | Vesting Date | |||
50,000 |
June 15, 1997 | |||
50,000 |
January 1, 1998 | |||
100,000 |
January 1, 1999 | |||
100,000 |
January 1, 2000 | |||
(e) Clothing Allowance: Xxxxxxxx clothing as reasonably necessary for the personal use
of Xxxxxx and his immediate family.
4. Duties. Xxxxxx is engaged as Chief Executive Officer and President. As long as
Xxxxxx is the Chief Executive Officer of the Company, the board shall nominate Xxxxxx for
reelection to the Company’s board at the time of each expiration of his term of office as a board
member. If Xxxxxx ceases to be the Chief Executive Officer of the Company at any time, he will
resign from the board of directors unless a majority of the members of the board other than Xxxxxx
vote to retain him on the board. As Chief Executive Officer and President, Xxxxxx shall have
complete responsibility for the management of the operations of the Company, and shall have full
authority and responsibility, subject to the general direction and control of the board of
directors, for formulating policies and administering the Company in all respects. His power shall
include authority to hire and fire personnel of the Company and to retain consultants when he deems
necessary to implement the Company’s policies. The precise services of Xxxxxx may be extended or
reduced from time to time at the direction of the board of directors, provided any such expanded
services are services normally associated with the position held by Xxxxxx.
5. Extent of Services. Xxxxxx agrees to devote his best efforts to the business of
the Company and shall not allow any other business interests to adversely affect his obligations
and responsibilities under this Agreement. Nothing in this Agreement shall be construed as
preventing Xxxxxx from: (a) investing his assets in any form or manner, or (b) serving as a
Chairman, officer, director, advisor, or consultant to another company or companies; provided,
however, that such services are not in connection with a business which is in direct competition
with the Company.
6. Working Facilities. Xxxxxx shall be furnished with a private office, administrative
assistant, and such other facilities and services suitable to Xxxxxx’x position and adequate for
the performance of the duties required by this Agreement.
7. Employee Benefits. Except as otherwise provided herein, Xxxxxx shall be entitled
to receive all of the rights, benefits, and privileges of a principal executive under any
retirement, pension, profit-sharing, insurance, health and hospital, and other employee benefit
plans which may be now in effect or hereafter adopted.
8. Life Insurance. The Company shall maintain during the term of this Agreement life
insurance in the amount of One Million Dollars ($1,000,000), the beneficiary of which may be named
by Xxxxxx.
9. Automobile Allowance. The Company shall pay Xxxxxx an automobile expense allowance
of Seven Hundred Dollars ($700) per month.
10. Vacation. Xxxxxx shall be entitled to annual vacations in a manner commensurate
with Xxxxxx’x status as a principal executive.
11. Disability. In the event Xxxxxx shall become disabled during the term of this
Agreement for a continuous period up to ninety days, Xxxxxx’x salary shall continue at the same
rate as on the date of such disability. To provide for disability which continues beyond ninety
days, the Company agrees to obtain and maintain disability insurance for the period covering the
term of this Agreement which will provide Xxxxxx with disability benefits after a waiting period of
ninety days in an amount no less than 60% of his then current salary. The Company shall also pay
Xxxxxx a pro rata share of Annual Bonus in the year which Xxxxxx was disabled. All stock options
granted to Xxxxxx as of the date of disability, whether granted pursuant to this Agreement or
otherwise, shall continue to vest as if Xxxxxx had not been disabled. The Company shall have no
other obligations with respect to compensation to Xxxxxx during his disability. For the purpose of
this Agreement, disability shall mean mental or physical illness or condition rendering Xxxxxx
incapable of performing his normal duties with the Company.
12. Proprietary Interests of Company. Xxxxxx agrees that he will not, during or after
the term of his employment, disclose confidential and proprietary information of the Company which
are valuable, special, and unique assets of the Company’s business (Trade Secrets).
In the event of a breach or threatened breach by Xxxxxx of the provisions of this section, the
Company shall be entitled to an injunction restraining Xxxxxx from such breach. Nothing herein
shall be construed as prohibiting the Company from pursuing any other remedies available to the
Company for such breach or threatened breach, including the recovery of any severance compensation
described herein, damages, costs, and attorney fees.
13. Noncompete. Xxxxxx agrees that during the term of this Agreement Xxxxxx will not,
directly or indirectly, own, manage, operate, control, be employed by, participate in, or be
connected in any manner with the ownership, management, operation, or control of any business which
manufactures or sells golf-inspired sportswear which is substantially the same as that of the
Company and which is distributed in the same channels of distribution as the then current channels
of distribution of the Company, provided, however, that if Xxxxxx’x employment is terminated for
reasons which provide for severance compensation, the noncompete term shall be extended to the
period for which he receives such severance compensation.
In the event of Xxxxxx’x actual or threatened breach of the provisions of this paragraph, the
Company shall be entitled to an injunction restraining Xxxxxx therefrom. Nothing shall be
construed as prohibiting the Company from pursuing any other available remedies for such breach or
threatened breach, including the recovery of any severance compensation described herein damages,
costs, and attorney fees.
14. Expenses. Xxxxxx is authorized to incur reasonable expenses for promoting and
conducting the business of the Company, including expenses for entertainment, travel and similar
items. The Company will reimburse Xxxxxx for all such expenses upon the presentation by Xxxxxx,
from time to time, of an itemized account of such expenditures.
15. Termination of Employment.
(a) Death. All stock options owned by Xxxxxx, whether granted pursuant to this
Agreement or otherwise and regardless of their scheduled vesting dates, will vest
immediately upon termination of Xxxxxx’x employment as a result of his death, and will be
exercisable for a period of one year following the date of death, provided that no option
may be exercised beyond its original expiration date.
(b) Termination Without Cause. Upon termination of Xxxxxx’x employment without
cause (as defined in the attached Exhibit A), Xxxxxx shall receive severance compensation as
follows:
i. If terminated within the first twelve months of this Agreement, cash
compensation in an amount equal to one and one-half times his then annual base
salary. If terminated after the first twelve months of this Agreement, cash
compensation in an amount equal to his then annual base salary. Such compensation
shall be paid in a lump sum; however, Xxxxxx acknowledges that such compensation is
an advance payment of severance intended to compensate him for the loss of income
during the respective periods following termination;
ii. Any earned but unpaid annual bonus plus a pro rata share of annual bonus
for the fiscal year in which terminated without cause; and
iii. All stock options owned by Xxxxxx, whether granted pursuant to this
Agreement or otherwise and regardless of their scheduled vesting dates, will vest
immediately upon termination of Xxxxxx’x employment, and will be exercisable for a
period of two years following the date of termination, provided that no option may
be exercised beyond its original expiration date.
The Company also agrees to continue to provide Xxxxxx full employee benefits for the
first year following termination of his employment without cause.
(c) Termination Upon Change of Control. Xxxxxx’x employment will be deemed to
have been terminated as a result of a change of control of the Company within the meaning of
this section if Xxxxxx’x employment terminates for any reason at the instigation of the
Company or Xxxxxx himself at any time within 90 days before or within 180 days after the
change in control. Upon termination of Xxxxxx’x employment as a result of a change of
control of the Company (as defined herein and in the attached Exhibit A), Xxxxxx shall
receive severance compensation as follows:
i. Cash compensation in an amount equal to two times his then annual base
salary, to be paid in a lump sum; however, Xxxxxx acknowledges that such
compensation is an advance payment of severance intended to compensate him for the
loss of income during the two-year period following termination;
ii. Any earned but unpaid annual bonus plus the annual bonus which would have
been earned at the end of the fiscal year in which the employment is terminated; and
iii. All stock options owned by Xxxxxx, whether granted pursuant to this
Agreement or otherwise and regardless of their scheduled vesting dates, will
vest immediately upon termination of Xxxxxx’x employment, and will be
exercisable for a period of five years following the date of termination, provided
that no option may be exercised beyond its original expiration date.
The Company also agrees to continue to provide Xxxxxx full employee benefits for the
first year following termination of his employment as a result of a change of control of the
Company.
(d) Intentionally omitted.
(e) Resignation in the Event of Change of Circumstances. In the event of any
change in Xxxxxx’x Duties, Compensation, or Benefits (as defined in the attached Exhibit A),
Xxxxxx shall be entitled to resign and receive severance compensation as provided for a
termination without cause.
(f) Severance Payments. The severance payments provided herein will be payable
regardless of when termination of employment occurs and will be payable notwithstanding any
other employment Xxxxxx may find.
16. Section 409A Compliance.
(a) Notwithstanding any provision of this Agreement to the contrary, if, at the time of
Xxxxxx’x termination of employment with the Company, he is a “specified employee” as defined
in Section 409A of the Internal Revenue Code (the “Code”), and one or more of the payments
or benefits received or to be received by Xxxxxx pursuant to this Agreement would constitute
deferred compensation subject to Section 409A, no such payment or benefit will be provided
under this Agreement until the earliest of (A) the date which is six (6) months after his
“separation from service” for any reason, other than death or “disability” (as such terms
are used in Section 409A(a)(2) of the Code), (B) the date of his death or “disability” (as
such term is used in Section 409A(a)(2)(C) of the Code) or (C) the effective date of a
“change in the ownership or effective control” of the Company (as such term is used in
Section 409A(a)(2)(A)(v) of the Code) (the “Deferred Payment”). The provisions of this
Section 16 shall only apply to the extent required to avoid Xxxxxx’x incurrence of any
penalty tax or interest under Section 409A of the Code or any regulations or Treasury
guidance promulgated thereunder. In addition, if any provision of this Agreement would
cause Xxxxxx to incur any penalty tax or interest under Section 409A of the Code or any
regulations or Treasury guidance promulgated thereunder, the Company shall reform such
provision to maintain to the maximum extent practicable the original intent of the
applicable provision without violating the provisions of Section 409A of the Code.
(b) In the event the six-month delay described in this Section 16 applies, the Company
shall make an irrevocable contribution in the amount of the Deferred Payment to a rabbi
trust which shall take the form of the model rabbi trust described in Internal Revenue
Service Revenue Procedure 92-64, which amount (along with any net income received by the
trust) shall be paid by the trust to Xxxxxx on the six-month anniversary of his termination
of employment, and the trust shall terminate at such time. The trustee shall be chosen by
the Company in its reasonable discretion. The Company shall pay the reasonable expenses of
establishing and maintaining the trust.
17. Notices. Any notice required or permitted to be given under this Agreement shall
be sufficient if in writing and delivered in person or sent by registered or certified mail to
Xxxxxx’x residence in the case of Xxxxxx or to its principal office in the case of the Company.
18. Arbitration. Any dispute arising out of this Agreement shall be resolved by
binding arbitration at San Diego, California pursuant to the rules of the American Arbitration
Association. In any such proceeding, the prevailing party shall be entitled to an award of its
reasonable attorneys fees and expenses.
19. Waiver. The waiver of any provision of this Agreement shall not operate or be
construed as a waiver of any other provision of this Agreement. No waiver shall be valid unless in
writing and executed by the party to be charged therewith.
20. Severability/Modification. In the event that any clause or provision of this
Agreement shall be determined to be invalid, illegal or unenforceable, such clause or provision may
be severed or modified to the extent necessary, and, as severed and/or modified, this Agreement
shall remain in full force and effect.
21. Assignment. The rights and obligations of the Company under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of the Company.
Xxxxxx acknowledges that the services to be rendered under this Agreement are unique and personal.
Accordingly, Xxxxxx may not assign his rights and obligations under this Agreement.
22. Entire Agreement. This instrument contains the entire agreement concerning the
employment arrangement between the parties and shall, as of the effective date hereof supersede all
other such agreements between the parties. It may not be amended except by an agreement in writing
signed by both parties.
23. Governing Law and Jurisdiction. This Agreement shall be interpreted, construed,
and enforced under the laws of the State of California. The courts and authorities of the State of
California shall have sole jurisdiction and venue for purposes of enforcing the arbitration
agreement above.
24. Authorization to Sign. The undersigned represents that he is properly authorized
to legally bind Xxxxxxxx, Inc., to this Agreement and to sign this Agreement on behalf of Xxxxxxxx,
Inc.
[Remainder of page left blank intentionally, signatures on following page]
IN WITNESS WHEREOF, the parties have executed this Agreement the date and year indicated
above.
| “COMPANY” XXXXXXXX, INC. |
||||
| By: | /s/ Xxxxx X. X’Xxxxxx | |||
| Title: Chairman, Compensation and Human Resources Committee | ||||
| By: | /s/ Xxxxxxx X. Xxxxxx, Xx. | |||
| Xxxxxxx X. Xxxxxxx | ||||
DEFINITIONS OF TERMS
For purposes of the severance compensation granted to Xxxxxx pursuant to the terms of the
Second First Amended and Restated Executive Employment Agreement between him and Xxxxxxxx, Inc., to
which this exhibit is attached, the following terms shall have the meanings indicated:
Termination Without Cause shall be deemed to have occurred if the executive officer is
terminated for any reason other than the executive officer’s fraud, misappropriation of or
intentional material damage to the property or business of the Company (including its
subsidiaries), or conviction of a felony, provided, however, that termination as a result of a
material breach of the Executive Employment Agreement shall be deemed to be termination with cause.
Change of Control shall be deemed to have occurred if:
1. Any “person,” including a “group” as determined in accordance with the Section 13(d)(3) of
the Securities Exchange Act of 1934 (the “Exchange Act”), is or becomes the beneficial owner,
directly or indirectly, of securities of the Company representing 20% or more of the combined
voting power of the Company’s then outstanding securities;
2. As a result of, or in connection with, any tender offer or exchange offer, merger or other
business combination, sale of assets or contested election, or any combination of the foregoing
transactions (a “Transaction”), the persons who were directors of the Company before the
Transaction shall cease to constitute a majority of the Board of Directors of the Company or any
successor to the Company;
3. The Company is merged or consolidated with another corporation and as a result of the
merger or consolidation less than 70% of the outstanding voting securities of the surviving or
resulting corporation shall then be owned in the aggregate by the former stockholders of the
Company, other than (x) affiliates within the meaning of the Exchange Act or (y) any party to the
merger or consolidation;
4. A tender offer or exchange offer is made and consummated for the ownership of securities of
the Company representing 20% or more of the combined voting power of the Company’s then outstanding
voting securities; or
5. The Company transfers substantially all of its assets to another corporation which is not a
wholly-owned subsidiary of the Company.
Change in Duties, Compensation or Benefits shall mean any one or more of the following:
1. A significant change in the nature or scope of the executive officer’s authorities or
duties;
2. A reduction in executive officer’s Annual Base Salary;
3. A diminution in executive officer’s eligibility to participate in bonus, stock option,
incentive award and other compensation plans which provide opportunities to receive compensation;
4. A diminution in Employee benefits (including but not limited to medical, dental, life
insurance and long-term disability plans) and prerequisites applicable to executive officer; or
5. A change in the location of executive officer’s principal place of employment by the
Company (including its subsidiaries) by more than ten miles from the location where he was
principally employed.
