EXHIBIT 10.4(4)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is dated as of April 1, 2003 (this
"Agreement"), by and between FOTOBALL USA, INC., a Delaware corporation (the
"Company"), and Xxxxx X. Xxxxxx ("Executive").
W I T N E S S E T H :
WHEREAS, Executive is currently serving as the President and Chief
Operating Officer of the Company under a two-year employment agreement with the
Company dated as of March 28, 2001; and
WHEREAS, the Company and Executive desires to extend the employment
relationship upon the terms set forth in this Agreement;
NOW THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged, the parties agree as follows:
1. Employment.
(a) The Company hereby employs (the "Employment") Executive as the
President and Chief Operating Officer of the Company. Executive shall have
authority to control the day-to-day operations of the Company, subject to the
general supervision, control and guidance of the Chief Executive Officer (the
"CEO") and the Board of Directors of the Company (the "Board"). Executive hereby
accepts the Employment and agrees to (i) render such executive services, (ii)
perform such executive duties and (iii) exercise such executive supervision and
powers to, for and with respect to the Company, as may be established by the CEO
or the Board, for the period and upon the terms set forth in this Agreement.
Other than the CEO, Executive shall be the most senior executive officer of the
Company during the Term.
(b) Executive shall devote substantially all of his business time and
attention during the normal business day to the business and affairs of the
Company consistent with his executive positions with the Company, except for
vacations permitted pursuant to Section 3.5 and Disability (as defined in
Section 6.2). This Agreement shall not be construed as preventing Executive from
engaging in charitable and community affairs, or giving attention to his passive
investments, provided that such activities do not interfere with the regular
performance of his duties and responsibilities under this Agreement.
2. Term. Except as otherwise specifically provided in Section 6 below,
the term of this Agreement (as may be extended, the "Term") shall commence on
April 1, 2003 and shall continue until March 31, 2005, subject to the terms and
conditions of this Agreement. The Term may be extended for consecutive one-year
renewal terms by written notice by either party to the
other between sixty (60) and ninety (90) days prior to the end of the original
two-year term or one-year renewal terms.
3. Compensation.
3.1. Base Salary. Executive shall be paid a base salary (the "Base
Salary") of one hundred thousand dollars ($100,000), during the period from
April 1, 2003 to September 30, 2003, one hundred and twenty thousand dollars
($120,000) during the period from October 1, 2003 to March 31, 2004 and two
hundred and forty thousand dollars ($240,000), during the second year of the
Term, payable in equal payments at such intervals as the other executive
officers of the Company are paid, but in any event at least on a monthly basis.
Thereafter, the Base Salary shall be reviewed by the Board on or before April 1
of each year during the Term, with such reviews to commence prior to such date,
and shall be subject to increase in the discretion of the Board, taking into
account merit, corporate and individual performance and general business
conditions, including changes in the consumer price index published by the
United States Bureau of Labor, Bureau of Labor Statistics, for the San Diego,
California metropolitan area. Such increase, if any, in Executive's Base Salary
shall be effective on April 1 of each year during any renewal Term commencing in
2005.
3.2. Bonus. In addition to the Base Salary, Executive shall be entitled
to such bonus compensation ("Bonus Compensation") as may be determined on a
calendar basis from time to time by the Compensation Committee of the Board and
subject to a budget to be agreed upon by the Board. The Bonus Compensation for
each year shall be paid by the Company to Executive no later than the date on
which similar year-end bonuses are paid to other senior executive officers of
the Company.
3.3. Stock Options.
(a) Subject to the receipt of stockholder approval for an amendment
(the "Amendment") to increase the size of the Plan (as defined below), the
Company shall issue to Executive non-qualified options (the "First Options") to
purchase 20,000 shares of common stock, $.01 par value (the "Common Stock"), of
the Company at a per share exercise price equal to the closing market price of
the Common Stock on the date of the receipt of stockholder approval for the
Amendment. Subject to the receipt of stockholder approval for the Amendment, on
the first day of the second year of the Term, the Company shall issue to
Executive non-qualified options (the "Second Options" and together with the
First Options, the "Options") to purchase 20,000 shares of Common Stock of the
Company at a per share exercise price equal to the closing market price of the
Common Stock on the date thereof. The issuance of the Options to the Executive
by the Company shall be subject to three-year vesting, and in accordance with
the terms of the 1998 Stock Option Plan of the Company or any successor stock
option plan (the "Plan").
(b) On the first business day following stockholder approval of the
Amendment, the Company shall cause the issuance to Executive of the First
Options and, if stockholder approval is obtained during the second year of the
Term, the issuance of the First Options and the Second Options, subject to and
in accordance with the terms of the Plan.
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(c) Executive's vested Options shall be exercisable for a period of ten
years from the date of issuance. Upon the termination of this Agreement, any
unvested Options shall lapse, except as otherwise provided in Section 6 below,
and Executive shall have ninety (90) days from the date of termination in
accordance with the terms of this Agreement to exercise any vested Options (one
year in the case of termination by reason of death or Disability of Executive).
3.4. Employee Benefits. In addition to the Base Salary and the Bonus
Compensation, Executive shall be entitled (i) to receive the fringe benefits now
or hereafter provided by the Company to its executive officers, including, but
not limited to, life, hospitalization, surgical, major medical and disability
insurance and sick leave, (ii) to be a full participant in all of the Company's
other benefit plans, pension plans, retirement plans and profit-sharing plans
which may be in effect from time to time or may hereafter be adopted by the
Company, (iii) to all costs and expenses for the maintenance, including
insurance, and operation of Executive's automobile; provided, however, that such
costs and expenses shall not exceed $500 in any month, (iv) to term life
insurance coverage in an amount equal to Executive's then current Base Salary
policy and (v) to YPO educational reimbursements annually.
3.5. Vacation. During the Term, Executive shall be entitled to such
vacation with pay during each calendar year of his Employment hereunder
consistent with his position as an executive officer of the Company, but in no
event less than three (3) weeks in any such calendar year (pro-rated as
necessary for partial calendar years during the Term). Such vacation may be
taken, in Executive's discretion, at such time or times as are not inconsistent
with the reasonable business needs of the Company. Executive shall not be
entitled to any additional compensation in the event that Executive, for
whatever reason, fails to take such vacation during any year of his Employment
hereunder. Executive shall also be entitled to all paid holidays given by the
Company to its executive officers.
4. Indemnification. Executive shall be entitled at all times to the
benefit of the maximum indemnification and advancement of expenses available
from time to time under the laws of the State of Delaware.
5. Expenses. During the Term, the Company shall reimburse Executive
upon presentation of appropriate vouchers or receipts in accordance with the
Company's expense reimbursement policies for executive officers, for all
out-of-pocket business travel and entertainment expenses incurred or expended by
Executive in connection with the performance of his duties under this Agreement.
6. Consequences of Termination of Employment.
6.1. Death. In the event of the death of Executive during the Term,
Executive's Employment hereunder shall be terminated as of the date of his death
and Executive's designated beneficiary, or, in the absence of such designation,
the estate or other legal representative of Executive (collectively, the
"Estate"), shall be paid Executive's unpaid Base Salary through the month in
which the death occurs and any unpaid Bonus Compensation for any fiscal year
which has ended as of the date of such termination or which was at least one
half (1/2) completed as of the date of death. In the case of such incomplete
fiscal year, the Bonus Compensation shall be
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pro-rated and all such Bonus Compensation payable as a result of this Section
6.1 shall be otherwise payable as determined by the Compensation Committee of
the Board, in its sole discretion. The Estate shall be entitled to all other
death benefits in accordance with the terms of the Company's benefit programs
and plans.
6.2. Disability. In the event Executive shall be unable to render the
services or perform his duties hereunder by reason of illness, injury or
incapacity (whether physical, mental, emotional or psychological) (any of the
foregoing shall be referred to herein as a "Disability") for a period of either
(i) ninety (90) consecutive days or (ii) one hundred eighty (180) days in any
consecutive three hundred sixty-five (365) day period, the Company shall have
the right to terminate this Agreement by giving Executive ten (10) days prior
written notice. If Executive's Employment hereunder is so terminated, Executive
shall be paid, in addition to payments under any disability insurance policy in
effect, Executive's unpaid Base Salary through the month in which the
termination occurs, plus Bonus Compensation on the same basis as is set forth in
Section 6.1 above.
6.3. Termination of Employment of Executive by the Company for Cause.
(a) Nothing herein shall prevent the Company from terminating
Executive's Employment for Cause (as defined below). From and after the date of
such termination, Executive shall no longer be entitled to receive Base Salary
and Bonus Compensation and the Company shall no longer be required to pay
premiums on any life insurance or disability policy for Executive. Any rights
and benefits which Executive may have in respect of any other compensation or
any employee benefit plans or programs of the Company, whether pursuant to
Section 3.4 or otherwise, shall be determined in accordance with the terms of
such other compensation arrangements or plans or programs. The term "Cause," as
used herein, shall mean that: (i) Executive shall embezzle funds or
misappropriate other property of the Company or any subsidiary; or (ii)
Executive shall willfully disobey a lawful directive of the CEO or the Board,
whether through commission or omission; or (iii) Executive shall breach this
Agreement in a material manner or engage in fraudulent conduct as regards the
Company.
(b) The Company shall provide Executive with written notice stating
that it intends to terminate Executive's Employment for Cause under this Section
6.3 and specifying the particular act or acts on the basis of which the Board
intends to so terminate Executive's Employment. Executive shall then be given
the opportunity, within fifteen (15) days of his receipt of such notice, to have
a meeting with the Board to discuss such act or acts (other than with respect to
an action described in Section 6.3(a)(i) above as to which the Board may
immediately terminate Executive's Employment for Cause). Other than with respect
to an action described in Section 6.3(a)(i) above, Executive shall be given
seven (7) days after his meeting with the Board to take reasonable steps to
cease or correct the performance (or nonperformance) giving rise to such written
notice. In the event the Board determines that Executive has failed within such
seven-day period to take reasonable steps to cease or correct such performance
(or nonperformance), Executive shall be given the opportunity, within ten (10)
days of his receipt of written notice to such effect, to have a meeting with the
Board to discuss such determination. Following that meeting, if the Board
believes that Executive has failed to take reasonable steps to cease or correct
his performance (or nonperformance) as above described, the Board may thereupon
terminate the Employment of Executive for Cause.
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6.4. Termination of Employment Other than for Cause, Death or
Disability.
(a) Termination. This Agreement may be terminated by the Company (in
addition to termination pursuant to Sections 6.1, 6.2 or 6.3 above) upon the
expiration of the Term.
(b) Severance and Non-Competition Payments.
(1) If this Agreement is terminated by the Company, including a
Constructive Termination (as defined below), other than as a result of death or
Disability of Executive or for Cause, the Company shall pay Executive a
severance and non-competition payment equal to the sum of (x) an amount equal to
the Base Salary for the remainder of the Term plus (y) an amount equal to the
Bonus Compensation earned by Executive in respect of the last full fiscal year
immediately preceding the year of termination multiplied by the number of full
fiscal years remaining in the Term; provided, however, that a termination during
the last twelve (12) months of the Term shall be governed by Section
6.4(b)(3)(x) below. Such severance and non-competition payment shall be payable,
in Executive's sole discretion, either (i) in a lump sum on the first day of the
month following the termination or (ii) in equal monthly installments commencing
on the first day of the month following termination and continuing for the
remainder of the Term. In addition, all unvested Options shall be deemed to have
vested on the date of such termination.
(2) For purposes of this Agreement, "Constructive Termination" shall be
deemed to have occurred upon (x) the removal of Executive from, or a failure of
Executive to continue as, President and Chief Operating Officer of the Company
and (y)(i) any material diminution in the nature or scope of the authorities,
powers, functions, duties or responsibilities attached to such positions or
(y)(ii) the material breach by the Company of this Agreement and, in any such
case, Executive does not agree to such change and elects to terminate his
Employment.
(3) (A) If this Agreement is not renewed beyond the Term by the Company
or if this Agreement is terminated by the Company, including a Constructive
Termination, other than as a result of death or Disability of Executive or for
Cause in accordance with this Section 6, during the last twelve (12) months of
the Term, a severance and non-competition payment equal to the sum of (x) an
amount equal to the Base Salary in respect of the calendar year immediately
preceding the year of termination plus (y) an amount equal to the Bonus
Compensation earned by Executive in respect of the calendar year immediately
preceding the year of termination. (B) If the Agreement is not renewed beyond
the Term by Executive, the Company may elect, by written notice given to the
Executive, within fifteen (15) days of the Company's receipt of Executive's
notice not to renew, to pay Executive the payments referred to in this Section
6.4(b)(3)(A) above. The severance and non-competition payment shall be payable
(to the extent applicable), in Executive's sole discretion, either (i) in a lump
sum of the first day of the month following the termination or (ii) in twelve
(12) equal monthly installments commencing on the first day of the month
following termination. In addition, all unvested Options shall be deemed to have
vested on the date of such termination if such termination was pursuant to
Section 6.4(b)(3)(A) or the Company elected to pay such
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termination as provided in Section 6.4(b)(3)(B) above. Otherwise such unvested
options shall terminate in accordance with the Plan.
(4) Executive shall not be required to mitigate the amount of any
severance and non-competition payment provided for under this Agreement by
seeking other employment or otherwise.
7. Confidential Information.
7.1. Executive covenants and agrees that he will not at any time,
either during the Term or thereafter, use, disclose or make accessible to any
other person, firm, partnership, corporation or any other entity any
Confidential Information (as defined below) pertaining to the business of the
Company except (i) while employed by the Company, in the business of and for the
benefit of the Company or (ii) when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority over the
business of the Company, or by any administrative body or legislative body
(including a committee thereof) with jurisdiction to order the Company to
divulge, disclose or make accessible such information. For purposes of this
Agreement, "Confidential Information" shall mean non-public information
concerning the Company's financial data, statistical data, strategic business
plans, product development (or other proprietary product data), customer and
supplier lists, customer and supplier information, information relating to
practices, processes, methods, trade secrets, marketing plans and other
non-public, proprietary and confidential information of the Company; provided,
however, that Confidential Information shall not include any information which
(x) is known generally to the public other than as a result of unauthorized
disclosure by Executive, (y) becomes available to the Executive on a
non-confidential basis from a source other than the Company or (z) was available
to Executive on a non-confidential basis prior to its disclosure to Executive by
the Company. It is specifically understood and agreed by Executive that any
Confidential Information received by Executive during his Employment by the
Company is deemed Confidential Information for purposes of this Agreement. In
the event Executive's Employment is terminated hereunder for any reason, he
immediately shall return to the Company all Confidential Information in his
possession.
7.2. Executive and the Company agree that this covenant regarding
Confidential Information is a reasonable covenant under the circumstances, and
further agree that if, in the opinion of any court of competent jurisdiction,
such covenant is not reasonable in any respect, such court shall have the right,
power and authority to excise or modify such provision or provisions of this
covenant as to the court shall appear not reasonable and to enforce the
remainder of the covenant as so amended. Executive agrees that any breach of the
covenant contained in this Section 7 would irreparably injure the Company.
Accordingly, Executive agrees that the Company, in addition to pursuing any
other remedies it may have in law or in equity, may obtain an injunction,
without the necessity of obtaining a bond or other security, against Executive
from any court having jurisdiction over the matter, restraining any further
violation of this Section 7.
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8. Non-Competition; Non-Solicitation.
8.1. During the Term and for an additional period of one (1) year
following the nonrenewal or termination of this Agreement unless the Company
elects not to pay in accordance with Section 6.4(b)(3)(B) above, Executive
agrees that, without the prior written consent of the Company: (i) he shall not
be a principal, manager, agent, consultant, officer, director or employee of,
or, directly or indirectly, own more than one (1%) percent of any class or
series of equity securities in, any partnership, corporation or other entity,
which, now or at such time, has material operations which are engaged in any
business activity competitive (directly or indirectly) with the business of the
Company or (ii) directly or indirectly solicit or have any dealings or contact
or contact with any suppliers or customers of the Company.
8.2. During the Term and for an additional period of one (1) year
following the nonrenewal or termination of this Agreement, Executive agrees
that, without the prior written consent of the Company (and other than on behalf
of the Company), Executive shall not, on his own behalf or on behalf of any
person or entity, directly or indirectly hire or solicit the employment of any
employee who has been employed by the Company at any time during the six (6)
months immediately preceding such date of hiring or solicitation.
8.3. Executive and the Company agree that the covenants of
non-competition and non-solicitation are reasonable covenants under the
circumstances, and further agree that if, in the opinion of any court of
competent jurisdiction such covenants are not reasonable in any respect, such
court shall have the right, power and authority to excise or modify such
provision or provisions of these covenants as to the court shall appear not
reasonable and to enforce the remainder of these covenants as so amended.
Executive agrees that any breach of the covenants contained in this Section 8
would irreparably injure the Company. Accordingly, Executive agrees that the
Company, in addition to pursuing any other remedies it may have in law or in
equity, may obtain an injunction, without the necessity of obtaining a bond or
other security, against Executive from any court having jurisdiction over the
matter, restraining any further violation of this Section 8.
9. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been given if delivered personally or sent
by facsimile transmission, overnight courier, or certified, registered or
express mail, postage prepaid. Any such notice shall be deemed given when so
delivered personally or sent by facsimile transmission (provided that a
confirmation copy is sent by overnight courier), one day after deposit with an
overnight courier, or if mailed, five (5) days after the date of deposit in the
United States mails, as follows:
If to the Company, to: Fotoball USA, Inc.
0000 Xxxxx Xxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
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If to Executive, to: Xx. Xxxxx Xxxxxx
0000 Xxxxxxx Xxxxxx
Xx Xxxxx, Xxxxxxxxxx 00000
10. Entire Agreement. This Agreement and the Plan (as amended by the
Amendment) contain the entire agreement between the parties hereto with respect
to the matters contemplated herein and supersede all prior agreements or
understandings among the parties related to such matters.
11. Binding Effect. Except as otherwise provided herein, this Agreement
shall be binding upon and inure to the benefit of the Company and its successors
and assigns and upon Executive. "Successors and assigns" shall mean, in the case
of the Company, any successor pursuant to a merger, consolidation, or sale, or
other transfer of all or substantially all of the assets or Common Stock of the
Company.
12. No Assignment. Except as contemplated by Section 11 above, this
Agreement shall not be assignable or otherwise transferable by either party.
13. Amendment or Modification; Waiver. No provision of this Agreement
may be amended or waived unless such amendment or waiver is authorized by the
Board and is agreed to in writing, signed by Executive and by a duly authorized
officer of the Company (other than Executive). Except as otherwise specifically
provided in this Agreement, no waiver by either party hereto of any breach by
the other party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar provision or condition at the same or at any prior or subsequent
time.
14. Fees and Expenses. If either party institutes any action or
proceedings to enforce any rights the party has under this Agreement, or for
damages by reason of any alleged breach of any provision of this Agreement, or
for a declaration of each party's rights or obligations hereunder or to set
aside any provision hereof, or for any other judicial remedy, the prevailing
party shall be entitled to reimbursement from the other party for its costs and
expenses incurred thereby, including but not limited to, reasonable attorneys'
fees and disbursements.
15. Governing Law. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the internal
laws of the State of Delaware, without regard to its conflicts of law rules.
16. Titles. Titles to the Sections in this Agreement are intended
solely for convenience and no provision of this Agreement is to be construed by
reference to the title of any Section.
17. Counterparts. This Agreement may be executed in one or more
counterparts, which together shall constitute one agreement. It shall not be
necessary for each party to sign each counterpart so long as each party has
signed at least one counterpart.
18. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such
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invalidity or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms and provisions of this Agreement in any other
jurisdiction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first set forth above.
FOTOBALL USA, INC.
By: /s/ Xxxxxxx Xxxxxx
--------------------
Name: Xxxxxxx Xxxxxx
Title: Chairman and CEO
/s/ Xxxxx X. Xxxxxx
------------------------
Xxxxx X. Xxxxxx
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