CHANGE IN CONTROL AGREEMENT
FOR
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
This Agreement is entered into this 15th day of March, 1999, by and
between Cutter & Buck Inc. (the "Company") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("Executive").
Executive is an at-will employee of the Company. The parties wish to
provide Executive with severance benefits if Executive's employment is
terminated in connection with a change in control of the Company. The
Company is willing to provide such benefits if Executive enters into the
Company's form of Confidentiality and Non-Competition Agreement for executive
officers.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and conditions contained herein, the parties hereby agree as follows:
1. CHANGE IN CONTROL.
(a) If, within the period commencing 90 days prior to the date of
occurrence (the "Event Date") of a Control Event and ending on the second
anniversary of the Event Date (the "Window"), the Company terminates Executive's
employment (other than for Cause) or Executive resigns for Good Reason, the
Company shall pay to Executive the Severance Payment in immediately available
funds. If the termination occurs prior to the Control Event, the Severance
Payment is due on the twentieth business day following the Event Date; if the
termination occurs on or subsequent to the Event Date, the Severance Payment is
due on the twentieth business day following the date of termination (the
"Termination Date").
(b) The Severance Payment shall be determined pursuant to the following
formula:
[(B-A)/365] x (C + D) where
A = the number of days of continued full-time employment of Executive
by the Company following the Event Date
B = 365
C = Executive's annual base salary as of the Termination Date
D = the average of all cash bonuses that Executive received or is
entitled to receive for the two most recent fiscal years of the
Company during which Executive was employed by the Company in his or
her current position for the entire year;
PROVIDED HOWEVER, that unless the Company, its successors or assigns provides
Executive with at least six (6) months advance written notice of termination,
the Severance Payment shall not be less than the amount computed as follows:
(0.5) x (C + D).
1
If the Termination Date occurs during the Window but prior to the Control Event,
the Severance Payment shall be reduced by the sum of any severance payments
previously received by Executive from the Company (but not below zero).
(c) Each of the following shall constitute a "Control Event":
(1) the acquisition of Common Stock of the Company (the "Common
Stock") by any "Person" (as such term is defined in the Rights Agreement dated
as of November 20, 1998 between the Company and ChaseMellon Shareholder Services
LLC (the "Rights Plan"), together with all Affiliates and Associates (as such
terms are defined in the Rights Plan) of such Person, such that such Person
becomes, after the date of this Agreement, the Beneficial Owner (as defined in
the Rights Plan) of a majority of the shares of Common Stock then outstanding,
but shall not include the Company, any subsidiary of the Company, any employee
benefit plan of the Company or of any subsidiary of the Company or any Person or
entity organized, appointed or established by the Company for or pursuant to the
terms of any such employee benefit plan; or
(2) the approval by the shareholders (or, if later, approval by the
shareholders of any Person) of any merger, consolidation, reorganization or
other transaction providing for the conversion or exchange of more than fifty
percent (50%) of the outstanding shares of Common Stock into securities of any
Person, or cash, or property, or a combination of any of the foregoing.
(d) Each of the following shall constitute "Good Reason", provided that it
occurs during the Window:
(1) the material diminution of Executive's position, duties,
responsibilities or status with the Company or its successor, as compared with
the position, duties, responsibilities or status of Executive with the Company
immediately prior to the Event Date, except in connection with the termination
of Executive for Cause;
(2) the Company's assignment of Executive on a substantially
full-time basis to work at a location where the distance between the new
location and Executive's principal residence is at least 20 miles greater than
the distance between the former location and such residence; provided, however,
that this paragraph shall not apply to travel in the furtherance of the
Company's business to an extent substantially consistent with Executive's
business travel obligations as of the date hereof;
(3) the Company's failure to obtain an assumption of the obligations
of the Company to perform this Agreement by any successor to the Company;
(4) any reduction in Executive's base salary, or a material reduction
in benefits payable to Executive or failure of the Company to pay Executive any
earned salary, bonus or benefits except with the prior written consent of
Executive;
2
(5) the exclusion or limitation of Executive from participating in
some form of variable compensation plan which provides the Executive the
opportunity to achieve a level of total compensation (base salary plus variable
compensation) consistent with what the Executive had the opportunity to earn at
the Event Date; or
(6) any demand by any director or officer of the Company that
Executive take any action or refrain from taking any action where such action or
inaction, as the case may be, would violate any law, rule, regulation or other
governmental pronouncement, court order, decree or judgment, or breach any
agreement or fiduciary duty.
(e) Each of the following shall constitute "Cause":
(1) any violation by Executive of any material obligation under this
Agreement or the attached Confidentiality and Non-Disclosure Agreement;
(2) conviction for commitment of a felony;
(3) any violation of law which has a material adverse effect on the
Company;
(4) habitual abuse of alcohol or a controlled substance;
(5) theft or embezzlement from the Company;
(6) repeated unexcused absence from work for reasons unrelated to
short-term illnesses;
(7) Disability of Executive (as defined below); and
(8) repeated failure or refusal by Executive to carry out the
reasonable directives, orders or resolutions of the Company's Board of Directors
or any officer to whom he reports.
(f) "Disability" shall mean any physical, mental or other health condition
which substantially impairs Executive's ability to perform his assigned duties
for 90 days or more in any 180 day period or that can be expected to result in
death. Any disagreement as to whether Executive is disabled shall be resolved
by a physician selected by the Company after an examination of Executive.
Executive hereby consents to such physical examination and to the
3
examination of all medical records of Executive necessary, in the judgment of
the examining physician, to make the determination of disability.
(g) Notwithstanding any other provision of this Agreement to the contrary,
in the event that any severance or other payment, benefit or right payable or
accruing to Executive hereunder or under the Company's 1991 Stock Option Plan,
1995 Employee Stock Option Plan or 1997 Cutter & Buck Stock Incentive Plan (the
"Option Plans") would constitute a "parachute payment" as defined in Section
280G(b)(2) of the Internal Revenue Code of 1986, as amended (the "Code"), then
the total amount of severance and other payments or benefits payable to
Executive hereunder and under the Option Plans which is deemed to constitute a
"parachute payment" shall not exceed and shall, if necessary, be reduced to an
amount (the "Revised Severance Payment") equal to 2.99 times Executive's "base
amount" as defined in Code Section 28G(b)(3). In the event of a disagreement
between the Company and Executive as to whether the provisions of Code section
280G are applicable or the amount of the Revised Severance Payment, such
determination shall be made by the Company's independent public accountants or,
if such firm is unable or unwilling to render such a determination, then by a
law firm mutually acceptable to Executive and the Company. All costs relating
to such determination shall be borne by the Company. The Company and the
Executive shall cooperate in good faith to make the determination required by
this Section l(g) by mutual agreement not later than the later of: (i) the
fifth day preceding the date that the Severance Payment is or would be due or
(ii) the earlier of (x) the tenth day following the expiration of any period of
accelerated vesting of options to purchase the Company's Common Stock provided
by Section 5(n) of the Option Plan or (y) the tenth day following the date of
exercise by Executive of his or her last remaining option which was exercisable
solely due to the application of Section 5(n) of the Option Plan. Pending the
final calculation of the Severance Payment or Revised Severance Payment, the
Company shall pay the amounts described under subsection (b) above at the time
and in the manner provided herein; provided that, pending such determination,
such payments shall be reduced by such amounts as the Company estimates in good
faith to be necessary to satisfy its tax (including excise tax) withholding
obligations and effect the reduction in the amount of the Severance Payment, as
contemplated by this Subsection 1(g). The aggregate amount of any compensation
actually paid or provided to Executive under the terms of this Agreement and in
excess of the Revised Severance Payment shall be deemed, to the extent of such
excess, a loan to Executive payable upon demand and bearing interest at the rate
of 8% per annum.
2. CONFIDENTIALLY AND NON-COMPETITION AGREEMENT. In consideration of the
obligations undertaken by the Company pursuant to this Agreement,
contemporaneously with the execution of this Agreement, Executive and the
Company shall enter into the form of Confidentiality and Non-Competition
Agreement attached hereto as EXHIBIT A and each agreement shall be effective
only if both agreements have been executed.
4
3. TERM OF AGREEMENT.
The Company's obligations under Section 1 of this Agreement shall expire
with respect to Control Events occurring on or after the third anniversary of
the date of this Agreement unless the term hereof is extended by the Board of
Directors of the Company by a majority vote of those members of the Board who
are not parties to this or a similar agreement.
4. AT WILL EMPLOYMENT. Unless and to the extent otherwise agreed by the
Company and Executive in a separate written employment agreement, Executive's
employment shall be "at will", with either party permitted to terminate the
employment at any time, with or without cause. No term of any employment
agreement between the Company and Executive shall be construed to conflict with,
lessen or expand the obligations of the parties under this Agreement.
5. NOTICES. All notices and other communications called for or required
by this Agreement shall be in writing and shall be addressed to the parties at
their respective addresses stated below or to such other address as a party may
subsequently specify by written notice and shall be deemed to have been received
(i) upon delivery in person, (ii) five days after mailing it by U.S. certified
or registered mail, return receipt requested and postage prepaid, or (iii) two
days after depositing it with a commercial overnight carrier which provides
written verification of delivery:
To the Company: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chairman
To Executive: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
6. WITHHOLDING. Except as described in subsection 1(g) of this
Agreement, all payments due to and all benefits to be provided to Executive
hereunder shall be subject to reduction for any applicable withholding taxes,
including excise taxes.
7. ASSIGNMENT. Executive's rights and duties hereunder are personal to
Executive and are not assignable to others, but Executive's obligations
hereunder will bind his heirs, successors, and assigns. The Company may assign
its rights under this Agreement in connection with any merger or consolidation
of the Company or any sale of all or any portion of the Company's assets
(including, without limitation, any division or product line), provided that any
such successor or assignee expressly assumes in writing the Company's
obligations hereunder.
8. NO DUTY TO MITIGATE. Executive shall not be required to mitigate the
amount of any payment made or benefit provided hereunder. The Company may
offset any payment due hereunder by the amount of damages to the Company
resulting from any breach of this Agreement by Executive.
5
9. GENERAL. This Agreement constitutes the exclusive agreement of the
parties with respect to the subject matter hereof and supersedes all prior
agreements or understandings of the parties. No waiver of or forbearance to
enforce any right or provision hereof shall be binding unless in writing and
signed by the party to be bound, and no such waiver or forbearance in any
instance shall apply to any other instance or to any other right or provision.
This Agreement will be governed by the local laws of the State of Washington
without regard to its conflicts of laws rules to the contrary. The parties
hereby consent to the exclusive jurisdiction and venue of the state and federal
courts sitting in King County, Washington for all matters and actions arising
under this Agreement. The prevailing party shall be entitled to reasonable
attorneys' fees and costs incurred in connection with such litigation. No term
hereof shall be construed to limit or supersede any other right or remedy of the
Company under applicable law with respect to the protection of trade secrets or
otherwise. If any provision of this Agreement is held to be invalid or
unenforceable to any extent in any context, it shall nevertheless be enforced to
the fullest extent allowed by law in that and other contexts, and the validity
and force of the remainder of this Agreement shall not be affected thereby.
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first above written.
CUTTER & BUCK INC. EXECUTIVE:
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Signature /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------- ---------------------------
Its President Name, Printed ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------- -----------------------
6
CONFIDENTIALITY AND NON-COMPETITION AGREEMENT
FOR
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
This Agreement is entered into this 15th day of March, 1999, by and
between Cutter & Buck Inc. (the "Company") and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("Executive").
Executive is an at-will employee of the Company. In consideration of
entering into an agreement to provide Executive with severance benefits if
Executive's employment is terminated in connection with a change in control
in the Company, Executive promises, on the terms set forth herein, at all
times to protect the Company's proprietary information and to not compete
with the Company following termination of Executive's employment in
connection with a change in control.
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants and conditions contained herein, the parties hereby agree as follows:
1. NON-COMPETITION AND NON-SOLICITATION.
(a) Executive agrees that during the term of his employment with
the Company and, subject to receipt the Severance Payment (as defined below)
by the Executive, until the earlier of: (i) the first anniversary of the
Termination Date (as defined below), or (ii) the period of time used in
calculating the amount of the Severance Payment, Executive will not in any
capacity directly or indirectly engage in, assist others to engage in or own
a material interest in any business or activity that is, or is preparing to
be, in competition with the Company with respect to any product or service
sold or service provided by the Company up to the time of termination of
employment in any geographical area in which at the time of termination of
employment such product or service is sold or is actively engaged in. For
the purposes of this Agreement, the terms "Severance Payment" and
"Termination Date" shall have the meanings assigned to them in the Change in
Control Agreement (as defined in Section 6 below).
(b) Executive further agrees that during the period stated above, he
will not directly or indirectly call on, reveal the name of, or otherwise
solicit, accept business from or attempt to entice away from the Company any
actual or identified potential customer of the Company, nor will he assist
others in doing so. Executive further agrees that he will not, during the
period stated above, encourage or solicit any other employee or consultant of
the Company to leave such employment for any reason, nor will he assist others
to do so.
(c) Executive acknowledges that the covenants in this Section 1 are
necessary and reasonable to protect the Company in the conduct of its business
and that compliance with such covenants will not prevent him from pursuing his
livelihood. However, should any court find that any provision of such covenants
is unreasonable, invalid or unenforceable, whether in period of time,
geographical area, or otherwise, then in that event the parties hereby agree
that such covenants shall be interpreted and enforced to the maximum extent
which the court deems reasonable.
1
2. TRADE SECRETS AND CONFIDENTIAL INFORMATION.
(a) Executive acknowledges that the Company's business and future
success depend upon the preservation of the trade secrets and other confidential
information of the Company and its suppliers and customers (the "Secrets"). The
Secrets may include, without limitation, existing and to-be-developed or
acquired product designs, new product plans or ideas, market surveys, the
identities of past, present or potential customers, business and financial
information, pricing methods or data, terms of contracts with present or past
customers, proposals or bids, marketing plans, personnel information, procedural
and technical manuals and practices, servicing routines, and parts and supplier
lists proprietary to the Company or its customers or suppliers, and any other
sorts of items or information of the Company or its customers or suppliers which
are not generally known to the public at large. Executive agrees to protect and
to preserve as confidential during and after the term of his employment all of
the Secrets at any time known to Executive or in his possession or control
(whether wholly or partially developed by Executive or provided to Executive,
and whether embodied in a tangible medium or merely remembered).
(b) Executive shall ▇▇▇▇ all items containing any of the Secrets with
prominent confidentiality notices acceptable to the Company. Executive shall
neither use nor allow any other person to use any of the Secrets in any way,
except for the benefit of the Company and as directed by Executive's supervisor.
All material containing or disclosing any portion of the Secrets shall be and
remain the property of the Company, shall not be removed from the Company's
premises without specific consent from an officer of the Company, and shall be
returned to the Company upon the termination of Executive's employment or the
earlier request of Executive's supervisor. At such time, Executive shall also
assemble all materials in his possession or control which contain any of the
Secrets, and promptly deliver such items to the Company.
3. INTELLECTUAL PROPERTIES.
(a) All ownership, copyright, patent, trade secrecy and other rights
in all works, designs, inventions, ideas, manuals, improvements, discoveries,
processes, customer lists or other properties (the "Intellectual Properties")
made or conceived by Executive during the term of his/her employment by the
Company shall be the rights and property solely of the Company, whether
developed independently by Executive or jointly with others, and whether or not
developed or conceived during regular working hours or at the Company's
facilities, and whether or not the Company uses, registers, or markets the same.
(b) In accordance with the Company's policy and Washington law, this
Agreement (other than Subsection 3(c)) does not apply to, and Executive has no
obligation to assign to the Company, any invention for which no Company trade
secrets and no equipment, supplies, or facilities of the Company were used and
which was developed entirely on Executive's own time, unless: (i) the invention
relates directly to the business of the Company, (ii) the invention relates to
actual or demonstrably anticipated research or development work of the Company,
or (iii) the invention results from any work performed by Executive for the
Company.
2
(c) If and to the extent that Executive makes use, in the course of
his employment, of any items or Intellectual Properties previously developed by
Executive or developed by Executive outside of the scope of this Agreement,
Executive hereby grants the Company a nonexclusive, royalty-free, perpetual,
irrevocable, worldwide license (with right to sublicense) to make, use, sell,
copy, distribute, modify, and otherwise to practice and exploit any and all such
items and Intellectual Properties.
(d) Executive will assist the Company as reasonably requested during
and after the term of his employment to further evidence and perfect, and to
enforce, the Company's rights in and ownership of the Intellectual Properties
covered hereby, including without limitation, the execution of additional
instruments of conveyance and assisting the Company with applications for
patents or copyright or other registrations.
4. AUTHORITY AND NON-INFRINGEMENT. Executive warrants that any and all
items, technology, and Intellectual Properties of any nature developed or
provided by Executive under this Agreement and in any way for or related to the
Company will be original to Executive and will not, as provided to the Company
or when used and exploited by the Company and its contractors and customers and
its and their successors and assigns, infringe in any respect on the rights or
property of Executive or any third party. Executive will not, without the prior
written approval of the Company, use any equipment, supplies, facilities, or
proprietary information of any other party. Executive warrants that Executive
is fully authorized to enter into employment with the Company and to perform
under this Agreement, without conflicting with any of Executive's other
commitments, agreements, understandings or duties, whether to prior employers or
otherwise. Executive will indemnify the Company for all losses, claims, and
expenses (including reasonable attomeys' fees) arising from any breach of by him
of this Agreement.
5. REMEDIES. The harm to the Company from any breach of Executive's
obligations under this Agreement may be wholly or partially irreparable, and
Executive agrees that such obligations may be enforced by injunctive relief and
other appropriate remedies, as well as by damages. If any bond from the Company
is required in connection with such enforcement, the parties agree that a
reasonable value of such bond shall be $5,000. Any amounts received by
Executive or by any other through Executive in breach of this Agreement shall be
held in constructive trust for the benefit of the Company.
6. EXECUTIVE AGREEMENT. In consideration of the obligations
undertaken by Executive pursuant to this Agreement, contemporaneously with
the execution of this Agreement, Executive and the Company are entering into
a Change in Control Agreement (the "Change in Control Agreement"), and each
agreement shall be effective only if both agreements have been executed.
7. AT WILL EMPLOYMENT. Unless and to the extent otherwise agreed by the
Company and Executive in a separate written employment agreement, Executive's
employment shall be "at will", with either party permitted to terminate the
employment at any time, with or without cause.
3
No term of any employment agreement between the Company and Executive shall
be construed to conflict with or lessen Executive's obligations under this
Agreement.
8. NOTICES. All notices and other communications called for or required
by this Agreement shall be in writing and shall be addressed to the parties at
their respective addresses stated below or to such other address as a party may
subsequently specify by written notice and shall be deemed to have been received
(i) upon delivery in person, (ii) five days after mailing it by U.S. certified
or registered mail, return receipt requested and postage prepaid, or (iii) two
days after depositing it with a commercial overnight carrier which provides
written verification of delivery:
To the Company: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chairman
To Executive: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
9. ASSIGNMENT. Executive's rights and duties hereunder are personal to
Executive and are not assignable to others, but Executive's obligations
hereunder will bind his heirs, successors, and assigns. The Company may assign
its rights under this Agreement in connection with any merger or consolidation
of the Company or any sale of all or any portion of the Company's assets
(including, without limitation, any division or product line), provided that any
such successor or assignee expressly assumes in writing the Company's
obligations under the Executive Agreement.
10. GENERAL. This Agreement constitutes the exclusive agreement of
the parties with respect to the subject matter hereof and supersedes all prior
agreements or understandings of the parties. No waiver of or forbearance to
enforce any right or provision hereof shall be binding unless in writing and
signed by the party to be bound, and no such waiver or forbearance in any
instance shall apply to any other instance or to any other right or provision.
This Agreement will be governed by the local laws of the State of Washington
without regard to its conflicts of laws rules to the contrary. The parties
hereby consent to the exclusive jurisdiction and venue of the state and federal
courts residing in King County, Washington for all matters and actions arising
under this Agreement. The prevailing party shall be entitled to reasonable
attorneys' fees and costs incurred in connection with such litigation. No term
hereof shall be construed to limit or supersede any other right or remedy of the
Company under applicable law with respect to the protection of trade secrets or
otherwise. If any provision of this Agreement is held to be invalid or
unenforceable to any extent in any context, it shall nevertheless be enforced to
the fullest extent allowed by law in that and other contexts, and the validity
and force of the remainder of this Agreement shall not be affected thereby.
4
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as
of the date first above
written.
CUTTER & BUCK INC. EXECUTIVE:
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Signature /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------- ---------------------------
Its President Name, Printed ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------- -----------------------
5