EXECUTION COPY
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), executed the 19th day
of September, 2005, is entered into by and between D. Scott Olivet
("Employee") and Oakley, Inc., a Washington corporation (the
"Company").
The parties agree as follows:
1.
Employment .
(a)
The Employee shall begin employment with the Company on September
19, 2005 (the "Effective Date").
(b)
The Company does hereby employ, engage and hire Employee as (i)
from the Effective Date through the CEO Start Date (as defined
below), an employee of the Company with responsibility to consult
from time to time with the Chairman of the Company and members of
senior management and (ii) from and after the CEO Start Date, as
the Chief Executive Officer of the Company (the "CEO"), and
Employee does hereby accept and agree to such hiring, engagement
and employment. In his capacity as the CEO, Employee shall
have such executive and managerial authority, powers and duties
with respect to the Company as shall be commensurate with the
position and such other authority, powers and duties as may be from
time to time reasonably assigned to him by the Board of Directors
of the Company (the "Board") as a whole or by its Chairman.
Except for sick leave, reasonable vacations and excused leaves of
absence, Employee shall, throughout his period of employment
subsequent to the CEO Start Date, devote substantially all his
working time, attention, knowledge and skills to the performance of
such duties in furtherance of the business of the Company.
The "CEO Start Date" shall mean the earlier of November 1, 2005,
and the date on which Employee notifies the Company that he is
prepared to assume the responsibilities of CEO and abide by this
Section 1(b).
(c)
The Employee shall be appointed to the Board upon the CEO Start
Date. For so long as Employee remains employed as the CEO,
the Nominating Committee of the Board shall recommend that Employee
continue to be nominated for election to the Board for succeeding
terms that commence during the Term of this Agreement, subject to
election by the shareholders of the Company.
2.
Term of Agreement . The term (the "Term") of
employment under this Agreement shall begin on the Effective Date
and continue through December 31, 2010, unless otherwise
provided herein. The Term shall be automatically extended for
successive additional one (1) year periods unless either party
gives the other written notice of nonextension at least ninety (90)
days prior to the end of the then Term. A notice of
nonextension by the Company shall be treated as a termination
without Cause by the Company as of the end of the then Term.
3.
Compensation .
(a)
Base Salary . The Company shall pay Employee an annual
base salary at the rate of $600,000 per year, payable in equal
biweekly installments or at such other times as Employee and the
Company shall agree. Employee's base salary may be increased
(but not decreased) as determined by the Compensation and Stock
Option Committee of the Board (the "Compensation Committee") in its
sole and absolute discretion from time to time (such amount, as I
may be increased, "Base Salary").
(b)
Bonus .
i)
Signing Bonus . Employee shall be entitled to receive
a signing bonus in an amount equal to $350,000 on the CEO Start
Date.
ii)
Annual Performance Bonus .
(1)
Employee shall be eligible to receive an annual performance bonus
with respect to each calendar year commencing after the Effective
Date, in an amount equal to a percentage of Employee's annual base
salary with a target bonus equal to 75% of Employee's annual base
Salary (the "Target Bonus"), based on pre-established financial
goals of the Company determined annually by the Compensation
Committee. In recent years, the Compensation Committee has
determined to pay Company executives bonuses in excess of the
target bonus for performance above budget. The annual
performance bonus shall be payable as soon as administratively
practicable following the public release of preliminary financial
information for the applicable calendar year, or such earlier date as may be required
to avoid imposition of the increase in tax described in Internal
Revenue Code Section 409A(a)(1)(B)(i)(II) . The
Compensation Committee, in its sole and absolute discretion, may
provide for bonus potential in addition to this annual performance
bonus.
(2)
For the 2005 calendar year, Employee shall be entitled to receive a
total annual performance bonus of $75,000, payable at such time as
the Company's other executive officers are paid performance bonuses
for 2005, provided Employee commences employment as the CEO on or
before November 1, 2005.
(c)
Equity Compensation .
i)
Stock Options . On the Effective Date, the Company
shall grant Employee an option to purchase 400,000 shares of the
Company's common stock (the "Grant"), at an exercise price equal to
the fair market value of the Company's common stock on the
Effective Date. The options subject to the Grant shall vest
and become exercisable in equal 20% installments on each of the
first five anniversaries of the Effective Date (subject to the
provisions of Section 4 of this Agreement). The Grant shall
be subject to such terms and conditions as are determined by the
Compensation Committee, consistent with the Company's Amended and
Restated 1995 Stock Incentive Plan, as amended (the "Stock
Incentive Plan"), as provided in the form of Stock Option Agreement
annexed hereto as Exhibit A. The term of the options subject
to the Grant shall be ten years from the date of grant.
ii)
Restricted Stock . On the Effective Date, the Company
shall grant Employee:
(1)
75,000 shares of Restricted Stock of the Company, which shall vest
and become nonforfeitable in equal 20% installments on each of the
first five anniversaries of the Effective Date (subject to the
provisions of Section 4 of this Agreement); and
(2)
75,000 shares of Restricted Stock of the Company, which shall vest
and become nonforfeitable upon the fifth anniversary of the
Effective Date (provided Employee has not had a termination of
employment prior to such date), provided, however, that if in any
calendar year commencing after calendar year 2005, and during the
Term, the Company shall record earnings per share growth of at
least 15% versus the prior calendar year, then 25% of the grant of
Restricted Stock made to Employee pursuant to this
Section 3(c)(ii)(2) shall become vested ("Performance
Acceleration") as of the first business day following the issuance
of the financials for such year (subject to the provisions of
Section 4 of this Agreement); and
(3)
the Restricted Stock grants made pursuant to Sections 3
(c)(ii)(1) and (2) shall be subject to any other terms and
conditions as are determined by the Compensation Committee,
consistent with the Stock Incentive Plan, as provided in the form
of Restricted Stock Agreement annexed hereto as Exhibit B.
iii)
Future Grants . The Compensation Committee shall
review its annual equity award policy and in its sole and absolute
discretion may make such additional future grants of equity
compensation as it deems appropriate.
(d)
Fringe Benefits . Employee shall be entitled to:
i)
an automobile allowance of $1,000 per month;
ii)
reimbursement for the following documented expenses: (x) the
reasonable direct cost to Employee of moving his personal effects
(including art) from his principal residence in or near Portland,
Oregon and storage in San Francisco, California, including in all
cases packing and unpacking, and trailering of his automobiles; (y)
temporary living expenses, rental car costs and commuting expenses
in each case for up to 90 days, and (z) selling commissions
and direct costs to Employee of selling his owned home in San
Francisco, California and of buying a new residence within
commuting distance of the Company's headquarters, in an amount not
to exceed $100,000 in the aggregate for this clause (z) and with
full tax gross up of the amounts in this subsection (ii) to the
extent necessary so Employee will have no after tax cost for such
reimbursement; and
iii)
participate in any fringe and other benefit programs adopted from
time to time by the Company for the benefit of its senior
executives, including, but not limited to vacation, 401(k) plan,
medical/dental, disability and life insurance benefits consistent
with those provided to similarly situated executive officers of the
Company.
(e)
The Company shall make such deductions and withhold such amounts
from each payment made to Employee under this Agreement as may be
required from time to time by law, governmental regulation and/or
order.
4.
Termination of Employment .
(a)
Termination Generally . If Employee's employment with
the Company is terminated, Employee will be entitled to benefits as
set forth below. The employment may be terminated by either
party at any time with or without Cause and with or without Good
Reason. In all cases Employee will receive, without
duplication of other provisions of this Agreement, accrued amounts,
including unpaid Base Salary, accrued vacation in accordance with
Company policy, unpaid expense reimbursement, unpaid bonuses earned
for completed prior years, rights under benefit, fringe and equity
plans consistent with Company practice and the terms of those plans
and Employee's then existing rights to indemnification and
directors and officers liability insurance coverage.
i)
Death . If Employee dies while employed by the
Company, his employment shall immediately terminate, the Company's
obligation to pay Employee's base salary and bonus shall cease as
of the date of death, and Employee's beneficiaries or his estate
shall receive benefits in accordance with any Company plans then in
effect.
ii)
Disability . If as a result of Employee's incapacity
due to physical or mental illness ("Disability"), Employee shall
have been absent from the full-time performance of his duties with
the Company for six consecutive months, the Company may, upon 30
days' notice to Employee while he is still so Disabled, and subject
to any applicable federal or state disability or leave laws,
terminate Employee's employment and Employee shall be entitled to
receive benefits in accordance with any Company plans then in
effect.
iii)
Termination for Cause . The Company shall have the
right to terminate Employee's employment for Cause by giving
Employee written notice of the effective date of such
termination. For purposes of this Agreement, "Cause" shall
mean (1) the willful and continued failure by Employee to
substantially perform his duties with the Company (other than by
reason of the Employee's physical or mental incapacity) after
written notice of such failure is given to Employee by the
Company), (2) the willful engaging by Employee in misconduct with
regard to the Company or in the performance of his duties
(including, but not limited to a material violation of any material
policies or procedures of the Company) that is demonstrably and
materially injurious to the Company, monetarily or otherwise, (3)
Employee's conviction of, or entry of a plea of guilty or nolo
contendere to, a felony or other crime involving moral turpitude,
(4) the commission by Employee of any act of theft, embezzlement or
fraud in connection with his employment with the Company, (5)
Employee's material breach of any of the material terms of this
Agreement or any other material agreement that he now has or later
has with the Company and/or any of its subsidiaries or affiliates,
which breach is not cured within 15 days after the giving of
written notice thereof or is not capable of cure, and (6)
Employee's knowing appropriation (or attempted appropriation) of a
material business opportunity of the Company, including attempting
to secure or securing from anyone other than the Company any
personal profit without the Company's consent in connection with
any transaction entered into on behalf of the Company. If the
Company terminates Employee's employment for Cause, the Company
shall have no further obligation under this Agreement from and
after the date of termination, except as provided above.
iv)
Voluntary Termination by Employee . In the event that
Employee's employment with the Company is voluntarily terminated by
Employee other than for Good Reason, the Company shall have no
further obligation under this Agreement from and after the date of
termination except as provided above. For purposes of this
Agreement, "Good Reason" shall mean (1) diminution in
Employee's title; (2) material diminution in Employee's
duties, power or authority that is not cured by the Company within
fifteen (15) days of the giving of written notice thereof; (3) so
long as Jim Jannard or his family or entities owned by them owns
35% or more of the outstanding voting stock of the Company failure
to elect or reelect Employee to the Board or removal therefrom;
(4) failure within fifteen (15) days after written notice to
pay Employee any amounts due hereunder; (5) relocation of
Employee from the Company's executive offices or relocation of such
offices 50 miles or more further away from Employee's principle
residence at such time; (6) failure of a successor to the Company
to delivery an assumption agreement to Employee within fifteen (15)
days after written notice; and (7) a material breach by the Company
of this Agreement that is not cured within fifteen (15) days of the
giving of written notice thereof.
v)
Other Termination . If Employee's employment is
terminated (i) by the Company for any reason other than
Employee's death or Disability or for Cause or (ii) by
Employee for Good Reason, the Company shall pay Employee (in
consideration for Employee's execution of a unilateral release of
all known or unknown claims against the Company as of the date of
such termination that is in the form annexed hereto as
Exhibit C, with such changes reasonably made by the Company
thereto as may be necessary or appropriate to make the release
legally enforceable or, without adding any significant burdens on
employee, to address the specific circumstances of such termination
of employment):
(1)
an amount equal to eighteen months (the "Severance Period") of the
Employee's Base Salary as of the date of such termination, payable
in biweekly installments over the Severance Period as if the
Employee had remained in the Company's employ during the Severance
Period;
(2)
an amount equal to any accrued but unpaid annual performance bonus
attributable to the calendar year ended immediately prior to the
calendar year in which the termination occurred (payable on the
date such bonus would otherwise have been paid had the Employee
remained in the Company's employ);
(3)
an amount equal to the pro rata portion of the annual performance
bonus (pro rated for the Stub Period, as defined below), if any,
payable for the calendar year in which the termination occurred,
based on actual results through the last calendar quarter ended
prior to the date of termination (the "Stub Period") compared to
the financial target related to such bonus for such period (the
"Stub Period Bonus") payable as soon as administratively
practicable following determination of such amount by the
Compensation Committee; and
(4)
an amount equal to the Target Bonus divided by 12 and multiplied by
18 minus the number of months in the Stub Period (the "Severance
Bonus Period"), payable in equal monthly installments over the
Severance Bonus Period.
Notwithstanding the
foregoing, the schedule of payments made pursuant the terms of this
Section 4(a)(v) shall be modified by the Company as may be required
to avoid imposition of the increase in tax described in Section
409A(a)(1)(B)(i)(II) without the imposition of the six month
waiting period described in Section 409A(a)(2)(B)(i), provided,
however, that such modification (i) shall not increase the length
of the period over which such benefits shall be paid and (ii) shall
be made in such a manner so as to avoid the imposition of a
significant financial hardship on Executive.
Provided Employee timely elects to receive continuation of benefits
under the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended ("COBRA") for himself and his dependents with respect to
any of the Company's medical or dental plans, the Company shall
provide medical benefits by paying such COBRA premiums for the
earlier to occur of (i) 18 months following Employee's termination
of employment or (ii) until such time as Employee and his
dependents no longer elect to receive such COBRA coverage.
(b)
Acceleration of Stock Options and Restricted Stock .
If Employee's employment is terminated by the Company without Cause
or by Employee for Good Reason, the vesting of that portion of
Employee's stock options and Restricted Stock that are outstanding
as of the date of Employee's termination, if any, which would have
vested within twelve months after the date of Employee's
termination shall be accelerated and all stock options shall remain
exerciseable for one (1) year after such termination, provided that
the Restricted Stock granted pursuant to Section 3(c)(ii)(1) shall
fully vest on any such termination. If Employee's employment
is terminated due to Employee's death or Disability, by Employee
without Good Reason, or by the Company for Cause, the unvested
portion of Employee's stock options and Restricted Stock that are
outstanding as of the date of Employee's termination, if any, shall
terminate upon such termination of employment. In addition,
upon a termination of employment by the Company other than for
Cause, death or Disability, or by Employee with Good Reason, in
connection with or within 24 months following the consummation of a
Change in Control (as defined in the Company Executive Severance
Plan), all unvested stock option and Restricted Stock grants shall
become immediately vested and, in the case of stock options,
exercisable and all stock options shall remain exerciseable for one
(1) year after such termination.
i)
Performance Acceleration . With regard to restricted
stock granted pursuant to Section 3(c)(ii)(2) of this Agreement,
(A) if Employee's employment is terminated by the Company without
Cause or by Employee for Good Reason, (B) the date of such
termination is on or after July 1 of any fiscal year and (C) at the
end of the calendar year in which such termination occurred the
Company has met the requirements for Performance Acceleration, then
those shares of Employee's Restricted Stock that are subject to the
Performance Acceleration for such calendar year shall become vested
on the date that the Compensation Committee confirmed that the
Performance Acceleration criteria was met, with the exact number of
restricted shares vesting being based pro rata on the number of
days Employee was employed by the Company in such calendar year;
provided, however, that there shall be no duplication of vesting
under the terms of this Agreement.
(c)
Excise Tax Gross Up. Payment to Executive of the
amount or amounts specified in Exhibit D, at such time or times as
specified in Exhibit D, as an excise tax Gross-Up Payment as
provided in Exhibit D. In connection with this, the Company
and Executive agree to the provisions of Exhibit D, which are
incorporated herein by this
reference.
5.
Assignment of Intellectual Property Rights .
(a)
Definition of "Inventions" . As used herein, the term
"Inventions" shall mean all inventions, discoveries, improvements,
original works of authorship, trade secrets, formulas, techniques,
data, programs, systems, specifications, documentation, algorithms,
flow charts, logic diagrams, source codes, object codes, processes,
and other technical, business, product, marketing or financial
information, plans, or other subject matter pertaining to the
Company or any of its customers, consultants or licensees, whether
or not patented, tested, reduced to practice, or subject to patent,
trademark, copyright, trade secret, mask work or other forms of
protection (including all rights to obtain, register, perfect,
renew, extend, continue, divide and enforce these proprietary
interests), which are made, created, authored, conceived,
modified, enhanced or reduced to practice by Employee, either alone
or jointly with others, during the period of employment with the
Company, whether or not during normal working hours, which
(A) relate to the actual or anticipated business, activities,
research, or investigations of the Company or (B) result from
or is suggested by work performed by Employee for the Company
(whether or not made or conceived during normal working hours or on
the premises of the Company), or (C) which result, to any
extent, from use of the Company's time, material, proprietary
information, premises or property; provided that the term
"Inventions" shall not be deemed to include those inventions, if
any, listed on the Schedule A attached to this Agreement,
which is incorporated by reference and which Employee represents
and warrants contains no confidential information of third
parties.
(b)
Work for Hire . Employee expressly acknowledges that
all copyrightable aspects of the Inventions are to be considered
"works made for hire" within the meaning of the Copyright Act of
1976, as amended (the "Act"), and that the Company is to be the
"author" within the meaning of such Act for all purposes. All
such copyrightable works, as well as all copies of such works in
whatever medium fixed or embodied, shall be owned exclusively by
the Company as of its creation, and Employee hereby expressly
disclaims any and all interest in any of such copyrightable works
and waives any right of droit morale or similar rights.
(c)
Assignment . Employee acknowledges and agrees that all
Inventions constitute trade secrets of the Company and shall be the
sole property of the Company or any other entity designated by the
Company. Employee hereby conveys and irrevocably assigns to
the Company, without further consideration, all his right, title
and interest in and to, and all claims for past infringement of,
all Inventions, including, with respect to any of the foregoing,
all rights of copyright, patent, trademark, trade secret, mask
work, and any and all other proprietary rights therein, the right
to modify and create derivative works, the right to invoke the
benefit of any priority under any international convention, and all
rights to register and renew same. This assignment is
intended to and does extend to Inventions which have not yet been
created. No rights are hereby conveyed in Inventions, if any,
made by Employee prior to his employment with the Company which are
identified in the attached Schedule A .
Notwithstanding the foregoing, (i) this Agreement does not apply to
any Invention that Employee developed entirely on his own time
without using the Company's equipment, supplies, facilities, or
proprietary information except for those Inventions that either
relate at the time of conception or reduction to practice of the
Invention to the Company's business, or actual or demonstrably
anticipated research or development of the Company; or result from
any work performed by Employee for the Company, and (ii) Employee
understands that the provisions of this Agreement requiring
assignment of Inventions to the Company do not apply to any
invention which qualifies under the provisions of California Labor
Code Section 2870 set forth in Schedule B . Employee
agrees to identify all Inventions made by Employee that Employee
believes meet the criteria of California Labor Code Section 2870
and are not otherwise disclosed on Schedule A to the Company
in confidence to permit a determination as to whether or not the
Inventions are the property of the Company, and Employee agrees to
disclose all information the Company reasonably requests about
Inventions, including those Employee contends qualify under this
exception to his duty to assign Inventions.
(d)
Proprietary Notices; No Filings
