EXECUTIVE EMPLOYMENT
AGREEMENT
This Executive Employment Agreement (the
“Agreement”) is entered into by and between
American Reprographics Company , a Delaware
corporation (“ ARC ”
) as the employer; and Jonathan
Mather , a resident of California, an individual (“
Executive ”), as the employee, on November
29, 2006. ARC and Executive may be referred to collectively in this
Agreement as the “Parties” and individually as a
“Party.”
RECITALS
ARC has agreed to employ Executive and Executive
has agreed to accept such employment, subject to the terms and
conditions set forth herein.
Now, therefore, in consideration of the
promises, covenants and agreements set forth in this Agreement, the
Parties agree as follows:
1. Position
and Duties
(a) ARC hereby
employs Executive as its Chief Financial Officer
(“CFO”), and Executive agrees to serve ARC in such
capacity, commencing December 4, 2006, upon the terms and
conditions set forth herein.
(b) Executive
shall report to ARC’s Chief Executive Officer
(“CEO”). Executive’s primary responsibilities
shall be to keep or cause to be kept the books of account of ARC in
a thorough and proper manner and shall render statements of the
financial affairs of ARC in such form and as often as reasonably
required by the Board of Directors or ARC’s CEO, in
accordance with US Generally Accepted Accounting Principles.
Executive, in his capacity as CFO, subject to the order of the
Board of Directors, shall have the custody of all funds and
securities of ARC, and shall attest to financial statements, shall
be responsible for ARC’s compliance with financial reporting
and disclosure laws and rules, and shall perform other duties
commonly incident to the office of CFO, and shall also perform such
other duties and have such other powers, consistent with his
position, as the Board of Directors or ARC’s CEO shall
designate from time to time. Executive shall have the authority
generally incident and necessary to perform such duties. Executive
will be a member of the executive team, and Executive’s
principal office shall be located at ARC’s Glendale,
California headquarters or such other site (subject to Section
10(e)(vi) below) at which ARC maintains its headquarters during the
term of this Agreement.
(c) During the
term of this Agreement, Executive will devote all of his employment
time and attention to the affairs of ARC and use his best efforts
to promote the business and interests of ARC. Executive owes a
fiduciary duty of loyalty, fidelity and allegiance to act at all
times in the best interests of ARC, and not to do any act which
would injure the business, interests, or reputation of ARC or any
of its subsidiaries or affiliates.
2.
Term
The term of this Agreement and of
Executive’s employment hereunder shall commence on the
Effective Date hereof and continue until the third (3rd)
anniversary of the Effective Date unless otherwise terminated in
accordance with the provisions hereof; provided, however, that this
Agreement will automatically be extended on a year-to-year basis on
the terms and conditions set forth herein, including the bonus
provisions of Section 3(b), unless either party gives written
notice to the other at least one hundred twenty (120) days prior to
the expiration of the term of this Agreement, which includes any
extensions, that this Agreement shall terminate at the end of such
term, or extension thereof.
3. Direct
Compensation
In consideration of the services to be provided
by Executive, Executive shall receive compensation, less all
applicable taxes, social security payments and other items that ARC
is required by law to withhold or deduct therefrom, as
follows:
(a)
Base Salary . Executive’s annual Base
Salary shall be $360,000, paid in installments in accordance with
ARC’s customary payroll procedures.
(b)
Incentive Bonus . During the term of this
Agreement, Executive shall be eligible to receive an annual
Incentive Bonus (“Incentive Bonus”) in an amount equal
to sixty percent (60%) of Executive’s Base Salary per year
upon successful completion of all performance criteria to be
established by ARC’s CEO in consultation with Executive. The
Incentive Bonus shall be paid no later than sixty (60) days
following the close of each fiscal year, in cash or ARC common
stock, or partly in each, as elected by Executive at least twenty
(20) days before the date such Incentive Bonus is paid. To the
extent that such Incentive Bonus is paid in ARC common stock, such
stock shall be valued using the average of the closing prices of
ARC common stock on the New York Stock Exchange for the ten (10)
trading days immediately preceding the date of issuance of ARC
common stock in payment of the Incentive Bonus. Such shares will be
issued forthwith after the approval of the calculation of the
number of shares to be issued to Executive by the Compensation
Committee of the Board of Directors at its first meeting following
the valuation date, but in no event will such shares be issued
later than two and one-half (2 ½) months after the close of
such fiscal year; provided, however, that as a condition to
receiving ARC common stock Executive must deposit with ARC on the
date of issuance cash in the amount, if any, by which the total of
employee withholding taxes required to be withheld with respect to
the entire Incentive Bonus exceeds the cash portion of the
Incentive Bonus available for withholding. To be eligible to
receive a bonus, Executive must have been employed by ARC during
the entire fiscal year to which such Incentive Bonus relates.
Subject to the foregoing, and to possible repayment if the
Incentive Bonus is, in fact, not earned, or if Executive’s
employment terminates prior to the end of a fiscal year, the
parties will make a reasonable estimate of the probable amount of
the Incentive Bonus to be earned for a particular year on or about
August 1 of each such fiscal year, and forty percent (40%) of the
amount of such estimate shall be paid to Executive on or about
August 15 of such fiscal year. A final reconciliation of the actual
amount of Executive’s Incentive Bonus against the amount paid
in August of such fiscal year shall be made at the time that the
Incentive Bonus, if any, is due, as above provided, and at that
time ARC shall pay the remaining amount due, or Executive shall
refund the excess previously paid, as the case may be.
(c)
Additional Bonuses . ARC may from time to
time, in its absolute discretion, establish additional bonus
programs for Executive.
4. General
Benefits
During the term of this Agreement, Executive
shall be entitled to other benefits provided by ARC to its senior
executives from time to time on a no less favorable basis than such
other senior executives (other than the CEO and President),
including but not limited to, 401(k) and other retirement plans,
deferred compensation, paid holidays, sick leave and other similar
benefits. Executive shall be entitled to four (4) weeks paid
vacation each calendar year accrued and vested in accordance with
ARC’s vacation policy applicable to senior
management.
5. Stock
Plans
Executive shall be granted an option to purchase
150,000 shares of ARC’s common stock, subject to the terms
and conditions of ARC’s customary form of Stock Option
Agreement to be executed by Executive and ARC, except that the
option shall not immediately terminate if Executive is terminated
for “Cause” as such term is defined in ARC’s 2005
Stock Plan (the “Stock Option Agreement”), which option
shall vest over a four (4) year period, with twenty-five (25%)
percent of the option vesting on the first anniversary of
Executive’s employment commencement date and one-forty-eighth
(1/48 th ) of the option vesting monthly for three (3)
years thereafter, at an exercise price equal to the closing price
of ARC’s common stock on the date Executive commences his
employment hereunder. In the sole discretion of the Board of
Directors of ARC, Executive shall be eligible to participate in
additional stock option, stock purchase, stock bonus and similar
plans of ARC (“Stock Plans”) established from time to
time by ARC.
6. Group
Insurance or Benefit Plans
During the term of this Agreement, Executive
shall be automatically covered by ARC group insurance programs
(including any self-insured programs sponsored by ARC), including
medical, dental, vision, disability, and life, if any, on a no less
favorable basis than applies to other senior executives (other than
the CEO and President). Executive’s spouse and children who
are eligible for coverage may join the insurance programs, subject
to ARC’s policies and applicable laws. The premiums for all
insurance programs for Executive and Executive’s spouse and
eligible children shall be paid by ARC.
7.
Reimbursement of Business Related
Expenses
Executive shall
be entitled to receive prompt reimbursement for reasonable expenses
incurred by him in performing services hereunder during the term of
this Agreement in accordance with the policies and procedures then
in effect and established by ARC for its employees. Executive shall
also be entitled to reimbursement of Executive membership dues and
related ongoing costs of appropriate professional organizations
which are approved by ARC’s Chief Executive Officer.
Executive shall also receive reimbursement for up to $5,000 in
attorney’s fees for reviewing and negotiating this Agreement
and related documentation.
8.
Obligations and Restrictive Covenants
(a)
Obligations . During the term of this
Agreement, Executive shall not engage in any other employment,
occupation or consulting activity for any direct or indirect
remuneration. This obligation shall not preclude Executive from:
(i) serving in any volunteer capacity with any professional,
community, industry, civic, educational or charitable organization;
(ii) serving as a member of corporate boards of directors, provided
that ARC’s CEO has given written consent, and these
activities or services do not materially interfere or conflict with
Executive’s responsibilities or ability to perform his duties
under this Agreement; or (iii) engaging in personal investment
activities for himself and his family which do not interfere with
the performance of his duties and obligations hereunder.
(b)
Non-Competition; Non-Solicitation . The
Parties hereto recognize that Executive’s services are unique
and the restrictive covenants set forth in this Section 8 are
essential to protect the business (including trade secret and other
confidential information disclosed by ARC to, learned by, or
developed by, Executive during the course of employment by ARC) and
the goodwill of ARC. For purposes of this Section 8, all references
to “ARC” shall include ARC’s predecessors,
subsidiaries and affiliates. As part of the consideration for the
compensation and benefits to be paid to Executive hereunder, during
the term of this Agreement Executive shall not:
(i) Engage in
any business similar or related to or competitive with the business
conducted by ARC described from time to time in ARC’s Annual
Report on Form 10-K to its shareholders and Board of Directors (the
“Core Business of ARC”);
(ii) Render
advice or services to, or otherwise assist, any other person,
association, corporation, or other entity that is engaged, directly
or indirectly, in any business similar or related to, or
competitive with, the Core Business of ARC;
(iii) Transact any
business in any manner with or pertaining to suppliers or customers
of ARC which, in any manner, would have, or is likely to have, an
adverse effect upon the Core Business of ARC; or
(iv) Induce any
employee of ARC to terminate his or her employment with ARC, or
hire or assist in the hiring of any such employee by any person or
entity not affiliated with ARC.
For purposes of
this Agreement, “affiliate” shall mean any entity which
owns or controls, is owned or controlled by, or is under common
ownership or control, with ARC.
9.
Confidentiality
Executive acknowledges that it is the policy of
ARC to maintain as secret and confidential all valuable and unique
information heretofore or hereafter acquired, developed or used by
ARC relating to the business, operations, employees and customers
of ARC, which information gives ARC a competitive advantage in the
industry, and which information includes technical knowledge,
know-how or trade secrets and information concerning operations,
sales, personnel, suppliers, customers, costs, profits, markets,
pricing policies, and other confidential information and materials
(the “Confidential Information”).
(a)
Non-Disclosure . Executive recognizes that
the services to be performed by Executive are special and unique,
and that by reason of his duties he will be given, acquire or learn
Confidential Information. Executive recognizes that all such
Confidential Information is the sole and exclusive property of ARC.
Executive shall not, either during or after his employment by ARC,
disclose the Confidential Information to anyone outside ARC or use
the Confidential Information for any purpose whatsoever, other than
for the performance of his duties hereunder, except as authorized
by ARC in connection with performance of such duties.
(b)
Return of Confidential Information .
Executive shall deliver promptly upon termination of employment
with ARC, or at any time requested by ARC, all memos, notes,
records, reports, manuals, drawings, and any other documents,
whether in electronic form or otherwise, containing any
Confidential Information, including without limitation all copies
of such materials in any format which Executive may then possess or
have under his control.
(c)
Ownership of Inventions; Assignment of Rights
. Executive agrees that all information, inventions,
intellectual property, trade secrets, copyrights, trademarks,
content, know-how, documents, reports, plans, proposals, marketing
and sales plans, client lists, client files and materials made by
him or by ARC (the “Work Product”) are the property of
ARC and shall not be used by him in any way adverse to the
interests of ARC. Executive assigns to ARC any and all rights of
every nature which Executive may have in any such Work Product;
provided, however, that such assignment does not apply to any right
which qualifies fully under California Labor Code Section 2870.
This section shall survive any termination of this Agreement and
the employment relationship between Executive and ARC. Executive
shall not deliver, reproduce or in any way allow such documents or
things to be delivered or used by any third party without specific
direction or consent of the Board of Directors. Likewise, Executive
shall not disclose to ARC, use in ARC’s business, or cause
ARC to use, any information or material that is a trade secret of
others.
(d)
Predecessors, Subsidiaries and Affiliates .
For purposes of this Section 9, references to ARC include its
predecessors, subsidiaries and affiliates.
10.
Termination
Notwithstanding any other term or provision
contained in this Agreement, this Agreement and the employment
hereunder will terminate prior to the expiration of the term of
this Agreement under the following circumstances:
(a)
Death . Upon Executive’s
death.
(b)
Disability . Upon Executive becoming
“Permanently Disabled”, which, for purposes of this
Agreement, shall mean Executive’s incapacity due to physical
or mental illness or cause, which, in the written opinion of
Executive’s regular licensed physician, results in the
Executive being unable to perform his duties on a full-time basis
for six (6) months during a period of twelve (12)
months.
(c)
Termination by ARC for Cause . Upon written
notice to Executive, ARC may terminate this Agreement for
“Cause,” which, for purposes of this Agreement, shall
mean termination by ARC in its reasonable discretion because of
Executive’s:
(i) willful
refusal without proper cause to perform (other than by reason of
physical or mental disability or death) the duties set forth in
this Agreement or delegated from time to time in writing by the
Board of Directors or ARC’s CEO that are lawful and
consistent with this Agreement, which remains uncorrected for
thirty (30) days following written notice to Executive by
ARC’s CEO specifying the duties willfully refused by
Executive; or
(ii) gross
negligence, self dealing intended to result in Executive’s
personal enrichment or willful misconduct of Executive in
connection with the performance of his duties hereunder, including,
without limitation, misappropriation of funds or property of ARC or
its affiliates, securing or attempting to secure personally any
profit i
