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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.
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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.
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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:
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(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.
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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 AR
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