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 John Toth , a resident of California, an individual (“ Executive ”), as the employee, on July 18, 2011 (the “ Effective Date ”). ARC and Executive may be referred to collectively in this Agreement as the “Parties” and individually as a “Party.”
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, 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 required by the Board of Directors or ARC’s CEO. 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 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.
(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.
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 $300,000, 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 not exceeding eighty percent (80%) of Executive’s Base Salary per year under performance criteria to be established by ARC’s CEO in consultation with Executive and approved by the Compensation Committee of ARC’s Board of Directors. The value of the Incentive Bonus shall be paid in cash no later than the 60 th day after the close of each fiscal year.
(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, 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 a one-time grant of 30,000 restricted shares of ARC common stock, to be approved by the Compensation Committee of ARC’s Board of Directors. The restricted shares of ARC common stock shall vest in equal installments of twenty-five percent (25%) on each of the first four anniversaries of the date of grant, subject to Executive’s continued employment with ARC on each vesting date. In addition, in the sole discretion of the Board of Directors of ARC, Executive shall be eligible to participate in stock option, stock purchase, stock bonus and similar plans of ARC 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. 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 CEO.
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.
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, which remains uncorrected for thirty (30) days following written notice to Executive by ARC’s CEO; or
(ii) gross negligence, self dealing 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 in connection with any transaction entered into on behalf of ARC or its affiliates, or any willful act or gross negligence having the effect of injuring the reputation, business or business relationships of ARC or its affiliates; or
(iii) fraud, dishonesty or misappropriation of ARC business and assets that harms the business of ARC or its affiliates; or
(iv) habitual insobriety, abuse of alcohol, abuse of prescription drugs, or use of illegal drugs; or
(v) engaging in any criminal activity involving moral turpitude; or
(vi) indictment or being held for trial in connection with a misdemeanor involving moral turpitude or any felony; or
(vii) conviction of a felony or entry into a guilty plea that negatively reflects on Executive’s fitness to perform the duties or harms the reputation or business or ARC or its affiliates; or
(viii) any material breach of any covenants under this Agreement or other material policy of ARC, other than under clauses (i) through (vii) of this Section 10(c), which remains uncorrected for thirty (30) days following written notice to Executive by ARC’s CEO.
(d) Termination by ARC without Cause . Upon written notice to Executive, ARC may terminate this Agreement at any time without any Cause or reason whatsoever.
(e) Termination by Executive with Good Reason . Upon written notice to ARC of any of the following “Good Reasons,” and the failure of ARC to correct the reduction, change or breach within thirty (30) days after receipt of such notice, Executive may terminate th