Employment Agreement - Hansen Natural Corp. and Hilton H. Schlosberg
EMPLOYMENT AGREEMENT
AGREEMENT dated as of January 1, 1999, by and between HANSEN
NATURAL CORPORATION, a Delaware corporation (the "Corporation"), and HILTON H.
SCHLOSBERG (the "Executive").
IN CONSIDERATION OF the premises and mutual covenants herein
contained, and other good and valuable consideration, the Corporation and the
Executive agree as follows:
1. Employment. The Corporation shall employ the Executive and
the Executive agrees to serve as an executive of the Corporation, in such
capacities and upon such conditions as are hereinafter set forth.
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2. Definitions.
(a) "Cause" shall mean (i) an act or acts of dishonesty or gross
misconduct on the Executive's part which result or are intended to result in
material damage to the Corporation's business or reputation or (ii) repeated
material violations by the Executive of his obligations under Section 4 of this
Agreement which violations are demonstrably willful and deliberate on the
Executive's part and which result in material damage to the Corporation's
business or reputation and as to which material violations the Board of
Directors of the Corporation has notified the Executive in writing.
(b) "Constructive Termination" shall mean:
(i) without the written consent of the Executive, (A) the
assignment to the Executive of any duties inconsistent in any
substantial respect with the Executive's position, authority or
responsibilities as contemplated by Section 4 of this Agreement,
or (B) any other substantial adverse change in such position,
including titles, authority or responsibilities;
(ii) any failure by the Corporation to comply with any of
the provisions of this Agreement, other than an insubstantial or
inadvertent failure remedied by the Corporation promptly after
receipt of notice thereof given by the Executive;
(iii) the Corporation's requiring the Executive without his
consent to be based at any office or location outside of Orange
County, California except for travel reasonably required in the
performance of the Executive's responsibilities; or
(iv) any failure by the Corporation to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 12(b), provided that the
successor has had actual written notice of the existence of this
Agreement and its terms and an opportunity to assume the
Corporation's responsibilities under this Agreement during a
period of 10 business days after receipt of such notice.
3. Employment Period. The "Employment Period" shall be the
period commencing January 1, 1999, and ending on December 31, 2003, subject to
extension or termination as hereinafter provided. On December 31, 2003, and on
each December 31 thereafter, the Employment Period shall be automatically
extended by one additional year unless prior to June 30, 2003, or any subsequent
June 30, the Corporation shall deliver to the Executive or the Executive shall
deliver to the Corporation written notice that the Employment Period will not be
extended (a "Non-Renewal Notice"), in which case the Employment Period will end
at its then scheduled expiration date and shall not be further extended except
by written agreement of the Corporation and the Executive.
4. Position and Duties.
(a) No Reduction in Position. During the Employment Period, the
Executive's position (including titles), authority and responsibilities
(including, without limitation, reporting authority and responsibility) shall be
at least commensurate with the position of President and COO. It is understood
that, for purposes of this Agreement, such position, authority and
responsibilities shall not be regarded as not commensurate merely by virtue of
the fact that a successor shall have acquired all or substantially all of the
business and/or assets of the Corporation as contemplated by Section 12(b) of
this Agreement, provided that the Executive shall continue to have a position
and authority and responsibilities with respect to such successor or affiliated
company substantially corresponding to that of the Executive with respect to the
Corporation prior to such acquisition. As used in this Agreement, the term
"affiliated company" means any company controlling, controlled by, or under
common control with the Corporation. During the Employment Period, the Executive
also agrees to serve without additional compensation as President of Hansen
Beverage Company ("HBC"), the Corporation's wholly-owned subsidiary.
(b) Business Time. During the Employment Period, the Executive
agrees to devote his full business time during normal business hours to the
business and affairs of the Corporation and to use his best efforts to perform
faithfully and efficiently the responsibilities assigned to him hereunder, to
the extent necessary to discharge such responsibilities.
5. Compensation.
(a) Base Salary. During the Employment Period, the Executive
shall receive a base salary (the "Base Salary"), payable bi-weekly or in such
other installments as may be agreed upon, at an annual rate of $180,000 for the
12-month period ending December 31, 1999, and increasing by a minimum of 8% for
each subsequent 12-month period during the Employment Period. The Corporation
shall review the Base Salary annually and in light of such review may, in the
discretion of the Board of Directors of the Corporation increase (but not
decrease) the Base Salary by more than the minimum 8% per annum increase taking
into account any change in the Executive's responsibilities, increases in
compensation of other executives with comparable responsibilities, performance
of the Executive and other pertinent factors, and such adjusted Base Salary
shall then constitute the "Base Salary" for purposes of this Agreement.
(b) Bonus. In addition to the Base Salary, the Executive may be
granted a bonus ("Bonus"), payable at such times, and in such amounts, as may be
fixed from time to time at the discretion of the Board of Directors.
(c) Incentive and Savings Plans; Retirement and Life Insurance
Programs. In addition to the Base Salary and Bonus payable as hereinabove
provided, during the Employment Period, the Executive shall be entitled to
participate in all incentive and savings plans and programs, including stock
option plans and other equity-based compensation plans, and in all retirement
and life insurance plans which the Corporation may from time to time make
available to the Executive and/or any other executives of the Corporation or any
affiliated company.
(d) Benefit Plans. During the Employment Period, the Executive,
his spouse and their eligible dependents (as defined in, and to the extent
permitted by, the applicable plan), as the case may be, shall be entitled to
participate in or be covered under all medical, dental, disability, group life,
accidental death and travel accident insurance plans and programs of the
Corporation and its affiliated companies (at the most favorable level of
participation and providing highest levels of benefits available to him) as in
affect (i) on the date hereof or (ii) if more favorable to the Executive, as in
effect at any time thereafter with respect to the Executive or other executives
with comparable responsibilities.
(e) Club Memberships. During the Employment Period, the
Corporation shall pay all initial and annual fees and all other reasonable
expenses relating to membership in up to two (2) business or social clubs to be
selected by the Executive in his sole discretion.
(f) Automobile. During the Employment Period, the Corporation
shall pay all costs and expenses relating to the purchase or lease, use, and
maintenance of a luxury automobile to be dedicated to the sole use of the
Executive.
(g) Expenses. During the Employment Period, the Executive shall
be entitled to receive prompt reimbursement for all reasonable travel,
entertainment and other expenses incurred by the Executive in connection with
the performance of his duties hereunder in accordance with such policies and
procedures as the Corporation may from time to time establish.
(h) Vacation and Fringe Benefits. During the Employment Period,
the Executive shall be entitled to paid vacation consisting of four (4) weeks
per year to be taken at such times selected by the Executive and reasonably
acceptable to the Corporation, such vacation to accrue ratably during the
Employment Period; such other paid holidays as may be accorded to employees of
the Corporation as well as up to ten (10) paid personal days per year to be
taken at such times as may be selected by the Executive.
6. Termination.
(a) Death or Disability. This Agreement shall terminate
automatically upon the Executive's death. The Corporation may terminate this
Agreement, after having established the Executive's Disability, by giving to the
Executive written notice of its intention to terminate his employment, and his
employment with the Corporation shall terminate effective on the 90th day after
receipt of such notice if, within 90 days after such receipt, the Executive
shall fail to return to full-time performance of his duties. For purposes of
this Agreement, "Disability" means disability which would entitle the Executive
to receive full long-term disability benefits under the Corporation's long-term
disability plan, or if no such plan shall then be in effect, any physical or
mental disability or incapacity which renders the Executive incapable of
performing the services required of him in accordance with his obligations under
Section 4 hereof for a period of more than 120 days in the aggregate during any
12-month period during the Employment Period.
(b) Voluntary Termination. Notwithstanding anything in this
agreement to the contrary, the Executive may, upon not less than 90 days'
written notice to the Corporation, voluntarily terminate employment for any
reason, provided that any termination by the Executive pursuant to Section 6(d)
on account of Constructive Termination shall not be treated as a voluntary
termination under this Section 6(b).
(c) Cause. The Corporation may terminate the Executive's
employment for Cause.
(d) Constructive Termination. The Executive may terminate his
employment for Constructive Termination.
(e) Notice of Termination. Any termination by the Company for
Cause or by the Executive for Constructive Termination shall be communicated by
Notice of Termination to the other party hereto given in accordance with Section
13(c). For purposes of this Agreement, a "Notice of Termination" means a written
notice given, in the case of a termination for Cause, within 30 business days of
the Corporation's having actual knowledge of the events giving rise to such
termination, and in the case of a termination for Constructive Termination,
within 90 days of the Executive's having actual knowledge of the events giving
rise to such termination, and which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated, and (iii) if the
termination date is other than the date of receipt of such notice, specifies the
termination date of this Agreement (which date shall be not more than 15 days
after the giving of such notice). The failure by the Executive to set forth in
the Notice of Termination any fact or circumstance which contributes to a
showing of Constructive Termination shall not waive any right of the Executive
hereunder or preclude the Executive from asserting such fact or circumstance in
enforcing his rights hereunder.
(f) Date of Termination. For the purpose of this Agreement, the
term "Date of Termination" means (i) in the case of a termination for which a
Notice of Termination is required, the date of receipt of such Notice of
Termination or, if later, the date specified therein, as the case may be and
(ii) in all other cases, the actual date on which the Executive's employment
terminates during the Employment Period.
7. Obligations of the Corporation upon Termination. Upon
termination of this Agreement the Corporation shall have the following
obligations:
(a) Death. If the Executive's employment is terminated during
the Employment Period by reason of the Executive's death, the Corporation shall
(i) continue to pay to the Executive's legal representatives the Executive's
full Base Salary for a period of one year from the Date of Termination, (ii)
provide the Executive's dependents with the benefits provided under Sections
5(d) and 5(f) for a period of one year from the Date of Termination, (iii) pay
to the Executive's legal representatives any compensation previously deferred by
the Executive and not yet paid by the Corporation and any accrued vacation pay
not yet paid by the Corporation and (iv) pay to the Executive's legal
representatives any other amounts or benefits owing to the Executive's
beneficiaries under the then applicable employee benefit plans or policies of
the Corporation (such amounts specified in clauses (iii) and (iv) are
hereinafter referred to as "Accrued Obligations").
(b) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability, the Corporation shall (i) continue to pay
to the Executive his full Base Salary for a period of one year from the Date of
Termination, (ii) provide the Executive and his dependents with the benefits
provided under Sections 5(d) and 5(f) for a period of one year from the Date of
Termination, and (iii) pay to the Executive the Accrued Obligations.
(c) Cause and Voluntary Termination. If, during the Employment
Period, the Executive's employment shall be terminated for Cause or voluntarily
terminated by the Executive (other than on account of Constructive Termination),
the Corporation shall pay the Executive all Base Salary and benefits to which
the Executive is entitled pursuant to Section 5 through the Date of Termination
and the Accrued Obligations. Unless otherwise directed by the Executive, the
Executive shall be paid all such Accrued Obligations in a lump sum in cash
within 30 days of the Date of Termination and the Corporation shall have no
further obligations to the Executive under this Agreement.
(d) Termination by Corporation other than for Cause or
Disability and Termination by the Executive for Constructive Termination. If,
during the Employment Period, the Corporation gives a Non-Renewal Notice or
terminates the Executive's employment other than for Cause or Disability, or the
Executive terminates his employment for Constructive Termination, the
Corporation shall pay or provide to the Executive the following:
(i) Cash Payment. First, the Corporation shall pay to the
Executive in a lump sum in cash within 15 days after the Date of
Termination the aggregate of the following amounts:
(A) if not theretofore paid, the Executive's
Base Salary through the date of Termination (plus, in the case
of termination without Cause, two weeks of Base Salary in lieu
of notice) at the rate in effect on the Date of Termination;
(B) a cash amount equal to any amounts
described in Section 7(a)(iv); and
(C) the present value of the Executive's Base
Salary for the period through December 31, 2003, or through the
date which is twelve months from the Date of Termination,
whichever period is longer, at the rate in effect on the Date of
Termination, discounted at the interest rate payable on one year
Treasury Bills in effect on the day that is 30 business days
prior to the Date of Termination, as if paid monthly from the
Date of Termination in arrears.
(ii) Benefits Continuation. Second, for the period from the
Date of Termination to December 31, 2003, or through the date
which is twelve months from the Date of Termination, whichever
period is longer, the Corporation shall provide for the
participation of the Executive, his spouse and their eligible
dependents (as defined in the applicable plan), as the case may
be, in the plans described in Section 5(d) on the same terms as
described in Section 5(d), and for the automobile provided under
Section 5(f). All rights under this Section 7(d)(ii) shall cease
immediately upon the Executive's violation of Section 11(b).
(iii) Deferred Payment. Third, the Corporation shall pay the
Executive any amounts payable under Section 7(a)(iii) on the
terms and conditions of the applicable plan or policy.
(iv) Discharge of Corporation's Obligations. Subject to the
performance of its obligations under this Section 7(d), the
Corporation shall have no further obligations to the Executive
under this Agreement in respect of any termination by the
Executive for Constructive Termination or by the Corporation
other than for Cause or Disability, except to the extent
expressly provided under Sections 10 or 12 hereof or under any
of the plans referred to in Sections 5(c) or 5(d) hereof.
8. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Corporation
or any of its affiliated companies and for which the Executive may qualify, nor
shall anything herein limit or otherwise prejudice such rights as the Executive
may have under any other agreements with the Corporation or any of its
affiliated companies, including, but not limited to, stock option or restricted
stock agreements. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan or program of the Corporation or
any of its affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan or program.
9. Full Settlement. Except as provided in Sections 7(d)(ii) and
11(b), the Corporation's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Corporation may have
against the Executive or others whether by reason of the subsequent employment
of the Executive or otherwise. In no event shall the Executive be obligated to
seek other employment by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement. In the event that the
Executive shall in good faith give a Notice of Termination for Constructive
Termination and it shall thereafter be determined that Constructive Termination
did not take place, the employment of the Executive shall, unless the
Corporation and the Executive shall otherwise mutually agree, be deemed to have
terminated, at the date of giving such purported Notice of Termination, by
mutual consent of the Corporation and the Executive and, except as provided in
the last preceding sentence, the Executive shall be entitled to receive only
those payments and benefits which he would have been entitled to receive at such
date had he terminated his employment voluntarily at such date under this
Agreement.
10. Legal Fees and Expenses. In the event that a claim or
payment or benefits under this Agreement is disputed, the Corporation shall pay
all reasonable attorney fees and expenses incurred by the Executive in pursuing
such claim, provided that Executive is successful as to at least part of the
disputed claim by reason of arbitration (as set forth in Section 13(g)) or
settlement.
11. Special Obligations of the Executive.
(a) Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Corporation all secret or confidential
information, knowledge or data relating to the Corporation or any of its
affiliated companies, and their respective businesses, (i) obtained by the
Executive during his employment by the Corporation or any of its affiliated
companies and (ii) not otherwise public knowledge (other than by reason of an
unauthorized act by the Executive). After termination of the Executive's
employment with the Corporation, the Executive shall not without the prior
written consent of the Corporation, unless compelled pursuant to an order of a
court or other body having jurisdiction over such matter, communicate or divulge
any such information, knowledge or data to anyone other than the Corporation and
those designated by it. In no event shall an asserted violation of the
provisions of this Section 11(a) constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
(b) Noncompetition. In order for the Corporation to reasonably
protect its interests against the competitive use of any confidential
information, knowledge or relationships concerning the business of the
Corporation and its affiliated companies to which the Executive has access
because of the special nature of his employment, the Executive shall not during
the Employment Period and for a period of six months thereafter, directly or
indirectly, by ownership of securities or otherwise, engage in any business
organization whose activities are competitive in any state of the United States
or in any foreign country with activities in which the Corporation and/or its
affiliated companies are engaged in such state or country, or become associated
with or render services to any person, business or enterprise so engaged. Mere
ownership as an investor of not more than 5% of the securities of a corporation
or other business enterprise shall not be deemed an association with such
corporation or enterprise.
12. Successors.
(a) This Agreement is personal to the Executive and, without the
prior written consent of the Corporation, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Corporation and its successors. The Corporation shall require any
successor to all or substantially all of the business and/or assets of the
Corporation, whether direct or indirect, by purchase, merger, consolidation,
acquisition of stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent as the Corporation would be
required to perform if no such succession had taken place. For purposes of this
Section 12(b), the term "Corporation" shall include the Corporation and HBC.
13. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, applied
without reference to principles of conflict of laws.
(b) Amendments. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(c) Notices. All notices and other communications hereunder
shall be in writing and shall be given by hand-delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive 2 Nidden
Irvine, California 92612
If to the Corporation: Hansen Natural Corporation
2380 Railroad Street
Corona, CA 91720
Attention: Board of Directors
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(d) Tax Withholding. The Corporation may withhold from any
amounts payable under this Agreement such federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(e) Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(f) Captions. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(g) Arbitration. Except with respect to the rights of the
Corporation to apply to a court of law or equity for equitable relief in the
event of the breach by the Executive of any of the provisions of Section 11 of
this Agreement, any controversy or claim arising out of or relating to this
Agreement or its termination shall be settled by arbitration in accordance with
the rules of the American Arbitration Association, and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. Any such arbitration shall take place in Los Angeles, California or at
such other location as may be agreed by the parties.
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IN WITNESS WHEREOF, the Executive has hereunto set his hand and
the Corporation has caused this Agreement to be executed in its name on its
behalf, all as of the day and year first above written.
HANSEN NATURAL CORPORATION
By:
Title: Chairman
EXECUTIVE:
Hilton H. Schlosberg