EAGLE PACIFIC INDUSTRIES, INC.
Employment Agreement
with
Xxxxxxx X. Xxxxx
THIS EMPLOYMENT AGREEMENT is executed this 16th day of September, 1999,
between Xxxxxxx X. Xxxxx (the "Employee") and Eagle Pacific Industries, Inc.
(the "Eagle"), having its corporate headquarters at 2430 Xxxxxxxx Consulting
Tower, 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxxxxxxxx, XX 00000.
WITNESSETH:
WHEREAS, Eagle desires to engage the services of the Employee as Chief
Executive Officer of Eagle and to assure the continued service of the Employee
to Eagle on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and mutual agreements
hereinafter contained, the parties agree as follows:
1. TERM OF EMPLOYMENT
The term of this Agreement and Employee's employment under this
Agreement shall begin on September 16, 1999, and continue until December 31,
2002. At the expiration of the initial term of this Agreement, the Agreement
shall automatically be renewed for a period of one year with any amendments as
agreed to by the parties, provided that either party may terminate this
Agreement at the expiration of the initial term by giving written notice to the
other party no later than six months prior to the expiration of the initial term
of the Agreement.
2. DUTIES
Employee is engaged to serve as Chief Executive Officer of Eagle. He
shall perform such duties and functions commensurate with his position and as
directed by Eagle. The parties hereto acknowledge that the Employee is engaged
in other business pursuits in which he renders services to other organizations
for which he receives compensation. While the Employee is expected to devote an
appropriate amount of time to his duties for Eagle, the Employee may purse other
business interests during the term of this Agreement so long as he does not
violate Section 6 below.
3. COMPENSATION
a. Base Salary.
As full compensation for the performance by the Employee of
all of his obligations under this Agreement, the Employee shall be
entitled to receive no less than an annual base salary of $200,000
payable periodically on the payroll schedule established for Eagle
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employees. Base salary shall be reviewed as of December 31 each year
commencing with December 31, 1999, and based on the performance of the
Employee, the business conditions of Eagle and the competitive market,
Eagle shall determine the amount, if any, of any increase in base
salary to be granted as of such dates.
b. Bonus.
The Employee and Eagle acknowledge that they are entering into
this Agreement upon the consummation of Eagle's acquisition of Pacific
Western Extruded Plastics Company ("PW Pipe"). Upon the consummation of
the PW Pipe transaction, Eagle shall pay the Employee a transaction
bonus equal to $175,000. In additions, during the term of this
Agreement, the Employee shall be entitled to participate in Level 1 of
Eagle's Key Employee Bonus Plan, a summary of which is attached hereto
as Exhibit A.
c. Stock Options and Restricted Stock.
As of the date hereof, in further consideration of the
Employee's employment hereunder, the Employee acknowledges that:
(i) the Employee has purchased 30,000 shares of Common Stock
of Eagle, a portion of the purchase price for which Eagle loaned to the
Employee subject to the terms of a Promissory Note of even date
herewith executed in favor of Eagle;
(ii) Eagle has granted the Employee 20,000 shares of
restricted Common Stock of Eagle, subject to the terms of a Restricted
Stock Agreement of even date herewith between the Employee and Eagle;
and
(iii) Eagle has granted the Employee an incentive stock option
to acquire 10,000 shares of Eagle's Common Stock at an exercise price
equal to the fair market value for such Common Stock as of the date
hereof, subject to the terms of a Incentive Stock Option Agreement
between the Employee and Eagle. The Employee acknowledges that the
option granted to the Employee may be treated as an "incentive" stock
option for federal income tax purposes, only if Eagle's shareholders
approve the increase in the number of shares of common stock reserved
under Eagle's stock option plan, as submitted to the shareholders by
Eagle's Board of Directors.
d. Annuity.
Eagle shall continue to pay the premiums on the annuities that
are currently in effect for the benefit of the Employee.
e. Office Space.
Eagle shall continue to provide the Employee with office space
and support staff consistent with the past.
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f. Car Allowance.
Eagle shall pay the Employee a car allowance of six hundred
dollars ($600.00) per month.
4. VACATION AND WELFARE BENEFITS
The Employee shall be entitled to all vacation, health/medical, life
insurance, savings, and any other plans which are established for the benefit of
Eagle employees. The Employee shall be entitled to such participation as long as
he remains in the employ of Eagle or for any period for which he is entitled to
continue participation beyond the term of his employment as may be specified
elsewhere in this Agreement. Eagle reserves the right to establish, modify, or
determine the terms and conditions of any such welfare plans at its own
discretion.
5. TERMINATION OF THE EMPLOYEE'S EMPLOYMENT BY EAGLE
a. During the Life of this Agreement.
If the Employee's employment is terminated by Eagle prior to the
expiration of this Agreement for any reason other than for cause (as hereinafter
defined) or under such circumstances as would constitute a breach of this
Agreement by the Employee, Eagle shall pay to the Employee, in lieu of continued
employment under this Agreement or in lieu of any other policy or program
maintained by Eagle, an amount equal to his base salary for the balance of the
initial term of the Agreement remaining at the time of such termination,
provided that such payment shall be for a minimum of twelve months of his base
salary at the time of such termination. Eagle may make any such payment that
arises from this Section on a pay schedule established by Eagle for other
executives. During periods of any such continuing payments, welfare benefits
provided to the Employee under this Agreement shall continue.
b. Upon the Expiration of this Agreement.
Should Eagle elect not to renew this Agreement upon its expiration, and
such election is not as a result of cause (as hereinafter defined) or breach of
this Agreement on the part of the Employee, and if Eagle no longer wishes to
employ the Employee in his position, Eagle shall pay the Employee an amount
equal to twelve months of his base salary at the time of expiration of this
Agreement and such payment shall be made, at the Employee's option, either in a
lump-sum as soon as is practicable following the expiration date of this
Agreement or in continuing payments on the pay schedule established by Eagle for
executives and welfare benefits as provided to the Employee in this Agreement
shall continue for the duration of such payments.
c. Termination for Cause, Resignation or Retirement.
If the Employee's employment terminates at any time for cause or his
resignation or retirement, the Employee shall forfeit the right to any severance
payments hereunder. For purposes of this subsection, "cause" shall include
larceny or theft of property of Eagle or any affiliated company or Eagle;
revealing trade secrets of Eagle, any affiliated company, or Eagle to anyone
except as expressly authorized by Eagle in the performance or the Employee
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duties or as required by law; willful dishonesty, gross misconduct, or fraud
toward Eagle, Eagle, or any affiliated company or conviction of a felony
involving moral turpitude.
x. Xxxxxxxxx.
(i) Anything contained herein to the contrary notwithstanding,
Eagle's obligation to the Employee to make severance payments under
this Agreement shall cease upon the termination of the Employee's
employment with Eagle for reason of retirement by the Employee, his
death, his disability for a period exceeding six (6) months, or under
any other circumstances as would constitute a breach of this Agreement
by the Employee, including, but not limited to, his resignation from
his employment.
(ii) Any payment of severance payments provided herein may, at
Eagle's discretion, be conditioned upon the execution of a release by
the Employee of all claims against Eagle arising out of his employment
and the termination thereof.
6. CONFIDENTIAL INFORMATION AND NON-COMPETITION
a. The Employee acknowledges the importance of Eagle's arrangements
with its employees, suppliers, and customers and he further acknowledges that
the nature of these arrangements and other information concerning the business
processes, formulas, programs, methods, techniques, policies, and practices of
Eagle are trade secrets and constitute valuable assets of Eagle. Therefore:
(i) The Employee shall not disclose or furnish to anyone,
either directly or indirectly, either during his employment under this
Agreement or at any time after his employment, any such trade secret of
Eagle or any other company controlling, controlled by, or under common
control with Eagle that comes into his possession during the course of
his employment.
(ii) To the extent that the Employee has knowledge of such
trade secrets or any other information concerning Eagle which has not
been disclosed to the public by Eagle and is material under applicable
securities laws, the Employee acknowledges and agrees that the effect
of the applicable securities laws prohibit the Employee from trading in
Eagle's stock unless and until Eagle voluntarily discloses such
material information to the general public.
(iii) Upon termination of the Employee's employment for any
reason, the Employee agrees not to compete in the manner described
hereinafter, with the business currently conducted by Eagle in the
United States for a period of twelve months following such termination.
The Employee agrees that, during such period, he will not be employed
by, work for, advise, consult with, serve, or assist in any way,
directly or indirectly, any party whose activities or business are
similar to or in competition with the business of Eagle.
(iv) Upon termination of the Employee's employment for any
reason, the Employee agrees not to solicit, cause or assist to solicit
for a period of twelve months following such termination, on behalf of
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himself or any business or organization with which he becomes directly
or indirectly associated by ownership, employment, consultancy or
otherwise, regardless of whether or not he receives compensation
therefrom, (1) any person employed or compensated in any manner by
Eagle, or to work, consult for or otherwise become associated with him
or any such business or organization, or (2) any customer who has done
business with Eagle at any time within the one (1) year period
preceding the date of his termination of employment, to purchase or
otherwise acquire a product similar to a product sold by Eagle.
The foregoing restrictions on competition by the Employee described in the
Sections 6(a)(iii) and (iv) shall also be operative during the term of the
Employee's employment. They shall also be operative for the benefit of Eagle and
of any business owned or controlled by Eagle, or any successor or assign if any
of the foregoing, but shall terminate if Eagle and the companies with which it
becomes affiliated as of the effective date of this Agreement cease to engage in
all of the businesses in which Eagle is engaged as of the time Employee's
employment terminates.
b. The Employee shall surrender to Eagle immediately upon termination
of his employment all books, records, and property belonging to Eagle or
relating to the employees, business, suppliers, and customers of Eagle without
making or retaining any copies.
c. The Employee acknowledges that Eagle will suffer irreparable damage
and injury and will not have an adequate remedy at law in the event of any
breach by him of any provision of this Section 6. Accordingly, in the event of a
breach or of a threatened or attempted breach by the Employee of any of the
preceding provisions of this Section 6, in addition to all other remedies to
which Eagle is entitled under law, Eagle shall be entitled to a temporary and
permanent injunction (without the necessity of showing any actual damage) or a
decree of specific performance of the provisions of this Section 6, and no bond
or other security shall be required in that connection.
7. DISCOVERIES
The Employee will promptly disclose, in writing, to Eagle each improvement,
discovery, idea, and invention relating to the business of Eagle made or
conceived by him either alone or in conjunction with others while employed by
Eagle or within one (1) year after the termination of such employment if such
improvement, discovery, idea, or invention that results from or was suggested by
such employment whether or not patentable, whether or not made or conceived (i)
at the request of or upon the suggestion of Eagle (ii) during his usual hours of
work, (iii) on or about the premises of Eagle and whether or not prior or
subsequent to the execution hereof. He will not disclose any such improvement,
discovery, idea, or invention to any person except Eagle. Each such improvement,
discovery, idea, or invention shall be the sole and exclusive property of, and
is hereby assigned to, Eagle and at the request of Eagle, Employee will assist
and cooperate with Eagle and any person or persons from time to time designated
by Eagle to obtain for Eagle the grant of any letters patent in the United
States and/or such other country or countries as may be designated by Eagle,
covering any applications, statements, assignments, or other documents, furnish
such information and data and take all such other action (including without
limitation, the giving of testimony) as Eagle may from time to time reasonably
request.
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8. MISCELLANEOUS
a. The Employee shall be entitled to participate in any Deferred
Compensation Program established for Eagle executives related to any bonuses or
other payments in this Agreement that are eligible for deferred payment under
the terms of any such Plan.
b. The Employee shall be reimbursed for, or have directly paid by Eagle
(dependent upon Eagle's financial policy), travel, entertainment, and other
associated expenses deemed reasonably necessary in carrying out the duties of
his position.
c. The Employee represents and warrants to Eagle that upon commencement
of employment with Eagle that he will not at any time be bound by any agreement
that would be violated by his execution or performance of this Agreement.
d. The Employee may not assign any of his rights or delegate any of his
duties under this Agreement.
e. Any notice or other communication under this Agreement shall be in
writing and shall be considered given when mailed by registered mail, return
receipt request, to either party.
f. This Agreement sets forth the entire understanding of the parties,
and completely and fully supersedes and replaces any prior agreement(s) with
respect to the subject matter herein, written or oral, to which the Employee was
a party, including between the Employee and PW Pipe. This Agreement shall be
governed by and construed in accordance with the law of the State of Oregon
applicable to agreements made in that state and cannot be changed or terminated
except by written agreement duly signed by both parties. If any provision of
this Agreement or the application thereof to any party or circumstance is
finally held invalid or unenforceable, the remaining provisions of this
Agreement and the application of such provisions to the other party or
circumstances will not be affected thereby, the provisions of this Agreement
being severable in any such instance, and the unlawful provision shall be deemed
to be amended to conform to requirements of any applicable law.
9. Any controversy or claim, including claims for damages arising out of or
relating to this Agreement, or any breach thereof, or other matters related to
the termination of the Employee's Employment, shall be settled in arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator may be
entered in any court having jurisdiction thereof.
10. This Agreement may be signed in one or more counterparts and all such
counterparts, taken together, shall constitute one document.
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IN WITNESS WHEREOF, this Employment Agreement has been executed by a
duly authorized officer of Eagle on this 16th day of September, 1999.
EAGLE PACIFIC INDUSTRIES, INC.
(the "Company")
By:__________________________________
Xxxxxx West, Secretary
IN WITNESS WHEREOF, this Employment Agreement has been executed by the
Employee on the 16th day of September, 1999 and the Employee attests that he is
in full agreement with all terms and conditions herein and has exercised his
legal right to have this Agreement reviewed by an Attorney if he so chooses.
By:__________________________________
(the "Employee")
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Exhibit A
EAGLE PACIFIC INDUSTRIES, INC.
KEY EMPLOYEE BONUS PLAN
o The Board of Directors will determine the employees that will
participate in the Key Employee Bonus Plan and will designate the Level
of Participation.
o The Levels of Participation are:
o Level 1 - 100% of bonus based on EBITDA goal, and the bonus
potential is 50% of base salary.
o Level 2 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 40% of base
salary.
o Level 3 - 75% of bonus is based on EBITDA goal and 25% on
individual goals, and the bonus potential is 35% of base
salary.
o Level 4 - 50% of bonus is based on EBITDA goal and 50% on
individual goals, and the bonus potential is 25% of base
salary.
o If 120% of the EBITDA goal is achieved, the bonus for the EBITDA
portion of the bonus will be 115% of the bonus based on obtaining the
EBITDA goal.
o Each year the Board of Directors will establish an EBITDA goal and the
individual goals for the following year.
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