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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 20th day of April,
1998, between International Total Services, Inc., an Ohio corporation (the
"Company"), and Xxxxx X. Xxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
1. Employment.
(a) The Company hereby employs the Executive as its Vice
President of Finance for the Corporate Headquarters, and the Executive hereby
accepts such employment, on the terms and subject to the conditions hereinafter
set forth.
(b) During the term of this Employment Agreement and any
renewal hereof (all references herein to the term of this Employment Agreement
shall include references to the period of renewal hereof, if any), the Executive
shall be and have the title of Vice President of Finance for the Corporate
Headquarters, subject to becoming Vice President and Chief Financial Officer
upon the first anniversary of this Employment Agreement (as described in Section
2), and shall devote such business time and all reasonable efforts to his
employment as the Executive deems appropriate and perform diligently such duties
as are customarily performed by officers holding such titles with publicly-held
companies of comparable size in the same or related industries, together with
such other duties as may be reasonably requested from time to time by the Board
of Directors of the Company (the "Board"), which duties shall be consistent with
his positions as set forth above and as provided in Paragraph 2.
2. Term and Positions.
(a) Subject to the provisions for renewal and termination
hereinafter provided, the term of this Employment Agreement shall begin on the
date hereof and shall continue until the second anniversary of this Employment
Agreement. Such term automatically shall be extended for one (1) additional
calendar year, unless: (i) this Employment Agreement is terminated as provided
in Paragraph 4(a)(i) or 4(a)(ii) or (ii) either the Company or the Executive
shall give at least 180 days written notice of non-extension of this Employment
Agreement to the other on or before the second anniversary of this Employment
Agreement or on or before any subsequent anniversary of this Employment
Agreement.
(b) Until the first anniversary of this Employment Agreement,
the Executive shall
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be entitled to serve as Vice President of Finance for the Corporate Headquarters
of the Company. Upon the first anniversary of this Employment Agreement, the
Executive shall be entitled to serve as Vice President and Chief Financial
Officer of the Company. Without limiting the generality of any of the foregoing,
except as hereafter expressly agreed in writing by the Executive: (i) the
Executive shall be required to report only to the Chief Executive Officer, and
(ii) no other individual shall be elected or appointed as Chief Financial
Officer of the Company. For service as an officer and employee of the Company,
the Executive shall be entitled to the full protection of applicable
indemnification provisions of the articles of incorporation and code of
regulations of the Company, as the same may be amended from time to time.
(c) If:
(i) the Company materially changes the Executive's
duties and responsibilities as set forth in Paragraph 1(b) or 2(b)
without his consent (including, without limitation, by violating any of
the provisions of clause (i) or (ii) of Paragraph 2 (b));
(ii) the Executive's place of employment or the
principal executive offices of the Company are moved to a location more
than fifty (50) miles from the geographical center of Cleveland, Ohio;
(iii) there occurs a material breach by the Company
of any of its obligations under this Employment Agreement (other than
those specified in this Section 2(c)), which breach has not been cured
in all material respects within ten (10) days after the Executive gives
notice thereof to the Company; or
(iv) there occurs a "change in control" (as
hereinafter defined) of the Company,
then the Executive shall have the right to terminate his employment with the
Company, but such termination shall not be considered a voluntary resignation or
termination of such employment or of this Employment Agreement by the Executive
but rather a discharge of the Executive by the Company without "cause" (as
defined in Paragraph 4(a)(ii)).
(d) The Executive shall be considered not to have consented to
any written proposal calling for a material change in his duties and
responsibilities unless he shall give written notice of his consent thereto to
the Board within fifteen (15) days after receipt of such written proposal. If
the Executive shall not have given such consent, the Company shall have the
opportunity to withdraw such proposed material change by written notice to the
Executive given within ten (10) days after the end of said fifteen (15) day
period.
(e) The term "change in control" means the first to occur of
the following events:
(i) any person or group of commonly controlled
persons, other than Xxxxxx X. Xxxxxxx or any such group of which Xxxxxx
X. Xxxxxxx is a member, owns or controls, directly or indirectly, fifty
percent (50%) or more of the voting control or value of the
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equity interests in the Company following consummation of the initial
public offering of the Company's Common Shares, without par value (the
"IPO"); or
(ii) any person or group of commonly controlled
persons who own less than five percent (5%) of the voting control or
value of the equity interests in the Company during the first 30 days
following the consummation of the IPO acquire ownership or control,
directly or indirectly, of more than twenty percent (20%) of the voting
control or value of the equity interests in the Company; or
(iii) the shareholders of the Company approve an
agreement to merge or consolidate with another corporation or other
entity resulting (whether separately or in connection with a series of
transactions) in a change in ownership of twenty percent (20%) or more
of the voting control or value of the equity interests in the Company,
or an agreement to sell or otherwise dispose of all or substantially
all of the Company's assets (including, without limitation, a plan of
liquidation or dissolution), or otherwise approve of a fundamental
alteration in the nature of the Company's business.
3. Compensation.
During the term of this Employment Agreement the Company shall
pay or provide, as the case may be, to the Executive the compensation and other
benefits and rights set forth in this Paragraph 3.
(a) The Company shall pay to the Executive a base salary
payable in accordance with the Company's usual pay practices (and in any event
no less frequently than monthly) at the rate of Ninety-Two Thousand Dollars
($92,000) per annum, to be increased (but not decreased) from time to time
(based upon the performance of the Company and the Executive) as determined by
the Board in its sole discretion.
(b) The Company shall pay to the Executive a signing bonus of
Ten Thousand Two Hundred Eighty-One Dollars and Fifteen Cents ($10,281.15),
payable in three equal monthly installments of Three Thousand Four Hundred
Twenty-Seven Dollars and Five Cents ($3,427.05) beginning thirty (30) days after
the date of this Employment Agreement; provided, however, such bonus payments
shall be prorated on a per diem basis in the event of the termination of the
Executive's employment before the third and final payment is due.
(c) The Company shall pay to the Executive bonus compensation
for each fiscal quarter of the Company, not later than sixty (60) days following
the end of such fiscal quarter or the termination of his employment, as the case
may be, prorated on a per diem basis for partial fiscal quarters, of 0.162% of
the Company's net operating profit for that fiscal quarter if the Company
achieves its operating budget goals for that fiscal quarter to be increased or
decreased from time to time as determined by the Board in its sole discretion;
provided, however, this bonus shall be increased by 0.10% of the Company's net
operating profit for that fiscal quarter if the Company exceeds its operating
budget goals for that fiscal quarter by 2.00% or more.
(d) The Company shall provide to the Executive and his family
all the medical,
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dental, and all other group insurance benefits which the Company provides
generally to employees of the Company during active employment. In the event of
disability or death of the Executive, these benefits shall be continued by the
Company for life for the Executive and his spouse.
(e) The Executive shall have the right to participate in all
retirement and other benefit plans of the Company generally available from time
to time to employees of the Company and for which the Executive qualifies under
their terms (and nothing in this Employment Agreement shall or shall be
considered to in any way affect the Executive's rights and benefits thereunder
except as expressly provided herein).
(f) Until the fifth anniversary of this Employment Agreement,
the Executive shall be entitled to three weeks of vacation per year. Upon the
fifth anniversary of this Employment Agreement, the Executive shall be entitled
to four weeks of vacation. The Executive shall be entitled to sick leave
allowance each year as determined by the Executive in his reasonable and good
faith discretion, which in any event shall be not less than as provided
generally under the Company's sick leave policy for executive officers.
(g) The Executive shall be entitled to participate in any
option or other employee benefit compensation plan that is generally available
to senior executive officers, as distinguished from general management, of the
Company. The Executive's participation in and benefits under any such plan shall
be on the terms and subject to the conditions specified in the governing
document of that plan.
(h) The Company shall reimburse the Executive or provide him
with an expense allowance during the term of this Employment Agreement for
travel, entertainment and other expenses reasonably and necessarily incurred by
the Executive in connection with the Company's business. The Executive shall
furnish such documentation with respect to reimbursement to be paid hereunder as
the Company shall reasonably request.
(i) The Company shall reimburse the Executive during the term
of this Employment Agreement for all expenses, including continuing education
expenses and licensing fees, reasonably and necessarily incurred by the
Executive in connection with maintaining the Executive's status as a certified
public accountant. The Executive shall furnish such documentation with respect
to reimbursement to be paid hereunder as the Company shall reasonably request.
4. Termination.
(a) The employment of the Executive under this Employment
Agreement, and the term hereof, may be terminated by the Company:
(i) on the death or permanent disability (as defined
below) of the Executive;
(ii) for cause at any time by action of the Board.
For purposes hereof, the
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term "cause" shall mean:
(A) The Executive's fraud, commission of a
felony or of an act or series of acts which result in material
injury to the business or reputation of the Company,
commission of an act or series of repeated acts of dishonesty
which are materially inimical to the best interests of the
Company, or the Executive's willful and repeated failure to
perform his duties under this Employment Agreement, which
failure has not been cured within fifteen (15) days after the
Company gives notice thereof to the Executive; or
(B) The Executive's material breach of any
other material provision of this Employment Agreement, which
breach has not been cured in all substantial respects within
ten (10) days after the Company gives notice thereof to the
Executive; or
(iii) other than for cause at any time by action of
the Board, subject to the operation of Paragraph 4(d).
The exercise by the Company of its rights of termination under this
Paragraph 4 shall be the Company's sole remedy in the event of the
occurrence of the event as a result of which such right to terminate
arises. Upon any termination of this Employment Agreement, the
Executive shall be deemed to have resigned from all offices and
directorships held by the Executive in the Company.
(b) For purposes of this Employment Agreement, the Executive's
"permanent disability" shall be deemed to have occurred after one hundred twenty
(120) days in the aggregate during any consecutive twelve (12) month period, or
after ninety (90) consecutive days, during which one hundred twenty (120) or
ninety (90) days, as the case may be, the Executive, by reason of his physical
or mental disability or illness, shall have been unable to discharge his duties
under this Employment Agreement. The date of permanent disability shall be such
one hundred twentieth (120th) or ninetieth (90th) day, as the case may be. In
the event either the Company or the Executive, after receipt of notice of the
Executive's permanent disability from the other, dispute that the Executive's
permanent disability shall have occurred, the Executive shall promptly submit to
a physical examination by the chief of medicine of any major accredited hospital
in the Cleveland, Ohio, area and, unless such physician shall issue his written
statement to the effect that in his opinion, based on his diagnosis, the
Executive is capable of resuming his employment and devoting his full time and
energy to discharging his duties within thirty (30) days after the date of such
statement, such permanent disability shall be deemed to have occurred.
(c) In the event of a termination claimed by the Company to be
for "cause" pursuant to Paragraph 4(a)(ii), the Executive shall have the right
to have the justification for said termination determined by arbitration in
Cleveland, Ohio. In order to exercise such right, the Executive shall serve on
the Company within thirty (30) days after termination a written request for
arbitration. The Company immediately shall request the appointment of an
arbitrator by the American Arbitration Association and thereafter the question
of "cause" shall be determined under the rules of the American Arbitration
Association, and the decision of the arbitrator shall be final
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and binding on both parties. The parties shall use all reasonable efforts to
facilitate and expedite the arbitration and shall act to cause the arbitration
to be completed as promptly as possible. During the pendency of the arbitration,
the Executive shall continue to receive all compensation and benefits to which
he is entitled hereunder, and if at any time during the pendency of such
arbitration the Company fails to pay and provide all compensation and benefits
to the Executive in a timely manner, the Company shall be deemed to have
automatically waived whatever rights it then may have had to terminate the
Executive's employment for cause. Expenses of the arbitration shall be borne
equally by the parties.
(d) In the event of termination for any of the reasons set
forth in Paragraph 2(a) or subparagraph (a)(i) or (a)(ii) of this Paragraph 4,
except as otherwise provided in Paragraph 3(c), the Executive shall be entitled
to no further compensation or other benefits under this Employment Agreement,
except as to that portion of any unpaid salary and other benefits accrued and
earned by him hereunder up to and including the effective date of such
termination. If the Company terminates the Executive's employment other than
pursuant to Paragraph 2(a) or subparagraph 4(a)(i) or 4(a)(ii) or the Executive
terminates his employment pursuant to subparagraph 2(c), all of the compensation
and benefits payable to the Executive pursuant to this Employment Agreement
shall be paid to the Executive for the remainder of the term of this Employment
Agreement (as that term is defined in subparagraph 2(a)).
5. Covenants and Confidential Information.
(a) The Executive acknowledges the Company's reliance and
expectation of the Executive's continued commitment to performance of his duties
and responsibilities during the term of this Employment Agreement. In light of
such reliance and expectation on the part of the Company, during the term of
this Employment Agreement and for a period of two (2) years thereafter (and, as
to clause (ii) of this subparagraph (a), at any time during and after the term
of this Employment Agreement), the Executive shall not, directly or indirectly,
do or suffer either of the following:
(i) Own, manage, control or participate in the
ownership, management, or control of, or be employed or engaged by or
otherwise affiliated or associated as a consultant, independent
contractor or otherwise with, any other corporation, partnership,
proprietorship, limited liability company, firm, association or other
business entity engaged in the business of, or otherwise engage in the
business of, aviation services or commercial security; except that the
Executive may own not more than one percent (1%) of any class of
publicly traded securities of any entity, and own interests in the
Company subject only to any restriction imposed by any agreement or
instrument other than this Employment Agreement; or
(ii) Disclose, divulge, discuss, copy or otherwise
use or suffer to be used in any manner, in competition with, or
contrary to the interests of, the Company, any confidential information
relating to the Company's operations, properties or otherwise to its
particular business or other trade secrets of the Company, it being
acknowledged by the Executive that all such information regarding the
business of the Company compiled or obtained by, or furnished to, the
Executive while the Executive shall have been
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employed by or associated with the Company is confidential information
and the Company's exclusive property; provided, however, that the
foregoing restrictions shall not apply to the extent that such
information: (A) is clearly obtainable in the public domain, (B)
becomes obtainable in the public domain, except by reason of the breach
by the Executive of the terms hereof, (C) was not acquired by the
Executive in connection with his employment or affiliation with the
Company, (D) was not acquired by the Executive from the Company or its
representatives, or (E) is required to be disclosed by rule of law or
by order of a court or governmental body or agency.
(b) The Executive agrees and understands that the remedy at
law for any breach by him of this Paragraph 5 will be inadequate and that the
damages flowing from such breach are not readily susceptible to being measured
in monetary terms. Accordingly, it is acknowledged that, upon adequate proof of
the Executive's violation of any legally enforceable provision of this Paragraph
5, the Company shall be entitled to immediate injunctive relief and may obtain a
temporary order restraining any threatened or further breach. Nothing in this
Paragraph 5 shall be deemed to limit the Company's remedies at law or in equity
for any breach by the Executive of any of the provisions of this Paragraph 5
which may be pursued or availed of by the Company.
(c) The Executive has carefully considered the nature and
extent of the restrictions upon him and the rights and remedies conferred upon
the Company under this Paragraph 5, and hereby acknowledges and agrees that the
same are reasonable in time and territory, are designed to eliminate competition
which otherwise would be unfair to the Company, do not stifle the inherent skill
and experience of the Executive, would not operate as a bar to the Executive's
sole means of support, are fully required to protect the legitimate interests of
the Company and do not confer a benefit upon the Company disproportionate to the
detriment to the Executive.
6. Tax Adjustment Payments. If all or any portion of the amounts
payable to the Executive under this Employment Agreement (together with all
other payments of cash or property, whether pursuant to this Employment
Agreement or otherwise, including, without limitation, the issuance of common
shares of the Company, or the granting, exercise or termination of options
therefor) constitutes "excess parachute payments" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code") that are
subject to the excise tax imposed by Section 4999 of the Code (or any similar
tax or assessment), the amounts payable hereunder shall be increased to the
extent necessary to place the Executive in the same after-tax position as he
would have been in had no such tax assessment been imposed on any such payment
paid or payable to the Executive under this Employment Agreement or any other
payment that the Executive may receive in connection therewith. The
determination of the amount of any such tax or assessment and the incremental
payment required hereby in connection therewith shall be made by the accounting
firm employed by the Executive within thirty (30) calendar days after such
payment and said incremental payment shall be made within five (5) calendar days
after determination has been made. If, after the date upon which the payment
required by this Paragraph 6 has been made, it is determined (pursuant to final
regulations or published rulings of the Internal Revenue Service, final judgment
of a court of competent jurisdiction, Internal Revenue Service audit assessment,
or otherwise) that the amount of excise or other similar taxes or assessments
payable by the Executive is greater than the amount initially
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so determined, then the Company shall pay the Executive an amount equal to the
sum of: (i) such additional excise or other taxes, PLUS (ii) any interest, fines
and penalties resulting from such underpayment, PLUS (iii) an amount necessary
to reimburse the Executive for any income, excise or other tax assessment
payable by the Executive with respect to the amounts specified in (i) and (ii)
above, and the reimbursement provided by this clause (iii), in the manner
described above in this Paragraph 6. Payment thereof shall be made within five
(5) calendar days after the date upon which such subsequent determination is
made.
7. Representations and Warranties of the Company.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio, and has all
requisite corporate power and authority to enter into, execute and deliver this
Employment Agreement, fulfill its obligations hereunder and consummate the
transactions contemplated hereby.
(b) The execution and delivery of, performance of obligations
under, and consummation of the transactions contemplated by, this Employment
Agreement have been duly authorized and approved by all requisite corporate
action by or in respect of the Company, and this Employment Agreement
constitutes the legally valid and binding obligation of the Company, enforceable
by the Executive in accordance with its terms.
(c) No provision of the Company's governing documents or any
agreement to which it is a party or by which it is bound or of any material law
or regulation of the kind usually applicable to and binding upon the Company
prohibits or limits its ability to enter into, execute and deliver this
Employment Agreement, fulfill its obligations hereunder and consummate the
transactions contemplated hereby.
8. Miscellaneous.
(a) The Executive represents and warrants that he is not a
party to any agreement, contract or understanding, whether employment or
otherwise, which would restrict or prohibit him from undertaking or performing
employment in accordance with the terms and conditions of this Employment
Agreement.
(b) The provisions of this Employment Agreement are severable
and if any provision may be determined to be illegal or otherwise unenforceable,
in whole or in part, the remaining provisions and any partially unenforceable
provision, to the extent enforceable in any jurisdiction, nevertheless shall be
binding and enforceable.
(c) The rights and obligations of the Company under this
Employment Agreement shall inure to the benefit of, and shall be binding on, the
Company and its successors and assigns, and the rights and obligations (other
than obligations to perform services) of the Executive under this Employment
Agreement shall inure to the benefit of, and shall be binding upon, the
Executive and his heirs, personal representatives and assigns.
(d) Any controversy or claim arising out of or relating to
this Employment
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Agreement, or the breach thereof, shall be settled by arbitration in accordance
with the Rules of the American Arbitration Association then pertaining in the
City of Cleveland, Ohio, and judgment upon the award rendered by the arbitrator
or arbitrators may be entered in any court having jurisdiction thereof. The
arbitrator or arbitrators shall be deemed to possess the powers to issue
mandatory orders and restraining orders in connection with such arbitration;
provided, however, that nothing in this Paragraph 8(d) shall be construed so as
to deny the Company the right and power to seek and obtain any remedy available
in a court for any breach or threatened breach by the Executive of any of his
covenants contained in Paragraph 5 hereof.
(e) Any notice to be given under this Employment Agreement
shall be personally delivered in writing or shall have been deemed duly given
when received after it is posted in the United States mail, postage prepaid,
registered or certified, return receipt requested, and if mailed to the Company,
shall be addressed to its principal place of business, attention: General
Counsel, and if mailed to the Executive, shall be addressed to him at his home
address last known on the records of the Company, or at such other address or
addresses as either the Company or the Executive, as addressee, may hereafter
designate in writing to the other.
(f) The failure of either party to enforce any provision of
this Employment Agreement shall not in any way be construed as a waiver of any
such provision as to any future violation thereof, or prevent that party
thereafter from enforcing each and every other provision of this Employment
Agreement. The rights granted the parties herein are cumulative and the waiver
of any single remedy shall not constitute a waiver of such party's right to
assert all other remedies available to it under the circumstances.
(g) This Employment Agreement supersedes all prior agreements
and understandings between the parties and may not be modified or terminated
orally. No modification, termination or attempted waiver shall be valid unless
in writing and signed by the party against whom the same is sought to be
enforced.
(h) This Employment Agreement shall be governed by and
construed according to the laws of the State of Ohio.
(i) This Agreement may be executed in two or more
counterparts, each of which will constitute one and the same instrument.
(j) Where necessary or appropriate to the meaning hereof, the
singular and plural shall be deemed to include each other, and the masculine,
feminine and neuter shall be deemed to include each other.
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IN WITNESS WHEREOF, the parties hereto have executed or caused
this Employment Agreement to be duly executed as of the date first above
written.
INTERNATIONAL TOTAL SERVICES, INC.
By:/s/ Xxxxxx X. Xxxxxxx
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Title: Chief Executive Officer
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And By: /s/ Xxxxx X. Xxxxxx
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Title: Secretary
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/s/ Xxxxx X. Xxxxxx
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XXXXX X. XXXXXX
