EXHIBIT 10.11
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between
Atlas Plumbing & Mechanical, L.L.C. (the "Company"), American Plumbing and
Mechanical, Inc., a Delaware corporation ("AMPAM"), and Xxxxxxx X. Xxxxxx
("Executive") is hereby entered into effective as of the date of the closing of
the transactions contemplated in the Agreement and Plan of Merger dated as of
September 16, 1999 by and among the Company, Atlas Plumbing & Mechanical, Inc.,
Atlas Plumbing & Mechanical, Inc.'s shareholders and AMPAM (the "Effective
Date").
RECITALS
The following statements are true and correct:
Whereas, as of the Effective Date, the Company, AMPAM, and the
subsidiaries of AMPAM (AMPAM and such subsidiaries, including the Company, being
collectively, the "AMPAM Companies") provide plumbing and mechanical contracting
services; and
Whereas, the Company wishes to employ Executive, and Executive
wishes to be employed by the Company, on the terms set forth herein; and
Whereas, in the course of his employment with the Company,
Executive will become familiar with and aware of information as to the Company's
and the AMPAM Companies' customers and specific manner of doing business,
including the processes, techniques and trade secrets used by the Company and
the AMPAM Companies, and future plans with respect thereto, all of which has
been and will be established and maintained at great expense to the Company and
the AMPAM Companies and which constitutes trade secrets and the valuable
goodwill of the Company and the AMPAM Companies.
Therefore, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each, it is
hereby agreed as follows:
AGREEMENTS
1. Employment and Duties.
a. The Company hereby employs Executive as the Chief Executive
Officer of the Company. As such, Executive shall have the
responsibilities, duties and authority customarily appertaining to such
office and such other duties as may be reasonably assigned to Executive
and which are consistent with such position. Executive shall report to
the Board of Directors of the Company (the "Board") unless otherwise
directed by the Board. Executive hereby accepts this employment upon
the terms and conditions herein contained and, subject to paragraph
1(c), agrees to devote substantially all of his time, attention and
efforts during normal business hours, excluding any periods of vacation
or sick leave, to promote and further the business and interests of the
Company and its affiliates.
b. Executive shall faithfully adhere to, execute and fulfill
all reasonable and lawful policies established by the Company, to the
extent such policies have been communicated to Executive in writing and
are not inconsistent with any of the terms of this Agreement
c. Executive shall not, during the term of his employment
hereunder, engage in any other business activity pursued for gain,
profit or other pecuniary advantage to the extent such activity
interferes materially with Executive's duties and responsibilities
hereunder. The foregoing limitations shall not prohibit Executive from
(i) serving on civic and charitable boards, subject to the Company's
policies and standards; (ii) making personal investments in such form
or manner as will not materially interfere with Executive's performance
of his duties under this Agreement and (iii) owning an interest in,
serving on the board of or otherwise participating in the business of
Crystal Homes, L.L.C., 9095 Xxxxx, L.L.C. and Atlas Real Estate,
L.L.C. (or their successors) or from engaging in other real estate
activities related thereto.
d. Executive shall be entitled to vacation in accordance with
the policies of the Company.
2. Compensation. For all services rendered by Executive, the Company
shall compensate Executive as follows:
a. Base Salary. The base salary (the "Base Salary") payable to
Executive during the term shall be $200,000 per year, payable in
accordance with the Company's payroll procedures for officers, but not
less frequently than twice monthly. On an annual basis such Base Salary
shall be reviewed by the Board of Directors of AMPAM (the "AMPAM
Board"), and may be increased or decreased at its discretion in light
of the Executive's position, responsibilities, performance and such
other reasonable, job related factors that the AMPAM Board deems
appropriate; provided, however, Base Salary, as adjusted, may not be
less than that amount in effect on the Effective Date.
b. Annual Bonus. In addition to the Base Salary, Executive
shall be entitled to receive an Annual Bonus for calendar year 1999 of
up to 100% of
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Executive's Base Salary should the 1999 calendar year Adjusted EBITDA
of the Company and Atlas Plumbing & Mechanical, Inc., combined, equal
or exceed $4,500,000 and which shall accrue proportionately once such
Adjusted EBITDA reaches $4,000,000. An example of the manner in which
the Annual Bonus shall accrue is attached hereto as Schedule A.
Executive shall be entitled to receive an Annual Bonus for calendar
year 2000 of up to 100% of Executive's then Base Salary should the
Company's 2000 calendar year Adjusted EBITDA equal or exceed $5,850,000
and which shall accrue proportionately once said Adjusted EBITDA
reaches $5,200,000. "Adjusted EBITDA" shall mean, as of a specified
date, the Company's (or the Company and Atlas Plumbing & Mechanical,
Inc.'s in the case of the 1999 calendar year) earnings before interest,
taxes, depreciation and amortization computed for the twelve (12) full
calendar months immediately preceding such specified date, and shall
exclude any corporate charges or credits from AMPAM (or any of its
affiliates) to the Company and exclude any effect of the Xxx Xxxx
Phantom Stock deferred compensation plan, and shall include for the
1999 calendar year addbacks as categorized in the Atlas Plumbing &
Mechanical, Inc.'s Information Memorandum dated May 1999 and shall
treat as operating leases those leases which Atlas Plumbing &
Mechanical, Inc. has in the past treated as operating leases. AMPAM
shall adopt an incentive bonus plan for subsequent years under which
Executive and other officers of the AMPAM Companies will be eligible to
receive annual bonus awards in amounts that are competitive with those
provided to similarly situated executives within the AMPAM Companies
and commensurate with the performance of the Company, as reasonably
determined by the AMPAM Board. Annual Bonuses and any other performance
or incentive bonuses shall not be unreasonably withheld, and any such
bonus based on the previous calendar year shall be paid to the
Executive in lump sum no later than April 30th of the year following
the year in which the bonus was earned.
c. Executive Perquisites and Benefits. Executive shall be
entitled to receive additional benefits and compensation from the
Company in the form and to the extent specified below:
i. Executive shall be reimbursed for all business
travel and other out-of-pocket expenses reasonably incurred by
Executive in the performance of his duties pursuant to this
Agreement and in accordance with the AMPAM's policy for
similarly situated officers. All such expenses shall be
appropriately documented in reasonable detail by Executive
upon submission of any request for reimbursement, and in a
format and manner consistent with the AMPAM's expense
reporting policy.
ii. Executive shall be entitled to participate in all
incentive compensation plans and to receive all fringe
benefits and perquisites offered by the Company or AMPAM to
any of the Company's or AMPAM Companies' similarly situated
executives, including, without limitation,
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participation in the various employee benefit plans or
programs provided to the employees of the Company or the AMPAM
Companies in general, subject to the regular eligibility
requirements with respect to each of such benefit plans or
programs, and such other benefits or perquisites as may be
approved for Executive by the Board (or AMPAM Board, as the
case may be) during the term of this Agreement, all on a basis
as favorable to Executive as may be provided or offered by the
Company to other comparable officers (in terms of position) of
the Company. Notwithstanding the above, until the Company
establishes employee welfare and pension benefit plans for its
officers, Executive shall participate in such plans of the
AMPAM Companies as may be designated.
The Company shall provide Executive with such other
perquisites as may be deemed appropriate for Executive by the
AMPAM Board during the term of this Agreement.
iii. Notwithstanding the above, the Board may offer
or provide to Executive, or to any other officer or executive
of the Company, AMPAM, or any AMPAM Company, special
compensation, benefits, and/or perquisites, in order to
attract or retain that executive or officer where the Board
determines, in its discretion, that the offer or provision of
such special compensation, benefits, and/or perquisites are in
the best interests of AMPAM or any AMPAM Company.
3. Non-Competition Agreement.
a. Executive acknowledges that as a consequence of his
employment with the Company, he will be furnished or have access to
Confidential Information (as defined below). Executive further
recognizes that the Company's and AMPAM's willingness to enter into
this Agreement is based in material part on Executive's agreement to
the provisions of this paragraph 3 and that Executive's breach of the
provisions of this paragraph 3 could materially damage the Company and
AMPAM. Subject to the further provisions of this Agreement (including
but not limited to paragraph 4(d) below), Executive will not during the
term of his employment with any of the AMPAM Companies and for a period
of two years (subject to the further provisions of this Agreement)
immediately following the termination of such employment for any
reason, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, company, partnership, corporation or
business of whatever nature:
i. engage, as an officer, director, shareholder,
owner, partner, joint venturer, or in a managerial capacity,
whether as an employee, independent contractor, consultant or
advisor, or as a sales representative, whether paid or unpaid,
in any plumbing, piping, mechanical, heating, ventilation or
air-conditioning contracting, installation or services
business
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directly related thereto (such business and operations
referred to herein as the "Plumbing and Mechanical Business"),
in direct competition with any AMPAM Company within 100 miles
of where any AMPAM Company conducts business including any
territory serviced by an AMPAM Company during the term of
Executive's employment (the "Territory");
ii. call upon any person who is, at that time, an
employee of any AMPAM Company for the purpose or with the
intent of enticing such employee away from or out of the
employ of the AMPAM Company;
iii. call upon any person or entity which is, at that
time, or which has been, within one year prior to that time, a
customer of an AMPAM Company within the Territory for the
purpose of soliciting customers, orders or contracts for any
Plumbing and Mechanical Business within the Territory;
iv. call upon any prospective acquisition candidate,
on Executive's own behalf or on behalf of any competitor,
which candidate was, to Executive's knowledge after due
inquiry, either called upon by an AMPAM Company or for which
an AMPAM Company made an acquisition analysis, for the purpose
of acquiring such entity;
v. disclose customers, whether in existence or
proposed, of the AMPAM Companies to any person, firm,
partnership, corporation or business for any reason or purpose
whatsoever except to the extent that the AMPAM Companies has
in the past disclosed such information to the public for valid
business reasons; or
vi. testify as an expert witness in plumbing and
mechanical services matters for a party adverse to an AMPAM
Company in litigation; provided that nothing contained in this
paragraph 3(a)(vi) shall interfere with Executive's duty to
testify as a witness if required by law.
Notwithstanding the above, the foregoing
covenant shall not be deemed to prohibit Executive from (i)
acquiring as an investment not more than 1% of the capital
stock of a company engaged in the Plumbing and Mechanical
Business, whose stock is traded on a national securities
exchange, the NASDAQ Stock Market or on an over-the-counter or
similar market, (ii) acquiring as an investment not more than
1% of the capital stock of a business involved in the Plumbing
and Mechanical Business whose stock is not publicly traded if
the Board consents to such acquisition or (iii) owning an
interest in, serving on the board of or otherwise
participating in the business of Crystal Homes, L.L.C., 9095
Xxxxx, L.L.C. and Atlas Real Estate, L.L.C. (or their
successors) or from engaging in other real estate activities
related thereto. Any ownership interest in any business
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which is in competition with AMPAM shall immediately be
disclosed to the Board by Executive.
b. Because of the difficulty of measuring economic losses to
the AMPAM Companies as a result of a breach of the foregoing covenant,
and because of the immediate and irreparable damage that could be
caused to one or more of the AMPAM Companies for which they would have
no other adequate remedy, Executive agrees that the foregoing covenant
may be enforced by any AMPAM Company, in the event of breach by him, by
injunctions, restraining orders, and orders of specific performance
issued by a court of competent jurisdiction. Executive further agrees
to waive any requirement that AMPAM Companies secure or post any bond
in connection with such remedies.
c. It is agreed by the parties that the foregoing covenants in
this paragraph 3 impose a reasonable restraint on Executive in light of
the activities and business of the AMPAM Companies on the date of the
execution of this Agreement and the current plans of the AMPAM
Companies; but it is also the intent of the Company and Executive that,
subject to paragraph 3(d) hereof, such covenants be construed and
enforced in accordance with the changing activities, business and
locations of the AMPAM Companies throughout the term of this covenant
whether before or after the date of termination of the employment of
Executive, unless the Executive was conducting such new business prior
to any AMPAM Company conducting such new business. For example, if,
during the term of Executive's employment, an AMPAM Company engages in
new and different activities, enters a new business or establishes new
locations for its current or new activities or business in addition to
or other than the activities or business enumerated under the Recitals
above or the locations currently established therefor, then, subject
to paragraph 3d. hereof, through the term of this covenant Executive
will be precluded from soliciting the customers or employees of such
new activities or business or from such new location and from directly
competing with such new business activities, or locations within 100
miles of where such new activities, business or locations are
conducted, unless Executive was conducting such new activities or
business prior to any AMPAM Company conducting such new activities or
business.
d. It is further agreed by the parties hereto that, in the
event that Executive shall cease to be employed hereunder and shall
enter into a business or pursue other activities not in competition
with the Plumbing and Mechanical Business of the AMPAM Companies or
related activities or business in locations the operation of which,
under such circumstances, does not violate clause (a)(i) of this
paragraph 3, and in any event such new business, activities or location
are not in violation of this paragraph 3 or of Executive's obligations
under this paragraph 3, if any, Executive shall not be chargeable with
a violation of this paragraph 3 if the AMPAM Companies shall at any
time after the termination of Executive's employment enter the same,
similar or a competitive (i) business, (ii) course of activities or
(iii) location, as applicable.
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e. The covenants in this paragraph 3 are severable and
separate, and the unenforceability of any specific covenant shall not
affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the
intention of the parties that such restrictions be enforced to the
fullest extent which the court deems reasonable, and the Agreement
shall thereby be reformed.
f. All of the covenants in this paragraph 3 shall be construed
as an agreement independent of any other provision in this Agreement
(except for paragraph 4(d)), and the existence of any claim or cause of
action of Executive against an AMPAM Company (except for paragraph
4(d)), whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company of such
covenants. It is specifically agreed that the period of two years
(subject to the further provisions of this Agreement) following
termination of employment stated at the beginning of this paragraph 3,
during which the agreements and covenants of Executive made in this
paragraph 3 shall be effective, shall be computed by excluding from
such computation any time during which Executive is in violation of any
provision of this paragraph 3.
g. The Company and the Executive hereby agree that this
covenant is a material and substantial part of this transaction.
4. Term; Termination; Right on Termination. The term of this Agreement
shall begin on the Effective Date and continue for five years (the "Initial
Term"), unless terminated sooner as herein provided; however, beginning on the
fifth anniversary of the Effective Date and on each anniversary thereafter the
term shall automatically continue for one year on the same terms and conditions
contained herein in effect as of the time of renewal (the "Extended Term")
unless not less than six months prior to any such anniversary either party shall
give written notice to the other party that the term shall not be so extended;
provided further, however, upon a Change in Control (as defined in paragraph
11(e)) during the Initial Term or any Extended Term the term of this Agreement
shall automatically continue following such Change in Control for a period equal
to the then remaining term or two years, whichever period is longer (such longer
period being an Extended Term), unless earlier terminated as provided in
paragraph 11. This Agreement and Executive's employment may be terminated in any
one of the following ways:
a. Death. The death of Executive shall immediately terminate
this Agreement with no severance compensation due Executive's estate;
provided, however, that the Executive shall be entitled to receive all
compensation and benefits specified in the Agreement which shall have
accrued prior to the date of such termination, and provided that for
the 90-day period following Executive's
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death, the Company, at its sole cost and expense, shall continue to
provide Executive's then qualified beneficiaries with coverage under
the Company's group health plan in which Executive participated
immediately prior to Executive's death or a successor plan thereto,
subject to the terms of such plan as it may be amended ("Company Health
Plan"). Thereafter, the Company shall provide continuation of coverage
elections to such qualified beneficiaries as are required by law.
b. Disability. If Executive becomes entitled to and receives
benefits under an insured long term disability plan of an AMPAM Company
(incurs a "Disability"), the Company, with the approval of a majority
of the members of the Board, may terminate this Agreement and
Executive's employment hereunder. In the event this Agreement is
terminated as a result of Executive's Disability, Executive shall have
no right to any severance compensation; provided, however, (i) for 12
months thereafter or until Executive's death, if earlier, the Company
shall continue to pay Executive an amount equal to Executive's monthly
Base Salary (computed by reference to Executive's Annual Base Salary at
the time of his termination) reduced by any cash benefits payable
during such time to Executive under such long term disability plan and
(ii) the Company, at its sole cost and expense, shall continue the
coverage of Executive and his qualified beneficiaries (for as long as
they are qualified beneficiaries thereunder) under the Company Health
Plan for as long as Executive continues to qualify for and receive
benefits under such long term disability plan, but not to exceed five
years. Thereafter, the Company shall provide continuation of coverage
elections to Executive and his qualified beneficiaries as required by
law.
c. Cause. The Company may terminate this Agreement and
Executive's employment 30 days after written notice to Executive for
"Cause", which shall be: (i) Executive's willful and material breach of
this Agreement (which remains uncured at the end of such 30-day
period); (ii) Executive's gross negligence in the performance or
intentional nonperformance (in either case continuing for 30 days after
receipt of written notice of need to cure) of any of Executive's
material duties and responsibilities hereunder; (iii) Executive's
dishonesty or fraud with respect to the business, reputation or affairs
of an AMPAM Company which materially and adversely affects an AMPAM
Company (monetarily or otherwise); or (iv) Executive's conviction of a
felony crime involving moral turpitude. Any termination for Cause must
be approved by a majority of the eligible members of the Board (For
this purpose, any member of the Board reasonably believed by a majority
of the Board to be at fault in the events leading the Board to consider
terminating Executive for Cause shall also be excluded, including
Executive if Executive is a member of the Board.). For purposes hereof
no act, or failure to act, on Executive's part shall be deemed
"willful" unless found by the Board, in its discretion, to be done, or
omitted to be done, by Executive not in good faith and without
reasonable belief that Executive's action or omission was in the best
interest of the Company. Notwithstanding the foregoing, Executive shall
not be deemed to have been
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terminated for Cause unless and until there shall have been delivered
to Executive a copy of a resolution duly adopted by the Board, finding
that, in the good faith discretion of the Board, Executive was guilty
of conduct set forth above and specifying the particulars thereof in
detail. In the event of a termination for Cause, Executive shall have
no right to any severance compensation.
d. Without Cause or For Good Reason. Executive may only be
terminated without Cause and other than due to Disability by the
Company during either the Initial Term or Extended Term if such
termination is approved by a majority of the members of the Board.
Should Executive be terminated by the Company without Cause and other
than due to Disability or should Executive terminate with Good Reason
during the Initial Term, Executive shall receive from the Company, in
addition to any accrued but unpaid salary, bonus, and benefits, in a
lump sum payment due on the effective date of termination, an amount
equivalent to the Annual Base Salary at the rate then in effect for (i)
whatever time period is remaining under the Initial Term (but in no
event more than two years) or (ii) for one year, whichever amount is
greater. Should Executive be terminated by the Company without Cause
and other than due to Disability or should Executive terminate with
Good Reason during the Extended Term, Executive shall receive from the
Company, in a lump sum payment due on the effective date of
termination, an amount equivalent to the Base Salary at the rate then
in effect for one year. Further, any termination by the Company without
Cause or due to Disability or by Executive for Good Reason whether
during the Initial Term or any Extended Term shall (except as otherwise
provided in paragraph 4(g) below) operate to shorten the period set
forth in paragraph 3(a) and during which the terms of paragraph 3 apply
to one year from the date of termination of employment. If Executive
resigns or otherwise terminates his employment without Good Reason,
rather than the Company terminating his employment pursuant to this
paragraph 4(d), Executive shall receive no severance compensation.
e. Executive shall have "Good Reason" to terminate his
employment hereunder as a consequence of any of the following events,
unless such event is agreed to in writing by Executive: (i) a material
reduction in his authority, title, responsibilities or duties; (ii)
Executive's Base Annual Salary is reduced below that in effect on the
Effective Date; (iii) the relocation of the Company's principal
executive offices or Executive's principal office to a location outside
northern Virginia; (iv) the assignment to Executive of any duties or
responsibilities which are materially inconsistent with Executive's
title, position or responsibilities as in effect immediately prior to
such assignment; (v) failure to pay in a timely manner any compensation
due to Executive; or (vi) any material breach by the Company of any
provision of this Agreement. Provided, however, Good Reason shall exist
with respect to a matter only if such matter is not corrected by the
Company or AMPAM within 30 days of its receipt of written notice of
such matter from Executive, and in no event shall a termination by
Executive occurring more than 60 days following the date of an event
described above be a termination for Good Reason due to such event.
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f. Resignation Without Good Reason. Executive may, without
Good Reason (as defined in paragraph 4(e)), terminate this Agreement
and Executive's employment, effective 30 days after written notice is
provided to the Company. If Executive resigns or otherwise terminates
his employment without Good Reason, rather than the Company terminating
his employment pursuant to paragraph 4(d), Executive shall receive all
accrued but unpaid salary, bonus and benefits. Under no circumstance
where Executive terminates Executive's employment without Good Reason,
shall Executive be entitled to any pro rata share or payment of any
bonus or other compensation which has not yet been determined or which
requires employment at the time of the determination or award for
eligibility.
g. If termination of Executive's employment arises out of the
Company's failure to pay Executive on a timely basis the amounts to
which he is entitled under this Agreement or as a result of any other
material breach of this Agreement by the Company, as determined by a
court of competent jurisdiction or pursuant to the provisions of
paragraph 18 below, the Company shall pay all amounts and damages to
which Executive may be entitled as a result of such breach, including
interest thereon and all reasonable legal fees and expenses and other
costs incurred by Executive to enforce his rights hereunder. Further,
none of the provisions of paragraph 3 shall apply in the event this
Agreement is terminated as a result of a breach by the Company.
h. Upon termination of this Agreement for any reason provided
above, in addition to the above payments, if any, Executive shall be
entitled to receive all compensation earned, accrued vacation and
reimbursements due through the effective date of termination, paid to
Executive in a lump sum on the effective date of termination. In
addition, a termination of this Agreement shall not alter or impair any
of Executive's vested rights or benefits, if any, under any (i)
employee benefit plan of the AMPAM Companies or (ii) deferred
compensation plan, including, without limitation, any stock option
plan, of the AMPAM Companies. All other rights and obligations of the
Company and Executive under this Agreement shall cease as of the
effective date of termination, except that Executive's obligations
under paragraphs 3 (if any), 5, 6, 7, and 8 herein and the Company's
obligations under paragraphs 11 and 14 shall survive such termination
in accordance with their terms, unless or except as expressly provided
otherwise in this Agreement.
5. Return of Company Property. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Executive by or on behalf of any AMPAM Companies or
their representatives, vendors or customers which pertain to the business of any
AMPAM Companies shall be and remain the property of the AMPAM Company, as the
case may be, and be subject at all times to their discretion and control.
Likewise, all
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correspondence, reports, records, charts, advertising materials and other
similar data pertaining to the business, activities or future plans of the AMPAM
Company which is collected by Executive shall be delivered promptly to the
Company without request by it upon termination of Executive's employment and
Executive shall not retain any copies of the same.
6. Intellectual Property. Executive shall disclose promptly to the
Company any and all conceptions, ideas, designs, plans, know-how, processes,
improvements and other discoveries, whether patentable or not, which (i) are
conceived or made by Executive, solely or jointly with another, during the
period of employment or thereafter, (ii) are directly related to the Plumbing
and Mechanical Business or activities of an AMPAM Company, and (iii) Executive
conceives as a result of his employment by the Company, including any
predecessor (collectively, the "Intellectual Property"). Executive hereby
assigns and agrees to assign all his interests therein to the Company or its
nominee. Whenever requested to do so by the Company, Executive shall execute any
and all applications, assignments or other instruments that the Company shall
deem necessary to apply for and obtain Letters Patent of the United States or
any foreign country or to otherwise protect the Company's interest therein.
Executive must also render to the Company, at the Company's expense, assistance
in the perfection, enforcement and defense of any Intellectual Property.
7. Trade Secrets. Executive agrees that he will not during or after the
term of this Agreement disclose the specific terms of an AMPAM Company's
relationships or agreements with its respective vendors or customers or any
other trade secret of an AMPAM Company, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever, except as required by law and prior to any such disclosure Executive
shall give the Company prior written notice thereof and the opportunity to
contest such disclosure.
8. Confidentiality.
a. Executive acknowledges and agrees that all Confidential
Information (as defined below) of the AMPAM Companies is confidential
and a valuable, special and unique asset of the AMPAM Companies that
gives the AMPAM Companies an advantage over its actual and potential,
current and future competitors. Executive further acknowledges and
agrees that Executive owes the Company and the AMPAM Companies a
fiduciary duty to preserve and protect all Confidential Information
from unauthorized disclosure or unauthorized use, that certain
Confidential Information constitutes "trade secrets" under applicable
laws and, that unauthorized disclosure or unauthorized use of the
Confidential Information would irreparably injure the Company and the
AMPAM Companies.
b. Both during the term of Executive's employment and after
the termination of Executive's employment for any reason (including
wrongful termination), Executive shall hold all Confidential
Information in strict confidence,
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and shall not use any Confidential Information except for the benefit
of the AMPAM Companies, in accordance with the duties assigned to
Executive. Executive shall not at any time (either during or after the
term of Executive's employment), disclose any Confidential Information
to any person or entity (except other employees of the AMPAM Companies
who have a need to know the information in connection with the
performance of their employment duties, and who have been informed of
the confidential nature of the confidential information and have agreed
to keep it confidential), or copy, reproduce, modify, transmit,
including electronic transmission, decompile or reverse engineer any
Confidential Information, or remove any Confidential Information from
the premises of any AMPAM Company, without the prior written consent of
the Board, or permit any other person to do so. Executive shall take
reasonable precautions to protect the physical security of all
documents and other material containing Confidential Information
(regardless of the medium on which the Confidential Information is
stored). This Agreement applies to all Confidential Information,
whether now known or later to become known to Executive.
c. Upon the termination of Executive's employment with the
Company for any reason, and upon written request of the Company at any
other time, Executive shall promptly surrender and deliver to the
Company all documents and other written material of any nature
containing or pertaining to any Confidential Information and shall not
retain any such document or other material. Within ten (10) days of a
written request by the Company, Executive shall certify to the Company
in writing that all such materials have been returned.
d. As used in this Agreement the term "Confidential
Information" shall mean any information or material known to or used by
or for an AMPAM Company (whether or not owned or developed by the AMPAM
Company and whether or not developed by Executive) that is not
generally known to persons in the Plumbing and Mechanical Business,
except as provided in this paragraph. Confidential Information
includes, but is not limited to, the following: all trade secrets of
the AMPAM Companies; all information that an AMPAM Company has marked
as confidential or has otherwise described to Executive (either in
writing or orally) as confidential; all nonpublic information
concerning the AMPAM Company's products, services, prospective products
or services, research, product designs, prices, discounts, costs,
marketing plans, marketing techniques, market studies, test data,
customers, customer lists and records, suppliers and contracts; all
AMPAM Company business records and plans; all AMPAM Company personnel
files; all financial information of or concerning the AMPAM Companies;
all information relating to operating system software, application
software, software and system methodology, hardware platforms,
technical information, inventions, computer programs and listings,
source codes, object codes, copyrights and other intellectual property;
all technical specifications; any proprietary information belonging to
an AMPAM Company; all computer hardware or software manuals; all
training or instruction manuals; and all data and all computer system
passwords
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and user codes. For purposes hereof, Confidential Information shall not
include such information (i) which becomes or is already known to the
public or some other party through no fault of Executive; or (ii) the
disclosure of which (x) is required by law (including regulations and
rulings) or the order of any competent governmental authority or (y)
Executive reasonably believes is required in connection with the
defense of a lawsuit against Executive, provided that in either case,
prior to disclosing any information, Executive shall give prior written
notice thereof to the Company and provide the Company with the
opportunity to contest such disclosure.
9. No Prior Agreements. Executive hereby represents and warrants to the
Company that the execution of this Agreement by Executive and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement, including any non-competition agreement invention or
secrecy agreement, with a former employer, client or any other person or entity.
Further, Executive agrees to indemnify the Company and the AMPAM Companies for
any loss, including, but not limited to, reasonable attorneys' fees and
expenses, the Company and any AMPAM Company may incur based upon or arising out
of Executive's breach of this paragraph 9.
10. Assignment; Binding Effect. Executive understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Executive agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement.
Subject to the preceding two sentences and the express provisions of paragraph
12 below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns. The Company and AMPAM will require any
successor (whether direct or indirect by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and assets of the Company
or AMPAM to expressly assume and agree in writing reasonably satisfactory to
Executive to perform this Agreement in the same manner and to the same extent
that the Company or AMPAM would be required to perform it if no such succession
had taken place. Failure of the Company or AMPAM to obtain such written
agreement prior to the effectiveness of any such succession shall be a material
breach of this Agreement.
11. Change in Control.
a. Executive understands and acknowledges that the Company may
be merged or consolidated with or into another entity and that such
entity shall automatically succeed to the rights and obligations of the
Company hereunder or that the Company may undergo a Change in Control
(as defined below). In the event a Change in Control is initiated or
occurs during the Initial Term or an Extended Term, then the provisions
of this paragraph 11 shall be applicable.
13
b. In the event of a Change in Control wherein AMPAM and
Executive have not received written notice at least ten business days
prior to the date of the event giving rise to the Change in Control
from the successor to all or a substantial portion of the AMPAM's
business and/or assets that such successor is willing as of the closing
to assume and agrees to perform, or continue to cause the Company to
perform, the Company's obligations under this Agreement in the same
manner and to the same extent that the Company is hereby required to
perform, then Executive may, at Executive's sole discretion, elect to
terminate Executive's employment on the effective date of such Change
in Control by providing written notice to the AMPAM Board at least five
business days prior to the closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of
paragraph 4(d) will apply as though the Company had terminated
Executive without Cause; however, the amount of the lump sum severance
payment due Executive shall be triple the amount calculated under the
terms of paragraph 4(d), but shall in no event exceed six times
Executive's annual base salary.
c. In any Change in Control situation, Executive may, at
Executive's sole discretion, elect to terminate Executive's employment
upon the effective date of such Change in Control by providing written
notice to the AMPAM Board at least five business days prior to the
closing of the transaction giving rise to the Change in Control. In
such case, the applicable provisions of paragraph 4(d) will apply as
though the Company had terminated Executive without Cause; however, the
amount of the lump sum severance payment due Executive shall be double
the amount calculated under the terms of paragraph 4(d), but shall in
no event exceed four times Executive's annual base salary.
d. If, on or within two years following the effective date of
a Change in Control the Company terminates Executive's employment other
than for Cause or Disability or Executive terminates his employment for
Good Reason, or if Executive's employment with the Company is
terminated by the Company within three months before the effective date
of a Change in Control and it is reasonably demonstrated that such
termination (i) was at the request of a third party that has taken
steps reasonably calculated to effect a Change in Control, or (ii)
otherwise arose in connection with or anticipation of a Change in
Control, then Executive shall receive from Company, in a lump sum
payment due on the effective date of termination, the greater of (i)
the equivalent of three times Executive's Base Annual Salary at the
rate then in effect or (ii) the Base Salary at the rate then in effect
for whatever period is then remaining on the Initial Term, if any,
which payment shall be in lieu of any amounts otherwise payable
pursuant to paragraph 4(d).
14
e. A "Change in Control" shall be deemed to have occurred if:
i. any person, entity or group (as such terms are
used in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Act")), other than persons and
entities which owned any capital stock of AMPAM at the closing
date of the transactions contemplated in the Agreement and
Plan of Merger, the AMPAM Companies or an employee benefit
plan of the AMPAM Companies, acquires, directly or indirectly,
the beneficial ownership (as defined in Section 13(d) of the
Act) of any voting security of AMPAM and immediately after
such acquisition such person, entity or group is, directly or
indirectly, the beneficial owner of voting securities
representing 50% or more of the total voting power of all of
the then outstanding voting securities of AMPAM entitled to
vote generally in the election of directors;
ii. upon the first purchase of the AMPAM's common
stock pursuant to a tender or exchange offer (other than a
tender or exchange offer made by the Company);
iii. the stockholders of AMPAM shall approve a
merger, consolidation, recapitalization or reorganization of
AMPAM, or a reverse stock split of outstanding voting
securities, or consummation of any such transaction if
stockholder approval is not obtained, other than any such
transaction which would result in at least 75% of the total
voting power represented by the voting securities of the
surviving entity outstanding immediately after such
transaction being beneficially owned by the holders of all of
the outstanding voting securities of AMPAM immediately prior
to the transactions with the voting power of each such
continuing holder relative to other such continuing holders
not substantially altered in the transaction;
iv. the stockholders of AMPAM shall approve a plan
of complete liquidation or dissolution of AMPAM or an
agreement for the sale or disposition by AMPAM of all or
substantially all of its assets; or
v. if, at any time during any period of two
consecutive years, individuals who at the beginning of such
period constitute the AMPAM Board cease for any reason to
constitute at least a majority thereof, unless the election or
nomination for the election by AMPAM's stockholders of each
new director was approved a vote of at least two-thirds of the
directors then still in office who were directors at the
beginning of the period.
f. Notwithstanding anything in this Agreement to the contrary,
a termination pursuant to paragraph 11(b), (c), or (d) shall operate to
automatically waive in full the noncompetition restrictions imposed on
Executive pursuant to paragraph 3.
15
g. If it shall be determined that any payment made or benefit
provided to Executive in connection with a change in control (as
defined in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), or any successor thereto) of AMPAM occurring
after the Effective Date and on or before the termination of this
Agreement whether or not made or provided pursuant to this Agreement
is subject to the excise tax imposed by Section 4999 of the Code,
AMPAM shall pay Executive an amount of cash (the "Additional Amount")
such that the net amount received by Executive after paying all
applicable taxes on such Additional Amount and any penalties, interest
and other reasonable costs incurred as a result of such excise tax or
additional payment, shall be equal to the amount that Executive would
have received if Section 4999 were not applicable.
12. No Mitigation or Offset. Executive shall not be required to
mitigate the amount of any Company payment provided for in this Agreement by
seeking other employment or otherwise. The amount of any payment required to be
paid to Executive by the Company pursuant to this Agreement shall not be reduced
by any amounts that are owed to the Company by Executive, provided that
Executive (i) executes and delivers to the Company a promissory note evidencing
a promise by Executive to pay the full amount of any amounts owed to the Company
within 12 months from the date of Executive's termination of employment and (ii)
provides such collateral reasonably satisfactory to the Company to ensure
payment of such promissory note.
13. Release. Notwithstanding anything in this Agreement to the
contrary, Executive shall not be entitled to receive any severance payments
pursuant to paragraphs 4 or 11 of this Agreement unless Executive has executed
(and not revoked) a general release of all claims, known or unknown, Executive
may have against the Company, AMPAM, its subsidiaries, their directors,
officers, and employees, in a form of such release reasonably acceptable to the
Company and AMPAM.
14. Indemnification. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
derivative, subrogation, criminal, administrative or investigative (other than
an action by the Company against Executive and a derivative action shall not be
considered an action by the Company), by reason of the fact that he is or was
performing services for the Company or any AMPAM Company or any present or
future subsidiary thereof, or as an executive officer of an AMPAM Company prior
to the date of this Agreement, then the Company shall indemnify, defend and hold
harmless the Executive against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, as actually and reasonably
incurred by Executive in connection therewith. In the event that both Executive
and the Company are made a party to the same third-party action, complaint, suit
or proceeding, the Company agrees to engage competent legal representation, and
Executive agrees to use the same representation, provided that if counsel
selected by the Company shall have a conflict of interest that prevents such
counsel from representing
16
Executive, Executive may engage separate counsel and the Company shall pay as
incurred all reasonable attorneys' fees and reasonable expenses of such separate
counsel, provided further that Executive may at any time, at Executive's sole
expense, hire separate counsel to represent Executive in such matter. Further,
while Executive is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Executive cannot be held liable to
the Company for errors or omissions made in good faith where Executive has not
exhibited gross, willful and wanton negligence and misconduct nor performed
criminal and fraudulent acts which materially damage the business of the
Company. The Company shall indemnify and defend Executive against and hold
Executive harmless from any costs, expenses (including reasonable attorneys'
fees as provided in this paragraph), liabilities, losses and exposures for
Executive's services as an employee, officer and director of the Company (or any
AMPAM Company or any successor) to the maximum extent permitted under applicable
law. The indemnification required by this paragraph 14 shall be made by the
Company by periodic payments promptly as and when bills are received or
liabilities are incurred. The provisions of this paragraph shall survive the
termination of this Agreement.
15. Complete Agreement. This Agreement supersedes, and replaces in
full, all representations, understandings and agreements (oral or written)
between Executive and the Company or any AMPAM Company or any of their officers,
directors or representatives existing as of the Effective Date and covering the
same subject matter as this Agreement but excluding the Agreement and Plan of
Merger dated as of September [ ], 1999 by and among the Company, Atlas Plumbing
& Mechanical, Inc., Atlas Plumbing & Mechanical, Inc.'s shareholders and AMPAM,
which shall not be affected by this Agreement. This written Agreement is the
final, complete and exclusive statement and expression of the agreement between
the Company, AMPAM, and Executive and of all the terms of this Agreement, and it
cannot be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
modified after the Effective Date except by a further writing signed by a duly
authorized officer of the Company and Executive, and no term of this Agreement
may be waived except by writing signed by the party waiving the benefit of such
term. Without limiting the generality of the foregoing, either party's failure
to insist on strict compliance with this Agreement shall not be deemed a waiver
thereof.
16. Notice Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: American Plumbing and Mechanical, Inc.
0000 Xxxxx Xxxxx Xxxx.
Xxxxx Xxxx, Xxxxx 00000
Attn: Xx. Xxxx Xxxxxx
To Executive: Xx. Xxxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxx Xxxxxxx, XX 00000
17
Notice shall be deemed given and effective on the earlier of three days after
the deposit in the U.S. mail of a writing addressed as above and sent first
class mail, certified, return receipt requested, or when actually received.
Either party may change the address for notice by notifying the other party of
such change in accordance with this paragraph 16.
17. Severability; Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof
18. Dispute Resolutions. Except with respect to injunctive relief as
provided in paragraph 3(b), neither party shall institute a proceeding in any
court or administrative agency to resolve a dispute between the parties before
that party has sought to resolve the dispute through direct negotiation with the
other party. If the dispute is not resolved within two weeks after a demand for
direct negotiation, the parties shall attempt to resolve the dispute through
mediation. If the parties do not promptly agree on a mediator, the parties shall
request the Association of Attorney Mediators in Xxxxxx County, Texas (or if the
Company's principal offices are not in Xxxxxx County, a similar organization in
the county in which the Company's principal offices are located) to appoint a
mediator certified by the Supreme Court of Texas. If the mediator is unable to
facilitate a settlement of the dispute within a reasonable period of time, as
determined by the mediator, the mediator shall issue a written statement to the
parties to that effect and any unresolved dispute or controversy arising under
or in connection with this Agreement shall be settled exclusively by
arbitration, conducted before a single arbitrator in the city in which AMPAM has
its principal offices, in accordance with the Commercial Arbitration Rules of
the American Arbitration Association then in effect. The arbitrator shall have
the authority to order back-pay, severance compensation, vesting of options (or
cash compensation in lieu of vesting of options), reimbursement of costs and
expenses, including those incurred to enforce this Agreement including
reasonable attorneys' fees and interest thereon in the event the arbitrator
determines that Executive was involuntarily terminated by the Company without
Disability or Cause, as defined in paragraphs 4(b) and 4(c), respectively, or
that the Company has otherwise materially breached this Agreement. A decision by
the arbitrator shall be final and binding. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. The costs and expenses,
including reasonable attorneys' fees, of the substantially prevailing party in
any dispute arising under this Agreement will be promptly paid by the other
party.
19. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of Texas without regard to its conflicts of
law provisions.
20. AMPAM Guaranty. AMPAM hereby irrevocably and unconditionally
18
guarantees to Executive the payment of all amounts and the performance of all
other obligations of the Company in accordance with the terms of this Agreement.
21. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective for all purposes as of the Effective Date.
Date: September 30, 1999
AMERICAN PLUMBING AND MECHANICAL,
INC.
By /s/ XXXXX X. XXXXXXX
-------------------------------------------
Xxxxx X. Xxxxxxx
Chief Financial Officer
Date: , 1999
-------------
ATLAS PLUMBING & MECHANICAL, L.L.C.
By /s/ XXXXX X. XXXXXXX
-------------------------------------------
Xxxxx X. Xxxxxxx
Chief Financial Officer
Date: September 30, 1999
EXECUTIVE
/s/ XXXXXXX X. XXXXXX
---------------------------------------------
Xxxxxxx X. Xxxxxx
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SCHEDULE A -- EXAMPLE OF THE MANNER IN WHICH THE ANNUAL BONUS ACCRUES
Actual combined Adjusted EBITDA of the
Company and Atlas Plumbing & Mechanical,
Inc. for 1999: $4,250,000
Target combined Adjusted EBITDA of the
Company and Atlas Plumbing & Mechanical,
Inc. for 1999: $4,500,000
PERCENTAGE OF TARGET ACHIEVED(1): 50%
SHAREHOLDER MAXIMUM BONUS ACTUAL BONUS
----------- ------------- ------------
Xxxxxxx X. Xxxxxx $200,000 $100,000
(1) The Annual Bonus accrues proportionately once the Adjusted EBITDA reaches
$4,000,000 up to $4,500,000.
20
