EMPLOYMENT AGREEMENT RE: XXXXXXXX
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into by and
between Xxxxxxx X. Xxxxxxxx (herein referred to as the "Executive"), Datatek
Consulting Group Corporation, a Texas corporation (herein referred to as the
"Company"), and Diversified Corporate Resources, Inc., a Texas corporation
("DCRI").
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; and
WHEREAS, this Agreement is being entered into in connection with the
Company acquiring all, or substantially all, of the assets of Datatek
Corporation, a Delaware corporation ("Seller"), pursuant to that certain
Purchase Agreement (herein referred to as the "Purchase Agreement") which is
effective as of March 6, 2000, between the Executive, the Company, Seller,
Xxxxx X. Xxxxxx, and DCRI; and
WHEREAS, Seller is engaged in the staff recruiting business in
Arizona and elsewhere; and
WHEREAS, the business activities heretofore operated by Seller will
hereafter be operated by a division or subsidiary of the Company (such future
business activities are herein referred to as the "Business"); and
WHEREAS, the purpose of this document is to set forth the terms and
conditions of Executive's employment transactions contemplated by the
Purchase Agreement.
1
NOW THEREFORE, for and in consideration of the mutual advantages and
benefits accruing respectively to the parties hereto, the mutual promises
hereinafter made and the acts to be performed by the respective parties
hereto, the Company and the Executive do hereby contract and agree as follows:
1. TRUTHFUL RECITALS. The foregoing recitals are true and correct in
all material respects, and are incorporated as part of the covenants of this
Agreement. Executive and Company ratify, stipulate and agree to, and warrant
the truth of all that is contained in the recitals.
2. EMPLOYMENT. The Company hereby employs the Executive as Executive
Vice President of the division or subsidiary of the Company which will
operate the Business in the future, and the Executive hereby accepts such
employment, to perform the duties and render services as herein set forth.
Such employment shall continue during the term of this Agreement.
3. TERM. Except in the case of earlier termination as herein
specifically provided, the Executive's employment with the Company pursuant
to this Agreement shall be for the period of time beginning on March 6, 2000,
and ending December 31, 2003 (the "Initial Termination Date"). The parties
hereto acknowledge that (a) prior to the Initial Termination Date, this
Agreement shall continue in effect until the earlier of the Initial
Termination Date, or the date this Agreement is terminated prior to the
Initial Termination Date for some reason permitted hereunder, and (b) the
Initial Termination Date shall be automatically extended for one (1) year
until December 31, 2004 unless one of the parties shall elect not to extend
the
2
term of this Agreement beyond December 31, 2003 by giving written notice to
the other party at least ninety (90) days prior to December 31, 2003.
4. COMPENSATION. As compensation for the services of Executive
during the initial term hereof, the Company shall pay the Executive a base
salary as below provided plus such additional compensation as herein set
forth. The compensation to be paid to the Executive shall be (a) a base
salary equal to one percent (1%) of the revenues of the operations of the
Business (determined as herein provided) during each calendar year, or
portion thereof involved, during the term of this Agreement, plus (b) bonus
compensation equal to five percent (5%) of the net, after tax profits of the
operations of the Business (the "Net Profits" as below defined) during each
calendar year, or portion thereof involved, during the term of this
Agreement. In the event that, during the term of this Agreement, Xxxxx X.
Xxxxxx ("Xxxxxx") shall cease to be an employee of the Company for any
reason, the amount of bonus compensation to be paid to the Executive shall be
ten percent (10%) of the net profits instead of five percent (5%) of the net
profits unless and to the extent that the Executive agrees in writing to all
or some portion of the additional five percent (5%) bonus amount being paid
to the replacement(s) of Xxxxxx. For purposes hereof, (a) during the first
twelve (12) months of this Agreement, the Executive will be paid at least
$12,000.00 per month even if the calculation of base salary and bonus
compensation, as herein provided would result in some lesser amount being
payable to the Executive, (b) during the remaining months of this Agreement,
the Company shall advance to the Executive, as an advance toward the base
salary and bonus compensation payable hereunder, an amount mutually agreed
upon by the Company and the Executive as being a reasonable estimate as to
the amount payable to the Executive
3
during such month for base salary and bonus compensation; in the absence of a
mutual agreement, the amount to be paid in each calendar year shall be not
less than one-twelfth (1/12th ) of the amount actually earned by the
Executive in the form of base salary and bonus compensation during the
preceding calendar year (reasonably estimated until actually determined), (c)
the revenues of the operations of the Business shall be determined by DCRI
pursuant to the policies and procedures of the Company which are in effect at
the time (such policies and procedures shall be consistent with the policies
and procedures of the other staff recruiting operations of DCRI, shall be
reasonable, and shall not be inconsistent with general standards in the staff
recruiting industry), and pursuant to generally accepted accounting
principles consistently applied, (d) except as otherwise provided herein, the
Net Profits shall be determined by DCRI based upon industry standards
followed by DCRI, and pursuant to generally accepted accounting principles
consistently applied (based upon the assumption, for tax computation
purposes, that the Company is not part of a consolidated group but rather
that the taxes applicable to the operations of the Business will be
determined by using the federal tax rate payable by DCRI with respect to year
involved, and by using a blended state rate based upon tax rates of the
states in which the Business operates and the revenues generated by the
Business in each such state during the year involved), and adjusted pursuant
to DCRI's normal intercompany, affiliate and overhead allocations which in no
event shall exceed, as a percentage of the annual revenues of the operations
of the Business, the following percentage amounts: (i) in calendar year 2000
three percent (3%) of revenues of the Business, (ii) in calendar year 2001
four percent (4%) of revenues of the Business, and (iii) in each calendar
year subsequent to 2001, the percentage amount shall not exceed the lesser of
the (A) six
4
percent (6%) of the revenues of the Business, or (B) the standard percentage
amount of corporate overhead allocated by DCRI to its operating subsidiaries
and divisions, and (e) the Net Profits of the operations of the Business
shall be determined without any deduction for (i) amortization of the
purchase price paid or payable to Seller pursuant to the terms of the
Purchase Agreement, or (ii) the value of two (2) automobiles being
transferred to the Executive and Xxxxxx.
Notwithstanding anything herein to the contrary, it is agreed that,
during the term of this Agreement, revenues of the Business (a) shall include
all revenues attributable to the operations of the Business which have been
diverted to an affiliate of the Company without the prior written consent of
the Executive (the foregoing does not include split fees earned by an
affiliate of the Company), and (b) shall not include any revenues which are
not attributable to the operations of the Business which has been acquired
from Seller by Buyer.
The Executive's base salary and bonus compensation shall be paid in
equal semi-monthly installments (subject to reduction for such payroll and
withholding deductions as may be required by law), in the manner as herein
provided.
5. FRINGE BENEFITS. In addition to the Executive's base salary and
bonus, the Executive shall be entitled to each of the following during the
term of this Agreement (at the Company's expense unless otherwise indicated):
(a) health insurance coverage which shall provide for payment of health,
dental and related expenses incurred during the term of this Agreement with
respect to the Executive, the Executive's spouse and the Executive's
children, and which shall contain such benefits and options as shall be
generally available to other employees of the Company from time-to-time in
the future (the parties acknowledge that the
5
portion of such health insurance to be paid for by the Executive shall be
consistent with DCRI's policy for other key executives which is then
applicable), (b) the right to these fringe benefits as are hereafter
generally made available to other key employees of the Company or DCRI
(including, but not by way of limitation, disability benefits if and to the
extent available), (c) such vacation and sick leave as shall be permitted by
the Company's standard policies which are in effect from time-to-time in the
future. Notwithstanding anything herein to the contrary, the amount of paid
vacation time to which the Executive shall be entitled shall not be less than
four (4) weeks per calendar year, and (d) reimbursement for health club
expenses not to exceed $100.00 per month. Until at least January 1, 2001, the
Company shall continue to utilize Seller's health and dental insurance
coverage (provided and to the extent such coverage is available to the
Company) unless (i) the Company is able to provide comparable alternative
coverage at a cost which is less than on an overall basis, than the cost of
Seller's insurance coverage , (ii) the parties agree to the contrary in
writing, or (iii) the cost of coverage to the Executive is not greater than
the cost of coverage under Seller's existing plan.
In addition to the foregoing, during the term of this Agreement, the
Company shall reimburse the Executive for the reasonable costs actually
incurred by the Executive with respect to the monthly fee (now in the amount
of $149.00 per month plus tax) and the usage charges related to a cellular
telephone, and for the reasonable and necessary costs of travel and meal
expenses which are incurred by the Executive on behalf of the Business,
provided that such costs are incurred in compliance with the policies and
procedures of the Company related to such expenditures.
6
6. DUTIES AND SERVICES. During the term of this Agreement, the
Executive agrees to (a) use his best efforts and devote substantially all of
his time to enhancing and developing the best interests and welfare of the
Company, (b) give his best efforts and skill to advancing and promoting the
growth and success of the Company, and (c) perform such duties or render such
services as the Board of Directors of the Company may, from time to time,
reasonably confer upon or impose on the Executive. It is understood that (i)
the duties of the Executive shall be comparable to his prior duties with
Seller, and (ii) the Executive's responsibilities to perform services is
based upon the Executive being based in Phoenix, Arizona, and not being
relocated without the prior written consent of the Executive.
7. TERMINATION.
a. The Company may terminate the Executive's employment
pursuant to this Agreement at any time for "cause" as herein defined. The
term "cause" shall mean any of the following events: (i) any act or omission
held to be fraud under the laws of the States of Arizona or the United States
of America, or (ii) a finding of probable cause, or a plea of NOLO CONTENDERE
to, a felony or other crime involving moral turpitude, or (iii) the grossly
negligent performance by the Executive of the responsibilities of his
position, or (iv) the material failure by the Executive to adhere to the
policies or directives of the Company and DCRI, including those set forth in
DCRI's Employee Handbook and Company policy statement relating to trading in
DCRI's securities by the DCRI personnel (the "Xxxxxxx Xxxxxxx Policy"), or
(v) the Executive's engagement in any act of dishonesty or theft within the
scope of his employment that, in the opinion of the Board of Directors of
DCRI, is detrimental to the best interests of the Company, or (vi) the
Executive's excessive use and/or distribution of alcohol or illegal
7
substances during business hours and at the Company's premises, or (vii) the
breach of any of the substantive terms of this Agreement, or (viii) the
failure of the Company to meet those budget and performance goals, for the
operations for which the Executive is responsible, which are established for
each calendar year during the term of this Agreement and which are mutually
agreed upon by the Company and the Executive. In the absence of a mutually
agreed upon budget and performance goals, the budget and performance goals
shall not be less than actual performance of Seller in 1999. The
determination by the Board of Directors of DCRI, as to the matters covered by
(iii), (iv), (v) or (viii) above shall be conclusive subject to the right of
the Executive to arbitrate any disputes as to the basis for termination;
provided, however, that the Company will not be entitled to terminate this
Agreement for cause pursuant to (iii), (iv) or (viii) above unless, prior to
such termination, the Executive has received a written reprimand detailing
the acts or omissions constituting such failure to perform the
responsibilities of his position, to adhere to the Company's policies or to
meet his performance goals, and the Executive has had at least (A) thirty
(30) days to cure the act or omission which constitutes cause pursuant to
(i), (ii), (iii), (iv), (v), (vi), or (vii) above, and (B) sixty (60) days to
cure the act or omission which constitutes cause pursuant to (viii) above.
b. The Executive may terminate this Agreement by giving the
Company and DCRI written notice at least ninety (90) days in advance of the
termination date if (i) the Company expands (subject to the market conditions
at the time) or restricts the Executive's duties, without the consent of the
Executive, to an extent inconsistent with the terms of this Agreement and the
market conditions at the time, or (ii) the Company or DCRI materially
8
breach (following expiration of the applicable cure periods) their
obligations under the terms of the Purchase Agreement.
c. Subject to the exceptions set forth in Paragraphs 7(a)
and 7(b) of this Agreement, neither the Company nor the Executive may
terminate the Executive's employment with the Company at any time during the
term of this Agreement.
d. The Executive's employment by the Company shall
automatically terminate on the date of the Executive's death if the Executive
dies during the term of this Agreement.
e. Subject to those limitations imposed by applicable state
or federal laws, if the Executive is permanently incapacitated by an
accident, sickness or otherwise, so as to render him mentally or physically
incapable of performing the services required of him pursuant to this
Agreement, Executive's employment by the Company shall terminate sixty (60)
days after the day on which the Board determines that the Executive is so
permanently disabled and that this Agreement should be terminated by reason
of such disability. Notwithstanding the foregoing, the Executive shall be
notified in writing if the Company determines that the Executive is
permanently disabled due to mental or physical health; in such event, the
Executive shall have the right to contest any determination of permanent
disability by the Company. In the event that the Executive does contest such
determination, such matter shall be resolved by arbitration pursuant to this
Agreement.
5. NON-SOLICITATION AGREEMENT. In the event that the termination of
employment of the Executive pursuant to this Agreement is effectuated by the
Executive electing to terminate his employment pursuant to this Agreement, or
by the Company for any
9
reason, the Executive agrees that the Executive shall not, during the term of
this Agreement, and for a two (2) year period of time, commencing with the
date of termination of this Agreement, (a) solicit for employment or hire any
individual who was an executive or employee of the Company, or any of its
affiliates, on the date of termination of this Agreement or at any time
within the twenty-four (24) months preceding the date of termination of his
employment with the Company, or (b) solicit the staffing related business of
any person or entity who is or was a customer, client, agent or
representative of the Company at the date of termination of his employment
with the Company, or any of its affiliates, or at any time during the
twenty-four (24) months preceding the date of termination of this Agreement.
The covenants and agreements set forth in this Paragraph 8 shall survive the
termination of this Agreement.
6. NONCOMPETITION AGREEMENT. The Executive acknowledges that the
special relationship of trust and confidence between himself, the Company,
and its clients, customers, vendors and suppliers creates a high risk and
opportunity for the Executive to misappropriate the relationship and goodwill
existing between the Company and its clients, customers, vendors and
suppliers. The Executive further acknowledges and agrees that it is fair and
reasonable for the Company to take steps to protect itself from the risk of
such misappropriation. The Executive further acknowledges that, prior to and
during his employment with the Company, he will be provided with access to
the Company's confidential and proprietary information that will enable him
to benefit from the Company's goodwill and know-how.
10
The Executive acknowledges that it would be inherent in the
performance of his duties as a director, officer, employee, agent, or
consultant, owner or Shareholder of any person, association, entity or
organization that competes with the Company to disclose or use such
information, as well as to misappropriate the Company's goodwill and know-how
for the benefit of such other person, association, entity or company.
Except as otherwise provided in Paragraph 12 of this Agreement,
ancillary to the enforceable promises set forth in this Agreement, the
Executive agrees that, during the term of this Agreement and for a period of
one (1) year after the date of termination of his employment with the
Company, the Executive shall not, without the prior written consent of the
Company, directly or indirectly, whether as a director, officer, employee,
agent, consultant or otherwise, engage in any activities in competition with
the Company in the metropolitan areas (as defined by the United Sates Census
Bureau) of any city in which the Company, or any of its affiliates, maintains
a place of business as of the date of termination of the Executive's
employment with the Company.
5. CONSIDERATION AND ENFORCEMENT. The Executive acknowledges that,
in exchange for the execution of the nonsolicitation, noncompetition and
confidentiality restrictions set forth in Paragraphs 8, 9 and 11 of this
Agreement, the Executive has received or will receive substantial and
valuable consideration in connection with this Agreement and as a result of
the Company purchasing the assets of Seller. The Executive agrees that such
consideration constitutes fair and adequate consideration for the
nonsolicitation, nondisclosure and noncompetition restrictions set forth in
this Agreement. The Executive further agrees that the limitations as to time,
geographical area and scope of activity to be restrained by these
11
restrictions are reasonable and acceptable and do not impose any greater
restraint than is reasonably necessary to protect the goodwill and other
business interests of the Company. The Executive further agrees that if, at
some later date, a court of competent jurisdiction determines that any one or
more of the restrictions set forth in Paragraphs 8, 9 and 11 of this
Agreement are unenforceable by reason of extending for too great a period of
time or over too great a geographical area, such provisions shall be reformed
by the court and enforced to extend over the period of time for which it may
be enforceable and over the maximum geographical area to which it may be
enforceable.
If the Executive is found to have violated any of the provisions of
Paragraphs 8, 9 or 11 of this Agreement, the Executive agrees that the
restrictive period of each covenant so violated shall be extended by a period
of time equal to the period of such violation by him. It is the intent of the
parties that the running of the restrictive period of any covenant shall be
tolled during any period of violation of such covenant so that the Company
may obtain the full and reasonable protection for which it contracted and so
that Executive may not profit by his breach.
The Executive acknowledges and agrees that the Company's remedies at
law may be inadequate in the event of a breach or threatened breach of the
covenants set forth in Paragraphs 8, 9 and 11 of this Agreement, and in such
event, the Company shall be entitled to have an injunction issued by any
court of competent jurisdiction, enjoining and restraining each and every
party concerned therewith from the creation or continuation of such breach.
12
Except as otherwise provided in Paragraph 12 of this Agreement, the
Executive's obligations under Paragraphs 8, 9 and 11 of the Agreement shall
survive the termination of this Agreement.
6. NONDISCLOSURE AGREEMENT. During the term of this Agreement, the
Company will provide to the Executive certain confidential and proprietary
information owned by the Company or DCRI. The Executive acknowledges that he
occupies or will occupy a position of trust and confidence with the Company,
and that the Company would be irreparably damaged if Executive were to breach
the covenants set forth in this Paragraph. Accordingly, the Executive agrees
that, unless he has the prior written consent of the Company, during the term
of this Agreement and for a period of two (2) years thereafter, except as may
be required by competent legal authority or as required by the Company to be
disclosed in the course of performing the Executive's duties under this
Agreement for the Company, he will not use or disclose to any person, firm or
other legal entity, any confidential records, secrets or information related
to the Company or any parent, subsidiary or affiliated person or entity
(collectively, "Confidential Information"). Confidential Information shall
consist of information and compilations of data relating in any way to the
Company and its affiliates including, without limitation all accounting,
financial, and business information, employment and personnel information,
contract terms, marketing plans, price lists and information, and customer
lists and information. The Executive acknowledges and agrees that all
Confidential Information of the Company and/or its affiliates that he has
acquired, or may acquire, were received, or will be received, in confidence
and as a fiduciary of the Company. The Executive will exercise utmost
diligence to protect and guard such Confidential
13
Information. The Executive agrees that he will not, without the express
written consent of the Company and DCRI, take with him upon the termination
of this Agreement any document or paper, or any photocopy or reproduction or
duplication thereof, relating to any Confidential Information.
The parties hereto acknowledge that the definition of Confidential
Information does not include information which (a) is a matter of public
record or is provided in other sources available to the industry other than
as a result of disclosure by the Executive, (b) was available to the
Executive on a non-confidential basis, or (c) becomes available to the
Executive from a source not known to the Executive to have a duty of
confidentiality with regard to the information.
The covenants and agreements set forth in this Paragraph 11 shall
survive the termination of this Agreement.
12. DEFAULT. In the event the Company and/or DCRI default in the
manner as set forth in this Paragraph 12 of this Agreement, the restrictive
time periods as set forth in Paragraphs 8, 9 and 11 of this Agreement shall
be reduced to the extent herein set forth. The Company and/or DCRI shall be
deemed to be in default if (a) the Company (i) fails to pay to the Executive
an undisputed amount of the compensation payable to the Executive under the
terms of this Agreement, or (ii) the Company fails to pay to Seller an
undisputed monetary obligation payable to Seller under the terms of the
Purchase Agreement, and (b) such failure to pay an undisputed amount
continues for a period of fifteen (15) days from the date the payment
involved was due, pursuant to the provisions of this Agreement or the
Purchase Agreement, and (c) such failure to pay shall remain unremedied for a
period of thirty (30)
14
days from the date of receipt by the Company and DCRI of written notice from
the Executive (with respect to a failure to pay under the terms of this
Agreement) or the Seller (with respect to a failure to pay under the terms of
the Purchase Agreement) specifying the failure to pay involved. If the
Company is in default with respect to the failures to pay an undisputed
monetary obligation (as provided in this Paragraph 12) under the terms of
this Agreement the one (1) year period of time, commencing with the date of
termination of this Agreement, as set forth in Paragraph 9 of this Agreement,
shall be eliminated entirely.
13. NOTICES. All notices or other instruments or communications
provided for in this Agreement shall be in writing and signed by the party
giving same and shall be deemed properly given if delivered in person,
including delivery by overnight courier, or if sent by registered or
certified United States mail, postage pre-paid, addressed to such party at
the address listed below. Each party may, by notice to the other party,
specify any other address for the receipt of such notices, instruments or
communications. Any notice, instrument or communication sent by mail shall be
deemed to be given upon actual receipt.
14. DCRI GUARANTY. DCRI shall and does hereby guarantee the
performance by the Company of all of the obligations and commitments of the
Company as set forth in this Agreement.
15. MISCELLANEOUS.
a. Subject to the condition that this Agreement is not
assignable by either party without the prior written consent of the other
party (except that the Company may assign this Agreement to an affiliate of
the Company or to a third party purchaser of the Company or its assets), the
terms and provisions of this Agreement shall inure to the benefit of, and
shall
15
be binding on, the parties hereto and their respective heirs,
representatives, successors and assigns.
b. This Agreement supersedes all other agreements (other
than the Purchase Agreement and related documents) either oral or in writing,
between the parties to this Agreement, with respect to the employment of the
Executive by the Company. This Agreement contains the entire understanding of
the parties and all of the covenants and agreement between the parties with
respect to such employment. Any such prior agreements are hereby terminated
without obligation for any payments otherwise due thereunder. No waiver or
modification of this Agreement or of any covenant, condition or limitation
herein contained shall be valid, unless in writing and duly executed by the
party to be charged therewith, and no evidence of any waiver or modification
shall be offered or received in evidence in any proceeding, arbitration, or
litigation between the parties hereto arising out of or affecting this
Agreement, or the rights or obligations of the parties hereunder, unless such
waiver or modification is in writing, duly executed as aforesaid, and the
parties further agree that the provisions of this Paragraph may not be waived
except as herein set forth.
c. All agreements and covenants contained herein are
severable and in the event any of them, with the exception of those contained
in Paragraph 2 hereof, shall be held to be invalid, as written pursuant to
the arbitration or judicial proceedings provided for in this Agreement, this
Agreement shall be interpreted as if such invalid agreements or covenants
were not contained herein.
d. Except for the injunctive relief as otherwise provided
in Paragraph 10 of this Agreement, any controversy between the parties to
this Agreement involving a dispute with
16
respect to any of the terms, covenants, or conditions of this Agreement shall
be submitted to arbitration in Phoenix, Arizona, if either party to this
Agreement shall request arbitration by notice in writing to the other party.
In such event, the arbitration proceedings involved shall be before a single
arbitrator administered by the American Arbitration Association under its
National Rules for the Resolution of Employment Disputes, and judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction hereof, Each party to the arbitration proceedings shall bear his
or its own attorneys fees and expenses, except that the expenses of the
arbitrator shall be borne by the Company and/or the Executive as determined
by the arbitrator involved. In the event of any litigation between the
parties related to the compliance with the terms and conditions of this
Agreement, the parties shall be responsible for their own attorneys' fees and
expenses incurred in connection with the dispute involved.
e. This Agreement has been made under and shall be governed
by the laws of the State of Arizona.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this ____ day of March, 2000.
---------------------------------------------
Xxxxxxx X. Xxxxxxxx
Address: 00000 X. 00xx Xxxxx
Xxxxxxxx, XX 00000
DIVERSIFIED CORPORATE RESOURCES, INC.
By:
-----------------------------------------
M. Xxx Xxxxxxx, President
Address: 00000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
DATATEK CONSULTING GROUP CORPORATION
By:
-----------------------------------------
M. Xxx Xxxxxxx, Secretary
Address: 00000 Xxxxx Xxxxxxx Xxxxxxxxxx
Xxxxx 000
Xxxxxx, XX 00000
18
