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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement), dated effective as of
March 1, 1998, is entered into by and between ACR Group, Inc., a Texas
corporation (the "Company"), and Xxxxxxx X. Xxxxxxx ("Employee").
ARTICLE I
Employee agrees to be employed by the Company, and the Company agrees
to employ Employee, as President and Chief Financial Officer of the Company, for
the purpose of performance by and on behalf of the Company of such services
commensurate with those positions as may be requested from time to time by the
Board of Directors of the Company. Should Employee give Cause (as hereinafter
defined) for termination, the Company may terminate Employee's employment at any
time thereafter by written notice thereof to Employee. After receipt of said
notice, Employee shall have ten (10) days to file a written reply that there is
no Cause of termination. Nothing contained herein, however, shall affect
Employee's right to receive benefits from policies of insurance or other
programs available to Employee by virtue of his employment by the Company.
ARTICLE II
During Employee's employment hereunder for a term (the "Term") from the
date first shown above and ending February 28, 2002, the Company shall pay and
provide to Employee the compensation and benefits set forth on Exhibit A,
attached hereto and incorporated herein for all purposes. Employer may terminate
this Agreement effective at the end of the Term by giving written notice of such
election at least two (2) years prior to the end of the Term. If Employer does
not elect to so terminate this Agreement, the Term of this Agreement shall be
extended automatically by an additional two (2) years. The provisions of the
preceding sentence shall thereafter continue in effect until Employer elects to
terminate this Agreement in the manner so provided.
ARTICLE III
Employee recognizes and agrees that the business of the Company and its
subsidiaries and their business interests require a confidential relationship
between it and its employees and the fullest practical protection and
confidential treatment of their trade secrets, trade practices, prospects,
transactions, customers and other knowledge of the business which will be or
have been conceived or developed by Employee during Employee's course of
employment with the Company. Accordingly, Employee agrees that during Employee's
term of employment with the Company and during the applicable period of the
non-competition provision described in Article IV hereof, Employee will:
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(i) Keep secret and confidential all such information, trade
secrets, trade practices, prospects, transactions, customer
lists, and business practices of the Company and its
subsidiaries;
(ii) Not use or aid others in using, directly or indirectly, the
same in competition with the Company or its subsidiaries,
unless required by a valid order of a court or other
governmental authority of competent jurisdiction; and
(iii) Other than on behalf of the Company's interest, not contact or
solicit the customers, employees, brokers, salesmen, investors
or competitors of the Company or its subsidiaries in any
manner which relates to any business engaged in by the Company
or its subsidiaries.
Employee further agrees that all inventions, ideas, prospects or
processes or other results of the efforts of Employee's employment by the
Company which are conceived, invented or developed, in whole or in part, by or
with the assistance of Employee during Employee's employment with the Company
shall be the sole and exclusive property of the Company, and Employee shall,
upon request by the Company at any time, execute such assignments of the same or
other similar documents in favor of the Company.
ARTICLE IV
In consideration of the compensation payable to Employee hereunder,
Employee agrees that, if Employee either voluntarily terminates his employment
with the Company or if the Company terminates Employee's employment for Cause
(but not if his employment is terminated by the Company without Cause), (i)
while he is employed by or receiving severance compensation from the Company,
Employee will not, directly or indirectly, operate, participate in, undertake
any employment with, advise or have any interest in any business enterprise
located or operating within any state in the United States in which the Company
or any of its subsidiaries is presently conducting business (the "Market Area"),
which is competitive with any business engaged in by the Company or any of its
subsidiaries at the time of Employee's termination of employment hereunder;
provided, however, that nothing set forth herein shall preclude Employee from
either undertaking employment with a business enterprise which conducts
business, both within the Market Area and outside the Market Area, which is
competitive with the Company or any of its subsidiaries, provided that none of
the duties to be performed by Employee pursuant to such employment shall,
directly or indirectly, relate to business activities of that business
enterprise conducted within the Market Area which are competitive with those of
the Company or any of its subsidiaries; and (ii) while he is employed by or
receiving severance compensation from the Company, and for a period of two (2)
years thereafter, Employee, his immediate family members and their respective
affiliates (as defined in Rule 144 promulgated under the Securities Xxx 0000, as
amended) will not, directly or indirectly, own or have any other financial
interest in any business enterprise located either within or outside the Market
Area which is competitive with any
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business engaged in by the Company or any of its subsidiaries at the time of
Employee's termination of employment hereunder. Notwithstanding the foregoing
provisions of this Article IV, Employee shall not be prohibited at any time from
having an indirect ownership interest, not exceeding one percent (1%) thereof,
in a business enterprise which is competitive with any business engaged in by
the Company or any of its subsidiaries, provided that the decision to acquire
such interest was not made by or upon the suggestion of Employee, a member of
his immediate family, or their respective affiliates.
Employee further agrees that during his term of employment hereunder he
will devote his full business time and best efforts to the business and affairs
of the Company.
Termination for "Cause", for purposes of this Agreement, is defined as
termination for any of the following reasons:
(i) If Employee has failed to perform any of his material
duties under this Agreement, breached any material provision of this
Agreement, or violated any statutory or common law duty of loyalty to
the Company or any of its subsidiaries;
(ii) If Employee has engaged in malfeasance, theft from the
Company or any of its subsidiaries, embezzlement or any other serious
and substantial crimes against the Company, or is convicted of a felony
involving moral turpitude;
(iii) If the Employee dies or becomes unable by reason of
physical disability or other incapacity to carry out or perform the
duties required of him hereunder for a continuous period of six (6)
months; or
(iv) If the earnings per share of the Company for any fiscal
year during the term of this Agreement is negative.
ARTICLE V
In the event that any dispute arises with respect to this Agreement,
including without limitation, a dispute as to whether Cause has occurred
permitting the Company to terminate Employee's employment hereunder, upon the
request of either Employee or the Company, whether made before or after the
institution of any legal proceeding filed with respect to such dispute, the
dispute shall be resolved by mandatory and binding arbitration administered by
the American Arbitration Association ("AAA") pursuant to the Federal Arbitration
Act (the "Act") in accordance herewith and the Commercial Arbitration Rules (the
"Rules") of the AAA. If the Act is inapplicable to any such claim or controversy
for any reason, such arbitration shall be conducted pursuant to the Texas
General Arbitration Act and in accordance with the Rules. Judgment upon the
award rendered by the arbitrators may be entered in and enforced by any court
having jurisdiction and in accordance with the practice of such court. All
statutes of limitation that
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would otherwise be applicable shall apply to any arbitration proceeding. Any
attorney-client privilege and other protection against disclosure of
confidential information, including, without limitation, any protection afforded
the work-product of any attorney, that could otherwise be claimed by any party
shall be available to and may be claimed by any such party in any arbitration
proceeding. No party waives any attorney-client privilege or any other
protection against disclosure of confidential information by reason of anything
contained in or done pursuant to or in connection with this arbitration
provision. Any arbitration proceeding shall be conducted in Xxxxxx County, Texas
by a panel of three arbitrators.
ARTICLE VI
Employee and the Company hereby agree and acknowledge that damages are
an inadequate remedy at law for the breach of the terms hereof and,
accordingly, the Company is hereby granted and shall have the right of
injunction and such other and further relief, both in law and in equity, as the
Company may be entitled to receive under the laws of the State of Texas, in the
event Employee breaches or threatens to breach any of the covenants or
agreements contained herein. In the event any provisions hereof shall be
modified or held ineffective by any Court in any respect, such adjudication
shall not invalidate or render ineffective the balance of the provisions hereof,
and the provisions hereof shall be enforced to the maximum extent allowed by
law. This Agreement shall be governed by the laws of the State of Texas and
shall be enforceable in Xxxxxx County, Texas. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, assigns, heirs and personal representatives. The parties hereto have
read the terms and conditions of this Agreement before signing the same, and
hereby agree that no statement, agreement or understanding, whether oral or
written, not contained herein will be recognized or enforced. This Agreement may
not be amended except by a written agreement executed by the Company and
Employee which makes specific reference to this Agreement. This Agreement, along
with its exhibits and attachments, supersedes any and all other agreements,
whether written or oral, between the Company and Employee relating to the
employment of Employee by the Company. There shall be no right of set-off or
counterclaim in respect of any claim, debt or obligation, against any payments
to Employee, his dependents, beneficiaries or estate provided for in this
Agreement.
ARTICLE VII
All notices, demands, requests and communications ("Notices") given or
required to be given by the Company to Employee or by Employee to the Company,
shall be in writing. All Notices by the Company to Employee shall be deemed to
have been properly given if sent by personal delivery, telecopy delivery or U.S.
registered or certified mail, postage prepaid, addressed to Employee at 0000
Xxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, or to such other address as Employee
may from time to time designate by written notice to the Company given as herein
required. Any payment by the Company to Employee may be made by check mailed to
his
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last such designated address. All Notices by Employee to the Company shall be
deemed to have been properly given if sent by personal delivery, telecopy
delivery or U.S. registered or certified mail, postage prepaid, addressed to the
Company at 0000 Xxxxxxxx, Xxxxx 000, Xxxxxxx, Xxxxx 00000, or to such other
address as the Company may from time to time designate by written notice to
Employee given as herein required. Notices given in the manner aforesaid shall
be deemed sufficiently served or given for all purposes hereunder at the time
such Notice was received by the addressee if such Notice is sent by personal or
telecopy delivery or when deposited in a post office or branch post office
regularly maintained by the U.S. Government.
IN WITNESS WHEREOF, the undersigned have set their hands effective as
of the 1st day of March, 1998.
ACR GROUP, INC.
By: /s/ Xxxx Xxxxxxx, Jr.
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"Company"
/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
"Employee"
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EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN ACR GROUP, INC. AND XXXXXXX X. XXXXXXX
1. Annual Salary. The Company shall pay to Employee a salary of $125,000
per annum ("Base Salary") payable in accordance with the Company's
regular payroll practices. The Board of Directors of the Company shall
review the salary of Employee annually, and increase (but not decrease)
such salary from time to time as it may deem appropriate.
2. Bonus. The Board of Directors of the Company shall approve a forecasted
earnings per share on a fully diluted basis ("Forecast E.P.S.") for the
Company's Common Stock with respect to each fiscal year of the Company
during the Term. No bonus shall be earned by Employee in respect of a
fiscal year if the Forecast E.P.S. is not attained. If the actual
earnings per share on a fully diluted basis ("Actual E.P.S.") for the
Company's Common Stock for a fiscal year equals or exceeds the Forecast
E.P.S. for such fiscal year, the Company shall pay Employee a bonus
equal to the sum of (i) $25,000, and (ii) the amount determined by the
following formula:
(Actual E.P.S. - Forecast E.P.S.) x Base Salary
Bonus = -------------------------------
Forecast E.P.S.
Such bonus payments shall be paid to Employee on or before the later of
(i) ninety (90) days after the end of the applicable fiscal year of the
Company, or (ii) five (5) days after the independent auditor for the
Company issues its opinion as to the Company's financial statements for
such fiscal year; provided, however, in no event shall such payment be
delayed beyond one hundred twenty (120) days after the end of the
fiscal year.
3. Stock Options. The Company hereby grants to Employee options
("Options") to acquire 100,000 shares of the Company's Common Stock,
subject to the terms and conditions of the Stock Option Agreement
attached hereto as Exhibit A-1.
4. Reimbursements. The Company shall reimburse Employee for all authorized
expenses incurred or paid by Employee in connection with the
performance of Employee's services under this Agreement upon
presentation of expense statements or vouchers and such other
supporting information as the Company may from time to time require or
request.
5. Automobile. During the term of this Agreement, the Company shall permit
Employee to continue to use the automobile owned or leased by the
Company presently being used by Employee, and shall reimburse Employee
for all costs incurred by him in the operation of such automobile. From
time to time during the Term, the Company shall purchase or lease
comparable replacement vehicles for use by Employee in a manner
reasonably consistent with its prior practice in respect thereof.
(i)
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6. Membership Dues. During the term of this Agreement, the Company will
pay or reimburse Employee for the monthly dues charged for membership
in a health club selected by Employee.
7. Other Benefits. The Company shall provide to Employee all other
benefits which are generally available to other employees of the
Company, which may include, without limitation, hospitalization and
401(k) contributions. In the event that the Company, at some future
time, provides no group insurance coverage, the Company will reimburse
Employee for the cost of insurance coverage for Employee comparable to
the insurance coverage now maintained by the Company for Employee.
8. Termination of Employee Without Cause. In the event that this Agreement
is terminated without Cause, Employee shall be paid or provided all
compensation and benefits to which he is entitled under this Agreement,
including salary, bonuses, stock options, use of automobile and
reimbursement of operating costs thereof, club membership dues, and all
other benefits, through the expiration of the Term. Notwithstanding the
foregoing, in the event that the Company is a party to a merger,
consolidation or reorganization with one or more other entities in
which the Company is not the surviving entity, or upon a sale of
substantially all of the assets of the Company to another person or
entity, in a transaction approved by the Board of Directors of the
Company, and, in connection therewith or subsequent thereto, this
Agreement is terminated without Cause, the only compensation and
benefits which Employee shall be entitled to receive pursuant to this
Paragraph 8 shall be his Base Salary in effect upon the termination of
employment which shall be paid for the two-year period following such
termination.
9. Allocation. The Company and Employee recognize and agree that 15% of
the above described compensation and benefits shall be allocated to the
covenants of Employee contained in Articles III and IV of the
Agreement.
(ii)
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EXHIBIT A-1
ACR GROUP, INC.
STOCK OPTION AGREEMENT
100,000 SHARES
This Stock Option Agreement (this "Agreement") is entered into by and
between ACR Group, Inc., a Texas corporation (the "Company"), and Xxxxxxx X.
Xxxxxxx ("Optionee") effective as of March 1, 1998, upon the following terms
and conditions:
1. Grant of Stock Option. The Company hereby grants to the Optionee
options (the "Options") to purchase from the Company 100,000 shares of the
Company's authorized and unissued common stock, par value $.01 per share
("Stock") at an exercise price of $2.24 per share (the "Exercise Price").
2. Term. The Options granted herein may be exercised in whole or in part
during the period or in part during the period beginning March 1, 2006.
Notwithstanding the foregoing, all or a portion of the Options may become
exercisable at an earlier date, as follows:
(a) Options covering 25,000 shares of Stock shall become first
exercisable upon and after the date which the Market Price (as
hereinafter defined) of the Stock has been equal to or greater than $3.24
for ten (10) consecutive trading days;
(b) Options covering an additional 25,000 shares of Stock shall first
become exercisable upon and after the date which the Market Price of the
Stock has been equal to or greater than $4.24 for ten (10) consecutive
trading days; and
(c) Options covering an additional 25,000 shares of Stock shall first
become exercisable upon and after the date which the Market Price of the
Stock has been equal to or greater than $5.24 for ten (10) consecutive
trading days; and
(d) Options covering an additional 25,000 shares of Stock shall first
become exercisable upon and after the date which the Market Price of the
Stock has been equal to or greater than $6.24 for ten (10) consecutive
trading days.
Upon the vesting of all or any portion of the Options on March 1, 2006, or
earlier, as hereinabove provided, the Options so vested may be exercised in
whole or in part and from time to time during the four (4) year period
commencing on the date of vesting of such Options.
The term "Market Price" as used herein shall mean the price of the Stock
determined as follows: (i) the last reported sale price for the Stock on such
day on the principal securities exchange on which the Stock is listed or
admitted to trading or if no such sale takes place on such
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date, the average of the closing bid and asked prices thereof as officially
reported, or, if not so listed or admitted to trading on any securities
exchange, the last sale price for the Stock on the National Association of
Securities Dealers SmallCap Market on such date, or, if there shall have been
no trading on such date or if the Stock shall not be listed on such system, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any NASD member firm selected from time to time by the Company for
such purpose; or (ii) if the Stock shall not be listed or admitted to trading
as provided in clause (i) above, the fair market value of the Stock as
determined in good faith by the Board of Directors of the Company. Upon the
occurrence of an event or transaction described in subparagraph 7(b) hereof,
Market Price shall mean the greater of (i) the price of the Stock as determined
in the preceding sentence, or (ii) the fair market value of the consideration
received by the holders of Stock of the Company in respect of one (1) share of
Stock as a result of such event or transaction, as determined in good faith by
the Board of Directors of the Company with respect to such consideration or
portion thereof consisting of securities or property other than cash.
4. Restrictions on Right to Exercise Stock Options.
(a) In no event shall the Company be required to transfer fractional
shares to the Optionee.
(b) In the event that the Optionee's status as an employee of the
Company shall be (i) voluntarily terminated by the Optionee or (ii) terminated
by the Company for Cause as defined in that certain Employment Agreement
between the Company and Optionee dated effective as of March 1, 1998, all
Options granted hereunder shall terminate ninety (90) days from the date on
which the Optionee ceases to be an employee of the Company.
(c) No Option shall be exercisable unless the shares issuable on the
exercise thereof shall have been registered under the Securities Act of 1933
and applicable state securities laws, or the Company shall have first received
the opinion of its counsel that registration under such laws is not required in
connection with such issuance. At the time of exercise, if the shares of Stock
with respect to which Options are being exercised have not been registered
under such laws, the Company may require the Optionee to give the Company
whatever written assurance counsel for the Company may require that the shares
of Stock are being acquired for investment and not with a view to the
distribution thereof, and that the shares will not be disposed of without the
written opinion of such counsel that registration under such laws is not
required. Share certificates for Stock issued to the Optionee upon exercise of
Options shall bear a legend to the foregoing effect to the extent counsel for
the Company deems it advisable.
5. Limitations Upon Transfer. The Options and all other rights granted
hereunder shall be exercised only by the Optionee, and the Options and all
rights granted hereunder shall not be transferred, assigned, pledged or
hypothecated in any way (whether by operation of law or otherwise), except by
will or by the laws of descent and distribution. The Options and all rights
granted hereby shall not be subject to execution, attachment or similar
process. Upon any attempt
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to transfer, assign, pledge, hypothecate or otherwise dispose of such Options
or any of such rights contrary to the provisions hereof, or upon levy of any
attachment or similar process upon such Options or such rights, such Options
and such rights shall immediately become null and void. Upon the death of the
Optionee, all unexercised Options shall be transferred to the Optionee's estate
and shall be entitled to be exercised in accordance with the terms hereof.
6. Method of Exercise. Any exercise of Options shall be by written
notice delivered by the Optionee to the Company, which written notice of
exercise shall be accompanied by the aggregate purchase price for the shares
with respect to which Options are being exercised. The purchase price of shares
of Stock of the Company acquired upon the exercise of Options shall be paid by
the Optionee in cash. The Company shall issue the shares of Stock covered by
any such notice to the Optionee as soon as practicable after receiving such
notice and the payment for the shares of Stock to be issued. All federal and
state stock transfer taxes, if any, on the issuance and sale of such shares of
Stock by the Company to the Optionee shall be borne and paid by the Optionee.
The Optionee shall not be, nor have any rights or privileges of, a shareholder
of the Company in respect of any of the shares issuable upon the exercise of
Options until certificates representing such shares of Stock shall have been
issued and delivered to the Optionee.
7. Adjustments.
(a) Subject to any required action by the Company's Board of
Directors or shareholders, the number of shares of Stock provided for in this
Agreement and the price per share thereof shall be proportionately adjusted for
any increase or decrease in the number of issued shares of the Stock resulting
from a subdivision or consolidation of shares or the payment of a stock
dividend (but only on the Stock) or any other increase or decrease in the
number of such shares effected without receipt of consideration by the Company.
(b) In the event of (i) a dissolution or liquidation of the Company,
(ii) a consolidation or merger in which the shareholders of the Company
immediately prior to the merger or consolidation do not, immediately following
any such consolidation or merger, own sufficient shares of the voting stock of
the surviving corporation to elect a majority of the board of directors of the
surviving corporation, (iii) a sale of all or substantially all of the assets
of the Company, or (iv) a sale of at least a majority of the outstanding Stock
of the Company to one purchaser, then this Agreement shall terminate; provided,
however, that in any such event, the Optionee shall have the right immediately
prior to any such event to exercise all Options which shall have become vested
pursuant to Paragraph 2 hereof.
(c) Except as expressly provided in this Agreement, the Optionee
shall have no rights by reason of any subdivision or consolidation of shares of
stock of any class, payment of any shares of any class, or by reason of any
dissolution or liquidation, merger or consolidation, sale of all or
substantially all of the assets of the Company, sale of a majority of the
outstanding common stock of the Company, or the spinoff of assets or stock of
another corporation.
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(d) Any issue by the Company of shares of capital stock of any
class, or securities convertible into shares of capital stock of any class,
shall into affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of the Company's Stock subject to
this Agreement. The grant of Options pursuant to this Agreement shall not
affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve, liquidate, or sell or transfer
all or any part of its business or assets.
8. Miscellaneous. This Agreement shall inure to the benefit of and be
binding upon the Company and the Optionee and their respective heirs, legal
representatives, successors and assigns. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
IN WITNESS WHEREOF, this Agreement has been executed and entered into
effective as of the date first above set forth.
ACR GROUP, INC.
By:
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Name:
-----------------------------
Title:
----------------------------
OPTIONEE:
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Xxxxxxx X. Xxxxxxx
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