EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made as of the first day of
January, 1999, by and between MOTO PHOTO, INC., a Delaware corporation
("Employer"), and Xxxxx X. Xxxxxx ("Employee"). This Agreement is based on the
following understandings:
a. The parties desire to enter into an employment relationship on the
terms and conditions set forth in this Agreement.
b. During the term of his employment, Employee will receive access to
proprietary information and/or trade secrets relating to Employer's
business, its franchisees, and its business contacts which are of a highly
confidential, unique, and valuable nature. In addition, Employee may be
adding to confidential information of Employer.
c. The parties acknowledge that Employer would suffer great loss and
damage if any Confidential Information (as defined in Section 4 of this
Agreement) is divulged at any time other than for the benefit of Employer.
d. The parties further acknowledge that Employee may establish close
working relationships with valued employees of Employer and its franchisees
and that Employer's business may suffer substantial harm if, upon the
termination of Employee's employment with Employer, Employee should
thereafter employ or attempt to employ, directly or indirectly, certain
personnel of Employer, its franchisees, or their employees.
Accordingly, the parties agree as follows:
1. DUTIES. Employer hereby employs Employee, for the term of this
Agreement, as Senior Vice President of Marketing, and Employee hereby accepts
such employment upon the terms and conditions specified in this Agreement.
During the term of his employment with Employer, Employee shall report to the
President and Chief Operating Officer and shall have the following duties:
1.1 Employee shall serve as head of Employer's Marketing Department,
directing other Marketing staff;
1.2 Employee shall be responsible for developing marketing strategies
for Employer-owned stores and franchised stores; and
1.3 Employee will perform such other duties as directed from time to
time by the President of Employer and/or the Board of Directors of Employer.
2. ANNUAL COMPENSATION
2.1 Base Compensation. As base compensation for Employee's services
to Employer during the period August 3, 1998 through March 31, 1999, Employer
shall pay Employee a regular salary, which shall be prorated, at the rate of One
Hundred Thirty-Five Thousand Dollars ($135,000) per employment year (April 1 to
March 31), payable in such manner as Employer pays its other executives.
Thereafter, Employer shall pay Employee a salary determined as
provided in Section 2.3 of this Agreement.
2.2 Bonus. Employee shall not be entitled to a bonus for fiscal
year 1998. Employee shall be entitled to a bonus of not less than $20,000 for
the fiscal year January 1, 1999 to December 31, 1999, calculated as provided in
this Section 2.2. Thereafter, Employee's bonus, if any, shall be determined as
provided in Section 2.3 of this Agreement. Employee's bonus for fiscal year
1999 shall be calculated as follows: Employer's Board of Directors shall, in
December 1998, set a profit goal for Employer for calendar year 1999, based on
Employer's pre-tax income for 1999. If Employer's pre-tax income exceeds the
profit goal set by the Board of Directors for calendar year 1999, Employee's
bonus shall be $20,000 plus three percent (3%) of any income in excess of the
profit goal set by the Board of Directors. No later than March 30 of each year,
Employer's independent CPA firm shall calculate pre-tax income and its
determination shall be binding. In calculating pre-tax income, the CPA firm
shall include gains or losses from the sale of company stores and shall add back
to the pre-tax income of Employer any bonuses of Employer's executives
(including Employee) who have a bonus based on pre-tax income of Employer. Any
bonus, to the extent due according to the calculation in this Section, will be
paid by March 30 of the following year.
2.3 Annual Review. By April 1 of each year of this Agreement,
Employer will review the compensation of Employee for the subsequent employment
year. The base salary may be increased and the bonus, if any, may be adjusted
either higher or lower.
2.4 Sign-on Bonus. Employer shall pay Employee a sign-on bonus of
$15,000. Employee acknowledges that he has received this sign-on bonus.
2.5 Relocation Expenses. Employer shall reimburse Employee for his
relocation expenses as set forth in Employer's relocation policy, provided,
however, that instead of the allocation for temporary living expenses as
provided in the policy, Employer shall pay Employee $1,200 per month for the
period August through December 1998. As an inducement to Employer to employ
Employee and to pay such additional living expenses, Employee shall sign a
promissory note substantially in the form set forth as Exhibit A to this
Agreement and in the principal amount equivalent to all relocation expenses paid
to Employee pursuant to this Agreement. Employee shall sign the promissory note
upon execution of this Agreement.
3. TERM. The term of this Agreement shall commence January 1, 1999, and
shall continue thereafter until December 31, 2001. Commencing January 1, 2001,
the term of this Agreement shall be extended so that it shall always be for a
period of one year until and unless either party gives the other party a one
year notice to terminate Employee's employment under this Agreement or
Employee's employment is sooner terminated in accordance with Section 10 of this
Agreement.
4. RESTRICTIVE COVENANTS.
4.1 Duties. During the term of this Agreement, Employee shall devote
his best efforts and full time, subject to Section 5 of this Agreement, to
advance the business and welfare of Employer. Employee shall take no action
against the best interest of Employer, and he shall pursue no business interests
during the term of this Agreement which conflict with his employment with
Employer.
4.2 Covenant Not to Compete. Employee acknowledges that Employer's
activities are international in scope. During the term of this Agreement and
for a period of two years after the termination of Employee's employment with
Employer, its successors or assigns, Employee shall not, directly or indirectly,
engage or be interested (as principal, agent, manager, employee, consultant,
owner, partner, officer, director, stockholder, trustee or otherwise) in any
entity engaged in a business which competes in a material manner with Employer
within a three mile radius of any business location of Employer or of any of its
subsidiaries, affiliates, or franchisees. Notwithstanding the foregoing,
Employee may work for a mass merchant or other large retailer which provides
photoprocessing services provided Employee's services to such mass
merchant/large retailer do not in any way involve, concern, or have an impact on
(including through marketing or advertising advice) the mass merchant's/large
retailer's photoprocessing services. Employee's ownership of less than two
percent (2%) of the outstanding voting stock of any publicly-held corporation,
or any other entity specifically authorized by the Board of Directors of
Employer, shall not constitute a violation of this Section 4.
4.3 Confidentiality. During the term of this Agreement and
thereafter, Employee shall not at any time, other than for the benefit of
Employer: (i) divulge, furnish, disclose, or make accessible to any person,
firm, or corporation, or use for his own purposes, any Confidential Information;
(ii) make or cause to be made any copies, facsimiles, or other reproductions of
any Confidential Information without Employer's express written consent; or
(iii) remove any Confidential Information from Employer's premises or fail or
refuse to surrender (notwithstanding the failure of Employer to make demands for
such materials) the same to Employer immediately upon termination of Employee's
employment with Employer or at any time before such termination upon Employer's
request.
For purposes of this Agreement, the term "Confidential Information"
shall mean and include (a) any information with respect to Employer's accounts,
plans, strategies, business policies, software, know-how, trade secrets,
customers, franchisees, prospects, mailing lists, suppliers, pricing policies or
rates, marketing techniques, or any other information which may now or in the
future be considered confidential or proprietary information of Employer; and
(b) manuals, files, records, software, memoranda, correspondence, drawings,
designs, or other writings belonging to or in the possession of Employer or
which may be produced by or come into Employer's possession in the course of
Employee's employment with Employer.
4.4 Solicitation of Employer's Employees. For a period of three
years after the termination of Employee's employment with Employer, its
successors or affiliates, Employee shall not (i) employ or attempt to employ,
directly or indirectly, personally or through any entity in which Employee may
be associated (as principal, agent, manager, employee, consultant, owner,
partner, officer, director, stockholder, trustee, or otherwise), any employee of
Employer, its subsidiaries or affiliates, or (ii) induce any employee of
Employer, its subsidiaries or affiliates, to leave the employment of Employer,
its subsidiaries or affiliates, or (iii) induce any employee of any franchisee
of Employer to leave the employment of any franchisee.
4.5 Equitable Relief. The parties acknowledge and agree that a
breach of this Section 4 cannot be compensated for by monetary damages and that
any remedy at law is inadequate. Accordingly, Employee agrees that, in the
event of a breach of any restrictive covenant set forth in this Agreement,
Employer may seek and obtain, in addition to any other legal relief available to
Employer, a temporary restraining order, preliminary injunction, and permanent
injunction restraining Employee from violating Section 4 of this Agreement. For
the purposes of this provision, the parties confer jurisdiction upon the courts
located in Xxxxxxxxxx County, Ohio, and agree on venue in Xxxxxxxxxx County,
Ohio.
4.6 Reformation. In the event that any provision of this Section 4
should be determined by a court of competent jurisdiction to be unenforceable by
reason of its being extended for too great a period of time, for too large a
geographic area, or for too great a range of activities, it shall be reformed to
extend only over the maximum period of time, geographic area, or range of
activities as to which it may be enforceable.
5. VACATION. Employee shall be entitled to vacation in accordance with
Company policy, to be taken at such times as determined by Employee, subject to
Employer's prior approval and to Employee's giving sufficient notice so that
Employer's business may operate effectively in Employee's absence.
Notwithstanding the foregoing, for any year during Employee's term of employment
that Company policy would provide for Employee to have two week's vacation,
Employee shall be entitled to three weeks' vacation.
6. HEALTH AND INSURANCE PLANS; FRINGE BENEFITS. Employee shall be
entitled to participate in all plans or agreements maintained by Employer
relating to health insurance for Employee, his wife and children, subject to the
terms and conditions of such plans in effect from time to time. Employee shall
also be entitled to all other fringe benefits provided senior officers of
Employer.
7. REIMBURSEMENT FOR EXPENSES. Employer shall reimburse Employee for all
reasonable expenses incurred on behalf of Employer in line with Employer's
policies.
8. AUTOMOBILE. During the term of this Agreement, Employer shall furnish
Employee with the use of an automobile or with an automobile allowance for use
on Employer's business, subject to Company policy.
9. NOTICE. Any notice required to be given pursuant to the provisions of
the Agreement shall be in writing and shall be delivered by certified mail or in
person to the parties at the following addresses:
Employer:
Moto Photo, Inc.
0000 Xxxx Xxxxxx Xxxxx
Xxxxxx, Xxxx 00000
Attn.: Xxxxx X. Xxxxxxx, President and Chief Operating Officer
Employee:
Xxxxx X. Xxxxxx
00000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxx 00000
or at such other place as either party may designate in writing to the other.
10. TERMINATION.
10.1 Termination for Cause. Employer may terminate Employee's
employment under this Agreement for cause upon written notice to Employee. For
purposes of this Agreement, the term "cause" means the following situations or
occurrences:
(a) Dishonesty, embezzlement, fraud, breach of fiduciary duty,
actions involving moral turpitude, or conviction of a felony by Employee; or
(b) Gross neglect of duty or gross insubordination by Employee,
including the failure to abide by any reasonable and material instructions of
Employer; provided, however, that it will not be reasonable if such instructions
request or demand actions which would be inconsistent with the duties of a
senior corporate executive; or
(c) Material breach of the provisions of Section 4 of this Agreement
and/or failure of Employee to sign a promissory note as provided in Section 2.5
of this Agreement.
10.2 Challenge to Termination. Should Employee dispute that his
discharge was for cause, Employee must submit his claim to arbitration in
accordance with Section 13 of this Agreement within sixty (60) days after the
termination of his employment. If a discharge of Employee is eventually
determined under arbitration to have been for cause, or if no arbitration is
requested by Employee within sixty (60) days after the termination of Employee's
employment, Employer shall have no liability whatsoever under this Agreement
from and after the date of termination.
10.3 Termination Without Cause. If the termination of Employee is
without cause, Employer shall be responsible for payment of compensation as
outlined in Section 2 (Compensation) of this Agreement and subject to Section 12
(Mitigation) of this Agreement. In addition, Employer and Employee agree that
they shall work together for an orderly transition for the benefit of Employer.
To that end, for a period of ninety (90) days following termination of his
employment, Employee shall be available to participate, at Employer's
discretion, in meetings, conferences, and the like for up to fifty percent (50%)
of the normal and customary work week. In return, to assist Employee in
obtaining new employment, during that ninety-day period Employer shall provide
Employee with an office at Employer's headquarters and secretarial and office
support, including the use of the telephone, facsimile machine, and copier.
Should Employer ask Employee to relocate, to regularly commute more than 75
miles from Loveland, Ohio, or to accept a substitute office or position to that
specified in Section 1.1, and should Employee decline to do so and Employer
therefore terminate Employee's employment, such termination shall be treated as
without cause.
10.4 Voluntary Termination. Should Employee voluntarily terminate his
employment with Employer for any reason, all obligations of Employer, except for
the prorated bonus described in Section 10.5 of this Agreement, shall be
extinguished as of the date of termination of employment, but Employee shall
remain subject to all of his covenants in Section 4 of this Agreement.
10.5 Bonus. Should termination be voluntary or involuntary without
cause, Employee shall be entitled to a bonus as described in Section 2, prorated
to the end of the month prior to the termination of Employee's employment.
11. DEATH OR DISABILITY. In the event of the death of Employee,
employment will terminate but Employee's spouse or estate shall receive
Employee's then- current salary and the benefits contemplated by paragraphs 2,
6, 7 and 8 for ninety (90) days after Employee's death.
If Employee is disabled and cannot perform the duties of his assignment, he
will continue to receive full compensation at the time the disability began for
the first six months of continuous disability. After six months of continuous
disability, Employee will receive 70% of full compensation, reduced by any
benefits paid under Employer's long-term disability insurance program, until the
earlier of Employee's death, Employee's being able to return to work, or the
expiration of this Agreement. If Employee remains continuously disabled after
the expiration of this Agreement, Employee will continue to be entitled to
benefits due under Employer's long-term disability insurance program.
Termination or expiration of this Agreement for any reason shall not affect
any obligations of Employee under Section 4 of this agreement.
12. MITIGATION. In the event of the termination of this Agreement,
Employee shall use his best efforts to mitigate his damages, if any, by seeking
suitable employment for which he is qualified. This obligation to mitigate
damages shall not affect any right Employee may have to a bonus as provided in
Section 10.5 of this Agreement.
13. ARBITRATION. Except as provided for in Section 4.5 of this Agreement,
any controversy or claim arising out of or relating to this Agreement shall be
settled by arbitration in Dayton, Ohio in accordance with the Commercial Rules
of Arbitration of the American Arbitration Association. The decision of the
arbitrator(s) shall be final and binding upon all parties to this Agreement.
Judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. The expenses of arbitration shall be borne
by the non-prevailing party.
14. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Ohio without reference to
Ohio's choice of law or conflict of laws provisions.
15. ASSIGNABILITY. This Agreement is personal to Employee, and Employee
shall have no right to assign it. The terms of this Agreement shall be binding
upon, shall inure to the benefit of, and shall be enforceable by Employer, its
successor and assigns.
16. WAIVER. No delay, waiver, omission or forbearance by either party to
enforce any right arising out of the breach of any provision of this Agreement
by the other party shall be construed as or constitute a continuing waiver or a
waiver of any other breach of any provision of this Agreement.
17. PARTIAL INVALIDITY. In the event that any word, phrase, clause,
sentence, or other provision in this Agreement violates any applicable statute,
ordinance, or rule of law in any jurisdiction in which it is used, such
provision shall be ineffective to the extent of such violation, without
violating any other provision in this Agreement.
18. COMPLETE AGREEMENT; MODIFICATION. This Agreement supersedes all prior
agreements, written or oral, between the parties, is intended as a complete and
exclusive statement of the terms of the Agreement between parties, and may be
amended, modified, or rescinded only by a written instrument executed by both
parties.
19. CAPTIONS. All captions in this Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision of this Agreement.
20. MULTIPLE COPIES. This Agreement may be executed in multiple copies,
each of which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first written above.
WITNESSES: EMPLOYER:
MOTO PHOTO, INC.
By
Xxxxx X. Xxxxxxx
President and Chief Operating Officer
EMPLOYEE:
Xxxxx X. Xxxxxx
EXHIBIT A
PROMISSORY NOTE
This Promissory Note (the "Note"') is made as of the third day of August,
1998, by Xxxxx X. Xxxxxx ("Employee") in favor of Moto Photo, Inc., a Delaware
corporation ("Employer"), 0000 Xxxx Xxxxxx Xxxxx. Xxxxxx, Xxxx 00000. This Note
is based on the following understanding:
Employee has been employed by Employer as Senior Vice President of
Marketing pursuant to an employment agreement dated as of January 1, 1999 ("the
Employment Agreement"). As an inducement to Employer to enter into the
Employment Agreement. Employee agreed to repay certain relocation expenses paid
Employee by Employer if Employee does not continue his employment with Employer
for a specified period.
Accordingly, Employee hereby promises to pay to Employer the sum of Forty
Thousand Three Hundred Fifty-Two Dollars and Thirty-Six Cents ($40,352.36) on
the following terms:
1. Any unpaid principal shall bear interest at nine percent (9%) per
year until it is paid or forgiven as provided in Paragraph 2 of this Note.
2. So long as Employee remains employed by Employer, Employer will
forgive one-fifth of the principal amount of this Note, together with accrued
interest, on August 3 of each year until the note is forgiven in full.
3. If Employee voluntarily terminates his employment with Employer, the
remaining principal under this Note, together with accrued interest, shall
become due and payable immediately. If Employer terminates Employee's
employment, or if Employee dies or becomes permanently disabled such that he
must terminate his employment with Employer, Employer shall forgive the
remaining principal and accrued interest under this Note.
4. No delay, waiver, omission or forbearance by Employer to declare a
default or exercise any right arising under this Note shall constitute a waiver
by Employer of any such default or of such right or as to subsequent breach or
default by Employee. Subsequent acceptance by Employer of any payments due it
under this Note shall not be deemed a waiver by Employer of any preceding
default in payment by Employee.
5. In the event of litigation relating to this Note, each party shall
bear its own litigation expenses, court costs, and attorneys' fees.
6. This Note shall be governed by and construed in accordance with the
internal laws of the State of Ohio without reference to Ohio's choice of law or
conflict of laws provisions.
Xxxxx X. Xxxxxx
