EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made this 12th day of May, 1998, by and between Celtic
Investment, Inc., an Illinois Corporation (the "Company") and Xxxxxxx X. Xxxxxx
("Employee").
RECITALS
WHEREAS, the Company and Employee desire to modify their employment
relationship by means of this agreement ("Employment Agreement"); and
WHEREAS, the Company desires to continue to employ Employee as its
President and Employee is willing to continue to accept such employment by the
Company on the terms and subject to the conditions set forth in this Employment
Agreement;
NOW THEREFORE, in consideration of the promises and mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
AGREEMENT
1. Employment and Duties. The Effective Date of this Agreement shall be
May 12, 1998. Upon the Effective Date of the employment, the Company shall, and
hereby does, employ the Employee and Employee shall, and hereby does, accept
employment as President of the Company. Employee agrees to devote in good faith
substantially all of his time and best efforts to the services that he is
required to render to the Company hereunder. Employee shall report to the
Company's Board of Directors and at all times during the term of this Agreement
shall have powers and duties at least commensurate with his position in the
Company. Employee's duties with the Company shall be consistent with those
historically held by Employee as President of the Company.
1.1. Disclosure and Acceptance of Other Activities. The Company
acknowledges that Employee is currently involved in other business activities
including but no limited to those related to H & Capital Investment, Emerald
Capital Investments, Inc., American Polymer Corporation and Millennium
Electronics, Inc. The Company consents to the continued participation by
Employee in such activities subject to his fulfillment of any and all fiduciary
duties he will have as an officer and director of the Company including those
fiduciary duties relating to corporate opportunities.
2. Term of Employment.
2.1 Definitions. For the purposes of this Employment Agreement, the
following terms shall have the following meanings:
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2.1.1.Stock Option Agreement. "Stock Option Agreement" shall mean
the Stock Option Agreement dated the date hereof, entered into by the
Company and Employee whereby Employee is granted (i) options to purchase
150,000 shares of the Company's Common Stock, which options vest over a
period of time as provided for in the Stock Option Agreement and (ii)
options to purchase 150,000 shares of the Company's Common Stock, which
options vest on the basis of the achievement of certain operating results
as agreed to in the Stock Option Agreement.
2.1.2. Termination for Cause. "Termination For Cause" shall mean
termination by the Company of Employee's employment by reason of
Employee's willful dishonesty towards, fraud upon, or deliberate injury or
attempted injury to the Company, or by reason of Employee's willful
material breach of this Employment Agreement which has resulted in
material injury to the Company.
2.1.3 Termination Without Cause. "Termination Without Cause" shall
mean any termination of employee's employment by the Company other than
for cause by Reason of Disability or by Reason of Death.
2.1.4.Voluntary Termination. "Voluntary Termination" shall mean termination
by Employee of Employee's employment by the Company other than (i) as described
in paragraph 2.1.5 or (ii) termination by reason of Employee's death or
disability as described in paragraphs 2. 5. and 2.6.
2.1.5.Good Reason Resignation. "Good Reason Resignation" shall mean
termination by Employee of Employee's employment by the Company following
the occurrence of any of the events set out below unless such event is
fully corrected by the Company within 30 days following written
notification by Employee to the Company that Employee intends to terminate
his employment for one or more of the reasons set out below:
(a) removal of Employee from, or a failure to appoint or
reappoint Employee to, any of his offices or the assignment of
Employee to any duties inconsistent with Employee's status as
Chairman and President of the Company;
(b) failure by the Company without Employee's consent to pay to
Employee any portion of Employee's current compensation, including
bonuses, the vesting of stock options and the issuance of shares
upon exercise of stock options; or
(c) any material breach by the Company of any provision of this
Employment Agreement.
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2.2. Initial Term. The term of employment of Employee by the Company under
this Employment Agreement shall be for a period of three (3) years beginning
with Effective Date ("Initial Term"), unless terminated earlier pursuant to this
Section. At any time prior to the expiration of the Initial Term, the Company
and Employee may, by mutual written agreement, extend Employee's employment
under the terms of this Employment Agreement for such additional periods as they
may agree.
2.3. Termination For Cause. Termination for Cause may be effected
immediately by the Company during the term of this Agreement by written
notification to Employee. Upon Termination For Cause, the following shall
promptly occur:
(a) The Company shall pay Employee all accrued salary earned at the
date of Termination for Cause;
(b) The Company shall pay Employee all vacation pay which is accrued
at the date of Termination for Cause;
(c) The Company shall pay all business expenses incurred by Employee
in connection with his duties hereunder which are unpaid at the date of
Termination for Cause;
(d) The Company shall pay to Employee all compensation or benefits
due to Employee at the date of Termination for Cause under any agreement
or plans, excluding stock options which are specifically provided for in
paragraphs 2.3 (e) and (f) below;
(e) Employee has been granted incentive stock options to purchase
150,000 shares of the Company's Common Stock pursuant to the Stock Option
Agreement which options vest solely on the basis of time of employment
("Time Based Options" and "Time Based Option Shares"). In the event the
Employee is Terminated for Cause, the Time Based Options shall terminate
immediately except to the extent such options have vested.
(f) Employee has been granted incentive stock options to purchase
150,000 shares of the Company's Common Stock pursuant to the Stock Option
Agreement which options vest solely on the basis of the achievement of
certain financial results ("Performance Based Options" and "Performance
Based Option Shares"). The Performance Based Options shall terminate
immediately except to the extent such options have vested.
2.4. Termination Without Cause. The Company may terminate Employee's
employment for any reason and without cause at any time upon thirty (30) days
written notice to Employee. Upon Termination without Cause, the following shall
promptly occur:
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(a) The Company shall pay Employee all salary compensation for a
period of one year from the date of Termination Without Cause.
(b) The Company shall pay Employee all vacation pay which is accrued
at the date of Termination without Cause;
(c) The Company shall pay all business expenses incurred by Employee
in the connection with his duties hereunder which are unpaid at the date
of Termination without Cause;
(d) The Company shall pay or deliver to Employee all compensation or
benefits due to Employee at the date of Termination without Cause under
any agreement or plans excluding stock options which are specifically
provided for in paragraphs 2.4 (e)and (f) below;
(e) Employee has been granted incentive stock options to purchase
150,000 Time Based Option Shares which vest solely on the basis of time of
employment. In the event the Employee is Terminated without Cause, all
Time Based Options shall be accelerated and shall vest immediately.
(f) Employee has been granted incentive stock options to purchase
150,000 shares of the Company's Common Stock pursuant to the Stock Option
Agreement which vest solely on the basis of the achievement of certain
operating results. In the event that Employee's employment is Terminated
without Cause all Performance Based Options shall be accelerated and shall
vest immediately.
2.5. Termination by Reason of Disability. If, during the term of this
Agreement, Employee, in the reasonable judgment of the Board of Directors of the
Company, has failed to perform his duties under this Agreement on account of
illness or physical or mental incapacity, and such illness or incapacity
continues for a period of more than three (3) consecutive months, the Company
shall have the right to terminate Employee's employment hereunder by twenty (20)
days written notification to Employee. In the event of termination by reason of
disability, Employee shall pay Employee all cash and other compensation which
would be due and owing to Employee under paragraph 2.3 of this Employment
Agreement if Employee's employment had been Terminated for Cause by the Company
rather than as a result of the Disability of Employee.
Upon receipt of notice of termination under this paragraph 2.5, Employee
may request an opportunity to discuss the termination of his employment at a
meeting of the Boards of Directors of the Company. Such request must be made, if
at all, in writing and shall be delivered to the Company withing five (5) days
from the date Employee receives notification of termination of employment under
this paragraph 2.5. Upon receipt of such request, the Company shall, within a
reasonable time, call and hold a Board of Directors meeting to allow Employee to
discuss termination for reason of disability.
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2.6 . Death. In the event of Employee's death during the term of this
Agreement, Employee's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs and the Company shall pay to
his estate or such beneficiaries as Employee may from time to time designate, to
the date of Employee's death all cash and other compensation which would be due
and owing to Employee under paragraph 2.3 of this Employment Agreement if
Employee's employment had been Terminated for Cause by the Company rather than
by as a result of the Death of Employee.
2.7. Voluntary Termination. In the event of a Voluntary Termination, The
Company shall pay to Employee all cash and other compensation which would be due
and owing to Employee under paragraph 2.3 of this Employment Agreement if
Employee's employment had been Terminated for Cause by the Company rather than
by the Voluntary Termination by Employee.
2.8. Good Reason Resignation. In the event of a Good Reason Resignation
Employee resigns, The Company shall continue to pay to Employee his salary for a
period of one (1) year from the date of Resignation for Good Reason and the
Company shall pay to Employee all cash and other compensation which would be due
and owing to Employee under paragraph 2.4 of this Employment Agreement if
Employee's employment had been Terminated without Cause by the Company rather
than the Good Reason Resignation by Employee.
3. Compensation. As his entire compensation for all services rendered to
the Company during the term of this Agreement, in whatever capacity rendered,
the Employee shall be paid, subject to withholding and other applicable
employment taxes, as follows;
3.1. Base Salary. Employee shall be paid a base salary of $100,000
per year commencing on the Effective Date. Such base salary shall be payable in
bi-monthly installments, provided however, if the first pay period of employment
is less than a full pay period, the first payment shall be prorated for the
number of days worked in the first calendar month of employment. Employee's base
salary shall be reviewed annually by the Board of Directors, and the base salary
for each employment year (or portion thereof) beginning July 1, 1999, shall be
determined by the Board of Directors which shall authorize an increase in
Employee's base salary for such year in an amount which, at a minimum, shall be
equal to the cumulative cost-of-living increment on the Base Salary as reported
in the "Consumer Price Index, Chicago, IL, All Items," published by the U.S.
Department of Labor (using January 1, 1995 as the base date for computation).
Provided however, that the base salary shall not increase by more than ten
percent (10%) per year due to increases in the Consumer Price Index.
3.2. Vacation. Employee shall be entitled to four (4) weeks of
vacation during each year during the term of this Agreement and any extensions
thereof, prorated for partial years.
3.3. Automobile Allowance. The Company shall pay Employee $300 per
month as an automobile allowance.
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3.4. Reimbursement for Expenses. During the term of this Agreement,
the Company shall reimburse Employee for reasonable and properly documented
out-of-pocket business and/or entertainment expenses incurred by Employee in
connection with his duties under this Agreement. The Company shall reimburse
Employee for 100% of his cellular telephone expenses on a monthly basis.
3.5. Additional Benefits. The Company shall provide the Employee
with health and disability insurance during the term of this Agreement. The
Employee shall be entitled to participate in such benefit and compensation plans
as are now generally available or later made generally available to the
employees or executive officers of the Company, including, but not limited to,
401(k) plans, stock option plans, profit sharing plans and other such plans and
benefits. The health plan offered to Employee hereunder will be at least as
advantageous to Employee as those offered by the Company prior to the date of
the execution of this Agreement.
4. Stock Options. As additional consideration for Employee's services
hereunder, the Employee shall be granted an option to purchase 400,000 shares of
Celtic Investment common stock at a price of $1.25 per share. The terms and
condition of such options are set forth in Exhibit "A" attached hereto and shall
be included in the Stock Option Agreement.
5. Covenant not to Compete. Employee agrees that he will not, during the
term of his employment, and for the ("Restriction Period") which is defined in
paragraph 5.1.2 of this Employment Agreement directly or indirectly, in any
state, county, city or metropolitan area in which the Company, or any subsidiary
of the Company has transacted business in the three (3) years preceding said
termination, own, manage, operate or control, or participate in the ownership,
management, operation or control of, or be connected with or have any interest
in, as a stockholder, director, officer, employee, agent, consultant, partner or
otherwise, any business which is engaged in the same business as the Company or
any Subsidiary of the Company. Specifically, but without limitation, this
covenant shall extend to all existing clients or customers of the Company and
all subsidiaries of the Company and all of the funding sources of the Company
and all subsidiaries of the Company.
5.1.1.If any of the provisions of this paragraph are held to be
unenforceable because of the scope, duration or area of its applicability, the
court making such determination shall have the power to modify such scope,
duration or area or all of them, and such provision shall then be applicable in
such modified form. The Company and the Employee acknowledge the reasonableness
of this covenant not to compete and the reasonableness of the geographic area
and duration of time which are part of this covenant.
5.1.2. The Restricted Period shall be that period of time during
which the Covenant not to Compete set forth in this paragraph 6 is binding upon
Employee. The Restricted Period shall initially be a period of twenty four (24)
months commencing on the Effective Date but shall be reduced thereafter by one
month for each full month of employment of Employee by the Company. Subject to
paragraph 6.1.3 below, in no event shall the Restricted Period be less
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than six (6) months from the date of termination of employment regardless of the
number of months of employment prior to termination.
0.0.0.Xx the event Employee's employment is terminated by the
Company without cause or in the event Employee Resigns for Good Reason, the
restrictions set forth in this paragraph 6 shall be limited to the time in which
Employee continues to receive a salary from The Company under this Agreement.
6. Confidential Information. Employee covenants and agrees not to
disclose, directly or indirectly, at any time either during employment or within
twenty four (24) months subsequent to the termination of employment to anyone
not an employee or consultant of the Company, and not to use at any time either
during employment or within two (2) years subsequent to the termination of
employment, except in the course of employment with the Company, any
Confidential Information, as defined below, of the Company or any parties
dealing with the Company unless he shall first secure the consent of the Company
in writing or unless he shall involuntarily be required to do so by a court
having competent jurisdiction, by any governmental agency having supervisory
authority over the business of he Company, or by any administrative body or
legislative body (including a committee thereof) with purported or apparent
jurisdiction to order Employee to divulge, disclose or make accessible such
information after notice to the Company. The Company and Employee hereby
acknowledge that: (a) the duration and geographical limitations imposed with
respect to said secret and confidential information are reasonable; and (b) the
restrictions stated hereinabove are reasonably necessary for the protection of
The Company's legitimate proprietary interests.
For purposes of this Agreement, the term Confidential Information shall
mean any and all:
(a) trade secrets concerning the business and affairs of the
Company, data, know-how, customer lists, current and anticipated customer
requirements, market studies, business plans, and any other information,
however documented, that is a trade secret within the meaning of the
Illinois Trade Secrets Act; and
(b) information concerning the business and affairs of the Company
(which includes historical financial statements, financial projections and
budgets, historical and projected sales, capital spending budgets and
plans, the names and backgrounds of key personnel, personnel training and
techniques and materials however documented; and
(c) notes, analysis, compilations, studies, summaries, and other
material prepared by or for the Company containing or based, in whole or
in part, on any information included in the foregoing.
Nothing contained in this paragraph 6 shall be deemed to apply to (i) any
information which is or becomes known to the public other than as a result of a
breach of this Section 6 by
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Employee or (ii ) any information which is lawfully acquired from a third party
who is not obligated to the Company to maintain such information in confidence.
7. Solicitation of Other Employees and/or Consultants. Employee agrees
that he will not, during the course of his employment or for a period of twenty
four (24) months commencing upon the expiration of his employment, either
voluntary or involuntary, for any reason whatsoever, directly or indirectly,
individually or on behalf of persons not now parties to this agreement, aid or
endeavor to solicit or induce any other employee, employees, consultant and/or
consultants of the Company to leave their employment with the Company in order
to accept employment of any kind with any other person, firm, partnership or the
Company.
8. Breach of Covenants by Employee. In the event that the Employee shall
breach paragraphs 5,6 or 7 of this agreement, then the Company shall be entitled
to seek injunctive relief against the Employee. In any proceeding commenced by
the Company to enforce paragraphs 5,6 or 7 of this Employment Agreement, the
prevailing party shall be liable and shall pay for all damages, court costs, and
reasonable attorneys' fees incurred as the direct result of commencing or
defending such proceeding. The provisions of paragraphs 5, 6 and 7 hereof shall
survive the termination of this Employment Agreement.
9. Miscellaneous.
9.1 This Employment Agreement and the written agreements referred to
herein, constitutes the entire agreement between the parties or the matters
discussed herein. It also supersedes any and all other agreements or contracts,
either oral or written, between the parties with respect to the subject matter
hereof.
9.2. The terms and conditions of this Employment Agreement may be amended
at any time by mutual agreement of the parties, provided that before any
amendment shall be valid or effective it shall have been approved by the Board
of Directors of the Company, reduced to writing and signed by the Company and
the Employee.
9.3. The invalidity or unenforceability of any particular provision of
this Employment Agreement shall not affect its other provisions, and this
Employment Agreement shall be construed in all respects as if such invalid or
unenforceable provision had been omitted.
9.4. Except as otherwise expressly provided herein, this Employment
Agreement shall be binding upon and inure to the benefit of the Company, its
successors and assigns, and upon the Employee, his administrators, executors,
legatees, heirs and assigns.
9.5. This Employment Agreement shall be construed and enforced under and
in accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, the parties have executed this Employment Agreement
the day and year first above-written.
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Celtic Investment, Inc. Employee:
By /s/Xxxxx Xxxxxx, Xx. By /s/ Xxxxxxx X. Xxxxxx
Xxxxx Xxxxxx, Xx., Senior Vice President Xxxxxxx X. Xxxxxx
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EXHIBIT "A"
EMPLOYMENT AGREEMENT
As additional compensation under the Employment Agreement to which the
Exhibit "A" is attached, the Company shall grant the Employee, the following
options("Options") to purchase shares of its common stock.
1. Exercise Price - All Options granted hereby shall be exercisable at the
price of $1.25 per share (the "Exercise Price"), the Closing Price of the
Company's common stock on the day of the grant of options as reported by NASDAQ.
2. Initial Option - Upon the Effective Date of the Employment Agreement,
the Company shall grant Employment an Initial Option entitling him to purchase
100,000 shares of the Company at the Exercise Price. The Initial Option shall be
fully vested as of the Effective Date and shall be exercisable for a period of
five years from the Effective Date.
3. Time Based Options - Options to purchase 150,000 shares shall be deemed
to be "Time Based Options ". The Time Based Options shall be granted on the
Effective Date but shall vest on each Anniversary Date of the Employment
Agreement. Options to purchase 50,000 shares shall vest on the first anniversary
date of the Employment Agreement, Options to purchase 50,000 shares shall vest
on the second anniversary date of the Employment Agreement, and Options to
purchase 50,000 shares shall vest on the third anniversary date of the
Employment Agreement. All Time Based Options shall be exercisable at the
Exercise Price. All Time Based Options shall be exercisable for a period of five
years from the date of vesting.
4. Performance Based Options - Options to purchase 150,000 shares shall be
deemed to be "Performance Based Options ". The Performance Based Options shall
be granted on the Effective Date but shall vest on each Anniversary Date of the
Employment Agreement. The Performance Based Options shall vest upon the Company
achieving increases in total assets, calculated on a consolidated basis and
determined in accordance with its annual Audited Financial Statements or its
unaudited interim statements. The Measuring Base Date shall be September 30,
1998. If the Company's total assets, calculated on a consolidated basis,
increase over the Measuring Base Date as provided below, the Performance Based
Options shall vest according to the following schedule:
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