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EXHIBIT 10.28
EMPLOYMENT AGREEMENT
ELMAGCO, INC., a Delaware corporation (the "Company") hereby employs X.X. XXXXX,
XX. (hereinafter referred to as "Employee") as President and Chief Executive
Officer of the Company, effective July 1, 1998, on the terms and conditions set
forth herein. BOOTS & XXXXX INTERNATIONAL WELL CONTROL, INC., ("Boots & Xxxxx"),
is a party hereto for the purposes of Section 3(f) hereof and to ensure the
performance by the Company of its obligations hereunder.
WITNESSETH
1. Duties. Employee shall perform such services regarding the operations
of the Company as the Board of Directors may from time to time reasonably
request, and Employee will only be assigned duties of the type, nature and
dignity normally assigned to an officer of his position with respect to a
corporation of the size, status and nature of the Company. Employee shall at all
times faithfully, with diligence, and to the best of his ability, experience and
talents, perform all the duties that may be required of and from him pursuant to
the terms of this agreement. It is expressly understood and agreed that in the
performance of his duties and obligations hereunder, Employee shall at all times
be subject to the direction and control of the Board of Directors of the
Company. Employee shall devote substantially all of his time to the performance
of his duties hereunder and shall exclusively conduct the business of Employer
and its affiliates. The expenditure of reasonable amounts of time by the
Employee for personal, charitable or professional activities or to the business
of L. E., Inc., and Xxxx Xxxxxxx Company, Inc. shall not be a breach of this
Agreement, provided such activities do not materially interfere with the
services required to be rendered by Employee under this Agreement, and are not
contrary to the business or other interests of the Company. Employee shall at
all times faithfully, with diligence and to the best of his ability, experience
and talents, perform all the duties that may be required of and from him
pursuant to the terms hereof.
2. Term. The employment contemplated by this Agreement shall commence on
July 1, 1998 and continue (unless terminated pursuant to the terms hereof) for a
term of five (5) years.
3. Compensation. In consideration of the work and other services that
Employee performs for the Company hereunder, the Company shall pay Employee the
following:
(a) Base Salary. During the term hereof, the Company shall pay Employee
a gross annual salary of $140,000, payable semi-monthly in accordance
with the company's normal payroll policies, subject to withholding for
federal income tax, social security, state and local taxes, if any, and
any other sums that the Company may be legally required to withhold.
Employee will be eligible for all cost of living adjustments that are
awarded to the Company employees.
(b) 1998 Incentive Bonus. For the year ending December 31, 1998, the
Company will pay to Employee an incentive bonus of $200,000 (the "1998
Incentive Bonus"), which may be paid in cash or, at the election of the
Company, up to one-half may be paid in shares of common stock, $.00001
par value, of Boots & Xxxxx ("Common Stock").
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If the Company elects to pay a portion of the 1998 Incentive Bonus in
Common Stock, the value of each share of Common Stock, for the purposes
hereof, shall be equal to the Market Price (as defined in subsection
3(e) hereof) and the cash portion of the 1998 Incentive Bonus shall be
reduced by the product of the number of shares of Common Stock issued
to Employee multiplied by the Market Price. In the event the Company
exercises its election to pay a portion of the bonus in shares of
Common Stock, it shall increase the cash paid to Employee by an amount
equal to (i) the federal income tax liability of Employee applicable to
the portion of such bonus paid in shares of Common Stock and (ii) the
federal income tax liability of Employee applicable to the cash
adjustment paid pursuant to (i) above.
(c) Default Incentive Bonus. For the year ended December 31, 1999, and
each succeeding year during the term hereof in which the Company fails
to enact the Alternative Incentive Bonus Plan discussed in subsection
3(d) below, the Company shall pay Employee a bonus based on the
Company's annual financial performance, as follows: Employee will
receive an amount equal to 4% of the net after tax income of the
Company up to $2,000,000; 5% of the net after tax income of the Company
in excess of $2,000,000 but less than $3,000,000; and 5.5% of the net
after tax income of the Company that is in excess of $3,000,000.
The Default Incentive Bonus shall be calculated using the audited
financial statements of the Company for the year ended December 31
prepared in accordance with generally accepted accounting principles
consistently applied and adjusted on a "tax-affected" basis to exclude
increases in amortization and depreciation expense resulting from the
step-up in basis from the Company's 338(h)(10) election in connection
with the acquisition of the Company by Boots & Xxxxx on July 23, 1998
(the "Acquisition"), the treatment of the Acquisition as a purchase,
intercompany charges that the Company would not ordinarily have paid or
incurred in connection with the conduct of its business, and to include
interest expense for the Company's working capital and capital
expenditure requirements for such period incurred on behalf of the
Company by Boots & Xxxxx or another affiliate of the Company (unless
already reflected in such financial statements as intercompany
charges). In no event shall interest expense on account of debt
incurred by Boots & Xxxxx to acquire the Company be included in such
calculation.
If the bonus amount which will accrue to the Employee under this
Section 3(c) is reduced as a result of the sale, transfer, or
assignment of any "core business" of the Company (after taking into
account any increases through additions to existing or new core
businesses), the manner in which the Default Incentive Bonus is
calculated shall be equitably adjusted in order to give the Employee
the opportunity to earn the same level of Default Incentive Bonus he
would have earned if not for such sale, transfer, or assignment. The
terms "core business" or
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"core businesses" means the brake, industrial generator or thruster
businesses of the Company or any other business line that represents
25% or more of the fair market value of the assets of the Company or
25% or more of the annual operating revenues of the Company.
(d) Alternative Incentive Bonus Plan. Boots & Xxxxx intends to develop
a broad based incentive compensation plan for senior management which
takes into account the consolidated financial performance of Boots &
Xxxxx in addition to the financial performance of the subsidiary or
business group by which the plan participants are employed.
Accordingly, the Company and Employee agree that should Boots & Xxxxx
implement an incentive plan (the "Alternative Incentive Bonus Plan")
covering key employees (including Employee) and such plan offers
Employee "Comparable Economic Value" (as defined below) to the Default
Incentive Bonus, at the election of the Company Employee's bonuses, if
any, shall be determined in accordance with the terms of such
Alternative Incentive Bonus Plan for all periods covered by such plan
and the Default Incentive Bonus provisions of subsection (c) hereof
shall be of no further force or effect.
"Comparable Economic Value" means a plan that, through any combination
of cash, stock, stock options, stock appreciation rights or any similar
compensation arrangement, offers potential compensation to Employee
equal to or greater than the Default Incentive Bonus set forth above.
For purposes of such comparison, the Default Incentive Bonus shall have
a value of $185,000 per year. The value of the Alternative Incentive
Bonus Plan will be determined based upon the projected bonus
compensation payable to Employee thereunder for the calendar year in
which it is to go into effect and the bonus compensation that would
have been paid to Employee under the Alternative Incentive Bonus Plan
for the year immediately preceding the year such plan is to go into
effect. The projected compensation and proforma compensation shall be
determined in the good faith judgment of the Board of Directors of the
Company. In other words, if the Alternative Incentive Bonus Plan would
have provided and is projected to provide incentive compensation to
Employee equal to or greater than $185,000 for the preceding year and
for the current year, the Company shall, at its option, have the right
to elect by written notice to Employee that such plan shall govern
Employee's incentive compensation, if any, in lieu of subsection 3(c)
hereof. Thereafter all incentive compensation shall be governed by the
terms of such plan, without the necessity for any further calculation
of "Comparable Economic Value." Further, the specific terms and
provisions of such plan shall be solely within the discretion of Boots
& Xxxxx, the only obligation hereunder being that the Comparable
Economic Value determination be met upon implementation of the plan
with respect to Employee.
(e) Definition of Market Price. As used herein, the term "Market Price"
means the average of the daily closing prices per share of the Common
Stock for the thirty (30) consecutive trading days immediately
preceding the day as of which Market Price is being determined. The
closing price for each day shall be the last reported
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sale price or, in case no such sale takes place on such day, the
average of the reported closing bid and asked prices, in either case on
the American Stock Exchange, or, if the shares of the Common Stock are
not listed or admitted to trading on the American Stock Exchange, on
the principal national securities exchange on which the shares are
listed or admitted to trading, or, if the shares are not so listed or
admitted to trading, the average of the highest reported bid and lowest
reported asked prices as furnished by the National Association of
Securities Dealers, Inc. (the "NASD") through NASDAQ or through a
similar organization if NASDAQ is no longer reporting such information
or as reported on the NASD's OTC Electronic Bulletin Board ("OTC"). If
shares of the Common Stock are not listed or admitted to trading on any
exchange or quoted through NASDAQ or any similar organization or
reported on OTC, the Market Price shall be deemed to be the value of a
share of the Common Stock as determined in good faith by the Company's
Board of Directors as expressed by a resolution of such board as of a
date which is within fifteen (15) days of the date as of which the
determination is to be made.
Payment of incentive bonuses under subsections 3(b) and 3(c) will be
made as soon as practical after receipt by the Company of the audited
financial statements of the Company, but not later than 45 days after
receipt of such statements. Incentive bonuses under subsection 3(d)
will be paid in accordance with the terms of such plan or, if such plan
does not specify the date of payment, in accordance with the foregoing.
(f) Options. Upon the execution of this Agreement, Boots & Xxxxx will
grant to Employee the option to acquire 100,000 shares of Boots & Xxxxx
subject to the following vesting schedule:
July 1, 1998 20,000 shares
July 1, 1999 20,000 shares
July 1, 2000 20,000 shares
July 1, 2001 20,000 shares
July 1, 2002 20,000 shares
The option price will be $2.50 per share, and the option shall
be represented by a written agreement containing terms and provisions
substantially the same as those contained in similar options granted by
Boots & Xxxxx (except as expressly modified herein) and shall be
granted in a transaction structured so as to comply with the exemption
granted by Rule 16b-3 of the Securities Exchange Act of 1934, as
amended. All unexercised options will expire on July 1, 2008. Vested
options will survive any termination of Employee's employment
hereunder. In the event Employee's employment is terminated without
cause, or upon a change of control (the acquisition of 50% or more of
the voting stock by any unaffiliated person, entity or related group)
of Boots & Xxxxx or the Company during the term of Employee's
employment, the unvested portion of Employee's option shall immediately
vest. The unvested portion of Employee's option shall immediately
terminate if Employee's employment is terminated pursuant to Section
10(c) or 7(d) hereof.
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(g) Vacation. Employee shall be entitled to vacation in accordance with
the vacation policies of the Company from time to time in effect with
respect to the executive employees of the Company.
(h) Other Benefits. During the term of this Agreement, Employee shall
be entitled to participate in all employee benefit plans from time to
time made available to the executives or general employees of the
Company or the executives of Boots & Xxxxx.
(i) Insurance. The Company will provide Employee with coverage under a
policy of hospitalization and major medical insurance at no cost to the
Employee. Employee's dependents may be covered under such insurance
policy, subject to the terms of such policy, at the expense of
Employee. The Company will provide life insurance coverage and short
term and long term disability insurance coverage in an amount to be
determined by the Board of Directors of the Company. Employee
acknowledges that Boots & Xxxxx or the Company may seek to secure a
policy of Key Man life insurance on the life of Employee, with death
benefits payable to Boots & Xxxxx or the Company. Employee agrees to
cooperate in securing the same.
4. Expenses. The Company shall reimburse Employee or any affiliate of
Employee for all reasonable expenses and disbursements incurred by Employee or
such affiliate, respectively, in connection with Employee's duties hereunder,
including expenses for entertainment and travel, as are consistent with the
policies and procedures of the Company.
5. Confidential Information. Employee acknowledges that in the course of
employment by the Company, Employee will receive certain trade secrets and
confidential information belonging to the Company or Boots & Xxxxx and its
affiliates that such companies desire to protect as confidential. For the
purposes of this agreement, the term "confidential information" shall mean
information of any nature and in any form which at the time is not generally
known to those persons engaged in business similar to that conducted by the
Company or Boots & Xxxxx and its affiliates which is proprietary or trade secret
in nature, or which has been revealed to Employee accompanied by the delivery of
a written statement which identifies such information as confidential. Employee
agrees that such information is confidential and that he will not reveal such
information to anyone other than officers, directors and employees of the
Company or Boots & Xxxxx and its affiliates. Upon termination of employment, for
any reason, Employee shall surrender to the party owning such information all
papers, documents and other property of such party.
6. Obligation of Loyalty. During the term of employment, Employee agrees
that he will not:
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(a) make a statement or perform any act intended to advance an interest
of any existing or prospective competitor of the Company or Boots &
Xxxxx or its affiliates in any way; that will or may injure the Company
or Boots & Xxxxx or its affiliates in any way; or solicit or encourage
any other employee of such companies to do any such act;
(b) inform any existing or potential customer, supplier or creditor of
the Company or Boots & Xxxxx or its affiliates that Employee intends to
resign; or make any statement or do any act intended to cause any
existing or potential customer, supplier or creditor of the Company or
Boots & Xxxxx or its affiliates to learn of Employee's intention to
resign; or
(c) discuss with any existing or potential customer, supplier or
creditor of the Company or Boots & Xxxxx or its affiliates the present
or future availability of services provided by a business that competes
with the Company or Boots & Xxxxx or its affiliates.
7. Disclosure of Information, Ideas, Concepts, Improvements, Discoveries
and Inventions. Employee agrees that during his employment, Employee shall
promptly disclose in writing to the Company all information, ideas, concepts,
improvements, discoveries and inventions, whether patentable or not, and whether
or not reduced to practice, which are conceived, developed, made or acquired by
Employee, either individually or jointly with others, and which relate to the
business, products or services of the Company or Boots & Xxxxx or its
affiliates, irrespective of whether Employee utilized the Company's time or
facilities and irrespective of whether such information, idea, concept,
improvement, discovery or invention was conceived, developed, discovered or
acquired by the Employee on the job, at home, or elsewhere (collectively, the
"Inventions").
8. Ownership of Information, Ideas, Concepts, Improvements, Discoveries,
Inventions, and All Original Works of Authorship.
(a) All Inventions are and shall be the sole and exclusive property of
the Company. Moreover, all drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs,
maps and all other writings or materials of any type embodying any of
such Inventions are and shall be the sole and exclusive property of the
Company. (b) Employee hereby specifically sells, assigns and transfers
to the Company all of his worldwide right, title and interest in and to
all such Inventions, and any United States or foreign applications for
patents, inventor's certificates or other industrial rights that may be
filled thereon, including divisions, continuations,
continuations-in-part, reissues and/or extensions thereof, and
applications for registration of any names and marks included
therewith. Both during the period of Employee's employment and
thereafter, Employee shall assist the Company and its nominee at all
times in the protection of such Inventions, both in the United States
and all foreign countries, including but not limited to, the execution
of all lawful oaths and all assignment documents requested by the
Company or its nominee in connection with the preparation, prosecution,
issuance or enforcement of any applications for United
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States or foreign letters patent, including divisions, continuations,
continuations-in-part, reissue, and/or extensions thereof, and any
application for the registration of names and marks included therewith.
(c) Moreover, if during Employee's employment, Employee creates any
original work of authorship which is the subject matter of copyright
relating to the business, products, or services of the Company or Boots
& Xxxxx or its affiliates whether such work is created solely by
Employee or jointly with others, the Company shall be deemed the author
of such work if the work is prepared by Employee in the scope of his or
her employment; or, if the work is not prepared by Employee within the
scope of his or her employment but is specifically ordered by Employer
as a contribution to a collective work, as a part of a motion picture
or other audiovisual work, as a translation, as a supplementary work,
as a compilation or as an instructional text, then the work shall be
considered to be work made for hire and the Company shall be the author
of the work. In the event such work is neither prepared by the Employee
within the scope of his employment or is not a work specially ordered
and deemed to be a work made for hire, then Employee hereby agrees to
assign, and by these presents, does assign, to the Company all of
Employee's worldwide right, title and interest in and to such work and
all rights of copyright therein. During the period of Employee's
employment, Employee agrees to assist the Company and its nominee, at
any time, in the protection of the Company's worldwide right, title and
interest in and to the work and all rights or copyright therein,
including but not limited to, the execution of all formal assignment
documents requested by the Company or its nominee and the execution of
all lawful oaths and applications for registration of copyright in the
United States and foreign countries.
9. Agreement Not To Solicit or Compete. During the term hereof and for a
period of two years after the termination of employment hereunder (the
"Termination Date"), regardless of how terminated, Employee will not, singly,
jointly, or as a partner, member, contractor, employee or agent of any
partnership or as an officer, director, employee, agent, contractor, stockholder
or investor in any other entity or in any other capacity, directly or
indirectly:
(a) own, manage, operate, join, control or participate in the
ownership, management, operation or control of, work for, permit the
use of his name by, provide financial or other assistance to, or be
connected in any manner with, any business which engages in a business
substantially similar to or competitive with the Company's business as
carried on as of the Termination Date, in any markets in which the
Company conducts business as of the Termination Date or conducted
business at any time within the three (3) years prior to such date;
(b) induce, or attempt to induce, any person or party who, on the
Termination
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Date is employed by the Company or Boots & Xxxxx or its affiliates or
at any time during the term of this covenant is, or may be, or becomes
an employee of any of such companies, to terminate his, her or its
employment with such company;
(c) induce, or attempt to induce, any person, business or entity which
is or becomes a customer or supplier of the Company or Boots & Xxxxx or
its affiliates, or which otherwise is a contracting party with the
Company or Boots & Xxxxx or its affiliates, as of the Termination Date,
or at any time during the term hereof, to terminate any written or oral
agreement or understanding with the Company or Boots & Xxxxx or its
affiliates, or to interfere in any manner with any relationship between
the Company or Boots & Xxxxx or its affiliates and such customer or
supplier;
(d) employ or otherwise engage in any capacity any person who at the
Termination Date or at any time during the period two years prior
thereto was employed, or otherwise engaged, in any capacity by the
Company or Boots & Xxxxx or its affiliates and who, by reason thereof
is or is reasonably likely to be in possession of any confidential
information.
Employee acknowledges and agrees that the provisions of this section constitute
a material, mutually bargained for portion of the consideration to be delivered
under this agreement and that it is a condition precedent to the creation and
existence of the obligations of the Company and Boots & Xxxxx hereunder.
Employee acknowledges and agrees that (i) the breach or anticipated breach by
Employee of any provision of this Section 9 will result in immediate and
irreparable injury for which there will not be an adequate remedy at law; (ii)
in the event of the termination of this agreement, Employee has experience and
capabilities that will enable him to obtain alternative employment that will not
cause or require him to violate the covenants in this Section 9; and (iii)
specific enforcement of this agreement by way of an injunction shall not prevent
Employee from earning a reasonable livelihood. Employee covenants and agrees
that the Company shall be entitled, in the event of a breach or an anticipated
breach of such provisions by Employee, to bring a civil action in any court of
competent jurisdiction for specific performance, affirmative and/or negative
injunctive relief and/or to seek any and all legal and equitable remedies to
which the Company may be entitled. Accordingly, Employee hereby submits to the
jurisdiction of such court and waives the defense in any equitable proceeding
that there is an adequate remedy at law for any such breach or anticipated
breach and such party shall not urge in any such action or proceeding the claim
or defense that such remedy at law exists. Any remedy provided for hereunder
shall not be exclusive or exhaustive and the Company may resort to other
remedies or any combination of remedies as it may choose or as otherwise may be
available to it.
Employee hereby acknowledges and agrees that the geographic area and the time
period and nature of the agreed restrictions evidenced hereby are necessary and
reasonable for the protection of the Company and Boots & Xxxxx. Employee
acknowledges and agrees
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that should the totality of the time period and/or geographic area of this
Section 9 be declared unenforceable, for whatever reason, the terms and
provisions hereof shall be construed and enforced such that the maximum
permissible effect will be given to such terms and provisions in order to effect
the Company's and Boots & Xxxxx' interests.
10. Termination for Cause by the Company. The Company may terminate
employment of Employee under this agreement if any of the following occur:
(a) the death of Employee;
(b) the Employee becomes, in the good faith opinion of the Company,
physically or mentally disabled, for a period of more than thirty (30)
consecutive days, or for a period of more than sixty (60) days in the
aggregate during a twelve (12) month period, to extent he is unable to
perform his duties hereunder;
(c) the Employee continues to be in breach of any material provision of
this agreement after notice thereof and a ten (10) day opportunity to
cure;
(d) the Employee fails, or refuses to comply with the policies,
standards or regulations of the Company that have been made known to
Employee after notice thereof and a ten (10) day opportunity to cure;
or
(e) the Employee commits, is arrested or officially charged with any
felony, or any crime involving moral turpitude, which, in the good
faith opinion of the Company, would impair Employee's ability to
perform his duties hereunder or would impair the business reputation of
the Company or Employee misappropriates any funds or property of
Employer.
In the event of a termination for cause pursuant to the provisions of this
agreement, the Company shall give a written statement to Employee (or his
representative) specifying the event causing such termination, and the
termination will be immediately effective. In the event of a termination for
cause pursuant to the provisions above, this agreement shall be wholly
terminated (except with respect to any of the provisions of this agreement
relating to activities and conduct after the termination of the employment
relationship between the Company, Boots & Xxxxx and Employee which shall remain
in full force and effect, and be enforceable as provided for herein) and
Employee shall not be entitled to any further compensation or any other benefits
provided for herein, and shall not be entitled to severance pay; provided,
however, that if such termination is pursuant to the death or disability of
Employee, Employee (or his estate) shall be entitled to receive the base salary
and bonus compensation, if any, to which Employee would have been entitled
pursuant to Section 3 hereof to the date of Employee's death or disability. The
calculation of Employee's bonus in such event shall be determined using the
financial information of the Company to the date of death or disability and
shall be calculated to such date rather than on a full fiscal year.
11. Termination for Cause by Employee. Employee may terminate his
employment hereunder if any of the following occurs:
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(a) there is a material change or alteration in the duties,
responsibilities or working conditions of Employee after notice thereof
and a ten (10) day opportunity to cure; or
(b) Boots & Xxxxx or the Company continues to be in breach of any
material provisions of this agreement after notice thereof and a ten
(10) day opportunity to cure.
12. Notices. All notices or other communications pursuant to this contract
may be given by personal delivery, or by certified mail, addressed to the home
office of Boots & Xxxxx or to the last known address of Employee. Notices given
by personal delivery shall be deemed given at the time of delivery, and notices
sent by certified mail shall be deemed given when deposited with the U.S. Post
Office.
13. Entirety of Agreement. This Agreement contains the entire understanding
of the parties and all of the covenants and agreements between the parties with
respect to the employment.
14. Governing Law. This Agreement shall be construed and enforced in
accordance with, and be governed by, the laws of the State of Texas.
15. Waiver. The failure of either party to enforce any rights hereunder
shall not be deemed to be a waiver of such rights, unless such waiver is an
express written waiver which has been signed by the waiving party. Waiver of one
breach shall not be deemed a waiver of any other breach of the same or any other
provision hereof.
16. Assignment. This Agreement shall not be assignable by Employee. In the
event of a future disposition of the properties and business of the Company or
Boots & Xxxxx by merger, consolidation, sale of assets, or otherwise, then the
Company and Boots & Xxxxx may assign this Agreement and all of its rights and
obligations to the acquiring or surviving entity; provided that any such entity
shall assume all of the obligations of the Company and Boots & Xxxxx hereunder.
17. Arbitration. Any dispute, controversy or claim arising out of or
relating to this Agreement shall be submitted to and finally settled by binding
arbitration to be held in Houston, Texas, in accordance with the rules of the
American Arbitration Association in effect on the date of this Agreement, and
judgment upon the award rendered by the arbitrator(s) may be entered in any
court having jurisdiction thereof. All agreements contemplated herein to be
entered into to which the parties hereto are parties shall contain provisions
which provide that all claims, actions or disputes pursuant to, or related to,
such agreements shall be submitted to binding arbitration. In any proceeding to
enforce the provisions hereof by specific performance or such other remedy as
may be available at law or in equity, the prevailing party shall be entitled to
recover reasonable expenses incurred by him, including reasonable attorney's
fees.
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DATED, this day of , 1998.
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ELMAGCO, INC. EMPLOYEE
By:
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BOOTS & XXXXX INTERNATIONAL
WELL CONTROL, INC.
By:
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