September 27, 1996
Xx. Xxxxxxx X. Xxxxxx
c/x Xxxxxx'x Incorporated
000 Xxxxxxxxx X.X.
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Re: Employment Agreement
Dear Xx. Xxxxxx:
Xxxxxx'x Incorporated, a New Mexico corporation (the
"Corporation"), recognizes that your contribution to the growth and success of
the Corporation has been substantial and desires to assure the Corporation of
your continued employment. The Corporation understands that you desire to
continue to serve the Corporation on the terms set forth in this letter (the
"Agreement"). In consideration of the promises hereafter set forth, the
Corporation and you agree as follows:
1. Employment. The Corporation agrees to continue
your employment, and you agree to continue to serve the Corporation, subject to
the terms and conditions set forth herein.
2. Term of Agreement. This Agreement will commence on
the Effective Date (as defined in Subsection 12(c)) and shall have a perpetual
term of five (5) years, such that on any given date, this Agreement will have a
remaining term of five (5) years from such date.
3. Position and Duties. During the term of this
Agreement, you shall serve as Chairman of the Board, President and Chief
Executive Officer of the Corporation. As such, you shall fulfill the duties and
responsibilities of Chairman of the Board, President and Chief Executive Officer
as they exist as of the date hereof. You agree to devote your time, skill and
attention to the business of the Corporation during normal business hours to the
extent necessary to discharge the duties and responsibilities assigned to you
hereunder. If the Corporation believes you have breached your responsibilities
and/or duties under this Section 3, it must deliver to you a written notice
specifically identifying the manner in which the Corporation believes that you
have failed to substantially perform your duties and/or carry out your
responsibilities. The Corporation shall grant you thirty (30) days from the date
you receive such notice to cure such deficiency and resume performance of your
responsibilities and/or duties.
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4. Compensation.
a. Base Salary. You shall receive a minimum
base salary ("Base Salary") of no less than $195,000 per year, which shall be
reviewed at least annually by the Board of Directors (the "Board"), or by a
Compensation Committee of the Board, if one has been appointed by the Board (the
"Committee"), and shall be increased at the discretion of the Board; provided,
however, that at a minimum, your Base Salary shall be increased each year,
commencing twelve (12) months from the Effective Date (as defined in Subsection
12(c)) of this Agreement, by an amount equal to the Base Salary multiplied by
the increase in the national Consumer Price Index from the preceding year. Any
increase in your Base Salary or other compensation shall in no way limit or
reduce any other obligation of the Corporation hereunder, and once established
at an increased rate, your Base Salary shall not thereafter be reduced. After
withholding and other required deductions, your Base Salary shall be paid in
equal installments in accordance with the policies of the Corporation as may be
established from time to time. Any reference herein to the Board shall, where
appropriate, encompass the Committee, if one has been appointed.
b. Bonuses. You shall be eligible to receive
bonuses from time to time in accordance with any bonus plan adopted by the
Board, in such amounts as shall be determined by the Board.
c. Expenses. During the term of your
employment hereunder, you shall be entitled to prompt reimbursement for all
ordinary and necessary business expenses incurred by you in furtherance of the
Corporation's business and in accordance with the policies and procedures of the
Corporation, as amended from time to time.
d. Benefits. You shall be entitled to
receive a package of benefits that includes all of the programs, plans and
perquisites currently provided to you by the Corporation as they may exist from
time to time.
5. Termination. You shall be entitled to the benefits
provided in Subsection 6(d) hereof upon termination of your employment during
the term of this Agreement unless such termination is (i) because of your
Disability (as hereafter defined), (ii) by the Corporation for Cause (as
hereafter defined), or (iii) by you other than for Good Reason (as hereafter
defined).
a. Disability. If, as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the full-time performance of your duties with the Corporation for six (6)
consecutive months, and within thirty (30) days after the Corporation
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September 27, 1996
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gives you written notice of termination you shall not have returned to the
full-time performance of your duties, the Corporation may terminate your
employment for "Disability."
b. Cause. Termination by the Corporation of
your employment for "Cause" shall mean termination upon (i) your conviction of a
felony that substantially impairs your ability to perform your duties with the
Corporation, or (ii) your willful failure to cure, or commence curing and
diligently pursue thereafter, a specified deficiency in the performance of your
duties and/or responsibilities within the thirty (30) day period described in
Section 3 hereof.
c. Good Reason. You shall be entitled to
terminate your employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, any one or more of the
following:
(1) the assignment to you of any
duties which you determine in good faith to be inconsistent with, or a reduction
of powers or functions associated with, your position, duties, responsibilities
and status with the Corporation, a change in your reporting responsibilities or
in the conditions of your employment, or improper intervention in your ability
to perform the duties and responsibilities that have been assigned to you under
this Agreement, except in connection with your termination of employment by the
Corporation for Cause or for Disability. If you resign your employment with the
Corporation within sixty (60) days after a Change of Control (as defined in
Subsection 12(b)) of the Corporation for reasons specified in this Subsection
5(c)(1), it shall be deemed to be a determination made in good faith;
(2) a reduction by the Corporation
in your Base Salary as in effect on the date hereof or as the same shall be
increased as provided herein;
(3) the failure of the Corporation
to cause any successor to expressly assume and agree to perform this Agreement
pursuant to Subsection 8(a) hereof;
(4) any purported termination by the
Corporation of your employment that is not effected by a Notice of Termination
(as defined in Subsection 12(d)) pursuant to Subsection 5(d) hereof and/or for
grounds not constituting Cause.
d. Notice of Termination. Any termination by
the Corporation for Cause or by you for Good Reason shall be communicated by
Notice of Termination to the other party hereto.
e. Date of Termination. "Date of
Termination" shall mean the date specified in the Notice of Termination, where
required, or in any other case the date upon which you cease to perform services
for the Corporation; provided that if within thirty (30) days
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September 27, 1996
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after any Notice of Termination is given, the party receiving such Notice of
Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date finally determined to be
the Date of Termination, either by mutual written agreement of the parties or by
a final judgment, order or decree of a court of competent jurisdiction (which is
not appealable or the time for appeal therefrom having expired and no appeal
having been perfected); provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such dispute with
reasonable diligence. Notwithstanding the pendency of any such dispute, the
Corporation will continue to pay you your full compensation in effect when such
notice was given (including, but not limited to, Base Salary) and continue you
as a participant in all compensation, benefit and insurance plans in which you
were a participant when such notice was given until the dispute is finally
resolved in accordance with this Subsection 5(e). Amounts paid under this
Subsection 5(e) are in addition to all other amounts due under this Agreement
and shall not be offset against or reduce any other amounts due under this
Agreement.
6. Compensation Upon Termination or During
Disability. Upon termination of your employment or during a period of Disability
you shall be entitled to the applicable benefits set forth below:
a. During any period in which you fail to
perform your full- time duties with the Corporation as a result of incapacity
due to physical or mental illness, you shall (i) receive your Base Salary at the
rate in effect at commencement of any such period until your employment is
terminated pursuant to Subsection 5(a) hereof; and (ii) at the option of the
Corporation, receive either (A) lump sum payment equal to two (2) years of your
Base Salary in effect on the date your employment is terminated plus an amount
equal to all bonuses paid to you during the two (2) years preceding the date
your employment is terminated pursuant to Section 5(a) hereof (the "Disability
Amount"), or (B) payment of the Disability Amount in twenty fourt (24) equal
monthly installments commencing one month from such termination date.
Thereafter, your benefits shall be determined in accordance with the
Corporation's retirement, insurance and other applicable programs and plans then
in effect. Anything in this Subsection 6(a) to the contrary notwithstanding, any
payments of Base Salary under this Agreement for any period during which you
receive payment under any short or long-term disability plans for which premiums
are paid by the Corporation shall be reduced by the amount of such disability
payments.
b. If your employment shall be terminated by
the Corporation for Cause or by you other than for Good Reason, the Corporation
shall pay you your full Base Salary through the Date of Termination at the rate
in effect at the time Notice of Termination is given or on the Date of
Termination if no Notice of Termination is required hereunder, together
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September 27, 1996
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with accrued vacation pay, if any, and the Corporation shall have no further
obligation to you under this Agreement.
c. If your employment terminates by reason
of your death, your benefits shall be determined in accordance with the
Corporation's survivors' benefits, insurance and other applicable programs and
plans then in effect and all benefits payable under this Agreement shall cease.
d. If your employment is terminated (i) by
the Corporation other than for Cause or Disability or (ii) by you for Good
Reason, then you shall be entitled to the following benefits:
(1) the Corporation shall pay you
your full Base Salary together with any bonuses that have accrued but have not
been paid through the Date of Termination at the rate in effect at the time
Notice of Termination is given, or the Date of Termination where no Notice of
Termination is required;
(2) in lieu of any further salary
payment to you for periods subsequent to the Date of Termination, the
Corporation shall, at its option; either (i) pay you a lump sum payment equal to
the sum of five (5) years of your annual Base Salary as in effect immediately
prior to the occurrence of the circumstances giving rise to your termination
plus an amount equal to all bonuses paid to you in addition to your Base Salary
in the five-year period preceding the Date of Termination (the "Severance
Amount"), or (ii) pay you the Severance Amount in sixty (60) equal monthly
installments commencing one month following the Date of Termination.
(3) the Corporation shall maintain
in full force and effect for your continued benefit and the benefit of your
eligible dependents and beneficiaries, until the first to occur of (i) your
attainment of alternative employment or (ii) five (5) years from the Date of
Termination, the employee benefits under the Corporation's benefit plans that
you or they were eligible to receive immediately prior to the Date of
Termination, subject to the terms and conditions of such benefit plans; provided
that your continued participation or the participation of such eligible
dependents or beneficiaries is possible under the general terms and provisions
of such benefit plans. In the event that your participation or the participation
of such eligible dependents or beneficiaries in any such benefit plan is barred,
the Corporation shall arrange to provide you and such eligible dependents or
beneficiaries with benefits substantially similar to those to which you and such
eligible dependents or beneficiaries are entitled under such benefit plans for
the period stated above. At the end of the period of coverage, you shall have
the option to have assigned to you, at no cost and with no apportionment of
prepaid premiums, any assignable insurance policy owned by the Corporation and
relating specifically to you; and
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September 27, 1996
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(4) notwithstanding any term to the
contrary in any options or warrants to purchase Common Stock of the Corporation
which have been granted to you by the Corporation, or in any agreement or plan
relating thereto, any such options or warrants shall become immediately
exercisable and shall remain exercisable for the longer of (A) one (1) year or
(B) the then remaining unexpired term of such options or warrants.
e. The payments provided for in Subsections
(6)(d)(1) and (2) shall be made by the Corporation to you not later than the
fifth day following the "Date of Termination."
f. You shall not be required to mitigate the
amount of any payment provided for in this Section 6, including but not limited
to, seeking other employment, nor shall the amount of any payment provided for
in this Section 6 be reduced by any compensation earned by you as a result of
employment by another employer after the Date of Termination, or otherwise.
7. Personal Guarantees. Upon termination of your
employment hereunder, whether with or without Cause or Good Reason, or upon your
death or Disability, the Corporation shall indemnify you from all claims, costs
and expenses related to personal guarantees of any leases, loans, debts,
obligations, or similar instruments, which you have undertaken with respect to
the Corporation. In addition, the Corporation shall use its best efforts to
secure the release of all such personal guarantees.
8. Successors; Binding Agreement.
a. The Corporation shall cause any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Corporation or of
any division or subsidiary thereof employing you, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent to which the
Corporation would be required to perform this Agreement had no such succession
taken place. Failure by the Corporation to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation in the same amount and on the
same terms as you would be entitled hereunder had you terminated your employment
for Good Reason after a Change of Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
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September 27, 1996
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b. This Agreement shall inure to the benefit
of and be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder had you
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there is no designee, to your estate.
9. Indemnification.
a. The Corporation is aware that upon the
occurrence of a Change of Control, the Board or a shareholder of the Corporation
may then cause or attempt to cause the Corporation to refuse to comply with its
obligations under this Agreement, or may cause or attempt to cause the
Corporation to institute, or may take, or attempt to take, other actions to deny
you the benefits intended under this Agreement. In these circumstances, the
purposes of this Agreement would be frustrated. It is the intent of the
Corporation that you should not be required to incur the expenses associated
with the enforcement of your rights under this Agreement by litigation or other
legal action because the cost and expense thereof would substantially detract
from the benefits intended to be extended to you hereunder, nor should you be
bound to negotiate any settlement of your rights hereunder under threat of
incurring such expenses. Accordingly, if following a Change of Control it
appears to you that the Corporation has failed to comply with any of its
obligations under this Agreement or if the Corporation or any other person takes
any action to declare this Agreement void or unenforceable, or institutes any
litigation or other legal action designed to deny, diminish or to recover from
you the benefits intended to be provided to you hereunder, then, provided that
you have complied with all of your obligations under this Agreement, the
Corporation shall indemnify you for all legal costs and fees (including without
limitation, attorneys' fees, retainers, court costs, charges for transcripts,
fees of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage and delivery service fees, and all
other out-of-pocket expenses) incurred by you in defending or asserting your
rights under this Agreement after a Change of Control of the Corporation. The
Corporation hereby irrevocably authorizes you from time to time to retain
counsel of your choice at the expense of the Corporation to represent you in
connection with the initiation or defense of any litigation or other legal
action, whether by or against the Corporation or any director, officer,
shareholder or other person, in any jurisdiction. Notwithstanding any existing
or prior attorney-client relationship between the Corporation and such counsel,
the Corporation irrevocably consents to your entering into an attorney-client
relationship with such counsel, and in that connection the Corporation and you
agree that a confidential relationship shall exist between you and such counsel.
The reasonable fees and expenses of counsel selected by you pursuant hereto
shall be paid or reimbursed to you by the Corporation on a regular,
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September 27, 1996
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periodic basis upon presentation by you of a statement or statements prepared by
such counsel is accordance with its customary practices.
b. The Corporation further agrees to pay
pre-judgment interest on any money judgment obtained by you calculated at the
prime interest rate established by Bank of America National Trust and Savings
Association (or another comparable national financial institution if no prime
interest rate is available from Bank of America) in effect from time to time
from the date that payments to you should have been made under this Agreement
until the date that such payments are made; provided, however, that the
Corporation shall use the prime interest rate first published by Bank of America
National Trust and Savings Association (or another comparable national financial
institution if no prime interest rate is available from Bank of America) in a
calendar month to compute interest payable with respect to any period during
such calendar month.
10. Payment Obligations Absolute; Amendment. The
Corporation's obligation to pay you the amounts provided for hereunder shall be
absolute and unconditional and shall not be affected by any circumstances,
including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Corporation may have against you or anyone else. All
amounts payable by the Corporation hereunder shall be paid without notice or
demand. Except as expressly provided herein, the Corporation waives all rights
which it may now have or may hereafter have conferred upon it, by statute or
otherwise, to amend, terminate, cancel or rescind this Agreement in whole or in
part. Each and every payment made hereunder by the Corporation shall be final
and the Corporation shall not seek to recover all or any part of any such
payment from you or from whomsoever may be entitled thereto, for any reason
whatsoever.
11. Notices. All notices hereunder shall be in
writing and delivered personally or sent by registered or certified mail,
postage prepaid:
If to the Corporation, to: Xxxxxx'x Incorporated
000 Xxxxxxxxx XX
Xxxxxxxxxxx, XX 00000
If to you, to: Xx. Xxxxxxx X. Xxxxxx
---------------------
---------------------
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September 27, 1996
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Either party may change the address to which notices are to be sent to it by
giving ten (10) days written notice of such change of address to the other party
in the manner above provided for giving notice. If delivered in person, then
such notice shall be effective immediately; if mailed, then seventy-two (72)
hours after deposit, postage prepaid.
12. Definitions. For the purposes of this Agreement:
a. The term "Corporation" shall include any
corporate successor to the business presently conducted by Xxxxxx'x
Incorporated. All references to Corporation or "Corporate" policies, procedures,
employees, benefits, criteria or standards shall include all subsidiaries and
businesses of Xxxxxx'x Incorporated.
b. The term "Change of Control" shall mean
the occurrence of any of the following events:
(1) an event required to be reported
by the Corporation by Item 1 of Form 8-K under Section 13 or 15(d) of the
Securities Exchange Act of 1934 filed pursuant to Rule 13a-11 or Rule 15d-11
thereunder;
(2) all or substantially all of the
assets of the Corporation are sold, transferred, leased or exchanged to one or
more persons, or the Corporation consolidates or merges with another corporation
unless the Corporation or a subsidiary of the Corporation is the continuing or
surviving corporation following the merger or consolidation; or
(3) the business or subsidiary for
which your services are principally performed is sold or otherwise disposed of
by the Corporation.
c. The term "Effective Date" shall mean the
date this Agreement is accepted and signed by you.
d. The term "Notice of Termination" shall
mean a written notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
13. Waiver; Modification. No provision of this
Agreement may be waived, modified, discharged or amended except by an instrument
in writing signed by you and such officer as may be specifically designated by
the Board. No term or condition of this
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Agreement shall be deemed to have been waived, nor shall there be any estoppel
against the enforcement of any provision of this Agreement, except by written
instrument by the party charged with such waiver or estoppel. No such written
waiver shall be deemed a continuing waiver unless specifically stated therein,
and each such waiver shall operate only as to the specific term or condition
waived and shall not constitute a waiver of such term or condition for the
future or as to any other term or condition. The failure of either party to
insist, in any one or more instances, upon strict performance of any of the
terms or conditions of this Agreement shall not be construed as a waiver or
relinquishment of any right granted hereunder or the future performance of any
such term, covenant or condition, but the obligations of either party with
respect thereto shall continue in full force and effect.
14. Governing Law. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New Mexico.
15. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
16. Severability. If any term or provision of this
Agreement or the application hereof to any person or circumstance shall to any
extent be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to persons or circumstances other than
those as to which it is held invalid or unenforceable shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law. The parties shall negotiate
in good faith to modify the provisions found to be invalid or unenforceable to
preserve each party's anticipated benefits thereunder.
17. Headings. The headings in this Agreement are
inserted for convenience of reference only and shall not be a part of or control
or affect the meaning of this Agreement.
18. Payroll and Withholding Taxes. All payments to be
made or benefits to be provided hereunder by the Corporation shall be subject to
reduction for any applicable payroll-related or withholding taxes.
19. Entire Agreement. This Agreement supersedes any
and all other oral or written agreements heretofore made relating to your Base
Salary, expense reimbursement, benefits and severance and constitutes the entire
agreement of the parties relating to the subject matter hereof; provided that,
except as specifically provided herein, this Agreement shall not
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supersede or limit in any way or affect any rights you may have under any other
of the Corporation's employee benefit plans, programs or arrangements
(including, without limitation, employee benefit plans within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974).
20. Assignment. This Agreement and the rights,
interest and benefits shall not be assigned, transferred, pledged or
hypothecated in any way and shall not be subject to execution, attachment or
similar process. Any attempt by you to assign, transfer, pledge or hypothecate
or make any other disposition of this Agreement or of such rights, interests and
benefits contrary to the foregoing provision or the levy of any attachment or
similar process thereupon, shall be null and void and without effect and shall
relieve the Corporation of any and all liability hereunder.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
XXXXXX'X INCORPORATED
By:_______________________________
Name:_____________________________
(Please Print)
Title:____________________________
(Please Print)
Agreed and accepted this
27th day of September, 1996.
By:/s/ Xxxxxxx X. Xxxxxx
--------------------------------
Xxxxxxx X. Xxxxxx
