EXHIBIT 10.10
EMPLOYMENT AGREEMENT
(XXXXXXXX X. XXXXXX, Xx.)
This Employment Agreement (the "Agreement") by and between Sales Systems,
Limited (the "Company"), a Pennsylvania corporation and a wholly-owned
subsidiary of Pentacon, Inc., a Delaware corporation ("Pentacon"), and Xxxxxxxx
X. Xxxxxx, Xx. ("Executive") is hereby entered into and effective as of the 13th
day of March, 1998, the date of the consummation of the initial public offering
of the common stock of Pentacon (the "IPO"). This Agreement hereby supersedes
any other employment agreements or understandings, written or oral, between the
Company and Executive.
RECITALS
As of the date of this Agreement, the Company and the other subsidiaries of
Pentacon are engaged primarily in the distribution of fasteners and other small
parts and the provision of related procurement and inventory management
services.
Executive is employed hereunder by the Company in a confidential
relationship wherein Executive, in the course of his employment with the
Company, has and will continue to become familiar with and aware of confidential
and proprietary information as to the Company's and Pentacon's customers and
specific manner of doing business, including the processes, techniques and trade
secrets utilized by the Company and Pentacon, and future plans with respect
thereto, all of which has been and will be established and maintained at great
expense to the Company and Pentacon. This confidential and proprietary
information is a trade secret and constitutes the valuable goodwill of the
Company and Pentacon.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
AGREEMENTS
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Executive as President of the Company. As
such, Executive shall have responsibilities, duties and authority reasonably
accorded to, expected of and consistent with Executive's position as President
of the Company and will report directly to the Board of Directors of the Company
(the "Board"). Executive hereby accepts this employment upon the terms and
conditions herein contained and, subject to paragraph 1(c), agrees that, during
the term of employment hereunder, to devote substantially all of his
business-related time, attention and efforts to promote and further the business
and interests of the Company and its affiliates. The Company will provide to the
Executive reasonable overhead and personnel support appropriate for Executive to
fulfill his duties hereunder.
(b) Executive shall faithfully adhere to all lawful policies established
by the Company.
(c) Executive shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes in any material respect with
Executive's duties and responsibilities hereunder. The foregoing limitations
shall not be construed as prohibiting Executive from making personal investments
in such form or manner as will neither require his services in the operation or
affairs of the companies or enterprises in which such investments are made nor
violate the terms of paragraph 3 hereof.
(d) Executive cannot be relocated by the Company unless the Executive
consents to such relocation. The Executive's refusal to relocate shall not be
considered "cause" for termination. Furthermore, Executive shall not be required
to commute to another location or travel extensively in lieu of relocation.
2. COMPENSATION. For all services rendered by Executive, the Company
shall compensate Executive beginning upon consummation of the IPO as follows:
(a) Base Salary. The base salary payable to Executive shall be $200,000
per year, commencing upon consummation of the IPO and payable on a regular basis
in accordance with the Company's standard payroll procedures but not less than
monthly. Such base salary may be increased from time to time, but never
decreased, at the discretion of the Board, in light of the Executive's position,
responsibilities and performance.
(b) Executive Perquisites, Benefits and Other Compensation. Executive
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Admittance for participation for Executive and Executive's
dependent family members under health, hospitalization, disability, dental,
life and other insurance plans that the Company may have in effect from
time to time.
(ii) Payment of all premiums for coverage for Executive and
Executive's dependent family members under health, hospitalization,
disability, dental, life and other insurance plans that the Company may
have in effect from time to time, provided benefits provided to Executive
under this clause (b)(ii) shall be at least equal to such benefits provided
to Pentacon executives.
(iii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Executive in the performance of his
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Executive upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.
(iv) The Company shall provide Executive with other executive
perquisites as may be available to or deemed appropriate for Executive by
the Board and participation in all other company-wide employee benefits as
are available from time to time to all
Pentacon subsidiaries. In the event the Company adopts a bonus program, the
Executive will be entitled to participate to the same extent as other
executives of the Company.
3. NON-COMPETITION AGREEMENT.
(a) Executive recognizes that the Company's willingness to enter into this
Agreement and into that certain Agreement and Plan of Reorganization dated as of
December 1, 1997 ("Purchase Agreement") among the Company, Pentacon, Executive
and others, is based in material part on Executive's agreement to the provisions
of this paragraph 3 and that Executive's breach of the provisions of this
paragraph 3 could materially damage the Company. Subject to and so long as the
Company is not in violation of its obligations under this Agreement, Executive
will not, during the period of his employment by or with the Company, and for a
period of two (2) years immediately following the termination of his employment
under this Agreement, for any reason whatsoever (other than a termination by the
Company without cause or by the Executive with Good Reason (as defined below),
in either of which case for a period of one (1) year immediately following the
termination), directly or indirectly, for himself or on behalf of or in
conjunction with any other person, company, partnership, corporation or business
of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any business in direct competition with the Company or
Pentacon, within two hundred (200) miles of where the Company or any of
Pentacon's subsidiaries conducts business, including any territory serviced
by the Company or Pentacon or any of such subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or Pentacon (including the respective
subsidiaries thereof) in a managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of the
Company or Pentacon (including the respective subsidiaries thereof);
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to that time, a customer of the Company
or Pentacon (including the respective subsidiaries thereof) within the
Territory for the purpose of soliciting or selling products or services in
direct competition with the Company or Pentacon within the Territory; or
(iv) call upon any prospective acquisition candidate, on Executive's
own behalf or on behalf of any competitor, which candidate was, to
Executive's knowledge after due inquiry, either called upon by the Company
or Pentacon (including the respective subsidiaries thereof) or for which
the Company or Pentacon made an acquisition analysis, for the purpose of
acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Executive from acquiring as an investment not more than two percent
(2%) of the capital stock
of a competing business, whose stock is traded on a national securities exchange
or on an over-the-counter or similar market.
(b) Because of the difficulty of measuring economic losses to the Company
and Pentacon as a result of a breach of the foregoing covenant, and because of
the immediate and irreparable damage that could be caused to the Company and
Pentacon for which they would have no other adequate remedy, Executive agrees
that the foregoing covenant may be enforced by Pentacon or the Company, in the
event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Executive in light of the
activities and business of the Company or Pentacon (including Pentacon's other
subsidiaries), as the case may be, on the date of the execution of this
Agreement and the current plans of Pentacon (including Pentacon's other
subsidiaries); but it is also the intent of the Company and Executive that such
covenants be construed and enforced in accordance with the changing activities,
business and locations of the Company and Pentacon (including Pentacon's other
subsidiaries), as the case may be, throughout the term of this covenant, whether
before or after the date of termination of the employment of Executive. For
example, if, during the term of this Agreement, the Company or Pentacon
(including Pentacon's other subsidiaries), as the case may be, engages in new
and different activities, enters a new business or establishes new locations for
its current activities or business in addition to or other than the activities
or business enumerated under the Recitals above or the locations currently
established therefor, then Executive will be precluded from soliciting the
customers or employees of such new activities or business or from such new
location and from directly competing with such new business within two hundred
(200) miles of its then established operating location(s) through the term of
this covenant.
It is further agreed by the parties hereto that, in the event that
Executive shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or Pentacon
(including Pentacon's other subsidiaries), or similar activities or business in
locations the operation of which, under such circumstances, do not violate
clause (a) of this paragraph 3, and in any event such new business, activities
or location are not in violation of this paragraph 3 or of Executive's
obligations under this paragraph 3, if any, Executive shall not be chargeable
with a violation of this paragraph 3 if the Company or Pentacon (including
Pentacon's other subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and this
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against the Company or
Pentacon, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Pentacon or the
Company of such covenants. It is specifically agreed that the period of two (2)
years (or one (1) year in certain circumstances as herein provided) following
termination of employment stated at the beginning of this paragraph 3, during
which the agreements and covenants of Executive made in this paragraph 3 shall
be effective, shall be computed by excluding from such computation any time
during which Executive is in violation of any provision of this paragraph 3.
4. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement
shall begin on the date of the consummation of the IPO and continue for five (5)
years (the "Term"), and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal unless the Company or
Executive, as the case may be, gives written notice of nonrenewal at least sixty
(60) days prior to the end of the current term. This Agreement and Executive's
employment may be terminated in any one of the followings ways:
(a) Death. The death of Executive shall immediately terminate this
Agreement with no severance compensation due to Executive's estate; provided,
however, that Executive's estate will receive his base compensation, benefits
and incentive compensation, if any, through the end of the month in which his
death occurs.
(b) Disability. If, as a result of long-term incapacity or disability from
which Executive is not reasonably likely to continue to full employment, as such
concept is defined in the insurance programs, from time to time, maintained by
the Company ("Long-Term Disability") due to physical or mental illness or
injury, Executive shall have been absent from his full-time duties hereunder for
six (6) consecutive months, then thirty (30) days after receiving written notice
(which notice may occur before or after the end of such six (6) month period,
but which shall not be effective earlier than the last day of such six (6) month
period), the Company may terminate Executive's employment hereunder, provided
that Executive is unable to resume his full-time duties at the conclusion of
such notice period.
If, as a result of a short-term incapacity or disability from which
Executive is reasonably likely to continue to full employment, as such concept
is defined in the insurance programs, from time to time, maintained by the
Company ("Short-Term Disability") due to physical or mental illness or injury,
Executive shall have been absent from his full-time duties hereunder for twelve
(12) consecutive months, then thirty (30) days after receiving written notice
(which notice may occur before or after the end of such twelve (12) month
period, but which shall not be effective earlier than the last day of such
twelve (12) month period), the Company may terminate Executive's employment
hereunder, provided that Executive is unable to resume his full-time duties at
the conclusion of such notice period.
During such six (6) month or twelve (12) month period, the Company shall
pay to Executive his base salary amount hereunder net of any disability
insurance payments under policies maintained by the Company or Pentacon which
are received by Employee; provided, however, that such payments shall be netted
only to the extent that the premiums for such insurance are borne by the Company
and are not paid or reimbursed by the Executive.
Also, Executive may terminate his employment hereunder if his health should
become impaired to an extent that makes the continued performance of his duties
hereunder hazardous to his physical or mental health or his life, provided that
Executive shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the Company's
request made within thirty (30) days of the date of such written statement,
Executive shall submit to an examination by a doctor selected by the Company who
is reasonably acceptable to Executive or Executive's doctor and such doctor
shall have concurred in the conclusion of Executive's doctor.
Notwithstanding the payments made pursuant to the provision of this
subsection (b) above, in the event this Agreement is terminated as a result of
Executive's Short-Term Disability or Long-Term Disability, Executive shall
receive from the Company, in a lump-sum payment due within ten (10) days of the
effective date of termination, the base salary at the rate then in effect for
whatever time period is remaining under the Initial Term (as hereinafter
defined) of this Agreement, but for not less than one (1) year and not more than
two (2) years.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after written notice to Executive for good cause, which shall be limited to: (i)
Executive's breach of any material provision of this Agreement (continuing for
ten (10) days after receipt of written notice of need to cure); (ii) Executive's
gross negligence in the performance or intentional nonperformance (continuing
for ten (10) days after receipt of written notice of need to cure) of any of
Executive's material duties and responsibilities hereunder which is harmful or
injurious to the Company or Pentacon; (iii) Executive's dishonesty, fraud or
willful misconduct with respect to the business or affairs of the Company or
Pentacon which materially and adversely affects the operations or reputation of
the Company or Pentacon; (iv) Executive's conviction of a felony crime; or (v)
Executive's violation of the Company's substance abuse policy that would result
in discharge under such policy as applied to the Company's employees generally.
In the event of a termination for good cause, as enumerated above, Executive
shall have no right to any severance compensation but shall receive all
compensation due and payable through the date of termination. Furthermore, in
the event of a termination for good cause, as enumerated above, Executive shall
have the right, during the ten (10) day period commencing upon notice of
termination from the Company pursuant to Section 4(c), to seek reinstatement (in
writing) by the Board of Directors of Pentacon, and shall be reinstated if
fifty-one percent (51%) of the Board of Directors of Pentacon (excluding the
affected Executive or his representative on the Board) approves the
reinstatement. If the Board of Directors of Pentacon is unable to meet and
review Executive's appeal for reinstatement during such ten (10) day period,
then the Executive shall be deemed to be suspended without pay until such time
as the Board of Directors of Pentacon can convene for such purpose. At such
board meeting, the Executive will be presented a reasonable opportunity to
present evidence or state his position as to why he should not have been
terminated pursuant to Section 4(c) or why he should be reinstated. The Board of
Directors of Pentacon will act as promptly as reasonable to convene for purposes
of hearing Executive's appeal and to respond to such appeal, and in any event
will make all reasonable efforts to convene within thirty (30) days of receipt
of the request for review from the Executive.
(d) Without Cause. At any time after the commencement of employment,
Executive may, without cause, and without Good Reason (as hereinafter defined)
terminate this Agreement and Executive's employment, effective thirty (30) days
after written notice is provided to the
Company. Executive may only be terminated without cause by the Company during
the Term hereof if such termination is approved by at least eighty percent (80%)
of the members of the Board of Directors of Pentacon, excluding any director who
was previously a stockholder of the Company or is a representative of the
stockholders of the Company as existing prior to the closing of the transactions
contemplated by the Purchase Agreement. Should Executive be terminated by the
Company without cause or should Executive terminate with Good Reason during the
first three (3) years of the Term (the "Initial Term"), Executive shall receive
from the Company, in a lump-sum payment due on the effective date of
termination, the base salary at the rate then in effect for whatever time period
is remaining under the Initial Term of this Agreement or for two (2) years,
whichever amount is greater. Should Executive be terminated by the Company
without cause or should Executive terminate with Good Reason during the Term
(but after the Initial Term), Executive shall receive from the Company, in a
lump-sum payment due on the effective date of termination, the base salary at
the rate then in effect equivalent to one (1) year of salary. Further, any
termination without cause by the Company shall operate to shorten the period set
forth in paragraph 3(a) and during which the terms of paragraph 3 apply to one
(1) year from the date of termination of employment. If Executive resigns or
otherwise terminates his employment without cause, rather than the Company
terminating his employment pursuant to this paragraph 4(d), or if Executive
terminates without Good Reason, Executive shall receive no severance
compensation.
Executive shall have "Good Reason" to terminate this Agreement and his
employment hereunder upon the occurrence of any of the following events: (a)
Executive is demoted by means of a material reduction in authority,
responsibilities or duties to a position of less stature or importance within
the Company than the position described in Section 1 hereof or (b) the Company
breaches any material provision of this Agreement (continuing for thirty (30)
days after receipt of written notice of need to cure). Executive acknowledges
that certain changes in authority, responsibility or duties will result from the
acquisition and subsequent operation by Pentacon of the Company (i.e., shift of
responsibility for human resources, environmental, insurance, and other
activities to officers of Pentacon) and agrees that such changes shall not be of
a nature to constitute Good Reason provided that Executive is treated
consistently, in all material respects, with executives in similar positions in
other operating subsidiaries of Pentacon.
Upon termination of this Agreement for any reason provided above, Executive
shall be entitled to receive all compensation earned and/or accrued and all
benefits and reimbursements due, and/or accrued through the effective date of
termination. Additional compensation subsequent to termination, if any, will be
due and payable to Executive only to the extent and in the manner expressly
provided above or in paragraph 11. All other rights and obligations of the
Company and Executive under this Agreement shall cease as of the effective date
of termination, except that the Executive's obligations under paragraphs 3, 5,
6, 7, 8 and 9 herein and the Company's obligations with respect to stock grants,
stock options and severance shall survive such termination in accordance with
their terms.
If Executive is terminated without cause or terminates his employment
hereunder with Good Reason the Executive shall be entitled to receive a prorated
portion of any annual bonus to which the Executive was entitled to receive for
the year during which termination occurred had the Executive not been
terminated.
Any unvested portion of any awards of stock options or stock grants
pursuant to this Agreement in connection with Executive's employment shall be
treated in the following manner in the event of a termination of Executive's
employment.
(i) If Executive's employment is terminated by the Company for
cause or if Executive resigns or terminates his employment other than for
Good Reason, then any unvested portion of any awards of stock options or
stock grants shall lapse or shall be forfeited.
(ii) If Executive's employment is terminated by the Company without
cause or if Executive terminates his employment for Good Reason, then any
unvested portion of any awards of stock options or stock grants shall
immediately vest to their fullest extent (notwithstanding any vesting
provisions to the contrary) and Executive shall be entitled to all rights
and privileges associated with such awards (subject to applicable
securities laws and regulations).
(iii) If Executive's employment is terminated pursuant to a "Change
in Control" then the stock options and stock awards shall be treated in the
manner provided in Section 11 hereof.
5. RETURN OF COMPANY PROPERTY. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Executive by or on behalf of the Company, Pentacon
or their representatives, vendors or customers which pertain to the business of
the Company or Pentacon shall be and remain the property of the Company or
Pentacon, as the case may be, and be subject at all times to their discretion
and control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Company or Pentacon which is collected by Executive shall be
delivered promptly to the Company without request by it upon termination of
Executive's employment. Executive may maintain a copy of any personal records
including a listing of business contacts provided same shall not be used in any
manner harmful or injurious to or in competition with the Company or Pentacon.
6. INVENTIONS. Executive shall disclose promptly to the Company any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by
Executive, solely or jointly with another, during the period of employment, and
which are directly related to the then current business or activities of the
Company and which Executive conceives as a result of his employment by the
Company. Executive hereby assigns and agrees to assign all his interests therein
to the Company or its nominee. Whenever requested to do so by the Company,
Executive shall execute any and all applications, assignments or other
instruments that the Company shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect the Company's interest therein.
7. TRADE SECRETS. Executive agrees that he will not, during or after the
Term of this Agreement with the Company, except in pursuit of the Company's
business and consistent with policies of the Company, disclose the specific
terms of the Company's or Pentacon's
relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
Pentacon, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever except in
connection with (a) any legal proceeding of the Company in which such disclosure
is required to be made by the Company, (b) obtaining the advice of outside
consultants engaged by the Company, (c) discussions with the Company's outside
auditors, (d) obtaining or maintenance of the Company's credit facility, or (e)
otherwise with the consent of Pentacon's CEO or the Board of Directors.
8. CONFIDENTIALITY.
(a) Executive acknowledges and agrees that all Confidential Information
(as defined below) of the Company is confidential and a valuable, special and
unique asset of the Company that gives the Company an advantage over its actual
and potential, current and future competitors. Executive further acknowledges
and agrees that Executive owes the Company a fiduciary duty to preserve and
protect all Confidential Information from unauthorized disclosure or
unauthorized use, that certain Confidential Information constitutes "trade
secrets" under applicable laws, and that unauthorized disclosure or unauthorized
use of the Company's Confidential Information would irreparably injure the
Company.
(b) Both during the term of Executive's employment and after the
termination of Executive's employment for any reason (including wrongful
termination), Executive shall hold all Confidential Information in strict
confidence, and shall not use any Confidential Information except for the
benefit of the Company, in accordance with the duties assigned to Executive.
Executive shall not, at any time (either during or after the term of Executive's
employment), disclose any Confidential Information to any person or entity
(except other employees of the Company who have a need to know the information
in connection with the performance of their employment duties), or copy,
reproduce, modify, decompile or reverse engineer any Confidential Information,
or remove any Confidential Information from the Company's premises, without the
prior written consent of the Chief Executive Officer of Pentacon, or permit any
other person to do so except for the benefit of the Company. In the event
Executive is requested or required (by oral questions, interrogatories, requests
for information or documents, subpoena, civil investigative demand or other
process) to disclose any Confidential Information, Executive will provide the
Company with immediate written notice of any such request or requirement so that
the Company may seek an appropriate protective order or seek with Executive's
cooperation to narrow the request or demand or waive Executive's compliance with
the provisions of this Agreement. If, failing the entry of a protective order or
the receipt of a waiver hereunder, Executive is, in the opinion of his counsel,
compelled to disclose Confidential Information, Executive may disclose only that
portion of the Confidential Information which Executive's counsel advises
Executive in writing that Executive is compelled to disclose and Executive will
exercise his or her best efforts to obtain assurance that confidential treatment
will be accorded such Confidential Information. In any event, Executive will not
oppose action by the Company to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the Confidential
Information. Executive shall take reasonable precautions to protect the physical
security of all documents and other material containing Confidential Information
(regardless of the medium on which the Confidential Information is stored). This
Agreement applies to all Confidential Information, whether now known or later to
become known to Executive.
(c) Upon the termination of Executive's employment with the Company for
any reason, Executive shall promptly surrender and deliver to the Company all
documents and other written material of any nature containing or pertaining to
any Confidential Information and shall not retain any such document or other
material. Within five days of any such request, Executive shall certify to the
Company in writing that all such materials have been returned.
(d) As used in this Agreement, the term "Confidential Information" shall
mean any information or material known to or used by or for the Company (whether
or not owned or developed by the Company and whether or not developed by
Executive) that is not generally known to the public. Confidential information
includes, but is not limited to, the following: all trade secrets of the
Company; all information that the Company has marked as confidential or has
otherwise described to Executive (either in writing or orally) as confidential;
all nonpublic information concerning the Company's products, services,
prospective products or services, research, product designs, prices, discounts,
costs, marketing plans, marketing techniques, market studies, test data,
customers, customer lists and records, suppliers and contracts; all Company
business records and plans; all Company personnel files; all financial
information of or concerning the Company; all information relating to operating
system software, application software, software and system methodology, hardware
platforms, technical information, inventions, computer programs and listings,
source codes, object codes, copyrights and other intellectual property; all
technical specifications; any proprietary information belonging to the Company;
all computer hardware or software manuals; all training or instruction manuals;
and all data and all computer system passwords and user codes.
9. NO PRIOR AGREEMENTS. Executive hereby represents and warrants to the
Company that the execution of this Agreement by Executive and his employment by
the Company and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer, client or any other person or
entity. Further, Executive agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Executive and such third party
which was in existence as of the date of this Agreement.
10. ASSIGNMENT; BINDING EFFECT. Executive understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Executive agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement.
Subject to the preceding two (2) sentences and the express provisions of
paragraph 12 below, this Agreement shall be binding upon, inure to the benefit
of and be enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
11. CHANGE IN CONTROL.
(a) Unless he elects to terminate this Agreement pursuant to subsection
(b), (c) or (d) below, Executive understands and acknowledges that the Company
or Pentacon may be merged
or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company or Pentacon may undergo another type of Change in Control. In
the event such a merger or consolidation or other Change in Control is initiated
prior to the end of the Term or any extension or renewal, then the provisions of
this paragraph 11 shall be applicable.
(b) In the event of a pending Change in Control wherein Pentacon and/or
the Company and Executive have not received written notice at least five (5)
business days prior to the anticipated closing date of the transaction giving
rise to the Change in Control from the successor to all or a substantial portion
of Pentacon's and/or the Company's business and/or assets that such successor is
willing as of the closing to assume and agree to perform Pentacon's and/or the
Company's obligations under this Agreement in the same manner and to the same
extent that Pentacon and/or the Company is hereby required to perform, then
Executive may, at Executive's sole discretion, elect to terminate Executive's
employment on such Change in Control by providing written notice to the Company
prior to the closing of the transaction giving rise to the Change in Control. In
such case, the applicable provisions of paragraph 4(d) will apply as though the
Company had terminated Executive without cause during the Initial Term; however,
the amount of the lump sum severance payment due Executive pursuant to this
Section 11(b) shall be triple the amount calculated under the terms of paragraph
4(d), but shall in no event exceed four times Executive's base salary.
(c) In any Change in Control situation, Executive may, at his sole
discretion, elect to terminate Executive's employment upon the effective date of
such Change in Control by providing written notice to the Company at least ten
(10) business days prior to the anticipated closing of the transaction (or ten
(10) days of such notice of such transaction, whichever is later) giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 4(d)
will apply as though the Company had terminated the Executive without cause
during the Initial Term; however, the amount of the lump sum severance payment
due Executive pursuant to this Section 11(c) shall be double the amount
calculated under the terms of paragraph 4(d), but shall in no event exceed three
times Executive's base salary.
(d) If, on or within one year following the effective date of a Change in
Control the Company terminates Executive's employment other than for cause or if
Executive's employment with the Company is terminated by the Company within
three (3) months before the effective date of a Change in Control other than for
cause and it is reasonably demonstrated that such termination (i) was at the
request of a third party that has taken steps reasonably calculated to effect a
Change in Control, or (ii) otherwise arose in connection with or anticipation of
a Change in Control, then Executive shall receive from Company, in a lump sum
payment due on the effective date of termination, the same amount which
Executive would have received pursuant to a termination under Section (b) above.
(e) Solely for purposes of applying paragraph 4 under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Executive must be paid in
full by the Company at or prior to such closing. Further, Executive will be
given sufficient time and opportunity to elect whether to exercise all or any of
his vested options to purchase Pentacon stock, such that he may convert the
options to
shares of Pentacon stock at or prior to the closing of the transaction giving
rise to the Change in Control, if he so desires.
(f) A "Change in Control" shall be deemed to have occurred if:
(i) any person, other than Pentacon or an Executive benefit plan of
Pentacon acquires, directly or indirectly, the beneficial ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of Pentacon and immediately after such
acquisition such person is, directly or indirectly, the beneficial owner of
voting securities representing thirty percent (30%) or more of the total
voting power of all of the then-outstanding voting securities of Pentacon;
(ii) the stockholders of Pentacon shall approve a merger,
consolidation, recapitalization or reorganization of Pentacon, or a reverse
stock split of outstanding voting securities, or consummation of any such
transaction if stockholder approval is not obtained, other than any such
transaction which would result in at least seventy-five percent (75%) of
the total voting power represented by the voting securities of the
surviving entity outstanding immediately after such transaction being
beneficially owned by at least seventy-five (75%) percent (75%) of the
holders of outstanding voting securities of Pentacon immediately prior to
the transactions with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in the
transaction;
(iii) the stockholders of Pentacon shall approve a plan of complete
liquidation of Pentacon or an agreement for the sale or disposition by
Pentacon of all or a substantial portion of Pentacon's assets (i.e., fifty
percent (50%) or more of the total assets of Pentacon); or
(g) Executive shall be fully grossed up by the Company or its successor
for any excise taxes that Executive incurs under Section 4999 of the Internal
Revenue Code of 1986 (as well as for income tax on the "gross up" amount), as a
result of any Change in Control. Such amount will be due and payable by the
Company on the date of the Change in Control.
(h) Upon the occurrence of a Change of Control, any unvested portion of
any awards of stock options or stock grants pursuant to this Agreement or
otherwise shall immediately vest and become exercisable to their fullest extent
(notwithstanding any vesting periods specified elsewhere) and Executive shall be
entitled to all rights and privileges associated with such awards (subject to
applicable securities laws and regulations). With respect to option awards which
vest pursuant to this paragraph, Executive shall have a period of twelve (12)
months from the date of vesting in which to exercise such options.
12. COMPLETE AGREEMENT. Except as expressly set forth herein, this
Agreement is not a promise of future employment. Executive has no oral
representations, understandings or agreements with the Company or any of its
officers, directors or representatives covering the same subject matter as this
Agreement. This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Executive, and it cannot
be varied, contradicted or supplemented by evidence of any prior or
contemporaneous
oral or written agreements. This written Agreement may not be later modified
except by a further writing signed by a duly authorized officer of the Company
and Executive, and no term of this Agreement may be waived except by a writing
signed by the party waiving the benefit of such Term.
13. NOTICE. Whenever any notice is required hereunder, it shall be given
in writing addressed as follows:
To the Company: Sales Systems, Limited
000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx
Attn: President
with a copy to: Pentacon, Inc.
0000 Xxx Xxxx Xxxx #000
Xxxxxxx, Xxxxx 00000
Attn: General Counsel
To Executive: Xxxxxxxx X. Xxxxxx, Xx.
000 Xxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxxxx
with a copy to: Xxxxx X. Xxxxxxxx
Xxxxxxx & Xxx
000 Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxx Xxxxxx, Xxxxxxxxxxxx 00000
Notice shall be deemed given and effective on the earlier of three (3) days
after the deposit in the U.S. mail of a writing addressed as above and sent
first class mail, certified, return receipt requested, or when actually
received. Either party may change the address for notice by notifying the other
party of such change in accordance with this paragraph 13.
14. SEVERABILITY; HEADINGS. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
15. ARBITRATION. With the exception of paragraphs 3, 7 and 8, any
unresolved dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three (3) arbitrators in Houston, Texas, in accordance with the National
Rules for the Resolution of Employment Disputes of the American Arbitration
Association ("AAA") then in effect, provided that the parties may agree to use
arbitrators other than those provided by the AAA. The arbitrators shall not have
the authority to add to, detract from or modify any provision hereof nor to
award punitive damages to any injured party. The arbitrators shall have the
authority to order back pay, severance compensation, vesting of options and
grants (or cash compensation in lieu of vesting of options), reimbursement of
legal fees and
costs, including those incurred to enforce this Agreement, and interest thereon
in the event the arbitrators determine that Executive was terminated without
disability or good cause, as described in paragraphs 4(b) and 4(c),
respectively, or that the Company has otherwise materially breached this
Agreement. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The direct expense of any arbitration proceeding shall be borne by
the Company.
16. GOVERNING LAW. This Agreement shall in all respects be construed
according to the laws of the State of Texas.
17. COUNTERPARTS. This Agreement may be executed simultaneously in two (2)
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18. GUARANTEE OF CHANGE OF CONTROL PAYMENTS. Pentacon has executed this
Agreement for the limited purposes of Section 18. In this connection, Pentacon
hereby guarantees the punctual payment when due by the Company of any payments
payable by the Company to the Executive under Section 11 hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
"EXECUTIVE" "COMPANY"
/s/ XXXXXXXX X. XXXXXX, XX. By: /s/ XXXXXXXX X. XXXXXX, XX.
------------------------------ ----------------------------------------
Xxxxxxxx X. Xxxxxx, Xx. Name:
--------------------------------------
Title:
-------------------------------------
"PENTACON"
By: /s/ XXXXX X. XXXXX
----------------------------------------
Name: Xxxxx X. Xxxxx
--------------------------------------
Title: Vice President
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