EMPLOYMENT AGREEMENT
AGREEMENT made this 1st day of June, 1999, between Elite Technologies,
Inc., a Texas corporation ("Employer"), having its principal place of business
in Duluth, Georgia, and Xxxxx Xxxxxxxx ("Employee").
WHEREAS, Employee and Employer desire to set forth in writing their
contract with respect to Employee's employment by Employer;
NOW, THEREFORE, in consideration of their mutual promises set forth herein,
the parties hereby agree as follows:
1. Employment. Employer hereby employs Employee, and Employee hereby
accepts such employment, upon the terms and conditions set forth in this
Agreement.
2. Duties and Authority.
a. Employee will occupy the position of Chairman of the Board and Chief
Executive Officer (the "Position") with Employer. Employee has also been
appointed as a member of the Board of Directors of Employer (the "Board").
b.Employee will have the responsibility and authority associated with the
Position, reporting directly to, and subject to the control of, the Board, and
will have general supervision, direction and control, as necessary, over all of
the business and affairs of Employer and its employees. Employee will be
primarily responsible for carrying out orders and resolutions of the Board and
such duties as may from time to time be assigned to Employee by the Board.
c. Employee agrees to devote his full time attention and best efforts to
the performance of his employment hereunder. 3. Term of Employment. The term of
employment shall begin on the date of this Agreement and shall extend for a
period of three (3) consecutive years unless earlier terminated as provided
herein. 4. Noncompetition. Employee agrees, during the term of this Agreement,
and for a period of one (1) additional year immediately following the
termination of this Agreement, that (i) he will not solicit, engage, entice,
procure, or otherwise interfere, in any manner, with the employees, customers,
or other business relationships of Employer, (ii) he will not engage, directly
or indirectly, in any business similar, like, comparable or related to the
business then being conducted by Employer, and (iii) he will not serve as an
officer, member of the board of directors, or have any other affiliation with
any entity engaged in such a business. In the event that Employer and Employee
are unable to agree on whether a particular business in which Employee attempts
to engage is directly or indirectly in competition with Employer, the matter
will be submitted to arbitration under the provisions of Paragraph 24 of this
Agreement.
5. Compensation. Employee will receive compensation during the term of this
Agreement as follows:
a. A base annual salary of Two Hundred Fifty Thousand Dollars ($250,000)
per year payable either bi-monthly, weekly, semi-weekly or monthly at the
discretion of Employer, subject to annual upward adjustments by the Board (the
"Base Salary").
b. An incentive salary (the "Profits Bonus") equal to a maximum of one and
one half percent (1.5%) of the Adjusted Net Profits (hereinafter defined) of
Employer during each fiscal year beginning or ending during the term of this
Agreement, prorated for any partial fiscal year. "Adjusted Net Profits" shall be
the net profits before federal and state income taxes, determined on a
consolidated basis and otherwise in accordance with generally accepted
accounting principles by the independent accounting firm employed by Employer as
auditors (the "Auditors") and adjusted to exclude: (i) any incentive salary
payments paid pursuant to this Agreement; (ii) any contributions to pension
and/or profit-sharing plans; (iii) any extraordinary gains or losses (including,
but not limited to, gains or losses on disposition of assets); (iv) any refund
or deficiency of federal and state income taxes paid in or assessed for a prior
year for which a Profits Bonus has been paid after taking into account such over
or under payment; and (v) any provision for federal or state income taxes made
in prior years for which a Profits Bonus has been paid which is subsequently
determined as unnecessary. The determination of the Adjusted Net Profits made by
the Auditors shall be final and binding upon Employee and Employer. The Profits
Bonus shall be paid within sixty (60) days after the end of each fiscal year.
The maximum Profits Bonus payable for any one fiscal year under this Paragraph
5.b. shall not exceed two hundred percent (200%) of Employee's Base Salary
during such fiscal year unless authorized by the Board. The Profits Bonus may be
paid in shares of common stock, $0.10 par value, of Employer ("Employer Shares")
by mutual agreement of Employer and Employee.
c. An incentive salary ("Revenue Bonus") equal to a maximum of four percent
(4%) of the Revenue Increase(s) (hereinafter defined) of Employer during each
fiscal year beginning or ending during the term of this Agreement. "Revenue
Increase(s)" shall be the difference between the gross revenue reported by
Employer for the applicable fiscal year, less the gross revenue reported by
Employer for the immediately preceding fiscal year, determined in accordance
with generally accepted accounting principles by the Auditors, and prorated for
any partial fiscal year. Any increase in gross revenue which is caused by the
acquisition, merger or roll up of any entity (the "Transaction") shall be
discounted by fifty percent (50%) in the year in which the Transaction occurs
and only the discounted amount included in calculating gross revenue. The
Revenue Bonus shall be paid within sixty (60) days after the end of each fiscal
year. The maximum Revenue Bonus payable for any one fiscal year under this
Paragraph 5.c. shall not exceed two hundred percent (200%) of Employee's Base
Salary unless authorized by the Board. The Revenue Bonus may be paid in Employer
Shares by mutual agreement of Employer and Employee. In the event of a
Transaction, Employer and Employee agree that, for purposes of calculating the
Revenue Increase, the gross revenues attributable to the acquired company or
assets (the "Target") for the immediately preceding fiscal year shall be the
gross revenues of the Target for the twelve (12) calendar months immediately
preceding the closing of the Transaction.
d. Employer agrees that Employee may review the books and records of
Employer at anytime during the term of this Agreement and for a period of twelve
(12) months after a termination of this Agreement for purposes of verifying the
calculation of the Profits Bonus and the Revenue Bonus. On written notice from
Employee to Employer, such review may be conducted at Employer's principal
business office after ten (10) days written notice from Employee. If such review
determines an underpayment to Employee of the amounts owed for the Profits Bonus
and the Revenue Bonus in excess of ten percent (10%) of the amounts actually
paid to Employee for same for the periods of the underpayment, Employer shall
reimburse Employee for the reasonable costs of such review.
6. Deferred Compensation. In the event that Employee retires after
performing services for Employer up until Employee reaches the age of 65 or
retires at an earlier age with the approval of Employer, Employee will be
entitled to deferred compensation payments after retirement upon the following
terms and conditions:
a. For a period of twenty (20) years ("Retirement Period") Employee will
receive all of the following: (i) base payments equal to thirty percent (30%) of
the average total salary (Base Salary plus Profits Bonus plus Revenue Bonus)
paid to Employee during the last three (3) full years of employment or based
upon his total period of employment, should that period be less that three (3)
full years, prior to the month of retirement ("Retirement Base Salary"); (ii)
Advisory Payments equal to thirty percent (30%) of the Retirement Base Salary,
provided that Employee serves as an advisor and consultant to Employer regarding
its business. Employee will hold himself available to perform services at
reasonable times at the request of the Board, consistent with any business
activities Employee may be engaged in at such time. The Board shall have the
right to require the presence of Employee at any Board meeting, not exceeding
more than one meeting per month. Attendance at these Board meetings shall not be
required should Employee's health prevent attendance; however, Employer shall
have the right to demand a written statement from Employee prepared by a
licensed medical examiner evidencing inability of Employee to attend the meeting
or meetings. Employee will be reimbursed for all reasonable and necessary travel
and incidental expenses incurred by Employee in connection with the performance
of advisory services; and (iii) Noncompetition Payments equal to forty percent
(40%) of the Retirement Base Salary.
b. The Retirement Base Salary, the Advisory Payments and the Noncompetition
Payments (collectively, the "Deferred Compensation Payments") shall be made in
equal monthly installments on the first day of each month, starting the month
following the month of retirement.
c. In the event of the death of Employee prior to the expiration of the
"Retirement Period," Employer will pay all remaining installments of Retirement
Base Salary specified in Paragraph 6.a.(i), but no other Deferred Compensation
Payments, to any beneficiary of Employee designated by Employee in a written
document filed with Employer, or in the absence of such designation, the estate
of Employee. Employer may elect to pay these remaining installments of
Retirement Base Salary in a lump sum or in the equal monthly installments
specified in Paragraph 6.b.
d. Employee shall not sell, assign, transfer, or pledge, or in any other
way dispose of or encumber, voluntarily or involuntarily, by gift, testamentary
disposition, inheritance, transfer to any inter-vivos trust, seizure and sale by
legal process, operation of law, bankruptcy, winding up of a corporation, or
otherwise, the right to receive any Retirement Base Salary pursuant to this
Agreement.
7. Relocation. In the event Employee is transferred and assigned to a new
principal place of work located more than fifty (50) miles from Employee's
present residence, Employer will pay for all reasonable relocation expenses
including:
a. Transportation fares, meals, and lodging for Employee, his spouse, and
family from Employee's present residence to any new residence located near the
new principal place of work.
b. Moving of Employee's household goods and the personal effects of
Employee and Employee's family from Employee's present residence to the new
residence.
c. Lodging and meals for Employee and Employee's family for a period of not
more than sixty (60) consecutive days while occupying temporary living quarters
located near the new principal place of work.
d. Round trip travel, meals and lodging expenses for Employee's family for
no more than two (2) house hunting trips to locate a new residence, each trip
not to exceed fourteen (14) days; and
e. Expenses in connection with the sale of the residence of Employee
including realtor fees, property appraisals, mortgage prepayment penalties,
termite inspector fees, title insurance policy and revenue stamps, escrow fees,
fees for drawing documents, state or local sales taxes, mortgage discount points
(if in lieu of a prepayment penalty), and seller's attorney's fees (not to
exceed one percent (1%) of the sales price). At the option of Employee and in
lieu of reimbursement for these expenses, Employee may sell the residence of
Employee to Employer at the fair market value of the residence determined by an
appraiser chosen by Employer. The appraisal will be performed within ten (10)
days after notice of transfer and notice of appraised value will be submitted by
report to Employee. Employee will have the right to sell the residence to
Employer at the appraised price by giving notice of intent to sell within thirty
(30) days from the date of the appraisal report. The term "residence" shall mean
the property occupied by Employee as the principal residence at the time of
transfer and does not include summer homes, multiple-family dwellings,
houseboats, boats, or airplanes but does include condominium or cooperative
apartment units and duplexes (two family) occupied by Employee.
8. Medical and Group Insurance. At the expense of Employer, Employer agrees
to include Employee in the group medical and hospital plan of Employer, when
such plan is established.
9. Stock Options. Pursuant to a separate stock option agreement (the "Stock
Option Agreement"), Employer will grant Employee options to acquire two million
(2,000,000) shares of Employer Shares at $0.01 per share, one million
(1,000,000) of which shares will vest and become fully exercisable on January 1,
2001, and the balance of which will vest and become fully exercisable on August
31, 2001, subject to acceleration of the vesting period upon the termination of
this Agreement for any reason whatsoever. The options will have a term of ten
(10) years. Employee agrees that at no time will he sell any Employer Shares in
such amounts or at such prices which would create a material adverse effect on
the ten (10) day moving average closing price of Employer Shares on such
exchange or system then trading in Employer's quoted stock. The Stock Option
Agreement will also grant Employee "piggy-back" registration rights with respect
to the shares acquired pursuant to the exercise of such options.
10. Vacation. Employee shall be entitled to six (6) weeks of paid vacation
during each fiscal year of employment; for the fourth fiscal year and each
fiscal year thereafter, said vacation time shall increase to five (5) weeks
during each fiscal year. The time for the vacation shall be mutually agreed upon
by Employee and Employer. If vacation is not taken, for the benefit of Employer,
Employee shall be compensated at one and one half (1 1/2) times his then current
Base Salary for time not taken. Additionally, Employee shall receive thirty (30)
days sick/personal leave for each fiscal year of employment. Unused
sick/personal leave will accrue and be retained by Employee to be used at his
discretion or paid on a termination of his employment.
11. Automobile. Employer will provide Employee, during the term of this
Agreement, with the use of a new luxury automobile of Employee's choice.
Employer will pay all operating expenses on such automobile and will procure and
maintain in force an automobile liability policy for the automobile with
coverage, including Employee, in the minimum amount of One Million Dollars
($1,000,000) combined single limit on bodily injury and property damage.
12. Expense Reimbursement. Employee shall be entitled to reimbursement for
all reasonable expenses, including travel and entertainment, incurred by
Employee in the performance of Employee's duties. Employee will maintain records
and written receipts as required by federal and state tax authorities to
substantiate expenses as an income tax deduction for Employer and shall submit
vouchers for expenses for which reimbursement is made 13. Low Interest Loan.
a. From time to time, Employee may borrow sums from Employer up to a
maximum aggregate of Six Hundred Thousand Dollars ($600,000) provided Employer
has excess funds available for such purposes. The Board shall establish the
amount of such funds available upon request by Employee. Each loan shall be
evidenced by a promissory note payable in not more than sixty (60) monthly
principal and interest installment payments starting with the first day of the
month following the month in which the loan is made, with interest at the rate
of three percent (3%) per year on the unpaid balance of the loan or loans
outstanding.
b. In the event Employee xxxxxx employment with Employer for reasons other
than permanent disability, death, or retirement while a loan or loans are
outstanding, the unpaid principal amount then outstanding shall be due and
payable within thirty (30) days after the date of termination. In the event
severance of employment is due to permanent disability, death, or retirement,
Employee, or the legal representative of Employee, shall repay any outstanding
loan in accordance with the terms of the promissory note.
c. Should there be a default in the payment of any installment of principal
and interest when due, during Employee's employment under this Agreement,
Employer may withhold installments from Employee's compensation under this
Agreement. If there is a default after a termination of Employee's employment,
then the entire sum of principal and interest, at the option of Employer, shall
immediately become due and payable without demand or notice. In case this note
is not paid upon acceleration, Employee shall pay all costs of collection and
reasonable attorney's fees whether or not suit is filed on the note.
14. Permanent Disability.
a. In the event Employee becomes Permanently Disabled (hereinafter defined)
during employment by Employer, Employer may terminate this Agreement by giving
thirty (30) days prior notice to Employee of its intent to terminate this
Agreement, and, unless Employee resumes performance of the duties set forth in
Paragraph 2 within such thirty (30) days and continues such performance, this
Agreement will terminate at the end of the thirty (30) day period. "Permanently
Disabled" for purpose of this Agreement will mean the inability, due to physical
or mental ill health, or any reason beyond the control of Employee, to perform
Employee's duties for sixty (60) consecutive days or for an aggregate of ninety
(90) days during any one fiscal year irrespective of whether such days are
consecutive, as determined by a physician selected by Employer and a physician
selected by Employee. Employee will be entitled to his Base Salary earned prior
to the date of becoming Permanently Disabled as provided for in Paragraph 5
computed pro rata up to and including the date of becoming Permanently Disabled.
b. Upon termination of employment under the provisions of Paragraph 14.a.,
Employee will be entitled to Retirement Base Salary under the provisions of
Paragraph 6(i). For purposes of Paragraph 6, termination under Paragraph 14.a.
of this Agreement shall be considered "retirement." Employee will be excused
from performing advisory services as required under Paragraph 6.b.(ii) but shall
nevertheless be entitled to receive the Advisory Payments except to the extent
limited by death of Employee as set forth in Paragraph 6.c. Employee, however,
shall not be entitled to Noncompetition Payments under Paragraph 6.
c. Employer shall maintain, at its expense, a disability policy covering
Employee for a dollar amount specified by the Board. This amount may not exceed
one hundred percent (100%) of the Base Salary. Benefits of this policy shall
begin on the date Employee's sick/personal leave days are exhausted and shall
continue until Employee's Deferred Compensation Payments as outlined in
Paragraph 6 of this Agreement commence.
15. Death. In the event that Employee dies during the term of this
Agreement, this Agreement shall immediately terminate except that Employee will
be entitled to his Base Salary earned prior to the date of death as provided for
in Paragraph 5 computed pro rata up to and including the date of death.
Additionally, Employee will be entitled to Retirement Base Salary under the
provisions of Paragraph 6(i). For purposes of Paragraph 6, termination under
Paragraph 15 of this Agreement shall be considered "retirement." Employee,
however, shall not be entitled to receive either Advisory Payments or
Noncompetition Payments under Paragraph 6. 16. Termination.
a. Employer may terminate Employee's employment under this Agreement by
giving ten (10) days prior written notice to Employee. Should Employer terminate
Employee's employment for any reason other than Cause (hereinafter defined),
Employee shall receive his Base Salary, the Profits Bonus and the Revenue Bonus
due for the remainder of the term of this Agreement, payable as and when same
would have become due and payable but for the termination of Employee's
employment, the Retirement Base Salary, the Advisory Payments and the
Noncompetition Payments. Should Employer terminate Employee's employment for
Cause, Employee will be entitled to his Base Salary earned prior to the date of
termination as provided for in Paragraph 5 of this Agreement, computed pro rata
up to and including the date of termination, plus one twelfth (1/12) of his Base
Salary. Employee shall not be entitled to any further payments under this
Agreement. For purposes of this Agreement, "Cause" will occur if Employee
willfully breaches or habitually neglects the duties to be performed under
Paragraph 2, habitually engages in the use of illegal substances or the
excessive use of alcohol.
b. In the event Employer is acquired, is a non-surviving party in a merger,
or transfers substantially all of its assets, this Agreement shall not be
terminated and Employer agrees to take all actions necessary to ensure that the
transferee or surviving company is bound by the provisions of this Agreement. c.
Employee may terminate Employee's employment by providing thirty (30) days prior
written notice to Employer. Should Employee terminate Employee's employment for
any reason other than Good Reason (hereinafter defined), Employee will be
entitled to his Base Salary earned prior to the date of termination as provided
for in Paragraph 5 of this Agreement, computed pro rata up to and including the
date of termination, plus one full year of his Base Salary, plus all stock based
compensation due through the term of this agreement. Should Employee terminate
Employee's employment with Good Reason, Employee shall receive his Base Salary,
the Profits Bonus and the Revenue Bonus due for the remainder of the term of
this Agreement, payable as and when same would have become due and payable but
for the termination of Employee's employment, the Retirement Base Salary, the
Advisory Payments and the Noncompetition Payments. For purposes of this
Agreement, "Good Reason" means the occurrence, during the term of this
Agreement, of any one of the following acts by Employer, or failures by Employer
to act: i. any material diminution in Employee's authorities or responsibilities
(including reporting responsibilities) or from his status, title, position or
responsibilities (including reporting responsibilities); the assignment to him
of any duties or work responsibilities which are inconsistent with such status,
title, position or work responsibilities; or any removal of Employee from, or
failure to reappoint or reelect him to the Position and Employer's Board of
Directors, except if any such changes are because of Permanent Disability,
retirement, or death; ii. a reduction by Employer in Employee's Base Salary,
Profits Bonus or Revenue Bonus as in effect on the date hereof or as the same
may be increased from time to time; iii. the failure by Employer, without
Employee's consent, to pay to Employee any portion of Employee's current
compensation; or iv. the failure by Employer to continue to provide Employee
with benefits substantially similar in value to Employee in the aggregate to
those enjoyed by Employee under any of Employer's pension, life insurance,
medical, health and accident, or disability plans.
17. Notices.
a. Any notice under this Agreement must be written. Notices must be either
(i) hand delivered to the address set forth below for the recipient; or (ii)
placed in the United States mail, certified, return receipt requested, addressed
to the recipient or (iii) deposited with an overnight delivery service,
addressed to the recipient; or (iv) telecopied by facsimile transmission to the
party, provided that the transmission is confirmed by telephone on the date of
the transmission and is followed with a copy sent by overnight delivery or
regular mail to the address specified below. Any mailed notice is effective upon
deposit with the United States Postal Service or the overnight delivery service,
as applicable; all other notices are effective upon receipt.
b. Either party may designate another address for this Agreement by giving
the other party at least five (5) business days' advance notice of its address
change. A party's attorney may send notices on behalf of that party, but a
notice is not effective against a party if sent only to that party's attorney.
18. Entire Agreement. This Agreement contains the entire agreement and
supersedes all prior agreements and understanding, oral or written, with respect
to the subject matter hereof. This Agreement may be changed only by an agreement
in writing signed by the party against whom any waiver, change, amendment or
modification is sought. 19. Waiver. The waiver by Employer of a breach of any of
the provisions of this Agreement by Employee shall not be construed as a waiver
of any subsequent breach by Employee.
20. Governing Law; Venue. This Agreement shall be construed and enforced in
accordance with the laws of the State of Georgia. Gwinnett County, Georgia shall
be the proper venue for any litigation arising out of this Agreement.
21. Paragraph Headings. Paragraph headings are for convenience only and are
not intended to expand or restrict the scope or substance of the provisions of
this Agreement.
22. Assignability. The rights and obligations of Employer under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of Employer. This Agreement is a personal employment agreement and
the rights, obligations and interests of Employee hereunder may not be sold,
assigned, transferred, pledged or hypothecated.
23. Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid or unenforceable, the remainder of the
Agreement shall remain in full force and effect and shall in no way be impaired.
24. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the rules of the American Arbitration Association, and judgment
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. Any arbitration shall be held in Atlanta, Georgia.
