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EXHIBIT 10.16
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT originally dated the lst day of April, 1996 (the "Original
Date") subsequently amended by Amendment No. 1 dated the 30th day of June, 1997,
further amended and restated by these presents dated September 1, 1998, between
Xxxxx X. Mercy ("Employee") and America Service Group Inc. a Delaware
corporation (the "Company").
WHEREAS, the Board of Directors of the Company (the "Board") heretofore
recruited and employed the Employee as President and Chief Executive Officer of
the Company and a director of the Company;
WHEREAS, the Board now desires to employ the Employee as the
nonexecutive Chairman of the Board of Directors of the Company, in addition to
serving as a director;
WHEREAS, the Employee has made a meaningful personal investment in the
common stock of the Company; and
WHEREAS, the Employee accepts the position of Chairman as contemplated
herein;
NOW, THEREFORE, the parties hereby agree as follows:
1. Employment and Duties. The Company hereby employs the Employee
as Nonexecutive Chairman of the Board of Directors of the Company to perform the
duties of such office. The Board shall also take all necessary steps to ensure
that Employee is slated as a nominee to the Board and elected Chairman during
his employment, provided that Employee may terminate his chairmanship, as
provided herein, and remain a director and Employee hereunder.
2. Performance. Employee agrees to devote reasonable time and
effort to the performance of his duties hereunder and to promote the interests
and welfare of the Company. However, it is understood that Employee has
additional employment with and provides services for third parties (except as
otherwise provided in Section 9).
3. Term. The term of Employee's employment hereunder commenced as
of the Original Date and shall continue from the date hereof as an employment at
will unless terminated by written notice from either party to the other as
herein provided.
4. Compensation. For all services rendered by Employee, the
Company agrees from the date hereof to pay Employee from and after the date
hereof: (i) a salary at a minimum annual rate of $60,000 until January 1, 1999,
and $24,000 per annum thereafter; (ii) with respect to calendar year 1998,
incentive compensation at a rate and under the incentive compensation plan as
presently approved by the Board, to be calculated upon the total amount of
Employee's base salary payments for 1998; plus (iii) such additional
compensation as the
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Compensation Committee of the Board shall from time to time determine.
Employee's compensation as a director shall be separate and equal to the
amount set by the Board of Directors for all directors.
5. Purchase of Stock.
(a) Purchase. Employee has purchased from the Company
146,000 shares of common stock of the Company at a price of $8.75 per share (the
"Purchase Price").
(b) Put Option. Upon termination of Employee's employment
hereunder for any reason or without cause, Employee, or Employee's estate if
applicable, shall, for a period of forty-five (45) days following the
Termination Date (as defined hereafter), have the right to sell, and the Company
shall thereupon have an obligation to purchase (or cause a third party to
purchase) such number of the shares purchased under Section 5(a) (the "Mercy
Shares") and of the shares vested pursuant to the stock award received under
Section 6(a) (the "Vested Award Shares") as Employee, or Employee's estate if
applicable, shall elect, at $9.90 per share. Completion of said transaction,
including stock certificate delivery and wire transfer of proceeds in accordance
with the Employee's instructions, shall occur within five (5) business days of
said notification. "Termination Date" shall mean the date of death, or the date
specified in the notice of termination, as the case may be, provided that if a
dispute exists, the Termination Date shall be the date on which the dispute is
finally determined either by mutual written agreement of the parties, or by the
final judgment, order or decree of a court of competent jurisdiction.
(c) Company's Right to Repurchase. Upon termination of
Employee's employment hereunder for any reason or without cause, the Company
shall for a period for forty-five (45) days following the Termination Date have
the right to purchase (or cause a third party to purchase), and Employee shall
thereupon have an obligation to sell to the Company (or to such purchaser) such
number of the Mercy Shares and of the Vested Award Shares as the Company shall
elect, at a price equal to the average closing price of the Company's common
stock for the thirty (30) trading days immediately preceding notification by the
Company to the Employee of the Company's intention to exercise this right.
Completion of said transaction, including stock certificate delivery and wire
transfer of proceeds in accordance with the Employee's instructions, shall occur
within five (5) business days of said notification.
(d) Registration of Mercy Shares. The sale of the Mercy
Shares to Employee has been registered by the Company on Form S-8 in accordance
with all applicable laws and regulations.
(e) Exception to Repurchase Obligation. Anything to the
contrary notwithstanding, the Company shall not be obligated to purchase the
Mercy Shares or the Vested Award Shares if and to the extent such purchase would
violate the Delaware General Corporation Law, or any loan agreement to which the
Company is then a party. Within five business days following notification by
Employee or his estate, if applicable, of an election (the "Original
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Election") to sell shares under Section 5(b), the Company shall determine
whether and to what extent the requested purchase would violate the Delaware
General Corporation Law or any such loan agreement and so advise the Employee or
his estate, in writing (the "Company Notice"). If and to the extent the Employee
or his estate sells the shares which the Company is prohibited from purchasing,
as described above (the "Restricted Shares"), within thirty (30) days (or such
longer period as the parties shall agree) following the Company Notice, the
Company shall pay the Employee or his estate, if applicable, the amount, if any,
by which the price otherwise payable for such shares under Section 5(b) exceeds
the net proceeds received, provided that:
(i) neither the Employee nor his estate sells
any shares of Common Stock other than Restricted Shares between the
date of the Original Election and the last date on which Restricted
Shares are sold hereunder; and
(ii) Employee and his estate use commercially
reasonable efforts to realize the maximum net proceeds from the sale of
Restricted Shares hereunder.
(f) Transfer of Mercy Shares and Vested Award Shares.
Sections 5(b), 5(c) and 5(e) hereof shall continue to apply to any Mercy Shares
and/or Vested Award Shares transferred by Employee to trusts for his benefit or
to his spouse or direct descendants or trusts for their benefit (collectively,
"Permitted Transferees"). Each such person shall have the same rights and
obligations under Section 5(b), 5(c) and 5(e) as Employee or his estate, if
applicable, would have with respect to such shares upon termination of
Employee's employment hereunder. Sections 5(b), 5(c) and 5(e) hereof shall cease
to apply to any Mercy Shares and/or Vested Award Shares otherwise transferred by
Employee (or by his Permitted Transferees) and the transferee thereof shall have
no rights or obligations under Sections 5(b), 5(c) or 5(e).
(g) Legend. All certificates representing Mercy Shares
and Vested Award Shares, including any Mercy Shares or Vested Award Shares
transferred to a Permitted Transferee, shall bear the following legend:
The shares represented by this certificate are
subject to certain options and rights to repurchase,
as set forth in an Amended and Restated Employment
Agreement between America Service Group Inc. and
Xxxxx X. Mercy dated____________, 1998.
(h) Precedence. In the event rights to sell are exercised
under Section 5(b) and rights to purchase are exercised under Section 5(c),
following Employee's termination of employment, then, notwithstanding the order
in which such rights are exercised, rights to sell exercised under Section 5(b)
by the Employee, his estate or Permitted Transferees shall take precedence.
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6. Incentive Compensation.
(a) Stock Awards. The Company has awarded to Employee
40,000 shares of the Company's common stock as a restricted stock award pursuant
to the Company's Incentive Stock Plan, subject to the terms and conditions set
forth in Exhibit A hereto. The issuance of such shares has been registered on
Form S-8.
(b) Stock Options. The Company has granted to the
Employee, pursuant to stockholder approval of the Company's Amended Incentive
Stock Plan, options to purchase 175,000 shares of the Company's common stock at
$8.75 per share (the "Options") pursuant to the terms of the Company's Amended
Incentive Stock Plan and subject to the terms and conditions set forth in
Exhibit B. The Options will expire ten (10) years from the date of grant and
have fully vested.
7. Expenses. The Company shall promptly pay or reimburse Employee
for all reasonable expenses incurred by him in connection with the performance
of his duties and responsibilities hereunder.
8. Termination.
(a) Resignation; Termination. Employee may resign or be
terminated as Chairman hereunder and this Agreement, as applicable, shall
remain in force. Either party to this Agreement may terminate Employee's
employment on thirty (30) days' notice.
(b) Disability; Death. If Employee shall fail to or be
unable to perform the duties required hereunder because of any physical or
mental infirmity, and such failure or inability shall continue for any six (6)
consecutive months during the term of this Agreement, the Company shall have the
right to terminate this Agreement. Except as otherwise provided herein, and
except for Section 5(b) and 5(c), this Agreement shall terminate upon the death
of Employee, and the estate of Employee shall be entitled to receive all unpaid
amounts due Employee hereunder to such date of death.
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9. Covenant Not to Compete.
(a) Employee acknowledges that in the course of his employment he
has become familiar with the Company and its affiliates' confidential
information concerning the Company and its affiliates and that his services are
of special, unique and extraordinary value to the Company and
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its affiliates. Therefore, Employee agrees that, during his employment with the
Company, and for one year after Employee ceases to perform duties hereunder,
neither Employee nor any company with which Employee is affiliated as an
employee, consultant or independent contractor, will directly or indirectly
engage in any business similar to the Business of the Company, as described
below, anywhere in the United States of America, or have any interest directly
or indirectly in any Business; provided, however, that nothing herein shall
prohibit Employee from (i) owning in the aggregate not more than 5% of the
outstanding stock of any class of stock of a corporation so long as Employee has
no active participation in the business of such corporation, (ii) affiliating
with any company which may participate in the Business, so long as that
participation at the time of affiliation aggregates less than 10% of such
company's revenue, or (iii) directly or through an affiliate, acquiring, merging
or otherwise gaining control, or purchasing an interest in an organization as
long as the Business represents less than 10% of the acquiree's revenue at the
time of the transaction. For purposes hereof, the "Business" shall consist of
(A) delivery of contract health care to correctional facilities, (B) drug and
alcohol abuse treatment programs by correctional institutions or criminal
justice programs, and (C) any other business in which the Company is engaged as
of the date that Employee ceases to perform duties hereunder.
(b) If, at the time of enforcement of this Section 9, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area.
(c) In the event of the breach by Employee of any of the
provisions of this Section 9, the Company, in addition and supplementary to
other rights and remedies existing in its favor, may apply to any court of law
or equity of competent jurisdiction for specific performance and/or injunctive
or other relief in order to enforce or prevent any violations of the provisions
hereof.
10. Notices. All notices hereunder, to be effective, shall be in
writing and shall be deemed delivered when delivered by and or when sent by
first-class, certified mail, postage and fees prepaid, to the following
addresses or as otherwise indicated in writing by the parties:
(a) If to the Company:
America Service Group Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attn: Chief Executive Officer
(b) If to Employee:
Xx. Xxxxx X. Mercy
0000 Xxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
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11. Assignment. This Agreement is based upon the personal services
of Employee and the rights and obligations of Employee hereunder shall not be
assignable except as herein expressed provided. This Agreement shall inure to
the benefit of and be enforceable by the Employee's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Employee should die while any amounts would still
be payable to him hereunder if he would have continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to the Employee's devisee, legatee or other designee and
if there is no such devisee, legatee or designee, to the Employee's estate.
12. Entire Agreement. This Agreement supersedes all prior
understandings and agreements with respect to the provisions hereof and contains
the entire agreement of the parties and may be amended only in writing, signed
by the parties hereto.
13. Severability. The provisions of this Agreement are severable,
and the invalidity of any provision shall not affect the validity of any other
provision. In the event that any arbitrator or court of competent jurisdiction
shall determine that any provision of this Agreement or the application thereof
is unenforceable because of the duration or scope thereof, the parties hereto
agree that said arbitrator or court in making such determination shall have the
power to reduce the duration and scope of each provision to the extent necessary
to make it enforceable, and that the Agreement in its reduced form shall be
valid and enforceable to the full extent permitted by law.
14. Non-Exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Employee's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by the Company
(except for any severance or termination policies, plans, programs or practices)
and for which the Employee may qualify, nor shall anything herein limit or
reduce such rights as the Employee may have under any other Agreement with the
Company. Amounts which are vested benefits or which the Employee is otherwise
entitled to receive under any plan or program of the Company shall be payable in
accordance with such plan or program, except as explicitly modified by this
Agreement.
15. Governing Law. This Agreement shall be construed under and
governed by the internal laws of the State of Delaware.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as a binding contract as of the day and year first above written.
AMERICA SERVICE GROUP INC.
By: /s/ X.X. Xxxxxx
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X.X. Xxxxxx
Chairman of the Executive Committee,
Board of Directors
EMPLOYEE:
By: /s/ Xxxxx X. Mercy
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Xxxxx X. Mercy
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