Exhibit 10(r)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated as of January 8, 1998,
between PICO PRODUCTS, INC., a New York corporation ("Employer"), and XXXXXXX X.
XXXXX, XX. ("Employee").
BACKGROUND. Employee currently serves under a consulting agreement as
Employer's Chairman and Chief Executive Officer. Employer and Employee mutually
agree to employ Employee as Chairman and Chief Executive Officer of Employer
upon the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto, intending to
be legally bound hereby, agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee, and Employee hereby
accepts such employment and agrees to perform his duties and responsibilities
hereunder, in accordance with the terms and conditions hereinafter set forth.
1.1. EMPLOYMENT TERM. The employment term of this Agreement shall
be for a period of three years and may be renewed in accordance with Section
1.2. The term "Employment Term" shall refer to the initial Employment Term,
which shall commence on the date hereof and shall continue until and end on the
third anniversary date of this Agreement (unless terminated prior thereto in
accordance with Section 7 hereof) and, to the extent this Agreement is renewed
pursuant to Section 1.2, to the last day of any successive one year period.
1.2. RENEWAL. This Agreement shall be automatically renewed for
successive one year terms at the expiration of the initial Employment Term, and
any subsequent Employment Term, unless written notice to the contrary is
provided by either Employer or Employee at least ninety days prior to the
expiration of such Employment Term. In the event that Employer does not elect
to renew this Agreement upon the expiration of an Employment Term, Employee
shall be entitled to receive the severance compensation described in Section
1.8(a)(i) and Section 1.8(b).
1.3. DUTIES AND RESPONSIBILITIES.
(a) During the Employment Term, Employee shall serve as
Chairman and Chief Executive Officer of Employer and shall perform all duties
and accept all responsibilities incidental to such position or as may be
assigned to him by Employer's Board of Directors, and he shall report to and
cooperate fully with the Board of Directors. Employee shall operate primarily
out of Employer's principal executive office in Los Angeles, California, but
shall be expected to travel as appropriate on Employer's business.
(b) Employee represents and covenants to Employer that he
is subject to or a party to only those employment agreements, non-competition
covenants, and non-disclosure agreements listed on Exhibit "A" hereto. Employee
represents and covenants to Employer that neither those documents nor any other
similar agreement, covenant, understanding or restriction to which Employee is
subject would prohibit Employee from executing this Agreement and performing his
duties and responsibilities hereunder, or would in any manner, directly or
indirectly, limit or affect the duties and responsibilities which may now or in
the future be assigned to Employee by Employer.
1.4. EXTENT OF SERVICE. During the Employment Term, Employee agrees
to use his best efforts to carry out his duties and responsibilities under
Section 1.3 hereof and to devote his full time, attention and energy thereto.
The foregoing shall not be construed as preventing Employee from continuing as
(a) Xxxx of the Xxxxx X. Xxxxxxx Graduate Management Center of the Claremont
Graduate School, (b) serving as a consultant or director for one or more
non-competitive business enterprises, (c) engaging in charitable or civic
activities, (d) teaching, or (e) making investments in other businesses or
enterprises; provided that such activities in the aggregate shall not prevent
him from discharging his duties and responsibilities to Employer.
1.5. BASE COMPENSATION. For all the services rendered by Employee
hereunder, Employer shall pay Employee an annual salary at the rate of $175,000
for the Employment Term, plus such additional amounts, if any, as may be
approved by Employer's Board of Directors, less withholding required by law or
agreed to by Employee, payable in installments at such times as Employer
customarily pays its other executive officers. The annual salary may be
increased by the Board of Directors in its sole discretion. The first salary
review shall be as of the end of the first six months of this Agreement.
1.6. BENEFITS. During the Employment Term, Employee shall be
entitled to certain benefits and shall be eligible for certain incentive
compensation, as follows:
(a) Employee shall be entitled to fifteen working days of
paid vacation per annum in accordance with Employer's then existing vacation
policy.
(b) Employee shall be entitled to all normal and usual
benefits provided by Employer to its management employees, including, but not
limited to, participation in profit sharing, disability, health, hospitalization
and retirement plans and such other benefits as the Board of Directors of
Employer may from time to time determine based upon the benefits paid to other
executive officers of Employer. In addition Employee shall be entitled to a car
allowance of $9,600 per annum. Employee shall also be entitled to a $1,000,000
life insurance policy on a split dollar basis and such other executive benefits
as shall be approved by Employer's Board of Directors or an appropriate
committee of the Board.
(c) In connection with his appointment as Chairman and
Chief Executive Officer of Employer, Employee has been granted options to
purchase 118,000 shares of Employer's Common Stock. Employee shall also be
granted 82,000 "phantom stock units." Said grant shall be made as soon as
practicable but in no event later than January 15, 1998. Employee shall be
eligible to receive additional stock options, additional phantom stock units, or
other forms of stock grants as shall be determined by Employer's Board or
Directors or an appropriate committee of such Board.
(d) Employee shall be eligible for an annual management
bonus with a target level equal to at least 50% of base salary based on
performance goals as shall be set by Employer's Board of Directors or an
appropriate committee of such Board.
(e) Employee shall be paid an amount equal to $44,600,
representing reimbursement for the present value of the loss of pension benefits
from Deloitte & Touche LLP as a result of Employee's assumption of the position
of Chief Executive Officer of Employer.
1.7. CHANGE IN CONTROL.
(a) For purposes of this paragraph 1.7, "Change in Control"
shall mean (i) a merger or consolidation of Employer with any entity other than
an entity with which Employer is affiliated at the date of execution of this
Agreement; (ii) a sale of substantially all of the assets of Employer to any
person or entity other than a person or entity with which Employer is affiliated
at the date of execution of this Agreement; or (iii) a change in a majority of
the members of the Board of Directors of Employer within any twelve-month
period.
(b) In the event of a Change in Control, Employee may elect
to terminate this Agreement for Good Cause. For purposes of this Agreement,
"Good Cause" shall mean:
(i) the assignment to Employee of any duties inconsistent
with his positions, duties, responsibilities and status with Employer as in
effect immediately prior to such Change in Control;
(ii) a change in Employee's reporting responsibilities,
titles or offices as in effect immediately prior to such Change in Control;
(iii) a reduction in Employee's base salary as in effect
immediately prior to such Change in Control; or
(iv) a relocation of Employee's office to a city other
than the city where Employee was based immediately prior to such Change in
Control.
(c) Employee shall provide written notice to Employer of
his election to terminate this Agreement for Good Cause, and shall specify in
such written notice the date upon which this Agreement shall terminate.
(d) If Employee terminates this Agreement following a
Change in Control for any reason other than Good Cause, Employer shall pay
Employee his base salary through the effective date of termination.
(e) If Employee elects to terminate this Agreement for Good
Cause:
(i) Employer shall pay Employee, as severance compensation,
an amount equal to 24 times Employee's base monthly cash compensation. Such
severance compensation shall be paid in 24 equal monthly installments,
commencing thirty days after the date of termination of this Agreement;
(ii) Employer shall continue to provide Employee with all
health, dental, hospitalization and disability benefits which Employee received
pursuant to Section 1.6(b) hereof, for a period of twelve months following the
termination of this Agreement; and
(iii) All stock options and phantom stock units held by
Employee which shall not have vested shall immediately vest.
Notwithstanding the foregoing, the payments to be made and other benefits to be
provided to Employee pursuant to this paragraph (e) shall not exceed an amount
sufficient to characterize any portion of such payments as an "excess parachute
payment" within the meaning of Section 280G(b) of the Internal Revenue Code of
1986, as amended, or any successor provision. In the event that a portion of
such payments or benefits would otherwise be deemed to be an excess parachute
payment, Employer shall notify Employee of such fact and Employee shall have a
period of thirty days in which to notify Employer of the order in which the
categories of amounts payable or benefits to be provided to him hereunder shall
be reduced so that no portion of such payments or benefits shall constitute an
excess parachute payment. In the event that Employee shall fail so to notify
Employer, Employer shall solely make such determination.
1.8. SEVERANCE COMPENSATION. If Employer terminates this Agreement,
other than pursuant to Section 7 hereof:
(a) Employer shall pay Employee an amount equal to the sum of
(i) Employee's base annual cash compensation plus (ii) the bonus or other
additional compensation Employee would have received for the current fiscal year
based on targeted performance goals. Such severance compensation shall be
payable in 12 equal monthly installments, commencing thirty days after the date
of termination of this Agreement; and
(b) Employer shall continue to provide Employee with the
health, dental, hospitalization and disability benefits which Employee received
pursuant to Section 1.6(b) hereof for a period of twelve months following the
termination of this Agreement. Thereafter, Employee shall be afforded the
opportunity to purchase coverage pursuant to the provisions of the Consolidated
Omnibus Budget Reconciliation Act (COBRA).
2. EXPENSES. Employee shall be reimbursed for the reasonable business
expenses incurred by him in connection with his performance of services
hereunder during the Employment Term upon presentation of an itemized account
and written proof of such expenses.
3. DEVELOPMENTS. Employee will disclose promptly in writing to Employer
all inventions, ideas, discoveries, and improvements, whether or not patentable,
conceived by Employee during the period of Employee's employment with Employer,
or a parent or subsidiary thereof, whether alone or with others, and whether or
not during regular business hours, or on Employer premises or with the aid of
Employer materials, which pertain in any
way to Employee's work with Employer or to any business activity which is or at
the time of such conception may be carried on by Employer or a parent or
subsidiary thereof. All such inventions, ideas, discoveries, and improvements
are the property of Employer to which Employee hereby assigns and transfers
forever all Employee's rights, titles and interests.
Employee, upon request by Employer and at Employer's sole expense,
will prepare and execute applications for patents for such inventions, ideas,
discoveries, and improvements, both in the United States and in foreign
countries, and will do everything necessary to ensure the issuance of such
patents, irrespective of whether required to be done during or after the
termination of Employee's period of employment with Employer.
Any inventions, ideas, discoveries, and improvements conceived or made
by Employee prior to the execution of this Agreement and not intended to be
included within its provisions are listed or described on Exhibit "B" attached
to this Agreement, and the absence of any such list or description indicates
that there are no inventions, ideas, discoveries, or improvements not covered by
this Agreement.
Employee has read the attached provisions of California law (Chapter
2, Div. 3 Labor Code Sec. 1 Art. 3.5, Sections 2870, 2871 and 2872) and
understands that under its provisions Employee may retain ownership of certain
inventions that Employee may make during the term of employment. Such
inventions shall not be subject to the terms of this Agreement. Any such
inventions which Employee desires to retain as Employee's property will be
reported and disclosed to the Employer with the understanding, however, that the
Employer may require Employee to disclose such information about such
inventions, as in Employer's opinion is necessary to enable it to determine if
the invention qualifies under this law for retention as Employee's property. It
is further understood that information disclosed by Employee will be held in
confidence by Employer. However, Employer need not treat any such disclosed
information as confidential if it has previously been known to it, or if at the
time of Employee's disclosure or thereafter it is disclosed in patents or other
publications, imparted to it by other parties having lawful possession of the
same, or is well known to the trade to which it relates.
4. TRADE SECRETS. The Employee agrees that he will not at any time,
either during or subsequent to the Employment Term, unless given express consent
in writing by the Employer, either directly or indirectly use or communicate to
any person or entity any confidential information of any kind concerning matters
affecting or relating to the names, addresses, buying habits or practices of any
of Employer's clients or customers; Employer's marketing methods, programs,
formulas, patterns, compilations, devices, methods, techniques or processes and
related data; the amount of compensation paid by Employer to employees and
independent contractors and other terms of their employment or contractual
relationships; other information concerning Employer's manner of operations.
(The foregoing shall not be deemed to prohibit the disclosure of information
which (a) is, at the time of disclosure, in the public domain other than as a
result of Employee's breach of this Agreement, or (b) can be demonstrated by
Employee to be known by Employee on the date of his commencement of employment.)
Employee agrees that the above information and items are important, material and
confidential trade secrets and that they affect the successful conduct of
Employer's business and its good will. Employee agrees that all business
procured by Employee while employed by Employer is and shall remain the
permanent and exclusive property of Employer. Employee further agrees that
Employer's relationship with each of its employees and
independent contractors is a significant and valuable asset of Employer. Any
interference with Employer's business, property, confidential information, trade
secrets, clients, customers, employees or independent contractors by Employee or
any of Employee's agents during or after the term of this Agreement shall be
deemed a material breach of this Agreement.
5. NONSOLICITATION. Employee hereby acknowledges and agrees that he is
likely to be exposed to a significant amount of confidential information
concerning Employer's business methods, operations, employment relationships and
customers while employed under this Agreement, that such information might be
retained by Employee in tangible form or simply retained in Employee's memory,
and that the protection of Employer's exclusive rights to such confidential
information and the benefits flowing from it can best be ensured by means of a
restriction on Employee's activities after termination of employment.
Therefore, Employee agrees that for the one-year period following termination of
employment (whether with or without cause) he shall not solicit, divert or
initiate (or attempt to solicit, divert or initiate) any contact with any
customer, client or vendor of Employer if such action is on behalf of any person
(including Employee) who shall then be in a business competitive with that of
Employer, for any commercial or business reason whatsoever. Employee also
agrees that for such period he will not directly or indirectly solicit the
employment of any employee of Employer and will not attempt to persuade any
employee to leave the employment of Employer.
6. EQUITABLE RELIEF.
6.1. Employee acknowledges that the restrictions contained in
Sections 4 and 5 hereof are reasonable and necessary to protect the legitimate
interests of Employer and that any violation of such restrictions would result
in irreparable injury to Employer. If the period of time or other restrictions
specified in Sections 4 and 5 should be adjudged unreasonable at any proceeding,
then the period of time or such other restrictions shall be reduced by the
elimination or reduction of such portion thereof so that such restrictions may
be enforced in a manner adjudged to be reasonable. Employee acknowledges that
Employer shall be entitled to preliminary and permanent injunctive relief for a
violation of any such restrictions without having to prove actual damages or to
post a bond; Employer shall also be entitled to an equitable accounting of all
earnings, profits and other benefits arising from such violation, which rights
shall be cumulative and in addition to any other rights or remedies to which
Employer may be entitled in law or equity. In the event of a violation, the
period referred to in Section 5 hereof shall be extended by a period of time
equal to that period beginning with the commencement of any such violation and
ending when such violation shall have been finally terminated in good faith.
6.2. Employee agrees that until the expiration of the covenants
contained in Sections 4 and 5 of this Agreement, he will provide, and that
Employer may similarly provide, a copy of the covenants contained in such
Sections to any business or enterprise (i) which he may directly or indirectly
own, manage, operate, finance, join, control or participate in the ownership,
management, operation, financing, control or control of, or (ii) with which he
may be connected with as an officer, director, employee, partner, principal,
agent, representative, consultant or otherwise, or in connection with which he
may use or permit his name to be used.
7. TERMINATION. This Agreement shall terminate prior to the expiration
of the term set forth in Section 1.1 above upon the occurrence of any one of the
following events:
7.1. DISABILITY. In the event that Employee is unable fully to
perform his duties and responsibilities hereunder to the full extent required by
the Board of Directors of Employer by reason of illness, injury or incapacity
for six consecutive months, during which time he shall continue to be
compensated as provided in Section 1.5 hereof (less any payments due Employee
under Employer or government provided disability benefits programs, including
social security disability, workers' compensation and disability retirement
benefits), this Agreement may be terminated by Employer, and Employer shall have
no further liability or obligation to Employee for compensation hereunder;
provided, however, that Employee will be entitled to receive the payments
prescribed under any disability benefit plan which may be in effect for
employees of Employer in which he participated. Employee agrees, in the event
of any dispute under this Section 7.1, to submit to a physical examination by a
licensed physician mutually agreed upon by Employee and the Board of Directors
of Employer. It is understood that nothing in the foregoing paragraph shall
constitute a waiver of any rights which Employee may have under applicable
workers' compensation laws, provisions of the American with Disabilities Act, or
provisions of state statutes of similar effect.
7.2. DEATH. In the event that Employee dies during the Employment
Term, Employer shall pay to his executors, legal representatives or
administrators an amount equal to the installment of his salary set forth in
Section 1.5 hereof for the month in which he dies, and thereafter Employer shall
have no further liability or obligation under the terms of this Agreement to his
executors, legal representatives, administrators, heirs or assigns or any other
person claiming under or through him; provided, however, that Employee's estate
or designated beneficiaries shall be entitled to receive the payments prescribed
for such recipients under any death benefit plan which may be in effect for
employees of the Employer in which Employee participated. It is understood and
agreed by the parties that nothing in this provision shall be deemed to waive
any protection provided to Employee by any workers' compensation statute or
other law requiring provision of a safe work place.
7.3. CAUSE. Notwithstanding any other provision hereof, Employer
may terminate this Agreement at any time for "cause." For purposes of this
Agreement, "cause" shall include, but not be limited to, the failure of Employee
to perform or observe any of the terms or provisions of this Agreement (after
notice of such failure and an opportunity to cure such failure within 30 days
after such notice), dishonesty, misconduct, conviction of a crime involving
moral turpitude, habitual insobriety, misappropriation of funds, disparagement
of Employer, its management or its employees or financial inability of Employer
to continue to do business. Employer's liability, if any, for payment to
Employee as a consequence of termination of Employee's employment pursuant to
this Agreement shall be reduced by and to the extent of any earnings received by
or accrued for the benefit of Employee during any unexpired part of the
Employment Term.
8. SURVIVAL. Notwithstanding the termination of this Agreement by reason
of Employee's disability under Section 7.1 or for cause under Section 7.3, his
obligations under Sections 4 and 5 hereof shall survive and remain in full force
and effect for the periods therein provided, and the provisions for equitable
relief against Employee in Section 6 hereof shall continue in force.
9. GOVERNING LAW. This Agreement shall be governed by and interpreted
under the laws of the State of California.
10. NOTICES. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when hand delivered or mailed by
registered or certified mail, as follows (provided that notice of change of
address shall be deemed given only when received):
If to Employer, to: Pico Products, Inc.
00000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxx Xxxxxxx, XX 00000
With a required copy to: Xxxxxxx X. Xxxxxx, Xx., Esquire
Saul, Ewing, Xxxxxx & Xxxx
0000 Xxxxxx Xxxxxx Xxxx
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
If to Employee, to: Xx. Xxxxxxx X. Xxxxx, Xx.
-------------------
-------------------
or to such other names or addresses as Employer or Employee, as the case may be,
shall designate by notice to each other person entitled to receive notices in
the manner specified in this Section.
11. CONTENTS OF AGREEMENT; AMENDMENT AND ASSIGNMENT.
11.1. This Agreement supersedes all prior agreements and sets forth
the entire understanding among the parties hereto with respect to the subject
matter hereof and cannot be changed, modified, extended or terminated except
upon written amendment approved by the Board of Directors of Employer and
executed on its behalf by a duly authorized officer. Without limitation,
nothing in this Agreement shall be construed as giving Employee any right to be
retained in the employ of Employer beyond the expiration of the Employment Term,
and Employee specifically acknowledges that, unless this Agreement is renewed in
accordance with Section 1.2 hereof, he shall be an employee-at-will of Employer
thereafter, and thus subject to discharge by Employer with or without cause and
without compensation of any nature.
11.2. Employee acknowledges that from time to time, Employer may
establish, maintain and distribute employee manuals or handbooks or personnel
policy manuals, and officers or other representatives of Employer may make
written or oral statements relating to personnel policies and procedures. Such
manuals, handbooks and statements are intended only for general guidance. No
policies, procedures or statements of any nature by or on behalf of Employer
(whether written or oral, and whether or not contained in any employee manual or
handbook or personnel policy manual), and no acts or practices of any nature,
shall be construed to modify this Agreement or to create express or implied
obligations of any nature to Employee.
11.3. Subject to the provisions of paragraph 1.7 above, all of the
terms and provisions of this Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective heirs, executors,
administrators, legal representatives, successors and assigns of the parties
hereto, except that the duties and responsibilities of Employee hereunder are of
a personal nature and shall not be assignable or delegatable in whole or in part
by Employee.
12. SEVERABILITY. If any provision of this Agreement or application
thereof to anyone or under any circumstances is adjudicated to be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect any other provision or application of this Agreement which can be given
effect without the invalid or unenforceable provision or application and shall
not invalidate or render unenforceable such provision or application in any
other jurisdiction.
13. REMEDIES CUMULATIVE; NO WAIVER. No remedy conferred upon Employer or
Employee by this Agreement is intended to be exclusive of any other remedy, and
each and every such remedy shall be cumulative and shall be in addition to any
other remedy given hereunder or now or hereafter existing at law or in equity.
No delay or omission by Employer or Employee in exercising any right, remedy or
power hereunder or existing at law or in equity shall be construed as a waiver
thereof, and any such right, remedy or power may be exercised by Employer or
Employee from time to time and as often as may be deemed expedient or necessary
by Employer or Employee, each in its sole discretion.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
Attest: PICO PRODUCTS, INC.
------------------------------ By:
Secretary -------------------------
-------------------------
XXXXXXX X. XXXXX, XX.
EXHIBIT "A"
EMPLOYMENT AGREEMENTS, NON-COMPETITION AGREEMENTS AND NON-DISCLOSURE AGREEMENTS
