EXHIBIT 10 (A)
EMPLOYMENT AGREEMENT
This Agreement is entered into, to be effective as of July 1, 2003, by
and between Warrantech Automotive, Inc., a Connecticut corporation, with its
principal place of business located at 0000 Xxxxxxx 000, Xxxxx 000, Xxxxxxx,
Xxxxx 00000 ("Employer" or "Warrantech"), and Xxxxxxxxxxx X. Xxxx, an individual
residing at 0000 Xxxxxxxxx Xxxxx, Xxxxxx, Xxxxx 00000 ("Executive").
RECITALS
WHEREAS, Employer desires to employ Executive and Executive desires to
be employed by Employer pursuant to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the forgoing and the terms and
conditions set forth herein, Employer and Executive hereby agree as follows:
I. EMPLOYMENT AND DUTIES
Employer hereby employs Executive, and Executive hereby accepts such
employment, upon the terms and conditions set forth in this Agreement. Executive
shall render such executive, managerial, supervisory, developmental, marketing,
or other services as Employer may specify from time to time, subject at all
times to the direction and control of the Chairman and Chief Executive Officer
for WarrantechCorporation, Employer's Board of Directors or any designee of any
thereof. Executive shall serve as and with the title of President of Employer.
II. TERM
The term of Executive's employment under this Agreement shall commence
on July 1, 2003 and shall continue through June 30, 2008.
III. COMPENSATION
3.1 Salary. Employer shall pay Executive a base salary at the rate of
Two Hundred Thirty Thousand Dollars ($230,000) for each twelve-month period
during the term of this Agreement. Such base compensation shall be payable in
accordance with Employer's payroll practices as in effect from time to time.
3.2 Incentive Compensation. Executive shall be eligible to receive an
annual incentive bonus in the amount of thirty per cent (30%) of Executive's
base salary based on Employer meeting or exceeding ninety per cent (90%) of its
net sales revenue and operating income goals as established in Employer's budget
for each fiscal year ending during the term of this Agreement. In the event,
however, that Employer meets or exceeds one hundred ten per cent (110%) of its
net sales revenue and operating income goals as established in the Employer's
budget for a given fiscal year, Executive shall be entitled to receive an annual
incentive bonus in the amount of forty per cent (40%) of Executive's base
salary. In addition, Executive will receive an additional five per cent (5%)
bonus for every ten per cent (10%) Employer exceeds one hundred ten per cent
(110%) of net sales revenue and operating income goals for a given fiscal year.
Indetermining Executive's entitlement to the incentive compensation described
herein, Employer shall rely upon the financial statements of the Consolidated
Companies (as defined herein) as prepared by its independent certified public
accountants, which financial statements shall be prepared in a manner consistent
with generally accepted accounting principles. Amounts due hereunder shall be
paid, if due, fifteen (15) days after the filing of the Employer's Annual Report
on Form 10-K with the Securities and Exchange Commission. Executive acknowledges
that if Executive's employment is terminated by the Employer for cause prior to
the payment of the any bonus, Executive shall forfeit any interest he has in
such bonus and shall not be entitled to any portion thereof.
For purposes of this Agreement, "Consolidated Companies" shall mean Warrantech
and all of its parents and subsidiaries.
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3.3 Stock Options. Executive shall be eligible to participate in the
stock option plan subject to the terms and conditions set forth in Exhibit "A"
hereof.
3.4 Medical Insurance. During the term of his employment, Executive
shall be eligible to participate in the Employer's medical plans, as they are in
existence on the date of this Agreement, or as they may be amended or added
hereafter, to the same extent as other executives of Employer at a similar
level, subject to the terms contained in the respective plan documents of any
such plan and subject to any required executive/employee contribution towards
such plan as determined by Employer, which contribution shall remain the
responsibility of Executive.
3.5 Automobile. It is contemplated that to perform the services
required by this Agreement, Executive shall obtain and remain fully responsible
for the maintenance and repair of an automobile, for which Employer shall
provide Executive with an expense allowance at the rate of Six Thousand Dollars
($6,000) per annum, payable in equal monthly installments.
3.6 Life Insurance. During the term of this Agreement and provided such
employment is not terminated in accordance with Section V hereof, Employer, for
the benefit of Executive, shall maintain in full force and effect a group term
life insurance policy in a face amount equal to one hundred percent (100%) of
Executive's base salary, not to exceed One Hundred Fifty Thousand Dollars
($150,000).
3.7 Physical. Employer will reimburse Executive for any charges in
excess of the coverage provided under Employer's medical plans for one complete
physical at the Xxxxxx Clinic during the term of this Agreement.
3.8 Vacation. Executive shall be eligible for up to three (3) weeks of
paid vacation during each calendar year in accordance with Employer's vacation
schedule and policies. Vacation days shall accrue monthly.
3.9 Club Membership. Employer will maintain Executive's membership to Timarron
Country Club, Southlake, Texas and corresponding dues will be payable
byEmployer. In addition Executive will be entitled to a monthly credit of $200
against non-business expenses incurred at said club. All other non-business
expenses shall be the sole responsibility of Executive. Membership expenses
shall be recorded as income in accordance with the applicable regulations of the
Internal Revenue Service.
3.10 Expenses. Employer shall reimburse Executive in accordance with Employer's
expense reimbursement policies for all reasonable and necessary expenses
including, without limitation, travel and entertainment expenses, incurred by
Executive in connection with the business of Employer. Expenses relating to
membership in and attendance at trade and business associations and conventions
shall be reimbursed subject to the prior approval of Employer. All such
reimbursement shall be paid upon presentation of expense statements or vouchers
or such other supporting information as Employer may reasonably require.
3.11 401(k) Plan. Executive will be eligible to participate in the Warrantech
Corporate Retirement Savings Plan in accordance with the Plan Description.
IV. EXTENT OF SERVICE
Executive shall devote his full time, attention, energies and skill to
the business of Employer, as directed by Employer, and shall assume and perform
such responsibilities and duties as may be assigned to him from time to time by
the Chairman and Chief Executive Officer for WarrantechCorporation, Employer's
Board of Directors or any designee of either thereof. During his employment,
Executive shall not engage, and shall not solicit any employees of the Employer
or any of its parents, subsidiaries or affiliates to engage, in any other
commercial activities.
V. TERMINATION
Notwithstanding any contrary provisions herein contained, the
employment of Executive pursuant to this Agreement may be terminated before the
expiration of the term as specified in the following provisions of this Article
V, but such termination shall not affect the obligations of Executive set forth
in Article VII hereof.
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5.1 Death or Disability. This Agreement, and all obligations of the
Employer hereunder, shall terminate immediately upon the death of Executive. In
the event that Executive is, due to any physical or mental injury, illness,
defect or other incapacitating condition, unable to perform his duties and
responsibilities for either (i) 60 consecutive days or (ii) an aggregate of 90
days in any consecutive 12-month period, the Employer may, in its discretion,
terminate this Agreement at any time thereafter and the Company shall have no
further obligation or liability to Executive.
5.2 By Employer, For Cause. (a) Employer shall have the right to
terminate Executive's employment under this Agreement upon the material failure,
material neglect or material refusal of Executive to:
(i) Perform the duties assigned to Executive under or pursuant to this
Agreement; or
(ii) Abide by the other covenants, terms and conditions of this
Agreement.
Prior to effecting any such termination, Employer shall provide Executive with
notice of such failure, neglect or refusal and shall give Executive a reasonable
time period, which shall not be more than ten (10) days, in which to correct
such problem.
(b) Employer shall have the right to immediately terminate
Executive's employment under this Agreement for certain
instances of misconduct including, but not limited to:
(i) Misappropriating any funds or property of Employer;
(ii) Attempting to obtain personal profit from any transaction in
which Employer has an interest;
(iii) Activities by Executive of a public nature failing to conform
to the community standard of generally accepted personal or
business conduct that such activities may reasonably be
expected to reflect badly upon the public image of Employer or
its business; or
(iv) Executive's conviction of, or pleading of guilty, or no
contest, to a felony, or a misdemeanor involving dishonesty or
moral turpitude.
5.3 By Employer, Without Cause. This Agreement may be terminated by the
Employer at any time without cause. In the event the Employer terminates
Executive's employment hereunder for any reason other than the reasons set forth
in sections 5.1 and 5.2 above, Executive shall be entitled to receive a lump-sum
amount equal to three (3) months of Executive's salary (less any applicable
required federal, state and local withholdings). Executive shall be under no
obligation to seek other employment or otherwise mitigate the obligations of the
Employer under this Agreement.
5.4 By Executive, Without Cause. This Agreement may be terminated by
Executive prior to the expiration of the term hereof upon not less than sixty
(60) day's prior written notice. Notwithstanding the forgoing, however, in the
event that Executive gives notice of his intent to terminate this Agreement
Employer may elect, in its sole discretion, to terminate this Agreement and
Executive's employment hereunder at any time after receipt of notice from
Executive.
5.5 Effect of Termination. In the case of termination pursuant to
sections 5.1, 5.2 or 5.4, the salary and other compensation specified in Section
III, unless otherwise specified, shall immediately terminate and cease to
accrue. Executive shall not be entitled to any stock options unless they have
fully vested and no credit will be given for partial years of employment to
ascertain the amount of options that are fully vested.
VI. INVENTIONS
6.1 Definitions. As used herein "Inventions" shall mean all
discoveries, inventions, improvements, and ideas relating to any process,
formula, program or software, machine, device, manufacture, composition of
matter, plan or design, whether patentable or not, and specifically includes,
but is not limited to, all designs and developments, of whatsoever nature,
relating to computer hardware, software or programs.
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6.2 Rights to Inventions. Executive shall, during the period of his
employment with Employer, make prompt and full disclosure of all Inventions
which Executive makes or conceives, individually, jointly, or with any other
executive, or Employer or any of its parents, subsidiaries or affiliates, during
the period of Executive's employment by Employer. All such inventions shall
become Employer's exclusive property.
Notwithstanding the foregoing, Executive shall retain all his rights
in, and shall not be required to assign to the Employer any invention
(hereinafter an "Excluded Invention"): (a) which was developed entirely on
Executive's own time, and (b) which does not relate directly to or have any
application to the business of Employer or any of its parents, subsidiaries or
affiliates or to their actual or demonstrably anticipated research or
development, or which does not result from any work performed by Executive for
Employer. This paragraph constitutes written notification to the Executive of
the inventions which Executive is not required to assign to Employer. Executive
shall advise employer of any invention made or conceived by Executive which
Executive believes he is entitled to pursuant to this paragraph.
6.3 Records. Executive will keep and maintain complete written records
of all Inventions made or conceived by Executive, and of all work on
investigations done or carried out by Executive for Employer at all stages
thereof, which records shall be the property of Employer, except for records of
the Excluded Inventions. Upon termination of his employment with Employer,
Executive agrees to deliver promptly to Employer any unpublished memoranda,
notes, records, reports, sketches, plans, programs, software, or other documents
held by him concerning any Inventions or potential Inventions to which Employer
would be entitled pursuant to the provisions hereof, including any information,
knowledge or data relating thereto, or pertaining to the Employer's business or
contemplated business, whether confidential or not.
6.4 Assignments. During Executive's employment hereunder and after the
termination thereof, Executive shall execute, acknowledge, and deliver to
Employer all such papers, including applications for or assignments of patents
or copyrights or applications for the same, as may be necessary to enable
Employer, its nominees, successors or assigns, at its or their expense, to
publish, protect by litigation or otherwise, obtain titled and/or copyrights or
patents to the Inventions which are the property of Employer pursuant to this
Agreement, in any and all countries.
VII. CONFIDENTIALITY AND NON-COMPETE
7.1 Non-Competition Covenant. Executives agrees that, during the period
of Executive's employment by Employer and during the one year period immediately
following Executive's employment by Employer or any of its parents, subsidiaries
or affiliates in any capacity, he will not, directly or indirectly, own, manage,
operate, control, consult with or for, be employed by or an agent for,
participate in or be connected in any manner with the ownership, management,
operation or control of any business that is competitive with the business of
Employer or any of its parents, subsidiaries or affiliates. Further, Executive
acknowledges that, as the President of Employer, his services are unique and
extraordinary, and that the restrictions herein are reasonable for Employer's
protection of its legitimate business interests.
If any court having jurisdiction determines that the foregoing
non-compete covenant is invalid due to its duration, coverage or extent, the
covenant shall be modified to reduce its duration, coverage or extent as
necessary to make such covenant valid, and the covenant as modified then shall
be enforced.
7.2 Non-Solicitation. During his employment and for two years after the
termination of that employment, for any reason, Executive will not, directly or
indirectly, either personally or on behalf of any other entity (whether as a
director, stockholder, owner, partner, consultant, principal, employee, agent or
otherwise) (i) canvas, solicit, transact or attempt to transact any business
from any person or entity who was a customer, client, vendor, dealer, or
insurance company of the Employer or any of its parents, subsidiaries or
affiliates or any other person or entity having a business relationship with the
Employer or any prospective customer, client, vendor, or insurance company of
the Employer or any other person or entity the Employer is in negotiations with
to enter into a business relationship during the term of Executive's employment
or whose identity was revealed to Executive during or as a consequence of his
employment; (ii) solicit, induce, entice, hire, employ or attempt to employ any
individual employed by the Company as of the termination of his employment or
during the prior 12 months; or (iii) take any action which is intended or would
reasonably be expected to, adversely affect the Employer, its business,
reputation or its relationship with its actual or prospective clients,
customers, suppliers, or investors.
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7.3 Confidentiality and Trade Secrets. During and after the terms of
his employment by Employer, Executive shall not communicate, divulge, or use any
secret, confidential information, trade secret, confidential customer list or
any confidential information relating to customers, clients, vendors, dealers,
insurance companies, suppliers of the Employer or any other person or entity
having a relationship with the Employer or any of its parents, subsidiaries or
affiliates for any purpose whatsoever except as consented to in writing by
Employer. This obligation shall apply with respect to any such item until such
item ceases (other than through the action of Executive) to be secret or
confidential. Confidential Information shall also include all information
contained or stored in the confidential databases of the Employer containing
Confidential Information or other information of the Employer. Executive shall
have no obligation hereunder to keep confidential any Confidential Information
to the extent disclosure of any thereof is required by law or determined in good
faith by counsel to Executive to be necessary or appropriate to comply with any
legal or regulatory order, regulation or requirement; provided, however, that in
the event disclosure is required by law, Executive shall provide Employer with
prompt notice of such requirement so that Employer may seek an appropriate
protective order.
7.4 Remedies. In the event of any actual breach by either of the
parties of the provisions of this Section VII, then each shall be entitled to
all the remedies available by law or in equity, including without limitation the
right to obtain damages for said breach and non-adherence and the right to
enjoin the other, or any other person or entity in or threatening breach or
non-adherence, from continuing, and to remedy, the activities which constitute
said breach. The parties acknowledge and agree that any remedies at law may be
inadequate in the event of any breach of the provisions of this Section VII,
and, therefore they agree and acknowledge that each shall be entitled to all
equitable remedies that are appropriate in the event of such breach.
VIII. MISCELLANEOUS.
8.1 Entire Agreement. This Agreement contains the entire agreement
among the parties, superseding in all respects any and all prior oral or written
agreements or understandings pertaining to the subject matter hereof and
transactions contemplated hereby, and shall be amended or modified only by
written instrument signed by all of the parties hereto.
8.2 Waiver. No waiver by any party of any condition, or of the breach
of any term, covenant, representation or warranty contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed to
be or construed as a further and continuing waiver of any such condition or
breach of any other term, covenant, representation, or warranty of this
Agreement, or the agreements or documents executed in connection herewith.
8.3 Binding Effect; Assignment. This Agreement shall be binding upon,
and shall inure to the benefit of and be enforceable by, the parties hereto and
their respective heirs, successors, and assigns, but this Agreement shall not be
assignable by Executive. In the event of (i) the merger or consolidation of
Employer with or into any other entity, (ii) the acquisition of Employer by any
entity, or (iii) the sale or other disposition by Employer of all or
substantially all of its businesses and/or assets, this Agreement shall remain
legally valid and binding and shall be enforceable by Executive against the
surviving entity.
8.4 General. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same instrument. The section headings contained herein
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. This Agreement shall be governed, enforced and
construed under the laws of the State of Texas, without regard to its conflict
of law provisions. Any dispute arising out of or related to this Agreement shall
be subject to the exclusive jurisdiction of the Superior Court of the State of
Texas, and the United States District Court for Texas, and the Executive waives,
and agrees not to assert, as a defense in any such action or proceeding, that
the Executive was not subject to personal jurisdiction thereto or that venue is
improper for lack of residence, inconvenient forum or otherwise.
8.5 Representations and Indemnities. Executive represents and warrants
to Employer that he has the full right and power to enter into this Agreement
and that he is not bound by any restriction or impediment thereto. Executive
represents and warrants that he is not subject to any covenant not to compete or
any other restriction with any former employer or other entity which would
inhibit or restrict Executive's ability to perform any tasks requested by
Employer or any of its parents, subsidiaries or affiliates. Executive hereby
indemnifies Employer against any claims, losses, damages or expenses that
Employer may incur or suffer in connection with any inaccuracy in, or breach of,
any of the representations and/or warranties set forth in this Section 8.5.
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8.6 Survivability. Notwithstanding anything herein to the contrary,
Sections 6.4, 7.1, 7.2, 7.3, 7.4 and 8.5 above shall survive the termination of
this Agreement and shall be deemed fully enforceable thereafter.
IN WITNESS WHEREOF, the parties have duly executed this Agreement to be
effective as of July 1, 2003.
WARRANTECH AUTOMOTIVE, INC. EXECUTIVE
By: \s\ Xxxx San Xxxxxxx \s\ Xxxxxxxxxxx X. Xxxx
------------------------ ----------------------------
Xxxx San Xxxxxxx Xxxxxxxxxxx X. Xxxx
Title: Chairman, Warrantech Corp.
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Date: July 9, 2003 Date: July 9, 2003
------------------------------ ------------------------
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EXHIBIT A
Stock Options
Warrantech Corporation ("Warrantech") hereby grants Executive options
(the "Options") to purchase up to One Hundred Thousand Dollars ($100,000) worth
of shares of Warrantech common stock ("Stock") under its 1998 Employee Incentive
Stock Option Plan, as amended (the "Plan"), at an exercise price equal to the
opening price of the Stock on the date such Options are approved by the Board of
Directors. The issuance of the Options is subject to the approval of the Board
of Directors, in its sole discretion.
Vesting of the shares shall be as follows:
(a) Fifty per cent (50%) of the Options shall vest in equal
amounts at the conclusion of each of the first, second, third,
fourth, and fifth years during the term of this Agreement,
provided that Employer meets at least 85% of its net sales
revenue and operating income objectives, as budgeted, in each
immediately preceding fiscal year. Failure to attain such
objectives for any one fiscal year shall not prevent Options
from vesting for those years in which said objectives were
obtained.
(b) The remaining fifty per cent (50%) of such Options will vest
in equal amounts at the conclusion of each of the first,
second third, fourth, and fifth years during the term of this
Agreement.
In calculating Employer's attainment of the objectives described above,
the parties shall rely upon the financial statements of the Consolidated
Companies as prepared by its independent certified public accountants, which
financial statements shall be prepared in a manner consistent with generally
accepted accounting principles.
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