EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into effective
as of the 12th day of May, 1999 (the "Effective Date"), by and between XXXXXX
INDUSTRIES, INC., a corporation organized under the laws of the State of
Tennessee, USA (the "Company"), and XXXXX X. XXXXXXXX (the "Executive").
For and in consideration of the mutual covenants and agreements contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. EMPLOYMENT. Subject to the terms and conditions of this Agreement,
Executive shall be employed by the Company as Chief Executive Officer - Road
One, Inc., and shall perform such duties and functions for the Company and any
company controlling, controlled by or under common control with the Company
(such companies hereinafter collectively called "Affiliates") as shall be
specified from time to time by the Chairman of the Board; Executive hereby
accepts such employment and agrees to perform such executive duties as may be
assigned to him.
2. DUTIES. Executive shall devote his full business related time and
best efforts to accomplishing such executive duties at such locations as may be
requested by the Chairman of the Board of the Company. While employed by the
Company, Executive shall not serve as a principal, partner, employee, officer or
director of, or consultant to, any other business or entity conducting business
for profit without the prior written approval of the Chairman of the Board of
the Company. In addition, under no circumstances will Executive have any
financial interest in any competitor of the Company; provided, however, that
Executive may invest in no more than 2% of the outstanding stock or securities
of any competitor whose stock or securities are traded on a national stock
exchange of any country.
3. TERM. The initial term of this Agreement shall be three (3) years
commencing on the date hereof ("Effective Date") and ending on the third
anniversary of the Effective Date. Beginning with the first annual shareholders'
meeting at which directors are to be elected following the Effective Date and as
of each annual shareholders' meeting at which directors are to be elected
thereafter, Executive's employment and the term of this Agreement shall be
extended automatically (without further action by either the Company or the
Executive) for an additional period such that the Term of this Agreement will
end on the 3rd anniversary of such shareholders' meeting, unless no later than
10 days following the date of such shareholders' meeting, the Company provides
the Executive with written notice that the Term of this Agreement is not being
extended. Notwithstanding the above, the Term of this Agreement shall end on the
Executive's 65th birthday.
4. COMPENSATION AND BENEFITS. As compensation for his services during
the Term of this Agreement, Executive shall be paid and receive the amounts and
benefits set forth in subsections (a), (b), (c) and (d) below:
(a) BASE SALARY. An annual base salary ("Base Salary") of $250,000
prorated for any partial year of employment. Executive's Base Salary shall be
subject to annual review, commencing as of the first anniversary of the
Effective Date of this Agreement, for adjustments at such time as the Company
conducts salary reviews for its executive officers generally. Executive's salary
shall be payable in accordance with the Company's regular payroll practices in
effect from time to time for executive officers of the Company.
(b) BONUS. In addition to the Base Salary, the Executive shall be
entitled to participate in any of the Company's present and future stock or cash
based bonus plans that are generally available to its executive officers, as
such plans may exist or be changed from time to time at the discretion of the
Company
(c) OTHER BENEFITS. Executive shall be entitled to vacation with pay,
life insurance, health insurance, fringe benefits, and such other employee
benefits generally made available by the Company to its executive officers, in
accordance with the established plans and policies of the Company, as in effect
from time to time.
(d) STOCK OPTIONS. As of the Effective Date of this Agreement,
Executive will be granted 200,000 stock options under the Xxxxxx Industries,
Inc. Stock Option and Incentive Plan ("Stock Option Plan") in accordance with
Schedule A attached hereto.
5. TERMINATION.
(a) BY EXECUTIVE. Executive may voluntarily terminate his employment
hereunder at any time, to be effective 60 days after delivery to the Company of
his signed, written resignation; Company may accept said resignation and pay
Executive in lieu of waiting for passage of the notice period.
(b) BY COMPANY. Subject to the terms of this Paragraph and Paragraph
5(c) below, the Company may terminate Executive's employment hereunder, in its
sole discretion, whether with or without just cause (as defined in Paragraph
5(b)(ix) below and subject to the notice periods described therein), at any time
upon written notice to Executive. If, prior to the end of the Term of this
Agreement, the Company terminates Executive's employment without just cause (as
defined in (ix) below), the Executive shall be entitled to receive, as damages
payable as a result of, and arising from, a breach of this Agreement, the
compensation and benefits set forth in (i) through (iv) below, subject to the
Executive's obligation to mitigate damages by reducing the amounts he is
entitled to receive hereunder by earnings from subsequent employment as provided
in (viii) below. The time periods in (i) through (iii) below shall be the lesser
of 36-months or the time period remaining from the date of Executive's
termination to the end of the Term of this Agreement (the "Severance Period").
(i) Base Salary. The Executive will continue to receive his current
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Base Salary (subject to withholding of all applicable taxes and any
amounts referred to in paragraph (iii) below) for the Severance Period
in the same manner as it was being paid as of the date of termination.
For purposes hereof, the Executive's "current Base Salary" shall be the
highest rate in effect during the twelve-month period prior to the
Executive's termination.
(ii) Bonus. The Executive shall receive monthly bonus payments
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from the Company for the Severance Period in an amount for each such
month equal to one-twelfth of the average ("Average Bonus") of the
bonuses earned by him for the three calendar years immediately
preceding the year in which such termination occurs. Any bonus amounts
that the Executive had previously earned from the Company but which may
not yet have been paid as of the date of termination shall not be
affected by this provision. Executive shall also receive, within 60
days after the date of his termination, a prorated bonus for any
uncompleted fiscal year at the date of termination equal to the Average
Bonus multiplied by the number of days he worked in such year divided
by 365 days.
(iii) Health and Life Insurance Coverage. Any health and life insurance
----------------------------------
benefits coverage (including any executive medical plan) provided to
the Executive at his date of termination shall be continued by the
Company at its expense at the same level and in the same manner as if
his employment had not terminated (subject to the customary changes in
such coverages if the Executive retires under a Company retirement
plan, reaches age 65 or similar events and subject to Executive's right
to make any changes in such coverages that an active employee is
permitted to make), during the Severance Period. Any additional
coverages the Executive had at termination, including dependent
coverage, will also be continued for such period on the same terms. Any
costs the Executive was paying for such coverages at the time of
termination shall be paid by the Executive by separate check payable to
the Company each month in advance. If the terms of any benefit plan
referred to in this paragraph do not permit continued participation by
the Executive, then the Company will arrange for other coverage at its
expense providing substantially similar benefits. The coverages
provided for in this paragraph shall be applied against and reduce the
period for which COBRA will be provided.
(iv) Stock Options. As of Executive's date of termination, all
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outstanding stock options granted to Executive under the Stock Option
and Incentive Plan and any other Company stock option plan shall become
100% vested and immediately exercisable. To the extent necessary, the
provisions of this paragraph (iv) shall constitute an amendment of the
Executive's stock option agreements under the Stock Option Plans.
(v) Effect of Death. In the event of the Executive's death
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after his termination of employment by the Company under this Paragraph
5(b), the benefits payable under (i) and (ii) of this Paragraph 5(b)
shall continue for a period of twelve (12) months, or, if shorter,
until the end of the Term of this Agreement; provided, however, such
payments will be paid in a lump sum payment within 60 days following
the Executive's death, to the Executive's surviving spouse, or, if
none, to the Executive's estate. In addition, in the event of
Executive's death, any dependent coverage in effect under (iii) of this
Paragraph 5(b) shall continue at the Company's expense, for a period of
12 months, or, if shorter, until the end of the Term of this Agreement.
(vi) Other Termination. Executive hereby agrees and
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acknowledges that if he voluntarily resigns from his employment, or is
terminated for just cause, prior to the end of the Term of this
Agreement, then he shall be entitled to no payment or compensation
whatsoever from the Company under this Agreement, other than as may be
due him through his last day of employment including any vested
benefits and any benefit continuation or conversion rights which he may
have in accordance with the established plans and policies of the
Company.
(vii) Change in Control. Notwithstanding any provision of this
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Agreement to the contrary, if Executive's employment is terminated
(whether by the Company or by Executive) under circumstances that would
entitle him to receive benefits under his agreement with the Company
providing compensation and benefits for termination following a "change
in control" of the Company (as defined in such agreement), then any
such termination shall be treated under this Agreement as a termination
by the Company without just cause and the Executive shall be entitled
to the compensation and benefits set forth in (i) through (iv) above
for the time periods provided in this Paragraph 5(b), and such amounts
shall be treated as damages payable as a result of, and arising from, a
breach of this Agreement.
(viii) Obligation to Mitigate. Although Executive shall not be
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required to seek subsequent employment, if Executive accepts subsequent
employment during the period he is receiving compensation and benefits
under (i) through (iii) above, Executive shall be required to notify
the Company within 10 days of accepting such subsequent employment, and
the Executive shall be required to mitigate damages by reducing the
amount of severance payments he is entitled to receive under (i) and
(ii) above by any compensation he earns from subsequent employment
during the period he is entitled to compensation under (i) and (ii)
above. In addition, the life insurance coverage being continued under
(iii) above shall terminate as of the date of the commencement of the
Executive's subsequent employment, and the health insurance coverage
being provided under (iii) above shall terminate as of the date the
Executive becomes covered under a health plan of the subsequent
employer.
(ix) "For Just Cause". For purposes of this Agreement, the
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phrase "for just cause" shall mean: (A) Executive's material fraud,
malfeasance, gross negligence, or willful misconduct with respect to
business affairs of the Company which is directly or materially harmful
to the business or reputation of the Company or any subsidiary of the
Company; (B) Executive's conviction of or failure to contest
prosecution for a felony or a crime involving moral turpitude; or (C)
Executive's material breach of this Agreement. A termination of
Executive for just cause based on clause (A) or (C) of the preceding
sentence shall take effect 30 days after the Executive receives from
Company written notice of intent to terminate and Company's description
of the alleged cause, unless Executive shall, during such 30-day
period, remedy the events or circumstances constituting cause;
provided, however, that such termination shall take effect immediately
upon the giving of written notice of termination of just cause under
any clause if the Company shall have determined in good faith that such
events or circumstances are not remediable (which determination shall
be stated in such notice).
(c) BY DEATH OR DISABILITY. If Executive's employment is terminated due
to Executive's death, the Executive's surviving spouse, or if none, his estate,
shall receive the benefits payable under (i) and (ii) of Paragraph 5(b) above;
provided, however, such payments shall be for a period of 12 months rather than
36 months and such payments shall be made in a lump sum payment within 60 days
of the Executive's death. In addition, if the Executive's dependents are
eligible to and actually elect to continue under COBRA any coverages provided
under Paragraph 5(b)(iii), the Company shall pay the cost of such COBRA coverage
for a period of 12 months following the date of Executive's death. If
Executive's employment is terminated due to Executive's disability (as defined
in the Company's long-term disability plan or insurance policy, or if no such
plan or policy, as determined in good faith by the Company), Executive shall be
entitled to the benefits payable or to be provided under (i), (ii), (iii) and
(iv) of Paragraph 5(b); provided, however, the benefits under (i), (ii) or (iii)
of Paragraph 5(b) shall be payable or to be provided for a period of 24 months.
Executive or his estate, as the case may be, shall not by operation of this
paragraph forfeit any rights in which he is vested at the time of his death or
disability.
(d) Upon termination of Executive's employment for any reason
whatsoever (whether voluntary on the part of Executive, for just cause, or other
reasons), the obligations of Executive pursuant to Paragraphs 6 and 7 hereof
shall survive and remain in effect for the periods described in Paragraph 6.
6. COMPETITION, CONFIDENTIALITY, AND NONSOLICITATION. Executive agrees
to be bound by the terms and conditions of the Noncompetition Agreement attached
hereto as Exhibit "A", which is hereby made a part of this Agreement.
7. INJUNCTIVE RELIEF. The Executive acknowledges that his services to
be rendered to the Company are of a special and unusual character which have a
unique value to the Company, the loss of which cannot adequately be compensated
by damages in an action at law. Executive further acknowledges that any breach
of the terms of Paragraph 6, including Exhibit "A", would result in material
damage to the Company, although it might be difficult to establish the monetary
value of the damage. Executive therefore agrees that the Company, in addition to
any other rights and remedies available to it, shall be entitled to obtain an
immediate injunction (whether temporary or permanent) from any court of
appropriate jurisdiction in the event of any such breach thereof by Executive,
or threatened breach which the Company in good faith believes will or is likely
to result in irreparable harm to the Company. The existence of any claim or
cause of action by Executive against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of Executive's agreement under this Paragraph and Paragraph 6 above.
8. MISCELLANEOUS.
(a) NOTICE. Any notice or other communication required or permitted
under this Agreement shall be effective only if it is in writing and shall be
deemed to have been duly given when delivered personally or seven days after
mailing if mailed first class by registered or certified mail, postage prepaid,
addressed as follows:
If to the Company: Xxxxxx Industries, Inc.
X.X. Xxx 000
0000 Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxx 00000
Attention: Chairman of the Board
If to the Executive: Xxxxx X. XxXxxxxx
0000 Xxxxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
or to such other address as any party may designate by notice to the
others.
(b) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the Executive's employment by the
Company, and supersedes and is in full substitution for any and all prior
understandings or agreements with respect to the Executive's employment.
(c) AMENDMENT. This Agreement may be amended only by an instrument in
writing signed by the parties hereto, and any provision hereof may be waived
only by an instrument in writing signed by the party or parties against whom or
which enforcement of such waiver is sought. The failure of either party hereto
to comply with any provision hereof shall in no way affect the full right to
require such performance at any time thereafter, nor shall the waiver by either
party hereto of a breach of any provision hereof be taken or held to be a waiver
of any succeeding breach of such provision, or a waiver of the provision itself,
or a waiver of any other provision of this Agreement.
(d) BINDING EFFECT. This Agreement is binding on and is for the benefit
of the parties hereto and their respective successors, heirs, executors,
administrators and other legal representatives. Neither this Agreement nor any
right or obligation hereunder may be assigned by the Executive or the Company,
except for assignment by the Company to any wholly owned subsidiary.
(e) SEVERABILITY AND MODIFICATION. If any provision of this Agreement
or portion thereof is so broad, in scope or duration, so as to be unenforceable,
such provision or portion thereof shall be interpreted to be only so broad as is
enforceable. In addition, to the extent that any provision of this Agreement as
applied to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or the validity or enforceability
of this Agreement.
(f) INTERPRETATION. This Agreement shall be interpreted, construed and
governed by and under the laws of the State of Tennessee. Each party irrevocably
(i) consents to the exclusive jurisdiction and venue of the courts of Xxxxxxxx
County, State of Tennessee and federal courts in the Eastern District of
Tennessee, in any action arising under or relating to this Agreement (including
Exhibit "A" hereto), and (ii) waives any jurisdictional defenses (including
personal jurisdiction and venue) to any such action. If any provision of this
Agreement is deemed or held to be illegal, invalid, or unenforceable under
present or future laws effective during the term hereof, this Agreement shall be
considered divisible and inoperative as to such provision to the extent it is
deemed to be illegal, invalid or unenforceable, and in all other respects this
Agreement shall remain in full force and effect; provided, however, that if any
provision of this Agreement is deemed or held to be illegal, invalid or
unenforceable there shall be added hereto automatically a provision as similar
as possible to such illegal, invalid or unenforceable provision as shall be
legal, valid or enforceable. Further, should any provision contained in this
Agreement ever be reformed or rewritten by any judicial body of competent
jurisdiction, such provision as so reformed or rewritten shall be binding upon
the Executive and the Company.
(g) FAILURE TO ENFORCE. The failure of either party hereto at any time,
or for any period of time, to enforce any of the provisions of this Agreement
shall not be construed as a waiver of such provision(s) or of the right of such
party hereafter to enforce each and every such provision.
(h) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
(i) NO CONFLICTING AGREEMENT. The Executive represents and warrants
that he is not party to any agreement, contract or understanding which would
prohibit him from entering into this Agreement or performing fully his
obligations hereunder.
(j) HEADINGS. The headings and subheadings of this Agreement are
inserted for convenience of reference only and are not to be considered in
construction of the provisions hereof.
(k) CONSTRUCTION. The Company and the Executive acknowledge that this
Agreement was the result of arm's-length negotiations between sophisticated
parties each represented by legal counsel. Each and every provision of this
Agreement shall be construed as though both parties participated equally in the
drafting of same, and any rule of construction that a document shall be
construed against the drafting party shall not be applicable to this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement effective as of the date first written above.
EXECUTIVE
/s/ Xxxxx X. XxXxxxxx
Xxxxx X. XxXxxxxx
XXXXXX INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Its Chairman
SCHEDULE A - OPTIONS
Incentive Stock Options to purchase 80,000 shares of Company common
stock, or if less, the maximum number that can be granted as incentive stock
options, with an exercise price of 100% of market value on the Effective Date.
The remainder of the 200,000 options (approximately 120,000 options)
shall be nonqualified stock options to purchase shares of Company common stock
at an exercise price of $4.00 per share.
All options shall vest 25% on each of the 1st through 4th anniversaries
of the grant date.
EXHIBIT "A"
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into effective this 12th day of May,
1999, between XXXXXX INDUSTRIES, INC. (the "Company") and XXXXX X. XXXXXXXX (the
"Executive") contemporaneously with and as part of the Employment Agreement
between the parties to which this Noncompetition Agreement is attached.
REASONS FOR THIS NONCOMPETITION AGREEMENT: During Executive's relationship with
the Company Executive has learned, will learn, or has or will have access to,
important proprietary information related to the manufacturing and distribution
of towing and recovery equipment, and towing services (collectively, the
"Company's Business"). Executive acknowledges that the proprietary customer,
operations, financial, and business information that has been or will be learned
or accessible has been and will be developed through the Company's expenditure
of substantial effort, time and money; and together with relationships developed
with customers and employees, could be used to compete unfairly with the
Company. The Company's ability to sell its products on a competitive basis
depends, in part, on its proprietary information and customer relationships, and
the Company would not share this information, provide training or promote
Executive's relationship with customers if the Company believed that it would be
used in competition with the Company, which non-disclosure would cause
Executive's performance and opportunities to suffer.
In consideration of employment or continued employment and other valuable
consideration, the receipt and sufficiency of which are acknowledged, the
Company and Executive agree:
1. DEFINITIONS: - For this Agreement, the following terms shall have the meaning
specified below:
(A) PERSON: - any individual, corporation, limited liability company,
partnership, joint venture, association, unincorporated organization or other
entity.
(B) TERMINATION DATE: - the date of Executive's termination of
employment from the Company, whether such termination is voluntary or
involuntary, whether with or without cause, and whether before or after the
expiration of the Term of the Executive's Employment Agreement.
(C) CUSTOMERS: - all Persons (i) that Executive solicited or contacted
on behalf of the Company; (ii) whose dealings with the Company were coordinated
or supervised, in whole or in part, by Executive; or (iii) about whom Executive
possessed Confidential Information, in each case during the one-year period
immediately prior to the Executive's Termination Date.
(D) CONFIDENTIAL INFORMATION: - information, without regard to form,
relating to the Company's customers, operation, finances, and business that
derives value, actual or potential, from not being generally known to other
Persons, including, but not limited to, technical or nontechnical data,
formulas, patterns, compilations (including compilations of customer
information), programs (including fulfillment and marketing programs), devices,
methods (including fulfillment methods), techniques, processes, financial data
(including sales forecasts), or lists of actual or potential customers or
suppliers (including identifying information about those customers), whether or
not reduced to writing. Confidential Information includes information disclosed
to the Company by third parties that the Company is obligated to maintain as
confidential. Confidential Information subject to this Agreement may include
information that is not a trade secret under applicable law, but information not
constituting a trade secret only shall be treated as Confidential Information
under this Agreement for a two year period after the Termination Date.
(E) TERRITORY: - the term "Territory" as used in this Agreement means
the continental United States. Executive acknowledges that Executive will
provide services to Company and will have a substantial impact on the Company's
Business throughout the Territory.
(F) COMPETING BUSINESS: - any Person (other than the Company) providing
or offering goods or services identical to or reasonably substitutable for the
Company's Business.
2. CONFIDENTIAL INFORMATION: - Executive shall use best efforts to protect
Confidential Information. During or after association with the Company,
Executive will not use or disclose any of the Company's Confidential Information
except in connection with his duties performed in accordance with his Employment
Agreement or except with the prior written consent of the Chairman of the Board
of the Company; provided, however, Executive may make disclosures required by a
valid order or subpoena issued by a court or administrative agency of competent
jurisdiction, in which event Executive will promptly notify the Company of such
order or subpoena to provide the Company an opportunity to protect its
interests.
3. RETURN OF MATERIALS: - On the Termination Date or for any reason or at any
time at the Company's request, Executive will deliver promptly to the Company
all materials, documents, plans, records, notes, or other papers and any copies
in Executive's possession or control relating in any way to the Company's
Business, which at all times shall be the property of the Company.
4. SOLICITATION OF EMPLOYEES: - During employment and for a period of 24 months
following his Termination Date, Executive will not solicit or induce or in any
manner attempt to solicit or induce, any person employed by the Company to leave
such employment, whether or not such employment is pursuant to a written
contract with the Company or at will.
5. SOLICITATION OF CUSTOMERS: - During employment and for a period of 24 months
following his Termination Date, Executive will not solicit Customers for the
purpose of providing or offering products or services identical to or reasonably
substitutable for the Company's Business.
6. LIMITATIONS ON POST-TERMINATION COMPETITION: - During employment and for a
period of 24 months following his Termination Date, Executive will not, within
the Territory, be employed or engaged by a Competing Business as a director,
executive, officer, manager, consultant or equivalent position.
7. Notwithstanding any provision of this Agreement to the contrary, if
Executive's employment is terminated (whether by the Company or by Executive)
under circumstances that would entitle him to receive benefits under his
agreement with the Company providing compensation and benefits for terminations
following a "change in control" of the Company (as defined in such agreement),
then the time periods in Paragraphs 5 and 6 above shall be reduced to 12 months.
8. DISPARAGEMENT: - Executive shall not at any time make false, misleading or
disparaging statements about the Company, including its products, management,
employees, and customers.
9. OWNERSHIP OF CONFIDENTIAL INFORMATION. The Executive hereby agrees that any
and all improvements, inventions, discoveries, formulas, processes, methods,
know-how, confidential data, trade secrets and other proprietary information
(collectively "Work Product") within the scope of any business of the Company or
any affiliate which the Executive may conceive or make or has conceived or made
during his employment with the Company shall be and are the sole and exclusive
property of the Company, and that the Executive shall, whenever requested to do
so by the Company, at its expense, execute and sign any and all applications,
assignments or other instruments and do all other things which the Company may
deem necessary or appropriate (i) in order to apply for, obtain, maintain,
enforce or defend letters patent of the United States or any foreign country for
any Work Product, or (ii) in order to assign, transfer, convey or otherwise make
available to the Company the sole and exclusive right, title and interest in and
to any Work Product.
10. INTERPRETATION; SEVERABILITY: - Rights and restrictions in this Agreement
may be exercised and are applicable only to the extent they do not violate any
applicable laws, and are intended to be limited to the extent necessary so they
will not render this Agreement illegal, invalid, or unenforceable. If any term
shall be held illegal, invalid, or unenforceable by a court of competent
jurisdiction, the remaining terms shall remain in full force and effect. This
Agreement does not in any way limit the Company's rights under the laws of
unfair competition, trade secret, copyright, patent, trademark or any other
applicable laws(s), which are in addition to rights under this Agreement. The
existence of a claim by Executive, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the Company's enforcement of this
Agreement.
