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Exhibit 10.3
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "AGREEMENT") is made and entered into as of
the 30th day of August, 1996, by and between Security Associates International,
Inc., and its subsidiaries and affiliates (collectively, the "EMPLOYER"), and
Xxxxxxx Xxxxx ("XXXXX").
RECITALS
A. The Employer desires that Xxxxx continue to provide services for the
benefit of the Employer and Xxxxx desires to accept such continued employment
with the Employer.
B. The Employer and Xxxxx acknowledge that Xxxxx is, and will continue to
be, a member of the senior management team of the Employer and, as such, will
participate in implementing the Employer's business plan.
NOW, THEREFORE, in consideration of the above premises and the following
mutual covenants and conditions, the parties agree as follows:
1. Employment. The Employer shall continue to employ Xxxxx as its Vice
President and Secretary, and Xxxxx hereby accepts such continued employment on
the following terms and conditions.
2. Duties. Xxxxx shall work for the Employer in a full-time capacity.
Xxxxx shall, during the term of this Agreement, continue to have the duties,
responsibilities, powers, and authority customarily associated with the
position of Vice President and Secretary. Xxxxx shall report to, and follow
the direction of, the Board of Directors of the Employer (the "BOARD"). Xxxxx
shall diligently, competently, and faithfully perform all duties, and shall
devote his entire business time, energy, attention, and skill to the
performance of duties for the Employer and will use his best efforts to promote
the legitimate business interests of the Employer. It shall not be considered
a violation of the foregoing for Xxxxx to serve on corporate, industry,
religious, civic, or charitable boards or committees, so long as such
activities do not significantly interfere with the performance of Xxxxx'x
responsibilities as an employee of the Employer in accordance with this
Agreement.
3. Term of Employment. This Agreement shall be entered into for a
period of three (3) years, commencing on the date hereof and ending on 29th
August, 1999 (the "INITIAL TERM"). The term of employment shall be renewed
automatically for successive periods of one (1) year each (a "RENEWAL TERM")
after the expiration of the Initial Term and any subsequent Renewal Term,
unless the Board provides Xxxxx, or Xxxxx provides the Board, with written
notice to the contrary at least six (6) months prior to the end of the Initial
Term or any Renewal Term, as the case may be.
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4. Compensation.
A. Salary. The Employer shall pay Xxxxx an annual salary of
$105,000 (the "BASE SALARY"), payable in substantially equal periodic
installments in accordance with the Employer's payroll policy from time
to time in effect. The Base Salary shall be subject to any payroll or
other deductions as may be required to be made pursuant to law,
government order, or by agreement with, or consent of, Xxxxx. Increases
to the Base Salary shall be made following an annual salary review, the
first of which shall take place in or around September, 1997, and all
subsequent reviews shall occur in or around September of each year
thereafter. The Base Salary shall not be reduced, and the term Base
Salary shall refer thereafter to the Base Salary, as it may be increased
from time to time.
B. Performance Bonus. In accordance with the Employer's practice
from time to time in effect, the Employer shall award Xxxxx an annual
bonus in an amount to be determined by the Employer based upon Xxxxx'x
and the Employer's performance and the achievement of other goals and
objectives set by the Employer (the "Performance Bonus").
C. Long-Term Incentive Plan. After entering into this Agreement, the
Employer shall grant the Executive incentive stock options (in accordance
with Section 422 of the Internal Revenue Code of 1986, as amended) under
the Employer's Stock Option Plan to purchase shares of the Employer's
common stock, the number of shares of which shall be agreed upon by the
parties. The stock options shall be granted at an exercise price equal
to the "fair market value" of such common stock on the date of the grant.
The stock options shall vest and become exercisable on August 1, 1999.
The stock options granted hereunder shall expire by their terms on the
first to occur of (i) ten (10) years from the date of their grant, (ii)
three (3) months after the Executive's employment is terminated under
Paragraph 6A, 6D, 6E or 6F (twelve (12) months in the event employment
terminates under Paragraph 6B), or (iii) the Executive's termination of
employment under Paragraph 6C. If the incentive stock options shall, at
any time, be determined not to qualify as incentive stock options under
Section 422 of the Code, such options shall automatically convert into,
and be treated as, non-qualified stock options. The actual terms and
conditions of the Stock Option Plan shall be established by the Employer,
and shall be memorialized in a written document to be prepared by the
Employer and which will be incorporated herein by reference.
D. Other Benefits. During the term of this Agreement, the Employer
shall:
(1) include Xxxxx in any life insurance, disability insurance,
medical, prescription, dental or health insurance (including
dependent coverage) (which premiums for the medical, prescription,
dental and health insurance coverage shall be entirely paid for by
the Employer), savings, pension and retirement plans and
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other benefit plans or programs (including, if applicable, any
excess benefit or supplemental executive retirement plans)
maintained by the Employer for the benefit of its executives;
(2) include Xxxxx in such perquisites as the Employer may
establish from time to time that are commensurate with his position
and at least comparable to those received by other executives of
the Employer;
(3) provide Xxxxx with six (6) weeks paid vacation/time off
per annum;
(4) provide Xxxxx with an automobile expense reimbursement
allowance of one thousand dollars ($1,000.00) per month to
reimburse him for the use of an automobile and the operating
expenses thereof.
5. Expenses. The Employer shall reimburse Xxxxx for all reasonable and
necessary business expenses, provided Xxxxx submits paid receipts or other
documentation acceptable to the Employer.
6. Termination. Notwithstanding anything in Paragraph 3 of this Agreement
to the contrary, the term of this Agreement shall terminate upon the first to
occur of the following events:
A. At the end of the term of this Agreement, including any Renewal
Terms, provided advance notice of such termination is given in accordance
with Paragraph 3 hereof.
B. Upon Xxxxx'x death or the date Xxxxx is given written notice that
he has been determined to be disabled by the Employer. For purposes of
this Agreement, Xxxxx shall be deemed to be disabled if Xxxxx, as a
result of illness or incapacity, shall be unable to perform substantially
his required duties for a period of four (4) consecutive months or for
any aggregate period of six (6) months in any twelve (12) consecutive
month period. A termination of Xxxxx'x employment by the Employer for
disability shall be communicated to Xxxxx by written notice and shall be
effective on the thirtieth (30th) day after receipt of such notice by
Xxxxx, unless Xxxxx returns to full-time performance of his duties before
such thirtieth (30th) day.
C. On the date the Employer provides Xxxxx with written notice that
he is being terminated for "CAUSE." For purposes of this Agreement,
Xxxxx shall be deemed terminated for Cause if the Employer terminates
Xxxxx after Xxxxx:
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(1) shall have been convicted of any felony including, but not
limited to, a felony involving fraud, theft, misappropriation,
dishonesty, or embezzlement;
(2) shall have committed willful acts that materially impair
the goodwill or business of the Employer or cause material damage
to its property, goodwill, or business; and
(3) shall have refused to, or willfully failed to, perform his
material duties hereunder.
No act or failure to act on the part of Xxxxx shall be considered
"willful" unless it is done, or omitted to be done, by Xxxxx in bad faith
or without reasonable belief that his action or omission was in the best
interests of the Employer. A termination of Xxxxx'x employment for Cause
shall be effected in accordance with the following procedures. The
Employer shall give Xxxxx written notice ("NOTICE OF TERMINATION FOR
CAUSE") of its intention to terminate Xxxxx'x employment for Cause,
setting forth in reasonable detail the specific conduct of Xxxxx that it
considers to constitute Cause and the specific provision(s) of this
Agreement on which it relies, and stating the date, time and place of the
Board Meeting for Cause. The "BOARD MEETING FOR CAUSE" means a meeting
of the Board at which Xxxxx'x termination for Cause will be considered,
that takes place not less than ten (10) and not more than twenty (20)
business days after Xxxxx receives the Notice of Termination for Cause.
Xxxxx shall be given an opportunity, together with counsel, to be heard
at the Board Meeting for Cause. Xxxxx'x termination for Cause shall be
effective when and if a resolution is duly adopted at the Board Meeting
for Cause by a two-thirds vote of the entire membership of the Board,
stating that in the good faith opinion of the Board, Xxxxx is guilty of
the conduct described in the Notice of Termination for Cause, and that
such conduct constitutes Cause under this Agreement.
D. On the date Xxxxx terminates his employment for "Good Reason."
For purposes of this Agreement, "GOOD REASON" means:
(1) the assignment to Xxxxx of any duties inconsistent in any
respect with Paragraph 2 of this Agreement, or any other action by
the Employer that results in a diminution in Xxxxx'x position,
authority, duties or responsibilities, other than an isolated,
insubstantial and inadvertent action that is not taken in bad faith
and is remedied by the Employer after receipt of notice thereof
from Xxxxx;
(2) any requirement by the Employer that Xxxxx'x services be
rendered primarily at a location or locations other than within the
greater Chicago metropolitan area and for other than a de minimis
period of time;
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(3) any breach of this Agreement by the Employer that is not
remedied by the Employer promptly after receipt of notice thereof
from Xxxxx;
(4) any failure by the Employer to comply with any provision
of Paragraph 4 of this Agreement, other than an isolated,
insubstantial and inadvertent failure that is not taken in bad
faith and is remedied by the Employer promptly after receipt of
notice thereof from Xxxxx;
(5) any purported termination of Xxxxx'x employment by the
Employer for a reason or in a manner not expressly permitted by
this Agreement; or
(6) the resignation by Xxxxx following a "CHANGE IN CONTROL."
A "Change in Control" shall be deemed to occur on the earliest of
(a) the acquisition by any entity, person, or group of beneficial
ownership, as that term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934, of more than 30% of the
outstanding capital stock of the Employer entitled to vote for the
election of directors ("VOTING STOCK"); (b) the commencement by any
entity, person, or group (other than the Employer or a subsidiary
of the Employer) of a tender offer or an exchange offer for more
than 20% of the outstanding Voting Stock of the Employer; (c) the
effective time of (1) a merger or consolidation of the Employer
with one or more corporations as a result of which the holders of
the outstanding Voting Stock of the Employer immediately prior to
such merger hold less than 80% of the Voting Stock of the surviving
or resulting corporation, or (2) a transfer of substantially all of
the property or assets of the Employer other than to an entity of
which the Employer owns at least 80% of the Voting Stock; and (d)
the election to the Board, without the recommendation or approval
of the incumbent Board, of the lesser of (1) three directors, or
(2) directors constituting a majority of the number of directors of
the Employer then in office.
A termination of employment by Xxxxx for Good Reason shall be effectuated
by giving the Employer written notice ("NOTICE OF TERMINATION FOR GOOD
REASON") of the termination within three (3) months (six (6) months in
the event of a Change in Control) of the event constituting Good Reason,
setting forth in reasonable detail the specific conduct of the Employer
that constitutes Good Reason and the specific provisions of this
Agreement on which Xxxxx relies. A termination of employment by Xxxxx
for Good Reason shall be effective on the fifth (5th) business day
following the date when the Notice of Termination for Good Reason is
given, unless the notice sets forth a later date (which date shall in no
event be later than thirty (30) days after the notice is given).
E. On the date Xxxxx terminates his employment for any reason, other
than a reason set forth in Paragraph 6D, provided that Xxxxx shall give
the Employer six (6) months written notice prior to such date of his
intention to terminate this Agreement.
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F. On the date the Employer terminates Xxxxx'x employment for any
reason, other than a reason set forth in Paragraph 6C, provided that the
Employer shall give Xxxxx six (6) months written notice prior to such
date of its intention to terminate this Agreement.
7. Compensation Upon Termination. If Xxxxx'x services are terminated
pursuant to Paragraph 6, Xxxxx shall be entitled to his Base Salary through his
final date of active employment, plus any accrued but unused vacation/time off
pay. Additionally, if Xxxxx'x services are terminated pursuant to Paragraphs
6A, 6B, 6D or 6F, Xxxxx or, in the case of his death, his designated
beneficiary (or, if there is no such beneficiary, Xxxxx'x spouse or, if there
is no spouse, his estate or legal representative) shall be entitled to (a)
severance pay, payable in accordance with the Employer's payroll policy from
time to time in effect, in an amount equal to 2.99 times his Base Salary and
the Performance Bonus awarded for the most recently completed annual period,
and (b) immediately exercise all incentive stock options previously granted to
him under Xxxxxxxxx 0X, whether or not such options would otherwise have been
exercisable on the date of termination. Xxxxx also shall be entitled to any
benefits mandated under the Consolidated Omnibus Budget Reconciliation Act of
1985 (COBRA) (for which the Employer shall be obligated to pay all premiums and
other costs associated with such COBRA continuation coverage), or required
under the terms of any death, insurance, or retirement plan, program, or
agreement provided by the Employer and to which Xxxxx is a party or in which
Xxxxx is a participant, including, but not limited to, any short-term or
long-term disability plan or program, if applicable.
8. Notices. Any and all notices required in connection with this
Agreement shall be deemed adequately given only if in writing and (a)
personally delivered, or sent by first class, registered or certified mail,
postage prepaid, return receipt requested, or by recognized overnight courier,
(b) sent by facsimile, provided a hard copy is mailed on that date to the party
for whom such notices are intended, or (c) sent by other means at least as fast
and reliable as first class mail. A written notice shall be deemed to have
been given to the recipient party on the earlier of (a) the date it shall be
delivered to the address required by this Agreement; (b) the date delivery
shall have been refused at the address required by this Agreement; (c) with
respect to notices sent by mail or overnight courier, the date as of which the
Postal Service or overnight courier, as the case may be, shall have indicated
such notice to be undeliverable at the address required by this Agreement; or
(d) with respect to a facsimile, the date on which the facsimile is sent and
receipt of which is confirmed. Any and all notices referred to in this
Agreement, or which either party desires to give to the other, shall be
addressed to his residence in the case of Xxxxx, or to its principal office in
the case of the Employer.
9. Waiver of Breach. A waiver by either party of a breach of any
provision of this Agreement by the other shall not operate or be construed as a
waiver or estoppel of any subsequent breach. No waiver shall be valid unless
in writing and signed by the party to be charged.
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10. Entire Agreement. This Agreement sets forth the entire and final
agreement and understanding of the parties and contains all of the agreements
made between the parties with respect to the subject matter hereof. This
Agreement supersedes any and all other agreements, either oral or in writing,
between the parties hereto, with respect to the subject matter hereof. No
change or modification of this Agreement shall be valid unless in writing and
signed by the Employer and Xxxxx. If any provision of this Agreement shall be
found invalid or unenforceable for any reason, in whole or in part, then such
provision shall be deemed modified, restricted, or reformulated to the extent
and in the manner necessary to render the same valid and enforceable, or shall
be deemed excised from this Agreement, as the case may require, and this
Agreement shall be construed and enforced to the maximum extent permitted by
law, as if such provision had been originally incorporated herein as so
modified, restricted, or reformulated or as if such provision had not been
originally incorporated herein, as the case may be.
11. Headings. The headings in this Agreement are inserted for convenience
only and are not to be considered a construction of the provisions hereof.
12. Execution of Agreement. This Agreement may be executed in several
counterparts, each of which shall be considered an original, but which when
taken together, shall constitute one agreement.
13. Attorneys' Fees. The Employer shall pay for all legal fees and
expenses associated with the preparation of this Agreement.
14. Successors.
A. This Agreement is personal to Xxxxx and, without the prior
written consent of the Employer, shall not be assignable by Xxxxx. This
Agreement shall inure to the benefit of and be enforceable by Xxxxx'x
legal representatives.
B. This Agreement shall inure to the benefit of and be binding upon
the Employer and its successors and assigns.
C. The Employer shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Employer expressly
to assume and agree to perform this Agreement in the same manner and to
the same extent that the Employer would have been required to
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perform it if no such succession had taken place. As used in this
Agreement, "Employer" shall mean both the Employer as defined above and
any such successor that assumes and agrees to perform this Agreement, by
operation of law or otherwise.
15. Recitals. The recitals to this Agreement are incorporated herein as
an integral part hereof and shall be considered as substantive and not
precatory language.
16. Due Authorization. The Employer hereby warrants and represents that
(a) the execution, delivery, and performance of this Agreement has been duly
authorized by all necessary corporate action on the part of the Employer, (b)
the Employer has the requisite power and authority to execute, deliver, and
perform this Agreement, and (c) this Agreement is a valid and legally binding
obligation of the Employer, enforceable against the Employer in accordance with
its terms.
17. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois, without reference to its
conflict of law provisions.
IN WITNESS WHEREOF, the parties have set their signatures on the date
first written above.
SECURITY ASSOCIATES
INTERNATIONAL, INC.
By: /s/ Xxxxx X. Xxxxxxx /s/ Xxxxxxx Xxxxx
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Its: President XXXXXXX XXXXX
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