Exhibit 10.5
EMPLOYMENT AGREEMENT
AGREEMENT, made this 8th day of December, 1997, by and between QPI
Multipress, Inc., an Ohio corporation, with offices located at 000 Xxxxxx
Xxxxxx, Xxxxxxxx, Xxxx 00000-0000 ("Company"), and Xxxxxxxx X. Xxxxxxxx,
residing at 0000 Xxxx Xxxxx, Xxxxxxxx, Xxxx 00000 ("Executive").
W I T N E S S E T H :
WHEREAS, Company is desirous of employing Executive as President of
Company and a member of the Board of Directors, and Executive is desirous of
committing himself to serve Company in such capacity, all upon the terms and
subject to the conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto, intending to be legally bound,
agree as follows:
1. Employment.
Company agrees to employ Executive, and Executive agrees to be
employed by Company, upon the terms and subject to the conditions of this
Agreement.
2. Term.
The employment of Executive by Company as provided in Section 1 will
be for a period commencing on December 15, 1997, and ending December 31, 2002,
unless sooner terminated as hereinafter provided (the "Term").
3. Duties; Best Efforts.
(a)Executive shall serve as President of Company, subject to policy directions
from the Board of Directors of Company. Executive shall have supervision and
control over, and responsibility for, all day to day operations of Company,
and shall have such other powers and duties as may be from time to time
prescribed by the Board of Directors of Company, provided that the nature of
Executive's powers and duties so prescribed shall not be inconsistent with
Executive's position and duties hereunder. Notwithstanding the foregoing,
the Company's selling, general and administrative expenditures shall be subject
to budgets submitted to and approved by Company's Board of Directors, and
Executive shall not have authority to authorize or approve unbudgeted
expenditures without prior Board approval.
(b)Executive shall devote all of his business time, attention and
energies to the business and affairs of Company, shall use his best efforts to
advance the best interests of Company and its stockholder Quality Products,
Inc., and shall not during the Term be engaged in any other business activity,
whether or not such business activity is pursued for gain, profit or other
pecuniary advantage.
4. Place of Performance.
In connection with his Employment by Company, Executive shall be
based at the principal offices of Company, which shall be in Ohio, and Executive
shall have reasonable discretion regarding his absence therefrom on sales travel
status.
5. Compensation.
(a) Base Salary. Company shall pay to Executive a base
salary (the "Base Salary") at a rate of not less than $120,000 per annum,
payable in equal installments during the Term in accordance with the
Company's usual payroll practices. The Board of Directors of Company will
review the Base Salary at least annually during the Term with increases
based upon the Cost of Living Index of the United States Department of Labor.
The Base Salary provided hereunder, as increased by the Board of Directors of
Company from time to time, shall not be reduced without Executive's consent.
(b) Out-of-Pocket Expenses. Company shall promptly pay
or reimburse to Executive the reasonable and
properly documented expenses incurred by him in the
performance of his duties hereunder, including,
without limitation, those incurred in connection
with business related travel or entertainment.
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(C) Participation in Benefit Plans. Executive shall
be entitled to participate in and receive benefits under any 401(k) plan
(after 6 months of employment), disability plan, health plan or any other
employee benefit plan or arrangement currently existing or made available in
the future by Company to its executives and key management employees.
(d) Vacation. Executive shall be entitled to paid
vacation personal days in each calendar year beginning in 1998 of four (4)weeks,
prorated in any calendar year during which Executive is employed hereunder for
less than an entire year in accordance with the number of complete months in
such year during which he is so employed. Unused vacation/personal days shall
not accrue to future years. Executive shall also be entitled to all paid
holidays given by Company to its executives and key management employees.
(e) Bonus Compensation. For each fiscal year during
the Term, Executive will receive a bonus based upon Company's cumulative margins
calculated as follows: 5.0% of Company Gross Margins 2.0 million up to $2.75
million 7.5% of Company Gross Margins > $2.75 million Bonus for any partial
fiscal years during the Term will be prorated based upon the number of days
employed during that fiscal year divided by 365.
(f) Company Gross Margins shall consist of the
Company's total gross margins for each fiscal year of the term, as reported in
the Company's financial statements forming a part of Quality Products, Inc.'s
audited consolidated financial statements for each such year, after deduction
of sales commissions payable to independent sales epresentatives. Company
represents that the Company's gross margin for the year ended September 30, 1997
was approximately $2,345,000 on net sales of approximately $6,340,000, and that
such figures were used by Company to establish the baseline for Executive's
bonus. Such gross margin was approximately 37% of net sales for fiscal 1997.
Company represents to Executive that its gross margin exceeded 30% of sales in
fiscal years 1995 and 1996. Based upon the foregoing, Executive represents that
he will use his best efforts as Company President to maintain a Company Gross
Margin of 30% or better, subject to economic conditions and factors beyond his
and Company's control.
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(g) Signing Bonus: Executive shall be paid a cash
bonus of $10,000 on his first day of employment with Company.
(h) Purchase of Executive's PH Group, Inc. Stock
and Beneficial Interests in PH Group, Inc. Stock. Company and Executive agree
that it is in the Company's and Executive's best interests that Executive not
have investments in the Company's competitors.
(i) PH Group, Inc. Stock. Executive will
use his best efforts to sell all of his PH Group, Inc. stock in arms-length
transactions for $5.00 per share pursuant to which neither Executive nor any
member of his family will retain any continuing economic or other interest in
such shares by no later than April 30, 1998. In the event that such sale has not
occurred by April 30, 1997, then on and after May 1, 1998 and through
July 31, 1998, Company shall have an assignable option to purchase all of
Executive's unsold PH Group, Inc. stock at a price of $5.00 cash per share.
(ii) Phoenix Management Ltd. Executive has
disclosed in connection herewith, his ownership of membership interests in
Phoenix Management Ltd., which beneficially owns stock in PH Group, Inc.
Company acknowledges that Executive's pre-existing ownership interest in
Phoenix Management Ltd., is not per se a violation of any term of this Agreement
nor a conflict of interest with any duties hereunder. Executive represents
that he will exercise his best efforts to sell his Phoenix interest in
arms-length transactions, provided owever, that Executive shall not be
under any duty to accept less than fair market value (in cash) for his Phoenix
interests. Executive covenants not to buy or acquire any additional beneficial
interest in PH Group, Inc., Phoenix or any other company which is a competitor
of the Company on or after the date hereof.
(i) Executive shall be granted an option to purchase
50,000 shares of Quality Products, Inc. Common Stock for $2.00 per share
during the period beginning October 1, 1999 and ending September 30, 2001
or such earlier date as the Term ends.
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(j) Other Benefits. In addition to the benefits
specified pursuant to this Section 5, Company shall pay the premiums on $150,000
of term life insurance for Executive's designated beneficiary, together with
providing Executive with the use of a Chrysler LHS automobile or comparable
automobile and shall pay the costs of insurance, epairs and maintenance thereon.
6. Termination.
Executive's employment hereunder shall be terminated upon
Executive's death and may be terminated by Company (which termination shall end
the Term) as follows:
(a) Company may, upon thirty (30) days written notice
to Executive, terminate the employment of Executive and the Term hereof in the
event (i) that Executive shall be convicted of or plead guilty (which shall
include a plea of nolo contendre) to a misdemeanor involving dishonesty or moral
turpitude or a felony; (ii) of an illegal, immoral or unethical act by the
Executive resulting in or intended to result, directly or indirectly, in gain
to the Executive or a third party at the expense of the Company, (iii) of the
Executive's willful engagement in misconduct that results in material injury
over $2,000) to the Company or (iv) of the Executive's continuing inability, or
willful and continued failure, to substantially perform the Executive's duties
to the Company or a breach of the Executive's duties to the Company which
remains uncured within thirty (30) days after a written demand for cure is
delivered to the Executive by the Company, which demand specifically
identifies the manner in which it is believed that the Executive has not
substantially performed his duties or has breached a duty.
(b) (i)Upon not less than thirty (30) days' written notice
by the Board of Directors of Company to Executive in the event that (i) the
Board shall have received a written statement from a reputable independent
physician to the effect that Executive shall have become so incapacitated as to
be unable to resume, within the ensuing three (3) months, his employment
hereunder by reason of physical or mental illness, or (ii) Executive shall not
have substantially performed his duties hereunder for three (3) months by reason
of any such physical or mental illness.
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(ii)In the event of the termination of Executive's
employment pursuant to Section 6(b)(i) hereof, for the shorter of six (6)
months following any such termination or the balance of the Term (as if
such termination had not occurred), as liquidated damages in full
satisfaction of Executive's claims under this Agreement, Company shall (i)
continue to pay Executive the Base Salary in effect at the time of such
termination, less the amount, if any, then payable to Executive under any
disability benefits of Company, (ii) maintain, at Company expense, all
medical and other health, accident, life or other disability plans and
programs in which Executive was entitled to participate immediately prior to
such termination.
(C)In the event of the termination of Executive's
employment as a result of Executive's death, Company shall (i) pay to
Executive's estate his Base Salary through the date of his death, (ii) pay to
Executive's estate within 120 days after the end of the fiscal year in which
Executive's death occurred, the amount which would have been payable to
Executive pursuant to Executive's Section 5(e) bonus for the fiscal year in
which his death occurred pro-rated to the date of his death and (iii) for the
longer of one year following his death or the balance of the Term (as if such
termination had not occurred), maintain, at its expense, for the continued
benefit of Executive's family, all medical and other health, accident, life
or other disability plans and programs in which Executive's family was
entitled to participate immediately prior to his death.
(d) In the event that any termination by Company of
Executive's employment is determined not to have been in accordance with
Sections 6(a), 6(b) or 6(c) and therefore constitutes a breach of the terms of
this Agreement or applicable law, then Company shall pay Executive as
liquidated damages in lieu of all other compensation or damages, the following:
(a) Base Salary equal to the lesser of $240,000 or the Base Salary due over the
unexpired Term; (b) the amount which would have been payable to Executive
pursuant to Executive's Section 5(e) bonus for the fiscal year in which his
termination occurred pro-rated to the date of termination; (c) the cost of all
medical, life and disability insurance benefits Executive was receiving from
Company prior to the termination, for a period of the shorter of two years
following the termination or the unexpired Term. Company's obligation to pay
liquidated damages hereunder shall not be diminished or reduced by any incom
which Executive may earn in subsequent employment.
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7. Executive's Representations.
(a)Executive represents and warrants to Company that
he is not subject to any written contract or agreement (including, without
limitation, any non-compete,non-disclosure or non- solicitation agreement or
covenant), which prevents or inhibits his accepting employment with the
Company or his performance of his obligations under this Agreement;
that he has resigned from all other employment; and that he has not
removed or retained any business records from his prior employer. Executive
shall indemnify and hold harmless Company (and its officers, directors and
shareholders) against any liability in connection with Executive's breach of
the foregoing representations and warranties. Provided that Executive is
not in breach of the foregoing representations and warranties, Company shall
defend and indemnify Executive at its expense against any action in tort
or contract by Executive's current employer concerning Executive's
termination of such employment, acceptance of employment by Company and sale of
his PH stock and Phoenix membership interests.
(b)Executive represents and warrants that he is full
capable of performing the essential functions of his position hereunder and is
suffering from no condition which would preclude such performance.
8. Limited Non-Competition Covenant.
During the Term and for a one-year period following the end of the
Term, Executive shall not engage in the marketing or sale of industrial presses
in the states of Ohio, Indiana and Michigan; provided, however, that in the
event that Executive's termination by Company is determined not to have been in
accordance with Sections 6(a) or 6(b)(i) of this Agreement or in violation of
applicable law, he shall not be subject to the restrictions of this section 8.
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9. Specific Remedies. If Executive commits a breach of any of the
provisions of Section 8 hereof, such violation shall be deemed to be grounds for
termination pursuant to Section 6(a)(iii) hereof and Company shall have the
right, in addition to its other remedies, to have the provisions of Section 8
specifically enforced by any court having equity jurisdiction, it being
acknowledged and agreed that any such breach will cause ir reparable injury to
Company and that money damages alone will not provide an adequate remedy to
Company.
10. Disputes. If Company or Executive shall dispute any termination
of Executive's employment hereunder or if a dispute concerning any payment
hereunder shall exist:
(a) either party shall have the right to compel
arbitration of the dispute in the City of Columbus, Ohio under the rules of the
American Arbitration Association by giving written notice of arbitration to
the other party within thirty (30)days after notice of such dispute has been
received by the party to whom noticehas been given; and
(b) if such dispute (whether or not submitted to
arbitration pursuant to Section 10(a) hereof) results in a determination that
(i) Company did not have the right to terminate Executive's employment under
the provisions of this Agreement or (ii) the position taken by Executive
concerning payments to Executive is correct, Company shall promptly pay, or
if theretofore paid by Executive, shall promptly reimburse Executive for, all
costs and expenses (including reasonable attorney's fees) reasonably
incurred by Executive in connection with such dispute.
11. Successors; Binding Agreement.
In the event of a future disposition by Company (whether direct or
indirect, by sale of assets or stock, merger, consolidation or otherwise) of all
or substantially all of its business and/or assets in a transaction to which
Executive consents, Company will require any successor, by agreement in form and
substance satisfactory to Executive, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that Company would be
required to perform if no such disposition had taken place. If the future
disposition by Company is not satisfactory to Executive, but is completed in
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any event, then Executive may resign and Company's successor and Executive shall
be released from all obligations under this Agreement.
This Agreement and all rights of Executive hereunder shall inure to
the benefit of, and be enforceable by, Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees and
legatees. If Executive should die while any amount would still be payable to him
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's estate.
12. Notices.
All notices, consents or other communications required or permitted
to be given by any party hereunder shall be in writing (including telecopy or
other similar writing) and shall be given by personal delivery, certified or
registered mail, return receipt requested, postage prepaid, or telecopy (or
other similar writing) as follows:
To Company: QPI Multipress, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000-0000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
With a copy to: Xxxxxxx X. Xxxxx, Esq.
Xxxxxxxx Xxxx Xxxxxxxx Xxxxxx Xxxxxxxx & Xxxxx
1345 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Fax: (000) 000-0000
To Executive: Xxxxxxxx X. Xxxxxxxx
0000 Xxxx Xxxxx
Xxxxxxxx, Xxxx 00000
Fax: (000) 000-0000
With a copy to: Xxxx Xxxxxxxxx, Esq.
Shayne & Xxxxxxxxx
000 X. Xxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Fax: (000) 000-0000
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or at such other address or telecopy number (or other similar number) as either
party may from time to time specify to the other by notice given in similar
manner. Any notice, consent or other communication required or permitted to be
given hereunder shall have been deemed to be given on the date of mailing,
personal delivery or telecopy or other similar means (provided an appropriate
delivery receipt is received by sender) thereof or, in the case of personal
delivery or telecopy or other similar means, the day of delivery thereof.
13. Modifications and Waivers.
No term, provision or condition of this Agreement may be modified or
discharged unless such modification or discharge is authorized by the Board of
Directors of Company and is agreed to in writing and signed by Executive. No
waiver by either party hereto of any breach by the other party hereto of any
term, provision or condition of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time.
14. Entire Agreement.
This Agreement constitutes the entire understanding between the
parties hereto relating to the subject matter hereof, superseding all
negotiations, prior discussions, preliminary agreements and agreements relating
to the subject matter hereof made prior to the date hereof. This Agreement is
the product of arms-length negotiation between Executive and Company, with each
party having been represented by legal counsel. All provisions herein shall be
deemed to have been drafted by both parties, jointly.
15. Law Governing.
Except as otherwise explicitly noted, this Agreement shall be
governed by and construed in accordance with the laws of the State of Ohio
(without giving effect to conflicts of law).
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16. Invalidity.
Except as otherwise specified herein, the invalidity or
unenforceability of any term or terms of this Agreement shall not invalidate,
make unenforceable or otherwise affect any other term of this Agreement which
shall remain in full force and effect.
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17. Headings.
The headings contained in this Agreement are for reference purposes
only and shall not affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year set forth above.
QPI Multipress, Inc.
/S/Xxxxx X. Xxxxxx
By:---------------------
Xxxxx X. Xxxxxx
Executive:
/s/ Xxxxxxxx X. Xxxxxxxx
By:-------------------------
Xxxxxxxx X. Xxxxxxxx
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