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EXHIBIT 10.4
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IMAGE INDUSTRIES, INC.
EMPLOYMENT CONTRACT
AGREEMENT dated as of the 30th day of July, 1993, by and between IMAGE
INDUSTRIES, INC., a Delaware corporation (hereinafter called the "Company"), and
H. XXXX XXXXXXX (hereinafter called the "Employee").
R E C I T A L S:
WHEREAS, the Company and the Employee are parties to that certain
Employment Contract dated as of March 30, 1991 (the "Existing Employment
Agreement") whereby the Employee is employed as the President of the Company;
and
WHEREAS, the Company desires to retain the services of Employee in his
current capacity as President and Chief Executive Officer of the Company
pursuant to the terms hereof in connection with the proposed public offering of
the Company's common stock.
NOW, THEREFORE, for and in consideration of the employment of Employee
by the Company, the above premises and the mutual covenants hereinafter set
forth, and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. EMPLOYMENT. The Company hereby employs the Employee as its President
and Chief Executive Officer, and the Employee hereby accepts such employment
under and subject to the terms and conditions hereinafter set forth.
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2. DUTIES. During the Term hereof (as defined below), the Employee
shall faithfully perform such duties as may be assigned to him from time to time
by the Board of Directors of the Company (the "Board") which are attendant to
the position of President and Chief Executive Officer, and shall report to the
Board. The Employee shall devote his full time and best efforts to the
performance of his duties hereunder, to the exclusion of all other business
activities; provided that the Employee may manage his own passive investments so
long as such management does not interfere materially with the performance of
his services hereunder. The Employee shall, upon request of the Company, serve
on the Board for no additional consideration.
3. COMPENSATION. In consideration of the services rendered
by the Employee under this Agreement, the Company shall pay the
Employee compensation as follows:
(a) Base Salary. A base salary of not less than Two
Hundred Fifty Thousand Dollars ($250,000.00) per Year (the
"Base Salary"). For purposes hereof, a "Year" shall mean the
Company's fiscal year, which is the fifty-two (52) week period
beginning approximately July 1 and ending approximately June
30. The Employee's Base Salary shall be paid on a bi-weekly
basis, in arrears, and shall be reviewed by the Compensation
Committee of the Board annually at the end of each Year, but
no such annual review shall cause the Base Salary to be
reduced to less than $250,000 per Year; and
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(b) Incentive Compensation. In addition to the Base
Salary (i) within thirty (30) days after the Commencement
Date, the Company shall pay to Employee a one-time bonus in
the amount of $150,000, and (ii) the Company may pay the
Employee an annual bonus, as determined by the Compensation
Committee of the Board from time to time.
4. SEVERANCE BENEFITS. The Employee shall be entitled to
severance benefits, as follows:
4.1 Termination of Employment.
(a) Termination Without Cause. If at any time during
the Term hereof, the employment of the Employee is terminated
by the Company without Cause as defined under and pursuant to
Section 7.4 hereof and provided that Employee is not
thereafter rehired by the Company for a period of at least
three (3) years, then, within thirty (30) days after the date
of termination, the Company shall pay, subject to all
applicable deductions and withholdings, to the Employee the
sum of (i) all accrued but unpaid Base Salary through the date
of termination; (ii) the Base Salary which would be payable
through the remainder of the Term, but in no event less than
one Year's Base Salary as then in effect; (iii) a bonus in an
amount equal to the average of the amount of the annual bonus
paid to Employee for the two (2) immediately preceding Years;
and (iv) the value of all accrued and
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unused vacation time based on the per diem amount of the Base
Salary (the "Severance Payment"). In addition, in such event
(A) the Company shall continue the Employee's group health
insurance, if available, and all other fringe benefits listed
on Schedule 1 at the Company's expense for a period of six (6)
months from the date of termination of employment, and will
make available to Employee COBRA coverage after such six (6)
month period as provided by law; and (B) all stock options
granted by the Company to Employee which are not vested on the
date of termination but which would vest if Employee remained
in the employ of the Company through the Year of termi nation
shall automatically become fully vested (the "Severance
Benefits"). If Employee is rehired by the Company within three
(3) years of termination without Cause, he shall repay to the
Company the Severance Payment.
(b) Voluntary Termination. In the event that the
Employee voluntarily terminates his employment pursuant to
Section 7.4 hereof at any time, or the Company termi nates his
employment for Cause pursuant to Section 7.3 hereof at any
time, during the Term, then the Company shall have no
obligation to pay the Severance Payment or provide the
Severance Benefits to the Employee, except as provided in
Section 4.2 hereof.
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(c) Termination Upon Death or Disability. If during
the Term hereof the employment of Employee is terminated upon
the death of Employee pursuant to Section 7.1 or upon the
permanent disability of the Employee pursuant to Section 7.2,
then, within thirty (30) days of the date of termination, the
Company shall pay, subject to all applicable deductions and
withholdings, to Employee the sum of (i) all accrued but
unpaid Base Salary through the date of termination; (ii) the
then current Base Salary for an additional six (6) month
period; (iii) a bonus in an amount equal to the average of the
amount of the annual bonus paid to Employee for the two (2)
immediately preceding Years; and (iv) the value of all accrued
and unused vacation time based on the per diem amount of the
Base Salary. In addition, in such event (except in the case of
death of Employee), (A) the Company shall continue the
Employee's group health insurance, if available, and all other
benefits listed on Schedule 1 at the Company's expense for a
period of six (6) months from the date of termination of
employment, and will make available to Employee COBRA
coverage after such six (6) months period as provided by law;
and (B) all stock options granted by the Company to Employee
which are not vested on the date of termination but which
would vest if Employee remained in the employ of the
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Company through the Year of termination shall automatically
become fully vested.
4.2 Change in Control. In the event of a Change in
Control (as defined below) during the Term, and termination of the employment of
the Employee occurs within twelve (12) months after such Change in Control for
any reason other than for Cause, including voluntary termination by the
Employee, and provided that the Employee is not thereafter rehired by the
Company for a period of at least three (3) years, the Company shall pay to
Employee within thirty (30) days of the date of termination the amount of the
annual Base Salary as then in effect, less deductions and withholdings,
irrespective of whether Employee's employment was terminated by Employee or the
Company or by death or disability, and shall provide all Severance Benefits as
described in Section 4.1(a) above. If the Employee is rehired by the Company
within said three (3) year period, then the Employee shall repay to the Company
the annual Base Salary paid to Employee under this Section 4.2.
For purposes hereof, a "Change in Control" shall mean any
transaction or series of related transactions pursuant to which either:
(a) all or substantially all of the assets of the
Company shall have been sold or transferred to an unaffiliated
third party; or
(b) the acquisition, directly or indirectly, by any
"person" (as such term is used in Sections 13(d) and
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14(d) of the Securities Exchange Act of 1934, as amended)
within any twelve (12) month period of securities of the
Company representing an aggregate of fifty percent (50%) or
more of the combined voting power of the Company's then
outstanding securities; or
(c) during any period of two (2) consecutive years,
individuals who at the beginning of such period constitute the
Board, cease for any reason to constitute at least a majority
thereof, unless each new director was nominated by the
directors then still in office who were directors at the
beginning of the period; or
(d) consummation of (i) a merger, consolidation or
other business combination of the Company with any other
"person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended) or affiliate
thereof, other than a merger, consolidation or business
combination which would result in the out standing common
stock of the Company immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into common stock of the surviving entity or a
parent or affiliate thereof) at least fifty percent (50%) of
the outstanding common stock of the Company or such surviving
entity or parent or affiliate thereof outstanding immediately
after such merger, consolidation or business combination, or
(ii) a plan of complete liquidation of the Company or an
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agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets;
provided that an offering and sale to the public by the Company of any equity
securities pursuant to an effective registration state ment under the Securities
Act of 1933, as amended (other than in connection with a merger), shall not be
deemed to be a "Change in Control."
5. OTHER BENEFITS. During the Term, Employee shall be entitled to the
current fringe benefits set forth in Schedule 1 hereto and such other fringe
benefits as are made available generally to other senior executive employees of
the Company as may be approved by the Board from time to time, including the
following:
5.1 Paid Vacation. The Employee shall be entitled to paid
vacations in accordance with the Company's practices with respect to vacations
for senior executive employees as from time to time established by the Board,
but no less than three (3) weeks per Year.
5.2 Insurance Benefits. During the Term of this Agree ment the
Employee shall be provided accident and health, dis ability, and life insurance
as the Company may from time to time make available to its senior executive
employees, and shall pay all premiums for the same (including dependent health
insurance) for the benefit of Employee, such benefits to be substantially
similar to those provided to Employee as of the date hereof. The Company may, at
its option and for its benefit, also purchase so-called key
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man insurance upon the life of the Employee in such amounts as it deems
necessary or appropriate, and the Employee agrees to submit to such physical
examinations for the same as may be required.
5.3 Expenses. The Company shall reimburse the Employee for all
reasonable expenses of types authorized by the Board and incurred in connection
with the Company's business affairs. The Employee shall comply with such
limitations and reporting require ments with respect to expenses as the Board
may establish from time to time.
6. TERM. The term of employment under this Agreement (the "Term") shall
begin on the date of execution by the Company of an Underwriting Agreement (the
"Commencement Date") in connection with its initial public offering which occurs
within ninety (90) days of the date hereof, and shall continue for a period of
three (3) years thereafter, unless sooner terminated as provided in Section 7.
In the event that such public offering is not closed within ninety (90) days of
the date hereof, this Agreement shall be of no force and effect, but the
Existing Employment Agreement shall continue in full force and effect.
Expiration of the Term and failure to execute a new Employment Agreement by the
Company or Employee shall not be deemed termination without Cause, and in such
event Employee shall not be subject to the restrictions contained in Section 9
hereof.
7. TERMINATION.
7.1 Death. In the event of the death of the Employee
during the Term, his employment by the Company shall be deemed to
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terminate at the end of the calendar month in which his death occurs and, except
as set forth in Section 4.1(c), all payments and benefits under this Agreement
shall then cease.
7.2 Permanent Disability. In the event of the disability of
the employee for a period in excess of 180 consecutive days as determined by a
qualified physician chosen by the Company, such that the Employee is unable to
perform his services hereunder substantially as performed previously, his
employment by the Company shall be deemed to terminate at the end of the
calendar month which includes the last day of such 180-day period, and except as
set forth in Section 4.1 (c), all payments and benefits shall then cease.
7.3 For Cause. The employment of the Employee by the
Company may be terminated by the Company (by a decision of a
majority of the Board of Directors) for "Cause" if:
(a) the Employee has engaged in willful and
intentional misconduct with respect to the Company, or grossly
neglected his duties to the Company, and in either case, after
written notice of the same, specifying in reasonable detail
the alleged misconduct or neglect, if the Employee fails to
correct or desist from the alleged misconduct or neglect
within thirty (30) days after such notice; or
(b) the Employee has engaged in a willful act which
constitutes a fraud or a felony and which results in a direct
injury to the Company; or
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(c) the Employee shall have been convicted of or
pleaded guilty to a felony or crime involving moral turpitude;
then the Company may terminate Employee's employment immediately by written
notice. In the event of termination under this Section 7.3, all payments and
benefits under this Agreement shall cease effective with termination of
employment. Termination of employ ment for any reason, other than termination
without Cause within twelve (12) months of a Change in Control, shall constitute
cause for removal of Employee from the Company's Board of Directors.
7.4 Termination Without Cause. This Agreement may be
terminated by either party without Cause on not less than ninety
(90) days' prior written notice to the other party.
8. PROPRIETARY INFORMATION; INVENTIONS IN THE FIELD.
8.1 Proprietary Information. In the course of his service to
the Company, the Employee may have access to confiden tial specifications,
know-how, strategic or technical data, processes, business documents or
information, marketing data, marketing research data, product research and
development data and manufacturing techniques, confidential customer lists and
sources of supply and trade secrets, all of which are confidential and may be
proprietary, owned or used by the Company. Such information shall hereinafter be
called "Proprietary Information" and shall include any and all items enumerated
in the preceding sentence and coming within the scope of the Company's business
as to which the Employee may have access, whether conceived or developed by
others
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or by the Employee alone or with others during the period of his service to the
Company, whether or not conceived or developed during regular working hours.
Proprietary Information shall not include any records, data, or information
which are in the public domain during the period of service by the Employee
provided the same are not in the public domain as a consequence of disclosure
directly or indirectly by the Employee in violation of this Agreement.
8.2 Fiduciary Obligations. Proprietary Information is of
critical importance to the Company and a violation of this Agreement would
seriously and irreparably impair and damage the Company's business and the
Employee shall keep all Proprietary Information in a fiduciary capacity for the
sole benefit of the Company.
8.3 Non-Disclosure. The Employee shall not during the Term of
this Agreement or for a period of five (5) years thereafter use for his own
benefit, or disclose, directly or indirectly, any Proprietary Information to any
person other than the Company or authorized employees thereof at the time of
such disclosure, or such other persons to whom the Employee has been
specifically instructed to make disclosure by an officer of the Company, and in
all such cases only to the extent required in the course of the Employee's
service to the Company. At the termination of his employment, the Employee shall
deliver to the Company all notes, letters, documents and records which may
contain Proprietary
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Information which are then in his possession or control and shall not retain or
use any copies or summaries thereof.
8.4 Patent Assignment. The Employee agrees to assign and
transfer to the Company or its designee, without any separate remuneration or
compensation, his entire right, title and interest in and to all Inventions in
the Field (as hereinafter defined), together with all United States and foreign
rights with respect thereto, and at the Company's expense to execute and deliver
all appropriate patent applications for securing United States and foreign
patents and Inventions in the Field and to perform all lawful acts, including
giving testimony, and to execute and deliver all such instruments that may be
necessary or proper to vest all such Inventions in the Field and patents with
respect thereto in the Company, and to assist the Company in the prosecution or
defense of any interference which may be declared involving any of said patent
applications or patents. For the purposes of this Agreement, the words
"Inventions in the Field" shall include any discovery, process, design,
development, improvement, application, technique, or invention, whether
patentable or not and whether reduced to practice or not, conceived or made by
the Employee, individually or jointly with others (whether on or off the
Company's premises or during or after normal working hours) while in the employ
of the Company or within one year after termination of the Employee's employment
by the Company, and which was or is directly or indirectly related to the
business of the Company, or
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which resulted or results from or was suggested by any work performed by any
employee or agent thereof during the Term.
9. PROTECTIVE COVENANTS. Employee acknowledges that he is
a key executive whose specialized skills, abilities and contacts
are important to the success of the Company, and agrees that he
shall faithfully and strictly adhere to the following covenants:
9.1 In the event Employee voluntarily terminates his
employment during the Term or his employment is terminated by the Company for
"Cause," the Employee covenants and agrees that he shall not, within one year
after the date of such termination of employment within the States of Alabama,
Georgia, South Carolina and within a two hundred (200) mile radius of the
Company's principal office located at Xxxxxxx 000, Xxxxxxxx, Xxxxxxx, directly
or indirectly own, operate or serve as an employee or consultant in a capacity
similar to that in which Employee served the Company, for any business, person
or entity whatsoever which is engaged in the manufacture or sale of carpet, the
extrusion of polyester fibers, the production of polyethylene terephthalate
("PET") flake or pellets, or the recycling of post-consumer PET materials that
are competitive with those sold or manufactured by the Company.
9.2 In the event Employee voluntarily terminates his
employment during the Term or his employment is terminated by the Company for
"Cause," the Employee covenants and agrees that he shall not, within one year
after the date of such termination of employment solicit, divert or appropriate,
or attempt to solicit,
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divert or appropriate, directly or by assisting others, any business from any of
the Company's customers, including actively-sought prospective customers, with
whom Employee had material contact during the last eighteen (18) months of his
employment, for purposes of providing products or services that are competitive
with those provided by the Company.
9.3 In the event Employee voluntarily terminates his
employment during the Term or his employment is terminated by the Company for
"Cause," the Employee covenants and agrees that he shall not, within one year
after the date of such termination of employment divert, solicit, recruit or
hire, or attempt to divert, solicit, recruit or hire, directly or by assisting
others, any other employee of the Company or any person who within the preceding
twelve (12) months has been an employee of the Company, whether or not such
employee is a full-time employee or a temporary employee of the Company and
regardless of whether such employment is pursuant to written agreement, for a
determined period, or at will.
10. REMEDIES. It is specifically understood and agreed that any breach
of the provisions of Sections 8 and 9 of this Agreement is likely to result in
irreparable injury to the Company and that the remedy at law alone will be an
inadequate remedy for such breach, and that in addition to any other remedy it
may have, the Company shall be entitled to enforce the specific performance of
this Agreement by the Employee and to seek both temporary and
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permanent injunctive relief (to the extent permitted by law) without the
necessity of proving actual damages.
11. NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and, if mailed by prepaid
first class mail or certified mail, return receipt requested, at any time other
than during a general discontinuance of postal service due to strike, lockout or
other wise, shall be deemed to have been received on the earlier of the date
shown on the receipt or three (3) business days after the postmarked date
thereof and, if telexed or telecopied, shall be followed forthwith by letter and
shall be deemed to have been received on the next business day following
dispatch and acknowledgement of receipt by the recipient's telex or telecopy
machine. In addition, notices hereunder may be delivered by hand, in which event
the notice shall be deemed effective when delivered, or by overnight courier, in
which event the notice shall be deemed to have been received on the next
business day following delivery to such courier. All notices and other
communications under this Agreement shall be given to the parties hereto at the
following addresses:
(i) If to the Company:
Image Carpets, Inc.
Xxxxxxx 000
Xxxxxxxx, Xxxxxxx 00000
Copy to:
G. Xxxxxx Xxxxxxx, Esquire
Parker, Johnson, Xxxx & Dunlevie
Xxxxx 000
0000 Xxxxxxxxx Xxxxxx, X.X.
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Xxxxxxx, Xxxxxxx 00000
(ii) If to the Employee:
H. Xxxx Xxxxxxx
000 Xxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
unless and until notice of another or different address shall be given as
provided herein. All notices shall be effective upon delivery or, if mailed, on
the third business day after being mailed.
12. MISCELLANEOUS.
12.1 Modification. This Agreement constitutes the entire
agreement between the parties hereto with regard to the subject matter hereof,
superseding all prior understandings and agreements, whether written or oral,
including without limitation the Prior Employment Agreement. This Agreement may
not be amended or revised except by a writing signed by the parties.
12.2 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of both parties and their respective successors
and assigns, including any corporation with which or into which the Company or
its successor may be merged or which may succeed to its assets or business,
although the obliga tions of the Employee are personal and may be performed only
by him.
12.3 Captions. Captions herein have been inserted solely for
convenience of reference and in no way define, limit or describe the scope of
substance of any provision of this Agreement.
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12.4 Severability. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, and this Agreement shall
be construed as if such invalid, illegal or unenforceable provision were limited
or modified, consistent with its general intent, to the extent necessary so that
it shall be valid, legal and enforceable, or if it shall not be possible to so
limit or modify such invalid, illegal or unenforceable provision, this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein, and all other provisions hereof shall be and remain
unimpaired and in full force and effect.
12.5 Governing Law. This Agreement shall be construed
under and governed by the laws of the State of Georgia.
12.6 Arbitration. Either party hereto may demand arbitration
of a claim or dispute arising hereunder by delivery of a written demand to the
other party within sixty (60) days after the claim arises, which demand shall
include the name of an arbitrator appointed by such party, together with a
statement of the matter in controversy. Within twenty (20) days after the
receipt of such demand, the other party shall appoint its arbitrator, and the
two arbitrators so chosen shall, within ten (10) days thereafter, select a third
arbitrator, or in the absence of agreement, the third arbitrator shall be
appointed by the Arbitration Committee of the American Arbitration Association.
A
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decision rendered by a majority of the arbitrators shall be final and binding on
the parties, and judgment on such award may be entered in accordance with the
applicable law in any court having jurisdiction thereof. All arbitration costs
and expenses shall be borne by the losing party. Any such arbitration shall be
held in Xxxxx County, Georgia, unless otherwise agreed by the parties.
Within ninety (90) days of the selection of the third
arbitrator (or such later date as the arbitrators determine as necessary to make
such determination), the arbitrators shall determine whether the Base Salary and
benefits provided hereunder should be continued to be paid to Employee during
the pendency of the arbitration based upon the merit of and the reasonableness
of the position of the Employee; provided that said Base Salary and benefits
shall be continued until the date of such determination and thereafter if so
determined by the arbitrators. In the event the arbitrator determines that such
salary and benefits should not have been paid to Employee, Employee shall pay
the full amount of such salary and the cost of such benefits to the Company
within thirty (30) days of such decision.
12.7 Restrictive Covenant. It is the intention of the parties
that if any restrictive covenant in this Agreement is determined by a court of
competent jurisdiction to be overly broad, then the court should enforce such
covenant to the maximum extent permitted by law as to scope, geographic area and
duration.
[EXECUTION SET FORTH ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as a sealed instrument as of the day and year first above written.
THE COMPANY:
IMAGE INDUSTRIES, INC.
BY:/s/ Xxxxx X. Xxxxxx
-----------------------------
XXXXX X. XXXXXX, Chairman
EMPLOYEE:
/s/ H. Xxxx Xxxxxxx
--------------------------------
H. XXXX XXXXXXX
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SCHEDULE 1
The Company will provide the following fringe benefits to the Employee:
1. A Company automobile comparable to the present
automobile, together with the costs of operating and
maintaining same.
2. Country club membership and dues at a country club of
Employee's choice within the general area of the
Company's principal facility.
3. Dependent medical insurance coverage at the Company's
expense.
4. Preparation of the Employee's federal and state tax
returns by the Company's independent auditors.
5. Personal life and disability insurance providing benefits
not less than that currently provided for Employee.
6. Annual physical at the expense of the Company.
7. Sick leave, including salary continuation, for a period
of time equal to the waiting period under the Company's
disability policy.
