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EXHIBIT 10.17
Xxxxxx X. Xxxxxxx
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is entered into
and effective as of November 1, 1997 (the "Effective Date") by and between
AMERICAN RESIDENTIAL SERVICES, INC., a Delaware corporation (the "Company"),
and XXXXXX X. XXXXXXX (the "Employee").
RECITALS
In entering into this Agreement, the Company desires to
provide the Employee with substantial incentives to serve the Company as a
senior executive performing at the highest levels of leadership and
stewardship, without distraction or concern over minimum compensation, benefits
or tenure, to manage the Company's growth and development and maximize the
returns to the Company's stockholders.
NOW, THEREFORE, in consideration of the foregoing and the
mutual provisions contained herein, and for other good and valuable
consideration, the parties hereto agree with each other as follows:
1. CERTAIN DEFINITIONS
A. Certain Definitions. As used herein, the following terms
have the meanings assigned to them below:
"Acquiring Person" means any Person who or which, together
with all Affiliates and Associates of such Person, is or are the
Beneficial Owner of twenty-five percent (25%) or more of the shares of
Common Stock then outstanding, but does not include any Exempt Person;
provided, however, that a Person shall not be or become an Acquiring
Person if such Person, together with its Affiliates and Associates,
shall become the Beneficial Owner of twenty-five percent (25%) or more
of the shares of Common Stock then outstanding solely as a result of a
reduction in the number of shares of Common Stock outstanding due to
the repurchase of Common Stock by the Company, unless and until such
time as such Person or any Affiliate or Associate of such Person shall
purchase or otherwise become the Beneficial Owner of additional shares
of Common Stock constituting one percent (1%) or more of the then
outstanding shares of Common Stock or any other Person (or Persons)
who is (or collectively are) the Beneficial Owner of shares of Common
Stock constituting one percent (1%) or more of the then outstanding
shares of Common Stock shall become an Affiliate or Associate of such
Person, unless, in either such case, such Person, together with all
Affiliates and Associates of such Person, is not then the Beneficial
Owner of twenty-five percent (25%) or more of the shares of Common
Stock then outstanding.
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"Active Status" means the Employee's Employment status from the
Effective Date to and including the first to occur of (a) the Part-time
Employment Effective Date or (b) the Termination Date.
"Affiliate" has the meaning ascribed to that term in Exchange Act Rule
12b-2.
"Annual Cash Compensation" of the Employee for any Compensation Year
means the sum of the salary and bonus earned by the Employee during that
Compensation Year, including all amounts deferred at the election of the
Employee pursuant to a Compensation Plan intended to qualify as a plan under
Section 401(k) of the Code or otherwise. If salary or bonus is paid in whole
or in part in property other than cash (such as Common Stock) the amount so
paid shall be the fair market value thereof on the date of payment; provided,
however, that, for purposes of this definition, the Base Salary the Employee is
deemed to earn during the No-salary Period will be the amount the Company would
have paid in cash pursuant to Section 4(A) were his Base Salary to have begun
accruing on the Effective Date.
"Associate" means, with reference to any Person, (a) any corporation,
firm, partnership, association, unincorporated organization or other entity
(other than the Company or a subsidiary of the Company) of which that Person is
an officer or general partner (or officer or general partner of a general
partner) or is, directly or indirectly, the Beneficial Owner of 10% or more of
any class of its equity securities, (b) any trust or other estate in which that
Person has a substantial beneficial interest or for or of which that Person
serves as trustee or in a similar fiduciary capacity and (c) any relative or
spouse of that Person, or any relative of that spouse, who has the same home as
that Person.
"Average Annual Cash Compensation" of the Employee means, as of the
Part-time Employment Effective Date, the average of (a) the Annual Cash
Compensation earned by the Employee in each of the two (2) Compensation Years
next preceding that date or, if less than two (2) Compensation Years have
occurred prior to that date and since the Effective Date, (b) the Annual Cash
Compensation in each whole Compensation Year, if any, and, restated on an
annualized basis, the Annual Cash Compensation in each partial Compensation
Year (up to a maximum of two (2) partial Compensation Years) next preceding the
Part-time Employment Effective Date.
"Base Salary" means: (a) prior to the Part-time Employment Effective
Date, the guaranteed minimum annual salary payable by the Company to the
Employee pursuant to Section 4(A); and (b) on and after the Part-time
Employment Effective Date, the guaranteed minimum annual salary payable by the
Company to the Employee pursuant to Section 5(E).
A specified Person is deemed the "Beneficial Owner" of, and is deemed
to "beneficially own," any securities:
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(a) of which that Person or any of that Person's
Affiliates or Associates, directly or indirectly, is the "beneficial
owner" (as determined pursuant to Exchange Act Rule 13d-3) or
otherwise has the right to vote or dispose of, including pursuant to
any agreement, arrangement or understanding (whether or not in
writing); provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any security under
this subparagraph (a) as a result of an agreement, arrangement or
understanding to vote that security if that agreement, arrangement or
understanding: (1) arises solely from a revocable proxy or consent
given in response to a public (that is, not including a solicitation
exempted by Exchange Act Rule 14a-2(b)(2)) proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the Exchange Act; and (2) is not then reportable by such
Person on Exchange Act Schedule 13D (or any comparable or successor
report);
(b) which that Person or any of that Person's Affiliates
or Associates, directly or indirectly, has the right or obligation to
acquire (whether that right or obligation is exercisable or effective
immediately or only after the passage of time or the occurrence of an
event) pursuant to any agreement, arrangement or understanding
(whether or not in writing) or on the exercise of conversion rights,
exchange rights, other rights, warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," securities tendered pursuant to a
tender or exchange offer made by that Person or any of that Person's
Affiliates or Associates until those tendered securities are accepted
for purchase or exchange; or
(c) which are beneficially owned, directly or indirectly,
by (1) any other Person (or any Affiliate or Associate thereof) with
which the specified Person or any of the specified Person's Affiliates
or Associates has any agreement, arrangement or understanding (whether
or not in writing) for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy or consent as described in the
proviso to subparagraph (a) of this definition) or disposing of any
voting securities of the Company or (2) any group (as that term is
used in Exchange Act Rule 13d-5(b)) of which that specified Person is
a member;
provided, however, that nothing in this definition shall cause a Person engaged
in business as an underwriter of securities to be the "Beneficial Owner" of, or
to "beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of forty (40) days after the date of that acquisition. For purposes
of this Agreement, "voting" a security shall include voting, granting a proxy,
acting by consent, making a request or demand relating to corporate action
(including, without limitation, calling a stockholder meeting) or otherwise
giving an authorization (within the meaning of Section 14(a) of the Exchange
Act) in respect of such security.
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"Board" means the entire Board of Directors of the Company.
"Business Reason" for the Company's termination of the
Employee's Employment means any lawful reason other than Cause.
"Cause" for the Company's termination of the Employee's
Employment means: (a) the Employee's final conviction of a felony
crime that enriched the Employee at the expense of the Company; or (b)
the Employee's deliberate and intentional continuing failure to
substantially perform his duties and responsibilities hereunder
(except by reason of the Employee's incapacity due to physical or
mental illness or injury) for a period of forty-five (45) days after
the Required Board Majority has delivered to the Employee a written
demand for substantial performance hereunder which specifically
identifies the bases for the Required Board Majority's determination
that the Employee has not substantially performed his duties and
responsibilities hereunder (such period being the "Grace Period");
provided, that for purposes of this clause (b), the Company shall not
have Cause to terminate the Employee's Employment unless (1) at a
meeting of the Board called and held following the Grace Period in the
city in which the Company's principal executive offices are located of
which the Employee was given not less than ten (10) days' prior
written notice and at which the Employee was afforded the opportunity
to be represented by counsel, appear and be heard, the Required Board
Majority shall adopt a written resolution which (A) sets forth the
Required Board Majority's determination that the failure of the
Employee to substantially perform his duties and responsibilities
hereunder has (except by reason of his incapacity due to physical or
mental illness or injury) continued past the Grace Period and (B)
specifically identifies the bases for that determination and (2) the
Company, at the written direction of the Required Board Majority,
shall deliver to the Employee a Notice of Termination for Cause to
which a copy of that resolution, certified as being true and correct
by the secretary or any assistant secretary of the Company, is
attached. Cause of the type referred to in clause (a) of the
preceding sentence is a "Type I Cause," while Cause of the type
referred to in clause (b) of the preceding sentence is a "Type II
Cause." For purposes of determining whether a Type II Cause has
occurred, no act or failure to act on the part of the Employee shall
be considered "deliberate and intentional" unless it is taken or
omitted to be taken by the Employee in bad faith or without a
reasonable belief that the Employee's act or omission was in the best
interests of the Company.
"Change of Control" means the occurrence of any of the
following events that occurs after the Effective Date: (a) any Person
becomes an Acquiring Person; (b) at any time the then Continuing
Directors cease to constitute a majority of the members of the Board;
(c) a merger of the Company with or into, or a sale by the Company of
its properties and assets substantially as an entirety to, another
Person occurs and, immediately after that occurrence, any Person,
other than an Exempt Person, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of
twenty-five percent (25%) or more of the total voting power of the
then outstanding Voting Shares of the Person surviving that
transaction
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(in the case or a merger or consolidation) or the Person acquiring
those properties and assets substantially as an entirety.
"Change of Control Payment" means at any time the amount equal
to three (3) times the Employee's then highest Base Salary during the
term of this Agreement.
"Code" means the Internal Revenue Code of 1986.
"Common Stock" means the common stock of the Company.
"Company" means (a) American Residential Services, Inc., a
Delaware corporation, and (b) any Person that assumes the obligations
of "the Company" hereunder, by operation of law, pursuant to Section
9(D)(iii) or otherwise.
"Compensation Plan" means any compensation arrangement, plan,
policy, practice or program established, maintained or sponsored by
the Company or any subsidiary of the Company, or to which the Company
or any subsidiary of the Company contributes, on behalf of any
Executive Officer or any member of the family of any Executive
Officer, (a) including (i) any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) or other "employee benefit plan" (as
defined in Section 3(3) of ERISA), (ii) any other retirement and
savings plan, including any supplemental benefit arrangement relating
to any plan intended to be qualified under Section 401(a) of the Code
or whose benefits are limited by the Code or ERISA, (iii) any
"employee welfare plan" (as defined in Section 3(1) of ERISA), (iv)
any arrangement, plan, policy, practice or program providing for
severance pay, deferred compensation or insurance benefit, (v) any
Incentive Plan and (vi) any arrangement, plan, policy, practice or
program (A) authorizing and providing for the payment or reimbursement
of expenses attributable to first-class air travel and first-class
hotel occupancy while on travel or (B) providing for the payment of
business luncheon and country club dues, long-distance charges, mobile
phone monthly air time or other recurring monthly charges or any other
fringe benefit, allowance or accommodation of employment, but (b)
excluding any compensation arrangement, plan, policy, practice or
program to the extent it provides for annual base salary.
"Compensation Committee" means the committee of the Board to
which the Board has delegated duties respecting the compensation of
Executive Officers and the administration of Incentive Plans, if any,
intended to qualify for the Exchange Act Rule 16b-3 exemption.
"Compensation Year" means any calendar year.
"Confidential Information" means, with respect to the Company
or any subsidiary of the Company, all trade secrets and other
confidential, nonpublic and/or proprietary information of that Person,
including information derived from reports, investigations,
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research, work in progress, codes, marketing and sale programs, customer lists,
records of customer service requirements, capital expenditure projects, cost
summaries, pricing formulae, contract analyses, financial information,
projections, confidential filings with any governmental authority and all other
confidential, nonpublic concepts, methods of doing business, ideas, materials
or information prepared or performed for, by or on behalf of that Person.
"CPI" means for any period the Consumer Price Index for All Urban
Consumers--All Items Index for Houston, Texas (or any substantially similar
index published for the same area), as published by the United States
Department of Labor, Bureau of Labor Statistics (or its successor) for that
period.
"Continuing Director" means at any time any individual who then (a) is
a member of the Board and was a member of the Board as of the Effective Date or
whose nomination for his first election, or that first election, to the Board
following that date was recommended or approved by a majority of the then
Continuing Directors (acting separately or as a part of any action taken by the
Board or any committee thereof) and (b) is not an Acquiring Person, an
Affiliate or Associate of an Acquiring Person or a nominee or representative of
an Acquiring Person or of any such Affiliate or Associate.
"Disability" of the Employee means the Employee has been determined
(which determination shall be final and binding on all Persons, absent manifest
error), as a result of a physical or mental illness or personal injury he has
incurred (including illness or injury resulting from any substance abuse), by a
Qualified Physician (who may be the doctor treating or otherwise acting as the
Employee's doctor in connection with the illness or injury in question)
selected by the Employee with the consent of the Company, or by the Company
with the consent of the Employee (which consent shall not be unreasonably
withheld in either case), to be unable to perform, at the time of that
determination and, in all reasonable medical likelihood, indefinitely
thereafter, the normal duties then most recently assigned, under and in
accordance with the terms hereof, to the Employee while on Active Status;
provided that, the determination whether the Employee has incurred a Disability
shall be made by a majority of three (3) Qualified Physicians, (a) one (1) of
whom shall be selected by the Employee, (b) one (1) of whom shall be selected
by the Company and (c) the remaining one (1) of whom shall be selected by the
Qualified Physicians selected by the Employee and the Company pursuant to
clauses (a) and (b) of this proviso and the fees and expenses of whom will be
shared and paid in equal amounts by the Employee and the Company, if: (1)(A)
the Company has reasonably withheld its consent to the Qualified Physician, if
any, selected by the Employee or (B) the Employee has reasonably withheld his
consent to the Qualified Physician, if any, selected by the Company and (2)
the Qualified Physicians selected by the Employee and the Company disagree as
to whether the Employee has incurred a Disability. For purposes of this
definition, if the Employee is unable by reason of illness or injury to give an
informed consent to the performance of the treatment
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of that illness or injury, a Qualified Physician selected by any Person who is
authorized by applicable law to give that consent will be deemed to have been
selected by the Employee.
"Effective Date" means November 1, 1997.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"Employment" means the salaried employment of the Employee by the
Company or a subsidiary of the Company hereunder.
"Exchange Act" means the Securities Exchange Act of 1934.
"Executive Officer" means any of the chairman of the board, the chief
executive officer, the chief operating officer, the chief financial officer,
the president, any executive or senior vice president or the general counsel of
the Company.
"Exempt Person" means (a) (1) the Company, any subsidiary of the
Company, any employee benefit plan of the Company or of any subsidiary of the
Company and (2) any Person organized, appointed or established by the Company
for or pursuant to the terms of any such plan or for the purpose of funding any
such plan or funding other employee benefits for employees of the Company or
any subsidiary of the Company and (b) the Employee, any Affiliate or Associate
of the Employee or any group (as that term is used in Exchange Act Rule
13d-5(b)) of which the Employee or any Affiliate or Associate of the Employee
is a member.
"Good Reason" for the Employee's termination of his Employment means:
(a) any violation hereof in any material respect by the Company; (b) either (1)
a failure of the Company to continue in effect any Compensation Plan in which
the Employee was participating or (2) the taking of any action by the Company
which would adversely affect the Employee's participation in or materially
reduce the Employee's benefits under, any such Compensation Plan, unless (A) in
the case of either subclause (1) or (2) of this clause, there is substituted a
comparable Compensation Plan that is at least economically equivalent, in terms
of the benefit offered to the Employee, to the Compensation Plan being ended or
in which the Employee's participation is being adversely affected or the
Employee's benefits are being materially reduced or (B) in the case of that
subclause (1), the failure, or in the case of that subclause (2), the taking of
action, adversely affects Executive Officers generally; or (c) the assignment
to the Employee of duties inconsistent in any material respect with the
Employee's then current positions (including status, offices, titles and
reporting requirements), authority, duties or responsibilities or any other
action by the Company which results in a material diminution in those
positions, authority, duties or responsibilities.
"Incentive Plan" means any compensation arrangement, plan, policy,
practice or program established, maintained or sponsored by the Company or any
subsidiary of the
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Company, or to which the Company or any subsidiary of the Company contributes,
on behalf of any Executive Officer and which provides for incentive, bonus or
other performance-based awards of cash, securities or the phantom equivalent of
securities, including any stock option, stock appreciation right and restricted
stock plan, but excluding any plan intended to qualify as a plan under any one
or more of Sections 401(a), 401(k) or 423 of the Code.
"Nonterminating Party" means the Employee or the Company, as the case
may be, to which the Terminating Party delivers a Notice of Termination.
"No-salary Period" has the meaning ascribed to that term in Section
4(A).
"Notice of Termination" to or from the Employee means a written
notice that: (a) to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Employee's Employment, and if the Termination Date is other than the date of
receipt of the notice, (b) sets forth that Termination Date.
"Outside Director" means at any time a member of the Board at that
time who is not then an employee of the Company or any subsidiary of the
Company.
"Part-time Employment Effective Date" means, (a) if the Company elects
pursuant to any applicable provision hereof to terminate the Employee's
Employment other than for Cause or (b) if the Employee elects pursuant to the
applicable provision hereof to terminate his Employment for Good Reason or by
reason of his Disability, the date the Nonterminating Party receives the
Terminating Party's Notice of Termination.
"Part-time Employment Period" means the period of time which begins on
the Part-time Employment Effective Date and ends on the first to occur of (a)
the third (3rd) anniversary of that Part-time Employment Effective Date, (b)
the termination by the Company of the Employee's Employment for Type I Cause or
(c) the death or Retirement of the Employee.
"Person" means any natural person, sole proprietorship, corporation,
partnership of any kind having a separate legal status, limited liability
company, business trust, unincorporated organization or association, mutual
company, joint stock company, joint venture, estate, trust, union or employee
organization or governmental authority.
"Qualified Physician" means, in the case of any determination whether
the Employee has sustained a Disability, a physician (a) holding an M.D. degree
from a medical school located in the United States and having a national
reputation in the United States as a leading medical school, (b) specializing
and board-certified in the treatment of the injury or illness that has or may
have caused that Disability, (c) licensed to practice that speciality in the
State of Texas or the state in which the Employee then is domiciled and (d)
having admission privileges to one or more private hospitals located in the
Texas Medical Center in Houston,
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Texas or in a hospital of comparable reputation in the state in which the
Employee then is domiciled.
"Required Board Majority" means at any time a majority of the members
of the Board at that time which includes at least a majority of the Outside
Directors at that time.
"Retirement" of the Employee means the Employee terminates his
Employment on or after the date he has attained age 65.
"Securities Act" means the Securities Act of 1933.
"Special Option" has the meaning ascribed to that term in Section
4(A).
"Terminating Party" means the Employee or the Company, as the case may
be, who or which terminates the Employee's Employment by means of a Notice of
Termination.
"Termination Date" means: (a) if the Employee's Employment is
terminated by reason of the Employee's death or Retirement, the date of that
death or Retirement; (b) if the Employee's Employment is terminated by reason
of the Employee's giving a Notice of Termination following a Change of Control
pursuant to Section 5(B)(i)(b), the first date on which the Company pays to the
Employee in full the amounts owed to the Employee pursuant to Section
5(B)(iii); (c) if the Employee's Employment is terminated by reason of the
Employee's giving a Notice of Termination without Good Reason and other than
for Disability pursuant to Section 5(B)(i)(c), the elapse of the thirtieth
(30th) day after the Company receives that notice; (d) if the Employee's
Employment is terminated by the Company at any time for Type I Cause or, prior
to the Part-time Employment Effective Date, at any time for Type II Cause, the
date the Employee receives the Company's Notice of Termination for Cause; and
(e) if the Employee's Employment is terminated for any other reason, at the
expiration of the Part-time Employment Period.
"Type I Cause" means Cause of the type referred to in clause (a) of
the definition of Cause herein.
"Type II Cause" means Cause of the type referred to in clause (b) of
the definition of Cause herein.
"Voting Shares" means: (a) in the case of any corporation, stock of
that corporation of the class or classes having general voting power under
ordinary circumstances to elect a majority of that corporation's board of
directors; and (b) in the case of any other entity, equity interests of the
class or classes having general voting power under ordinary circumstances
equivalent to the Voting Shares of a corporation.
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B. Other Definitional Provisions. (i) Except as otherwise
specified herein, all references herein to any statute defined or referred to
herein, including the Code, ERISA and the Exchange Act, shall be deemed
references to that statute or any successor statute, as the same may have been
or may be amended or supplemented from time to time, and any rules or
regulations promulgated thereunder.
(ii) When used in this Agreement, the words "herein," "hereof" and
"hereunder" and words of similar import shall refer to this Agreement as a
whole and not to any provision of this Agreement, and the word "Section" refers
to a Section of this Agreement unless otherwise specified.
(iii) Whenever the context so requires, the singular number includes
the plural and vice versa, and a reference to one gender includes each other
gender and the neuter.
(iv) The word "including" (and, with correlative meaning, the word
"include") means including, without limiting the generality of any description
preceding such word, and the words "shall" and "will" are used interchangeably
and have the same meaning.
2. EMPLOYMENT
A. On the terms and subject to the conditions hereinafter set
forth, and beginning as of the Effective Date, the Company will employ the
Employee as its Chief Executive Officer (the most senior Executive Officer) and
the Employee will serve in the Company's employ in that position. The Employee
shall perform such duties, and have such powers, authority, functions, duties
and responsibilities for the Company and corporations affiliated with the
Company as are commensurate and consistent with his employment as the Company's
Chief Executive Officer. The Employee also shall have such additional powers,
authority, functions, duties and responsibilities as may be assigned to him by
the Board; provided that, without the Employee's written consent, such
additional powers, authority, functions, duties and responsibilities shall not
be inconsistent or interfere with, or detract from, those herein vested in, or
otherwise then being performed for the Company by, the Employee.
B. The Employee shall not, at any time during his Employment,
engage in any other activities unless those activities do not interfere
materially with the Employee's duties and responsibilities for the Company at
that time, except that the Employee shall be entitled, subject to the
provisions of Section 7, (a) to continue with such activities as the Employee
has carried on prior to the Effective Date, including making and managing his
personal investments and participating in other business or civic activities
and (b) to serve on corporate or other business, civic or charitable boards or
committees and trade association or similar boards or committees.
3. TERM OF EMPLOYMENT
Subject to the provisions of Section 5, the term of the Employee's
Employment shall be for a continually renewing term of three (3) years
commencing on the Effective Date and
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renewing each day thereafter for an additional day without any further action
by either the Company or the Employee, it being the intention of the parties
that there shall be continuously a remaining term of three (3) years' duration
of the Employee's Employment until an event has occurred as described in, or
one of the parties shall have made an appropriate election pursuant to, the
provisions of Section 5. When the Termination Date shall have occurred and the
Company shall have paid to the Employee all the applicable amounts Section 5
provides the Company shall pay as a result of the termination of the Employee's
Employment, including all amounts accruing during the Part-time Employment
Period, if any, this Agreement will terminate and have no further force or
effect, except that Sections 4(C), 8, 9, 10 and 11 shall survive that
termination indefinitely and Section 7 shall survive for the period of time
provided for therein.
4. COMPENSATION
A. Base Salary. A Base Salary shall be payable to the
Employee by the Company as a guaranteed minimum annual amount hereunder for
each Compensation Year during the period from the Effective Date to the first
to occur of the Part-time Employment Effective Date or the Termination Date .
That Base Salary shall be payable in the intervals consistent with the
Company's normal payroll schedules (but in no event less infrequently than
semi-monthly), shall be payable initially at the annual rate of $250,000 and
shall be increased (but not decreased or adjusted other than as provided in
Section 5) as follows:
(i) on the first and each subsequent anniversary of the
Effective Date, by the same percentage increase (if any) in the CPI for
the twelve (12) month period immediately preceding such anniversary;
(ii) on the first and each subsequent anniversary of the
Effective Date, by such additional amount as shall be determined in the
sole discretion of the Compensation Committee, but only in such form
and to such extent as the Compensation Committee may from time to time
approve, as evidenced by the written minutes or records of the
Compensation Committee and its written notices of such determinations
or approvals to the Employee; and
(iii) if the Employee relocates from a state without a
personal income tax at the time of his relocation to a state having a
personal income tax, or if the Employee resides in a state without a
personal income tax on the date hereof which subsequently adopts a
personal income tax, then, in either case, the Base Salary in effect at
the time of such relocation or adoption, as applicable, shall
immediately be increased by the amount equal to the Base Salary
immediately prior to this increase multiplied by seventy percent (70%)
of the highest personal income tax rate of such state; for example, if
the Employee relocates from a state without a personal income tax to a
state having a personal income tax and the highest rate of that tax is
six percent (6%) when the Base Salary is $250,000, then the Base Salary
will be increased by $10,500 (computed at 70% x 6% x $250,000);
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In addition, the Employee shall receive as payment for his service in the
period beginning on the Effective Date and ending on the date that is the first
to occur of (a) May 31, 1998 or (b) the Termination Date (the "No-salary
Period"), the Company hereby grants to the Employee effective as of October 31,
1997 a nonqualified stock option to purchase from the Company 30,675 shares of
Common Stock at an exercise price of $14.75 per share (the "Special Option").
The Special Option will become exercisable with respect to all the shares of
Common Stock subject thereto on June 1, 1998 and thereafter will remain
exercisable during the five-year period ending at the close of business on
October 31, 2002, when the Special Option, to the extent not then or
theretofore exercised, will expire. The Special Option will be deemed an Option
granted pursuant to the 1996 Incentive Plan of American Residential Services,
Inc. (the "1996 Plan") and, except as provided in Section 5(G), will be subject
to all the provisions of the 1996 Plan which apply to Options (as defined in
the 1996 Plan). Effective as of the Part-time Employment Effective Date, the
Base Salary theretofore in effect shall be adjusted as provided in Section
5(E).
B. Other Compensation. In order to induce the Employee to enter
into Employment with the Company, the Company hereby grants to the Employee
effective as of October 31, 1997 a nonqualified stock option to purchase from
the Company 250,000 shares of Common Stock at an exercise price of $14.75 per
share (the "Hiring Option"). The Hiring Option will become exercisable with
respect to twenty percent (20%) of the shares of Common Stock subject thereto
on each of the first five (5) anniversaries of the Effective Date and will
expire at the close of business on the tenth (10th) anniversary of the
Effective Date to the extent not then or theretofore exercised. The Hiring
Option will be deemed an Option granted pursuant to the 1996 Plan and, except
as provided in Section 5(G), will be subject to all the provisions of the 1996
Plan which apply to Options (as defined in the 1996 Plan). The Employee shall
be entitled to participate in all Compensation Plans from time to time in
effect while he remains on Active Status, regardless of whether the Employee is
an Executive Officer. All awards to the Employee under all Incentive Plans
shall take into account the Employee's positions with and duties and
responsibilities to the Company and its subsidiaries. For purposes of each
Compensation Plan pursuant to which compensation or other benefits are
determined in whole or in part by reference to a participant's base salary, the
Base Salary earned by the Employee for his service during the No-salary Period
will be deemed to be the amount the Company would have paid in cash pursuant to
Section 4(A) were his Base Salary to have begun accruing on the Effective Date,
and the grant of the Special Option will be disregarded; provided, however,
that if the Employee, by reason of having received the Special Option in lieu
of his Base Salary for his service during the No-salary Period, either is
ineligible to participate in any Compensation Plan or receives a reduction in
the compensation or other benefits he otherwise would receive pursuant to any
Compensation Plan, the Company will determine the aggregate value of all such
compensation and other benefits so lost by the Employee and credit that
aggregate value as deferred compensation to the Employee effective as of July
1, 1998 in a deferred compensation account the Company will establish for the
Employee.
C. Tax Indemnity. Should any of the payments of Base Salary,
other incentive or supplemental compensation, benefits, allowances, awards,
payments, reimbursements or other
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perquisites, or any other payment in the nature of compensation, singly, in any
combination or in the aggregate, that are provided for hereunder to be paid to
or for the benefit of the Employee be determined or alleged to be subject to an
excise or similar purpose tax pursuant to Section 4999 of the Code, or any
successor or other comparable federal, state or local tax law by reason of
being a "parachute payment" (within the meaning of Section 280G of the Code),
the Company shall pay to the Employee such additional compensation as is
necessary (after taking into account all federal, state and local taxes payable
by the Employee as a result of the receipt of such additional compensation) to
place the Employee in the same after-tax position (including federal, state and
local taxes) he would have been in had no such excise or similar purpose tax
(or interest or penalties thereon) been paid or incurred. The Company hereby
agrees to pay such additional compensation within the earlier to occur of (i)
five (5) business days after the Employee notifies the Company that the
Employee intends to file a tax return taking the position that such excise or
similar purpose tax is due and payable in reliance on a written opinion of the
Employee's tax counsel (such tax counsel to be chosen solely by the Employee)
that it is more likely than not that such excise tax is due and payable or (ii)
twenty-four (24) hours of any notice of or action by the Company that it
intends to take the position that such excise tax is due and payable. The
costs of obtaining the tax counsel opinion referred to in clause (i) of the
preceding sentence shall be borne by the Company, and as long as such tax
counsel was chosen by the Employee in good faith, the conclusions reached in
such opinion shall not be challenged or disputed by the Company. If the
Employee intends to make any payment with respect to any such excise or similar
purpose tax as a result of an adjustment to the Employee's tax liability by any
federal, state or local tax authority, the Company will pay such additional
compensation by delivering its cashier's check payable in such amount to the
Employee within five (5) business days after the Employee notifies the Company
of his intention to make such payment. Without limiting the obligation of the
Company hereunder, the Employee agrees, in the event the Employee makes any
payment pursuant to the preceding sentence, to negotiate with the Company in
good faith with respect to procedures reasonably requested by the Company which
would afford the Company the ability to contest the imposition of such excise
or similar purpose tax; provided, however, that the Employee will not be
required to afford the Company any right to contest the applicability of any
such excise or similar purpose tax to the extent that the Employee reasonably
determines (based upon the opinion of his tax counsel) that such contest is
inconsistent with the overall tax interests of the Employee.
5. TERMINATION, PART-TIME EMPLOYMENT PERIOD, DISABILITY AND DEATH
A. Termination of Employment by the Company. (i) The
Company shall be entitled, if acting at the direction of the Required Board
Majority, to terminate the Employee's Employment (a) at any time for Type I
Cause or (b) at any time prior to the Part-time Employment Effective Date for
Type II Cause or for any Business Reason. If the Employee is neither a member
of the Board nor an Executive Officer, the Company shall be entitled, if acting
at the direction of the chief executive officer of the Company, to terminate
the Employee's Employment at any time prior to the Part-time Employment Date
for any Business Reason. The Company's termination of the Employee's
Employment for Cause will be effective on the date the Company delivers a
Notice of
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Termination for Cause to the Employee pursuant to this Section
5(A)(i)(together, in the case of a termination for Type II Cause, with the
certified resolution referred to in clause (b) of the definition herein of
Cause), while the Company's termination of the Employee's Employment for a
Business Reason will be effective on the third (3rd) anniversary of the date
the Company delivers a Notice of Termination for a Business Reason to the
Employee pursuant to this Section 5(A)(i).
(ii) If the Company terminates the Employee's Employment for Cause,
the Company promptly thereafter, and in any event within five (5) business
days thereafter, shall pay the Employee his Base Salary to and including the
Termination Date and the amount of all compensation previously deferred by the
Employee (together with any accrued interest or earnings thereon), in each case
to the extent not theretofore paid, and, when that payment is made, the Company
shall, notwithstanding Section 3, have no further or other obligations
hereunder to the Employee.
(iii) If the Company terminates the Employee's Employment for a
Business Reason, the respective rights and obligations of the Company and the
Employee during the Part-time Employment Period will be as set forth in Section
5(E).
B. Termination of Employment by the Employee. (i) The Employee
shall be entitled to terminate his Employment (a) for a Good Reason at any time
within one hundred eighty (180) days after the facts or circumstances
constituting that Good Reason first exist and are known to the Employee, (b) by
reason of a Change of Control at any time within three hundred sixty-five (365)
days after that Change of Control occurs (provided, however, that the Employee
shall not be entitled to terminate his Employment by reason of that Change of
Control if it occurs (1) during the thirty (30) day period following the
Company's receipt of the Employee's Notice of Termination without Good Reason
and other than for Disability pursuant to this Section 5(B)(i), (2) after (A)
the receipt by the Nonterminating Party of the Terminating Party's Notice of
Termination pursuant to Section 5(C) or (B) the Employee's receipt of the
Company's Notice of Termination for a Business Reason (other than in connection
with that Change of Control) pursuant to Section 5(A) or (3) more than three
hundred sixty-five (365) days after the Company's receipt of the Employee's
Notice of Termination for Good Reason pursuant to this Section 5(B)(i)) or (c)
without Good Reason and other than for Disability at any time. The Employee's
termination of his Employment for Good Reason will be effective on the third
(3rd) anniversary of the date the Employee delivers a Notice of Termination for
Good Reason to the Company pursuant to this Section 5(B)(i). The Employee's
termination of his Employment by reason of a Change of Control will be
effective on the first date on which the Change of Control Payment shall have
been paid in full to the Employee. The Employee's termination of his
Employment without Good Reason and other than for Disability will be effective
on the thirtieth (30th) day following the Employee's delivery of a Notice of
Termination without Good Reason and other than for Disability pursuant to this
Section 5(B)(i).
(ii) If the Employee terminates his Employment for Good Reason,
the respective rights and obligations of the Company and the Employee during
the Part-time Employment Period will be as set forth in Section 5(E ).
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(iii) If the Employee terminates his Employment by reason of a
Change of Control, the Company shall pay to the Employee in a cash lump sum
within five (5) business days after the date the Company receives the
Employee's Notice of Termination by reason of that Change of Control the amount
equal to the sum of (a) the portion of the Base Salary to and including the
Termination Date which has not yet been paid, (b) all compensation previously
deferred by the Employee (together with any accrued interest and earnings
thereon), (c) any accrued but unpaid vacation pay and (d) the Change of Control
Payment.
(iv) If the Employee terminates his Employment without Good Reason
and other than for Disability, the Company shall pay to the Employee, in a
cash lump sum within five (5) business days after the Termination Date, the
amount equal to the sum of (a) the portion of the Base Salary to and including
the Termination Date which has not yet been paid, (b) all compensation
previously deferred by the Employee (together with any accrued interest and
earnings thereon) which has not yet been paid, (c) any accrued but unpaid
vacation pay and (d) the amount equal to fifty percent (50%) of the Base Salary
being paid for the Compensation Year in which the Company receives the
Employee's Notice of Termination without Good Reason and other than for
Disability; provided, however, that if the Employee terminates his Employment
without Good Reason and other than for Disability within six (6) months of the
theretofore scheduled final day of the Part-time Employment Period, the amount
payable pursuant to clause (d) of this sentence shall be the amount determined
pursuant to that clause multiplied by a fraction the numerator of which is the
number of days from and excluding the date the Company receives the Notice of
Termination to and including that final day and the denominator of which is one
hundred eighty-two (182). For purposes of this Section 5(B)(iv), if the
anniversary of the Effective Date in the Compensation Year in which the Company
receives the Notice of Termination without Good Reason and other than for
Disability has not occurred on or prior to the date of that receipt, the Base
Salary for that Compensation Year will be calculated on the assumption that no
increase in the amount thereof would be made effective as of that anniversary
pursuant to Section 4(A) or 5(E)(i), as applicable.
C. Termination by Reason of Disability. If the Employee incurs
any Disability while on Active Status, either the Employee or the Company may
terminate the Employee's Employment effective on the third (3rd) anniversary of
the date the Nonterminating Party receives a Notice of Termination from the
Terminating Party pursuant to this Section 5(C). If the Employee's Employment
is terminated by reason of the Employee's Disability, the respective rights and
obligations of the Company and the Employee during the Part-time Employment
Period will be as set forth in Section 5(E).
D. Termination of Employment by Death. The Employee's Employment
shall terminate automatically at the time of his death. If the Employee's
Employment is terminated by reason of the Employee's death, the Company shall
pay to the Person the Employee has designated in a written notice delivered to
the Company as his beneficiary entitled to such payment, if any, or to the
Employee's estate, as applicable, in a cash lump sum within thirty (30) days
after the Termination Date, the amount equal to the sum of (i) the portion of
the Base Salary through the end of the month in which the Termination Date
occurs which has not yet been paid, (ii) all
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compensation previously deferred by the Employee (together with any accrued
interest or earnings thereon) which has not yet been paid, (iii) any accrued
but unpaid vacation pay (if the Employee dies while on Active Status) and (iv)
(a) if the Employee dies while on Active Status, the product of (1) the Base
Salary being paid for the Compensation Year in which he dies multiplied by (2)
three (3) or (b) if the Employee dies during the Part-time Employment Period,
the product of (1) one-twelfth (1/12th) of the Base Salary being paid for the
Compensation Year in which the Employee dies multiplied by (2) the number of
whole and partial calendar months in the period beginning with the first
calendar month after the calendar month in which he dies and ending with the
last calendar month in which the Termination Date would have occurred if the
Employee's Employment were to have continued to the end of the Part-time
Employment Period. For purposes of this Section 5(D), if the anniversary of
the Effective Date in the Compensation Year in which the Employee dies has not
occurred on or before the Termination Date, the Base Salary for that
Compensation Year will be calculated on the assumption that no increase in the
amount thereof would be made effective as of that anniversary pursuant to
Section 4(A) or 5(E)(i), as applicable.
E. Employee's Rights During the Part-time Employment
Period. (i) The Company shall pay the Employee a Base Salary, in the
intervals consistent with the Company's normal payroll schedules (but in no
event less frequently than semi-monthly) from the Part-time Employment
Effective Date to and including the Termination Date in the amounts determined
from time to time as follows: Effective as of the Part-time Employment
Effective Date, the Base Salary payable by the Company to the Employee for the
period from and including that date to and excluding the third (3rd)
anniversary of that date shall be as follows:
(a) if the Part-time Employment Effective Date occurs as
a result of the receipt by the Nonterminating Party of a Notice of
Termination for a Business Reason pursuant to Section 5(A) or a Notice
of Termination for Good Reason pursuant to Section 5(B)(i), the amount
equal to the Average Annual Cash Compensation of the Employee
determined as of the Part-time Employment Effective Date; and (b) if
the Part-time Employment Effective Date occurs as a result of the
receipt by the Nonterminating Party of a Notice of Termination for
Disability pursuant to Section 5(C), the amount equal to the amount by
which (1) seventy-five percent (75%) of the Average Annual Cash
Compensation of the Employee determined as of the Part-time Employment
Effective Date exceeds (2) the aggregate amount of periodic payments
the Employee receives during the twelve (12) months beginning on that
date under Compensation Plans then in effect and providing for the
payment to the Employee solely as a result or on account of
disability; and
(b) on the first and each subsequent anniversary of the
Part-time Employment Effective Date, the Base Salary payable pursuant
to this Section 5(E) shall be increased (but not decreased) by the
same percentage increase (if any) in the CPI for the twelve (12) month
period immediately preceding that anniversary.
(ii) (a) The Employee shall continue to participate in all
Compensation Plans from time to time in effect during the Part-time Employment
Period, provided, however, that: (1) the
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Employee shall not be entitled to receive any new award or grant under any
Incentive Plan, and any such new award or grant shall be at the sole discretion
of the Compensation Committee or the Board, as applicable, with respect to that
Incentive Plan; and (2) if (A) the terms of any such plan preclude the
Employee's continued participation therein or (B) his continued participation
in any such plan would or reasonably could be expected to disqualify that plan
under the Code, the Employee shall not be entitled to participate in that plan,
but the Company instead shall provide the Employee with the after-tax
equivalent of the benefits that would have been provided to the Employee were
he a participant in that plan.
(b) For purposes of determining eligibility (including
years of service) for retirement benefits payable under any Compensation Plan,
the Employee shall be deemed to have retired at the Termination Date.
(iii) Subject to the provisions of Section 7, the Employee
shall not be (A) prevented from accepting other employment or engaging in (and
devoting substantially all his time to) other business activities or (B)
required to perform any regular duties for the Company (except to provide such
services consistent with the Employee's educational background, experience and
prior positions with the Company as may be acceptable to the Employee) or to
seek or accept additional employment with any other Person. If the Employee,
at his discretion, shall accept any such additional employment or engage in any
such other business activity there shall be no offset, reduction or effect upon
any rights, benefits or payments to which the Employee is entitled pursuant to
this Agreement. Furthermore, the Employee shall have no obligation to account
for, remit, rebate or pay over to the Company any compensation or other amounts
earned or derived in connection with such additional employment or business
activity. The Employee shall, however, make himself generally available for
special projects or to consult with the Company and its employees at such times
and at such places as may be reasonably requested by the Company and which
shall be reasonably satisfactory to the Employee and consistent with the
Employee's regular duties and responsibilities in the course of his then new
occupation or other employment, if any.
(iv) Unless and until the Employee shall have sustained a
Disability, the Company shall continue to provide the Employee with either the
same or, at the Company's election, at a different location within thirty-five
(35) miles of the Employee's principal residence, in any case reasonably
acceptable to the Employee, alternate but comparable office space, furnishings,
facilities, reserved parking, supplies, services, equipment, secretarial and
administrative assistance that are in each case at least commensurate with the
size and quality of that which were provided to the Employee during the
Compensation Year immediately preceding the Part-time Employment Effective Date
pursuant to Section 6(C), but in no event less than are being furnished or
provided on the date hereof. The Company and Employee may mutually agree upon
an equivalent monthly cash allowance in lieu of the Employee being provided all
or any part of these items.
(v) The Employee shall remain entitled to the benefits of
Section 4(C).
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F. Return of Property. On termination of the Employee's
Employment, however brought about, the Employee (or his representatives) shall
promptly deliver and return to the Company all the Company's property that is
in the possession or under the control of the Employee.
G. Stock Options. Notwithstanding any provision of this
Agreement to the contrary: (i) except in the case of a termination of the
Employee's Employment for Cause, all stock options previously granted to the
Employee under Incentive Plans that have not been exercised and are outstanding
as of the time immediately prior to the Termination Date (other than the
Special Option) shall, notwithstanding any contrary provision of any applicable
Incentive Plan, remain outstanding (and continue to become exercisable pursuant
to their respective terms) until exercised or the expiration of their term,
whichever is earlier; and (ii) in the case of a termination of the Employee's
Employment for Cause, all stock options previously granted to the Employee
under Incentive Plans that have not been exercised and are outstanding as of
the time immediately prior to the Termination Date (other than the Special
Option) shall, notwithstanding any contrary provision of any applicable
Incentive Plan, remain outstanding and continue to be exercisable until
exercised or the date that is ten (10) days after the Termination Date,
whichever is earlier; and (iii) in the case of a termination of the Employee's
Employment for any reason, including Cause, the Special Option, if then
outstanding and unexercised in whole or in part, shall, notwithstanding any
contrary provision of any applicable Incentive Plan, remain outstanding (and
continue to become or remain exercisable in accordance with the terms) until
exercised or the expiration of its term, whichever is earlier. No stock option
previously granted to the Employee under any Incentive Plan shall,
notwithstanding any contrary provision of that Incentive Plan, expire or fail
to become exercisable or, if exercisable, cease to be exercisable by reason of
either (i) the occurrence of the Employee's Part- time Employment Effective
Date or (ii) the Employee's service during the Employee's Part-time Employment
Period being less than full-time.
6. OTHER EMPLOYEE RIGHTS
A. Paid Vacation; Holidays. The Employee shall be
entitled to not less than four (4) weeks of annual vacation and all legal
holidays during which times his applicable compensation shall be paid in full.
B. Business Expenses. The Employee is authorized to
incur, and will be entitled to receive prompt reimbursement for, all reasonable
expenses incurred by the Employee in performing his duties and carrying out his
responsibilities hereunder, including business meal, entertainment and travel
expenses, provided that the Employee complies with the applicable policies,
practices and procedures of the Company relating to the submission of expense
reports, receipts or similar documentation of those expenses. The Company
shall either pay directly or promptly reimburse the Employee for such expenses
not more than twenty (20) days after the submission to the Company by the
Employee from time to time of an itemized accounting of such expenditures for
which direct payment or reimbursement is sought. Unpaid reimbursements after
such twenty (20) day period shall accrue interest in accordance with Section
9(K).
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C. Support. While on Active Status, the Employee shall
be provided by the Company with office space, furnishings, and facilities,
reserved parking, secretarial and administrative assistance, supplies and other
support equipment (including a computer, facsimile machine and photocopier).
D. No Forced Relocation. The Employee shall not be
required to move his principal place of residence from the Houston, Texas area
or to perform regular duties that could reasonably be expected to require
either such move against his wish or to spend amounts of time each week outside
the Houston, Texas area which are unreasonable in relation to the duties and
responsibilities of the Employee hereunder, and the Company agrees that, if it
requests the Employee to make such a move and the Employee declines that
request, (i) that declination shall not constitute any basis for a
determination that Type II Cause exists and (ii) no animosity or prejudice will
be held against Employee.
7. COVENANT NOT TO COMPETE
A. The Employee recognizes that in each of the highly
competitive businesses in which the Company is engaged, personal contact is of
primary importance in securing new customers and in retaining the accounts and
goodwill of present customers and protecting the business of the Company. The
Employee, therefore, agrees that during the term of his Employment and for a
period of one (1) year after the Termination Date, he will not, within fifty
(50) miles of the geographic location in which the he has devoted substantial
attention at such location to the material business interests of the Company:
(i) accept employment or render service to any Person that is engaged in a
business directly competitive with the business then engaged in by the Company
or (ii) enter into or take part in or lend his name, counsel or assistance to
any business, either as proprietor, principal, investor, partner, director,
officer, employee, consultant, advisor, agent, independent contractor, or in
any other capacity whatsoever, for any purpose that would be competitive with
the business of the Company.
B. If the provisions of this Section 7 are violated in
any material respect, the Company shall be entitled, upon application to any
court of proper jurisdiction, to a temporary restraining order or preliminary
injunction (without the necessity of posting any bond with respect thereto) to
restrain and enjoin the Employee from that violation. If the provisions of
this Section 7 should ever be deemed to exceed the time, geographic or
occupational limitations permitted by the applicable law, the Employee and the
Company agree that such provisions shall be and are hereby reformed to the
maximum time, geographic or occupational limitations permitted by the
applicable law.
8. CONFIDENTIAL INFORMATION
A. The Employee acknowledges that he has had and will
continue to have access to various Confidential Information. The Employee
agrees, therefore, that he will not at any time, either while employed by the
Company or afterwards, knowingly make any independent use of, or
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knowingly disclose to any other person (except as authorized by the Company)
any Confidential Information. Confidential Information shall not include (i)
information that becomes known to the public generally through no fault of the
Employee, (ii) information required to be disclosed by law or legal process or
the order of any governmental authority under color of law, provided, that
prior to disclosing any information pursuant to this clause (ii), the Employee
shall, if possible, give prior written notice thereof to the Company and
provide the Company with the opportunity to contest such disclosure, or (iii)
the Employee reasonably believes that such disclosure is required in connection
with the defense of a lawsuit against the Employee. In the event of a breach
or threatened breach by the Employee of the provisions of this Section 8(A)
with respect to any Confidential Information, the Company shall be entitled to
a temporary restraining order and a preliminary and permanent injunction
(without the necessity of posting any bond in connection therewith) restraining
the Employee from disclosing, in whole or in part, that Confidential
Information. Nothing herein shall be construed as prohibiting the Company from
pursuing any other available remedy for that breach or threatened breach,
including the recovery of damages.
B. The Employee shall disclose promptly to the Company
any and all conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by the
Employee solely or jointly with any other Person or Persons during the period
of his Employment and which pertain primarily to the material business
activities of the Company, and the Employee hereby assigns and agrees to assign
all his interests therein to the Company or to its nominee; whenever requested
to do so by the Company, the Employee shall execute any and all applications,
assignments or other instruments which the Company shall deem necessary to
apply for and obtain Letters of Patent of the United States or any foreign
country or to otherwise protect the Company's interest therein. These
obligations shall (i) continue beyond the Termination Date with respect to
inventions, improvements, and valuable discoveries, whether patentable or not,
conceived, made or acquired by the Employee during the period of his Employment
and (ii) be binding upon the Employee's assigns, executors, administrators and
other legal representatives.
9. GENERAL PROVISIONS
A. Severability. If any one or more of the provisions
of this Agreement shall, for any reason, be held or found by final judgment of
a court of competent jurisdiction to be invalid, illegal or unenforceable in
any respect, (i) such invalidity, illegality or unenforceability shall not
affect any other provisions of this Agreement, (ii) this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein (except that this clause (ii) shall not prohibit any
modification allowed under Section 7(B)) and (iii) if the effect of a holding
or finding that any such provision is invalid, illegal or unenforceable is to
modify to the Employee's detriment, reduce or eliminate any compensation,
reimbursement, payment, allowance or other benefit to the Employee intended by
the Company and Employee in entering into this Agreement, the Company shall,
within thirty (30) days after the date of such finding or holding, negotiate
and expeditiously enter into an agreement with the Employee which contains
alternative provisions (reasonably acceptable to the Employee) that will
restore to the Employee (to the extent
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lawfully permissible) substantially the same economic, substantive and income
tax benefits and legal rights the Employee would have enjoyed had such
provision been upheld as legal, valid and enforceable.
B. Nonexclusivity of Rights. Nothing herein shall
prevent or limit the Employee's continuing or future participation in any
Compensation Plan or, subject to Section 9(N), limit or otherwise affect such
rights as the Employee may have under any other contract or agreement with the
Company. Vested benefits and other amounts to which the Employee is or becomes
entitled to receive under any Compensation Plan on or after the Termination
Date shall be payable in accordance with that Compensation Plan, except as
expressly modified hereby.
C. Full Settlement. The Company's obligations to make
the payments provided for in, and otherwise to perform its undertakings in,
this Agreement shall not be affected by any right of set-off, counterclaim,
recoupment, defense or other action, claim or right the Company may have
against the Employee or others. In no event shall the Employee be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Employee under any provision hereof, and those amounts
shall not be reduced, regardless of whether the Employee obtains other
employment or becomes self-employed.
D. Successors. (i) This Agreement is personal to the
Employee and, without the prior written consent of the Company, is not
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit and be enforceable by
the Employee's legal representatives acting in their capacities as such
pursuant to applicable law.
(ii) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns. If the Employee is
not an Executive Officer, but is an officer of a subsidiary of the Company, the
Company shall be entitled to assign all its obligations hereunder to that
subsidiary and treat the Employee as an employee of that subsidiary for all
purposes, but the Company shall remain liable for the full, timely performance
of all the obligations so assigned as if the assignment had not been made.
(iii) The Company shall require any successor (direct or
indirect and whether by purchase, merger, consolidation, share exchange or
otherwise) to the business, properties and assets of the Company substantially
as an entirety expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would have been required to
perform it had no such succession taken place.
E. Amendments; Waivers. This Agreement may not be
amended or modified except by a written agreement executed and delivered by the
parties hereto or their respective successors or legal representatives acting
in their capacities as such pursuant to applicable law.
F. Notices. All notices and other communications under
this Agreement shall be in writing and shall be given by hand delivery or by
registered or certified mail, return receipt requested, postage prepaid,
addressed to the appropriate Person at the address of such Person set
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forth below (or at such other address as such Person may designate by written
notice to each other party in accordance herewith):
(a) if to the Employee, addressed as follows:
Xxxxxx X. Xxxxxxx
0000 Xxxx Xxxx
Xxxxxxx, Xxxxx 00000
; and
(b) if to the Company, addressed as follows:
American Residential Services, Inc.
Post Oak Tower, Suite 725
5051 Westheimer
Houston, Texas 77056-5604
Attn: Corporate Secretary
G. No Waiver. The failure of the Company or the
Employee to insist on strict compliance with any provision of, or to assert any
right under, this Agreement (including the right of the Employee to terminate
his Employment for Good Reason or by reason of a Change of Control pursuant to
Section 5(B) (i)) shall not be deemed a waiver of that provision or of any
other provision of or right under this Agreement.
H. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, WITHOUT
REFERENCE TO ANY PRINCIPLES OF CONFLICTS OF LAWS.
I. Jurisdiction and Venue. The Company irrevocably
consents with respect to any action, suit or other legal proceeding pertaining
directly to this Agreement or to the interpretation or enforcement of any of
the Employee's rights hereunder to service of process in the State of Texas and
hereby waives any right to contest or oppose receipt of such service of
process. The Company irrevocably (i) agrees that any such action, suit or
other legal proceeding may be brought in the courts of such state or in the
courts of the United States sitting in such state, (ii) consents to the
jurisdiction of each such court in any such action, suit or other legal
proceeding and (iii) waives any objection it may have to the laying of venue of
any such action, suit or other legal proceeding in any of such courts.
J. Headings. The headings of Sections and subsections
hereof are included solely for convenience of reference and shall not control
the meaning or interpretation of any of the provisions of this Agreement.
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K. Interest. If any amounts required to be paid or
reimbursed to the Employee hereunder are not so paid or reimbursed at the times
provided herein (including amounts required to be paid by the Company pursuant
to Sections 6 and 10, those amounts shall accrue interest compounded daily at
the annual percentage rate which is three percentage points (3%) above the
interest rate announced by Texas Commerce Bank National Association, Houston,
Texas (or its successor), from time to time, as its Base Rate (or prime lending
rate), from the date those amounts were required to have been paid or
reimbursed to the Employee until those amounts are finally and fully paid or
reimbursed; provided, however, that in no event shall the amount of interest
contracted for, charged or received hereunder exceed the maximum non-usurious
amount of interest allowed by applicable law.
L. Publicity. The Company agrees with the Employee
that, except to the extent required by law or legal process (including the
Exchange Act and the Securities Act), it will not make or publish, without the
prior written consent of the Employee, any written or oral statement concerning
the terms of the Employee's employment relationship with the Company and will
not, if a Notice of Termination is given by either the Company or the Employee
for any reason, publish or cause to be published any statement concerning the
Employee, including his work-related performance or the reasons or basis for
the giving of that Notice of Termination.
M. Tax Withholding. Notwithstanding any other provision
hereof, the Company may withhold from amounts payable hereunder all Federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
N. Entire Agreement. The Company and the Employee agree
that this Agreement supersedes all prior written and oral agreements between
them with respect to the Employment of the Employee by the Company.
10. INTENDED BENEFITS TO EMPLOYEE; PAYMENT OF EXPENSES; RESOLUTION OF
DISPUTES
A. Intended Benefits; Payment of Expenses. In entering
into this Agreement the Company intends that the Employee receive without
reduction or delay all the intended benefits of this Agreement and that those
benefits, and the terms and conditions hereof, be construed in a manner most
favorable to the Employee; the Company, therefore, agrees that it will strive
expeditiously and in good faith to construe and resolve in the Employee's favor
and to his benefit any ambiguities or uncertainties that may be created by the
express language hereof. If, however, at any time during the term hereof or
afterwards: (i) there should exist a dispute or conflict between the Employee
and the Company or another Person as to the validity, interpretation or
application of any term or condition hereof, or as to the Employee's
entitlement to any benefit intended to be bestowed hereby, which is not
resolved to the satisfaction of the Employee, (ii) the Employee must (A) defend
the validity of this Agreement, (B) contest any determination by the Company
concerning the amounts payable (or reimbursable) by the Company to the Employee
or (C) determine in any tax year of the Employee the tax consequences to the
Employee of any amounts payable (or
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reimbursable) under Section 4(C) or 4(B)(iii), or (iii) the Employee must
prepare responses to an Internal Revenue Service ("IRS") audit of, or otherwise
defend, his personal income tax return for any year the subject of any such
audit, or an adverse determination, administrative proceedings or civil
litigation arising therefrom that is occasioned by or related to an audit by
the IRS of the Company's income tax returns, then the Company hereby
unconditionally agrees: (a) on written demand of the Company by the Employee,
to provide sums sufficient to advance and pay on a current basis (either by
paying directly or by reimbursing the Employee) not less than thirty (30) days
after a written request therefor is submitted by the Employee, the Employee's
out of pocket costs and expenses (including attorney's fees, expenses of
investigation, travel, lodging, copying, delivery services and disbursements
for the fees and expenses of experts, etc.) incurred by the Employee in
connection with any such matter; (b) the Employee shall be entitled, upon
application to any court of competent jurisdiction, to the entry of a mandatory
injunction without the necessity of posting any bond with respect thereto which
compels the Company to pay or advance such costs and expenses on a current
basis; and (c) the company's obligations under this Section 10(A) will not be
affected if the Employee is not the prevailing party in the final resolution of
any such matter.
B. Resolution of Disputes. If a dispute of any type
referred to in Section 10(A) arises between the Company and the Employee and
they fail to resolve that dispute by direct negotiation, the Company and the
Employee agree that the next step taken to resolve that dispute, prior to
either party initiating any litigation to resolve that dispute (not including
any litigation that may be required to enforce the Employee's rights to the
payment or advancement of expenses and legal fees on a current basis pursuant
to Section 10(A)) shall be to submit the dispute to an agreed Alternative
Dispute Resolution ("ADR") process, to which process the parties shall strive
diligently in good faith to agree within ten (10) business days after either
party has given written notice to the other party that it is unable to concur
in the other party's final proposed negotiated resolution of the dispute. If
the Company and the Employee are unable to agree in writing to an acceptable
ADR process within that ten (10) business day period, then the parties shall
submit to a mandatory ADR process by making joint application to the then Chief
United States Federal District Judge in the Southern District of Texas for the
selection of an ADR process for the parties. The parties shall diligently in
good faith participate in the ADR process chosen by that judge. If the parties
are unable to resolve their dispute after diligent good faith participation in
the ADR process, then either party shall be free to initiate such litigation as
that party deems appropriate under the circumstances. Under no circumstances
shall the Employee be obligated to pay for the cost of any ADR process or to
pay or reimburse the Company for any attorneys' fees, costs or other expenses
incurred by the Company in connection with any process undertaken by the
Employee to resolve disputes under this Agreement. As used in this Section
10, the term "Employee" includes, if the Employee has died or become
incompetent as a matter of applicable law, the Employee's legal representative
acting in his capacity as such under applicable law.
11. INDEMNIFICATION
The Employee shall be indemnified by the Company to the
maximum extent permitted by the law of Delaware, the state of the Company's
incorporation, and the law of the state
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of incorporation of any subsidiary of the Company of which the Employee is a
director or an officer or employee, as the same may be in effect from time to
time.
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IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the day and year indicated above.
AMERICAN RESIDENTIAL SERVICES, INC.
By:
--------------------------------
Xxxxxx X. Xxxxxx, Xx.
Chairman of the Board
EMPLOYEE
------------------------------------
XXXXXX X. XXXXXXX
Employee's Permanent Address:
0000 Xxxx Xxxx
Xxxxxxx, Xxxxx 00000
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