Exhibit 99.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, made as of this 3rd day of November, 1997, by
and between ENVIRONMENTAL PROTECTION IMPROVEMENT COMPANY, INC. (EPIC), a New
Jersey corporation, with its principal offices located at 000 Xxxxxx Xxxx,
Xxxxxxxx, Xxx Xxxxxx 00000 (the "Company"), a wholly-owned subsidiary of Compost
America Holding Company, Inc. ("CAHC") and XXX XXXXXXXXX, an individual,
residing at 0 Xxxxxxx Xxxxx, Xxxxxxx, Xxxxxx 00000 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires the Executive to be employed by the Company,
and the Executive is desirous of such employment, upon the terms and conditions
set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, the parties intending to be legally bound
hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings:
(a) "Agreement" means this Employment Agreement, as the same may,
from time to time, be amended in accordance with the provisions hereof.
(b) "Cause" means with respect to the Executive:
(i) Defrauding the Company in any way;
(ii) Being convicted of any crime that is punishable by
imprisonment for more than thirty (30) days and is not traffic or vehicular
related (whether or not the Executive is sentenced to imprisonment) or that
offends principles, generally
accepted in the community, of general or business morals and ethics or
generally accepted principles of natural or moral law or that is such that
his conviction thereof would, by commonly accepted standards of the
professional community, justify his discharge;
(iii) An action taken in knowing contradiction to the best
interests of the Company;
(iv) Repeated refusal to perform job functions reasonably
required of him under this Agreement; or
(v) Any other act which has a direct, substantial and adverse
effect on the Company's reputation or business.
(c) "Company" means EPIC and its successors, whether now or hereafter
existing.
(d) "Competing Organization" means any person or legal entity engaged
in the rail transportation of sludge, municipal solid waste, contaminated soils,
dredge spoils and the like (collectively "Waste Materials") in the United States
of America.
(e) "Confidential Information" means any information in which the
Company has a legally protectable interest in preventing its unauthorized or
unintended disclosure to third parties and which is kept confidential by the
Company in the operation of its business or the conduct of its research and
which is not otherwise available to the public and is not available from any
source other than the Company, including, by way of illustration but not
limitation: source codes, object codes, engineering and other sketches, drawings
and tracings, specifications, engineering data,
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memoranda, designs, sources of supplies and materials, cost and financial
data, processes, production machines and equipment, procedures, customer
lists, marketing plans and business forecasts, together with all the
Company's Know-how and Technical Data relating thereto.
(f) "Customer" means any individual, firm, partnership, corporation,
company, joint venture or governmental or military unit or any other entity
which has a contract with the Company during the Term of this Agreement for the
transportation of Waste Materials.
(g) "Disability" means the Executive's inability to perform his
duties under this Agreement for a period of six (6) consecutive months, or for
eighty percent (80%) or more of the normal working days during the nine (9)
consecutive months then ending, because of his physical or mental illness or
infirmity. Should the Executive suffer a Disability as defined herein, the
Executive shall receive full Salary (as hereinafter defined) and benefits, as
set forth herein, for two (2) years from the date of the Disability and,
thereafter, one-half Salary for the balance of the Term of this Agreement.
(h) "Future Inventions" means all inventions, discoveries, ideas,
concepts, designs and improvements of any sort, whether patentable,
copyrightable or not, relating in any way to the business of the Company with
respect to the rail transportation of Waste Materials, which the Executive may,
during the Term of
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this Agreement, conceive or invent, whether alone or jointly with others, and
whether during business hours or thereafter, and such term includes all
"know-how" and Technical Data relating to the foregoing, and all letters
patent and copyrights of the United States or any other country which may be
issued in connection with the foregoing.
(i) "Principal Office" means the principal office of the Company,
which currently is located in Denville, New Jersey. The Company represents and
warrants that during the Term of this Agreement, it will not require the
Executive to work at a location other than the Principal Office of the Company,
or if the Company elects to move the Principal Office, at a location which is
(a) more than thirty miles from the place where the Principal Office of the
Company is located on the effective date of this Agreement or (b) which is more
than five miles from the intersections of Routes 287, 202, 22 and 206 in New
Jersey. If the Company requires the Executive to work at a location which is (a)
more than thirty miles from the place where the Principal Office of the Company
is located on the effective date of this Agreement or (b) more than five miles
from the intersections of Routes 287, 202, 22 and 206 in New Jersey, such
requirement shall be deemed a termination by the Company of this Agreement
pursuant to Section 9(e) of this Agreement, unless an alternative agreement
regarding Principal Office is entered into between the Company and the
Executive.
(j) "Technical Data" means all written, printed and
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other tangible materials embodying or containing Know-how, and includes,
without limiting the generality of the foregoing, all correspondence,
designs, processes, source codes, object codes, engineering sketches,
drawings and tracings, specifications and engineering data, reporting
formats, memoranda, notebooks, and all copies thereof, together with all
models and prototypes of every description.
(k) "Term" means the period from the date of the execution of this
Employment Agreement to September 15, 2002 unless earlier terminated as provided
herein.
2. Employment. The Company hereby employs the Executive, and the
Executive hereby accepts such employment, upon the terms and subject to the
conditions set forth in this Agreement.
3. Duties. The Executive shall be employed by the Company as its Vice
President of Operations and shall perform such duties and render such services
consistent therewith as may from time to time be reasonably required of him by
the Company's Chairman.
4. Extent of Service. During the Term of this Agreement, the Executive
agrees that he will:
(a) Serve the Company faithfully, diligently and to the best of his
ability under the reasonable direction of the Board;
(b) Devote his best efforts, attention and energy to the performance
of his duties hereunder and to promoting and furthering the interests of the
Company, taking, however, from time to time, reasonable vacations consistent
with the performance of
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his obligations hereunder and the vacation policies of the Company applicable
to all executives generally, not to exceed four (4) weeks in any calendar
year. The Executive shall be additionally compensated by the Company at his
regular weekly salary rate, for up to a maximum of two weeks unused vacation
time per year;
(c) Not without the prior written approval of the Chairman of the
Company, which approval shall not be unreasonably withheld, become associated
with or engaged with any business other than that of the Company, and will do
nothing inconsistent with his duties to the Company.
5. Term of Employment. The term of employment of the Executive under
this Agreement shall be guaranteed for the Term, unless terminated pursuant to
Paragraph 9 of this Agreement.
6. Basic Compensation; Bonus As basic compensation for the services to
be rendered hereunder by the Executive during the Term of this Agreement, the
Company agrees to pay to the Executive and the Executive agrees to accept, an
initial annual cash salary (the "Salary") of $125,000. On and after April 30,
1998, for each year during the Term, the Executive shall be entitled to an
annual bonus (the "Bonus") as specified on Schedule A attached hereto (the
"Bonus Formula"). The Salary payable to the Executive hereunder shall be paid in
equal installments during the Term, or in such other manner as shall be
consistent with the payroll policies of the Company applicable to all
executives. The Bonus shall be calculated in accordance with the Bonus Formula
as of April 30th of
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each year and shall be paid in a single installment each year within ninety
(90) days thereafter.
7. Other Compensation. Upon the execution of this Agreement, the Company
shall issue to the Executive options to purchase 300,000 unregistered shares of
the Company's common stock, no par value, at an option price of $1.00 per share.
50,000 of these options will vest upon the execution of this Agreement. The
balance of the options will vest 50,000 on September 15, 1998, 50,000 on
September 15, 1999, 50,000 on September 15, 2000, 50,000 on September 15, 2001,
and 50,000 on September 15, 2002. All options not otherwise exercised shall
expire on September 15, 2002.
8. Other Benefits.
(a) General Executive Benefits. The Executive shall receive medical
insurance coverage provided by the Company to its executives generally and/or
participate in the best of any other similar plan or arrangement, or other
fringe benefit provided by the Company to its executives generally. The
Executive shall also be entitled to participate in any stock bonus, purchase or
option plan and any bonus or profit sharing plan provided for the Executive
specifically or to any group of executives of the Company of which the Executive
is made a member by express provision of such plan.
(b) Expense Reimbursement. The Company shall reimburse the Executive
for reasonable out-of-pocket expenses incurred in connection with the Company's
business, including travel expenses,
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food, and lodging while away from home, subject to such policies as the
Company may from time to time reasonably establish for its employees and
subject to substantiation of expenses as required under applicable federal
and state tax laws and regulations.
(c) Automobile Allowance. The Company will provide the Executive
with a car allowance of $600 per month to be paid to the Executive when
installments of Salary are paid.
(d) Officers and Directors Liability Insurance. The Company shall
purchase Officers and Directors Liability Insurance which shall cover the
Executive in an amount and with coverage to be determined by the Company.
9. Termination.
(a) The Term of this Agreement and the employment of the Executive
hereunder shall terminate in the event of the death of the Executive and, at the
option of the Company, upon thirty (30) days prior written notice to the
Executive, upon the Disability of the Executive. During the period of any
Disability, the Executive shall receive the compensation set forth in Paragraph
1(g) herein.
(b) In addition to the provisions of Paragraph 9 (a) above, the
Company may also, for Cause, elect to terminate the Term of this Agreement and
the employment of the Executive hereunder by ten (10) days' prior written notice
to the Executive. Upon any such termination for Cause, the Executive shall no
longer be
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entitled to receive his Salary or any other benefits under this Agreement.
(c) The Executive shall have the right to terminate this Agreement
upon written notice given to the Company (i) at least three (3) months prior to
his intended date of resignation, in which case the Executive shall receive no
compensation or other benefits after the date of termination, or (ii) upon his
Disability, in which case he shall receive compensation in accordance with
Paragraph 1 (g) herein.
(d) In the event of a merger or combination in which the Company is
not the surviving entity, or of a sale of all or substantially all of the
Company's assets, the Company may, at its sole option (1) upon thirty (30) days'
prior written notice to the Executive, assign this Agreement and all rights and
obligations under it to any business entity that succeeds to all or
substantially all of the Company's business through that merger or combination
or sale of assets, or (2) on at least thirty (30) days' prior written notice to
the Executive, terminate this Agreement effective on the date of the merger or
combination or sale of assets. Such termination shall constitute a "Termination
without Cause" under Paragraph 9(e) hereof.
(e) Termination without Cause. Should the Executive be terminated
for any reason other than for Cause, Disability or the expiration of this
Agreement (including a change of the Executive's place of employment as provided
in Paragraph 1(i) above), the
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Executive shall be entitled to receive payments from the Company as follows:
(i) An amount equal to all the remaining installments of Salary
and Bonus, if any, that would otherwise be payable to the Executive under this
Agreement, payable in equal monthly installments, beginning seven (7) days after
the date of such termination;
(ii) The immediate vesting of all options, pension plans and
other benefit packages in which the Executive was a participant at the time of
his termination; and
(iii) Such additional payments and other compensation as may be
reasonable under the circumstances and approved by the Board of Directors of the
Company in the event that the termination is due to a merger of the Company into
another company, or, the Company is sold to third parties.
10. Representations and Warranties of the Executive as to Conflicts. The
Executive hereby represents and warrants to the Company that his employment by
the Company does not and will not violate any agreement or instrument to which
he is a party or by which he is bound, and the Executive agrees that he will
indemnify and hold harmless the Company, its directors, officers and employees
against any claims, damages, liabilities and expenses (including reasonable
attorneys' fees) which may be incurred, including amounts paid in settlement, by
and of them in connection with any claim based upon or related to a breach of
the Executive's representation and warranty set forth in this Paragraph 10. In
the event of any claim based upon or related to a breach of the Executive's
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representation and warranty set forth in this Paragraph 10. In the event of
any claim based upon or related to a breach of the Executive's representation
and warranty set forth in this Paragraph 10, the Company will give prompt
notice thereof, in writing, to the Executive and the Executive shall have the
right to defend such claim with counsel reasonably satisfactory to the
Company.
11. Future Inventions. The Executive shall assign and convey to the
Company, and hereby does assign and convey to the Company, and the Company
hereby accepts, all of the Executive's right, title and interest in and to all
Future Inventions made or conceived during the Term of this Agreement, and the
Executive hereby agrees that he shall, without the payment of royalty or any
other consideration to him therefor:
(a) Inform the Company promptly and fully of each such Future
Invention by a written report reasonably satisfactory to the Company;
(b) Apply, at the Company's request and expense, for United States
and foreign letters patent, copyright, trademark or service xxxx as the case may
be, either in the Executive's name or otherwise as the Company shall direct;
(c) Assign and convey to the Company, and he hereby does assign and
convey to the Company, all of his right, title and interest in and to
applications for United States and foreign letters patent, copyrights,
trademarks and service marks and to any letters patent, copyrights, trademarks
and service marks which may
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be issued upon any such Future Invention;
(d) Deliver promptly to the Company, without charge to the Company
but at its expense, such written instruments, and do such other acts, as may be
reasonably necessary, in the opinion of the Company, to obtain and maintain
United States and foreign letters patent, copyrights, trademarks or service
marks on each such Future Invention and to vest the Executive's entire right,
title and interest thereto in the Company; and
(e) Grant to the Company, and he hereby does grant to the Company,
prior to any further assignment of the Executive's right, title and interest to
the Company in any Future Invention as required above, the royalty-free right to
use in its business, and to make, have made, use and sell products, processes,
services, writings and marks based upon or related to such Future Invention made
or conceived by the Executive.
12. Confidentiality.
(a) During the Term of this Agreement and at all times thereafter,
the Executive will not use Confidential Information for his own benefit or for
the benefit of any person or legal entity other than the Company, nor will he
discuss the same with any other person or legal entity, except as reasonably
required to conduct the business of the Company in the ordinary course or by
legal process, provided, however, that any obligation which the Executive may
have pursuant to this Agreement to keep certain information confidential shall
not prevent him from disclosing any or all such
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information to the extent such disclosure is reasonably required in
connection with the preparation of closing adjustments or financial
statements as contemplated by that certain Stock Purchase Agreement dated
[ , 1997] by and among Xxxxxx X. Xxxxx, Compost America Holding
Company, Inc. and X.X. Xxxxx Construction Co., Inc. (the "Stock Purchase
Agreement") or the pursuit by any parties thereto of claims under the Stock
Purchase Agreement.
(b) Except with the prior written approval of the Company, or except
as required to conduct the business of the Company in the ordinary course, the
Executive will not, at any time, directly or indirectly, use, disseminate,
disclose, lecture upon, or publish articles concerning, any Confidential
Information.
(c) Upon the termination of his employment with the Company, all
documents, records, notebooks and similar repositories of, or containing,
Confidential Information, including any copies thereof, then in the Executive's
possession, or under his control, whether prepared by him or others, will be
left with or immediately returned to the Company by the Executive.
13. Non-Compete. The Executive agrees that, during the Term of this
Agreement and during any period following the termination of his employment with
the Company pursuant to Paragraph 9, subsections (a), (d)(2) or (e) of this
Agreement in which he is being compensated by the Company in connection with his
termination pursuant to those provisions, and in the case of his termination
pursuant to Paragraph 9 subsections (b) or (c) during the period of
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two (2) years following the termination of his employment, and in any state
in which the Company or any of its affiliates does business, he will not,
without the written approval of the Company, directly or indirectly, under
any circumstances whatsoever, own, manage, operate, engage in, control or
participate in the ownership, management, operation or control of, or be
connected in any manner, whether as an individual partner, stockholder,
director, officer, principal, agent, employee or consultant, or in any other
relation or capacity whatsoever, with any Competing Organization, and will
not in any such manner, compete with or call on any Customer of the Company,
wherever located, who was a Customer of the Company at any time during the
one year period prior to the termination of the Executive's employment with
the Company, for the purpose of inducing such Customer to do business with
the Executive or any competing Organization. Notwithstanding the foregoing,
nothing contained in this Paragraph 13 shall restrict the Executive from
making any investment in any company, so long as such investment consists of
no more than five percent (5%) of any class of equity securities of a company
whose securities are traded on a national securities exchange or in the
over-the-counter market.
14. Non-Interference. The Executive will not, for a period of one (1)
year following the termination of the Executive's employment pursuant to
Paragraph 9, subsections (a), (c) or (e), directly or indirectly, employ, hire,
solicit or, in any manner,
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encourage any employee of the Company to leave the employ of the Company to
engage in business with the Executive or a Competing Organization.
15. Injunctive Relief. In addition to any other rights or remedies
available to the Company as a result of any breach by the Executive of his
obligations under this Agreement, the Company shall be entitled to enforcement
of such obligations by an injunction or a decree of specific performance from a
court with appropriate jurisdiction, and in the event that the Company is
successful in any suit or proceeding brought or instituted by the Company to
enforce any of the provisions of this Agreement, or on account of any damages
sustained by the Company by reason of the violation by the Executive of any of
the terms of this Agreement to be performed by the Executive, the Executive
agrees to pay to the Company all attorneys' fees reasonably incurred by the
Company.
16. Withholding. The Executive hereby agrees that he will make such
arrangement as the Company may deem necessary to discharge any obligations of
the Company to withhold Federal, state or local taxes imposed upon the Company
in respect of this Agreement.
17. Severability. The provisions of this Agreement shall be severable and
if any part of any provision shall be held invalid or unenforceable, or any
separate covenant contained in any provision is held to be unduly restrictive
and void by a final decision of any court or other tribunal of competent
jurisdiction, such part,
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covenant or provision shall be construed or limited in scope to give it
maximum lawful validity, and the remaining provisions of this Agreement shall
nonetheless remain in full force and effect.
18. Entire Agreement. This Agreement contains the entire agreement of
the parties relative to the subject matter hereof, superseding and terminating
all prior agreements or understandings, whether oral or written, between the
parties hereto relative to the subject matter hereof, and this Agreement may not
be extended, amended, modified or supplemented without the prior written consent
of the parties hereto.
19. Waiver. Any waiver of the performance of the terms or provisions of
this Agreement shall be effective only if in writing and signed by the party
against whom such waiver is to be enforced. The failure of either party to
exercise any of his or its rights under this Agreement or to require the
performance of any term or provision of this Agreement, or the waiver by either
party of any breach of this Agreement, shall not prevent a subsequent exercise
or enforcement of such rights or be deemed a waiver of any subsequent breach of
the same or any other term or provision of this Agreement.
20. Notices. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed given when personally
delivered or sent by overnight courier or certified mail, postage prepaid,
return receipt requested, to the respective addresses of the parties hereto as
set forth above or to such other
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address as either party may designate by notice to the other party given as
herein provided.
21. Assignment. Except as provided in Paragraph 9(d), this Agreement
shall not be assignable by either party without the prior written consent of the
other party.
22. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New Jersey, without giving
effect to the conflict of laws rules of such state.
23. Survival of Terms. The terms of this Agreement and the respective
obligations of the parties hereto shall survive the termination of the
Executive's employment with the Company for as long as any obligation or duty
remains outstanding.
24. Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, Bergen County, New Jersey, and judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction over the
parties. The dispute will be resolved by a panel of three arbitrators if the
dollar amount that is being arbitrated exceeds $100,000.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
COMPANY
By:_________________________________
Xxxxx X. Xxxxxx, Chairman
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EXECUTIVE
By:_________________________________
Xxx Xxxxxxxxx
SCHEDULE A
BONUS FORMULA
Any Bonus to which the Executive may be entitled shall be calculated on an
annual basis as follows:
"Bonus Pool" shall mean to the extent that the Company's Earnings Before
Interest, Taxes, Depreciation and Amortization ("EBITDA") on Average Assets in
any fiscal year exceed 15.2% in such fiscal year, the amount by which EBITDA
exceeds 15.2% shall be maintained as a bonus pool of which the Executive shall
be entitled to five (5%) percent.
"Average Assets" shall mean the stated value of all of the Company's assets
on its Audited Balance Sheet of the Company and
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its Subsidiaries, if any, as at the end of any fiscal year divided by the
beginning year assets, as adjusted for the unamortized portion of the
Purchase Price Premium.
"Purchase Price Premium" shall mean $33,000,000 minus the stated value of
all assets on the Adjusted Balance Sheet of the Company as of the Closing Date.
The Purchase Price Premium shall be amortized on a straight line basis over a
twenty (20) year period for purposes of the Bonus Formula.
"Adjusted Balance Sheet" shall mean the balance sheet of the Company as
finally agreed upon by the parties thereto in accordance with the Stock Purchase
Agreement.
The Purchase Price Premium shall be reduced by the excess of replacement
cost over the greater of net book value or sale value for any and all assets on
the Adjusted Balance Sheet which are the subject of a transaction with Compost
America Holding Company, Inc. or any of its Affiliates after the Closing Date.
Adjustments will be made to EBITDA to give effect to market rates of return
on assets for all Affiliate transactions by and between the Company and Compost
America Holding Company, Inc. or any of its Affiliates.
The following is an example of the calculation of the Purchase Price
Premium:
Contract Purchase Price $33,000,000
Assets on Closing Balance Sheet:
--------------------------------
Cash $ 750,000
Accounts Receivable 2,000,000
Prepaid Expenses 500,000
Fixed Assets, Net 4,000,000
-----------
Total Assets on Closing Balance Sheet 7,250,000
-----------
Purchase Price Premium $25,750,000
-----------
-----------
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Average Assets:
----------------
June 30,1997 April 30, 1998
------------ --------------
Total Assets on Balance Sheet $ 7,250,000 $10,000,000
Purchase Price Adjustment 25,750,000 24,677,083
------------ --------------
Total Adjusted Assets $33,000,000 $34,677,083
------------ --------------
------------ --------------
Beginning Adjusted Assets $33,000,000
Final Adjusted Assets 34,677,083
------------
Subtotal 67,677,083
------------
2
Average Assets $33,838,542
------------
------------
Bonus Pool:
EBITDA For Period July 1, 1997- April 30, 1998 $6,000,000
($5,000,000 for 10 months 12/10)
Base EBITDA Calculation
Average Assets For Period $33,838,542
Base Rate of EBITDA 15.2%
Base EBITDA 5,143,458
--------------
Bonus Pool $ 856,542
--------------
--------------
Bonus Calculation:
Bonus Pool $856,542
--------
--------
Bonus Calculation:
------------------
X. Xxxxxxxxx (5%) $ 42,827
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