EMPLOYMENT CONTRACT
-------------------
EMPLOYMEENT CONTRACT, dated as of June 7, 1994, between
TEMTEX INDUSTRIIES, INC., a Delaware corporation with offices at
0000 XXX Xxxxxxx, Xxxxx 000, X.X.-00, Xxxxxx, Xxxxx 00000 (the
"Company"), and X. X. XXXXXX, residing at 0000 Xxxxx Xxxx Xxxxx,
Xxxxxx, Xxxxx 00000 (the "Executive").
RECITALS:
A. The Company desires to continue to employ Executive as
an executive officer of the Company.
B. Executive has agreed to continue his employment with
the Company pursuant to the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the foregoing premises
and other good and valuable consideration, the sufficiency of
which is hereby acknowledged, the Company and Executive hereby
agree as follows:
1. TERM AND RENEWAL.
The Company agrees to employ Executive, and the Executive
agrees to serve, on the terms and conditions of this Agreement
for a period commencing on June 7, 1994 and ending three (3)
years from the starting date, or such shorter period as may be
provided for herein. On each anniversary of this Agreement, the
term shall be extended for an additional period of one (1) year
unless the Board of Directors elects, at the directors, meeting
immediately following the annual stockholders' meeting, not to
extend this Agreement. In the event that this Agreement is not
extended by the Board of Directors, this Agreement shall remain
in effect for only the remainder of the term then in effect.
Notwithstanding the foregoing, this Agreement shall not be
extended beyond the time that Executive has attained the normal
retirement age (which shall be no earlier than 65) established by
the Board of Directors for the Company's executives. The period
during which Executive is employed hereunder is hereafter
referred to as the "Employment Period."
1
2. DUTIES AND SERVICES.
During the Employment Period, Executive shall be employed as
the President and Chief Executive Officer of the Company and
shall also perform services in a responsible executive or
managerial capacity for any of the Company's subsidiary
corporations when and as requested by the Company. In
performance of his duties, Executive shall be subject to the
direction of the Board of Directors of the Company. Executive
agrees to his employment as described in this Section 2 and
agrees to devote all of his business time and efforts to the
performance of his duties under this Agreement. Executive shall
be available to travel as the needs of the business require.
1
3. COMPENSATI0N.
As compensation for his services hereunder, the Company
shall pay Executive, during the Employment Period, a base salary
payable in equal monthly installments at the annual rate of
$201,300. Executive shall also participate in any bonus programs
for the Company's executive officers, as provided by the Board of
Directors. During the term of this Agreement, the Company may
increase the base salary payable to the Executive, but cannot
reduce the base amount of Executive's salary. Executive will
also be eligible to participate in the regular employee benefit
programs now or hereafter established by the Company and in any
special executive benefits and perquisites established by the
Company's Board of Directors.
4. EXPENSES.
Executive shall be entitled to reimbursement for travel and
other out-of-pocket expenses incurred by Executive in the
performance of his duties hereunder, upon submission and approval
of written statements and bills in accordance with the then
regular procedures of the Company. Executive shall be entitled
to reasonable vacations in accordance with the then regular
procedures of the Company governing executives.
5. NONCOMPETI0N.
Executive agrees that (a) he will not during the Employment
Period engage in, or otherwise directly or indirectly be employed
by, or act as a consultant or lender to, or be a director,
officer, employee, owner or partner of, any other business or
organization that directly or indirectly competes with the
business of the Company or any of its subsidiaries and (b) for a
period of two (2) years after he voluntarily terminates this
Agreement, Executive shall not directly or indirectly compete
with or be engaged in the same business as the Company or any of
its subsidiaries or be employed by, or act as consultant or
lender to, or be a director, officer, employee, owner, or partner
of, any business or organization which, at the time of such
cessation, directly or indirectly competes with or is engaged in
the same business as the Company or any of its subsidiaries;
provided, however, that notwithstanding the foregoing, the
provisions of this Section 5 will not be deemed breached merely
because Executive (i) owns not more than 1 percent of the
outstanding equity securities of an entity, if, at the time of
its acquisition by Executive, such securities are listed on a
national securities exchange, is reported on NASDAQ, or is
regularly traded in the over-the-counter market by a member of a
national securities exchange, or (ii) Executive becomes employed
by a company or other entity which manufacturers, sells or
distributes products which compete with products of the Company
if such company or other entity has total revenues of more than
$100,000,000 and the products produced by such company or other
entity which compete with the products of the Company constitute
less than 15 % of the total revenues of such company or. other
entity and Executive's duties and responsibilities are completely
segregated from the competitive products, or (iii) Executive
becomes employed by a company or other entity which manufactures,
sells or distributes products which compete with the products
manufactured, sold or distributed by the Company provided that
such products contribute less than 15% of the total revenues of
the Company.
2
6. CONFIDENTLAL INFORMATION.
All confidential information which Executive may now
possess, may obtain from the Company or its subsidiaries during
or after the Employment Period, or may create prior to the end of
the Employment Period or otherwise relating to the financial
condition, results of operations, business, properties, assets,
liabilities, or future prospects of the Company or of any
customer or supplier of any of them shall not be published,
disclosed, or made accessible by him to any other person or
entity either during or after the termination of his employment
or used by him except during the Employment Period in the
business and for the benefit of the Company and its subsidiaries,
in each case without prior written permission of the Company.
Executive shall deliver to the Company all tangible evidence of
such confidential information prior to or at the termination of
his employment. The provisions of this Section 6 shall survive
the termination of this Agreement by either party.
7. TERMINATION.
(a) Executive's Death. If Executive shall die during the
Employment Period, this Agreement shall terminate, except that
Executive's estate shall be entitled to receive the base salary
payable to Executive, accrued to the last day of the month in
which his death occurs, together with any death benefits provided
under employee benefit plans maintained by the Company.
(b) Executive's Disability. If, during the Employment
Period, Executive shall become physically or mentally disabled,
whether totally or partially, so that he is prevented from
performing his usual duties and services hereunder for a period
of six (6) consecutive or nonconsecutive months during any twelve
(12) month period, this Agreement shall terminate effective on
such incapacity, and Executive (or his legal representatives)
shall be entitled only to the base compensation earned pro rata
to the date of termination with no entitlement to any base salary
after the date of termination; provided, however, that Executive
shall be entitled to receive all benefits to which he may be
entitled pursuant to the Company's employee benefit plans.
(c) Termination by the Company Without Cause. This
Agreement may be terminated by the Company without cause upon
thirty (30) days' prior written notice thereof given to
Executive. In the event of termination without cause, the
company shall for a period of two and one-half (2-1/2) years
continue to pay Executive the base salary effective at the time
of termination in accordance with the Company's regular payroll
cycle. Additionally, Executive shall be entitled to continue to
participate in all regular employee benefit plans of the Company
for a period of two and one-half (2-1/2) years following
termination without cause.
(d) Termination by the Company for Cause. This Agreement
may be terminated by the Company "for cause", as defined below,
by delivering to Executive written notice describing the cause
and granting Executive thirty (30) days to respond to the Board
of Directors. If this Agreement is terminated by the Company for
cause, Executive shall only be entitled to the base salary earned
by him to the date of termination with no entitlement to any base
salary continuation payments or benefits continuation (except as
otherwise provided by the terms of an employee benefit plan of
the Company). The determination as to whether termination shall
be for cause shall be made by the Board of Directors of the
Company in the exercise of its business judgment. Termination of
this Agreement by the Company for cause shall be deemed to have
occurred only if.
3
(i) termination shall have been the result of an act
or acts of dishonesty on the Executive's part
constituting a felony or intended to result
directly or indirectly in substantial gain or
personal enrichment to him at the expense of the
Company; or
(ii) termination shall have been the result of the
Executive's wilful and continued failure
substantially to perform his duties and
responsibilities as an officer of the Company
(other than such failure resulting from his
incapacity due to physical or mental illness)
after a demand for substantial performance is
delivered to the Executive by the Board of
Directors of the Company which specifically
identifies the manner in which such Board believes
that the Executive has not substantially performed
his duties and the Executive is given a reasonable
time after such demand substantially to perform
his duties.
Executive's employment shall in no event be considered to
have been terminated by the Company for cause if the act or
failure to act upon which the termination is based (A) was done
or omitted to be done without intent of gaining therefrom
directly or indirectly a profit to which the Executive was not
legally entitled and as a result of his good faith belief that
such act or failure to act was in or was not opposed to the
interests of the Company, or (B) is an act or failure to act in
respect of which the Executive meets the applicable standard of
conduct prescribed for indemnification or reimbursement of
expenses under the Bylaws of the Company or the laws of its state
of incorporation.
(e) Voluntary Termination by Executive. Executive may
terminate this Agreement at any time upon delivering thirty (30)
days' written notice to the Company. In the event of such
voluntary termination other than for "good reason", as
hereinafter defined, Executive shall be entitled to his base
salary earned to the date of his resignation, but no base salary
continuation payment or benefits continuation (except as provided
by the terms of the Company's employee benefit plans). On or
after the date the Company receives notice of Executive's
resignation (other than resignation for good reason), the Company
may, at its option, pay Executive his base salary through the
effective date of his resignation and terminate his employment
immediately.
(f) Termination by Executive For Good Reason. Executive
may at any time voluntarily terminate his employment for 'good
reason", as defined below, upon thirty (30) days written notice
thereof to the Company. In the event of such voluntary
termination for "good reason", Executive shall be deemed to have
been terminated without cause with the same payments and benefits
set forth in Section 7(c) being applicable to Executive's
termination under this Section 7(f).
4
For purposes of this Agreement, "good reason" shall mean the
occurrence of any of the following events:
(i) removal from the offices Executive holds on the
date of this Agreement or a material reduction in
Executive's authority or responsibility, but not
including termination of Executive "for cause";
(ii) reduction in the base salary payable to Executive;
or
(iii) the Company otherwise commits a material
breach of this Agreement.
8. CHANGE OF CONTROL.
(a) Concerns Regarding Change of Control. Executive and
the Company agree that the circumstances surrounding a "Change of
Control," as hereinafter defined, impose unique risks to the
Company and the Executive and that in response to the unique
circumstances surrounding a Change of Control, the provisions of
this Agreement shall separately consider the parties rights' and
obligations in the event that a Change of Control occurs. This
Section 8 shall be applicable whether or not a Change of Control
is contemplated at this time. Notwithstanding any other
provision of this Agreement, the severance payments and benefits,
if any, payable to Executive shall be determined solely by
reference to this Section 8 in the event that a Change of Control
has occurred, or if Executive is "involuntarily terminated," as
hereinafter defined, in contemplation of a Change of Control.
(b) Voluntary Termination Following a Change of Control.
If a Change of Control has occurred, Executive shall have ninety
(90) days in which to terminate his employment. If Executive
voluntarily terminates his employment within ninety (90) days
following a Change of Control he shall be entitled to receive one
(1) year's base salary as a lump sum payment. Upon payment of
the severance compensation described in the preceding sentence,
the Company will have no future obligation to Executive under
this Agreement. Except as otherwise provided in Section 8(c), if
Executive does not voluntarily terminate his employment within
ninety (90) days of a Change of Control, Executive shall not be
entitled to any severance compensation if he voluntarily
terminates his employment after that time.
(c) Involuntary Termination in Contemplation of, or Within
Three Years Following a Change of Control. If Executive is
involuntarily terminated, other than for cause, as defined in
Section 7(d), in contemplation of, or within dim (3) years
following, a Change of Control, the Company shall pay Executive
(i) a lump sum severance payment equal to two and one-half (2-
1/2) times Executive's base salary in effect at the time of
involuntary termination, payable as a lump sum, and (ii)
continuation of all employee benefits, executive benefits and
perquisites, or benefits reasonably equivalent thereto, for a
period of two and one-half (2-1/2) years. Notwithstanding the
foregoing, in no event shall Executive's severance compensation
exceed 2.99 times his five-year average annual compensation as
set forth in Section 280(G) of the Internal Revenue Code of 1986,
as, amended, or any successor to such section.
5
For purposes of this Agreement, the following shall be
deemed to constitute involuntary termination:
(i) dismissal of Executive (except termination for
cause as defined in Section 7(d) hereof);
(ii) reduction in Executive's base salary;
(iii) reduction in the level of employee benefits
received by Executive, unless substituted with
reasonably comparable benefits;
(iv) requesting Executive to relocate more than 100
miles from his current location other than the
relocation of Executive in connection with the
relocation of the Company's corporate headquarters
or relocation to another existing facility of the
Company;
(v) removal from the offices Executive holds on the
date of this Agreement or a material reduction in
Executive's authority or responsibility; or
(vi) the Company otherwise commits a material breach of
this Agreement.
In the event that within three (3) years following a Change
of Control, Executive is terminated for cause, Executive shall
only be entitled to his base salary up until the last date of
employment pursuant to the date of termination for cause.
(d) Termination of this Agreement More Than Three Years
After a Change of Control. The parties' rights and obligations
arising from a termination of this Agreement, whether by
Executive or the Company, that occurs more than three (3) years
following a Change of Control shall be governed by Section 7 of
this Agreement.
(e) Definition of Change of Control. For purposes of this
Agreement, a Change of Control shall be deemed to exist upon the
occurrence of any of the following:
(i) any "Person" (as such term is used in Section
13(d) and Section 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"),
other than Xxxxx X. Upfield, Xxxxxx Upfield or the
executor(s) of the estates of Xxxxx X. Upfield or
Xxxxxx Upfield, respectively, is or becomes a
'beneficial owner' (as defined in Section 13d-3
under theExchange Act), directly or indirectly, of
securities of the Company representing more than
twenty-five percent (25 %) of the combined voting
power of the Company's outstanding securities;
(ii) at any time during the twenty-four (24) month
period following a merger, tender offer,
consolidation, sale of assets or contested
election, or any combination of such transactions,
at least a majority of the Company's Board of
Directors shall cease to be "continuing directors"
(meaning directors of the Company prior to such
transaction or who subsequently became directors
and whose election or nomination for election by
the Company's stockholders, was approved by a vote
of at least two-thirds of the directors then still
in office prior to such transaction);
6
(iii) the Company's stockholders approve a plan of
complete liquidation of the Company or an
agreement of sale or disposition by the Company of
all or substantially all of the Company's assets
(f) No Mitigation of Compensation. Executive shall not be
required to mitigate any severance payments received under this
Section 8 due to his employment with a successor organization.
(g) Executive's Legal Fees. The Company shall pay any
attorneys' fees incurred by Executive in reasonably seeking to
enforce the terms of this Section 8.
9. SURVIVAL.
The covenants, agreements, representations, and warranties
contained in or made pursuant to this Agreement shall survive
Executive's termination of employment.
10. MODIFICATION.
This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all
existing agreements between them concerning such subject matter,
and may be modified only by a written instrument duly executed by
each party.
11. NOTICES.
Any notice or other communication required or permitted to
be given hereunder shall be in writing and shall be mailed by
certified mail, return receipt requested, or by Federal Express,
Express Mail, or similar overnight delivery or courier service or
delivered (in person or by telecopy, telex, or similar
telecommunications equipment) against receipt to the party to
whom it is to be given at the address of such party set forth in
the preamble to this Agreement (or to such other address as the
party shall have furnished in writing in accordance with the
provisions of this Section 1.1). Any notice given to the Company
shall be addressed to the attention of the Corporate Secretary.
Notice to the estate of Executive shall be sufficient if
addressed to Executive as provided in this Section 11. Any notice
or other communication given by certified mail shall be deemed
given at the time of certification thereof, except for a notice
changing a party's address which shall be deemed given at the
time of receipt thereof. Any notice given by other means
permitted by this Section 11 shall be deemed given at the time of
receipt thereof.
12. WAIVER.
Any waiver by either party of a breach of any provision of
this Agreement shall not operate as or be construed to be a
waiver of any other breach of that provision or of any breach of
any other provision of this Agreement. The failure of a party to
insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be considered a waiver or deprive
that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any
waiver must be in writing.
11
13. BINDING EFFECT.
Executive's rights and obligations under this Agreement
shall not be transferable by assignment or otherwise, such rights
shall not be subject to commutation, encumbrance, or the claims
of Executive's creditors, and any attempt to do any of the
foregoing shall be void. The provisions of this Agreement shall
be binding upon and inure to the benefit of Executive and his
heirs and personal representatives, shall be binding upon and
inure to the benefit of the Company and its successors and
assigns.
14. HEADINGS.
The headings of this Agreement are solely for the
convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
15. COUNTERPARTS; GOVERNING LAW.
This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
It shall be governed by and construed in accordance with the laws
of the State of Texas, without giving effect to the conflict of
laws rules. Any action, suit, or proceeding arising out of,
based on, or in connection with this Agreement, any document or
instrument delivered pursuant to, in connection with, or
simultaneously with this Agreement, any breach of this Agreement
or any such document or instrument, or any transaction
contemplated hereby or thereby may be brought only in the
District Courts of Dallas County, Texas or the United States
District Court for the Northern District of Texas, Dallas
Division and each party covenants and agrees not to assert, by
way of motion, as a defense, or otherwise, in any such action,
suit, proceeding, any claim that such party is not subject
personally to the jurisdiction of such court, that such party's
property is exempt or immune from attachment or execution, that
the action, suit or proceeding is brought in an inconvenient
forum, that the venue of the action, suit, or proceeding is
improper, or that this Agreement or the subject matter hereof may
not be enforced in or by such court.
8
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date first above written.
COMPANY:
TEMTEX INDUSTRIES, INC.
By:_____________________________
Name:___________________________
Title:__________________________
EXECUTIVE:
________________________________
X.X. XXXXXX
9