EXHIBIT 10.13
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is effective as of March 21,
2000, between ENCOMPASS MANAGEMENT CO., a Delaware corporation (the "Company")
and XXXXXX X. XXXX, a resident of Fort Bend County, Texas ("Employee").
Encompass Services Corporation, a Texas corporation ("Encompass") has joined
herein solely for the purpose of guaranteeing the performance by the Company of
its obligations hereunder, as provided in Section 28 of this Agreement. In
consideration of the premises and the mutual covenants contained herein, the
parties agree as follows:
1. Employment. The Company hereby agrees to employ Employee and Employee
hereby agrees to work for the Company as its Vice President - Treasurer and
Chief Information Officer. Employee's principal office shall be in Houston,
Texas. So long as Employee is employed by the Company, Employee shall devote
Employee's skill, energy and substantially all of his business-related efforts
to the faithful discharge of Employee's duties as an employee of the Company.
In providing services hereunder, Employee shall comply with and follow all
directives, policies, standards and regulations from time to time established by
the Board of Directors of the Company or Encompass, which are applicable to the
Company.
2. Term of Employment. Employee's employment by the Company pursuant to
this Agreement shall continue in effect for a term of two (2) years from the
date of this Agreement (the "Initial Period"), which shall be automatically
extended, without any action on the part of Employee or the Company, for
additional, successive one-year periods (each such one-year period, an
"Additional Period" and all of such one-year periods collectively, the
"Additional Periods") commencing on the second anniversary date of this
Agreement and on each anniversary date thereafter, unless either party gives
notice of non-renewal of this Agreement, as provided in Section 10(e) of this
Agreement, or otherwise terminates this Agreement, in accordance with the other
provisions of Section 10 hereof.
3. Representations and Warranties. Employee represents and warrants that
Employee is under no contractual or other restrictions or obligations that will
limit in any way Employee's activities on behalf of the Company or its
Affiliates or will prohibit or limit the disclosure or use by Employee of any
information that directly or indirectly relates to the businesses of the Company
or its Affiliates, or the services to be rendered by Employee under this
Agreement.
4. Compensation. Subject to the provisions of Section 10 of this
Agreement, Employee will be entitled to the compensation and benefits set forth
in this Section 4.
(a) During the Initial Period, the Company shall pay Employee an Annual
Base Salary, payable semi-monthly, in equal installments, at a rate equal to
$180,000 per year for the first calendar year or portion thereof occurring
during the term of this Agreement. In each
subsequent calendar year, or portion thereof, occurring during the term of this
Agreement, the Company shall pay to Employee an Annual Base Salary determined by
the Compensation Committee of Encompass following its annual salary and
performance review. Employee's Annual Base Salary for each succeeding calendar
year (or portion thereof) occurring during the term of this Agreement will be
reviewed at least annually in the fourth quarter of each calendar year of
Employee's employment hereunder, commencing in the fourth quarter of calendar
year 2000. In the event this Agreement is terminated or expires during any
calendar year, the amount of such Annual Base Salary owed by the Company to
Employee, if any, will be determined pursuant to Section 10 of this Agreement.
(b) Employee shall be eligible to receive an annual bonus pursuant to the
incentive compensation program in effect, if any, from time to time for
executive employees of the Company. The target bonus of Employee under such
program shall not be less than 75% of Employee's Annual Base Salary in effect
for the calendar year with respect to which such bonus is earned. The bonus, if
any, will be earned for Employee's performance during each calendar year (or
portion thereof) occurring during the term of this Agreement, but will be
finally determined and paid following the closing of the books and records of
the Company for such calendar year and review of same by the Compensation
Committee of Encompass and the Company's independent auditors. In the event
this Agreement is terminated or expires during any calendar year, the amount of
such bonus, if any, owed by the Company to Employee will be determined pursuant
to Section 10 of this Agreement.
(c) All payments of salary and other compensation to Employee shall be made
after deduction of any taxes required to be withheld with respect thereto under
applicable federal, state and local laws.
5. Fringe Benefits; Expenses.
(a) During the term of employment of Employee hereunder, Employee shall
participate in all employee benefit plans sponsored by the Company for its
executive employees, which may include, but will not be limited to, stock bonus,
stock purchase, stock performance incentive and stock option plans, sick leave
and disability leave, health insurance, dental insurance and pension and/or
profit sharing plans; provided, however, that except as provided below, the
existence, nature, amount and limitations of such plans shall be determined from
time to time by the Board of Directors of the Company or Encompass.
(b) The Company will reimburse Employee for all reasonable business
expenses incurred by Employee in the scope of Employee's employment; provided,
however, that Employee must file expense reports with respect to such expenses
in accordance with the Company's policies as are in effect from time to time,
and any expenses requiring the approval of any officer or the Board of Directors
of the Company or Encompass pursuant to any policies of the Company then in
effect shall have been so approved.
(c) During the term of employment of Employee hereunder, Employee shall be
entitled to a minimum of four weeks paid vacation during each calendar year and
to paid
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holidays and other paid leave set forth in the Company's policies in effect from
time to time. Any vacation not used during a calendar year may not be used
during any subsequent period.
(d) During the term of employment of Employee hereunder, the Company will
pay all license fees, occupation taxes and reasonable educational costs and
expenses necessary to maintain Employee's good standing under any professional
licenses required in connection with Employee's employment by the Company.
(e) During the term of this Agreement, the Company shall use its reasonable
efforts to provide to Employee (i) life insurance payable to Employee's
designated beneficiary or beneficiaries in an amount at least three times
Employee's Annual Base Salary and (ii) disability insurance on behalf of
Employee which, as a goal, shall provide for salary continuation in the event of
permanent disability in an amount equal to the lesser of (I) 60% of Employee's
Annual Base Salary, or (II) $10,000 per month.
6. Indemnification and Insurance. The Company shall indemnify Employee
with respect to matters relating to Employee's services as an officer and/or
director of the Company or any of its Affiliates, occurring during the course
and scope of Employee's employment with the Company, to the extent and pursuant
to the procedures set forth in the Company's By-laws, and in accordance with the
terms and procedures of any other indemnification which is generally applicable
to executive officers of the Company or Encompass that may be provided by the
Company or Encompass from time to time. The foregoing indemnity is contractual
and will survive any adverse amendment to or repeal of the By-laws. The Company
will also cover Employee under a policy of officers' and directors' liability
insurance providing coverage that is comparable to that provided now or
hereafter to any other executive officer or director of the Company. The
provisions of this Section 6 will survive the termination of this Agreement for
any reason.
7. Change in Control. If a Change of Control occurs and if during the
Protected Period, Employee's employment is terminated or not renewed pursuant to
Section 10, whether by the Company or by Employee, then the Company shall
promptly pay or otherwise provide to Employee the benefits set forth below:
(a) An amount equal to two times the sum of (i) Employee's Annual Base
Salary then in effect and (ii) the amount of Employee's target bonus established
by the Compensation Committee of Encompass at the beginning of the calendar year
in which such termination occurs, which shall not be less than 75% of the Annual
Base Salary for such year, payable in a single lump sum by certified or bank
cashier's check within 30 days of such termination; and
(b) An amount equal to the product of (i) the maximum monthly premium
payment that may be charged to continue coverage for Employee and Employee's
dependents under the Company's health insurance plan under COBRA, and under all
life insurance and disability policies provided by the Company for Employee,
multiplied by (ii) 24. Such amount shall be payable semi-monthly in accordance
with the Company's policies then in effect over a period of twenty-four (24)
calendar months beginning in the first calendar month following the effective
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date of such termination. Any unpaid amounts under this clause (b) will cease
if Employee obtains substantially similar coverage under new employment.
Notwithstanding the foregoing, Employee shall not be entitled to any benefits
under this Section 7 if such termination is (i) due to Employee's death, (ii) by
the Company on account of Employee's disability as provided in Section 10(d)
below, (iii) by the Company for Cause or (iv) by Employee for other than Good
Reason as provided in Section 10 below.
8. Gross-Up of Parachute Payments.
(a) To provide Employee with adequate protection in connection with
Employee's ongoing employment with the Company, this Agreement or other
incentive plans of the Company provide Employee with various benefits in the
event of termination of Employee's employment with the Company during the
Protected Period following a Change of Control. If Employee's employment is
terminated or not renewed pursuant to Section 10 during a Protected Period
following a Change of Control, or otherwise in connection with a "change of
control" of Encompass, within the meaning of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), a portion of those benefits could
be characterized as "excess parachute payments" within the meaning of Section
280G of the Code. The parties hereto acknowledge that the protections set forth
in this Section 8 are important, and it is agreed that Employee should not have
to bear the full burden of the excise tax that might be levied under Section
4999 of the Code or any similar provision of federal, state of local law, in the
event that any portion of the benefits payable to Employee pursuant to this
Agreement or the other incentive plans of the Company are treated as an excess
parachute payment. The parties, therefore, have agreed as set forth in this
Section 8.
(b) Anything in this Agreement to the contrary notwithstanding, if it shall
be determined that any payment or distribution (including income recognized by
Employee upon the early vesting of restricted property or upon the exercise of
options whose exercise date has been accelerated) by the Company or any other
Person to or for the benefit of Employee (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
8) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any similar provision of any federal, state or local law or any
interest or penalties are incurred by Employee with respect to such excise tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Company shall pay an
additional payment, not to exceed $250,000 in the aggregate (a "Gross-Up
Payment"), in an amount such that after payment by Employee of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed on the Gross-Up Payment,
Employee retains an amount of the Gross-Up Payment equal to fifty percent (50%)
of the Excise Tax imposed on the Payments. Employee will bear the cost of the
remaining 50% until the aggregate Gross-Up Payments from the Company have
reached $250,000, and will thereafter bear all additional taxes, interest or
penalties.
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(c) In the event of any dispute as to the applicability or amount of any
Gross-Up Payment, all determinations required to be made under this Section 8,
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination, shall be made by the independent public accounting firm regularly
employed by the Company (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and to Employee within 15 business
days after the receipt of notice from Employee that there has been a Payment, or
such earlier time as is requested by the Company. All fees and expenses of the
Accounting Firm will be borne by the Company. If the Accounting Firm determines
that no Excise Tax is payable by Employee, it shall furnish Employee with a
written statement that failure to report the Excise Tax on Employee's applicable
federal income tax return would not result in the imposition of a negligence or
similar penalty. Any determination by the Accounting Firm shall be binding on
the Company and Employee unless and until a final determination is received from
the Internal Revenue Service indicating a contrary result. As a result of
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments may not have been made by the Company that should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. If Employee thereafter is required to make a payment of any Excise
Tax, the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of Employee, consistent with the maximum limitation stated in
Section 8(b) above. In the event it is determined by the Accounting Firm that
the Gross Payments previously made by the Company exceeded the limitations
stated in Section 8(b) above, upon written notice from the Company, accompanied
by a copy of the Accounting Firm's calculation of same, the amount of such
overpayment shall be promptly paid by Employee to the Company.
9. Options and Other Stock-Related Plans. Except to the extent
otherwise provided in this Section 9 below, the terms and conditions of any
option, stock bonus, restricted stock, stock award or other stock-related plan
or program with respect to capital stock of Encompass, which may be granted to
Employee, or in which Employee may participate, shall be governed by the
applicable Encompass or Company plan, if any, and/or separate agreement(s)
between the Company or Encompass, and Employee with respect thereto.
(a) All stock options granted to Employee prior to February 22, 2000 will
vest upon a termination of this Agreement by the Company or Employee under
Section 10(c) at any time during the Initial Period.
(b) Upon the occurrence of any of the termination events described in
Section 9(a) above, the exercise period of each stock option granted before
February 22, 2000 and then held by Employee shall be the greater of (i) the
balance of the Initial Period, or (ii) ninety (90) days from the date of such
termination, but in neither event beyond the unexpired term of such option as
set forth in the respective plan or option agreement under which such option was
initially granted.
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(c) The exercise period of all Founder options (as defined in (Exhibit A)
held by the Employee on the date hereof shall be the remainder of the ten-year
term of the Founder Options, notwithstanding any earlier termination of
employment of the Employee by the Company or any Affiliate, and notwithstanding
whether such termination is with or without Cause, for Good Reason, or due to
retirement, death or disability.
(d) Except as otherwise provided in Section 9(b) or 9(c) above, the
exercise period for stock options held by Employee at the time of any
termination of this Agreement shall be the greater of (i) ninety (90) days from
the effective date of termination of employment other than under Section 10(b)
of this Agreement, (ii) thirty (30) days from the effective date of termination
of employment under Section 10(b) of this Agreement, (iii) the exercise period
established in or under the terms of the stock option plan or stock option
agreement to which such stock options are subject, or (iv) the exercise period
established in or under the terms of any other written agreement between
Employee and Encompass or the Company with respect to such stock options.
10. Termination or Non-Renewal of Employment.
(a) Termination by Either Party; General Provisions. Either the Company or
Employee may terminate this Agreement and Employee's employment hereunder at any
time during the term of this Agreement by delivery of written notice by the
terminating party to the other party at least sixty (60) days prior to the
effective date of such termination as set forth in such notice; provided that
notice under this Section 10(a) shall only be effective to terminate this
Agreement in situations not governed by Section 10(e) of his Agreement. Within
thirty (30) days after such termination is effective, in addition to any other
payments or benefits provided in this Section 10, the Company shall pay to
Employee an amount equal to the sum of (i) Employee's unpaid Annual Base Salary
prorated through the date of termination of this Agreement at the rate in effect
at the time of such termination, (ii) vacation pay earned pursuant to the
policies of the Company then in effect but not taken to the date of such
termination, and (iii) all other amounts previously deferred by Employee or
earned by Employee as reflected in the books and records of the Company but not
paid as of such date under all Company incentive or deferred compensation plans
or programs.
(b) Termination for Cause; Resignation without Good Reason. If the Company
terminates Employee's employment for Cause, or Employee terminates his
employment without Good Reason, the payments due to Employee shall be limited to
the amounts described in Section 10(a) of this Agreement.
(c) Termination Without Cause; Termination for Good Reason. If the Company
terminates Employee's employment without Cause (except as provided in Section
10(d) below), or if Employee terminates Employee's employment for Good Reason,
the Company shall promptly pay or otherwise provide to Employee the following
amounts in addition to those set forth in Section 10(a) of this Agreement:
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(i) An amount equal to two times the sum of (A) Employee's Annual Base
Salary then in effect and (B) the amount of Employee's target bonus
established by the Compensation Committee of Encompass at the beginning of
the calendar year in which such termination occurs, which shall not be less
than 75% of the Annual Base Salary for such year, payable in a single lump
sum by certified or bank cashier's check within 30 days of such
termination; and
(ii) An amount equal to the product of (A) the maximum monthly premium
payment that may be charged to continue coverage for Employee and
Employee's dependents under the Company's health insurance plan under
COBRA, and under all life insurance and disability policies provided by the
Company for Employee multiplied by (B) 24. Such amount shall be payable
semi-monthly in accordance with the Company's policies then in effect over
a period of twenty-four (24) calendar months beginning in the first
calendar month following the effective date of such termination. Any
unpaid amounts under this clause (ii) will cease if Employee obtains
substantially similar coverage under new employment.
(d) Termination on Disability. If at any time during the term of Employee's
employment hereunder, Employee is unable to perform the essential functions of
Employee's job with or without reasonable accommodation, the Company shall
continue payment of Employee's compensation as provided in Section 4 of this
Agreement during the first twelve (12) month period of such disability to the
extent not covered by the Company's disability insurance policies (the Company
may offset against its obligations in this sentence the amounts actually
received by Employee under such policies). If Employee should die during the
term of Employee's employment hereunder, Employee's employment and the Company's
obligations hereunder for compensation payments shall terminate as of the end of
the month in which Employee's death occurs.
(e) Non-Renewal of Employment; General Provisions. Either the Company or
Employee may elect not to renew Employee's employment hereunder at the end of
the Initial Period, or at the end of any Additional Period thereafter, by
delivery of written notice by the electing party to the other party at least
sixty (60) days prior to the effective date of such termination, as set forth in
such notice. Within thirty (30) days after the expiration of the employment term
(in addition to any other amounts provided in Section 10(f) below in the case of
a non-renewal by the Company), the Company shall pay to Employee an amount equal
to the sum of (i) Employee's unpaid Annual Base Salary prorated through the date
of termination of this Agreement at the rate then in effect at the time of such
non-renewal, (ii) vacation pay earned pursuant to the policies of the Company
then in effect but not taken to the date of such termination, and (iii) all
other amounts previously deferred by Employee or earned by Employee as reflected
on the books and records of the Company but not paid as of such date under all
Company incentive or deferred compensation plans or programs. In the event of a
non-renewal by Employee, the amounts due Employee shall be limited to the
amounts specified in clause (i), (ii) and (iii) of the preceding sentence.
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(f) Non-Renewal by the Company at End of Initial Period or Additional
Period. If the Company elects not to continue this Agreement and renew
Employee's employment as of the end of the Initial Period or an Additional
Period, and provided in the Company's reasonable good faith determination,
Employee continues to perform Employee's duties and responsibilities through the
end of such Initial Period or Additional Period, as the case may be, then the
Company shall promptly pay or otherwise provide to Employee the following
amounts in addition to those set forth in Section 10(a):
(i) An amount equal to the sum of (A) Employee's Annual Base Salary then
in effect and (B) the amount of Employee's target bonus established by the
Compensation Committee of Encompass at the beginning of the calendar year
in which such non-renewal occurs, which shall not be less than 75% of the
Annual Base Salary for such year, payable in a single lump sum by certified
or bank cashier's check within 30 days of such non-renewal; and
(ii) An amount equal to the product of (A) the maximum monthly premium
payment that may be charged to continue coverage for Employee and
Employee's dependents under the Company's health insurance plan under
COBRA, and under all life insurance and disability policies provided by the
Company for Employee multiplied by (B) 12. Such amount shall be payable
semi-monthly in accordance with the Company's policies then in effect over
a period of twelve (12) calendar months beginning in the first calendar
month following the effective date of such non-renewal. Any unpaid amounts
under this clause (ii) will cease if Employee obtains substantially similar
coverage under new employment.
(g) Waiver of Claims. In the event this Agreement expires as a result of
non-renewal by the Company, or is terminated by the Company without Cause or
because Employee is unable to perform the essential functions of his or her job,
with or without reasonable accommodation, in accordance with Section 10(d)
hereof, or is terminated by Employee with Good Reason, Employee agrees to
accept, in full settlement of any and all claims, losses, damages and other
demands that Employee may have arising out of such termination or non-renewal,
as liquidated damages and not as a penalty, the payments, benefits and vesting
of rights set forth in this Agreement. Employee waives any and all rights
Employee may have to bring any cause of action or proceeding contesting any such
termination or non-renewal. Under no circumstances shall Employee be entitled to
any compensation or confirmation of any benefits under this Agreement for any
period of time following Employee's date of termination if Employee's
termination is for Cause, or Employee's election to not renew this Agreement at
the end of the Initial Period or any Additional Period, or Employee's election
to terminate his or her employment without Good Reason.
(h) Lock-ups, etc. During the one (1) year period after Employee receives
the lump sum payments as provided in Section 10(c) or (f) above, Employee shall
sign any lock-up letters, standstill agreements, or other similar documentation
specifically required by an underwriter from such Employee in connection with a
public offering of securities by the Company or Encompass or take other actions
reasonably related thereto as requested by the Board of
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Directors of the Company or Encompass; provided, however, that equivalent
agreements are being required of Company management and the period of any such
lock-up or standstill agreements shall not exceed the shorter of (i) 180 days or
(ii) the balance of the one (1) year period. In the event Employee fails to sign
any such letters, agreements or similar documentation or take any such action,
the Company may seek and obtain specific performance of such covenant,
including, without limitation, any injunction requiring execution thereof or the
taking of any such actions, and Employee hereby appoints the then president of
the Company in office from time to time to sign any such documents on Employee's
behalf so long as such documents are prepared on the same basis as other
shareholders generally or as all Company management shareholders.
11. No Mitigation Obligation. All amounts paid to Employee under
this Agreement following Employee's termination of employment and this Agreement
are acknowledged by the Company and Employee to be reasonable and to be
liquidated damages, and Employee will not be required to reduce the amount of
such payments by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever (including from
other employment) create any mitigation, offset, reduction or any other
obligation on the part of Employee under this Agreement.
12. Covenant Not to Compete.
(a) During Employee's employment with the Company or any of its
Affiliates, and thereafter during the Restricted Period, in order to help, among
other things, ensure the security of the Company's Confidential Information,
regardless of the reason for the termination of Employee's employment and this
Agreement, Employee will not engage in or carry on, directly or indirectly,
either for himself or as a member of a partnership or as a shareholder,
investor, owner, officer or director of a company or other entity, or as an
employee, agent, associate or consultant of any person, partnership, corporation
or other entity, any business in any State of the United States or in any other
part of the world that directly competes with any services or products produced,
sold, conducted, developed, or in the process of development by the Company or
its Affiliates on the date of termination of Employee's employment.
(b) Notwithstanding the foregoing, Employee shall not be deemed to be
in violation of Section 12(a) based solely on the ownership of less than one
percent of any class of securities of a publicly-held company whose gross assets
exceed $100,000,000.
(c) Employee acknowledges that (i) during the term of this Agreement,
Employee will be provided training by the Company or its Affiliates and access
to certain Confidential Information related to the business and operations of
the Company and its Affiliates and (ii) the limitations set forth herein on
Employee's rights to compete with the Company and its Affiliates are reasonable
and necessary for the protection of the Company and its Affiliates. In this
regard, Employee specifically agrees that the limitations as to period of time
and geographic area, as well as all other restrictions on Employee's activities
specified herein, are reasonable and necessary for the protection of the Company
and its Affiliates. In particular, Employee acknowledges that the parties
anticipate that Employee will be actively seeking markets for the
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products and services of the Company and its Affiliates throughout the United
States and elsewhere in the world during Employee's employment with the Company.
(d) In the event that there shall be any violation of the covenant not
to compete set forth in this Section 12, then the time limitation thereof shall
be extended for a period of time equal to the period of time during which such
violation continues; and in the event the Company is required to seek relief
from such violation in any court, board of arbitration or other tribunal, then
the covenant shall be extended for a period of time equal to the pendency of
such proceedings, including all appeals.
(e) Employee agrees that the remedy at law for any breach by Employee
of this Section 12 will be inadequate and that the Company shall also be
entitled to injunctive relief.
13. Confidential Information. During the term of Employee's
employment hereunder, and for five (5) years after Employee's termination of
employment, Employee shall not use or disclose, without the prior written
consent of the Company, Confidential Information relating to the Company or any
of its Affiliates, and upon termination of Employee's employment will return to
the Company all written materials in Employee's possession embodying such
Confidential Information. Employee will promptly disclose to the Company all
Confidential Information, as well as any business opportunity related to the
Company which comes to Employee's attention during the term of Employee's
employment with the Company. Employee will not take advantage of or divert any
such business opportunity for the benefit of Employee or any other Person
without the prior written consent of the Company. Employee agrees that the
remedy at law for any breach by Employee of this Section 13 will be inadequate
and that the Company shall also be entitled to injunctive relief.
14. Intellectual Property.
(a) To the extent they relate to, or result from, directly or
indirectly, the actual or anticipated operations of the Company or any of its
Affiliates, or the activities of Employee in the course and scope of his
employment, Employee hereby agrees that all patents, trademarks, copyrights,
trade secrets, and other intellectual property rights, all inventions, whether
or not patentable, and any product, drawing, design, recording, writing,
literary work or other author's work, in any other tangible form developed in
whole or in part by Employee during the term of this Agreement, or otherwise
developed, purchased or acquired by the Company or any of its Affiliates
("Intellectual Property"), shall be the exclusive property of the Company or
such Affiliate, as the case may be.
(b) Employee will hold all Intellectual Property in trust for the
Company and will deliver all Intellectual Property in Employee's possession or
control to the Company upon request and, in any event, at the end of Employee's
employment with the Company.
(c) Employee shall assign and does hereby assign to the Company all
property rights that Employee may now or hereafter have in the Intellectual
Property. Employee shall take such action, including, but not limited to, the
execution, acknowledgment, delivery and assistance in
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preparation of documents, and the giving of testimony, as may be requested by
the Company to evidence, transfer, vest or confirm the Company's right, title
and interest in the Intellectual Property.
(d) Employee will not contest the validity of any invention, any
copyright, any trademark or any mask work registration owned by or vesting in
the Company or any of its Affiliates under this Agreement.
15. Definitions. As used in this Agreement, the terms defined in
Exhibit A have the meaning assigned to such terms in such exhibit.
16. Notices. All notices, requests, demands and other communications
required by or permitted under this Agreement shall be in writing and shall be
sufficiently delivered if delivered by hand, by courier service, or sent by
registered or certified mail, postage prepaid, to the parties at their
respective addresses listed below:
(a) If to Employee:
__________________
__________________
__________________
(b) If to the Company:
Encompass Management Co.
0 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attention: Corporate Secretary
Facsimile: 000-000-0000
Any party may change such party's address by such notice to the other parties.
17. Set-off Rights. The Company's obligations to make the payments and
provide the benefits required by this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set off, counterclaim,
recoupment, defense or other claim, right or action that the Company may have
against Employee or others, unless such amount is a determinable liability of
Employee to the Company.
18. Assignment. This Agreement is personal to Employee, and Employee
shall not assign any of Employee's rights or delegate any of Employee's duties
hereunder without the prior written consent of the Company. Neither Employee
nor Employee's spouse will have the right to commute, encumber, or otherwise
dispose of any payments under this Agreement. The Company shall have the right
to assign this Agreement to a successor in interest in connection with a merger,
sale of substantially all assets, or the like; provided however, that an
assignment of this Agreement to an entity with operations, products or services
outside of the industries in which the Company or its Affiliates is then active
shall not be deemed to expand the scope of Employee's covenant not to compete
with such operations, products or services without
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Employee's written consent. As used in this Agreement, the term "Company" means
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, written agreement, or otherwise.
19. Survival. The provisions of this Agreement shall survive the
termination of Employee's employment hereunder in accordance with their terms.
20. Governing Law. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Texas without regard to
the choice-of-law principles thereof.
21. Binding Upon Successors. This Agreement shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.
22. Entire Agreement. This Agreement constitutes the entire agreement
between the Company and Employee with respect to the terms of employment of
Employee by the Company and supersedes all prior agreements and understandings,
whether written or oral, between them concerning such terms of employment.
23. Amendments and Waivers. This Agreement may be amended, modified or
supplemented, and any obligation hereunder may be waived, only by a written
instrument executed by the parties hereto. The waiver by either party of a
breach of any provision of this Agreement shall not operate as a waiver of any
subsequent breach. No failure on the part of any party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a waiver
hereof, nor shall any single or partial exercise of any such right or remedy by
such party preclude any other or further exercise thereof or the exercise of any
other right or remedy.
24. Cumulative Rights And Remedies. All rights and remedies hereunder are
cumulative and are in addition to all other rights and remedies provided by law,
agreement or otherwise. Employee's obligations to the Company and the Company's
rights and remedies hereunder are in addition to all other obligations of
Employee and rights and remedies of the Company created pursuant to any other
agreement.
25. Construction. Each party to this Agreement has had the opportunity to
review this Agreement with legal counsel. This Agreement shall not be construed
or interpreted against any party on the basis that such party drafted or
authored a particular provision, parts of or the entirety of this Agreement.
26. Severability. In the event that any provision or provisions of this
Agreement is held to be invalid, illegal or unenforceable by any court of law or
otherwise, the remaining provisions of this Agreement shall nevertheless
continue to be valid, legal and enforceable as though the invalid or
unenforceable parts had not been included therein. In addition, in such event
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the
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original intent of the parties as closely as possible with respect to those
provisions that were held to be invalid, illegal or unenforceable.
27. Attorneys' Fees and Costs. If any action at law or in equity is
brought to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and necessary
disbursements in addition to any other relief to which it may be entitled.
28. Encompass Performance Guarantee. Encompass shall cause the Company to
perform each and every obligation to be performed by the Company hereunder.
IN WITNESS WHEREOF, the Company and Employee have executed this Agreement
on the date first above written.
COMPANY:
ENCOMPASS MANAGEMENT CO.
By: /S/ XXXXXX X. XXXX
--------------------------------
Name: Xxxxxx X. Xxxx
------------------------------
Title: President and CEO
-----------------------------
EMPLOYEE:
/S/ XXXXXX X. XXXX
------------------------------------
Name: Xxxxxx X. Xxxx
------------------------------
IN WITNESS WHEREOF, Encompass Services Corporation has executed this
Agreement on the date first above written solely for the purpose of guaranteeing
the performance by the Company of its obligations hereunder, as provided in
Section 28 of this Agreement.
ENCOMPASS SERVICES CORPORATION
By: /S/ XXXXXX X. XXXX
-----------------------------
Name: Xxxxxx X. Xxxx
----------------------------
Title: President and CEO
---------------------------
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EXHIBIT A
DEFINITIONS
"Annual Base Salary" means the salary of Employee in effect at the relevant
time determined in accordance with Section 4(a) hereof.
"Affiliate" means, with respect to any Person, each other Person who
controls, is controlled by, or is under common control with the Person
specified.
"Cause" when used in connection with the termination of employment with the
Company, means: (i) Employee's breach of his obligations under this Agreement
after Employee has been given notice specifying such breach and a reasonable
opportunity to cure such breach; (ii) Employee's failure to adhere to any
written Company policy after Employee has been given notice specifying the
failure and a reasonable opportunity to comply with such policy or cure his
failure to comply; (iii) the conviction of, indictment for, or the entering of a
guilty plea or plea of no contest with respect to, a felony, the equivalent
thereof, or any other crime with respect to which imprisonment is a possible
punishment, or (regardless of whether any indictment or conviction is pursued)
threatening the life or health of any other employee; (iv) the commission by
Employee of an act of fraud upon the Company or any of its Affiliates; (v) the
misappropriation (or attempted misappropriation) of any funds or property of the
Company or any of its Affiliates by Employee; (vi) the failure by Employee to
perform the duties assigned to him under this Agreement after reasonable notice
and opportunity to cure such performance; (vii) the engagement by Employee in
any direct, material conflict of interest with the Company without compliance
with the Company's conflict of interest policy, if any, then in effect; (viii)
the engagement by Employee, without the written approval of the Board of
Directors of Encompass, in any activity which competes with the business of the
Company or any of its Affiliates or which would result in a material injury to
the Company or any of its Affiliates; (ix) the engagement by Employee in any
activity which would constitute a material violation of the provisions of the
Company's or Encompass' Xxxxxxx Xxxxxxx Policy or Business Ethics Policy, if
any, then in effect, or (x) the failure by Employee to sign any lock-up letters,
standstill agreements, or other similar documentation required by an underwriter
in connection with the public offering of securities by the Company or Encompass
or to take other actions reasonably related thereto as requested by the Board of
Directors of Encompass or the Company.
"Change of Control" means:
(i) the acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Designated
Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act")) of 30% or more of either (1) the then outstanding shares
of Common Stock of Encompass (the "Outstanding Encompass Common Stock") or
(2) the combined voting power of the then outstanding voting
- 14 -
securities of Encompass entitled to vote generally in the election of
directors (the "Outstanding Encompass Voting Securities"); provided,
however, that the following acquisitions shall not constitute a Change of
Control: (a) any acquisition of Common Stock of Encompass or voting
securities of Encompass directly from Encompass (excluding an acquisition
by virtue of the exercise of a conversion privilege), (b) any acquisition
of Common Stock of Encompass or voting securities of Encompass by
Encompass, (c) any acquisition of Common Stock of Encompass or voting
securities of Encompass by any employee benefit plan(s) (or related
trust(s)) sponsored or maintained by the Company or Encompass or any other
corporation controlled by Encompass and approved by the Incumbent Board,
(d) any acquisition by any corporation pursuant to a reorganization, merger
or consolidation, if, immediately following such reorganization, merger or
consolidation, the conditions described in clauses (1), (2) and (3) of
paragraph (iii) below of this definition are satisfied, or (e) an
acquisition by Apollo Management L.P. and/or one or more of its affiliates
resulting in an ownership of no more than 40% of the Common Stock of
Encompass (for this purpose, any securities convertible into Common Stock
held by Apollo Management L.P. and its affiliates will be treated as if
they have been converted for purposes of determining the percentage of
ownership held on an "as-converted basis"); or
(ii) individuals who, as of the date hereof, constitute the entire
Board of Directors of Encompass (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors of
Encompass (the "Board"); provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by Encompass shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of either (1) an actual or
threatened election contest (as such terms are used in Rule 14a-11 of the
Regulation 14A promulgated under the Exchange Act), or an actual or
threatened solicitation of proxies or consents by or on behalf of a Person
other than the Board or (2) a plan or agreement to replace a majority of
the members of the Board then comprising the Incumbent Board; or
(iii) approval by the shareholders of Encompass of a reorganization,
merger or consolidation, in each case unless, immediately following such
reorganization, merger or consolidation, (1) more than 50% (or such greater
percentage as may be approved by the Incumbent Board) of the then
outstanding shares of common stock of the corporation resulting from such
reorganization, merger or consolidation (including, without limitation, a
corporation which as a result of such transaction owns Encompass through
one or more subsidiaries) and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and
- 15 -
entities who were the beneficial owners, respectively, of the Outstanding
Encompass Common Stock and Outstanding Encompass Voting Securities
immediately prior to such reorganization, merger or consolidation in
substantially the same proportions as their ownership immediately prior to
such reorganization, merger or consolidation, of the Outstanding Encompass
Common Stock or Outstanding Encompass Voting Securities, as the case may
be, (2) no Designated Person (excluding Encompass, any employee benefit
plan(s) (or related trust(s)) of Encompass and/or its subsidiaries or any
Person beneficially owning, immediately prior to such reorganization,
merger or consolidation, directly or indirectly, 30% (or such lesser
percentage as may be approved by the Incumbent Board) or more of the
Outstanding Encompass Common Stock or Outstanding Encompass Voting
Securities, as the case may be) beneficially owns, directly or indirectly,
30% (or such lesser percentage as may be approved by the Incumbent Board)
or more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such reorganization, merger or consolidation
or the combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of directors,
and (3) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation
were members of the Incumbent Board at the time of the execution of the
initial agreement providing for such reorganization, merger or
consolidation; or
(iv) approval by the shareholders of Encompass of (1) a complete
liquidation or dissolution of Encompass or (2) the sale or other
disposition of all or substantially all of the assets of Encompass, other
than to a corporation, with respect to which immediately following such
sale or other disposition, (A) more than 50% (or such greater percentage as
may be approved by the Incumbent Board) of the then outstanding shares of
common stock of such corporation and the combined voting power of the then
outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and entities
who were beneficial owners, respectively, of the Outstanding Encompass
Common Stock and Outstanding Encompass Voting Securities immediately prior
to such sale or other disposition in substantially the same proportion as
their ownership, immediately prior to such sale or other disposition, of
the Outstanding Encompass Common Stock and Outstanding Encompass Voting
Securities, as the case may be, (B) no Designated Person (excluding
Encompass and any employee benefit plan (or related trust) of Encompass
and/or its subsidiaries or such corporation and any Person beneficially
owning, immediately prior to such sale or other disposition, directly or
indirectly, 30% (or such lesser percentage as may be approved by the
Incumbent Board) or more of the Outstanding Encompass Common Stock or
Outstanding Encompass Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 30% (or such lesser percentage as may be
approved by the Incumbent Board) or more of, respectively, the then
outstanding shares of common stock of such corporation or the combined
voting power of the then outstanding voting securities of such corporation
- 16 -
entitled to vote generally in the election of directors, and (C) at least a
majority of the members of the board of directors of such corporation were
members of the Incumbent Board at the time of the execution of the initial
agreement or action of the Board providing for such sale or other
disposition of assets of Encompass.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985.
"Confidential Information" includes information conveyed or assigned to the
Company or any of its Affiliates by Employee or conceived, compiled, created,
developed, discovered or obtained by Employee from and during Employee's
employment relationship with the Company, whether solely by Employee or jointly
with others, which concerns the affairs of the Company or its Affiliates and
which the Company or Encompass could reasonably be expected to desire be held in
confidence, or the disclosure of which would likely be embarrassing, detrimental
or disadvantageous to the Company or its Affiliates and without limiting the
generality of the foregoing includes information relating to inventions, and the
trade secrets, technologies, algorithms, products, services, finances, business
plans, marketing plans, legal affairs, supplier lists, client lists, potential
clients, business prospects, business opportunities, personnel assignments,
contracts and assets of the Company or any of its Affiliates and information
made available to the Company or any of its Affiliates by other parties under a
confidential relationship. Confidential Information, however, shall not include
information (a) which is, at the time in question, in the public domain through
no wrongful act of Employee, (b) which is later disclosed to Employee by one not
under obligations of confidentiality to the Company or any of its Affiliates or
Employee, (c) which is required by court or governmental order, law or
regulation to be disclosed, or (d) which the Company has expressly given
Employee the right to disclose pursuant to written agreement.
"Founder Options" means the options to acquire common stock of Encompass
for an exercise price of approximately $3.07 per share (as presently
constituted) granted to the Employee prior Encompass' initial public offering.
"Good Reason" means the occurrence of any of the following events:
(a) Employee is assigned duties, taken as a whole, that are materially
inconsistent with, or materially diminished from, Employee's positions, duties,
responsibilities and status with the Company immediately prior to such action,
or Employee's status, reporting responsibilities, titles or offices are
materially diminished from those in effect immediately prior to such action, or
Employee's duties and responsibilities are materially increased without a
corresponding reasonable increase in Employee's compensation (provided that in
the case of such a change within a Protected Period, such increase must be
satisfactory to Employee in Employee's sole reasonable judgment), except in each
case in connection with the termination of Employee's employment by the Company
for Cause or on account of disability, or as a result of Employee's death, or by
Employee for other than Good Reason; provided, however, that Good Reason shall
- 17 -
not be triggered under this subsection (a) by an immaterial action not taken in
bad faith or by an action that is remedied by the Company promptly after receipt
of written notice from Employee; or
(b) Employee's Annual Base Salary is reduced (i) within a Protected Period,
from that in effect immediately prior to the commencement of a Protected Period
or as the same may be increased from time to time thereafter, or (ii) other than
within a Protected Period, from that which was in effect prior to such action
unless such reduction is part of a general reduction in compensation within the
officer ranks due to economic or company-wide considerations; or
(c) The Company (i) within a Protected Period, fails to continue in effect
any benefit or compensation plan, including, but not limited to, the annual
bonus plan, qualified retirement plan, executive life insurance plan and/or
health and accident plan, in which Employee is participating immediately prior
to the commencement of the Protected Period, or plans providing, in the sole
reasonable judgment of Employee, Employee with substantially similar benefits,
or the Company takes any action that would adversely affect Employee's
participation in or reduce Employee's benefits under any of such plans
(excluding any such action by the Company that is required by law), or (ii)
other than within a Protected Period, takes any action to materially reduce or
eliminate Employee's participation in the Company's benefit or compensation
plans unless such reduction or elimination is part of a general reduction in
benefits within the officer ranks due to economic or company-wide
considerations; or
(d) The Company requires Employee at any time to relocate more than 50
miles from where Employee's principal office was located immediately prior to
such event; or
(e) The amendment, modification or repeal of any provision of the
Certificate of Incorporation or Bylaws of the Company that was in effect
immediately prior to the commencement of a Protected Period, if such amendment,
modification or repeal would materially adversely affect Employee's rights to
indemnification by the Company; or
(g) The Company shall violate or breach any obligation of the Company
(regardless whether such obligation be set forth in the Bylaws of the Company
and/or in this Agreement or any other separate agreement entered into between
the Company and Employee) to indemnify Employee against any claim, loss, expense
or liability sustained or incurred by Employee by reason, in whole or in part,
of the fact that Employee is or was an officer or director of the Company; or
(h) The Company shall violate or breach any other material obligation of
the Company owing to Employee relating to Employee's employment with the
Company, provided that in the event of a violation or breach that is reasonably
subject to being cured by the Company, Good Reason shall only occur if the
Company shall fail or refuse to commence a cure
- 18 -
within 15 days after written notice thereof is given by Employee to the Company
or shall thereafter fail to diligently prosecute such cure to completion; or
(i) The Company shall fail to keep in force, for the benefit of Employee,
directors' and officers' insurance policy with coverage amounts and scope at
least equal to the coverage amounts in effect on the date hereof; or
(j) The Company shall fail to obtain from a successor (including a
successor to a material portion of the business or assets of the Company) a
satisfactory assumption in writing of the Company's obligations under this
Agreement; or
(k) The Company shall fail to provide Employee with office space, related
facilities and support personnel (including, but not limited to, administrative
and secretarial assistance) that are both commensurate with Employee's position
and Employee's responsibilities to and position with the Company and not
materially dissimilar to the office space, related facilities and support
personnel provided to other executive officers of the Company; or
(l) The Company notifies Employee of the Company's intention not to
observe or perform one or more of the material obligations of the Company under
this Agreement.
"Person" means any individual, corporation, trust, partnership, limited
partnership, foundation, association, limited liability company, joint stock
association or other legal entity.
"Protected Period" means the period of time beginning with a Change of
Control and ending 6 months following such Change of Control; provided, however,
that if any event has occurred which could reasonably be expected to result in a
Change of Control and a Change of Control occurs within six months after such
event, then the Protected Period will begin on the date of such event.
"Restricted Period" means the period beginning on the date of the
termination or resignation of Employee's employment with the Company and its
Affiliates and ending as follows, as applicable:
(i) one year after the termination of Employee's employment if
Employee is not entitled to benefits under Section 7 or 10(c); or;
(ii) two years after the termination of Employee's employment, if
Employee receives all of the benefits under Section 7 or 10(c) (after
giving effect to any permissible setoff).
- 19 -
