EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") between ELTRAX SYSTEMS, INC. a
Minnesota corporation having its principal place of business in Atlanta,
Georgia ("Eltrax"), together with its subsidiaries (collectively, the
"Company") and XXX X. XXXXXXX, an individual residing in the State of Georgia
("Employee"), is dated as of March 24, 1999.
ARTICLE 1: EMPLOYMENT, DUTIES AND TERM
1.1 EMPLOYMENT POSITION. Upon the terms and conditions set forth in this
Agreement, the Company hereby employs Employee as President and Chief
Executive Officer of Eltrax, and Employee accepts such employment.
1.2 DUTIES.
(a) Employee shall devote his full-business time and give his best efforts
to the Company and to fulfilling those duties commensurate with his
position; provided, however, that Employee may serve as a director
for a company that does not compete with Eltrax, subject to the prior
approval of the Eltrax Board of Directors, whose consent shall not be
unreasonably withheld.
(b) Employee shall perform his duties in the best interests of the
Company, its employees and its shareholders.
(c) Employee shall comply with the Company's policies and procedures to
the extent they are not inconsistent with this Agreement, in which
case the provisions of this Agreement shall prevail.
1.3 TERM. The term of Employee's employment shall commence on March 24, 1999
(the "Employment Date"), and shall terminate on the later of March 31, 2003
or the final day of the Severance Period (as defined in Section 3.2(b)(ii),
unless earlier terminated pursuant to Article 3 of this Agreement.
Employee will assume his duties as President and CEO of the Company during
April of 1999, on a date to be determined by the Eltrax Board of Directors.
ARTICLE 2: BASE COMPENSATION, EXPENSES, AND BENEFITS
2.1 BASE SALARY. For all services rendered under this Agreement during the
term of Employee's employment, the Company shall pay Employee, in
accordance with Eltrax's usual pay practices, a base salary, exclusive
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of benefits and bonuses, at an annual rate of Two Hundred Fifty Thousand
Dollars ($250,000) (the "Base Salary").
2.2 BONUS.
(a) In addition to the Base Salary, Employee will be entitled to an annual
bonus (which shall not be less than zero) calculated as 2% of the
Company's net income (without taking into account amounts paid under
this Section 2.2(a)), as reported in the Company's Form 10-K (the
"Bonus"). Notwithstanding, for each of 1999 and 2000, Employee shall
receive a minimum $100,000 Bonus and for the first three (3) months of
2003, Employee shall receive an amount equal to the Bonus for such
year multiplied by 25%. Company and the Employee agree that the
formula used to determine the Bonus shall be mutually reviewed on or
within 120 days from the Employment Date.
(b) The declaration and payment of the Bonus shall be made as soon as
practicable following the audit of the Company's annual earnings, but
in no event later than April 15th of each year, and shall be paid in
a lump sum to Employee, subject to applicable withholding rules.
2.3 OPTIONS.
(a) Employee shall receive options (the "Bonus Options") issued under
the Eltrax Stock Incentive Plans (the "Option Plans") to acquire
500,000 shares of Eltrax common stock (the "Bonus Stock"), at an
exercise price equal to the market price of such Bonus Stock on the
Employment Date. To the extent permitted under applicable law, the
Bonus Options shall be characterized as incentive stock options under
Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code").
(i) The Bonus Options shall vest, subject to Article 3, according
to the following schedule: (A) 100,000 on the Employment Date,
and (B) 100,000 on each successive yearly anniversary of the
Employment Date.
(ii) Provided termination of this Agreement has not occurred
pursuant to Sections 3.1(a) or 3.2(a), the Company guarantees
that at March 31, 2003, or if earlier, the end of the Severance
Period (as defined in Section 3.2(b)(ii)), the difference
between the Bonus Stock Fair Market Value (defined below) and
the aggregate exercise price of Employee's vested Bonus
Options will be no less than $1,305,000. In the event such
difference is less than $1,305,000, the Company will pay to
the Employee the amount of such deficiency (but in no event
more than
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$1,305,000) as additional compensation, as soon as practicable
following the calculation of such deficiency. Bonus Stock
Fair Market Value shall mean the average of the closing prices
of Eltrax common stock on each of the five trading days
preceding the day immediately prior to March 31, 2003, or if
earlier, the end of the Severance Period, multiplied by the
number of shares of Bonus Stock which may be acquired pursuant
to exercise of Employee's vested Bonus Options.
(b) During the first quarter of each year beginning in 2000, Employee
shall receive options to acquire a minimum of 50,000 shares of
Eltrax's common stock at the market price of such shares on such
issuance date (the "Performance Options"). To the extent permitted
under applicable law, the Performance Options shall be characterized
as incentive stock options under Section 422 of the Code. The
vesting of such Performance Options shall be based on standards of
performance for the Employee and the Company determined by the
Company's Board of Directors; provided, however, that vesting shall
not be delayed beyond March 31, 2003.
(c) All aspects of the Bonus Options and the Performance Options shall be
governed by the terms and conditions of the Eltrax Option Plans, unless
specific language regarding the treatment of such Options appears in
this Agreement.
2.4 BENEFITS. In addition to other compensation, Employee shall be entitled
to participate in all benefit plans currently maintained or hereafter
established by the Company for the benefit of its executive officers
generally, in accordance with the terms and conditions of such plans (each
a "Benefit Plan"). To the extent Employee is subject to any waiting period
pending entry into a particular Benefit Plan, the Company will reimburse
Employee during such period for his actual COBRA costs, if any, under his
prior employer's group health plan.
2.5 VACATION. Employee shall be entitled to twenty-five (25) paid vacation
days for each twelve (12) month period of employment, which if unused,
shall accrue ratably during each such period.
2.6 EXPENSES. The Company shall reimburse Employee for all expenses
reasonably and necessarily incurred by Employee during the course and in
furtherance of his employment, subject to and made in accordance with such
reasonable and nondiscriminatory policies and procedures as may be
established by the Company as applicable to its employees.
ARTICLE 3: EARLY TERMINATION
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3.1 TERMINATION FOR CAUSE.
(a) The Company may terminate Employee's employment immediately for
Cause. For the purpose hereof, "Cause" means: (i) fraud against
the Company; (ii) theft or embezzlement of the Company's assets,
or misuse of Company funds; (iii) willful violation of law resulting
in a felony conviction against the Company; (iv) Employee's conviction
of any felony not in the Company's business; (v) a material breach of
the terms and conditions of this Agreement not cured within thirty (30)
days after written notice describing such breach; or (vi) the
continued failure by Employee to perform his duties under this
Agreement not cured within thirty (30) days after written notice
describing such failure.
(b) In the event of termination for Cause pursuant to this section, none of
Employee's unvested Bonus Options or Performance Options shall vest
following the Termination Date set forth in a Notice of Termination
(as defined in Section 3.4(a)), and Employee shall receive through
such Termination Date, in accordance with the Company's usual pay
practices, the following:
(i) pay at the usual rate of Employee's Base Salary;
(ii) any accrued but unpaid Bonus relating to the prior calendar
year of employment;
(iii) any benefits to which the Employee is entitled under any
Benefit Plan; and
(iv) compensation for all accrued but unused vacation days, for
all periods under this Agreement, to be paid within
thirty (30) days of termination, calculated by multiplying
the aggregate number of such days by a fraction, the
numerator of which equals the Base Salary and the
denominator of which equals 260.
3.2 TERMINATION WITHOUT CAUSE. Either Employee or the Company may terminate
Employee's employment without Cause by delivering to the other party
hereto, a Notice of Termination which specifies a Termination Date no
sooner than thirty (30) days following the date of such Notice. In the
event of termination of this Agreement and of Employee's employment
pursuant to this section, compensation shall be paid as described below:
(a) If the termination is by Employee, Employee shall receive through the
Termination Date, in accordance with the Company's usual pay practices,
each of the items listed in paragraphs (i) - (iv) of Section 3.1(b)
above, and
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none of Employee's unvested Bonus Options or Performance Options shall
vest following such Termination Date.
(b) If the termination is by the Company, or by the Employee with Good
Reason (as defined in Section 3.4(c)), Employee shall receive, in
accordance with the Company's usual pay practices:
(i) Each of the items listed in paragraphs (i) - (iv) of
Section 3.1(b) above, through the Termination Date;
(ii) For a period of twelve (12) months following such
Termination Date (the "Severance Period"):
(1) Employee's Base Salary;
(2) The Bonus applicable to the complete calendar year
which ends within the Severance Period, plus a pro-rata
share of the Bonus applicable to the subsequent calendar
year, calculated by multiplying the Bonus for such year
by a fraction, the numerator of which shall equal the
number of days between January 1st and the final day of
the Severance Period, and the denominator of which shall
equal 365; and
(3) Any benefits to which Employee is entitled under any
Benefit Plan; provided, however, that Employee does not
receive comparable benefits during such Severance Period
from another source.
(iii) Until termination of the Severance Period, with respect to
Employee's Bonus Options and Performance Options, Employee
shall be treated as employed by the Company. As a
consequence, Employee's Bonus Options and Performance
Options will continue to vest, in accordance with their
designated schedules, until the end of the Severance Period,
and such Options shall remain exercisable for a period of
three (3) months following the end of the Severance Period.
Following the Severance Period, no vesting of Employee's
Bonus Options or Performance Options shall occur.
3.3 TERMINATION IN THE EVENT OF DEATH OR DISABILITY. Employee's employment
shall terminate in the event of death or Disability of Employee.
"Disability" shall mean Employee's inability, as reasonably determined by
the Eltrax Board of Directors, to perform the essential functions of his
duties under this Agreement because of illness or incapacity for a
continuous period of six (6) months. In the event of Employee's
termination due to death or Disability, Employee shall receive each of
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the items listed in paragraphs (i) and (ii) of Section 3.2(b) above, all
unvested Performance Options and Bonus Options shall immediately vest,
and all such Options will remain exercisable through and including the
end of the Severance Period, but in no event beyond such date.
3.4 DEFINITIONS:
(a) "Termination Date" shall mean the effective date of termination
specified in a Notice of Termination; provided, however, that in the
case of Employee's death, the Termination Date shall be the date of
such death, and in the case of Employee's Disability, the Termination
Date shall be the date Eltrax provides written notice of such
Disability to Employee.
(b) "Notice of Termination" shall include a written notice of termination
communicated to the other party hereto in accordance with Section 6.3
hereof; provided, however, that such Notice shall only be effective
if it:
(i) indicates the specific termination provision in this Agreement
relied upon;
(ii) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for such termination, and
(iii) states the effective date of termination.
(c) "Good Reason" means:
(i) A material breach by the Company of the terms and conditions
of this Agreement not cured within thirty (30) days after the
Company's receipt of written notice describing such breach;
(ii) The removal of Employee as President or CEO of the Company,
or Employee failing to be named as President and CEO of any
company (or its parent) which acquires more than 50% of the
outstanding stock of the Company; or
(iii) Assuming no prior termination of this Agreement, for any
reason, the failure of the Company on or prior to March 1,
2003, to offer Employee the opportunity to renew his
employment for a period of twenty-four (24) months following
March 31, 2003, on the same terms as set forth in
Sections 1.1, 2.1 2.6 (other than Section 2.3(a)), and
Articles 3, 4 and 5 herein.
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ARTICLE 4: CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
4.1 CONFIDENTIALITY. Employee will not, during the term or after the
termination or expiration of the term of employment, publish, disclose,
or utilize in any manner any Confidential Information (as hereinafter
defined) obtained while employed by the Company. If Employee leaves
the employ of the Company, Employee will not, without its prior written
consent, retain or take away any drawing, writing or other record in any
form containing any Confidential Information. "Confidential Information"
means information or material which is not generally available to or used
by others, or the utility or value of which is not generally known or
recognized as standard practice, whether or not the underlying details are
in the public domain, including: (a) information or material relating
to the Company, and its businesses as conducted or anticipated to be
conducted, business plans, operations, past, current or anticipated
software, products or services, customers or prospective customers, or
research, engineering, development, manufacturing, purchasing, accounting,
or marketing activities; (b) information or material relating to the
Company's inventions, improvements, discoveries, "know-how," technological
developments, or unpublished works, or to the materials, apparatus,
processes, formulae, plans or methods used in the development, manufacture
or marketing of the Company's software, products or services; (c) any
information marked "proprietary," "private," or "confidential"; (d) trade
secrets; (e) software in any stage of development, including source code
and binary code, software designs, specifications, programming aids
(including subroutines and productivity tools), programming languages,
interfaces, visual displays, technical documentation, user manuals, data
files and databases; and (f) any similar information of the type described
above which the Company obtained from another party and which the Company
treats as or designates as being proprietary, private or confidential,
whether or not owned or developed by the Company.
4.2 BUSINESS CONDUCT AND ETHICS. During the term of employment with the
Company, Employee will engage in no activity or employment which materially
conflicts with the interest of the Company, and will comply with all
reasonable, nondiscriminatory Company policies and guidelines.
4.3 SURVIVAL. The obligations of this Article 4 shall survive the expiration
or termination of Employee's employment.
ARTICLE 5: NON-COMPETITION
5.1 NON-COMPETITION. Employee agrees that on and prior to the time he ceases
to provide services to the Company, or until the end of the
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Severance Period, if later:
(a) Employee will not, directly or indirectly, alone or as a partner,
member, officer, director, shareholder or employee of any other firm
or entity, engage in any commercial activity in competition with any
part of the Company's business which was under Employee's management
or supervision at any time during the term of this Agreement or any
part of the Company's business with respect to which Employee has
Confidential Information. For purposes of this section,
"shareholder" shall not include beneficial ownership of less than
five percent (5%) of the combined voting power of all issued and
outstanding voting securities of a publicly held corporation whose
voting stock is traded in a public market;
(b) Employee will not divert, or by aid to others, do anything which would
tend to divert, or may divert from the Company, any trade or business
with any customer, supplier or vendor with whom the Company has had
any contact or association; or
(c) Outside the normal course of Employee's duties as President and Chief
Executive Officer, take any affirmative action to induce or attempt
to induce any person employed by the Company to leave the employment
of the Company.
5.2 ENFORCEMENT. In addition to any other rights and remedies available to
the Company for breach of this Article 5, the Company shall be entitled
to enforcement by court injunction.
5.3 EFFECT OF TERMINATION. Upon the termination of Employee's employment, no
additional compensation shall be paid for the non-competition obligation.
ARTICLE 6: GENERAL PROVISIONS
6.1 NO ADEQUATE REMEDY. The parties acknowledge it is impossible to measure
in money the damages which will accrue to either party by reason of a
failure to perform any of the obligations under this Agreement.
Therefore, in the event of a claim for equitable relief, each party hereby
waives the claim or defense that the other has an adequate remedy at law.
6.2 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the successors
and assigns of the Company. This Agreement shall not be assignable by the
Employee, but its economic terms shall inure to the benefit of the
Employee's heirs and beneficiaries.
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6.3 NOTICES. All notices, requests and demands given to or made pursuant
hereto shall, except as otherwise specified herein, be in writing and be
delivered or mailed to any such party at its address which:
(a) In the case of the Company shall be:
Eltrax Systems, Inc.
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Clunet X. Xxxxx
With a copy to:
Xxxxxxx X. Xxxxx, Esq.
Jaffe, Raitt, Heuer & Xxxxx, P.C.
Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
(b) In the case of Employee shall be:
Xxx X. Xxxxxxx
0000 Xxxxxx Xxx
Xxxxxxxx, Xxxxxxx 00000
Any notice, if mailed properly addressed, postage prepaid, registered or
certified mail, shall be deemed sent on the registered date or that
stamped on the certified mail receipt, and shall be deemed received on
the second business day thereafter.
6.4 CAPTIONS. The various headings or captions in this Agreement are for
convenience only and shall not affect the meaning or interpretation of
this Agreement.
6.5 GOVERNING LAW. The validity, construction and performance of this
Agreement shall be governed by the laws of the State of Georgia without
giving effect to the conflict of laws principles thereof.
6.6 CONSTRUCTION. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under
applicable law. If any provision of this Agreement shall be prohibited or
invalid, all remaining clauses shall remain fully enforceable.
6.7 WAIVERS. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any partial exercise of any right or remedy
hereunder preclude any exercise of that or any other right or remedy
granted hereby by law.
6.8 MODIFICATION. This Agreement may not be and shall
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not be modified or amended except by written instrument signed by
all parties.
6.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding between the parties hereto in reference to all the matters
herein agreed upon and supersedes all prior or contemporaneous agreements,
understandings and negotiations with respect to the subject matter hereof.
6.10 ARBITRATION. With the sole exception of the injunctive relief
contemplated by Section 5.2 of this Agreement, any controversy or claim
arising out of any aspect of the relationship of the parties hereto, will
be settled by binding arbitration in Atlanta, Georgia by a panel of three
arbitrators in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Judgment upon any arbitration award
may be entered in any court having jurisdiction thereof and the parties
consent to the jurisdiction of the courts of the State of Georgia for
this purpose.
6.11 ATTORNEYS' FEES. In the event there is litigation or other proceedings
between the parties hereto with respect to their rights and obligations
under this Agreement, the prevailing party in any such litigation shall
be entitled to recover from the opposing party all reasonable attorneys'
fees and expenses (including fees of accountants) incurred by the
prevailing party in connection with such proceeding.
6.12 VENUE; JURISDICTION. The parties agree that all actions or proceedings
arising in connection with this Agreement and the instruments, agreements
and documents executed pursuant to the terms of this Agreement shall be
tried, litigated and arbitrated only in the courts of the United States
located in the Northern District of Georgia, the Georgia state courts or
the offices of the American Arbitration Association located nearest
Atlanta, Georgia. The Employee irrevocably accepts for himself and in
respect of his property, generally and unconditionally, the jurisdiction
of such courts. The Employee irrevocably consents to the service of
process out of any such courts in any such action or proceeding by the
mailing of copies thereof by registered or certified mail, postage prepaid,
to him, at his address as set forth in the records of the Company, such
service to become effective ten (10) days after such mailing. Nothing in
this Section 6.12 shall affect the right of any party to serve process in
any other manner permitted by law. Employee irrevocably waives any right
he may have to assert the doctrine of FORUM NON CONVENIENS or to object
to venue to the extent any proceeding is brought in accordance with this
Section 6.12.
6.13 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation
of this Agreement.
6.14 INDEMNIFICATION. The Company acknowledges that it has reviewed that
certain
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Agreement Regarding Special Compensation and Post-Employment
Restrictive Covenants by and between Employee and Sprint Corporation
("Sprint:"), dated December 12, 1995 (the "Sprint Agreement"). The
Company agrees that:
(a) The Company will, at its own cost and expense, defend Employee in all
suits, claims or other actions brought by Sprint against Employee
which arise either directly, or indirectly, under or pursuant to
enforcement of the restrictive employment covenants contained in
Section 12 of the Sprint Agreement; and
(b) To the extent that after adjudication of the Sprint Agreement Employee
is restricted from complying with the terms and conditions of this
Agreement (the "Injunctive Period"), Employee will continue to receive
all compensation and associated benefits set forth herein as if such
restrictions were not present; provided, however, that during the
Injunctive Period Employee does not receive comparable compensation
for services provided to persons other than the Company; and provided
further, that to the extent permitted by law, Employee otherwise
complies with the terms and conditions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EMPLOYEE ELTRAX SYSTEMS, INC., together with
its subsidiaries
By:
----------------------------------
Xxx X. Xxxxxxx Xxxxxxx X. X'Xxxxxx
Its: Chief Executive Officer
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