SECOND AMENDED EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective the 1st day of July,
1998, by and between RECYCLING INDUSTRIES, INC., a Colorado corporation having
its principal executive office at 0000 Xxxxx Xxxxxxxx Xxxx., Xxxxx 000,
Xxxxxxxxx, XX 00000 (hereinafter referred to as the "Company"), and XXXXXX X.
XXXXX (hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires to continue to employ the Employee in an
executive capacity and the Employee desires to remain in the Company's employ;
and
WHEREAS, the Company and the employee have previously entered into a First
Amended Executive Employment Agreement and desire, pursuant to Section 13.4 of
that agreement, to make certain revisions thereto which were agreed to but not
properly reflected in that agreement.
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and obligations contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Employee hereby agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following terms have
the meanings prescribed below:
ACQUISITION shall mean the purchase by the Company of all the outstanding
equity interests in, or substantially all of the assets and business of, a
previously unaffiliated entity for the purposes of the Company assuming the
continued operation of the acquired business as a going concern.
AFFILIATE is used in this Agreement to define a relationship to a person or
entity and means a person or entity who, directly or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, such person or entity.
ANNUAL BONUS shall have the meaning assigned thereto in Section 4.2 hereof.
BASE SALARY shall have the meaning assigned thereto in Section 4.1 hereof.
BOARD OF DIRECTORS means the board of directors of the Company.
BENEFICIAL OWNER shall have the meaning assigned thereto in Rule 13(d)-3
under the Exchange Act; provided, however, and without limitation, that any
individual, corporation, partnership, group, association or other person or
entity that has the right to acquire any Voting Stock at any time in the
future, whether such right is (i) contingent or absolute or (ii) exercisable
presently or at any time in the future, pursuant to any agreement or
understanding or upon the exercise or conversion of rights, options or
warrants, or otherwise, shall be the Beneficial Owner of such Voting Stock.
BORROWING RATE shall mean the "prime lending rate" as reported by the Wall
Street Journal.
BUSINESS DAY shall mean every day the New York Stock Exchange is open for
business.
CAUSE shall have the meaning assigned thereto in Section 5.3 hereof.
CHANGE OF CONTROL of the Company shall mean any one of the following
events: (i) the acquisition by an entity, person or group (other than the
Company), either in a single transaction or in a series of transactions, of
30% or more of the Company's Voting Stock, including acquisitions of Voting
Stock through the exercise or conversion of warrants, options, convertible
securities, debt or any rights to acquire Voting Stock; (ii) a change in a
majority of the Company; Directors as of the date hereof (the "Incumbent
Board"), unless the new or additional Directors have been appointed or
nominated by a majority of the Board of Directors; PROVIDED HOWEVER, that
any change in the majority of the Incumbent Board in connection with an
actual or threatened proxy contest shall be a change of control; (iii) a
merger by the Company with or into another entity, following which the
Company's shareholders own less than 60% of the outstanding voting securities
of the surviving entity;(iv) the completion by the Company of a sale of all
or substantially all of its assets; and (v) the Company entering into or
completing any type of reorganization, whereby during the pendency or upon
completion of the reorganization, the Company's Chief Executive Officer,
Chief Operating Officer or Chief Financial Officer are replaced by persons
who are representatives of or nominated by any class of the Company's debt or
equity securities, other than the Common Stock.
CODE means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated by the Internal Revenue Service thereunder, all as
in effect from time to time during the Employment Period.
COMMON STOCK means the Company's common stock, par value $.001 per share.
COMPANY means Recycling Industries, Inc., a Colorado corporation, the
principal executive office of which is located at 0000 Xxxxx Xxxxxxxx Xxxx.,
Xxxxx 000, Xxxxxxxxx, XX 00000.
CONFIDENTIAL INFORMATION shall have the meaning assigned thereto in Section
8.2 hereof.
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DATE OF TERMINATION means the earliest to occur of (i) the date of the
Employee's death, (ii) the date on which the Employee terminates this Agreement
for any reason other than Good Reason or (iii) the date of receipt of the Notice
of Termination, or such later date as may be prescribed in the Notice of
Termination in accordance with Section 5.6 hereof.
DISABILITY means an illness or other disability which prevents the Employee
from discharging his responsibilities under this Agreement for a period of 180
consecutive calendar days, or an aggregate of 180 calendar days in any calendar
year, during the Employment Period, all as determined in good faith by the Board
of Directors of the Company (or a committee thereof).
EFFECTIVE DATE means July 1, 1997.
EMPLOYEE means Xxxxxx X. Xxxxx.
EMPLOYMENT PERIOD shall have the meaning assigned thereto in Section 3
hereof.
EXCHANGE ACT means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated by the Securities and Exchange Commission
thereunder, all as in effect from time to time during the Employment Period.
EXCISE TAX shall have the meaning assigned thereto in Section 11.1.
GEORGETOWN ACQUISITION means the acquisition by the Company of Addlestone
International Corporation's Georgetown, South Carolina Facility.
GOOD REASON shall have the meaning assigned thereto in Section 5.5 hereof.
GROSS-UP PAYMENT shall have the meaning assigned thereto in Section 11.1
hereof.
IMPOSITION OF EXCISE TAX shall have the meaning assigned thereto in
Section 11.1.
INITIAL TERM shall have the meaning assigned thereto in Section 3 hereof.
MARKET PRICE. For purposes of this Agreement, Market Price means the
closing price of the Common Stock for the ten immediately preceding trading
days if listed on a national securities exchange or quoted on the Nasdaq
National Market or the average of the last reported bid and asked price for the
Common Stock as reported on the Nasdaq SmallCap Market or on the Electronic
Bulletin Board or, if none, the National Quotation Bureau, Inc.'s "Pink Sheets."
NOTICE OF TERMINATION shall have the meaning assigned thereto in Section
5.6 hereof.
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PAYMENT shall have the meaning assigned thereto in Section 11 hereof.
UNEXPIRED TERM shall have the meaning assigned thereto in Section 6.3(c)
hereof.
VOTING STOCK means all outstanding shares of capital stock of the Company
entitled to vote generally in an election of directors; provided, however, that
if the Company has shares of Voting Stock entitled to more or less than one vote
per share, each reference to a proportion of the issued and outstanding shares
of Voting Stock shall be deemed to refer to the proportion of the aggregate
votes entitled to be cast by the issued and outstanding shares of Voting Stock.
WITHOUT CAUSE shall have the meaning assigned thereto in Section 5.4
hereof.
2. GENERAL DUTIES OF COMPANY AND EMPLOYEE.
2.1 The Company agrees to employ the Employee, and the Employee agrees to
accept employment by the Company and to serve the Company as Chairman of the
Board and Chief Executive Officer. At all times during the Employment Period,
the Employee shall report directly to the Board of Directors and shall be
elected to serve as a member of the Board of Directors and as the Chairman of
the Board of Directors. The authority, duties and responsibilities of the
Employee shall include those described in Schedule A to this Agreement, and such
other or additional duties as may from time to time be assigned to the Employee
by the Board of Directors (or a committee thereof) and agreed to by the
Employee. While employed hereunder, the Employee shall devote reasonable time
and attention during normal business hours to the affairs of the Company and use
his best efforts to perform faithfully and efficiently his duties and
responsibilities. The Employee may (a) serve on corporate, civic, religious or
charitable boards or committees, (b) deliver lectures, fulfill speaking
engagements or teach at educational institutions, (c) participate in political
and religious activities, including participation in a political campaign
provided the Employee will comply with all laws and regulations related to such
activities, and (d) manage and oversee personal investments and other business
activities which are not competitive with the Company, so long as such
activities do not significantly interfere with the performance of the Employee's
duties and responsibilities; provided that such activities, alone or on a
cumulative basis, do not interfere with the performance of the Employee's duties
hereunder.
2.2 The Employee agrees and acknowledges that he owes a fiduciary duty of
loyalty, fidelity and allegiance to act at all times in the best interests of
the Company and to do no act and to make no statement, oral or written, which
would injure Company's business, its interests or its reputation.
2.3 The Employee agrees to comply at all times during the Employment
Period with all applicable policies, rules and regulations of the Company,
including, without limitation, the
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Company's policy regarding trading in the Common Stock, as each is in effect
from time to time during the Employment Period.
2.4 The Employee may search for and select, subject to the approval of
the Board of Directors, an individual to serve as his successor to the office of
Chief Executive Officer. If, during the Employment Period, a successor Chief
Executive Officer is hired by the Company and provided the Employee continues to
serve as Chairman of the Board of Directors, the duties of the Employee under
this Section 2 shall be appropriately modified and all other terms of this
agreement shall remain unchanged.
3. TERM.
Unless sooner terminated pursuant to other provisions hereof, the
Employee's period of employment under this Agreement shall be a period of five
years from July 1, 1997 (the "Initial Term"). Prior to the expiration of the
Initial Term, the Company and the Employee may agree, in writing, to extend the
Initial Term. The Initial Term and any and all renewals thereof are referred to
herein collectively as the "Employment Period."
4. COMPENSATION AND BENEFITS.
4.1 BASE SALARY. As compensation for services to the Company, the
Company shall pay to the Employee, until the Date of Termination, an annual base
salary of $400,000 (the "Base Salary"). The Board of Directors (or a committee
thereof), in its discretion, may increase the Base Salary based upon relevant
circumstances. The Base Salary shall be payable in equal semi-monthly
installments or in accordance with the Company's established policy, subject
only to such payroll and withholding deductions as may be required by law and
other deductions applied generally to employees of the Company for insurance and
other employee benefit plans.
4.2 LOAN. The Company shall loan the Employee the amounts and under the
terms provided in this Section 4.2
(i) LOAN AMOUNT. Commencing with the closing of the Georgetown
Acquisition, the Company shall loan to the Employee up to $1,925,000 as follows
(the "Loans"):
(a) Upon the execution of this agreement, the Company shall
loan to the Employee $85,000 in connection with the closing of the
Georgetown Acquisition.
(b) Upon the closing of each Acquisition subsequent to the
Georgetown Acquisition (a "Subsequent Acquisition"), the Company shall loan
to the Employee the amount set forth on Schedule B attached hereto and
incorporated by reference herein. For purposes of this Section 4.2(b); (i)
a single Subsequent Acquisition shall be deemed to occur if the acquired
business had annual revenues of more than $5,000,000 and less than
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$30,000,000 for its last completed fiscal year; (ii) two Subsequent
Acquisitions shall be deemed to have occurred if the acquired business had
annual revenues for its last completed fiscal year of greater than
$30,000,000 but less than $50,000,000; and (iii) each incremental increase,
or part thereof, of $25,000,000 in the acquired business's annual revenues
for its last completed fiscal year over $50,000,000 shall equal one
additional Subsequent Acquisition.
For example, if subsequent to the Georgetown Acquisition, the Company
acquires Company A with annual revenues of $10,000,000 on August 1, 1997;
Company B with annual revenues of $31,000,000 on September 1, 1997, and
Company C with annual revenues of $75,000,000 on October 1, 1997, the
Employee would be loaned the following amounts on the closing of each
acquisition:
Company A = $100,000 (Company A equals Subsequent Acquisition 1)
Company B = $245,000 (Company B equals Subsequent Acquisitions 2
and 3)
Company C = $480,000 (Company C equals Subsequent Acquisitions 4,
5 and 6)
(ii) LOAN ADVANCE. Unless previously advanced upon the completion
of Subsequent Acquisitions as provided above in Section 4.2(i), the Company
shall advance to the Employee up to an additional $295,000 on or before October
1, 1997 from time to time as the Employee may request in writing and subject to
the Company's availability of funds at the time of the request. Amounts loaned
to the Employee pursuant to this Section 4.2(ii) are advances against amounts to
be loaned upon the closing of each Subsequent Acquisition as provided in Section
4.2(i) and, as a result, no additional amounts will be loaned to the Employee
upon the closing of a Subsequent Acquisition as provided in Section 4.2(i) until
sufficient Subsequent Acquisitions have been closed to cover the amounts
advanced pursuant to this Section 4.2(ii).
(iii) INTEREST. The Loans provided for in this Section 4.2 shall
bear interest at the Borrowing Rate as adjusted on the last day of each fiscal
quarter, PROVIDED, HOWEVER, that any amounts advanced to the Employee pursuant
to Section 4.2(ii) shall bear interest at the higher of the Borrowing Rate or
16% until such time as sufficient Subsequent Acquisitions are closed to cover
the amounts advanced pursuant to Section 4.2(ii). Commencing December 15, 1998,
interest shall be payable annually in cash on or before December 31st of each
year during the term of the Loans.
(iv) TERM. All outstanding principal and accrued but unpaid
interest on the Loans shall be due on July 1, 2004. The remaining principal
balance and accrued interest of the
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Note shall be forgiven by the Company if the Employee is terminated pursuant
to Sections 5.1. 5.2, 5.4 or 5.5 hereof or upon a Change of Control of the
Company.
(v) FORM OF NOTE The form of promissory note for each advance is
attached hereto as Schedule C.
4.3 BONUS. In addition to the Base Salary, the Employee shall be awarded
for each fiscal year until the Date of Termination, an annual bonus (either
pursuant to a bonus or incentive plan or program of the Company or otherwise) of
not less than $180,000 plus an additional amount to be determined by the Board
of Directors (or a committee thereof), in its sole discretion (the "Annual
Bonus").
4.4 LOCATION OF OFFICE. The Employee's primary office will be located at
the Company' headquarters in Arapahoe or Xxxxxxx County, Colorado.
4.5 VACATION. Until the Date of Termination, the Employee shall
accrue and be entitled to take one week of paid vacation during each one year
period the Employee has been employed by the Company provided, however, that
the Employee may only accrue a maximum of five weeks of vacation. Any
vacation accrued but not taken by the Employee in excess of five weeks will
be forfeited if not used during the one year Employment period following the
date of accrual. For purposes of this provision, the Employee was initially
employed by the Company on January 1, 1990.
4.6 VEHICLE. Until the Date of Termination, the Company shall lease a
sports utility vehicle, subject to the approval of the Compensation Committee,
on behalf of the Employee.
4.7 INCENTIVE, SAVINGS AND RETIREMENT PLANS. Until the Date of
Termination, the Employee shall be eligible to participate in and shall receive
all benefits under all executive incentive, savings and retirement plans and
programs currently maintained or hereinafter established by the Company for the
benefit of its executive officers and/or employees.
(i) Employee shall be entitled to participate in the Company's
insurance benefit plan which will provide the Employee with term insurance
on the life of the Employee equal to $1,000,000. The Company shall be
responsible for and shall pay all premiums thereon. In all cases, the
beneficiary of such insurance shall be the Employee's spouse and/or lineal
descendants and/or a trust for the benefit of any such person or persons,
as designated, from time to time, by the Employee.
(ii) The Employee and/or the Employee's family, as the case may
be, shall be eligible to participate in and shall receive all benefits
under the Company's welfare benefit plans. Such welfare benefit plans may
include, without limitation, medical, dental, disability, group life,
accidental death and travel accident insurance plans and programs.
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4.8 REIMBURSEMENT OF EXPENSES. The Employee may from time to time until
the Date of Termination incur various business expenses customarily incurred by
persons holding positions of like responsibility, including, without limitation,
travel, long distance telephone charges, cellular phone charges, facsimile,
entertainment and similar expenses incurred for the benefit of the Company or
while traveling or commuting on Company business. Subject to the Company's
policy regarding the reimbursement of such expenses as in effect from time to
time during the Employment Period, the Company shall reimburse the Employee for
such expenses from time to time, at the Employee's request, and the Employee
shall account to the Company for all such expenses.
4.9 DE-MINIMIS EXPENSES. The Employee shall be permitted to use Company
equipment, such as telephones, copy machines and facsimile machines, for
de-minimis personal matters.
5. TERMINATION.
5.1 DEATH. This Agreement shall terminate automatically upon the death
of the Employee.
5.2 DISABILITY. The Company may terminate this Agreement, upon written
notice to the Employee delivered in accordance with Sections 5.6 and 13.1
hereof, upon the Disability of the Employee.
5.3 CAUSE. The Company may terminate this Agreement, upon written notice
to the Employee delivered in accordance with Sections 5.6 and 13.1 hereof, for
Cause. For purposes of this Agreement, "Cause" means (i) the Employee's willful
and continued refusal to perform substantially his duties and responsibilities
as contemplated in this Agreement (other than any such refusal based upon the
written advice received from the Employee's legal counsel that performance of
his duties would cause a breach of his duties to the Company or be a violation
of applicable law or regulation, or resulting from Disability or from the
Employee's termination for Good Reason); (ii) the Employee's willful engaging in
activities which would (a) constitute a breach of a material term of this
Agreement, or (b) result in a material injury to the Company or its Affiliates;
(iii) the Employee's non-appealable conviction of a felony; (iv) the Employee's
acknowledged or admitted commission of acts of fraud, embezzlement, theft or
other dishonest acts against the Company or the good faith determination by the
Board of Directors that the Employee has committed the foregoing acts; and (v)
the Employee's use of alcohol (except at Company sponsored parties or
receptions) or illegal drugs on the Company's premises. For the purposes
hereof, no act or failure or refusal to act on the Employee's part shall be
considered "willful" unless done, or omitted to be done, by the Employee not in
good faith and without belief that his action or omission was in the best
interest of the Company or any Affiliate.
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5.4 WITHOUT CAUSE. The Company may terminate this Agreement Without
Cause, upon written notice to the Employee delivered in accordance with Sections
5.6 and 13.1 hereof. For purposes of this Agreement, the Employee will be
deemed to have been terminated "Without Cause" if the Employee is terminated by
the Company for any reason other than Cause, Disability or death.
5.5 GOOD REASON. The Employee may terminate this Agreement for Good
Reason, upon written notice to the Company delivered in accordance with Sections
5.6 and 13.1 hereof. For purposes of this Agreement, "Good Reason" means (i)
the assignment to the Employee of substantial duties inconsistent in any
material respect with the Employee's duties or responsibilities as contemplated
in this Agreement, provided, however, Employee acknowledges that, from time to
time, he may be required to fulfill various clerical and other tasks incidental
to his employment by the Company which are specifically considered within the
Employee's duties or responsibilities as contemplated in this Agreement, (ii)
any other action by the Company which results in a material diminishment in the
Employee's position (including titles and reporting requirements), authority,
duties or responsibilities, (iii) the removal of the Employee from his position
either as Chief Executive Officer or Chairman of the Company, (iv) any material
breach by the Company of any of the provisions of this Agreement, (v) upon a
Change of Control, the failure of any successor or surviving entity to adopt and
assume all of the provisions of this agreement, including any obligations
triggered by a Change of Control or (vi) any reduction, or attempted reduction,
at any time during the Employment Period, of the Base Salary of the Employee
unless: (i) such reduction is part of an overall proportional reduction in the
compensation of the Company's executive officers implemented by the Company's
Board of Directors or, (ii) in his capacity as a Director, the Employee
recommends or approves the reduction. The determination of the occurrence of any
of the foregoing shall be based upon the good faith determination by the
Employee.
5.6 NOTICE OF TERMINATION. Any termination of this Agreement by the
Company for Cause, Without Cause or as a result of the Employee's Disability, or
by the Employee for Good Reason, shall be communicated by Notice of Termination
to the other party hereto given in accordance with this Agreement. For purposes
of this Agreement, a "Notice of Termination" means a written notice which (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 a termination of the Employee's employment under the provisions so
indicated and (iii) in the case of termination of this Agreement by the Company
for Cause, provides the Employee, and in the case of termination of this
Agreement by the Employee for Good Reason, provides the Company, with a period
of 30 days to cure the basis of such termination, and (iv) specifies the
termination date, if such date is other than the date of receipt of such notice
(which termination date shall not be more than 30 days after the giving of such
notice).
6. OBLIGATIONS OF COMPANY UPON TERMINATION.
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6.1 CAUSE; OTHER THAN GOOD REASON. If this Agreement shall be terminated
either by the Company for Cause or by the Employee for any reason other than
Good Reason, the Company shall pay to the Employee, in a lump sum in cash within
30 days after the Date of Termination, (i) the aggregate of the Employee's Base
Salary (as in effect on the Date of Termination) through the Date of
Termination, if not theretofore paid, and, in the case of compensation
previously deferred by the Employee, all amounts of such compensation previously
deferred and not yet paid by the Company and (ii) the product of (a) the Annual
Bonus paid to the Employee for the last full fiscal year preceding the Date of
Termination and (b) the fraction obtained by dividing (x) the number of days
between the Date of Termination and the last day of the last full fiscal year
preceding the Date of Termination and (y) 365. All other obligations of the
Company and rights of the Employee hereunder shall terminate effective as of the
Date of Termination.
6.2 DEATH OR DISABILITY.
(i) Subject to the provisions of this Section 6.2, if this
Agreement is terminated as a result of the Employee's death or Disability,
the Company shall pay to the Employee or his estate, in a lump sum in cash
within 30 days of the Date of Termination an amount equal to the Employee's
Base Salary (as in effect on the Date of Termination). The Company may
purchase insurance to cover all or any part of the obligation contemplated
in the foregoing sentence, and the Employee agrees to submit to a physical
examination to facilitate the procurement of such insurance.
(ii) Whenever compensation is payable to the Employee hereunder
during a period in which he is partially or totally disabled, and such
Disability would (except for the provisions hereof) entitle the Employee to
Disability income or salary continuation payments from the Company
according to the terms of any plan or program presently maintained or
hereafter established by the Company, the Disability income or salary
continuation paid to the Employee pursuant to any such plan or program
shall be considered a portion of the payment to be made to the Employee
pursuant to this Section 6.2 and shall not be in addition hereto. If
Disability income is payable directly to the Employee by an insurance
company under the terms of an insurance policy paid for by the Company, the
amounts paid to the Employee by such insurance company shall be considered
a portion of the payment to be made to the Employee pursuant to this
Section 6.2 and shall not be in addition hereto.
6.3 CHANGE OF CONTROL; TERMINATION FOR GOOD REASON OR WITHOUT CAUSE.
Upon a Change of Control or if this Agreement shall be terminated either by the
Employee for Good Reason or by the Company Without Cause:
(i) the Company shall pay to the Employee, in a lump sum in cash
within 30 days after the earlier of the effective date of the Change of Control
or Date of Termination the aggregate of the following amounts:
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(a) an amount equal to 5.0 times the Employee's Base Salary
(as then in effect or such higher rate as may have been in effect at
any time during the 90-day period preceding the Change of Control)
and (b) the Annual Bonus paid to the Employee for the last full
fiscal year but, if no bonus was paid, an amount of not less than
$180,000;
(b) in the case of compensation previously deferred by the
Employee, all amounts of such compensation previously deferred and not yet
paid by the Company;
(c) the amount of all accrued but unused vacation as provided
in Section 6.5, below; and
(d) the amount of any federal, state and local taxes payable
by the Employee as a result of the foregoing payments made pursuant to this
Section 6.3(i) plus the amount of any federal, state and local taxes
payable by the Employee as a result of the preceding tax reimbursement
payment.
(ii) The Company shall promptly upon submission by the Employee of
supporting documentation, pay or reimburse to the Employee any costs and
expenses paid or incurred by the Employee which would have been payable under
Section 4.8 of this Agreement.
(iii) All loans made to the Employee under Section 4.2 of the
Agreement shall be immediately forgiven and the Company shall pay to the
Employee (1) a lump sum equal to the amount of any federal, state and local
taxes payable by the Employee as a result of such forgiveness, and (2) a lump
sum equal to the amount of any federal, state and local taxes payable by the
Employee as a result of the preceding tax reimbursement payment.
(iv) all stock options granted to the Employee shall: (i)
immediately vest and become exercisable either by payment of the exercise price
or upon a cashless exercise by the Employee; and (ii) have their exercise price
reduced to the lower of Market Price on the date of the Change of Control or
$1.00 per share. With respect to the stock options, the Company shall pay to
the Employee (1) a lump sum equal to the amount of any federal, state and local
taxes payable by the Employee as a result of either the vesting, change in
exercise price or exercise of any options held by the Employee, and (2) a lump
sum equal to the amount of any federal, state and local taxes payable by the
Employee as a result of the preceding tax reimbursement payment. The provisions
of this Section 6.3(iv) shall survive the termination or expiration of this
Agreement and until all options held by the Employee have been exercised or
expired and all resulting taxes paid.
(v) All legal fees and other expenses incurred by the Employee to
enforce the terms of this Agreement plus the Company shall pay to the Employee
an amount equal to (1) the amount of any federal, state and local taxes payable
by the Employee as a result of the foregoing
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payments, and (2) a lump sum equal to the amount of any federal, state and
local taxes payable by the Employee as a result of the preceding tax
reimbursement payment.
6.4 NO MITIGATION OBLIGATION. The Employee shall not be required to
mitigate damages or the amount of any payment provided for under this Section 6
by seeking other employment or otherwise, nor shall the amount of any payment
provided for under this Section 6 be reduced by any compensation earned by the
Employee as the result of employment by another employer after the termination
of the Employee's employment, or otherwise.
6.5 VACATION TIME. Notwithstanding anything herein to the contrary, upon
termination of this Agreement for any reason, the Company shall pay the Employee
for any accrued but not taken Vacation Time as of the Date of Termination on a
per diem basis based on the Base Salary then in effect, PROVIDED, HOWEVER, that
upon termination in the event of a Change of Control, the amount of accrued
vacation shall not be subject to the five week limitation and all forfeited
accrued vacation from January 1, 1990 through the Date of Termination shall be
deemed to be due and owing to the Employee.
7. EMPLOYEE'S OBLIGATION TO AVOID CONFLICTS OF INTEREST.
In keeping with the Employee's fiduciary duties to the Company, the
Employee agrees that he shall not knowingly become involved in a conflict of
interest with the Company, or upon discovery thereof, allow such conflict to
continue. The Employee further agrees to disclose to the Company, promptly
after discovery, any facts or circumstances which might involve a conflict of
interest with the Company.
8. EMPLOYEE'S CONFIDENTIALITY OBLIGATION.
8.1 The Employee hereby acknowledges, understands and agrees that all
Confidential Information is the exclusive and confidential property of the
Company and its Affiliates which shall at all times be regarded, treated and
protected as such in accordance with this Section 8. The Employee acknowledges
that all such Confidential Information is in the nature of a trade secret.
8.2 For purposes of this Agreement, "Confidential Information" means
information, which is used in the business of the Company or its Affiliates and
(i) is proprietary to, about or created by the Company or its Affiliates,(ii)
gives the Company or its Affiliates a competitive business advantage or the
opportunity of obtaining such advantage or the disclosure of which would be
detrimental to the interests of the Company or its Affiliates, (iii)is
designated as Confidential Information by the Company or its Affiliates, is
known by the Employee to be considered confidential by the Company or its
Affiliates, or from all the relevant circumstances should reasonably be assumed
by the Employee to be confidential and proprietary to the Company or its
Affiliates, (iv) was not or does not become generally available to the public
other than as a result of the disclosure by the Employee or (v) was not
available or did not become available
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to the Employee on a non-confidential basis prior to its disclosure to the
Employee by the Company. Such Confidential Information includes, without
limitation, the following types of information and other information of a
similar nature (whether or not reduced to writing or designated as
confidential):
(a) Internal personnel and financial information of the
Company or its Affiliates, purchasing and internal cost information,
internal service and operational manuals and the manner and methods
of conducting the business of the Company or its Affiliates;
(b) Marketing and development plans, price and cost data,
price and fee amounts, pricing and billing policies, quoting
procedures, marketing techniques, forecasts and forecast assumptions
and volumes, and future plans and potential strategies (including,
without limitation, all information relating to any acquisition
prospect and the identity of any key contact within the organization
of any acquisition prospect) of the Company or its Affiliates which
have been or are being discussed;
(c) Customer services and the type, quantity, specifications
and content of products and services purchased, leased, licensed or
received by customers of the Company or its Affiliates; and
(d) Confidential and proprietary information provided to the
Company or its Affiliates by any actual or potential customer,
government agency or other third party (including businesses,
consultants and other entities and individuals).
8.3 As a consequence of the Employee's acquisition or anticipated
acquisition of Confidential Information, the Employee shall occupy a position of
trust and confidence with respect to the affairs and business of the Company and
its Affiliates. In view of the foregoing and of the consideration to be
provided to the Employee, the Employee agrees that it is reasonable and
necessary that the Employee make each of the following covenants:
(i) At any time during the Employment Period and thereafter, except
as required by law, the Employee shall not disclose Confidential
Information to any person or entity, either inside or outside of the
Company, other than as necessary in carrying out his duties and
responsibilities as set forth in Section 2 hereof, without first obtaining
the Company's prior written consent (unless such disclosure is compelled
pursuant to court orders or subpoena, and at which time the Employee shall
give notice of such proceedings to the Company).
(ii) At any time during the Employment Period and thereafter, the
Employee shall not use, copy or transfer Confidential Information other
than as necessary in carrying
13
out his duties and responsibilities as set forth in Section 2 hereof,
without first obtaining the Company's prior written consent.
(iii) On the Date of Termination, upon the Company's written request,
the Employee shall promptly deliver to the Company (or its designee) all
written materials, records and documents made by the Employee or which came
into his possession prior to or during the Employment Period concerning the
business or affairs of the Company or its Affiliates, including, without
limitation, all materials containing Confidential Information.
9. DISCLOSURE OF INFORMATION, IDEAS, CONCEPTS, IMPROVEMENTS, DISCOVERIES AND
INVENTIONS.
As part of the Employee's fiduciary duties to the Company, the Employee
agrees that during his employment by the Company, the Employee shall promptly
disclose in writing to the Company all information, ideas, concepts,
improvements, discoveries and inventions, whether patentable or not, and whether
or not reduced to practice, which are conceived, developed, made or acquired by
the Employee, either individually or jointly with others, and which relate to
the business, products or services of the Company or its Affiliates,
irrespective of whether the Employee used the Company's time or facilities and
irrespective of whether such information, idea, concept, improvement, discovery
or invention was conceived, developed, discovered or acquired by the Employee on
the job, at home, or elsewhere. This obligation extends to all types of
information, ideas and concepts, including information, ideas and concepts
relating to new types of services, corporate opportunities, acquisition
prospects, the identify of key representatives within acquisition prospect
organizations, prospective names or service marks for the Company's business
activities, and the like.
10. OWNERSHIP OF INFORMATION, IDEAS, CONCEPTS, IMPROVEMENTS, DISCOVERIES AND
INVENTIONS AND ALL ORIGINAL WORKS OF AUTHORSHIP.
10.1 All information, ideas, concepts, improvements, discoveries and
inventions, whether patentable or not, which are conceived, made, developed or
acquired by the Employee or which are disclosed or made known to the Employee,
individually or in conjunction with others, during the Employee's employment by
the Company and which relate to the business, products or services of the
Company or its Affiliates (including, without limitation, all such information
relating to corporate opportunities, research, financial and sales data, pricing
and trading terms, evaluations, opinions, interpretations, acquisition
prospects, the identity of customers or their requirements, the identity of key
contacts within the customers' organizations or within the organization of
acquisition prospects, marketing and merchandising techniques, and prospective
names and service marks) are and shall be the sole and exclusive property of the
Company. Furthermore, all drawings, memoranda, notes, records, files,
correspondence, manuals, models, specifications, computer programs, maps and all
other writings or materials of
14
any type embodying any of such information, ideas, concepts, improvements,
discoveries and inventions are and shall be the sole and exclusive property
of the Company.
10.2 In particular, the Employee hereby specifically sells, assigns,
transfers and conveys to the Company all of his worldwide right, title and
interest in and to all such information, ideas, concepts, improvements,
discoveries or inventions, and any United States or foreign applications for
patents, inventor's certificates or other industrial rights which may be filed
in respect thereof, including divisions, continuations, continuations-in-part,
reissues and/or extensions thereof, and applications for registration of such
names and service marks. The Employee shall assist the Company and its nominee
at all times, during the Employment Period and thereafter, in the protection of
such information, ideas, concepts, improvements, discoveries or inventions, both
in the United States and all foreign countries, which assistance shall include,
but shall not be limited to, the execution of all lawful oaths and all
assignment documents requested by the Company or its nominee in connection with
the preparation, prosecution, issuance or enforcement of any application for
United States or foreign letters patent, including divisions, continuations,
continuations-in-part, reissues and/or extensions thereof, and any application
for the registration of such names and service marks.
10.3 If the Employee creates, during the Employment Period, any original
work of authorship fixed in any tangible medium of expression which is the
subject matter of copyright (such as, videotapes, written presentations on
acquisitions, computer programs, drawings, maps, architectural renditions,
models, manuals, brochures or the like) relating to the Company's business,
products or services, other than an autobiographical work concerning the
Employee or others, whether such work is created solely by the Employee or
jointly with others, the Company shall be deemed the author of such work if the
work is prepared by the Employee in the scope of his employment; or, if the work
is not prepared by the Employee within the scope of his employment but is
specially ordered by the Company as a contribution to a collective work, as a
part of a motion picture or other audiovisual work, as a translation, as a
supplementary work, as a compilation or as an instructional text, then the work
shall be considered to be work made for hire, and the Company shall be the
author of such work. If such work is neither prepared by the Employee within
the scope of his employment nor a work specially ordered and deemed to be a work
made for hire, then the Employee hereby agrees to sell, transfer, assign and
convey, and by these presents, does sell, transfer, assign and convey, to the
Company all of the Employee's worldwide right, title and interest in and to such
work and all rights of copyright therein. The Employee agrees to assist the
Company and its Affiliates, at all times, during the Employment Period and
thereafter, in the protection of the Company's worldwide right, title and
interest in and to such work and all rights of copyright therein, which
assistance shall include, but shall not be limited to, the execution of all
documents requested by the Company or its nominee and the execution of all
lawful oaths and applications for registration of copyright in the United States
and foreign countries.
11. CERTAIN TAXES.
15
11.1 GROSS-UP PAYMENTS. If all or any portion of the payments and
benefits which the Employee is entitled to receive pursuant to the terms of this
Agreement or any other plan, arrangement or agreement in respect of the Company
or its affiliates (the "Payments") constitutes "excess parachute payments"
within the meaning of Section 280G of the Code, that are subject to the excise
tax (the "Excise Tax") imposed by Section 4999 of the Code (or similar tax
and/or assessment), the Company (or its successors or assigns) shall pay to the
Employee an additional amount ("Gross-Up Payment") such that the net amount
retained by the Employee, after deduction of (i) any Excise Tax on Payments,
(ii) any federal, state and local income tax and Excise Tax upon the payment
provided for by this Section 11.1, and (iii) any interest and penalties imposed
in respect of the Excise Tax shall be equal to the full amount of the Payments.
For purposes of determining the amount of the Gross-Up Payment, the Employee
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is to
be made, and state and local income taxes at the highest marginal rates of
taxation in the state and locality of the Employee's residence on the date the
Gross-Up Payment is to be made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes. The
Gross-Up Payment for any Payment shall be paid to Employee within ten (10) days
after the Imposition of Excise Tax, unless the Company undertakes to indemnify
him as provided in Section 11.2. The "Imposition of Excise Tax" shall mean the
earliest of: (a) the issuance by the Internal Revenue Service of a notice
stating in effect that an Excise Tax is due with respect to the Payment; (b)
Employee's delivery to the Company of an opinion of tax counsel selected by
Employee that all or a portion of the Payment is subject to the Excise Tax and
the amount of the Excise Tax on the Payment; or (c) the Company's delivery to
Employee of an opinion of tax counsel selected by the Company and acceptable to
Employee that all or a portion of the Payment is subject to the Excise Tax and
the amount of the Excise Tax on the Payment.
11.2 DEFENSE AND SETTLEMENT OPTION. In lieu of paying the Gross-Up
Payment for any Payment, the Company may elect to undertake, at its sole
expense, the defense and settlement of any assessment by the Internal Revenue
Service of the Excise Tax on any Payment. If the Company so elects to undertake
the defense or settlement of any assessment by the Internal Revenue Service of
the Excise Tax on any Payment, the Company shall protect, defend, indemnify and
hold Employee forever harmless from and against the Excise Tax on such Payment
and any and all liabilities, demands, claims, actions, causes of action,
assessments, losses, costs, damages or expenses, including attorney's fees and
accountant's fees in connection with any thereof, and any interest and penalties
sustained by Employee as a result of or arising out of or by virtue of the
Company's undertaking.
11.3 ADJUSTMENTS. If the Excise Tax is determined to be less than the
amount taken into account in determining the Gross-Up Payment paid pursuant to
Section 11.1, Employee shall repay to the Company, within ten days after receipt
of a refund by the Employee from the Internal Revenue Service of such
overpayment, the portion of the Gross-Up Payment attributable to such reduction
plus interest on the amount of such repayment at the rate provided in Section
16
1273(b)(2)(B) of the Code for debt instruments with a maturity after issuance
equal to the period beginning on the date the Gross-Up Payment was made and
ending on the date of repayment required by this sentence. If the Excise Tax
is determined to exceed the amount taken into account in determining the
Gross-Up Payment paid pursuant to Section 11.1, the Company within 10 days
after the time that the amount of such excess Excise Tax is determined shall
make an additional payment to the Employee of an amount equal to such excess
plus an amount equal to any interest and penalties payable to the Internal
Revenue Service with respect to such excess and any Excise Tax on payment
pursuant to this sentence upon payments made pursuant to this sentence.
12. EMPLOYEE'S NON-COMPETITION OBLIGATION.
12.1 Until the Date of Termination, and for a period of 12 months
thereafter if this Agreement is terminated either by (i) the Company for Cause;
(ii) the Employee for any reason other than Good Reason or (iii) following or
upon a Change of Control, the Employee shall not, acting alone or in conjunction
with others, directly or indirectly, in any of the business territories in which
the Company or any of its Affiliates is presently or from time to time during
the Employment Period conducting business, invest or engage, directly or
indirectly, in any business which is competitive with that of the Company or
accept employment with or render services to such a competitor as a director,
officer, agent, employee or consultant, or take action inconsistent with the
fiduciary relationship of an employee to his employer; provided, however, that
the beneficial ownership by the Employee of up to three percent of the Voting
Stock of any corporation subject to the periodic reporting requirements of the
Exchange Act shall not violate this Section 12.1.
13. MISCELLANEOUS.
13.1 NOTICES. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be deemed to have been given when delivered by hand or mailed by
registered or certified mail, return receipt requested, as follows (provided
that notice of change of address shall be deemed given only when received):
If to the Company to:
0000 X. Xxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Board of Directors
If to the Employee to:
17
Xxxxxx X. Xxxxx
0000 X. Xxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, XX 00000
or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section 13.1.
13.2 WAIVER OF BREACH. The waiver by any party hereto of a breach of any
provision of this Agreement shall neither operate nor be construed as a waiver
of any subsequent breach by any party.
13.3 ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the Company, its successors, legal representatives and assigns, and
upon the Employee, his heirs, executors, administrators, representatives and
assigns; provided that in case of the sale of all or substantially all of the
assets and/or business of the Company, whether by merger, consolidation,
purchase or otherwise, the Company will require the purchaser or acquiror to
assume all of the Company's obligations and liabilities hereunder.
13.4 ENTIRE AGREEMENT; NO ORAL AMENDMENTS. This Agreement, together with
any exhibit attached hereto and any document, policy, rule or regulation
referred to herein, replaces and merges all previous agreements and discussions
relating to the same or similar subject matter between the Employee and the
Company and constitutes the entire agreement between the Employee and the
Company with respect to the subject matter of this Agreement. This Agreement
may not be modified in any respect by any verbal statement, representation or
agreement made by any employee, officer or representative of the Company or by
any written agreement unless signed by an officer of the Company who is
expressly authorized by the Company to execute such document.
13.5 ENFORCEABILITY. If any provision of this Agreement or application
thereof to anyone or under any circumstances shall be determined to be invalid
or unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application.
13.6 GOVERNING LAW. The laws of the State of Colorado shall govern the
interpretation, validity and effect of this Agreement without regard to the
place of execution or the place for performance thereof.
13.7 INJUNCTIVE RELIEF. The Company and the Employee agree that a breach
of any term of this Agreement by the Employee would cause irreparable damage to
the Company and that, in the event of such breach, the Company shall have, in
addition to any and all remedies of law, the
18
right to any injunction, specific performance and other equitable relief to
prevent or to redress the violation of the Employee's duties or
responsibilities hereunder.
13.8 COMPLETE AMENDMENT. This Agreement amends in its entirety the
Executive Employment Agreement between the Company and the Employee dated
July 1, 1997.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement to be effective July 1, 1998.
RECYCLING INDUSTRIES, INC.
By:
-------------------------------
Xxxxxxx X. Xxxxx, Director
By:
-------------------------------
Xxxxxx X. Xxxxxxxxx, Director
EMPLOYEE:
By:
-------------------------------
Xxxxxx X. Xxxxx
19
SCHEDULE A
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
The Employee as chairman shall preside at all meetings of shareholders,
and the chairman shall also preside at all meetings of the board of
directors. Subject to the direction and control of the board of directors,
the Employee shall be the chief executive officer of the Company and as such
shall have general and active management of the business of the Company and
shall see that all orders and resolutions of the board of directors are
carried into effect. The chairman may negotiate, enter into, and execute
contracts, deeds, and other instruments on behalf of the Company as are
necessary and appropriate to the conduct to the business and affairs of the
Company or as are approved by the board of directors. The chairman shall
have such additional authority and duties as are appropriate and customary
for the office of chairman and chief executive officer, except as the same
may be expanded or limited by the board of directors from time to time.
In addition the foregoing duties, the Employee shall:
1. Prepare a strategic plan for the Company in cooperation with the
Company's other executive officers.
2. Identify acquisition opportunities and negotiate for the completion of
such acquisitions in accordance with the Company's strategic plan.
3. Identify and negotiate debt and equity financing consistent with the
Company's strategic plan.
4. Oversee the operations of the Company through and with the Company's
officers who are responsible for operations.
5. Oversee the financing of the Company through and with the Company's
officers who are responsible for financial matters.
6. Manage the corporate functions of the Company.
20
SCHEDULE B
LOAN SCHEDULE
Subsequent Acquisition
Number Loan Amount Cumulative Loan Amount
1 $100,000 $100,000
2 $115,000 $215,000
3 $130,000 $345,000
4 $145,000 $490,000
5 $160,000 $650,000
6 $175,000 $825,000
7 $190,000 $1,015,000
8 $205,000 $1,220,000
9 $220,000 $1,440,000
10 $235,000 $1,675,000
11 $250,000 $1,925,000
21
SCHEDULE C
FORM OF PROMISSORY NOTE
22
