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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
AGREEMENT effective as of May 14, 1999, between XXXXXXX & SYLVAN
POOLS CORPORATION (the "Company"), its successors and assigns, and Xxxx X. Xxxxx
(the "Employee").
The Company agrees to employ the Employee as Executive Vice-President
and Chief Financial Officer of the Company, and the Employee agrees to serve the
Company as Executive Vice-President and Chief Financial Officer, all in
accordance with the terms and conditions set forth below.
1. EMPLOYMENT
(a) The Employee shall have such powers and duties as are customarily
performed by similar officers of companies of similar size as the Company or
such other titles, duties and powers as the board of directors shall reasonably
determine.
(b) The term of this Agreement (the "Term") shall commence on the date
hereof and terminate on December 31, 2000. Unless, at least thirty days prior to
the end of the Term (whether the initial Term or as theretofore extended), the
Company shall have given written notice to the Employee of its intention not to
renew this Agreement, or the Employee shall have given written notice to the
Company of his unwillingness to renew this Agreement or the employment of the
Employee has otherwise been terminated during the Term, the Term shall
automatically be extended for an additional year.
2. COMPENSATION
The Employee will receive a base salary of $140,000.00 with annual
review for so long as this Agreement is continued, at which times increases will
be considered in good faith. In addition to the base salary, the Company shall
pay the Employee a bonus targeted at thirty-five percent (35%) of his base
salary each year ("Target Bonus"), and the Compensation Committee of the
Company's Board of Directors shall determine the appropriate target measures or
goals in connection with bonus compensation. Such bonus shall be determined and
paid within thirty (30) days after the Company's audited financial statements
become available.
3. INITIAL OPTIONS
(a) concurrently with the split-off of the Company and distribution
of its shares to the public and subject to the limitation in (c) below, the
Company hereby agrees to grant to the Employee options (the "Initial Options")
to purchase 25,000 shares of the Company's common stock (the "Shares") at the
price and subject to the following terms and conditions. The Initial Options
shall vest as of the split-off date (the "Commencement Date").
(b) The exercise price per Share for the Initial Options shall be
$16.00 per share.
(c) Regardless of the fact that the Initial Options are deemed to vest
in the Executive on the Commencement Date, the Executive may exercise Initial
Options only in the percentages and at the times set forth below: 0% prior to
the second anniversary of the Commencement Date;
25% at any time after the second anniversary of the
Commencement Date;
50% at any time after the third anniversary of the
Commencement Date;
75% at any time after the fourth anniversary of the
Commencement Date;
100% at any time after the fifth anniversary of the
Commencement Date;
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4. BENEFITS
During the term of this Agreement, the Employee and his eligible
dependents shall be entitled to participate in and receive benefits under any
stock option or profit-sharing plan, health, disability, medical insurance or
other employee welfare or benefit plan or arrangement made generally available
by the Company during the term of this Agreement to its executives and key
management employees.
5. CAR
During the term of this Agreement, the Company shall provide the
Employee with an automobile of a type customary for executives in similar
positions and shall pay for operating expenses incurred in connection with the
use of the automobile, including the costs of insurance, gas, maintenance and
car phone.
6. TRADE SECRETS: CONFIDENTIAL AND PROPRIETARY INFORMATION
The Employee shall not at any time or in any manner, either directly or
indirectly, divulge, disclose or communicate to any person, firm, company,
corporation or business in any manner whatsoever any confidential information
relating to the business of the Company, including without limitation, the
Company's customer list, pricing policies, trade secrets, know-how, product
designs, strategic plans and similar types of information. The foregoing
restrictions shall not apply to the extent that such information (a) is
obtainable in the public domain, (b) becomes obtainable in the public domain,
except by reason of the breach by the Employee of the terms hereof, or (c) is
required to be disclosed by rule of law or by order of a court or governmental
body or agency. This Section 6 shall remain in full force and effect for a
period of ten (10) years after expiration or termination of this Agreement for
any reason.
7. COVENANT NOT TO COMPETE
During the term of this Agreement and for a period of two (2) years
thereafter, the Employee will not, without the Company's prior written consent,
directly or indirectly engage in, make any investment in or have any interest in
any business in competition with the business of the Company; the Employee will
not advise, assist or render services either directly or indirectly to any
person, firm, company, corporation or business other than the Company with
reference to any business in competition with the business engaged in by the
Company during the Employee's employment by the Company; and the Employee will
not employ or offer employment to any employee or solicit, directly or
indirectly, any employee to leave the Company. Notwithstanding the foregoing,
the ownership of securities of any business competing with the Company, if such
securities are publicly traded on a national securities market and constitute
less than five percent (5%) of the outstanding stock thereof, shall not
constitute a violation of this provision. For purposes of this Section 7, a
business in competition with the Company shall mean any business engaged in the
manufacture, design, installation, processing, sale or distribution of products
that are the same as or similar to those of the Company at any time during the
term of this Agreement.
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8. TERMINATION OF CONTRACT
It is agreed that subject to the provisions of Section 9 below, the
Company may terminate the employment of the Employee at any time with or without
cause by prior written notice to the Employee.
9. SEVERANCE AND ENTITLEMENT
In the event the Company decides to terminate the employment of the
Employee under the section entitled "TERMINATION OF CONTRACT" for any reason
and/or at any time, for reasons other than "Good Cause" (as hereinafter
defined), or determines not to renew this Agreement at the end of the Term
(whether the initial Term or as theretofore extended), the Employee will be
entitled to, in lieu of any and all other payments that may otherwise be due
under this Agreement, (i) a termination allowance in an amount equal to (a)
twelve months' salary at the then current rate of the Employee's pay and (b) the
annual Target Bonus to which the Employee would be entitled if his targeted
goals were attained for the fiscal year during which such termination occurs and
the Employee were employed during such entire year, multiplied by a fraction the
numerator of which is the number of days elapsed during the year through such
date of termination and the denominator of which is 365, and (ii) a continuation
of all medical and other employee benefits for the shorter of (a) twelve months
following the effective date of the termination and (b) the effective date of
coverage by similar plans of another employer. The termination allowance shall
be paid by the Company in twelve equal monthly installments beginning on the
first day of the first month following the effective date of termination;
provided, however, that the Employee continues to be in compliance with Sections
6 and 7 above. Any stock options vested and exercisable as of the date of such
termination may be exercised by the Employee for up to three (3) months after
the date that the Company delivers notice of such termination. In the event the
Company terminates this Agreement for "Good Cause," which will be defined as the
failure or refusal by the Employee to perform his assigned duties, failure to
adhere to Company policy and/or the engaging by the Employee in misconduct
injurious to the Company, the Employee will not be entitled to receive any
termination allowance, continuation of benefits, or any other payments provided
for in this Agreement, and any and all unexercised stock options held by the
Employee, both exercisable and non-exercisable and unvested, shall be
automatically forfeited and cancelled by the Company.
10. NOTICE OF TERMINATION
Any intended termination of the employment of the Employee by the
Company or by the Employee shall be communicated by written notice of
termination ("Notice of Termination") to the other party hereto in accordance
with the section entitled "NOTICES" and shall state the grounds for termination.
Any purported termination of the Employee's employment which is not effected
pursuant to a Notice of Termination shall not be effective in discharging the
Employee.
11. DEATH OR DISABILITY; RESIGNATION
(a) Disability or Death. If the Employee is incapacitated for a period
of three (3) consecutive months so that he cannot perform his duties hereunder
on a full-time basis, then move forward
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either the Company or the Employee may give written notice to the other
terminating the Employee's employment effective thirty (30) days thereafter
(the "Disability Termination Date"). The Company shall continue to provide
salary, medical coverage, disability and group life insurance to the Employee
for six (6) months after the earlier of the Disability Termination Date or date
of death. In the event of death or disability any stock options that are not yet
exercisable shall immediately become exercisable. In the event of the Employee's
death or disability, his estate or the Employee may exercise any options held
for up to one (1) year after such date. Except as set forth herein, if the
Employee dies prior to the termination of his employment or if notice of
termination for up to disability is given as provided above, the Company's
obligations hereunder shall terminate as of the earlier of the Employee's death
or the Disability Termination Date.
(b) Resignation. If the Employee's employment is terminated by reason
of his voluntary resignation, all of the Company's obligations hereunder shall
terminate as of the termination date. All unexercised options, both vested and
unvested, shall be automatically forfeited and cancelled by the Company.
12. CHANGE IN CONTROL
If there occurs a "change in control" (as hereinafter defined) of the
Company, any options granted to the Employee shall immediately become
exercisable by the Employee at any time.
The term "change in control" means the first to occur of the following
events: (i) when any "person" as defined in Section 3(a)(9) of the Exchange Act
and as used in Sections 13(d) and 14(d) thereof, including a "group" as defined
in Section 13(d) of the Exchange Act, but excluding the Company and any employee
benefit plan sponsored or maintained by the Company (including any trustee of
such plan acting as trustee), directly or indirectly, becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act, as amended from time to
time), of securities of the Company representing more than fifty percent (50%)
of the combined voting power of the Company's then outstanding securities; or
(ii) The completion of a transaction requiring shareholder approval for the
acquisition of substantially all of the stock or assets of the Company by an
entity other than the Company or any merger of the Company into another company
and the Company is not the surviving company. Notwithstanding anything else in
this agreement, "Change in control" shall not include any change for reasons of
bankruptcy, insolvency or otherwise for the benefit of the Company's creditors.
13. TAXES
If all or any of the amounts payable to the Executive under this Agreement
(together with all other payments of cash or property, whether pursuant to this
Agreement or otherwise, including, without limitation, the issuance of shares
or options) constitutes "excess parachute payments" within the meaning of
Section 280G of the Code that are subject to the excise tax imposed by Section
4999 of the Code (or any similar tax or assessment), the amounts payable
hereunder shall be increased to the extent necessary to place the Executive in
the same after-tax position as he would have been in had no such tax assessment
been imposed on any such payment paid or payable to the Executive under this
Agreement or any other payment that the Executive may receive in connection
therewith. The determination of the amount of any such tax or assessment and
the incremental payment required hereby in connection therewith shall be made
by the accounting firm employed by the Executive within thirty (30) calendar
days after such payment and said incremental payment shall be made within five
(5) calendar days after determination has been made. If, after the date upon
which the payment required by this Section 3(d) has been made, it is determined
(pursuant to final regulations or published rulings of the Internal Revenue
Service, final judgment of a court of competent jurisdiction, Internal Revenue
Service audit assessment, or otherwise) that the amount of excise or other
similar taxes or assessments payable by the executive is greater than the
amount initially so determined, then the Company shall pay the Executive an
amount equal to the sum of: (i) such additional excise or other taxes, PLUS
(ii) any interest, fines and penalties resulting from such underpayment, PLUS
(iii) an amount necessary to reimburse the Executive for any income, excise or
other tax assessment payable by the Executive with respect to the amounts
specified in (i) and (ii) above, and the reimbursement provided by this clause
(iii), in the manner described above in this Section 3(c). Payment thereof
shall be made within five (5) calendar days after the date of such subsequent
determination. If, after the date upon which the payment required by this
Section 3(c) has been made to the Executive, it is determined that the
Executive is entitled to receive a refund of all or part of such payment, then
the Executive shall pay to the Company all amounts received by the Executive as
a refund of any such overpayment of excise or other taxes.
14. AMENDMENT
This Agreement may be amended at any time by a written agreement signed
by the Company and the Employee.
15. WAIVERS
The voluntary waiver by the Company or the Employee of any provision of
this Agreement or any breach thereof does not entail a waiver of any other
portion of this Agreement or this Agreement as a whole, or any subsequent breach
of the same provision, and does not affect the validity of this Agreement.
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16. GOVERNING LAW
This Agreement, and all rights, duties and remedies hereunder shall be
governed by and construed and interpreted in accordance with the procedural and
substantive laws of the State of Ohio.
17. SEVERABILITY
Should any portion of this Agreement be declared by a court of law
having competent jurisdiction over the persons and subject matter of this
Agreement to be invalid or unenforceable, the remainder of this Agreement shall
remain enforceable and in full effect. In the event that any provision of this
Agreement should be or becomes invalid for any reason, such provision shall
remain effective to the maximum extent permissible, and the parties shall
consult and agree on a legally acceptable modification giving effect to the
commercial objectives of the unenforceable or invalid provision, and every other
provision of this Agreement shall remain in full force and effect.
18. SUCCESSORS
This Agreement shall inure to the benefit of, and be enforceable by, the
parties' successors, representatives, executors, administrators or assignees.
19. NOTICES
All notices or other communications hereunder shall be in writing and
shall be made by hand delivery, facsimile or registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
If to the Company, to: Xxxxxxx & Sylvan Pools Corporation
000 Xxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Chief Executive Officer
If to the Employee, to: Xxxx X. Xxxxx
Xxxxxxx & Sylvan Pools Corporation
000 Xxxx Xxxxx
Xxxxxxx, XX 00000
or at such other addresses as shall be furnished by the parties by like notice,
and such notice or communication shall be deemed to have been given or made as
of the date so delivered, if
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delivered personally; when receipt is acknowledged, if sent by facsimile; and
five calendar days after so mailed, if sent by registered or certified mail.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
XXXXXXX & SYLVAN POOLS CORPORATION
By:____________________________________
Xxxxxx X. Xxxxxx
Its: Chief Executive Officer
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Xxxx X. Xxxxx
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