EXHIBIT 10.40
TBC MANAGEMENT, LTD.
November 16, 1999
Xx. Xxxx X. Xxxxxx
Xxxxxx Boats & Motors, Inc.
5000 Plaza on the Xxxx Xxxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Re: Employment Agreement
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Dear Xxxx:
This letter agreement (this "Letter Agreement") sets forth the terms of
your employment relationship with TBC Management, Ltd., a Texas limited
partnership (the "Company"), which has an agreement to provide management
services to Xxxxxx Boats & Motors, Inc., a Texas corporation, and its
subsidiaries (collectively referred to as "Xxxxxx Boats"). As an inducement to
you to enter into this Letter Agreement, if for any reason the agreement between
the Company and Xxxxxx Boats ceases to exist, the Company shall immediately
assign this Letter Agreement to Xxxxxx Boats. Xxxxxx Boats, by signing below
where indicated, agrees to accept such assignment and perform the terms of this
Letter Agreement. This Letter Agreement supersedes all previous agreements
between you and the Company and/or Xxxxxx Boats, including but not limited to
the Letter Agreements dated December 14, 1995, as amended, and May 7, 1996 (the
"May 7 Letter Agreement").
1. Duties. You agree to perform the duties and assume the
responsibilities normally incidental to the position of President of Xxxxxx
Boats. You further agree to perform for the Company such other duties and
responsibilities as may be reasonably prescribed from time to time by the
Company. It is acknowledged that you are the President, but not an employee, of
Xxxxxx Boats.
2. Extent of Service. The initial term of this employment contract with
the Company shall expire on the third anniversary of the Effective Date of this
Letter Agreement (as defined in paragraph 3 hereof), unless sooner terminated in
accordance with the terms hereof. You shall devote such time, attention and
energy to the business of the Company as shall be reasonably requested, and you
will faithfully, industriously, and to the best of your ability perform all of
the duties that may be required of you as an employee. You will not engage in
activities, businesses, or investment that would in any way conflict with the
best interests of the Company or Xxxxxx Boats.
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November 16, 1999
Page 2
3. Effective Date. This Letter Agreement shall be effective as of June
28, 1999 (the "Effective Date"). The parties acknowledge that this Letter
Agreement shall be deemed effective as of the expiration of the May 7 Letter
Agreement.
4. Salary. As long as you remain employed by the Company, the Company
will pay you an annual salary of $200,000 (before federal or state withholding
deductions), subject to adjustments, payable on the same schedule that salary is
paid to other salaried employees of the Company. Your performance and base
salary will be reviewed annually by the Company. You may be entitled to receive
such further compensation as may be authorized by the Company upon such annual
review or at other times deemed appropriate by the Company.
5. [Intentionally Omitted]
6. Benefits. As long as you remain employed by the Company, you shall
be entitled to participate in health insurance, dental insurance, disability
insurance, and accidental, death and disability insurance, as provided to the
other executive employees of the Company, and such vacation and holiday time as
provided in the Company's vacation/holiday policy. The Company shall provide you
the use of an automobile for business use with all maintenance costs, automobile
insurance premiums, gas and Company-related cellular phone charges paid by the
Company.
7. Renewal and Extension Bonus Payment. As consideration for limiting
other employment opportunities during the term of this Letter Agreement, the
Company will pay you a renewal and extension bonus payment (the "Renewal Bonus")
of $129,362.01, subject to withholding for applicable federal income tax, social
security and other items required by law. The Company and you agree that you
shall promptly repay a pro rata share of the Renewal Bonus to the Company based
upon the initial three (3) year term of this Letter Agreement (net of any
applicable taxes paid by you upon the payment of the Renewal Bonus) if you leave
the employ of the Company during the initial term of this Letter Agreement,
except for any termination of this Letter Agreement in connection with: (a) a
termination by you for Good Reason (as defined below), (b) a termination by the
Company Without Good Cause (as defined below), or (c) a termination by you
Without Good Reason (as defined below) within sixty (60) days after the date of
a Change of Control (as defined below).
8. Annual Bonus. As long as you remain employed by the Company and the
consolidated income of Xxxxxx Boats before income tax expense and non-recurring
audit adjustments (collectively "Pre-tax Income") reflects growth of 20% or more
over the previous fiscal year, you
Xx. Xxxx X. Xxxxxx
November 16, 1999
Page 3
shall receive an annual bonus of 1.5% of such total annual Pre-tax Income. If
the Pre-tax Income reflects growth of less than 20% over the previous fiscal
year, the annual bonus shall be an amount determined by the Company.
9. Termination of Employment; Severance Payments. Notwithstanding the
foregoing or anything to the contrary contained in this Letter Agreement, you
may terminate your employment relationship with the Company at any time and for
any reason whatsoever, or for no reason, after giving the Company written notice
of such resignation at least 30 days prior to such intended resignation date,
subject to the following provisions:
(a) You shall have the right to resign for any Good Reason (as defined
below) and such resignation shall be deemed to be a termination Without Good
Cause (as defined below) for all purposes under this Agreement, including the
"Change of Control" provisions set forth below and the severance provisions set
forth in paragraph 9(d) below. For purposes of this Agreement, the term "Good
Reason" shall be defined as:
(i) The Company's failure in any material respect to perform
any provision of this Agreement;
(ii) Any material changes in your duties and responsibilities
under this Agreement without your written consent;
(iii) The hiring or promotion by the Company of another
executive employee to a position of substantially similar job description or
daily responsibility for the management of the Company without your written
consent;
(iv) The Company's directing you to work at a location other
than Austin, Texas without your written consent; or
(v) After a Change of Control, any material change which, in
your sole but reasonable discretion, impacts you detrimentally upon your
position within the Company.
(b) Any resignation by you for any reason other than Good Reason shall
be deemed a resignation "Without Good Reason." Other than as provided in
paragraph 9(d) with respect to your resignation Without Good Reason during the
60-day period following a Change of Control, in the event of your resignation
Without Good Reason, the Change of Control provisions in paragraph 10 and the
severance provisions in paragraph 9(d) shall be inapplicable.
(c) From the date you voluntarily terminate your employment with the
Company Without Good Reason (other than as provided in paragraph 9(d) with
respect to your resignation Without
Xx. Xxxx X. Xxxxxx
November 16, 1999
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Good Reason during the 60-day period following a Change of Control), from the
date of your death or from the date your employment is terminated For Cause (as
defined below) by the Company, you shall no longer be entitled to any base
salary, bonus or other compensation benefits, other than such salary and bonus
amounts earned but unpaid as of the date of termination of your employment. The
term "For Cause" shall mean (i) your gross neglect or willful misconduct in the
discharge of your duties and responsibilities to the Company, as determined by
the Board of Directors of the general partner of the Company, (ii) your repeated
failure to obey reasonable directions from the Company or the Board of Directors
of the general partner of the Company, (iii) any act of yours against the
Company or Xxxxxx Boats intended to enrich you at the expense of the Company or
Xxxxxx Boats, (iv) any willful act or omission by you having the effect of
materially injuring the business or business relationships of the Company or
Xxxxxx Boats, or (v) your commission of a felony or any crime involving moral
turpitude, fraud or misrepresentation. Any termination that is not For Cause or
that does not result from your death or disability, shall be deemed to be a
termination "Without Good Cause."
(d) If your employment is terminated by the Company Without Good Cause
(including expiration of a term without renewal) or you terminate this Letter
Agreement Without Good Reason within sixty (60) days after the date of a Change
of Control, then you shall be entitled to receive 2.99 times your annual
compensation with proration of bonus for the year in which your employment was
terminated, which amounts shall be payable over the three-year term in the same
manner as such compensation would have been payable if employment had not
terminated, provided that the Company may elect to pay or you may elect to
receive such compensation as a lump sum payment.
(e) Notwithstanding the foregoing you may submit the decision to
classify termination of your employment as "For Cause" to binding arbitration
under the rules and auspices of the American Arbitration Association then in
effect.
10. Change of Control. The Company acknowledges that you agreed to
assume your position with the Company and to enter into this Agreement based
upon his confidence in the current shareholders of the Company and the support
of the Board of Directors for the development of a new strategy for the Company.
Accordingly, if the Company should undergo a "Change of Control," as defined in
this section, the parties agree as follows:
(a) For purposes of this Agreement, a "Change of Control" shall be
deemed to exist in the event that any of the following occurs:
(i) a change in the ownership of the capital stock of the
Company where a corporation, person or group acting in concert (a "Person") as
described in Section 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), holds or acquires, directly or indirectly, beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
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November 16, 1999
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Act) of a number of shares of capital stock of the Company which constitutes 40%
or more (or, 30% or more in the event the Company is subject to the reporting
requirements of Sections 12 or 15(d) under the Exchange Act) of the combined
voting power of the Company's then outstanding capital stock then entitled to
vote generally in the election of directors; or
(ii) the persons who were members of the Board of Directors
immediately prior to a tender offer, exchange offer, contested election or any
combination of the foregoing, cease to constitute a majority of the Board of
Directors of the Company; or
(iii) a dissolution of the Company, or the adoption by the
Company of a plan of liquidation, or the adoption by the Company of a merger,
consolidation or reorganization involving the Company in which the Company is
not the surviving entity, or a sale of all or substantially all of the assets of
the Company (for purposes of this Agreement, a sale of all or substantially all
of the assets of the Company shall be deemed to occur if any Person acquires, or
during the 12-month period ending on the date of the most recent acquisition by
such Person, has acquired, gross assets of the Company that have an aggregate
fair market value equal to 50% or more of the fair market value of all of the
gross assets of the Company immediately prior to such acquisition or
acquisitions); or
(iv) a tender offer or exchange offer is made by any Person
which, if successfully completed, would result in such person beneficially
owning (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
either 50% or more of the Company's outstanding shares of Common Stock or shares
of capital stock having 50% or more of the combined voting power of the
Company's then outstanding capital stock (other than an offer made by the
Company), and sufficient shares are acquired under the offer to cause such
person to own 30% or more of the voting power; or
(v) a change in control is reported or is required to be
reported by the Company in response to either Item 6(e) of Schedule 14A of
Regulations 14A promulgated under the Exchange Act or Item 1 of Form 8-K
promulgated under the Exchange Act, which change in control has not been
approved by a majority of the Board of Directors then in office who were
directors at the beginning of the two-year period ending on the date the
reported change in control occurred; or
(vi) during any period of two consecutive years, individuals
who, at the beginning of such period constituted the entire Board of Directors
of the Company, cease for any reason (other than death) to constitute a majority
of the directors, unless the election, or the nomination for election, by the
Company's stockholders, of each new director was approved by a vote of a least a
majority of the directors then still in office who were directors at the
beginning of the period.
Xx. Xxxx X. Xxxxxx
November 16, 1999
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For purposes of paragraph 10(a)(i) above, if a Person were the
beneficial owner of 30% or more or 40% or more, as applicable, of the combined
voting power of the Company's then outstanding securities as of the Effective
Date and such Person thereafter accumulates more than 5% of additional voting
power, a Change of Control of the Company shall be deemed to have occurred,
notwithstanding anything in this Agreement to the contrary. A Change of Control
shall include any other transactions or series of related transactions occurring
which have substantially the same effect as the transactions specified in any of
the preceding clauses of paragraph 4(a)(i)-(vi). However, a Change of Control
shall not be deemed to occur if a person becomes the beneficial owner of the
applicable percentage or more (as referenced above) of the combined voting power
of the company's then outstanding securities solely by reason of the Company's
redemption or repurchase of securities; but further acquisitions by such Person
that cause such Person to be the beneficial owner of the applicable percentage
or more (as referenced above) of the combined voting power of the Company's then
outstanding securities shall be deemed a Change of Control.
(b) In the event of a Change of Control, as defined in this section,
all stock options then held by you for the purchase of equity securities of the
Company shall immediately become vested, effective on the date of the Change of
Control.
11. Nondisclosure and Noncompetition; Consideration.
(a) You shall not, at any time during the term of your employment by
the Company, nor so long as such information remains confidential with the
Company or Xxxxxx Boats, use for your own account or for the benefit of any
other person, firm, corporation or entity, directly or indirectly, except in the
ordinary course of business, any of the supplier lists, customer or subscriber
lists, contract terms, trade names, trade secrets or goodwill owned or used by
the Company or Xxxxxx Boats in its business or, directly or indirectly, disclose
or furnish to any other person, firm, corporation or entity, the methods by
which the Company's business or that of Xxxxxx Boats is or has been conducted,
any of the methods by which the customers or business of the Company or that of
Xxxxxx Boats are or have been obtained, or any confidential or proprietary
information whatsoever of the Company or Xxxxxx Boats, including, without
limitation, the Intellectual Property described in paragraph 12 below and the
identities of or other information regarding any customers or prospective
customers of the Company.
(b) Unless the Company consents in writing, at any time during the term
of your employment with the Company, and within one year after the date your
employment with the Company terminates, you will not, within the United States,
directly or indirectly own, manage, operate, control, be employed by, advise or
be connected in any manner (including, without limitation, as an employee,
director, agent, partner, officer, stockholder, creditor, consultant or
otherwise) with any person, firm, corporation or business which directly or
indirectly is competitive with the Company's business (i.e., any business which
engages in the business of retail marketing
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November 16, 1999
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or selling recreational power boats, boat motors or boat trailers or provides
services to people or entities selected because of their involvement in the same
industry); provided, however, the covenant not to compete set forth in this
paragraph 11(b) shall not apply if you are rightfully entitled to receive, and
the Company fails to pay you, the consideration in paragraph 9(d) or if you are
part of a group that seeks to effect a Change of Control with respect to the
Company.
(c) Notwithstanding the foregoing, nothing in this Letter Agreement
will prohibit you from owning less than five percent of the capital stock of a
corporation, the common stock of which is publicly traded on a national
securities exchange or through NASDAQ, notwithstanding that such corporation may
compete with the Company.
(d) At any time during the term of your employment by the Company, and
within one year after the date your employment with the Company terminates,
neither you nor any entity or business owned or controlled by you, will,
directly or indirectly for your benefit or the benefit of any third party,
without the written consent of the Company, hire or solicit the employment of
any employee of the Company or influence or induce any employee to leave or
decline employment by the Company.
12. Materials. All data, listings, charts, drawings, records,
documents, programs, software, documentation, memoranda, journals, notebooks,
records, files, drafts, specifications and similar items relating to the
business of the Company or its affiliates, whether compiled by you, furnished to
you by the Company, its customers or clients or otherwise made accessible to you
or coming into your possession, while you are employed by the Company, and
copies of any such items, shall be and remain the sole and exclusive property of
the Company or its customers or clients, as the case may be, and none of such
items shall be removed from the Company's business premises by you without the
prior consent of the Company, except as required in the course of your
employment. All of such items shall be returned to the Company by you upon the
termination of your employment with the Company for whatever reason. The
provisions of this paragraph shall not, however, prohibit you from using any
materials published by the Company and made available (without a breach of this
agreement) to the general public.
13. Intellectual Property. If, during the term of your employment, you
develop any proprietary technology (including without limitation any
architecture, structure, layouts, processes, formulae, inventions, know-how,
ideas, concepts, designs, drawings, specifications, test data, and quality and
quality control standards); any patents and patent rights (including all
information or discoveries covered thereby and all enhancements, modifications,
improvements, divisions, continuations, continuations in part, reissues,
re-examinations or extensions thereof), trademarks and trademark rights,
copyrights and copyright rights, trade secrets and trade secret rights, and
applications, registrations or their equivalents for any of the same; or any
other intellectual property rights (collectively, the "Intellectual Property"),
relating to the manufacturing or supplying of
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November 16, 1999
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products or services in which the Company is or is likely to be involved, such
Intellectual Property shall automatically become the property of the Company.
You agree to cooperate with the Company to perfect your respective claims to
such Intellectual Property and to execute and deliver any and all documents
reasonably necessary in order to effectuate the intent of this paragraph, and
you hereby grant to the Company an irrevocable power of attorney to execute any
such documents.
14. Notices. All notices and communications hereunder shall be in
writing and shall be deemed to have been duly given to a party when delivered in
person (including delivery by an express delivery service or by facsimile
transmission during the recipient's regular business hours), or three business
days after such notice is enclosed in a properly sealed envelope, certified or
registered, and deposited (postage and certification or registration prepaid) in
a post office or collection facility regularly maintained by the United States
Postal Service and addressed for delivery, if to you, at 0000 Xxxxx Xxxx,
Xxxxxx, Xxxxx 00000, or if to the Company, at 5000 Plaza on the Xxxx Xxxx.,
Xxxxx 000, Xxxxxx, Xxxxx 00000.
15. Miscellaneous.
(a) The rights and obligations of the Company under this Letter
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company.
(b) This Letter Agreement shall be subject to and governed by the laws
(except the conflict of laws) of the State of Texas.
(c) Whenever the context requires, the gender of all words used herein
shall include the masculine, feminine and neuter, and the number of all words
shall include the singular and plural. Titles of sections are for convenience
only and neither limit nor amplify any of the provisions contained herein.
(d) Upon execution of this Letter Agreement, the rights, duties and
obligations of the parties hereto with respect to the matters set forth herein
shall be governed solely by the provisions of this Letter Agreement, and all
representations, warranties, terms and conditions with respect to such matters
which may be contained in any prior writing executed by the parties (or by any
of them) shall be null and void and of no further force and effect.
(e) If any provisions of this Letter Agreement, or the application
thereof to any party hereto or under any circumstances, shall be invalid or
unenforceable to any extent, the remainder of this Letter Agreement and the
application of such provisions to other parties or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law;
provided, that a provision as similar in terms and effect to such invalid or
unenforceable shall be added automatically as part of this Letter Agreement.
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November 16, 1999
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(f) In the event of a breach or threatened breach by you of any
provision of this Letter Agreement, then in addition to any other available
remedy to which the Company may be entitled, including the recovery of damages,
the Company shall be entitled to an injunction restraining you from breaching or
attempting to breach, in whole or in part, any of the provisions of this Letter
Agreement. In addition, in the event of a breach by either party of any
provision of this Letter Agreement, the non-breaching or (in the event of
litigation) the prevailing party shall be entitled to recover from the other
party all reasonable costs and attorneys' fees incurred by the non-breaching or
prevailing party in seeking any of such remedies, in addition to the other
relief to which the non-breaching or prevailing party may be entitled. As used
in the preceding sentence, "prevailing party" shall include, without limitation,
the party who retains legal counsel or brings an action against the other party
and subsequently obtains all or substantially all of the relief sought, whether
by compromise, settlement or judgment.
* * *
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November 16, 1999
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If you are in agreement with the foregoing, please so indicate by
signing the enclosed extra original of this Letter Agreement and returning it to
the Company, whereupon the provisions contained herein will be effective as of
the date of this letter. Xxxxxx Boats, by signing below where indicated, agrees
to be bound by the terms of this agreement in the event the management contract
between the Company and Xxxxxx Boats ceases to exist.
Very truly yours,
TBC Management, Ltd.
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx, Chief Financial Officer of
Xxxxxx Boats & Motors, Inc., its Managing
General Partner
AGREED TO AND ACCEPTED:
/s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx
Date: , 1999
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AGREED TO AND ACCEPTED:
Xxxxxx Boats & Motors, Inc.
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Chief Financial Officer
Date: , 1999
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