Exhibit 10(aa)
EMPLOYMENT AGREEMENT
This Agreement is entered into, to be effective as of March 15, 2004,
by and between Warrantech Home Service Company, a Connecticut corporation, with
its principal place of business located at 0000 Xxxxxxx 000, Xxxxx 000, Xxxxxxx,
Xxxxx 00000 ("Employer"), and Xxxx Xxxxxxx, an individual residing at 00000 XX
00xx Xxxxx, Xxxxxxx, Xxxxxxx 00000 ("Executive").
RECITALS
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WHEREAS, Employer recognizes that Executive will be a key member of
management and important to the long term development and prospects of Employer;
and
WHEREAS, Employer desires to employ Executive and Executive desires to
be employed by Employer pursuant to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the forgoing and the terms and
conditions set forth herein, Employer and Executive hereby agree as follows:
I. Employment and Duties
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Employer hereby employs Executive, and Executive hereby accepts such
employment, upon the terms and conditions set forth in this Agreement. Executive
shall render such executive, managerial, supervisory, developmental, marketing,
or other services as Employer may specify from time to time, subject at all
times to the direction and control of the Chief Executive Officer of Warrantech
Corporation, Employer's Board of Directors or any designee of any thereof.
Executive shall serve as and with the title of President of Employer.
II. Term
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The term of Executive's employment under this Agreement shall commence
on March 15, 2004 and shall continue through March 31, 2007.
III. Compensation
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3.1 Salary. Employer shall pay Executive a base salary equal to
One Hundred Thousand Dollars ($100,000). Such base compensation shall be payable
in accordance with Employer's payroll practices as in effect from time to time.
When unit sales through real estate agencies, brokers and agents exceed 10,000
per month for three consecutive months, net of cancellations, Executive's base
salary will be increased by $25,000 per annum. When unit sales through real
estate agencies, brokers and agents exceed 12,000 per month for three
consecutive months, net of cancellations, Executive's base salary will be
increased by an additional $50,000 per annum.
3.2 Incentive Compensation. Employer and Executive have agreed
that Executive will be eligible to receive an annual cash incentive bonus in an
amount equal to two per cent (2%) of Employer's EBITDA determined in accordance
with generally accepted accounting principles. The calculation and distribution
of such bonus shall correspond with Employer's fiscal year and shall be made
annually within 15 days after the filing of the Warrantech Corporation's Annual
Report on Form 10-K with the Securities and Exchange Commission.
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3.3 Stock Options. Executive shall be eligible to participate in
Warrantech Corporation's stock option plan ("Plan") in accordance with the terms
and conditions set forth in Exhibit "A" attached hereto and incorporated herein.
3.4 Medical Insurance. Employer shall obtain and maintain in full
force and effect a comprehensive major medical, hospitalization group plan (or
the equivalent) with dental coverage for the benefit of Executive and his
qualified dependents. The medical and dental premiums will be fully paid for
Executive and his qualified dependents. In the event of termination pursuant to
Article V or in the event Employer and Executive mutually agree, medical and
dental benefits will be available under the federal Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) at Executive's option and expense.
3.5 Relocation. Employer will provide relocation from Executive's
current residence in Florida to the Dallas/Fort Worth, Texas area in accordance
with Employer's regular relocation practices and policies. Executive will
complete his relocation not later than September 1, 2004. Employer will bear the
cost of rent and utilities for a one-bedroom apartment for Executive's use prior
to relocation, such apartment to be selected by Employer, for a period ending on
the earlier to occur of (i) September 1, 2004, and (ii) the completion of
Executive's relocation (provided Executive remains an employee of Employer).
Employer will provide Executive with up to six (6) round trip coach airline
tickets between Florida and Texas to be used by Executive and/or his spouse
during the period prior to relocation. Upon completion of his relocation on or
before September 1, 2004, Executive will be eligible to receive a $25,000
relocation bonus.
3.6 Other Compensation. In addition to the compensation heretofore
set forth, or as may be hereinafter provided, Employer shall provide Executive
during his employment any and all benefits commensurate with his position, which
Employer, in its sole and absolute discretion, may make available to its
executive officers (or employees in general, if any one is not available solely
for executive officers) under any general pension plan, or other executive
benefit plan which may be in effect at any time or from time to time during the
employment period.
3.7 Automobile. It is contemplated that to perform the services
required by this Agreement, Executive shall obtain and remain fully responsible
for the maintenance and repair of an automobile, for which Employer shall
provide Executive with an expense allowance in the amount of Six Thousand
Dollars ($6,000) per annum.
3.8 Life Insurance. Employer, for the benefit of Executive, shall
provide group term-life coverage in an amount equal to one hundred percent
(100%) of Executive's base salary, not to exceed One Hundred Fifty Thousand
Dollars ($150,000).
3.9 Vacation. Executive shall be entitled to receive paid vacation
during each calendar year in accordance with Employer's vacation schedule.
3.10 Expenses. Employer shall reimburse Executive in accordance
with Employer's expense reimbursement policies for all reasonable and necessary
expenses including, without limitation, travel and entertainment expenses,
incurred by Executive in connection with the business of Employer. Expenses
relating to membership in and attendance at trade and business associations and
conventions shall be reimbursed subject to the prior approval of Employer. All
such reimbursement shall be paid upon presentation of expense statements or
vouchers or such other supporting information as Employer may reasonably
require.
3.11 401(k). Executive will be eligible to participate in the
Warrantech Corporation Retirement Savings Plan at the first open enrollment
period following one year of employment.
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IV. Extent of Service
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Executive shall devote his full time, attention, energies and skill to
the business of Employer, as directed by Employer, and shall assume and perform
such responsibilities and duties as may be assigned to him from time to time by
the Chief Executive Officer of Warrantech Corporation, Employer's Board of
Directors or any designee of either thereof. Executive shall be required to
travel to such locations as may be directed by Employer in the course of
Executive's duties hereunder.
V. Termination
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Notwithstanding any contrary provisions herein contained, the
employment of Executive pursuant to this Agreement may be terminated before the
expiration of the term as specified in the following provisions of this Article
V, but such termination shall not affect the obligations of Executive set forth
in Article VII hereof.
5.1 Death. Executive's employment hereunder shall be terminated
immediately in the event of his death.
5.2 By Employer, For Cause. Employer shall have the right to
immediately terminate Executive's employment under this Agreement for cause.
"Cause" includes, but is not limited to, the following:
(a) Misappropriating any funds or property of Employer;
(b) Attempting to obtain personal profit from any transaction in
which Employer has an interest;
(c) The material failure, material neglect or material refusal to
(i) perform the duties assigned to Executive under or pursuant
to this Agreement or (ii) abide by the other covenants, terms
and conditions of this Agreement; or
(d) Activities by Executive of a public nature failing to conform
to the community standard of generally accepted personal or
business conduct that such activities may reasonably be
expected to reflect badly upon the public image of Employer or
its business.
5.3 By Employer and Executive, Without Cause. This Agreement may
be terminated by Employer or Executive prior to the expiration of the term
hereof upon not less than sixty (60) days prior written notice. Notwithstanding
the forgoing, however, in the event that Executive gives notice of his intent to
terminate this Agreement Employer may elect, in its sole discretion, to
terminate this Agreement and Executive's employment hereunder at any time after
receipt of notice from Executive.
5.4 Effect of Termination. In the case of termination pursuant to
this Article V, the salary and other compensation specified in Section III,
unless otherwise specified, shall immediately terminate and cease to accrue.
Executive shall not be entitled to any stock options unless they have fully
vested and no credit will be given for partial years of employment to ascertain
the amount of options that are fully vested.
VI. Inventions
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6.1 Definitions. As used herein "Inventions" shall mean all
discoveries, inventions, improvements, and ideas relating to any process,
formula, program or software, machine, device, manufacture, composition of
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matter, plan or design, whether patentable or not, and specifically includes,
but is not limited to, all designs and developments, of whatsoever nature,
relating to computer hardware, software or programs.
6.2 Rights to Inventions. Executive shall, during the period of
his employment with Employer, make prompt and full disclosure of all Inventions
which Executive makes or conceives, individually, jointly, or with any other
executive, or Employer or affiliate of Employer, during the period of
Executive's employment by Employer. All such inventions shall become Employer's
exclusive property.
Notwithstanding the foregoing, Executive shall retain all his rights
in, and shall not be required to assign to the Employer any invention
(hereinafter an "Excluded Invention"): (a) which was developed entirely on
Executive's own time, and (b) which does not relate directly to or have any
application to the business of Employer or any Warrantech affiliate or to their
actual or demonstrably anticipated research or development, or which does not
result from any work performed by Executive for Employer. This paragraph
constitutes written notification to the Executive of the inventions which
Executive is not required to assign to Employer. Executive shall advise employer
of any invention made or conceived by Executive which Executive believes he is
entitled to pursuant to this paragraph.
6.3 Records. Executive will keep and maintain complete written
records of all Inventions made or conceived by Executive, and of all work on
investigations done or carried out by Executive for Employer at all stages
thereof, which records shall be the property of Employer, except for records of
the Excluded Inventions. Upon termination of his employment with Employer,
Executive agrees to deliver promptly to Employer any unpublished memoranda,
notes, records, reports, sketches, plans, programs, software, or other documents
held by him concerning any Inventions or potential Inventions to which Employer
would be entitled pursuant to the provisions hereof, including any information,
knowledge or data relating thereto, or pertaining to the Employer's business or
contemplated business, whether confidential or not.
6.4 Assignments. During Executive's employment hereunder and after
the termination thereof, Executive shall execute, acknowledge, and deliver to
Employer all such papers, including applications for or assignments of patents
or copyrights or applications for the same, as may be necessary to enable
Employer, its nominees, successors or assigns, at its or their expense, to
publish, protect by litigation or otherwise, obtain titled and/or copyrights or
patents to the Inventions which are the property of Employer pursuant to this
Agreement, in any and all countries.
VII. Confidentiality and Non-Compete
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7.1 Non-Competition Covenant. Executive agrees that, during the
period of Executive's employment by Employer and during the one year period
immediately following Executive's employment by Employer or any Warrantech
subsidiary or affiliate in any capacity, he will not, directly or indirectly,
own, manage, operate, control, consult with or for, be employed by or an agent
for, participate in or be connected in any manner with the ownership,
management, operation or control of any business that is competitive with the
business of Employer or any of its subsidiaries or affiliates. Further,
Executive acknowledges that, as the President of Employer, his services are
unique and extraordinary, and that the restrictions herein are reasonable for
Employer's protection of its legitimate business interests.
If any court or arbitrator having jurisdiction determines that the
foregoing non-compete covenant is invalid due to its duration, coverage or
extent, the covenant shall be modified to reduce its duration, coverage or
extent as necessary to make such covenant valid, and the covenant as modified
then shall be enforced.
7.2 Confidentiality and Trade Secrets. During and after the terms
of his employment by Employer, Executive shall not communicate, divulge, or use
any secret, confidential information, trade secret or confidential customer list
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of Employer or any affiliate of Employer for any purpose whatsoever except as
consented to in writing by Employer. This obligation shall apply with respect to
any such item until such item ceases (other than through the action of
Executive) to be secret or confidential. Executive shall have no obligation
hereunder to keep confidential any Confidential Information to the extent
disclosure of any thereof is required by law or determined in good faith by
counsel to Executive to be necessary or appropriate to comply with any legal or
regulatory order, regulation or requirement; provided, however, that in the
event disclosure is required by law, Executive shall provide Employer with
prompt notice of such requirement so that Employer may seek an appropriate
protective order.
7.3 Remedies. In the event of any actual breach by either of the
parties of the provisions of this Section VII, then each shall be entitled to
all the remedies available by law or in equity, including without limitation the
right to obtain damages for said breach and non-adherence and the right to
enjoin the other, or any other person or entity in or threatening breach or
non-adherence, from continuing, and to remedy, the activities which constitute
said breach. The parties acknowledge and agree that any remedies at law may be
inadequate in the event of any breach of the provisions of this Section VII,
and, therefore they agree and acknowledge that each shall be entitled to all
equitable remedies that are appropriate in the event of such breach.
VIII. Miscellaneous.
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8.1 Entire Agreement. This Agreement contains the entire agreement
among the parties, superseding in all respects any and all prior oral or written
agreements or understandings pertaining to the subject matter hereof and
transactions contemplated hereby, and shall be amended or modified only by
written instrument signed by all of the parties hereto.
8.2 Waiver. No waiver by any party of any condition, or of the
breach of any term, covenant, representation or warranty contained in this
Agreement, whether by conduct or otherwise, in any one or more instances shall
be deemed to be or construed as a further and continuing waiver of any such
condition or breach of any other term, covenant, representation, or warranty of
this Agreement, or the agreements or documents executed in connection herewith.
8.3 Right of Offset. If at any time Employer is obligated to make
payments to Executive under this Agreement, whether as compensation,
reimbursement of expenses or otherwise, Employer shall have the right to offset
against said obligation any amount which Executive is obligated to pay to
Employer or any corporation controlling, controlled by or under common control
with the Employer at the time of offset. In the event that the amount which
Employer seeks to offset is in dispute or otherwise unliquidated, Employer may
nevertheless exercise its right of offset, but if it is ultimately determined
that Employer was not entitled to such offset, Employer shall, in addition to
the amount not properly offset, pay Executive interest on such amount from the
date of offset to the date of payment at 6% per annum. In the event that it is
necessary for Executive to take any action, whether at law or in equity, to
recover amounts which employer inappropriately withheld under this provision,
then the prevailing party shall be entitled to reasonable attorney's fees, costs
and other necessary disbursements in addition to any other relief to which it
may be entitled.
8.4 Binding Effect; Assignment. This Agreement shall be binding
upon, and shall inure to the benefit of and be enforceable by, the parties
hereto and their respective heirs, successors, and assigns, but this Agreement
shall not be assignable by Executive. In the event of (i) the merger or
consolidation of Employer with or into any other entity, (ii) the acquisition of
Employer by any entity, or (iii) the sale or other disposition by Employer of
all or substantially all of its businesses and/or assets, this Agreement shall
remain legally valid and binding and shall be enforceable by Executive against
the surviving entity.
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8.5 General. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, but all of which
shall constitute one and the same instrument. The section headings contained
herein are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement. This Agreement shall be governed,
enforced and construed under the laws of the State of Texas.
8.6 Resolution of Disputes. In the event of a dispute or
disagreement between the parties arising out of or in connection with this
Agreement, prior to submission of the controversy to arbitration, the parties
shall submit the matter to mediation in a proceeding to be conducted in
Stamford, Connecticut. If the parties exhaust the mediation process without a
successful resolution of the matter, the dispute shall be settled in the State
of Connecticut by arbitration before a panel of three arbitrators, one selected
by Employer and one selected by Executive, with a third being appointed by the
two so chosen. The arbitration shall be commenced by the initiating party
notifying the other party of its demand for arbitration and of the arbitrator
whom it selected and demanding that the other party select its arbitrator. If
the third arbitrator is not selected within 30 days after the demand is served,
he shall be selected in accordance with the rules and regulations then in effect
of this American Arbitration Association or its successor. In any action,
whether at law, in equity, or in arbitration, to enforce or interpret the terms
of, or otherwise arising out of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, arbitrator fees, costs and necessary
disbursements in addition to any other relief to which it may be entitled.
8.7 Representation and Indemnity. Executive represents and
warrants to Employer that (i) he has the full right and power to enter into this
Agreement, (ii) he is not bound by any non-compete covenant or agreement that
would prevent him from accepting employment with Employer, subject Employer to
any liability arising out of his employment, or infringe on his ability to fully
perform his duties as President of Employer, and (iii) he is not subject to any
other restriction or impediment that would prevent him from fully performing his
duties as President of Employer. Executive hereby indemnifies Employer against
any claims, losses, damages or expenses that Employer may incur or suffer in
connection with any inaccuracy in, or breach of, any of the representations
and/or warranties set forth in this Section 8.7.
8.8 Survivability. Notwithstanding anything herein to the
contrary, Sections 6.4, 7.1, 7.2, 7.3, 8.3, 8.6, and 8.7 above shall survive the
termination of this Agreement and shall be deemed fully enforceable thereafter.
IN WITNESS WHEREOF, the parties have duly executed this Agreement to be
effective as of March 15, 2004.
WARRANTECH HOME SERVICE COMPANY EXECUTIVE
By: /s/ XXXX SAN ANTONIO /s/ XXXX XXXXXXX
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Xxxx San Antonio Xxxx Xxxxxxx
Title: Chief Executive Officer
Date: March 15, 2004 Date: March 15, 2004
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EXHIBIT A
Stock Options
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Warrantech Corporation ("Warrantech") hereby grants Executive options
to purchase up to Sixty Thousand Dollars ($60,000) worth of shares of Warrantech
Corporation common stock ("Stock") under its Incentive Stock Option Plan (the
"Plan") at an exercise price equivalent to the fair market value of the Stock at
the close of business on the date such options are approved by Warrantech's
Board of Directors. Subject to the qualifications set forth below, the options
granted hereunder will vest and become exercisable at the conclusion of each
fiscal year during the term of the Agreement as follows: Ten Thousand Dollars
($10,000) worth of the options granted hereunder will vest and become
exercisable at the conclusion of Warrantech's fiscal year ending March 31, 2005.
Twenty Thousand Dollars ($20,000) worth of the options granted hereunder will
vest and become exercisable at the conclusion of Warrantech's fiscal year ending
March 31, 2006. Thirty Thousand Dollars ($30,000) worth of the options granted
hereunder will vest and become exercisable at the conclusion of Warrantech's
fiscal year ending March 31, 2007.
Stock options are subject to and based 50% on Employer meeting its financial
objectives and 50% based on Warrantech meeting its financial objectives at the
close of each relevant fiscal year and are subject to approval by the Board of
Directors. Such options shall be subject to other terms and conditions
applicable to options granted under the Plan. The vesting and exercise of such
options are also dependent on Executive's continued employment with Employer at
the time such options vest.
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