EXHIBIT 10.31
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") between ELTRAX SYSTEMS, INC. a
Minnesota corporation having its principal place of business in Atlanta, Georgia
("Eltrax"), together with its subsidiaries (collectively, the "Company") and XXX
X. XXXXXXX, an individual residing in the State of Georgia ("Employee"), is
dated as of March 24, 1999.
ARTICLE 1: EMPLOYMENT, DUTIES AND TERM
1.1 Employment Position. Upon the terms and conditions set forth in this
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Agreement, the Company hereby employs Employee as President and Chief
Executive Officer of Eltrax, and Employee accepts such employment.
1.2 Duties
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(a) Employee shall devote his full-business time and give his best efforts
to the Company and to fulfilling those duties commensurate with his
position; provided, however, that Employee may serve as a director for
a company that does not compete with Eltrax, subject to the prior
approval of the Eltrax Board of Directors, whose consent shall not be
unreasonably withheld.
(b) Employee shall perform his duties in the best interests of the
Company, its employees and its shareholders.
(c) Employee shall comply with the Company's policies and procedures to
the extent they are not inconsistent with this Agreement, in which
case the provisions of this Agreement shall prevail.
1.3 Term. The term of Employee's employment shall commence on March 24, 1999
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(the "Employment Date"), and shall terminate on the later of March 31,
2003 or the final day of the Severance Period (as defined in Section 3.2
(b)(ii), unless earlier terminated pursuant to Article 3 of this
Agreement. Employee will assume his duties as President and CEO of the
Company during April of 1999, on a date to be determined by the Eltrax
Board of Directors.
ARTICLE 2: BASE COMPENSATION, EXPENSES, AND BENEFITS
2.1 Base Salary. For all services rendered under this Agreement during the
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term of Employee's employment, the Company shall pay Employee, in
accordance with Eltrax's usual pay practices, a base salary, exclusive of
benefits and bonuses, at an annual rate of Two Hundred Fifty Thousand
Dollars ($250,000) (the "Base Salary").
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2.2 Bonus.
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(a) In addition to the Base Salary, Employee will be entitled to an annual
bonus (which shall not be less than zero) calculated as 2% of the
Company's net income (without taking into account amounts paid under
this Section 2.2(a)), as reported in the Company's Form 10-K (the
"Bonus"). Notwithstanding, for each of 1999 and 2000, Employee shall
receive a minimum $100,000 Bonus and for the first three (3) months of
2003, Employee shall receive an amount equal to the Bonus for such
year multiplied by 25%. Company and the Employee agree that the
formula used to determine the Bonus shall be mutually reviewed on or
within 120 days from the Employment Date.
(b) The declaration and payment of the Bonus shall be made as soon as
practicable following the audit of the Company's annual earnings, but
in no event later than April 15th of each year, and shall be paid in a
lump sum to Employee, subject to applicable withholding rules.
2.3 Options.
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(a) Employee shall receive options (the "Bonus Options") issued under the
Eltrax Stock Incentive Plans (the "Option Plans") to acquire 500,000
shares of Eltrax common stock (the "Bonus Stock") at an exercise
price equal to the market price of such Bonus Stock on the Employment
Date. To the extent permitted under applicable law the Bonus Options
shall be characterized as incentive stock options under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
(i) The Bonus Options shall vest, subject to Article 3, according
to the following schedule: (A) 100,000 on the Employment
Date, and (B) 100,000 on each successive yearly anniversary
of the Employment Date.
(ii) Provided termination of this Agreement has not occurred pursuant
to Sections 3.1(a) or 3.2(a), the Company guarantees that at
March 31, 2003, or if earlier, the end of the Severance Period
(as defined in Section 3.2(b)(ii)), the difference between the
Bonus Stock Fair Market Value (defined below) and the aggregate
exercise price of Employee's vested Bonus Options will be no less
than $1,305,000. In the event such difference is less than
$1,305,000, the Company will pay to the Employee the amount of
such deficiency (but in no event more than $1,305,000) as
additional compensation, as soon as practicable following the
calculation of such deficiency. Bonus Stock Fair Market Value
shall mean the average of the closing prices of Eltrax common
stock on each of the
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five trading days preceding the day immediately prior to
March 31, 2003, or if earlier, the end of the Severance Period,
multiplied by the number of shares of Bonus Stock which may be
acquired pursuant to exercise of Employee's vested Bonus Options.
(b) During the first quarter of each year beginning in 2000, Employee
shall receive options to acquire a minimum of 50,000 shares of
Eltrax's common stock at the market price of such shares on such
issuance date (the "Performance Options"). To the extent permitted
under applicable law, the Performance Options shall be characterized
as incentive stock options under Section 422 of the Code. The vesting
of such Performance Options shall be based on standards of performance
for the Employee and the Company determined by the Company's Board of
Directors; provided, however, that vesting shall not be delayed beyond
March 31, 2003.
(c) All aspects of the Bonus Options and the Performance Options shall be
governed by the terms and conditions of the Eltrax Option Plans,
unless specific language regarding the treatment of such Options
appears in this Agreement.
2.4 Benefits. In addition to other compensation, Employee shall be entitled to
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participate in all benefit plans currently maintained or hereafter
established by the Company for the benefit of its executive officers
generally, in accordance with the terms and conditions of such plans (each
a "Benefit Plan"). To the extent Employee is subject to any waiting period
pending entry into a particular Benefit Plan, the Company will reimburse
Employee during such period for his actual COBRA costs, if any, under his
prior employer's group health plan.
2.5 Vacation. Employee shall be entitled to twenty-five (25) paid vacation days
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for each twelve (12) month period of employment, which if unused, shall
accrue ratably during each such period.
2.6 Expenses. The Company shall reimburse Employee for all expenses reasonably
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and necessarily incurred by Employee during the course and in furtherance
of his employment, subject to and made in accordance with such reasonable
and nondiscriminatory policies and procedures as may be established by the
Company as applicable to its employees.
ARTICLE 3: EARLY TERMINATION
3.1 Termination for Cause.
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(a) The Company may terminate Employee's employment immediately for Cause.
For the purpose hereof, "Cause" means: (i) fraud against the Company;
(ii) theft or embezzlement of the Company's assets, or misuse of
Company funds; (iii) willful violation of law resulting in a felony
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conviction against the Company; (iv) Employee's conviction of any
felony not in the Company's business; (iv) a material breach of the
terms and conditions of this Agreement not cured within thirty (30)
days after written notice describing such breach; or (v) the continued
failure by Employee to perform his duties under this Agreement not
cured within thirty (30) days after written notice describing such
failure.
(b) In the event of termination for Cause pursuant to this section, none
of Employee's unvested Bonus Options or Performance Options shall
vest following the Termination Date set forth in a Notice of
Termination (as defined in Section 3.4(a)), and Employee shall receive
through such Termination Date, in accordance with the Company's usual
pay practices, the following:
(i) pay at the usual rate of Employee's Base Salary;
(ii) any accrued but unpaid Bonus relating to the prior calendar year
of employment;
(iii) any benefits to which the Employee is entitled under any
Benefit Plan; and
(iv) compensation for all accrued but unused vacation days, for all
periods under this Agreement, to be paid within thirty (30) days
of termination, calculated by multiplying the aggregate number
of such days by a fraction, the numerator of which equals the
Base Salary and the denominator of which equals 260.
3.2 Termination Without Cause. Either Employee or the Company may terminate
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Employee's employment without Cause by delivering to the other party
hereto, a Notice of Termination which specifies a Termination Date no
sooner than thirty (30) days following the date of such Notice. In the
event of termination of this Agreement and of Employee's employment
pursuant to this section, compensation shall be paid as described below:
(a) If the termination is by Employee, Employee shall receive through the
Termination Date, in accordance with the Company's usual pay
practices, each of the items listed in paragraphs (i)-(iv) of
Section 3.l(b) above, and none of Employee's unvested Bonus Options
or Performance Options shall vest following such Termination Date.
(b) If the termination is by the Company, or by the Employee with Good
Reason (as defined in Section 3.4(c)), Employee shall receive, in
accordance with the Company's usual pay practices:
(i) Each of the items listed in paragraphs (i) - (iv) of Section
3.1(b) above, through the Termination Date;
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(ii) For a period of twelve (12) months following such Termination
Date (the "Severance Period"):
(1) Employee's Base Salary;
(2) The Bonus applicable to the complete calendar year which
ends within the Severance Period, plus a pro-rata share of
the Bonus applicable to the subsequent calendar year,
calculated by multiplying the Bonus for such year by a
fraction, the numerator of which shall equal the number of
days between January 1st and the final day of the Severance
Period, and the denominator of which shall equal 365; and
(3) Any benefits to which Employee is entitled under any
Benefit Plan; provided, however, that Employee does not
receive comparable benefits during such Severance Period
from another source.
(iii) Until termination of the Severance Period, with respect to
Employee's Bonus Options and Performance Options. Employee shall
be treated as employed by the Company. As a consequence,
Employee's Bonus Options and Performance Options will continue
to vest, in accordance with their designated schedules, until
the end of the Severance Period, and such Options shall remain
exercisable for a period of three (3) months following the end
of the Severance Period. Following the Severance Period, no
vesting of Employee's Bonus Options or Performance Options shall
occur.
3.3 Termination in the Event of Death or Disability. Employee's employment
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shall terminate in the event of Death or Disability of Employee.
"Disability" shall mean Employee's inability, as reasonably determined by
the Eltrax Board of Directors, to perform the essential functions of his
duties under this Agreement because of illness or incapacity for a
continuous period of six (6) months. In the event of Employee's termination
due to death or Disability, Employee shall receive each of the items listed
in paragraphs (i) and (ii) of Section 3.2(b) above, all unvested
Performance Options and Bonus Options shall immediately vest, and all such
Options will remain exercisable through and including the end of the
Severance Period, but in no event beyond such date.
3.4 Definitions:
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(a) "Termination Date" shall mean the effective date of termination
specified in a Notice of Termination; provided, however, that in the
case of Employee's death, the Termination Date shall be date of such
death, and in the case
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of Employee's Disability, the Termination Date shall be the date
Eltrax provides written notice of such Disability to Employee.
(b) "Notice of Termination" shall include a written notice of termination
communicated to the other party hereto in accordance with Section 6.3
hereof; provided, however, that such Notice shall only be effective if
it:
(i) indicates the specific termination provision in this Agreement
relied upon;
(ii) sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for such termination, and
(iii) states the effective date of termination.
(c) "Good Reason" means:
(i) A material breach by the Company of the terms and conditions of
this Agreement not cured within thirty (30) days after the
Company's receipt of written notice describing such breach;
(ii) The removal Of Employee as President or CEO of the Company, or
Employee failing to be named as President and CEO of any
company (or its parent) which acquires more than 50% of the
outstanding stock of the Company; or
(iii) Assuming no prior termination of this Agreement, for any
reason, the failure of the Company on or prior to March 1,
2003, to offer Employee the opportunity to renew his employment
for a period of twenty-four (24) months following March 31,
2003, on the same terms as set forth in Sections 1.1, 2.1-2.6
(other than Section 2.3(a)), and Articles 3, 4 and 5 herein.
ARTICLE 4: CONFIDENTIALITY, DISCLOSURE AND ASSIGNMENT
4.1 Confidentiality. Employee will not, during the term or after the
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termination or expiration of the term of employment, publish, disclose, or
utilize in any manner any Confidential Information (as hereinafter defined)
obtained while employed by the Company. If Employee leaves the employ of
the Company, Employee will not, without its prior written consent, retain
or take away any drawing, writing or other record in any form containing
any Confidential Information. "Confidential Information" means information
or material which is not generally available to or used by others, or the
utility or value of which is not generally known or recognized as standard
practice, whether or not the underlying details are in the public domain,
including: (a) information or material relating to the Company, and
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its businesses as conducted or anticipated to be conducted, business plans,
operations, past, current or anticipated software, products or services,
customers or prospective customers, or research, engineering, development,
manufacturing, purchasing, accounting, or marketing activities; (b)
information or material relating to the Company's inventions, improvements,
discoveries, "know-how," technological developments, or unpublished works,
or to the materials, apparatus, processes, formulae, plans or methods used
in the development, manufacture or marketing of the Company's software,
products or services; (c) any information marked "proprietary," "private,"
or "confidential"; (d) trade secrets; (e) software in any stage of
development, including source code and binary code, software designs,
specifications, programming aids (including subroutines and productivity
tools), programming languages, interfaces, visual displays, technical
documentation, user manuals, data files and databases; and (f) any similar
information of the type described above which the Company obtained from
another party and which the Company treats as or designates as being
proprietary, private or confidential, whether or not owned or developed by
the Company.
4.2 Business Conduct and Ethics. During the term of employment with the
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Company, Employee will engage in no activity or employment which materially
conflicts with the interest of the Company, and will comply with all
reasonable, nondiscriminatory Company policies and guidelines.
4.3 Survival. The obligations of this Article 4 shall survive the expiration
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or termination of Employee's employment.
ARTICLE 5: NON-COMPETITION
5.1 Non-Competition. Employee agrees that on and prior to the time he ceases to
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provide services to the Company, or until the end of the Severance Period,
if later:
(a) Employee will not, directly or indirectly, alone or as a partner,
member, officer, director, shareholder or employee of any other firm
or entity, engage in any commercial activity in competition with any
part of the Company's business which was under Employee's management
or supervision at any time during the term of this Agreement or any
part of the Company's business with respect to which Employee has
Confidential Information. For purposes of this section, "shareholder"
shall not include beneficial ownership of less than five percent (5%)
of the combined voting power of all issued and outstanding voting
securities of a publicly held corporation whose voting stock is traded
in a public market;
(b) Employee will not divert, or by aid to others, do anything which would
tend to divert, or may divert from the Company, any trade or business
with any customer, supplier or vendor with whom the Company has had
any contact or association; or
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(c) Outside the normal course of Employee's duties as President and Chief
Executive Officer, take any affirmative action to induce or attempt to
induce any person employed by the Company to leave the employment of
the Company.
5.2 Enforcement. In addition to any other rights and remedies available to the
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Company for breach of this Article 5, the Company shall be entitled to
enforcement by court injunction.
5.3 Effect of Termination. Upon the termination of Employee's employment, no
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additional compensation shall be paid for the non-competition obligation.
ARTICLE 6: GENERAL PROVISIONS
6.1 No Adequate Remedy. The parties acknowledge it is impossible to measure in
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money the damages which will accrue to either party by reason of a failure
to perform any of the obligations under this Agreement. Therefore, in the
event of a claim for equitable relief, each party hereby waives the claim
or defense that the other has an adequate remedy at law.
6.2 Successors and Assigns. Except as otherwise provided herein, this Agreement
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shall be binding upon and inure to benefit of the successors and assigns of
the Company. This Agreement shall not be assignable by the Employee, but
its economic terms shall inure to the benefit of the Employee's heirs and
beneficiaries.
6.3 Notice. All notices, requests and demands given to or made pursuant hereto
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shall, except as otherwise specified herein, be in writing and be delivered
or mailed to any such party at its address which:
(a) In the case of the Company shall be:
Eltrax Systems, Inc.
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Attn: Clunet X. Xxxxx
With a copy to:
Xxxxxxx X. Xxxxx, Esq.
Jaffe, Raitt, Heuer & Xxxxx, P.C.
Xxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
(b) In the case of Employee shall be:
Xxx X. Xxxxxxx
0000 Xxxxxx Xxx
Xxxxxxxx, Xxxxxxx 00000
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Any notice, if mailed properly addressed, postage prepaid, registered or
certified mail, shall be deemed sent on the registered date or that stamped
on the certified mail receipt, and shall be deemed received on the second
business day thereafter.
6.4 Captions. The various headings or captions in this Agreement are for
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convenience only and shall not affect the meaning or interpretation of this
Agreement.
6.5 Governing Law. The validity, construction and performance of this
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Agreement shall be governed by the laws of the State of Georgia without
giving effect to the conflict of laws principles thereof.
6.6 Construction. Wherever possible, each provision of this Agreement shall be
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interpreted in such manner as to be effective and valid under applicable
law. If any provision of this Agreement shall be prohibited or invalid, all
remaining clauses shall remain fully enforceable.
6.7 Waivers. No failure on the part of either party to exercise, and no delay
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in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any partial exercise of any right or remedy hereunder
preclude any exercise of that or any other right or remedy granted hereby
by law.
6.8 Modification. This Agreement may not be and shall not be modified or
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amended except by written instrument signed by all parties.
6.9 Entire Agreement. This Agreement constitutes the entire agreement and
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understanding between the parties hereto in reference to all the matters
herein agreed upon and supersedes all prior or contemporaneous agreements,
understandings and negotiations with respect to the subject matter hereof.
6.10 Arbitration. With the sole exception of the injunctive relief contemplated
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by Section 5.2 of this Agreement, any controversy or claim arising out of
any aspect of the relationship of the parties hereto, will be settled by
binding arbitration in Atlanta, Georgia by a panel of three arbitrators in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association. Judgment upon any arbitration award may be entered
in any court having jurisdiction thereof and the parties consent to the
jurisdiction of the courts of the State of Georgia for this purpose.
6.11 Attorneys' Fees. In the event there is litigation or other proceedings
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between the parties hereto with respect to their rights and obligations
under this Agreement, the prevailing party in any such litigation shall be
entitled to recover from the opposing party all reasonable attorneys' fees
and expenses (including fees of accountants) incurred by the prevailing
party in connection with such proceeding.
6.12 Venue: Jurisdiction. The parties agree that all actions or proceedings
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arising in connection with this Agreement and the instruments, agreements
and documents executed pursuant to the terms of this Agreement shall be
tried, litigated and
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arbitrated only in the courts of the United States located in the Northern
District of Georgia, the Georgia state courts or the offices of the
American Arbitration Association located nearest Atlanta, Georgia. The
Employee irrevocably accepts for himself and in respect of his property,
generally and unconditionally, the jurisdiction of such courts. The
Employee irrevocably consents to the service of process out of any such
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to him, at his address as
set forth in the records of the Company, such service to become effective
ten (10) days after such mailing. Nothing in this Section 6.12 shall affect
the right of any party to serve process in any other manner permitted by
law. Employee irrevocably waives any right he may have to assert the
doctrine of forum non conveniens or to object to venue to the extent any
proceeding is brought in accordance with this Section 6.12.
6.13 Headings. The headings contained in this Agreement are for reference
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purposes only and shall not in any way affect the meaning or interpretation
of this Agreement.
6.14 Indemnification. The Company acknowledges that it has reviewed that certain
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Agreement Regarding Special Compensation and Post-Employment Restrictive
Covenants by and between Employee and Sprint Corporation ("Sprint"), dated
December 12, 1995 (the "Sprint Agreement"). The Company agrees that:
(a) The Company will, at its own cost and expense, defend Employee in all
suits, claims or other actions brought by Sprint against Employee
which arise either directly, or indirectly, under or pursuant to
enforcement of the restrictive employment covenants contained in
Section 12 of the Sprint Agreement; and
(b) To the extent that after adjudication of the Sprint Agreement Employee
is restricted from complying with the terms and conditions of this
Agreement (the "Injunctive Period"), Employee will continue to receive
all compensation and associated benefits set forth herein as if such
restrictions were not present; provided, however, that during the
Injunctive Period Employee does not receive comparable compensation
for services provided to persons other than the Company; and provided
further, that to the extent permitted by law, Employee otherwise
complies with the terms and conditions of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
EMPLOYEE ELTRAX SYSTEMS, INC., together with
its subsidiaries
/s/ Xxx X. Xxxxxxx By: /s/ Clunet X. Xxxxx
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Xxx X. Xxxxxxx Clunet X. Xxxxx
Its: Secretary
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