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Exhibit 10.8
EMPLOYMENT AGREEMENT
BETWEEN
INTERNATIONAL TOTAL SERVICES, INC.
AND
XXXXXX X. XXXXXXX
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the day of , 1997,
between International Total Services, Inc., an Ohio corporation (the "Company"),
and Xxxxxx X. Xxxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
1. Employment.
(a) The Company hereby employs the Executive as its Chief Executive
Officer, and the Executive hereby accepts such employment, on the terms and
subject to the conditions hereinafter set forth.
(b) During the term of this Employment Agreement and any renewal
hereof (all references herein to the term of this Employment Agreement shall
include references to the period of renewal hereof, if any), the Executive shall
be and have the title of Chief Executive Officer and shall devote such business
time and all reasonable efforts to his employment as the Executive deems
appropriate and perform diligently such duties as are customarily performed by
Chief Executive Officers of publicly-held companies of comparable size in the
same or related industries, together with such other duties as may be reasonably
requested from time to time by the Board of Directors of the Company (the
"Board"), which duties shall be consistent with his positions as set forth above
and as provided in Paragraph 2.
2. Term and Positions.
(a) Subject to the provisions for renewal and termination
hereinafter provided, the term of this Employment Agreement shall begin on the
date hereof and shall continue until December 31, 2000. Such term automatically
shall be extended for one (1) additional calendar year, unless: (i) this
Employment Agreement is terminated as provided in Paragraph 4(a)(i) or 4(a)(ii)
or (ii) either the Company or the Executive shall give written notice of
non-extension of this Employment Agreement to the other on or before June 30,
2000.
(b) The Executive shall be entitled to serve as the Chief Executive
of the Company. Without limiting the generality of any of
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the foregoing, except as hereafter expressly agreed in writing by the Executive:
(i) the Executive shall be required to report only to the Board as an entire
body, and (ii) no other individual shall be elected or appointed as Chief
Executive Officer of the Company. For service as an officer and employee of the
Company, the Executive shall be entitled to the full protection of applicable
indemnification provisions of the articles of incorporation and code of
regulations of the Company, as the same may be amended from time to time.
(c) If:
(i) the Company materially changes the Executive's duties and
responsibilities as set forth in Paragraph 1(b) or 2(b) without his
consent (including, without limitation, by violating any of the
provisions of clause (i) or (ii) of Paragraph 2 (b));
(ii) the Executive's place of employment or the principal
executive offices of the Company are moved to a location more than
fifty (50) miles from the geographical center of Cleveland, Ohio;
(iii) there occurs a material breach by the Company of any of its
obligations under this Employment Agreement (other than those
specified in this Section 2(c)), which breach has not been cured in
all material respects within ten (10) days after the Executive gives
notice thereof to the Company; or
(iv) there occurs a "change in control" (as hereinafter defined)
of the Company,
then the Executive shall have the right to terminate his employment with the
Company, but such termination shall not be considered a voluntary resignation or
termination of such employment or of this Employment Agreement by the Executive
but rather a discharge of the Executive by the Company without "cause" (as
defined in Paragraph 4(a)(ii)).
(d) The Executive shall be considered not to have consented to any
written proposal calling for a material change in his duties and
responsibilities unless he shall give written notice of his consent thereto to
the Board within fifteen (15) days after receipt of such written proposal. If
the Executive shall not have given such consent, the Company shall have the
opportunity to withdraw such proposed material change by written notice to the
Executive given within ten (10) days after the end of said fifteen (15) day
period.
(e) The term "change in control" means the first to occur of the
following events:
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(i) any person or group of commonly controlled persons other than
Executive or any such group of which Executive is a member, owns or
controls, directly or indirectly, fifty percent (50%) or more of the
voting control or value of the equity interests in the Company
following consummation of the initial public offering of the Company's
Common Shares, without par value (the "IPO"); or
(ii) any person or group of commonly controlled persons who own
less than five percent (5%) of the voting control or value of the
equity interests in the Company during the first 30 days following the
consummation of the IPO acquire ownership or control, directly or
indirectly, of more than twenty percent (20%) of the voting control or
value of the equity interests in the Company; or
(iii) the shareholders of the Company approve an agreement to
merge or consolidate with another corporation or other entity
resulting (whether separately or in connection with a series of
transactions) in a change in ownership of twenty percent (20%) or more
of the voting control or value of the equity interests in the Company,
or an agreement to sell or otherwise dispose of all or substantially
all of the Company's assets (including, without limitation, a plan of
liquidation or dissolution), or otherwise approve of a fundamental
alteration in the nature of the Company's business.
3. Compensation.
During the term of this Employment Agreement the Company shall pay
or provide, as the case may be, to the Executive the compensation and other
benefits and rights set forth in this Paragraph 3.
(a) The Company shall pay to the Executive a base salary payable in
accordance with the Company's usual pay practices (and in any event no less
frequently than monthly) at the rate of Three Hundred Thousand Dollars
($300,000) per annum, to be increased (but not decreased) from time to time
(based upon the performance of the Company and the Executive) as determined by
the Board in its sole discretion.
(b) The Company shall pay to the Executive bonus compensation, not
later than thirty (30) days following the end of each fiscal year or the
termination of his employment, as the case may be, of $100,000 if the Company's
actual net income for the preceding fiscal year equals or exceeds the net income
target in the Company's Annual Budget for that fiscal year. The first bonus
period shall be the fiscal year that ends March 31, 1998. The Executive shall
not receive any bonus if the Company does not meet
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or exceed the net income target in the Annual Budget for a particular fiscal
year.
(c) The Company shall provide to the Executive and his family all
the medical, dental, and all other group insurance benefits which the Company
provides generally to employees of the Company during active employment. In the
event of disability or death of the Executive, these benefits shall be continued
by the Company for life for the Executive and his spouse.
(d) The Executive shall have the right to participate in all
retirement and other benefit plans of the Company generally available from time
to time to employees of the Company and for which the Executive qualifies under
their terms (and nothing in this Agreement shall or shall be considered to in
any way affect the Executive's rights and benefits thereunder except as
expressly provided herein).
(e) The Executive shall be entitled to such periods of vacation and
sick leave allowance each year as are determined by the Executive in his
reasonable and good faith discretion, which in any event shall be not less than
as provided generally under the Company's vacation and sick leave policy for
executive officers.
(f) The Executive shall be entitled to participate in any option or
other employee benefit compensation plan that is generally available to senior
executive officers, as distinguished from general management, of the Company.
The Executive's participation in and benefits under any such plan shall be on
the terms and subject to the conditions specified in the governing document of
that plan.
(g) The Company shall reimburse the Executive or provide him with an
expense allowance during the term of this Employment Agreement for travel,
entertainment and other expenses reasonably and necessarily incurred by the
Executive in connection with the Company's business. The Executive shall furnish
such documentation with respect to reimbursement to be paid hereunder as the
Company shall reasonably request.
4. Termination.
(a) The employment of the Executive under this Employment Agreement,
and the term hereof, may be terminated by the Company:
(i) on the death or permanent disability (as defined below) of
the Executive;
(ii) for cause at any time by action of the Board. For purposes
hereof, the term "cause" shall mean:
(A) The Executive's fraud, commission of a
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felony or of an act or series of acts which result in
material injury to the business or reputation of the
Company, commission of an act or series of repeated acts of
dishonesty which are materially inimical to the best
interests of the Company, or the Executive's willful and
repeated failure to perform his duties under this Employment
Agreement, which failure has not been cured within fifteen
(15) days after the Company gives notice thereof to the
Executive; or
(B) The Executive's material breach of any
other material provision of this Employment Agreement, which
breach has not been cured in all substantial respects within
ten (10) days after the Company gives notice thereof to the
Executive; or
(iii) other than for cause at any time by action of
the Board, subject to the operation of Paragraph 4(d).
The exercise by the Company of its rights of termination under this
Paragraph 4 shall be the Company's sole remedy in the event of the
occurrence of the event as a result of which such right to terminate
arises. Upon any termination of this Employment Agreement, the
Executive shall be deemed to have resigned from all offices and
directorships held by the Executive in the Company.
(b) For purposes of this Employment Agreement, the Executive's
"permanent disability" shall be deemed to have occurred after one hundred twenty
(120) days in the aggregate during any consecutive twelve (12) month period, or
after ninety (90) consecutive days, during which one hundred twenty (120) or
ninety (90) days, as the case may be, the Executive, by reason of his physical
or mental disability or illness, shall have been unable to discharge his duties
under this Employment Agreement. The date of permanent disability shall be such
one hundred twentieth (120th) or ninetieth (90th) day, as the case may be. In
the event either the Company or the Executive, after receipt of notice of the
Executive's permanent disability from the other, dispute that the Executive's
permanent disability shall have occurred, the Executive shall promptly submit to
a physical examination by the chief of medicine of any major accredited hospital
in the Cleveland, Ohio, area and, unless such physician shall issue his written
statement to the effect that in his opinion, based on his diagnosis, the
Executive is capable of resuming his employment and devoting his full time and
energy to discharging his duties within thirty (30) days after the date of such
statement, such permanent disability shall be deemed to have occurred.
(c) In the event of a termination claimed by the Company to be
for "cause" pursuant to Paragraph 4(a)(ii), the Executive shall have the right
to have the justification for said termination
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determined by arbitration in Cleveland, Ohio. In order to exercise such right,
the Executive shall serve on the Company within thirty (30) days after
termination a written request for arbitration. The Company immediately shall
request the appointment of an arbitrator by the American Arbitration Association
and thereafter the question of "cause" shall be determined under the rules of
the American Arbitration Association, and the decision of the arbitrator shall
be final and binding on both parties. The parties shall use all reasonable
efforts to facilitate and expedite the arbitration and shall act to cause the
arbitration to be completed as promptly as possible. During the pendency of the
arbitration, the Executive shall continue to receive all compensation and
benefits to which he is entitled hereunder, and if at any time during the
pendency of such arbitration the Company fails to pay and provide all
compensation and benefits to the Executive in a timely manner, the Company shall
be deemed to have automatically waived whatever rights it then may have had to
terminate the Executive's employment for cause. Expenses of the arbitration
shall be borne equally by the parties.
(d) In the event of termination for any of the reasons set
forth in Paragraph 2(a) or subparagraph (a)(i) or (a)(ii) of this Paragraph 4,
except as otherwise provided in Paragraph 3(c), the Executive shall be entitled
to no further compensation or other benefits under this Employment Agreement,
except as to that portion of any unpaid salary and other benefits accrued and
earned by him hereunder up to and including the effective date of such
termination. If the Company terminates the Executive's employment other than
pursuant to Paragraph 2(a) or subparagraph 4(a)(i) or 4(a)(ii) or the Executive
terminates his employment pursuant to subparagraph 2(c), all of the compensation
and benefits payable to the Executive pursuant to this Employment Agreement
shall be paid to the Executive for the remainder of the term of this Employment
Agreement (as that term is defined in subparagraph 2(a)).
5. Covenants and Confidential Information.
(a) The Executive acknowledges the Company's reliance and
expectation of the Executive's continued commitment to performance of his duties
and responsibilities during the term of this Employment Agreement. In light of
such reliance and expectation on the part of the Company, during the term of
this Employment Agreement and for a period of two (2) years thereafter (and, as
to clause (ii) of this subparagraph (a), at any time during and after the term
of this Employment Agreement), the Executive shall not, directly or indirectly,
do or suffer either of the following:
(i) Own, manage, control or participate in the
ownership, management, or control of, or be employed or engaged by or
otherwise affiliated or associated as a consultant, independent
contractor or otherwise with, any other corporation, partnership,
proprietorship, limited
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liability company, firm, association or other business entity engaged
in the business of, or otherwise engage in the business of, aviation
services or commercial security; except that the Executive may own not
more than one percent (1%) of any class of publicly traded securities
of any entity, and own interests in the Company subject only to any
restriction imposed by any agreement or instrument other than this
Agreement; or
(ii) Disclose, divulge, discuss, copy or otherwise
use or suffer to be used in any manner, in competition with, or
contrary to the interests of, the Company, any confidential information
relating to the Company's operations, properties or otherwise to its
particular business or other trade secrets of the Company, it being
acknowledged by the Executive that all such information regarding the
business of the Company compiled or obtained by, or furnished to, the
Executive while the Executive shall have been employed by or associated
with the Company is confidential information and the Company's
exclusive property; provided, however, that the foregoing restrictions
shall not apply to the extent that such information: (A) is clearly
obtainable in the public domain, (B) becomes obtainable in the public
domain, except by reason of the breach by the Executive of the terms
hereof, (C) was not acquired by the Executive in connection with his
employment or affiliation with the Company, (D) was not acquired by the
Executive from the Company or its representatives, or (E) is required
to be disclosed by rule of law or by order of a court or governmental
body or agency.
(b) The Executive agrees and understands that the remedy at
law for any breach by him of this Paragraph 5 will be inadequate and that the
damages flowing from such breach are not readily susceptible to being measured
in monetary terms. Accordingly, it is acknowledged that, upon adequate proof of
the Executive's violation of any legally enforceable provision of this Paragraph
5, the Company shall be entitled to immediate injunctive relief and may obtain a
temporary order restraining any threatened or further breach. Nothing in this
Paragraph 5 shall be deemed to limit the Company's remedies at law or in equity
for any breach by the Executive of any of the provisions of this Paragraph 5
which may be pursued or availed of by the Company.
(c) The Executive has carefully considered the nature and
extent of the restrictions upon him and the rights and remedies conferred upon
the Company under this Paragraph 5, and hereby acknowledges and agrees that the
same are reasonable in time and territory, are designed to eliminate competition
which otherwise would be unfair to the Company, do not stifle the inherent skill
and experience of the Executive, would not operate as a bar to the Executive's
sole means of support, are fully required to protect the legitimate interests of
the Company and do not confer a benefit
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upon the Company disproportionate to the detriment to the Executive.
6. Tax Adjustment Payments. If all or any portion of the amounts
payable to the Executive under this Employment Agreement (together with all
other payments of cash or property, whether pursuant to this Employment
Agreement or otherwise, including, without limitation, the issuance of common
shares of the Company, or the granting, exercise or termination of options
therefor) constitutes "excess parachute payments" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (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 Employment 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 Paragraph 6 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 Paragraph 6. Payment thereof shall be made within five (5) calendar days
after the date upon which such subsequent determination is made.
7. Representations and Warranties of the Company.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio, and has all
requisite corporate power and authority to enter into, execute and deliver this
Employment Agreement, fulfill its obligations hereunder and consummate the
transactions contemplated hereby.
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(b) The execution and delivery of, performance of obligations
under, and consummation of the transactions contemplated by, this Employment
Agreement have been duly authorized and approved by all requisite corporate
action by or in respect of the Company, and this Employment Agreement
constitutes the legally valid and binding obligation of the Company, enforceable
by the Executive in accordance with its terms.
(c) No provision of the Company's governing documents or any
agreement to which it is a party or by which it is bound or of any material law
or regulation of the kind usually applicable to and binding upon the Company
prohibits or limits its ability to enter into, execute and deliver this
Employment Agreement, fulfill its obligations hereunder and consummate the
transactions contemplated hereby.
8. Miscellaneous.
(a) The Executive represents and warrants that he is not a
party to any agreement, contract or understanding, whether employment or
otherwise, which would restrict or prohibit him from undertaking or performing
employment in accordance with the terms and conditions of this Employment
Agreement.
(b) The provisions of this Employment Agreement are severable
and if any provision may be determined to be illegal or otherwise unenforceable,
in whole or in part, the remaining provisions and any partially unenforceable
provision, to the extent enforceable in any jurisdiction, nevertheless shall be
binding and enforceable.
(c) The rights and obligations of the Company under this
Employment Agreement shall inure to the benefit of, and shall be binding on, the
Company and its successors and assigns, and the rights and obligations (other
than obligations to perform services) of the Executive under this Employment
Agreement shall inure to the benefit of, and shall be binding upon, the
Executive and his heirs, personal representatives and assigns.
(d) Any controversy or claim arising out of or relating to
this Employment Agreement, or the breach thereof, shall be settled by
arbitration in accordance with the Rules of the American Arbitration Association
then pertaining in the City of Cleveland, Ohio, and judgment upon the award
rendered by the arbitrator or arbitrators may be entered in any court having
jurisdiction thereof. The arbitrator or arbitrators shall be deemed to possess
the powers to issue mandatory orders and restraining orders in connection with
such arbitration; provided, however, that nothing in this Paragraph 8(d) shall
be construed so as to deny the Company the right and power to seek and obtain
any remedy available in a court for any breach or threatened breach by the
Executive of any of his covenants contained in Paragraph 5 hereof.
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(e) Any notice to be given under this Employment Agreement
shall be personally delivered in writing or shall have been deemed duly given
when received after it is posted in the United States mail, postage prepaid,
registered or certified, return receipt requested, and if mailed to the Company,
shall be addressed to its principal place of business, attention: General
Counsel, and if mailed to the Executive, shall be addressed to him at his home
address last known on the records of the Company, or at such other address or
addresses as either the Company or the Executive, as addressee, may hereafter
designate in writing to the other.
(f) The failure of either party to enforce any provision of
this Employment Agreement shall not in any way be construed as a waiver of any
such provision as to any future violation thereof, or prevent that party
thereafter from enforcing each and every other provision of this Employment
Agreement. The rights granted the parties herein are cumulative and the waiver
of any single remedy shall not constitute a waiver of such party's right to
assert all other remedies available to it under the circumstances.
(g) This Employment Agreement supersedes all prior agreements
and understandings between the parties and may not be modified or terminated
orally. No modification, termination or attempted waiver shall be valid unless
in writing and signed by the party against whom the same is sought to be
enforced.
(h) This Employment Agreement shall be governed by and
construed according to the laws of the State of Ohio.
(i) Where necessary or appropriate to the meaning hereof, the
singular and plural shall be deemed to include each other, and the masculine,
feminine and neuter shall be deemed to include each other.
INTERNATIONAL TOTAL SERVICES, INC.
By:_________________________
Title:______________________
And By:_____________________
Title:______________________
____________________________
XXXXXX X. XXXXXXX
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