EMPLOYMENT AGREEMENT
Xxxxx Xxxxxxxx ("Xxxxxxxx") and Details, Inc. ("Details," which shall
include the Company unless the context otherwise requires), for good and
valuable consideration including the mutual promises contained herein, hereby
agree to the following:
1. Effective Date of the Agreement. The effective date of this Agreement
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is December __, 1997 (the "Effective Date"). For purposes of this Agreement,
the term "Employment Period" shall mean the period beginning on the date hereof
and ending on the later of December 31, 2000 or the date twelve months after
written notice of the expiration thereof is given by Xxxxxxxx or the Company to
the other.
2. Duties. During his employment, Xxxxxxxx shall serve as the President
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of the NTI Division of Details (such NTI Division, the "Company") and as Vice
President of Details. In such capacity, Xxxxxxxx will be accountable to, and
will also have such powers, duties and responsibilities as may from time to time
be prescribed by, the Chief Executive Officer of Details or the Board of
Directors of Details, provided that such duties and responsibilities are
consistent with his executive position. He will perform and discharge his
duties and responsibilities faithfully, diligently and to the best of his
ability. He will devote substantially all of his working time and efforts to
the business and affairs of Details.
3. Base Salary. For the remainder of the 1997 calendar year, Xxxxxxxx
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will receive a base salary at a rate commensurate and consistent with his
current salary at the Company. For the calendar years 1998, 1999 and 2000,
Xxxxxxxx will receive a base salary at the rate of $275,000, $300,000 and
$325,000 per year, respectively. In December 2000 and in each subsequent year
during Xxxxxxxx'x employment, the Board of Directors of Details will review his
base salary and determine the level of his base salary for the following year
(which level shall not be reduced). All payments under this paragraph or any
other paragraph of this Agreement will be made in accordance with the regular
payroll practices of the Company, reduced by applicable withholding.
4. Annual Bonus. For calendar 1997 (including the portion thereof
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prior to the date of this Agreement), Xxxxxxxx shall not receive a bonus unless
it is accrued on the Closing Balance Sheet or contributed to the Company by the
Sellers (the terms "Closing Balance Sheet" and "Sellers" being used as such
terms are defined in the Stock Purchase Agreement dated as of December 19, 1997
among Details, Xxxxxxxx and the other parties thereto). For subsequent periods
during his employment, Xxxxxxxx will be eligible to receive an annual bonus (the
"Bonus") based on calendar year performance. The Bonus shall be calculated
according to the table set forth in Exhibit A hereto and shall be based on the
EBITDA targets ("Target EBITDA") set forth below for calendar years 1998, 1999
and 2000. In December 2000 and in each subsequent year during Xxxxxxxx'x
employment, the Board of Directors of Details will determine appropriate Bonus
performance criteria and targets and the associated Bonus
amounts (which shall be based on a Bonus amount payable upon achievement of the
performance targets of not less than the Bonus amount payable in respect of
target performance in the prior year).
Calendar Target
Year EBITDA
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1998 $6,500,000
1999 $8,600,000
2000 $9,900,000
In the event of any material acquisition or disposition by the Company or its
subsidiaries of assets or stock (other than acquisitions or dispositions of
assets in the ordinary course of business), the foregoing EBITDA Targets shall
be appropriately adjusted in good faith by Details' Board of Directors based on
the projected pro forma impact of the acquisition or disposition.
For purposes of calculating the Bonus, EBITDA shall be the Company's
earnings before interest, taxes, depreciation, amortization and extraordinary or
non-recurring income or charges, as determined by Details in its reasonable
judgment. In the event that the Board of Directors of Details implements
reductions in overall levels of benefits enjoyed by the Company's employees that
cause a sufficiently negative impact on employee morale or the Company's ability
to attract, retain and incent highly qualified employees as to preclude the
Company from attaining at least $6,500,000 of EBITDA in 1998, Xxxxxxxx will
nevertheless receive a bonus for 1998 of at least $100,000.
After the preparation and finalization of the financial statements
reflecting the first six months of each calendar year, Details shall pay
Xxxxxxxx an advance on the Bonus, if any, payable to him for the year (the
"Advance"). The Advance shall equal seventy-five percent (75%) of fifty percent
(50%) of the Bonus that Details expects to pay Xxxxxxxx at year end based on
Details' then good faith estimate of the Company's EBITDA for the calendar year.
If the actual Bonus for a calendar year is less than the amount of the Advance
paid to Xxxxxxxx in such year, then the shortfall shall be deducted from the
next Bonus(es) to which Xxxxxxxx would otherwise be entitled (but in no event
shall Xxxxxxxx be required to repay an Advance).
5. Stock Options. Key employees of the Company will be eligible to
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participate in the 1997 Equity Incentive Plan (the "Equity Incentive Plan") of
Details Holdings Corp. (or, if applicable, its parent corporation) ("Details
Holdings"), and in connection therewith to receive restricted shares of and/or
options to acquire, Details Holdings' Class A-5 Common Stock, in each case
subject to the vesting and other terms specified in the applicable Option
Agreement and the Equity Incentive Plan. Details Holdings' intends that options
to acquire an aggregate of 24,062.45 shares of Class A-5 Common Stock,
representing 1.25% of the currently outstanding Class A Common Stock, will be
made available to the Company's employees (including Xxxxxxxx, as described
below) under the Equity Incentive Plan, divided equally
between options exercisable at $5.00 per share and options exercisable at $61.17
per share, it being understood that each employee will be given the opportunity
to purchase Restricted Stock (as defined in the 1997 Equity Incentive Plan) for
a purchase price of $5.00 per share in lieu of receiving options exercisable for
$5.00 per share. Each employee, as a condition to receiving Restricted Stock or
options under the Equity Incentive Plan, will be required to become party, as an
"Employee" (or if designated as such by the Company, a "Manager"), to the
Stockholders Agreement dated as of October 28, 1997 among Details Holdings and
its stockholders, as amended and otherwise modified from time to time.
Following the Effective Date, Details Holdings shall xxxxx Xxxxxxxx the
option to purchase up to 9,023.25 shares of Details Holdings' Class A-5 Common
Stock (which shall be Restricted Stock (as defined in the Equity Incentive
Plan)) at a purchase price of $5.00 per share, and will receive options to
purchase up to 9,023.25 shares of Details Holdings' Class A-5 Common Stock, at
an exercise price of $61.17 per share. The shares of Restricted Stock and
options will vest in equal monthly installments over a four-year period from the
Effective Date, and will be subject to the terms and conditions set forth in the
1997 Equity Incentive Plan and the Option Agreement between Details Holdings and
Xxxxxxxx.
6. Benefits. Beginning January 1, 1998, Xxxxxxxx will receive four weeks
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of paid vacation per year, pro rated for partial years. He will be eligible to
participate in all benefit and welfare plans made generally available to
executives of the Company, as in effect from time to time, all subject to plan
terms and generally applicable policies. The Company will continue to pay the
premium for Xxxxxxxx'x life insurance which he now owns in the amount of $1.5
million (Federal Xxxxxx, Policy No. FK-2228575).
7. Severance. Xxxxxxxx'x employment may be terminated at any time by him
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or by the Company (regardless of the length or existence of any notice of
expiration of the Employment Period). In the event his employment terminates
prior to the expiration of the Employment Period, Xxxxxxxx shall be entitled to
the payments specified in this paragraph 7.
If Details terminates Xxxxxxxx'x employment other than for Cause (meaning
fraud in the performance of his duties for, or responsibilities to, Details;
breach of fiduciary duty in the performance of his duties for, or
responsibilities to, Details; his commission of a felony or a crime involving an
act that would substantially and adversely affect Details' image or reputation;
or gross neglect of his duties or responsibilities or gross misconduct), or
Xxxxxxxx terminates his employment for Good Reason (meaning Details requires
Xxxxxxxx to relocate outside of the Colorado Springs area, or imposes duties on
Xxxxxxxx that are inconsistent with his executive position), Details will, in
lieu of any other payments or benefits hereunder or otherwise, (i) continue to
pay his base salary at the rate in effect on the Date of Termination through the
expiration of the Employment Period, and (ii) pay him a prorated bonus for the
period from the beginning of the year in which the Date of Termination occurred
through the Date of Termination, to be paid at the same time that the annual
bonus for the full year is ordinarily paid pursuant to paragraph 4, in the
amount, based on actual achievement of annual bonus targets for such full fiscal
year, that would have been paid had his employment
continued through the end of the year, prorated by the portion of the full year
represented by the period ended on the Date of Termination.
If Xxxxxxxx or Details terminates his employment because of death, Details
will, in lieu of any other payments or benefits hereunder or otherwise, (i)
continue to pay his base salary through the Date of Termination at the rate then
in effect and (ii) pay him a prorated bonus (pro rated in the manner set forth
above) through the Date of Termination, to be paid at the same time that the
annual bonus is ordinarily paid pursuant to paragraph 4.
If Xxxxxxxx or Details terminates his employment because of Disability,
Details will, in lieu of any other payments or benefits hereunder or otherwise,
(i) continue to pay his base salary at the rate then in effect for a period of
one year from the date of such Disability, provided, however, that if Xxxxxxxx
is eligible to receive disability payments under a long-term disability plan of
Details or the Company, such payments of salary shall cease, and (ii) pay him a
prorated bonus (pro rated in the manner set forth above) through the Date of
Termination, to be paid at the same time that the annual bonus is ordinarily
paid pursuant to paragraph 4.
If Details terminates Xxxxxxxx'x employment for Cause or Xxxxxxxx
terminates his employment for any reason other than Good Reason or death or
Disability, Details will, in lieu of any other payments hereunder or otherwise,
pay his base salary through the Date of Termination, at the rate then in effect.
For purposes of this Agreement, the "Date of Termination" shall mean the
date Xxxxxxxx'x employment with Details terminates regardless of the reason, and
"Disability" shall mean any illness, injury, accident or condition of either a
physical or psychological nature that results in Xxxxxxxx being unable to
perform substantially all of the duties of his employment with Details for a
period of 90 consecutive calendar days, or for an aggregate of 180 days during
any period of 365 consecutive calendar days.
8. Confidentiality; Proprietary Rights. Without the written consent of
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the Board of Directors of Details, Xxxxxxxx will not during or after his
employment with Details, disclose to any person or entity (other than a person
or entity to which disclosure is in his reasonable judgment necessary or
appropriate in connection with the performance of his duties as an executive
officer of Details), any information obtained by him while in the employ of
Details the disclosure of which may be adverse to the interests of Details, or
use any such information to the detriment of Details; provided, however, that
such restriction shall not apply to information generally known to the public
other than as a result of unauthorized disclosure by Xxxxxxxx.
All inventions, developments, methods, processes and ideas conceived,
developed or reduced to practice by Xxxxxxxx during his employment, and for
three months thereafter, which are directly or indirectly useful in, or relate
to, the business of or products manufactured or sold by Details or any of its
subsidiaries shall be promptly and fully disclosed by him to an
appropriate executive officer of Details (accompanied by all papers, drawings,
data and other materials relating thereto) and shall be Details' exclusive
property as against him. Xxxxxxxx will, upon Detail's request and at its expense
(but without any additional compensation to him), execute all documents
reasonably necessary to assign his right, title and interest in any such
invention, development, method or idea (and to direct issuance to Details of all
patents or copyrights with respect thereto).
9. Restricted Activities. Xxxxxxxx agrees that, through the Date of
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Termination and for a period until the earlier of (A) twenty-four months after
the Date of Termination or (B) the later of (i) December 31, 2000 or (ii) one
year after the Date of Termination, (a) he will not, directly or indirectly, be
connected as an officer, employee, consultant, owner or otherwise with any
business which competes with any business of Details or its subsidiaries (other
than a business of Details that represents less than five percent of Details'
revenues) in any area where such business is then being conducted by Details or
a subsidiary, and (b) he will not, and he will not assist any other person or
entity to, hire or otherwise seek to induce employees of Details or any of its
subsidiaries to terminate their employment; provided, however, that the
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restrictions contained in this paragraph 9 shall not extend beyond the end of
the period (if any) for which he receives base salary payments pursuant to
paragraph 7, unless Details determines in its sole discretion, on or prior to
the end of such period, to continue (or commence) to make base salary payments
to him in the manner specified in paragraph 7, in which case the restrictions
under this paragraph 9 shall continue as long as Details is making such base
salary payments, but in no event longer than the period specified above;
provided, further, that any base salary payments made pursuant to the foregoing
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proviso for periods after December 31, 2000 shall be made at the rate of
$450,000 per year.
It is understood and agreed that ownership of not more than five percent of
the stock or other equity interests of a public company shall not constitute a
violation of this Agreement. Xxxxxxxx agrees that the restrictions contained in
paragraph 8 and this paragraph 9 are reasonably necessary for the protection of
Details and that a violation of such provisions will cause damage that may be
irreparable or impossible to ascertain and, accordingly, that Details will be
entitled (subject to meeting the appropriate evidentiary standard for injunctive
relief) without posting a bond to injunctive or other similar relief in equity
from a court of competent jurisdiction to enforce or restrain a violation of
these restrictions.
10. Arbitration. In the event of any dispute between the parties
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concerning the construction or interpretation of this Agreement, or the
performance or breach of the Agreement by any party, the dispute shall be
resolved by binding arbitration subject to the rules and procedures of the
American Arbitration Association; provided, however, that the parties shall be
entitled to discovery in accordance with the Federal Rules of Civil Procedure.
Hearings will be held in Denver, Colorado. Arbitration shall be commenced by
the written demand by any party for arbitration served upon the other party and
filed with the American Arbitration Association. Notwithstanding the foregoing,
each of the Parties agree that nothing contained in this paragraph 11 shall
prevent either party from seeking temporary or permanent injunctive relief to
prevent breaches of or otherwise to specifically enforce paragraphs 8 and 9
hereof.
11. Headings. The headings in this Agreement are for convenience only and
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shall not affect the meaning hereof.
12. Entire Agreement. This Agreement constitutes the entire agreement
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between Details, the Company and Xxxxxxxx with respect to the subject matter
hereof, and supersedes any prior communications, agreements and understandings,
written or oral among Details, the Company and Xxxxxxxx, with respect to his
employment and compensation and all matters pertaining thereto.
13. Severability. If any provision of this Agreement should, for any
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reason, be held invalid or unenforceable in any respect, it shall be construed
by limiting it so as to be enforceable to the maximum extent compatible with
applicable law.
14. Governing Law. This Agreement shall be governed by and construed in
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accordance with the internal substantive laws of the State of Colorado without
giving effect to any choice or conflict of laws provision or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
15. Binding Effect. This Agreement shall be binding upon, and shall inure
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to the benefit of the parties to this Agreement and their respective heirs,
personal and legal representatives, successors and assigns.
IN WITNESS WHEREOF, this Agreement has been executed by Details, by its
duly authorized representative, and by Xxxxxxxx as of the date and year first
above written.
DETAILS, INC.
/s/ Xxxxxx X. Xxxxx
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By: Xxxxxx X. Xxxxx
Title: Chief Financial Officer
/s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
EXHIBIT A
The Bonus for each year shall be determined by the following methodology.
EBITDA of the Company for each year shall be divided by the Target EBITDA for
that year. The resulting fraction (expressed as a percentage) is the "EBITDA
Percentage". The amount of the Bonus for each year is a function of the EBITDA
Percentage for that year as set forth on the table below:
If the EBITDA The Bonus
Percentage is: in each year shall equal:
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1998 1999 2000
Below 90%
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-0- -0- -0-
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Between 90% and $ 33,000 $ 36,667 $ 40,000
below 95%
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95%* $ 66,000 $ 73,333 $ 80,000
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100%** $100,000 $110,000 $120,000
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*For an EBITDA Percentage that exceeds 95%, the Bonus will be determined by
linear interpolation from the Bonus payable at 95% to the Bonus payable at 100%.
**For an EBITDA Percentage that exceeds 100%, the Bonus will be determined by
linear interpolation from the Bonus payable at 100% to a maximum Bonus equal to
two-times the Bonus payable at 100%, which maximum Bonus will be paid at EBITDA
of $10,000,000, $12,900,000 and $14,900,000 for the calendar years 1998, 1999
and 2000, respectively.
