EMPLOYMENT AGREEMENT
AGREEMENT, dated as of August 29, 1997, by and between RT INDUSTRIES, INC.,
d/b/a US Automotive Manufacturing, a Delaware corporation ("RTI") and QUALITY
AUTOMOTIVE COMPANY, a Delaware corporation and wholly-owned subsidiary of RTI
("Quality") (collectively, the "Companies"), and XXXXXX XXXXXXXXX an individual
residing at 00 Xxxxxxxxxx Xxxxx, Xxxx Xxxxx Xxxx Xxxxxxx, Xxxxxxxxxxxx, Xxxxxxxx
00000 (the "Executive").
RECITAL:
WHEREAS, the Companies desire to employ the Executive and the Executive
desires to serve the Companies, on the terms and conditions set forth herein and
the Companies and the Executive deem this Agreement to be satisfactory to
establish the terms of the employment relationship.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties hereto agree as follows:
1. Term of Employment. The Companies hereby agree to employ the Executive
as provided for in Section 2 below, and the Executive hereby agrees to accept
such employment by the Companies, for a term commencing on August 29, 1997 (the
"Effective Date") and ending on the third anniversary of the Effective Date,
unless earlier terminated pursuant to Section 4 below (the "Employment Period").
2. Duties and Authority of Executive.
(a) The Companies and the Executive agree that, during the Employment
Period, the Executive shall serve as President and Chief Executive Officer of
each of the Companies, reporting to the Board of Directors of RT (the "Board").
Quality and the Executive further agree that the Executive shall serve, without
further compensation, as a director of Quality.
(b) The Executive agrees that, during the Employment Period, he shall
devote his full business time, energies and skill to his duties as described
herein, and shall perform such duties and exercise his powers hereunder within
the limitations imposed upon him, at all times, faithfully, and to the best of
his ability and experience, and shall refrain from performing his duties or
exercising his powers in any way that would be harmful to the best interests of
the Companies.
3. Compensation and Related Matters.
(a) As full compensation for all services and duties to be rendered and
performed by the Executive pursuant to this Agreement, the Companies agree:
(i) to pay the Executive, during the Employment Period, an initial
salary at the rate of $225,000.00 per annum (the "Annual Salary"), payable
in equal biweekly or semi-monthly installments, less such deductions or
amounts to be withheld as shall be required by applicable law and
regulations; and
(ii) to pay to the Executive
(1) an annual bonus equal to five percent (5%) of the first
$1,000,000.00 in audited pre-tax consolidated profits of the Companies
for each fiscal year during the Employment Period; and
(2) an additional annual bonus equal to ten percent (10%) of the
audited pre-tax consolidated profits of the Companies in excess of
$1,000,000 for each fiscal year during the Employment Period;
provided, however, that the annual bonus or additional annual bonus
shall not exceed Five Hundred Thousand Dollars ($500,000) for any
given year
(The amounts to be paid under this subsection (3)(a)(ii) shall be referred to
collectively as the Executive's annual bonus (the "Bonus")). Notwithstanding
anything to the contrary contained herein, the Executive shall be entitled to a
minimum Bonus of $100,000 for the 1997 fiscal year in the event that the
consolidated gross sales for the Companies in such year exceed Seventeen Million
Dollars ($17,000,000) and the Executive shall be entitled to a minimum Bonus of
$50,000 for the 1998 fiscal year in the event that the consolidated gross sales
for the Companies in such year also exceed Seventeen Million Dollars
($17,000,000).
(b) The Companies shall reimburse the Executive promptly for all reasonable
business expenses for travel and all reasonable business entertainment and other
expenses actually incurred by him during the Employment Period in the
performance of services of the Companies under this Agreement in accordance with
the reimbursement policies as established from time to time by the Boards, upon
presentation to the Companies of expense statements or vouchers or such other
supporting information as the Companies may reasonably require.
(c) During the Employment Period, the Executive shall be entitled to
participate in all retirement, health, dental, disability, qualified stock
option and other employee benefit plans maintained by the Companies for its
salaried employees generally, to the extent he is eligible under the terms of
such plans.
(d) The Companies shall recognize, among other things, the Executive's past
service with the Companies and its affiliates to the extent such past service
was recognized for similar purposes for purposes of determining the Executive's
benefits, including any retirement benefits, provided that this shall not be
deemed to require the Companies to provide any benefits
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not provided in this Agreement or to apply increases in compensation or benefits
following the Effective Date to service credited in respect of periods prior to
the Closing, and it shall not result in any duplication of benefits in respect
of such service.
4. Termination.
(a) Death. This Agreement shall cease and terminate upon the death of the
Executive, but the amount of any Annual Salary accrued and due and payable to
the Executive hereunder on the date of his death shall be paid to his heirs or
legal representatives. In addition, The Companies shall pay to the Executive's
surviving spouse or if he has no surviving spouse to his heirs or legal
representatives the Executive's Annual Salary, payable bi-weekly or semi-monthly
and all health benefits and insurance for a period of three (3) months following
death. In addition, a portion of the Executive's Bonus for such year, computed
on a pro rata basis from the beginning of such bonus period to the date of the
Executive's death, shall be paid to his heirs or legal representatives within
sixty (60) days of the end of the then current fiscal year.
(b) Disability. If the Executive becomes substantially unable to perform
his duties hereunder as a result of illness or other disability which renders
him unfit or incapable of performing his duties hereunder, and such disability
or incapacity continues for ninety (90) consecutive days or a period of one
hundred eighty (180) days in any twelve-month period, the Boards shall have the
right to terminate this Agreement upon the giving to the Executive of not less
than thirty (30) days prior written notice of the termination date, in which
event this Agreement shall be deemed terminated on the date contained in such
notice. Upon such termination, the Executive shall be paid the amount of any
Annual Salary, benefits or other payments accrued and due and payable to him
hereunder on the date of termination. In addition, a portion of the Executive's
Bonus for such year, computed on a pro rata basis from the beginning of such
bonus period to the termination date, shall be paid to the Executive within
sixty (60) days of the end of the then current fiscal year.
(c) Cause. The employment of the Executive and the obligations of the
Companies under this Agreement may be terminated by the RT Board at any time for
"cause" (as hereinafter defined). Termination for "cause" shall mean termination
for any one or more of the following reasons: (A) misappropriation by the
Executive of corporate funds, (B) conviction of the Executive of a felony, (C)
willful failure by the Executive to devote his full business time to the
Companies, (D) employment of the Executive by any person other than the
Companies except as otherwise permitted herein, (E) willful or grossly negligent
violation by the Executive of directions of the Board, (F) gross and willful
misconduct by the Executive resulting in material damage (monetarily or
otherwise) to the Companies, or (G) material breach of this Agreement.
Notwithstanding anything herein, upon prior approval of the Board, the
Executive may serve on a less than full time basis as a director, officer or
agent of non-profit corporations, or as a director of for-profit corporations,
not engaged in the Business (as hereinafter defined in Section 5), and such
service shall not be deemed "cause". Such approval shall be deemed given if the
Executive provides written notice of intent to serve in any such capacity to the
Board and
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does not receive written directions not to serve from the Board within fourteen
(14) days of such notice of intent to serve.
If the Companies at any time terminate this Agreement for "cause," the
Executive shall be entitled to all compensation, including the Bonus amount
which is accrued and due and payable to him, at the date of termination, and all
incidental benefits from the Companies provided hereunder.
Timely written notice of any actions, acts, omissions, failures or refusals
to act, or events which may or will give rise to the termination of the
Executive for cause shall be provided to the Executive. Thereafter, if the
Companies elect to terminate this Agreement for "cause," it shall do so by
giving written notice thereof to the Executive, which notice shall set forth the
effective date of termination.
(d) Resignation. The Executive may resign from employment by the Companies
at any time upon at least sixty (60) days notice to the Companies. Such notice
shall set forth an effective date for the resignation not less than sixty (60)
days nor more than ninety (90) days after the date of such notice. In such
event, as of the effective date of resignation, all salary, bonus payments and
other compensation and/or benefits to the Executive shall terminate.
(e) Except as otherwise provided herein, upon the expiration or other
termination of this Agreement, all obligations of the Companies to the Executive
under this Agreement shall forthwith terminate.
5. Non-Compete.
(a) The Executive agrees for a period (the "Restricted Period") commencing
on the date hereof and terminating two (2) years after the date when the
Companies cease to pay the Executive his Annual Salary (which in no event shall
decrease below the dollar amount applicable at the time of such termination) and
accrued Bonus amounts, the Executive shall not directly or indirectly, within
the Commonwealth of Virginia and State of Florida or anywhere in the continental
United States where the Companies conduct substantial business activities, (i)
engage in the Business for the Executive's own account; (ii) enter the employ
of, or render any services to, any person engaged in the Business (other than
with the prior approval of the Board); (iii) without the consent of the Board,
serve as an investor, employee, partner, shareholder, officer, director,
principal, agent, trustee or consultant to any such person engaged in the
Business; provided, however, the Executive may own, directly or indirectly,
solely as an investment, any securities of RTI in any amount, and securities of
any other person, traded on any national securities exchange if the Executive is
not a controlling person of, or a member of a group which controls, such person
and does not, directly or indirectly beneficially own two percent (2%) or more
of any class of securities of such person; or (iv) without the consent of the
Board, solicit any of the Companies' existing customers or employee or others
engaged by the Companies at the date of termination of the Executive's
employment. For purposes of this provision, the "Business" shall mean the
manufacture and sale at wholesale of brake linings,
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pads, rotors and shoes, and ignition wires in which the Companies or its
subsidiaries are engaged at the time of termination of this Agreement.
(b) Notwithstanding the above non-compete provisions of paragraph 5(a),
this Section 5 shall be null and void and without force and effect as to the
Executive if (i) the Executive serves as an officer, director or stockholder of
any company which acquires Quality or substantially all of Quality's assets
pursuant to that certain stock pledge and security agreement, as of even date
herewith, of which Quality is a party, or (ii) it is determined by an arbitrator
in accordance with the arbitration provisions of Section 12 hereof that the
Executive was wrongfully terminated.
(c) Neither the Companies or the Executive shall, at any time during or
after the term of this Agreement, directly or indirectly, disparage the
commercial, business or financial reputation of the other party(ies).
6. Confidentiality.
(a) The Companies and the Executive acknowledge that the services to be
performed by the Executive under this Agreement are unique and extraordinary
and, as a result of such employment, the Executive will be in possession of
confidential information relating to the business practices of the Companies.
The term "confidential information" shall mean any and all information (oral and
written) relating to the Companies or any of their affiliates, or any of their
respective activities, other than such information which can be shown by the
Executive to be in the public domain (such information not being deemed to be in
the public domain) merely because it is embraced by more general information
which is in the public domain) other than as the result of breach of the
provisions of this Section (a), including, but not limited to, information
relating to: trade secrets, personnel lists, financial information, research
projects, services used, pricing, customers, customer lists and prospects,
product sourcing, marketing and selling and servicing. The Executive agrees that
he will not, during or for a period of two years after the termination of
employment, directly or indirectly, use, communicate, disclose or disseminate to
any person, firm or corporation any confidential information regarding the
clients, customers or business practices of the Companies acquired by the
Executive, without the prior written consent of the Companies; provided,
however, that the Executive understands that the Executive will be prohibited
from misappropriating any trade secret (as defined for purposes of Virginia law)
at any time during or after the termination of employment.
(b) Upon the termination of the Executive's employment for any reason
whatsoever, all documents, records, notebooks, equipment, price lists,
specifications, programs, customer and prospective customer lists and other
materials which refer or relate to any aspect of the businesses of the Companies
which are in the possession of the Executive, including all companies thereof,
except to the extent necessary to protect or defend his legitimate personal
interests under this Agreement or otherwise against the Companies (the "Retained
Copies"), shall be immediately returned to the Companies or destroyed; provided,
however, that the Executive covenants (i) to provide the Companies with a list,
together with copies, of any and all Retained
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Copies and (ii) not to use such Retained Copies for any purpose inconsistent
with, or in breach of, the provisions of Section 5 (Non-Compete) of this
Agreement.
(c) (i) The Executive agrees that all processes, technologies and
inventions ("Inventions"), including new contributions, improvements, ideas and
discoveries, whether patentable or not, conceived, developed, invented or made
by him during his employment by the Companies shall belong to the Companies,
provided that such Inventions grew out of the Executive's work with the
Companies, are related in any manner to the Business or are conceived or made on
the Companies' time or with the use of the Companies' facilities or materials.
The Executive shall further: (a) promptly disclose such Inventions to the
Companies; (b) assign to the Companies, without additional compensation, all
patent and other rights to such Inventions; (c) sign all papers necessary to
carry out the foregoing; and (d) give testimony in support of his inventorship;
(ii) If any Invention is described in a patent application or is
disclosed to third parties, directly or indirectly, by the Executive within
two years after the termination of his employment by the Companies, it is
to be presumed that the Invention was conceived or made during the period
of the Executive's employment by the Companies; and
(iii) The Executive agrees that he will not assert any rights to any
Invention as having been made or acquired by him prior to the date of this
Agreement, except for Inventions, if any, disclosed to the Companies in
writing prior to the date hereof.
(d) The Companies shall be the sole owners of all products and proceeds of
the Executive's services hereunder, including, but not limited to, all
materials, ideas, concepts, formats, suggestions, developments, arrangements,
packages, programs and other intellectual properties (all of which shall be
deemed works made for hire) that the Executive may acquire, obtain, develop or
create in connection with and during the term of the Executive's employment
hereunder, free and clear of any claims by the Executive (or anyone claiming
under the Executive) of any kind or character whatsoever (other than the
Executive's right to receive payments hereunder). The Executive shall, at the
request of the Companies, execute such assignments, certificates or other
instruments as the Companies may from time to time deem necessary or desirable
to evidence, establish, maintain, perfect, protect, enforce or defend its right,
or title and interest in or to any such properties.
7. Equitable Remedies.
(a) The parties hereto hereby acknowledge and agree that:
(i) the Companies would be irreparably injured in the event of a
breach by the Executive of any of his obligations under Sections 5 and 6;
(ii) monetary damages would not be an adequate remedy for any such
breach; and
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(iii) the Companies shall be entitled to injunctive relief, in
addition to any other remedy which it may have, in the event of any such
breach.
(b) The parties hereto hereby further acknowledge that, in addition to any
other remedies the Companies may have under Sections 5 and 6 hereof, the
Companies shall have the right and remedy to require the Executive to account
for and pay over to the Companies all compensation, profits, monies, accruals,
increments or other benefits (collectively, " Benefits") derived or received by
the Executive as the result of any transactions constituting a breach of any of
the provisions of Sections 5 and 6, and the Executive hereby agrees to account
for any pay over such Benefits to the Companies.
(c) Each of the rights and remedies enumerated in Sections 7(a) and 7(b)
shall be independent of the other, and shall be severally enforceable, and all
of such rights and remedies shall be in addition to, and not in lieu of, any
other rights and remedies available to the Companies under law or in equity.
(d) If any provision contained in Sections 5 and 6 is hereafter construed
to be invalid or unenforceable, the same shall not affect the remainder of the
covenant or covenants, which shall be given full effect, without regard to the
invalid portions.
(e) If any provision contained in Sections 5 and 6 is found to be
unenforceable by reason of the extent, duration or scope thereof, or otherwise,
then the court making such determination shall have the right to reduce such
extent, duration, scope or other provision and in its reduced from any such
restriction shall thereafter be enforceable as contemplated hereby.
(f) It is the intent of the parties hereto that the covenants contained in
Sections 5 and 6 shall be enforced to the fullest extent permissible under the
laws and public policies of each jurisdiction in which enforcement is sought
(the Executive hereby acknowledging that said restrictions are reasonably
necessary for the protection of the Companies). Accordingly, it is hereby agreed
that if any of the provisions of Sections 5 and 6 shall be adjudicated to be
invalid or unenforceable for any reason whatsoever, said provision shall be
(only with respect to the operation thereof in the particular jurisdiction in
which such adjudication is made) construed by limiting and reducing it so as to
be enforceable to the extent permissible, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of said
provision in any other jurisdiction.
8. Waiver. No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, but any such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
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9. Notices. All notices or other communications provided for hereunder
shall be in writing and shall be delivered by hand or by courier, sent by
telecopy (receipt confirmed) or mailed by first class mail, postage prepaid,
certified mail, return receipt requested, and shall be deemed delivered as of
the earlier of the time of actual receipt or one (1) business day after being
sent by telecopy or three (3) days after mailing in the case of mailing. Such
notices and other communications shall be sent to a party hereto at his address
set forth below, or to such other address as a party may specify by similar
notice to the other party hereto:
If to RTI: RT INDUSTRIES, INC.
d/b/a US Automotive Manufacturing
Xxxxx 000, Xxxxxxx Xxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxxxxxxx, Xxxxxxxx 00000
Telecopier: _____________________
and
Frankfurt, Xxxxxx, Xxxxx & Xxxx
Attn: Xxxx X. Xxxxxxxxx, Esquire
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier:
If to Quality: QUALITY AUTOMOTIVE COMPANY
Xxxxx 000, Xxxxxxx Xxxxx
Xxxx Xxxxxx Xxx 0000
Xxxxxxxxxxxx, Xxxxxxxx 00000
Attn: President
Telecopier: _____________________
and
Xxxxxx Xxxxxxxxxx LLP
Attn: Xxxx X. Xxxxxxxxx, Esquire
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopier: (000) 000-0000
If to the Executive: Xxxxxx Xxxxxxxxx
00 Xxxxxxxxxx Xxxxx
Cold Xxxxx Xxxx Xxxxxxx
Xxxxxxxxxxxx, Xxxxxxxx 00000
Telecopier: _____________________
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10. Assignment. This Agreement and all of the Executive's rights, duties
and obligations hereunder are personal in nature and shall not be assignable or
delegatable by the Executive. Any purported assignment or delegation thereof
shall not be valid or binding on the Companies and their respective assigns and
successors, except that the Executive's rights to compensation up to the date of
his death may be exercised by his executor, beneficiary, conservator or other
similar person upon the death or incompetence of the Executive. This Agreement
shall inure to the benefit of and shall be legally binding upon any successor or
assignee of the Companies.
11. Defense and Indemnity.
(a) In addition to and not in limitation of any other rights to
indemnification which may be provided to the Executive in the respective
Articles of Incorporation, By-Laws or otherwise of each of the Companies, the
Companies agree in the manner hereinafter set forth to indemnify and defend
against any claims or proceedings brought or actions filed against the Executive
by any party other than the Companies, arising out of his employment hereunder,
or in any way connected with or arising out of his business or employment
relationship with the Operating Companies. Notwithstanding the foregoing, the
Companies shall not be required to indemnify the Executive against, and the
Executive shall be required to repay to the Companies, payments made for all
expenses including reasonable attorney fees and costs if it is determined by a
court of competent jurisdiction or the arbitrator as provided in Section 12
hereof that the underlying claim or matter to which such indemnification
relates:
(i) is a claim or matter to which the Executive is not entitled to
indemnification under the law; or
(ii) is a result of the gross negligence or willful misconduct of the
Executive.
In the event that it shall be determined that either of the Companies is to
be repaid pursuant hereto, then the Executive shall also pay or reimburse the
Companies for their reasonable attorneys' fees and share of court and/or
arbitration costs incurred in connection with any such court proceeding or
arbitration.
(b) The obligations and liabilities of the Companies hereunder with respect
to claims resulting from the assertion of liability of the Executive shall be
subject to the following terms and conditions:
(i) The giving of prompt notice by the Executive to the Companies of
any claim which might give rise to a claim by the Executive based on the
agreements contained in this Section, stating the nature and basis of said
claims and the amounts thereof, to the extent known;
(ii) In the event any such action, suit or proceeding is brought
against the Executive with respect to which the Companies may have
liability under this Agreement, the
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action, suit or proceeding shall be defended (including all proceedings on
appeal or for review) by the Companies and their legal counsel. The
Executive shall have the right to appoint counsel of its selection and the
Companies shall pay the reasonable fees and expenses actually billed to the
Executive within thirty (30) days of presentment of the invoice from
counsel for the Executive.
(c) Neither the Companies nor the Executive shall make any settlement of
any claims without the written consent of the other party, which consent shall
not be unreasonably withheld or delayed.
(d) Except as herein expressly provided, the remedies provided in this
Section shall be cumulative and shall not preclude assertion by any party of any
other rights or the seeking of any other rights or remedies against any other
party hereto.
12. Arbitration. In the event of a dispute between the Companies and the
Executive over the terms of this Agreement which is not settled by the parties,
then the Companies and the Executive agree to settle any and all such disputed
issues by arbitration in accordance with the then-existing commercial rules of
the American Arbitration Association ("AAA") in Virginia. The Companies and the
Executive shall jointly appoint one person to act as the arbitrator. In the
event the Companies and the Executive cannot agree to an arbitrator within
thirty (30) days, the arbitrator shall be chosen by the appropriate mechanism,
as set forth in the official AAA rules, to appoint a single arbitrator in the
event of a deadlock among the parties to the arbitration. The decision of the
arbitrator shall be binding upon the parties. The costs of the arbitration,
including the fees and expenses of the arbitrator, shall be borne fifty percent
by the Companies, on the one hand, and fifty percent by the Executive, on the
other, but each party shall pay its own attorneys' fees; provided, however, that
if the arbitrator shall rule for the Executive, the Companies shall pay or
reimburse the Executive's reasonable attorneys' fees and the Executive's share
of the arbitration costs incurred in connection with such arbitration.
13. Entire Agreement. This Agreement constitutes the entire understanding
of the parties and supersedes any and all prior discussions, negotiations,
agreements and understandings, whether oral or written, with respect to the
subject matter hereof. This Agreement can be modified only by written instrument
properly executed by the Executive and the Companies.
14. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the Commonwealth of Virginia.
15. Section Headings. The section headings contained in this Agreement are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
16. Severability. In the event any one or more of the provisions of this
Agreement shall for any reason be held invalid, illegal or unenforceable, the
remaining provisions of this Agreement shall be unimpaired, and the invalid,
illegal or unenforceable provisions shall be
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replaced by mutually acceptable valid, legal and enforceable provisions which
come closest to the intent of the parties.
17. Third Party Rights. Nothing in this Agreement, express or implied, is
intended to confer on any person not a party hereto any rights or remedies by
reason of this Agreement except for such rights and remedies which are conferred
upon (i) the heirs and legal representatives of the Executive pursuant to
Section 4(a) hereof and (ii) the spouse of the Executive pursuant to Section
4(a) hereof.
18. Warranty. Executive hereby warrants and represents as follows:
(a) That the execution of this Agreement and the discharge of Executive's
obligations hereunder will not breach or conflict with any other contract,
agreement, or understanding between Executive and any other party or parties.
(b) Executive has ideas, information and know-how relating to the business
conducted by the Companies and Executive's disclosure of such ideas, information
and know-how to the Companies will not conflict with or violate the rights of
any third party or parties.
19. Counterparts. This Agreement may be executed by the parties in one or
more counterparts, each of which shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement, and shall
become effective when one or more counterparts has been signed by each of the
parties hereto and delivered to each of the other parties hereto.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have each executed and delivered this Agreement as of the day and year
first above written.
RT INDUSTRIES, INC.
a Delaware Corporation
By:_______________________________________
, President
QUALITY AUTOMOTIVE COMPANY
a Delaware Corporation
By:_______________________________________
, President
_________________________________________
XXXXXX XXXXXXXXX
00
