MEMORANDUM OF UNDERSTANDING
1. RESIGNATION. You, Xxxxxx X. Xxxxx, confirm your resignation as
Chairman of the Board, Chief Executive Officer and an employee of Employee
Solutions, Inc. ("ESI") (as well as any position as an officer, director or
employee which you held with any of ESI's subsidiaries) effective August 6,
1998.
2. SEVERANCE PAYMENT. Within two business days after all parties have
signed this agreement, ESI will provide to you a one-time payment equal to your
current annual base salary minus applicable withholdings.
3. CONSULTING SERVICES. Subject to the terms and conditions herein, you
agree to provide consulting services to ESI for a two-year period. Such services
shall include without limitation assistance with matters in litigation or
arbitration. You agree to travel as reasonably requested from time to time by
ESI in performance of such services. Compensation for such services shall be
furnished at the rate of $16,375 per month, with the first payment (with respect
to the month of August 1998) to be made within two business days after all
parties have signed this Agreement. The payment for the month of September 1998
and subsequent months through July 2000 will be due and payable at the end of
each month. No separate compensation will be provided for your service as a
director of ESI.
4. INDEPENDENT CONTRACTOR STATUS. You are retained by ESI only for the
purposes and to the extent set forth in this Agreement, and your relationship to
ESI during the period of service hereunder is solely that of an independent
contractor. You shall not be considered under the provisions of this Agreement
or otherwise as having an employee status or being entitled to participate in
any plans, arrangements or distributions by ESI pertaining to or in connection
with any benefits for ESI's regular employees. In conducting your duties
hereunder, you shall retain sole discretion and judgment in the manner and means
of carrying out said duties, provided, however, that you shall act reasonably
and exercise due care in carrying out said duties and shall comply with all
general ESI policies with respect thereto. In addition, you shall have no
authority to bind ESI by any promise or representation, unless specifically
authorized to do so. No contract, agreement or other obligation in the name or
on the account of ESI shall be valid or binding unless first signed by an
authorized executive officer of ESI.
5. RESPONSIBILITY FOR TAXES. You shall be responsible for the payment
of all unemployment taxes and costs, federal and state taxes, together with any
penalties and interest thereon, as well as social security contributions,
unemployment insurance and workers' compensation and insurance costs, which may
be due and payable with respect to the amounts received by you hereunder.
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6. PROOF OF TAX PAYMENTS. You shall, upon request from ESI, provide ESI
with information, documentation and other proof satisfactory to ESI establishing
that you are timely reporting and timely paying your taxes in a manner
consistent with the independent contractor status provided for herein and
otherwise fully and timely complying with your tax-paying and tax-reporting
obligations.
7. RESPONSIBILITY FOR EXPENSES. Except as provided in Sections 10 and
11 herein, ESI shall not be liable to you for any expenses incurred by you in
performing your services, duties, responsibilities and obligations hereunder,
nor shall ESI be liable to you for any office overhead or other overhead
expenses which may be incurred by you as a result of this Agreement.
8. CANCELLATION OF OPTIONS. All of your current options are cancelled
effective August 6, 1998.
9. COBRA AVAILABILITY. COBRA coverage shall be available for you and
your family members at your own expense in accordance with ESI's customary
procedures.
10. EXPENSE REIMBURSEMENT. ESI will reimburse your reasonable business
expenses incurred in accordance with company policy in connection with providing
consulting services.
11. OFFICE ALLOWANCE. You will be responsible for your own office
space, provided that ESI will provide $1,250 per month through September 1999 to
defray office expense. You will vacate your current office no later than
September 30, 1998. You may have use of another office designated by ESI in the
south portion of ESI's premises through no later than December 31, 1998.
12 NON-DISCLOSURE. You shall not discuss, with any ESI employee or any
other person, any non-public information relating to ESI without the prior
written authorization of ESI's Chief Executive Officer or Chairman. The
foregoing shall not apply to communications made (i) in your role as a director;
(ii) in the course of performing consulting services requested by ESI's Chief
Executive Officer or Chairman, to persons specifically identified by ESI's Chief
Executive Officer or Chairman; or (iii) testimony in a judicial or
administrative proceeding. You agree that you will refer all inquiries
concerning ESI to the appropriate designated officer(s) of ESI.
13. PROPRIETARY AND CONFIDENTIAL INFORMATION.
(a) RESTRICTIVE COVENANTS. You acknowledge that, in your
capacity as an independent contractor hereunder, you will occupy a position of
trust and confidence, and that you will develop and have much information about
ESI and its operations that is confidential or not generally known in the
community. You agree that all such information (herein, "Confidential
Information") is proprietary or confidential or constitutes trade secrets and is
the sole property of ESI. You agree to keep confidential, and (except in the
ordinary performance of your duties as a consultant or as a director as set
forth in Section 12 above) will not reproduce, copy or disclose to
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any other person or firm, any such Confidential Information, or any other
Confidential Information, consisting of any documents or information relating to
the methods, clients, accounts, systems, programs, procedures, correspondence or
records of ESI or any other documents used or owned by ESI, nor will you advise,
discuss with or in any way assist any other person or firm in obtaining or
learning about any of the items described in this paragraph. Accordingly, you
agree that during the term of this Agreement, and afterwards, you will not
disclose, permit or encourage anyone to disclose any such information, nor will
you utilize any such information, either alone or with others, outside the scope
of Section 12 above. Upon the termination or expiration of the consulting
relationship between the parties, for any reason whatsoever, the originals and
all copies of all Confidential Information shall be immediately delivered and
returned to ESI, without any notice or demand on ESI's part being required.
(b) REMEDIES. It is agreed that the restrictions contained in
this Section 13 are reasonable, but it is recognized that damages in the event
of the breach of any of the restrictions will be difficult or impossible to
ascertain; and, therefore, you agree that, in addition to and without limiting
any other right or remedy ESI may have, ESI shall have the right to an
injunction against you issued by a court of competent jurisdiction enjoining any
such breach. It is further specifically acknowledged and agreed by the parties
that, in the event of any breach of this Section 13, then, at its sole option,
ESI shall have no further obligations under this Agreement, including, but not
limited to, the obligation to make any further payments which might otherwise be
required hereunder.
14. NON-COMPETITION.
(a) RESTRICTIVE COVENANTS. You agree that, during the term of
the payments to be made under Section 3 and for a period of two years
thereafter, you shall not engage, directly or indirectly, whether on your own
account or as a shareholder (other than as a less than one percent (1%)
shareholder of a publicly-held company), partner, joint venturer, employee,
consultant, advisor, and/or agent, of any person, firm, corporation, or other
entity, in any or all of the following activities within any State or Territory
of the United States of America (collectively, the "Restricted States") or
elsewhere, as noted:
(1) Enter into or engage in the PEO business or
training persons in connection with any such business in any manner whatsoever
in any one or more of the Restricted States or provide consulting services,
mergers and acquisitions services or any other services to any PEO businesses or
PEOs;
(2) Use any customer lists or solicit customers,
joint venturers, contractors, agents, employees, suppliers, or business
patronage, of ESI for the purpose of, or which results in, competition with ESI
concerning the PEO business or any other business in which ESI is currently
engaged, regardless of where located;
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(3) Solicit the engagement or employment of any ESI
officers, directors, employees, independent contractors or any other party or
person being paid by ESI; or
(4) Promote or assist, financially or otherwise, any
person, firm, association, corporation, or other entity engaged as a PEO or
engaged in the PEO business in any one or more of the Restricted States.
(b) REMEDIES. It is agreed that the restrictions contained in
this Paragraph 14 are reasonable, but it is recognized that damages in the event
of the breach of any of the restrictions will be difficult or impossible to
ascertain; and, therefore, you have agreed that, in addition to and without
limiting any other right or remedy which it may have, ESI shall have the right
to an injunction against you, in ESI's discretion, issued by a court of
competent jurisdiction enjoining any such breach. It is further specifically
acknowledged and agreed by the parties that, in the event of any breach of this
Section 14, then, at its sole option, ESI shall have no further obligations
under this Agreement, including, but not limited to, the obligation to make any
further payments which might otherwise be required hereunder.
(c) ACKNOWLEDGMENTS. You also agree, acknowledge, covenant,
represent and warrant as follows:
(1) That you have read and fully understand the
foregoing restrictions and that you have had the opportunity to consult with
competent legal counsel regarding the uses and enforceability of restrictive
covenants in the Restricted States;
(2) That you are aware that there may be defenses to
the enforceability of the foregoing restrictive covenants, based on time or
territory considerations, and that they knowingly, consciously, intentionally
and entirely voluntarily, irrevocably waive any and all such defenses and will
not assert the same in any action or other proceeding brought by ESI for the
purpose of enforcing the restrictive covenants or in any other action or
proceeding involving you, on the one hand, and ESI, on the other hand; and
(3) That you are fully and completely aware that, and
further understand that, the foregoing restrictive covenants are an essential
part of the consideration for ESI entering into this Agreement and that ESI is
entering into this Agreement in full reliance on these acknowledgments,
covenants, representations and warranties.
(d) ADDITIONAL AGREEMENTS. In the event that the period of
time and/or territory described above are nevertheless held to be in any respect
an unreasonable restriction (after giving due consideration to the provisions of
Paragraph 14(c) above), then it is agreed that the court so holding may reduce
the territory to which the restriction pertains or the period of time in which
it operates or may reduce both such territory and such period, to the minimum
extent necessary to render such provision enforceable.
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15. RELEASE. You hereby fully and forever release and discharge ESI and
its parents, affiliates and subsidiaries, including all predecessors and
successors, assigns, officers, directors, trustees, executives, agents and
attorneys, past and present (collectively, the "Released Parties") from any and
all claims, demands, liens, agreements, contracts, covenants, actions, suits,
causes of action, obligations, controversies, debts, costs, expenses, damages,
judgments, orders and liabilities, of whatever kind or nature, direct or
indirect, in law, equity or otherwise, whether known or unknown, arising out of
your employment by ESI or the termination thereof, including, but not limited
to, any claims for relief or causes of action under federal, state or local
statute, ordinance or regulation regarding discrimination in employment and any
claims, demands or actions based upon alleged wrongful or retaliatory discharge
or breach of contract under any state or federal law. The foregoing release does
not extend to (i) claims solely to enforce ESI's obligations under this
Agreement; or (ii) claims solely to enforce the Indemnification Agreement
between ESI and you dated November 21, 1996, or claims for indemnification under
any applicable law of ESI's Articles of Incorporation or Bylaws.
16. NON-DISPARAGEMENT. ESI (meaning, solely for this purpose, ESI's
directors and executive officers and other individuals authorized to make
official communications on ESI's behalf) will not disparage you or your
performance or otherwise take any action which could reasonably be expected to
adversely affect your personal or professional reputation. Similarly, you will
not disparage ESI or any of its directors, officers, agents or employees or
otherwise take any action which could reasonably be expected to adversely affect
the personal or professional reputation of ESI or any of its directors,
officers, agents or employees.
17. COVENANT NOT TO SUE. You agree never to join in or commence any
claim, action, suit or proceeding, in law or in equity, or before any
administrative agency, or to incite, encourage, or participate in any such
claim, action, suit or proceeding against ESI in any way pertaining to or
arising out of your employment or termination of employment with ESI, except to
enforce the terms of this agreement.
18. TENDER-BACK. Should you attempt to challenge the enforceability of
this Agreement or any provision herein, or attempt to initiate any legal
proceedings, including but not limited to administrative agency or court
proceedings arising out of or related to your employment or termination of
employment with ESI, you shall initially tender to ESI, by certified check
delivered to counsel for ESI, the full amount of cash consideration paid to you
hereunder, plus interest at the legal rate from the date of your execution of
this Agreement, and shall invite ESI to cancel this Agreement. If ESI accepts
the offer to cancel the Agreement, this Agreement shall be canceled. If ESI does
not accept this offer to cancel, ESI shall so notify you and shall place the
amount tendered by you in an interest-bearing account pending a determination of
the enforceability of this Agreement. If the Agreement is determined to be
enforceable, 100% of the amount of the account shall be repaid to you; if this
Agreement is not determined to be enforceable, the amount in the account shall
be retained by ESI or its designee. This Section 18 shall not be applicable to
actions brought by you to enforce ESI's obligations hereunder.
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19. GOVERNING LAW; VENUE. This Agreement shall be governed in all
respects by the laws of the State of Arizona, and exclusive venue for any
controversy or claim arising out of, or relating to, this Agreement, or its
breach, shall lie in Phoenix, Maricopa County, Arizona.
20. EXPENSES IN CONNECTION WITH AGREEMENT. Each party shall be
responsible for its own fees and expenses (including legal fees) in connection
with this Agreement.
EMPLOYEE SOLUTIONS, INC.
/s/ Xxxxxx X. Xxxxx /s/ Xxxxx X. Xxxxxx
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Xxxxxx X. Xxxxx By: Xxxxx X. Xxxxxx, CEO/President
September __, 1998 September __, 1998
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