TOGNIETTI CONSULTING AGREEMENT 1999
CONSULTING AGREEMENT
This Consulting Agreement ("Agreement") is by and between Drypers
Corporation, a Delaware corporation ("Company"), and Xxxxx X. Xxxxxxxxx
("Consultant").
W I T N E S S E T H:
WHEREAS, Consultant is a party to that Employment Agreement between the
parties hereto, dated August 30, 1992, as amended by that certain Agreement
Amending and Restating Employment Agreement, between the parties hereto, dated
as of February 25, 1997 (as amended, referred to herein as the "Employment
Agreement");
WHEREAS, Consultant is currently an officer and a director of the
Company; and
WHEREAS, the parties hereto desire to redefine Consultant's role with the
Company pursuant to which the Consultant will act as a consulting independent
contractor.
NOW, THEREFORE, in consideration of the above premises and of the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, and intending to be
legally bound, the parties hereto agree as follows:
1. RESIGNATION AND RETENTION.
TOGNIETTI CONSULTING AGREEMENT 1999
1.1 Consultant hereby resigns as of the date hereof as an officer of
the Company and all subsidiaries of the Company and, upon the request of a
majority of the members of the then existing board of directors of the
Company, agrees to resign for solely personal reasons as a director of the
Company. Subject to the Company's and Consultant's compliance with their
respective obligations under this Agreement, each of the Company and
Consultant hereby release the other party from any and all claims arising
out of Consultant's prior employment as an employee and officer of the
Company, including, without limitation, the forgiveness, release,
extinguishment and discharge by the Company of the Consultant's Promissory
Note dated August 1, 1997, in the principal amount of $130,000.00 in favor
of the Company. The Company agrees that should any inquiry be made of the
Company regarding the reasons for the Consultant's resignation as an
officer of the Company, the Company shall represent that the Consultant
resigned as an officer to assume transactional functions as a consultant
on the Company's behalf and to pursue other business interests. Each of
the Company and the Consultant agree to (i) make no other public
announcements regarding the reasons for the Consultant's resignation as an
officer of the Company, (ii) make no denigrating or disparaging remarks
regarding the other, regardless of the truth or falsity of any such
remark, and (iii) take no action that would reflect negatively upon the
other's business or reputation. Unless specifically addressed, this
Agreement is not intended to be a waiver of any rights the Consultant may
have to (i) any nonforfeitable benefits under any of the Company's
employee benefit plans and executive compensation arrangements which, by
their terms, specifically provide for nonforfeitable benefits, (ii)
convert group benefits under any of the Company's employee benefit plans
to individual coverage, to the extent that such plans allow such
conversion, (iii) continue coverage under any of the Company's medical
plans as provided under the Employee Retirement Income Security Act of
1974, as amended, or section 4980 B of the Internal Revenue Code of 1986,
as amended, or (iv) receive compensation and benefits pursuant to this
Agreement.
1.2 The Company hereby retains Consultant as a general advisor and
consultant to management of the Company on certain matters pertaining to
the Company's business throughout the United States and Consultant hereby
accepts such arrangement upon the terms and conditions specified in this
Agreement. The Employment Agreement is hereby cancelled as of the date
hereof, and is replaced by this Agreement.
1.3 During the Term of Agreement (as hereinafter defined) under this
Agreement, the Consultant is entitled to all protections of any
indemnification agreements or provisions, including Company By-laws,
agreements and any director and officer liability insurance policies,
established or maintained by the Company for other directors and executive
officers of the Company.
2. DUTIES AND RESPONSIBILITIES.
2.1 Consultant shall (a) use reasonable efforts during the Term of
Agreement to search for potential business opportunities for the Company
("Projects") in accordance with the written direction, as accepted in
writing by the Consultant, of the Company's Chief Executive Officer and
(b) comply with all rules and regulations with respect to the Company's
business as may be issued from time to time by the Company that apply to
its executive officers. All business opportunities relating to the
Company's current or anticipated development that shall come to the
attention of Consultant shall be immediately brought to the attention of
the Company's Chief Executive Officer; and during the Term of Agreement
(as hereinafter defined), Consultant shall not usurp or divert any such
business opportunities for his own benefit or that of others without the
prior written approval of the Company. It is not contemplated that the
services described in this subparagraph 2.1 shall require Consultant's
full-time service throughout the Term of Agreement.
2.2 It is expressly understood and agreed that Consultant is not
authorized to enter into any contract on behalf of the Company or
otherwise in any manner whatsoever bind the Company. Consultant agrees to
make no representation to any person, corporation or firm inconsistent in
any manner with the provisions of this subparagraph 2.2. Consultant and
the Company further agree that Consultant is an independent contractor
under the terms of this Agreement and is not an employee of the Company.
3. FEE FOR SERVICE.
3.1 As the fee for his services hereunder during the Term of
Agreement, Consultant shall be paid a fee of $300,000.00 per year for each
year during such term, payable in semi-monthly installments.
3.2 During the Primary Term of Agreement (as hereinafter defined):
(a) Consultant shall be entitled to receive $1,000.00
per month as an automobile allowance (such amount being intended to
include, without limitation, the cost of the automobile and all
operating costs including insurance, fuel, maintenance and repairs);
(b) Commencing 1 July 1999, the Consultant shall be
entitled to receive $4,292.00 per month as payment for an office and
secretary located off-site from the Company's facilities;
(c) Consultant shall be entitled to receive
reimbursement of reasonable expenses related to the performance of
his duties hereunder consistent with the Company's normal
reimbursement policies for executive officers; and
(d) Consultant shall be entitled to receive such
performance bonuses in such amounts and conditioned upon such
performance and/or such financial standards as the Compensation
Committee of the Board of Directors shall determine to be
appropriate for each Project.
3.3 During the Term of Agreement, and to the extent Consultant is
not entitled to receive similar benefits as a result of his employment or
affiliation with another business entity, Consultant shall also be
entitled to receive the following to the extent permitted by the
applicable Company plan and each such item shall be reported as required
by law:
(a) the payment of premiums on Consultant's split dollar
life insurance plan (as established when the Consultant was employed
by the Company), with the beneficiaries of such a policy as may be
designated by the Consultant;
(b) the payment to Consultant of $1,790.00 per month to
compensate Consultant for loss of group comprehensive life, medical
and dental insurance;
(c) the payment to Consultant of $710.00 per month to
compensate Consultant for loss of the Company's portion of all
payroll taxes;
(d) the payment to Consultant of $417.00 per month to
compensate Consultant for loss of benefits under Company benefit
plans available only to employees, including the benefits received
by Consultant under the Company's 401(k) plan in which Consultant
previously participated; and
(e) membership in The Houstonian Club, as such
membership is in effect on the date hereof, at the expense of the
Company. At the end of the Term of Agreement, the Company shall use
commercially reasonable efforts without the necessity of payment of
any fees to transfer such membership to the Consultant.
4. TERM AND TERMINATION.
4.1 The "Term of Agreement" under this Agreement shall commence upon
the date hereof and end upon either (a) November 1, 2002, in the event
that the Average Stock Price ( as hereinafter defined) of the Company's
common stock, $.001 par value per share (the "Company Common Stock"), has
not been equal to or greater than $12.00 per share at any time during the
period (the "Determination Period") commencing after March 1, 2001 and
ending on November 1, 2001, or (b) November 1, 2001, in the event that the
Average Stock Price of the Company Common Stock has been equal to or
greater than $12.00 per share at any time during the Determination Period;
in each case, however, subject to termination upon the occurrence of any
of the events specified in Section 4.2 hereof. The "Average Stock Price"
shall mean the average of the per share closing prices of the Company
Common Stock on the Nasdaq National Market System (or other principal
exchange upon which the Company Common Stock is then trading) during any
five consecutive trading days, adjusted to give effect to any stock
dividend, stock split or other reclassification pursuant to which the
shares of Company Common Stock to be issued to the Consultant upon
exercise of any of Consultant's currently outstanding options to purchase
shares of the Company Common Stock (the "Consultant's Options") as set
forth on EXHIBIT A hereto are adjusted in accordance with the terms of
such options.
4.2 The Term of Agreement may be terminated upon the occurrence of
any of the following events:
(a) if the Company gives written notice to Consultant of
its intent to terminate the term of this Agreement for Cause (as
defined below), with the date of termination to be specified
prospectively in such notice;
(b) if Consultant gives written notice to the Company of
his intent to terminate this Agreement, with the date of termination
to be specified in such notice; or
(c) the death of Consultant.
For purposes of this Agreement, "Cause" shall mean: (a) if
Consultant is convicted of or pleads guilty or nolo contendere to any
felony or serious intentional misdemeanor, other than an offense that in
the opinion of the Board of Directors does not affect the Company or
Consultant's position as a consultant; or (b) if Consultant violates any
provision of Sections 6, 7 or 8 of this Agreement.
4.3 The "Primary Term of Agreement" under this Agreement commences
upon the date hereof and ends upon written notice by the Company to
Consultant of its intent to terminate the term of this Agreement following
the Consultant becoming an employee, officer or devoting a substantial
portion of his time for the benefit of another business entity.
4.4 Consultant may be terminated at any time by the Board of
Directors, without Cause; provided that any such termination is without
prejudice to the Consultant's rights to be paid his Compensation pursuant
to Section 3.1, although any and all other benefits would cease.
5. CONSULTANT'S OPTIONS.
5.1 The Company shall execute and deliver to Consultant as soon as
practicable such agreements and other instruments as are necessary and
appropriate in order to cause each of Consultant's options to acquire
Company Common Stock to vest in full effective upon the date hereof, and
all such options are hereby made fully vested and exercisable. Such
options shall not require Consultant to be an employee at the time of
exercise, or limit the period of exercise by reason of employment status.
Consultant understands that all of such options are or shall become
Nonqualified Options (as defined in the applicable stock option plan) and
subject to applicable tax withholding at the time of exercise.
5.2 In the event that during the Term of Agreement any of the option
agreements to purchase Company Common Stock held by Xxxxxx X. Xxxxx or
Xxxxxxx X. Xxxxxxxx on the date hereof are (i) cancelled and exchanged for
option agreements that provide for the purchase of shares of Company
Common Stock at an exercise price (the "New Exercise Price") that is less
than the then current exercise price of such options, or (ii) amended to
such effect or are otherwise replaced or repriced to such effect, then
Consultant's options to purchase that number of shares of Company Common
Stock equal to the greater of Xx. Xxxxx'x or Xx. Xxxxxxxx' shares subject
to such repriced option or options shall be cancelled and exchanged for
options to purchase Company Common Stock at the New Exercise Price. Such
options shall be fully vested and exercisable. Any new options (not in
replacement or exchange for such currently outstanding options) issued to
Messrs. Xxxxx or Xxxxxxxx shall not entail or require issuance of any
options to the Consultant.
6. NON-COMPETITION.
6.1 Consultant acknowledges that he has received special training
and shall continue to receive special knowledge from the Company.
Consultant acknowledges that included in the special knowledge received is
the confidential information identified in Section 7 below. Consultant
acknowledges that this confidential information is valuable to the Company
and, therefore, its protection and maintenance constitutes a legitimate
interest to be protected by the Company by this covenant not to compete.
Therefore, Consultant agrees that for the period (the "Noncompetition
Period") during the Term of Agreement and commencing upon the termination
thereof and ending upon the first anniversary thereof, in each case unless
otherwise extended pursuant to the terms hereof, Consultant will not,
directly or indirectly, either as an employee, employer, consultant,
agent, principal, partner, stockholder, corporate officer, director, or in
any other individual or representative capacity, engage or participate in
any business that is engaged in the manufacture or marketing of disposable
baby diapers, disposable training pants or pre-moistened wipes within the
United States of America or within any other geographic area of the world
where the Company engages or proposes at the time of the termination of
the Term of Agreement to engage in business (the "Noncompetition Area").
Consultant represents to the Company that the enforcement of the
restriction contained in this Section 6 would not be unduly burdensome to
Consultant and that in order to induce the Company to redefine
Consultant's role with the Company and to provide for the fees during the
Term of Agreement as set forth in Section 3 hereof, Consultant further
represents and acknowledges that Consultant has entered into this
agreement not to compete and is willing and able to compete in other
geographical areas not prohibited by this Section 6. Notwithstanding the
foregoing, it is agreed by the Company that the Consultant may acquire an
ownership interest, directly or indirectly, of not more than five percent
(5%) of the outstanding securities of any corporation that is engaged in a
business competitive with the Company and that is listed on any recognized
securities exchange or traded in the over the counter market in the United
States, provided that such investment is of a totally passive nature and
does not involve Consultant devoting time to the management or operations
of such corporation.
6.2 Consultant agrees that a breach or violation of this covenant
not to compete by such Consultant shall entitle the Company, as a matter
of right, to an injunction issued by any court of competent jurisdiction,
restraining any further or continued breach or violation of this covenant.
Such right to an injunction shall be cumulative and in addition to, and
not in lieu of, any other remedies to which the Company may show itself
justly entitled. Further, during any period in which Consultant is in
breach of this covenant not to compete, the time period of this covenant
shall be extended for an amount of time that Consultant is in breach
hereof.
6.3 In addition to the restrictions set forth in Section 6.1,
Consultant shall not for the Noncompetition Period, either directly or
indirectly, (i) make known to any person, firm or corporation that is
engaged in the manufacture or marketing of disposable baby diapers,
disposable training pants or pre-moistened wipes, the names and addresses
of any of the customers of the Company or contacts of the Company or any
other information pertaining to such persons, except as may otherwise be
required by applicable law, or (ii) within the Noncompetition Area, call
on, solicit, or take away, or attempt to call on, solicit or take away any
of the customers of the Company on whom Consultant called or with whom
Consultant became acquainted during Consultant's association with the
Company, whether for Consultant or for any other person, firm or
corporation.
6.4 The representation and covenants contained in this Section 6 on
the part of Consultant will be construed as ancillary to and independent
of any other provision of this Agreement, and the existence of any claim
or cause of action of Consultant against the Company or any officer,
director, or shareholder of the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement
by the Company of the covenants of the Consultant contained in this
Section 6. In addition, the provisions of this Section 6 shall continue to
be binding upon Consultant during the Noncompetition Period in accordance
with its terms, notwithstanding the termination of Consultant for any
reason.
6.5 If Consultant violates any covenant contained in this Section 6
and the Company brings legal action for injunctive or other relief, the
Company shall not, as a result of the time involved in obtaining the
relief, be deprived of the benefit of the full period of any such
covenant. Accordingly, the covenants of Consultant contained in this
Section 6 shall be deemed to have durations as specified above, which
periods shall commence upon the later of (i) the last day of the Term of
Agreement and (ii) the date of entry by a court of competent jurisdiction
of a final judgment enforcing the covenants of Consultant in this Section
6.
6.6 The parties to this Agreement agree that the limitations
contained in this Section 6 with respect to geographic area, duration, and
scope of activity are reasonable. However, if any court shall determine
that the geographic area, duration, or scope of activity of any
restriction contained in this Section 6 is unenforceable, it is the
intention of the parties that such restrictive covenant set forth herein
shall not thereby be terminated but shall be deemed amended to the extent
required to render it valid and enforceable.
7. DISCLOSURE OF CONFIDENTIAL INFORMATION. During the Term of Agreement,
the Consultant will disclose to the Company all ideas and business plans
developed by him during such period which relate directly to the business of the
Company. The Consultant recognizes and acknowledges that he may have access to
certain additional confidential information of the Company or of certain
corporations affiliated with the Company, and that all such information
constitutes valuable, special and unique property of the Company and its
affiliates. The Consultant agrees that, during the Term of Agreement and for a
period of five years after the termination of the Term of Agreement, he will
not, without the prior written consent of the Company, disclose or authorize or
permit anyone under his direction to disclose to anyone not properly entitled
thereto any of such confidential information. For purposes of the immediately
preceding sentence, persons properly entitled to such information shall be (i)
the Board of Directors of the Company and such officers, employees and agents of
the Company or any affiliate thereof to whom such information is furnished in
the normal course of business under established policies approved by the Company
and (ii) such outside parties as are legally entitled to or are customarily
furnished such information, including banking, lending, collection, accounting,
and data processing institutions or agencies who or which are provided such
information in the normal course of business of the Company. The Consultant
further agrees that upon termination of the Term of Agreement he will not take
with him or retain, without the prior written authorization of the Company, any
papers, procedural or technical manuals, customer lists, customer account
analyses (including, without limitation, accounts receivable agings, customer
payment histories and customer account activity reports), price books, files or
other documents or copies thereof belonging to the Company or to any affiliate
of the Company, or any materials, supplies, equipment or furnishings belonging
to the Company or to any affiliate of the Company, or any other confidential
information of any kind belonging to the Company or any affiliate of the
Company. In the event of a breach or threatened breach by the Consultant of the
provisions of this Section 7, the Company and the Consultant agree that the
remedy at law available to the Company and its affiliates would be inadequate
and that the Company and its affiliates shall be entitled to an injunction,
without the necessity of posting bond therefor, restraining the Consultant from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting the Company and its affiliates from pursuing
any other remedies, in addition to the injunctive relief available under this
Section 7, for such breach or threatened breach, including the recovery of
damages from the Consultant.
80 TRADE SECRETS. All patents, formulae, inventions, processes,
copyrights, proprietary information, trademarks or trade names, or future
improvements to patents, formulae, inventions, processes, copyrights,
proprietary information, trademarks or trade names, developed or completed by
the Consultant during the Term of Agreement (collectively, the "Items") shall be
promptly disclosed to the Company. To the extent that the Company determines
such Items to be within the scope of the Company's business, the Consultant
shall execute such instruments of assignment of the Items to the Company as the
Company shall request. The Consultant acknowledges that a remedy at law for any
breach by him of the provisions of this Section 8 would be inadequate, and the
Consultant hereby agrees that the Company shall be entitled to injunctive relief
in case of any such breach.
90 LEGAL FEES AND EXPENSES. The Company shall pay all reasonable legal
fees and costs incurred by the Consultant in connection with this Agreement that
are incurred on or prior to the date hereof. In the event that Consultant
contests the validity or enforceability of any of the provisions of Sections 6,
7 or 8 hereof, then Consultant hereby agrees to pay in a timely and prompt
manner any and all legal fees and expenses incurred by the Company from time to
time as a result of Consultant's contesting of the validity or enforceability of
any provision of Sections 6, 7 or 8 hereof; provided however, notwithstanding
the foregoing, in the event that Consultant contests the validity or
enforceability of any provision of Section 6, 7 or 8 hereof and is wholly
successful in such contest, then and in that event only will the Company
reimburse Consultant for (i) the Company's legal expenses paid by Consultant and
(ii) his reasonable legal fees and costs incurred in connection with such
contest.
100 MISCELLANEOUS.
10.1 NOTICES. Any notice required or permitted under this Agreement
shall be in writing and shall be deemed to be delivered three business
days after deposit in the United States mail, postage prepaid, certified
or registered mail, return receipt requested, addressed as follows:
Company: Drypers Corporation
0000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxx X. Xxxxx
Consultant: Xxxxx X. Xxxxxxxxx
000 Xxxxxx Xxxx Xxxxx
Xxxx, Xxxxx 00000
Notice given in any other manner shall be effective when received by
the addressee. The address for notice may be changed by notice given in
accordance with this provision.
10.2 AMENDMENTS. This Agreement constitutes the entire agreement
between the parties with respect to the relationship between the Company
and Consultant and may not be amended, supplemented, waived, or terminated
except by written instrument executed by the parties hereto.
10.3 PRESERVATION OF BUSINESS. Consultant shall use his best efforts
to preserve the business and organization of the Company and to keep
available to the Company the services of its employees, and to preserve
the business relations of the Company. Consultant shall not commit any act
that might reasonably be expected to injure the Company. This Section 10.3
shall not be deemed to have been violated if the Consultant contacts
employees or other independent contractors of the Company to secure other
employment for such persons if and only to the extent that the Consultant
first notifies the Chief Executive Officer of the Company in writing that
he intends to make such contact, the nature and content of such proposed
contact and the name, time and purpose of such proposed contact.
10.4 ASSIGNMENTS. The Company may not assign this Agreement without
the consent of the Consultant, except in connection with a sale of
substantially all of the assets or the capital stock of the Company. The
rights and obligations of Consultant hereunder are personal to him, and no
such rights, benefits, duties or obligations shall be subject to voluntary
or involuntary alienation, assignment or transfer.
10.5 EFFECT OF AGREEMENT. This Agreement shall be binding upon
Consultant and his heirs, executors, administrators and legal
representatives and upon the Company and its successors and any permitted
assigns.
10.6 WAIVER OF BREACH. The waiver by either party hereto of a breach
of any provision of this Agreement by the other party hereto shall not
operate or be construed as a waiver by such party of any subsequent breach
of such other party.
10.7 GOVERNING LAW. The validity, construction, and enforcement of
this Agreement shall be governed by the laws of the State of Texas. In the
event of a dispute concerning this Agreement, the parties agree that venue
lies in a court of competent jurisdiction in Xxxxxx County, Texas.
10.8 SEVERABILITY. If any provision of this Agreement is declared
unenforceable by a court of last resort, such declaration shall not affect
the validity of any other provision of this Agreement.
10.9 CONSTRUCTION. The headings contained in this Agreement are for
reference purposes only and shall not affect this Agreement in any manner
whatsoever. Wherever required by the context, any gender shall include any
other gender, the singular shall include the plural, and the plural shall
include the singular.
10.10 TIME FOR PERFORMANCE. If the time for performance of any
obligation set forth in this Agreement falls on a Saturday, Sunday, or
legal holiday, compliance with such obligation on the next business day
following such Saturday, Sunday, or legal holiday shall be deemed
acceptable.
10.11 EXECUTION. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which
shall be deemed one instrument. Consultant acknowledges that he has read
this Agreement and has been represented by separate legal counsel and he
understands that executing this Agreement is a condition of his right to
the Compensation described in Section 3.
10.12 PRIOR AGREEMENT. This Agreement supersedes and replaces the
Employment Agreement, which agreement shall terminate and be of no further
force or effect upon the due execution and delivery of this Agreement by
the parties hereto.
10.13 ARBITRATION. The Company and Consultant agree to submit to
final and binding arbitration any and all disputes, claims (whether in
tort, contract, statutory, or otherwise) and/or disagreements concerning
the interpretation or application of this Agreement and/or Consultant's
engagement by the Company and/or the termination of this Agreement and/or
Consultant's engagement by the Company; PROVIDED, HOWEVER, notwithstanding
the foregoing, in no event shall any dispute, claim or disagreement
arising under Section 6, 7 or 8 of this Agreement be submitted to
arbitration pursuant to this Section 10.13 or otherwise. Any such dispute,
claim and/or disagreement subject to arbitration pursuant to the terms of
this Section 10.13 shall be resolved by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association (the
"AAA"). Arbitration under this provision must be initiated within 30 days
of the action, inaction, or occurrence about which the party initiating
the arbitration is complaining. Within ten days of the initiation of an
arbitration hereunder, each party will designate an arbitrator pursuant to
Rule 14 of the AAA Rules. The appointed arbitrators will appoint a neutral
arbitrator from the panel in the manner prescribed in Rule 13 of the AAA
Rules. Consultant and the Company agree that the decision of the
arbitrators selected hereunder will be final and binding on both parties.
This arbitration provision is expressly made pursuant to and shall be
governed by the Federal Arbitration Act, 9 U.S.C. Sections 1 - 14. The
parties hereto agree that pursuant to Section 9 of the Act that a judgment
of the United States District Court for the Southern District of Texas,
shall be entered upon the award made pursuant to the arbitration.
TOGNIETTI CONSULTING AGREEMENT 1999
INTENDING TO BE LEGALLY BOUND, the parties hereto have executed this
Agreement to be dated and effective as of the 5th day of January 1999.
COMPANY:
DRYPERS CORPORATION
By: /s/ XXXXXX X. XXXXX
Xxxxxx X. Xxxxx
Chairman and Chief Executive Officer
CONSULTANT:
/s/ XXXXX X. XXXXXXXXX
Xxxxx X. Xxxxxxxxx
