EMPLOYMENT AGREEMENT
This Employment Agreement ("AGREEMENT") is made as of the 22nd day of
December, 2005 by and among Charys Holding Company, Inc., a Delaware corporation
located at 0000 Xxxxxxxxx Xxxxxx Xxxx, Xxxxx X-000, Xxxxxxx Xxxxxxx 00000
("CHARYS"), Method IQ, Inc., a Georgia corporation located at 0000 Xxxxxxxx
Xxxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxx 00000 (the "COMPANY"), and Xxxxx X.
Xxxxxxxx, Xx. (hereinafter, the "EXECUTIVE").
R E C I T A L S
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A. Charys acquired all of the issued and outstanding stock of the
Company effective November 1, 2005.
B. The Board of Directors of Charys (the "CHARYS BOARD") recognizes the
Executive's potential contribution to the growth and success of Charys by
providing executive management services to the Company and desires to assure the
Company of the Executive's employment in an executive capacity.
C. The Board of Directors of the Company (the "BOARD") recognizes the
Executive's potential contribution to the growth and success of the Company, and
desires to assure the Company of the Executive's employment in an executive
capacity and to compensate him therefore, has approved the provisions of this
Agreement and has authorized the officers of the Company to execute the
Agreement on behalf of the Company.
D. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, the parties agree as follows:
1. Employment.
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1.1 Employment and Terms. The Company hereby agrees to employ
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the Executive and the Executive hereby agrees to serve the Company on the terms
and conditions set forth herein.
1.2 Duties of Executive. During the Term of Employment under
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this Agreement (as hereinafter defined), the Executive shall serve as the
Company's Chief Executive Officer. The Executive shall be accountable only to
the Board, and, subject to the authority of the Board, shall have supervision
and control over, and responsibility for the overall operations of the Company.
He also shall have such other powers and duties as may from time to time be
prescribed by the Board, provided that such duties are consistent with the
Executive's position as Chief Executive Officer of a company the size and type
of the Company. The Executive shall devote the necessary time and attention to
the business and affairs of the Company, render such services to the best of his
ability, and use his reasonable best efforts to promote the interests of the
Company. Notwithstanding the foregoing or any other provision of this Agreement,
it shall
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not be a breach or violation of this Agreement for the Executive to (i) be
employed in any capacity by Rock Creek Equity Holdings, LLC, (ii) serve on
corporate (subject to approval of the Board, which shall not be unreasonably
withheld), civic or charitable boards or committees, (iii) deliver lectures,
fulfill speaking engagements or teach at educational institutions, or (iv)
manage personal investments, so long as such activities do not significantly
interfere with or significantly detract from the performance of the Executive's
responsibilities to the Company in accordance with this Agreement. The Executive
may continue to serve out the remaining term as a board member on any corporate
board on which he serves as of the Commencement Date.
2. Term. The term of employment under flu's Agreement (the "TERM
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OF EMPLOYMENT") shall commence as of the 22nd day of December, 2005 (the
"COMMENCEMENT DATE") and shall continue for a period ending two (2) years from
any date as of which the Term of Employment is being determined, subject to
earlier termination pursuant to Section 5 hereof. This agreement shall
automatically renew for an additional 2-year term at the conclusion of the
initial or successive 2-year terms. The date on which the Term of Employment
shall expire is sometimes referred to in this Agreement as the "EXPIRATION
DATE."
3. Compensation.
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3.1 Base Salary. The Executive shall receive a base salary at the
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annual rate of $175,000 (the "BASE SALARY") during the Term of Employment, with
such Base Salary payable in installments consistent with the Company's normal
payroll schedule, subject to applicable withholding and other taxes. The Base
Salary shall be reviewed, at least annually, for merit increases and may, by
action and in the discretion of the Board, be increased at any time or from time
to time. Notwithstanding the foregoing, the Board may decrease the Executive's
salary at any time with the written consent of the Executive, which shall be
granted at the Executive's sole discretion. Any such reduction in the
Executive's salary shall not effect the calculation of Base Salary for the
purpose of Section 5 of this Agreement. Notwithstanding anything to the
contrary herein, in no event shall Executive's salary be reduced below
$60,000.00, and, if the Company has met or exceeded $1.4 million in EBIDTA by
the date which is one year from the Commencement Date, then, in no even shall
Executive's salary be (or be reduced to) less than the Base Salary set forth
above.
3.2 Bonuses. In addition to Base Salary, the Executive shall be
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eligible to receive a bonus (the "ANNUAL BONUS") payable in such amount and at
such times as may be recommended by the Compensation Committee of the Board of
Directors in its sole discretion.
4. Expense Reimbursement and Other Benefits.
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4.1 Reimbursement of Expenses. Upon the submission of proper
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substantiation by the Executive, and subject to such rules and guidelines as the
Company may from time to time adopt with respect to the reimbursement of
expenses of executive personnel, the Company shall reimburse the Executive for
all reasonable expenses actually paid or incurred by the Executive during the
Term of Employment in the course of and pursuant to the business of the Company,
The Executive shall account to the Company in writing for all expenses for which
reimbursement is sought and shall supply to the Company copies of all relevant
invoices, receipts or other evidence reasonably requested by the Company.
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4.2 Compensation/Benefit Programs. During the Term of
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Employment, the Executive shall be entitled to participate in all medical,
dental, hospitalization, accidental death and dismemberment, disability, travel
and life insurance plans and all other plans as are presently and hereinafter
offered by the Company to its executive personnel, including savings, pension,
profit-sharing and deferred compensation plans.
4.3 Working Facilities. During the Term of Employment, the Company
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shall furnish the Executive with an office, secretarial help and such other
facilities and services suitable to his position and adequate for the
performance of his duties hereunder.
4.4 Automobile. During the Term of Employment, the Company shall,
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at the Executive's election, either (i) pay to the Executive a non-accountable
automobile allowance of $500 per month or (ii) provide the Executive with a
mid-size automobile (which initially shall be new and shall be replaced not less
frequently than every three (3) years), and reimburse the Executive for the
costs of gasoline, oil, repairs, maintenance, insurance and other expenses
incurred by Executive by reason of the use of the automobile.
4.5 Stock Options.
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a. Initial Grant. As of the Commencement Date, Charys shall
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grant to the Executive an option to purchase 200,000 shares of common stock of
Charys (the "COMMON STOCK") (hereinafter, the "INITIAL OPTIONS") at
the closing price on the Commencement Date. One Hundred Percent (100%) of
this option shall be exercisable on the Commencement Date and shall remain
exercisable for a period often (10) years, whether or not the Executive
continues to be employed by the Company during that period. The parties intend
that the Initial Options be granted pursuant to the Charys stock option plan
(the "CHARYS STOCK OPTION PLAN") and shall be incentive stock options to the
extent allowable under the Charys Stock Option Plan and applicable laws;
provided, however, in the event that the Initial Options may not be granted
under the Charys Stock Option Plan due to the failure of Charys to obtain
shareholder approval of an increase in the number of shares available for grant
thereunder, the Initial Options shall be granted to the Executive outside of the
Charys Stock Option Plan.
b. Future Grants. In addition, during the Term of
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Employment, the Executive shall be eligible to be granted options (the "STOCK
OPTIONS") to purchase common stock of Charys under (and therefore subject to all
terms and conditions of) the Charys Stock Option Plan, and any successor plan
thereto; provided, however, that the Stock Options shall become immediately
exercisable in full upon termination of the Executive's employment with the
Company for any reason other than termination by the Company for Cause under
Section 5.1 hereof or termination by the Executive without Good Reason under
Section 5.5(b) hereof. The number of Stock Options and terms and conditions of
the Stock Options shall be determined by the committee of the Board appointed
pursuant to the Charys Stock Option Plan, or by the Charys Board, in its
discretion and pursuant to the Charys Stock Option Plan.
4.6 Target Companies. Within thirty (30) days after Commencement
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Date, a special committee (the "COMMITTEE") of the Charys Board shall be
established to meet with the Executive and Xxxxxxx X. Xxxxxxxx (collectively,
the "MANAGERS") to establish guidelines (the "GUIDELINES") for acquisitions of
companies similar to the Company. After the Guidelines have
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been established and approved by the Charys Board, the Managers may from time to
time bring acquisition candidates (a "TARGET COMPANY" or the "TARGET COMPANIES")
to the Committee for review. If the acquisition terms of a Target Company comply
with the Guidelines, Charys will make available a pool of Common Stock and
apportion cash which may be available from Charys for the acquisition of the
Target Company as a wholly-owned subsidiary of the Company, pursuant to any
acquisition structure recommended by the Company's attorneys, accountants or
other professional advisors.
As soon as practicable after the acquisition of the Company, the
Committee and the Managers shall establish reasonable financial goals for the
results of operations of any Target Company acquired, to include target sales,
target growth in sales, and target earnings before interest, depreciation, taxes
and amortization, as determined in accordance with United States generally
accepted accounting principles ("EBITDA"), hereinafter collectively the "TARGET
GOALS."
At the end of each full fiscal year of operation for any Target
Company, Charys shall cause an audit of the Target Company to be performed by
Charys' accountants (fee 'TARGET REVIEW").
In the event the results of operation of each Target Company, as
determined by the Target Review, is equal to greater than the Target Goals, then
an amount not less than Twenty-Five Percent (25%) of the net income of any
Target Company, as established by the Target Review, would be paid to the
Managers, in accordance with each Manager's Employment Agreement, in cash or in
common stock of Charys, at the Company's option, in accordance with the example
set forth in EXHIBIT A hereto. The incentive compensation payable under this
Section shall be cumulative over a three (3) year period.
4.7 Other Benefits. The Executive shall be entitled to four (4)
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weeks of paid vacation each calendar year during the Term of Employment, to be
taken at such times as the Executive and the Company shall mutually determine
and provided that no vacation time shall significantly interfere with the duties
required to be rendered by the Executive hereunder. Any vacation time not taken
by Executive during any calendar year may be carried forward into any succeeding
calendar year. The Executive shall receive such additional benefits, if any, as
the Board of the Company shall from time to time determine.
5. Termination.
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5.1 Termination for Cause. The Company shall at all times have the
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right, upon written notice to the Executive, to terminate the Term of
Employment, for Cause as defined below. For purposes of this Agreement, the term
"CAUSE" shall mean (i) an action or omission of the Executive which constitutes
a willful and material breach of, or a willful and material failure or refusal
(other than by reason of his disability or incapacity) to perform his duties
under, this Agreement which is not cured within fifteen (15) days (or if the
Executive is acting diligently to effect a cure, such longer time as shall be
reasonably necessary to effect the cure) after receipt by the Executive of
written notice of same, (ii) fraud, embezzlement, misappropriation of funds or
material breach of trust in connection with his services hereunder, or (iii) a
conviction of any crime which involves dishonesty or a breach of trust. Any
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termination for Cause shall be made in writing by notice to the Executive, which
notice shall set forth in reasonable detail all acts or omissions upon which the
Company is relying for such termination. The Executive (and his legal
representative) shall have the right to address the Board regarding the acts set
forth in the notice of termination. Upon any termination pursuant to this
Section 5.1, the Company shall (i) pay to the Executive any unpaid Base Salary
through the date of termination and (ii) pay to the Executive accrued but unpaid
Incentive Compensation, if any, for any Bonus Period ending on or before the
date of the termination of Executive's employment with the Company. Upon any
termination effected and compensated pursuant to this Section 5.1, the Company
shall have no further liability hereunder (other than for (x) reimbursement for
reasonable business expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 4.1, and (y) payment of compensation for
unused vacation days that have accumulated during the calendar year in which
such termination occurs).
5.2 Disability. The Company shall at all times have the right,
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upon written notice to the Executive, to terminate the Term of Employment, if
the Executive shall as the result of mental or physical incapacity, illness or
disability, become unable to perform his obligations hereunder for a period of
180 days in any 12-month period. The determination of whether the Executive is
or continues to be disabled shall be made in writing by a physician selected by
the Board and reasonably acceptable to the Executive. Upon any termination
pursuant to this Section 5.2, the Company shall (i) pay to the Executive the
Executive's Base Salary for the remainder of the then-current Term of
Employment, (ii) pay to the Executive accrued but unpaid Incentive Compensation,
if any, for any Bonus Period ending on or before the date of termination of the
Executive's employment with the Company, (iii) pay to the Executive his
Termination Year Bonus, if any, at the time provided in Section 3.2f hereof, and
(iv) pay to the Executive any then unpaid Additional Bonuses at the time
provided in Section 3.2(c), Upon any termination effected and compensated
pursuant to this Section 5.2, the Company shall have no farther liability
hereunder (other than for (x) reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however to the provisions of
Section 4.1, and (y) payment of compensation for unused vacation days that have
accumulated during the calendar year in which such termination occurs).
5.3 Death. Upon the death of the Executive during the Term of
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Employment, the Company shall (i) pay to the estate of the deceased the
Executive's Base Salary for the remainder of the then-current Term of
Employment, (ii) pay to the estate of the deceased Executive accrued but unpaid
Incentive Compensation, if any, for any Bonus Period ending on or before the
Executive's date of death, (iii) pay to the estate of the deceased Executive,
the Executive's Termination Year Bonus, if any, at the time provided hi Section
3.2f hereof, and (iv) pay to the Executive's estate any then unpaid Additional
Bonuses at the time provided in Section 3.2(c). Upon any termination effected
and compensated pursuant to this Section 5.3, the Company shall have no further
liability hereunder (other than for (x) reimbursement for reasonable business
expenses incurred prior to the date of the Executive's death, subject, however
to the provisions of Section 4.1, and (y) payment of compensation for unused
vacation days that have accumulated during the calendar year in which such
termination occurs).
5.4 Termination Without Cause. The Company shall have the right to
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terminate the Term of Employment by written notice to the Executive not less
than thirty (30) days prior to the termination date. Upon any termination
pursuant to this Section 5.4 (that is not
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a termination under any of Sections 5.1, 5.2, 5.3 or 5.5), the Company shall (i)
pay to the Executive on the termination date unpaid Base Salary, if any, through
the date of termination specified in such notice, (ii) pay to the Executive the
accrued but unpaid Incentive Compensation, if any, for any Bonus Period ending
on or before the date of the termination of the Executive's employment with the
Company, at the time provided in Section 3.2a, (iii) pay to the Executive on the
termination date a lump sum payment equal to three (3) times the sum of (x) his
Base Salary and (y) the accrued but unpaid Bonus for the year in which such
termination occurs, (iv) continue to provide the Executive with the benefits
under Sections 4.2 and 4.4 hereof (the "BENEFITS") for a period of three (3)
years immediately following the date of his termination in the manner and at
such times as the Benefits otherwise would have been provided to the Executive;
(v) pay to the Executive as a single lump sum payment, within 30 days of the
date of termination, a lump sum benefit equal to the value of the portion of his
benefits under any savings, pension, profit sharing or deferred compensation
plans that are forfeited under such plans but that would not have been forfeited
if the Executive's employment had contained for an additional three (3) years.
In the event that the Company is unable to provide the Executive with any
Benefits required hereunder by reason of the termination of the Executive's
employment pursuant to this Section 5.4, then the Company shall promptly
reimburse the Executive for amounts paid by the Executive to acquire comparable
coverage. Upon any termination effected and compensated pursuant to this Section
5.4, the Company shall have no further liability hereunder (other than for (x)
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however, to the provisions of Section 4.1, and (y) payment
of compensation for unused vacation days that have accumulated during the
calendar year in which such termination occurs).
5.5 Termination by Executive.
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a. The Executive shall at all times have the right, by
written notice not less than thirty (30) days prior to the termination date, to
terminate the Term of Employment.
b. Upon termination of the Term of Employment pursuant to
this Section 5.5 by the Executive without Good Reason (as defined below), the
Company shall (i) pay to the Executive upon the termination date any unpaid Base
Salary through the effective date of termination specified in such notice or
otherwise mutually agreed and (ii) pay to the Executive any accrued but unpaid
Incentive Compensation, if any, for any Bonus Period ending on or before the
termination of Executive's employment with the Company, at the time provided in
Section 3.2. Upon any termination effected and compensated pursuant to this
Section 5.5(b), the Company shall have no further liability hereunder (other
than for (x) reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of Section 4.1, and
(y) payment of compensation for unused vacation days that have accumulated
during the calendar year in which such termination occurs).
c. Upon termination of the Term of Employment pursuant to
this Section 5.5 by the Executive for Good Reason, the Company shall pay to the
Executive the same amounts, and shall continue or compensate for Benefits in the
same amounts, that would have been payable or provided by the Company to the
Executive under Section 5.4 of this Agreement if the Term of Employment had been
terminated by the Company without Cause. In addition, if the termination of the
Term of Employment occurs after a Change in Control (as hereinafter
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defined), and as a result of the Change in Control, the Executive would be
entitled to a reduction in the option price for any options granted to the
Executive, or any cash payments from the Company, (other than those provided
under this Agreement) in addition to those specified in Section 5.4, under any
plan or program maintained by the Company (the "ADDITIONAL BENEFITS"), then the
Company shall provide the Executive with those Additional Benefits, if and only
to the extent that such Additional Benefits, when added to the amounts payable
and the Benefits provided by the Company to the Executive hereunder, will not
constitute excess parachute payments with the meaning of Section 280G of
Internal Revenue Code of 1986, as amended, and the regulations thereunder (the
"CODE"). Upon any termination effected and compensated pursuant to this Section
5.5(c), the Company shall have no further liability hereunder (other than for
(x) reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however, to the provisions of Section 4.1, and (y) payment
of compensation for unused vacation days that have accumulated during the
calendar year in which such termination occurs.)
d. For purposes of this Agreement, "GOOD REASON" shall mean
(i) the assignment to the Executive of any duties inconsistent in any respect
with the Executive's position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by Section
1.2 of this Agreement, or any other action by the Company which results in a
diminution in such position, authority, duties or responsibilities, excluding
for this purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive; (ii) any failure by the Company to comply with
any of the provisions of Article 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive; (iii) the Company's requiring the Executive to be based at any office
or location, that is not within 50 miles of the executive's home city except for
travel reasonably required hi the performance of the Executive's
responsibilities; (iv) any purported termination by the Company of the
Executive's employment other than for Cause pursuant to Section 5.1, or because
of the Executive's disability pursuant to Section 5.2 of this Agreement; (v) the
termination by the Company of Xxxxxxx X. Xxxxxxxx for any reason other than
Cause; or (vi) the occurrence of a Change in Control For purposes of this
Section 5.5(d), the Executive acknowledges that the Company's holding company
functions are headquartered and centralized in Atlanta, Georgia. For purposes of
this Section 5.5(d), any good faith determination of Good Reason made by the
Executive shall be conclusive; provided that the Executive shall not exercise
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his right to terminate his employment for Good Reason without first giving sixty
(60) days written notice to the Company of the factual basis constituting Good
Reason. The Company shall have the right to cure the problem(s) noted by the
Executive, before the Executive may terminate his employment for Good Reason.
e. For purposes of this Agreement, the term "CHANGE IN
CONTROL" shall mean:
(i) Approval by the shareholders of the Company of (x) a
reorganization, merger, consolidation or other form of corporate transaction or
series of transactions, in each case, with respect to which persons who were the
shareholders of the Company immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately thereafter, own more than
Fifty Percent (50%) of the combined voting
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power entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities, in substantially the same proportions as their ownership immediately
prior to such reorganization, merger, consolidation or other transaction., or
(y) a liquidation or dissolution of the Company or (z) the sale of all or
substantially all of the assets of the Company (unless such reorganization,
merger, consolidation or other corporate transaction, liquidation, dissolution
or sale is subsequently abandoned);
(ii) A new Board member is elected without the approval
of at least two (2) of the persons who, as of the Commencement Date of this
Agreement, constitute the Board (the "INCUMBENT BOARD"); or
(iii) the acquisition (other than from the Company) by
any person, entity or "group", within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act, of beneficial ownership within the
meaning of Rule 13-d promulgated under the Securities Exchange Act of more man
Fifty Percent (50%) of either the then outstanding shares of the Company's
Common Stock or the combined voting power of the Company's then outstanding
voting securities entitled to vote generally in the election of directors
(hereinafter referred to as the ownership of a "CONTROLLING INTEREST")
excluding, for this purpose, any acquisitions by (1) the Company or its
Subsidiaries, (2) any person, entity or "group" that as of the Commencement Date
of this Agreement owns beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act) of a Controlling Interest or (3)
any employee benefit plan of the Company or its Subsidiaries;
(iv) provided that, with respect to this Section 5.5(e),
a Change in Control shall not be deemed to have occurred should any of the
contingencies referred to in this Section involve any of those companies,
persons or other legal entities with whom the Company is negotiating on or
before the Commencement Date and which are communicated, in writing, by the
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Company to the Executive upon execution of this Agreement.
5.6 Certain Additional Payments by the Company. Anything in this
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Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment, distribution or other action by the Company to or for the
benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, including
any additional payments required under this Section 5.6) (a "PAYMENT") would be
subject to an excise tax imposed by Section 4999 of the Code, or any interest or
penalties are incurred by the Executive with respect to any such excise tax
(such excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "EXCISE TAX"), the Company shall make a payment
to the Executive (a "GROSS-UP PAYMENT") in an amount such that after payment by
the Executive of all taxes (including any Excise Tax) imposed upon the Gross-Up
Payment, the Executive retains (or has had paid to the Internal Revenue Service
on his behalf) an amount of the Gross-Up Payment equal to the sum of (x) the
Excise Tax imposed upon the Payments and (y) the product of any deductions
disallowed because of the inclusion of the Gross-Up Payment in the Executive's
adjusted gross income and the highest applicable marginal rate of federal income
taxation for the calendar year in which the Gross-Up Payment is to be made. For
purposes of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to (i) pay federal income taxes at the highest marginal rates of
federal income taxation for the calendar year in which the Gross-Up Payment is
to be made, and (ii) pay
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applicable state and local income taxes at the highest marginal rate of taxation
for the calendar year in which the Gross-Up Payment is to be made, net of the
maximum reduction in federal income taxes which could be obtained from deduction
of such state and local taxes.
5.7 Resignation. Upon any termination of employment pursuant to
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this Article 5, the Executive shall be deemed to have resigned as an officer,
and if he or she was then serving as a director of the Company, as a director,
and if required by the Board, the Executive hereby agrees to immediately execute
a resignation letter to the Board.
5.8 Survival. The provisions of this Article 5 shall survive the
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termination of this Agreement, as applicable.
6. Restrictive Covenants.
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6.1 Non-competition. In order to fully protect the Company's
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Proprietary Information, at all times during the Restricted Period, the
Executive shall not, directly or indirectly, perform or provide managerial or
executive services on behalf of any person, entity or enterprise which is
engaged in, or plans to engage in, the provision of telephonic customer
interaction solutions in the United States that directly or indirectly competes
with the Company's Business (for this purpose, the "COMPANY'S BUSINESS" is the
business of telephone and telecommunication installation and service).
Notwithstanding anything to the contrary in the forgoing or elsewhere herein,
the "Company's Business" shall not be deemed to include the current business of
Executive's other company, Synerio, Inc., a Georgia corporation, which is
building, operating and selling hosted call center applications. During the
Executive's employment with the Company, the Executive shall not, directly or
indirectly, have any interest in any business that provides telephonic customer
interaction solutions in the United States (other than the Company) that
competes with the Company's Business, provided that this provision shall not
apply to the Executive's ownership or acquisition, solely as an investment, of
securities of any issuer that is registered under Section 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended, and that are listed or admitted for
trading on any United States national securities exchange or that are quoted on
the National Association of Securities Dealers Automated Quotations System, or
any similar system or automated dissemination of quotations of securities prices
in common use, so long as the Executive does not control, acquire a controlling
interest in or become a member of a group which exercises direct or indirect
control of, more than five percent (5%) of any class of capital stock of such
corporation. For purposes of this Agreement the "RESTRICTED PERIOD" shall be the
period during which the Executive is employed by the Company and, if the
Executive's employment with the Company is either terminated by the Company
without Cause pursuant to Section 5.4, or by the Executive for Good Reason
pursuant to Section 5.5c, and the Company has paid to the Executive all of
amounts then payable to the Executive pursuant to Sections 5.4 or 5.5c, as
applicable, the one (1) year period immediately following the termination of the
Executive's employment with the Company.
6.2 Confidential Information. The Executive recognizes and
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acknowledges that the Trade Secrets (as defined below) and Confidential
Information (as defined below), of the Company and all physical embodiments
thereof, as they may exist from time-to-time, collectively, the "PROPRIETARY
INFORMATION" are valuable, special and unique assets of the Company's business.
In order to obtain and/or maintain access to such Proprietary Information,
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which employee acknowledges is essential to the performance of his duties under
this Agreement, the Executive agrees that, except with respect to those duties
assigned to him by the Company, the Executive shall hold in confidence all
Proprietary Information and the Executive will not reproduce, use, distribute,
disclose, or otherwise misappropriate any Proprietary Information, in whole or
in part, and will take no action causing, or fail to take any action necessary
to prevent causing, any Proprietary Information to lose its character as
Proprietary Information, nor will the Executive make use of any such Information
for the Executive's own purposes or for the benefit of any person, business or
legal entity (except the Company) under any circumstances, except that the
Executive may disclose such Proprietary Information to the extent required by
law, provided that, prior to any such disclosure, the Company be provided an
opportunity to contest such disclosure.
For purposes of this Agreement, the term "TRADE SECRETS" means
information belonging to or licensed to the Company, regardless of form,
including, but not limited to, any technical or non-technical data, formula,
pattern, compilation, program, device, method, technique, drawing, financial,
marketing or other business plan, lists of actual or potential customers or
suppliers, or any other information similar to any of the foregoing, which
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
derive economic value from its disclosure or use. The term "CONFIDENTIAL
INFORMATION" means any information belonging to or licensed to the Company,
regardless of form, other than Trade Secrets, which is valuable to the Company
and not generally known to competitors of the Company.
The provisions of this Section 6.2 will apply to Trade Secrets for as
long as such information remains a Trade Secret and to Confidential Information
during the Executive's employment with the Company and for a period of two (2)
years following the termination of the Executive's employment with the Company
for whatever reason.
6.3 Non-solicitation of Employees and Customers. At all times
-----------------------------------------------
during the Restricted Period, as defined in Section 6.1 hereof, the Executive
shall not, directly or indirectly, for himself or for any other person, firm,
corporation, partnership, association or other entity (a) solicit, recruit or
attempt to solicit or recruit any employee of the Company to leave the Company's
employment, or (b) solicit or attempt to solicit any of the actual or targeted
prospective customers or clients of the Company with whom the Executive had
material contact or about whom the Executive learned Confidential Information on
behalf of any person or entity in connection with any business that competes
with the Company's Business.
6.4 Ownership of Developments. All copyrights, patents, trade
----------------------------
secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed or
created by Executive during the course of performing work for the Company or its
clients (collectively, the "WORK PRODUCT") shall belong exclusively to the
Company and shall, to the extent possible, be considered a work made by the
Executive for hire for the Company within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by
the Executive for hire for the Company, the Executive agrees to assign, and
automatically assign at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of the Company, the
Executive
-10-
shall take such further actions, including execution and delivery of instruments
of conveyance, as may be appropriate to give full and proper effect to such
assignment.
6.5 Books and Records. All books, records, and accounts relating
------------------
in any manner to the customers or clients of the Company, whether prepared by
the Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company on termination of the Executive's employment hereunder or on the
Company's request at any time.
6.6 Definition of Company. Solely for purposes of this Article
------------------------
6, the term "COMPANY" also shall include any existing or future subsidiaries of
the Company that are operating during the time periods described herein and any
other entities that directly or indirectly, through one or more intermediaries,
control, are controlled by or are under common control with the Company during
the periods described herein.
6.7 Acknowledgment by Executive. The Executive acknowledges
------------------------------
and confirms that (a) the restrictive covenants contained in this Article 6 are
reasonably necessary to protect the legitimate business interests of the
Company, and (b) the restrictions contained in this Article 6 (including without
limitation the length of the term of the provisions of this Article 6)are not
overbroad, overlong, or unfair and are not the result of overreaching, duress or
coercion of any kind. The Executive further acknowledges and confirms that his
full, uninhibited and faithful observance of each of the covenants contained in
this Article 6 will not cause him any undue hardship, financial or otherwise,
and that enforcement of each of the covenants contained herein will not impair
his ability to obtain employment commensurate with his abilities and on terms
fully acceptable to him or otherwise to obtain income required for the
comfortable support of him and his family and the satisfaction of the needs of
his creditors.-The Executive acknowledges and confirms that his special
knowledge of the business of the Company is such as would cause the Company
serious injury or loss if he were to use such ability and knowledge to the
benefit of a competitor or were to compete with the Company in violation of the
terms of this Article 6. The Executive further acknowledges that the
restrictions contained in this Article 6 are intended to be, and shall be, for
the benefit of and shall be enforceable by, the Company's successors and
assigns.
6.8 Reformation by Court. In the event that a court of competent
-----------------------
jurisdiction shall determine that any provision of this Article 6 is invalid or
more restrictive than permitted under the governing law of such jurisdiction,
then only as to enforcement of this Article 6 within the jurisdiction of such
court, such provision shall be interpreted and enforced as if it provided for
the maximum restriction permitted under such governing law.
6.9 Extension of Time. If the Executive shall be in violation of
--------------------
any provision of this Article 6, then each time limitation set forth in this
Article 6 shall be extended for a period of time equal to the period of time
during which such violation or violations occur. If the Company seeks
injunctive relief from such violation in any court, then the covenants set forth
in this Article 6 shall be extended for a period of time equal to the pendency
of such proceeding including all appeals by the Executive.
-11-
6.10 Survival. The provisions of this Article 6 shall survive the
---------
termination of tins Agreement, as applicable.
7. Support Functions: Profit Participation. During the term of this
-------------------------------------------
Agreement, no material administrative or corporate support functions, unless
requested by the CEO or President of the Company, shall be integrated with those
of Charys, unless required by applicable law, rule or regulation, until the
earlier of the date when (a) the Company's credit facilities with Carolina First
Bank (or any refinancing of the same) has been paid in full or (b) until
Executive is released as a guarantor on all Company debt guaranteed by such
Executive. Net profits in excess of 10 % of the net sales of the Company shall
be eligible for distribution through a bonus compensation plan administered by
the Managers.
8. Injunction. It is recognized and hereby acknowledged by the parties
-----------
hereto that a breach by the Executive of any of the covenants contained in
Article 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
may be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Article 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
9. Attorney's Fees. Nothing contained herein shall be construed to
-----------------
prevent the Company or the Executive from seeking and recovering from the other
damages sustained by either or both of them as a result of its or his breach of
any term or provision of this Agreement. In the event that either party hereto
brings suit for the collection of any damages resulting from, or the injunction
of any action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs and attorneys' fees of the other.
10. Assignment. Neither party shall have the right to assign or
-----------
delegate his rights or obligations hereunder, or any portion thereof, to any
other person.
11. Governing Law and Venue. This Agreement shall be governed by and
---------------------------
construed and enforced in accordance with the internal laws of the State of
Georgia. The venue for any action to enforce this Agreement shall be the state
or federal courts located within Xxxxxx County, Georgia.
12. Entire Agreement. This Agreement constitutes the entire agreement
------------------
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between the Executive and the Company (or
any of its affiliates) with respect to such subject matter. This Agreement may
not be modified in any way unless by a written instrument signed by both the
Company and the Executive.
13. Notices: All notices required or permitted to be given hereunder
--------
shall be in writing and shall be personally delivered by courier, sent by
registered or certified mail, return
-12-
receipt requested or sent by confirmed facsimile transmission addressed as set
forth herein. Notices personally delivered, sent by facsimile or sent by
overnight courier shall be deemed given on the date of delivery and notices
mailed in accordance with the foregoing shall be deemed given upon the earlier
of receipt by the addressee, as evidenced by the return receipt thereof, or
three (3) days after deposit in the U.S. mail. Notice shall be sent (i) if to
the Company, addressed to the address of the Company in the preamble to this
Agreement, Attention: Chairman of the Board, and (ii) if to the Executive, to
his address as reflected on the payroll records of the Company, or to such other
in accordance with this provision.
14. Benefits; Binding Effect. This Agreement shall be for the benefit
---------------------------
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where permitted and
applicable, assigns, including, without limitation, any successor to the
Company, whether by merger, consolidation, sale of stock, sale of assets or
otherwise.
15. Severability. The invalidity of any one or more of the words,
-------------
phrases, sentences, clauses, provisions, sections or articles contained in this
Agreement shall not affect the enforceability of the remaining portions of this
Agreement or any part thereof, all of which are inserted conditionally on their
being valid in law, and, in the event that any one or more of the words,
phrases, sentences, clauses, provisions, sections or articles contained in this
Agreement shall be declared invalid, this Agreement shall be construed as if
such invalid word or words, phrase or phrases, sentence or sentences, clause or
clauses, provisions or provisions, section or sections or article or articles
had not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
16. Waivers. The waiver by either party hereto of a breach or violation
--------
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
17. Damages. Nothing contained herein shall be construed to prevent the
--------
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, men the party found to be at fault shall pay all reasonable court
costs and attorneys' fees of the other.
18. Section Headings. The article, section and paragraph headings
------------------
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
19. No Third Party Beneficiary. Nothing expressed or implied in this
------------------------------
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and permitted assigns, any
rights or remedies under or by reason of this Agreement.
-13-
20. Counterparts. This Agreement may be executed in one or more
-------------
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument and agreement.
21. Indemnification.
----------------
a. Subject to limitations imposed by law, the Company shall
indemnify and hold harmless the Executive to the fullest extent permitted by law
from and against any and all claims, damages, expenses (including attorneys'
fees), judgments, penalties, fines, settlements, and all other liabilities
incurred or paid by him in connection with the investigation, defense,
prosecution, settlement or appeal of any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative and to which me Executive was or is a party or is threatened to be
made a party by reason of the fact that the Executive is or was an officer,
employee or agent of the Company, or by reason of anything done or not done by
the Executive in any such capacity or capacities, provided that the Executive
acted in good faith, in a manner that was not grossly negligent or constituted
willful misconduct and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The Company also shall pay any and all expenses (including attorneys
fees) incurred by the Executive as a result of the Executive being called as a
witness in connection with any matter involving the Company and/or any of its
officers or directors.
b. The Company shall pay any expenses (including attorneys'
fees), judgments, penalties, fines, settlements, and other liabilities incurred
by the Executive in investigating, defending, settling or appealing any action,
suit or proceeding described in this Section 20 in advance of the final
disposition of such action, suit or proceeding. The Company shall promptly pay
the amount of such expenses to the Executive, but in no event later than 10 days
following the Executive's delivery to the Company of a written request for an
advance pursuant to this Section 20, together with a reasonable accounting of
such expenses.
c. The Executive hereby undertakes and agrees to repay to the
Company any advances made pursuant to this Section 20 if and to the extent that
it shall ultimately be found that the Executive is not entitled to be
indemnified by the Company for such amounts.
d. The Company shall make the advances contemplated by this
Section 20 regardless of the Executive's financial ability to make repayment,
and regardless whether indemnification of the Indemnitee by the Company will
ultimately be required. Any advances and undertakings to repay pursuant to this
Section 20 shall be unsecured and interest- free.
e. The provisions of this Section 20 shall survive the
termination of this Agreement.
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-14-
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
COMPANY:
By: /s/ Xxxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President and Chief Operating Officer
CHARTS HOLDING COMPANY, INC.
By: /s/ Xxxxx Xxx Xx.
----------------------------------------
Name: Xxxxx Xxx Xx.
---------------------------------------
Title: CEO
--------------------------------------
EXECUTIVE:
/s/ Xxxxx X. Xxxxxxxx, Xx.
--------------------------------------------
Name: Xxxxx X. Xxxxxxxx, Xx.
-15-
Exhibit A
Base year numbers for Method IQ - stand alone
Revenue 15,000,000
EBITDA 1,400,000
Net Income 1,200,000
Target Acquisitions Incentive Compensation Example
Purchase Parameters (examples)
4 times EBITDA Purchase Price - No more than 50% Stock
Minimum Sales level of $3 million
Trailing 12 month EBITDA =/> 10% of Revenue
Retained Earnings has to be positive
Has to be profitable
Sales Price can not exceed 5 times Book Value
(Book Value can be adjusted for undervalued assets based on third party appraisal)
Performance Enhancement Target Weighted
Sales Increase 10% year over year Growth 20.00%
EBITDA 13% year over year Growth 35.00%
Net Income 14% year over year Growth 45.00%
Acquisitions Base Year Numbers
Targeted Performance Base Year
Sales 6,000,000
EBITDA 500,000
Net Income 400,000
Base Year First Year Second Year Third Year
Combined Base Year Numbers Combined Targets Targets Targets
Sales 21,000,000 100.00% 23,100,000 100.00% 25,410,000 100.00% 27,951,000 100.00%
EBITDA 1,900,000 9.05% 2,147,000 9.29% 2,426,110 9.55% 2,741,504 9.81%
Net Income 1,600,000 7.62% 1,824,000 7.90% 2,079,360 8.18% 2,370,470 8.48%
Target Bonus Amount at 15% 273,600 311,904 355,571
Stock Price Avg for Year 4.00 6.00 8.00
Target Bonus Units 68,400 51,964 44,446
Actual Performance
Sales 24,000,000 100.00% 26,000,000 100.00% 33,000,000 100.00%
EBITDA 2,000,000 8.33% 2,100,000 8.08% 3,500,000 10.61%
Net Income 1,850,000 7.71% 900,000 3.46% 1,200,000 3.64% 3,950,000
Achieved Target Performance
Sales 103.90% 102.32% 118.06%
EBITDA 93.15% 86.56% 127.67%
Net Income 101.43% 43.28% 50.62%
Weighted Average Achieved Performance
Sales 20.78% 20.46% 23.61%
EBITDA 32.80% 30.30% 44.68%
Net Income 45.64% 19.48% 22.78% Target Bonus
Achieved
Total 99.02% 70.24% 91.06% 813,844
Target Bonus Achieved 270,930 219,072 323,841
Stock Price Avg for Year $ 4.00 $ 6.00 $ 8.00 Incentive Units
Incentive Shares Achieved 67,733 36,512 40,480 Earned
144,725
Value
$1,157,798.10
Second Acquisition Year Two
First Year Second Year
Targeted Performance Base Year Target Target
Sales 3,000,000 100.00% 3,300,000 100.00% 3,630,000
EBITDA 250,000 8.33% 282,500 8.56% 319,225
Net Income 200,000 6.67% 228,000 6.91% 259,920
Combined Base Year Numbers 27,000,000 100.00% 29,700,000 100.00% 32,670,000 100.00%
Sales 2,250,000 8.33% 2,542,500 8.56% 2,673,025 8.79%
EBITDA 2,050,000 7.59% 2,337,000 7.87% 2,664,180 8.15%
Net Income
Target Bonus Amount at 15% 350,550 399,627
Stock Price Avg for Year 6.00 8.00
Target Bonus Units 58,425 49,953
Actual Performance
Sales 24,000,000 26,000,000 100.00% 33,000,000 100.00%
EBITDA 2,000,000 2,600,000 9.29% 2,500,000 7.58%
Net Income 1,850,000 2,200,000 7.86% 2,000,000 6.06%
Achieved Target Performance
Sales 103.90% 94.28% 101.01%
EBITDA 93.15% 102.26% 87.02%
Net Income 101.43% 94.14% 75.07%
Weighted Average Achieved Performance
Sales 20.78% 18.86% 20.20%
EBITDA 32.60% 35.79% 30.46%
Net Income 45.64% 42.36% 33.78%
Target Bonus
Total 99.02% 97.01% 84.44% Achieved
Target Bonus Achieved 270,930 340,064 337,442 610,995
Stock Price Avg for Year 4.00 $ 6.00 $ 8.00
Incentive Shares Achieved 67,733 56,677 42,180
Incentive Units
Earned
166,590
Sales Price Incentive if all three Years Goals are meet
Purchase Price based on Board Parameters 1,200,000 Value
Actual Price Negotiated 900,000 $ 1,323,722
Variance 300,000
Sales Price Incentive % 25.00%
Bonus for Successful Integration - paid in cash $ 75,000
The Sales price incentive was omitted in the Draft letter of intent but will be
connected.
