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EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Agreement is made this 1st day of August, 1997, between Service
Experts, Inc., a Delaware corporation (the "Company"), and Xxxxxx X. Xxxxxx III
("Employee").
W I T N E S S E T H:
WHEREAS, the Company, which maintains its principal executive offices
at 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxxxx, Xxxxxxxxx 00000, owns and operates
heating, ventilating and air conditioning ("HVAC") service and replacement
businesses under the name "Service Experts";
WHEREAS, the Company desires to employ Employee and Employee desires to
accept such employment by the Company subject to the terms and conditions
contained herein;
WHEREAS, in serving as an employee of the Company, Employee will
participate in the use and development of confidential proprietary information
about the Company, its customers and suppliers, and the methods used by the
Company and its employees in competition with other companies, as to which the
Company desires to protect fully its rights; and
WHEREAS, the effectiveness of this Agreement is contingent upon the
approval of the Board of Directors of the Company, and this Agreement shall be
of no force or effect until such approval is granted;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein set forth, the parties hereto agree as follows:
1. Employment. The Company hereby employs Employee and Employee accepts
such employment with the Company, subject to the terms and conditions set forth
herein. Employee shall be employed as Senior Vice President of the Company,
shall perform all duties and services incident to such position, and such other
duties and services as may be assigned or delegated to him by the Board of
Directors of the Company from time to time; provided, however, that without
Employee's consent, the duties and services of Employee hereunder shall not be
materially increased or altered in a manner inconsistent with Employee's
position and original duties hereunder. During his employment hereunder,
Employee shall devote his best efforts and attention, on a full-time basis, to
the performance of the duties required of him as an employee of the Company.
2. Compensation. As compensation for services rendered by Employee
hereunder, Employee shall receive:
(a) An annual salary as set forth on Appendix I hereto, or
such higher salary as shall be established by the Compensation
Committee of the Board of Directors of the Company, which salary shall
be payable in arrears in equal monthly installments, plus insurance and
other benefits equivalent to the benefits provided other executive
employees of the Company;
(b) Compensated vacation time, equivalent to vacation time
provided
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to other executive employees of the Company, to be taken at any time
during each year of the term of this Agreement;
(c) Bonus compensation to be determined in the sole discretion
of the Compensation Committee; and
(d) Reimbursement for all reasonable expenses incurred by
Employee in the performance of his duties under this Agreement,
provided that Employee submits verification of such expenses in
accordance with the policies of the Company.
Prior to the end of each fiscal year during the term of this Agreement,
the Compensation Committee shall review with Employee his compensation
hereunder. Any increases in salary or changes in fringe benefits agreed upon by
Employee and the Compensation Committee at such annual review shall become
effective the following month unless otherwise agreed to by the Company and
Employee.
3. Confidential Information and Trade Secrets.
3.1 Employee recognizes that Employee's position with the Company
requires considerable responsibility and trust, and, in reliance on Employee's
loyalty, the Company may entrust Employee with highly sensitive confidential,
restricted and proprietary information involving Trade Secrets and Confidential
Information (as hereinafter defined).
3.2 For purposes of this Agreement, a "Trade Secret" is any scientific
or technical information, design, process, procedure, formula or improvement
that is valuable and not generally known to competitors of the Company.
"Confidential Information" is any data or information, other than Trade Secrets,
that is important, competitively sensitive, and not generally known by the
public, including, but not limited to, the Company's business plan, business
prospects, customer lists, training manuals, product development plans, bidding
and pricing procedures, market strategies, internal performance statistics,
financial data, confidential personnel information concerning employees of the
Company, supplier data, operational or administrative plans, policy manuals, and
terms and conditions of contracts and agreements. The terms "Trade Secret" and
"Confidential Information" shall not apply to information which is (i) received
by Employee from a third party with no restriction on disclosure, or (ii)
required to be disclosed by any applicable law.
3.3 Except as required to perform Employee's duties hereunder,
Employee will not use or disclose any Trade Secrets or Confidential Information
of the Company during employment, at any time after termination of employment
and prior to such time as they cease to be Trade Secrets or Confidential
Information through no act of Employee in violation of this Agreement.
3.4 Upon the request of the Company and, in any event, upon the
termination of employment hereunder, Employee will surrender to the Company all
memoranda, notes, records, manuals or other documents pertaining to the
Company's business or Employee's employment (including all copies thereof).
Employee will also leave with the Company all materials involving any Trade
Secrets or Confidential Information of the Company. All such information and
materials, whether or not made or developed by Employee, shall be the sole and
exclusive property of the Company, and Employee hereby assigns to the Company
all of Employee's right, title and interest in and to any and all of such
information and materials.
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4. Covenant Not to Compete.
4.1 Employee hereby covenants and agrees with the Company that during
the term hereof and for a period expiring two years after the termination or
expiration of this Agreement, Employee will not directly or indirectly (i)
operate, develop or own any interest other than the ownership of less than five
percent (5%) of the equity securities of a publicly traded company, in any
business which has significant (viewed in relation to the business of the
Company) activities relating to the ownership, management or operation of, or
consultation regarding an HVAC service and replacement company (an "HVAC
Business"); (ii) compete with the Company or its subsidiaries and affiliates in
the operation or development of any HVAC Business within fifty (50) miles of any
HVAC Business owned by the Company; (iii) be employed by or consult with any
business which owns, manages or operates an HVAC Business within fifty (50)
miles of any HVAC Business owned by the Company; (iv) interfere with, solicit,
disrupt or attempt to disrupt any past, present or prospective relationship,
contractual or otherwise, between the Company, or its subsidiaries or
affiliates, and any customer, client, supplier or employee of the Company, or
its subsidiaries or affiliates; or (v) solicit any past, present or prospective
management employee (including all corporate officers and managers, all regional
managers and all general managers) of the Company, or its subsidiaries or
affiliates, to leave their employment with the Company or its subsidiaries or
affiliates, or hire any such employee to work in any capacity; provided,
however, that this provision shall not apply if Employee's employment hereunder
is terminated without cause prior to the expiration of the Agreement.
4.2 If a judicial determination is made that any of the provisions of
this Section 4 constitutes an unreasonable or otherwise unenforceable
restriction against Employee, the provisions of this Section 4 shall be rendered
void only to the extent that such judicial determination finds such provisions
to be unreasonable or otherwise unenforceable. In this regard, the parties
hereto hereby agree that any judicial authority construing this Agreement shall
be empowered to sever any portion of the territory or prohibited business
activity from the coverage of this Section 4 and to apply the provisions of this
Section 4 to the remaining portion of the territory or the remaining business
activities not so severed by such judicial authority. Moreover, notwithstanding
the fact that any provisions of this Section 4 are determined not to be
specifically enforceable, the Company shall nevertheless be entitled to recover
monetary damages as a result of the breach of such provision by Employee. The
time period during which the prohibitions set forth in this Section 4 shall
apply shall be tolled and suspended as to Employee for a period equal to the
aggregate quantity of time during which Employee violates such prohibitions in
any respect.
5. Specific Enforcement. Employee specifically acknowledges and agrees
that the restrictions set forth in Sections 3 and 4 hereof are reasonable and
necessary to protect the legitimate interests of the Company and that the
Company would not have entered into this Agreement in the absence of such
restrictions. Employee further acknowledges and agrees that any violation of the
provisions of Sections 3 or 4 hereof will result in irreparable injury to the
Company, that the remedy at law for any violation or threatened violation of
such Sections will be inadequate and that in the event of any such breach, the
Company, in addition to any other remedies or damages available to it at law or
in equity, shall be entitled to temporary injunctive relief before trial from
any court of competent jurisdiction as a matter of course and to permanent
injunctive relief without the necessity of proving actual damages.
6. Term. This Agreement shall be effective on August 1, 1997 and
continue
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for an initial period of three (3) years from such date, unless sooner
terminated by either party in the manner set forth herein. The date upon which
this Agreement and Employee's employment hereunder shall terminate, whether
pursuant to the terms of this Section or pursuant to any other provision of this
Agreement shall hereafter be referred to as the "Termination Date."
7. Termination Upon Cessation of Company's Operations or Death of the
Employee. In the event the Company ceases its operations or the Employee dies
during the term of this Agreement, this Agreement shall immediately terminate
and neither the Employee nor the Company shall have any further obligations
hereunder, except that (a) the Company shall continue to be obligated under
Section 2(a) hereof for any unpaid salary, bonus, unreimbursed expenses or
payments pursuant to Section 10 hereof owed to Employee or his estate that have
accrued but not been paid as of the Termination Date and (b) in the event of
death of the Employee during the term of this Agreement, the Company shall pay
to Employee's estate an amount equal to three months salary.
8. Termination by Employee. Employee may at any time terminate his
employment by giving the Company ninety (90) days prior written notice of his
intent to terminate the Agreement. At the Termination Date, the Company shall
have no further obligation to Employee and Employee shall have no further rights
or obligations hereunder, except as set forth in Sections 3 and 4 above, and
except for the Company's obligation under Section 2(a) hereof for unpaid salary,
bonus or unreimbursed expenses that have accrued but have not been paid as of
the Termination Date.
9. Termination for Cause. The Company shall have the right at any time
to terminate Employee's employment immediately for cause, which shall include
any of the following reasons:
(a) If Employee shall violate the provisions of Sections 3 or
4 of this Agreement, or shall fail to comply with any other material
term or condition of this Agreement which materially and adversely
affects the business or affairs of the Company; or
(b) If Employee shall commit (i) a felony or (ii) an act of
dishonesty, willful mismanagement, fraud or embezzlement against the
Company.
Employee's obligations under Sections 3 and 4 hereof shall survive the
termination of the Agreement pursuant to this Section 9. In the event Employee's
employment hereunder is terminated in accordance with this Section, the Company
shall have no further obligation to make any payments to Employee hereunder
except for unpaid salary, bonus or unreimbursed expenses that have accrued but
have not been paid as of the Termination Date.
10. Termination Without Cause. In the event that Company breaches this
Agreement or Employee is terminated without cause during the term hereof (which
shall not include a termination pursuant to Sections 7, 8, 9, 11 or 12), the
Company shall (a) pay Employee all bonuses and unreimbursed expenses owed to
Employee that have accrued but have not been paid as of the Termination Date;
(b) continue to pay to Employee his salary set forth in Section 2(a) hereof for
the greater of two (2) years or the remaining term of this Agreement; and (c)
continue to provide the insurance and other benefits of Section 2(a) hereof for
the greater of two (2) years or the remaining term of this Agreement. The
Company's obligations pursuant to this Section 10 shall terminate immediately if
Employee obtains employment which would have been in violation of Section 4
hereof, as determined in good faith by the Board of Directors. If
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Employee is terminated without cause, the provisions of Section 4 will be void
and of no effect. In addition to the severance payment payable under this
Section 10, Employee shall be paid an amount equal to two (2) times the average
annual bonus earned by Employee in the two (2) years immediately preceding the
date of termination. Employee shall also be entitled to an accelerated vesting
of any awards granted to Employee under the Company's 1996 Incentive Stock Plan.
11. Termination Upon a Change in Control.
11.1 For purposes of this Agreement, a "Change in Control" shall mean
(a) the time that the Company first determines that any person and all other
persons who constitute a group (within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), have acquired
within any twelve (12) month period (i) direct or indirect beneficial ownership
(within the meaning of Section 13(d)(3) under the Exchange Act) of twenty
percent (20%) or more of the Company's outstanding securities or (ii) assets of
the Company having a fair market value in excess of one-third of the Company's
total assets, unless a majority of the Continuing Directors, as hereinafter
defined, approves the acquisition not later than ten (10) business days after
the Company makes that determination or (b) the first day on which a majority of
the members of the Company's Board of Directors are not Continuing Directors.
11.2 For purposes of this Agreement, "Continuing Directors" shall mean,
as of any date of determination, any member of the Board of Directors of the
Company who (i) was a member of the Board of Directors on August 16, 1996, (ii)
has been a member of the Board of Directors for the two years immediately
preceding such date of determination or (iii) was nominated for election or
elected to the Board of Directors with the affirmative vote of a majority of
Continuing Directors who were members of the Board at the time of such
nomination or election.
11.3 In the event of a termination upon a Change in Control, Employee
shall immediately be paid all accrued salary, bonus compensation to the extent
earned, vested deferred compensation (other than plan benefits which will be
paid in accordance with the applicable plan), any benefits under any plans of
the Company in which Employee is a participant to the full extent of Employee's
rights under such plans (including accelerated vesting of any awards granted to
Employee under the Company's 1996 Incentive Stock Plan), accrued vacation pay
and any appropriate business expenses incurred by Employee in connection with
his duties hereunder, all to the date of termination, and all severance
compensation provided in Section 11.4, but no other compensation or
reimbursement of any kind.
11.4 In addition, Employee shall be paid as severance compensation his
base salary in monthly installments (at the rate payable at the time of such
termination) through the remaining term of this Agreement and any extensions
hereof; provided, however, that if Employee is employed by a new employer during
such period, the severance compensation payable to Employee during such period
will be reduced by the amount of compensation that Employee is receiving from
the new employer. Employee is under no obligation to mitigate the amount owed
Employee pursuant to this Section 11.4 by seeking other employment or otherwise.
Notwithstanding anything in this Section 11.4 to the contrary, Employee may in
Employee's sole discretion, by delivery of a notice to the Company within thirty
(30) days following a termination upon a Change in Control, elect to receive
from the Company a lump sum severance payment by bank cashier's check equal to
the present value of the flow of cash payments that would otherwise be paid to
Employee pursuant to this Section 11.4. Such present value shall be determined
as of the date of delivery of the notice of election by Employee and shall be
based on a discount rate
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equal to the interest rate on 90-day U.S. Treasury bills, as reported in the
Wall Street Journal (or similar publication), on the date of delivery of the
election notice. If Employee elects to receive a lump sum severance payment, the
Company shall make such payment to Employee within ten (10) days following the
date on which Employee notifies the Company of Employee's election. In addition
to the severance payment payable under this Section 11.4, Employee shall be paid
an amount equal to two (2) times the average annual bonus earned by Employee in
the two (2) years immediately preceding the date of termination. Employee shall
also be entitled to an accelerated vesting of any awards granted to Employee
under the Company's 1996 Incentive Stock Plan. Employee shall continue to accrue
retirement benefits and shall continue to enjoy any benefits under any plans of
the Company in which Employee is a participant to the full extent of Employee's
rights under such plans, including any perquisites provided under this
Agreement, through the remaining term of this Agreement; provided, however, that
the benefits under any such plans of the Company in which Employee is a
participant, including any such perquisites, shall cease upon re-employment by a
new employer.
11.5 Notwithstanding anything else in this Agreement and solely in the
event of a termination upon a Change in Control, the amount of severance
compensation paid to Employee under this Section 11, but exclusive of any
payments to Employee in respect of any stock options then held by Employee (or
any compensation deemed to be received by Employee in connection with the
exercise of any stock options at any time), shall not include any amount the
Company is prohibited from deducting for federal income tax purposes by virtue
of Section 280G of the Internal Revenue Code or any successor provision.
12. Disability of Employee. If, on account of physical or mental
disability, Employee shall fail or be unable to perform his assigned duties in
any material respect for a period of 60 consecutive days, the Company shall pay
Employee his full salary as set forth in Section 2(a) hereof and shall provide
the insurance, bonus and other benefits of Section 2(a) for a period of six (6)
months from the date such disability began or for such shorter period as
Employee is unable to perform his duties hereunder; provided, however, that
Employee's salary shall be reduced by any disability income paid to him pursuant
to any disability insurance policy maintained under this Agreement. In the event
Employee is unable to perform his duties hereunder after the expiration of the
six-month period, this Agreement shall automatically terminate. Employee shall
not be required to perform his obligations under Section 1 hereof during any
period of disability.
13. Assignment.
(a) The rights and benefits of Employee under this Agreement,
other than accrued and unpaid amounts due under Section 2(a) hereof,
are personal to him and shall not be assignable. Discharge of
Employee's undertakings in Sections 3 and 4 hereof shall be an
obligation of Employee's executors, administrators, or other legal
representatives or heirs.
(b) This Agreement may not be assigned by the Company except
to an affiliate of the Company, provided, however, that if the Company
shall merge or effect a share exchange with or into, or sell or
otherwise transfer substantially all its assets to, another
corporation, the Company shall assign its rights hereunder to that
corporation and cause such corporation to assume the Company's
obligations under this Agreement.
14. Notices. Any notice or other communications under this Agreement
shall
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be in writing, signed by the party making the same, and shall be delivered
personally or sent by certified or registered mail, postage prepaid, addressed
as follows:
(a) If to Employee, to such address furnished to SEI or at
such other address as may be furnished by him to SEI in writing.
(b) If to the Company: Service Experts, Inc.
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Executive Officer
With a copy to: X. Xxxxx Xxxx, Esq.
Xxxxxx Xxxxxxx Xxxxxx & Xxxxx,
A Professional Limited Liability
Company
0000 Xxxxxxxxx Xxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
or to such other address as may hereafter be designated by either party
hereto. All such notices shall be deemed given on the date personally
delivered or mailed.
15. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Tennessee.
16. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid, but if any one
or more of the provisions contained in this Agreement shall be invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability for any such provisions in every other respect and of the
remaining provisions of this Agreement shall not be in any way impaired.
17. Modification. No waiver of modification of this Agreement or of any
covenant, condition, or limitation herein contained shall be valid unless in
writing and duly executed by the party to be charged therewith and no evidence
of any waiver or modification shall be offered or received in evidence of any
proceeding, arbitration or litigation between the parties hereunder, unless such
waiver or modification is in writing, duly executed as aforesaid and the parties
further agree that the provisions of this section may not be waived except as
herein set forth.
18. Entire Agreement. This Agreement contains the entire agreement of
the parties hereto with respect to the subject matter contained herein. There
are no restrictions, promises, covenants or undertakings, other than those
expressly set forth herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter. This
Agreement may not be changed except by a writing executed by the parties.
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IN WITNESS WHEREOF, the undersigned have executed this Employment
Agreement on the day and year first above written.
SERVICE EXPERTS, INC.
By: /s/ Xxxx X. Xxxxxxxx
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Xxxx X. Xxxxxxxx
Its Chief Executive Officer
EMPLOYEE
/s/ Xxxxxx X. Xxxxxx III
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Xxxxxx X. Xxxxxx III
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APPENDIX I
COMPENSATION AND BENEFITS
Annual Salary - $200,000
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