EX-10.3
EMPLOYMENT AND NON-COMPETE AGREEMENT
(Xxxxxxx)
THIS EMPLOYMENT AND NON-COMPETE AGREEMENT (this "Agreement"), has been
entered into as of the day of June, 1997, by and
among SETECH, INC., a Delaware corporation ("SETECH"), XXXXX SUPPLY CO., INC.
("Employer"), and XXXXXXX X. XXXXXXX, XX., an individual and resident of Shelby
County, Tennessee ("Employee").
RECITALS
WHEREAS, SETECH has entered into a Stock Purchase Agreement dated June
___, 1997 (the "Stock Purchase Agreement"), to purchase all of the shares of
capital stock of Employer, for which Employee is the chief executive officer;
WHEREAS, as a condition of the Stock Purchase Agreement, the parties
agreed to enter into certain employment and non-competition agreements;
WHEREAS, Employer desires to obtain the services of Employee, and Employee
desires to secure employment from the Employer upon the following terms and
conditions;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and for other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT. Employer hereby employs Employee as President of
Employer, and Employee hereby accepts and agrees to such employment, pursuant
and subject to the orders, advice and direction of the Chairman of the Board
and the Board of Directors of Employer. Employee shall perform such other
duties as are customarily performed by one holding such position in other, same
or similar businesses or enterprises as that engaged in by Employer. Employee
also shall render such services and duties as may be reasonably assigned to him
from time to time by the Chairman of the Board and the Board of Directors of
Employer. Employee shall report directly to the Chairman of the Board of
Employer.
2. BEST EFFORTS OF EMPLOYEE. Employee agrees that he will at all times
faithfully, industriously, and to the best of his ability, experience and
talents, perform all of the duties that may be reasonably required of and from
him pursuant to the express and implicit terms hereof, to the reasonable
satisfaction of Employer. Such duties shall be rendered at the office of
Employer in Memphis, Tennessee.
3. TERM OF EMPLOYMENT. The term of the employment of Employee shall be
for a period of three (3) years, commencing June 30, 1997 (the "Commencement
Date"), and terminating June 30, 2000 (the "Expiration Date"), and subject to
earlier termination as provided in Section 5 of this Agreement.
4. COMPENSATION OF EMPLOYEE. During the term of its employment of
Employee, Employer shall pay Employee, and Employee shall accept from Employer
in return for his services and the covenants contained herein, the following:
A. BASE COMPENSATION. Employer shall pay Employee, and Employee
shall accept from Employer, in payment of Employee's services hereunder,
annual base compensation of One Hundred and Twenty-Eight Thousand Dollars
($128,000.00) (less applicable payroll taxes), payable monthly in
accordance with the standard practices of the Employer ("Base
Compensation").
B. BONUS. In addition, Employee may also be paid, on an annual or
other basis, such bonus or other compensation ("Bonus") as is determined
in accordance with the SETECH, Inc. Executive Incentive Bonus Plan for a
Division President position, as such plan may be adopted by the Board of
Directors of SETECH from time to time (the "Plan"). Notwithstanding the
foregoing, the amount awarded to Employee under such Plan or any other
executive bonus compensation plan (including stock option plans or stock
appreciation rights) adopted by Employer in excess of Base Compensation,
shall be proportional to that received by Xxxxxx X. Xxxxxxxx, in the
proportion that Xxxxxx X. Xxxxxxxx'x Base Compensation bears to the Base
Compensation of Employee.
C. STOCK OPTION. Immediately upon the closing of the Stock Purchase
Agreement, Employee is hereby granted an option to purchase Forty Five
Thousand (45,000) shares of common stock of SETECH ("Stock") at $3.50 per
share (the "Option"). Employee (or his personal representative) must
exercise this Option by delivery of a written instrument to Employer: (i)
during the term of his employment by Employer or within thirty (30) days
after such employment is terminated; or (ii) within sixty (60) days after
the date of Employee's death. For purposes of this Section, in the event
the Stock shall be subdivided into a greater number of shares of Stock,
the Option in effect immediately prior to each such subdivision,
simultaneously with the effectiveness of such subdivision, shall be
proportionately increased. In the event the Stock shall be combined into a
smaller number of shares of Stock, the Option in effect immediately prior
to each such combination, simultaneously with the effectiveness of such
combination, shall be proportionately decreased.
D. EMPLOYEE BENEFITS. Employee shall be entitled to receive the
normal health care benefits and such other employment benefits as are
generally available to senior officers and employees of Employer and
SETECH.
5. EARLY TERMINATION.
A. FOR CAUSE TERMINATION BY EMPLOYER. The Employer may terminate the
employment of Employee at any time for "Cause." For the purposes hereof,
the term "Cause" shall mean, without limitation: the conviction of
Employee of a felony, or a crime of moral turpitude designated as such
under the laws of the State of Tennessee; a breach of trust with funds of
Employer or any affiliate thereof; the failure of the Employee to carry
out the reasonable written instructions of the Chairman of the Board or
the Board of Directors of Employer; the inability of Employee, through
sickness or other incapacity, to perform his duties under this Agreement
for a period in excess of ninety (90) substantially consecutive days; or a
material breach of this Agreement. In the event of the termination of
Employee for Cause, Employer shall have no obligation to make any further
payments to Employee except for Base Compensation earned through the date
of termination, and Employee shall forfeit and lose his right to receive
any other form of compensation other than benefits currently vested with
Employee through any disability plan of the Employer or pursuant to stock
options granted to Employee which by their terms are exercisable after
termination of employment.
B. WITHOUT CAUSE TERMINATION BY EMPLOYER. The Employer also may
terminate this Agreement prior to the expiration of the initial or
successive term of this Agreement upon sixty (60) days prior written
notice to Employee. If Employer shall so terminate this Agreement other
than for Cause, Employee shall be entitled to:
(1) All compensation and benefits earned through the date of
termination;
(2) Base Compensation for one year from the date of termination
plus Termination Bonus, payable in monthly installments commencing
one month from the date of termination and ending one year from the
date of termination. For the purposes of this Agreement, the term
"Termination Bonus" shall mean as follows:
(a) If Employee is terminated less than six months from the
Commencement Date, Employee is not entitled to receive any
Termination Bonus;
(b) If Employee is terminated six months or more but less
than one year from the Commencement Date, Employee is entitled
to receive a Termination Bonus based on Employer's annualized
current fiscal year earnings (divided by the number of months in
the current fiscal year as of the date of termination and
multiplied by a factor of twelve) and determined in accordance
with the criteria of the Plan;
(c) If Employee is terminated one year or more but less
than eighteen months from the Commencement Date, Employee is
entitled to receive a Termination Bonus equal to the Bonus
received by Employee during the previous fiscal year;
(d) If Employee is terminated eighteen months or more but
less than two years from the Commencement Date, Employee is
entitled to receive a Termination Bonus based on Employer's
annualized current fiscal year earnings (divided by the number
of months in the current fiscal year as of the date of
termination and multiplied by a factor of twelve) and determined
in accordance with the criteria of the Plan;
(e) If Employee is terminated two years or more but less
than thirty months from the Commencement Date, Employee is
entitled to receive a Termination Bonus equal to the Bonus
received by Employee during the previous fiscal year; or
(f) If Employee is terminated thirty months or more from
the Commencement Date, Employee is entitled to receive a
Termination Bonus based on Employer's annualized current fiscal
year earnings (divided by the number of months in the current
fiscal year as of the date of termination and multiplied by a
factor of twelve) and determined in accordance with the criteria
of the Plan
(3) Assistance to Employee in securing replacement employment
from an executive search firm, the reasonable costs of which shall be
paid by Employer;
(4) Health Insurance coverage for Employee (and his family) for
the lesser period of one year from the date of termination or until
such time as Employee (and his family) becomes eligible for coverage
under a subsequent employer's health plan; and
(5) Coverage under any other benefit plans under which Employee
was covered prior to termination (excluding any 401(k) or other
deferred compensation plan, any bonus plans, stock option plans or
other compensation plans) for the period set forth in Section 5B(4).
C. TERMINATION BY EMPLOYEE FOR CHANGE IN CONTROL. Upon sixty (60)
days prior written notice to Employer, the Employee may terminate this
Agreement upon a Change in Control of Employer or SETECH which is coupled
with a material dimunition in the responsibilities, position or authority
of Employee. As used in this Section C, the term "Change in Control" shall
have the same meaning as set forth in Section 3 of that certain
Shareholder Agreement by and between SETECH, Employee and Xxxxxx X.
Xxxxxxxx dated as of June 30, 1997, as such Shareholder Agreement may be
amended from time to time. In the event of such termination under this
Section, Employee will be entitled to the same benefits and compensation
as set forth in Section 5B.
6. RESTRICTIVE COVENANTS. Employee covenants and agrees that, during
the term of his employment with Employer and for a period of one (1) year
thereafter, he shall be subject to the following restrictions:
A. COMPETITION. Employee will not, directly or indirectly, engage or
invest in, own, manage, operate, finance, control or participate in the
ownership, management, operation, financing or control of, be employed by,
associated with, or in any manner connected with, lend credit to, or
render services or advice to any business whose products, services or
activities are related to the integrated industrial supply industry,
anywhere within the United States of America; provided, however, that
Employee may purchase or otherwise acquire up to (but not more than) two
percent (2%) of any class of securities of any enterprise (but without
otherwise participating in the activities of such enterprise) if such
securities are listed on any national or regional securities exchange or
have been registered under Section 12(g) of the Securities Exchange Act of
1934.
B. CUSTOMER SOLICITATION. Employee will not in any way, directly or
indirectly, for himself or on behalf of or in conjunction with any person
or entity other than the Employer or its affiliates, including SETECH,
solicit, divert, take away, or attempt to take away any person or entity
(or their business or patronage) that has been a customer or client of the
Employer or its affiliates or whose business or patronage the Employer or
its affiliates have solicited or sought to obtain, during the term of his
employment with Employer. Notwithstanding the foregoing provisions of this
Section B, Employee may solicit such customers or clients if Employee is
presently engaged in a business which does not compete with Employer and
its affiliates.
C. EMPLOYEE SOLICITATION. Employee will not in any way, directly or
indirectly, for himself or on behalf of or in conjunction with any person
or business entity other than the Employer or its affiliates, including
SETECH, solicit the employment of any officers, directors, employees or
agents of the Employer or its affiliates.
D. CONFIDENTIAL INFORMATION.
(1) DEFINITION. For purposes of this Agreement, the term
"Confidential Information" shall mean information that the Employer
or its affiliates, including SETECH, own or possess, that they use or
is potentially useful in their businesses, that they treat as
proprietary, private, or confidential, and that is not generally
known to the public, including, but not limited to, information
relating to existing and contemplated businesses, sales, company
financial information, products, technology, manufacturing
techniques, engineering processes, chemical formulae, marketing,
sales methods, technical service expertise, employees, lists of
actual or potential customers, actual and potential customer usage
and requirements, new and existing programs or services, prices and
terms, pricing strategy, sources of supplies and materials, operating
and other cost data, trade secrets, inventions, patent applications,
and other proprietary information as may exist or be developed from
time to time by the Employer or its affiliates.
(2) INFORMATION ACCESS AND DISCLOSURE. Employee acknowledges
that he shall occupy a position of trust and confidence with the
Employer and will have access to and may develop Confidential
Information of actual or potential value to or otherwise useful to
Employer or its affiliates, including SETECH. Employee shall hold in
strictest confidence and not disclose, without express written
authorization from the Chairman of the Board or the Board of
Directors of Employer, to any person or entity, other than the
Employer or its affiliates and their officers and agents, or use in
whole or in part any Confidential Information that Employee may
acquire while employed by Employer.
(3) EMPLOYER PROPERTY RETURN. At the termination of Employee's
employment with Employer, or at any other time that Employer may
request, Employee shall promptly deliver to Employer all memoranda,
notes, records, reports, documents, sketches, plans, models,
compositions, formulations, computer data, and other tangible items
made or compiled by Employee or in Employee's possession concerning
or relating to the Employer or its affiliates, including SETECH, and
their businesses, operations or affairs and any Confidential
Information that the Employee may possess or have under his control
("Company Property").
E. EXTENSION OF TERM OF RESTRICTIVE COVENANTS. If Employee breaches
any of the foregoing restrictive covenants, the term of such covenant
shall be extended by the period of the duration of such breach.
F. EXPIRATION OF CERTAIN COVENANTS ON EXPIRATION DATE.
Notwithstanding the foregoing, if Employee remains employed by Employer
for the entire three-year term of employment and does not violate any of
the foregoing restrictive covenants during that time, the term of the
restrictive covenants against competition (Section 6(A)) and customer
solicitation (Section 6(B)) shall expire on the Expiration Date.
7. REMEDIES. Employee acknowledges that any violation of any of the
restrictive covenants contained in Section 6 of this Agreement will cause
continuing and irreparable harm to the Employer and its affiliates, including
SETECH, for which monetary damages would not be adequate compensation.
Employee, therefore, agrees that, if he violates or threatens to violate any of
these restrictive covenants, the Employer and its affiliates shall be entitled,
in addition to any other legal or equitable remedies available to it, to (a)
entry of an injunction, temporary and permanent, enjoining such breach and
securing specific performance of this Agreement, including requiring Employee
to return all Company Property; (b) monetary damages, insofar as they can be
determined; and (c) recovery of the reasonable attorney's fees and costs of
prosecuting any such action of Employer or its affiliates. The parties waive
the right to a jury trial with respect to any controversy or claim between or
among the parties hereto, including but not limited to those arising out of or
relating to this Agreement, as well as any claim based on or arising from an
alleged tort.
8. ARBITRATION. Any controversy or claim between or among the parties
hereto, including any claim arising out of or relating to this Agreement,
Employee's employment by Employer, or based on or arising from any alleged
tort, shall be determined by binding arbitration in accordance with the Federal
Arbitration Act (or, if not applicable, the applicable Tennessee law), the
rules of practice and procedure for the arbitration of commercial disputes of
the American Arbitration Association ("A.A.A."), and the "Special Rules" set
forth below. In the event of any inconsistency, the Special Rules shall
control. Judgment upon any arbitration award may be entered in any court
having jurisdiction. Any party to this Agreement may bring an action,
including a summary or expedited proceeding, to compel arbitration of any
controversy or claim to which this Agreement applies in any court having
jurisdiction over such action. All costs of arbitration, including the
reasonable attorney's fees and expenses incurred of the prevailing party, shall
be paid by the losing party in arbitration.
A. SPECIAL RULES. The arbitration shall be conducted in the City of
Nashville, Tennessee, and administered by A.A.A., who will appoint an
arbitrator. All arbitration hearings will be commenced within ninety (90)
days of the demand for arbitration; further, the arbitrator shall only,
upon a showing of cause, be permitted to extend the commencement of such
hearing for an additional sixty (60) days.
B. SPECIFIC PERFORMANCE. Nothing in Section 11 of this Agreement
shall be construed to preclude the Employer or its affiliates, successors
or assigns (including SETECH) from obtaining injunctive or equitable
relief to secure specific performance of this Agreement, including
requiring Employee to return all Company Property, or otherwise to prevent
a breach or contemplated breach of this Agreement by Employee. Employee
hereby consents and agrees that the State of Tennessee and any state or
federal court located therein has jurisdiction over Employee and that the
proper place of venue shall be the County of Xxxxxxxxxx, Tennessee.
9. ASSUMPTION BY SETECH. In the event Employer is dissolved, merged or
consolidated into another entity or otherwise ceases to exist, or in the event
Employer defaults under this Agreement, SETECH hereby agrees to assume the
remaining obligations of the Employer under this Agreement.
10. SEVERABILITY. Whenever possible, each provision and term of this
Agreement will be interpreted in a manner to be effective and valid; however,
if any provision or term of this Agreement is held to be prohibited or invalid,
then such provision or term will be ineffective only to the extent of such
prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provision or term or the remaining provisions
or terms of this Agreement. More specifically, Employee acknowledges that the
restrictive covenants contained in Section 6 of this Agreement are reasonable
in scope, time and geographic area; however, if any of these covenants are held
to be unreasonable, arbitrary, or against public policy, such covenants will be
considered divisible with respect to scope, time, and geographic area, and in
such lesser scope, time and geographic area, will be effective, binding and
enforceable against the Employee.
11. SUCCESSORS AND ASSIGNS. This Agreement will be binding upon the
Employer and the Employee and will inure to the benefit of the Employer and its
affiliates, successors and assigns (including SETECH), as well as to the
Employee and his heirs. This Agreement is not assignable by the Employee,
except upon the written agreement of both parties.
12. WAIVER. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing,
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement.
13. GOVERNING LAW. This Agreement and all performance hereunder shall be
construed and governed by the laws of the State of Tennessee, without regard to
conflicts of laws principles.
14. CONSTRUCTION. The headings of Sections in this Agreement are
provided for convenience only and will not affect its construction or
interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement unless otherwise specified.
All words used in this Agreement will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
word "including" does not limit the preceding words or terms. All references
herein to the word "and" shall mean "and/or," and all references herein to the
word "or" shall mean "and/or." The parties, in acknowledgement that all of
them have been represented by counsel and that this Agreement has been
carefully negotiated, agree that the construction and interpretation of this
Agreement and other documents entered into in connection herewith shall not be
affected by the identity of the party or parties under whose direction or at
whose expense this Agreement and such documents were prepared or drafted.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersedes all prior written and oral agreements and understandings between
SETECH, Employer and Employee with respect to the subject matter of this
Agreement. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
EMPLOYEE: EMPLOYER:
XXXXX SUPPLY CO., INC.
____________________________ By:________________________________
XXXXXXX X. XXXXXXX, XX.
Title:_____________________________
SETECH, INC.:
By:___________________________
Title:________________________
