EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is entered into
as of October 31, 2005, between Electro Rent Corporation, a
California corporation ("Electro Rent"), and Xxxxx X. Xxxxx
("Executive") with reference to the following facts:
Executive and Electro Rent wish to enter into an employment
contract providing for the continued employment of Executive on the
terms and conditions set forth herein. Capitalized terms not
otherwise defined are defined in Schedule 0 hereto.
NOW THEREFORE, based on the mutual covenants contained herein,
the parties agree as follows:
1. Employment and Duties. From the date hereof until a
termination under Section 2 (the "Employment Period"), Electro Rent
hereby agrees to employ Executive and Executive hereby accepts
employment with Electro Rent under the terms and conditions set
forth in this Agreement. Executive shall be employed as Electro
Rent's Vice President and Chief Financial Officer, with the duties
and responsibilities commensurate with his position as may be
assigned by Electro Rent.
2. At Will Employment. Executive's employment under this
Agreement shall be "at-will," without a fixed term, and may be
terminated by Electro Rent or Executive at any time, with or
without notice, for any reason or no reason (and no reason need be
given). The Employment Period shall terminate automatically on
Executive's death.
3. Compensation. As compensation for the performance by
Executive of all of his obligations under this Agreement, during
the Employment Period Electro Rent shall pay to Executive (i) a
base salary, currently paid at the rate of One Hundred Seventy One
Thousand Five Hundred Dollars ($171,500) per annum, subject to
adjustment hereafter, payable in accordance with Electro Rent's
normal practices for its senior executive officers (the "Base
Salary") and (ii) a discretionary bonus in an amount to be
determined each year in accordance with Electro Rent's practices
for its senior officers. No additional compensation shall be
payable to Executive by reason of the number of hours worked or any
hours worked on Saturdays, Sundays or holidays, by reason of
special responsibilities assumed, special projects completed or
performance goals attained, or otherwise
4. Benefits.
4.1. Benefits. During the Employment Period, Electro Rent shall
provide Executive with those employment benefits generally
available to its senior executive officers, as such benefits may be
modified from time to time in Electro Rent's sole and absolute
discretion.
4.2. Expenses. Electro Rent shall repay or reimburse Executive for
ordinary and necessary business expenses incurred on behalf of
Electro Rent during the Employment Period, to the extent compatible
with, and subject to the verification and substantiation
documentation and procedures applicable under, Electro Rent's
general policies for its senior executive officers. Executive
shall keep accurate and complete records of all such expenses,
including, but not limited to, proof of payment and purpose.
4.3. Vacation and Sick Leave. During the Employment Period,
Executive shall be entitled to a paid annual vacation in accordance
with the policies for Electro Rent's senior executive officers as
modified from time to time by it in its sole and absolute
discretion.
4.4. Stock Options. Executive has received various stock options
under Electro Rent's Stock Option Plans options, which are
unaffected by the execution of this Agreement.
5. Effect of Termination.
5.1. Payment upon Termination. Upon any termination of Executive's
employment, except as set forth in Section 5.2, Electro Rent's sole
obligation shall be to pay to Executive (or, if applicable, to
Executive's estate) all amounts accrued and unpaid as of the date
of termination in respect of (i) Executive's salary for periods
through such date, (ii) vacation pay to the extent consistent with
Electro Rent's policies in effect from time to time during the
Employment Period regarding entitlement to payment in respect of
accrued but unused vacation time, and (iii) any reimbursement for
expenses owing to Executive pursuant to Section 5.1.
5.2. Termination Without Cause or for Good Reason.
5.2.1. Following Material Change. If at any time during the 18
months following a Material Change, Electro Rent terminates
Executive other than for Cause, or if Executive terminates for Good
Reason, then in addition to amounts that Executive is entitled to
receive under Section 5.1, (1) Executive shall be entitled to
receive as a severance payment two times Executive's Base Salary in
effect at that time, payable, at the Company's option, either (i)
in monthly installments over two years or (ii) as one accelerated
lump sum as soon as practically possible, with an appropriate
discount to reflect such acceleration and (2) the vesting of all of
Executive's options granted by the Company shall be immediately
accelerated.
5.2.2. At Other Times. If at any other time Electro Rent
terminates Executive other than for Cause, or if Executive
terminates for Good Reason, then in addition to amounts that
Executive is entitled to receive under Section 5.1, Executive shall
be entitled to receive as a severance payment an amount equal to
one year of Base Salary in effect at that time, payable, at the
Company's option, either (i) in monthly installments over one year
or (ii) as one accelerated lump sum as soon as practically
possible, with an appropriate discount to reflect such
acceleration.
In addition, in both cases 5.2.1 and 5.2.2, (1) upon payment of
Electro Rent's bonus pool (if any) for its employees (including
Executive) for the year in which the termination occurs (the "Final
Bonus Pool"), Executive will be paid (at the same time as other
bonuses from the Final Bonus Pool are paid) a share of any Final
Bonus Pool equal to Executive's share of the comparable bonus pool
for the immediately prior year times the percentage of the year
which passed prior to the Date of Termination and (2) the Company
will reimburse Executive for any COBRA payments for the 12 months
following the Date of Termination.
5.3. Tax Effect of Payments. In the event that it is determined
that any payment or distribution of any type to or for the benefit
of Executive made by Electro Rent, any of its affiliates, any
person who acquires ownership or effective control of Electro Rent
or ownership of a substantial portion of Electro Rent's assets
(within the meaning of section 280G of the Internal Revenue Code of
1986, as amended, and the regulations thereunder (the "Code")) or
any affiliate of such person, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise (the "Total Payments"), would be subject to
the excise tax imposed by section 4999 of the Code or any interest
or penalties with respect to such excise tax (such excise tax,
together with any such interest or penalties, are collectively
referred to as the "Excise Tax"), then such payments or
distributions shall be limited to such amount which would result in
no portion of the payments or distributions being subject to the
Excise Tax. The benefits to be limited may be selected by
Executive as long as he provides a prioritized list within ten (10)
days of being notified by Electro Rent of the need for a limitation
on Total Payments.
5.4. Exclusivity of Remedies. Executive agrees that the rights and
entitlements set forth in this Section 5 are his exclusive
contractual and severance rights and entitlements from Electro Rent
and any affiliated entity upon and as a result of the termination
of Executive's employment with Electro Rent, and upon termination
Electro Rent shall be released from all other obligations under
this Agreement, and the Company may require that Executive will
sign a reasonable release to that effect as a condition to any
severance payments.
6. Covenants.
6.1. Employment Exclusive. During the Employment Period, Executive
(i) shall devote all his working time, attention, skill and efforts
to the business and affairs of Electro Rent, (ii) shall use his
best efforts to promote the success of Electro Rent's business;
(ii) shall observe and comply with all reasonable rules,
regulations, policies and practices promulgated to its employees
(including Executive) by Electro Rent, (iv) shall not enter the
employ of or serve as a consultant to, or in any way perform any
services with or without compensation for, any other person,
enterprise, business, company, corporation, partnership, firm,
association without the prior written consent of Electro Rent, and
(v) except as permitted under Electro Rent's policies for senior
officers as in force from time to time, shall not own any interest
in any entity or individual that (a) competes with Electro Rent in
Electro Rent's business as it is then conducted or (b) is a
material supplier or vendor to Electro Rent.
6.2. Confidential Information. Executive previously signed a copy
of Employers' confidentiality policy and agrees to abide by it (as
amended from time to time) during and after the Employment Period.
7. Miscellaneous.
7.1. Agreement Authorized. Executive hereby represents and
warrants that he is free to enter into this Agreement and to render
his services pursuant to this Agreement without breach of any
contract or law, that he is not employed by, or hold any offices
with any other entities, and that he is not subject to any
obligation or restriction that would prevent him from discharging
his duties under this Agreement, and agrees to indemnify and hold
harmless Electro Rent from and with respect to any liability,
damages or costs, including attorneys' fees, arising out of any
breach by Executive of this representation and warranty. Electro
Rent hereby represents and warrants that any required authorization
of this Agreement by its Board has been obtained.
7.2. Notices. Any notice required or desired to be given to
Electro Rent or to Executive shall be given in writing, and shall
be addressed (i) to Electro Rent at its principal place of
business, and (ii) to Executive at his most recent home address in
the records of Electro Rent, or to such other address as that party
may hereafter designate in writing, and shall be sufficiently given
by actual delivery thereof to Electro Rent or Executive, as the
case may be, or by telegraph or registered mail, postage prepaid,
return receipt requested, addressed to the other party as
aforesaid, and the date of delivery, mailing or telegraphing shall
be the date of the giving of such notice.
7.3. Payment of Taxes. To the extent that any taxes become payable
by Executive by virtue of any payments made or benefits conferred
by Electro Rent, Electro Rent shall not be liable to pay or
obligated to reimburse Executive for any such taxes or to make any
adjustment under this Agreement. Any payments otherwise due under
this Agreement to Executive, including, but not limited to, the
Base Salary and any bonus or severance, may be reduced by any
required withholding for Federal, State and/or local taxes and
other appropriate payroll deductions. Any payments due hereunder
may be adjusted as reasonably required to comply with the terms of
Section 409A of the Internal Revenue Code, while attempting to
achieve a result whose economic impact is as similar as possible to
that contemplated hereunder.
7.4. Insurance. Electro Rent may, from time to time, apply for and
take out, in its own name and at its own expense, life, health,
accident, disability or other insurance on Executive in any sum or
sums that it may deem necessary to protect its interests, and
Executive shall aid and cooperate in all reasonable respects with
Electro Rent in procuring any and all such insurance, including,
without limitation, submitting to the usual and customary medical
examinations, and by filling out, executing and delivering such
applications and other instruments in writing as may be reasonably
required by an insurance company or companies to which an
application or applications for such insurance may be made by or
for Electro Rent.
7.5. Assignment. This Agreement is a personal contract, and the
rights, interests and obligations of Executive under this Agreement
may not be sold, transferred, assigned, pledged or hypothecated,
except that this Agreement may be assigned by Electro Rent to any
corporation or other business entity which succeeds to all or
substantially all of the business of Electro Rent through merger,
consolidation, corporate reorganization or by acquisition of all or
substantially all of the assets of Electro Rent and which assumes
Electro Rent's obligations under this Agreement. The terms and
conditions of this Agreement shall inure to the benefit of and be
binding upon any such successor to the business of Electro Rent.
7.6. Entire Agreement. This Agreement sets forth the entire
understanding of the parties with respect to the employment
relationship, including the commencement and termination of the
employment relationship, and supersedes any and all prior
agreements or understandings between the parties relating to such
subject matter. No person has any authority to make any
representation or promise on behalf of any of the parties which is
inconsistent with the representations set forth in the Agreement
and the Agreement has not been executed in reliance on any promise
or representation not set forth in the Agreement.
7.7. Modification, Waiver and Amendment. None of the terms or
provisions of this Agreement shall be modified or waived, and this
Agreement may not be amended or terminated, except by a written
instrument signed by the party against which any modification,
waiver, amendment or termination is to be enforced. No waiver of
any one provision shall be considered a waiver of any other
provision, and the fact that an obligation is waived for a period
of time or in one instance shall not be considered to be a
continuing waiver.
7.8. Cooperation. Each party hereto agrees to execute any and all
further documents and writings and perform such other reasonable
actions which may be or become necessary or expedient to effectuate
and carry out the provisions hereof.
7.9. Governing Law. This Agreement concerns a California resident,
and all questions with respect to this Agreement and the rights and
liabilities of the parties shall be governed by the laws of that
state, regardless of the choice of law provisions of California or
any other jurisdiction.
7.10. Litigation. Executive agrees to render assistance,
advice and counsel to Electro Rent at its request regarding any
matter, dispute or controversy with which Electro Rent may become
involved and of which Executive has or may have reason to have
knowledge, information or expertise. Such services will be without
additional compensation if Executive is then employed by Electro
Rent and for reasonable compensation and subjected to his
reasonable availability if he is not.
7.11. Rules of Construction.
7.11.1. Headings. The Section headings in this Agreement are
inserted only as a matter of convenience, and in no way define,
limit, or extend or interpret the scope of this Agreement or of any
particular Section.
7.11.2. Tense and Case. Throughout this Agreement, as the
context may require, references to any word used in one tense or
case shall include all other appropriate tenses or cases. The term
"including" means "including but not limited to" unless the context
otherwise requires.
7.11.3. Severability. Nothing contained in this Agreement shall
be construed so as to require the commission of any act contrary to
law and whenever there is any conflict between any provision of
this Agreement and any statute, law, ordinance, order or
regulation, contrary to which the parties have no right to
contract, the latter shall prevail, but in such event any provision
of this Agreement so affected shall be curtailed and limited only
to the extent necessary to bring it within legal requirements.
7.11.4. Counterparts. This Agreement may be executed in two
counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
EXECUTIVE ACKNOWLEDGES HAVING CAREFULLY READ, UNDERSTOOD ALL
OF THE PROVISIONS IN THIS AGREEMENT AND HAVING NEGOTIATED SUCH
PROVISIONS. EXECUTIVE ACKNOWLEDGES THAT HE HAS AN OPPORTUNITY TO
CONSULT WITH COUNSEL OF HIS CHOICE. EXECUTIVE KNOWS THAT HE CANNOT
RELY ON ANY STATEMENT OUTSIDE OF (i) THIS AGREEMENT OR (ii) A
FORMAL WRITTEN AMENDMENT OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first written above.
"Executive"
/s/ Xxxxx X. Xxxxx
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Signature
"Electro Rent"
Electro Rent Corporation
By: /s/ Xxxxxx Xxxxxxxxx
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Xxxxxx Xxxxxxxxx, Its CEO
Schedule 0
Definitions
"Cause" shall exist if any one or more of the following should
occur: Executive's (a) material breach of, this Agreement, or
failure to comply with a reasonable direction of Electro Rent,
which remains in any such case uncured for more than ten (10) days
after a written warning (except in the case of a willful failure to
perform his duties or a willful breach, which shall require no
warning), (b) breach of his fiduciary duty to Electro Rent,
(c) indictment (or equivalent) for a felony or other serious crime,
(d) inability for any reason to render full services as
contemplated by this Agreement for a period of twenty-six (26)
consecutive weeks, or eight (8) months in any twelve month period,
or (e) commission of a wrongful act that would make the continuance
of his employment by Electro Rent materially detrimental to Electro
Rent. No act, or failure to act, on Executive's part shall be
considered "willful" if it was done, or omitted to be done, by him
in good faith with a reasonable belief that it was not contrary to
the best interest of Electro Rent.
The "Employment Period" means the period from the date hereof
through the effective date of any termination.
"Good Reason" shall exist if Electro Rent (i) materially breaches
this Agreement; (ii) requires Executive to relocate the principal
place of his services more than twenty (20) miles from the location
at which Executive performed Executive's duties prior to such
relocation; (iii) fails to provide Executive with compensation and
benefits in the aggregate on terms not materially less favorable in
the aggregate than those enjoyed by Executive under this Agreement
immediately prior to the Material Change, or the subsequent taking
of any action that would materially reduce any of Executive's
compensation and benefits in effect at the time of the Material
Change unless such compensation and benefits are substantially
equally reduced for executive officers of Electro Rent as a group
(as measured by a percentage) and there is less than a ten percent
(10%) reduction in compensation or benefits; or (iv) assigns to
Executive duties materially and adversely inconsistent with
Executive's positions prior to the Material Change (this includes a
change in reporting responsibilities, authority including title, or
responsibilities; provided, however, a lateral transfer within
Electro Rent or to an affiliate shall not be provide ground for
Good Reason), and in each case such matter continues for more than
ten (10) days after written notice from Executive (except in the
case of a willful breach, which shall require no warning). No act,
or failure to act, on Electro Rent's part shall be considered
"willful" if it was done, or omitted to be done, in good faith
without the intent to violate Executive's rights.
A "Material Change" shall be deemed to have occurred if (i) there
shall be consummated any consolidation or merger of Electro Rent,
or any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all,
of the assets of Electro Rent other than a transaction or series of
related transactions in which the holders of Electro Rent's common
stock immediately prior to the merger or consolidation have at
least seventy five percent (75%) ownership of the voting capital
stock of the surviving corporation immediately after the
transaction or series of related transactions, or (ii) any person
(as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
shall become the beneficial owner (within the meaning of Rule 13d-3
under the Exchange Act) of twenty five percent (25%) or more of
Electro Rent's outstanding Common Stock, excluding persons and
affiliates of persons who have been 5% stock holders of Electro
Rent for at least one year, or (iii) during any period of two
consecutive years, individuals who at the beginning of such period
constitute the entire Board shall cease for any reason (except
death) to constitute a majority thereof unless the election, or the
nomination for election by Electro Rent's shareholders, of each new
director was approved by a vote of the directors then still in
office who were directors at the beginning of the period. For
purposes of Section 5, the occurrence of two or more of the events
constituting a Material Change which are the result of the same or
related transaction(s) shall be deemed a single Material Change and
its date shall be the date the first such event occurred. For
example, a merger in which former shareholders of Electro Rent
received less than 75% of the voting capital stock of the surviving
corporation followed by a change in Electro Rent's Board falling
within clause (iii) above and contemplated by said merger shall be
deemed a single Material Change as of the date of said merger.
