EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of this 1st day of October 1998, by and between XXXXXX
INDUSTRIES, INC., a Delaware corporation (hereinafter called the "Company"), and
XXX X. XXXXX, residing at 000 Xxxxx Xxxxxxxxx Xxxxx, Xxxx Xxxxx, Xx 00000,
(hereinafter called the "Employee").
WITNESSETH
WHEREAS, the Employee was initially employed by the Company under an
Employment Agreement, dated June 11, 1984, as amended, which agreement was
superseded by a second Employment Agreement between Employee and the Company,
dated January 1, 1997, which agreement was superseded by a third Employment
Agreement between Employee and the Company dated as of November 1, 1997, and the
Company desires to enter into a new employment agreement with Employee which
agreement shall supersede all prior employment agreements; and,
WHEREAS, Employee desires to enter into the new employment agreement with
the Company;
NOW THEREFORE, it is agreed as follows:
1. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes any employment
agreements, oral or written, entered into between Employee and the Company prior
to the date of this Agreement including, but not limited to, the Employment
Agreements between the Employee and the Company, dated June 11, 1984, as
amended, January 1, 1997 and November 1, 1997, respectively.
2. RETENTION OF SERVICES. The Company hereby retains the services of
Employee, and Employee agrees to furnish such services, upon the terms and
conditions hereinafter set forth.
3. TERM. Subject to earlier termination on the terms and conditions
hereinafter provided, the term of this Agreement shall be comprised of a four
(4) year and three (3) month period of employment commencing October 1, 1998 and
ending December 31, 2002. On each January 1, commencing January 1, 2000, unless
either party provides prior written notice to the other party that it does not
want the term of the Agreement to be extended, the term of the Agreement shall
extend to three (3) years from each January 1.
4. DUTIES AND EXTENT OF SERVICES DURING PERIOD OF EMPLOYMENT. During the
period of employment, Employee shall be employed as a Senior Executive of the
Company. In such capacity, Employee agrees that he shall serve the Company under
the direction of the Board of Directors of the Company to the best of his
ability, shall perform all duties incident to his offices on behalf of the
Company, and shall perform such other duties as may from time to time be
assigned to him by the Board of Directors of the Company. Employee shall also
serve in similar capacities of such of the subsidiary corporations of the
Company as may be selected by the Board of Directors and shall be entitled to
such additional compensation therefore as may be determined by the Board of
Directors of the Company. Notwithstanding the foregoing, it is understood and
agreed that the duties of Employee during the period of employment shall not be
inconsistent with (i) his position and title as Senior Executive of the Company;
or (ii) with those duties ordinarily performed by a comparable executive
officer.
5. REMUNERATION. During the period of employment, Employee shall be
entitled to receive the following compensation for his services:
(i) The Company shall pay to Employee an annual salary at the rate of
FOUR HUNDRED SEVENTY-FIVE ($475,000) DOLLARS commencing October
1, 1998, payable in weekly installments, or in such other manner
as shall be agreeable to the Company and Employee.
(ii) In addition to his salary set forth in Paragraph 5(i) above,
Employee shall receive an increment in an amount equal to the
cumulative cost of living on his base salary as reported in the
"Consumer Price Index, New York Northeastern New Jersey, all
items", published by the United States Department of Labor,
Bureau of Labor Statistics, using January 1, 1998 as the base
year for computation. Such cost of living increment with respect
to the aforesaid salary of Employee shall be made semi-annually
as follows:
(A) With respect to the first six months of each calendar year
during the period of employment, such increment shall be
calculated and payable cumulatively on or before the first
day of August of such year; and
(B) With respect to the last six months of each calendar year
during the period of employment, such increment shall be
calculated and payable cumulatively on or before the first
day of February of the following calendar year.
If Employee's employment shall terminate during any six-month period
referred to in this Paragraph 5 (ii), then the cost of living increment provided
for herein shall be prorated accordingly.
(iii)Not later than one hundred twenty (120) days after the end of the
fiscal year of the Company and each subsequent fiscal year of the
Company ending during the period of employment, the Company shall
pay to Employee, as incentive compensation an amount equal to
five (5%) percent of the Consolidated Pretax Earnings of the
Company in excess of the Company's Minimum Consolidated Pretax
Earnings, as defined below in this clause (iii) and in no event
more than Employee's annual salary set forth in clause (i)
immediately above.
For purposes hereof, the term "Consolidated Pretax Earnings" of the Company
shall mean, with respect to any fiscal year, the consolidated income, if any, of
the Company for such fiscal year as set forth in the audited, consolidated
financial statements (the "Financial Statements") of the Company and its
subsidiaries included in its Annual Report to stockholders for such fiscal year,
before deduction of taxes based on income or of the incentive compensation to be
paid to Employee for such fiscal year under this Agreement. For the purposes
hereof the term "Minimum Consolidated Pretax Earnings" of the Company shall mean
with respect to any fiscal year, the amount of consolidated Pretax Earnings of
the Company equal to ten percent (10%) of (x) the company's Stockholders' Equity
as set forth in the Financial Statements for the beginning of such fiscal year,
plus (y) the proceeds from the sale of the Company's equity securities, less (z)
the purchase price from the acquisition of the Company's equity securities on a
time-proportioned basis, during such fiscal year.
6. EMPLOYEE BENEFITS - EXPENSES
a) During the term of this agreement, the Company shall provide, at
its expense $56,000 annually to purchase life insurance, with
Employee having the right to designate the insurer, owner and
beneficiary of such life insurance.
b) In the event of the death of Employee, within 30 days thereafter
the Company shall promptly make a lump sum payment to Employee's
widow, or to such other person or persons as may be designated by
Employee in his Will, or to his estate in the event of Employee's
intestacy, of the salary and compensation to which Employee is
entitled hereunder for the three year period from date of death
and one-half of such salary for the balance of the period covered
by this Agreement, and in the year of death an additional payment
equal to the pro rata amount for said year of the compensation
set forth in paragraph 5 (iii), the Company's contribution to the
401(k), and the pro-rata cost of living increment, which
additional payment shall be made in accordance with paragraph 5
(ii).
c) Employee shall be eligible to participate in the Company's stock
option and stock purchase plans and to acquire warrants to
purchase the Company's stock, to the extent determined in the
sole discretion of the Compensation Committee of the Company's
Board of Directors.
d) During the period of employment, Employee shall be furnished with
office space and facilities commensurate with his position and
adequate for the performance of his duties; he shall be provided
with the perquisites customarily associated with the position of
a Senior Executive of the Company; and he shall be entitled to
six weeks regular vacation during each year.
e) It is contemplated that, during the period of employment,
Employee may be required to incur out-of-pocket expenses in
connection with the performance of his services hereunder,
including expenses incurred for travel and business
entertainment. Accordingly, the Company shall pay, or reimburse
Employee, for all out-of-pocket expenses reasonably incurred by
Employee in the performance of his duties hereunder in accordance
with the usual procedures of the Company. Notwithstanding the
foregoing, the recognition that Employee will be required during
the term of this Agreement to do a considerable amount of driving
in connection with his services hereunder, the Company shall
provide Employee with the use of a suitable automobile and all
expenses incidental throughout the term of this Agreement,
including fuel, repairs, maintenance and insurance.
f) All benefits to Employee specially provided for herein shall be
in addition to, and shall not diminish, (i) such other benefits
and/or compensation as may hereafter be granted to or afforded to
Employee by the Board of Directors of the Company; and (ii) any
rights which Employee may have or may acquire under any
hospitalization, life insurance, pension, profit-sharing,
incentive compensation or other present or future employee
benefit plan or plans of the Company.
g) Employee currently works from offices in Lancaster, Pennsylvania
and from his homes where he has created work space and his
responsibilities do not require regular attendance at any Company
office. These responsibilities include, among other things,
conducting executive recruiting tasks and visiting customers,
investment banks and potential acquisition candidates in the best
interests of the Company. In recognition of these special
employment conditions, disability for Employee shall occur if he
becomes unable, for twelve consecutive months or more, due to ill
health or other incapacity to perform the services described
above. In that event, the Company may thereafter, upon at least
90 days written notice to employee, place him on disability
status and terminate this agreement. If employee is so determined
by the Company as disabled, he shall be entitled to his annual
compensation as set forth in paragraph 5 (i) and 5 (ii) hereof
payable in weekly installments for the first two years after
notice of disability and thereafter one-half of such compensation
payable in weekly installments for the balance of the period
covered by this agreement.
7. NON-COMPETITION. Employee agrees that, during term of this Agreement, he
will not, without the prior written approval of the Board of Directors of the
Company, directly or indirectly through any other individual or entity,(a)
become an officer or employee of, or render any services to, any competitor of
the Company, (b) solicit, raid, entice or induce any customer of the Company to
cease purchasing goods or services from the Company or to become a customer of
any competitor of the Company, and Employee will not approach any customer for
any such purpose or authorize the taking of any such actions by any other
individual or entity, or (c) solicit, raid, entice or induce any employee of the
Company to become employed by any competitor of the Company, and Employee will
not approach any such employee for any such purpose or authorize the taking of
any such action by any other individual or entity. However, nothing contained in
this paragraph 7 shall be construed as preventing Employee from investing his
assets in such form or manner as will not require him to become an officer or
employee of, or render any services (including consulting services) to, any
competitor of the Company.
8. TERMINATION FOR CAUSE.
a) The Company has been intimately familiar with the ability,
competence and judgment of Employee, which are acknowledged to be
of the highest caliber. Accordingly, the Company and Employee
agree that Employee's services hereunder may be terminated by the
Company only (i) for an act of moral turpitude materially
adversely affecting the financial condition of the Company, or
(ii) breach of the terms of this Agreement which shall materially
adversely affect the financial condition of the Company.
b) If the Company terminates Employee's employment hereunder for any
reason other than as set forth in paragraph 8 (a) hereof,
Employee's compensation shall continue to be paid to him as
provided in paragraph 5 hereunder for the remainder of the term
of this Agreement. Employee shall have no duty to mitigate the
Company's damages hereunder. Therefore, no deduction shall be
made by the Company for any compensation earned by Employee from
other employment or for monies or property otherwise received by
Employee subsequent to such termination of his employment
hereunder. Employee and the Company acknowledge that the
foregoing provisions of this paragraph 8(b) are reasonable and
are based upon the facts and circumstances of the parties at the
time of entering into this Agreement, and with due regard to
future expectations.
9. CONSOLIDATION OR MERGER. In the event of any consolidation or merger of
the Company into or with any other corporation during the term of this
Agreement, or the sale of all or substantially all of the assets of the Company
to another corporation during the term of this Agreement, such successor
corporation shall assume this Agreement and become obligated to perform all of
the terms and provisions hereof applicable to the Company, and Employee's
obligations hereunder shall continue in favor of such successor corporation.
10. INDEMNIFICATION. The Company agrees to indemnify the Employee to the
fullest extent permitted by applicable law consistent with the Company's
Certification of Incorporation and By-Laws as in effect on the effective date of
this Agreement with respect to any action or failure to act on his part while he
was an officer, director and/or employee (a) of the Company or any subsidiary
thereof or (b) of any other entity if his service with such entity was at the
request of the Company. This provision shall survive the termination of this
Agreement.
11. NOTICES. Notice is to be given hereunder to the parties by telegram or
by certified or registered mail, addressed to the respective parties at the
addresses herein below set forth or to such addresses as may be hereinafter
furnished, in writing:
TO: Xxx X. Xxxxx
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxx Xxxxx, XX 00000
TO: XXXXXX INDUSTRIES, INC.
00 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxx, President
12. CHANGE OF CONTROL. In the event there shall be a change in the present
control of the Company as hereinafter defined, or in any person directly or
indirectly presently controlling the Company, as hereinafter defined, Employee
shall have the right, exercisable within six months of his becoming aware of
such event, to terminate his employment. Upon such termination, Employee shall
immediately receive as a lump sum payment an amount equal to (i) three (3) times
his "base amount", within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended (hereinafter "the Code"), reduced by (ii) $100.00, but
in no event shall he receive an amount greater than is deductible under Section
280G of the Internal Revenue Code of 1986, as amended, such amount to be
determined by the Company's independent auditors.
For purposes of this Agreement, a change in control of the Company, or in
any person directly or indirectly controlling the Company, shall mean:
a) a change in control as such term is presently defined in Regulation
240.12b-2 under the Securities Exchange Act of 1934 ("Exchange Act");
or
b) if any "person" (as such term is used in Section 13(d) and 14 (d) of
the Exchange Act) other than the Company or any "person" who on the
date of this Agreement is a director or officer of the Company,
becomes the "beneficial owner" (as defined in Rule 13(d)-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing twenty-five (25%) of the voting power of the Company's
then outstanding securities; or
c) if during the term of this Agreement, individuals who at the beginning
of such period constitute the Board of Directors cease for any reason
to constitute at least a majority thereof, unless the election of each
director who is not a director at the beginning of such period has
been approved in advance by directors representing at least two-thirds
(2/3) of the directors then in office who were directors at the
beginning of the period.
13. SUCCESSORS AND ASSIGNS. This agreement shall be binding upon and inure
to the benefit of the successors and assigns of the Company. Unless clearly
inapplicable, reference herein to the Company shall be deemed to include such
other successor. In addition, this Agreement shall be binding upon and inure to
the benefits of the Employee and his heirs, executors, legal representatives and
assigns, provided, however, that the obligations of Employee hereunder may not
be delegated without the prior written approval of Directors of the company.
14. AMENDMENTS. This agreement may not be altered, modified, amended or
terminated except by a written instrument signed by each of the parties hereto.
15. GOVERNING LAW. This agreement shall be governed by and construed and
interpreted in accordance with the laws of Delaware, without reference to
principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
XXXXXX INDUSTRIES, INC. XXXXXX INDUSTRIES, INC.
By: /s/ Xxxxx Xxxxxxxxx By: /s/ Xxxxx Xxxx
-------------------- -------------------------------
Xxxxx Xxxxxxxxx Xxxxx Xxxx, President
Secretary
/s/ Xxx X. Xxxxx
--------------------------------
Xxx X. Xxxxx, Employee
