EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of May 16, 2002
by and between American Inflatables, Inc., a Delaware corporation (the
"Company"), and Xxxxx X. Xxxxxxxxxx ("Employee"):
W I T N E S S E T H:
WHEREAS, Employee owns 34.9% of the issued and outstanding stock of the
Company and Employee wishes to induce Xxxxxxx X. Xxxxxxxxx, Red Oak Limited
Partnership, a South Carolina limited partnership, and Xxxxxxx X. Xxxxx (each an
"ASDG Shareholder"), who are the sole shareholders of American Sports
Development Group, Inc., f/k/a National Paintball Supply, Inc. ("ASDG"), to
enter into and consummate the transactions described in the Share Exchange
Agreement dated May 16, 2002 (the "Share Exchange Agreement"), between the
Company and the ASDG Shareholders;
WHEREAS, the ASDG Shareholders are unwilling to enter into and perform
the Share Exchange Agreement unless Employee enters this Agreement with the
Company in replacement of all other employment agreements and the like between
Employee and the Company.
NOW, THEREFORE, in consideration of the covenants contained herein,
together with other valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, Company and Employee agree as follows:
1. EMPLOYMENT. Company hereby agrees to employ Employee, and Employee
hereby accepts such employment upon the terms and conditions set forth in this
Agreement. Employee shall report to the Chief Executive Officer of the Company
(the "CEO") or such other person as the CEO shall designate from time to time
and shall have such offices and titles and perform such duties as the CEO or his
designee may reasonably require. Changes in or additions to Employee's duties
under this Agreement shall not result in additional compensation unless
expressly agreed to by the board of directors of the Company or its designee.
2. TERM. The initial term of this Agreement shall be for three (3)
years, beginning on May 16, 2002 and terminating on May 16, 2005. This Agreement
may be terminated in accordance with the provisions of this Agreement but, if
not terminated earlier, shall continue following the initial term month-to-month
until terminated pursuant to the terms of this Agreement.
3. COMPENSATION. While employed by Company under this Agreement
Employee shall receive an annual base salary of One Hundred Forty Four Thousand
Dollars ($144,000), payable in bi-weekly installments. In addition to his base
salary, during his employment, Employee shall receive a bonus of up to $350,000
per year as follows: for each calendar quarter during which (a) gross sales of
the inflatables division of the Company for such quarter equal or exceed
$500,000 and (b) the gross margin (defined as sales price less cost of good
sold) on the gross sales of the inflatables division of the Company exceeds
32.5%, Employee shall receive an amount equal to 2.5% of the total gross sales
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in excess of $500,000 of the inflatables division of the Company for that
quarter, but, notwithstanding the foregoing, no further bonus shall be due for
any year after Employee has already received $350,000 in bonus payments with
respect to that year. Bonus payments shall be made within 30 days of the end of
each quarter.
4. FRINGE BENEFITS AND EXPENSE REIMBURSEMENT. While employed by Company
under this Agreement, the Employee shall receive from time to time the same
health and other benefits on the same basis that Company generally makes
available to all of its employees as a whole from time to time. Employee shall
be reimbursed for expenses pursuant to the expense reimbursement policy approved
by the board of directors of the Company from time to time. In addition to the
foregoing, the Company will reimburse Employee for an aggregate of up to $1,000
per month of Employee's expenses reasonably incurred in furtherance of the
business of the Company, provided Employee has provided the Company with written
receipts for such expenses. Employee may allocate such $1,000 amongst qualified
expenses in his discretion.
5. GENERAL POLICIES. Employee agrees to comply with and accepts all
policies and requirements of the Company that are generally applicable to
Company's employees as they are in effect from time to time.
6. TERMINATION OF THIS AGREEMENT. This agreement may be terminated
prior to the end of the initial term only for Cause as defined below.
Thereafter, either party may terminate this agreement immediately for Cause at
any time or after giving the other party ten days advance written notice of
termination.
a. When termination is sought by the Company the term "Cause"
shall mean any of the following:
i. commission by Employee of a felony or other crime involving
moral turpitude or any other act which has a material adverse
effect on the Company's reputation, or commission by Employee
of any other act which is a breach of his fiduciary duty of
loyalty to Company;
ii. the continued willful and material failure by Employee to
perform any one or more of the duties or obligations
reasonably required of him under this Agreement after the
Company has given Employee three written notices of this
requirement within any six month period;
iii. Employee's willful making in the course of his employment of
any misrepresentation or false statement whether written or
oral to the Company or to others;
iv. any breach by Employee of any of the provisions of this
Agreement or the Xxxxxxxxxx Guaranty, the Joint Escrow
Agreement or the Shareholder Agreement (each as defined in the
Share Exchange Agreement) which has not been remedied by
Employee within ten days after the Company or the ASDG
Shareholders, as applicable, gives Employee written notice of
the breach;
v. the death of Employee; and
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vi. Employee's inability by reason of disability to perform
substantially his duties under this Agreement for a period of
three (3) consecutive months.
b. When termination is sought by the Employee "Cause" shall
mean any breach by Company of any of the provisions of this Agreement which has
not been remedied by Company within ten days after Employee gives Company
written notice of the breach.
7. ACTIVITIES DURING EMPLOYMENT.
a. Employee agrees that while he is employed in any capacity
by Company, (i) except to the extent that the Company has specifically granted
written consent to other activities, Employee will devote his full time,
attention and energy to the business of the Company and will use his best
efforts, skills and abilities to promote the Company's business and interests
and will not engage, other than as directed by the Company in the course of
his employment, in selling, manufacturing, distributing, or otherwise producing
or marketing inflatable products or paintball gaming products in the United
States (the "Business"); (ii) Employee will not engage in any activity which is
detrimental to the interests of Company, or which interferes with the
performance of his duties hereunder; and (iii) Employee will not have any
financial interest in any business (other than an interest in the ASDG) which is
engaged in the Business. For purposes of Sections 7, 8, 9 and 10 of this
Agreement, "Company" includes both the Company and ASDG.
b. Employee agrees that all information and any and all other
programs and other materials prepared by Employee during the course of
Employee's employment by Company, whether or not such information, programs, or
other materials are prepared on or off the premises of Company, shall belong
exclusively to the Company and shall be deemed to be works made for hire. To
the extent that any such information, programs, or other materials may not, by
operation of law, be works made for hire, Employee hereby assigns to Company
the ownership of all rights, titles and interests in such information, programs,
and other materials, including, but not limited to, copyrights and patent
rights, and Company shall have the right to obtain and hold in its own name
copyrights, patents or other protection which may be available or become
available in such information, programs, and other materials. Employee agrees
to give Company, it designees or assignees, all assistance reasonably required
to perfect such rights, titles and interests.
c. Employee agrees and warrants that all work done by Employee
for Company shall in no manner infringe upon the rights of others, including,
but not limited to, the rights, if any, of Employee's previous employers. In
the event that Employee believes that a third party's rights may be infringed
upon by any work he performs for Company, Employee shall report such potential
infringement promptly to Company.
8. COVENANT TO PROTECT CONFIDENTIAL INFORMATION AND TRADE SECRETS.
a. Both during and after the term of this Agreement the
Employee agrees to maintain the confidentiality of all trade secrets and
confidential information of the Company in accord with the confidentiality
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policies and practices of the Company. Employee agrees that he will not without
the express written consent of the Company use or disclose confidential
information of the Company in any way except on a confidential basis in pursuit
of the business objectives of the Company. The following information shall not
be considered confidential information of the Company: (i) information that has
become generally known outside of the Company through no fault of Employee, (ii)
information that Employee learns on a non-confidential basis from a third party
entitled to disclose it, (iii) information that Employee can demonstrate was
developed by Employee prior to his becoming employed by Company or known to
Employee prior to his employment and (iv) information that Employee can show was
independently developed by Employee following his employment without use of any
confidential information of Company.
b. Employee acknowledges and agrees that (i) by virtue of
employment with the Company, Employee shall have access to confidential
information and trade secrets of the Company, (ii) because of such access, the
Company would be exposed to significant injury in the event that Employee were
to work in competition with the Company following the termination of employment
with the Company, (iii) that it may be impossible for the Company to detect or
remedy the harm that would result from Employee's knowledge of its confidential
information and trade secrets while working in competition with the Company, and
(iv) that the Company's business is truly nationwide and that a nationwide
covenant is essential to protect the Company's legitimate interests.
c. To prevent improper disclosure and use of confidential
information, Employee agrees that for a period of one (1) year after termination
of his employment, unless he can prove that such action was done without the use
in any way of confidential information, he shall not:
i. directly or indirectly engage in the Business within the
continental United States (excluding Alaska).
ii. influence or attempt to influence customers of the Company to
divert their business from the Company or otherwise divert or
attempt to divert from the Company, the business of customers
of the Company if such customers purchased from the Company or
were actively solicited by the Company during the last 12
months or shorter period of his employment with the Company;
or
iii. solicit any person who was employed by the Company during the
last six months of his employment with the Company to leave
their employment with the Company.
9. NON-COMPETITION FOLLOWING TERMINATION OF EMPLOYMENT.
a. Employee acknowledges that he is granting this covenant in
return for the Company's agreement to enter into the Sales Agreement and
consummate the transactions contemplated by the Share Exchange Agreement.
Employee also acknowledges that the Company makes sales throughout the
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continental United States. Following the termination of his employment with the
Company, the Employee shall not for one year ( as long as the Company continues
to engage in the Business on a nationwide basis):
i. engage in the Business within the continental United States
(except for Alaska);
ii. influence or attempt to influence customers of the Company to
divert their business from the Company or otherwise divert
or attempt to divert from the Company, the business of
customers of the Company if such customers purchased from
the Company or were actively solicited by the Company during
the last 12 months or shorter period of his employment with
the Company; or
iii. solicit any person was employed by the Company during the last
six months of his employment with the Company to leave their
employment with the Company.
b. Reasonableness of Restrictions. Employee has carefully read
and considered the provisions of Section 9 of this Agreement, and, having done
so, agrees that the restrictions set forth in that section, including, but not
limited to, the time period of restriction and scope of the restriction are fair
and reasonable and are reasonably required for the protection of the interests
of Company and its, officers, directors, shareholders, and other employees. In
the event that, notwithstanding the foregoing, any of the provisions of Section
9 shall be held to be invalid or unenforceable, the remaining provisions thereof
shall nevertheless continue to be valid and enforceable as though the invalid or
unenforceable parts had not been included therein. In the event that any
provision of Section 9 relating to the time period and/or the areas of
restriction and/or related aspects shall be declared by a court of competent
jurisdiction to exceed the maximum restrictiveness such court deems reasonable
and enforceable, the time period and/or areas of restriction and/or related
aspects deemed reasonable and enforceable by the court shall become, and
thereafter be, the maximum restriction in such regard, and the restriction shall
remain enforceable to the fullest extent deemed reasonable by such court.
10. REMEDIES FOR BREACH OF EMPLOYEE'S COVENANTS AGAINST COMPETITION AND
OF NON-DISCLOSURE. In the event of a breach or threatened breach of any of the
covenants in Sections 7, 8 and 9, Company shall have the right to seek monetary
damages for any past breach and equitable relief, including specific performance
by means of an injunction against Employee or against Employee's partners,
agents, representatives, servants, employers, employees, family members and/or
any and all persons acting directly or indirectly by or with him, to prevent or
restrain any further breach.
11. SURRENDER OF BOOKS AND RECORDS. Employee agrees that all files,
documents, records, customer lists, vendor and supplier records, books,
products, calculations, drawings, descriptions, designs and other materials
which come into Employee's use or possession during the term of this Agreement
shall at all times remain the property of Company, and that upon the termination
of this Agreement for any reason, Employee shall immediately surrender to
Company all such materials.
12. ATTORNEYS' FEES. Should it become necessary for Company, on the one
hand, or Employee, on the other hand, to institute legal proceedings as a result
of the breach of any terms or covenants contained in this Agreement, the
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prevailing party in such litigation shall be entitled to have and recover from
the non-prevailing party reasonable attorneys' fees plus court costs in addition
to any and all relief otherwise available to the prevailing party, either at law
or in equity.
13. ARBITRATION.
a. Arbitrable Claims. To the fullest extent permitted by law,
all disputes between Employee (and his attorneys, successors, and assigns) and
Company (and its Affiliates, shareholders, directors, officers, employees,
agents, successors, attorneys, and assigns) of any kind whatsoever, including,
without limitation, all disputes relating in any manner to the employment or
termination of Employee, and all disputes arising under this Agreement,
("Arbitrable Claims") shall be resolved by arbitration. All persons and entities
specified in the preceding sentence (other than Company and Employee) shall be
considered third-party beneficiaries of the rights and obligations created by
this Section on Arbitration. Arbitrable Claims shall include, but are not
limited to, contract (express or implied) and tort claims of all kinds, as well
as all claims based on any federal, state, or local law, statute, or regulation,
excepting only claims under applicable workers' compensation law and
unemployment insurance claims. By way of example and not in limitation of the
foregoing, Arbitrable Claims shall include (to the fullest extent permitted by
law) any claims arising under Title VII of the Civil Rights Act of 1964, the Age
Discrimination in Employment Act, the Americans with Disabilities Act, and the
California Fair Employment and Housing Act, as well as any claims asserting
wrongful termination, harassment, breach of contract, breach of the covenant of
good faith and fair dealing, negligent or intentional infliction of emotional
distress, negligent or intentional misrepresentation, negligent or intentional
interference with contract or prospective economic advantage, defamation,
invasion of privacy, and claims related to disability.
b. Procedure. Arbitration of Arbitrable Claims shall be in
accordance with the National Rules for the Resolution of Employment Disputes of
the American Arbitration Association, as amended ("AAA Employment Rules"), as
augmented in this Agreement. Arbitration shall be initiated as provided by the
AAA Employment Rules, although the written notice to the other party initiating
arbitration shall also include a statement of the claim(s) asserted and the
facts upon which the claim(s) are based. Arbitration shall be final and binding
upon the parties and shall be the exclusive remedy for all Arbitrable Claims.
Either party may bring an action in court to compel arbitration under this
Agreement and to enforce an arbitration award. Otherwise, neither party shall
initiate or prosecute any lawsuit or administrative action in any way related to
any Arbitrable Claim. Notwithstanding the foregoing, either party may, at its
option, seek injunctive relief pursuant to section 1281.8 of the California Code
of Civil Procedure. All arbitration hearings under this Agreement shall be
conducted by a panel of three arbitrators (unless the amount in dispute is less
than $25,000 in which case there shall be only one arbitrator) in Greenville,
South Carolina. In the event that the arbitrator(s) determine that requiring
that the arbitration occur in Greenville, S.C. deprives either party of a fair
opportunity to present their claim or defense in the arbitration proceeding, the
arbitrator(s) may designate an alternate site for the arbitration proceedings
that in their judgment will permit all parties a fair opportunity to present
their claims and defenses. The interpretation and enforcement of this agreement
to arbitrate shall be governed by the California Arbitration Act. THE PARTIES
HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO ARBITRABLE
CLAIMS, INCLUDING WITHOUT LIMITATION ANY RIGHT TO TRIAL BY JURY AS TO THE
MAKING, EXISTENCE, VALIDITY, OR ENFORCEABILITY OF THE AGREEMENT TO ARBITRATE.
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c. Arbitrator Authority. The arbitrator shall have only such
authority to award equitable relief, damages, costs, and fees as a court would
have for the particular claim(s) asserted. The fees of the arbitrator shall be
split between both parties equally. If the allocation of responsibility for
payment of the arbitrator's fees would render the obligation to arbitrate
unenforceable, the parties authorize the arbitrator to modify the allocation as
necessary to preserve enforceability. The arbitrator shall have exclusive
authority to resolve all Arbitrable Claims, including, but not limited to,
whether any particular claim is arbitrable and whether all or any part of this
Agreement is void or unenforceable.
d. Continuing Obligations. The rights and obligations of
Employee and Employer set forth in this Section on Arbitration shall survive the
termination of Employee's employment and the expiration of this Agreement.
14. SEVERABILITY. The illegality, unenforceability or invalidity of any
one or more covenants, phrases, clauses, sentences or paragraphs of this
Agreement, as determined by a court of competent jurisdiction or by arbitration
under this Agreement, shall not effect the remaining portions of this Agreement,
or any part thereof; and in case of any such illegality, unenforceability or
invalidity, this Agreement shall be construed as if such covenants, phrases,
clauses, sentences or paragraphs, to the extent and only to the extent
determined to be illegal, unenforceable or invalid, had not been inserted.
15. WAIVER OF BREACH. The waiver by either party of any breach of any
provision of this Agreement shall not be effective unless in writing signed by
the waiving party and then shall not operate or be construed as a waiver of any
subsequent breach of any provision of this Agreement.
16. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding between the parties relating to the subject matter herein and
supersedes all previous understandings or agreements, written or oral, between
Employee and the Company. Without limiting the foregoing, any and all other
employment agreements and the like between Employee and the Company (including
without limitation that certain undated Employment Agreement by and between the
Company and Employee consisting of two pages, indicating on its face that its
term shall begin on December 20, 1998 and terminate on January 20, 2005 and
being signed on behalf of the Company by Employee) are hereby terminated,
without penalty to and without fault of either party, and replaced by this
Agreement. This Agreement may be modified only by an agreement in writing,
signed by all parties hereto, expressly purporting to modify this Agreement.
17. HEADINGS; INTERPRETATION. The headings in this Agreement are
inserted only as a matter of convenience and for reference and in no way define,
affect, limit, or describe the scope or intent of this agreement. The language
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used in this Agreement shall be deemed to be the language chosen by the parties
hereto to express their mutual intent, and no rule of strict construction shall
be applied against any party hereto.
18. NOTICES. All notices and other communications required or
permitted under this Agreement to be in writing shall be given:
If to Company, to:
-----------------
American Inflatables, Inc.
C/o American Sports Development Group, Inc.
000 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attention: President
Fax No: (000) 000-0000
With a copy to:
--------------
Xxxxx X. Xxxx, Xx. Esq.
Wyche, Burgess, Xxxxxxx & Xxxxxx, P.A.
X.X. Xxx 000
00 X. Xxxxxxxxxx Xxx (29601)
Xxxxxxxxxx, XX 00000-0000
Fax No.: (000)-000-0000
If to Employee, to:
------------------
Xxxxx X. Xxxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxx Xxxx, XX 00000
Fax No: (000) 000-0000
or to such other person or to such other address or facsimile number as the
party to whom notice is to be given may have furnished the other party by
written notice. Any such communication shall be deemed to have been given when
actually delivered to the address specified in this section, provided that any
notice given by facsimile is promptly confirmed by mail.
19. SUCCESSORS, HEIRS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, their successors, heirs and
assigns.
20. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument. Rebuttable proof of
execution of this Agreement by any party may be made by presentation of a copy
of this Agreement bearing a facsimile or photostatic copy of the signature of
the party whose execution is sought to be proved, and such copies shall be as
valid as the originals and as admissible as evidence of proof of the execution
and terms and provisions hereof as the originals.
SIGNATURES ON FOLLOWING PAGE
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
AMERICAN INFLATABLES INC.
By:/s/ Xxxxxxx Xxxxxxxx
---------------------------------
Xxxxxxx Xxxxxxxx, Vice President
EMPLOYEE
/s/ Xxxxx X. Xxxxxxxxxx
------------------------------------ (SEAL)
Xxxxx X. Xxxxxxxxxx
