EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 15th day of June 1999 by and
between HERC Products Inc., a Delaware corporation (the "Corporation") and S.
XXXXXX XXXX ("Executive").
A. The Corporation has employed Executive as its President and Chief Executive
Officer and wishes to continue to employ Executive in such capacities.
B. Executive is willing to be employed by the Corporation on the terms and
conditions set forth below.
The Corporation and Executive agree as follows:
1. EMPLOYMENT.
(a) The Corporation will employ Executive as its President and Chief
Executive Officer. Executive will also serve in such other
capacities, as the Board of Directors of the Corporation shall
reasonably deem necessary. Executive will perform such duties as
may be required of him by the Corporation under and subject to
the instruction, direction and control of the Board of Directors
of the Corporation.
(b) The Corporation will use its best efforts to elect Executive as a
director of the Corporation during the term of this Agreement.
2. DEVOTION TO EMPLOYMENT.
Executive accepts employment with the Corporation on the terms and
conditions of this Agreement, and will devote all of his business time and
effort to perform his duties on behalf of the Corporation in his position
as set forth in Section 1, provided, however, that nothing herein shall be
construed to prevent Executive from making and supervising personal
investments. During the term of this Agreement, Executive shall not be
actively engaged in any other business activity which will in any way
impair his ability to properly meet his obligations to the Corporation or
represent any activity competitive with the Corporation or detrimental to
its business. Executive agrees to comply with the reasonable policies,
standards and regulations of the Corporation from time to time established.
3. COMPENSATION AND BENEFITS.
The Corporation agrees to pay Executive compensation for his services as
follows:
3.1 BASE SALARY.
The Corporation will pay Executive an annual base salary, subject to
withholding taxes and other normal payroll deductions, at the rate of
$115,500 per year with annual increases of 15% per year for the term
of this agreement.
3.2 BONUSES.
In addition to Executive's salary, Executive shall be paid a bonus
equal to the percentage specified below of the Corporation's annual
EBITDA, not including extraordinary accounting events or any
accounting impact from discontinued operations, during each of the
periods specified below during which this Agreement is in effect. Any
bonus earned pursuant to the preceding sentence shall be paid to
Executive in cash or stock of the Company within 30 days after the
amount thereof has been determined by HERC's independent auditors. If
the Executive is paid in stock the closing bid price for December 31
of the year within which the bonus is due shall be used for the
calculation of the amount of stock. Executive may also receive such
other bonuses and increases in Base Salary, if any, as may be awarded
to him from time to time by the Corporation's Board of Directors:
Period Percentage
------ ----------
1/l/99 - 12/31/99 7.5%
1/1/2000 - 12/31/2000 7.5%
If the Company achieves its EBITDA, as projected in the approved
budget for the year, the Executive shall be provided an additional
incentive bonus of 25,000 shares of stock in the Company for each year
the budgeted EBITDA is achieved.
3.3 BENEFITS.
Executive shall be entitled to such medical, dental, disability, life
insurance and other benefits and perquisites, if any, no less
favorable than such as are afforded to other senior executives of the
Corporation, subject to applicable waiting periods and other
conditions. Medical, dental and other health insurance shall also
provide coverage for Executive's spouse and dependent children, if
any. Executive shall be entitled to three weeks of vacation in each
employment year and to a reasonable number of other days off for
religious and personal reasons.
3.4 BUSINESS EXPENSES.
The Corporation will pay or reimburse Executive for all
transportation, hotel and other expenses reasonably incurred by
Executive on business trips and for all other ordinary reasonable
out-of-pocket expenses actually incurred by him in the conduct of the
business of the Corporation against itemized vouchers submitted with
respect to any such expenses approved in accordance with customary
procedures.
3.5 AUTO ALLOWANCE.
The Corporation shall either, at the Corporation's option, pay
Executive the sum of $500 per month as an automobile allowance for
business use or provide Executive with a suitable automobile for
business use at the expense of the Corporation.
4. STOCK GRANTS.
In consideration of Executive's employment hereunder, H.E.R.C. Products
Incorporated will grant Executive 50,000 shares of H.E.R.C.'s Restricted
Common Stock. Such stock to have the terms set forth in Schedule A annexed
hereto.
5. TERM.
The term of this Agreement shall commence as of the date thereof, and shall
continue for a term of two (2) years, unless sooner terminated as provided
herein. This agreement is subject to automatic renewal under the terms
hereof for one year periods provided, however, that on or before six (6)
months prior to the termination date under paragraph 5 hereof, upon written
notice provided to the Executive by the Company or to the Company by the
Executive, the terms of this Agreement shall be renegotioated between
Executive and Company or written notice of intent to terminate this
Agreement shall otherwise be given on such date. If the agreement is
automatically renewed for any one year term the salary per paragraph 3.1
shall remain the same as the second year of this agreement unless adjusted
by the Board.
6. TERMINATION.
This Agreement shall terminate prior to the end of its term: (a) upon the
death of Executive, or (b) if Executive fails, because of illness or
incapacity, to render the services contemplated by this Agreement for a
period of six consecutive months. The Corporation may terminate this
Agreement prior to the end of its term for cause, upon notice to Executive
by the Corporation. As used herein, "cause" shall mean: (a) the refusal or
failure by Executive to carry out specific directions of the Board of
Directors of the Corporation which are of a material nature and consistent
with his status as Chairman of the Board, President and Chief Executive
Officer, or the refusal or failure by Executive to perform a material part
of Executive's duties hereunder, or a breach of any of Executive's
fiduciary duties to the Corporation; (b) fraudulent or dishonest action by
Executive in his relations with the Corporation or any of its Affiliates,
or with any customer or business contact of the Company or any of its
Affiliates ("dishonest" for these purposes shall mean Executive's knowingly
or recklessly making of a material misstatement or omission for his
personal benefit); or (c) the conviction of Executive of any crime
involving an act of moral turpitude. Notwithstanding the foregoing, no
"cause" for termination shall be deemed to exist with respect to
Executive's acts described in clause (a) above unless the Company shall
have given written notice to Executive specifying the "cause" with
reasonable particularity and, within five business days after such notice,
Executive shall not have cured or eliminated the problem or thing giving
rise to such of cause.
7. RESIGNATION AS DIRECTOR.
If, for any reason, (a) Executive terminates his employment with the
Corporation, or (b) the Corporation terminates Executive's employment under
the terms of this Agreement, or (c) this Agreement expires without being
renewed or extended, then Executive will resign as a director, effective
upon the occurrence of such termination or expiration, whichever is
applicable.
8. PROTECTION OF CONFIDENTIAL INFORMATION; NON-COMPETITION.
8.1 CONFIDENTIAL INFORMATION.
Executive warrants that he is not subject to any restriction on his
executing and performing this Agreement, and acknowledges that:
(a) As a result of his employment by the Corporation, Executive has
obtained and will obtain secret and confidential information
concerning the business of the Corporation and its Affiliates,
including, without limitation, financial information, patents and
other proprietary rights, trade secrets and "know-how," customers, and
certain methodologies ("Confidential Information").
(b) The Corporation and its Affiliates will suffer substantial damage,
which will be difficult to compute if, during the period of his
employment with the Corporation or thereafter, Executive should
divulge Confidential Information or, thereafter, Executive should
enter a business competitive with those of the Corporation.
(c) The provisions of this Agreement are reasonable and necessary for the
protection of the business of the Corporation and its Affiliates.
8.2 MAINTAIN CONFIDENTIALITY.
Executive agrees that he will not at any time, either during the term of
this Agreement or thereafter, divulge to any person or entity any
Confidential Information obtained or learned by him as a result of his
employment with the Corporation or any of its Affiliates, except (a) in the
course of performing his duties hereunder, (b) with the Corporation's
express written consent; (c) to the extent that any such information is in
the public domain other than as a result of Executive's breach of any of
his obligations hereunder; or (d) where required to be disclosed by court
order subpoena or other government process. If Executive shall be required
to make disclosure pursuant to the provisions of clause (d) of the
preceding sentence, Executive promptly, but in no event more than 72 hours
after learning of such subpoena, court order, or other government process,
shall notify, by personal delivery or by electronic means, confirmed by
mail, the Corporation and, at the Corporation's expense, Executive shall:
(i) take all reasonably necessary steps required by the Corporation to
defend against the enforcement of such subpoena, court order or other
government process, and (ii) permit the Corporation to intervene and
participate with counsel of its choice in any proceeding relating to the
enforcement thereof.
8.3 RECORDS.
Upon termination of his employment with the Corporation, Executive will
promptly deliver to the Corporation all original memoranda, notes, records,
reports, manuals, drawings, blueprints, formula and other documents
relating to the business of the Corporation and its Affiliates and all
property associated therewith, which he may then possess or have under his
control; provided, however, that Executive shall be entitled to retain
copies of such documents reasonably necessary to document his financial
relationship (both past and future) with the Corporation.
8.4 NON-COMPETE.
During the term of this Agreement and the eighteen-month period following
the termination of Executive's employment with the Corporation under the
terms of this Agreement, Executive, without the prior written permission of
the Corporation, shall not, anywhere in the United States of America,
directly or indirectly, (a) enter into the employ of or render any services
to any person, firm or corporation engaged in any business which is a
"Competitive Business" (as defined below); (b) engage in any Competitive
Business for his own account; (c) become associated with or interested in
any Competitive Business as an individual, partner, shareholder, creditor,
director, officer, principal, agent, employee, trustee, consultant, advisor
or in any other relationship or capacity; (d) employ or retain, or have or
cause any other person or entity to employ or retain, any person who was
employed or retained by the Corporation in the six-month period prior to
the termination of Executive's employment; or (e) solicit, interfere with,
or endeavor to entice away from the Corporation, for the benefit of a
Competitive Business, any of its customers or other persons with whom the
Corporation has a contractual relationship. However, nothing in this
Agreement shall preclude Executive from investing his personal assets in
the securities of any corporation or other business entity which is engaged
in a Competitive Business if such securities are traded on a national stock
exchange or in the over-the-counter market and if such investment does not
result in his beneficially owning, at any time, more than 1% of the
publicly-traded equity securities of such Competitive Business.
8.5 INJUNCTIVE RELIEF.
If Executive breaches, or threatens to breach, any of the provisions of
Sections 8.2, 8.3 or 8.4, the Corporation shall have the right and remedy
to have the provisions of this Agreement specifically enforced by any court
having equity jurisdiction, it being acknowledged and agreed by Executive
that the services being rendered hereunder to the Corporation are of a
special, unique and extraordinary character and that any such breach or
threatened breach will cause irreparable injury to the Corporation and that
money damages will not provide an adequate remedy in the Corporation.
8.6 MODIFICATION OF SCOPE.
If any provision of Section 8.2 or 8.4 is held to be unenforceable because
of the scope, duration or area of its applicability, the tribunal making
such determination shall have the power to modify such scope, duration, or
area, or all of them, and such provision or provisions shall then be
applicable in such modified form.
9. DEFINITIONS. AS USED IN THIS AGREEMENT:
9.1. "Affiliate" shall mean any entity that, directly or indirectly, is
controlled by, controlling, or under common control with the Corporation.
9.2. "Competitive Business" shall mean a business which is directly
competitive with any business engaged in by the Corporation or any
Affiliate of the Corporation.
10. NOTICES.
All notices provided for by this Agreement shall be made in writing and
shall be deemed given when (a) personally delivered to the party entitled
to receive it: (b) transmitted by electronic means; or (c) mailed first
class mail, by certified mail, return receipt requested, addressed to the
person entitled to it at the address set forth below (or at such other
address as may have been designated by written notice). The notice shall be
deemed to be received on the date of its actual delivery or electronic
transmission to the party entitled thereto, or three days after mailing. If
sent to the Corporation, notices shall be delivered to:
HERC Products Incorporated
0000 Xxxx Xxxxxxx Xxxx, Xxxxx X
Xxxxxxx, Xxxxxxx 00000
Attention: Chairman of the Board of Directors Compensation Committee
Telecopier: (000) 000-0000
and, if sent to Executive, notices shall be delivered to:
S. Xxxxxx Xxxx
c/o HERC Products Incorporated
0000 Xxxx Xxxxxxx Xxxx, Xxxxx X
Xxxxxxx, Xxxxxxx 00000
Telecopier: (000) 000-0000
Marked "Personal and Confidential"
11. ASSIGNMENT.
The rights and benefits of the Corporation under this Agreement shall be
transferable, and all covenants and agreements hereunder shall inure to the
benefit of and be enforceable by, its successors and assigns. Executive may
not assign this Agreement, but it shall inure to the benefit of and be
binding upon his heirs and legal representatives.
12. ARBITRATION.
In the event of any dispute between the parties as to the interpretation of
any of the terms and provisions of this agreement, the matter shall be
submitted to arbitration in the following manner:
Either party shall serve written notice upon the other party that they
desire to submit the dispute to arbitration and within fifteen (15) days of
the date of any such written notice each party shall appoint an arbitrator
within ten (10) days thereafter the two arbitrators so selected shall
appoint a third. In the event either party shall fail to appoint an
arbitrator within such fifteen-day period or if the two arbitrators so
appointed shall fail to select a third within such ten-day period, then a
judge of the Superior Court of Maricopa County, Arizona, or such other
court as may have jurisdiction thereover shall appoint such arbitrator. The
three arbitrators shall determine the controversy in accordance with the
Rules of the American Arbitration Association and a decision of the
majority of the arbitrators shall bind and be conclusive upon the parties.
The parties shall pay the expense of arbitration in the manner determined
by the arbitrators and judgment upon the award rendered by the arbitrators
may, if permissible, be entered in any court having jurisdiction.
13. MISCELLANEOUS.
13.1 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
laws of the State of Arizona.
13.2 WAIVER.
No waiver or modification of this Agreement shall be valid unless in
writing and duly executed by the party to be charged therewith. Waiver
by either party hereto of any breach or default by the other party of
any of the terms and provisions of this Agreement shall not operate as
a waiver of any other breach or default, whether similar to or
different from the breach or default waiver.
13.3 SEVERABILITY.
All agreements, provisions, representations, warranties and covenants
contained herein are severable, and in the event that any one or more
of them shall be held to be invalid, illegal or unenforceable in any
respect by any court of competent jurisdiction, the validity, legality
and enforceability of the remaining provisions contained herein shall
not in any way be affected thereby, and this Agreement shall be
interpreted as if such invalid, illegal or unenforceable agreements,
provisions or covenants were not contained herein.
13.4 ENTIRE AGREEMENT.
This Agreement constitutes and embodies the full and complete
understanding and agreement of the parties hereto provided, and
supersedes all prior understandings or agreements, whether oral or in
writing.
The parties have executed this Agreement the day and year first above written.
HERC Products Incorporated
By: _______________________________ S. Xxxxxx Xxxx: ________________________
Signature: ________________________
Title: ____________________________
SCHEDULE A
TERMS OF STOCK GRANT
1. Shares granted price is the closing bid price on June 15, 1999
2. Shares will vest over 2 years on the following schedule:
Shares: Vesting Date:
------- -------------
25,000 shares 6/l5/99
25,000 shares 6/15/2000
3. In the event HERC is acquired by another company all stock becomes
immediately vested.
4. In the event HERC issues stock in a public or private placement the shares
will be adjusted in proportion to the new stock issued (Anti-dilutive
clause).
