Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), made and entered into this
1st day of May, 1998, by and between Laboratory Specialists, Inc. (the
"Company"), a Louisiana corporation, Laboratory Specialists of America, Inc., an
Oklahoma corporation and parent of the Company ("LSAI") and Roy D. Harrison, an
individual ("Harrison").
WHEREAS, the parties hereto entered into this Employment Agreement in
connection with and as a condition of that certain Asset Purchase Agreement
between Harrison Laboratories, Inc. ("HLI"), Harrison, the Company and LSAI,
dated April 13, 1998 (the "Asset Purchase Agreement"), providing for the
purchase of certain assets of HLI by the Company and LSAI;
NOW, THEREFORE, for and in consideration of the conditions hereinbelow to
be performed on the part of the respective parties hereto, and in consideration
of the mutuality thereof, the parties hereto agree as follows:
1. Term of Employment. The Company hereby agrees to employ Harrison, and
Harrison hereby agrees to serve the Company as a sales representative, during
the three-year period commencing on the date of this Agreement, subject to the
provisions of Sections 4 and 5 hereof.
2. Duties. Substantially all of the duties and responsibilities of
Harrison, subject to such travel as the duties of Harrison hereunder may
reasonably require, shall be performed by Harrison at and from Midland, Texas.
During the term of employment hereunder, Harrison shall devote his full business
time, attention, skill, energy and best efforts to the duties assigned to him
from time to time by the Company as a sale representative to service and
maintain the customer base acquired by LSAI and the Company from HLI pursuant to
the Asset Purchase Agreement and to further develop the customer base of the
Company for the services offered and provided by the Company within the
marketing area assigned to Harrison by the Company. As an employee of the
Company, Harrison shall be subject to the overall supervision and instructions
of management of the Company.
3. Compensation and Other Benefits. During Harrison's employment pursuant
to this Agreement, the Company or LSAI shall pay or provide to Harrison and
Harrison shall be entitled to receive or have maintained for his benefit, the
following:
3.1 The Company or LSAI shall compensate Harrison for the services to
be rendered by him hereunder as follows:
3.1.1 The Company or LSAI shall pay to Harrison an annual base
salary in the sum of Fifty Thousand ($50,000) per year, payable in
equal semi-monthly, pay-period installments on the first and fifteen
day of each month following the date of this Agreement; provided,
however, that the first and last semi-monthly pay-period installments
to be paid during the term of Harrison's employment pursuant to this
Agreement shall be pro rated based on the number of days of such
employment during the applicable semi-monthly, pay-period installment.
3.1.2 The Company or LSAI shall pay to Harrison a monthly bonus
equal to three and one-half percent (3.5%) of HLI Revenues (as defined
below) during each month payable on the fifteenth day of the following
month. For purposes of this Agreement, "HLI Revenues" shall mean all
revenues of the Company directly attributable to the customers
comprising the customer based of HLI acquired by LSAI and the Company
pursuant to the Asset Purchase Agreement as determined in accordance
with generally accepted accounting principles.
3.1.3 With respect to New Customers (as defined below) obtained
by Harrison for the Forensic Testing services provided by the Company
and LSAI, Harrison shall be entitled to monthly sales commissions as
set forth in this Section 3.1.3. The Company or LSAI shall pay to
Harrison a monthly commission, payable on the fifteenth day of each
month, based upon the revenues for Forensic Testing provided to each
New Customer during the preceding month, as determined in accordance
with generally
accepted account principles, equal to (i) six percent (6%) of such
revenues during the first year that each New Customer utilizes the
Forensic Testing services of the Company, (ii) four percent (4%) of
such revenues during the second year that each New Customer utilizes
the Forensic Testing services of the Company, (iii) two percent (2%)
of such revenues during the third year that such New Customer utilizes
the Forensic Testing services of the Company, and (iv) one percent
(1%) after the third year that such New Customer utilizes the Forensic
Testing services of the Company and LSAI. For purposes of this
Agreement, "New Customers" shall mean customers of the Company and
LSAI other than those customers that have previously utilized the
Forensic Testing services of the Company and LSAI on the date of this
Agreement, the customers comprising in part the assets purchase by
LSAI and the Company from HLI pursuant to the Asset Purchase
Agreement, and those customers comprising in whole or in part the
assets of a company subsequently acquired directly or indirectly by
LSAI or the Company pursuant to a purchase or merger transaction.
3.2 Harrison is hereby authorized to incur reasonable expenses for
the promotion of the Company's business, including entertainment, travel
and similar expenses (including without limitation oil and gas expenses of
the automobile utilized by Harrison), and he shall be reimbursed therefore
by the Company or LSAI upon his presentation of itemized accounts of such
expenditures.
3.3 The Company or LSAI shall provide to Harrison health and
disability insurance benefits comparable to those provided to an executive
of the Company.
3.4 Harrison shall be entitled to reasonable periods of vacation with
pay in each year, and reasonable periods of sick leave with pay in
accordance with Company's vacation and sick leave policies applicable to an
executive of the Company as established by the Board of Directors of the
Company.
3.5 The Company or LSAI shall pay to Harrison an automobile allowance
of Five Hundred Dollars ($500) per month, payable on the fifteen day of
each month while employed pursuant to this Agreement to assist Harrison in
the performance of his duties and responsibilities as an employee of the
Company.
3.6 On the date of this Agreement, Harrison shall be entitled to
become a participant in the 401(k) retirement benefit plan maintained by
the Company for its employees on the same basis that other Company
employees participate. The Company agrees to waive any minimum service
requirement for initial participation and vesting under such benefit plan.
4. Disability or Death.
4.1 In the event the Board of Directors of the Company determines in
good faith that Harrison is unable, because of physical or mental illness
or disability, to render services of the character contemplated by this
Agreement and that such illness or disability reasonably may be expected to
be permanent or to continue for a period of at least six (6) consecutive
months (or for shorter periods totaling more than six (6) months during any
period of eighteen (18) consecutive months), in such event the Board of
Directors of the Company may elect to terminate the employment of Harrison
hereunder upon written notice by the Company to Harrison effective on the
next first or fifteenth day of the month following the date of such notice.
Prior to and as a condition precedent of any such termination by the Board
of Directors, upon request therefor by the Company, Harrison shall submit
to a medical examination by a physician designated by the Company in
Midland, Texas, for the purpose of determining the existence, nature and
extent of any such illness or disability; provided, however, that in the
event Harrison refuses or fails to submit himself to such medical
examination within 30 days of such request, the Board of Directors shall
have the right immediately to terminate Harrison's employment pursuant to
this Agreement without such medical examination. In the event the
physician designated by the Company determines that Harrison is unable,
because of physical or mental illness or disability, to render services of
the character contemplated this Agreement, Harrison shall have the right,
within 10 days of the determination of Harrison's illness or disability by
the physician selected by the Company, to select a physician in Midland,
Texas, and submit himself to an examination for the purpose of determining
the existence, nature and extent any such illness or disability. In the
event Harrison fails to submit himself for examination by the physician
selected by Harrison within the 10-day period, the determination of such
illness or disability the by physician selected by the Company shall be
binding
upon Harrison and shall be reasonable grounds for the Company to terminate
Harrison's employment pursuant to this Agreement. Furthermore, in the event
the physician designated by the Company and the physician selected by
Harrison are unable to reach an agreement on the issue of the ability of
Harrison to perform services under this Agreement due to any illness or
disability, such physicians shall promptly designate a qualified physician
to make such determination and the finding of such physician as to the
existence or nonexistence of such illness or disability shall be binding on
the Company and Harrison and, if such illness or disability is found to
exist, such finding shall be reasonable grounds for the Company to
terminate Harrison's employment pursuant to this Agreement. In the event
the Board of Directors terminates the employment of Harrison under this
Agreement pursuant to this Section 4.1, Harrison shall be entitled to
receive the amount of compensation determined pursuant to (i) Sections
3.1.1 and 3.1.3 up to the date of the termination of the employment of
Harrison, payable on the dates established pursuant to Sections 3.1.1 and
3.1.3, respectively, and (ii) Section 3.1.2 from the date of Harrison's
employment termination pursuant to this Section 4.1 through April 30, 2001,
payable on the fifteenth day of each month following the end of each month
during such period.
4.2 In the event Harrison shall die during the term of this
Agreement, this Agreement shall terminate effective on the next first or
fifteenth day of the month following the date of death, and the Company or
LSAI shall pay to the spouse of Harrison, or if unmarried at the time of
his death, to the estate of Harrison, the compensation otherwise payable to
Harrison but for his death pursuant to (i) Sections 3.1.1 and 3.1.2 for a
period of three (3) months following the date of Harrison's death, payable
on the dates established pursuant to Sections 3.1.1 and 3.1.3,
respectively, and (ii) Section 3.1.2 from the date of Harrison's death
through April 30, 2001, payable on the fifteenth day of each month
following the end of each month during such period. '''
5. Termination for Cause. In the event the Board of Directors of the
Company determines in good faith that Harrison should be terminated for Cause
(as defined below), the Company may terminate this Agreement, and all
obligations hereunder shall thereupon terminate. For purposes of this
Agreement, "Cause" shall mean (i) gross negligence by Harrison, (ii) the willful
failure by Harrison to substantially perform the duties assigned to Harrison
under this Agreement (other than physical or mental illness or disability which
determination shall be in accordance with Section 4.1 of this Agreement), (iii)
fraud, including without limitation any misrepresentation or breach of any
warranty or covenant by HLI contained in the Asset Purchase Agreement, or (iv)
the willful misconduct by Harrison which is materially injurious to the Company
or LSAI, or (v) Harrison's conviction of a felony.
6. Non-Competition. (i) During Harrison's employment pursuant to this
Agreement, or, if longer, the period of employment of Harrison by the Company or
LSAI, Harrison shall not engage in competition with the Company or LSAI, either
directly or indirectly, in any manner or capacity as an employee or executive
officer of a competitor company in any phase of the business carried on by the
Company or LSAI at any time during the term of Agreement. Furthermore, in order
to induce LSAI and the Company to enter into the Asset Purchase Agreement and
this Agreement, Harrison covenants and agrees, for a period of three (3) years
following the date of Harrison's termination of employment with the Company, not
to (A) directly or indirectly solicit, canvass or otherwise contact or accept
any business or transaction from any customer, former or otherwise of the
Company, or take any action which shall cause the termination or curtailment of
the business relationship with LSAI or the Company and/or its successor or
successors and any of its customers, former or otherwise, including without
limitation those customers constituting in whole or in part the HLI Assets and
(B) directly or indirectly, without the prior written consent of LSAI and the
Company or their successor or successors, solicit, entice, raid, persuade or
induce any individual who as of the date of Harrison's employment termination is
an employee of LSAI or the Company, or any of its successor or successors, to
terminate or refrain from renewing or extending his or her employment with LSAI
or the Company or any of its respective successors, except this clause shall not
apply to any such employee whose employment shall have been terminated by LSAI
or the Company or its successor or successors.
(ii) If any part of the restrictions set forth in subsection (i) of this
Section 6 shall, for any reason whatsoever, be declared invalid by an
arbitration panel, the validity or enforceability of the remainder of such
restrictions shall not thereby be adversely affected and shall be enforced to
the fullest extent permitted by law. If any of such restrictions are deemed to
be unreasonable by an arbitration panel, then Harrison shall submit to the
reduction or modification of this Section 6 as said panel deems reasonable.
(iii) If Harrison shall be in violation of the aforementioned restrictive
covenant and agreements in this Section 6, then in addition to other remedies
available to LSAI or the Company, the time limitation thereof shall be extended
for a period of time equal to the period of time during which such violation
occurred.
(iv) The terms and provisions of this Section 6 are for the benefit of
LSAI and the Company and may be waived in whole or in part only in writing by
LSAI and the Company.
7. Confidentiality. During Harrison's employment pursuant to this
Agreement, or, if longer, the period of employment of Harrison by the Company,
and for a period of three (3) years thereafter, Harrison shall not divulge to
anyone, other than the Company, LSAI or persons designated by the Company or
LSAI in writing, any confidential material information directly or indirectly
useful in any aspect of the business of the Company, LSAI or any of its
subsidiaries, as conducted from time to time, as to which Harrison is now, or at
any time during employment shall become, informed and which is not then
generally known to the public or recognized as standard practice.
8. Certain Provisions to Survive Termination; Etc. Notwithstanding any
termination of his employment under this Agreement, Harrison, in consideration
of his employment hereunder to the date of such termination, shall remain bound
by the provisions of Section 6 and 7, and consequently, in addition to all other
remedies that may be available to it, the Company shall be entitled to
injunctive relief for any actual or threatened violation of such Sections.
Harrison acknowledges that the Company, LSAI and its successor or successors
would be irreparable damaged and that money damages and any other remedy
available at law would be inadequate to redress or remedy any loss in the event
that the provisions of Sections 6 and 7 were not fully performed in accordance
with their specific terms or are otherwise breached, and Harrison, therefore,
agrees that the Company, LSAI and its successor or successors, in addition to
recovering any claim for damages or obtaining any other remedy available at
law, also may enforce the terms of Sections 6 and 7 by injunction or specific
performance and may obtain may other appropriate remedy available in equity, and
that Harrison hereby waives his right to assert and will not assert in defense
against such equitable claims that an adequate legal remedy is available.
9. Non-Assignability. Neither party hereto shall have the right to assign
this Agreement or any rights or obligations hereunder without the written
consent of the other party.
10. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association and judgment
upon the award rendered by the arbitrator or arbitrators may be entered in any
court having jurisdiction thereof. The arbitration proceedings shall be
conducted in Midland, Texas, unless otherwise agreed by the parties hereto. The
arbitrator or arbitrators shall be deemed to possess the powers to issue
mandatory orders and restraining orders in connection with such arbitration;
provided, however, that nothing in this Section 10 shall be construed so as to
deny the Company, LSAI and its successor or successors the right and power to
seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by Harrison of any of his covenants contained in Sections 6
and 7 hereof.
11. Notice. All notices required or permitted to be given hereunder shall
be in writing and shall be deemed to have been given forty-eight (48) hours
after depositing in the United States mail, certified mail, postage prepaid,
addressed to the party to receive such notice at the address set forth
hereinbelow or such other address as either party may give to the other in
writing pursuant to written notice pursuant to this Section:
If to Harrison: Mr. Roy D. Harrison
5301 Shady Bend Court
Midland, Texas 79707
If to the Company: Laboratory Specialists, Inc.
1111 Newton Street
Gretna, Louisiana 70053
Attention: Larry E. Howell
If to LSAI: Laboratory Specialists of America, Inc.
101 Park Avenue, Suite 810
Oklahoma City, Oklahoma 73102
Attention: John Simonelli
12. General. The terms and provisions herein contained (i) constitute the
entire Agreement between the Company, LSAI and Harrison with respect to the
subject matter hereof, (ii) may be amended or modified only by a written
instrument executed by the parties hereto, and (iii) shall be construed and
enforced in accordance with the laws in effect in the State of Texas without
regard to its conflicts of law provisions. Failure by a party hereto to require
performance of any provision of this Agreement shall not affect, impair or waive
such party's right to require full performance at any time thereafter.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement on
the date first above written.
"Company" LABORATORY SPECIALISTS, INC.
By: /s/ Arthur R. Peterson, Jr.
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Arthur R. Peterson, Jr., President
"LSAI" LABORATORY SPECIALISTS OF AMERICA, INC.
By: /s/ Larry E. Howell
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Larry E. Howell, President
"Harrison" /s/ Roy D, Harrison
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Roy D. Harrison