EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made effective as of
June 25, 1997 between PIA Merchandising Services, Inc., a Delaware corporation
(the "Corporation"), and Terry R. Peets (the "Executive").
R E C I T A L
WHEREAS, the Corporation desires to employ the Executive as its Chief
Executive Officer reporting to the Corporation's Board of Directors, and the
Executive desires to accept such employment; and
WHEREAS, the Corporation desires to name the Executive as a member of
the Corporation's Board of Directors, and the Executive desires to accept such
position; and
WHEREAS, the Corporation and the Executive desire to fix the terms of
the Executive's employment with the Corporation, and have agreed upon the terms
and conditions set forth below.
A G R E E M E N T
NOW, THEREFORE, the parties hereby agree as follows:
1. EMPLOYMENT DUTIES. The Corporation hereby hires the Executive,
and the Executive hereby accepts employment with the Corporation, on the terms
set forth below. The Executive shall serve as Chief Executive Officer and shall
report to the Board of Directors. The Executive shall perform all the duties
that are usual and customary for the office to which the Executive is appointed,
subject always to the policies set by the Board of Directors or Bylaws of the
Corporation. The Executive shall perform said duties primarily at the Irvine,
California location of the Corporation and its environs. No transfer or change
in location shall be made without Executive's prior consent. The parties
hereby acknowledge that the Executive will be required to travel in connection
with the performance of his duties hereunder.
2. TERM. The Executive shall be employed at-will by the Corporation
beginning as of June 25, 1997, subject to Executive's current consulting
assignment, and ending on the date of notice of termination as provided for in
Paragraph 8 herein (the "Employment Term").
3. COMMITMENT OF EXECUTIVE. The Executive shall work for the
Corporation on a full-time basis and shall devote substantially all of his
business time, attention, knowledge and skill to the performance of his
duties herein throughout the Employment Term and shall at all times discharge
said duties faithfully and to the best of his ability, experience and
talents. Notwithstanding the foregoing, the Corporation acknowledges and
agrees that Executive may continue to serve as a director of other companies
so long as such board memberships do not conflict with or adversely affect
his performance at the Corporation. At all times during the Employment Term,
the Executive shall use his best efforts to observe and conform to all the
laws and regulations applicable to the Corporation.
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4. COMPENSATION AND EXPENSES.
(a) FIXED SALARY. From June 25, 1997 through August 10, 1997,
the Executive shall receive a fixed salary of $1,200 per day. The Executive
shall receive a fixed salary during the Employment Term at the rate of $20,834
per month for the remainder of the first 12 months, payable in accordance with
the Corporation's payroll practices for other executive officers of the
Corporation, as such practices may change time to time. Such fixed salary shall
be adjusted on each anniversary date of this Agreement in accordance with the
percentage change in the Los Angeles-Long Beach-Anaheim Consumer Price Index for
the month of July compared to the index for the preceding July, in addition to
such other upward adjustments, if any, as may be approved by the Board of
Directors from time to time. Executive acknowledges that the Corporation will
deduct and withhold from the fixed salary payable to Executive hereunder the
amount required to be deducted and withheld under the provisions of all
applicable statutes, regulations, ordinances or orders.
(b) BONUS. The Executive shall receive a bonus, payable
annually within 15 days after receipt by the Board of Directors of the
Corporation's audited (or if no audit is prepared, unaudited) financial
statements for the applicable period, equal to 4.0% of the Corporation's annual
operating income, which is defined as earnings before interest, taxes and
amortization ("EBITA"), up to a maximum of 100% of the Executive's annual fixed
salary set forth in Paragraph 4(a) (the "Bonus"). The EBITA will exclude the
operating earnings which are acquired as a result of the Corporation entering
into an acquisition or merger ("Acquired EBITA"). The Bonus shall be payable
with respect to each partial or complete fiscal year during the Employment Term
based on the Corporation's profits during such period, commencing with the
period from July 1, 1997 through December 31, 1997.
(c) STOCK OPTION GRANT. On the date hereof, the Corporation
will grant to the Executive a stock option (the "Option") covering 250,000
shares of the Corporation's common stock, $.01 par value (the "Common Stock"),
pursuant to the Corporation's 1995 Stock Option Plan. The Option will vest at
the rate of 25% per year on each of the first four anniversaries of the date
hereof. The exercise price of the Option will be the closing price of the
Common Stock on the Nasdaq National Market on the date hereof.
(d) EXPENSES. During the Employment Term, the Executive will be
reimbursed for his reasonable and necessary expenses incurred for the benefit of
the Corporation, but only in accordance with the general policy of the
Corporation as adopted by the Corporation from time to time. With respect to
any expenses which are reimbursed by the Corporation to the Executive, the
Executive agrees to account to the Corporation in sufficient detail and with
sufficient documentary and other evidence to allow the Corporation to support a
claim for an income tax deduction for such paid item if such item is deductible.
(e) CAR ALLOWANCE. The Corporation requires the Executive to
travel in and about the Los Angeles metropolitan area and to utilize his own
vehicle for such purpose. Accordingly, during the Employment Term, the
Executive will receive an allowance for automobile expenses at a fixed rate of
$750.00 per month, payable on a monthly basis in arrears.
5. BENEFIT PLANS. The Executive shall be entitled to participate in
group plans or programs maintained by the Corporation, if any, relating to
retirement, health, dental, vision, disability, life insurance and other related
benefits as in effect from time to time generally for the other executive
officers of the Corporation. In addition to the benefit provided to other
senior executives, Executive shall receive the benefits specified in Exhibit A.
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6. VACATION AND SICK LEAVE. On an annual basis, the Executive shall
be entitled to as many paid vacation days and as much sick leave as the
Executive, in his best judgment, deems appropriate and reasonable. The
Executive shall schedule and take such vacation days so as not to materially
disrupt or impair the operations of the Corporation.
7. COVENANT NOT TO COMPETE.
(a) GENERALLY. The Executive acknowledges and agrees that
because of the special, unique, unusual and extraordinary nature of the services
the Executive is providing, it would substantially adversely affect the business
of the Corporation were the Executive to provide the same substantially similar
services to any third party. Therefore, during the Employment Term, the
Executive agrees to be bound by the covenant not to compete set forth herein.
The Executive shall not, without the prior written consent of the Corporation,
at any time during the Employment Term in any state of the United States of
America, or in any other country or territory throughout the world, engage or
participate, directly or indirectly, in any business that is in competition in
any manner with that of the Corporation, whether as employee, agent, employer,
principal, partner, holder of equity securities (other than as a holder of less
than one percent of the outstanding equity securities of any publicly traded
company), creditor, corporate officer, corporate director or in any other
individual or representative capacity whatsoever.
(b) SEVERABLE COVENANTS. It is intended that the preceding
covenant shall be construed as a series of separate covenants, one for each
county of each state of the United States of America. If, in any judicial
proceeding, a court shall refuse to enforce any of the separate covenants
included herein, then such unenforceable covenant shall be deemed eliminated
from these provisions for the purpose of those proceedings to the extent
necessary to permit the remaining separate covenants to be enforced.
8. TERMINATION OF EMPLOYMENT.
(a) FOR CAUSE. The Corporation may terminate the employment of
the Executive for cause at any time. Termination for cause shall be effective
from the date of notice thereof to the Executive. Cause, as used herein, shall
be any one or more of the following acts of the Executive but no other act or
omission: (i) conviction for fraud, embezzlement, or any felonious offense; and
(ii) a material violation of any of the provisions of this Agreement (including
without limitation violations of Section 1 by failure to follow written policies
set by the Board of Directors, violations of Section 3 by material neglect of
duties and violations of Section 7) which continues after written notice and
reasonable opportunity (not to exceed 15 days) in which to cure. If the alleged
breach or default is of a type which cannot be cured within 15 days and the
Executive makes reasonable efforts to cure such alleged breach within such 15-
day period, then the time shall be extended as necessary to complete such cure.
Upon termination in accordance with this Paragraph 8(a), the Executive shall be
entitled to no further compensation hereunder other than the fixed salary
accrued until the date written notice is delivered to the Executive and any
Bonus accrued until the date written notice is delivered to the Executive (such
accrued Bonus, if any, shall be determined in accordance with the terms of
Paragraph 4(b) except that such determination shall be based on the unaudited
EBITA less Acquired EBITA of the Corporation reported from the beginning of the
fiscal year in which such termination occurs through the date written notice is
delivered to the Executive). The Corporation's exercise of its right to
terminate with cause shall be without prejudice to any other remedy to which it
may be entitled at law, in equity or under this Agreement.
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(b) FOR DEATH OR INCAPACITY. This Agreement shall automatically
terminate upon the death of the Executive. In addition, if any disability or
incapacity of the Executive to perform his duties as the result of any injury,
sickness or physical, mental or emotional condition continues for a period of
180 days out of any 360 calendar day period, the Corporation may terminate the
Executive's employment upon 10 days written notice. Upon termination in
accordance with this Paragraph 8(b), the Executive (or the Executive's estate,
as the case may be) shall be entitled to no further compensation hereunder other
than the fixed salary accrued until the date of death or, in the case of
disability, the date written notice is delivered to the Executive and any Bonus
accrued until such date (such accrued Bonus, if any, shall be determined in
accordance with the terms of Paragraph 4(b) except that such determination shall
be based on the unaudited EBITA less Acquired EBITA of the Corporation reported
from the beginning of the fiscal year in which such termination occurs through
such date).
(c) WITHOUT CAUSE. The Corporation may terminate the employment
of the Executive without cause any time by serving prior written notice to the
Executive. Upon termination in accordance with this Paragraph 8(c), the
Executive shall be entitled to no further compensation hereunder other than
(i) the fixed salary accrued hereunder until the effective date of termination
specified in the notice to the Executive (the "Termination Date"), (ii) any
Bonus accrued until the Termination Date (such accrued Bonus, if any, shall be
determined in accordance with the terms of Paragraph 4(b) except that such
determination shall be based on the unaudited EBITA less Acquired EBITA of the
Corporation reported from the beginning of the fiscal year in which such
termination occurs through the Termination Date), (iii) the fixed salary at the
rate paid as of the Termination Date during the twelve (12) month period
beginning on the Termination Date, such fixed salary to be paid in equal monthly
installments in advance during such twelve month period, and (iv) the benefits
to which the Executive was entitled pursuant to Paragraph 5 and Exhibit A during
the twelve (12) month period beginning on the Termination Date.
(d) VOLUNTARY TERMINATION OR RESIGNATION. The Executive may
terminate or resign his employment at any time by serving no less than 30
business days' prior written notice to the Corporation. Upon termination or
resignation in accordance with this Paragraph 8(d), the Executive shall be
entitled to no further compensation hereunder other than the fixed salary
accrued through the date of termination specified in the notice from the
Executive and any Bonus accrued until such date (such accrued Bonus, if any,
shall be determined in accordance with the terms of Paragraph 4(b) except that
such determination shall be based on the unaudited EBITA less Acquired EBITA of
the Corporation reported from the beginning of the fiscal year in which such
termination occurs through such date).
(e) TERMINATION FOR GOOD REASON. The Executive may terminate or
resign his employment at any time for "good reason" (as defined below) by
serving no less than 30 business days' prior written notice to the Corporation.
The Executive shall have the right to terminate or resign his employment for
"good reason" if the Corporation (or any successor thereto pursuant to Paragraph
9(b) hereof) breaches an obligation set forth in Paragraph 1, 4, 5 or 6 hereof.
Upon termination in accordance with this Paragraph 8(e), a termination "without
cause" will be deemed to have occurred and the Executive shall be entitled to
the compensation set forth in Paragraph 8(c).
9. MISCELLANEOUS.
(a) AUTHORITY. Executive represents and warrants to the
Corporation that Executive is free to enter into this Agreement and has full
right, power and authority to enter into this Agreement. Executive represents
and warrants that the execution of this Agreement and the performance of the
terms and conditions hereof, will not violate any contract, agreement, document,
or understanding to which Executive is a party or by which Executive may be
bound
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and that the execution of this Agreement and the performance of the terms and
conditions hereof will not subject the Corporation to any claims, liabilities
or litigation. Except as set forth on Schedule 1 and the board memberships
referenced in Paragraph 1, the Executive further represents that the
Executive is not a party to or otherwise bound by any agreement or
arrangement, or subject to any judgment, decree or order of any court or
administrative agency, (i) that would conflict with the Executive's
obligation to diligently promote and further the interest of the Corporation,
or (ii) that would conflict with the Corporation's business as now conducted.
The Corporation represents and warrants to the Executive that it has full
right, power and authority to enter into this Agreement.
(b) ASSIGNMENT. It is understood and the parties hereby agree
that the services to be performed by the Executive hereunder are personal,
special, unique, unusual and extraordinary in nature, and the obligations to
perform such services and the conditions and covenants of this Agreement cannot
be assigned by the Executive and any such attempted assignment is void. This
Agreement, however, shall be assignable by the Corporation to any corporation or
other business entity which succeeds to all or substantially all of the business
of the Corporation through merger, consolidation, corporation reorganization or
by acquisition of all or substantially all of the assets of Corporation and
which assumes Corporation's obligations under this Agreement and binding on the
Corporation and its successors and assigns.
(c) ATTORNEYS' FEES, COSTS. If any party shall bring an action
against the other party hereto by reason of the breach of any covenant,
warranty, representation or condition herein, or otherwise arising out of this
Agreement, whether for declaratory or other relief, the prevailing party in such
suit shall be entitled to such party's costs of suit and attorneys' fees, which
shall be payable whether or not such action is prosecuted to judgment.
(d) ENTIRE AGREEMENT. This Agreement contains the entire
agreement of the parties hereto and supersedes and replaces all prior agreements
and understandings, whether oral or written, between the parties with respect to
the subject matter herein.
(e) SEVERABILITY. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision, provided that no such severability shall be
effective if it materially changes the economic benefit of the Agreement to any
party.
(f) HEADINGS. The headings of paragraphs and
subparagraphs herein are used for convenience only and shall not affect the
meaning or contents hereof.
(g) NOTICE. Any notice, payment, report or any other
communication required or permitted to be given by one party to the other party
by this Agreement shall be in writing and either (i) served personally on the
other party, (ii) sent by express, registered or certified first-class mail,
postage pre-paid, addressed to the other party at his address as indicated next
to his signature below, or to such other address as the addressee shall have
theretofore furnished to the other party by like notice or (iii) delivered by
commercial courier to the other party. Notice shall be deemed given upon the
earlier of actual receipt or the third day after mailing if mailed pursuant to
clause (ii) above.
(h) APPLICABLE LAW. This Agreement shall be construed and
interpreted in accordance with the laws of the State of California, as such laws
are interpreted, construed and applied with respect to disputes arising in such
state between residents thereof domiciled in such state.
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IN WITNESS WHEREOF, this Agreement has been executed by each of the
parties effective as of the day and year first above written.
CORPORATION:
PIA MERCHANDISING SERVICES, INC.
By: /s/ Clinton E. Owens
-----------------------------------
Clinton E. Owens
Chairman of the Board
EXECUTIVE:
/s/ Terry R. Peets
----------------------------------------
Terry R. Peets
Address:
327 Coral Avenue
Balboa Island, California 92662
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EXHIBIT A
TO EMPLOYMENT AGREEMENT
BENEFIT PLANS
1. EXEC-U-CARE SUPPLEMENTAL MEDICAL. Exec-U-Care provides covered executives
with health and dental insurance over and above that offered to the
Corporation's employees. The standard health and dental plan requires
employees to pay between $50 and $105 per month for health plan coverage
for the employee and his family, and between $15 and $35 per month for
dental coverage.
2. TERM LIFE AND DISABILITY INSURANCE. The Corporation shall provide a term
life insurance policy and a disability insurance policy with policy limits
consistent with the Corporation's Chairman of the Board.
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SCHEDULE 1
TO EMPLOYMENT AGREEMENT
RESTRICTIONS ON EMPLOYMENT ACTIVITIES
1. For the five week period from Sunday, June 29, 1997, through Saturday,
August 2, 1997, Executive will be unavailable to PIA on Monday, Tuesday and
Wednesday of each week, due to a prior consulting commitment with Randalls
Food Markets, Inc., Houston, Texas.
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