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EXHIBIT 10.21
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between Sherwood
Mechanical, Inc. (the "Company"), a California corporation, American Plumbing &
Mechanical, Inc., a Delaware corporation ("AmPaM"), and Robert Sherwood
("Executive") is hereby entered into effective as of the date of the closing
date of the transactions contemplated in the Acquisition Agreement between the
Company, AmPaM and others dated February 11, 1999 (the "Effective Date").
RECITALS
The following statements are true and correct:
As of the Effective Date, the Company, AmPaM and the other
subsidiaries of AmPaM (collectively, the "AmPaM Companies") are engaged
primarily in the providing of plumbing and mechanical contracting services.
Executive is employed hereunder by the Company in a confidential
relationship wherein Executive, in the course of his employment with the
Company, has and will continue to become familiar with and aware of information
as to the Company's and AmPaM's customers and specific manner of doing
business, including the processes, techniques and trade secrets utilized by the
Company and AmPaM, and future plans with respect thereto, all of which has been
and will be established and maintained at great expense to the Company and
AmPaM. This information is a trade secret and constitutes the valuable goodwill
of the Company and AmPaM.
Therefore, in consideration of the mutual promises, terms, covenants
and conditions set forth herein and the performance of each, it is hereby
agreed as follows:
AGREEMENTS
1. Employment and Duties.
(a) The Company hereby employs Executive as President of the
Company. As such, Executive shall have the responsibilities, duties
and authority reasonably accorded to, expected of and consistent with
Executive's position as President of the Company. Executive hereby
accepts this employment upon the terms and conditions herein contained
and, subject to paragraph 1(c), agrees to devote substantially all of
his time, attention and efforts during normal business hours to
promote and further the business and interests of the Company and its
affiliates.
(b) Executive shall faithfully adhere to, execute and fulfill
all reasonable and lawful policies established by the Company, to the
extent such policies have been
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communicated to Executive in writing and are not inconsistent with any
of the terms of this Agreement.
(c) Except as set forth on Schedule 1(c) hereto, Executive
shall not, during the term of his employment hereunder, engage in any
other business activity pursued for gain, profit or other pecuniary
advantage if such activity interferes in any material respect with
Executive's duties and responsibilities hereunder. The foregoing
limitations shall not be construed as prohibiting Executive from
making personal investments in such form or manner as will not require
a substantial portion of such Executive's time during normal business
hours in the operation or affairs of the companies or enterprises in
which such investments are made.
(d) Executive shall be entitled to vacation in accordance
with the policies of the Company.
2. Compensation. For all services rendered by Executive, the Company
shall compensate Executive as follows:
(a) Base Salary. The base salary payable to Executive during
the term shall be $162,000 per year, payable in accordance with the
Company's payroll procedures for officers, but not less frequently
than monthly. On an annual basis such base salary shall be reviewed by
the Board of Directors of AmPaM (the "AmPaM Board") and may be
adjusted at its discretion, in light of the Executive's position,
responsibilities, performance and such other reasonable, job related
factors that the AmPaM Board deems appropriate; provided, however, any
adjusted Base Salary may not be less than that amount in effect on the
Effective Date.
(b) Annual Bonus. AmPaM will consider adopting an incentive
bonus plan under which Executive and other key employees of the AmPaM
Companies will be eligible to receive annual bonus awards in amounts
that are competitive with those provided to similarly situated
executives, as determined by the AmPaM Board.
(c) Executive Perquisites, Benefits and Other Compensation.
Executive shall be entitled to receive additional benefits and
compensation from the Company in such form and to such extent as
specified below:
(i) Executive shall be reimbursed for all business
travel and other out-of-pocket expenses (including those
costs to maintain any professional certifications held or
obtained by Executive) reasonably incurred by Executive in
the performance of his duties pursuant to this Agreement and
in accordance with AmPaM's policy for its similarly situated
executives. All such expenses shall be appropriately
documented in reasonable detail by Executive upon submission
of any request for
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reimbursement, and in a format and manner consistent with
AmPaM's expense reporting policy.
(ii) Executive shall be entitled to participate in
all incentive compensation plans and to receive all fringe
benefits and prerequisites offered by the Company or AmPaM to
any of the Company's or the AmPaM Companies' similarly
situated executives, including, without limitation,
participation in the various employee benefit plans or
programs provided to the employees of the Company or the
AmPaM Companies in general, subject to the regular
eligibility requirements with respect to each such benefit
plans or programs.
(iii) The Company shall provide Executive with such
other perquisites as may be deemed appropriate for Executive
by the AmPaM Board during the term of this Agreement, all on
a basis as favorable to Executive as may be provided or
offered to other similarly situated executives of the AmPaM
Companies.
3. Non-Competition Agreement.
(a) Executive acknowledges that as a consequence of his
employment with the Company, he will be furnished or have access to
Confidential Information (as defined below). Executive further
recognizes that the Company's willingness to enter into this Agreement
is based in material part on Executive's agreement to the provisions
of this paragraph 3 and that Executive's breach of the provisions of
this paragraph 3 could materially damage the Company. Subject to
paragraph 4(d) and the further provisions of this Agreement, Executive
will not, during the term of his employment with the Company, and for
a period of two years immediately following the termination of such
employment for any reason, directly or indirectly, for himself or on
behalf of or in conjunction with any other person, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder,
owner, partner, joint venturer, or in a managerial capacity,
whether as an employee, independent contractor, consultant or
advisor, or as a sales representative, in any plumbing,
piping, mechanical, heating, ventilation, or air conditioning
contracting, installation or services business or operation,
or any ancillary contracting, installation or services
business directly related thereto (such business and
operations referred to herein as the "Plumbing and Mechanical
Business") within 100 miles of where any AmPaM Company
conducts business, including any territory serviced by an
AmPaM Company during the term of Executive's employment (the
"Territory");
(ii) call upon any person who is, at that time, an
employee of an AmPaM Company for the purpose or with the
intent of enticing such employee away from or out of the
employ of the AmPaM Company;
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(iii) call upon any person or entity which is, at
that time, or which has been, within one year prior to that
time, a customer of an AmPaM Company within the Territory for
the purpose of soliciting customers, orders or contracts for
any Plumbing and Mechanical Business within the Territory;
(iv) call upon any prospective acquisition
candidate, on Executive's own behalf or on behalf of any
competitor, which candidate was, to Executive's knowledge
after due inquiry, either called upon by an AmPaM Company or
for which an AmPaM Company made an acquisition analysis, for
the purpose of acquiring such entity;
(v) disclose customers, whether in existence or
proposed, of the Company to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever
except to the extent that the Company has in the past
disclosed such information to the public for valid business
reasons; or
(vi) testify as an expert witness in matters related
to the Plumbing and Mechanical Business for an adverse party
to an AmPaM Company in litigation; provided, that nothing
contained in this paragraph 4(a)(vi) shall interfere with
Executive's duty to testify as a witness if required by law.
Notwithstanding the above, the foregoing covenant shall not
be deemed to prohibit Executive from acquiring as an investment (i)
not more than 1% of the capital stock of a company engaged in the
Plumbing and Mechanical Business whose stock is traded on a national
securities exchange, the Nasdaq Stock Market or on an over-the-counter
or similar market or (ii) not more than 5% of the capital stock of a
competing business whose stock is not publicly traded if the AmPaM
Board consents to such acquisition.
(b) Because of the difficulty of measuring economic losses to
the Company and AmPaM as a result of a breach of the foregoing
covenant, and because of the immediate and irreparable damage that
could be caused to the Company and AmPaM for which they would have no
other adequate remedy, Executive agrees that foregoing covenant may be
enforced by the Company, in the event of breach by him, by
injunctions, restraining orders and orders of specific performance
issued by a court of competent jurisdiction. Executive further agrees
to waive any requirement for the Company's securing or posting of any
bond in connection with such remedies.
(c) It is agreed by the parties that the foregoing covenants
in this paragraph 3 impose a reasonable restraint on Executive in
light of the activities and business of the AmPaM Companies on the
date of the execution of this Agreement and the current plans of the
AmPaM Companies; but it is also the intent of the Company and
Executive that, subject to paragraph 3(g) hereof, such covenants be
construed and enforced in accordance with the
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changing activities, business and locations of the AmPaM Companies
throughout the term of this covenant, whether before or after the date
of termination of the employment of Executive, unless the Executive
was conducting such new business prior to any AmPaM Company conducting
such new business. For example, if, during the term of this Agreement,
an AmPaM Company engages in new and different activities, enters a new
business or establishes new locations for its current activities or
business in addition to or other than the activities or business
enumerated under the Recitals above or the locations currently
established therefor, then, subject to paragraph 3(g) hereof, through
the term of this covenant Executive will be precluded from soliciting
the customers or employees of such new activities or business or from
such new location and from directly competing with such new business
activities, or locations within 100 miles of where such new
activities, business or locations are conducted, unless Executive was
conducting such new activities or business prior to any AmPaM Company
conducting such new activities or business.
(d) It is further agreed by the parties hereto that, in the
event that Executive shall cease to be employed hereunder and shall
enter into a business or pursue other activities not in competition
with the Plumbing and Mechanical Business of any of the AmPaM
Companies or similar activities or business in locations the operation
of which, under such circumstances, does not violate clause (a)(i) of
this paragraph 3, and in any event such new business, activities or
location are not in violation of this paragraph 3 or of Executive's
obligations under this paragraph 3, if any, Executive shall not be
chargeable with a violation of this paragraph 3 if the AmPaM Companies
shall, at any time after the termination of Executive's employment,
enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(e) The covenants in this paragraph 3 are severable and
separate, and the unenforceability of any specific covenant shall not
affect the provisions of any other covenant. Moreover, in the event
any court of competent jurisdiction shall determine that the scope,
time or territorial restrictions set forth are unreasonable, then it
is the intention of the parties that such restrictions be enforced to
the fullest extent which the court deems reasonable, and the Agreement
shall thereby be reformed.
(f) All of the covenants in this paragraph 3 shall be
construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of
Executive against the Company or AmPaM, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the
enforcement by AmPaM or the Company of such covenants. It is
specifically agreed that the period of two years (subject to the
further provisions of this Agreement) following termination of
employment stated at the beginning of this paragraph 3, during which
the agreements and covenants of Executive made in this paragraph 3
shall be effective, shall be computed by excluding from such
computation any time during which Executive is in violation of any
provision of this paragraph 3.
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(g) The Company and the Executive hereby agree that this
covenant is a material and substantial part of this transaction.
4. Term; Termination; Rights on Termination. The term of this
Agreement shall begin on the Effective Date and continue for five years (the
"Initial Term") unless terminated sooner as herein provided; however, beginning
on the fifth anniversary of the Effective Date and on each anniversary
thereafter the term shall automatically continue for one year on the same terms
and conditions contained herein in effect as of the time of renewal (the
"Extended Term") unless not less than six months prior to any such anniversary
either party shall give written notice to the other party that the term shall
not be so extended; provided further, however, upon a Change in Control (as
defined in paragraph 11(d)) during the Initial Term or any Extended Term the
term of this Agreement shall automatically continue following such Change in
Control for a period equal to the then remaining term or two years, whichever
period is longer (such longer period being an Extended Term), unless earlier
terminated as provided in paragraph 11. This Agreement and Executive's
employment may be terminated in any one of the followings ways:
(a) Death. The death of Executive shall immediately terminate
this Agreement with no severance compensation due to Executive's
estate; provided, however, for the 90 day period following Executive's
death, the Company, at its sole cost and expense, shall continue to
provide the Executive's then qualified beneficiaries with coverage
under the Company's group health plan in which Executive participated
immediately prior to his death or a successor plan thereto, subject to
the terms of such plan as it may be amended ("Company Health Plan").
Thereafter, the Company shall provide continuation of coverage
elections to such qualified beneficiaries as are required by law.
(b) Disability. If, Executive becomes entitled to and
receives benefits under an insured long term disability plan of an
AmPaM Company (incurs a "Disability"), the Company, with the approval
of at least 51% of the members of the AmPaM Board, may terminate this
Agreement and Executive's employment hereunder. In the event this
Agreement is terminated as a result of Executive's Disability,
Executive shall have no right to any severance compensation; provided,
however, (i) for 12 months thereafter or until his death, if earlier,
the Company shall continue to pay Executive an amount equal to his
monthly base salary at the time of his termination, reduced by any
monthly benefits payable to Executive under such long term disability
plan and (ii) the Company, at its sole cost and expense, shall
continue the coverage of Executive and his qualified beneficiaries
(for as long as they are qualified beneficiaries thereunder) under the
Company's Health Plan for as long as Executive continues to qualify
for and receive benefits under such long term disability plan, but not
to exceed five years. Thereafter, the Company shall provide COBRA
elections to Executive and his qualified beneficiaries as required by
law.
(c) Cause. The Company may terminate this Agreement and
Executive's employment 30 days after written notice is provided by the
Company, at the direction of the
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AmPaM Board, to Executive for "Cause", which shall be: (1) Executive's
willful and material breach of this Agreement (which remains uncured
at the end of such 30 day period); (2) Executive's gross negligence in
the performance or intentional nonperformance (in either case
continuing for 30 days after receipt of written notice by the Company,
at the direction of the AmPaM Board, of need to cure) of any of
Executive's material duties and responsibilities hereunder; (3)
Executive's dishonesty or fraud with respect to the business,
reputation or affairs of an AmPaM Company which materially and
adversely affects an AmPaM Company (monetarily or otherwise); or (4)
Executive's conviction of a felony crime involving moral turpitude.
Any termination for Cause must be approved by at least 51% of the
members of the AmPaM Board. For purposes hereof, no act, or failure to
act, on Executive's part shall be deemed "willful" unless done, or
omitted to be done, by Executive not in good faith and without
reasonable belief that Executive's action or omission was in the best
interest of the Company. Notwithstanding the foregoing, Executive
shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to Executive a copy of a resolution
duly adopted by the AmPaM Board, finding that in the good faith
opinion of the AmPaM Board Executive was guilty of conduct set forth
above and specifying the particulars thereof in detail. In the event
of a termination for Cause, Executive shall have no right to any
severance compensation.
(d) Without Cause and For Good Reason. Executive may, without
Good Reason (as hereinafter defined), terminate this Agreement and
Executive's employment, effective 30 days after written notice is
provided to the Company. Executive may only be terminated without
Cause and other than due to Disability by the Company during either
the Initial Term or Extended Term if such termination is approved by
at least 51% of the members of the AmPaM Board. Should Executive be
terminated by the Company without Cause and other than due to
Disability or should Executive terminate with Good Reason during the
Initial Term, Executive shall receive from the Company, in a lump sum
payment due on the effective date of termination, an amount equivalent
to the base salary at the rate then in effect for (i) whatever time
period is remaining under the Initial Term (but in no event more than
two years) or (ii) for one year, whichever amount is greater. Should
Executive be terminated by the Company without Cause and other than
due to Disability or should the Executive terminate with Good Reason
during the Extended Term, Executive shall receive from the Company, in
a lump sum payment due on the effective date of termination, an amount
equivalent to the base salary at the rate then in effect for one year.
Further, any termination by the Company without Cause or due to
Disability or by Executive for Good Reason (whether during the Initial
Term or any Extended Term) shall operate to shorten the period set
forth in paragraph 3(a) and during which the terms of paragraph 3
apply to one year from the date of termination of employment. If
Executive resigns or otherwise terminates his employment without Good
Reason, rather than the Company terminating his employment pursuant to
this paragraph 4(d), Executive shall receive no severance
compensation.
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Executive shall have "Good Reason" to terminate his
employment hereunder upon the occurrence of any of the following
events, unless such event is agreed to in writing by Executive: (a)
Executive is demoted by means of a material reduction in authority,
title, responsibilities or duties to a position of less stature or
importance within the Company than the position described in Section 1
hereof; (b) Executive's annual base salary as then in effect is
reduced in accordance with paragraph 2(a) or otherwise; or (c) the
relocation of the Company's principal executive offices to a location
outside the greater San Diego, California area or the Company's
requiring Executive to relocate anywhere other than the Company's
principal executive offices; (c) the assignment to Executive of any
duties or responsibilities which are materially inconsistent with
Executive's title, position or responsibilities as in effect
immediately prior to such assignment; or (d) the failure by the
Company to continue in effect any employee benefit plan in which
Executive participates and/or any prerequisite provided Executive,
which is (are) material to Executive's total compensation and
benefits, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan or perquisite; provided, however, Good Reason shall exist with
respect to a matter only if such matter is not corrected within 30
days of receipt by the Company of written notice of such matter from
Executive.
If termination of Executive's employment arises out of the Company's
failure to pay Executive on a timely basis the amounts to which he is entitled
under this Agreement or as a result of any other breach of this Agreement by
the Company, as determined by a court of competent jurisdiction or pursuant to
the provisions of paragraph 18 below, the Company shall pay all amounts and
damages to which Executive may be entitled as a result of such breach,
including interest thereon and all reasonable legal fees and expenses and other
costs incurred by Executive to enforce his rights hereunder. Further, none of
the provisions of paragraph 3 shall apply in the event this Agreement is
terminated as a result of a breach by the Company.
Upon termination of this Agreement for any reason provided above, in
addition to the above payments, if any, Executive shall be entitled to receive
all compensation earned and all benefits and reimbursements due through the
effective date of termination, paid to Executive in a lump sum on the effective
date of termination. In addition, a termination of this Agreement shall not
alter or impair any of Executive's vested rights or benefits, if any, under any
(i) employee benefit plan of the AmPaM Companies or (ii) deferred compensation
plan, including, without limitation, any stock option plan, of the AmPaM
Companies. All other rights and obligations of the Company and Executive under
this Agreement shall cease as of the effective date of termination, except that
Executive's obligations under paragraphs 3, 5, 6, 7, and 8 herein and the
Company's obligations under paragraphs 4 (with respect to severance payments,
if applicable), 11(g) and 14 shall survive such termination in accordance with
their terms, unless or except as expressly provided otherwise in this
Agreement.
5. Return of Company Property. All records, designs, patents, business
plans, financial statements, manuals, memoranda, lists and other property
delivered to or compiled by Executive by
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or on behalf of the Company, AmPaM or any AmPaM Companies or their
representatives, vendors or customers which pertain to the business of the
Company or AmPaM or any AmPaM Companies shall be and remain the property of the
Company or AmPaM or the AmPaM Company, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company or AmPaM
or the AmPaM Company which is collected by Executive shall be delivered
promptly to the Company without request by it upon termination of Executive's
employment and Executive shall not retain any copies of the same.
6. Inventions. Executive shall disclose promptly to the Company any
and all significant conceptions and ideas for inventions, improvements and
valuable discoveries, whether patentable or not, which are conceived or made by
Executive, solely or jointly with another, during the period of employment or
within one year thereafter, if conceived during employment, and which are
directly related to the business or activities of the Company and which
Executive conceives as a result of his employment by the Company, including any
predecessor (collectively, the "Intellectual Property"). Executive hereby
assigns and agrees to assign all his interests therein to the Company or its
nominee. Whenever requested to do so by the Company, Executive shall execute
any and all applications, assignments or other instruments that the Company
shall deem necessary to apply for and obtain Letters Patent of the United
States or any foreign country or to otherwise protect the Company's interest
therein. Executive must also render to the Company, at the Company's expense,
assistance in the perfection, enforcement and defense of any Intellectual
Property.
7. Trade Secrets. Executive agrees that he will not, during or after
the term of this Agreement, disclose the specific terms of the Company's or
AmPaM's relationships or agreements with their respective significant vendors
or customers or any other significant and material trade secret of the Company
or AmPaM, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever, except as
required by law and prior to any such disclosure Executive shall give the
Company prior written notice thereof and the opportunity to contest such
disclosure.
8. Confidentiality.
(a) Executive acknowledges and agrees that all Confidential
Information (as defined below) of the Company is confidential and a
valuable, special and unique asset of the Company that gives the
Company an advantage over its actual and potential, current and future
competitors. Executive further acknowledges and agrees that Executive
owes the Company a fiduciary duty to preserve and protect all
Confidential Information from unauthorized disclosure or unauthorized
use, that certain Confidential Information constitutes "trade secrets"
under applicable laws and, that unauthorized disclosure or
unauthorized use of the Confidential Information would irreparably
injure the Company.
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(b) Both during the term of Executive's employment and after
the termination of Executive's employment for any reason (including
wrongful termination), Executive shall hold all Confidential
Information in strict confidence, and shall not use any Confidential
Information except for the benefit of the Company, in accordance with
the duties assigned to Executive. Executive shall not, at any time
(either during or after the term of Executive's employment), disclose
any Confidential Information to any person or entity (except other
employees of the Company who have a need to know the information in
connection with the performance of their employment duties, and who
have been informed of the confidential nature of the confidential
information and have agreed to keep it confidential), or copy,
reproduce, modify, transmit, including electronic transmission,
decompile or reverse engineer any Confidential Information, or remove
any Confidential Information from the Company's premises, without the
prior written consent of the AmPaM Board, or permit any other person
to do so. Executive shall take reasonable precautions to protect the
physical security of all documents and other material containing
Confidential Information (regardless of the medium on which the
Confidential Information is stored). This Agreement applies to all
Confidential Information, whether now known or later to become known
to Executive.
(c) Upon the termination of Executive's employment with the
Company for any reason, and upon written request of the Company at any
other time, Executive shall promptly surrender and deliver to the
Company all documents and other written material of any nature
containing or pertaining to any Confidential Information and shall not
retain any such document or other material. Within five days of any
such written request, Executive shall certify to the Company in
writing that all such materials have been returned.
(d) As used in this Agreement, the term "Confidential
Information" shall mean any information or material known to or used
by or for an AmPaM Company (whether or not owned or developed by an
AmPaM Company and whether or not developed by Executive) that is not
generally known to persons in the Plumbing and Mechanical Business.
Confidential Information includes, but is not limited to, the
following: all trade secrets of the AmPaM Companies; all information
that an AmPaM Company has marked as confidential or has otherwise
described to Executive (either in writing or orally) as confidential;
all nonpublic information concerning the Company's products, services,
prospective products or services, research, product designs, prices,
discounts, costs, marketing plans, marketing techniques, market
studies, test data, customers, customer lists and records, suppliers
and contracts; all AmPaM Company business records and plans; all AmPaM
Company personnel files; all financial information of or concerning
the AmPaM Companies; all information relating to operating system
software, application software, software and system methodology,
hardware platforms, technical information, inventions, computer
programs and listings, source codes, object codes, copyrights and
other intellectual property; all technical specifications; any
proprietary information belonging to an AmPaM Company; all computer
hardware or software manuals; all training or instruction manuals; and
all data and all computer system passwords and user codes. For
purposes hereof, Confidential Information
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shall not include such information (i) which becomes or is already
known to the public through no fault of Executive; or (ii) the
disclosure of which (x) is required by law (including regulations and
rulings) or the order of any competent governmental authority or (y)
Executive reasonably believes is required in connection with the
defense of a lawsuit against Executive, provided that in either case,
prior to disclosing any information, Executive shall give prior
written notice thereof to the Company and provide the Company with the
opportunity to contest such disclosure.
9. No Prior Agreements. Executive hereby represents and warrants to
the Company that the execution of this Agreement by Executive and his
employment by the Company and the performance of his duties hereunder will not
violate or be a breach of any agreement, including any non-competition
agreement, invention or secrecy agreement, with a former employer, client or
any other person or entity. Further, Executive agrees to indemnify the Company
for any loss or expense, including, but not limited to, reasonable attorneys'
fees and expenses, the Company may incur based upon or arising out of
Executive's breach of this paragraph 9.
10. Assignment; Binding Effect. Executive understands that he has been
selected for employment by the Company on the basis of his personal
qualifications, experience and skills. Executive agrees, therefore, that he
cannot assign all or any portion of his performance under this Agreement.
Subject to the preceding two sentences and the express provisions of paragraph
12 below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns. The Company and AmPaM will require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and assets of the
Company or AmPaM to expressly assume and agree in writing reasonably
satisfactory to Executive to perform this Agreement in the same manner and to
the same extent that the Company or AmPaM would be required to perform it if no
such succession had taken place. Failure of the Company or AmPaM to obtain such
written agreement prior to the effectiveness of any such secession shall be a
material breach of this Agreement.
11. Change in Control.
(a) Executive understands and acknowledges that the Company
may be merged or consolidated with or into another entity and that
such entity shall automatically succeed to the rights and obligations
of the Company hereunder or that the Company may undergo a Change in
Control (as defined below). In the event a Change in Control is
initiated or occurs during the Initial Term or any Extended Term, then
the provisions of this paragraph 11 shall be applicable.
(b) In the event of a Change in Control wherein AmPaM and
Executive have not received written notice at least ten business days
prior to the date of the event giving rise to the Change in Control
from the successor to all or a substantial portion of the AmPaM's
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business and/or assets that such successor is willing as of the
closing to assume and agrees to perform, or continue to cause the
Company to perform, the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby
required to perform, then Executive may, at Executive's sole
discretion, elect to terminate Executive's employment on the effective
date of such Change in Control by providing written notice to the
AmPaM Board at least five business days prior to the closing of the
transaction giving rise to the Change in Control. In such case, the
applicable provisions of paragraph 4(d) will apply as though the
Company had terminated Executive without Cause; however, the amount of
the lump sum severance payment due Executive shall be triple the
amount calculated under the terms of paragraph 4(d), but shall in no
event exceed six times Executive's annual base salary.
(c) In any Change in Control situation, Executive may, at
Executive's sole discretion, elect to terminate Executive's employment
upon the effective date of such Change in Control by providing written
notice to the AmPaM Board at least five business days prior to the
closing of the transaction giving rise to the Change in Control. In
such case, the applicable provisions of paragraph 4(d) will apply as
though the Company had terminated Executive without Cause; however,
the amount of the lump sum severance payment due Executive shall be
double the amount calculated under the terms of paragraph 4(d), but
shall in no event exceed four times Executive's annual base salary.
(d) If, on or within two years following the effective date
of a Change in Control the Company terminates Executive's employment
other than for Cause or Disability or if Executive terminates his
employment for Good Reason, or if Executive's employment with the
Company is terminated by the Company within three months before the
effective date of a Change in Control and it is reasonably
demonstrated that such termination (i) was at the request of a third
party that has taken steps reasonably calculated to effect a Change in
Control, or (ii) otherwise arose in connection with or anticipation of
a Change in Control, then Executive shall receive from Company, in a
lump sum payment due on the effective date of termination, the greater
of (i) the equivalent of three years' annual base salary at the rate
in effect on the date of Executive's termination, or (ii) the base
salary for whatever period is then remaining on the Initial Term, if
any, which payment shall be in lieu of any amounts otherwise payable
pursuant to paragraph 4(d).
(e) A "Change in Control" shall be deemed to have occurred
if:
(i) any person, entity or group (as such terms are
used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Act"), other than the
AmPaM Companies or an employee benefit plan of the AmPaM
Companies, acquires, directly or indirectly, the beneficial
ownership (as defined in Section 13(d) of the Act) of any
voting security of AmPaM and immediately after such
acquisition such person is, directly or indirectly, the
beneficial owner of voting securities
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representing 20% or more of the total voting power of all of
the then outstanding voting securities of AmPaM entitled to
vote generally in the election of directors;
(ii) upon the first purchase of AmPaM's common stock
pursuant to a tender or exchange offer (other than a tender
or exchange offer made by AmPaM);
(iii) the stockholders of AmPaM shall approve a
merger, consolidation, recapitalization or reorganization of
AmPaM, or a reverse stock split of outstanding voting
securities, or consummation of any such transaction if
stockholder approval is not obtained, other than any such
transaction which would result in at least 75% of the total
voting power represented by the voting securities of the
surviving entity outstanding immediately after such
transaction being beneficially owned by the holders of all of
the outstanding voting securities of AmPaM immediately prior
to the transactions with the voting power of each such
continuing holder relative to other such continuing holders
not substantially altered in the transaction;
(iv) the stockholders of AmPaM shall approve a plan
of complete liquidation or dissolution of AmPaM or an
agreement for the sale or disposition by AmPaM of all or
substantially all of AmPaM's assets; or
(v) if, at any time during any period of two
consecutive years, individuals who at the beginning of such
period constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election
or nomination for the election by the Company's stockholders
of each new director was approved by a vote of at least
two-thirds of the directors then still in office who were
directors at the beginning of the period.
(f) Notwithstanding anything in this Agreement to the
contrary, a termination pursuant to paragraph 11(b), (c), or (d) shall
operate to automatically waive in full the noncompetition restrictions
imposed on Executive pursuant to paragraph 3.
(g) If it shall be finally determined that any payment made
or benefit provided to Executive in connection with a Change in
Control of the Company or AmPaM, whether or not made or provided
pursuant to this Agreement, is subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended, or any
successor thereto, the Company shall pay Executive an amount of cash
(the "Additional Amount") such that the net amount received by
Executive after paying all applicable taxes on such Additional Amount
shall be equal to the amount that Executive would have received if
Section 4999 were not applicable.
12. No Mitigation or Offset. Executive shall not be required to
mitigate the amount of any Company payment provided for in this Agreement by
seeking other employment or otherwise.
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The amount of any payment required to be paid to Executive by the Company
pursuant to this Agreement shall not be reduced by any amounts that are owed to
the Company by Executive, or by any setoff, counterclaim, recoupment, defense
or other claim, right or action.
13. Release. Notwithstanding anything in this Agreement to the
contrary, Executive shall not be entitled to receive any severance payments
pursuant to paragraphs 4 or 11 of this Agreement unless Executive has executed
(and not revoked) a general release of all claims Executive may have against
the Company and its affiliates relating to Executive's employment hereunder in
a form of such release reasonably acceptable to the Company.
14. Indemnification. In the event Executive is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the Company
against Executive), by reason of the fact that he is or was performing services
under this Agreement or as an executive officer of the Company prior to the
date of this Agreement, then the Company shall indemnify Executive against all
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement, as actually and reasonably incurred by Executive in connection
therewith. In the event that both Executive and the Company are made a party to
the same third-party action, complaint, suit or proceeding, the Company agrees
to engage competent legal representation, and Executive agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Executive,
Executive may engage separate counsel and the Company shall pay all reasonable
attorneys' fees and reasonable expenses of such separate counsel. Further,
while Executive is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Executive cannot be held liable to
the Company for errors or omissions made in good faith where Executive has not
exhibited gross, willful and wanton negligence and misconduct nor performed
criminal and fraudulent acts which materially damage the business of the
Company. The Company shall indemnify Executive against and hold Executive
harmless from any costs, liabilities, losses and exposures for Executive's
services as an employee, officer and director of the Company (or any successor)
to the maximum extent permitted under applicable law.
15. Complete Agreement. This Agreement supersedes, and replaces in
full, all representations, understandings and agreements (oral or written)
between Executive and the Company or any AmPaM Company, AmPaM or any of their
officers, directors or representatives existing as of the Effective Date and
covering the same subject matter as this Agreement, but excluding the
Acquisition Agreement among AmPaM, the Company, the Executive and other
stockholders of the Company, dated February 11, 1999, which shall not be
affected by this Agreement. This written Agreement is the final, complete and
exclusive statement and expression of the agreement between the Company, AmPaM
and Executive and of all the terms of this Agreement, and it cannot be varied,
contradicted or supplemented by evidence of any prior or contemporaneous oral
or written agreements. This written Agreement may not be modified after the
Effective Date except by a further writing signed by a duly authorized officer
of the Company and Executive, and no term of this Agreement may be waived
except by writing signed by the party
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waiving the benefit of such term. Without limiting the generality of the
foregoing, either party's failure to insist on strict compliance with this
Agreement shall not be deemed a waiver thereof.
16. Notice. Whenever any notice is required hereunder, it shall be
given in writing addressed as follows:
To the Company: c/o American Plumbing & Mechanical, Inc.
1502 Augusta, Suite 425
Houston, Texas 77057
To Executive: 11610 Scripps Lake Dr.
San Diego, California 92131
Notice shall be deemed given and effective on the earlier of three days after
the deposit in the U.S. mail of a writing addressed as above and sent first
class mail, certified, return receipt requested, or when actually received.
Either party may change the address for notice by notifying the other party of
such change in accordance with this paragraph 16.
17. Severability; Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
18. Dispute Resolutions. Except with respect to injunctive relief as
provided in paragraph 3(b), neither party shall institute a proceeding in any
court or administrative agency to resolve a dispute between the parties before
that party has sought to resolve the dispute through direct negotiation with
the other party. If the dispute is not resolved within two weeks after a demand
for direct negotiation, the parties shall attempt to resolve the dispute
through mediation. If the parties do not promptly agree on a mediator, the
parties shall request the Association of Attorney Mediators in Harris County,
Texas to appoint a mediator certified by the Supreme Court of Texas. If the
mediator is unable to facilitate a settlement of the dispute within a
reasonable period of time, as determined by the mediator, the mediator shall
issue a written statement to the parties to that effect and any unresolved
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration, conducted before a panel of three
arbitrators in San Diego, California, in accordance with the rules of the
American Arbitration Association then in effect. The arbitrators shall have the
authority to order back-pay, severance compensation, vesting of options (or
cash compensation in lieu of vesting of options), reimbursement of costs and
expenses, including those incurred to enforce this Agreement, including
reasonable attorneys' fees and interest thereon in the event the arbitrators
determine that Executive was terminated without Disability or Cause, as defined
in paragraphs 4(b) and 4(c), respectively, or that the Company has otherwise
materially
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breached this Agreement. A decision by a majority of the arbitration panel
shall be final and binding. Judgment may be entered on the arbitrators' award
in any court having jurisdiction. The costs and expenses, including reasonable
attorneys' fees, of the prevailing party in any dispute arising under this
Agreement will be promptly paid by the other party.
19. Governing Law. This Agreement shall in all respects be construed
according to the laws of the State of Texas without regard to its conflicts of
law provisions.
20. AmPaM Guaranty. AmPaM hereby irrevocably and unconditionally
guarantees to Executive the payment of all amounts and the performance of all
other obligations of the Company in accordance with the terms of this
Agreement.
21. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective for all purposes as of the Effective Date.
SHERWOOD MECHANICAL, INC.
By: /s/ David C. Baggett
-----------------------------------
Name: David C. Baggett
---------------------------------
Title: Vice President
--------------------------------
EXECUTIVE
By: /s/ Robert Sherwood
-----------------------------------
Robert Sherwood
AMERICAN PLUMBING & MECHANICAL, INC.
By: /s/ David C. Baggett
-----------------------------------
Name: David C. Baggett
---------------------------------
Title: Chief Financial Officer
--------------------------------
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