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EXHIBIT 10.17
AMPAM PARENT/MGT
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and between American
Plumbing and Mechanical, Inc., a Delaware corporation (the "Company" or
"AMPAM") and all its subsidiaries, and David C. Baggett ("Executive") is hereby
entered into effective as of April 1, 1999.
RECITALS
Whereas, as of the Effective Date, the Company and the subsidiaries of
the Company (the Company and such subsidiaries being collectively, the "AMPAM
Companies") provide plumbing and mechanical contracting services; and
Whereas, the Company wishes to employ Executive, and Executive wishes
to be employed by the Company, on the terms set forth herein; and
Whereas, in the course of his employment with the Company, Executive
will become familiar with and is aware of information as to the AMPAM
Companies' customers and specific manner of doing business, including the
processes, techniques and trade secrets used by the AMPAM Companies, and future
plans with respect thereto, all of which has been and will be established and
maintained at great expense to the AMPAM Companies and which constitutes trade
secrets and the valuable goodwill of the AMPAM Companies.
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 the Chief Financial
Officer of the Company. As such, Executive shall have the
responsibilities, duties and authority customarily appertaining
to such office and such other duties as may be reasonably
assigned to Executive and which are consistent with such
position. Executive shall report to the Chief Executive Officer
of the Company unless otherwise directed by the Board of
Directors. 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, excluding any periods
of vacation or sick leave, to promote and further the business
and interests of the Company and its affiliates.
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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 communicated to Executive
in writing and are not inconsistent with any of the terms of
this Agreement.
c. Except as set forth on Schedule 1c. 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 to the extent such activity interferes
materially with Executive's duties and responsibilities
hereunder. The foregoing limitations shall not prohibit
Executive from making personal investments in such form or
manner as will not materially interfere with Executive's
Performance of his duties under this Agreement.
d. Executive shall be entitled to vacation in accordance with
the policies of the Company for similarly-situated employees.
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 $200,000.00 per year ("Base Salary") payable
in accordance with the Company's payroll procedures for
officers, but not less frequently than twice monthly. On an
annual basis such base salary shall be reviewed by the Board of
Directors of the Company (the "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 Board deems appropriate; provided,
however, as adjusted Base Salary may not be less than that
amount in effect on the Effective Date.
b. Annual Bonus. The Company will consider adopting an
incentive bonus plan under which Executive and other officers of
the Company will be eligible to receive annual bonus awards in
amounts that are competitive with those provided to similarly
situated executives and commensurate with the performance of the
AMPAM Companies, as reasonably determined by the Board.
c. Executive Perquisites and Benefits. Executive shall be
entitled to receive additional benefits and compensation from
the Company in the form and to the extent specified below:
i. Executive shall be reimbursed for all business travel
and other out-of-pocket expenses reasonably incurred by
Executive in the performance of his duties pursuant to
this Agreement and in accordance with the Company's
policy for its officers, including, without limitation,
continuing education, license and administrative fees.
All such expenses shall be appropriately documented in
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reasonable detail by Executive upon submission of any
request for reimbursement, and in a format and manner
consistent with the Company's expense reporting policy.
ii. Executive shall be entitled to participate in all bonus
and incentive compensation plans and to receive all fringe
benefits and perquisites offered by the Company to any of
the Company's similarly situated executives, including,
without limitation, participation in the various employee
benefit plans or programs provided to the employees of the
Company in general, subject to the regular eligibility
requirements with respect to each of such benefit plans or
programs, and such other benefits or perquisites as may be
approved for Executive by the Board during the term of this
Agreement, all on a basis as favorable to Executive as may
be provided or offered by the Company to other comparable
officers (in terms of position) of the Company.
Notwithstanding the above, until the Company establishes
employee welfare and pension benefit plans for its
officers, Executive shall participate in such plans of the
AMPAM Companies as may be designated.
NOTWITHSTANDING THE ABOVE, THE BOARD MAY OFFER OR PROVIDE
TO EXECUTIVE, OR TO ANY OTHER OFFICER OR EXECUTIVE OF THE
COMPANY OR ANY AMPAM COMPANY, SPECIAL COMPENSATION,
BENEFITS, AND/OR PERQUISITES, IN ORDER TO ATTRACT OR RETAIN
THAT EXECUTIVE OR OFFICER WHERE THE BOARD DETERMINES, IN
ITS DISCRETION, THAT THE OFFER OR PROVISION OF SUCH SPECIAL
COMPENSATION, BENEFITS, AND/OR PERQUISITES ARE IN THE BEST
INTERESTS OF AMPAM OR ANY AMPAM COMPANY. SHOULD THE BOARD
MAKE SUCH DETERMINATION AND OFFER OR PROVIDE SPECIAL
COMPENSATION, BENEFITS AND/OR PERQUISITES TO AN OFFICER OR
EXECUTIVE, EXECUTIVE WILL NOT AUTOMATICALLY BE ENTITLED TO
SUCH SPECIAL COMPENSATION, BENEFITS AND/OR PERQUISITES.
iii. Until such time as Executive becomes eligible for
coverage under a group health plan of AMPAM, the Company
shall monthly reimburse Executive for any COBRA
continuation premiums paid by Executive for his coverage
after the Effective Date.
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 the further provisions
of this Agreement, Executive will not, during the term of his
employment with the Company
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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 venture, or in a managerial capacity,
whether as an employee, independent contractor,
consultant or advisor, or as a sales representative,
whether paid or unpaid, in any plumbing, piping,
mechanical, heating, ventilation or air conditioning
contracting, installation or services business directly
related thereto (such business and operations referred to
herein as the "Plumbing and Mechanical Business"), in
direct competition with any of the AMPAM Companies within
100 miles of where any of the AMPAM Companies conducts
business including any territory serviced by any of the
AMPAM Companies during the term of Executive's employment
(the "Territory");
ii. call upon any person who is, at that time, an employee
of the AMPAM Companies for the purpose or with the intent
of enticing such employee away from or out of the employ
of the AMPAM Companies;
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 the AMPAM Companies 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 the AMPAM Companies or for
which the AMPAM Companies made an acquisition analysis,
for the purpose of acquiring such entity;
v. disclose customers, whether in existence or proposed, of
the AMPAM Companies to any person, firm, partnership,
corporation or business for any reason or purpose
whatsoever except to the extent that the AMPAM Companies
has in the past disclosed such information to the public,
any person, firm, partnership, corporation, business, or
other entity, for valid business reasons, or
vi. testify as an expert witness in plumbing and mechanical
services matters for an adverse party to any of the AMPAM
Companies in litigation; provided that nothing contained
in this paragraph 3(a)(vi) shall interfere with
Executive's duty to testify as a witness if required by
law.
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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 1% of the capital
stock of a competing business whose stock is not publicly
traded if the Board consents to such acquisition. Any
ownership interest in any business which is in
competition with the AMPAM Companies shall immediately be
disclosed to the Board by Executive.
b. Because of the difficulty of measuring economic losses to
the Company 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 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
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
the AMPAM Companies conducting such new business. For example,
if, during the term of Executive's employment, any of the AMPAM
Companies engages in new and different activities, enters a new
business or establishes new locations for its current or new
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 3g. 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 of the AMPAM Companies 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 the
AMPAM
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Companies or related 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 non enforceability 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 any of the AMPAM Companies, whether predicated
on this Agreement or otherwise, shall not constitute a defense
to the enforcement by 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 violation of any provision of this
paragraph 3.
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(e)) 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:
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a. Death. The death of Executive shall immediately terminate
this Agreement with no severance compensation due 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 Executive's then qualified
beneficiaries with coverage under the Company's group health
plan in which Executive participated immediately prior to
Executive's 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 the AMPAM
Companies (incurs a "Disability"), the Company, with the
approval of a majority of the members of the 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 Executive's death, if earlier, the Company
shall continue to pay Executive an amount equal to Executive's
monthly adjusted Base Salary (computed by reference to
Executive's annual adjusted Base Salary at the time of his
termination) reduced by any cash 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 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
continuation of coverage elections to Executive and his
qualified beneficiaries as required by law.
c. Cause. The Company may terminate this Agreement and
Executive's employment for "Cause", which shall be: (1)
Executive's willful and material breach of this Agreement (which
remains uncured at the end of a 30-day period); provided, that
none of the following shall constitute Cause for purposes of
this clause (1): isolated incidences of (A) bad judgement, (B)
negligence, or (C) any act or omission that Executive believed
in good faith to have been in or not opposed to the interest of
the Company; (2) Executive's gross negligence in the performance
or intentional nonperformance (in either case continuing for 30
days after receipt of written notice 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 the AMPAM Companies; or (4) Executive's
conviction of a felony crime involving moral turpitude. Any
termination for Cause must be approved by a majority of the
eligible members of the Board (FOR THIS PURPOSE, ANY MEMBER OF
THE BOARD REASONABLY BELIEVED BY A MAJORITY OF THE BOARD TO BE
AT FAULT IN THE EVENTS LEADING THE BOARD TO CONSIDER TERMINATING
EXECUTIVE FOR CAUSE SHALL ALSO BE EXCLUDED, INCLUDING EXECUTIVE
IF EXECUTIVE IS A MEMBER OF THE BOARD.). For
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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/or 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
Notice of Termination and a copy of a resolution duly adopted by
the Board, finding that, in the good faith opinion of the 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.
i. The Company may not terminate Executive's employment for
Cause unless:
(1) no fewer than 30 days prior to the Date of
Termination, the Company provides Executive with
written notice (the "Notice of Consideration") of
its intent to consider termination of Executive's
employment for Cause, including a detailed
description of the specific reasons which form the
basis for such consideration;
(2) for a period of not less than 25 days after the
date Notice of Consideration is provided, Executive
shall have the opportunity to appear before the
Board, with or without legal representation, at
Executive's election, to present arguments and
evidence on his own behalf, and
(3) following the presentation to the Board as provided
in (2) above or Executive's failure to appear
before the Board at a date and time specified in
the Notice of Consideration (which date shall not
be more than 30 days after the date the Notice of
Consideration is provided), Executive may be
terminated for Cause only if the Board, by majority
vote of its eligible voters, determines that the
actions or inactions of Executive specified in the
Notice of Consideration, or reasonably related
and/or later-discovered actions or inactions,
occurred, that such actions or inactions constitute
Cause, and that Executive's employment should
accordingly be terminated for Cause;
ii. Unless the Company (A) complies with the substantive and
procedural requirements of this Section 4.c. prior to a
Termination of Employment for Cause, and (B) concludes, in
its good faith discretion that Executive's action or
inaction specified in the Notice of Termination for Cause
did occur and constituted Cause, any Termination of
Employment shall be deemed a termination without Cause for
all purposes of this Agreement.
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iii. After providing a notice of need to cure or Notice of
Consideration pursuant to the provisions of this Section
4.c., the Board may, by the affirmative vote of all of its
members (excluding for this purpose Executive if he is a
member of the Board, and any other member of the Board
reasonably believed by the Board to be at fault in the
events leading to issuing the Notice of Consideration),
suspend Executive with pay until a final determination
pursuant to this Section 4.c. has been made.
d. Without Cause or For Good Reason. 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 a majority of the members of the
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 addition to any accrued but
unpaid salary, bonus and benefits in a lump sum payment due on
the effective date of termination, an amount equivalent to the
annual adjusted 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
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 adjusted 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 that paragraph 4.d.,
Executive shall receive no severance compensation.
e. Executive shall have "Good Reason" to terminate his employment
hereunder as a consequence of any of the following events, unless
such event is agreed to in writing by Executive: (a) a material
reduction in his authority, title, responsibilities or duties;
(b) Executive's adjusted Base Salary is reduced below that in
effect on the Effective Date; (c) the relocation of the Company's
principal executive offices or Executive's principal office to a
location outside the state of Texas without a commensurate
adjustment in Executive's Base Annual Salary to reflect any
increase in cost of living as measured by comparing the
applicable regional or local consumer price indices; (d) 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; (e) the failure by the Company to continue in effect
any employee benefit plan in which Executive participates and/or
any
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perquisite 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, or
the failure by the Company to continue Executive's participation
therein, or any action by the Company which would materially
reduce Executive s participation therein or reward opportunities
thereunder; (O the failure of the Company to obtain a
satisfactory agreement from any successor or assign of the
Company to assume and agree to perform this Agreement, as
contemplated in paragraph 10.; (g) a material breach of this
Agreement by the Company (including failure of the Company to pay
Executive on a timely basis the amounts to which Executive is
entitled under this Agreement); provided. however, Good Reason
shall exist with respect to a matter only if such matter is not
corrected by the Company within 30 days of its receipt of written
notice of such matter from Executive, and in no event shall a
termination by Executive occurring more than 60 days following
the date of an event described above be a termination for Good
Reason due to such event.
f. If termination of Executive's employment arises out of the
Company's failure to pay Executive on a timely basis the amounts
to which Executive 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.
g. Resignation Without 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. If Executive resigns or otherwise
terminates his employment without Good Reason, rather than the
Company terminating his employment pursuant to that paragraph
4.d., Executive shall receive all accrued but unpaid salary,
bonus and benefits. Under no circumstance where Executive
terminates Executive's employment without Good Reason, shall
Executive be entitled to any pro rata share or payment of any
bonus or other compensation which has not yet been determined or
which requires employment at the time of the determination or
award for eligibility.
h. 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, accrued vacation
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
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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. In addition, notwithstanding
any other provision of this Agreement, upon termination of this
Agreement other than (i) by the Company for Cause, (ii) by
Executive without Good Reason and in the absence of a Change in
Control or (iii) at the expiration of the Initial Term or any
Extended Term pursuant to a timely notice, all options to
purchase the stock of the Company (or any successor thereof) and
all similar equity-based awards, outstanding granted or issued on
the date hereof shall, at the time of such termination, become
vested without regard to any vesting schedule thereof and in the
case of options, shall be exercisable for the greater of two
years from the date of such termination or the period provided in
such award. 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 1l.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 or on behalf of any
of the AMPAM Companies or their representatives, vendors or customers
which pertain to, the business of any AMPAM Companies shall be and
remain the property of the AMPAM Companies, 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 AMPAM Companies 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. Intellectual Property. Executive shall disclose promptly to the
Company any and all conceptions, ideas, designs, plans, know-how,
processes, improvements and other discoveries, whether patentable or
not, which (i) are conceived or made by Executive, solely or jointly
with another, during the period of employment or thereafter, (ii) are
directly related to the plumbing and mechanical business or activities
of the AMPAM Companies, and (iii) 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.
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7. Trade Secrets. Executive agrees that he will not, during or after the
term of this Agreement, disclose the specific terms of the AMPAM
Companies' relationships or agreements with its respective vendors or
customers or any other trade secret of the AMPAM Companies, 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.
b. 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. 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
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 ten days of a written
request by the
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Company, Executive shall certify to the Company in writing
that all such materials have been returned.
As used in this Agreement, the term "Confidential
Information" shall mean any information or material known to
or used by or for the AMPAM Companies (whether or not owned
or developed by the AMPAM Companies and whether or not
developed by Executive) that is not generally known to
persons in the Plumbing and Mechanical Business, except as
provided in this paragraph. Confidential Information
includes, but is not limited to, the following: all trade
secrets of the AMPAM Companies; all information that the
AMPAM Companies have marked as confidential or have
otherwise described to Executive (either in writing or
orally) as confidential; all nonpublic information
concerning the AMPAM Companies' 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
Companies' business records and plans; all AMPAM Companies'
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 the AMPAM Companies; 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 shall not
include such information (i) which becomes or is already
known to the public or some other party 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, 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
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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 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 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 would be
required to perform it if no such succession had taken place. Failure
of the Company to obtain such written agreement prior to the
effectiveness of any such succession 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 an Extended
Term, then the provisions of this paragraph 11. shall be
applicable.
b. In the event of a Change in Control wherein the Company 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
Company's 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 Board at least five business days
prior to the closing of the transaction giving rise to the Change
in Control. In such case, Executive shall be deemed to have
terminated Executive's employment for Good Reason on such date;
provided, 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 nine times
Executive's Base Annual Salary as in effect at the time of
termination.
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 Board at least five business days prior to the
Closing of the transaction giving rise to the Change in Control.
In such case, Executive shall be deemed to have terminated
Executive's employment for Good Reason on such date; provided,
however, the amount of the lump sum severance payment due
Executive shall be double the amount calculated under the terms
of
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paragraph 4.d., but shall in no event exceed six times
Executive's Base Annual Salary as in effect at the time of
termination.
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 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
times Executive's Base Annual Salary at the rate then in effect,
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 13d. and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Act")), other than persons and
entities which owned any capital stock of the Company at the
closing date of the transactions contemplated in the
Acquisition Agreements, 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 the Company and
immediately after such acquisition such person, entity or
group is, directly or indirectly, the beneficial owner of
voting securities representing [35]% or more of the total
voting power of all of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors;
ii. upon the first purchase of the Company's common stock
pursuant to a tender or exchange offer (other than a tender
or exchange offer made by the Company);
iii. the stockholders of the Company shall approve a merger,
consolidation, recapitalization or reorganization of the
Company, 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
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voting securities of the Company 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 the Company shall approve a plan of complete
liquidation or dissolution of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of
the Company'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 11b., c., or d. shall operate to
automatically waive in full the non-competition restrictions imposed
on Executive pursuant to paragraph 3.
g. If it shall be determined that any payment made or benefit provided to
Executive in connection with a change in control (as defined in
Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), or any successor thereto) of the Company occurring after the
Effective Date and on or before the termination of this Agreement,
whether or not made or provided pursuant to this Agreement, is subject
to the excise tax imposed by Section 4999 of the Code, 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 and any penalties, interest and other
reasonable costs incurred as a result of such excise tax or additional
payment, 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. 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, provided
that Executive (i) executes and delivers to the Company a promissory note
evidencing a promise by Executive to pay the full amount of any amounts
owed to the Company within 12 months from the date of Executive's
termination of employment and (ii) provides such collateral reasonably
satisfactory to the Company to ensure payment of such promissory note.
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
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Agreement unless Executive has executed (and not revoked) a general
release of all claims, known or unknown, Executive may have against the
Company, its subsidiaries, their directors, officers, and employees, 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, derivative,
subrogation, criminal, administrative or investigative (other than an
action by the Company against Executive and a derivative action shall not
be considered an action by the Company), by reason of the fact that he is
or was performing services for the Company or any of the AMPAM Companies or
any present or future subsidiary thereof, or as an executive officer of the
AMPAM Companies 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 as incurred all
reasonable attorneys' fees and reasonable expenses of such separate
counsel, provided further that Executive may at any time, at Executive's
sole expense, hire separate counsel to represent Executive in such matter.
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, expenses (including
reasonable attorneys' fees as provided in this paragraph), liabilities,
losses and exposures for Executive's services as an employee, officer and
director of the Company (or any of AMPAM Companies or any successor) to the
maximum extent permitted under applicable law. The indemnification required
by this paragraph 14. shall be made by the Company by periodic payments
promptly as and when bills are received or liabilities are incurred. The
provisions of this paragraph shall survive the termination of this
Agreement.
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 of the AMPAM Companies or any of their
officers, directors or representatives existing as of the Effective Date
and covering the same subject matter as this Agreement. This written
Agreement is the final, complete and exclusive statement and expression of
the agreement between the Company 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
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Executive, and no term of this Agreement may be waived except by writing
signed by the party 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: American Plumbing and Mechanical, Inc.
1502 Augusta, Suite 425
Houston, Texas 77057
Attn: Chief Executive Officer
To Executive: David C. Baggett
420 West 33rd Street
Houston, TX 77018
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 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 Resolution. Except with respect to injunctive relief as provided in
paragraph 3b., 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 (or if the Company's principal offices are not in Harris
County, a similar organization in the county in which the Company's
principal offices are located) 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 single arbitrator in the city in which the
Company has its principal offices, in accordance with the
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Commercial Arbitration Rules of the American Arbitration Association then
in effect. The arbitrator 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 arbitrator determines that Executive
was involuntarily terminated by the Company without Disability or Cause, as
defined in paragraphs 4b. and 4c., respectively, or that the Company has
otherwise materially breached this Agreement. A decision by the arbitrator
shall be final and binding. Judgment may be entered on the arbitrator's
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. 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.
21. Additional Provisions. The additional provisions set forth in Annex A
hereto shall apply.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective for all purposes as of the Effective Date.
Date: July 16, 1999
AMERICAN PLUMBING AND MECHANICAL, INC.
/s/ ROBERT A. CHRISTIANSON
-----------------------------------------
[Printed Name and Title]
Date: July 14, 1999
EXECUTIVE
/s/ DAVID C. BAGGETT
-----------------------------------------
David C. Baggett
-----------------------------------------
[Printed Name]
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