EMPLOYMENT AGREEMENT
This agreement is made as of this 1st day of May, 1998, by and
between Microtel International, Inc., a Delaware corporation with offices at
4290 E. Brickell Street, Ontario, California, 91761-1511 (the "Employer" or
the "Company"), and James P. Butler, who resides at 7716 East Fieldcrest
Lane, Orange, California, 92869, (the "Employee").
WITNESSETH
WHEREAS, the Employee desires to be employed by the Employer, and the
Employer desires to employ the Employee upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual promises, covenants and agreements hereinafter contained the parties
hereto agree as follows:
I. EMPLOYMENT
1.1 EMPLOYMENT. Subject to the provisions for termination as
hereinafter provided, the terms of this agreement shall begin on the date
first written above and shall terminate on May 1, 2001 (the "Employment
Period").
1.2 RENEWAL. Subject to the provisions for termination as
hereinafter provided, this agreement shall be automatically renewed for two
(2) successive one (1) year terms commencing on May 1, 2001, (the"Renewal
Periods") unless, during the following periods, either party to this
Agreement shall notify the other party in writing of its desire not to renew
this Agreement; provided, however, any action required to be taken with
respect to this Employment Agreement by the Employer shall only be taken
after the Executive Compensation and Management Development Committee of the
Board of Directors of the Employer approves such action. The required notice
periods in order to prevent an automatic renewal of this Agreement shall be
as follows:
Period During Which Notice Of
Non-Renewal Must Be Given Renewal Period
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3/1/99 to 5/1/00 5/1/01 to 5/1/02
3/1/00 to 5/1/00 5/1/01 to 5/1/02
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1.3 DUTIES. Subject to Section 1.4, the Employee hereby promises
to perform and discharge well and favorably the duties of Senior Vice
President and Chief Financial Officer and to perform services in such
additional capacities as may be directed by the Chairman and Chief Executive
Officer, and concurred in by the Company's Board of Directors (the "Board")
in accordance herewith. As Chief Financial Officer, the Employee's duties
shall consist of the usual and customary duties of his position and he shall
be subject to the direction and control of the Chairman and Chief Executive
Officer and shall at all times have the authority as shall reasonably be
required to enable him to discharge such duties in an efficient manner.
1.4 REDESIGNATION. The Chairman and Chief Executive Officer may,
in his discretion, with the concurrence of the Board, elect or appoint the
Employee to offices or positions other than, or in addition to, Chief
Financial Officer (hereinafter the "Redesignation") by providing the Employee
with prompt written notice of the Redesignation. If any Redesignation and
related addition to and/or reduction of Employee's duties results in a
substantial net change in the scope of the Employee's responsibilities, the
Employee may elect, in his sole discretion, not to accept such Redesignation
and to resign upon providing written notice of his resignation to the
Employer not less than thirty (30) days after the Employee has been provided
with written notice of the Redesignation. In such event, if such
Redesignation occurs during the Employment Period, the Employer shall pay the
Employee his annual salary, as provided herein, for one (1) year following
the effective date of such resignation or until January 1, 2001, whichever is
the longer period. In the event that the Redesignation shall occur at any
time after the Employment Period, and during one of the Renewal Periods, the
Employer shall pay the Employee his annual salary, as provided herein, for
one (1) year following the effective date of such resignation. All sums
owing hereunder in the event of a Redesignation and a subsequent resignation
by the Employee shall be due and payable within thirty (30) days of the
effective date of such resignation.
1.5 OTHER BUSINESS ACTIVITIES. The Employee shall devote his full
time, attention and energies to the business of the Company and shall not, so
long as he remains in the employ of the Company, be engaged in any other
employment or business of substantial nature, whether or not such business
activity is pursued for gain and profit, without the written consent of the
Company. Nothing contained herein, however, shall be construed as preventing
the Employee from (i) making passive investments of his assets in such form
or manner as he desires, providing such investments: (a) do not require the
Employee to render services in the operations or affairs of the firms,
corporations or other entities in which such investments are made, and (b)
are not made in any business directly or indirectly competing with the
Employer or its subsidiaries or affiliated corporations, if any,
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unless the stock of such company is listed on a national stock exchange and
the Employee owns less than three percent (3%) of the outstanding voting
securities, or (ii) becoming a member of the Board of Directors of any other
corporation that the Employee desires, provided that the corporation upon
whose Board the Employee is a member of is not, in the sole discretion of the
Employer's Board of Directors, in competition with the business of the
Employer.
The Company shall provide the Employee with adequate office and
support staff to accomplish the objectives for which he is employed and in
order to perform the duties as set forth herein.
II. COMPENSATION
2.1 ANNUAL SALARY. The Employer shall pay to the Employee in
compensation for Employee's services hereunder, a base salary at an annual
rate of $125,000, payable in equal periodic installments in accordance with
the customary payroll policy of the Employer. The Employee shall also be
eligible to receive merit or promotional increases in accordance with the
Employer's annual review, or other general review of its officer compensation.
2.2 EXPENSES. The Employer agrees to reimburse the Employee against
his receipts for all reasonable business expenses incurred by him during the
Employment Period or Renewal Periods in connection with the performances of
his services hereunder.
2.3 BONUSES. The Employer agrees that the Employee will be
entitled to participate in any bonus or similar plan approved by the
Employer's Board of Directors.
2.4 STOCK OPTIONS AND OTHER INCENTIVE PLANS. The Employee shall
continue to be eligible to participate in any Incentive Stock Option or
Non-Qualified Stock Option Plan or other incentive plans duly approved by the
Board of Directors for implementation within the Company.
2.5 ADDITIONAL BENEFITS. The Employee shall be entitled to the
customary and usual medical, insurance, fringe and other benefits made
available to the Employer's employees generally.
III. TERMINATION
3.1 TERMINATION DUE TO DEATH. If during the Employment Period or
Renewals thereof, Employee shall die, this Agreement shall terminate, except
that the compensation or other amounts payable hereunder, to or for the
benefit of Employee shall be paid for one (1) year following the death of the
Employee to such person or persons as Employee
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may designate by notice to the Employer from time to time or, in the absence
of such designation, to his legal representatives.
3.2 TERMINATION DUE TO DISABILITY. If during the Employment
Period, or Renewals thereof, Employee shall become physically or mentally
disabled, whether totally or partially, so that he is unable substantially to
perform his services hereunder (i) for a period of 180 consecutive days, or
(ii) for shorter periods aggregating 180 days during any period of eighteen
consecutive months , the Employer may at any time after the last day of the
180 consecutive days of disability or the day on which the shorter periods of
disability shall have equalled an aggregate of 180 days, by 10 days written
notice to Employee (but before Employee has recovered from such disability),
terminate this Agreement. Notwithstanding such disability, the Employer shall
continue to pay Employee compensation or other amounts payable hereunder, to
or for the benefit of Employee up to and including the date one (1) year
after the effective date of such termination.
3.3 TERMINATION FOR CAUSE. The Employer may at any time during the
Employment Period and any Renewals thereof, by notice, terminate this
Agreement and discharge the Employee for cause, whereupon the Employer's
obligation to pay any compensation, severance allowance, or other amounts
payable hereunder to or for the benefit of Employee shall terminate on the
date of such discharge, notwithstanding anything herein contained to the
contrary. As used herein, the term "for cause" shall be deemed to mean and
include chronic alcoholism; drug addiction; misappropriation of any money or
other assets or properties of the Employer or its subsidiaries; wilful
violation of specific and lawful written directions from his supereior or
from the Board of Directors of the Employer; failure or refusal to perform
the services required of Employee under this Agreement; wilful disclosure of
trade secrets or other confidential information resulting in substantial
detriment to the Company as documented by the Employer under oath or
affirmation; conviction in a court of competent jurisdiction of any crime
involving the funds or assets of the Company including, but not limited to,
embezzlement and larceny; any civil or criminal conduct or personal
misbehavior which is detrimental to the image, reputation, welfare or
security of the Employer where such misconduct or misbehavior and judgment
have been documented by the Employer under oath or affirmation; and any other
acts or omissions that constitute grounds for cause under the laws of the
States of Delaware, California, Massachusetts or Illinois, or such other
States wherein the Company may have operations.
3.4 TERMINATION WITHOUT CAUSE. The Employer may terminate this
Agreement without cause at any time upon sixty (60) days written notice to
the Employee. In the event the Employer does terminate this Agreement without
it being "for cause", the Employee, if requested in writing by the Employer,
shall continue to render services at full compensation until the effective
date of such termination. Thereafter, during the Employment Period, Employee
shall be paid his annual salary for one (1) year following the effective
date of such termination, or until May 1, 2000, whichever is the longer
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period. In the event such termination pursuant to this Section 3.4 occurs
during any of the Renewal Periods, the Employee shall be paid his Annual
Salary through the expiration of the particular Renewal Term to which the
Company is obligated under Section 1.2, as well as all other amounts payable
hereunder. Termination "without cause" shall include the ceasing of
operations due to bankrupcy and/or the general inability of the Employer to
meet the Employer's obligations as they become due.
3.5 TERMINATION WITHOUT CAUSE FOLLOWING A CHANGE IN CONTROL. This
Agreement may be terminated by Employer, or successor to Employer, upon
thirty (30) days written notice to Employee upon the happening of any of the
following events:
a. Sale by Employer of substantially all of its assets;
b. Sale, exchange or other disposition of two-thirds or
more of the outstanding capital stock of the Employer;
c. Merger or reorganization in which shareholders of the
Employer immediately prior to such merger or
reorganization receive less than fifty percent(50%) of
the outstanding voting shares of the successor
corporation.
In the event that the Employee's employment is terminated without cause
within two years following a change of control, the Employer or successor to
Employer shall:
a. Pay to Employee, in a lump sum within thirty (30) days
from date of termination, or, at Employee's election,
in installments, the Employee's Annual Salary and all
other amounts payable hereunder for one and one-half (1
1/2) years following the effective date of such
termination or untilMay 1, 2000, whichever is the
longer period.
b. In the event such termination occurs during any of the
Renewal Periods, pay to Employee his Annual Salary to
the expiration of that particular Renewal Period, his
Annual Salary for a period of one year following the
end of such Renewal Period, plus all other amounts
payable hereunder
c. Pay to Employee the average of the Annual Executive
Bonuses awarded to him in the three years preceding
his termination over the same time span and under the
same conditions as Annual Salary.
d. Pay to Employee any Executive Bonus awarded but not yet
paid.
e. Continue Employee's coverage in all benefit programs in
which he was participating on the date of his
termination of employment until the earlier of (1) the
end of the Employment Period or Renewal Period,
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or (2) the date he receives equivalent coverage and
benefits under a subquent employer.
IV. COVENANTS NOT TO COMPETE
4.1 The Employee agrees that (i) during the Employment Period and
any Renewals thereof, or in the event of a termination pursuant to Section
3.3 and, thereafter for a period of one (1) year or (ii) in the event of a
termination pursuant to Sections 3.4 or 3.5 and for the period from the
effective date of such termination until the expiration of a period of
twelve months following his resignation upon Redesignation for the Interim
Period as defined in Section 1.4, he will not act as a principal, agent,
employee, employer, consultant, control person, stockholder, director or
co-partner of any person, firm, business entity other than the Employer, or
in any individual representative capacity whatsoever, directly or indirectly,
without the express consent of the Employer:
(a) engage or participate or be employed in any business
whose products or services are competitive with those of the Employer in the
world; provided, however, that the ownership by the Employee of not more than
three percent (3%) of a corporation or similar business venture shall not be
deemed to be a violation of this covenant as long as the Employee does not
become a controlling person or actively involved in the management of such
corporation or business venture;
(b) approach, solicit business from, or otherwise do
business or deal with any customer of the Employer in connection with any
product or service competitive with any provided by the Employer; provided,
however, the Employee may approach, solicit business from, or otherwise do
business or deal with any subsidiary or division of any customer of the
Employer provided that such customer's division or subsidiary does not
provide a product or service competitive with any provided by the Employer.
(c) approach, counsel, solicit, assist to solicit or
attempt to induce any person who is then in the employ of the Employer, its
affiliates or subsidiaries to leave the employ of the Employer, or employ, or
attempt to employ on behalf of any person or entity any such person or
persons who at any time during the preceding six months was in the employ of
the Employer;
(d) aid or counsel any other person, firm, corporation or
business entity to do any of the above.
For purposes of this Section 4.1, the term "customer" shall
mean (I) any person or entity who was a customer of the Employer at any time
during the last two months of the Employee's employment by the Employer; (ii)
any prospective customer to
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whom the Employer had made a presentation, or similar offering of product(s)
during the last year of the Employee's employment by the Employer.
The Employee acknowledges (I) that his position with the
Employer requires performance of services which are special, unique,
extraordinary and intellectual in character and places him in a position of
confidence and trust with the customers and employees of the Employer,
through which, among other things, he shall obtain knowledge of such
organization's "technical information" and "know how" and become acquainted
with their customers, in which matters such organizations have substantial
proprietary interests, (ii) that the restrictive covenants set forth above
are necessary in order to protect and maintain such proprietary interests and
other legitimate business interests of the Company, and (iii) that the
Employer would not have entered into this agreement unless such covenants
were included herein.
The Employee also acknowledges that the business of the
Employer presently extends throughout the world, that he has personally
supervised or engaged in such business on behalf of the Employer, or will do
so pursuant to the terms of this Agreement, and, accordingly, it is
reasonable that the restrictive covenants set forth above are not more
limited as to geographic area than is set forth therein. The Employee also
represents to the Employer that the enforcement of such covenants will not
prevent the Employee from earning a livelihood.
If any of the provisions of this Section, or any part
thereof, is hereinafter construed to be invalid or unenforceable, the same
shall not affect the remainder of such provision or provisions, which shall
be given full effect, without regard to the invalid portions. If any of the
provisions of this Section, or any part thereof, is held to be unenforceable
because of the duration of such provision, the area covered thereby or the
type of conduct restricted therein, the parties agree that the court making
such determination shall have the power to modify the duration, geographic
area and/or other terms of such provision and, as so modified, said provision
shall then be enforceable. In the event that the courts of any one or more
jurisdictions shall hold such provisions wholly or partially unenforceable by
reason of the scope thereof or otherwise, it is the intention of the parties
hereto that such determination not bar or in any way affect the Employer's
right to the relief provided for herein in the courts of any other
jurisdictions as to breaches or threatened breaches of such provisions in
such other jurisdictions, the above provisions as they relate to each
jurisdiction being, for this purpose, severable into diverse and independent
covenants.
V. CONFIDENTIAL INFORMATION
5.1 DISCLOSURE OF INFORMATION. The Employee recognizes and
acknowledges that the financial information, trade secrets, technical
information, and confidential or proprietary information of the Employer,
including such information as may exist from
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time to time, and information as to the identity of customers or prospective
customers of the Employer and other similar items, are valuable, special and
unique assets of the Employer's business, access to and knowledge of which
are essential to the performance of the duties of the Employee hereunder. The
Employee will not, during or after the term hereof, in whole or in part,
disclose such secrets or confidential, technical or proprietary information
to any person, firm, corporation, association or other entity for any reason
or purpose whatsoever, nor shall the Employee make use of any such property
or information for his own purpose or for the benefit of any person, firm,
corporation or other entity (except the Employer) under any circumstances,
during or after the term hereof, provided that after the term hereof these
restrictions shall not apply to such secrets or information which are then in
the public domain (provided that the Employee was not responsible, directly
or indirectly, for such secrets or information entering the public domain
without the consent of the Employer).
5.2 OWNERSHIP OF INVENTIONS. All of the Employee's right, title
and interest in all developments or improvements devised or conceived by the
Employee, alone or with others, during his working hours, as well as in all
developments or improvements devised or conceived by the Employee, alone or
with others, which relate to any business in which the Employer is then
engaged or contemplating engaging in, regardless of when devised or
conceived, is the exclusive property of the Employer. The Employee shall
promptly disclose all such developments and improvements to the Employer. The
Employee shall not use or disclose any such developments or improvements,
other than in furtherance of the Employer's business, without the Employer's
prior written consent
5.3 RETURN MEMORANDA. Employee hereby agrees to deliver promptly
to the Employer on termination of his employment, or at any other time the
Employer may so request, all memoranda, notes, records, reports, manuals,
drawings and other documents (and all copies thereof) relating to the
Employer's business and all property associated therewith, which he may then
possess or have under his control.
VI. INJUNCTIVE RELIEF
6.1 The Employee acknowledges that the remedy at law for any
breach or threatened breach of Articles IVand V hereof by the Employee will
be inadequate, and that, accordingly, the Employer shall, in addition to all
other available remedies (including without limitation , seeking such damages
as it can be shown it has sustained by reason of such breach), be entitled to
injunctive relief without being required to post bond or other security, and
without having to prove the inadequacy of the available
remedies at law. The Employee agrees not to plead or defend on grounds of
adequate remedy at law or any similar defense in any action by the Employer
against him, or injunctive relief, or for specific performance of any of his
obligations pursuant to Articles IV and V hereof. Nothing herein shall be
construed as prohibiting the Employer from pursuing any other remedies for
such breach or threatened breach.
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VII. MISCELLANEOUS PROVISIONS
7.1 NOTICES AND COMMUNICATIONS. All notices and communications
hereunder shall be in writing and shall be hand-delivered or sent postage
prepaid by registered or certified mail, return receipt requested, to the
address first above written or to such other address of which notice shall
have been given in the manner herein provided.
7.2 ENTIRE AGREEMENT. All prior or contemporaneous agreements
and understandings between the parties with respect to the subject matter of
this Agreement are superseded by this Agreement, and this Agreement
constitutes the entire understanding between the parties. This Agreement may
not be modified, amended, changed or discharged except by a writing signed by
both parties hereto, and then only to the extent therein set forth.
7.3 ASSIGNMENT. This Agreement may be assigned by the Employer
and shall be binding upon and inure to the benefit of the Employer's assigns
and successors. The services to be performed by the Employee pursuant to this
Agreement may not be assigned by the Employee.
7.4 WAIVER. No waiver of any breach of this Agreement or of any
objection to any act or omission connected herewith shall be implied or
claimed by any party, or be deemed to constitute a consent to any
continuation of such breach, act or omission, unless in a writing signed by
the party against whom enforcement of such waiver or consent is sought, and
then only to the extent therein set forth.
7.5 INDEMNIFICATION. The Employer will indemnify Employee, to the
maximum extent permitted by applicable law and the By-laws of the Company,
against all costs, charges and expenses incurred or sustained by him in
connection with any action, suit or other reason of his being an officer,
director or employee of the Employer or any subsidiary or affiliate thereof.
7.6 SECTION HEADINGS. The Section headings of this Agreement are
solely for the purpose of convenience and shall neither be deemed a part of
this Agreement nor used in any interpretation thereof.
7.7 GOVERNING LAW. This Agreement and the relationship of the
parties shall be governed by, and construed in accordance with, the laws of
the state of Delaware, or until such time as the Company's state of
incorporation may be changed to another state within the United States, at
which point the relationship of the parties would then be governed by, and
construed in accordance with, the laws of the new state of incorporation.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement as
of the day and year first above written.
MICROTEL INTERNATIONAL, INC.
Dated: ___________ By:__________________________
Carmine T. Oliva, Chairman, President and Chief
Executive Officer
Dated: ___________ By:__________________________
Robert B. Runyon, Chairman, Executive Compensation and
Management Development Committee, Board of Directors
Dated: ___________ By:__________________________
James P. Butler, Employee