Employment Agreement, dated as of July 8, 2004

EX-10.5 25 k88598exv10w5.txt EMPLOYMENT AGREEMENT, DATED AS OF JULY 8, 2004 EXHIBIT 10.5 EMPLOYMENT AGREEMENT TENT. EFFECTIVE DATE AUGUST 2, 2004 This Employment Agreement is entered into as of July 8, 2004 among Tarpon Industries Inc., a Michigan corporation (the "Company"), Eugene Welding Company, a Michigan corporation ("EWCO"), and James T. House ("Employee"). In consideration of the mutual covenants contained in this Agreement, the Company, EWCO and Employee agree as follows: 1. Employment During the term of this Agreement (as defined in Sections 2 and 4), the Company and EWCO shall employ Employee, and Employee hereby accepts such employment by the Company and EWCO, on a full time basis, in accordance with the terms and conditions set forth in this Agreement. (a) Position and Duties. Employee shall serve as Senior V.P. & CFO Chief Financial Officer of the Company and of EWCO or in such other position with the Company, EWCO or both as the Board of Directors of the Company or EWCO, as applicable, shall, from time to time, specify. Employee shall perform all duties, services and responsibilities and have such authority and powers for, and on behalf of, the Company and EWCO as are customary and appropriate for such position and as are established from time to time by, or in accordance with procedures established by, the Company's or EWCO's Chief Executive Officer or Board of Directors. (b) Performance. Employee shall perform the duties, called for under this Agreement to the best of his ability and shall devote all of his business time, energies, efforts and skill to such duties during the term of his employment and shall not accept employment with any other employer or business or engage in any other business of any nature whatsoever, in any capacity whatsoever, unless approved in writing in advance by the Chief Executive Officer or Board of Directors of the Company or EWCO, as applicable. Employee shall be based in the Marysville, Michigan area and perform his duties in the State of Michigan except for travel incidental to the performance of his duties under this Agreement. 2. Term The term of Employee's employment under this Agreement shall begin on the date of this Agreement and shall continue for three years, unless earlier terminated pursuant to Section 4. 3. Compensation, Expenses and Benefits As full compensation for Employee's performance of his duties pursuant to this Agreement, the Company and EWCO, jointly and severally, shall pay Employee during, the term of this Agreement, and Employee shall accept as full payment for such performance, the following aggregate amounts and benefits: (a) Salary. As salary for Employee's services to be rendered under this Agreement, the Company and EWCO, jointly and severally, shall pay Employee an aggregate annual salary of $140,000 ("Starting Salary"). Employee's salary shall be increased to $160,000 effective upon the closing of the Company's initial public offering of its common shares and further increased to $190,000 after the second consecutive fiscal quarter that begins after the closing of the Company's initial public offering that the Company's net income before extraordinary items is greater than $10,000. Such salary may be increased from time to time by an amount determined by the applicable Board of Directors. Such salary shall be payable semi-monthly in arrears, or at such other interval, not less frequent than monthly, as the Company or EWCO shall designate. (b) Bonus. Upon the closing of the Company's initial public offering of its common shares, the Company and EWCO, jointly and severally, shall pay to Employee a signing Bonus of $25,000. In addition, after such initial public offering, Employee will be eligible to participate in any bonus plan established by the Compensation Committee of the Board of Directors that is applicable to the Company's executive officers. (c) Business Expenses. The Company and EWCO, jointly and severally, shall pay or reimburse Employee for all reasonable, ordinary and necessary travel, entertainment, meals, lodging, and other out-of-pocket expenses incurred by Employee in connection with the Company's or EWCO's business, for which Employee submits appropriate receipts and which are consistent with company policy or have been authorized by the Company's or EWCO's Chief Executive Officer. (d) Benefits. Employee shall be eligible to participate in all fringe benefits, currently including major medical and dental insurance, a 401(k) plan and other employee benefit plans, applicable to other similar employees of the Company and EWCO, when and if adopted and made available during the term of this Agreement to employees with similar periods of service, subject to any eligibility or other requirements for participating in such fringe benefits and to the actual existence of the respective plans. (e) Vacation. Employee shall be entitled to three weeks of paid vacation time in accordance with the Company's current vacation policy. (f) Automobile; Cellular Phone. The Company and EWCO, jointly and severally, shall provide Employee with an automobile allowance of an aggregate of $500 a month. The Company and EWCO, jointly and severally, shall also provide Employee with a cellular phone and shall pay or reimburse Employee for all such cellular phone costs incurred by Employee in connection with the Company's or EWCO's Business. (g) Options. The Company will grant Employee an option to purchase 40,000 common shares, which will be issued pursuant to the Company's Stock Option Plan ("Option Shares"), subject to vesting restrictions determined by the Board of Directors; provided that the vesting of such option shall accelerate so that it becomes 100% exercisable immediately upon termination of Employee's employment under this Agreement by the Company or EWCO without cause pursuant to Section 4(d). -2- (h) Indemnification. The Company and EWCO, jointly and severally, shall, to the fullest extent authorized or permitted by the Michigan Business Corporation Act, defend, indemnify and hold Employee, his heirs, executors, administrators and other legal representatives, harmless from and against any and all claims, suits, debts, causes of action, proceedings or other actions, at law or in equity, including costs and reasonable attorney fees which any person or entity may have had, now has or may in the future have with respect to Employee's service to the Company or EWCO as an officer, director, employee or agent thereof. This provision shall survive the termination of this agreement. 4. Termination (a) Death. Employee's employment under this Agreement shall terminate immediately upon Employee's death. (b) Disability. Employee's employment under this Agreement shall terminate, at the Company's or EWCO's option, immediately upon notice to Employee given after Employee's "total disability", but no earlier than the later of (i) the day after six (6) consecutive months during which Employee suffers from a "total disability", and (ii) the day that Employee is eligible to begin receiving disability benefits under the insurance policy or its equivalent provided by Section 3(d). "Total disability" shall mean Employee's physical or mental condition entitling him to disability benefits, after the passage of time, pursuant to the insurance policy or its equivalent provided by Section 3(d), assuming such condition continues, all, if permitted by such insurance policy or its equivalent, as determined by a doctor chosen by the Company or EWCO and a doctor chosen by Employee, and, if necessary, a doctor mutually chosen by such doctors. Employee shall continue to receive compensation pursuant to Section 3 during the period prior to termination of Employee's employment pursuant to this Section 4(b), if Employee's employment is not otherwise terminated pursuant to this Agreement, less any disability benefits Employee receives pursuant to the insurance policy or its equivalent provided by Section 3(d) with respect to such period. There shall be no such deduction for disability benefits received by Employee if Employee pays the premiums on such disability insurance policy. (c) With Cause. The Company and EWCO shall each have the right, upon written notice to Employee, to terminate Employee's employment under this Agreement for "cause." Such termination shall be effective immediately upon Employee's receipt of such written notice. "Cause" means material breach by Employee of this Agreement, any material breach by Employee of his fiduciary duties to the Company or EWCO, material failure to perform his duties under this Agreement continuing for 30 days following written notice by the Company of such material failure which notice shall specify the act or omission constituting such material failure, gross neglect, abuse of office amounting to a breach of trust, fraud, any willful violation of any law, rule or regulation (other than traffic violations and similar offenses), which violation shall have a material adverse effect upon the Company or EWCO, or any act of theft or dishonesty by Employee. (d) Without Cause. The Company, EWCO and Employee shall each have the right, upon written notice to the other, to terminate Employee's employment under this Agreement without cause. Such termination shall be effective 30 days after such notice is deemed given pursuant to Section 15(a). -3- 5. Effects of Termination (a) If Employee's employment under this Agreement is terminated pursuant to Sections 4(a), (b) or (c), or if Employee resigns pursuant to Section 4(d), the Company's and EWCO's obligations under this Agreement, including obligations under Section 3, shall end except for the Company's and EWCO's joint and several obligation to: (i) reimburse Employee (or his estate) for all out-of-pocket expenses incurred and unpaid pursuant to Section 3(c) and all vacation leave and other benefits actually due pursuant to Sections 3(d) and 3(e), accrued and unpaid through the date of termination; (ii) pay to Employee (or his estate) any salary and bonus compensation, pursuant to Sections 3(a) and 3(b), actually earned, accrued and unpaid through the date of termination and (iii) indemnify employee as provided under section 3(h). (b) If Employee's employment under this Agreement is terminated by the Company or EWCO pursuant to Section 4(d), in addition to its obligations under Section 5(a), the Company and EWCO, jointly and severally, shall pay aggregate compensation for a period of 12 months and provide the aggregate benefits for a period of twelve (12) months set forth in Sections 3(a), 3(b), 3(d) and 3(f) beginning after the 30 days written notice, subject to earlier termination upon the occurrence of any of the events described in Sections 4(a) or (c). (c) If Employee's employment under this Agreement terminates other than pursuant to Section 4 of this Agreement (such as, for example, expiration of the term of Employee's employment under Section 2 of this Agreement), in addition to its obligations under Section 5(a), the Company and EWCO, jointly and severally, shall pay aggregate compensation for a period of 12 months and provide the aggregate benefits for a period of 12 months set forth in Sections 3(a), 3(b), 3(d) and 3(f) beginning immediately after such termination, subject to earlier termination upon the occurrence of any of the events described in Sections 4(a) or (c); provided that the Company and EWCO shall have no obligations under this Section 5(c) if at the expiration of the original term of this Agreement pursuant to Section 2, the Company and EWCO offer to extend the term of Employee's employment for an additional year on the same terms and conditions set forth in this Agreement and Employee does not accept such offer. (d) Termination of Employee's employment under this Agreement shall not affect any party's rights and obligations under Sections 3 (subject to the limitations set forth in Sections 5(a) and (b)), 5, 7, 8, 9, 10 and 11, such rights and obligations shall continue and survive the termination of Employee's employment and this Agreement, for any reason, notwithstanding any breach of this Agreement by Employee or by the Company or EWCO; provided, in the event Employee's employment is terminated by the Company or EWCO under Section 4(d) or other than pursuant to Section 4, Employee's obligations under Sections 7, 8 and 9 shall be limited to the time in which Employee receives compensation under Section 5(b) or 5(c). 6. Conflicts of Interest While employed by the Company or EWCO, Employee shall not, directly or indirectly: (a) participate in any way in the benefits of transactions between the Company or EWCO and its suppliers or customers, or have personal financial transactions with any of the -4- Company's or EWCO's suppliers or customers, including, without limitation, having a financial interest in the Company's or EWCO's suppliers or customers, or making loans to, or receiving loans from, the Company's or EWCO's suppliers or customers; (b) realize a personal gain or advantage from a transaction in which the Company or EWCO has an interest or use information obtained in connection with Employee's employment with the Company or EWCO for Employee's personal advantage or gain; or (c) accept any offer to serve as an officer, director, partner, consultant, agent or manager with, or to be employed in a sales or technical capacity by, a person or entity which does business with the Company or EWCO. 7. Solicitation of Employees and Consultants Upon termination of Employee's employment with the Company and EWCO under this Agreement, with or without cause, by either the Company, EWCO or Employee, Employee shall not for a period of one year, or such shorter period provided in Section 5(d) following the date of such termination, directly or indirectly: (a) solicit or attempt to hire any person who is then employed by, or is a consultant to, the Company or EWCO or who, to Employee's knowledge, was employed by, or was a consultant to, the Company or EWCO at any time during the year before the termination of Employee's employment with the Company or EWCO under this Agreement; or (b) encourage any such person to terminate his or her employment or consultation with the Company or EWCO. 8. Covenant Not to Compete During the term of Employee's employment under this Agreement and (a) for a period of one year following the termination of Employee's employment with the Company or EWCO under this Agreement pursuant to Section 4(b) or 4(c) or by Employee pursuant to Section 4(d), (b) for the period of time in which Employee is paid pursuant to Section 5(b) following termination of Employee's employment with the Company or EWCO under this Agreement by the Company or EWCO pursuant to Section 4(d), or (c) for a period of one year following the termination of Employee's employment with the Company or EWCO under this Agreement other than as set forth in (a) or (b) above (the "Period"), Employee shall not, directly or indirectly, himself, or through or for an individual, person or entity wherever located: (a) engage in any activities, perform any services in connection with any products, or sell any products, which are similar to the activities or services performed by, or products sold by, the Company or EWCO during the term of Employee's employment under this Agreement; or (b) be employed by, consult with, own any capital stock of, or have any financial interest of any kind in, any individual, person or entity, wherever located, which conducts a business reasonably similar to the Company's or EWCO's business; provided, that Employee may -5- own, for investment purposes only, up to 3% of the stock of any publicly traded business whose stock is either listed on a national stock exchange or on The Nasdaq National Market (if Employee is not otherwise affiliated with such business). 9. Solicitation of Company or EWCO Customers Upon termination of Employee's employment with the Company or EWCO under this Agreement, with or without cause, by either the Company, EWCO or Employee, Employee shall not, directly or indirectly, at any time within the Period, solicit any entity that, to Employee's knowledge, was a customer of the Company or EWCO within the year before the date of such termination to perform services or supply products for such customer of a similar nature to those services performed or products provided by the Company or EWCO to such customer during the term of such employment under this Agreement. 10. Return of Documents Upon termination of Employee's employment with the Company or EWCO for any reason, all documents, procedural manuals, guides, specifications, plans, drawings, designs and similar materials, diaries, records, customer lists, notebooks, and similar repositories of or containing confidential information, including all copies thereof, then in Employee's possession or control, whether prepared by Employee or others, shall be left with, or forthwith returned by Employee to, the Company or EWCO, as applicable. 11. Company's Remedies Employee acknowledges and agrees that the covenants and undertakings contained in Sections 1(b), 6, 7, 8, 9 and 10 of this Agreement relate to matters which are of a special, unique and extraordinary character and that a violation of any of the terms of such Sections will cause irreparable injury to the Company, EWCO or both, the amount of which will be difficult, if not impossible, to estimate or determine and which cannot be adequately compensated. Therefore, Employee agrees that the Company and EWCO, in addition to any other available remedies under applicable law, shall be entitled, as a matter of course, to an injunction, restraining order or other equitable relief from any court of competent jurisdiction, restraining any violation or threatened violation of any such terms by Employee and such other persons as the court shall order. 12. Employee's Remedies Employee's remedy against the Company or EWCO for breach of this Agreement and/or wrongful termination of his employment is the collection of any compensation due him as provided in Sections 3 and 5 and such other remedies available to Employee under law or in equity. 13. Assignment Neither the Company nor EWCO shall be required to make any payment under this Agreement to any assignee or creditor of Employee, other than to Employee's legal representative or his estate on death or disability. Employee's obligations under this Agreement are personal and may not be assigned, delegated or transferred in any manner and any attempt to do so shall be void. -6- Employee, or his legal representative, shall have no rights by way of anticipation or otherwise to assign or otherwise dispose of any right of Employee under this Agreement. The Company and EWCO may assign this Agreement without Employee's consent to any successor to the Company's or EWCO's business. This Agreement shall be binding upon, and shall inure to the benefit of, the Company, EWCO, Employee and their permitted successors and assigns. 14. Company's and EWCO's Obligations Unfunded Except for any benefits under any benefit plan of the Company or EWCO that are required by law or by express agreement to be funded, it is understood that the Company's and EWCO's obligations under this Agreement are not funded, and it is agreed that neither the Company nor EWCO shall be required to set aside or escrow any monies in advance of the due date of the payment of such monies to Employee. 15. Notices (a) To Employee. Any notice to be given under this Agreement by the Company or EWCO to Employee shall be deemed to be given if delivered to Employee in person or three business days after mailed to him by certified or registered mail, postage prepaid, return receipt requested, to: James T. House 2140 Clinton View Rochester Hills, MI 48309 or at such other address as Employee shall have advised the Company and EWCO in writing. (b) To the Company or EWCO. Any notice to be given by Employee to the Company or EWCO shall be deemed to be given three business days after mailed by certified or registered mail, postage prepaid, return receipt requested, to: Tarpon Industries Inc. and Eugene Welding Company 2420 Wills St. Marysville, MI 48040 With a copy to: Patrick T. Duerr, Esq. Honigman Miller Schwartz and Cohn LLP 2290 First National Building 660 Woodward Ave. Detroit, Michigan ###-###-#### or at such other address as the Company or EWCO shall have advised Employee in writing. 16. Amendments -7- This Agreement shall not be amended, in whole or in part, except by an agreement in writing signed by the Company, EWCO and Employee. 17. Entire Agreement This Agreement constitutes the entire agreement between the parties with respect to the subject matter of this Agreement and all prior agreements or understandings, oral or written, are merged in this Agreement and are of no further force or effect. The parties acknowledge that they are not relying on any representations, express or implied, oral or written, (relating to any aspect of Employee's current or future employment or otherwise), except for those stated in this Agreement. Employee further acknowledges that his sole rights and remedies with respect to any aspect of his employment or termination of his employment are provided for in this Agreement. 18. Captions The captions of this Agreement are included for convenience only and shall not affect the construction of any provision of this Agreement. 19. Governing Law and Forum This Agreement, its construction, and the determination of any rights, duties or remedies of the parties arising out of or relating to this Agreement, shall be governed by, and interpreted in accordance with, the laws of the state of Michigan, except for any provisions of Michigan law which direct the application of other states' laws, and except that if any provision of this Agreement would be illegal, void, invalid or unenforceable under such Michigan laws, then the laws of such other jurisdiction which would render such provisions valid and enforceable shall govern so far as is necessary to sustain the validity and enforceability of the terms of this Agreement. Each party consents to be subject to personal jurisdiction of the courts of Michigan, and any lawsuit or other court action or proceeding relating to, or arising out of, this Agreement or Employee's employment with the Company shall be instituted only in the state or federal court of proper jurisdiction in the state of Michigan and those courts shall have exclusive jurisdiction over any case or controversy arising out of or relating to this Agreement. 20. Severability All provisions, agreements, and covenants contained in this Agreement are severable, and in the event any of them shall be held to be illegal, void or invalid by any competent court or under any applicable law, such provision shall be changed to the extent reasonably necessary to make the provision, as so changed, legal, valid and binding. If any provision of this Agreement is held illegal, void or invalid in its entirety, the remaining provisions of this Agreement shall not in any way be affected or impaired, but shall remain binding in accordance with their terms. 21. No Waiver No waiver of any provision of this Agreement shall be valid unless in writing and signed by the party against whom enforcement of the waiver is sought. The waiver by either party of any -8- breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. 22. Consultation with Counsel Employee acknowledges that he has been given the opportunity to consult with his personal legal counsel concerning all aspects of this Agreement and the Company and EWCO have urged Employee to so consult with such counsel. IN WITNESS WHEREOF, the Company, EWCO and Employee have duly executed this Agreement as of the date and year first above written. Tarpon Industries Inc, By: /s/ Charles Vanella ---------------------------------- Its: President & CEO Eugene Welding Company, By: /s/ Charles Vanella ---------------------------------- Its: President & CEO /s/ James T. House -------------------------------------- James T. House -9-