THIRD AMENDED AND RESTATED EMPLOYMENT CONTRACT
THIS THIRD AMENDED AND RESTATED CONTRACT OF EMPLOYMENT (hereinafter "Contract")
is made in Indianapolis, Indiana, dated and effective as amended July 1, 1999,
by and between STANDARD MANAGEMENT CORPORATION, an Indiana Corporation, and all
wholly owned subsidiaries of the above named corporations (hereinafter the
"Company"), and Xxxxxx X. Xxxxx (hereinafter "Executive").
RECITALS
A.Executive has participated in the organization of the Company and its
business.
B.Executive has and is expected to continue to make a major contribution to the
profitability, growth and financial strength of the Company.
C.The Company considers the continued services of the Executive to be in the
best interest of the Company and its shareholders and desires to assure the
continued services of the Executive on behalf of the Company on an objective
and impartial basis and without distraction or conflict of interest in the
event of an attempt to obtain control of the Company.
D.Executive is willing to remain in the employ of the Company under the terms
and conditions hereof and upon the understanding that the Company will provide
him with the income security herein if his employment is terminated by the
Company or if he voluntarily terminates his employment for good reason.
NOW, THEREFORE, in consideration of the mutual agreements contained herein, the
parties to this Contract hereby agree as follows:
AGREEMENT
1.EMPLOYMENT. The Company hereby agrees to employ Executive as Executive Vice
President - Administration of the Company. Executive accepts such employment
and agrees to be subject to the general supervision, orders, advice and
direction of the President and Chief Executive Officer and the Board of
Directors of the Company in a manner consistent with the Articles of
Incorporation and By-Laws of the Company.
2.TERMS OF EMPLOYMENT AND COMPENSATION. Executive's term of employment (the
"Employment Term") hereunder shall start on July 1, 1999 and continue until
such employment terminates pursuant to Section 7 hereof.
3.SALARY AND BONUS. Executive's salary for the first year hereunder shall be
$157,325.00 per year. Thereafter during the Employment Term, Executive's
salary shall be increased each year by an amount equal to Executive's salary
for the previous year multiplied by the percent change of the Consumer Price
Index for all Urban Consumers (the "CPI") (published by the Bureau of Labor
Statistics, United States Department of Labor) during the immediately preceding
calendar year. For example, if the percent change in the CPI from January 1,
1999 to December 31, 1999 were 5%, Executive's salary for the second year
hereunder would be $165,191.00. Executive's salary shall be payable on the
Company's regular salary payment dates. In addition, within 90 days after the
end of each fiscal year during the Employment Term, Executive shall receive a
bonus. The bonus paid to Executive shall be one and one-half percent (1-1/2%)
of the annual gross operating income of the Company paid within ninety (90)
days after the close of each fiscal year covered hereunder. Provided, however,
that in no event shall said bonus be less than ten percent (10%) of the annual
salary of Executive for the year in consideration.
The salary and bonus payments hereunder shall be subject to withholding and any
other applicable tax law.
4.SALARY GUARANTEE. All salaries payable to the Executive under the Agreement
will be guaranteed (the "Guaranteed Payments") as of the effective date of the
Agreement for the full Employment Term of the Agreement except for terminations
for violations found in Section 7(b) (c) (d) or (e) hereof.
(a)After the initial three year Employment Term of Guaranteed Payments, any
additional one year extensions made pursuant to the terms of Section 7(a) will
be guaranteed once the notice period for the extension or termination period
found in Section 7(a) has passed.
(b)None of the Guaranteed Payments described in this Section shall prevent the
Executive from receiving the Termination Benefits described in Section 13 of
the Agreement.
(c)All Guaranteed Payments described in this Section and payable to the
Executive shall be payable to the Estate of Xxxxxx X. Xxxxx in the event of
death of the Executive.
(d)In the event of any mental disability which renders the Executive unable to
fulfill his duties pursuant to Section 1 of this Agreement, all Guaranteed
Payments shall be made to Xxxxxx X. Xxxxx'x spouse, his attorney in fact, his
personal representative, his guardian, or any other such person legally
specifically listed, to whomever is legally authorized to receive monetary
payments due and owing to Xxxxxx X. Xxxxx.
(e)In the event of any physical disability which renders the Executive unable
or unwilling to fulfill his duties pursuant to Section 1 of this Agreement, all
Guaranteed Payments shall be made directly to the Executive.
(f)Upon the termination of Executive=s employment for any reason other than
pursuant to Section 7(b), (d) or (e) hereof, the Company shall pay to Executive
in a lump-sum payment, within thirty (30) calendar days after such termination,
the salary received by him on the date of such termination in an amount equal
to two (2) years of annual salary.
5.REIMBURSEMENT FOR EXPENSES. The Company shall, during the Employment Term,
reimburse Executive for all reasonable travel, business entertainment and other
business expenses incurred by Executive in rendering services under this
Contract. Such reimbursement shall be subject to compliance with the
applicable policies and procedures established by the Company. During the
Employment Term, Executive shall be entitled to an automobile allowance of
$500.00 per month.
6.FRINGE BENEFITS. During the Employment Term, Executive shall be entitled to
participate in the Company's corporate, medical and disability insurance plans.
The Company shall also provide Executive with term life insurance in the amount
of $200,000. Executive shall be entitled to all other fringe benefits
generally provided for salaried employees of the Company upon attaining
eligibility as provided under such fringe benefit programs. Executive shall be
entitled to four (4) weeks vacation per year.
7.TERMINATION. The Employment Term shall terminate on the first to occur of
the following events:
(a)the third anniversary of the date on which the Employment Term become
effective; provided, however, that after such third anniversary, the Employment
Term shall be extended each year thereafter for an additional one year period
unless either party gives the other written notice at least 90 days before such
extension of its intention not to renew the Contract;
(b)termination by the Company for cause, upon written notice (specifying the
particulars) to Executive from the Company's Board of Directors, which cause
shall be limited to:
(i) the persistent failure of or refusal by Executive to comply with the
material orders, advice, directions, policies, standard and regulations of the
Company and its President or Board of Directors, as promulgated from time to
time, or with the provisions of this Contract, which failure or refusal is
detrimental to the Company;
(ii) an act or acts of fraud or dishonesty by Executive resulting in or
tending to result in gain to or personal enrichment of Executive at the
Company's expense;
(iii) any felony conviction of Executive or material tort which is detrimental
to the Company; or
(iv) the persistent absence of Executive from his employment without cause or
explanation;
(c)the death of Executive;
(d)the 90th day after notice from the Company to Executive that Executive is
considered to be permanently disabled due to his inability to perform his
duties or fulfill his responsibilities hereunder, which inability existed for a
period of 90 days or more before such notice; or
(e)termination by Executive, at his option, after 90 days prior written notice
to the Company.
Upon termination of Executive's employment pursuant to Section 7(b) (c) (d) or
(e), Executive (or his estate) shall receive (i) any unpaid salary payments
with respect to periods prior to the date of termination, and (ii) any
termination, disability or death benefits to which he is entitled under any
employee benefit plan of the Company which is in effect at the time of the
termination of his employment. In all other events of termination, Executive
shall continue to receive the Guaranteed Payments.
8.AGREEMENT NOT TO COMPETE. Executive agrees that if his employment is
terminated by the Company pursuant to Subsection 7(b) hereof he shall not, for
a period of one year from the date his employment hereunder terminates, (x)
directly or indirectly sell or attempt to sell, within Indiana, on behalf of
himself or any other person, corporation or entity, any type of product
marketed by the Company at the time his employment is terminated, (y) directly
or indirectly sell or attempt to sell any type of product marketed by the
Company at the time his employment is terminated to any person, corporation or
other entity that is a customer of the Company at the time his employment is
terminated, and (z) within Indiana, directly or indirectly, own, manage,
operate, control, be employed by, participate in, or be connected in any manner
with the ownership, management, operation, or control of any business similar
to the type of business conducted by the Company at the time of termination of
Executive's employment hereunder; provided, however, that Executive may be a
shareholder of less than 5% of the outstanding shares of voting stock of any
company listed on a recognized stock exchange or traded in the NASD over-the-
counter market.
9.TECHNICAL INFORMATION. Executive covenants and agrees that during the
Employment Term and for a period of six months after termination of the
Employment Term (regardless of whether Executive is terminated or defaults
under any other provision of this Contract) he will assign to the Company or
its nominees all of his right, title and interest in and to all "Technical
Information" (as hereinafter defined) which he makes, develops or conceives,
either alone or in conjunction with others; he will disclose promptly to the
Company all such Technical Information; and he will cooperate with the Company
in its efforts to protect its rights of ownership in such Technical
Information. For purposes of this Contract, "Technical Information" shall mean
and include, but not be limited to, all software, processes, devices,
trademarks, trade names, copyrights, marketing plans, improvements, and ideas
relating to the business of the Company, and all goodwill associated with any
such item.
10.COVENANT AGAINST DISCLOSURE OF TECHNICAL AND CONFIDENTIAL INFORMATION.
Executive agrees that while he is employed by the Company and thereafter he
shall not, directly or indirectly, disclose or use to the detriment of the
Company or for the benefit of any other person, corporation or other entity,
any confidential information or trade secret (including, but not limited to,
the identity and needs of any customer of the Company, the method and
techniques of any of the business of the Company, the marketing, sales, costs
and pricing plans and objectives of the Company, the problems, developments,
research records, and Technical Information) of the Company, or any of the
affiliates of the Company. Furthermore, Executive shall deliver promptly to
the Company upon termination of his employment, or at any time the Company may
so request, all memoranda, notes, records, reports, manuals, software, models,
designs, and other documents and computer records (and all copies thereof)
relating to the business of the Company, and all property associated therewith,
which he may then possess or have under his control. This Contract supplements
and does not supersede Executive's obligations under statute or the common law
to protect the Company's trade secrets and confidential information.
11.REMEDY. Executive acknowledges that the restrictions contained in Sections
8 through 10 of this Contract are reasonable and that the legal remedies for
breach of the covenants which are contained in Sections 8 through 10 of this
Contract may be inadequate and, therefore, agrees that, in the event of any
actual or threatened breach of any such covenant, in addition to any other
right or remedy which the Company may have, the Company may: (a) seek specific
enforcement of any such covenant through injunction or other equitable relief,
and (b) recover from Executive an amount equal to (i) all sums paid by the
Company to him after commencement of the breach, plus (ii) all costs and
expenses (including attorneys' fees) incurred by the Company in enforcement of
the covenant, plus (iii) all other damages to which the Company may be legally
entitled.
12.UNDERTAKING TO PAY TERMINATION BENEFITS. In addition to the payments
Executive shall receive under Section 4 hereof in the event of the termination
of his employment, the Company agrees to pay to the Executive the Termination
Benefits specified in Section 13 hereof if (a) control of the Company is
acquired (as defined in paragraph 14(a) hereof) and (b) within three years
after the acquisition of control occurs (i) the Company terminates the
employment of Executive for any reason other than pursuant to Section 7(b),
7(c) or 7(d) hereof, or (ii) Executive voluntarily terminates his employment
for good reason (as defined in Section 14(b) hereof).
13.TERMINATION BENEFITS. If Executive is entitled to termination benefits
pursuant to paragraph 12 hereof, the Company agrees to pay to Executive as
termination compensation in a lump-sum payment within five calendar days of the
termination of Executive's employment an amount to be computed by multiplying
(a) Executive's average annual compensation payable by the Company which is
includable in the gross income of Executive for the most recent five calendar
years ending coincident with or immediately before the date on which control of
the Company is acquired (or such portion of such period during which Executive
was an employee of the Company, by (b) 299%. For purposes of this Contract,
employment and compensation paid by an direct or indirect subsidiary of the
Company, if any will be deemed to be employment and compensation paid by the
Company.
(a)The Termination Benefits described in this section are payable to the
Executive regardless of any determination by the Company's independent public
accountants that payments made pursuant to this section are or would be non-
deductible by the Company for federal income tax purposes because of Section
280G of the Internal Revenue Code of 1986 or any subsequent revisions in the
Internal Revenue Code.
14.DEFINITIONS.
(a)As used in this Contract, the "acquisition of control": means (i) attaining
ownership of 25% or more of the shares of voting stock of the Company by any
person or group (other than a person or group including Executive or with whom
or which Executive is affiliated), or (ii) the occurrence of a "change of
control" required to be described under the proxy disclosure rules of the
Securities and Exchange Commission.
(b)As used in this Contract, the term "good reason" means, without Executive's
written consent, (i) a change in Executive's status, position or
responsibilities which, in his reasonable judgment, does not represent a
promotion from his status, position or responsibilities as in effect
immediately prior to the change in control; the assignment to Executive of any
duties or responsibilities which, in his reasonable judgment, are inconsistent
with such status, position or responsibilities; or any removal of Executive
from or failure to reappoint or reelect him to any of such positions, except in
connection with the termination of his employment for total and permanent
disability, death or pursuant to Subsection 7(ii) or 7(iii) herein or by him
other than for good reason; (ii) a breach by the Company of its covenants under
this Contract after a change in control; (iii) the relocation of the Company's
principal executive offices to a location outside the Indianapolis, Indiana
metropolitan area or the Company's requiring him to be based at any place other
than the location at which he performed his duties prior to a change in control
except for required travel on the Company's business to an extent substantially
consistent with his business travel obligations at the time of a change in
control; (iv) the failure by the Company to continue to provide Executive with
benefits substantially similar to those enjoyed by him or to which he was
entitled under any of the Company's pension, profit sharing, life insurance,
medical, dental, health and accident, or disability plans in which he was
participating at the time of a change in control, the taking of any action by
the Company which would directly or indirectly materially reduce any of such
benefits or deprive him of any material fringe benefit enjoyed by him or to
which he was entitled at the time of the change in control, or the failure by
the Company to provide him with the number of paid vacation and sick leave days
to which he is entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation and sick leave policies and
consistent with Section 6 of this Contract; (v) 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 Contract; (vi) any purported termination of
Executive's employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of Subsection 15(c) hereof (and, if
applicable, Subsection 7(b) hereof); and for purposes of this Contract, no such
purported termination shall be effective; or (vii) any request by the Company
that Executive participate in an unlawful act or take any action constituting a
breach of Executive's professional standard of conduct.
Notwithstanding anything in this paragraph 14(b) to the contrary, Executive's
right to terminate his employment pursuant to paragraph 12 herein shall not be
affected by his incapacity due to physical or mental illness.
15.ADDITIONAL PROVISIONS RELATING TO TERMINATION.
(a)The Company is aware that the Board of Directors or shareholders of the
Company may then cause or attempt to cause the Company to refuse to comply with
its obligations under this Contract, or may cause or attempt to cause the
Company to institute, or may institute litigation seeking to have this Contract
declared unenforceable, or may take or attempt to take action to deny Executive
the benefits intended under this Contract. In these circumstances, the purpose
of this Contract could be frustrated. It is the intent of the Company that
Executive not be required to incur the expenses associated with the enforcement
of his rights under this Contract by litigation or other legal action, nor be
bound to negotiate any settlement of his rights hereunder, because the cost and
expense of such legal action or settlement would substantially detract from the
benefits intended to be extended to Executive hereunder. Accordingly, if
following a change in control, if it should appear to Executive that the
Company has failed to comply with any of its obligations under this Contract or
in the event that the Company or any other person takes any action to declare
this Contract void or unenforceable, or institutes any litigation or other
legal action designed to deny, diminish or to recover from Executive the
benefits entitled to be provided to Executive hereunder, and that Executive has
complied with all of his obligations under this Contract, the Company
irrevocably authorizes Executive from time to time to retain counsel of his
choice, at the expense of the Company as provided in this Subsection 15(a), to
represent Executive in connection with the initiation or defense of any
litigation or other legal action, whether such action is by or against the
Company or any director, officer, shareholder, or other person affiliated with
the Company, in any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and such counsel, the Company
irrevocably consents to Executive entering into an attorney-client relationship
with such counsel, and in that connection the Company and Executive agree that
a confidential relationship shall exist between Executive and such counsel.
The reasonable fees and expenses of counsel selected from time to time by
Executive as hereinabove provided shall be paid or reimbursed to Executive by
the Company on a regular, periodic basis upon presentation by Executive of a
statement or statements prepared by such counsel in accordance with its
customary practices, up to a maximum aggregate amount of $50,000.00. Any legal
expenses incurred by the Company by reason of any dispute between the parties
as to enforceability of or the terms contained in this Contract,
notwithstanding the outcome of any such dispute, shall be the sole
responsibility of the Company, and the Company shall not take any action to
seek reimbursement from Executive for such expenses.
(b) The amounts payable to Executive under this Contract shall not be treated
as damages but as severance compensation to which Executive is entitled by
reason of termination of his employment in the circumstances contemplated by
this Contract. The Company shall not be entitled to set off against the
amounts payable to Executive of any amounts earned by Executive in other
employment after termination of his employment with the Company, or any amounts
which might have been earned by Executive in other employment had he sought
such other employment.
(c)Any purported termination by the Company or by Executive shall be
communicated by written Notice of Termination to the other party hereto in
accordance with Section 22 hereof. For purposes of this Contract, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Contract relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of his
employment under the provision so indicated. For purposes of this Contract, no
such purported termination shall be effective without such Notice of
Termination.
(d)In addition to any payments, termination benefits or any other benefits
Executive is entitled to receive hereunder, in the event of a change or
acquisition of control, the Company agrees to pay the Payment Amount (as
hereinafter defined) to the Executive in a lump-sum payment within thirty (30)
calendar days after the termination of Executive=s employment for any reason,
including, without limitation, termination of employment by the Company,
termination of employment by the Executive and termination of employment by
reason of death. The APayment Amount@ shall be the product, determined as of
the date of Executive=s termination of employment, determined by (i)
multiplying the number of shares of common stock of the Company then subject to
unexercised options (AUnexercised Options@) held by the Executive which were
granted by the Company or an affiliate of the Company by (ii) the highest per
share fair market value of the common stock on any day during the period
beginning six (6) months prior to the date of Executive=s termination of
employment. For purposes of this provision, Unexercised Options shall include
all outstanding options whether or not they are exercisable at the time of the
election by Executive hereunder. There shall be no deduction of Executive=s
exercise price per share for each Unexercised Option from the amount to be
received by him pursuant to this subsection (d). Upon payment by the Company
of the Payment Amount in accordance with this subsection (d), the Unexercised
Options shall be deemed to be surrendered by the Executive and cancelled by the
Company. Such cancellation shall be effective regardless of whether the
Executive surrenders an agreement relating to any Unexercised Option.
16.ENTIRE AGREEMENT. This Contract contains the entire agreement of the
parties relating to the employment of Executive by the Company, superseding any
and all prior such agreements, and cannot be amended, modified, or supplemented
in any respect except by subsequent written agreement entered into by the
parties. The Second Amended and Restated Employment Contract dated and
effective January 1, 1990 shall terminate in all respects on July 1, 1999.
17.BENEFIT. Executive acknowledges that the services to be rendered to him are
unique and personal; accordingly, Executive may not assign any of his rights or
delegate any of his duties or obligations under this Contract. The rights and
obligations of the Company under this Contract shall inure to the benefit of,
and be binding upon, the legal representatives, successors and assigns of the
Company.
00.XX WAIVER. No failure on the part of either party at any time to require
the performance by the other party of any term of this Contract shall be taken
or held to be a waiver of such term or in any way affect such party's right to
enforce such term, and no waiver on the part of either party of any term in
this Contract shall be taken or held to be a waiver of any other term hereof or
the breach thereof.
19.SEVERABILITY. The provisions of Sections 8 through 11 hereof are severable,
and the invalidity or unenforceability of any particular provision of Sections
8 through 11 shall not affect or limit the enforceability of the other
provisions. If any provision in Sections 8 through 11 hereof is held
unenforceable for any reason, including the time period, geographic area, or
scope of activity covered, then such provision shall be enforced to whatever
extent is reasonable and enforceable.
20.GOVERNING LAW. This Contract shall be governed and construed in accordance
with the law of the State of Indiana (other than the provisions relating to
choice of law). The Contract may be brought in any state or federal court of
record in Indianapolis, Indiana and the parties hereto waive any right to
question the jurisdiction of such court over their person or the property of
such venue.
21.CAPTIONS. The captions in this Contract are for convenience and
identification purposes only, and not an integral part of this Contract, and
are not to be considered in the interpretation of any part hereof.
22.NOTICES. All notices and other communications hereunder shall be in writing
and shall be deemed to have been duly given if in writing and personally
delivered to the party to whom notice should be given or if sent by registered
or certified mail, postage prepaid, addressed to the addresses set forth below,
or to such other addresses as shall be furnished in writing by either party to
the other:
Xxxxxx X. Xxxxx
Standard Management Corporation
0000 Xxxxxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
To the Company:
Standard Management Corporation
0000 Xxxxxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Chairman
IN WITNESS WHEREOF, the Company has caused this Contract to be executed on its
behalf by its duly authorized officer and Executive has hereunto set his hand
as of the 1st day of July, 1999.
STANDARD MANAGEMENT CORPORATION
AND ALL WHOLLY OWNED SUBSIDIARIES
By:
Xxxxxx X. Xxxxxx
Chairman, President and Chief Executive
Officer
Attest:
Xxxxxxx X. Xxxxx
Secretary
EXECUTIVE
Xxxxxx X. Xxxxx
H:\Jamescar\DOCS\Employ\3rdamen.ETS.wpd
