EXHIBIT 10.55
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and effective as
of this 1st day of January, 2004 ("Effective Date"), between SED INTERNATIONAL,
INC., a Georgia corporation (the "Subsidiary") and wholly owned subsidiary of
SED INTERNATIONAL HOLDINGS, INC., a Georgia corporation (the "Company"), and
XXXXXXXX XXXXXX, an individual resident of the State of Georgia (the
"Executive").
BACKGROUND:
Executive and the Subsidiary are parties to that certain Employment
Agreement, dated July 1, 2002 (as amended, the "Prior Agreement"), pursuant to
which Executive agreed to serve as Executive Vice President of the Subsidiary
and as a member of the Company's Board of Directors. The Subsidiary recognizes
Executive's past and potential contributions to the growth and success of the
Subsidiary. The Subsidiary desires to provide for the continued employment of
Executive and to make certain changes in the Prior Agreement which the
Subsidiary has determined will reinforce and encourage the continued dedication
of Executive to the Subsidiary and will promote the best interests of the
Subsidiary and its stockholders. Executive is willing to continue to serve the
Subsidiary on the terms and conditions herein provided, and to replace the
Prior Agreement with this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. EMPLOYMENT OF EXECUTIVE; DUTIES OF EXECUTIVE. The Subsidiary hereby
employs Executive as its Executive Vice President, and Executive hereby accepts
employment with the Subsidiary in those capacities, subject to the terms and
conditions set forth in this Agreement. As Executive Vice President, Executive
shall faithfully perform for the Subsidiary the duties of said offices (as
described in the Bylaws of the Company) and shall perform such other duties of
an executive, managerial or administrative nature as are from time to time
assigned or delegated to the Executive by the Board of Directors of the
Company. Throughout his employment hereunder, Executive shall devote
substantially all of his time, energy and skill to perform the duties of his
employment (vacations as provided hereunder and reasonable absences because of
illness excepted), and shall use his best efforts to follow and implement all
management policies and decisions of the Company. Executive shall not become
involved in the management of any other company, partnership, proprietorship or
other entity, other than an affiliate of the Subsidiary (or the Company),
without the consent of the Board of Directors of the Subsidiary; provided,
however, that as long as it does not interfere with Executive's employment
hereunder, Executive may serve as a director in a company that does not compete
with the business of the Subsidiary or any affiliate of the Subsidiary, and may
serve as an officer or director or otherwise participate in educational,
welfare, social, religious or civic organizations. The Executive shall not be
required to relocate from the Atlanta, Georgia metropolitan area in connection
with the performance of his duties hereunder.
2. COMPENSATION, BENEFITS AND REIMBURSEMENT OF EXPENSES.
(a) As compensation for his services hereunder, the Subsidiary shall
pay Executive an annual base salary of Two Hundred Sixty Thousand Dollars
($260,000.00). Such salary shall be paid in accordance with the normal payroll
practices of the Subsidiary and shall be subject to such deductions and
withholdings as are required by law or by the policies of the Subsidiary, from
time to time in effect.
(b) Executive shall be entitled to receive an annual bonus ("Bonus")
with respect to each fiscal year of the Company ending during the Term of this
Agreement in an amount equal to three percent (3%) of the Company's Pretax
Adjusted Annual Income (as defined immediately hereafter). "Pretax Adjusted
Annual Income" shall mean, with respect to a given fiscal year, earnings before
taxes as reported on the Company's audited consolidated statement of operations
for such fiscal year, excluding extraordinary, nonoperational costs and
profits.
(c) Executive shall be entitled to participate or to continue
participation in any present or future group life, health and hospitalization
or disability insurance plans, pension or retirement plans or similar death
benefits as are available to management executives of the Company and the
Subsidiary, on the same terms as such other executives, in each case to the
extent that Executive is eligible under the terms of such plans or programs.
(d) Executive shall be entitled to at least four (4) weeks of paid
vacation per year.
(e) Executive shall be reimbursed in accordance with the policies of
the Subsidiary, as adopted and amended from time to time, for all reasonable
and appropriate expenses incurred by him in connection with the performance of
his duties of employment hereunder; provided, however, Executive shall as a
condition of such reimbursement, submit verification of the nature and amount
of such expenses in accordance with the reimbursement policies from time to
time adopted by the Subsidiary.
(f) As used herein, "Change of Control" shall mean the occurrence of
one of the following:
(i) any individual, corporation, partnership, group,
association or other person or entity, together with his, its
or their affiliates or associates (other than a trustee or
other fiduciary holding securities under an Executive benefit
plan of the Company or Subsidiary) hereafter becomes the
beneficial owner of securities of the Company representing
thirty percent (30%) or more of the combined voting power of
the Company's then outstanding securities entitled to vote
generally in the election of directors;
(ii) the directors of the Company who either were directors
as of the Effective Date of this Agreement or whose election
as directors subsequent to the Effective Date was approved by
a majority of the persons who were directors as of the
Effective Date (the "Continuing Directors") shall at any
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time fail to constitute a majority of the members of the
Board of Directors of the Company;
(iii) all or substantially all of the assets of the Company
are sold, conveyed, transferred or otherwise disposed of,
whether through one event or as a series of related events,
without being approved by a majority of the Continuing
Directors;
(iv) the Executive shall no longer be a member of the Board
of Directors of the Company, unless (1) Executive shall have
declared in writing his desire to resign such position or
that he no longer wishes to serve as a director of the
Company, (2) Executive shall have died or become disabled
during the Term of this Agreement, or (3) Executive's
employment hereunder shall have been terminated for Good
Cause (as defined in Section 3(c) below).
If a Change of Control occurs while the Executive is employed by the Subsidiary
during the Term of this Agreement, and Executive's employment is subsequently
terminated involuntarily, or voluntarily by Executive based on (1) material
changes in the nature or scope of the Executive's duties or employment, (2) a
reduction in compensation of the Executive made without the Executive's
consent, (3) a relocation of the Subsidiary's executive offices other than in
compliance with the provisions of Section 1 of this Agreement, or (4) a good
faith determination made by the Executive, upon consultation with the Board of
Directors of the Company, that it is necessary or appropriate for the Executive
to relocate from the Atlanta, Georgia metropolitan area to enable Executive to
perform his duties hereunder, Executive may, in his sole discretion, give
written notice within sixty (60) days after the date of termination of
employment to the Subsidiary that he is exercising his rights under this
Section 2(f) to request payment of the amounts provided for herein (said notice
shall be referred to as the "Notice of Exercise").
If Executive gives a Notice of Exercise to receive the payments provided for
hereunder, the Subsidiary shall pay to or for the benefit of Executive,
immediately upon the Subsidiary's receipt of the Notice of Exercise, a single
cash payment for damages suffered by the Executive by reason of the Change in
Control (the "Executive Payment") in an amount equal to Seven Million and
No/100ths Dollars ($7,000,000.00).
The Executive Payment shall be in addition to and shall not be offset or reduced
by (i) any other amounts that have been earned or accrued or that have otherwise
become payable or will become payable to the Executive or his beneficiaries, but
have not been paid by the Subsidiary at the time the Executive gives the Notice
of Exercise including, without limitation, salary, Bonus amounts, the Salary
Continuance, severance pay, consulting fees, disability benefits, termination
benefits, retirement benefits, life and health insurance benefits or any other
compensation or benefit payment that is part of any previous, current or future
contract, plan or agreement, written or oral, (ii) any reimbursement that may
become due to Executive pursuant to the provisions of Sections 2(h), 2(i) and
2(j) of this Agreement, and (iii) any indemnification payments that may have
accrued but not been paid or that may thereafter become payable to the Executive
pursuant to the provisions of the Company's and the Subsidiary's Articles of
Incorporation, Bylaws or similar policies,
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plans or agreements relating to indemnification of directors and officers of
the Company and the Subsidiary under certain circumstances. The Executive
Payment shall not be reduced by any present value calculations.
In the event the Executive dies within ninety (90) days after a Change of
Control occurs, the Executive's legal representative shall be entitled to
receive an amount equal to the Executive Payment provided that the Notice of
Exercise has been or is given either by the Executive or his legal
representative, as the case may be; provided, the period for the Notice of
Exercise by Executive's legal representative shall be sixty (60) days after the
Executive's death.
(g) If the benefits provided to Executive under this Agreement or
under any other agreement with, or plan of, the Company or the Subsidiary (in
the aggregate, the "Total Payment") constitute a payment so that an excise tax
(the "Excise Tax") is due under Section 280G, Section 4999 or other provision
of the Internal Revenue Code of 1986 (as amended, the "Code"), then the
benefits provided under this Agreement shall be limited to the Reduced Amount
(as defined immediately hereafter). The "Reduced Amount" shall be the largest
amount that could be received by Executive under this Agreement such that no
part of the Total Payment provided to Executive shall be subject to the Excise
Tax. The Reduced Amount shall be calculated by a nationally recognized benefits
consulting firm or accounting firm, and such amount shall be presented to
Executive for review and approval. If the amount payable to Executive is
limited to the Reduced Amount, Executive shall have the right, in Executive's
sole discretion, to designate the portion of the Total Payment that should be
reduced or eliminated so as to avoid having the benefits provided to Executive
under this Agreement be subject to the Excise Tax.
(h) If the Internal Revenue Service claims in writing that any benefit
received under this Agreement constitutes an "excess parachute payment" under
Section 280G of the Code, Executive shall notify the Subsidiary in writing of
such claim within ten (10) business days of the claim. Executive shall apprise
the Subsidiary of the nature of such claim and the date on which such claim is
requested to be paid. Executive shall not pay such claim prior to the
expiration of the thirty (30) day period following the date on which Executive
provides notice of the claim to the Subsidiary (or such shorter period ending
on the date that any payment of taxes with respect to the claim is due). If the
Subsidiary notifies Executive in writing prior to the expiration of such period
that it desires to contest such claim, Executive shall (i) give the Subsidiary
any information reasonably requested by the Subsidiary relating to such claim;
(ii) take such action in connection with contesting such claim as the
Subsidiary shall reasonably request in writing from time to time; (iii)
cooperate with the Subsidiary in good faith in order to effectively contest
such claim; and (iv) permit the Subsidiary to participate in any proceedings
relating to such claim; provided, however, that the Subsidiary shall bear and
pay directly all costs and expenses (including, but not limited to, additional
interest and penalties and related legal, consulting or similar fees) incurred
in connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or other tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses.
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(i) If, after the receipt by Executive of an amount advanced by the
Subsidiary in connection with the contest of the Excise Tax claim, Executive
becomes entitled to receive any refund with respect to such claim, Executive
shall promptly pay to the Subsidiary the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto);
provided, however, that if the amount of that refund exceeds the amount
advanced by the Subsidiary or it is otherwise determined for any reason that
additional amounts could be paid to Executive without incurring any Excise Tax,
any such amount will be promptly paid by the Subsidiary to Executive. If, after
the receipt of an amount advanced by the Subsidiary in connection with an
Excise Tax claim, a determination is made that Executive shall not be entitled
to any refund with respect to such claim and the Subsidiary does not notify
Executive in writing of its intent to contest the denial of such refund prior
to the expiration of thirty (30) days after such determination, such advance
shall be forgiven and shall not be required to be repaid and shall be deemed to
be in consideration for services rendered after date of the termination of
Executive's employment.
(j) All costs and expenses, including reasonable legal, accounting and
other advisory fees, incurred by the Executive to prepare responses to an
Internal Revenue Service audit of, and otherwise defend, his personal income
tax return for any year that is the subject of any such audit or an adverse
determination, administrative proceeding or civil litigation arising therefrom
that is occasioned by, or related to, an audit by the Internal Revenue Service
of the Subsidiary's consolidated income tax returns are, upon written demand by
the Executive explaining the basis for the request for such reimbursement or
advancement, to be promptly advanced or reimbursed to the Executive or paid
directly, on a current basis, by the Subsidiary or its successors.
3. TERM AND TERMINATION.
(a) The term ("Term") of this Agreement and of Executive's employment
hereunder shall commence as of the Effective Date and shall continue for a
period of five (5) years (the "Initial Term") unless earlier terminated as
provided in Section 3(b) of this Agreement. Executive shall have the right to
renegotiate an additional one (1) year to the Initial Term, at any time beyond
the first anniversary of this Agreement, so long as the Term shall not exceed
five (5) years.
(b) Executive's employment under this Agreement shall terminate upon
Executive's death. Executive's employment hereunder may also be terminated (i)
upon mutual agreement of Executive and the Subsidiary; (ii) unilaterally by the
Subsidiary, upon written notice to Executive, for Good Cause (as defined in
Section 3(c) below); or (iii) upon written notice to Executive if Executive
shall at any time be unable to perform the essential functions of his job
hereunder, by reason of a physical or mental illness or condition, with or
without reasonable accommodation, for a continuous period of one hundred eighty
(180) consecutive days, as certified by a physician or physicians selected by
the Board of Directors of the Company.
(c) As used in this Agreement, "Good Cause" means: (i) any act of fraud
or dishonesty; (ii) any act of theft or embezzlement; (iii) the breach of any
material provision
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of this Agreement by Executive (provided that such breach is not cured by
Executive within thirty (30) days of receiving written notice of such breach
from the Subsidiary); (iv) violation of the policies and procedures of the
Subsidiary; (v) failure to comply with the written directions of the Board of
Directors of the Company; (vi) engaging in any unlawful harassment or
discrimination; (vii) the conviction of Executive of any crime involving moral
turpitude (whether felony or misdemeanor) or involving any felony; (viii) any
act of moral turpitude by Executive that materially adversely affects the
Subsidiary or its business reputation; (ix) violation of state or federal
securities laws; or (x) any other matter constituting "good cause" under the
laws (including, inter alia, statutes, regulations or judicial case law) of the
State of Georgia.
(d) Upon the termination of this Agreement and Executive's employment
hereunder as provided in Section 3(b), the Subsidiary shall have no further
obligation to Executive other than (i) for payment of salary, Bonus amounts,
expense reimbursement and other benefits earned or accrued and unpaid at the
effective date of such termination; (ii) for payment of any amounts that may
become due to Executive pursuant to the provisions of Sections 2(f), 2(g),
2(h), 2(i) and 2(j) of this Agreement; and (iii) any indemnification payments
that may become payable to Executive pursuant to the provisions of the
Company's and the Subsidiary's Articles of Incorporation, Bylaws, or similar
policies, plans or agreements relating to indemnification of directors and
officers of the Company and the Subsidiary under certain circumstances.
(e) Subject to the provisions of Section 2(f) hereof, a breach of this
Agreement by the Subsidiary, including, without limitation, the occurrence of
any of the events described in Section 2(f), if not cured within thirty (30)
days after the giving of notice thereof by Executive to the Board of Directors
of the Company, shall entitle Executive to terminate voluntarily Executive's
employment under this Agreement and recover all damages for such breach by the
Subsidiary as permitted hereunder and by law.
4. AGREEMENT NOT TO SOLICIT CUSTOMERS. As part of the consideration
for the compensation and benefits to be paid to Executive hereunder, in keeping
with Executive's duties as a fiduciary and in order to protect the Subsidiary's
interest in the business relationships developed by Executive with the
customers and potential customers of the Subsidiary, Executive agrees that
during the Term of Executive's employment under this Agreement and for a period
of one (1) year from the date of the termination of such employment (at any
time for any reason, with or without cause), Executive shall not, without the
prior written consent of the Subsidiary, directly or indirectly solicit or
attempt to solicit any Restricted Customer (as hereinafter defined) for the
purpose of or with a view to providing services or products to the Restricted
Customer which the Subsidiary has provided or provides to such Restricted
Customer. "Restricted Customer" means any person or entity to which (i) the
Subsidiary provided or actively sought to provide services or products and (ii)
with whom Executive had material contact during the two (2) year period
immediately preceding the termination of Executive's employment with the
Subsidiary. Executive understands that the foregoing restrictions may limit his
ability to engage in certain businesses anywhere in the world during the period
provided for above, but acknowledges that the Subsidiary has a legitimate
interest in restricting solicitation as provided in this Section without
reference to a specific territory and that Executive will
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receive sufficiently high remuneration and other benefits under this Agreement
to justify such restriction.
5. OWNERSHIP AND PROTECTION OF PROPRIETARY INFORMATION.
(a) As used herein, "Proprietary Information" means information
related to the Subsidiary or the Company that (i) derives economic value,
actual or potential, from not being generally known to other persons who can
obtain economic value from its disclosure or use; and (ii) is the subject of
efforts by the Subsidiary or the Company that are reasonable under the
circumstances to maintain its secrecy, including, without limitation, (1) with
respect to information which has been reduced to tangible form, marking such
information clearly and conspicuously with a legend identifying its
confidential or proprietary nature; (2) with respect to any oral presentation
or communication, denominating such information as confidential immediately
before, during or after such oral presentation or communication; or (3)
otherwise treating such information as confidential. Assuming these two
criteria are met, Proprietary Information includes, without limitation,
technical and nontechnical data related to the formulas, patterns, designs,
compilations, programs, inventions, methods, techniques, drawings, processes,
finances, actual or potential customers and suppliers, research, development,
existing and future products, and employees of the Subsidiary and the Company.
Proprietary Information includes information that has been disclosed to the
Subsidiary or the Company by a third party, which the Subsidiary or the Company
is obligated to treat as confidential, and information which is proprietary to
an affiliate of the Subsidiary or the Company.
(b) Executive acknowledges that all Proprietary Information and all
physical embodiments thereof are confidential to and are and will remain the
sole and exclusive property of the Subsidiary. Executive must: (i) immediately
disclose to the Subsidiary all Proprietary Information developed in whole or in
part by Executive during the Term of his employment with the Subsidiary, (ii)
assign to the Subsidiary any right, title or interest Executive may have in
such Proprietary Information, and (iii) at the request and expense of the
Subsidiary, do all things and sign all documents or instruments reasonably
necessary in the opinion of the Subsidiary to eliminate any ambiguity as to the
ownership by and rights of the Subsidiary in such Proprietary Information
including, without limitation, providing to the Subsidiary Executive's full
cooperation in any litigation or other proceeding to establish or protect such
rights.
(c) Except to the extent necessary to perform the services to be
provided hereunder, Executive will not reproduce, use, distribute, disclose or
otherwise disseminate the Proprietary Information or any physical embodiments
thereof and will in no event take any action causing, or fail to take the
action necessary in order to prevent, any Proprietary Information disclosed to
or developed by Executive to lose its character or cease to qualify as
Proprietary Information. Each reproduction of any of the Proprietary
Information must prominently contain a legend identifying its confidential or
proprietary nature.
(d) Executive represents and warrants that any information disclosed
by Executive to the Subsidiary is not confidential or proprietary to Executive
or to any third party.
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Accordingly, no obligation of any kind is assumed by or to be implied against
the Subsidiary by virtue of any information received, in whatever form or
whenever received, from Executive relating to the subject matter hereof, and
the Subsidiary will be free to reproduce, use and disclose to others such
information without limitation.
(e) Upon request by the Subsidiary, and in any event upon termination
of the employment of Executive with the Subsidiary for any reason, as a prior
condition to receiving any final compensation hereunder, Executive will
promptly deliver to the Subsidiary all property belonging to the Subsidiary,
including, without limitation, all Proprietary Information and all embodiments
thereof then in his custody, control or possession.
(f) The covenants of confidentiality set forth in this Section 5 will
apply on and after the Effective Date to any Proprietary Information disclosed
by the Subsidiary to or developed by Executive prior to or after the Effective
Date and will continue and be maintained by Executive (i) with respect to all
Proprietary Information which falls within the definition of "trade secrets"
under applicable law, at all times following the termination of Executive's
employment hereunder for any reason whatsoever, and (ii) with respect to all
other Proprietary Information, during the Term of Executive's employment
hereunder and for a period of three (3) years after the termination of
Executive's employment hereunder for any reason whatsoever.
6. INTELLECTUAL PROPERTY. The Subsidiary shall be the sole owner of
all the products and proceeds of Executive's services hereunder, including,
without limitation, all materials, ideas, concepts, formats suggestions,
developments, arrangements, packages, programs and other intellectual property
that Executive may acquire, obtain, develop or create in connection with, and
during the Term of, Executive's employment hereunder, free and clear of any
claims by Executive or anyone claiming under Executive of any kind or character
whatsoever, other than Executive's right to receive payments hereunder.
Executive shall, at the reasonable request of the Subsidiary, execute such
assignments, certificates or other instruments as the Subsidiary from time to
time shall deem necessary or desirable to evidence, establish, maintain,
perfect, protect, enforce, or defend its right, title or interest in or to any
such properties.
7. REMEDY FOR BREACH. Executive agrees that the damage to the
Subsidiary resulting from any actual or threatened breach by Executive of any
of the covenants contained in Sections 4, 5 and 6 of this Agreement would be
immediate, irreparable and difficult to measure, and that money damages would
not be an adequate remedy. Therefore, Executive agrees that the Subsidiary
shall be entitled to specific performance of the covenants in any of such
sections or injunctive relief, by temporary or permanent injunction or other
appropriate judicial remedy, writ or order, or both, in addition to any damages
and legal expenses (including attorneys' fees) which the Subsidiary may be
legally entitled to recover.
8. MISCELLANEOUS. Any notice required hereunder shall be deemed
delivered to the Subsidiary when transmitted to the Secretary of the Subsidiary
by certified mail,
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postage prepaid, addressed to such person at the corporate headquarters of the
Subsidiary at 0000 Xxxxx Xxxxx Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxx 00000 (or the
principal place of business of the Subsidiary if hereafter it is moved), and
shall be deemed delivered to Executive when delivered by certified mail, postage
prepaid, addressed to Executive at 000 Xxxxxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxx
00000. No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel to enforce any provisions of this
Agreement, except by a statement in writing signed by the party against whom
enforcement of the waiver or estoppel is sought. This Agreement is made under,
and shall be governed by and construed in accordance with, the laws of the State
of Georgia without giving effect to the conflict of law provisions thereof. The
headings of the sections of this Agreement are included solely for convenience
of reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement. This Agreement contains the entire agreement of
the parties relating to the subject matter hereof and supersedes all prior and
contemporaneous agreements and understandings with respect to such subject
matter. No amendment or modification of this Agreement shall be deemed effective
unless made in a writing signed by the parties hereto. This Agreement is solely
for the benefit of the Subsidiary (and its affiliates) and Executive, and there
shall be no third party beneficiaries to this Agreement. This Agreement may not
be assigned by Executive. This Agreement shall inure to the benefit of the
Subsidiary, its subsidiaries and affiliates, and their respective successors and
assigns. To the extent any provision or any portion of any provision of this
Agreement shall be invalid or unenforceable, it shall be considered deleted
herefrom and the remainder of this Agreement shall be unaffected. The
obligations and covenants contained in Sections 2(f), 2(g), 2(h), 2(i), 2(j),
3(d) and 4 through 8 (inclusive) of this Agreement shall survive any termination
of Executive's employment hereunder at any time for any reason whatsoever.
IN WITNESS WHEREOF, the parties have duly executed and delivered this Agreement
as of the Effective Date.
"SUBSIDIARY": "EXECUTIVE":
SED INTERNATIONAL, INC.,
a Georgia corporation /s/ XXXXXXXX XXXXXX
--------------------------------
Xxxxxxxx Xxxxxx
By: /s/ XXXX XXXXXX
--------------------------------
Name and Title: Xxxx Xxxxxx VP OPS.
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