EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of this 20th day of October, 1999, by and between X. XXXXXXXX,
INC., a Delaware corporation (the "Employer"), and XXXXXX X. XXXXXX (the
"Employee").
WHEREAS, the Board of Directors of the Employer desires to
provide for the continued employment of the Employee as a member of the
Employer's management, in the best interest of the Employer and its
stockholders. The Employee is willing to commit himself continue to serve the
Employer, on the terms and conditions herein provided;
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants herein contained, the parties hereto agree as follows:
1. DEFINED TERMS
The definitions of capitalized terms used in this Agreement
(unless stated where first used) are provided in the last Section hereof.
2. EMPLOYMENT
The Employer hereby continues to employ the Employee as
Vice President-North American Manufacturing for the Employer, and the
Employee hereby accepts such continued employment upon the terms and
conditions herein contained.
3. DUTIES AND CONDITIONS OF EMPLOYMENT
3.1 DUTIES. The Employee shall devote his entire
business time, attention and energies to the Employer and shall not engage in
any conduct which shall reflect adversely upon the Companies. The Employee
shall perform such duties for the Companies as may be assigned to one in his
executive status and capacity by the Board. The Employee shall serve
diligently and to the best of his ability.
During his employment by the Employer, the Employee
shall not, without the Employer's prior written consent, be
engaged in any other business activity, whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, except that
notwithstanding the foregoing, he may invest his personal funds for his own
account; provided that such investment shall be passive and not controlling
in any such investment and subject to the provisions of Section 13.2 hereof
and provided further that he will not be required to provide any substantial
services on behalf of such enter prise. Notwithstanding the foregoing, the
Employee may serve on the Boards of Directors of other corporations during
the Term as long as such service does not interfere with the performance of
his duties hereunder.
3.2 CONDITIONS. The Employee shall be provided with
suitable office space, furnishings, secretarial and adminis trative
assistance. Without the Employee's consent, the Employee shall not be
required to report principally to an office located more than five hundred
(500) miles from his principal office at the date of this Agreement.
4. TERM OF AGREEMENT; TERMINATION OF EMPLOYMENT;
ESCROW DURING DISPUTE
4.1 TERM OF AGREEMENT. The Employer hereby employs the
Employee for a Term commencing as of the date hereof and ending October 20,
2002. At the end of November 1999 and at the end of each calendar month
thereafter up to and including the end of the calendar month in which the
Employee's 62nd birthday occurs, this Agreement shall automatically be
extended for one (1) month unless either party shall give notice to the other
of non-extension prior to the end of such calendar month; provided, however,
if a Change in Control shall have occurred during the Term of this Agreement,
Sections 7 and 8 and 10 through 20 of this Agreement shall continue in effect
until at least the end of the Change-in-Control Protective Period (whether or
not the Term of the Agreement shall have expired for other purposes).
4.2 TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN
CONTROL. Prior to any Change in Control, the Employer may terminate the
employment of the Employee for Cause pursuant to this Agreement. Prior to any
Change in Control, the Employee may terminate his employment pursuant to this
Agreement if the Employer fails to make full and timely payments of all sums
provided for in Sections 5 and 6 hereof (subject to Section 7.2 hereof), or
otherwise shall breach its covenants hereunder in any material respect.
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4.3 ESCROW DURING A TERMINATION DISPUTE. Prior to any
Change in Control, if the Employee shall be terminated for Cause, and, within
30 days of such termination, shall notify the Employer of his intention to
adjudicate such termination as improper, the Employer agrees that it will
deposit with KeyBank National Association, Cleveland, Ohio, as Escrow Agent
the in stallments of the Employee's Base Salary (as provided in Section 5
below) as the same would have become payable but for such termination. In the
event of a final adjudication by a tribunal of competent jurisdiction that
such termination was not for Cause, then the amounts so deposited in escrow,
plus any interest earned by the Escrow Agent thereon, shall be delivered
promptly to the Employee. If such adjudication shall be in favor of the
Employer, the Escrow Agent shall return the sums so deposited, plus such
interest, to the Employer.
The escrowed salary shall not be deemed to be liquidated
damages but the Employer shall be entitled to a credit against any such award
to the extent of the sums so delivered to the Employee.
5. COMPENSATION
The Employer agrees to pay to the Employee as compensation
for his services hereunder a Base Salary initially equal to the fixed annual
salary currently being paid to the Employee as shown on the Employer's
employment records, payable in substantially equal weekly, biweekly,
bimonthly or monthly installments, as the case may be, in the manner
currently being paid to the Employee. The Base Salary may be discretionarily
increased by the Board from time to time as the Board deems appropriate in
its reasonable business judgment. The Base Salary in effect from time to time
shall not be decreased during the Term (except as provided in Section 7.2).
It is understood and agreed that the Employee's
compensation may not be limited to his Base Salary and that the Employee may
receive an annual bonus in the amount, if any, determined annually by the
Employer.
The Employee shall also participate in employee
compensation and benefit plans available generally to executives of the
Employer (including, without limitation, any tax-qualified profit sharing
plan, nonqualified profit sharing plan, life insurance plan and health
insurance plan) on a level appropriate to his position and shall receive the
employee fringe benefits available generally to executives of the
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Employer (including, without limitation, the use of a company car).
6. EXPENSES
The Employee is authorized to incur reasonable expenses for
promoting the business of the Employer, including expenses for entertainment,
travel and similar items. The Employer shall reimburse the Employee for all such
expenses upon the presentation by the Employee, from time to time, of an
itemized account of such expenditures.
7. PRE-TERMINATION COMPENSATION; DISABILITY
7.1 NORMAL PRE-TERMINATION COMPENSATION. If the
Employee's employment shall be terminated for any reason during the Term (or,
if later, prior to the end of the Change-in-Control Protective Period), the
Employer shall pay the Employee's Base Salary to the Employee through the
Date of Termination at the rate in effect at the time the Notice of
Termination is given (subject to Section 7.2 hereof), together with all
compensation and benefits payable to the Employee through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Employer during such period. Subject to
Sections 8, 9, 10 and 11 hereof, after completing the expense reimbursements
required by Section 6 hereof and making the payments and providing the
benefits required by this Section 7, the Employer shall have no further
obligations to the Employee under this Agreement.
7.2 DISABILITY ADJUSTMENT TO BASE SALARY PAYMENTS.
During the Term (or, if later, at any time prior to the end of the
Change-in-Control Protective Period), during any period that the Employee
fails to perform the Employee's full-time duties with the Employer as a
result of incapacity due to physical or mental illness (but in no event for
more than twenty-four (24) months), the Employer shall pay only sixty percent
(60%) of the Employee's Base Salary to the Employee at the rate in effect at
the commencement of any such period (less amounts, if any, payable to the
Employee at or prior to the time of any such Base Salary payment under
disability benefit plans of the Employer or under the Social Security
disability insurance program). After six (6) months of Disability, the
Employer shall have the right to terminate the Employee's employment pursuant
to this Agreement and all Base Salary payments (except the sixty percent
(60%) payments pursuant to the foregoing sentence) shall cease. Except to the
extent
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provided in this Section 7.2, all Base Salary payments to the Employee shall
be abated during the period of Disability. Subject to Sections 8, 9, 10 and
11 hereof, after completing the expense reimbursements required by Section 6
hereof and making the payments and providing the benefits required by this
Section 7, the Employer shall have no further obligations to the Employee
under this Agreement.
8. NORMAL POST-TERMINATION PAYMENTS; CONTINUATION
PAY; TERMINATION PAY; PROMPT PAYMENT
8.1 NORMAL POST-TERMINATION PAYMENTS. If the
Employee's employment shall be terminated for any reason during the Term of
this Agreement (or, if later, prior to the end of the Change-in-Control
Protective Period), the Employer shall pay the Employee's normal
post-termination compensation and benefits to the Employee as such payments
become due. Subject to Section 10 hereof, such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
Employer's retirement, insurance and other compensation or benefit plans,
programs and arrangements (other than this Agreement).
8.2 CONTINUATION PAY; TERMINATION PAY. Notwith
standing anything to the contrary in Section 7.2, 9.1 or 10.1(A) hereof, if
the laws governing this Agreement shall require that the Employer continue to
pay or otherwise compensate the Employee for any period of time following
termination of the Employee's employment ("Continuation Pay") or if such laws
require certain amounts of severance pay, termination compensation or the
like (collectively, "Termination Pay"), then to the fullest extent permitted
by law any payments to the Employee pursuant to Section 7.2, 9.1 or 10.1(A)
hereof shall be included in the calculation of Continuation Pay and
Termination Pay and such payments shall be deducted from the amount of
Continuation Pay or Termination Pay due the Employee.
8.3 PROMPT PAYMENT. Any payments due under Section 5,
6, 7 or 9 hereof or this Section 8 shall be made promptly after the event
giving rise to the obligation and shall be made to the Employee or in
accordance with Section 14.2 hereof, as the case may be.
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9. POST-TERMINATION PAYMENTS UPON TERMINATION (PRIOR
TO A CHANGE IN CONTROL) BY DEATH OR BY THE EMPLOYER WITHOUT CAUSE
9.1 DEATH BENEFIT. If the Employee's employment shall
be terminated by death during the Term (or, if later, prior to the end of the
Change-in-Control Protective Period), then, in addition to the compensation
and benefits provided by Sections 7.1 and 8 hereof, the Employer shall pay a
lump sum amount equal to sixty percent (60%) of the Base Salary for
twenty-four (24) months in accordance with Section 14.2.
9.2 TERMINATION BY THE EMPLOYER WITHOUT CAUSE. If the
Employer shall terminate the Employee's employment during the Term and prior
to a Change in Control, without Cause (and not for Disability or in
connection with the Employee's death), the Employer shall pay the Employee
his Base Salary throughout the remaining Term and annual bonuses during the
remaining Term, each of which bonuses shall be equal to one-half (1/2) times
the average annual bonus paid to the Employee during the most recent five (5)
calendar years of the Employee's employ ment by any of the Companies
(prorated for any partial years in the remaining Term).
10. SEVERANCE PAYMENTS; DEDUCTIBILITY.
10.1 SEVERANCE PAYMENTS.
Subject to Section 10.2 hereof, the Employer shall pay the
Employee the payments described in this Section 10.1 (the "Severance
Payments") upon the termination of the Employee's employment following a
Change in Control and prior to the end of the Change-in-Control Protective
Period, in addition to any payments and benefits to which the Employee is
entitled under Sections 5, 6, 7 and 8.1 hereof, unless such termination is
(i) by the Employer for Cause, (ii) by reason of death or Disability, or
(iii) by the Employee without Good Reason. For purposes of this Agreement,
the Employee's employment shall be deemed to have been terminated by the
Employer without Cause following a Change in Control or by the Employee with
Good Reason following a Change in Control, as the case may be, if (i) the
Employee's employment is terminated without Cause prior to a Change in
Control and such termination was at the request or direction of a Person who
has entered into an agreement with the Employer the consummation of which
would constitute a Change in Control, (ii) the Employee terminates his
employment with Good Reason prior to a Change in Control and the circum-
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stance or event which constitutes Good Reason occurs at the request or
direction of such Person, or (iii) the Employee's employment is terminated by
the Employer without Cause prior to a Change in Control (but following a
Potential Change in Control) and such termination is otherwise in connection
with or in anticipation of a Change in Control which actually occurs. For
purposes of any determination regarding the applica bility of the immediately
preceding sentence, any position taken by the Employee shall be presumed to
be correct unless the Employer establishes to the Committee by clear and
convincing evidence that such position is not correct.
(A) In lieu of any further salary payments
to the Employee for periods subsequent to the Date of Termination and
in lieu of any severance benefit otherwise payable to the Employee, the
Employer shall pay to the Employee a lump sum severance payment, in
cash, equal to three (3) times the sum of (i) the higher of the Em
ployee's Base Salary in effect immediately prior to the occurrence of
the event or circumstance upon which the Notice of Termination is based
or the Employee's Base Salary in effect immediately prior to the Change
in Control, and (ii) the higher of the annual bonus earned by the
Employee in respect of the Employer's fiscal year immediately preceding
that in which the Date of Termina tion occurs or the average annual
bonus so earned in respect of the three fiscal years immediately
preceding that in which the Change in Control occurs.
(B) Notwithstanding any provision of any
annual incentive plan to the contrary, the Employer shall pay to the
Employee a lump sum amount, in cash, equal to the sum of (i) any annual
incentive compensation which has been allocated or awarded to the
Employee for a completed fiscal year preceding the Date of Termination
and which, as of the Date of Termination, is contingent only upon the
continued employment of the Employee to a subsequent date, and (ii) a
pro rata portion to the Date of Termination of a deemed annual bonus
for the Employer's fiscal year in which the Date of Termination occurs,
calculated by multiplying (i) the higher of the annual bonus earned by
the Employee with respect to the immediately preceding fiscal year or
the average annual bonus earned by the Employee with respect to the
immediately preceding three fiscal years of the Employer by (ii) the
fraction obtained by dividing the number of days in the fiscal year of
the
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Employer in which termination occurs up to and including the Date of
Termination by 365.
(C) For the thirty-six (36) month period
immediately following the Date of Termination, the Employer shall
arrange to provide the Employee with life, disability, accident and
health insurance benefits substantially similar to those which the
Employee is receiving immediately prior to the Notice of Termination
(without giving effect to any amendment to such benefits made
subsequent to a Change in Control, which amendment adversely affects
in any manner the Employee's entitlement to or the amount of such
benefits); PROVIDED, HOWEVER, that, unless the Employee consents to a
different method (after taking into account the effect of such method
on the calculation of "parachute payments" pursuant to Section 10.2
hereof), such health insurance benefits shall be provided through a
third-party insurer. Benefits other wise receivable by the Employee
pursuant to this Section 10.1(C) shall be reduced to the extent
comparable benefits are actually received by or made available to the
Employee without cost during the thirty-six (36) month period fol
lowing the Employee's termination of employment (and any such benefits
actually received by or made available to the Employee shall be
reported to the Employer by the Employee). If the Severance Payments
shall be decreased pursuant to Section 10.2 hereof, and the Section
10.1(C) benefits which remain payable after the application of Section
10.2 hereof are thereafter reduced pursuant to the immediately
preceding sentence because of the receipt or availability of comparable
benefits, the Employer shall, at the time of such reduction, pay to the
Employee the least of (a) the amount of the decrease made in the Sever
ance Payments pursuant to Section 10.2 hereof, (b) the amount of the
subsequent reduction in these Section 10.1(C) benefits, or (c) the
maximum amount which can be paid to the Employee without being, or
causing any other payment to be, nondeductible by reason of section
280G of the Code.
10.2 DEDUCTIBILITY.
(A) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received or to be
received by the Employee in connection with a Change in Control or the
termination of the Employee's employment (whether pursuant to the terms of
this Agreement or any other plan,
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arrangement or agreement with the Employer, any Person whose actions result
in a Change in Control or any Person affiliated with the Employer or such
Person) (all such payments and bene fits, including the Severance Payments,
being hereinafter called "Total Payments") would not be deductible (in whole
or part), by the Employer, an affiliate or Person making such payment or
providing such benefit as a result of section 280G of the Code, then, to the
extent necessary to make such portion of the Total Payments deductible (and
after taking into account any reduction in the Total Payments provided by
reason of section 280G of the Code in such other plan, arrangement or
agreement), the cash Severance Payments shall first be reduced (if necessary,
to zero), and the noncash Severance Payments shall thereafter be reduced (if
necessary, to zero); PROVIDED, HOWEVER, that the Employee may elect (at any
time prior to the delivery of a Notice of Termination hereunder) to have the
non cash Severance Payments reduced (or eliminated) prior to any reduction of
the cash Severance Payments.
(B) For purposes of this limitation, (i) no portion of
the Total Payments the receipt or enjoyment of which the Employee shall have
effectively waived in writing prior to the delivery of a Notice of
Termination shall be taken into ac count, (ii) no portion of the Total
Payments shall be taken into account which in the opinion of tax counsel (the
"Tax Counsel") reasonably acceptable to the Employee and selected by the
accounting firm which was, immediately prior to the Change in Control, the
Employer's independent auditor (the "Auditor") does not constitute a
"parachute payment" within the meaning of section 280G(b)(2) of the Code,
including by reason of section 280G(b)(4)(A) of the Code, (iii) the Severance
Payments shall be reduced only to the extent necessary so that the Total
Payments (other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually rendered
within the meaning of section 280G(b)(4)(B) of the Code or are otherwise not
subject to disallowance as deductions by reason of section 280G of the Code,
in the opinion of the Tax Counsel, and (iv) the value of any noncash benefit
or any deferred payment or benefit included in the Total Payments shall be
determined by the Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
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(C) If it is established pursuant to a final deter-
mination of a court or an Internal Revenue Service proceeding that,
notwithstanding the good faith of the Employee and the Employer in applying
the terms of this Section 10.2, the aggregate "parachute payments" paid to or
for the Employee's benefit are in an amount that would result in any portion
of such "parachute payments" not being deductible by reason of section 280G
of the Code, then the Employee shall have an obligation to pay the Employer
upon demand an amount equal to the sum of (i) the excess of the aggregate
"parachute payments" paid to or for the Employee's benefit over the aggregate
"parachute payments" that could have been paid to or for the Employee's
benefit without any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code; and (ii) interest on the
amount set forth in clause (i) of this sentence at one hundred twenty percent
(120%) of the rate provided in section 1274(b)(2)(B) of the Code from the
date of the Employee's receipt of such excess until the date of such payment.
10.3 The payments provided in Sections 10.1(A) and (B)
hereof shall be made not later than the fifth day following the Date of
Termination; PROVIDED, HOWEVER, that if the amounts of such payments, and the
limitation on such payments set forth in Section 10.2 hereof, cannot be
finally determined on or before such day, the Employer shall pay to the
Employee on such day an estimate, as determined in good faith by the
Employer, in accordance with Section 10.2 hereof, of the minimum amount of
such payments to which the Employee is clearly entitled and shall pay the
remainder of such payments (together with interest at one hundred twenty
percent (120%) of the rate provided in section 1274(b)(2)(B) of the Code) as
soon as the amount thereof can be determined but in no event later than the
thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the Employer to the
Employee, payable on the fifth (5th) business day after demand by the
Employer (together with interest at one hundred twenty percent (120%) of the
rate provided in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Section, the Employer shall provide the Employee
with a written state ment setting forth the manner in which such payments
were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Employer has received from
outside counsel, auditors or consultants (and any such opinions or advice
which are in writing shall be
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attached to the statement). In the event the Employer should fail to pay when
due the amounts described in Sections 10.1(A), (B) and (C) hereof or in
Section 10.2 hereof, the Employee shall also be entitled to receive from the
Employer an amount representing interest on any such unpaid amounts from the
due date, as determined under this Section 10.3 (without regard to any
extension of the Date of Termination pursuant to Section 11.3 hereof), to the
date of payment at one hundred twenty percent (120%) of the rate provided in
section 1274(b)(2)(B) of the Code.
10.4 The Employer also shall pay to the Employee all
legal fees and expenses incurred by the Employee (i) in disputing in good
faith any issue relating to the termination of the Employee's employment
following a Change in Control and prior to the end of the Change-in-Control
Protective Period, (ii) in seeking in good faith to obtain or enforce any
benefit or right provided by this Agreement, or (iii) in connection with any
tax audit or proceeding to the extent attributable to the applica tion of
section 4999 of the Code to any payment or benefit provided hereunder. Such
payments shall be made within five (5) business days after delivery of the
Employee's written requests for payment accompanied with such evidence of
fees and expenses incurred as the Employer reasonably may require.
11. TERMINATION PROCEDURES AND COMPENSATION DURING
DISPUTE.
11.1 NOTICE OF TERMINATION. During the Term (and, if
longer, until the end of the Change-in-Control Protective Period), any
purported termination of the Employee's employment (other than by reason of
death) shall be communicated by written Notice of Termination from one party
hereto to the other party hereto in accordance with Section 15 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Employee's
employment under the provision so indicated. Further, with respect to any
purported termination of the Employee's employment after a Change in Control
and prior to the end of the Change-in-Control Protective Period, a Notice of
Termination for Cause is re quired to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which was called and
held for the purpose of considering such termi-
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nation (after reasonable notice to the Employee and an opportunity for the
Employee, together with the Employee's counsel, to be heard before the Board)
finding that, in the good faith opinion of the Board, the Employee was guilty
of conduct set forth in clause (i) or (ii) of the definition of Cause herein,
and specifying the particulars thereof in detail.
11.2 DATE OF TERMINATION. "Date of Termination," with
respect to any purported termination of the Employee's employment during the
Term (and, if longer, prior to the end of the Change-in-Control Protective
Period), shall mean (i) if the Employee's employment is terminated for
Disability, thirty (30) days after Notice of Termination is given (provided
that the Employee shall not have returned to the full-time performance of the
Employee's duties during such thirty (30) day period), and (ii) if the
Employee's employment is terminated for any other reason, the date specified
in the Notice of Termination (which, in the case of a termination by the
Employer, shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the Employee,
shall not be less than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
11.3 DISPUTE CONCERNING TERMINATION. With respect to
any purported termination of the Employee's employment after a Change in
Control and prior to the end of the Change-in-Control Protective Period, if
within fifteen (15) days after any Notice of Termination is given, or, if
later, prior to the Date of Termination (as determined without regard to this
Section 11.3), the party receiving such Notice of Termination notifies the
other party that a dispute exists concerning the termination, the Date of
Termination shall be extended until the date on which the dispute is finally
resolved, either by mutual written agreement of the parties or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom has expired
and no appeal has been perfected); PROVIDED, HOWEVER, that the Date of
Termination shall be extended by a notice of dispute given by the Employee
only if such notice is given in good faith and the Employee pursues the
resolution of such dispute with reasonable diligence.
11.4 COMPENSATION DURING DISPUTE. If a purported
termination occurs following a Change in Control and prior to the end of the
Change-in-Control Protective Period and the Date of Termination is extended
in accordance with Section 11.3
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hereof, the Employer shall continue to pay the Employee the full compensation
in effect when the notice giving rise to the dispute was given (including,
but not limited to, salary) and continue the Employee as a participant in all
compensation, benefit and insurance plans in which the Employee was partici
pating when the notice giving rise to the dispute was given, until the Date
of Termination, as determined in accordance with Section 11.3 hereof. Amounts
paid under this Section 11.4 are in addition to all other amounts due under
this Agreement (other than those due under Section 7.1 hereof) and shall not
be offset against or reduce any other amounts due under this Agreement.
12. NO MITIGATION
The Employer agrees that, if the Employee's employment
with the Employer terminates following a Change in Control and prior to the
end of the Change-in-Control Protective Period, the Employee is not required
to seek other employment or to attempt in any way to reduce any amounts
payable to the Employee by the Employer pursuant to Section 10 hereof or
Section 11.4 hereof. Further, the amount of any payment or benefit provided
for in this Agreement (other than Section 10.1(C) hereof) shall not be
reduced by any compensation earned by the Employee as the result of
employment by another employ er, by retirement benefits, by offset against
any amount claimed to be owed by the Employee to the Employer, or other wise.
13. CONFIDENTIALITY; NON-COMPETITION AND NON-SOLICI-
TATION
13.1 CONFIDENTIALITY. The Companies' methods, plans for
doing business, processes, pricing, compounds, customers and supplies are
vital to the Companies and, to the extent not made public by the Companies,
constitute confidential information subject to the Companies' proprietary
rights therein. The Employee covenants and agrees that during the Term and at
all times thereafter, the Employee will not, directly or indirectly, make
known, divulge, furnish, make available or use, otherwise than in the regular
course of the Employee's employ ment by the Employer, any invention, product,
process, apparatus or design of any of the Companies, or any knowledge or
information in respect thereof (including, but not limited to, business
methods and techniques), or any other confidential or so-called "insider"
information of any of the Companies. This
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covenant shall apply without regard to the time or circumstances of any
termination of the Employee's employment.
13.2 NON-COMPETITION AND NON-SOLICITATION. The Employee
covenants and agrees that during the period of one (1) year following any
termination of the Employee's employment which occurs prior to a Change in
Control, the Employee will not, directly or indirectly, either as an
individual for the Employee's own account or as an investor, or other
participant in, or as an employee, agent, or representative of, any other
business enterprise:
(i) solicit, employ, entice, take away or interfere with,
or attempt to solicit, employ, entice, take away or
interfere with, any employee of the Employer or the
Companies; or
(ii) engage or participate in or finance, aid or be
connected with any enterprise which competes with the
business of the Companies, or any of them.
The geographical limitations of the foregoing shall include any country in which
the Companies or any of them shall be doing business as of such date of such
termination. This covenant shall apply without regard to the circumstances of
any termina tion of the Employee's employment which occurs prior to a Change in
Control.
13.3 The Employee acknowledges that the covenants
contained in this Section 13 are of the essence of this Agree ment and said
covenants shall be construed as independent of any other provisions of this
Agreement. Recognizing the irreparable nature of the injury that could result
from the Employee's violation of any of the covenants and agreement to be
performed and/or observed by the Employee pursuant to the provisions of this
Section 13, and that damages would be inadequate compensation, it is agreed
that any violations by the Employee of the provisions of this Section 13,
shall be the proper subject for immediate injunctive and other equitable
relief to the Employer.
14. SUCCESSORS; BINDING AGREEMENT
14.1 In addition to any obligations imposed by law upon
any successor to the Employer, the Employer will require any successor
(whether direct or indirect, by purchase, merger,
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consolidation or otherwise) to all or substantially all of the business
and/or assets of the Employer to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Employer would
be required to perform it if no such succession had taken place. Failure of
the Employer to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Employee to compensation from the Employer in the same
amount and on the same terms as the Employee would be entitled to hereunder
if the Employee were to terminate the Employee's employment for Good Reason
after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. Except as provided in this Section 14.1, this
Agreement shall not be assignable by either party without the written consent
of the other party hereto.
14.2 This Agreement shall inure to the benefit of and
be enforceable by the Employee's personal or legal repre sentatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Employee shall die while any amount would still be payable
to the Employee hereunder (other than amounts which, by their terms,
terminate upon the death of the Employee) if the Employee had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Employee's estate.
15. NOTICES
For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to the
Employee, to the address shown for the Employee in the personnel records of the
Employer and, if to the Employer, to the address set forth below, or to such
other address as either party may have fur nished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon actual receipt:
15
To the Employer:
Xxxxxx X. Xxxxxxxx
Chief Financial Officer and Executive
Vice President-Finance and Administration
X. Xxxxxxxx, Inc.
P. O. Xxx 0000
Xxxxx, Xxxx 00000-0000
With a copy to:
Xxxxx X. Xxxxxx, Esq.
Berick, Xxxxxxxx & Xxxxx Co., L.P.A.
1350 Xxxxx Center
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, Xxxx 00000-0000
16. MISCELLANEOUS
No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Employee and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dis similar provisions or conditions at the
same or at any prior or subsequent time. This Agreement supersedes the
Employment Agreement between the Employer and the Employee dated as of
December 28, 1990 and any other agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof
which have been made by either party, except as expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Ohio. All refer ences
to sections of the Exchange Act or the Code shall be deemed also to refer to
any successor provisions to such sec tions. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law and any additional withholding to which the
Employee has agreed. The obligations of the Employer and the Employee under
this Agreement which by their nature may require (partial or total)
performance after the expiration of the Term or the Change-in-Control
Protective Period (including, without limitation, those under Sections 5
through 11 and Section 13 hereof) shall survive such expiration.
16
17. VALIDITY
The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
18. COUNTERPARTS
This Agreement may be executed in several counter parts,
each of which shall be deemed to be an original but all of which together
will constitute one and the same instrument.
19. SETTLEMENT OF DISPUTES AFTER CHANGE IN CONTROL;
ARBITRATION
After a Change in Control and prior to the end of the
Change-in-Control Protective Period, all claims by the Employee for benefits
under this Agreement shall be directed to and determined by the Committee and
shall be in writing. Any denial by the Committee of a claim for benefits
under this Agreement shall be delivered to the Employee in writing and shall
set forth the specific reasons for the denial and the specific provisions of
this Agreement relied upon. The Commit tee shall afford a reasonable
opportunity to the Employee for a review of the decision denying a claim and
shall further allow the Employee to appeal to the Committee a decision of the
Committee within sixty (60) days after notification by the Committee that the
Employee's claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Akron, Ohio, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdic tion. Notwithstanding any
provision of this Agreement to the contrary, the Employee shall be entitled
to seek specific per formance of the Employee's right to be paid until the
Date of Termination during the pendency of any dispute or controversy arising
under or in connection with this Agreement.
20. DEFINITIONS
For purposes of this Agreement, the following terms shall
have the meanings indicated below:
(A) "Beneficial Owner" shall have the meaning set forth
in Rule 13d-3 under the Exchange Act.
17
(B) "Board" shall mean the Board of Directors of the
Employer.
(C) "Cause" for termination by the Employer of the
Employee's employment shall mean the following:
(I) with respect to a termination as to
which the Notice of Termination is duly given prior to a
Change in Control, the Employee's breach of his covenants
herein contained, the Employee's gross neglect of his duties
hereunder, the Employee's knowingly committing misfeasance or
knowingly permitting nonfeasance of his duties in any material
respect, or the Employee's committing a felony; and
(II) with respect to a termination as to
which the Notice of Termination is duly given following a
Change in Control, (i) the willful and continued failure by
the Employee to substantially perform the Employee's duties
with the Employer (other than any such failure resulting from
the Employee's incapacity due to physical or mental illness
or any such actual or anticipated failure after the issuance
of a Notice of Termination for Good Reason by the Employee
pursuant to Section 11.1 hereof) after a written demand for
substantial performance is delivered to the Employee by the
Board, which demand specifically identifies the manner in
which the Board believes that the Employee has not
substantially performed the Employee's duties, or (ii) the
willful engaging by the Employee in conduct which is
demonstrably and materially injurious to the Employer or its
subsid iaries, monetarily or otherwise. For purposes of
clauses (i) and (ii) of this definition, (x) no act, or
failure to act, on the Employee's part shall be deemed
"willful" unless done, or omitted to be done, by the Employee
not in good faith and without reason able belief that the
Employee's act, or failure to act, was in the best interest of
the Employer and (y) in the event of a dispute concerning the
application of this provision, no claim by the Employer that
Cause exists shall be given effect unless the Emplo yer
establishes to the Committee by clear and convincing evidence
that Cause exists.
18
(D) A "Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(I) any Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Employer
(not including in the securities beneficially owned by such
Person any securities acquired directly from the Employer or
its affiliates other than in connection with the acquisition
by the Employer or its affiliates of a business) representing
25% or more of either the then outstanding shares of common
stock of the Employer or the combined voting power of the
Employer's then outstanding securities; or
(II) the following individuals cease for any
reason to constitute a majority of the number of directors
then serving: individuals who, on the date hereof, constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors
of the Employer) whose appointment or election by the Board
or nomination for election by the Employer's stockholders was
approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors on
the date hereof or whose appointment, election or nomination
for election was previously so approved; or
(III) the stockholders of the Employer
approve a merger or consolidation of the Employer with any
other corporation or approve the issuance of voting
securities of the Employer in connection with a merger or
consolidation of the Employer (or any direct or indirect
subsidiary of the Employer) pursu ant to applicable stock
exchange requirements, other than (i) a merger or
consolidation which would result in the voting securities
of the Employer outstanding immediately prior to such
merger or consolidation continuing to represent (either by
remaining out standing or by being converted into voting
securities of the surviving entity or any parent thereof),
in combination with the ownership of any trustee or other
fiduciary holding securities under an employee
19
benefit plan of the Employer or any subsidiary of the
Employer, at least 75% of the combined voting power of the
voting securities of the Employer or such surviving entity or
any parent thereof outstanding imme diately after such merger
or consolidation, or (ii) a merger or consolidation effected
to implement a recapitalization of the Employer (or similar
transac tion) in which no Person is or becomes the Beneficial
Owner, directly or indirectly, of securities of the Employer
(not including in the securities Beneficial ly Owned by such
Person any securities acquired directly from the Employer or
its subsidiaries other than in connection with the acquisition
by the Employer or its subsidiaries of a business)
representing 25% or more of either the then outstanding shares
of common stock of the Employer or the combined voting power
of the Employer's then outstanding securities; or
(IV) the stockholders of the Employer
approve a plan of complete liquidation or dissolution of
the Employer or an agreement for the sale or disposition by
the Employer of all or substantially all of the Employer's
assets, other than a sale or disposition by the Employer of
all or substantially all of the Employer's assets to an
entity, at least 75% of the combined voting power of the
voting securities of which are owned by stockholders in
substantially the same proportions as their ownership of
the Employer immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall
be deemed to have occurred if there is consummated any transaction or series
of integrated transactions immediately following which the record holders of
the common stock of the Employer immediately prior to such transaction or
series of transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the assets of
the Employer immediately following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or
transaction which would otherwise constitute a Change in Control (a
"Transaction") shall not constitute a Change in Control for purposes of this
Agreement if, in connection with the Transaction, the Employee participates
as an equity investor in the acquiring entity or any of its affiliates (the
20
"Acquiror"). For purposes of the preceding sentence, the Employee shall not be
deemed to have participated as an equity investor in the Acquiror by virtue of
(i) obtaining beneficial ownership of any equity interest in the Acquiror as a
result of the grant to the Employee of an incentive compensation award under one
or more incentive plans of the Acquiror (including, but not limited to, the
conversion in connection with the Transaction of incentive compensation awards
of the Employer into incentive compensation awards of the Acquiror), on terms
and conditions substantially equivalent to those applicable to other executives
of the Employer immediately prior to the Transaction, after taking into account
normal differences at tributable to job responsibilities, title and similar
matters, (ii) obtaining beneficial ownership of any equity interest in the
Acquiror on terms and conditions substantially equivalent to those obtained in
the Transaction by all other stockholders of the Employer, or (iii) passive
ownership of less than three percent (3%) of the stock of the Acquiror.
(E) "Change-in-Control Protective Period" shall mean
the period from the occurrence of a Change in Control until the later of the
second anniversary of such Change in Control or, if such Change in Control
shall be caused by the stockholder approval of a merger or consolidation
described in Section 20(E)(III) hereof, the second anniversary of the
consummation of such merger or consolidation.
(F) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(G) "Committee" shall mean (i) the individuals (not
fewer than three in number) who, immediately prior to a Potential Change in
Control, constitute the Compensation Committee of the Board, plus (ii) in the
event that fewer than three individuals are available from the group
specified in clause (i) above for any reason, such individuals as may be
appointed by the individual or individuals so available (including for this
purpose any individual or individuals previously so appointed under this
clause (ii)); provided, however, that the maximum number of individuals
constituting the Committee shall not exceed five.
(H) "Companies" shall mean, collectively, the Employer
and each corporation which is now and hereafter shall become a subsidiary of,
or a parent of, the Employer, together with their respective successors and
assigns.
21
(I) "Continuation Pay" shall mean those payments so
described in Section 8.2 hereof.
(J) "Date of Termination" shall have the meaning
stated in Section 11.2 hereof.
(K) "Disability" shall be deemed the reason for the
termination by the Employer of the Employee's employment, if, as a result of
the Employee's incapacity due to physical or mental illness, the Employee
shall have been absent from the full-time performance of the Employee's
duties with the Employer for a period of six (6) consecutive months, the
Employer shall have given the Employee a Notice of Termination for
Disability, and, within thirty (30) days after such Notice of Termination is
given, the Employee shall not have returned to the full-time performance of
the Employee's duties.
(L) "Employee" shall mean the individual named in the
first paragraph of this Agreement.
(M) "Employer" shall mean X. Xxxxxxxx, Inc. and,
except in determining under Section 20(E) hereof whether or not any Change in
Control of the Employer has occurred, any successor to its business and/or
assets which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(N) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
(O) "Good Reason" for termination by the Employee of
the Employee's employment shall mean the occurrence (without the Employee's
express prior written consent) after any Change in Control, or after any
Potential Change in Control under the circumstances described in the second
sentence of Section 10.1 hereof (treating all references in paragraphs (I)
through (VII) below to a "Change in Control" as references to a "Potential
Change in Control"), of any one of the following acts by the Employer, or
failures by the Employer to act, unless, in the case of any act or failure to
act described in paragraph (I), (V), (VI) or (VII) below, such act or failure
to act is cor rected prior to the Date of Termination specified in the Notice
of Termination given in respect thereof:
(I) the assignment to the Employee of any
duties inconsistent with the Employee's status as an executive
officer of the Employer or a substantial adverse alteration in
the nature or status of the
22
Employee's responsibilities from those in effect immediately
prior to the Change in Control (other than any such alteration
primarily attributable to the fact that the Employer may no
longer be a public company);
(II) a reduction by the Employer in the
Employee's annual base salary as in effect on the date hereof
or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all
executives of the Employer and all executives of any Person in
control of the Employer;
(III) the relocation of the Employer's
principal executive offices to a location more than fifty (50)
miles from the location of such offices immediately prior to
the Change in Control or the Employer's requiring the Employee
to be based any where other than the Employer's principal
executive offices except for required travel on the Employer's
business to an extent substantially consistent with the
Employee's present business travel obligations;
(IV) the failure by the Employer, without
the Employee's consent, to pay to the Employee any portion of
the Employee's current compensation, or to pay to the Employee
any portion of an installment of deferred compensation under
any deferred compensation program of the Employer, within
seven (7) days of the date such compensation is due;
(V) the failure by the Employer to contin ue
in effect any compensation plan in which the Employee
participates immediately prior to the Change in Control which
is material to the Employee's total compensation, including
but not limited to the Employer's 1991 Stock Incentive Plan
and Nonqualified Profit Sharing Plan or any substitute plans
adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure
by the Employer to continue the Employee's participation
therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the
amount of benefits provided and the level of the Employee's
23
participation relative to other participants, as existed at
the time of the Change in Control;
(VI) the failure by the Employer to
continue to provide the Employee with benefits
substantially similar to those enjoyed by the Employee
under any of the Employer's pension, life insurance,
medical, health and accident, or disability plans in which
the Employee was participating at the time of the Change in
Control, the taking of any action by the Employer which
would directly or indirectly materially reduce any of such
benefits or deprive the Employee of any material fringe
benefit enjoyed by the Employee at the time of the Change
in Control, or the failure by the Employer to provide the
Employee with the number of paid vacation days to which the
Employee is entitled on the basis of years of service with
the Employer in accordance with the Employer's normal
vacation policy in effect at the time of the Change in
Control; or
(VII) any purported termination of the
Employee's employment which is not effected pursuant to a
Notice of Termination satisfying the require ments of Section
11.1 hereof; for purposes of this Agreement, no such purported
termination shall be effective.
The Employee's right to terminate the Employee's employment
for Good Reason shall not be affected by the Employee's incapacity due to
physical or mental illness. The Employee's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Employee that Good Reason exists shall be presumed
to be correct unless the Employer establishes to the Committee by clear and
convincing evidence that Good Reason does not exist.
(P) "Notice of Termination" shall have the meaning
stated in Section 11.1 hereof.
(Q) "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not
24
include (i) the Employer or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Employer
or any of its subsidiaries, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Employer in
substantially the same proportions as their ownership of stock of the
Employer.
(R) "Potential Change in Control" shall be deemed to
have occurred if the event set forth in any one of the follow ing paragraphs
shall have occurred:
(1) the Employer enters into an agreement,
the consummation of which would result in the occur rence of a
Change in Control;
(2) the Employer or any Person publicly
announces an intention to take or to consider taking actions
which, if consummated, would constitute a Change in Control;
(3) any Person becomes the Beneficial Owner,
directly or indirectly, of securities of the Employer
representing 15% or more of either the then outstanding shares
of common stock of the Employer or the combined voting power
of the Employer's then out standing securities; or
(4) the Board adopts a resolution to the
effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
(S) "Severance Payments" shall mean those payments
described in Section 10.1 hereof.
(T) "Term" shall mean the period of time described in
Section 4.1 hereof (including any extension or continuation described
therein).
25
(U) "Termination Pay" shall mean those payments so
described in Section 8.2 hereof.
(V) "Total Payments" shall mean those payments
described in Section 10.2 hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed (the corporate signatory by the respective officer
duly authorized) as of the day and year first above written.
\s\ Xxxxxx X. Xxxxxx
------------------------------------------
Xxxxxx X. Xxxxxx
X. XXXXXXXX, INC.
By \s\ Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx, Secretary
By \s\ X. X. Xxxxxxxx
----------------------------------------
X. X. Xxxxxxxx, Executive Vice President
26
