Exhibit 10.18
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, effective as of October 17, 2002, by and between
XXXXXXX INDUSTRIES, INC., a Delaware corporation having its principal address
at 0000 Xxxxxxxxxx Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxx 00000 (the
"Employer"), and XXXX X. XXXXX, an individual residing at 0000 Xxxxxxxx Xxxx,
Xxxxxxxxxx, Xxxxxxxxx 00000(xxx "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been employed by the Employer in several
capacities since March 9, 1990, and currently as Vice President and Chief
Financial Officer; and
WHEREAS, the parties desire to provide for the ongoing employment of the
Executive by the Employer as set forth in this Agreement;
NOW THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the Executive and the Employer hereby agree as follows:
1. Term of Employment.
The Employer agrees to employ the Executive, and the Executive hereby
accepts such employment, as Vice President and Chief Financial Officer of the
Employer, for a rolling three-year term. This Agreement shall commence as of
the date hereof, and be automatically extended so that the unexpired term on
any date is always three years (the "Employment Period"), until such time as
either party gives written notice to the other party of its election not to
extend such term. The Employment Period shall end three years from the date
on which such notice is given unless it is terminated earlier as provided in
Section 4 hereof.
2. Duties and Authority.
During the Employment Period the Executive shall serve as Vice President
and Chief Financial Officer of the Employer. The Executive shall devote his
best efforts and full working time and attention to services for the
Employer. The Executive agrees to hold any additional office or position
with the Employer or any of the Employer's subsidiaries without additional
compensation if elected or appointed to such office or position.
3. Compensation.
a. As compensation for the Executive's services in all capacities during
the Employment Period, the Employer shall pay the Executive the following:
i. a base salary at a rate of $240,000 per annum to be paid in
equal installments in accordance with normal payroll practices of the
Employer but not less frequently than monthly, provided that in each
subsequent calendar year or part thereof during which the Executive is
employed commencing in 2003, the Executive's base salary shall be adjusted
upward annually from the Executive's current base salary at a rate
commensurate with increases granted to other key executives (the "Base
Salary").
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ii. a discretionary annual cash incentive bonus (the "Bonus") for
each calendar year or part thereof during which the Executive is employed,
the amount of such bonus to be consistent with the executive bonus program
which the Employer establishes for other key executives.
b. The Executive shall be entitled to reimbursement for reasonable
business and travel expenses incurred in the performance of his duties in
accordance with the Employer's normal reimbursement practices.
c. Subject to the terms of the applicable plan and/or program, the
Executive shall participate in all bonus, incentive, stock option, pension,
disability and health plans and programs and all fringe benefits plans
maintained by or on behalf of the Employer and in which senior executives of
the Employer are entitled to participate.
d. Subject to Section 4(c) herein, the Executive's existing stock
options with respect to the Employer's common stock shall continue to be
governed by and subject to the terms and conditions set forth in the
respective option agreements.
4. Termination of Employment.
a. The Executive's employment hereunder shall terminate upon the
Executive's death, and the Employer shall have the right to terminate the
Executive's employment upon his permanent disability. A permanent disability
is a physical or mental disability which results in the Executive's inability
to substantially perform his duties hereunder for a period of 180 consecutive
days or for a period of 200 days within any period of 12 consecutive months,
except that a permanent disability shall not include a physical or mental
disability which occurs in connection with the Executive's employment
hereunder. In the event of termination by reason of death or permanent
disability, the Employer's obligation to pay further compensation hereunder
shall cease on the date of termination, except that the Executive (or, in the
case of death, his beneficiaries, or his estate if no beneficiary has been
named) shall be entitled to receive his Base Salary and Bonus prorated on a
calendar day basis through the date of such termination.
b. The Employer may terminate the Executive's employment hereunder for
Cause (as defined below) upon not less than 30 days prior written notice
specifying such Cause. For purposes of this Agreement, the term "Cause" shall
mean (i) the Executive's willful and continued failure to substantially
perform his duties hereunder, (ii) the engaging by the Executive in willful
misconduct which is demonstrably and materially injurious to the Employer, or
(iii) the Executive's conviction of a felony for a crime of moral turpitude.
For purposes of this Section 4(b), no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action
or omission was in the best interest of the Employer. The Executive shall
not be terminated for Cause in the case of actions or omissions described in
clauses (i) or (ii) of this Section 4(b) unless the Employer shall have given
the Executive an opportunity to cure any such actions or omissions during the
30-day period after the Executive's receipt of written notice required under
this Section 4(b).
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c. The Executive's employment hereunder may be terminated by the
Employer without Cause upon not less than 90 days prior written notice or by
the Executive for "Good Reason" (as defined below) upon not less than 10 days
prior written notice. In such event, (i) the Executive shall continue to
receive his then current Base Salary otherwise payable pursuant to Section 3
hereof as if his employment had continued for the remainder of the Employment
Period and an annual bonus for the remainder of the Employment Period equal
to the average Bonus for the three calendar years immediately preceding the
written notice, such bonus to be paid in the normal course at the time other
executive bonuses are normally paid, and (ii) all of the outstanding unvested
Employer stock options then held by Executive shall immediately vest and
become exercisable upon such notice. In addition, at the Employer's expense,
the Executive shall continue to participate in all of the Employer's health
plans and programs until he reaches age 65 as if he remained employed until
such time. For purposes of this Agreement, "Good Reason" shall mean (A) a
failure by the Employer to comply with any material provision of this
Agreement which has not been cured within ten (10) days after notice of such
noncompliance has been given by the Executive to the Employer, (B) other than
as provided in Section 2 herein, the assignment to the Executive by the
Employer of duties inconsistent with the Executive's position, authority,
duties, responsibilities or status with the Employer as in effect immediately
after the date of execution of this Agreement, including, but not limited to,
any reduction whatsoever in such position, authority, duties,
responsibilities or status, or a change in the Executive's titles or offices,
as then in effect, or any removal of the Executive from, or any failure to
reelect the Executive to, any of such positions, except in connection with
the termination of his employment on account of his death, disability, or for
Cause, (C) the requirement of excessive travel on the part of the Executive,
(D) a relocation by the Employer of the Executive's principal place of
employment to any location outside a thirty mile radius from the Executive's
current principal place of employment, (E) the failure of the Employer to
have any successor to the Employer assume the Agreement, (F) the delivery to
the Executive of notice of the Employer's decision to terminate the
Executive's employment without Cause, or (G) any other material change in the
conditions of employment if the Executive determines in good faith that his
customary duties can no longer be performed because of the change.
d. The Executive shall also have the right to resign voluntarily without
Good Reason from employment during the Employment Period by written notice to
the Employer at least 60 days prior to the effective date of the resignation.
Upon such resignation without Good Reason, the Executive shall be entitled to
receive any accrued but unpaid Base Salary. The Employer shall have
discretion whether or not to award the Executive a Bonus for any calendar
year in which he resigns without Good Reason.
e. If the Executive's employment shall terminate by expiration of the
Employment Period or is terminated by the Employer for Cause pursuant to
Section 4(b), or if the Executive shall voluntarily resign for any reason
other than Good Reason, the Executive's right to receive the Base Salary
(except any accrued and unpaid salary and except as set forth in Section 4(f)
below), the Bonus, and any other compensation and benefits to which he would
otherwise be entitled under this Agreement shall be forfeited as of the date
of termination of employment.
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f. Except as provided in Section 4(b) hereof, or any relevant option
agreement, the Executive's death or termination of employment shall not
affect his rights under any Employer stock options.
g. Notwithstanding anything to the contrary herein, the Executive may
also terminate his employment upon a "Change in Control" (as hereinafter
defined). If the Executive terminates his employment upon a " Change in
Control" then:
i. the Employer shall pay the Executive as severance pay in a lump
sum within thirty (30) days following such termination, the following
amounts, which shall not be discounted to take into account present value:
(1) the Executive's Base Salary through the date of
termination at the rate in effect immediately prior to
the termination date;
(2) an amount equal to the product of (x) the Executive's
annual Base Salary at the rate in effect immediately
prior to the date of termination, multiplied by (z)
the number of years (including partial years) then
remaining in the Employment Period; and
(3) an amount equal to the product of (x) the average
annual Bonus for the three calendar years immediately
preceding the date of termination, multiplied by (z) the
number of years (including partial years as full years)
then remaining in the Employment Period;
ii. the Employer shall, at the Employer's expense, allow the
Executive to continue to participate, until he reaches age 65, in all the
Employer's benefits, to the same extent and upon the same terms and
conditions as the Executive participated immediately prior to the
termination, provided that the Executive's continued participation is
permissible or otherwise practicable under the general terms and provisions
of such benefit plan; and
iii. on the later of (x) the day the Executive notifies the Employer
he is terminating upon a Change in Control, and (y) ten (10) days prior to
the date the Executive actually terminates his employment, all remaining
unvested options previously granted the Executive shall become immediately
exercisable on that date.
"Change in Control", as used in Section 4(g) of the Agreement, is
defined to mean the occurrence of any of the following three events:
(i) a change in control of a nature that would be required to be
reported in response to any form or report to the Securities and Exchange
Commission or any stock exchange on which the Employer's shares are listed
which requires the reporting of a change in control of the Employer;
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(ii) when any "person," as such terms is used in Section 13(d) or
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), is or becomes the "beneficial owner," as defined in Rule 13d-3 under
the Exchange Act, directly or indirectly, of 20% of the voting power of the
Employer's then outstanding securities, other than (x) beneficial owners of
more than 5% of the Employer's Common Stock on August 10, 1995, (y) "Exempted
Persons" as defined in Section 1(a) of the Employer's Rights Agreement, dated
as of November 10, 1994, (z) mutual funds, banks, investment advisors
registered under the Investment Advisers Act of 1940, as amended, and other
institutional investors, which either (i) became 20% beneficial owners as a
result of an acquisition of Common Stock by the Employer which, by reducing
the number of such shares then outstanding, increases the proportionate
number of shares beneficially owned by such person to 20% or more of the
outstanding Common Stock except that if such person, after such share
purchased by the Employer, becomes the beneficial owner of any additional
shares of Common Stock, then this exception would not apply, or (ii) were
exempted from the operation of this provision with the prior approval of
eighty percent of the Board of Directors of the Employer; or
(iii) when the individuals who, on the effective date of this
Agreement constitute the Board of Directors of the Employer cease for any
reason to constitute at least a majority thereof, provided, however, that a
director who was not a director on the effective date of this Agreement shall
be deemed to have been a director at that date if such director was elected
by, or on the recommendation of or with the approval of, at least sixty
percent of the directors who were directors on the effective date of this
Agreement (either directly or by prior operation of this provision);
provided, however, that an occurrence shall cease to be a "Change in Control"
for purposes of this Section 4(g) six months after the occurrence of an event
that would otherwise constitute a "Change in Control," except that, for
purposes of computing this six-month period, the six-month time period shall
not commence until, as to clause (i), the date on which a change in control
form or report is actually filed, and as to clause (ii), the date on which a
beneficial owner discloses in a public filing that it has crossed the 20%
threshold.
5. Notices.
Any notice or other communication hereunder shall be made in writing by
hand-delivery and shall be deemed to have been delivered and received when
delivered by hand, if personally delivered, as follows: (a) if to the
Executive at the address shown at the beginning of this Agreement or to such
other person(s) or address(es) as the Executive shall have furnished to the
Employer in writing, and (b) if to the Employer at the address shown at the
beginning of this Agreement, attention of the Board of Directors, with copies
to the Employer at the same address, Attention: General Counsel, and to
Xxxxxxx Xxxx & Xxxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
Attention: Xxxx Xxxxxxxx, Esq., or to such other person(s) or address(es) as
such persons or the Employer shall have furnished to the Executive in
writing.
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6. Certain Additional Payments by the Employer.
a. Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment, distribution, waiver of
Employer rights, acceleration of vesting of any stock options or restricted
stock, or any other payment or benefit in the nature of compensation to or
for the benefit of the Executive, alone or in combination (whether such
payment, distribution, waiver, acceleration or other benefit is made pursuant
to the terms of this Agreement or any other agreement, plan or arrangement
providing payments or benefits in the nature of compensation to or for the
benefit of the Executive, but determined without regard to any additional
payments required under this Section 6) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code (or any successor provision)
or any interest or penalties are incurred by the Executive with respect to
such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of
all taxes with respect to the Gross-Up Payment (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payments.
b. Subject to the provisions of Section 6(c), all determinations
required to be made under this Section 6, including whether and when a Gross-
Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made
by the nationally recognized accounting firm then auditing the accounts of
the Employer (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Employer and the Executive within 15 business days
of the receipt of notice from the Executive that there has been a Payment, or
such earlier time as is requested by the Employer. In the event that the
Accounting Firm is unwilling or unable to perform its obligations pursuant to
this Section 6, the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to hereunder as the Accounting Firm).
All fees and expenses of the Accounting Firm shall be borne solely by the
Employer. Any Gross-Up Payment, determined pursuant to this Section 6, shall
be paid by the Employer to the Executive within five days of the receipt of
the Accounting Firm's determination. Any determination by the Accounting
Firm shall be binding upon the Employer and the Executive. The parties
hereto acknowledge that, as a result of the potential uncertainty in the
application of Section 4999 of the Code (or any successor provision) at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that the Employer will not have made Gross-Up Payments which should
have been made consistent with the calculations required to be made hereunder
(an "Underpayment"). In the event that the Employer exhausts its remedies
pursuant to Section 6(c) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment shall be
promptly paid by the Employer to or for the benefit of the Executive.
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c. The Executive shall notify the Employer in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment
by the Employer of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than 20 business days after the Executive is
informed in writing of such claim and shall apprise the Employer of the
nature of such claim and the date on which such claim is requested to be
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the
Employer (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Employer notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
i. give the Employer any information reasonably requested by the
Employer relating to such claim,
ii. take such action in connection with contesting such claim as the
Employer shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Employer,
iii. cooperate with the Employer in good faith in order effectively
to contest such claim, and
iv. permit the Employer to participate in any proceedings relating
to such claim;
provided, however, that the Employer shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limiting the
foregoing provisions of this Section 6(c), the Employer shall control all
proceedings taken in connection with such contest and, at its sole option,
may pursue or forgo any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim and may,
at its sole option, either direct the Executive to pay the tax claimed and
xxx for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Employer shall determine; provided, however,
that if the Employer directs the Executive to pay such claim and xxx for a
refund, the Employer shall advance the amount of such payment to the
Executive, on an interest-free basis, and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Employer's control
of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal
Revenue Service or any other taxing authority.
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d. If, after the receipt by the Executive of an amount advanced by the
Employer pursuant to Section 6(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Employer's complying with the requirements of Section 6(c)) promptly pay to
the Employer the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Employer pursuant to Section 6(c),
a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Employer does not notify the
Executive in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
7. Assignability.
This Agreement shall not be assignable by the Employer except to a
majority-owned subsidiary or parent entity of the Employer and shall be
binding upon and inure to the benefit of the Employer and its successors and
assigns. This Agreement shall not be assignable by the Executive, but it
shall be binding upon, and to the extent provided in Section 4(a) shall inure
to the benefit of, the Executive's heirs, executors, administrators and legal
representatives.
8. Entire Agreement.
This Agreement supersedes any and all prior understandings between the
Executive and the Employer as to the subject matter hereof.
9. Waivers, Amendments and Further Agreements.
Neither this Agreement nor any term or condition hereof, including
without limitation the terms and conditions of this Section 9, may be waived,
modified or amended in whole or in part as against the Employer or the
Executive except by written instrument executed by each of the parties
expressly stating that it is intended to operate as a waiver, modification or
amendment of this Agreement or the applicable term or condition hereof. Each
of the parties hereto agrees to execute all such further instruments and
documents and to take all such further action as the other party may
reasonably require in order to effectuate the terms and purposes of this
Agreement.
10. Severability.
In case one or more of the provisions contained in this Agreement shall
be or become invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
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11. No Conflicting Obligations.
The Executive represents and warrants to the Employer that the Executive
is not now under any obligation to anyone other than the Employer and other
entities of which he is a non-executive director and has no interest which is
inconsistent or in conflict with this Agreement, or would prevent, limit or
impair, in any way, the Executive's performance of any of the covenants or
duties hereinabove set forth. However, subject to Section 2 hereof, nothing
herein shall be deemed to limit the Executive's participation in, or pursuit
of, non-conflicting business interests.
12. Survival.
Except as otherwise provided herein, the covenants, agreements,
representations and warranties contained in or made pursuant to this
Agreement shall survive the Executive's termination of employment,
irrespective of any investigation made by or on behalf of any party.
13. Governing Law.
This Agreement shall be governed by and construed and enforced in
accordance with the law of the State of Tennessee, without regard to the
principles of conflicts of law thereof.
14. Arbitration; Legal Fees.
Any dispute, controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be finally settled by arbitration by a
single arbitrator in accordance with the rules then in effect of the American
Arbitration Association in an arbitration in Memphis, Tennessee. Judgment
upon an award rendered by the arbitrator may be entered in any court of
competent jurisdiction. To the extent that the Executive prosecutes or
defends, whether by arbitration or through a judicial proceeding, a dispute,
controversy or claim relating to this Agreement which results in a judgment,
award or settlement in the Executive's favor in any material respect, the
Employer shall reimburse the Executive for all reasonable fees and costs
(including legal fees) incurred by the Executive in such successful
prosecution or defense.
15. Headings.
The headings in this Agreement are solely for convenience of reference
and shall be given no effect in the construction or interpretation of this
Agreement.
16. Counterparts.
This Agreement may be executed in counterparts each of which shall be
deemed an original but which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, the parties have executed or caused to be executed this
Agreement effective as of the date first above written.
XXXXXXX INDUSTRIES, INC.
By: /s/Xxxxxx X. Xxxx
Name: Xxxxxx X. Xxxx
Title: Chairman
Date: October 17, 2002
/s/Xxxxxxx X. X'Xxxxx
Name: Xxxxxxx X. X'Xxxxx
Title: Chief Executive Officer
Date: October 17, 2002
/s/Xxxx X. XxXxx
Xxxx X. XxXxx
Date: October 17, 2002
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