Exhibit 10.1
EMPLOYMENT AGREEMENT
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THIS AGREEMENT ("Agreement"), dated as of January 1, 2003,
between THE XXXXX XXXXXX COMPANIES INC., a Delaware corporation (the "Company"),
and XXXXXXX X. XXXXXX, a resident of New York, New York (the "Executive" or
"you"),
W I T N E S S E T H:
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WHEREAS, the Company and its subsidiaries are principally
engaged in the business of manufacturing, marketing and selling skin care,
makeup, fragrance and hair care products and related services (the "Business");
and
WHEREAS, the Company and the Executive are parties to an
employment agreement dated as of July 1, 2001, as amended as of July 1, 2002
(the "Previous Agreement"); and
WHEREAS, the Company desires to continue to retain the
services of the Executive, and to promote him to the office of Chief Operating
Officer; and
WHEREAS, the Compensation Committee of the Board of Directors
of the Company (the "Compensation Committee") and the Stock Plan Subcommittee of
the Compensation Committee have approved the terms of this Agreement; and
WHEREAS, this Agreement shall replace the Previous Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and obligations hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Employment Term.
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The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to enter into employment, as Chief Operating Officer of
the Company for the period commencing on January 1, 2003 and ending June 30,
2005 unless terminated sooner pursuant to Section 6 hereof (the "Term of
Employment"). The six-month period commencing on January 1, 2003 and ending on
June 30, 2003 shall be the "First Contract Year" hereunder, and subsequent
twelve-month periods shall be subsequent Contract Years.
2. Duties and Extent of Services.
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(a) During the Term of Employment, the Executive shall
serve as Chief Operating Officer of the Company, and, in such capacity, shall
render such executive, managerial, administrative and other services as
customarily are associated with and incident to such positions, and as the
Company may, from time to time, reasonably require of him consistent with such
position.
(b) The Executive shall also hold such other positions
and executive offices of the Company and/or of any of the Company's subsidiaries
or affiliates as may from time to time be agreed by the Executive or assigned by
the Chief Executive Officer of the Company, the Chairman of the Board of
Directors of the Company or the Board of Directors of the Company, provided that
each such position shall be commensurate with the Executive's standing in the
business community as Chief Operating Officer. The Executive shall not be
entitled to any compensation other than the compensation provided for herein for
serving during the Term of Employment in any other office or position of the
Company or any of its subsidiaries or affiliates, unless the Board of Directors
of the Company or the appropriate committee thereof shall specifically approve
such additional compensation.
(c) The Executive shall be a full-time employee of the
Company and shall exclusively devote all his business time and efforts
faithfully and competently to the Company and shall diligently perform to the
best of his ability all of the duties required of him as Chief Operating
Officer, and in the other positions or offices of the Company or its
subsidiaries or affiliates assigned to him hereunder. Notwithstanding the
foregoing provisions of this section, the Executive may serve as a
non-management director of such business corporations (or in a like capacity in
other for-profit or not-for-profit organizations) as the Board of Directors,
Chairman of the Board or Chief Executive Officer of the Company may approve,
such approval not to be unreasonably withheld.
3. (a) Base Salary. As compensation for all services to
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be rendered pursuant to this Agreement and as payment for the rights and
interests granted by Executive hereunder, the Company shall pay or cause any of
its subsidiaries to pay the Executive a base salary of $108,333.33 per month
(which equates to $1,300,000.00 per annum) (the "Base Salary"), subject to the
provisions of Section 3(c) below. All amounts of Base Salary provided for
hereunder shall be payable in accordance with the regular payroll policies of
the Company in effect from time to time.
(b) Incentive Bonus Compensation. The Compensation
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Committee has established for the Executive opportunities (i.e., the maximum
bonus that may be awarded in respect of each fiscal year of the Company) under
the Company's Executive Annual Incentive Plan or any subsequent Bonus Plan for
executives that is approved by the stockholders of the Company (the "Bonus
Plan") in respect of each Contract Year under this Agreement. In respect of the
First Contract Year hereunder, the Executive shall continue to have the bonus
opportunities established by the Compensation Committee in September 2002 in
respect of the Company's fiscal year ending June 30, 2003 in the aggregate
amount of no less than $1,300,000 and additional opportunities covering the
six-month period ending June 30, 2003 in the aggregate amount of no less than
$350,000. The aggregate opportunities shall be no less than $1,650,000.00 in
respect of the Second Contract Year and $1,750,000.00 in respect of the Third
Contract Year. All such opportunities shall be subject to the terms and
conditions of the Bonus Plan, which are incorporated herein by reference.
(c) Deferral. The Executive may elect to defer payment
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of all or any part of his incentive bonus compensation payable in accordance
with Section 3(b) hereof in respect of any Contract Year during the Term of
Employment, by giving to the Company written notice thereof, on or before
March 31 of such Contract Year. Additionally, in the event that in respect of
any fiscal year of the Company any amount of Base Salary, any amount payable
under the Bonus Plan or any other amount payable to the Executive hereunder or
otherwise shall, either alone or in combination with other amounts payable
hereunder or otherwise, result in the payment by the Company of any amount that
shall not be currently deductible by it pursuant to the provisions of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), or like or
successor provisions (a "Non-Deductible Amount"), the Company may elect to defer
the payment of the Non-Deductible Amount. Any amounts, so deferred, either by
election of the Executive or by election of the Company shall be credited to a
bookkeeping account in the name of the Executive as of the date scheduled for
payment hereunder. Such amounts shall be credited with interest as of each
June 30 during the term of deferral, compounded annually, at a rate per annum,
equal to the annual rate of interest announced by Citibank, N.A. in New York,
New York as its base rate in effect on such June 30, but in no event shall such
rate exceed 9%. The entire amount credited to such bookkeeping account shall be
paid to the Executive on a date to be chosen by the Company, but in no event
later than ninety (90) days after the termination of the Executive's employment
with the Company, unless the Executive requests prior to termination of his
employment from the Company to continue the deferral of such payments until a
later date or dates and the Company agrees to such request. The Company, in its
sole discretion, may provide an investment facility for all or a portion of such
deferred amounts, but shall not be required to do so.
4. (a) Stock Options. The Compensation Committee has
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approved the grant to the Executive of options to purchase no fewer than 200,000
shares of the Company's Class A Common Stock ("Stock Options") under the Fiscal
2002 Share Incentive Plan or successor plan (the "Share Incentive Plan") in
respect of the Second and Third Contract Years. The option grant is subject to
the terms and conditions of the Share Incentive Plan (or applicable successor
plan), which are incorporated herein by reference. The terms of the options
shall be set forth in a separate grant letter approved by the Compensation
Committee or the Stock Plan Subcommittee of the Compensation Committee.
b) Certain Conditions. Executive acknowledges and
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agrees that any grant of Stock Options otherwise provided for in this Section 4
shall be effective as provided herein only to the extent permitted by the Share
Incentive Plan, and this Agreement shall not obligate the Company to adopt any
successor plan providing for the grant of stock units or Stock Options (or
substantially similar benefits).
5. Benefits.
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(a) Standard Benefits. During the Term of Employment, the
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Executive shall be entitled to (i) participate in any and all benefit programs
and arrangements now in effect and hereinafter adopted and made generally
available by the Company to its senior officers, including but not limited to
the Xxxxx Xxxxxx Companies 401(k) Plan (the "401(k) Plan"), the Xxxxx Xxxxxx
Companies Retirement Growth Account Plan (the "Qualified Plan"), the related
Xxxxx Xxxxxx Inc. Benefit Restoration Plan (the "Non-Qualified Plan"),
contributory and non-contributory Company welfare and benefit plans, disability
plans, and medical, death benefit and life insurance plans for which the
Executive shall be eligible, or may become eligible during the Term of
Employment; and (ii) paid vacations during each year of the Term of Employment
in accordance with the policies and procedures of the Company as in effect from
time to time for its senior officers.
(b) Additional Insurance. The Company has caused to be
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issued additional insurance on the life of the Executive in the amount of
$5,000,000.00. The Executive acknowledges that this coverage will result in the
receipt by him of additional taxable income.
(c) Perquisite Reimbursement; Financial Counseling. The
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Company shall reimburse the Executive for the actual expenses incurred by him
in connection with his professional standing, in accordance with the guidelines
set out in the Company's executive perquisites program. In no event shall the
gross amount of such reimbursements be greater than $15,000.00 in respect of any
fiscal year during the Term of Employment. Additionally, the Executive will
reimburse the Executive for up to $3,500.00 per year in financial consulting
services. The Executive acknowledges that participation in such programs will
result in the receipt by him of additional taxable income.
(d) Executive Auto. The Executive will participate in the
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Executive Automobile program of the Company, and may elect to be provided an
automobile having an acquisition value of up to $50,000.00. Executive
acknowledges that participation in this program will result in the receipt by
him of additional taxable income.
(e) Expenses. The Company agrees to reimburse the Executive
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for all reasonable and necessary travel (including first class air fare),
business entertainment and other business out-of-pocket expenses incurred or
expended by him in connection with the performance of his duties hereunder
upon presentation of proper expense statements or vouchers or such other
supporting information as the Company may reasonably require of the Executive.
(f) Spousal Travel. The Executive may upon prior approval
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of the Chief Executive Officer or his designee arrange for his spouse to
accompany him on business related travel itineraries, on a reasonable basis, at
Company expense.
6. Termination.
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(a) Permanent Disability. In the event of the "permanent
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disability" (as hereinafter defined) of the Executive during the Term of
Employment, the Company shall have the right, upon written notice to the
Executive, to terminate the Executive's employment hereunder, effective upon the
giving of such notice (or such later date as shall be specified in such notice).
In the event of such termination, the Company shall have no further obligations
hereunder, except that the Executive shall be entitled (i) to receive any
amounts or benefits to which the Executive may otherwise have been entitled
prior to the effective date of termination; (ii) to be paid his Base Salary
under Section 3(a) hereof for a period of one (1) year from the effective date
of termination; provided, however, that the Company shall only be required to
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pay that amount of the Executive's Base Salary which shall not be covered by
pension benefits or long-term disability payments, if any, to the Executive
under any Company plan or arrangement and (iii) to receive a pro-rata portion of
the annual bonus that the Executive would have been entitled to receive had he
remained in employment through the end of the Contract Year during which the
termination due to permanent disability occurred. In addition, upon termination
for permanent disability, the Executive shall continue to participate in any and
all pension, insurance and other benefit plans and programs of the Company
during the period the Executive is continuing to receive his Base Salary in
accordance with this Section 6(a). Thereafter, the Executive's rights to
participate in such programs and plans, or to receive similar coverage, if any,
shall be as determined under such programs; provided, however, that, except as
otherwise provided in this Section 6(a), the Company will have no further
obligations under Sections 3(b) and 4 hereof. For purposes of this Section
6(a), "permanent disability" means any disability as defined under the Company's
applicable disability insurance policy or, if no such policy is available, any
physical or mental disability or incapacity that renders the Executive incapable
of performing the services required of him in accordance with his obligations
under Section 2 hereof for a period of six (6) consecutive months or for shorter
periods aggregating six (6) months during any twelve-month period.
(b) Death. In the event of the death of the Executive during
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the Term of Employment, this Agreement shall automatically terminate. In the
event of such termination the Company shall have no further obligations
hereunder, except to pay the Executive's beneficiary or legal representative
(i) for a period of one (1) year from the date of his death, the Executive's
Base Salary as established under Section 3(a) hereof as of the date of his
death; (ii) (A) bonus compensation earned but not paid under Section 3(b) hereof
that relates to any Contract Year ending prior to the date of his death and (B)
a one-time payment equal to fifty percent (50%) of the average actual bonuses
paid or payable during the Term of Employment in accordance with Section 3(b)
hereof, except that if the Executive dies during the First Contract Year, the
sum of $825,000.00; and (iii) any other amounts to which the Executive otherwise
would have been entitled to hereunder prior to the date of his death; provided,
however, that, except as otherwise provided in this Section 6(b), the Company
will have no further obligations under Section 3(b) hereof.
(c) Termination Without Cause. The Company shall have the
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right, upon one hundred twenty (120) days' prior written notice given to the
Executive, to terminate the Executive's employment for any reason whatsoever.
In the event of such termination, for a period ending on the latest to occur of
(x) a date two (2) years from the effective date of termination, (y) June 30,
2005, or (z) the conclusion of a severance period consistent with Company policy
(which in no event will exceed two years), the Executive shall be entitled as
damages to (i) receive his Base Salary as established under Section 3(a) hereof;
(ii) receive bonus compensation equal to fifty percent (50%)of the average of
the actual annual bonuses paid or payable to the Executive during the Term of
Employment in accordance with Section 3(b) hereof, or, if such termination
occurs prior to the payment of any bonus hereunder, $825,000.00; and
(iii) participate in all pension, insurance and other benefit plans, programs or
arrangements, on terms identical to those applicable to full-term senior
officers of the Company. Except as otherwise provided in this Section 6(c), the
Company will have no further obligations under Sections 3(b) and 4 hereof. In
the event of termination pursuant to this Section 6(c), the Executive shall not
be required to mitigate his damages hereunder.
(d) Cause. The Company shall have the right, upon written
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notice to the Executive, to terminate the Executive's employment under this
Agreement for "Cause" (as hereinafter defined), effective upon the giving of
such notice (or such later date as shall be specified in such notice), and the
Company shall have no further obligations hereunder, except to pay the Executive
any amounts otherwise payable pursuant to Section 3 hereof and provide the
Executive any benefits to which the Executive may have been otherwise entitled
prorated to the effective date of termination. The Executive's right to
participate in any of the Company's retirement, insurance and other benefit
plans and programs shall be as determined under such programs and plans;
provided, however, that, except as otherwise provided in this Section 6(d), the
Company will have no further obligations under Sections 3(b) and 4 hereof.
For purposes of this Agreement, "Cause" means:
(i) fraud, embezzlement or gross insubordination on
the part of the Executive or material breach by the Executive of his obligations
under Section 7 or 8 hereof;
(ii) conviction of, or the entry of a plea of nolo
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contendere by the Executive for, any felony;
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(iii) a material breach of, or the willful failure or
refusal by the Executive to perform and discharge, his duties, responsibilities
or obligations under this Agreement (other than under Sections 7 and 8 hereof,
which shall be governed by clause (i) above, and other than by reason of
disability or death) that is not corrected within thirty (30) days following
written notice thereof to the Executive by the Company, such notice to state
with specificity the nature of the breach, failure or refusal; provided that if
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such breach, failure or refusal is capable of correction but cannot reasonably
be corrected within thirty (30) days of written notice thereof, correction shall
be commenced by the Executive within such period and may be completed within a
reasonable period thereafter; or
(iv) any act of moral turpitude or willful misconduct
by the Executive which (A) is intended to result in substantial personal
enrichment of the Executive at the expense of the Company or any of its
subsidiaries or affiliates or (B) has a material adverse impact on the business
or reputation of the Company or any of its subsidiaries or affiliates (such
determination to be made by the Company's Board of Directors in its reasonable
judgment).
(e) Termination by Executive. The Executive shall have the
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right, exercisable at any time during the Term of Employment, to terminate his
employment for any reason whatsoever, upon six (6) months' prior written notice
to the Company. Upon such termination, the Company shall have no further
obligations hereunder other than to pay the executive his accrued benefits
through the date of such termination.
(f) Termination by Executive for Material Breach. The
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Executive shall have the right, exercisable by notice to the Company, to
terminate his employment effective thirty (30) days after the giving of such
notice, if, at any time during the Term of Employment, the Company shall be in
material breach of its obligations hereunder; provided, however, that such
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notice must be provided to the Company within thirty (30) days of the date on
which the Executive obtains knowledge of such material breach; and provided
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further, that such termination will not become effective if within the thirty-
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day (30) notice period the Company shall have cured all such material breaches
of its obligations hereunder. For purposes of this Section 6(f), a material
breach shall include, but not be limited to, a material reduction in the
Executive's authority, functions, duties or responsibilities provided in Section
2 hereof or the Company's failure to cause the Executive to serve in all the
positions set forth in Section 1 hereof for any time period in which he is
entitled to so serve. Such termination shall be deemed to be a termination
without cause and shall be controlled by the provisions of Section 6(c) hereof.
(g) Change of Control.
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(i) Definitions. For purposes of this Agreement,
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(A) a "Change of Control" shall be deemed
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to have occurred upon any of the following events:
(1) a change in control of the
direction and administration of the Company's business of a nature that would
be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14(A) promulgated under the Securities Exchange Act of 1934, as
amended; or
(2) during any period of two
(2) consecutive years, the individuals who at the beginning of such period
constitute the Company's Board of Directors or any individuals who would be
"Continuing Directors" (as defined below) cease for any reason to constitute a
majority thereof; or
(3) the Company's Class A Common
Stock shall cease to be publicly traded; or
(4) the Company's Board of Directors
shall approve a sale of all or substantially all of the assets of the Company,
and such transaction shall have been consummated; or
(5) the Company's Board of Directors
shall approve any merger, consolidation, or like business combination or
reorganization of the Company, the consummation of which would result in the
occurrence of any event described in Section 6(g)(i)(A)(2) or (3) above, and
such transaction shall have been consummated.
Notwithstanding the foregoing, (X)
changes in the relative beneficial ownership among members of the Lauder family
and family-controlled entities shall not, by itself, constitute a Change of
Control of the Company, (Y) any spin-off of a division or subsidiary of the
Company to its stockholders shall not constitute a Change of Control of the
Company.
(B) "Continuing Directors" shall mean (1) the directors in
office on January 1, 2003 and (2) any successor to such directors and any
additional director who after January 1, 2003 was nominated or selected by a
majority of the Continuing Directors in office at the time of his or her
nomination or selection.
(C) "Good Reason" means the occurrence of any of the following,
without the express written consent of the Executive, after the occurrence of a
Change in Control:
(1) (a) the assignment to the
Executive of any duties inconsistent in any material adverse effect with the
Executive's position, authority or responsibilities as contemplated by Section 2
hereof, or (b) any other material adverse change in such position, including
title, authority or responsibilities;
(2) any failure by the Company to
comply with any provisions of Sections 3, 4 or 5 hereof, other than an
insubstantial or inadvertent failure remedied by the Company promptly after
receipt of notice thereof given by the Executive;
(3) the Company's requiring the
Executive to be based at any office or location more than fifty (50) miles
from that location at which he performed his services specified under the
provisions of Section 2 immediately prior to the Change in Control, except for
travel reasonably required in the performance of the Executive's
responsibilities; or
(4) any failure by the Company to
obtain the assumption and agreement to perform this Agreement by a successor as
contemplated by Section 14.
(ii) Termination for Good Reason. Following the
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occurrence of a Change of Control, the Executive may terminate his employment
for Good Reason. Such termination shall be deemed to be a termination
without cause and shall be controlled by the provisions of Section 6(c) hereof.
(h) Certain Payments by the Company.
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(i) In the event that any amount or benefit paid
or distributed to the Executive pursuant to this Agreement, taken together with
any amounts or benefits otherwise paid or distributed to the Executive by the
Company or any affiliated company (collectively, the "Covered Payments"), are or
become subject to the tax (the "Excise Tax") imposed under Section 4999 of the
Code, or any similar tax that may hereafter be imposed, the Company shall pay to
the Executive at the time specified in Section 6(h)(v) below an additional
amount (the "Tax Reimbursement Payment") such that the net amount retained by
the Executive with respect to such Covered Payments, after deduction of any
Excise Tax on the Covered Payments and any Federal, state and local income or
employment tax and Excise Tax on the Tax Reimbursement Payment provided for by
this Section 6(f), but before deduction for any Federal, state or local income
or employment tax withholding on such Covered Payments, shall be equal to the
amount of the Covered Payments.
(ii) For purposes of determining whether any of
the Covered Payments will be subject to the Excise Tax and the amount of such
Excise Tax,
(A) such Covered Payments will be
treated as "parachute payments" within the meaning of Section 280G of the Code,
and all "parachute payments" in excess of the "base amount" (as defined under
Section 28OG(b)(3) of the Code) shall be treated as subject to the Excise Tax,
unless, and except to the extent that, in the good faith judgment of the
Company's independent certified public accountants appointed prior to the date
of the Change in Control or tax counsel selected by such Accountants
(the "Accountants"), the Company has a reasonable basis to conclude that such
Covered Payments (in whole or in part) either do not constitute "parachute
payments" or represent reasonable compensation for personal services actually
rendered (within the meaning of Section 28OG(b)(4)(B) of the Code) in excess
of the allocable "base amount," or such "parachute payments" are otherwise not
subject to such Excise Tax, and
(B) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by the
Accountants in accordance with the principles of Section 280G of the Code.
(iii) For purposes of determining the amount of
the Tax Reimbursement Payment, the Executive shall be deemed to pay:
(A) Federal income, social security,
medicare and other employment taxes at the highest applicable marginal rate of
Federal income taxation for the calendar year in which the Tax Reimbursement
Payment is to be made, and
(B) any applicable state and local
income or other employment taxes at the highest applicable marginal rate of
taxation for the calendar year in which the Tax Reimbursement Payment is to be
made, net of the maximum reduction in Federal income taxes which could be
obtained by Executive from the deduction of such state or local taxes if paid
in such year.
(iv) In the event that the Excise Tax is
subsequently determined by the Accountants or pursuant to any proceeding or
negotiations with the Internal Revenue Service to be less than the amount taken
into account hereunder in calculating the Tax Reimbursement Payment made, the
Executive shall repay to the Company, at the time of such determination, the
portion of such prior Tax Reimbursement Payment that would not have been paid
if such reduced Excise Tax had been taken into account in initially calculating
such Tax Reimbursement Payment, plus interest on the amount of such repayment
at the rate provided in Section 1274(b)(2)(b) of the Code. Notwithstanding the
foregoing, in the event any portion of the Tax Reimbursement Payment to be
refunded to the Company has been paid to any Federal, state or local tax
authority, repayment thereof shall not be required until actual refund or
credit of such portion has been made to the Executive, and interest payable to
the Company shall not exceed interest received or credited to the Executive by
such tax authority for the period it held such portion. The Executive and the
Company shall mutually agree upon the course of action to be pursued (and the
method of allocating the expenses thereof) if the Executive's good faith claim
for refund or credit is denied.
In the event that the Excise Tax is later determined
by the Accountants or pursuant to any proceeding or negotiations with the
Internal Revenue Service to exceed the amount taken into account hereunder at
the time the Tax Reimbursement Payment is made (including, but not limited to,
by reason of any payment the existence or amount of which cannot be determined
at the time of the Tax Reimbursement Payment), the Company shall make an
additional Tax Reimbursement Payment in respect of such excess (plus any
interest or penalty payable with respect to such excess) at the time that the
amount of such excess is finally determined.
(v) The Tax Reimbursement Payment (or portion
thereof) provided for in Section 6(f) (i) above shall be paid to the Executive
not later than 10 business days following the payment of the Covered Payments;
provided, however, that if the amount of such Tax Reimbursement Payment (or
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portion thereof) cannot be finally determined on or before the date on which
payment is due, the Company shall pay to the Executive by such date an amount
estimated in good faith by the Accountants to be the minimum amount of such Tax
Reimbursement Payment and shall pay the remainder of such Tax Reimbursement
Payment (together with interest at 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 forty-five (45) calendar days after payment of the related Cover Payment.
In the event that the amount of the estimated Tax Reimbursement Payment exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on the fifth business
day after written demand by the Company for payment (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
(i) Non-Renewal. In the event the Company does not
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offer the Executive the renewal of the Term of Employment on the basis of terms
no less favorable than those pending at the time of the conclusion of the Term,
the Executive shall be entitled to a severance arrangement providing Base
Salary and contribution of certain benefits for a period consistent with Company
policy at that time (which in no event will exceed two years).
(j) Effect of Termination. In addition to the
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foregoing, in the event that this Agreement shall be terminated pursuant to the
provisions of subparagraphs 6(a), 6(b), 6(c), 6(e), 6(f) or 6(g) above,
notwithstanding anything to the contrary contained in the Company's Share
Incentive Plan or other similar option plan, all Stock Option awards previously
made to the Executive shall vest and become immediately exercisable for the one
(1) year period from the effective date of such termination, after which all
such option awards shall expire and be of no further force or effect. Subject
to the preceding sentence, upon the termination of the Executive's employment
hereunder for any reason, the Company shall have no further obligations
hereunder, except as otherwise provided herein. The Executive, however,
shall continue to have the obligations provided for in Sections 7 and 8 hereof.
Furthermore, upon such termination, the Executive shall be deemed to have
resigned immediately from all offices and directorships held by him in the
Company or any of its subsidiaries.
7. Confidentiality; Ownership.
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(a) The Executive agrees that he shall forever keep
secret and retain in strictest confidence and not divulge, disclose, discuss,
copy or otherwise use or suffer to be used in any manner, except in connection
with the Business of the Company, its subsidiaries or affiliates and any other
business or proposed business of the Company or any of its subsidiaries or
affiliates, any "Protected Information" in any "Unauthorized" manner or for any
"Unauthorized" purpose (as such terms are hereinafter defined).
(i) "Protected Information" means trade secrets,
confidential or proprietary information and all other knowledge, know-how,
information, documents or materials owned, developed or possessed by the Company
or any of its subsidiaries or affiliates, whether in tangible or intangible
form, pertaining to the Business or any other business or proposed business of
the Company or any of its subsidiaries or affiliates, including, but not limited
to, research and development, operations, systems, data bases, computer programs
and software, designs, models, operating procedures, knowledge of the
organization, products (including prices, costs, sales or content), processes,
formulas, techniques, machinery, contracts, financial information or measures,
business methods, business plans, details of consultant contracts, new personnel
hiring plans, business acquisition plans, customer lists, business relationships
and other information owned, developed or possessed by the Company or its
subsidiaries or affiliates; provided that Protected Information shall not
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include information that becomes generally known to the public or the trade
without violation of this Section 7.
(ii) "Unauthorized" means: (A) in contravention
of the policies or procedures of the Company or any of its subsidiaries or
affiliates; (B) otherwise inconsistent with the measures taken by the Company
or any of its subsidiaries or affiliates to protect their interests in any
Protected Information; (C) in contravention of any lawful instruction or
directive, either written or oral, of an employee of the Company or any of its
subsidiaries or affiliates empowered to issue such instruction or directive; or
(D) in contravention of any duty existing under law or contract. Notwithstanding
anything to the contrary contained in this Section 7, the Executive may disclose
any Protected Information to the extent required by court order or decree or by
the rules and regulations of a governmental agency or as otherwise required by
law or to his legal counsel and, in connection with a determination under
Section 6(h), to accounting experts; provided that the Executive shall provide
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the Company with prompt notice of such required disclosure in advance thereof so
that the Company may seek an appropriate protective order in respect of such
required disclosure.
(b) The Executive acknowledges that all developments,
including, without limitation, inventions (patentable or otherwise),
discoveries, formulas, improvements, patents, trade secrets, designs, reports,
computer software, flow charts and diagrams, procedures, data, documentation,
ideas and writings and applications thereof relating to the Business or any
business or planned business of the Company or any of its subsidiaries or
affiliates that, alone or jointly with others, the Executive may conceive,
create, make, develop, reduce to practice or acquire during the Term of
Employment (collectively, the "Developments") are works made for hire and shall
remain the sole and exclusive property of the Company. The Executive hereby
assigns to the Company, in consideration of the payments set forth in
Section 3(a) hereof, all of his right, title and interest in and to all such
Developments. The Executive shall promptly and fully disclose all future
material Developments to the Board of Directors of the Company and, at any time
upon request and at the expense of the Company, shall execute, acknowledge and
deliver to the Company all instruments that the Company shall prepare, give
evidence and take all other actions that are necessary or desirable in the
reasonable opinion of the Company to enable the Company to file and prosecute
applications for and to acquire, maintain and enforce all letters patent and
trademark registrations or copyrights covering the Developments in all countries
in which the same are deemed necessary by the Company. All memoranda, notes,
lists, drawings, records, files, computer tapes, programs, software, source
and programming narratives and other documentation (and all copies thereof) made
or compiled by the Executive or made available to the Executive concerning the
Developments or otherwise concerning the Business or planned business of the
Company or any of its subsidiaries or affiliates shall be the property of the
Company or such subsidiaries or affiliates and shall be delivered to the Company
or such subsidiaries or affiliates promptly upon the expiration or termination
of the Term of Employment.
(c) The provisions of this Section 7 shall, without any
limitation as to time, survive the expiration or termination of the
Executive's employment hereunder, irrespective of the reason for any
termination.
8. Covenant Not to Compete. Subject to the last
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sentence of this Section 8, the Executive agrees that during the Term of
Employment and for a period of one (1) year commencing upon the expiration or
termination of the Executive's employment hereunder (the "Non-Compete Period"),
the Executive shall not, directly or indirectly, without the prior written
consent of the Company:
(a) solicit, entice, persuade or induce any employee,
consultant, agent or independent contractor of the Company or of any of its
subsidiaries or affiliates to terminate his, her or its employment with the
Company or such subsidiary or affiliate, to become employed by any person, firm
or corporation other than the Company or such subsidiary or affiliate or
approach any such employee, consultant, agent or independent contractor for any
of the foregoing purposes, or authorize or assist in the taking of any such
actions by any third party (for purposes of this Section 8 (a), the terms
"employee," "consultant," "agent" and "independent contractor" shall include
any persons with such status at any time during the six (6) months preceding any
solicitation in question); or
(b) directly or indirectly engage, participate, or make
any financial investment in, or become employed by or render consulting,
advisory or other services to or for any person, firm, corporation or other
business enterprise, wherever located, which is engaged, directly or indirectly,
in competition with the Business or any business of the Company or any of its
subsidiaries or affiliates as conducted or any business proposed to be conducted
at the time of the expiration or termination of the Executive's employment
hereunder; provided, however, that nothing in this Section 8(b) shall be
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construed to preclude the Executive from making any investments in the
securities of any business enterprise whether or not engaged in competition with
the Company or any of its subsidiaries or affiliates, to the extent that such
securities are actively traded on a national securities exchange or in the
over-the-counter market in the United States or on any foreign securities
exchange and represent, at the time of acquisition, not more than 3% of the
aggregate voting power of such business enterprise.
Notwithstanding the foregoing, the Executive shall not be
subject to the terms and provisions of paragraph (b) of this Section 8 if the
Term of Employment is terminated pursuant to Section 6(c) hereof.
9. Specific Performance. The Executive acknowledges
---------------------
that the services to be rendered by the Executive are of a special, unique and
extraordinary character and, in connection with such services, the Executive
will have access to confidential information vital to the Company's Business and
the other current or planned businesses of it and its subsidiaries and
affiliates. By reason of this, the Executive consents and agrees that if the
Executive violates any of the provisions of Sections 7 or 8 hereof, the Company
and its subsidiaries and affiliates would sustain irreparable injury and that
monetary damages would not provide adequate remedy to the Company and that the
Company shall be entitled to have Section 7 or 8 hereof specifically enforced by
any court having equity jurisdiction. Nothing contained herein shall be
construed as prohibiting the Company or any of its subsidiaries or affiliates
from pursuing any other remedies available to it or them for such breach or
threatened breach, including the recovery of damages from the Executive.
10. Deductions and Withholding. The Executive agrees
---------------------------
that the Company or its subsidiaries or affiliates, as applicable, shall
withhold from any and all compensation paid to and required to be paid to the
Executive pursuant to this Agreement, all Federal, state, local and/or other
taxes which the Company determines are required to be withheld in accordance
with applicable statutes or regulations from time to time in effect and all
amounts required to be deducted in respect of the Executive's coverage under
applicable employee benefit plans. For purposes of this Agreement and
calculations hereunder, all such deductions and withholdings shall be
deemed to have been paid to and received by the Executive.
11. Entire Agreement. Except for the Fiscal 2002 Share
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Incentive Plan, the Executive's outstanding stock option agreements, the
Executive Annual Incentive Plan, the 401(k) Savings Plan, the insurance
arrangement between the Company and the Executive, the Qualified Plan and the
Non-Qualified Plan and applicable successor plans or agreements, this Agreement
embodies the entire agreement of the parties with respect to the Executive's
employment, compensation, perquisites and related items and supersedes any other
prior oral or written agreements, arrangements or understandings between the
Executive and the Company or any of its subsidiaries or affiliates, and any such
prior agreements, arrangements or understandings are hereby terminated and of no
further effect. This Agreement may not be changed or terminated orally but only
by an agreement in writing signed by the parties hereto.
12. Waiver. The waiver by the Company of a breach of any
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provision of this Agreement by the Executive shall not operate or be construed
as a waiver of any subsequent breach by him. The waiver by the Executive of a
breach of any provision of this Agreement by the Company shall not operate or be
construed as a waiver of any subsequent breach by the Company.
13. Governing Law; Jurisdiction.
----------------------------
(a) This Agreement shall be subject to, and governed by,
the laws of the State of New York applicable to contracts made and to be
performed therein.
(b) Any action to enforce any of the provisions of this
Agreement shall be brought in a court of the State of New York located in the
Borough of Manhattan of the City of New York or in a Federal court located
within the Southern District of New York. The parties consent to the
jurisdiction of such courts and to the service of process in any manner provided
by New York law. Each party irrevocably waives any objection which it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in such court and any claim that such suit, action or
proceeding brought in such court has been brought in an inconvenient forum and
agrees that service of process in accordance with the foregoing sentences shall
be deemed in every respect effective and valid personal service of process upon
such party.
14. Assignability. The obligations of the Executive may
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not be delegated and, except with respect to the designation of beneficiaries in
connection with any of the benefits payable to the Executive hereunder, the
Executive may not, without the Company's written consent thereto, assign,
transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any interest herein. Any such attempted delegation or disposition
shall be null and void and without effect. The Company and the Executive agree
that this Agreement and all of the Company's rights and obligations hereunder
may be assigned or transferred by the Company to and shall be assumed by and be
binding upon any successor to the Company. The Company shall require any
successor by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
succession had taken place. The term "successor" means, with respect to the
Company or any of its subsidiaries, any corporation or other business entity
which, by merger, consolidation, purchase of the assets or otherwise acquires
all or a majority of the operating assets or business of the Company.
15. Severability. If any provision of this Agreement or
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any part thereof, including, without limitation, Sections 7 and 8 hereof, as
applied to either party or to any circumstances shall be adjudged by a court of
competent jurisdiction to be void or unenforceable, the same shall in no way
affect any other provision of this Agreement or remaining part thereof, or the
validity or enforceability of this Agreement, which shall be given full effect
without regard to the invalid or unenforceable part thereof.
If any court construes any of the provisions of Section 7 or 8
hereof, or any part thereof, to be unreasonable because of the duration of such
provision or the geographic scope thereof, such court may reduce the duration or
restrict or redefine the geographic scope of such provision and enforce such
provision as so reduced, restricted or rede
16. Notices. All notices to the Company or the Executive
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permitted or required hereunder shall be in writing and shall be delivered
personally, by telecopier or by courier service providing for next-day delivery
or sent by registered or certified mail, return receipt requested, to the
following addresses:
The Company:
The Xxxxx Xxxxxx Companies Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
Tel: (000) 000-0000
Fax: (000) 000-0000
The Executive:
Xxxxxxx X. Xxxxxx
c/o The Xxxxx Xxxxxx Companies Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxx X. Xxxxxxxxx, Esq.
Pillsbury Winthrop LLP
0 Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Either party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party. Any such notice
shall be deemed given, if delivered personally, upon receipt; if telecopied,
when telecopied; if sent by courier service providing for next-day delivery, the
next business day following deposit with such courier service; and if sent by
certified or registered mail, three days after deposit (postage prepaid) with
the U.S. mail service.
17. No Conflicts. The Executive hereby represents and
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warrants to the Company that his execution, delivery and performance of this
Agreement and any other agreement to be delivered pursuant to this Agreement
will not (i) require the consent, approval or action of any other person or
(ii) violate, conflict with or result in the breach of any of the terms of, or
constitute (or with notice or lapse of time or both, constitute) a default
under, any agreement, arrangement or understanding with respect to the
Executive's employment to which the Executive is a party or by which the
Executive is bound or subject. The Executive hereby agrees to indemnify and
hold harmless the Company and its directors, officers, employees, agents,
representatives and affiliates (and such affiliates' directors, officers,
employees, agents and representatives) from and against any and all losses,
liabilities or claims (including interest, penalties and reasonable attorneys'
fees, disbursements and related charges) based upon or arising out of the
Executive's breach of any of the foregoing representations and warranties.
18. Paragraph Headings. The paragraph headings contained
-------------------
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
19. Counterparts. This Agreement may be executed in one
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or more counterparts, each of which shall be deemed to be an original, but all
of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
THE XXXXX XXXXXX COMPANIES INC.
By: /s/Xxxxxx X. Xxxxxxxxx
-----------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Senior Vice President, Global
Human Resources
/s/Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
