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EXHIBIT 10.1
CONSULTING AGREEMENT
This Consulting Agreement (this "Agreement") is entered into effective
as of April 1, 2001 by and between Xxxxxx X. Xxxxxxxx ("Consultant") and Kent
Electronics Corporation, a Texas corporation (the "Company").
WHEREAS, Consultant is a founder and the Chairman of the Board of
Directors of the Company, serving prior to the date hereof as the most senior
executive officer of the Company,
WHEREAS, pursuant to the mutual agreement of the Company and
Consultant, Consultant will cease to serve as an executive officer and full time
employee of the Company on April 1, 2001, the effective date of this Agreement,
WHEREAS, the Company desires for Consultant to continue to provide
support, guidance and counsel to the chief executive officer of the Company
during the term of this Agreement, and
WHEREAS, this Agreement is not intended to reduce any payments or
benefits to be provided to Consultant following the termination of Consultant's
employment by the Company pursuant to (i) the Employment Agreement dated January
3, 1996, by and between Consultant and the Company, as amended (the "Employment
Agreement") or (ii) the Executive Healthcare Benefits and Consulting Agreement
between the Company and the Consultant dated January 27, 1993 (the "Medical
Benefits Agreement"),
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged,
The parties agree as follows:
1. Extent of Services
1.1 Duties.
(a) The Company hereby agrees to engage Consultant, and Consultant
hereby agrees to be engaged by the Company, to provide executive
consulting services to the Company. It is recognized that the services
to be rendered by Consultant are of such a nature as to be peculiarly
rendered by Consultant, encompass the individual ability of Consultant
and cannot be measured exclusively in terms of hours or services
rendered in any particular period. Subject to the authority of the
Company's Board of Directors (the "Board"), it is presently intended
that Consultant will serve as Chairman of the Board of Directors of the
Company.
(b) Consultant shall, in the capacity of an independent contractor,
function as an advisor and consultant to the then current management of
the Company and, in such capacity, Consultant shall as reasonably
requested by the Board or the chief
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executive officer of the Company from time to time (i) furnish his
advice, information, judgment and knowledge with respect to business
methods, practices, history, customers, employees and suppliers of the
Company, (ii) generally advise and consult with management regarding
matters affecting the Company's business and affairs, and (iii) attend
meetings and serve on committees as he may be requested from time to
time to accomplish the foregoing duties. In addition, if so requested
by the Company at any time during the term of this Agreement,
Consultant shall, upon reasonable notice, furnish such information and
assistance to the Company in connection with any litigation,
arbitration or other dispute or controversy in which the Company or any
of its affiliates is, or may become, involved and in which Consultant
is not involved as an adverse or potentially adverse party.
1.2 Limitations. Consultant shall not be required to perform any
duties described in this Section 1 at any place other than in the
Houston, Texas metropolitan area without his consent. Consultant shall
not be required to perform any duties described in this Section 1
during any period in which Consultant is prevented from performing such
duties due to an illness or accident. Consultant shall not be required
to provide the Company more than 500 hours of services during any
twelve month period, and Consultant shall not be required to provide
more than 20 hours of services in any calendar week. In addition,
Consultant shall be entitled to advise Company of periods of time, not
to exceed four consecutive weeks, during which he will be unavailable
for consulting, whether due to personal vacations or other reasons;
provided, however, that Consultant shall not be entitled to designate
more than four weeks of such unavailability during any three month
period.
1.3 Other Activities. Nothing in this Agreement shall preclude
Consultant from serving as a director or member of a committee of any
organization involving no conflict of interest with the interests of
the Company, from engaging in charitable and community activities, or
from managing his personal investments, provided that such activities
do not materially interfere with the regular performance of his duties
and responsibilities under this Agreement.
1.4 Independent Contractor.
(a) It is expressly understood and agreed that Consultant shall
act as an independent contractor in the undertaking of all consulting
assignments hereunder; Consultant is not an employee of, nor employed
by, the Company. Consultant shall utilize his own means and methods of
accomplishing the consulting projects assigned to him by the Company
from time to time and shall not be subject to the supervision,
direction or control of the Company with respect to the details of such
work.
(b) Executive shall function solely as an independent
contractor; therefore, it is expressly understood and agreed that, with
respect to the duties described in Section 1.1, no employee-employer
relationship shall exist between the Company and Consultant with
respect to Consultant's provision of consulting services hereunder.
Accordingly, (i) Consultant shall have no right to be covered, or
accrue service credit, as
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an active employee under any of the employee benefit plans or programs
maintained by the Company for its employees, except to the extent set
forth in this Agreement, and (ii) except as otherwise required by law,
the Company shall have no right or responsibility to withhold from
Consultant's consulting fees or any other taxable income provided to
Consultant hereunder, any federal income tax withholding, FICA taxes,
unemployment taxes or other taxes or amounts required to be withheld
from the compensation of employees under any state or federal law or
regulation.
(c) At the end of each calendar year during the term of this
Agreement, the Company shall provide IRS Forms 1099 (or its successor)
to Consultant that show the amounts paid hereunder to or on behalf of
Consultant during the calendar year that are required to be included in
the taxable income of Consultant for such year. Taxable income shall be
determined by the Company in accordance with applicable tax law and
regulation.
2. Term. Subject to the provisions for earlier termination provided
herein, and conditioned upon Consultant not being unable to commence his
engagement hereunder on April 1, 2001 due to his death or Disability, the term
of this Agreement and the term of Consultant's engagement by the Company shall
commence on April 1, 2001 and continue uninterrupted until April 1, 2006
("Consulting Term").
3. Compensation. In consideration of the services to be rendered
pursuant to this Agreement by Consultant to the Company, Consultant shall be
compensated as set forth in this Agreement, including this Section 3.
3.1 Cash Consulting Fee.
During the Consulting Term, the Company shall pay, or cause to
be paid, to Consultant in equal monthly installments the sum of
$250,000 per year (the "Consulting Fee"), for services rendered under
this Agreement. The Consulting Fee shall be prorated on a daily basis
in the first and last month of the Consulting Term, if not full months.
3.2 Additional Benefits.
(a) As additional consideration for Consultant's services
hereunder, and subject to the authority of the Board, during the
Consulting Term Consultant shall be entitled to receive all benefits
(other than benefits under cash bonus, stock or other equity incentive
plans) consistent with Consultant's position as Chairman of the Board
and, to the extent permitted by law and the Company's benefit plans,
comparable to those provided to Consultant during his prior service as
chief executive officer of the Company. In order for Consultant to
perform his services under this Agreement, Consultant shall be provided
with the full-time use of an automobile (or an automobile allowance)
consistent with the Company's corporate policy on automobiles as in
effect from time to time. Subject to the Company's other contractual
obligations to Consultant, the Company reserves the right, through
action taken by the Board, to modify, suspend or discontinue
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any and all benefits referred to in this Section 3.2 at any time
without recourse by Consultant so long as such action is taken
generally with respect to the Company's senior executives and does not
single out Consultant.
(b) The Company will, for so long as Consultant may have
liability to any person for actions taken or omissions by Consultant in
his capacity as a director of the Company and so long as available on a
commercially reasonable basis, maintain in effect directors' and
officers' liability insurance covering Consultant on terms no less
favorable than the directors' and officers' liability insurance
maintained by the Company in effect on the date hereof in terms of
coverage and amounts. In addition, for so long as Consultant may have
liability to any person for actions taken or omissions by Consultant in
his capacity as a director or agent of the Company, the Company shall
not terminate or amend any provisions of the Company's articles of
incorporation, bylaws or other organizational documents so as to reduce
or otherwise adversely affect Consultant's rights to indemnification
from the Company or the limitation or elimination of Consultant's
liability to the Company or its shareholders for monetary damages to
terms less favorable than those in effect on the date hereof.
3.3 Working Facilities; Expenses.
(a) Consultant shall be provided with office space and
appropriate support services at the Company's executive offices as
needed to fulfill his duties hereunder. Without limiting the scope of
the previous sentence, to the extent that Consultant so desires, the
Company shall provide Consultant with a private, furnished office and
an administrative assistant commensurate with his executive position
with the Company at the time of his retirement.
(b) Consultant shall be reimbursed for all expenses reasonably
incurred in the furtherance of the business of the Company during the
Consulting Term. Consultant shall keep complete and accurate records of
all expenditures such that Consultant may fully account to the
Company's chief executive officer or Board, if requested, or as may
then be required by the Internal Revenue Service.
3.4 Benefits Following Termination of Engagement.
(a) As additional consideration for Consultant's services
hereunder, upon the termination of Consultant's engagement by the
Company, due to death, Disability, termination by the Consultant
(whether or not for Good Reason), or termination by the Company
(whether or not for Just Cause), the Company shall, commencing on the
first day of the month following the date of the termination of
Consultant's engagement, pay, or cause to be paid, to Consultant in
equal monthly installments, an annual amount equal to $250,000 per year
(the "Additional Annual Amount"), for a period equal to the greater of
(x) 15 years, (y) the life of Consultant, or (z) the life of Xxxxxxx X.
Xxxxxxxx so long as she is married to Consultant at the date of
Consultant's death ("Consultant's Spouse"); and provided further that
Consultant shall not be entitled to any amounts under this Section 3.4
if Consultant's engagement is
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terminated prior to a Change in Control for Just Cause or without Good
Reason. In addition, the Additional Annual Amount shall be adjusted
annually to reflect increases in the cost of living after the date of
termination of Consultant's engagement by the Company hereunder, as
measured by the Consumer Price Index ("CPI") for all urban consumers
calculated by the Bureau of Labor Statistics (or any successor or
replacement index).
(i) If Consultant shall die before Consultant's
Spouse and Consultant's Spouse is married to Consultant at the
date of Consultant's death, whether before or after the
payments of the Additional Annual Amount described above shall
have commenced, then the Additional Annual Amount shall be
paid in monthly installments to Consultant's Spouse. If
Consultant's Spouse then dies before all amounts required to
be paid have been paid, then, upon the death of Consultant's
Spouse, any remaining payments of the Additional Annual Amount
shall be made to the personal representative of the estate of
Consultant's Spouse, to pass as a part thereof.
(ii) If Consultant's Spouse shall die before
Consultant, then any community property interest of
Consultant's Spouse in this Agreement shall vest in
Consultant. If Consultant then dies before all amounts
required to be paid have been paid, then, upon Consultant's
death, any remaining payments of the Additional Annual Amount
shall be made to Consultant's beneficiary designated in
writing to the Company by Consultant, or in the absence
thereof, to the personal representative of the estate of
Consultant, to pass as a part thereof.
(b) Upon the termination of Consultant's engagement by the
Company, whether due to death, Disability, resignation (whether or not
for Good Reason) or discharge (whether or not for Just Cause), the
Company shall secure its obligations under this Section 3.4 as
described below. In the case of a termination of Consultant's
engagement (whether or not after any Change in Control), the Company
shall pay to Consultant cash in an amount sufficient to permit
Consultant to purchase a fully paid annuity contract issued by an
insurance company acceptable to Consultant, in his sole discretion,
providing for the payment to Consultant of the amounts required to be
paid pursuant to this Section 3.4 ("Section 3.4 Payments"), and shall
also pay to Consultant cash in an amount sufficient to pay Consultant's
income taxes (calculated at the highest marginal federal income tax
rate and after taking into account any applicable surtaxes and other
generally applicable taxes which would have the effect of increasing
the marginal federal income tax rate, and, if applicable, at the
highest marginal state income tax rate in effect in the State of Texas)
payable upon receipt of any such annuity contract (which payment of
income taxes and its effect on the taxability of the payments under the
annuity contract shall be taken into account in establishing the
annuity contract, which will be designed to provide Consultant with the
same after-tax benefit that he would have received if the Company
directly made the Section 3.4 Payments assuming the highest federal and
Texas marginal income tax rates in effect at the time of the
establishment of the annuity); provided however, that such cash payment
to Consultant to purchase this annuity shall not release the Company
from its obligations hereunder in the event that as
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a result of changes in the CPI such cash is not sufficient to make the
payments required by this Section 3.4.
(c) Upon the effective date of this Agreement, on the
request of the Consultant the Company shall establish a "rabbi trust"
for the benefit of Consultant into which there shall be contributed by
the Company cash in an amount sufficient to purchase the annuity
contract and pay the anticipated income taxes contemplated by the
preceding paragraph (b) upon the termination of Consultant's engagement
at any time during the term of this Agreement without any regard as to
whether such termination is for Just Cause or without Good Reason prior
to a Change in Control. Any instruments establishing such rabbi trust
shall in all respects be satisfactory in form and substance to
Consultant and his counsel.
3.5 Incapacity. If Consultant or any other person entitled to
the payment of benefits hereunder shall at the time any payment is due
be incapacitated, the Company shall make such payment to the legally
appointed conservator or guardian of such person, or if no
conservatorship or guardianship shall have been established, the
Company may, in the case of temporary incapacity, apply such payment,
or any portion thereof, for the benefit of such person.
3.6 Offsets. The compensation and benefits provided hereunder
are in addition to all other compensation and benefits provided by the
Company or by any other employer of Consultant, or by any governmental
agency, and shall not be reduced by any amount payable under any
pension or retirement arrangement, social security, or any other
government benefit or payment. In addition, the Company hereby agrees
that in the event of any dispute with respect to the payment of
compensation or benefits to Consultant hereunder that the Company shall
not have the right to withhold any such payments or to offset against
any such payments any other amounts that may otherwise be payable or
owed by Consultant to the Company, except in accordance with an order
obtained pursuant to the procedures described in Section 6 hereof.
4. Confidential Information; Non-Competition.
4.1 General. Consultant acknowledges that during his
engagement by, and as a result of his relationship with, the Company he
will obtain knowledge of and gain access to information regarding the
Company's (including for purposes of this Section 4 all former,
current, and future subsidiaries of the Company) business, operations,
products, proposed products, production methods, processes, customer
lists, advertising, marketing and promotional plans and materials,
price lists, pricing policies, financial information and other trade
secrets, confidential information and material proprietary to the
Company or designated as being confidential by the Company which is not
generally known by non-Company personnel, including information and
material originated, discovered or developed in whole or in part by
Consultant (collectively referred to herein as "Confidential
Information"). Consultant agrees that during the term of this Agreement
and, to the fullest extent permitted by law, thereafter, he will, in a
fiduciary capacity for the benefit of the Company, hold all
Confidential Information strictly in confidence and
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will not directly or indirectly reveal, report, disclose, publish or
transfer any of such Confidential Information to any person, firm or
other entity or utilize any of the Confidential Information for any
purpose, except in furtherance of the Company's business or his
engagement under this Agreement.
4.2 Return of Materials. Consultant agrees that upon the
expiration or earlier termination of this Agreement he will at the
Company's request surrender and return to the Company all lists, books,
records and other Confidential Information of the Company, or obtained
in connection with the Company's business, it being expressly
acknowledged by Consultant that all such items are the exclusive
property of the Company, and Consultant shall not make or retain any
copies thereof.
4.3 Non-Competition. Consultant agrees that during the term of
this Agreement he will neither directly nor indirectly engage in a
business competing with any of the businesses conducted by the Company
or any of its subsidiaries, nor without the prior written consent of
the Company's chief executive officer or the Board, directly or
indirectly have any equity interest in, own, manage, operate, control,
be connected with as a stockholder, joint venturer, director, officer,
employee, partner or consultant, or otherwise engage, invest or
participate in any business which is competitive with any of the
businesses conducted by the Company or by any subsidiary of the
Company; provided, however, that nothing contained in this Section 4.3
shall prevent Consultant from investing or trading in stocks, bonds,
commodities, securities, real estate or other forms of investment for
his own account and benefit (directly or indirectly), so long as such
investment activities do not interfere with Consultant's services to be
rendered hereunder and are consistent with the conflict of interest
provisions contained in the Company's Business Ethics Policy as it
exists from time to time.
5. Termination Prior to Expiration of Term. This Agreement shall
terminate and be null and void ab initio, and Consultant's engagement and his
rights under this Agreement shall terminate, on April 1, 2001 without any
liability of the Company to Consultant if Consultant is unable to commence his
engagement hereunder due to his death or Disability. Consultant's engagement,
and his rights under this Agreement, may be terminated during the Consulting
Term only as provided below in this Section 5.
5.1 Discharge or Resignation.
(a) Consultant may be discharged prior to the expiration of the
term of this Agreement only for Just Cause. For the purpose of any
provision of this Agreement, the termination of Consultant's engagement
shall be deemed to have been for "Just Cause" only: (i) if termination
of his engagement shall have been the result of an act or acts of
dishonesty on the part of Consultant constituting a felony and
resulting or intended to result directly or indirectly in gain or
personal enrichment at the expense of the Company, or (ii) if during
the Consulting Term there has been a breach by Consultant of the
provisions of Section 1 above, relating to the provision of executive
consulting services to the Company, or of Section 4, relating to
Confidential Information and non-competition, and such breach results
in demonstrable material injury to the Company, and
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with respect to any alleged breach of Section 1 or Section 4,
Consultant shall have either failed to remedy such alleged breach
within 30 days after his receipt of written notice from the Company
pursuant to a resolution duly adopted by the Board after notice to the
Consultant and an opportunity to be heard demanding that he remedy such
alleged breach, or shall have failed to take all reasonable steps to
that end during such 30-day period and thereafter; provided, that there
shall have been delivered to Consultant a certified copy of the
resolution of the Board adopted by the affirmative vote of not less
than two-thirds of the entire membership of the Board (other than
Consultant, if he is then a member of the Board) at a meeting called
and held for that purpose and at which Consultant was given an
opportunity to be heard, finding that Consultant was guilty of conduct
set forth in subparagraphs (i) or (ii) above, specifying the
particulars thereof in detail. "Just Cause" shall not include the death
or Disability of Consultant.
(b) Anything in this Section 5.1 or elsewhere in this Agreement
to the contrary notwithstanding, the engagement of Consultant shall in
no event be considered to have been terminated for Just Cause if
termination of his engagement took place as the result of (i) bad
judgment or negligence on the part of Consultant; (ii) an act or
omission without intent of gaining therefrom directly or indirectly a
profit to which Consultant was not legally entitled; (iii) an act or
omission believed by Consultant in good faith to have been in or not
opposed to the interests of the Company; (iv) an act or omission in
respect of which a determination could properly be made that Consultant
met the applicable standard of conduct prescribed for indemnification
or reimbursement or payment of expenses under the laws of the state of
incorporation of the Company or pursuant to the terms of any policy of
directors' and officers' liability insurance that may be applicable to
directors and officers of the Company, in each case as in effect at the
time of such act or omission; (v) an act or omission which occurred
more than 12 calendar months prior to the Consultant's having been
given notice of the termination of his engagement for such act or
omission unless the commission of such act or such omission could not
at the time of such commission or omission have been known to the
Company's chief executive officer or a member of the Board (other than
Consultant, if he is then a member of the Board), in which case more
than 12 calendar months from the date that the commission of such act
or such omission was or could reasonably have been so known; or (vi) a
continuing course of action which commenced and was or could reasonably
have been known to the Company's chief executive officer or a member of
the Board (other than Consultant) more than 12 calendar months prior to
notice having been given to Consultant of the termination of his
engagement.
(c) Consultant may resign prior to the expiration of the term
of this Agreement for Good Reason at any time upon providing written
notice to the Company and the Consultant's continued engagement with
the Company after an event constituting Good Reason has occurred shall
not be deemed a waiver of the Consultant's right to terminate his
engagement for such Good Reason at any time after the event and receive
the benefits under Section 5.1(d)(ii). "Good Reason" shall mean (i) any
reduction or attempted reduction of compensation or benefits below that
required by Section 3, (ii) any failure to appoint, reappoint, elect or
reelect Consultant to, or any removal of Consultant from, the positions
of (1) Chairman of the Board of Directors (or any
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comparable position determined by Consultant) of the Company or any
entity succeeding to the business of the Company and (2) the Chairman
of the Board of Directors (or any comparable position determined by
Consultant) of any entity directly or indirectly controlling the
Company or any entity succeeding to the business of the Company, or
(iii) the material failure by the Company to fulfill its obligations
under this Agreement, to the extent not remedied in a reasonable period
of time, but in no event more than 30 days, after receipt of written
notice from Consultant specifying the material failure by the Company.
(d) (i) If prior to a Change in Control Consultant is
discharged for Just Cause or resigns without Good Reason, the
Company shall not be obligated to pay Consultant any sums of
money pursuant to Section 3.1 other than a cash lump sum
payment equal to the Consulting Fee due Consultant as of the
date of discharge or resignation. Consultant's other
compensation and benefits under this Agreement shall not be
impaired or otherwise adversely affected by termination of
Consultant's engagement; provided, however, that Consultant
shall not be entitled to any amounts under Section 3.4 or
Section 5.1(d)(iii) if Consultant's engagement is terminated
prior to a Change in Control for Just Cause or without Good
Reason.
(ii) If prior to a Change in Control Consultant
is discharged without Just Cause or resigns for Good Reason,
Consultant shall be entitled to the following:
(1) a cash lump sum payment equal to the
Consulting Fee due Consultant pursuant to
Section 3.1 as of the date of discharge or
resignation; plus
(2) a cash lump sum payment equal to the
Consulting Fee pursuant to Section 3.1 which
would be received by Consultant for the
remainder of the Consulting Term. The entire
lump sum amount shall be paid concurrent with
any discharge or within 3 business days of the
date of any resignation. Consultant shall have
no duty to mitigate or attempt to mitigate his
damages. Consultant's other compensation and
benefits under this Agreement, including without
limitation those provided pursuant to Sections
3.4 and 5.1(d)(iv), shall not be impaired or
otherwise adversely affected by termination of
Consultant's engagement.
(iii) If Consultant's engagement is terminated
(whether through discharge by the Company or the resignation
of Consultant) after a Change in Control (even if for Just
Cause or without Good Reason), Consultant, or his spouse,
estate or otherwise designated beneficiary, as the case may
be, shall be entitled to the following:
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(1) a cash lump sum payment equal to the
Consulting Fee due Consultant pursuant to
Section 3.1 as of the date of discharge or
resignation; plus
(2) a cash lump sum payment equal to the
product of five times the highest annual cash
compensation which was received or earned by
Consultant from the Company in respect of any
year during which the Employment Agreement was
in force. The entire lump sum amount shall be
paid concurrent with any discharge or within 3
business days of the date of any resignation.
Consultant shall have no duty to mitigate or
attempt to mitigate his damages. Consultant's
other compensation and benefits under this
Agreement, including without limitation those
provided pursuant to Section 3.4, shall not be
impaired or otherwise adversely affected by
termination of Consultant's engagement.
(iv) If prior to a Change in Control Consultant is
discharged without Just Cause or resigns for Good Reason, and
a Change in Control occurs before the expiration of the
Consulting Term, in addition to any payments to which he is
entitled under Section 5.1(d)(ii), Consultant shall be
entitled to a cash lump sum payment equal to the excess of (1)
the product of five times the highest annual cash compensation
which was received by Consultant from the Company in any year
during which the Employment Agreement was in force, over (2)
the amount of any payment made to Consultant pursuant to
Section 5.1(d)(ii)(2). The entire lump sum amount shall be
paid concurrent with any such Change in Control.
(e) For purposes of this Agreement, a "Change in Control"
shall be deemed to have occurred on the earliest of the following
dates:
(i) The date any entity or person (including a
"group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, or any comparable successor provisions)
shall have become the beneficial owner of, or shall have
obtained voting control over, twenty percent (20%) or more of
the then outstanding common shares of the Company;
(ii) (1) The date the stockholders of the Company
approve a definitive agreement to sell or otherwise dispose of
substantially all the assets of the Company, or to merge or
consolidate the Company with or into another corporation, in
which the Company is not the continuing or surviving
corporation or pursuant to which any common shares of the
Company would be converted into cash, securities or other
property of another corporation, other than a merger of the
Company in which holders of common shares immediately prior to
the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the
merger as immediately before, or (2) the date the Company
enters into a binding agreement to sell or otherwise transfer
(including without limitation by merger or consolidation) to
one or more
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unaffiliated entities or persons not less than a majority of
the outstanding capital stock of the Company; or
(iii) The date upon which, during any period of two
consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company (the
"Company Board") cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination for
election by the Company's stockholders, of each new Company
Board member was approved by a vote of at least three-fourths
of the Company Board members then still in office who were
Company Board members at the beginning of such period.
5.2 Disability. In the case of the determination of a
Disability as of April 1, 2001, the term "Disability" shall mean an
illness or accident which prevents, and is reasonably anticipated to
prevent, Consultant from performing with reasonable accommodation by
the Company his duties under this Agreement for a period of 12
consecutive months commencing April 1, 2001. In the case of the
determination of a Disability during the Consulting Term after April 1,
2001, the term "Disability" shall mean an illness or accident which
prevents Consultant from performing with reasonable accommodation by
the Company his duties under this Agreement for a period of 12
consecutive months. In the absence of fraud, any determination by
Consultant's physician whether or not Consultant has suffered a
Disability or whether or not an illness or accident prevents, or is
reasonably anticipated to prevent, Consultant from performing any of
his duties under this Agreement shall be conclusive and binding on the
Company for purposes of this Agreement. Unless Consultant shall have
returned to performance of his duties in accordance with the terms
hereof within such 12-month period, the Consulting Term under this
Agreement shall be deemed to have ended as of the close of business on
the last day of such 12-month period. In the event of the Disability of
Consultant resulting in the termination of the Consulting Term,
Consultant shall be entitled to the full Consulting Fee and benefits
provided for in Section 3 above for the period of such Disability, but
shall not receive the Consulting Fee pursuant to Section 3.1 for a
period in excess of 12 months after the onset of such Disability.
Consultant's other compensation and benefits under this Agreement,
including without limitation those provided pursuant to Section 3.4 but
excluding those provided pursuant to Section 5.1(d)(iii), shall not be
impaired or otherwise adversely affected by termination of Consultant's
engagement on account of Disability.
5.3 Death. The death of Consultant shall result in the
termination of the Consulting Term, and Consultant's Spouse, or if
Consultant's Spouse predeceases him, the personal representative of the
estate of Consultant or designated beneficiary shall be entitled to the
benefits described in Section 3, including, without limitation, Section
3.4. The Company shall not be obligated to pay Consultant's Spouse, or
if Consultant's Spouse predeceases him, the personal representative of
the estate of Consultant or designated beneficiary any sums of money
pursuant to Section 3.1 other than a cash lump sum payment equal to the
Consulting Fee due Consultant pursuant to Section 3.1 as of the date of
death. Consultant's other compensation and benefits under this
Agreement,
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including without limitation those provided pursuant to Section 3.4 but
excluding those provided pursuant to Section 5.1(d)(iii), shall not be
impaired or otherwise adversely affected by termination of Consultant's
engagement on account of death.
5.4 Requirement of Bonus Payment In Certain Circumstances.
(a) In the event that Consultant is deemed to have
received an excess parachute payment (as such term is defined in
Section 280G(b) of the Code) which is subject to the excise taxes (the
"Excise Taxes") imposed by Section 4999 of the Code in respect of any
payment of compensation to Consultant from the Company pursuant to this
Agreement, in whatever form, the Company shall make the Bonus Payment
(as defined below) to Consultant promptly after the date on which
Consultant received or is deemed to have received any excess parachute
payments.
(b) The term "Bonus Payment" means a cash payment in an
amount equal to the sum of (A) all Excise Taxes payable by Consultant,
plus (B) all additional Excise Taxes and federal or state income taxes
to the extent such taxes are imposed in respect of the Bonus Payment,
such that Consultant shall be in the same after-tax position and shall
have received the same benefits that he would have received if the
Excise Taxes had not been imposed. For purposes of calculating any
income taxes attributable to the Bonus Payment, Consultant shall be
deemed for all purposes to be paying income taxes at the highest
marginal federal income tax rate, taking into account any applicable
surtaxes and other generally applicable taxes which have the effect of
increasing the marginal federal income tax rate and, if applicable, at
the highest marginal state income tax rate to which the Bonus Payment
and Consultant are subject. An example of the calculation of the Bonus
Payment is set forth below: Assume that the Excise Tax rate is 20%,
that the highest federal marginal income tax rate is 40% and that
Consultant is not subject to state income taxes. Assume that Consultant
has received an excess parachute payment in the amount of $500,000, on
which $100,000 in Excise Taxes are payable. The amount of the required
Bonus Payment is $250,000. The Bonus Payment, less Excise Taxes of
$50,000 and income taxes of $100,000, yields $100,000, the amount of
the Excise Taxes payable in respect of the excess parachute payment.
(c) Consultant agrees to cooperate reasonably with the
Company to minimize the amount of the excess parachute payments,
including without limitation assisting the Company in establishing that
some or all of the payments received by Consultant contingent on a
change described in Section 280G(b)(2)(A)(i) of the Code are reasonable
compensation for personal services actually rendered by Consultant
before the date of such change or to be rendered by Consultant on or
after the date of such change. In the event that the Company is able to
establish that the amount of the excess parachute payments is less than
originally anticipated by Consultant, Consultant shall refund to the
Company any excess Bonus Payment to the extent not required to pay
Excise Taxes or income taxes (including those incurred in respect of
the payment of the Bonus Payment). Notwithstanding the foregoing,
Consultant shall not be required to take any actions which his tax
advisor advises him in writing (i) is improper or (ii) exposes
Consultant to material personal liability, and Consultant may require
the Company to deliver to
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Consultant an indemnification agreement in form and substance
satisfactory to Consultant as a condition to taking any action required
by this Section 5.4.
(d) The Company shall make any payment required to be made
under this Agreement in cash and on demand. Any payment required to be
paid by the Company under this Agreement which is not paid within five
days of receipt by the Company of Consultant's demand therefor shall
thereafter be deemed delinquent, and the Company shall pay to
Consultant immediately upon demand interest at the highest nonusurious
rate per annum allowed by applicable law from the date such payment
becomes delinquent to the date of payment of such delinquent sum.
(e) In the event that there is any change to the Code
which results in the recodification of Section 280G or Section 4999 of
the Code, or in the event that either such section of the Code is
amended, replaced or supplemented by other provisions of the Code of
similar import ("Successor Provisions"), then this Agreement shall be
applied and enforced with respect to such new Code provisions in a
manner consistent with the intent of the parties as expressed herein,
which is to assure that Consultant is in the same after-tax position
and has received the same benefits that he would have been in and
received if any taxes imposed by Section 4999 or any Successor
Provisions had not been imposed.
6. Arbitration.
6.1 General. In the event that Consultant's engagement shall be
terminated by the Company during the term of this Agreement and such
termination is alleged to be for Just Cause, or Consultant's right to
terminate his engagement for Good Reason under Section 5.1(c) shall be
questioned by the Company, or for any other reason, or in the event of
any other dispute arising under or in connection with this Agreement,
Consultant shall have the right, in addition to all other rights and
remedies provided by law, at his sole election either to seek
arbitration in Houston, Texas under the rules of the American
Arbitration Association (the "AAA") by serving a notice to arbitrate
upon the Company or to institute a judicial proceeding in a court of
competent jurisdiction located in Xxxxxx County, Texas. The arbitrator
shall be selected by mutual agreement of the parties, if possible. If
the parties fail to reach an agreement upon the appointment of an
arbitrator within 30 days following the receipt by the Company of
Consultant's desire to arbitrate, the arbitrator shall be selected from
a panel or panels of persons submitted by the AAA. The selection
process shall be that which is set forth in the AAA Commercial
Arbitration Rules then prevailing. In the event that the Company
institutes any legal proceeding against Consultant to resolve a dispute
under this Agreement, Consultant shall have the right either to seek
arbitration in Houston, Texas or to institute a judicial proceeding in
a court located in Xxxxxx County, Texas, as provided in the preceding
sentence, and the Company shall dismiss its proceeding or take such
other action as may be reasonably requested by Consultant in order for
such proceeding to be brought in the forum selected by Consultant in
accordance with the preceding sentence. Any award rendered pursuant to
this Section 6.1 shall be final and binding on the parties to this
Agreement.
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6.2 Procedure. The Company shall have the burden of proving Just
Cause for any discharge of Consultant under Section 6.1, and the
Company shall have the burden of proving that Good Reason did not exist
in respect of any resignation by Consultant. Judgment upon any award of
any arbitrator may be entered in any court having jurisdiction, or
application may be made to any such court for the judicial acceptance
of the award and for an order of enforcement.
6.3 Costs and Expenses. The Company shall pay the fees of any
arbitrator, witnesses and such other expenses as may be generated by an
arbitration, except Consultant's attorneys' fees, unless the arbitrator
concludes that such arbitration procedure was not instituted in good
faith by Consultant. In such event the arbitrator shall be empowered to
allocate fees and assess costs and other expenses of the arbitration,
except attorneys' fees, as the arbitrator may deem appropriate, bearing
in mind the relative financial abilities of the parties and the
respective merits of their positions.
7. Non-Assignment. This Agreement shall not be assignable nor the
duties hereunder delegable by Consultant. None of the payments hereunder may be
encumbered, transferred or in any way anticipated. The Company shall not assign
this Agreement nor shall the Company directly or indirectly transfer (including
without limitation by merger, share exchange or consolidation) all or any
substantial part of the stock or assets of the Company without first obtaining
in conjunction with such transfer the express assumption of all of its
obligations in this Agreement by the successor, assignee or transferee and each
entity directly or indirectly controlling the Company or any such successor,
assignee or transferee.
8. Remedies. Consultant acknowledges that the services he is to render
under this Agreement are of a unique and special nature, the loss of which
cannot reasonably or adequately be compensated for in monetary damages, and that
irreparable injury and damage will result to the Company in the event of any
default or breach of this Agreement by Consultant. Because of the unique nature
of the Confidential Information, Consultant further acknowledges and agrees that
the Company will suffer irreparable harm if Consultant fails to comply with his
obligations in Section 4 hereof and that monetary damages would be inadequate to
compensate the Company for such breach. Accordingly, Consultant agrees that the
Company will, in addition to any other remedies available to either of them at
law, in equity or, without limitation, otherwise, be entitled to injunctive
relief or specific performance to enforce the terms, or prevent or remedy the
violation, of any provisions of this Agreement. This provision shall not
constitute a waiver by the Company of any rights to damages or other remedies
which it may have pursuant to this Agreement or otherwise.
9. Survival. The provisions of Sections 4.1, 4.2, 6 and 8 shall survive
the expiration or earlier termination of this Agreement.
10. Notices. Any notices or other communications relating to this
Agreement shall be in writing and delivered personally or mailed by certified
mail, return receipt requested, to the party concerned at the address set forth
below:
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If to the Company: Kent Electronics Corporation
0000 Xxxxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attn: Chief Executive Officer
If to Consultant: At his residence address as maintained by
the Company in the regular course of its
business.
Either party may change the address for the giving of notices at any time by
notice given to the other party under the provisions of this Section 10.
11. Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior written and oral and all contemporaneous oral agreements, understandings
and negotiations with respect to the subject matter hereof. This Agreement may
not be changed orally, but only by an agreement in writing signed by both
parties.
12. Construction. This Agreement shall be governed under and construed
in accordance with the laws of the State of Texas, without regard to the
conflicts of laws principles thereof. The paragraph headings and captions
contained herein are for reference purposes and convenience only and shall not
in any way affect the meaning or interpretation of this Agreement. It is
intended by the parties that this Agreement be interpreted in accordance with
its fair and simple meaning, not for or against either party, and neither party
shall be deemed to be the drafter of this Agreement.
13. Severability. If any portion or provisions of this Agreement is
determined to be invalid, illegal or unenforceable, the remaining portions or
provisions hereof shall not be affected.
14. Binding Effect. The rights and obligations of the parties under
this Agreement shall be binding upon and inure to the benefit of the permitted
successors, assigns, heirs, administrators, executors and personal
representatives of the parties.
15. Other Agreements. Upon the execution of this Agreement, Consultant
shall no longer be an employee of the Company. All other agreements or
arrangements of the Company with or for the benefit of the Consultant in effect
on the date hereof shall remain effective, including but not limited to the
obligations of the Company under the Employment Agreement, the Medical Benefits
Agreement and that certain Agreement dated March 16, 1993 between the Company
and Consultant requiring a Bonus Payment in the event Consultant is deemed to
have received an excess parachute payment under Section 280G of the Code, and
the parties hereto agree that such agreements shall be unaffected except as
expressly modified by this Agreement. The parties agree that sections 1 and 3 of
the Medical Benefits Agreement are no longer of any effect, such sections being
superseded by the provisions hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first written above.
/s/ Xxxxxx X. Xxxxxxxx
---------------------------------------
Xxxxxx X. Xxxxxxxx
XXXX ELECTRONICS CORPORATION
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
Xxxxx X. Xxxxx
Chief Executive Officer and President
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