AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
Exhibit 10.5
AMENDMENT NO.
2
TO
This AMENDMENT NO. 2 (the “Amendment”)
to the Employment Agreement, dated May 1, 1997, as amended on June 30, 2005 (the
“Employment Agreement”), by and between Walco International, Inc., a Delaware
corporation (the “Company”) and Xxxxx X. Xxxxxxx (the “Executive”) is entered
into as of the 7th day of May, 2008. Animal Health International,
Inc., a Delaware corporation, f/k/a Steer Parent Corporation (“AHII”) is a party
to this Amendment solely for the purposes of Section 6(e) of this
Amendment.
WHEREAS, on January 30, 2007, AHII
completed an initial public offering of its securities; and
WHEREAS, following such offering, the
Company and the Executive desire to amend certain terms of the Employment
Agreement as set forth herein.
NOW THEREFORE, for good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows.
1. Capitalized
Terms. All capitalized terms used, but not defined herein,
shall have the same meaning as prescribed in the Employment
Agreement.
2. Amendment to Section 2 of
Employment Agreement. Section 2 of the Employment Agreement is
hereby deleted and replaced in its entirety by the following:
2. Term. The
term of this Agreement shall commence on the effective date hereof and shall
continue until December 31, 2010, and thereafter shall automatically extend for
one or more additional one-year renewal periods, subject to earlier termination
pursuant to Section 5 hereof.
3. Amendment to Section 5.4 of
the Employment Agreement. Section 5.4 of the Employment
Agreement is hereby deleted and replaced in its entirety by the
following:
5.4 By the Company Other than
for Cause. The Company may terminate the Executive's
employment hereunder other than for Cause at any time upon notice to the
Executive.
4. Amendment to Section 5.5 of
the Employment Agreement. Section 5.5 of the Employment
Agreement is hereby deleted and replaced in its entirety by the
following:
5.5 Resignation by the Executive
for Good Reason. The Executive may resign his employment
hereunder for Good Reason, upon notice to the Company setting forth in
reasonable detail the nature of such Good Reason. The following shall
constitute Good Reason for termination by the Executive: (i) willful failure of
the Company to provide the Executive the Base Salary and benefits in accordance
with the terms of Section 4 hereof other than, in the case of a material
reduction in Base Salary or benefits, any such reduction which is part of a
general reduction or other concessionary arrangement affecting all employees or
affecting that group of employees of which the Executive is a member, (ii) a
material diminution in the nature or scope of the Executive's powers, duties or
responsibilities without the Executive's prior consent; provided, however, that
any diminution of the business of the Company or any of its Affiliates,
including without limitation the sale or transfer of any or all of the assets of
the Company or any of its Affiliates, shall not constitute "Good Reason", or
(iii) any other material breach of this Agreement. If the Executive
believes Good Reason exists for terminating this Agreement, he shall give the
Company written notice of the acts or omissions constituting Good Reason within
90 days of the initial existence of such acts or omissions, and no termination
of this Agreement shall be effective unless and until the Company fails to cure
such acts or omissions within 30 days after receiving the written notice and the
Executive separates from service within two years following the initial
existence of the acts or omissions giving rise to Good Reason.
5. Compensation Due Upon
Termination of Agreement in Accordance with Sections 5.4 and 5.5 of the
Employment Agreement. In the event of a termination of the
Employment Agreement in accordance with Sections 5.4 and 5.5 of the Employment
Agreement, as revised pursuant to this Amendment, then the Company and AHII
shall have no further obligation to the Executive under the Employment Agreement
or otherwise, except for (a) payment of any earned but unpaid Base Salary
through the date of termination; (b) payment of any authorized but un-reimbursed
business expenses through the date of termination; (c) payment of any earned,
vested benefits (other than any entitlement to severance or separation pay, if
any) that the Executive may have under the applicable provisions of any benefit
plan or policy of the Company in which the Executive is participating before the
date of termination; and (d) payment of the severance (the "Severance")
described in Section 6 of this Amendment. The Executive shall not be
entitled to the Severance if his employment is terminated due to his death, due
to his disability, by the Company for Cause in accordance with Section 5.3 of
the Employment Agreement, if the Executive resigns other than for Good Reason,
or because either party provides a proper notice of non-renewal in accordance
with Section 2 of the Employment Agreement, as revised pursuant to this
Amendment.
6. Severance. The
Severance shall include the following:
(a) Severance
Pay. The Company shall pay the Executive severance pay (the
"Severance Pay") an amount equal to 24 months of the Executive’s Base Salary,
minus applicable taxes and withholdings. The Severance Pay shall be
paid as follows: (i) $450,000 of the Severance Pay shall be paid in
equal semi-monthly installments on the fifteenth and last day of each month
beginning on March 31st of the year following the date of termination and ending
on the 15th day of the month containing the second anniversary of the date of
termination, provided that the date of termination constitutes a separation from
service for purposes of Code Section 409A, and (ii) the remaining difference
between the amount equal to (x) 24 months of the Executive’s Base Salary less
(y) $450,000 of the Severance Pay, shall be paid in equal semi-monthly
installments on the fifteenth and last day of each month beginning on fifteenth
day of the month following the month in which the date of termination occurs and
ending on March 15th of the year following the date of termination, provided
that the date of termination constitutes a separation from service for purposes
of Code Section 409A and provided further that the Company receives no later
than 45 days after the date of termination the release of claims described in
Section 7 of this Amendment.
(b) Company
Vehicle. On the 30th day following the effective date of the
release of claims referenced in Section 7 of this Amendment, the Company shall
transfer title and ownership to the Executive of the Company vehicle provided
for his use before the date of termination.
(c) Medical and Dental
Insurance. Subject to any employee contributions applicable to
active employees generally, if the Executive is entitled to continue his
coverage under applicable law and plan terms and timely elects to continue
medical, dental and vision insurance continuation coverage following the date of
termination under the Consolidated Omnibus Budget Reconciliation Act ("COBRA"),
the Company shall provide for such coverage at the Company's expense for 18
months following the date of termination in accordance with Section 8 of this
Amendment (the "MDV Premium Payments"). If the Executive thereafter
exhausts his COBRA coverage eligibility and obtains subsequent medical, dental
and/or vision insurance coverage by purchasing an individual insurance policy
that is reasonably acceptable to the Company, the Company shall reimburse the
Executive for the cost of such coverage in accordance with Section 8 of this
Amendment (the "MDV Reimbursement"). Such MDV Reimbursements shall be
made as soon as practicable, but in no event later than the last day of the
calendar month following the calendar month in which such costs were
incurred. The Company's obligation for MDV Reimbursements under this
Section 6(c) shall extend (i) for six months; or (ii) the date the Executive
obtains other group health insurance coverage (as a result of subsequent
employment, marriage, or otherwise) through another employer's group health
insurance plan, whichever is sooner. The Company's obligations under
this Section 6(c) are conditioned on the Executive communicating with the
Company as necessary to facilitate payment and promptly notifying the Company's
General Counsel in writing if he becomes eligible for other group health
insurance coverage through another employer's group health insurance
plan.
(d) Life and
Long-Term-Disability Insurance. The Company shall continue to
pay the premiums on the Executive's life and disability insurance policy
provided under Section 4.7 of the Employment Agreement in effect immediately
before the Termination Date for 18 months following the date of termination in
accordance with Section 8 of this Amendment (the "Life/Disability Premium
Payments"). If the Executive thereafter elects to continue such life
and disability insurance coverage, the Company shall reimburse the Executive for
the cost of such coverage in accordance with Section 8 of this Amendment (the
"Life/Disability Reimbursement"). Such Life/Disability Reimbursements
shall be made as soon as practicable, but in no event later than the last day of
the calendar month following the calendar month in which such costs were
incurred. The Company's obligation for Life/Disability Reimbursements
under this Section 6(d) shall extend (i) for six months, or (ii) the date the
Executive obtains other life or disability insurance, as applicable and of
comparable coverage, as a result of subsequent employment, whichever is
sooner. The Company's obligations under this Section 6(d) are
conditioned on the Executive communicating with the Company as necessary to
facilitate payment and promptly notifying the Company's General Counsel in
writing if he becomes eligible for other life insurance coverage through another
employer.
(e) Extension of Vesting Period
for Stock Options. AHII shall continue to vest and make
exercisable for 24 months after the date of termination any unvested stock
options awarded to the Executive pursuant to the Executive under the Animal
Health International, Inc. 2007 Stock Option and Incentive Plan (the "Stock
Option Plan") and those certain two Incentive Stock Option Agreements with the
Executive (the "Stock Option Agreements"). In no event shall
stock options awarded to the Executive be exercisable more than 10 years after
their grant date.
7. Conditions on Payment of
Severance. Notwithstanding any other provision in the
Employment Agreement or this Amendment, the Company's obligation to pay the
Severance to the Executive is subject to the condition that the Executive
complies with his post-termination covenants under Sections 9.1 and 9.3 of the
Employment Agreement, as revised pursuant to this Amendment. The
Company shall have the right to suspend or cease payment of any Severance as
well as to seek restitution of any Severance already paid, if such covenants
have been breached by the Executive but all other provisions of this Agreement
shall remain in full force and effect. The Company's payment of
Severance to the Executive is also subject to the condition that the Executive
signs a release of claims in a form satisfactory to the Company within
forty-five (45) days of the date he receives notice of termination of his
employment or the date he receives a copy of the release of claims, whichever is
later, and upon his not revoking the release of claims thereafter as permitted
by applicable law.
8. Limit on Company Obligations
for Premium Payments and Reimbursements. In no event shall the
Company's obligations to make the MDV Premium Payments and the Life/Disability
Premium Payments exceed a combined total of $1,000 per month. The
Company shall each month initially apply the $1,000 toward any outstanding MDV
Premium Payments and then toward any outstanding Life/Disability Premium
Payments. In no event shall the Company's obligations to make the MDV
Reimbursements and Life/Disability Reimbursements exceed a combined total of
$1,000 per month. The Company shall each month initially apply the
$1,000 toward any outstanding MDV Reimbursements and then to any outstanding
Life/Disability Reimbursements.
9. Internal Revenue Code
Section 409A. The Employment Agreement, as revised by this
Amendment, is intended to be exempt from the tax imposed by Internal Revenue
Code section 409A and its related rules, regulations, and other guidance ("Code
Section 409A") and any ambiguous provisions shall be construed in a manner that
is compliant with or exempt from the application of Code Section
409A. If a provision of the Agreement would result in the imposition
of an applicable tax under Code Section 409A, such provision shall be reformed
to the extent permissible under Code Section 409A to avoid imposition of the
applicable tax, with such reformation effected in a manner that has the most
favorable tax result to the Executive. The parties shall cooperate
and work together in good faith to take all such action as reasonably may be
necessary or appropriate to effectuate the intent of this
paragraph. Notwithstanding the preceding sentence or any other
provision of the Employment Agreement, as revised by this Amendment, the
Executive shall be solely responsible for any risk that the compensation to be
paid by the Company to the Executive pursuant to the Employment Agreement, as
revised by this Amendment, may be subjected to the tax imposed by Code Section
409A.
10. Reimbursement for Physical
Examinations. Company shall, as additional compensation during
employment, reimburse the Executive for an annual physical medical examination
by the Executive’s private physician in an amount not to exceed $3,000 in any
Company fiscal year.
11. Amendment of Section 9.1 of
the Employment Agreement. Sections 9.1 of the Employment
Agreement is hereby deleted and replaced in its entirety by the
following:
9.1 While
the Executive is employed by the Company and for a period of three years after
his employment terminates (the "Non-Competition Period"), the Executive shall
not, directly or indirectly, whether as an owner, partner, investor, consultant,
agent, employee, co-venturer, or otherwise, compete with the Company or any of
its Affiliates within the United States (or within any county of any of the
states hereof), Mexico, Canada, or Brazil. Specifically, but without
limiting the foregoing, the Executive agrees not to engage in any manner in any
activity that is directly or indirectly competitive or potentially competitive
with the business of the Company or any of its Affiliates as conducted or under
consideration at any time during the Executive's
employment. Restricted activity includes without limitation accepting
employment or a consulting position with any Person who is, or at any time
within twelve (12) months prior to termination of the Executive's employment has
been, a customer or supplier of the Company or any of its
Affiliates. For the purposes of this Section 9, the business of the
Company and its Affiliates shall include all of the Products and the Executive's
undertaking shall encompass all items, products and services that may be used in
substitution for Products.
12. Amendment of Section 9.3 of
the Employment Agreement. Section 9.3 of the Employment
Agreement is hereby deleted and replaced in its entirety by the
following:
9.3 The
Executive further agrees that while he is employed by the Company and for a
period of three years thereafter, the Executive will not hire or attempt to hire
any employee of the Company or any of its Affiliates, assist in such hiring by
any Person, encourage any such employee to terminate his or her relationship
with the Company or any of its Affiliates, or solicit or encourage any customer,
supplier, licensee, franchiser or other entity with a business relationship with
them or, in the case of a supplier, to conduct with any Person any business or
activity which is conducted or could be conducted with the Company or any of its
Affiliates.
13. Entire
Agreement. This Amendment constitutes the sole and entire
agreement of the parties with respect to the second amendment of the Employment
Agreement; supersedes all prior verbal and written understandings and agreements
between the parties relating to its subject matters; and may not be modified
except in a writing signed by both parties.
IN WITNESS WHEREOF, the undersigned
have executed this Agreement as of the date first written above:
|
EXECUTIVE
|
WALCO INTERNATIONAL, INC. |
| /s/ Xxxxx X. Xxxxxxx | By: /s/ Xxxxxxx X. Xxxxx |
| Xxxxx X. Xxxxxxx | Name: Xxxxxxx X. Xxxxx |
| Title: Senior V.P. and C.F.O. | |
| ANIMAL HEALTH INTERNATIONAL, INC. | |
| Solely for the purpose of Section 6(e) hereof | |
| By: /s/ Xxxxxxx X. Xxxxx | |
| Name: Xxxxxxx X. Xxxxx | |
| Title: Senior V.P. and C.F.O. |
