EMPLOYMENT AGREEMENT
THIS
EMPLOYMENT AGREEMENT (this “Agreement”)
is made and entered into effective as of the 30th day of December, 2008 (the
“Effective
Date”), by and between Xxxxxx
Industries, Inc., a corporation organized under the laws of the State of
Tennessee, USA (the “Company”),
and J.
Xxxxxxx Xxxx (the “Executive”).
WHEREAS,
Executive and the Company entered into an employment agreement (the “Original
Agreement”) in 2002, embodying the terms of Executive’s employment and
pursuant to which Executive has been serving as Executive Vice President and
Chief Financial Officer of the Company; and
WHEREAS,
this Agreement amends and restates the Original Agreement as of the Effective
Date in order, inter alia, to evidence formal compliance with Section 409A of
the Internal Revenue Code of 1986, as amended, and the guidance thereunder (such
Section, referenced herein as “Section
409A”; and such code, referenced herein as the “Code”).
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein and for
other good and valuable consideration, the parties hereto agree as
follows:
1. Employment.
Subject to the terms and conditions of this Agreement, Executive shall be
employed by the Company as Executive Vice President and Chief Financial Officer
of the Company, and shall perform such duties and functions for the Company and
any company controlling, controlled by or under common control with the Company
(such companies hereinafter collectively called “Affiliates”)
as shall be specified from time to time by the Chief Executive Officer (“CEO”)
or the Board of Directors of the Company; Executive hereby accepts such
employment and agrees to perform such executive duties as may be assigned to
him.
2. Duties.
Executive shall devote his full business related time and best efforts to
accomplishing such executive duties at such locations as may be requested by the
CEO or Board of Directors of the Company. While employed by the Company,
Executive shall not serve as a principal, partner, employee, officer or director
of, or consultant to, any other business or entity conducting business for
profit without the prior written approval of the CEO of the Company. In
addition, under no circumstances will Executive have any financial interest in
any competitor of the Company; provided, however, that Executive may invest in
no more than 2% of the outstanding stock or securities of any competitor whose
stock or securities are traded on a national stock exchange of any
country.
3. Term.
The term of this Agreement shall commence on the date hereof and shall end on
the third annual shareholders’ meeting at which directors are to be elected
following the Effective Date (the “Term”),
provided, however, beginning with the first annual shareholders’ meeting at
which directors are to be elected following the Effective Date and each such
annual shareholders’ meeting thereafter, Executive’s employment and the Term of
this Agreement shall be extended automatically (without further action by either
the Company or the Executive) for an additional period such that the Term of
this Agreement will end on the 3rd
anniversary of such shareholders’ meeting, unless no later than 10 days
following the date of such shareholders’ meeting, the Company provides the
Executive with written notice that the Term of this Agreement is not being
extended. Notwithstanding the above, the Term of this Agreement shall end on the
Executive’s 65th
birthday.
4. Compensation
and Benefits. As compensation for his services during the Term of this
Agreement, Executive shall be paid and receive the amounts and benefits set
forth in subsections (a), (b) and (c) below:
(a) Base
Salary. An annual base salary (“Base
Salary”) of $212,033 prorated for any partial year of employment.
Executive’s Base Salary shall be subject to annual review, for adjustments at
such time as the Company conducts salary reviews for its executive officers
generally. Executive’s salary shall be payable in accordance with the Company’s
regular payroll practices in effect from time to time for executive officers of
the Company.
(b) Bonus.
In addition to the Base Salary, the Executive shall be entitled to participate
in any of the Company’s present and future stock or cash based bonus plans that
are generally available to its executive officers, as such plans may exist or be
changed from time to time at the discretion of the Company
(c) Other
Benefits. Executive shall be entitled to vacation with pay, life
insurance, health insurance, fringe benefits, and such other employee benefits
generally made available by the Company to its executive officers, in accordance
with the established plans and policies of the Company, as in effect from time
to time.
5. Termination.
(a) By
Executive. Executive may voluntarily terminate his employment hereunder
at any time, to be effective 60 days after delivery to the Company of his
signed, written resignation; Company may accept said resignation and pay
Executive in lieu of waiting for passage of the notice period. Executive hereby
agrees and acknowledges that if he voluntarily resigns from his employment prior
to the end of the Term of this Agreement, then he shall be entitled to no
payment or compensation whatsoever from the Company under this Agreement, other
than as may be due him through his last day of employment, including any vested
benefits and any benefit continuation or conversion rights which he may have in
accordance with the established plans and policies of the
Company.
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(b) By
Company. Subject to the terms of this Paragraph and Paragraph 5(c) below,
the Company may terminate Executive’s employment hereunder, in its sole
discretion, whether with or without just cause (as defined in Paragraph
5(b)(viii) below and subject to the notice periods described therein), at any
time upon written notice to Executive. If the Company terminates Executive’s
employment for just cause (as defined in (viii) below), Executive shall be
entitled to no payment or compensation whatsoever from the Company under this
Agreement, other than as may be due him through his last day of employment. If,
prior to the end of the Term of this Agreement, the Company terminates
Executive’s employment without just cause (as defined in (viii) below), the
Executive shall be entitled to receive, as damages payable as a result of, and
arising from, a breach of this Agreement, the compensation and benefits set
forth in (i) through (iv) below, subject to the Executive’s obligation to
mitigate damages by reducing the amounts he is entitled to receive hereunder by
earnings from subsequent employment as provided in (vii) below. The time periods
in (i) through (iii) below shall be the lesser of 36 months or the time period
remaining from the date of Executive’s termination to the end of the Term of
this Agreement (the “Severance
Period”). All compensation payable under (i) through (iv) below shall be
subject to the terms of Paragraph 8 below, which may delay the payment of the
compensation for up to 6 months.
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(i) Base
Salary. The Executive will continue to receive his current Base
Salary (subject to withholding of all applicable taxes and any amounts
referred to in paragraph (iii) below) for the Severance Period, payable in
normal payroll periods, in the same manner as it was being paid as of the
date of termination, and no less frequently than monthly. For purposes
hereof, the Executive’s “current Base Salary” shall be the highest rate in
effect during the twelve-month period prior to the Executive’s
termination.
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(ii) Bonus.
The Executive shall be paid monthly bonus payments from the Company in
each month of the Severance Period beginning with the month following the
month in which his employment is terminated in an amount for each such
month equal to one-twelfth of the average (“Average
Bonus”) of the bonuses earned by him for the three calendar years
immediately preceding the year in which such termination occurs. Any bonus
amounts that the Executive had previously earned from the Company but
which may not yet have been paid as of the date of termination shall not
be affected by this provision. Executive shall also receive, within 60
days after the date of his termination, a prorated bonus for any
uncompleted fiscal year at the date of termination equal to the Average
Bonus multiplied by the number of days he worked in such year divided by
365 days.
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(iii) Health
and Life Insurance Coverage. The Company shall provide Executive
(and any spouse or dependents covered at the time of the Executive’s
termination) with medical, dental, life insurance and other health
benefits (pursuant to the same Company Plans that are medical, dental,
life insurance and other health benefit plans and that are in effect for
active employees of the Company), for the Severance Period. The coverages
provided for in this paragraph shall be applied against and reduce the
period for which COBRA will be
provided.
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(1)
To the extent that such medical, dental or other health benefit plan
coverage is provided under a self-insured plan maintained by the Company
(within the meaning of Section 105(h) of the
Code):
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(X) the
charge to Executive for each month of coverage will equal the monthly
COBRA charge established by the Company for such coverage in which the
Executive or the Executive’s spouse or dependents (as applicable) are
enrolled from time to time, based on the coverage generally provided to
salaried employees (less the amount of any administrative charge typically
assessed by the Company as part of its COBRA charge), and Executive will
be required to pay such monthly charge in accordance with the Company’s
standard COBRA premium payment requirements; and
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(Y) on
the date of Executive’s termination of employment (subject to delay under
Paragraph 8 below), the Company will pay Executive a lump sum in cash
equal to the number of months in the Severance Period, multiplied by the
monthly COBRA charge established by the Company for the coverage being
provided on Executive’s termination date to the Executive and, if
applicable, his spouse and dependents. For this purpose, the Company’s
monthly COBRA charge will be increased by 10% on each January in the
projected payment period and such increased amount shall apply to each
successive month in the calendar year in which the increase became
applicable.
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(2)
To the extent that such medical, dental or other health benefit plan
coverage is provided under a fully-insured medical reimbursement plan
(within the meaning of Section 105(h) of the Code), there will be no
charge to Executive for such
coverage.
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(iv) Stock
Options and Other Equity Awards. As of Executive’s date of
termination, all outstanding stock options, stock appreciation rights,
restricted stock units, and other equity awards granted to Executive under
the Stock Option and Incentive Plan and any other Company stock plans (the
“Stock
Option Plans”) shall become 100% vested and immediately
exercisable. To the extent necessary, the provisions of this paragraph
(iv) shall constitute an amendment of the Executive’s stock option or
other equity compensation agreements under the Stock Option
Plans.
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(v) Effect
of Death. In the event of the Executive’s death after his
termination of employment by the Company under this Paragraph 5(b), the
benefits payable under (i) and (ii) of this Paragraph 5(b) shall continue
for a period of twelve (12) months, or, if shorter, until the end of the
Term of this Agreement; provided, however, such payments will be paid in a
lump sum payment within 60 days following the Executive’s death, to the
Executive’s surviving spouse, or, if none, to the Executive’s estate. In
addition, in the event of Executive’s death, any dependent coverage in
effect under (iii) of this Paragraph 5(b) shall continue, for a period of
12 months, or, if shorter, until the end of the Term of this
Agreement.
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(vi)
Coordination
with Change in Control Agreement. Notwithstanding any provision of
this Agreement to the contrary, if Executive’s employment is terminated
(whether by the Company or by Executive) under circumstances that would
entitle him to receive benefits under his agreement with the Company
providing compensation and benefits for termination following a “change in
control” of the Company (as defined in such agreement), then any such
termination shall be treated under this Agreement as a termination by the
Company without just cause and the Executive shall be entitled to the
compensation and benefits set forth in (i) through (iv) above for the time
periods provided in this Paragraph 5(b), and such amounts shall be treated
as damages payable as a result of, and arising from, a breach of this
Agreement.
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(vii) Obligation
to Mitigate. Although Executive shall not be required to seek
subsequent employment, if Executive accepts subsequent employment during
the period he is receiving compensation and benefits under (i) through
(iii) above, Executive shall be required to notify the Company within 10
days of accepting such subsequent employment, and the Executive shall be
required to mitigate damages by reducing the amount of severance payments
he is entitled to receive under (i) and (ii) above by any compensation he
earns from subsequent employment during the period he is entitled to
compensation under (i) and (ii) above. In addition, the life insurance
coverage being continued under (iii) above shall terminate as of the date
of the commencement of the Executive’s subsequent employment, and the
health insurance coverage being provided under (iii) above shall terminate
as of the date the Executive becomes covered under a health plan of the
subsequent employer.
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(viii) “Just
Cause”. For purposes of this Agreement, the phrase “just cause”
shall mean: (A) Executive’s material fraud, malfeasance, gross negligence,
or willful misconduct with respect to business affairs of the Company
which is directly or materially harmful to the business or reputation of
the Company or any subsidiary of the Company; (B) Executive’s
conviction of or failure to contest prosecution for a felony or a crime
involving moral turpitude; or (C) Executive’s material breach of this
Agreement. A termination of Executive for just cause based on clause (A)
or (C) of the preceding sentence shall take effect 30 days after the
Executive receives from Company written notice of intent to terminate and
Company’s description of the alleged cause, unless Executive shall, during
such 30-day period, remedy the events or circumstances constituting cause;
provided, however, that such termination shall take effect immediately
upon the giving of written notice of termination of just cause under any
clause if the Company shall have determined in good faith that such events
or circumstances are not remediable (which determination shall be stated
in such notice).
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(c) By
Death. If Executive’s employment is terminated due to Executive’s death,
the Executive’s surviving spouse, or if none, his estate, shall receive the
benefits payable under (i) and (ii) of Paragraph 5(b) above; provided, however,
such payments shall be for a period of 12 months rather than 36 months and such
payments shall be made in a lump sum payment within 60 days of the Executive’s
death.
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(d) For
Disability. If Executive’s employment is terminated due to Executive’s
disability (as defined in the Company’s long-term disability plan or insurance
policy, or if no such plan or policy, as determined in good faith by the
Company), Executive shall be entitled to the benefits payable or to be provided
under (i), (ii), (iii) and (iv) of Paragraph 5(b); provided, however, the
benefits under (i), (ii) or (iii) of Paragraph 5(b) shall be payable or to be
provided for a period of 24 months. Executive or his estate, as the case may be,
shall not by operation of this paragraph forfeit any rights in which he is
vested at the time of his death or disability.
(e) Survival
of Restrictive Covenants. Upon termination of Executive’s employment for
any reason whatsoever (whether voluntary on the part of Executive, for just
cause, or other reasons), the obligations of Executive pursuant to Paragraphs 6
and 7 hereof shall survive and remain in effect for the periods described in
Paragraph 6.
6. Competition,
Confidentiality, and Nonsolicitation.
Executive agrees to be bound by the terms and conditions of the Noncompetition
Agreement attached hereto as Exhibit “A”, which is hereby made a part of this
Agreement.
7. Injunctive
Relief. The Executive acknowledges that his services to be rendered to
the Company are of a special and unusual character which have a unique value to
the Company, the loss of which cannot adequately be compensated by damages in an
action at law. Executive further acknowledges that any breach of the terms of
Paragraph 6, including Exhibit “A”, would result in material damage to
the Company, although it might be difficult to establish the monetary value of
the damage. Executive therefore agrees that the Company, in addition to any
other rights and remedies available to it, shall be entitled to obtain an
immediate injunction (whether temporary or permanent) from any court of
appropriate jurisdiction in the event of any such breach thereof by Executive,
or threatened breach which the Company in good faith believes will or is likely
to result in irreparable harm to the Company. The existence of any claim or
cause of action by Executive against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by the
Company of Executive’s agreement under this Paragraph and Paragraph 6
above.
8. Section
409A.
(a) Meaning
of Termination of Employment.
Solely as necessary to comply with Section 409A, for purposes of Paragraph 5(b)
and Paragraph 5(d), “termination of employment” or “employment termination” or
similar terms shall have the same meaning as “separation from service” under
Section 409A(a)(2)(A)(i) of the Code.
(b) Installment
Payments.
For purposes of Paragraph 5(b) with respect to amounts payable in the event of
termination of employment by the Company without just cause and Paragraph 5(d)
with respect to amount payable in the event of termination of Executive’s
employment for Disability, each such payment is a separate payment within the
meaning of the final regulations under Section 409A. Each such payment that is
made within 2-1/2 months following the end of the year that contains the date of
Executive’s termination of employment is intended to be exempt from Section 409A
as a short-term deferral within the meaning of the final regulations under
Section 409A, each such payment that is made later than 2-1/2 months following
the end of the year that contains the date of Executive’s termination of
employment is intended to be exempt under the two-times separation pay exception
of Treasury Reg. § 1.409A-1(b)(9)(iii) up to the limitation on the availability
of such exception specified in such regulation, and each such payment that is
made after the two-times separation pay exception ceases to be available shall
be subject to delay in accordance with Paragraph 8(c) below.
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(c) Six
Month Delay.
This Agreement will be construed and administered to preserve the exemption from
Section 409A of payments that qualify as a short-term deferral or that qualify
for the two-times separation pay exception. With respect to other amounts that
are subject to Section 409A, it is intended, and this Agreement will be so
construed, that any such amounts payable under this Agreement and the Company’s
and Executive’s exercise of authority or discretion hereunder shall comply with
the provisions of Section 409A and the treasury regulations relating thereto so
as not to subject Executive to the payment of interest and additional tax that
may be imposed under Section 409A. As a result, in the event Executive is a
“specified employee” on the date of Executive’s termination of employment (with
such status determined by the Company in accordance with rules established by
the Company in writing in advance of the “specified employee identification
date” that relates to the date of Executive’s termination of employment, or in
the absence of such rules established by the Company, under the default rules
for identifying specified employees under Section 409A), any payment that is
subject to Section 409A, that is payable to Executive in connection with
Executive’s termination of employment, shall not be paid earlier than six months
after such termination of employment (if Executive dies after the date of
Executive’s termination of employment but before any payment has been made, such
remaining payments that were or could have been delayed will be paid to
Executive’s estate without regard to such six-month delay).
9.
Miscellaneous.
(a)
Notice.
Any notice or other communication required or permitted under this Agreement
shall be effective only if it is in writing and shall be deemed to have been
duly given when delivered personally or seven days after mailing if mailed first
class by registered or certified mail, postage prepaid, addressed as
follows:
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If
to the Company:
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Xxxxxx
Industries, Inc.
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X.X.
Xxx 000
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0000
Xxxxxxx Xxxxx
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Xxxxxxxx,
Xxxxxxxxx 00000
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Attention:
Chief Executive Officer
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| If to the Executive: |
J.
Xxxxxxx Xxxx
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407
Gentlemen’s Ridge
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Signal
Xxxxxxxx, Xxxxxxxxx 00000
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or to
such other address as any party may designate by notice to the
others.
(b) Entire
Agreement. This Agreement constitutes the entire agreement between the
parties hereto with respect to the Executive’s employment by the Company, and
supersedes and is in full substitution for any and all prior understandings or
agreements with respect to the Executive’s employment.
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(c) Amendment.
This Agreement may be amended only by an instrument in writing signed by the
parties hereto, and any provision hereof may be waived only by an instrument in
writing signed by the party or parties against whom or which enforcement of such
waiver is sought. The failure of either party hereto to comply with any
provision hereof shall in no way affect the full right to require such
performance at any time thereafter, nor shall the waiver by either party hereto
of a breach of any provision hereof be taken or held to be a waiver of any
succeeding breach of such provision, or a waiver of the provision itself, or a
waiver of any other provision of this Agreement.
(d) Binding
Effect.
This Agreement is binding on and is for the benefit of the parties hereto and
their respective successors, heirs, executors, administrators and other legal
representatives. Neither this Agreement nor any right or obligation hereunder
may be assigned by the Executive or the Company, except for assignment by the
Company to any wholly owned subsidiary.
(e) Severability
and Modification.
If any provision of this Agreement or portion thereof is so broad, in scope or
duration, so as to be unenforceable, such provision or portion thereof shall be
interpreted to be only so broad as is enforceable. In addition, to the extent
that any provision of this Agreement 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 the validity or enforceability of this Agreement.
(f) Interpretation.
This Agreement shall be interpreted, construed and governed by and under the
laws of the State of Tennessee. Each party irrevocably (i) consents to the
exclusive jurisdiction and venue of the courts of Xxxxxxxx County, State of
Tennessee and federal courts in the Eastern District of Tennessee, in any action
arising under or relating to this Agreement (including Exhibit “A” hereto), and
(ii) waives any jurisdictional defenses (including personal jurisdiction and
venue) to any such action. If any provision of this Agreement is deemed or held
to be illegal, invalid, or unenforceable under present or future laws effective
during the term hereof, this Agreement shall be considered divisible and
inoperative as to such provision to the extent it is deemed to be illegal,
invalid or unenforceable, and in all other respects this Agreement shall remain
in full force and effect; provided, however, that if any provision of this
Agreement is deemed or held to be illegal, invalid or unenforceable there shall
be added hereto automatically a provision as similar as possible to such
illegal, invalid or unenforceable provision as shall be legal, valid or
enforceable. Further, should any provision contained in this Agreement ever be
reformed or rewritten by any judicial body of competent jurisdiction, such
provision as so reformed or rewritten shall be binding upon the Executive and
the Company.
(g) Failure
to Enforce.
The failure of either party hereto at any time, or for any period of time, to
enforce any of the provisions of this Agreement shall not be construed as a
waiver of such provision(s) or of the right of such party hereafter to enforce
each and every such provision.
(h) Counterparts.
This Agreement may be executed in several counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the same
instrument.
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(i) No
Conflicting Agreement.
The Executive represents and warrants that he is not party to any agreement,
contract or understanding which would prohibit him from entering into this
Agreement or performing fully his obligations hereunder.
(j) Headings.
The headings and subheadings of this Agreement are inserted for convenience of
reference only and are not to be considered in construction of the provisions
hereof.
(k) Construction.
The Company and the Executive acknowledge that this Agreement was the result of
arm’s-length negotiations between sophisticated parties each represented by
legal counsel. Each and every provision of this Agreement shall be construed as
though both parties participated equally in the drafting of same, and any rule
of construction that a document shall be construed against the drafting party
shall not be applicable to this Agreement.
IN
WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date first written above.
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XXXXXX
INDUSTRIES, INC.
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By:
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/s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx
X. Xxxxxxx
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President
and Co-Chief Executive Officer
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EXECUTIVE
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| /s/ J. Xxxxxxx Xxxx | |||
| J. Xxxxxxx Xxxx | |||
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