EXHIBIT 10.05
EXECUTION COPY
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AGREEMENT, effective as of the 7th day of August, 2006 (the "Effective
Date"), by and between THE XXXXXXXX AND XXXXXXXX COMPANY, an Ohio Corporation
(the "Company") and XXXXXXX X. X'XXXXX (the "Executive").
WHEREAS, Executive and the Company are parties to that certain
employment agreement dated December 31, 2004 (the "Original Agreement"); and
WHEREAS, the Board of Directors of the Company (the "Board") desires
to continue to retain Executive as the Chief Executive Officer and President of
the Company and to encourage the attention and dedication to the Company of
Executive as a member of the Company's management, in the best interests of the
Company and its shareholders; and
WHEREAS, in order to effect the foregoing, the Company and Executive
wish to enter into an amended and restated employment agreement on the terms and
conditions set forth below.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. EMPLOYMENT. By this Agreement, the Company and Executive set forth
the terms of the Company's employment of Executive on and after the Effective
Date (as defined above) of this Agreement. Any prior agreements or
understandings with respect to Executive's employment by the Company (including
the Original Agreement) are superseded by this Agreement as of the Effective
Date.
2. TERM. The term of this Agreement shall be the period commencing on
the Effective Date and terminating on January 31, 2008 (the "Initial Term"). At
the end of the Initial Term and on each subsequent anniversary of such date, the
term of this Agreement shall renew automatically for a period of one (1) year
(the "Initial Term" and each such renewed period to be the "Term"); PROVIDED,
HOWEVER, that upon the occurrence of a Change in Control (as defined in Section
8(e) of this Agreement), the Term shall automatically be extended for 24 months
from the date of such Change in Control, and shall thereafter renew
automatically for a period of one (1) year at the end of such 24-month period
and on each subsequent anniversary of such date; PROVIDED, FURTHER, HOWEVER,
that in no event shall this Agreement terminate prior to the Company's
satisfaction of all of the Company's obligations to Executive hereunder.
Notwithstanding the foregoing, the Term is subject to termination as provided in
Section 8.
3. DUTIES.
(a) Executive will serve as Chief Executive Officer and President of
the Company (the "Position") and will be appointed a member of the Board.
Executive will report only to the Board.
(b) Executive shall furnish such managerial, executive, financial,
technical, and other skills, advice, and assistance in operating the Company and
its Affiliates as the Company may reasonably request. For purposes of this
Agreement, "Affiliate" means each corporation which is a member of a controlled
group of corporations (within the meaning of Section 1563(a) of the Internal
Revenue Code of 1986, as amended (the "Code")) which includes the Company.
(c) Executive shall also perform such other duties that are consistent
with the Position as are reasonably assigned to Executive by the Board.
(d) Executive shall devote Executive's entire time, attention, and
energies to the business of the Company and its Affiliates. The words "entire
time, attention, and energies" are intended to mean that Executive shall devote
Executive's full effort during reasonable working hours to the business of the
Company and its Affiliates and shall devote at least 40 hours per week to the
business of the Company and its Affiliates. Executive shall travel to such
places as are necessary in the performance of Executive's duties.
(e) Executive shall have the authority and control to make and execute
the decisions he deems necessary to fulfill his responsibilities under this
Agreement, including, without limitation, the authority to determine the need
for, select and manage personnel and all such other authority and control
commensurate with the positions of chief executive officer and president of a
corporation similar in size and scope subject to the Board fulfilling its duties
and responsibilities.
4. COMPENSATION. As full compensation for Executive's services
hereunder, the Company agrees to pay Executive as follows with respect to the
Term:
(a) BASE SALARY. Executive shall receive a base salary (the "Base
Salary") of at least $750,000 per year, payable in 26 bi-weekly installments,
subject to proration for any partial year. Such Base Salary, and all other
compensation payable under this Agreement, shall be subject to withholding as
required by applicable law. The Compensation Committee of the Board (the
"Compensation Committee") shall review Executive's performance at least annually
and consider such increase of Base Salary as the Compensation Committee shall
determine to be appropriate.
(b) ANNUAL INCENTIVE COMPENSATION. Executive will be eligible for an
annual bonus based upon achievement of certain corporate and personal
performance objectives established by the Compensation Committee. The bonus
target for Executive shall be 70 percent (70%) of his Base Salary (the "Target
Annual Bonus"), with the maximum annual bonus being 140 percent (140%) of his
Base Salary; PROVIDED, HOWEVER, that the Compensation Committee has the right to
modify the corporate and personal performance objectives on an annual basis;
PROVIDED, FURTHER that, following the occurrence of a Change in Control (as
defined in Section 8(e)), the Target Annual Bonus cannot be reduced from the
Target Annual Bonus in effect as of the date of the Change in Control (or the
prior year's Target Annual Bonus if no such Target Annual Bonus is in effect).
(c) INCENTIVE COMPENSATION FOR THE FIRST YEAR. For the period from
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January 17, 2005 to September 30, 2005 only, Executive was guaranteed a bonus of
at least $393,750, subject to increase based upon achievement of corporate and
personal objectives established by the Board pursuant to Section 4(b). The
corporate objectives for fiscal year 2005 were EBIT-ROC = 29% and Revenue Growth
= 2%. The guaranteed bonus will be paid on October 1, 2005, and any increased
bonus amount based upon the achievement of corporate objectives will be paid by
November 30, 2005.
(d) SIGNING BONUS. Executive shall be obligated to repay the full
amount of the $200,000 signing bonus that Executive received on December 31,
2004 (the "Prior Effective Date") if Executive voluntarily terminates his
employment within one (1) year of such date, unless Executive terminates his
employment as a result of Changed Circumstances or within one (1) year following
a Change in Control, as those terms are defined in Section 8.
(e) EXPENSES. The Company shall, upon submission and approval of
written statements and bills in accordance with the then regular policies and
procedures of Company, reimburse Executive for any and all reasonable necessary,
customary and usual expenses incurred by him while traveling for or on behalf of
Company, and any and all other necessary, customary or usual expenses (including
entertainment) incurred by Executive for or on behalf of Company in the normal
course of business.
(f) PERQUISITES. Executive will also be entitled to the following
additional benefits during the Term:
(i) COMPANY CAR ALLOWANCE. The Company will provide
Executive with $14,000 per year for the purchase or lease of a
vehicle.
(ii) ANNUAL PHYSICAL EXAM. The Company will reimburse
Executive for the cost of any annual physical examination up to an
amount of $1,500 per year.
(iii) LEGAL AND FINANCIAL PLANNING. The Company will
reimburse Executive for any costs and expenses incurred in relation to
personal legal advice for estate planning and tax planning purposes or
financial planning advice, in the aggregate for all planning up to an
amount of $6,000 per year.
(iv) HEALTH CLUB FEES. The Company will reimburse Executive
for the cost of any health club membership obtained by Executive up to
an amount of $1,500 per year.
(g) INITIAL STOCK OPTION GRANT. As of the Prior Effective Date,
Executive was granted options to purchase 300,000 common shares of the Company.
The exercise price for these shares is the fair market value of the shares on
the date of grant. These options have a seven-year life, and vest and become
exercisable on each of the first three anniversaries of the grant date at a rate
of 33.3 % (100,000 shares) per year. Notwithstanding the foregoing, the options
to purchase the 300,000 common shares granted to Executive by the Company become
one-hundred percent (100%) vested upon termination of Executive's employment
without Cause in accordance with Section 8(a) during the Initial Term.
Notwithstanding the foregoing, all options granted to Executive by Company
become one-hundred percent (100% ) vested upon a
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Change in Control as defined in Section 8(e), or termination of Executive's
employment due to Disability in accordance with Section 8(c), due to Changed
Circumstances in accordance with Section 8(d) or due to death. Notwithstanding
the foregoing, with respect to subsequent option grants, upon termination of
Executive's employment without Cause in accordance with Section 8(a) or due to
expiration of a Term in accordance with Section 8(f), all options granted to
Executive by the Company will continue to vest during the period commencing on
the date of termination of Executive's employment and ending on the first
anniversary of such date and will continue to be exercisable until 90 days after
such first anniversary date; PROVIDED, HOWEVER, that any such options will
become one-hundred percent (100%) vested upon a Change in Control as defined in
Section 8(e).
(h) RESTRICTED STOCK AWARD. As of the Prior Effective Date, Executive
received a restricted stock award of 70,000 shares, of which (i) 35,000 shares
shall vest on the third anniversary of the grant, and (ii) 35,000 shares will
vest on achievement of performance-based benchmarks. For any of the
performance-based restricted shares to vest, the Company's revenue growth over a
three year period must exceed the 25th percentile of the initial Standard &
Poor's Mid-cap 400. Restrictions will lapse on a linear basis so that upon
achieving revenue growth matching the 50th percentile of the Standard & Poor's
Mid-cap 400, all restrictions will lapse. If growth exceeds the 50th percentile,
additional restricted shares will be awarded and restrictions will lapse on a
linear basis so that upon achieving revenue growth equal to or greater than the
75th percentile, two times the original number of performance-based shares will
be earned. In the event of a termination of Executive's employment without Cause
in accordance with Section 8(a) during the Initial Term, the time-based
restricted stock award of 35,000 shares set forth above will become fully vested
at the date of termination of Executive's employment and the performance-based
restricted stock award of 35,000 shares will vest as set forth in accordance
with the provisions in the last sentence below. In the event of a Change in
Control as defined in Section 8(e), all such restricted stock awards will become
fully vested immediately prior to such Change in Control. With respect to
subsequent restricted stock awards, in the event of a termination of Executive's
employment without Cause in accordance with Section 8(a) or due to expiration of
a Term in accordance with Section 8(f), the vesting of such restricted stock
awards shall continue for an additional one (1) year commencing on the date of
termination of Executive's employment and ending on the first anniversary of
such date (the "First Anniversary"), and the measurement period for any
performance-based stock awards will end on the First Anniversary and restricted
stock subject to such awards will become vested based upon the formula set forth
above but comparing the Company's revenue growth using the Company's quarterly
results most recently available prior to the First Anniversary compared to the
revenue growth of the Standard & Poor's Mid-cap 400 for the same quarterly
period. In the event of a termination of Executive's employment due to
Disability in accordance with Section 8(c), due to Changed Circumstances in
accordance with Section 8(d) or due to death, then: (i) time-based restricted
stock awards will become fully vested at such time; and (ii) the measurement
period for any performance-based stock awards will end at the date of
termination of Executive's active employment, and the restricted stock subject
to such awards will become vested based upon the formula set forth above but
comparing the Company's revenue growth using the Company's quarterly results
most recently available prior to such employment termination date compared to
the revenue growth of the Standard & Poor's Mid-cap 400 for the same quarterly
period.
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(i) OTHER STOCK AWARDS. Each December 1 during the Term, Executive
will be eligible for consideration for an annual restricted stock award
consisting of both time-based and performance-based shares, which shall vest
over a three-year period (the "Other Stock Awards"). Notwithstanding the
foregoing, in the event of a Change in Control as defined in Section 8(e), all
such Other Stock Awards (and any other equity based awards including any
restricted units and other restricted stock grants) will become fully vested
immediately prior to such Change in Control.
(j) VACATION. Executive shall be entitled to five (5) weeks of paid
vacation per year.
5. BENEFITS.
(a) Executive will be entitled to participate in all of the various
employee benefit plans and programs of the Company, including its
Flexible/Medical/Vision/Dental Plan, 401(k) Savings Plan, and life insurance and
disability insurance plans. Executive agrees to purchase the maximum amount of
disability insurance coverage available under the Company's plan. Executive and
his spouse will be eligible to receive retiree medical benefits after five (5)
years of service pursuant to the Company's plan.
(b) During the Term, the Company agrees to provide Executive with
additional disability insurance coverage beyond the maximum amounts purchased by
Executive under the Company's plan, which will provide Executive with up to
ninety percent (90%) of his Base Salary in the event that Executive becomes
temporarily disabled and is unable to perform his duties under this Agreement.
(c) Notwithstanding anything contained herein to the contrary, the
Base Salary, as defined in Section 6(a)(i) below, shall be reduced by any
benefits paid to Executive by the Company under any disability plans made
available to Executive by the Company.
(d) In addition to the basic life insurance provided to the Company's
other employees, the Company will provide Executive with life insurance in the
amount of $2,000,000 as long as Executive remains employed by the Company.
(e) The Company has amended its Retiree Medical Plan to provide only
for Executive that Executive and his spouse will become eligible to participate
in such plan after he has achieved five (5) years of active employment with the
Company or its Affiliates. In addition, the Company has agreed that it will pay
Executive's and Executive's spouse's cost to obtain COBRA coverage for 18 months
following termination of Executive's employment for any reason except
termination for Cause in accordance with Section 8(b).
(f) During the Term and for the later of ten (10) years following the
end of the Term or the conclusion of any litigation, including all possible
appeals, for which such indemnifications may apply and such errors and omissions
insurance may provide coverage, Company will provide Executive with
indemnifications and coverage under an errors and omissions insurance policy
provided to other directors and officers of the Company or any successor.
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6. RETIREMENT.
(a) The following definitions will be applicable only to Section 6 of
this Agreement, except as expressly provided herein:
(i) "Base Salary" shall mean the then-current annual base
salary (exclusive of Bonuses) paid to Executive.
(ii) "Bonuses" shall mean bonus payments earned by Executive
under any incentive compensation plans or future incentive
compensation plans of the Company for its executive officers.
(b) "Final Average Annual Compensation" shall mean the average of
Executive's Base Salary and Bonuses (excluding any compensation attributable to
stock options of any type granted by the Company and any compensation determined
by the Board to be a long-term incentive arrangement) for the three (3)
consecutive calendar years out of the prior five (5) calendar years that yield
the highest sum. For purposes of this calculation, the fifth prior calendar year
shall be the full or partial year in which Executive's active employment with
the Company terminates, and Base Salary and Bonuses for such year shall be
annualized. Notwithstanding the foregoing, for purposes of this calculation, if
Executive has been employed for less than five calendar years, "Final Average
Annual Compensation" shall be determined as set forth above for the greater of
(i) three consecutive calendar years or (ii) the period of time for which
Executive has been actively employed.Executive will be entitled to participate
in all qualified and nonqualified retirement plans which are available to other
senior officers of the Company and according to the terms of those plans. In
addition, Executive will be entitled to participate in a supplemental executive
retirement plan (the "SERP") put in place for Executive. Under this plan,
Executive shall be entitled to receive an annual retirement benefit equal to the
difference between (i) four percent (4%) of his Final Average Annual
Compensation multiplied by his years of service to the Company, and (ii) the
annual benefits payable to him under the Xxxxxxxx & Xxxxxxxx Retirement Plan
(the "Qualified Plan") and the Xxxxxxxx & Xxxxxxxx "Supplemental Plan" which
restores benefits lost under the Qualified Plan due to Code Section 415 and
401(a)(17) limits. For purposes of the calculation set forth in the immediately
preceding sentence, it shall be assumed that the benefits under the SERP,
Qualified Plan and Supplemental Plan begin when Executive's employment
terminates and are payable in the form of a single life annuity. Such SERP
benefit generally shall be payable in the form of a single life annuity for
Executive's life; PROVIDED, HOWEVER, that if Executive is married at the time he
commences to receive benefits under this plan, his benefit will be paid in the
form of a 100% joint and survivor annuity for the lives of Executive and
Executive's spouse at the time Executive's benefits commence (if Executive's
spouse survives him) that is actuarially equivalent to the single life annuity.
Executive acknowledges that the annual payment under a 100% joint and survivor
annuity will be actuarially reduced compared to the annual payment that he would
otherwise have received if payment were in the form of a single life annuity.
Executive will commence to receive his SERP payments beginning whenever his
employment terminates, PROVIDED that, if such termination is prior to age
sixty-two (62), the amount of the benefits will be discounted by 4.8% per year
multiplied by the number of years difference between age sixty-two (62) and
Executive's age at the time of termination. To the extent permissible under
Section 409A of the Code and regulations thereunder, Executive may elect to
defer commencement of the receipt of
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SERP payments. If the commencement of SERP payments is so deferred, the payments
shall be increased to be the actuarial equivalent of the payments Executive
would have received commencing as of his employment termination date. For
purposes of this Section, a "year of service" shall mean each twelve (12) month
period or part thereof measured from the Effective Date of this Agreement in
which Executive works at least one thousand (1,000) hours, and actuarial
equivalence for a given purpose shall be determined using the most recent
actuarial assumptions that would be used for such purpose under the Qualified
Plan, provided, however, that any increase to reflect the deferred commencement
of benefits shall use the 4.8% per year factor for each applicable year prior to
age 62 instead of the Qualified Plan actuarial assumptions.
7. NON-COMPETITION AND CONFIDENTIALITY.
(a) NON-COMPETITION.
(i) In order to protect the Company, it is understood that a
covenant not to compete is a necessary and appropriate adjunct to this
Agreement. During Executive's employment and for a period of two (2)
years from and after the date on which Executive's employment with the
Company terminates for any reason and after he shall have ceased
receiving retirement benefits (PROVIDED that such retirement benefits
have begun to be paid during such two (2) year period), severance
benefits or disability benefits, whichever shall be the last to occur,
but in no event longer than five (5) years from and after termination
of employment, Executive shall not compete with the Company. Executive
shall be deemed to be competing with the Company if Executive: (1)
calls on, solicits, takes away, accepts or attempts to do business in
the "Restricted Business" (as defined below) with any person or entity
that is presently a client or customer of the Company (or any of its
related or affiliated entities) or about which Executive learned or
had access to "Company Confidential Information" (as defined below)
while a Company employee, except for the benefit of the Company;
and/or (2) enters into or attempts to enter into any business engaged
in the Restricted Business anywhere the Company does business (whether
acting (alone or in association) as an agent, representative,
consultant, officer, director, independent contractor, employee,
owner, partner, limited partner, joint venturer, investor, creditor,
stockholder or member); and/or (3) hires or attempts to hire for
Executive's or person's behalf, any employee who is at the time of the
hire or attempted hire an employee of the Company or any of its
related or affiliated entities.
(ii) For the purposes of this Agreement, the "Restricted
Business" means: the provision of (1) information technology
(including customer relationship management and web services)
solutions or related services (including consulting, training,
networking/communication and support services) to the Auto Industry,
or (2) forms or other consumables to the Auto Industry. "Auto
Industry" is intended to mean entities that are engaged in the
manufacture, distribution, sale (retail or wholesale), short-term
rental, extended-term lease or general or special service or repair of
new or used automobiles, pickups, trucks, vans, motorcycles,
recreational vehicles or other vehicles (including fleets) or the
installation, repair, sale or distribution of parts or
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accessories for new or used automobiles, pickups, trucks, vans,
motorcycles, recreational vehicles or other vehicles, or boats.
(iii) Executive specifically acknowledges and agrees that
the geographic restriction on Executive's ability to compete with the
Company, as set forth in this Agreement, is reasonable and necessary
to protect the Company' business interests in the relevant market.
Executive understands that the Company Confidential Information (as
defined below) may be used to the Company's disadvantage should
Executive work for or otherwise become associated with a competitor of
the Company anywhere that the Company does business, regardless of the
competitor's specific geographic location.
(iv) Notwithstanding the foregoing, the following shall not
constitute competing with the Company or any of its related or
affiliated companies or a violation of any provision of this
Agreement: (a) ownership of voting securities or other equity
interests representing less than one percent (1%) of the voting power
of an entity the securities of which are traded on a national or
foreign securities exchange or in the over-the-counter market; or (b)
following Executive's employment with the Company, employment in any
capacity by an original equipment manufacturer, distributor, dealer
group or supplier to an original equipment manufacturer engaged in the
Auto Industry (individually, an "Auto Entity"), PROVIDED that
Executive's employment is not with a supplier or distributor primarily
engaged in the Restricted Business or with any Auto Entity's division,
subsidiary (or affiliate of such subsidiary) or affiliate that engages
directly in the Restricted Business.
(b) CONFIDENTIALITY.
(i) "Company Confidential Information" includes, among other
things:
(1) any information relating to the Company's financial position,
business operations, plans or strategies, research and development and
personnel;
(2) the names of the Company's actual or prospective customers
and the nature of the Company's relationships (including types, prices and
amounts of products acquired or anticipated to be acquired from the Company)
with such customers, including specific individuals employed by customers,
compiled in a format such as an account record card, customer buying patterns,
group run concepts and combination ordering patterns of the Company's customers,
information related to, for instance, special needs, sizes, ink, thickness,
paper type for particular applications of the Company's customers, information
related to value added services provided by the Company to its customers,
information related to targeted and/or anticipated product or service needs of
the Company's customers and the policies and/or business practices of the
Company's customers;
(3) sales, marketing, operational and product development plans
and forecasts, including identification of the Company's most profitable
customer accounts and service/product lines, information related to vendors used
by the Company to service the
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Company's customers, creativity concepts on
multiple location accounts developed or implemented by the Company and the
Company's production costs;
(4) non-public price lists and sales volume and other
information, including the prices at which the Company sells products or
services to particular customers or customer groups;
(5) the Company's various computer systems and information
technology, as such systems and technology may exist from time to time,
including without limitation, computer and related equipment, computer programs
(whether identified as software, firmware or other and on whatever media),
databases, documentation, manuals, hardware and software support systems and
methods, techniques or algorithms of organizing or applying the same;
(6) developments, improvements, inventions and processes that are
or may be produced in the course of the Company's operations;
(7) confidential and private matters of the Company's customers
and potential customers submitted to the Company for handling and processing;
(8) any information licensed to the Company on a confidential
basis from third parties for the Company's own internal use and/or for
sublicense to end users; and
(9) any other information, not generally known, concerning the
Company or its operations, products, personnel, customers or business, acquired,
disclosed or made known to Executive while in the employ of the Company which,
if used or disclosed other than in the performance of Executive's job duties for
the Company, could with reasonable possibility adversely affect the business of
the Company or give to a competitor a competitive advantage.
(ii) Executive will not, during Executive's employment with
the Company or following termination of employment for any reason, use
for Executive's own benefit or, without the prior written consent of
the Company, disclose to any person (other than in the ordinary
conduct of the Company's business) any Company Confidential
Information. Executive acknowledges and agrees that Executive's
obligations not to disclose any Company Confidential Information, as
that term is defined herein or otherwise under the law, is in addition
to any obligation Executive has pursuant to (i) any other agreement
Executive has entered into or may in the future enter into with the
Company; and (ii) any applicable law. The restrictions set forth in
this Section 7(b) shall not be applicable (i) with respect to any
information that is either known to or could readily be determined by
third parties, or (ii) with respect to any disclosure Executive is
required to provide in connection with litigation, government
investigations or any other legal process, PROVIDED that Executive
provides the Company with prompt notice of its disclosure obligations
so that the Company may seek an appropriate protective order or other
appropriate remedy.
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(c) OWNERSHIP OF INVENTIONS.
(i) Executive will fully and completely disclose to the
Company during Executive's employment with the Company any inventions,
ideas, works of authorship and other trade secrets or confidential and
proprietary information made, developed and/or conceived by Executive
alone or jointly with others arising out of or relating to Executive's
employment by the Company.
(ii) Executive agrees that any inventions, ideas or original
works of authorship, in whole or in part conceived or made by
Executive, which are made through the use of any Company Confidential
Information or any Company equipment, facilities, supplies or time,
which relate to the Company's business or the Company's actual or
demonstrably anticipated research and development, or which resulted
or result from any work performed by Executive for the Company, shall
belong exclusively to the Company and shall be deemed the Company's
Confidential Information whether or not fixed in a tangible medium of
expression. Without limiting the foregoing, Executive agrees that any
such original works of authorship shall be deemed to be "works made
for hire" and that the Company shall be deemed the author thereof
under the U.S. Copyright Act. In any event, Executive hereby
irrevocably assigns and transfers to the Company all rights, title and
interest in such works, including, but not limited to, copyrights.
(iii) Executive hereby assigns to the Company, its
successors or assigns, any and all inventions, patents and rights in
patents, and applications for patents both in the United States and in
any foreign country, in connection with any of Executive's inventions,
improvements or developments, whether existing now or created in the
future, and to do any and all acts, and to execute any and all
instruments, which the Company may request to secure to itself, its
successors or assigns, all rights relating to such inventions or
improvements or developments or patents or applications in the United
States or in any foreign country, including the right to file in the
Company's name.
(d) RETURN OF MATERIALS. Within three (3) business days following the
termination of employment, in any manner or for any reason, Executive will
promptly return to the Company all Company equipment and other property in
Executive's possession, custody or control including, but not limited to,
documents and any copies of documents pertaining to Company Confidential
Information.
(e) BREACH. In the event of a material breach by Executive of his
obligations under Section 7 of this Agreement (as modified by Section 8(e)
hereof), all of the Company's obligations to provide additional compensation or
benefits set forth in Section 8 under this Agreement shall cease.
8. TERMINATION.
(a) TERMINATION OR DISCHARGE WITHOUT CAUSE.
(i) The Company reserves the right to discharge Executive at
any time and for any reason; but, subject to the express terms of the
other subsections of this Section 8 regarding discharge and
termination of employment, upon a discharge or
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termination of Executive's employment by the Company without Cause,
Executive shall be entitled to the following severance benefits,
PROVIDED that Executive executes, delivers to the Company and does not
rescind a waiver of claims substantially in the form attached as
Exhibit A hereto (the "Release"):
(1) No later than 10 days following the date of termination of
Executive's employment, a Bonus for the year in which termination occurs (the
"Terminating Year") equal to the Target Annual Bonus for such year, multiplied
by a fraction, the numerator of which is the number of days Executive was
employed during the Terminating Year and the denominator of which is 365 (the
"Pro-Rata Target Bonus"). If a Target Annual Bonus has not been established for
the Terminating Year, the "Target Annual Bonus" shall mean the prior year's
Target Annual Bonus for purposes of this Section 8.
(2) No later than 10 days following the date of termination of
Executive's employment, a lump sum cash payment in an amount equal to: (i) two
(2) times the scheduled Base Salary in the Terminating Year plus (ii) two (2)
times the sum of the greater of (x) the Target Annual Bonus or the (y) the
average of the annual Bonus (excluding any compensation attributable to stock
options of any type granted by the Company and any compensation determined by
the Board to be a long-term incentive arrangement) for each of the three (3)
fiscal years ended immediately prior to the date of termination, or if Executive
has received an annual Bonus in fewer than the three (3) fiscal years prior to
termination, the average will be based on the annual Bonus received for each
fiscal year prior to the date of termination in which Executive received an
annual bonus, with any partial year bonus annualized for purposes of this
provision (the greater of (x) or (y) to be defined as the "Reference Bonus").
(3) Executive's benefits under the Supplemental Plan, calculated
as though Executive had remained actively employed by the Company for an
additional two (2) years.
(4) Continuation of medical and dental benefits to the extent
that Executive is entitled to receive such benefits under the Company's retiree
medical plan and subject to the terms and conditions of such plan.
(ii) In the event of termination of employment under this Section
8(a), Executive shall be subject to and bound by all of the restrictive
provisions of Section 7 above. Executive shall not be required to seek other
employment or to take other actions to mitigate any damages suffered by the
Company nor shall any compensation received by Executive from any other sources
reduce any payments or benefits to which he is entitled under this Agreement.
(b) DISCHARGE FOR CAUSE.
(i) If Executive's employment with the Company is terminated
by a Discharge For Cause, regardless of whether such Discharge For
Cause occurs after the occurrence of any of the events set forth in
Sections 8(d) or 8(e) below, he shall be entitled to receive only his
Base Salary and any other payments or reimbursements due under this
Agreement up to the date of his discharge and no further payments
hereunder
11
shall be required from the Company; PROVIDED, HOWEVER, that Executive
shall be entitled to receive his benefits, if any, under the pension
plan and the supplemental plan in accordance with the terms of the
respective plan documents.
(ii) In the event of termination of employment under this
Section 8(b), Executive acknowledges that he shall remain subject to
and bound by the restrictive provisions of Section 7 above.
(iii) In the event Executive disagrees that Executive's
discharge was a Discharge For Cause, such claim shall be submitted to
arbitration in accordance with Section 14 below.
(iv) "Discharge For Cause" shall be construed to have
occurred whenever occasioned by (a) reason of actions by Executive
which are felonious, involve moral turpitude or other material
misconduct by Executive, in each case, which has diminished or has a
reasonably foreseeable risk of diminishing either the Company's
reputation or Executive's ability to act on the Company's behalf, or
(b) material breach of Section 7 of this Agreement. The Company shall
provide written notice to Executive detailing the grounds and facts in
support thereof for the Company claim that cause exists under this
provision, and Executive shall have thirty days from the date of that
notice to remedy the cause to the reasonable satisfaction of the
Company. Following a Change in Control, as defined in Section 8(e),
the cessation of employment of Executive shall not be deemed to be a
Discharge For Cause unless and until there shall have been delivered
to Executive a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the entire membership of the
Board or, if the Company is no longer publicly traded on an
established securities market and any parent of the Company is
publicly traded, the board of directors of such parent(s) of the
Company (excluding Executive, if Executive is a member of such board)
at a meeting of such board called and held for such purpose (after
reasonable notice is provided to Executive and Executive is given an
opportunity, together with counsel for Executive, to be heard before
the board), finding that, in the good faith opinion of the board,
Executive is guilty of the conduct described in Section 8(b)(iv)(a) or
8(b)(iv)(b), and specifying the particulars thereof in detail.
(c) TERMINATION DUE TO DISABILITY.
(i) If, by reason of illness, disability, or other
incapacity certified by two (2) physicians competent to do so in the
opinion of the Board and reasonably acceptable to Executive or his
legal representative, Executive is unable to perform the duties
required of him under this Agreement for a period of six (6)
consecutive months, the Company, following the giving of thirty (30)
days written notice to Executive and the failure of Executive by
reason of illness, disability, or other incapacity to resume his
duties within such thirty (30) days and thereafter perform the same
for a period of two (2) consecutive months, the Company may terminate
Executive's employment by giving him written notice thereof. Executive
shall cooperate with the Company and the physicians appointed by the
Company and submit to reasonable medical examinations. If information
is provided to any member of the Board about Executive's
12
medical condition in connection with the Board's assessment of
Executive's capacity hereunder, it shall be accompanied by a reminder
that such information should be treated as confidential.
(ii) Provided that Executive delivers to the Company and
does not rescind the Release, Executive shall be entitled to:
(1) No later than 10 days following the date of termination of
Executive's employment, a Pro-Rata Target Bonus for the Terminating Year.
(2) An annual disability benefit equal to ninety percent (90%) of
his Base Salary. The disability benefit shall be provided through the then
existing Company-sponsored disability plan with the Company making any
additional contributions as may be necessary to pay Executive the required
amount. The disability benefit, including any Company-required contribution,
shall be paid so long as and on the same terms and conditions as the payments
being made under the Company-sponsored disability plan.
(3) Executive's benefits under the Supplemental Plan calculated
as though Executive had remained employed by the Company for an additional two
(2) years after his active employment ended due to his disability.
(4) Full vesting under any stock option or time-based restricted
stock awards provided to Executive and determination of vesting under any
performance-based restricted stock awards pursuant to the provisions of
applicable plans.
(iii) In the event of termination of employment under this
Section 8(c), Executive acknowledges that he shall remain subject to
and bound by the restrictive provisions of Section 7 above. Executive
shall not be required to seek other employment or to take other
actions to mitigate any damages suffered by the Company nor shall any
compensation received by Executive from any other sources reduce any
payments or benefits to which he is entitled under this Agreement.
(d) BENEFITS UPON TERMINATION FOLLOWING CHANGED CIRCUMSTANCES.
(i) If Executive voluntarily terminates his employment
within eighteen (18) months after the occurrence of any of the
following events:
(1) Executive is required by the Company, prior to a Change in
Control, to perform duties or services which differ significantly from those
performed by him on the Effective Date hereof or which are not ordinarily and
generally performed by a Chief Executive Officer of a corporation similar in
size and scope to the Company or there is a diminution of Executive's authority
or responsibility;
(2) The nature of the duties or services which the Company, prior
to a Change in Control, requires him to perform necessitates absence overnight
from his place of residence on the Effective Date hereof, because of travel
involving the business or affairs of the Company, for more than ninety (90) days
during any period of twelve (12) consecutive months;
13
(3) Executive no longer is a Director of the Company (except as a
result of Executive's death, resignation or removal pursuant to O.R.C. Sec.
1701.58) or Executive is required to report to some person or entity other than
the Board; or
(4) Default by the Company in the payment of any sum, the
provision of any benefit, or the grant of any stock option or restricted stock
award as required by this Agreement.
(ii) Then, provided that Executive delivers to the Company
and does not rescind the Release, Executive shall be entitled to:
(1) No later than 10 days following the date of termination of
Executive's employment, a lump sum cash payment in an amount equal to: (i) two
(2) times the scheduled Base Salary in the year in which termination occurs plus
(ii) two (2) times the Reference Bonus.
(2) Executive's benefits under the Supplemental Plan, calculated
as though Executive had remained actively employed by the Company for an
additional two (2) years.
(3) Continuation of medical and dental benefits to the extent
that Executive is entitled to receive such benefits under the Company's retiree
medical plan and subject to the terms and conditions of such plan.
(4) Full vesting under any stock option or time-based restricted
stock awards provided to Executive and determination of vesting under any
performance-based restricted stock awards pursuant to the provisions of
applicable plans.
(5) No later than 10 days following the date of termination of
Executive's employment, a Pro-Rata Target Bonus for the Terminating Year.
(iii) In the event of termination of employment under this
Section 8(d), Executive shall be subject to and bound by all of the
restrictive provisions of Section 7 above. Executive shall not be
required to seek other employment or to take other actions to mitigate
any damages suffered by the Company nor shall any compensation
received by Executive from any other sources reduce any payments or
benefits to which he is entitled under this Agreement.
(e) BENEFITS UPON A CHANGE IN CONTROL.
(i) The Company recognizes that the threat of a Change in
Control would be of significant concern to Executive. The following
provisions provide termination protection for Executive in the event
of a Change in Control. These provisions, among other purposes, are
intended to xxxxxx and encourage Executive's continued attention and
dedication to his duties in the event of such potentially disturbing
and disruptive circumstances. For purposes of this Section 8(e), Good
Reason means that following a Change in Control (A) Executive's Base
Salary and Target Annual Bonus are reduced below the amount of such
Base Salary and Target Annual Bonus in effect
14
immediately preceding the Change in Control without Executive's
written consent; (B) Executive's benefits or fringe benefits
(including bonuses, vacation, health and disability insurance, etc.)
cease to be substantially equivalent to those in effect immediately
preceding the Change in Control without Executive's written consent;
(C) Executive is required to perform, or is assigned, by the Company
or any successor any duties or services which are inconsistent in any
respect with Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities, or
which are not ordinarily and generally performed by a Chief Executive
Officer of a corporation similar in size and scope to the Company or
there is a diminution of his position, authority, duties,
responsibility or reporting responsibility (in each case whether or
not occurring solely as a result of the Company's ceasing to be a
publicly traded entity or becoming a subsidiary), excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and that is remedied by the Company promptly after receipt
of notice thereof given by Executive; (D) the nature of the duties or
services which the Company or any successor requires him to perform
necessitates absence overnight from his place of residence prior to
the Change in Control, because of travel involving the business
affairs of the Company, for more than ninety (90) days during any
period of twelve (12) consecutive months; (E) Executive is required to
be based at a location other than the principal executive offices of
the Company if Executive was employed at such location immediately
preceding the date of such Change in Control; (F) Executive's
principal place of employment is relocated in excess of fifty (50)
miles from Dayton, Ohio; or (G) any failure by the Company to comply
with and satisfy Section 10.
Prior to terminating employment for Good Reason, Executive may request in
Executive's sole discretion a determination by final and binding arbitration in
accordance with Section 14 below of whether Good Reason exists. If the
arbitrator determines that Good Reason does not exist, Executive may continue
employment without prejudice.
For purposes of this Section 8(e)(i), any good faith determination of "Good
Reason" made by Executive shall be conclusive. Executive's mental or physical
incapacity following the occurrence of an event described in clauses (A) through
(G) shall not affect Executive's ability to terminate employment for Good
Reason.
"Change in Control" shall mean the occurrence of any of the following:
(1) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (ii) the combined voting power of
the then outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting Securities");
PROVIDED, HOWEVER, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by Xxxxxxx X. Xxxxx, Xx., his children or his grandchildren,(iv) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (v)
any acquisition by any
15
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (3) of this Section 8(e)(i);
(2) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board, PROVIDED that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office is in connection
with an actual or threatened election contest or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board;
(3) Consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company, the acquisition of assets of another corporation, a
statutory share exchange or other similar transactions (a "Corporate
Transaction"), in each case, unless, following such Corporate Transaction, (i)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Corporate Transaction
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership, immediately prior to such Corporate
Transaction of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding (1) Xxxxxxx X.
Xxxxx, Xx., his children or his grandchildren or (2) any employee benefit plan
(or related trust) of the Company or such corporation resulting from such
Corporate Transaction) beneficially owns, directly or indirectly, 20% or more
of, respectively, the then outstanding shares of common stock of the corporation
resulting from such Corporate Transaction or the combined voting power of the
then outstanding voting securities of such corporation except to the extent that
such ownership existed prior to the Corporate Transaction and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Corporate Transaction were members of the Incumbent Board at the time
of the execution of the initial agreement, or at the time of the action of the
Board, providing for such Corporate Transaction;
(4) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(ii) If (A) within the twenty-four (24) month period
following a Change in Control, either the Company terminates
Executive's employment for any reason other than a Discharge For
Cause, or if Executive terminates his employment with the Company for
Good Reason or (B) a Change in Control occurs and if Executive's
employment with the Company is terminated by the Company other than
for a Discharge
16
For Cause prior to the date on which the Change in Control occurs (in
which case the Change in Control will be deemed to have occurred
immediately prior to the date of such termination for purposes of this
Agreement), and if it is reasonably demonstrated by Executive that
such termination of employment (1) was at the request of a third party
that has taken steps reasonably calculated to effect a Change in
Control or (2) otherwise arose in connection with or anticipation of a
Change in Control, PROVIDED that, in each case, Executive delivers to
the Company and does not rescind the Release, Executive shall be
entitled to receive from the Company the following benefits:
(1) No later than 10 days following the date of termination of
Executive's employment, a lump sum severance payment (the "Severance Payment"),
in cash, equal to 2.99 times the sum of (i) Executive's annual Base Salary in
effect immediately prior to the occurrence of the event or circumstance upon
which such termination of employment is based or in effect immediately prior to
the Change in Control (whichever is higher), and (ii) the Reference Bonus.
(2) Executive shall be entitled, during the period expiring on
the earlier of his securing other employment or thirty-six months from the date
of such termination of employment, to continued coverage under the
Company-sponsored medical benefits program in existence on such date of
termination or, if such continued coverage is barred, or otherwise at the option
of the Company, the Company shall provide substantially equivalent medical
benefit coverage (including with respect to the tax impact upon Executive)
through the purchase of insurance or otherwise (at substantially equivalent cost
to Executive).
(3) No later than 10 days following the date of termination of
Executive's employment, a Pro-Rata Target Bonus for the Terminating Year.
(4) Executive's benefits under the SERP and Supplemental Plan as
contemplated by Section 6 shall be calculated as though Executive had remained
employed by the Company for the three (3) year period following such termination
of employment (it being understood that upon a termination of the Employee's
employment under this Section 8(e) such three year period will be the number of
years (without duplication) credited pursuant to Section 9(a)(ii) of the
Supplemental Plan (or any applicable successor provision of the Supplemental
Plan or any applicable successor plan) or any similar provision of the SERP.
Notwithstanding anything to the contrary in any Supplemental Plan or the SERP,
Executive shall not be subject to any minimum service requirement in the
Supplemental Plan or the SERP. For the avoidance of doubt, in no event will the
Severance Payment (as defined below) or the Gross-Up Payment (as defined below)
be included in Executive's earnings for the purpose of calculating Executive's
benefit under the SERP or the Supplemental Plan.
(5) Executive shall be reimbursed for up to twenty thousand
dollars ($20,000) for outplacement fees if he chooses to seek other employment
following his discharge by the Company.
(6) The benefits provided in this Section 8(e) shall be in lieu
of, and not in addition to, any other benefits provided under this Agreement.
17
(iii) Effective upon a Change in Control, Executive's rights
under the Company's relocation policy then in effect, including any
addenda thereto (the "Relocation Policy") shall become irrevocable,
PROVIDED that, in addition to any such rights under the Relocation
Policy (a) Executive shall not be required to reimburse the Company or
any successor thereto for any amounts that Executive has or is
otherwise entitled to receive pursuant to the Relocation Policy and
(b) the Company or any successor thereto shall make Executive whole
with respect to any expenses incurred by Executive due to any
relocation (whether or not consummated), including any applicable tax
gross-ups.
(iv) In the event of termination of employment under this
Section 8(e), Executive shall not be subject to the restrictive
provisions of Section 7(a) above. Executive shall not be required to
seek other employment or to take other actions to mitigate any damages
suffered by the Company nor shall any compensation received by
Executive from any other sources reduce any payments or benefits to
which he is entitled under this Agreement. The Company's obligation to
make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense, or other claim, right or
action that the Employer may have against Executive or others.
(v) The Company or the consolidated, surviving or transferee
entity in the event of a consolidation, merger or sale of assets,
shall pay as incurred (within 10 days following the Company's receipt
of an invoice from Executive), to the full extent permitted by law,
all legal fees and expenses that Executive may reasonably incur as a
result of any contest, including, without limitation, any arbitration
pursuant to the provisions of Section 8(e)(i) of this Agreement,
(regardless of the outcome thereof) by the Company, Executive or
others with respect to the enforcement of Executive's rights under
this Section 8(e) or under any plan for the benefit of employees of
the Company, including without limitation the stock option plan,
pension plans, payroll-based stock ownership plan, tax deferred
savings and protection plan, bonus arrangements, supplemental pension
plan, deferred compensation agreements, incentive compensation plans,
and life insurance and compensation program; PROVIDED, HOWEVER, that
Executive shall be required to reimburse the Company or such
consolidated, surviving or transferee entity, for the cost of such
legal fees and expenses if Executive is deemed by the arbitrator or
court, as the case may be, to have brought or defended such contest in
bad faith.
(f) TERMINATION UPON EXPIRATION OF A TERM.
(i) The Company may choose not to renew and thereby terminate the
Agreement at the end of the Initial Term or any extension of the Term
by providing written notice to Executive of its intention not to renew
the Agreement at least 180 days prior to the end of any such Term;
PROVIDED, HOWEVER, that in the event of non-renewal pursuant to this
provision, Executive will be paid the severance amounts and benefits
set forth in Section 8(a) above.
(ii) Executive may choose not to renew and thereby terminate
the Agreement at the end of the Initial Term or any extension of the
Term by providing
18
written notice to the Company at least 180 days prior to the end of
any such Term; PROVIDED, HOWEVER, that, in the event of non-renewal
pursuant to this provision, Executive shall be entitled to receive
only his Base Salary, a Pro-Rata Target Bonus for the Terminating Year
and any other benefits and reimbursements up to the date of his
termination and no further payments hereunder shall be required from
the Company; PROVIDED, HOWEVER, that Executive shall be entitled to
receive his benefits, if any, under the Qualified Plan, the
Supplemental Plan and any other benefit plan in accordance with the
terms of the respective plan documents.
(iii) In the event of termination of employment under this
Section 8(f), Executive acknowledges that he shall remain subject to
and bound by the restrictive provisions of Section 7 above. Executive
shall not be required to seek other employment or to take other
actions to mitigate any damages suffered by the Company nor shall any
compensation received by Executive from any other sources reduce any
payments or benefits to which he is entitled under this Agreement.
(g) SECTION 409A OF THE CODE. The benefits provided under this
Agreement, including without limitation the SERP provided under Section 6(b) and
any severance pay provided under Section 8, shall comply with Section 409A of
the Code and the regulations thereunder. To the extent so required in order to
comply with Section 409A of the Code, amounts and benefits to be paid or
provided under this Agreement shall be paid or provided to Executive in a single
lump sum on the first business day after the date that is six months following
the date of termination of Executive's employment. To the extent that
Executive's entitlement to continued coverage under the Company's health and
welfare benefit plans is so delayed, (i) Executive shall be entitled to COBRA
continuation coverage under Section 4980B of the Code ("COBRA Coverage") during
such period of delay, (ii) the Company shall reimburse Executive for any Company
portions of such COBRA Coverage in the seventh month following the Date of
Termination and (iii) such continued coverage shall begin in the seventh month
following the Date of Termination.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any Payment
would be subject to the Excise Tax, then Executive shall be entitled to receive
an additional payment (the "Gross-Up Payment") in an amount such that, after
payment by Executive of all taxes (and any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 9(a), if it shall be determined that Executive is
entitled to the Gross-Up Payment, but that the Parachute Value of all Payments
does not exceed 110% of the Safe Harbor Amount, then no Gross-Up Payment shall
be made to Executive and the amounts payable under this Agreement shall be
reduced so that the Parachute Value of all Payments, in the aggregate, equals
the Safe Harbor Amount. The reduction of the amounts payable hereunder, if
applicable, shall be made by first reducing the payments under Section
8(e)(ii)(1), unless an alternative method of reduction is elected by Executive,
and in any event shall be made in such a manner as to
19
maximize the Value of all Payments actually made to Executive. For purposes of
reducing the Payments to the Safe Harbor Amount, only amounts payable under this
Agreement (and no other Payments) shall be reduced. If the reduction of the
amount payable under this Agreement would not result in a reduction of the
Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable
under the Agreement shall be reduced pursuant to this Section 9(a). The
Company's obligation to make Gross-Up Payments under this Section 9 shall not be
conditioned upon termination of Executive's employment.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required, the amount of such Gross-Up Payment and the assumptions to
be utilized in arriving at such determination, shall be made by
PricewaterhouseCoopers LLP, or such other nationally recognized certified public
accounting firm as may be designated by Executive (the "Accounting Firm"). The
Accounting Firm shall provide detailed supporting calculations both to the
Company and Executive within 15 business days of the receipt of notice from
Executive that there has been a Payment or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the Change in Control,
Executive may appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9, shall be paid by the Company to Executive within 5
days of the receipt of the Accounting Firm's determination. Any determination by
the Accounting Firm shall be binding upon the Company and Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments that will not have been made by the Company should have been
made (the "Underpayment"), consistent with the calculations required to be made
hereunder. In the event the Company exhausts its remedies pursuant to Section
9(c) and Executive thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company to or
for the benefit of Executive.
(c) Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable, but no later than 10 business days after Executive is informed in
writing of such claim. Executive shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which Executive gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies Executive in writing prior to the expiration of such
period that the Company desires to contest such claim, Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claim
20
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order effectively
to contest such claim, and
(4) permit the Company to participate in any proceedings relating
to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 9(c),
the Company shall control all proceedings taken in connection with such contest,
and, at its sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable taxing
authority in respect of such claim and may, at its sole discretion, either pay
the tax claimed to the appropriate taxing authority on behalf of Executive and
direct Executive to xxx for a refund or contest the claim in any permissible
manner, and Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; PROVIDED, HOWEVER, that,
if the Company pays such claim and directs Executive to xxx for a refund, the
Company shall indemnify and hold Executive harmless, on an after-tax basis, from
any Excise Tax or income tax (including interest or penalties) imposed with
respect to such payment or with respect to any imputed income in connection with
such payment; and PROVIDED, FURTHER, that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which the Gross-Up Payment would be payable
hereunder, and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by Executive of a Gross-Up Payment or
payment by the Company of an amount on Executive's behalf pursuant to Section
9(c), Executive becomes entitled to receive any refund with respect to the
Excise Tax to which such Gross-Up Payment relates or with respect to such claim,
Executive shall (subject to the Company's complying with the requirements of
Section 9(c), if applicable) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If, after payment by the Company of an amount on
Executive's behalf pursuant to Section 9(c), a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after such determination,
then the amount of such payment shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
(e) Notwithstanding any other provision of this Section 9, the Company
may, in its sole discretion, withhold and pay over to the Internal Revenue
Service or any other
21
applicable taxing authority, for the benefit of Executive, all or any portion of
any Gross-Up Payment, and Executive hereby consents to such withholding.
(f) DEFINITIONS. The following terms shall have the following meanings
for purposes of this Section 9.
(1) "Excise Tax" shall mean the excise tax imposed by Section 4999 of
the Code, together with any interest or penalties imposed with respect to such
excise tax.
(2) "Parachute Value" of a Payment shall mean the present value as of
the date of the change of control for purposes of Section 280G of the Code of
the portion of such Payment that constitutes a "parachute payment" under Section
280G(b)(2), as determined by the Accounting Firm for purposes of determining
whether and to what extent the Excise Tax will apply to such Payment.
(3) A "Payment" shall mean any payment or distribution in the nature
of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of Executive, whether paid or payable pursuant to this Agreement or
otherwise.
(4) The "Safe Harbor Amount" means 2.99 times Executive's "base
amount," within the meaning of Section 280G(b)(3) of the Code.
(5) "Value" of a Payment shall mean the economic present value of a
Payment as of the date of the change of control for purposes of Section 280G of
the Code, as determined by the Accounting Firm using the discount rate required
by Section 280G(d)(4) of the Code.
10. ASSIGNMENT OF RIGHTS AND DUTIES. This Agreement and Executive's
rights and obligations hereunder may not be assigned by Executive. The Company
shall assign the Company's rights and duties hereunder to any person, firm,
corporation or other business entity that succeeds to substantially all of the
assets and operations of the Company. This Agreement shall not be terminated by
any merger in which Company is not the surviving or resulting corporation, or on
any transfer of all or substantially all of Company's assets. In the event of
any such merger or transfer of assets, the provisions of this Agreement shall be
binding on and inure to the benefit of the surviving business entity or the
business entity to which such assets shall be transferred.
11. PRIOR EMPLOYMENT. Executive represents to the best of his
knowledge that he is under no binding obligation that would prevent him from
entering into this Agreement. Notwithstanding the foregoing, should Executive's
prior employer nevertheless make any claims with respect to Executive's right to
resign his prior employment or enter into this Agreement, the Company agrees to
defend and indemnify Executive from any legal challenge or other lawsuit that
may be brought against him arising out of such claims.
12. MODIFICATION AND WAIVER OF BREACH. No waiver or modification of
this Agreement or any term hereof shall be binding unless it is in writing
signed by the parties hereto. No failure to insist upon compliance with any
term, provision or condition of this Agreement, whether by conduct or otherwise,
in any one or more instances, shall be deemed to be or
22
constructed as a waiver of any such term, provision or condition or as a waiver
of any other term, provision or condition of this Agreement.
In the event of any claimed breach of this Agreement, the party alleged to
have committed such breach shall be entitled to written notice of such alleged
breach and a period of fifteen (15) days to remedy such breach. Executive
understands that a breach of any one or more of the covenants set forth in
Section 7 above will result in irreparable and continuing damage to the Company
for which there exists no adequate remedy at law, and in the event of any breach
or threatened breach of Executive's obligations under Section 7, the Company
may, instead of arbitrating its claim of breach of Section 7, file suit to
enjoin Executive from the breach or the threatened breach of such covenants.
13. NOTICES. All notices and other communications required under this
Agreement to be in writing shall be served personally on, or sent by relievable
overnight courier to, the party to be charged with receipt thereof. Notices and
other communications served by overnight courier shall be deemed given hereunder
twenty-four (24) hours after deposit of such notice or communications with such
reputable overnight courier which guarantees 24-hour delivery under the
particular circumstances (such as holidays or weekends) duly addressed to the
party to whom such notice or communication is to be given as follows:
(a) If to the Company:
The Xxxxxxxx and Xxxxxxxx Company
Xxx Xxxxxxxx Xxx
Xxxxxxxxx, Xxxx 00000
Attention: Vice President, Corporate Finance and
Chief Financial Officer
(b) If to Executive at his last address shown on the Company's
records.
Either Executive or the Company may change the address for purposes of
this Section by giving to the other party a written notice of such change.
14. ARBITRATION.
(a) Except for the breach or threatened breach by Executive of the
covenants set forth in Section 7 above, which may be enforced through litigation
including injunctive relief at the option of the Company, any dispute or
controversy arising out of or relating to this Agreement, including, but not
limited to, whether Executive has been Discharged For Cause or whether Executive
can terminate his employment hereunder for Good Reason, shall be submitted to
and settled by arbitration in Dayton, Ohio in accordance with the rules
then-pertaining of the American Arbitration Association applicable to employment
disputes to the extent that such rules are not inconsistent with this Section
14.
(b) Any dispute submitted to arbitration hereunder shall be heard by a
panel of three (3) arbitrators, one of whom shall be selected by the Company,
another of whom shall be selected by Executive, and the third of whom shall be
selected by the two arbitrators so appointed. The decision of a majority of this
panel of arbitrators on the question submitted shall
23
be final and conclusive upon the Company and upon Executive and his wife or
widow, personal representatives, designated beneficiaries and heirs, and shall
be enforceable in any court having competent jurisdiction thereof. The Company
shall bear the fees and expenses of the arbitrators and costs charged by the
American Arbitration Association to administer the arbitration.
15. SEVERABILITY. In the event any provision of this Agreement is held
invalid, then the remaining provisions of this Agreement shall not be affected
thereby.
16. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Ohio.
17. COMPLETE AGREEMENT. This Agreement, together with the letter from
the Company and Universal Computer System Holding, Inc. to Executive, contains
the entire agreement between the parties hereto with respect to the subject
matter contemplated by this Agreement and supersedes all previous and all
contemporaneous negotiations, commitments, writing, and understandings,
including, without limitation, the Original Agreement, except as expressly
provided herein. This Agreement may be modified, changed or added to only by an
agreement in writing executed by both parties.
18. LEGAL REVIEW AND DRAFTING; ATTORNEYS' FEES. Executive acknowledges
that he has had the opportunity to have this Agreement reviewed by competent
legal counsel. It is agreed this Agreement shall be constructed with the
understanding that both parties were responsible for drafting it. Company will
reimburse Executive for reasonable attorneys' fees incurred by Executive in
connection with negotiating and preparing this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first written above.
THE XXXXXXXX AND XXXXXXXX COMPANY
/s/ Xxxxxx X. Xxxxxxx
-------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President and General Counsel
EXECUTIVE
/s/ Xxxxxxx X. X'Xxxxx
---------------------------------------
Xxxxxxx X. X'Xxxxx
SIGNATURE PAGE TO AMENDED AND RESTATED EMPLOYMENT AGREEMENT
RELEASE OF CLAIMS
For and in consideration of the payments and other benefits due to
Xxxxxxx X. X'Xxxxx (the "EXECUTIVE") pursuant to the Amended and Restated Change
in Control Agreement, dated as of August 7, 2006 (the "AGREEMENT"), by and
between the Executive and The Xxxxxxxx and Xxxxxxxx Company (the "COMPANY") and
for other good and valuable consideration, Executive hereby releases the
Company, its divisions, affiliates, subsidiaries, parents, branches,
predecessors, successors, assigns, officers, directors, trustees, employees,
agents, shareholders, administrators, representatives, attorneys, insurers and
fiduciaries, past, present and future (the "RELEASED PARTIES") from any and all
claims of any kind arising out of, or related to, Executive's employment with
the Company, its affiliates and subsidiaries (collectively, with the Company,
the "AFFILIATED ENTITIES"), and Executive's separation from employment with the
Affiliated Entities, which Executive now has or may have against the Released
Parties, whether known or unknown to Executive, by reason of facts which have
occurred on or prior to the date that Executive has signed this Release. Such
released claims include, without limitation, any and all claims relating to the
foregoing under federal, state or local laws pertaining to employment,
including, without limitation, the Age Discrimination in Employment Act
("ADEA"), Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
Section 2000e ET. SEQ., the Fair Labor Standards Act, as amended, 29 U.S.C.
Section 201 ET. SEQ., the Americans with Disabilities Act, as amended, 42 U.S.C.
Section 12101 ET. SEQ. the Reconstruction Era Civil Rights Act, as amended, 42
U.S.C. Section 1981 ET. SEQ., the Rehabilitation Act of 1973, as amended, 29
U.S.C. Section 701 ET. SEQ., the Family and Medical Leave Act of 1992, 29 U.S.C.
Section 2601 ET. SEQ., and any and all state or local laws regarding employment
discrimination and/or federal, state or local laws of any type or description
regarding employment, including but not limited to any claims arising from or
derivative of Executive's employment with the Affiliated Entities, as well as
any and all such claims under state contract or tort law.
Executive has read this Release of Claims carefully, acknowledges that
Executive has been given at least 21 days to consider all of its terms and has
been advised to consult with any attorney and any other advisors of Executive's
choice prior to executing this Release of Claims, and Executive fully
understands that by signing below Executive is voluntarily giving up any right
which Executive may have to xxx or bring any other claims against the Released
Parties, including any rights and claims under the ADEA. Executive also
understands that Executive has a period of seven days after signing this Release
of Claims within which to revoke his agreement, and that neither the Company nor
any other person is obligated to make any payments or provide any other benefits
to Executive pursuant to the Agreement until eight days have passed since
Executive's signing of this Release of Claims without Executive's signature
having been revoked other than any accrued obligations or other benefits payable
pursuant to the terms of the Company's normal payroll practices or employee
benefit plans. Finally, Executive has not been forced or pressured in any manner
whatsoever to sign this Release of Claims, and Executive agrees to all of its
terms voluntarily. Executive understands that in order to revoke this Release of
Claims, Executive must send a written revocation of Executive's intent to do so
to [NAME AND ADDRESS OF NOTICE PERSON].
A-1
Notwithstanding anything else herein to the contrary, this Release of
Claims shall not affect: (i) any rights that Executive may have with respect to
matters which by their terms, are to be performed after the date hereof by the
Company (including, without limitation, obligations to Executive under any stock
option, stock award or agreements or obligations under any pension, deferred
compensation, retention or other compensation or benefit plan, all of which
shall remain in effect in accordance with their terms); (ii) rights to
indemnification Executive may have under (A) applicable corporate law, (B) the
by-laws or certificate of incorporation of the Affiliated Entities, (C) any
other agreement between Executive and a Released Party, (D) as an insured under
any director's and officer's liability insurance policy now or previously in
force or (E) Section 7.05 of the Agreement and Plan of Merger, dated as of
August 7, 2006, among the Company, Universal Computer System Holding, Inc. and
Racecar Acquisition Co.; (iii) any right Executive may have to obtain
contribution in the event of the entry of judgment against Executive as a result
of any act or failure to act for which both Executive and any of the Affiliated
Entities are jointly responsible; (iv) any rights that Executive may have under
the Agreement to the extent not satisfied, including without limitation any
rights to reimbursement of legal fees and expenses; and (v) any rights of
Executive as a shareholder of the Company or any of the Affiliated Entities.
This Release of Claims, and the attached covenants, are final and
binding and may not be changed or modified except in a writing signed by both
parties.
August 7, 2006 /s/ Xxxxxxx X. X'Xxxxx
------------------------- --------------------------------
Date Xxxxxxx X. X'Xxxxx
August 7, 2006 /s/ Xxxxxx Xxxxxxx
------------------------- --------------------------------
Date The Xxxxxxxx and Xxxxxxxx Company
