EXHIBIT 10.18
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is made and entered into as
of May 25, 2004, by and between Xxxxxx Xxxxxx, Inc., a Tennessee corporation
(the "Company"), and Xxxxxxx X. Xxxxx ("Executive").
Executive is currently employed by the Company as President. Executive has
served in a senior executive capacity with the Company for many years thereby
acquiring an intimate knowledge of the business and affairs of the Company and
has demonstrated his ability and has performed valuable services for the
Company. The Company desires to incentivize the Executive to remain in its
employ for the full term of this Agreement and to contractually protect the
Company from the misuse of proprietary, confidential information and from the
Executive competing with the Company. Accordingly, the Company hereby offers
to enter into this Agreement with Executive.
The Company's Board of Directors (the "Board") considers the establishment
and continuity of competent management to be essential to protecting and
enhancing the best interests of the Company and its shareholders. Thus, the
Board has determined that it is appropriate to provide Executive with
compensation and benefits arrangements upon a Change in Control (as defined
below) which ensure that the compensation and benefits expectations of Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, the Company wishes to secure the services of Executive for a
period to and including March 31, 2005 on the terms and conditions set forth
below, and Executive is willing to enter into this Agreement. In consideration
of the premises hereof and of the mutual promises and agreements contained
herein, the parties therefore agree as follows:
A. TERM OF AGREEMENT
1. Original Term. This Agreement shall be effective as of the date
first set forth above (the "Effective Date"). The Company shall
employ Executive as President of the Company for a term (the
"Employment Period") commencing on the Effective Date and continuing
until March 31, 2005 unless sooner terminated pursuant to Section F
or H hereof.
2. Renewals. The Employment Period shall automatically be extended for
additional one-year periods unless written notice of non-extension
is given in writing by either party no less than 60 days prior to
the scheduled expiration date.
B. POSITION AND DUTIES
During the Employment Period, subject to the power of the Board of
Directors to elect and remove officers, Executive shall serve as President of
the Company. Executive shall have the authority, functions, duties, powers and
responsibilities for Executive's corporate offices and positions which are set
forth in the Company's bylaws from time to time in effect and such other
authority, functions, duties, powers and responsibilities as the Board of
Directors or Chairman of the Board of Directors of the Company may from time to
time prescribe or delegate to Executive, in all cases to be consistent with
Executive's corporate offices and positions. Executive agrees, subject to his
election or appointment as such and without additional compensation, to serve
during the Employment Period in such particular additional offices of comparable
stature and responsibility to which he may be elected from time to time in
the Company and its subsidiaries and to serve as a Director of any subsidiary
of the Company. During the Employment Period, (i) Executive's services shall
be rendered on a full-time, exclusive basis, (ii) he will apply on a full-time
basis all of his skill and experience to the performance of his duties in such
employment and shall report only to the Company's Chairman of the Board of
Directors, (iii) he shall have no other employment and, without the prior
written consent of the Compensation Committee of the Company's Board of
Directors, no outside business activities which require the devotion of
substantial amounts of Executive's time, and (iv) unless Executive otherwise
consents in writing, the headquarters for the performance of his services
shall be the principal executive offices of the Company in Nashville,
Tennessee, subject to such reasonable travel as the performance of his duties
in the business of the Company may require. Notwithstanding the foregoing
sentence, Executive may devote a reasonable amount of his time to civic,
community, charitable, or passive investment activities and to serve as a
director and/or officer of personally owned corporations and to other types of
business or public activities not expressly mentioned in this paragraph.
C. COMPENSATION
1. Base Salary. Executive shall be paid an annual base salary as set
forth on Exhibit A hereto, subject to such increase as may from time
to time be approved by the Compensation Committee of the Company's
Board of Directors; provided, however, that following any such
increase in Executive's base salary by the Compensation Committee,
such base salary shall not be reduced without the prior written
consent of Executive. Base salary shall be payable according to the
Company's regular practice for salary payment.
2. Incentive Compensation. Executive shall be eligible to receive
annual incentive and bonus compensation, shall be eligible to
participate in the Company's long-term equity-based incentive
compensation plans, including, without limitation, the 1992 Employee
Stock Incentive Plan and the Company's 2003 Stock Incentive Plan,
and in all incentive, gainsharing, savings and retirement plans,
practices, policies and programs applicable to other senior
executive officers of the Company and its subsidiaries, but in no
event shall such plans, practices, policies and programs provide
Executive with incentive, gainsharing, savings and retirement
benefits opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company
and its subsidiaries for Executive under such plans, practices,
policies and programs as in effect at any time during the 90-day
period immediately preceding the date (the "Change in Control Date")
on which a Change in Control (as defined below) occurs, or if more
favorable to Executive, those provided generally at any time on or
after the Change in Control Date to other senior executive officers
of the Company.
3. Other Benefits. During the Employment Period Executive shall be
entitled to all of the fringe benefits which the Company and its
subsidiaries make available to senior management if and to the
extent that the Executive is eligible to participate in accordance
with the terms of the benefit plans or policies, provided, however,
that the termination benefits hereunder are in lieu of any severance
benefits to which the Executive would otherwise be entitled. Such
benefits may include, but are not limited to, (i) medical, hospital,
dental, disability and life insurance plans and coverages,
(ii) pension, profit sharing, 401(k), employee stock ownership plan,
deferred compensation and similar plans or arrangements, and
(iii) any other benefit plan, program or arrangement, including those
relating to automobiles, clubs, vacations, and expense reimbursement,
which the Company and its subsidiaries from time to time may make
available either to their employees generally or to their senior
executive officers, but in no event shall such plans, practices,
policies and arrangements provide benefits which are less favorable,
in the aggregate, than the most favorable of such plans, practices,
policies and arrangements in effect at any time during the 90-day
period immediately preceding the Change in Control Date or if more
favorable to Executive, those provided generally at any time on or
after the Change in Control Date to other senior executive officers
of the Company and its subsidiaries.
D. NONDISCLOSURE AND NON-USE OF CONFIDENTIAL INFORMATION
1. Confidential Information.
(a) Executive acknowledges and agrees that the information,
observations and data obtained by him during the course of his
performance under the Agreement concerning the business or
affairs of the Company and its subsidiaries and affiliates is
the property of the Company or such subsidiary or affiliate, as
the case may be. Therefore, during the Employment Period and
at all times thereafter, Executive (i) shall hold in a fiduciary
capacity for the benefit of the Company, its subsidiaries and
affiliates, and (ii) without the prior written consent of the
Board of Directors or except to the extent required by law (and
upon prompt written notice of such requirement to the Company
and such subsidiary or affiliate), shall not directly or
indirectly, divulge, furnish, disclose, use or make accessible
for any purpose (except in the course of his employment under
this Agreement and in furtherance of the business of the Company
and its subsidiaries and affiliates) any Confidential
Information (as defined below). Executive acknowledges and
agrees that the disclosure of any Confidential Information will
be damaging or harmful to the business activities of the
Company, its subsidiaries and affiliates, and that such
disclosure can direct or divert corporate opportunities, product
sales and/or profits away from the Company, its subsidiaries or
affiliates. In the event Executive shall be required by law to
make any disclosure as set forth above, Executive shall promptly
notify the Company and any subsidiary or affiliate which may
reasonably be affected by such disclosure and shall cooperate
with the Company, such subsidiary and such affiliate to preserve
in full the confidentiality of all Confidential Information
of the Company, such subsidiary or such affiliate. Confidential
Information shall be considered confidential or proprietary
unless and to the extent that such Confidential Information
become generally known to and available for use by the public
other than as a result of any act or omission to act by
Executive. Executive will take all appropriate steps to
safeguard Confidential Information and to protect it against
disclosure, misuse, espionage, loss and theft.
(b) As used in this Agreement, the term "Confidential Information"
means information that is not generally known to the public and
that is used, developed or obtained by the Company or any of its
subsidiaries and affiliates in connection with the Company's or
such subsidiary's or affiliate's business, including but not
limited to (i) products or services, (ii) fees, costs and
pricing structures, (iii) designs, plans or manufacturing data,
(iv) analysis, observations or data, (v) drawings, artwork,
photographs, videotapes, audio tapes, other recordings, and
reports, (vi) computer software, including operating systems,
applications program listings, and computer files, (vii) flow
charts, manuals and documentation, (viii) data bases,
(ix) accounting and business methods, (x) inventions, devices,
new developments, methods and processes, whether patentable or
unpatentable and whether or not reduced to practice,
(xi) customers, clients, authors or artist and customer, client,
author or artist lists, (xii) other copyrightable works,
(xiii) all technology and trade secrets, (xiv) intellectual
property, unique business information, or confidential or
proprietary information, and (xv) all similar and related
information in whatever form. Confidential Information will not
include any information that has been published in a form
generally available to the public prior to the date Executive
proposes to disclose or use such information. Information wil
not be deemed to have been published merely because individual
portions of the information have been separately published, but
only if all material features comprising such information have
been published in combination.
2. Product Development. In the event that Executive as part of his
activities on behalf of the Company generates, authors or
contributes, individually or with the assistance of others, to any
invention, design, new development, device, product, method or
process (whether or not patentable or reduced to practice or
comprising Confidential Information), any copyrightable work (whether
or not comprising Confidential Information) or any other form of
Confidential Information relating directly or indirectly to the
business of the Company or any of its subsidiaries or affiliates as
now or hereafter conducted (collectively, the "Intellectual
Property"), Executive acknowledges that such Intellectual
is the exclusive property of the Company and hereby assigns all
right, title and interest in and to such Intellectual Property to
the Company. Any copyrightable work prepared in whole or in part by
Executive will be deemed "a work made for hire" under
Section 201 (b) of the 1976 Copyright Act, and the Company will own
all of the rights comprised in the copyright therein. Executive
will cooperate with the Company in all reasonable respects to protect
the Company's interests in and rights to such Intellectual Property
(including, without limitation, providing reasonable assistance in
securing patent protection and copyright registrations and executing
all documents as reasonably requested by the Company whether such
requests occur prior to after termination of Executive's employment
with the Company).
3. Delivery of Materials Upon Termination of Employment. As requested
by the Company from time to time and upon the termination of the
Executive's employment with the Company for any reason, Executive
will promptly deliver to the Company all copies and embodiments, in
whatever form, of all Confidential Information or Intellectual
Property in Executive's possession or within his control (including,
but not limited to, written records, memoranda, notes, photographs,
plans, records, video tapes, audiotapes, other recordings, reports,
manuals, notebooks, documentation, program listings, flow charts,
magnetic media, disks, diskettes, tapes and all other materials
containing any Confidential Information or Intellectual Property)
irrespective of the location or form of such material and, if
requested by the Company, will provide the Company with written
confirmation that all such materials have been delivered to the
Company.
E. NONCOMPETITION
1. Covenant Not to Compete. Executive acknowledges and agrees with the
Company that Executive's services to the Company and its subsidiaries
are unique in nature and that the Company and its subsidiaries would
be irreparably damaged if Executive were to provide similar services
to any person or entity competing with the Company or any of its
subsidiaries, or engaged in similar business. Executive accordingly
covenants and agrees with the Company that during the Employment
Period and for two years following the termination of Executive's
employment with the Company for any reason (the "Noncompetition
Period"), Executive will not, directly or indirectly, either for
himself or for any other individual, corporation, partnership, joint
venture or other entity, participate in (as defined below) any
business (including, without limitation, any division, group or
franchise of a larger organization) competing with any of the
businesses then conducted (or, to the knowledge of Executive,
planned to be conducted within two years) by the Company or any of
its successors or then subsidiaries within any geographical area in
which the Company or its subsidiaries engage or plan within two years
to engage in any such businesses. For purposes of this Agreement,
the term "participate in" will include, without limitation, having
any direct or indirect interest in any corporation, partnership,
joint venture or other entity, whether as a sole proprietor, owner,
stockholder, partner, joint venturer, creditor or otherwise, or
rendering any direct or indirect service or assistance to any
individual, corporation, partnership, joint venture and other
business entity (whether as a director, officer, manager,
supervisor, employee, agent, consultant or otherwise).
2. Nonsolicitation and Noninterference. During the Noncompetition
Period, Executive will not directly or indirectly, on behalf of
himself or another entity, (i) induce, attempt to induce, or assist
others to induce any artist, composer, songwriter, lyricist,
musician, author, writer, editor, programmer, technician, cable
operator, employee, consultant, customer, supplier, licensee or other
person or entity to terminate its, his or her association with the
Company or its subsidiaries, or to cease doing business with the
Company or its subsidiaries, or do anything to interfere with the
relationship between the Company or its subsidiaries, on the one
hand, and any artist, composer, songwriter, lyricist, musician,
author, writer, editor, programmer, technician, cable operator,
employee, consultant or other person or entity doing business and/or
under contract with the Company or any of its subsidiaries, or with
whom the Company or any of its subsidiaries is then negotiating, or
with whom the Company or any of its subsidiaries enters into any
contract or agreement during the Noncompetition Period, or (ii) hire,
without the written consent of the Company, any person who was an
employee of the Company or any of its subsidiaries at any time within
twelve (12) months of the termination of the Employment Period.
3. Limitations.
(a) Nothing contained in this Section E shall prevent Executive from
owning up to a 5% interest in any corporation or entity having
one or more classes of its securities listed on a national
securities exchange or market, or publicly traded in the
over-the-counter market, provided that Executive is not actively
involved in any manner whatsoever in the operation or management
of such corporation or entity.
(b) If under the circumstances existing at the time of enforcement
of this Section E, the period, scope or geographic area
described in this Section E shall be found or held to be
unreasonable, the parties hereto agree that the maximum period,
scope or geographic area reasonable under the circumstances
shall be substituted for the stated period, scope or geographic
area.
F. TERMINATION OF EMPLOYMENT (OTHER THAN SUBSEQUENT TO A CHANGE IN CONTROL).
1. Applicability. This Section F shall apply only to termination of
the Employment Period prior to the occurrence of a Change in
Control (as defined below) during the Employment Period.
Termination of the Employment Period following the occurrence of a
Change in Control shall be governed by Section H.
2. Events of Termination and Related Payments.
(a) Disability. In the event that during the Employment Period
Executive should become Disabled, the Company (acting by
resolution of the Board) may elect to terminate the Employment
Period by written notice to Executive, his guardian or personal
representative. Executive, his guardian or personal
representative, as the case may be, shall be entitled to receive
(i) full compensation pursuant to Section C at his then base
salary rate from the date of termination of employment
continuing for the lesser of (a) one year following the date of
such notice and (b) the remainder of the then effective
Employment Period, and (ii) bonus for the calendar year in which
Executive's termination of employment occurs as determined in
good faith by the Compensation Committee of the Board of
Directors in its sole discretion. Notwithstanding the foregoing
provisions of this Section F(2)(a), the payments provided herein
with respect to any period of Disability shall be reduced by the
amount of any benefits payable to Executive, his guardian or
personal representative, as the case may be, during such period
under any disability or similar plan or program of the Company
of any of its subsidiaries in respect of Executive's Disability.
(b) Death. In the event of Executive's death during the Employment
Period, his personal representative shall be entitled to receive
any compensation pursuant to Section C which is accrued and
unpaid as of the date of his death.
(c) Termination Due to Serious Misconduct. In the event that during
the Employment Period Executive should commit Serious Misconduct
(as defined below), the Company (acting by resolution of the
Board) may elect to terminate the Employment Period by written
notice to Executive, and Executive shall be entitled only to any
compensation and benefits which are vested but unpaid as of the
date of termination of employment.
(d) Termination for Reasons Other Than Death. Disability, Serious
Misconduct or Voluntary Action by the Executive. In the event
that the Employment Period is terminated at the option of the
Company for any reason other than for Serious Misconduct, death,
disability, or voluntary action by the Executive, the Executive
shall be paid a lump sum payment equal to the lesser of
(1) current base salary and target bonus for the remainder of
the term hereunder, and (2) a sum equal to twice current base
salary and target bonus, and the Company shall pay such sum to
Executive within thirty (30) business days following such
termination. Executive's voluntary resignation resulting from
unwarranted demotion and/or material diminution of
responsibilities shall be governed by the terms of this
provision and shall not be considered a voluntary termination as
defined in subparagraph (e) hereunder. In the event of such
termination, the Company shall reimburse the Executive for the
premium paid by the Executive for the continued coverage for the
Executive (and any dependents of the Executive covered by the
Company's health care plans as of the date of termination) under
the Company's health care plan pursuant to COBRA (or any of the
mandatory health care continuation law then in effect), such
coverage being substantially similar to that provided the
Executive on the date of his termination, but such
reimbursement shall be only for a period which is of (1) the
remainder of the term hereof, and (2) two years from the date of
termination.
(e) Voluntary Termination by Executive. In the event that
Executive, for reasons other than those set forth in
subparagraph (d) hereinabove, voluntarily terminates his
employment with the Company prior to the end of the Employment
Period, the Company shall pay any earned but unpaid portion of
Executive's base salary and incentive compensation through the
date of his termination provided that the Executive is in full
compliance with the provisions of Sections D and E hereof.
3. Definition of Certain Terms.
(a) "Disabled" means such physical or mental condition of Executive
as is determined by the Company's Board of Directors in its sole
discretion to be expected to continue indefinitely and which
renders him incapable of performing any substantial portion of
the services contemplated hereby (as confirmed by competent
medical evidence).
(b) "Serious Misconduct" means embezzlement or misappropriation of
corporate funds, other acts of dishonesty or reckless or
intentional misconduct which is materially harmful to the
business or reputation of the Company or its subsidiaries, the
conviction of a felony, refusal to perform or disregard of the
duties properly assigned by the Chief Executive Officer of the
Company or the Board, or a material breach of any of the
provisions of Sections D or E above or of any of the other
provisions of this Agreement which violations are not cured
within sixty (60) days of written notice to the Executive of
the breach.
4. Effect of Breach of Noncompetition of Nondisclosure Provisions. In
the event Executive materially breaches or otherwise fails to comply
in any material respect with the provisions of Sections D or E above,
then, in addition to any other remedies provided herein or at law or
in equity, the Company shall not have any further obligation to make
any additional payments to Executive pursuant to this Agreement.
Termination of such payments pursuant to the preceding sentence shall
not relieve Executive's obligations pursuant to Sections D or E
above.
G. CHANGE IN CONTROL
For purposes hereof, a "Change in Control" shall have occurred if:
(1) any "person" other than any trustee or other fiduciary holding
securities under an employee benefit plan of the Company
within the meaning of Section 14(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") becomes the
"beneficial owner" as defined in Rule 13D-3 thereunder,
directly or indirectly, of 20% or more of either the then
outstanding shares of the Company's Common Stock (the
"Outstanding Company Common Stock") or the combined voting
power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Company Voting Securities"); provided, however, that any
acquisition by the Company or its subsidiaries, or by Xxx
Xxxxx, S. Xxxxxx Xxxxx, members of their families, relatives,
certain family partnerships, trusts associated with the Xxxxx
family and other entities who have as of July 1, 1995 jointly
filed a Statement on Schedule 13D under the Exchange Act, or
by any reconstituted version of such filing group or any
corporation with respect to which, following such acquisition,
more than 80% of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power
of the Voting Securities of such corporation entitled to vote
generally in the election of directors is then beneficially
owned, directly or indirectly, by the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Common Stock and Company Voting Securities
immediately prior to such acquisition in substantially the
same proportion as their ownership, immediately prior to such
acquisition, of the Outstanding Company Common Stock and
Company Voting Securities, as the case may be, shall not
constitute a Change in Control;
(2) during any two-year period, individuals who constitute the
Board of Directors of the Company (the "Incumbent Board") as
of the beginning of the period cease for any reason to
constitute at least a majority of the Board, provided that any
individual becoming a director during such period whose
election or nomination for election by the Company's
shareholders was approved by an affirmative vote of at least
two-thirds of the directors then comprising the Incumbent
Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a
nominee for director without objection to such nomination)
shall be, for the purposes of this subparagraph (b),
considered as though person 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 relating to the election
of the directors of the Company (as such terms are used in
Rule 14A-11 of Regulation 14A promulgated under the Exchange
Act) or other actual or threatened solicitation of proxies
or consents; or
(3) approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with
respect to which all or substantially all of the individuals
and entities who were the respective beneficial owners of the
Common Stock and Company Voting Securities immediately prior
to such reorganization, merger or consolidation do not,
following such reorganization, merger or consolidation,
beneficially own, directly or indirectly, more than 80% 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 reorganization, merger or consolidation, or a
complete liquidation or dissolution of the Company or of the
sale or other disposition of all or substantially all of the
assets of the Company.
Notwithstanding the foregoing, a Change in Control for purposes of this
Agreement shall not be considered to occur as a result of a transaction
which is approved by the Company's Board of Directors in advance of the
transaction and prior to the consummation of the transaction if such
transaction is specifically excluded by the Board of Directors from the
definition of "Change of Control" for purposes of this Agreement and such
exclusion is approved by an affirmative vote of at least two-thirds of the
directors then comprising the Incumbent Board. Furthermore, anything in
this Agreement to the contrary notwithstanding, if Executive's employment
with the Company is terminated prior to the date on which a Change in
Control occurs, and if it is reasonably demonstrated by Executive that such
termination of employment (1) was at the request of a third party who has
taken steps reasonably calculated to effect the Change in Control or
(2) otherwise arose in connection with or in anticipation of the Change in
Control, then for all purposes of this Agreement, a Change in Control shall
be considered to have occurred immediately prior to Executive's employment
termination date.
In the event the Board adopts any plan or takes any action which, if
consummated, would result in a Change in Control of the Company, the Company
shall take any action determined by the Board to be necessary or appropriate
to ensure the prompt payment when due of any amounts which may thereafter
become payable hereunder upon termination by the Company of Executive during
the Employment Period, including but not limited to the placement of
sufficient funds to pay all such amounts in an escrow account with a bank
or other fiduciary institution.
On the Change in Control Date, to the extent permitted by law, regardless
of date or grant, all stock options previously granted shall be come
exercisable and all restrictions on restricted stock shall lapse. All
previously deferred compensation (including interest or earnings) shall, at
Executive's election, be paid to Executive within 10 days of the Change in
Control Date.
H. TERMINATION FOLLOWING CHANGE IN CONTROL
Following a Change in Control of the Company, the provisions of Section H
and Section I shall apply exclusively with respect to (i) the termination
of Executive's employment during the Employment Period and (ii) amounts
payable to Executive upon such termination.
If a Change in Control of the Company shall have occurred, Executive shall
be entitled to the benefits provided herein upon Executive's subsequent
termination of employment during the Employment Period, unless such
termination is (i) because of Executive's death, (ii) by the Company
because of Executive's Disability or Serious Misconduct or (iii) by
Executive other than for Good Reason. For purposes hereof, "Good Reason"
shall mean the occurrence or continuation, without consent of Executive,
after a Change in Control of the Company of any of the following events
within 24 months after the Change in Control Date:
(1) the assignment to Executive of any duties materially
inconsistent with the position with the Company that
Executive held immediately prior to the Change in Control of
the Company, or a material adverse change in the status,
position or conditions of Executive's employment or the
nature of Executive's responsibilities in effect immediately
prior to such Change in Control, or any removal of Executive
from or any failure to re-elect Executive to any of such
positions, except in connection with the termination of his
employment by the Company for Serious Misconduct, Disability
or death or by Executive other than for Good Reason;
(2) a reduction by the Company in Executive's annual base salary
as in effect immediately prior to such Change in Control which
is not consistent with general compensation reduction for a
senior executive officer of the Company;
(3) the relocation of Executive's principal office to a location
outside a 25 mile radius from Executive's principal office
immediately prior to such Change in Control, except for
required travel on the Company's business to an extent
substantially consistent with Executive's business travel
obligations immediately prior to such Change in Control;
(4) the failure by the Company to pay to Executive any portion of
Executive's salary within seven days of the date such salary
is due;
(5) the failure by the Company to continue in effect any benefit
or compensation plan in which Executive participates
immediately prior to the Change in Control which is material
to Executive's total compensation, including but not limited
to the stock option, employee stock ownership, bonus,
insurance, disability and vacation plans which the Company
currently has or any substitute or additional plans adopted
prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan or plans) has been made with respect to such plan, or
the failure by the Company to continue Executive's
participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in
terms of the amount of benefits provided and the level of
Executive's participation relative to other participants, as
in existence immediately prior to such Change in Control; or
(6) the failure of the Company to obtain an agreement from any
successor to assume and agree to perform this Agreement, as
contemplated herein.
Executive's right to terminate his employment for Good Reason pursuant to
this section shall not be affected by Executive's incapacity due to
physical or mental illness. Executive's continued employment shall not
constitute consent to, or a waiver of with respect to, any circumstance
constituting Good Reason hereunder. In the event of any dispute between
Executive and the Company as to whether any event constituting Good Reason
shall have occurred, the burden of proving by clear and convincing
evidence that such event does not constitute Good Reason shall rest on the
Company.
Any termination of Executive's employment by the Company or by Executive
pursuant to this Section H shall be communicated by written notice of
termination (the "Notice of Termination") to the other party hereto, and
shall indicate the specific termination provision in the Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment. For
the purposes hereof, "Date of Termination" shall mean (i) if Executive's
employment is terminated for Disability, 30 days after Notice of Termination
is given (provided that Executive shall not have returned to the full-time
performance of his duties during such 30 days) or (ii) if Executive's
employment is terminated for any other reason other than death, the date
specified in the Notice of Termination.
I. PAYMENTS UPON TERMINATION FOLLOWING TO CHANGE IN CONTROL
Following a Change in Control, Executive shall be entitled to the following
benefits upon termination of employment during the 36-month period following
the Change in Control Date:
1. Death, Disability, Serious Misconduct or Termination by Executive
Other Than for Good Reason. Following a Change in Control and a
termination of Executive's employment because of Executive's death
or by the Company because of Executive's Disability or Serious
Misconduct or by Executive other than for Good Reason, the Company's
only remaining obligations under this Agreement shall be to pay any
base salary earned through the Date of Termination plus the amount
of any compensation previously deferred by Executive, in each case
to the extent theretofore unpaid, and Executive's benefits shall be
limited to vested benefits provided under any retirement, insurance
and other benefit programs of the Company then in effect determined
in accordance with the terms thereof.
2. Other. If following a Change in Control the employment shall be
terminated by Executive for Good Reason or by the Company other than
for death, Disability or Serious Misconduct, Executive shall be
entitled to the amounts provided below, such amounts to be paid in
cash in a lump sum no later than the tenth business day following
the Date of Termination:
(a) the Company shall pay to Executive his full base salary, and
earned or accrued, but unpaid vacation pay, through the Date of
Termination at the rate in effect at such time, plus all other
amounts, including but not limited to incentive compensation for
a past fiscal year which has not yet been awarded or paid to
Executive under incentive plans, programs or arrangements,
including any deferred awards (it being understood that with
respect to any incentive compensation which has not been
awarded, the individual performance component of the award shall
be determined on at least the basis that Executive has met all
applicable standards) to which Executive is entitled under any
compensation or benefit plan of the Company;
(b) a lump-sum severance payment (the "Severance Payment") equal to
two (2) times the sum of (i) Executive's annual base salary as
of the Date of Termination and (ii) any cash bonus received by
Executive in the immediately preceding fiscal year; provided,
that such amount shall be paid in lieu of, and Executive hereby
waives the right to receive, any other amount of severance
relating to salary or bonus continuation to be received by
Executive upon termination of employment of Executive under any
severance plan, policy or arrangement of the Company; and
(c) at the election of Executive, the cash-out of any or all of
Executive's stock or stock-based awards granted pursuant to
both the Xxxxxx Xxxxxx, Inc. 1992 Employee Stock Incentive Plan
and the 2003 Stock Incentive Plan at the "Change in Control
Price" provisions set for therein.
3. Legal Expenses. In addition to any other amounts payable hereunder,
the Company also shall reimburse Executive for all legal fees and
expenses reasonably incurred by Executive as a result of any
termination of the Employment Period under the circumstances set
forth in Section H hereto (including all such fees and expenses, if
any, incurred in contesting or disputing any right or benefit
provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of
Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), to any payment of benefit provided hereunder).
4. Continuation of Benefits. Following a Change in Control, for the
remainder of the Employment Period, or such longer period as any
plan, program, practice or policy may provide, the Company shall
continue benefits to Executive at least equal to those which would
have been provided to them in accordance with the plan, programs,
practices and policies described in Section C(3) of this Agreement
if Executive's employment had not been terminated in accordance with
the most favorable plans, practices, programs or policies of the
Company or its subsidiaries applicable generally to other senior
executive officers during the 90-day period immediately preceding
the Change in Control Date or, if more favorable to Executive, as in
effect generally at any time thereafter with respect to other senior
executive officers of the Company and its subsidiaries; provided,
however, that if Executive becomes reemployed with another employer
and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under
such other plan during such applicable period of eligibility. For
purposes of determining eligibility of Executive for retiree
benefits pursuant to such plans, practices, programs and policies,
Executive shall be considered to have remained employed until the
end of the Employment Period and to have retired on the last day
of the Employment Period.
To the extent not theretofore paid, the Company shall timely pay or
provide to Executive any other amounts or benefits required to be
paid or provided or which Executive is eligible to receive pursuant
to this Agreement under any plan, program, policy or practice or
contract or agreement of the Company and its subsidiaries, but
excluding solely purposes of this Section I(4) amounts waived by
Executive pursuant to Section I(2)(b).
5. Certain Reduction in Payments by the Company. For purposes of this
Section, (i) a "Payment" shall mean any payment or distribution in
the nature of compensation to or for the benefit of Executive,
whether paid or payable pursuant to this Agreement or otherwise;
(ii) an "Agreement Payment" shall mean a Payment paid or payable
pursuant to this Agreement (disregarding this Section); (iii) "Net
After Tax Receipt" shall mean the Present Value (as defined below)
of a Payment net of all taxes imposed on Executive with respect
thereto under Sections I and 4999 of the Code, determined by
applying the highest marginal rate under Section I of the Code
which applied to Executive's taxable income for the immediately
preceding taxable year (iv) "Present Value" shall mean such
value determined in accordance with Section 280G(d)(4) of the Code;
and (v) "Reduced Amount" shall mean the smallest aggregate amount
of Agreement Payments which (a) is less than the sum of all
Agreement Payments and (b) results in aggregate Net After Tax
Receipts which are equal to or greater than the Net After Tax
Receipts which would result if the aggregate Agreement Payments
were any other amount less than the sum of all Agreement Payments.
Anything in this Agreement to the contrary notwithstanding, in the
event KPMG LLP (the "Accounting Firm") shall determine that receipt
of all Payments would subject Executive to tax under Section 4999
of the Code, the Accounting Firm shall determine whether some amount
of Payments would meet the definition of a Reduced Amount. If the
Accounting Firm determined that there is a Reduced Amount, the
aggregate Payments shall be reduced to such Reduced Amount. 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 shall 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.
If the Accounting Firm determined that aggregate Agreement Payments
should be reduced to the Reduced Amount, the Company shall promptly
give Executive notice to that effect and a copy of the detailed
calculation thereof, and Executive may then elect, in his sole
discretion, which and how much of the Agreement.
Payments shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Agreement Payments
equals the Reduced Amount), and shall advise the Company in writing
of his election within 10 days of his receipt of notice. If no
such election is made by Executive within such 10-day period, the
Company may elect which of such Agreement Payments shall be
eliminated or reduced (as long as after such election the Present
Value of the aggregate Agreement Payments equals the Reduced Amount)
and shall notify Executive promptly of such election. All
determinations made by the Accounting Firm under this Section shall
be binding upon the Company and Executive and shall be made within
60 days of a Date of Termination. As promptly as practicable
following such determination, the Company shall pay to or distribute
for the benefit of Executive such Agreement Payments as are then
due to Executive under this Agreement and shall promptly pay to or
distribute for the benefit of Executive in the future such Agreement
Payments as become due to Executive under this Agreement.
While it is the intention of the Company and Executive to reduce
the amounts payable or distributable to Executive hereunder only if
the aggregate Net After Tax Receipts to Executive would thereby be
increased 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 amounts will
have been paid or distributed by the Company to or for the benefits
of Executive pursuant to this Agreement which should not have been
so paid or distributed ("Overpayment") or that additional amounts
which will have not been paid or distributed by the Company for the
benefit of the Executive pursuant to this Agreement could have been
so paid or distributed ("Underpayment"), in each case, consistent
with the calculation of the Reduced Amount hereunder. In the event
that the Accounting Firm, based either upon the assertion of a
deficiency by the Internal Revenue Service against the Company or
Executive which the Accounting Firm believes has a high probability
of success determines that an Overpayment has been made, any such
Overpayment paid or distributed by the Company to or for the benefit
of Executive shall be treated for all purposes as a loan to
Executive which Executive shall repay to the Company together with
interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code; provided, however, that no such
loan shall be deemed to have been made and no amount shall be
payable by the Executive to the Company if an to the extent such
deemed loan and payment would not either reduce the amount on which
the Executive is subject to tax under Section 1 and Section 4999 of
the Code or generate a refund of such taxes. In the event that the
Accounting Firm, based upon controlling precedent or substantial
authority, determined that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for the
benefit of Executive together with interest at the applicable
federal rate provided for in Section 7872(f)(2) of the Code.
6. Full Settlement.
Except as otherwise provided herein, 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 which the Company may have against Executive or others.
In no event shall Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts
payable to Executive under any of the provision of this Agreement
and, except as provided to Executive under any of the provisions of
this Agreement and, except as provided in Section I(2)(b) of this
Agreement, such amounts shall not be reduced whether or not
Executive obtains other employment.
J. REMEDIES
Executive acknowledges that he will receive privileged information from
the Company and that he will have substantial access to the Company's trade
secrets, business information and personnel data. In consideration of his
employment and the privilege of access to the Company's trade secrets,
information, business methods and procedures, and personnel data, Executive
acknowledges that the restrictions contained within Sections D and E are
reasonable and necessary in order to preserve the Company's legitimate
interests and that any violation thereof would result in irreparable injury
to the Company for which monetary damages would be an inadequate remedy.
Therefore, Executive acknowledges and agrees that in the event of any
violations thereof, the Company may seek from any court of competent
jurisdiction preliminary and permanent injunctive relief as well as an
equitable account of all Executive's profits or benefits arising out of
such violation, which rights shall be cumulative and in addition to any
other action or remedies to which the Company may be entitled.
K. SUCCESSORS
(a) This Agreement is personal to Executive and without the prior
written consent of the Company shall not be assignable by
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and
be enforceable by Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement
in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the
Company as herein before defined and any successor to its
business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach hereof
and shall entitle Executive to terminate his employment for
Good Reason.
L. NOTICES
All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
Xxxxxxx X. Xxxxx, President
Xxxxxx Xxxxxx, Inc.
Xxxxxx Place at Xxx Xxxx Xxxx
Xxxxxxxxx, Xxxxxxxxxx 00000-0000
If to the Company:
Xxxxxx Xxxxxx, Inc.
Xxxxxx Place at Elm Hill Pike
Post OFfice Box 141000
Nashville, Tennessee 37214-1000
Attention: General Counsel
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
M. MISCELLANEOUS
1. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other
provision of the Agreement.
2. The Company may withhold from any amounts payable under this Agreement
such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
3. Executive's or the Company's failure to insist upon strict compliance
with any provision hereof or any other provision of this Agreement or
the failure to assert any right Executive or the Company may have
hereunder, including, without limitation, the right of the Executive
to terminate employment for Good Reason, shall not be deemed to be a
waiver of such provision or right or any other promotion or right of
this Agreement.
N. WAIVERABILITY OF PROVISIONS
No provision of this Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in writing and is signed
by Executive and an executive officer of the Company. No waiver by either
party hereto of the party's compliance with or breach of, any condition or
provision herein to be performed by said party shall constitute a
simultaneous waiver of any other terms, provisions or conditions herein nor
shall such waiver by either party constitute a continuing waiver of said
pertinent term, provision or condition subsequent thereto unless such
continuation of waiver is agreed to in writing by the parties pursuant to
the terms of this paragraph.
O. ENTIRE AGREEMENT
This Agreement, including attachments, contains the entire agreement between
the parties hereto and no agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this Agreement.
P. APPLICABLE LAW
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Tennessee. Any dispute
regarding this Agreement or any amendment or addendum hereto shall be
resolved through an arbitration hearing held in accordance with the
procedures of the American Arbitration Association. Such arbitration
hearing shall be held in Davidson County, Tennessee and the arbitrators'
decision shall be final, binding and nonappealable by the parties hereto.
The cost of any such litigation to enforce all or part of this Agreement,
including, without limitation, court costs and attorney's fees, shall be
paid by the party found to be in default hereunder or who is otherwise found
to be acting or to have acted contrary to the terms hereof.
IN WITNESS WHEREOF, Executive and the Company have executed this
Agreement as of the day and year first written above.
EXECUTIVE: XXXXXX XXXXXX, INC.:
/s/ Xxxxxxx X. Xxxxx /s/ Xxx Xxxxx
------------------------- -------------------------
Xxxxxxx X. Xxxxx Name
President
Chairman and CEO
-------------------------
Title
May 25, 2004 May 26, 2004
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Date Date
