EXHIBIT 10.1
EMPLOYMENT AGREEMENT WITH XXXXXXX X. X'XXXXX
This EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of the
31st day of December, 2004, by and between THE XXXXXXXX AND XXXXXXXX COMPANY
(the "Company"), an Ohio corporation, and XXXXXXX X. X'XXXXX ("Executive").
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
herein) of this Agreement. Any prior agreements or understandings with respect
to Executive's employment by the Company are cancelled as of the date hereof.
TERM
The term of this Agreement initially shall be the period commencing on January
17, 2005 (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. Notwithstanding the foregoing, the term of this
Agreement is subject to termination as provided in Section 8.
DUTIES
Executive will serve as Chief Executive Officer and President of the Company
("Position") and will be appointed a member of the Company's Board of Directors.
Executive will report only to the Company's Board of Directors.
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) which includes the Company.
Executive shall also perform such other duties that are consistent with the
position of Chief Executive Officer and President as are reasonably assigned to
Executive by the Company's Board of Directors.
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.
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 Company's Board of Directors fulfilling its
duties and responsibilities.
COMPENSATION
As full compensation for Executive's services hereunder, the Company agrees to
pay Executive as follows:
BASE SALARY
Executive shall receive a 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 of Directors shall review Executive's performance at least annually
and consider such increase of Base Salary as the Compensation
Committee shall determine to be appropriate.
ANNUAL INCENTIVE COMPENSATION
Executive will be eligible for an annual bonus based upon achievement of certain
corporate and personal performance objectives established by the Company's Board
of Directors. The bonus target for Executive shall be 70 percent (70%) of his
Base Salary, with the maximum annual bonus being 140 percent (140%) of his Base
Salary; provided, however, that the
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Compensation Committee of the Board of Directors has the right to modify the
corporate and personal performance objectives on an annual basis.
INCENTIVE COMPENSATION FOR THE FIRST YEAR
For the period from January 17, 2005 to September 30, 2005 only, Executive will
be guaranteed a bonus of at least $393,750, subject to increase based upon
achievement of corporate and personal objectives established by the Board of
Directors pursuant to Section 4(b). The corporate objectives for fiscal year
2005 are 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.
SIGNING BONUS
On the Effective Date, Executive will be paid a signing bonus of $200,000.
Executive shall be obligated to repay the full amount of such bonus if Executive
voluntarily terminates his employment within one (1) year of the Effective 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.
EXPENSES
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.
PERQUISITES
Executive will also be entitled to the following additional benefits:
Company Car Allowance
The Company will provide Executive with $14,000 per year for the purchase or
lease of a vehicle.
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.
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.
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.
INITIAL STOCK OPTION GRANT
As of the Effective Date of this Agreement, Executive shall be granted options
to purchase 300,000 common shares of the Company. The exercise price for these
shares will be the fair market value of the shares on the date of grant. The
option will have a seven-year life, and the options will 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 the Executive by the Company
will become one-hundred percent (100%) vested upon Executive's termination of
employment Without Cause in accordance with Section 8(a) during the Initial
Term. Notwithstanding the foregoing, all options granted to Executive by Company
will become one-hundred percent (100% ) vested upon a Change in Control as
defined in Section 8(e), or Executive's termination of 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 Executive's termination of
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.
RESTRICTED STOCK AWARD
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As of the effective date of this Agreement, Executive will receive 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 or greater than the 75th percentile, two times the original number
of performance-based shares will be earned. In the event of Executive's
termination of 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. With respect to subsequent restricted stock awards, in the event of
Executive's termination of 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 Change in Control as defined in
Section 8(e), or Executive's termination of 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.
OTHER STOCK AWARDS
Each December 1, 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.
VACATION
Executive shall be entitled to five (5) weeks of paid vacation per year.
BENEFITS
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.
During the term of Executive's employment with the Company, 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.
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.
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.
Within 30 days of the Effective Date, the Company will amend 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. In addition, the Company agrees that it will pay the
Executive's and the 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).
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During the term of the Agreement and for the later of ten (10) years following
the end of the term of the Agreement 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.
RETIREMENT
The following definitions will be applicable to Section 6 of this Agreement:
"Base Salary" shall mean the then-current annual base salary (exclusive of
Bonuses) paid to Executive.
"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.
"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 of
Directors 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
Internal Revenue Code section 415 and 401(a)(17) limits. For this calculation,
it shall be assumed that the benefits under the SERP, Qualified Plan and
Supplemental Plan begin when his 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 his spouse at the time his benefits commence (if
she 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 Internal Revenue Code and regulations thereunder, Executive
may elect to defer commencement of the receipt of SERP payments. If the
commencement of SERP payments is so deferred, the payments shall be increased to
be the actuarial equivalent of the payments he 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.
NON-COMPETITION AND CONFIDENTIALITY
NON-COMPETITION
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
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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.
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
accessories for new or used automobiles, pickups, trucks, vans, motorcycles,
recreational vehicles or other vehicles, or boats.
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. 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.
CONFIDENTIALITY
"Company Confidential Information" includes, among other things:
any information relating to the Company's financial position, business
operations, plans or strategies, research and development and personnel;
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;
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 Company's customers, creativity concepts on multiple location
accounts developed or implemented by the Company and the Company's production
costs;
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;
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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;
developments, improvements, inventions and processes that are or may be produced
in the course of the Company's operations;
confidential and private matters of the Company's customers and potential
customers submitted to the Company for handling and processing;
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
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.
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.
OWNERSHIP OF INVENTIONS
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.
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.
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.
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.
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BREACH
In the event of a material breach by Executive of his obligations under Section
7 of this Agreement, all of the Company's obligations to provide additional
compensation or benefits set forth in Section 8 under this Agreement shall
cease.
TERMINATION
TERMINATION OR DISCHARGE WITHOUT CAUSE
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 such
discharge, 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 on a form provided by the Company that releases the Company,
its employees, officers, directors and related entities from any and all claims
arising out of or related to Executive's employment or termination of
employment:
A Bonus for the year in which termination occurs (the "Terminating Year") equal
to the Bonus target for such year provided that the corporate and personal
performance objectives are met (calculated and, if earned, payable within 30
days of the end of the Terminating 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.
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 sum of the annual Bonus for
the prior three (3) years divided by three (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.
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.
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.
DISCHARGE FOR CAUSE
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 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.
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.
Should Executive disagree that his discharge was a Discharge For Cause, the
question shall be submitted to arbitration in accordance with Section 13 below.
"Discharge For Cause" shall be construed to have occurred whenever occasioned by
(i) reason of actions by Executive which are felonious, involve moral turpitude
or are other material misconduct by Executive 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 (ii) 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.
TERMINATION DUE TO DISABILITY
If, by reason of illness, disability, or other incapacity certified by two (2)
physicians competent to do so in the opinion of the Company's Board of
Directors, Executive is unable to perform the duties required of him under this
Agreement for a
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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 Company's Board of
Directors about Executive's 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.
Provided that Executive delivers to the Company and does not rescind a waiver of
claims on a form provided by the Company that releases the Company, its
employees, officers, directors and related entities from any and all claims
arising out of or related to Executive's employment or termination of employment
Executive shall be entitled to:
A Bonus for the year in which termination occurs (the "Terminating Year") equal
to the Bonus target for such year provided that the corporate and personal
performance objectives are met (calculated and, if earned, payable within 30
days of the end of the Terminating 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.
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.
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.
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.
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.
BENEFITS UPON TERMINATION FOLLOWING CHANGED CIRCUMSTANCES
If Executive voluntarily terminates his employment within eighteen (18) months
after the occurrence of any of the following events:
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;
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;
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 of
Directors; or 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; or
Then, provided that Executive delivers to the Company and does not rescind a
waiver of claims on a form provided by the Company that releases the Company,
its employees, officers, directors and related entities from any and all claims
arising out of or related to Executive's employment or termination of
employment, Executive shall be entitled to:
30
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 sum of the annual Bonus for
the prior three (3) years divided by three (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.
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.
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.
A Bonus for the year in which termination occurs (the "Terminating Year") equal
to the Bonus target for such year provided that the corporate and personal
performance objectives are met (calculated and, if earned, payable within 30
days of the end of the Terminating 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.
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.
BENEFITS UPON A CHANGE IN CONTROL
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), a
Good Reason means that following a Change in Control (A) Executive's Base Salary
and Bonus is reduced below the amount of such Base Compensation in effect
immediately preceding the Change in Control without Executive's written consent;
(B) Executive's 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 by the Company or any successor to perform
duties or services which differ significantly from those performed by him prior
to the Change in Control, 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 authority or responsibility; (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; or (E) Executive's principal place of employment is
relocated in excess of fifty (50) miles from Dayton, Ohio.
"Change in Control" shall mean the occurrence of any of the following:
Any "person," as such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (other than Xxxxxxx X.
Xxxxx, Xx., his children or his grandchildren, the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the Company, or
any company owned, directly or indirectly, by the shareholders of the Company in
substantially the same proportions as their ownership of stock of the Company),
who is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
twenty percent (20%) or more of the combined voting power of the Company then
outstanding securities;
during any period of two (2) consecutive years, individuals who at the beginning
of such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clause (1), (3) or (4) of this Section) whose
election by the Company's shareholders was approved by a vote of at least
two-thirds (2/3) of the directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
the Company is merged or consolidated with another corporation or other entity
or the Company is otherwise a party to a corporate reorganization and as a
result of such merger, consolidation or other corporate reorganization less than
fifty percent (50%) of the outstanding voting securities of the parent,
surviving or resulting corporation or other entity are owned
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by the persons or entities who were shareholders of the Company immediately
prior to the consummation of such merger, consolidation or other corporate
reorganization;
the Company is liquidated or dissolved, or there occurs a sale or other
disposition of all or substantially all of the Company's assets.
If, 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 provided that Executive delivers to the Company and does not
rescind a waiver of claims on a form provided by the Company that releases the
Company, its employees, officers, directors and related entities from any and
all claims arising out of or related to Executive's employment or termination of
employment, Executive shall be entitled to receive from the Company the
following benefits:
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, and
(ii) the sum 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 of Directors to be a long-term incentive arrangement) for each of
the three (3) years prior to the date of termination divided by three (3), or if
Executive has received an annual Bonus in fewer than the three (3) years prior
to termination, the sum of the annual Bonus received for each year prior to the
date of termination shall be divided by the number of years in which he received
a bonus.
Executive shall be entitled, during the period expiring on the earlier of his
securing other employment or twenty-four (24) 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 through
the purchase of insurance or otherwise.
A Bonus for the year in which termination occurs (the "Terminating Year") equal
to the Bonus target for such year provided that the corporate and personal
performance objectives are met (calculated and, if earned, payable within 30
days of the end of the Terminating 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.
Executive's benefits under the supplemental plan shall be calculated as though
Executive had remained employed by the Company for the two (2) year period
following such termination of employment.
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.
The benefits provided in this Section 8(e) shall be in lieu of, and not in
addition to, any benefits provided under Section 8(d) of this Agreement.
Notwithstanding any other provisions of this Agreement, in the event that any
payment or benefit received or to be received by Executive in connection with a
Change in Control or the termination of Executive's employment (whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with
the Company, any person whose actions result in a Change in Control or any
person affiliated with the Company or such person) (all such payments and
benefits, including the Severance Payment, being hereinafter called "Total
Payments") would be subject (in whole or part), to an excise tax pursuant to
Sections 280G and 4999 of the Code (such tax hereinafter referred to as the
"Excise Tax"), then the Severance Payment shall be reduced to the extent
necessary so that no portion of the Total Payments is subject to Excise Tax
(after taking into account any reduction in the Total Payments provided by
reason of Section 280G of the Code in such other plan, arrangement or agreement)
if (A) the net amount of such Total Payments, as so reduced, (and after
deduction of the net amount of federal, state and local income tax on such Total
Payments), is greater than (B) the excess of (i) the net amount of such Total
Payments, without reduction (but after deduction of the net amount of federal,
state and local income tax on such Total Payments), over (ii) the amount of
Excise Tax to which Executive would be subject in respect of such Total
Payments. For purposes of determining whether and the extent to which the Total
Payments will be subject to the Excise Tax, (i) no portion of the Total Payments
the receipt or enjoyment of which Executive shall have effectively waived in
writing prior to the date of this termination of employment shall be taken into
account, (ii) no portion of the Total Payments shall be taken into account which
in the opinion of tax counsel selected by the Company does not constitute a
32
"parachute payment" within the meaning of Section 280G(b)(2) of the Code,
(including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating
the Excise Tax, no portion of such Total Payment shall be taken into account
which constitutes reasonable compensation for services actually rendered, within
the meaning of Section 280G(b)(4)(B) of the Code, in excess of the base amount
as defined in Section 280G(b)(3) of the Code allowable to such reasonable
compensation, and (iii) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be determined by the
Company in accordance with the principles of Sections 280G(d)(3) and (4) of the
Code. Prior to the thirtieth day following the date of Executive's termination
of employment, the Company shall provide Executive with its calculation of the
amounts referred to in this Section and such supporting materials as are
reasonably necessary for Executive to evaluate the Company's calculations. If
Executive reasonably objects to the Company's calculations, he shall notify the
Company of his objections and the basis thereof within thirty (30) days of
receipt of the calculation from the Company and the Company, unless it
reasonably determines and notifies Executive that Executive's objections are
without a reasonable basis, shall pay to Executive such portion of the Severance
Payment (up to one hundred percent (100%) thereof) as Executive determines is
necessary to result in Executive's receiving the greater of clauses (A) and (B)
of this Section.
In the event of termination of employment under this Section 8(e), Executive
shall be subject to 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.
In the event that, following the creation of Executive's right to receive the
payments pursuant to Section 8(e)(ii), Executive incurs any costs or expenses,
including attorneys' fees, in the enforcement of 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, then, unless the Company or the
consolidated, surviving or transferee entity in the event of a consolidation,
merger or sale of assets, is wholly successful in defending against the
enforcement of such rights, the Company, or such consolidated, surviving or
transferee entity, shall promptly pay to Executive all such costs and expenses.
The benefits provided under this Agreement, including without limitation the
supplemental executive retirement plan provided under Section 6(b) and any
severance pay provided under Section 8, shall comply with Internal Revenue Code
section 409A and the regulations thereunder. The Executive and the Company
recognize that Internal Revenue Service regulations for Code Section 409A have
not been issued at the time this Agreement is entered into. To the extent that
benefits provided under this Agreement would result in an inclusion in the
Executive's gross income under Code Section 409A(a)(1)(A) or in interest or
additional tax under Code Section 409A(a)(1)(B), or applicable regulations for
Code Section 409A, Executive and Company shall agree to negotiate such
modifications of this Agreement to amend such benefits to the extent necessary
to prevent such inclusion, interest, or additional tax.
TERMINATION UPON EXPIRATION OF A TERM
The Company may choose not to renew and thereby terminate the Agreement at the
end of the initial term or any extended 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, the Executive will be paid the severance amounts and
benefits set forth in Section 8(a) above.
Executive may choose not to renew and thereby terminate the Agreement at the end
of the initial term or any extended term by providing 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 bonus payment determined in
accordance with Section 8(a)(i)(1) 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 pension plan, the supplemental plan
and any other benefit plan in accordance with the terms of the respective plan
documents.
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.
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 rights and duties hereunder
to any person, firm, corporation or other business entity that succeeds to
substantially
33
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.
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.
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
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.
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:
IF TO THE COMPANY:
The Xxxxxxxx and Xxxxxxxx Company
Xxx Xxxxxxxx Xxx
Xxxxxxxxx, Xxxx 00000
Attention: Vice President, Corporate Finance and Chief
Financial Officer
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.
ARBITRATION
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, 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
13.
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 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
34
bear the fees and expenses of the arbitrators and costs charged by the American
Arbitration Association to administer the arbitration.
SEVERABILITY
In the event any provision of this Agreement is held invalid, then the remaining
provisions of this Agreement shall not be affected thereby.
GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Ohio.
COMPLETE AGREEMENT
This Agreement 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. This Agreement may be modified, changed or added to only by an
agreement in writing executed by both parties.
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.
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
By: /s/ XXXXXX X. XXXXX
-------------------------------
Xxxxxxx X. Xxxxx,
Chairman and Acting Chief
Executive Officer
EXECUTIVE
/s/ XXXXXXX X. X'XXXXX
-------------------------------
Xxxxxxx X. X'Xxxxx
35
