EMPLOYMENT AGREEMENT
EMPLOYMENT
AGREEMENT (this “Agreement”),
dated
as of July 18, 2006 (the “Effective
Date”),
by
and between Xxxxxxxxx Xxxxx Incorporated, a Kentucky corporation (the
“Company”),
and
Xxxxxx X. Xxxxx (“Executive”).
WHEREAS,
the Company desires to employ Executive and to enter into an agreement embodying
the terms of such employment, and considers it to be in its best interests
and
in the best interests of its stockholders to employ Executive during the
Employment Term (as defined in Section 1 below);
WHEREAS,
Executive desires to accept such employment with the Company and to enter into
this Agreement; and
WHEREAS,
Executive is willing to accept employment on the terms hereinafter set forth
in
this Agreement.
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein and
for
other good and valuable consideration, the parties hereby agree as
follows:
1. Term
of Employment.
Unless
terminated earlier in accordance with the provisions of Section 7, Executive’s
employment under this Agreement shall be effective for a term commencing on
August 14, 2006 (the “Start
Date”)
and
ending on the three (3) year anniversary of the Start Date (the “Employment
Term”).
Thereafter, the Employment Term shall be automatically extended for subsequent
one (1)-year periods unless written notice to the contrary is given by either
the Company or Executive within ninety (90) days prior to the expiration of
the
Employment Term or the expiration of any subsequent one (1)-year extension
thereof. Notwithstanding this Section 1, the equity grants made pursuant to
Section 5 of this Agreement shall be made as of the Effective Date.
2. Position
and Duties.
(a) As
of the
Start Date, Executive shall serve as the Chief Executive Officer and President
of the Company. In such position, Executive shall report directly to the Board
(as defined in Section 10(c)) and have such authority, responsibilities, and
duties customarily exercised by a person holding such position. The Company
shall cause Executive to be appointed to the Board as of the Start Date and,
during the Employment Term, to be nominated for election as a member of the
Board as needed to maintain Executive’s position on the Board.
(b) During
the Employment Term, Executive will devote substantially all of his business
time and best efforts to the performance of his duties. Executive
may:
(i) in
addition to being a director of the Company and with the prior written approval
of the Chairman of the Board, serve as a director or trustee of: (x) up to
three
(3) corporate or charitable entities and (y) trade or other associations related
to the Company’s industry; and
(ii) manage
his personal investments;
to
the
extent that such activities do not materially inhibit or materially interfere
with the performance of Executive’s duties under this Agreement.
3. Base
Salary.
During
the Employment Term, the Company shall pay Executive a base salary (the
“Base
Salary”)
at the
annual rate of $450,000.00, payable in regular installments in accordance with
the Company’s usual payroll practices. The Base Salary includes fees otherwise
payable for his services for the Board. The Board shall review and may consider
for increase (but not decrease) at any time Executive’s Base Salary in its sole
discretion based on Executive’s performance.
4. Incentive
Compensation.
Executive shall be eligible to participate in any annual or long-term, cash
or
equity based, incentive plan or other arrangements of the Company, as they
exist
from time-to-time. Executive shall first be eligible to participate in an annual
performance bonus plan for the performance period commencing January 1, 2007,
with a target bonus for such period at 75% of Base Salary. The Board shall
determine Executive’s annual incentive plan participation for subsequent
years.
5. Equity
Grants.
(a) Restricted
Stock Units.
In
accordance with the terms of that certain Restricted Stock Units Agreement
between the Company and Executive of even date herewith, as of the Effective
Date, the Company shall grant Executive 65,000 Restricted Stock Units (as
defined in Section 10(r)). The Restricted Stock Units shall vest as
follows:
|
Vesting
Date
|
Number
of Units to Vest
|
|
September
30, 2006
|
1,625
|
|
December
31,2006
|
3,250
|
|
March
31, 2007
|
3,250
|
|
June
30, 2007
|
3,250
|
|
September
30, 2007
|
3,250
|
|
December
31, 2007
|
3,250
|
|
March
31, 2008
|
3,250
|
|
June
30, 2008
|
3,250
|
|
September
30, 2008
|
3,250
|
|
December
31, 2008
|
3,250
|
|
March
31, 2009
|
3,250
|
|
June
30, 2009
|
3,250
|
|
September
30, 2009
|
3,250
|
|
December
31, 2009
|
3,250
|
|
March
31, 2010
|
3,250
|
|
June
30, 2010
|
3,250
|
|
September
30, 2010
|
3,250
|
|
December
31, 2010
|
3,250
|
|
March
31, 2011
|
3,250
|
|
June
30, 2011
|
3,250
|
|
August
14, 2011
|
1,625
|
(b) Restricted
Shares.
(i) In
accordance with the terms of that certain Restricted Stock Agreement between
the
Company and Executive of even date herewith, as of the Effective Date and
subject to shareholder approval, the Company shall grant Executive 90,000
Restricted Shares of Common Stock which shall vest as follows upon the Fair
Market Value (as defined in Section 10(m)) of a share of the Common Stock (as
defined in Section 10(g)) reaching the following prices for ***
(**)
consecutive trading days on and after the Start Date; provided, however, that
such ** (**)-trading day period occurs prior to a Termination of Employment
(as
defined in Section 10(u)), but subject to Section 7(b)
below:
|
**
Day Fair Market Value
at
or Above
|
Shares
Vesting
|
|
$**.**
|
22,500
|
|
$**.**
|
22,500
|
|
$**.**
|
22,500
|
|
$**.**
|
22,500
|
(ii) In
accordance with the terms of that certain Restricted Stock Agreement between
the
Company and Executive of even date herewith, as of the Effective Date and
subject to shareholder approval, the Company shall grant Executive 65,000
Restricted Shares of Common Stock which shall vest upon the satisfaction of
the
requirements described in Subsections (1) and (2) below:
(1) for
**
(**) consecutive trading days after the Start Date, the Fair Market Value of
a
share of the Common Stock being equal to or greater than *-*, * percent (***%)of
the Fair Market Value of a share of Common Stock as of the Effective Date (the
“Share
Price Requirement”);
and
(2) for
the
applicable number of Restricted Shares per the schedule immediately below,
the
later of: (A) the corresponding vesting date as listed on the schedule below,
or
(B) the satisfaction of the Share Price Requirement; provided, however, that
such vesting date or Share Price Requirement occurs prior to a Termination
of
Employment, but subject to Section 7(b) below:
|
|
Shares
Vesting
|
|
September
30, 2006
|
1,625
|
|
December
31, 2006
|
3,250
|
|
March
31, 2007
|
3,250
|
|
June
30, 2007
|
3,250
|
_________________________
*
Confidential information omitted and filed separately with the Securities and
Exchange Commission under a Confidential Treatment Request.
|
September
30, 2007
|
3,250
|
|
December
31, 2007
|
3,250
|
|
March
31, 2008
|
3,250
|
|
June
30, 2008
|
3,250
|
|
September
30, 2008
|
3,250
|
|
December
31, 2008
|
3,250
|
|
March
31, 2009
|
3,250
|
|
June
30, 2009
|
3,250
|
|
September
30, 2009
|
3,250
|
|
December
31, 2009
|
3,250
|
|
March
31, 2010
|
3,250
|
|
June
30, 2010
|
3,250
|
|
September
30, 2010
|
3,250
|
|
December
31, 2010
|
3,250
|
|
March
31, 2011
|
3,250
|
|
June
30, 2011
|
3,250
|
|
August
14, 2011
|
1,625
|
(c) Stock
Options.
In
accordance with the terms of that certain Stock Option Agreement between the
Company and Executive of even date herewith, as of the Effective Date and
subject to shareholder approval, the Company shall grant Executive six (6)-year
term Options (as defined in Section 10(p)) to purchase 130,000 shares of Common
Stock with a per share exercise price equal to the Fair Market Value of a share
of Common Stock as of the date of grant. Such Options shall vest as
follows:
|
Vesting
Date
|
Number
of Options to Vest
|
|
September
30, 2006
|
5,417
|
|
December
31, 2006
|
10,833
|
|
March
31, 2007
|
10,833
|
|
June
30, 2007
|
10,833
|
|
September
30, 2007
|
10,833
|
|
December
31, 2007
|
10,833
|
|
March
31, 2008
|
10,833
|
|
June
30, 2008
|
10,833
|
|
September
30, 2008
|
10,833
|
|
December
31, 2008
|
10,834
|
|
March
31, 2009
|
10,834
|
|
June
30, 2009
|
10,834
|
|
August
14, 2009
|
5,417
|
(d) Change
in Control.
In the
event of a Change in Control during the Employment Term, Executive shall receive
accelerated vesting of: (i) fifty percent (50%) of the then-unvested Restricted
Stock Units granted pursuant to Section 5(a) above, (ii) fifty percent (50%)
of
the then-unvested Restricted Shares granted pursuant to Subsections 5(b)(i)
and
(ii) above, and (iii) fifty percent (50%) of the then-unvested Stock
Options granted pursuant to Section 5(c) above. The Restricted Stock Units,
Restricted Shares and Stock Options that are subject to accelerated vesting
pursuant to this Section 5(d) shall be taken pro-rata from each then-unvested
tranche of the applicable award, and the remaining portion of each tranche
shall
vest according to the original terms of the applicable award agreement, subject
to potential accelerated vesting pursuant to Section 7(c) below.
(e) Shareholder
Approval.
In the
event shareholder approval of the awards granted pursuant to Subsection 5(b)(i),
Subsection 5(b)(ii), and/or Section 5(c) above is not secured at or prior to
the
Company’s annual shareholders’ meeting in 2007 (the “2007
Annual Meeting”),
then:
(i) the
Company agrees to use its reasonable efforts to grant Executive a compensation
arrangement of equivalent value; or
(ii) by
written notice delivered to the Company within the thirty (30)-day period
immediately following the 2007 Annual Meeting, Executive may terminate his
employment with the Company and receive, subject to Section 7(g), (A) a lump-sum
cash payment equal to $400,000.00 and (B) the Accrued Obligations (as defined
in
Section 7(a) below); provided, however, that such notice must provide no less
than thirty (30) days, but no more than one hundred twenty (120) days, prior
notice of the effective date of such Termination of Employment and that such
notice shall relieve the Company of its obligations per Section 5(e)(i)
above. Notwithstanding the above, as needed to avoid incurring penalties under
Section 409A of the Code (as defined in Section 10(f)), such payments due under
this Section 5(e)(ii) shall be subject to a 6-month delay from the
Termination of Employment. Except as provided herein, Executive shall have
no
further rights to any compensation or any other benefits under this Agreement
due to such Termination of Employment. All other accrued and vested benefits,
if
any, due Executive following Termination of Employment pursuant to this
Section 5(e)(ii) shall be determined in accordance with the plans, policies
and practices of the Company.
6. Other
Benefits.
(a) Retirement
Benefits.
During
the Employment Term, Executive shall be provided with the opportunity to
participate in the Company’s qualified 401(k) profit sharing plan and
non-qualified deferred compensation plan, as may exist from time to time, in
each case, in accordance with the terms of such plans.
(b) Welfare
Benefits.
During
the Employment Term, Executive shall be provided with the opportunity to
participate in the Company’s medical plan and other employee welfare benefits on
a comparable basis as such benefits are generally provided by the Company from
time to time to the Company’s other senior executives, in each case, in
accordance with the terms of such plans.
(c) Perquisites.
During
the Employment Term, Executive shall be provided with the opportunity to receive
or participate in perquisites on a comparable basis as such perquisites are
generally provided by the Company from time to time to the Company’s other
senior executives, subject to the following:
(i) Transportation
benefit
-
Executive will be entitled to transportation, via car service or other
comparable arrangement in connection with the performance of his duties
hereunder (including but not limited to transportation between his primary
residence and the Main Office (as defined in Section 10(o))), which will be
in
lieu of the Company’s standard cash automobile subsidy provided to senior
executives. To the extent this benefit is taxable income to Executive, he will
receive a Tax Gross-Up Payment (as defined in Section 10(t)); and
(ii) Attorney
fees
- The
Company will pay reasonable attorneys’ fees and related expenses incurred by
Executive in connection with the negotiation and review of this
Agreement.
(iii) Indemnification
Agreement
- The
Company agrees to enter into an agreement with Executive whereby the Company
shall: (a) indemnify Executive to the maximum extent allowed under Kentucky
law and (b) maintain directors’ and officers’ liability insurance for the
benefit of the Executive in a form at least as comprehensive as, and in an
amount that is at least equal to, that maintained by the Company at such time
for any officer or director of the Company.
(d) Reimbursement
of Business Expenses.
During
the Employment Term, all reasonable business expenses incurred by Executive
in
the performance of his duties hereunder shall be reimbursed by the Company
upon
receipt of documentation of such expenses in a form reasonably acceptable to
the
Company, and otherwise in accordance with the Company’s expense reimbursement
policies. Pursuant to the terms of this Section 6(d), the Company shall pay
for
the reasonable expenses of the Executive’s wife when she travels with him on the
Company’s business.
7. Termination.
Notwithstanding any other provision of the Agreement:
(a) For
Cause by the Company or Voluntary Resignation by Executive Without Good
Reason.
If
Executive is terminated by the Company for Cause (as defined in Section 10(d))
or if Executive voluntarily resigns without Good Reason (as defined in Section
10(n)), Executive shall be entitled to receive as soon as reasonably practicable
after his date of termination or such earlier time as may be required by
applicable statute or regulation: (i) his earned but unpaid Base Salary through
the date of termination; (ii) payment in respect of any vacation days accrued
but unused through the date of termination, to the extent provided by Company
policy; (iii) reimbursement for all business expenses properly incurred in
accordance with Company policy prior to the date of termination and not yet
reimbursed by the Company; and (iv) subject to Section 7(g), any earned but
unpaid annual bonus in respect of any of the Company’s fiscal years preceding
the fiscal year in which the termination occurs (provided, however that if
Executive’s termination is by the Company for Cause and such event(s) and/or
action(s) that constitute Cause are materially and demonstrably injurious to
the
business or reputation of the Company, then no payment will be made pursuant
to
this clause (iv)) (the aggregate benefits payable pursuant to clauses (i),
(ii),
(iii) and (iv) hereafter referred to as the “Accrued
Obligations”);
and
except as provided herein he shall have no further rights to any compensation
(including any Base Salary or annual bonus, if any) or any other benefits under
this Agreement. All equity-based awards shall be treated as set forth under
the
terms of the applicable plan or agreement. All other accrued and vested
benefits, if any, due Executive following Executive’s Termination of Employment
pursuant to this Section 7(a) shall be determined and paid in accordance with
the plans, policies, and practices of the Company.
(b) Without
Cause by the Company or Voluntary Resignation by Executive for Good
Reason.
If
Executive is terminated by the Company other than for Cause, Disability (as
defined in Section 10(i)) or death, or if Executive voluntarily resigns for
Good
Reason, Executive shall receive: (i) the Accrued Obligations; and (ii) subject
to Section 7(g), (A) Base Salary through the end of the calendar quarter in
which Termination of Employment under this Section 7(b) occurs, (B) treatment
of
all equity-based awards per the terms of the applicable plan or agreement;
provided, however, that vesting of any equity awards granted pursuant to Section
5 of this Agreement (including Restricted Shares vesting upon achievement of
certain stock price targets) shall be calculated through the end of the calendar
quarter in which Termination of Employment occurs, and (C) the continuation
of
medical benefits through the end of the calendar quarter in which Termination
of
Employment occurs; provided, however, that such benefit shall be reduced or
eliminated to the extent Executive receives similar benefits from a subsequent
employer. Notwithstanding the above, as needed to avoid incurring penalties
under Section 409A of the Code, such payments due under this Section 7(b)
shall be subject to a 6-month delay; provided, however, in the 7th month after
Termination of Employment, a lump-sum catch-up payment shall be made for the
6-month delay. Except as provided herein, Executive shall have no further rights
to any compensation (including any Base Salary) or any other benefits under
this
Agreement. All other accrued and vested benefits, if any, due Executive
following Termination of Employment pursuant to this Section 7(b) shall be
determined in accordance with the plans, policies and practices of the
Company.
(c) Termination
following a Change in Control.
If,
during the 2-year period following a Change in Control (as defined in Section
10(e)), Executive is terminated by the Company other than for Cause, Disability
or death, or if Executive voluntarily resigns for Good Reason, Executive shall
receive: (i) the Accrued Obligations; (ii) subject to Section 7(g): (A) the
benefits set forth in Section 7(b); (B) full accelerated vesting of (x) any
then-unvested Restricted Stock Units granted pursuant to Section 5(a), (y)
any
then-unvested Restricted Shares granted pursuant to Subsections 5(b)(i) and
(ii), and (z) any then-unvested Stock Options granted pursuant to
Section 5(c); and (C) a Tax Gross-Up Payment for purposes of Code Section
280G.
(d) Death.
Following a Termination of Employment for death, Executive’s estate shall be
entitled to receive: (i) the Accrued Obligations; and (ii) subject to Section
7(g), (A) a pro-rata bonus, if any, for the year of death, based on the target
bonus for such year, and paid when bonuses under such applicable bonus plans
are
normally paid, (B) treatment of all equity-based awards per the terms of such
applicable plan or agreement, (C) all other benefits and payments per the
applicable plan or program, and (D) life insurance benefits paid per such
applicable plans. Except as provided herein, Executive’s estate shall have no
further rights to any compensation (including any Base Salary) or any other
benefits under this Agreement. All other accrued and vested benefits, if any,
due Executive following a Termination of Employment for death shall be
determined in accordance with the plans, policies, and practices of the
Company.
(e) Disability.
Following a Termination of Employment for Disability, Executive shall be
entitled to receive: (i) the Accrued Obligations; and (ii) subject to
Section 7(g), (A) a pro-rata bonus, if any, for the year of
Termination of Employment, based on the target bonus for such year, and paid
when bonuses under the applicable bonus plans are normally paid,
(B) treatment of all equity-based awards per the terms of the applicable
plan or agreement, (C) all other benefits and payments per the applicable
plan or program, and (D) short-term and long-term disability benefits per
the applicable plans. Except as provided herein, Executive shall have no further
rights to any compensation (including any Base Salary) or any other benefits
under this Agreement. All other accrued and vested benefits, if any, due
Executive following a Termination of Employment for Disability shall be
determined in accordance with the plans, policies, and practices of the
Company.
(f) No
Mitigation or Offset.
In no
event shall the benefits set forth in this Section 7 be subject to mitigation
or
offset.
(g) Release.
Notwithstanding any other provision of this Agreement to the contrary, Executive
acknowledges and agrees that any and all payments to which Executive is entitled
under this Section 7 which are described as being subject to this Section 7(g)
are conditioned upon and subject to Executive’s execution of, and not having
revoked within any applicable revocation period, a general release and waiver,
in such reasonable and customary form as shall be prepared by the Company,
of
all claims Executive may have against the Company and its directors, officers,
subsidiaries and affiliates, except as to (i) matters covered by provisions
of
this Agreement that expressly survive the termination of this Agreement and
(ii) rights to which Executive is entitled by virtue of his participation
in the employee benefit plans, policies and arrangements of the
Company.
8. Covenants.
(a) Confidentiality.
Executive agrees that Executive will not at any time during Executive’s
employment with the Company or thereafter, except in performance of Executive’s
obligations to the Company hereunder, disclose, either directly or indirectly,
any Confidential Information (as hereinafter defined) that Executive may learn
by reason of his association with the Company. The term “Confidential
Information”
shall
mean any past, present, or future confidential or secret plans, programs,
documents, agreements, internal management reports, financial information,
or
other material relating to the business, strategies, services, or activities
of
the Company, including, without limitation, information with respect to the
Company’s operations, processes, products, inventions, business practices,
finances, principals, vendors, suppliers, customers, potential customers,
marketing methods, costs, prices, contractual relationships, including leases,
regulatory status, compensation paid to employees, or other terms of employment,
and trade secrets, market reports, customer investigations, customer lists,
and
other similar information that is proprietary information of the Company;
provided, however, the term “Confidential Information” shall not include any of
the above forms of information which has become public knowledge, unless such
Confidential Information became public knowledge due to any act or acts by
Executive or his representative(s) in violation of this Agreement.
Notwithstanding the foregoing, Executive may disclose such Confidential
Information when required to do so by a court of competent jurisdiction, by
any
governmental agency having supervisory authority over the business of the
Company and/or its affiliates, as the case may be, or by any administrative
body
or legislative body (including a committee thereof) with jurisdiction to order
Executive to divulge, disclose or make accessible such information; provided,
further, that in the event that Executive is ordered by any such court or other
government agency, administrative body, or legislative body to disclose any
Confidential Information, Executive shall (i) promptly notify the Company
of such order, (ii) at the reasonable written request of the Company,
diligently contest such order at the sole expense of the Company as expenses
occur, and (iii) at the reasonable written request of the Company, seek to
obtain, at the sole expense of the Company, such confidential treatment as
may
be available under applicable laws for any information disclosed under such
order.
(b) Non-Compete.
During
the Employment Term and for two (2) years immediately following a Termination
of
Employment for any reason, Executive shall not, without the prior written
consent of the Company, participate or engage in, directly or indirectly (as
an
owner, partner, employee, officer, director, independent contractor, consultant,
advisor or in any other capacity calling for the rendition of services, advice,
or acts of management, operation or control) any business for a Competitor
(as
defined below). The term “Competitor”
shall
mean any entity whose principal business involves the operation of a pari-mutuel
or casino gaming business.
(c) Non-Solicit.
During
the Employment Term and for two (2) years immediately following a Termination
of
Employment for any reason, Executive shall not, without the prior written
consent of the Company, solicit or induce any then-existing employee of the
Company or any of its subsidiaries to leave employment with the Company or
any
of its subsidiaries or contact any then-existing customer or vendor under
contract with the Company or any
of
its subsidiaries for the purpose of obtaining business similar to that engaged
in, or received (as appropriate), by the Company.
(d) Cooperation.
Executive agrees that during the Employment Term or following a Termination
of
Employment for any reason, Executive shall, upon reasonable advance notice,
assist and cooperate with the Company with regard to any investigation or
litigation related to a matter or project in which Executive was involved during
Executive’s employment. The Company shall reimburse Executive for all reasonable
and necessary expenses related to Executive’s services under this Section 8(d)
(i.e. travel, lodging, meals, telephone and overnight courier) within ten (10)
business days of Executive submitting to Company appropriate receipts and
expense statements.
(e) Survivability.
The
duties and obligations of Executive pursuant to this Section 8 shall survive
the
termination of this Agreement and Executive’s Termination of Employment for any
reason.
(f) Remedies.
Executive acknowledges that the protections of the Company set forth in this
Section 8 are fair and reasonable. Executive agrees that remedies at law for
a
breach or threatened breach of the provisions of this Section 8 would be
inadequate and, therefore, the Company shall be entitled, in addition to any
other available remedies, without posting a bond, to equitable relief in the
form of specific performance, temporary restraining order, temporary or
permanent injunction, or any other equitable remedy that may be then
available.
(g) Limitation.
If the
duration, scope, or nature of any restriction on business activity covered
by
any provision of Section 8(b) or (c) above is in excess of what is valid and
enforceable under applicable law, such restriction shall be construed to limit
duration, scope or activity to an extent that is valid and enforceable, with
such extent to be the maximum extent possible under applicable law. For each
of
Section 8(b) and (c) above, Executive hereby acknowledges that such Section
shall be given the construction which renders its provisions valid and
enforceable to the maximum extent, not exceeding its express terms, possible
under applicable law.
9. Miscellaneous.
(a) Resolution
of Disputes and Reimbursement of Legal Costs.
Except
as otherwise provided in Section 8, the Company and Executive agree that any
controversy or claim arising out of or relating to this Agreement or the breach
thereof shall be settled by arbitration administered by the American Arbitration
Association in accordance with its Commercial Arbitration Rules then in effect.
Venue for any arbitration pursuant to this Agreement will lie in Louisville,
Kentucky. Any award entered by the arbitrator(s) shall be final, binding and
nonappealable and judgment may be entered thereon by either party in accordance
with applicable law in any court of competent jurisdiction. This arbitration
provision shall be specifically enforceable. Each party shall be responsible
for
its own expenses relating to the conduct of the arbitration (including
reasonable attorneys’ fees and expenses) and shall share the fees of the
American Arbitration Association and the arbitrator(s), if applicable,
equally.
(b) Governing
Law.
This
Agreement will be governed by, and interpreted in accordance with, the laws
of
the Commonwealth of Kentucky applicable to agreements made and to be wholly
performed within the Commonwealth of Kentucky, without regard to the conflict
of
laws provisions of any jurisdiction which would cause the application of any
law
other than that of the Commonwealth of Kentucky.
(c) Entire
Agreement/Amendments.
This
Agreement contains the entire understanding of the parties with respect to
the
employment of Executive by the Company. There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties with respect
to the subject matter herein other than those expressly set forth herein.
Neither this Agreement may be altered, modified, or amended except by written
instrument signed by the parties hereto. Sections 7 and 8 shall survive the
termination of Executive’s employment with the Company, except as otherwise
specifically stated therein.
(d) Neutral
Interpretation.
This
Agreement constitutes the product of the negotiation of the parties hereto
and
the enforcement of this Agreement shall be interpreted in a neutral manner,
and
not more strongly for or against any party based upon the source of the
draftsmanship of the Agreement. Each party has been provided ample time and
opportunity to review and negotiate the terms of this Agreement and consult
with
legal counsel regarding the Agreement.
(e) No
Waiver.
The
failure of a party to insist upon strict adherence to any term of this Agreement
on any occasion shall not be considered a waiver of such party’s rights or
deprive such party of the right thereafter to insist upon strict adherence
to
that term or any other term of this Agreement.
(f) Severability.
In the
event that any one or more of the provisions of this Agreement shall be or
become invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions of this Agreement shall not
be
affected thereby.
(g) Successors.
(i) This
Agreement is personal to Executive and 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.
(ii) This
Agreement shall inure to the benefit of and be binding upon the Company and
its
successors and assigns. The Company shall require any successor (whether direct
or indirect, by purchase, merger, reorganization, consolidation, acquisition
of
property or stock, liquidation, or otherwise) to all or a substantial portion
of
its business and/or assets, by agreement in form and substance reasonably
satisfactory to Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would
be
required to perform this Agreement if no such succession had taken place.
Regardless of whether such an agreement is executed, this Agreement shall be
binding upon any successor of the Company and such successor shall be deemed
the
“Company” for purposes of this Agreement.
(h) Notice.
For the
purpose of this Agreement, notices and all other communications provided for
in
this Agreement shall be in writing and shall be deemed to have been duly given
if delivered personally, if delivered by overnight courier service, if sent
by
facsimile transmission or if mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses or
sent via facsimile to the respective facsimile numbers, as the case may be,
as
set forth below, or to such other address as either party may have furnished
to
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt; provided, however, that
(i) notices sent by personal delivery or overnight courier shall be deemed
given when delivered; (ii) notices sent by facsimile transmission shall be
deemed given upon the sender’s receipt of confirmation of complete transmission,
and (iii) notices sent by United States registered mail shall be deemed
given two days after the date of deposit in the United States mail.
If
to the
Company, to:
Xxxxxxxxx
Xxxxx Incorporated
Attn:
General Counsel
000
Xxxxxxx Xxxxxx
Xxxxxxxxxx,
XX 00000
With
a
copy to:
Xxxxxx
Price Xxxxxxx & Kammholz P.C.
Attn:
Xxxxxxx X. Xxxxxxxx, Esq.
000
Xxxxx
XxXxxxx Xxxxxx
Xxxxxxx,
XX 00000
Facsimile:
(000) 000-0000
If
to
Executive, to such address as shall most currently appear on the records of
the
Company.
(i) Withholding.
The
Company may withhold from any amounts payable under this Agreement such Taxes
(as defined in Section 10(s)) as may be required to be withheld pursuant to
any
applicable law or regulation.
(j) Counterparts
and Signatures.
This
Agreement may be signed in counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same
instrument. Signatures delivered by facsimile or PDF file shall constitute
original signatures.
(k) Code
Section 409A.
It is
intended that any amounts payable under this Agreement and the Company’s and
Executive’s exercise of authority or discretion hereunder shall comply with Code
Section 409A (including the Treasury regulations and other published guidance
relating thereto) so as not to subject Executive to the payment of any interest
or additional tax imposed under Code Section 409A. To the extent any amount
payable under this Agreement would trigger the additional tax imposed by Code
Section 409A, the Agreement shall be modified to avoid such additional
tax.
10. Definitions.
(a) “Agreement”
-
see
the recitals to this Agreement.
(b) “Base
Salary”
-
see
Section 3.
(c) “Board”
means
the Board of Directors of the Company.
(d) “Cause”
for
termination by the Company of Executive’s employment with the Company means any
of the following:
(i) the
willful and continued failure of Executive to perform substantially his duties
to the Company (other than any such failure resulting from incapacity due to
disability), after a written demand for substantial performance is delivered
to
Executive by the Chairman of the Board which specifically identifies the manner
in which the Board believes that Executive has not substantially performed
his
duties;
(ii) Executive’s
conviction of, or plea of guilty or no contest to (A) a felony or (B) a
misdemeanor involving dishonesty or moral turpitude; or
(iii) the
willful engaging by Executive in illegal conduct or gross misconduct which
is
materially and demonstrably injurious to the business or reputation of the
Company.
For
purposes of this definition, no act or failure to act, on the part of Executive,
shall be considered “willful” unless it is done, or omitted to be done, by
Executive in bad faith or without reasonable belief that Executive’s action or
omission was in the best interests of the Company. Any act, or failure to act,
based upon specific authority given pursuant to a resolution duly adopted by
the
Board or upon instructions of the Chairman of the Board or based upon the advice
of counsel of the Company which Executive honestly believes is within such
counsel’s competence shall be conclusively presumed to be done, or omitted to be
done, by Executive in good faith and in the best interests of the Company.
The
Company shall give written notice to Executive of the termination for Cause.
Such notice shall state in detail the particular act or acts or the failure
or
failures to act that constitute the grounds on which the Cause termination
is
based and such notice shall be given within six (6) months of the occurrence
of,
or, if later, the Company’s actual knowledge of, the act or acts or the failure
or failures to act which constitute the grounds for Cause. Executive shall
have
sixty (60) days upon receipt of the notice in which to cure such conduct, to
the
extent such cure is possible.
(e) “Change
in Control”
means
the first to occur of the following events:
(i) excluding
Duchossois Industries, Inc. and its affiliates, the acquisition by any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934 (the “Exchange
Act”)
(a
"Person")
of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of more than 50% of either the then outstanding voting securities
of the Company (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 "Outstanding
Company Voting Securities");
(ii) individuals
who, as of the Effective Date, constitute the Board (the "Incumbent
Board")
cease
for any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the Effective
Date whose election, or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then comprising
the Incumbent Board shall be considered as though such individual were a member
of the Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of
a
Person other than the Board;
(iii) consummation
of a reorganization, merger or consolidation or sale or other disposition of
all
or substantially all of the assets of the Company or the acquisition of assets
of another entity (a "Corporate
Transaction”),
in
each case, unless, immediately following such Corporate Transaction, (A) all
or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Corporate Transaction
beneficially own, directly or indirectly, more than 60% of, respectively, the
then-outstanding shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in the election
of
directors, as the case may be, of the corporation resulting from such Corporate
Transaction (including, without limitation, a corporation which as a result
of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially
the
same proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Corporate Transaction) beneficially owns, directly or indirectly,
20%
or more of, respectively, the then-Outstanding Company Common Stock resulting
from such Corporate Transaction or the Outstanding Company Voting Securities
resulting from such Corporate Transaction, except to the extent that such
ownership existed prior to the Corporate Transaction, and (C) at least a
majority of the members of the Board of Directors of the Company resulting
from
such Corporate Transaction were members of the Incumbent Board at the time
of
the execution of the initial plan or of the action of the Board providing for
such Corporate Transaction; or
(iv) approval
by the shareholders of the Company of a complete liquidation or dissolution
of
the Company.
Notwithstanding
the foregoing, actions taken in compliance with the Stockholder's Agreement,
dated as of September 8, 2000, among the Company, Duchossois Industries, Inc.
and subsequent signatories thereto, as amended from time to time, shall not
be
deemed a Change in Control.
(f) “Code”
means
the Internal Revenue Code of 1986, as amended from time to time.
(g) “Common
Stock”
means
the common stock, no par value, of the Company.
(h) “Company”
-
see
the recitals to this Agreement.
(i) “Disability”
means
the inability of Executive to perform his normal duties as a result of any
physical or mental injury or ailment for (i) any consecutive ninety (90)-day
period or (ii) any one hundred eighty (180) days (whether or not consecutive)
during any three hundred sixty-five (365) calendar day period.
(j) “Employment
Term”
-
see
Section 1.
(k) “Exchange
Act”
means
the Securities Exchange Act of 1934.
(l) “Executive”
-
see
recitals to this Agreement.
(m) “Fair
Market Value”
means,
as of any date, (i) the closing price of the Common Stock on such date reported
on The NASDAQ Stock Market (or, if no sale of the Common Stock was reported
for
such date, on the next preceding date on which such a sale of such security
was
reported), (ii) if the Common Stock is not listed on The NASDAQ Stock Market,
but is listed on a national securities exchange, the closing price of the Common
Stock on such date reported by such exchange, (or, if no sale of the Common
Stock was reported for such date, on the next preceding date on which such
a
sale of such security was reported), (iii) if the Common Stock is not listed
on
The NASDAQ Stock Market or any national securities exchange, the average of
the
high bid and low asked quotations for the Common Stock on such date in the
over-the-counter market (or, if no quotation of the Common Stock was reported
for such date, on the next preceding date on which such quotation of such
security was reported), or (iv) if there is no public market for the Common
Stock, the fair market value of the Common Stock determined by the Board in
good
faith exercise of its discretion; provided, however, such determination shall
be
made in a manner consistent with Code Section 409A and official guidance
thereunder.
(n) “Good
Reason”
for
termination by Executive of Executive’s employment means the occurrence (without
Executive’s express written consent) of any one of the following acts by the
Company or failures by the Company to act:
(i) the
assignment to Executive of any duties inconsistent in any material respect
with
the position of President and Chief Executive Officer (including status, office,
title and reporting requirements), or the authority, duties or responsibilities
of the President and Chief Executive Officer, or any other diminution in any
material respect in such position, authority, duties or responsibilities unless
agreed to by Executive;
(ii) the
Company’s requiring Executive to be based at, or perform his principal functions
at, any office or location other than a location within 35 miles of the Main
Office unless such other location is closer to Executive’s then-primary
residence than the Main Office;
(iii) a
reduction in Base Salary;
(iv) a
reduction in Executive’s welfare benefits plans, qualified retirement plan, or
paid time off benefit unless other senior executives suffer a comparable
reduction;
(v) any
purported termination of Executive’s employment under this Agreement by the
Company other than for Cause, death or Disability; and
(vi) the
Company’s notice to Executive of non-renewal of the Agreement.
Prior
to
Executive’s right to terminate this Agreement, he shall give written notice to
the Company of his intention to terminate his employment on account of a Good
Reason. Such notice shall state in detail the particular act or acts or the
failure or failures to act that constitute the grounds on which Executive’s Good
Reason termination is based and such notice shall be given within six (6) months
of the occurrence of the act or acts or the failure or failures to act which
constitute the grounds for Good Reason. The Company shall have sixty (60) days
upon receipt of the notice in which to cure such conduct, to the extent such
cure is possible.
(o) “Main
Office”
means
000 Xxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx.
(p) “Option”
means
an option to purchase shares of Common Stock.
(q) “Restricted
Shares”
see
Section 5(b).
(r) “Restricted
Stock Unit”
means
the right to receive a share of Common Stock after a Termination of Employment,
with such right subject to a risk of forfeiture or other restrictions that
will
lapse upon the achievement of one or more goals, such as the completion of
service by Executive or achievement of certain performance objectives. Due
to
Code Section 409A, it is expected that any shares of Common Stock received
per a
Restricted Stock Unit shall be received six (6) months after a Termination
of
Employment.
(s) “Taxes”
means
the incremental United States federal, state and local income, excise and other
taxes payable by Executive with respect to any applicable item of
income.
(t) “Tax
Gross-Up Payment”
means
an amount payable to Executive such that, after payment of Taxes on such amount,
there remains a balance sufficient to pay the Taxes being
reimbursed.
(u) “Termination
of Employment”
means
a
termination by the Company or by Executive of Executive’s employment with the
Company.
[Signature
page follows.]
[Signature
page follows.]
IN
WITNESS WHEREOF,
the
parties hereto have duly executed this Agreement as of the day and year first
above written.
|
XXXXXX
X. XXXXX
/s/
Xxxxxx X. Xxxxx
|
|
|
XXXXXXXXX
XXXXX INCORPORATED
By: /s/
Xxxxxx X. Xxxxx
Xxxxxx
X. Xxxxx,
Authorized
Representative
of
the Board of Directors
|
|
17
