AGREEMENT
THIS AGREEMENT (the "Agreement"), effective this _____ day of
September, 1998 (the "Effective Date"), by and between XXXXXX
INDUSTRIES, INC., a Tennessee corporation (the "Company"), and
Xxxx X.Xxxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company wishes to assure both itself and its key
employees of continuity of management and objective judgment in the
event of any Change in Control of the Company, and to induce its key
employees to remain employed by the Company, and the Executive is a
key employee of the Company and an integral part of its management;
and
WHEREAS, this Agreement is not intended to alter materially the
compensation and benefits that the Executive reasonably could expect
to receive in the absence of a Change in Control of the Company, and
this Agreement accordingly will be operative only upon circumstances
relating to a Change in Control of the Company, as set forth herein.
NOW, THEREFORE, for and in consideration of the premises and the
mutual covenants herein contained, the parties hereby agree as
follows:
I. OPERATION OF AGREEMENT.
This Agreement shall be effective immediately upon its execution
by the parties hereto, but anything in this Agreement to the contrary
notwithstanding, neither this Agreement nor any provision hereof shall
be operative unless, during the term of this Agreement, there has been
a Change in Control of the Company, as defined in Article III below.
Immediately upon such an occurrence, all of the provisions hereof
shall become operative.
II. TERM OF AGREEMENT.
The term of this Agreement shall be for a rolling, three (3) year
term commencing on the date hereof, and shall be deemed automatically
(without further action by either the Company or the Executive) to
extend each day for an additional day such that the remaining term of
the Agreement shall continue to be three (3) years; provided, however,
that on Executive's 62nd birthday this Agreement shall cease to extend
automatically and, on such date, the remaining "term" of this
Agreement shall be three (3) years; provided further, that the Company
may, by notice to the Executive, cause this Agreement to cease to
extend automatically and, upon such notice, the "Term" of this
Agreement shall be three (3) years following such notice; and provided
further, that the automatic extension shall not extend beyond any
anniversary of the Effective Date of this Agreement unless the Company
notifies the Executive in writing prior to such anniversary date that
it elects to extend such automatic extension until the next
anniversary date.
DEFINITIONS.
1. Base Amount - The term "Base Amount" shall have the same
meaning as ascribed to it under Section 280G(b)(3) of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Board or Board of Directors - The Board of Directors of
Xxxxxx Industries, Inc., or its successor.
3. Cause - The Term "Cause" as used herein shall mean: (i)
Executive's material fraud, malfeasance, gross negligence, or willful
misconduct with respect to business affairs of the Company which is
directly or materially harmful to the business or reputation of the
Company or any subsidiary of the Company, or (ii) Executive's
conviction of or failure to contest prosecution for a felony or a
crime involving moral turpitude. A termination of Executive for
"Cause" based on clause (i) of the preceding sentence shall take
effect thirty (30) days after the Company gives written notice of such
termination to Executive specifying the conduct deemed to qualify as
Cause, unless Executive shall, during such 30-day period, remedy the
events or circumstances constituting cause to the reasonable
satisfaction of the Company. A termination for Cause based on clause
(ii) above shall take effect immediately upon giving of the
termination notice.
4. Change in Control - The term "Change in Control" as used
herein shall mean:
(a) the acquisition, directly or indirectly, by any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended) of securities of the Company
representing an aggregate of forty percent (40%) or more of the
combined voting power of the Company's then outstanding securities
(excluding the acquisition by persons who own such amount of
securities on the date hereof, or acquisitions by persons who acquire
such amount through inheritance or gift); or
(b) the date of any transfer or sale of securities by
Xxxxxxx X. Xxxxxx if, immediately after such sale or transfer, Xxxxxxx
X. Xxxxxx ceases to own at least 5% of the combined voting power of
the Company's then outstanding securities; or
(c) when, during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board
of Directors of the Company, cease for any reason to constitute at
least a majority thereof, provided, however, that a director who was
not a director at the beginning of such period shall be deemed to have
satisfied the two-year requirement if such director was elected by, or
on the recommendation of or with the approval of, at least three-
quarters of the directors who were directors at the beginning of such
period (either actually or by prior operation of this Section 4(c));
or
(d) consummation of (i) a merger, consolidation or other
business combination of the Company with any other "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended) or affiliate thereof, other than a merger,
consolidation or business combination which would result in the
outstanding common stock of the Company immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into common stock of the surviving entity or a parent or
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affiliate thereof) at least fifty percent (50%) of the outstanding
common stock of the Company (or such surviving entity or parent or
affiliate thereof) that is outstanding immediately after such merger,
consolidation or business combination, or (ii) a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets; or
(e) when, through a sale, transfer or other disposition, the
Company significantly reduces or ceases its operations in either the
towing and recovery equipment manufacturing and distribution industry
segment or the towing services industry segment, where a significant
reduction means a disposition of at least eighty percent (80%) of the
identifiable assets used in such industry segment; or
(f) the occurrence of any other event or circumstance which is
not covered by (a) through (e) above which the Board of the Company
determines affects control of the Company and adopts a resolution that
such event or circumstance constitutes a Change in Control for the
purposes of this Agreement."
5. Disability - The term "Disability" shall mean the
Executive's inability as a result of physical or mental incapacity to
substantially perform his duties for the Company on a full-time basis
for a period of six (6) months.
6. Excess Severance Payment - The term "Excess Severance
Payment" shall have the same meaning as the term "excess parachute
payment" defined in Section 280G(b)(1) of the Code.
7. Severance Payment - The term "Severance Payment" shall have
the same meaning as the term "parachute payment" defined in Section
280G(b)(2) of the Code.
8. Present Value - The term "Present Value" shall have the same
meaning as provided in Section 280G(d)(4) of the Code.
9. Reasonable Compensation - The term "Reasonable Compensation"
shall have the same meaning as provided in Section 280G(b)(4) of the
Code.
IV. BENEFITS UPON TERMINATION FOLLOWING A CHANGE IN CONTROL.
1. Termination - If a Change in Control occurs during the term
of this Agreement and the Executive's employment is terminated (i)
within twenty-four (24) months following the date of the Change in
Control, or (ii) within six (6) months prior to the date of the Change
in Control and is related to such Change in Control, and in either
case (i) or (ii) such termination is a result of Involuntary
Termination or Voluntary Termination, as defined below, then the
benefits described in Section 2 below shall be paid or provided to the
Executive:
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1. Involuntary Termination - For purposes hereof, "Involuntary
Termination" shall mean termination of employment that is involuntary
on the part of the Executive and that occurs for reasons other than
for Cause, Disability or death.
(b) Voluntary Termination - For purposes hereof, "Voluntary
Termination" shall mean termination of employment that is voluntary on
the part of the Executive, and, in the judgment of the Executive, is
due to (i) a reduction of the Executive's responsibilities, title or
status resulting from a formal change in such title or status, or from
the assignment to the Executive of any duties inconsistent with his
title, duties or responsibilities in effect within the year prior to
the Change in Control; (ii) a reduction in the Executive's
compensation or benefits, or (iii) a Company-required involuntary
relocation of Executive's place of residence or a significant increase
in the Executive's travel requirements. A termination shall not be
considered voluntary within the meaning of this Agreement if such
termination is the result of Cause, Disability or death of the
Executive.
2. Benefits to be Provided - If the Executive becomes eligible
for benefits under Section 1 above, the Company shall pay or provide
to Executive the compensation and benefits set forth in this Section
2; provided, however, that the compensation and benefits to be paid or
provided pursuant to paragraphs (a), (b), (c) and (d) of this Section
2 shall be reduced to the extent that the Executive receives or is
entitled to receive upon his termination the compensation and benefits
(but only to the extent he actually receives such compensation and
benefits) described in paragraphs (a), (b), (c) and (d) of this
Section 2 pursuant to the terms of an employment agreement with the
Company or as a result of a breach by the Company of the employment
agreement; and provided, however, that notwithstanding contrary
provisions in the employment agreement, to the extent benefits are
actually paid or provided under this Agreement, the benefits shall be
provided in lump sum payments where specified in paragraphs (a) and
(b) below.
(a) Salary - The Executive will continue to receive his current
salary (subject to withholding of all applicable taxes and any amounts
referred to in Section 2(c) below) for a period of thirty-six (36)
months from his date of termination in the same manner as it was being
paid as of the date of termination; provided, however, that the salary
payments provided for hereunder shall be paid in a single lump sum
payment, to be paid not later than 30 days after his termination of
employment; provided, further, that the amount of such lump sum
payment shall be determined by taking the salary payments to be made
and discounting them to their Present Value (as defined in Section
III.8) on the date Executive's employment is terminated. For purposes
hereof, the Executive's "current salary" shall be the highest rate in
effect during the twelve-month period prior to the Executive's
termination.
(b) Bonuses and Incentives - The Executive shall receive bonus
payments from the Company for the thirty-six (36) months following the
month in which his employment is terminated in an amount for each
month equal to one-twelfth of the average ("Average Bonus") of the
bonuses paid to him for the three calendar years immediately preceding
the year in which such termination occurs. Any bonus amounts that the
Executive had previously earned from the Company but which may not yet
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have been paid as of the date of termination shall not be affected by
this provision. Executive shall also receive a prorated bonus for any
uncompleted fiscal year at the date of termination equal to the
Average Bonus multiplied by the number of days he worked in such year
divided by 365 days. The bonus amounts determined herein shall be
paid in a single lump sum payment, to be paid not later than 30 days
after termination of employment; provided, further, that the amount of
such lump sum payment shall be determined by taking the bonus payments
(as of the payment date) to be made and discounting them to their
Present Value (as defined in Section III.8) on the date Executive's
employment is terminated.
(c) Health and Life Insurance Coverage - The health and life
insurance benefits coverage (including any executive medical plan)
provided to the Executive at his date of termination shall be
continued by the Company at its expense at the same level and in the
same manner as if his employment had not terminated (subject to the
customary changes in such coverages if the Executive retires under a
Company retirement plan, reaches age 65 or similar events and subject
to Executive's right to make any changes in such coverages that an
active employee is permitted to make), beginning on the date of such
termination and ending on the date thirty-six (36) months from the
date of such termination. Any additional coverages the Executive had
at termination, including dependent coverage, will also be continued
for such period on the same terms, to the extent permitted by the
applicable policies or contracts. Any costs the Executive was paying
for such coverages at the time of termination shall be paid by the
Executive by separate check payable to the Company each month in
advance. If the terms of any benefit plan referred to in this Section
do not permit continued participation by the Executive, the Company
will arrange for other coverage at its expense providing substantially
similar benefits. The coverages provided for in this Section shall be
applied against and reduce the period for which COBRA will be
provided. If the Executive is covered by a split-dollar or similar
life insurance program at the date of termination, he shall have the
option in his sole discretion to have such policy transferred to him
upon termination, provided that the Company is paid for its interest
in the policy upon such transfer.
(d) Stock Options - As of Executive's date of termination, all
outstanding stock options granted to Executive under the Xxxxxx
Industries, Inc. Stock Option and Incentive Plan and any such similar
stock option plan (the "Stock Option Plans") shall become 100% vested
and immediately exercisable. To the extent necessary, the provisions
of this subsection (d) shall constitute an amendment of the
Executive's stock option agreements under the Stock Option Plans.
(e) Effect of Lump Sum Payment - The lump sum payment under (a)
or (b) above shall not alter the amounts Executive is entitled to
receive under the benefit plans described in (c) above. Benefits
under such plans shall be determined as if Executive had remained
employed and received such payments without reduction for their
Present Value over a period of thirty-six (36) months.
V. LIMITATION OF BENEFITS.
1. Tax Equalization Payment. If all or any portion of the
compensation or benefits provided to Executive under this Agreement
are treated as Excess Severance Payments (whether by action of the
Internal Revenue Service or otherwise), the Company shall protect
Executive from depletion of the amount of such compensation and
benefits by payment of a tax equalization payment in accordance with
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this subsection. In connection with any Internal Revenue Service
examination, audit or other inquiry, the Company and Executive agree
to take actions to provide and to cooperate in providing evidence to
the Internal Revenue Service (and, if applicable, the State of the
Executive's residence) that the compensation and benefits provided
under this Agreement do not result in the payment of Excess Severance
Payments. The tax equalization payment shall be an amount which when
added to the other amounts payable, or to be provided, to Executive
under this Agreement will place Executive in the same position as if
the excise tax penalty of Code Section 4999 (and any state tax
statute), or any successor statute of similar import, did not apply to
any of the compensation or benefits provided under this Agreement.
The amount of this tax equalization payment shall be determined by the
Company's independent accountants and shall be paid to Executive not
later than ten (10) days prior to the date any excise tax under Code
Section 4999 is due to be paid by Executive.
2. Additional Limitation. In addition to the limits otherwise
provided in this Section V, to the extent permitted by law, Executive
may in his sole discretion elect to reduce (or change the timing of)
any payments or benefits he may be eligible to receive under this
Agreement to prevent the imposition of excise taxes on Executive under
Section 4999 of the Code or otherwise reduce or delay liability for
taxes owed under the Code.
VI. MISCELLANEOUS.
1. Notices Any notice or other communication required or
permitted under this Agreement shall be effective only if it is in
writing and shall be deemed to have been duly given when delivered
personally or seven days after mailing if mailed first class by
registered or certified mail, postage prepaid, addressed as follows:
If to the Company: Xxxxxx Industries, Inc.
X.X. Xxx 000
0000 Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxx 00000
Attention: President
If to the Executive: Xxxx X. Xxxxxxx
0000 Xxxxx Xxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
or to such other address as any party may designate by notice to the
others.
2. Assignment - This Agreement shall inure to the benefit of
and shall be binding upon the parties hereto and their respective
executors, administrators, heirs, personal representatives and
successors, but, except as hereinafter provided, neither this
Agreement nor any right hereunder may be assigned or transferred by
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either party thereto, or by any beneficiary or any other person, nor
be subject to alienation, anticipation, sale, pledge, encumbrance,
execution, levy or other legal process of any kind against the
Executive, his beneficiary or any other person. Notwithstanding the
foregoing, any person or business entity succeeding to substantially
all of the business of the Company by purchase, merger, consolidation,
sale of assets or otherwise, shall be bound by and shall adopt and
assume this Agreement and the Company shall obtain the assumption of
this Agreement by such successor. If Executive shall die while any
amount would still be payable to Executive hereunder (other than
amounts which, by their terms, terminate upon the death of Executive)
if Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators
of Executive's estate.
3. No Obligation to Fund - The agreement of the Company (or its
successor) to make payments to the Executive hereunder shall represent
solely the unsecured obligation of the Company (and its successor),
except to the extent the Company (or its successors) in its sole
discretion elects in whole or in part to fund its obligations under
this Agreement pursuant to a trust arrangement or otherwise.
4. Applicable Law - This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of
Tennessee.
5. Claims; Expenses - All claims by Executive for compensation
and benefits under this Agreement shall be directed to and determined
by the Board and shall be in writing. Any denial by the Board of a
claim for benefits under this Agreement shall be delivered to
Executive in writing and shall set forth the specific reasons for the
denial and the specific provisions of this Agreement relied upon. The
Board shall afford a reasonable opportunity to Executive for a review
of a decision denying a claim and shall further allow Executive to
appeal to the Board a decision of the Board within sixty (60) days
after notification by the Board that Executive's claim has been
denied. In the event the Executive incurs legal fees and other
expenses in seeking to obtain or to enforce any rights or benefits
provided by this Agreement and is successful, in whole or in part, in
obtaining or enforcing any such rights or benefits through settlement
or otherwise, the Company shall promptly pay Executive's reasonable
legal fees and expenses incurred in enforcing this Agreement. Except
to the extent provided in the preceding sentence, each party shall pay
its own legal fees and other expenses associated with any dispute.
6. Conversion To Employment Agreement - The Company reserves
the right at any time in its sole discretion to convert all or any
part of its obligations under this Agreement and restate them in an
employment agreement with the Executive, provided that such employment
agreement provides compensation and benefits to the Executive upon the
basis and for the reasons stated in this Agreement that are
substantially identical to the compensation and benefits provided
under this Agreement.
7. Amendment - This Agreement may only be amended by a written
instrument signed by the parties hereto, which makes specific
reference to this Agreement.
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7. Severability - If any provision of this Agreement shall be
held invalid or unenforceable by any court of competent jurisdiction,
such holding shall not invalidate or render unenforceable any other
provisions hereof.
9. Other Benefits Nothing in this Agreement shall limit or
replace the compensation or benefits payable to Executive, or
otherwise adversely affect Executive's rights, under any other benefit
plan, program or agreement to which Executive is a party.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officers and the
Executive has hereunder set his hand, as of the date first above
written.
XXXXXX INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
Title: President
(Corporate Seal)
Attest: /s/ Xxxxx Xxxxxxx
Secretary
EXECUTIVE
/s/ Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx
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