EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT, dated as of February 13, 2003 (this "Agreement"), is entered into by and between XXXX Industries, Inc., a Delaware corporation (the "Company"), and Xxxx X. Xxxxxx (the "Executive").
WHEREAS, the Executive has developed and possesses skills and experience that are of value to the Company; and
WHEREAS, the Company desires to secure the services and employment of the Executive on behalf of the Company and the Executive is willing to render such services on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows:
1. Employment Term. Subject to the terms and provisions of this Agreement, the Company hereby agrees to employ the Executive, and the Executive hereby agrees to be employed by the Company, for the period commencing on February 13, 2003 (the "Effective Date") and ending on February 13, 2006, unless terminated sooner as hereinafter provided (the "Employment Term").
2. Duties. During the Employment Term the Executive shall serve as Vice President, Chief Financial Officer and Secretary of the Company, and shall perform such duties, services and responsibilities on behalf of the Company and its subsidiaries as may be determined from time to time by the President or the Board of Directors of the Company (the "Board") and shall have the authority commensurate with such position. In performing his duties hereunder, the Executive will report directly to the President. The Executive shall devote his full business time, attention and skill to the performance of such duties, services and responsibilities, and will use his best efforts to promote the interests of the Company. The Executive may engage in any civic or charitable activity or deliver lectures, fulfill speaking engagements or teach at educational institutions, provided such activities do not materially interfere with the performance of his duties hereunder.
3. Compensation. In full consideration of the performance by the Executive of the Executive's obligations during the Employment Term (including any services by the Executive as an officer, director, employee or member of any committee of any subsidiary or affiliate of the Company, or otherwise on behalf of Company), the Executive shall be compensated as follows:
(a) Base
Salary. The Executive shall receive a base salary (the "Base Salary") at a rate of
$140,000 per year, subject to review by the Board from time to time in the Board's sole
discretion. The Base Salary shall be payable in accordance with the normal payroll
practices of the Company then in effect. |
(b) Bonus.
During the Employment Term, the Executive shall be eligible to participate in the
Company's annual executive incentive bonus plan, if any such plan is adopted, under which
the Executive's target bonus will be 50% of the Base Salary in effect at the time such
bonus becomes payable. |
(c) Benefits.
During the Employment Term, the Executive shall be entitled to participate in any
employee or executive benefit plans, policies or programs that are provided generally to
senior executives of the Company as such plans, policies or programs may be in effect
from time to time. The Company will provide the Executive with the following relocation
assistance: |
| o |
Selling
transaction expenses for the Executive's current home |
| o |
Reasonable
packing and moving expenses |
| o |
Purchase
transaction expenses for a new home in the Frankfort, IN area |
| o |
One
month of salary to cover miscellaneous expenses (upon relocation) |
| o |
Reasonable
interim living expenses not to extend beyond May 31, 2003 |
| o |
Tax
gross-up for reimbursable expenses which are considered taxable The Executive is expected
to relocate to the Frankfort, IN area by August 31, 2003. |
(d) Vacations.
During the Employment Term, the Executive shall be entitled to 20 paid vacation days in
each vacation year determined by the Company in accordance with the Company's policies in
effect from time to time. |
(e) Taxes.
The Executive shall be solely responsible for taxes imposed on the Executive by reason of
any compensation and benefits provided under this Agreement and all such compensation and
benefits shall be subject to applicable withholding taxes. |
4. Termination. The Executive's employment with the Company hereunder and the Employment Term shall terminate upon the occurrence of any of the following events (the date of termination, the "Termination Date"):
(a) Death.
The death of the Executive. |
(b) Disability.
The termination of employment by the Company for Disability upon thirty (30) days'
written notice to the Executive, provided the Executive has not returned to work on a
full-time, permanent basis prior to the end of such thirty (30) day period. |
(c) Cause.
The termination of employment by the Company for Cause. The Executive's termination for
Cause shall be effective upon delivery of written notice specifying the matter or matters
the Company deems to constitute Cause. |
(d)
Without Cause. The
termination of employment by the Company other than for Cause or
Disability. |
(e) Good
Reason. The termination of employment by the Executive for Good Reason; provided,
however that (i) the Executive must deliver a notice of termination within sixty (60)
days after the occurrence of the event(s) constituting Good Reason, and (ii) the Company
shall have (30) days following the receipt of the Executive's notice of termination
within which to cure the event(s) identified by the Executive as constituting Good Reason
and, if so cured, Good Reason shall be deemed not to have occurred. |
(f) Expiration
of Employment Term. The expiration of the Employment Term on February 13, 2006. |
In the event of termination of the Executive's employment, for whatever reason (other than death), the Executive agrees to cooperate with the Company, its subsidiaries and its affiliates and to be reasonably available to the Company, its subsidiaries and its affiliates with respect to continuing and/or future matters arising out of the Executive's employment hereunder or any other relationship with the Company, its subsidiaries and its affiliates, whether such matters are business-related, legal or otherwise.
5. Termination Payments.
(a) Death
or Disability. If the Executive's employment with the Company is terminated by reason
of the Executive's death, or by the Company for Disability, the Company's sole obligation
hereunder shall be to pay the Executive or his estate, as the case may be, the Accrued
Compensation and the Pro Rata Bonus Amount in a lump sum within 30 days following the
Termination Date. |
(b) By
Company for Cause; By Executive Without Good Reason. If the Executive's employment
with the Company is terminated by the Company for Cause or by the Executive without Good
Reason, or the Executive's employment hereunder terminates pursuant to Section 4(f) of
this Agreement, the Company's sole obligation hereunder shall be to pay the Executive the
Accrued Compensation in a lump sum within 30 days following the Termination Date. |
(c) By
Company Without Cause. If the Executive's employment with the Company is terminated
by the Company for any reason other than Cause or Disability, the Company's sole
obligation hereunder shall be to pay the Executive (i) the Accrued Compensation and the
Pro Rata Bonus Amount in a lump sum within 30 days following the Termination Date and
(ii) so long as the Executive is not in violation of the covenants contained in Section 6
hereof, severance equal to the Executive's Base Salary (at the rate in effect on the
Termination Date), payable in equal installments in accordance with the normal payroll
practices of the Company over the twelve (12) month period following the Termination Date. |
(d) Good
Reason. If the Executive's employment with the Company is terminated by the Executive
for Good Reason, the Company's sole obligation hereunder shall be to pay the Executive
(i) the Accrued Compensation and the Pro Rata Bonus Amount in a lump sum within 30 days
following the Termination Date and (ii) so long as the Executive is not in violation of
the covenants contained in Section 6 hereof, severance equal to the Executive's Base
Salary (at the rate in effect on the Termination Date), payable in equal installments in
accordance with the normal payroll practices of the Company over the twelve (12) month
period following the Termination Date. |
(e) Transaction
Bonus Offset. Notwithstanding the foregoing, any cash severance otherwise payable
hereunder shall be reduced by 50% of the amount of any transaction bonus that, prior to
the date the severance amount is determined, has been paid pursuant to any Transaction
Bonus Agreement entered into between the Executive and the Company after the date hereof.
Any transaction bonus (or portion thereof) paid or payable after that date shall be
reduced, if at all, pursuant to the Transaction Bonus Agreement. |
(f) No
Mitigation. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement, nor shall such amounts be reduced by any
earnings or benefits that the Executive may receive from any other source. |
(g) Internal
Revenue Code Section 280G. Notwithstanding anything contained in this Agreement to
the contrary, to the extent that any payment or distribution of any type to or for the
benefit of the Executive by the Company, any affiliate of the Company, any person who
acquires ownership or effective control of the Company or ownership of a substantial
portion of the Company's assets (within the meaning of Section 280G of the Internal
Revenue Code (the "Code"), and the regulations thereunder), or any affiliate of such
person, whether paid or payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (the "Total Payments") is or will be subject to the excise
tax imposed under Section 4999 of the Code (the "Excise Tax"), then the Total Payments
shall be reduced (but not below zero) if and to the extent that a reduction in the Total
Payments would result in the Executive retaining a larger amount, on an after-tax basis
(taking into account federal, state and local income taxes and the Excise Tax), than if
the Executive received the entire amount of such Total Payments. Unless the Executive
shall have given prior written notice specifying a different order to the Company to
effectuate the foregoing, the Company shall reduce or eliminate the Total Payments, by
first reducing or eliminating the portion of the Total Payments which are not payable in
cash (other than Total Payments attributable to stock options or other equity awards
("Equity Awards")) and then by reducing or eliminating cash payments, in each case in
reverse order beginning with payments or benefits which are to be paid the latest in
time, and then by reducing Equity Awards in the manner which will maximize the after-tax
benefit to the Executive. Any notice given by the Executive pursuant to the preceding
sentence shall take precedence over the provisions of any other plan, arrangement or
agreement governing the Executive's rights and entitlements to any benefits or
compensation. The determination of whether the Total Payments shall be reduced pursuant
to the foregoing and the amount of such reduction shall be made, at the Company's
expense, by an accounting firm selected by the Company which is one of the five largest
accounting firms in the United States (other than the Company's regular independent
auditor). |
(h) For
purposes of this Section 5, the Executive's employment shall not be treated as terminated
for so long as he is an employee of the Company or any of its subsidiaries. |
6. Executive Covenants.
(a) Unauthorized
Disclosure. The Executive agrees and understands that in the Executive's position
with the Company, the Executive has been and will be exposed to and has received and will
receive information relating to the confidential affairs of the Company, its subsidiaries
and its affiliates, including but not limited to technical information, intellectual
property, business and marketing plans, strategies, customer information, other
information concerning the products, promotions, development, financing, expansion plans,
business policies and practices of the Company, its subsidiaries and its affiliates, and
other forms of information considered by the Company to be confidential and in the nature
of trade secrets ("Confidential Information"). The Executive agrees that during the
Employment Term and thereafter, the Executive will not disclose such Confidential
Information, either directly or indirectly, to any third person or entity without the
prior written consent of the Company. This confidentiality covenant has no temporal,
geographical or territorial restriction. Upon termination of the Employment Term, the
Executive will promptly supply to the Company all property, keys, notes, memoranda,
writings, lists, files, reports, customer lists, correspondence, tapes, disks, cards,
surveys, maps, logs, machines, technical data or any other tangible product or document
which has been produced by, received by or otherwise submitted to the Executive during or
prior to the Employment Term. Any material breach of the terms of this paragraph shall be
considered Cause. |
(b) Non-competition.
By and in consideration of the Company's entering into this Agreement and the payments to
be made and benefits to be provided by the Company hereunder, and further in
consideration of the Executive's exposure to the proprietary information of the Company,
the Executive agrees that the Executive will not, during the Employment Term, and
thereafter during the Non-competition Term (as defined below), directly or indirectly,
own, manage, operate, join, control, be employed by, or participate in the ownership,
management, operation or control of, or be connected in any manner with, including but
not limited to holding any position as a shareholder, director, officer, consultant,
independent contractor, employee, partner, or investor in, any Restricted Enterprise (as
defined below); provided, that in no event shall the ownership of less than 1% of the
outstanding equity securities of any issuer whose securities are registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), standing alone, be
prohibited by this Section 6(b). For purposes of this Section 6(b), the term "Restricted
Enterprise" shall mean any person, corporation, partnership or other entity that
competes, directly or indirectly, with any business or activity conducted or proposed to
be conducted by the Company or any of its subsidiaries or affiliates as of the date of
the Executive's termination of employment. Following termination of the Employment Term,
upon request of the Company, the Executive shall notify the Company of the Executive's
then current employment status. For purposes of this Agreement, the term "Non-competition
Term" shall mean the period beginning on the Termination Date and ending on the second
anniversary of such date. Any material breach of the terms of this Section 6(b) shall be
considered Cause. Notwithstanding the foregoing, in the event the Executive's employment
with the Company is terminated by the Company without Cause or by the Executive for Good
Reason following a Change in Control, the Executive shall not be subject to this Section
6(b), and this Section 6(b) shall have no force or effect. |
(c) Non-solicitation.
During the Non-competition Term, the Executive shall not, and shall not cause any other
person to, interfere with or harm, or attempt to interfere with or harm, the relationship
of the Company or any of its subsidiaries or affiliates with, or endeavor to entice away
from the Company or any of its subsidiaries or affiliates, or hire, any person who at any
time during the Employment Term was an employee or customer of the Company or any of its
subsidiaries or affiliates. Notwithstanding the foregoing, in the event the Executive's
employment with the Company is terminated by the Company without Cause or by the
Executive for Good Reason following a Change in Control, the Executive shall not be
subject to this Section 6(c), and this Section 6(c) shall have no force or effect. |
(d) Remedies.
The Executive agrees that any breach of the terms of this Section 6 would result in
irreparable injury and damage to the Company, its subsidiaries and/or its affiliates for
which the Company, its subsidiaries and/or its affiliates would have no adequate remedy
at law; the Executive therefore also agrees that in the event of said breach or any
threat of breach, the Company, its subsidiaries and/or its affiliates, as applicable,
shall be entitled to an immediate injunction and restraining order to prevent such breach
and/or threatened breach and/or continued breach by the Executive and/or any and all
persons and/or entities acting for and/or with the Executive, without having to prove
damages, in addition to any other remedies to which the Company, its subsidiaries and/or
its affiliates may be entitled at law or in equity. The terms of this Section 6(d) shall
not prevent the Company, its subsidiaries and/or its affiliates from pursuing any other
available remedies for any breach or threatened breach hereof, including but not limited
to the recovery of damages from the Executive. The Executive and the Company further
agree that the provisions of the covenants contained in this Section 6 are reasonable and
necessary to protect the businesses of the Company, its subsidiaries and its affiliates
because of the Executive's access to Confidential Information and his material
participation in the operation of such businesses. The Executive hereby acknowledges that
due to the global aspects of the Company's, its subsidiaries' and its affiliates'
businesses and competitors it would not be appropriate to impose any geographic
limitation on this Section 6. Should a court or arbitrator determine, however, that any
provision of the covenants contained in this Section 6 are not reasonable or valid,
either in period of time, geographical area, or otherwise, the parties hereto agree that
such covenants should be interpreted and enforced to the maximum extent which such court
or arbitrator deems reasonable or valid. |
The existence of any claim or cause of action by the Executive against the Company, its subsidiaries and/or its affiliates, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants contained in this Section 6.
7. Non-Waiver of Rights. The failure by any party to enforce at any time the provisions of this Agreement or to require at any time performance by any other party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement and any part hereof or the right of any party to enforce each and every provision in accordance with its terms.
8. Notices. Every notice relating to this Agreement shall be in writing and shall be given by personal delivery, by a reputable same-day or overnight courier service (charges prepaid), by registered or certified mail, postage prepaid, return receipt requested or by facsimile to the recipient with a confirmation copy to follow the next day to be delivered by personal delivery or by a reputable same-day or overnight courier service; to:
| If to the Company: |
XXXX Industries, Inc. 0000 Xxxx Xxxxx Xxxx Xxxxxx, Xxxxxxxx 00000 Attention: Xxxxxxx Xxxxxx |
| If to the Employee: |
Xxxx X. Xxxxxx At the address the Company has on file for the Executive. |
Either of the parties hereto may change their address for purposes of notice by given notice in writing to the other party pursuant to this Section 8. The date of service of such notice shall be the date such notice is personally delivered, three business days after the date of mailing if sent by certified or registered mail, two business days after the date of delivery to the courier if sent by courier, or the next business day after the date of transmittal if sent by facsimile.
9. Binding Effect/Assignment. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, personal representatives, estates, successors (including, without limitation, by way of merger) and assigns. Notwithstanding the provisions of the immediately preceding sentence, the Executive shall not assign all or any portion of this Agreement without the prior written consent of the Company.
10. Entire Agreement. This Agreement sets forth the entire understanding of the parties hereto with respect to the subject matter hereof and supersedes all prior agreements, written or oral, between them as to such subject matter, including, but not limited to, the Prior Agreement. This Agreement may not be amended, nor may any provision hereof be modified or waived, except by an instrument in writing duly signed by the party to be charged. As of the Effective Date the Prior Agreement shall no longer have any force or effect.
11. Severability. If any provision of this Agreement, or any application thereof to any circumstances, is invalid, in whole or in part, such provision or application shall to that extent be severable and shall not affect other provisions or applications of this Agreement.
12. Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Illinois, without reference to the principles of conflict of laws.
13. Headings. The headings contained herein are solely for the purposes of reference, are not part of this Agreement and shall not in any way affect the meaning or interpretation of this Agreement.
14. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.
15. Definitions. As used in this Agreement, the following terms shall have the following meanings:
"Accrued Compensation" shall mean any accrued and unpaid Base Salary as of the Termination Date, all benefits accrued under any benefit plans, programs or arrangements in which the Executive shall have been a participant as of the date of such termination, in accordance with the applicable terms and conditions of such plans, programs or arrangements, and an amount equal to such reasonable and necessary business expenses incurred by the Executive in connection with the Executive's employment on behalf of the Company on or prior to the Termination Date but not previously paid to the Executive.
"Cause" shall mean: (i) the Executive's material breach of this Agreement, (ii) conduct by the Executive that is fraudulent or unlawful, (iii) gross negligence of or willful misconduct by the Executive in the performance of his duties, or (iv) repeated failure of the Executive to perform his duties hereunder.
"Change in Control" shall mean the occurrence of any one of the following events:
(a) An
acquisition (other than directly from the Company) of any common stock, par value $.01
per share, of the Company ("Common Stock") or other voting securities of the Company by
any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the
Exchange Act), immediately after which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty percent (50%) or more
of either (i) the then outstanding Common Stock or (ii) the combined voting power of the
Company's then outstanding voting securities entitled to vote for the election of
directors (the "Voting Securities"); provided, however, in determining whether a Change
in Control has occurred, Common Stock or Voting Securities which are acquired in a
"Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition
which would cause a Change in Control. A "Non-Control Acquisition" shall mean an
acquisition by (i) an employee benefit plan (or a trust forming a part thereof)
maintained by (A) the Company or (B) any corporation or other Person the majority of the
voting power, voting equity securities or equity interest of which is owned, directly or
indirectly, by the Company (for purposes of this definition, a "Related Entity"), (ii)
the Company or any Related Entity, (iii) any Person in connection with a "Non-Control
Transaction" (as hereinafter defined), or (iv) the UNR Asbestos-Disease Claims Trust; |
(b) The
individuals who, as of the date of this Agreement are members of the Board (the
"Incumbent Board"), cease for any reason to constitute at least a majority of the members
of the Board; provided, however, that if the election, or nomination for election by the
Company's common stockholders, of any new director was approved by a vote of at least
two-thirds of the Incumbent Board, such new director shall, for purposes of this
Agreement, be considered a member of the Incumbent Board; provided, further, however,
that no individual shall be considered a member of the Incumbent Board if such individual
initially assumed office as a result of either an actual or threatened Election Contest
(as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other than the
Board (a "Proxy Contest"), including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or |
(c) The
consummation of: |
(i) A
merger, consolidation or reorganization with or into the Company or in which securities
of the Company are issued (a "Merger"), unless the Merger is a Non-Control Transaction. A
"Non-Control Transaction" shall mean a Merger if: |
(A) the
stockholders of the Company immediately before such Merger own directly or indirectly
immediately following the Merger at least fifty percent (50%) of the outstanding common
stock and the combined voting power of the outstanding voting securities of (x) the
corporation resulting from such Merger (the "Surviving Corporation"), if fifty percent
(50%) or more of the combined voting power of the then outstanding voting securities of
the Surviving Corporation is not Beneficially Owned, directly or indirectly by another
corporation (a "Parent Corporation"), or (y) the Parent Corporation, if fifty percent
(50%) or more of the combined voting power of the Surviving Corporation's then
outstanding voting securities is Beneficially Owned, directly or indirectly, by a Parent
Corporation; |
(B) the
individuals who were members of the Incumbent Board immediately prior to the execution of
the agreement providing for the Merger constitute at least a majority of the members of
the board of directors of (x) the Surviving Corporation, if fifty percent (50%) or more
of the combined voting power of the then outstanding voting securities of the Surviving
Corporation is not Beneficially Owned, directly or indirectly by a Parent Corporation, or
(y) the Parent Corporation, if fifty percent (50%) or more of the combined voting power
of the Surviving Corporation's then outstanding voting securities is Beneficially Owned,
directly or indirectly, by a Parent Corporation; and |
(C) no
Person other than (1) the Company or another corporation that is a party to the agreement
of Merger, (2) any Related Entity, or (3) any employee benefit plan (or any trust forming
a part thereof) that, immediately prior to the Merger, was maintained by the Company or
any Related Entity, or (4) any Person who, immediately prior to the Merger had Beneficial
Ownership of fifty percent (50%) or more of the then outstanding Common Stock or Voting
Securities, has Beneficial Ownership immediately following the Merger, directly or
indirectly, of fifty percent (50%) or more of the combined voting power of the
outstanding voting securities or common stock of (x) the Surviving Corporation, if fifty
percent (50%) or more of the combined voting power of the then outstanding voting
securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly
by a Parent Corporation, or (y) the Parent Corporation, if fifty percent (50%) or more of
the combined voting power of the Surviving Corporation's then outstanding voting
securities is Beneficially Owned, directly or indirectly, by a Parent Corporation; |
(ii) A
complete liquidation or dissolution of the Company; or |
(iii) The
sale or other disposition of all or substantially all of the assets of the Company to any
Person (other than a transfer to a Related Entity or under conditions that would
constitute a Non-Control Transaction with the disposition of assets being regarded as a
Merger for this purpose or the distribution to the Company's stockholders of the stock of
a Related Entity or any other assets). |
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the then outstanding Common Stock or Voting Securities as a result of the acquisition of Common Stock or Voting Securities by the Company which, by reducing the number of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Common Stock or Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Common Stock or Voting Securities which increases the percentage of the then outstanding Common Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
"Disability" shall mean the inability of the Executive to perform his duties, services and responsibilities hereunder by reason of a physical or mental infirmity, as reasonably determined by the Board, for a total of 180 calendar days in any twelve-month period during the Employment Term.
"Good Reason" shall mean the occurrence after a Change in Control of any of the following events: (i) a material diminution in the Executive's position, duties or responsibilities; (ii) a reduction in the Executive's Base Salary; or (iii) a relocation without the consent of the Executive of the Company's corporate headquarters to a location that is more than 50 miles from the location of the corporate headquarters immediately before the Change in Control.
"Pro Rata Bonus Amount" shall mean an amount equal to the annual bonus paid to the Executive for the year prior to the year in which the Executive's employment is terminated, multiplied by a fraction, the numerator of which is the number of days elapsed from the beginning of the bonus period through and including the Termination Date, and the denominator of which is 365.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered on the date first above written.
|
XXXX Industries, Inc. By: Name: Xxxxxx Xxxx Title: Chief Executive Officer Xxxx X. Xxxxxx |
