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EXHIBIT 10(b)
EMPLOYMENT AGREEMENT
AGREEMENT by and between Xxxxx Enterprises, Inc., a Delaware
corporation (the "Company") and Xxxxx X. Xxxxxxxx, Xx. (the "Executive"), dated
as of July 1, 1997.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall mean the date of this
Agreement as set forth above, July 1, 1997.
(b) The "Employment Period" shall mean the period
commencing on the Effective Date and ending on the earlier of (i) the second
anniversary of the Effective Date, or (ii) the termination of the Executive's
employment pursuant to Section 5 of this Agreement; provided, however, that
commencing on the date one year after the Effective Date, and on each annual
anniversary of such date (such date and each annual anniversary thereof shall
be hereinafter referred to as the "Renewal Date"), unless previously
terminated, the Employment Period shall be automatically extended so as to
terminate two years from such Renewal Date, unless at least 60 days prior to
the Renewal Date the Company shall give written notice to the Executive that
the Employment Period shall not be so extended.
2. Change of Control. For the purposes of this Agreement, a
"Change of Control" shall mean:
(a) The acquisition, in one or more transactions, 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, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of
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20% or more of either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) 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"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition pursuant to a public offering of securities by the Company, (ii)
any acquisition if, immediately thereafter, members of the Xxxxx family,
collectively, continue to own more of the Outstanding Company Common Stock or
the Outstanding Company Voting Securities than any other Person or (iii) any
acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii), (iii) and (iv) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, 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 date hereof 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 of 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; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) 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 Business Combination beneficially own, directly or
indirectly, more than 50% of, respectively, the then outstanding shares of
common stock ("Outstanding Resulting Company Common Stock") and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors ("Outstanding Resulting Company Voting
Securities"), as the case may be, of the corporation resulting from such
Business Combination (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 Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii) no Person
(excluding any corporation resulting from such Business Combination or any
employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business
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Combination, (iii) at least a majority of the members of the board of directors
of the corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or of
the action of the Board, providing for such Business Combination, and (iv)
members of the Xxxxx family, collectively, continue to own more of the
Outstanding Resulting Company Common Stock and the Outstanding Resulting
Company Voting Securities than any other Person; or
(d) A liquidation of the Company; or
(e) Any change in the Board, or in the board of directors of any
corporation resulting from a Business Combination, such that Xxxxx Nominees (as
defined below) hold less than a majority of the board of director positions in
the Company or such corporation. For purposes of this subsection (e), "Xxxxx
Nominees" shall mean any member of the Xxxxx family and any other individual
whose election, or nomination for election, as a director of the Company or of
such corporation was approved by a member of the Xxxxx family; provided,
however, that no individual other than a member of the Xxxxx family shall be
deemed a Xxxxx Nominee if that person's election, or nomination for election,
as a director of the Company or such corporation was also approved by, or at
the request of, another Person who owns beneficially the lesser of: (i) as many
or more shares of Outstanding Company Common Stock or Outstanding Company
Voting Securities as then owned beneficially by the Xxxxx family, or (ii) 20%
of the Outstanding Company Common Stock or Outstanding Company Voting
Securities.
3. Employment. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the
employ of the Company subject to the terms and conditions of this Agreement,
for the Employment Period.
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 120-day period immediately
preceding the Effective Date and (B) the Executive's services shall be
performed at the principle executive offices of the Company, as the same may be
located from time to time; provided that this Agreement shall not prohibit the
assignment to Executive on a reasonable and temporary basis of duties at any
office or location other than such principle office location.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled, the
Executive agrees to devote reasonable attention and time during normal business
hours to the business and affairs of the Company and, to the extent necessary
to discharge the responsibilities assigned to the
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Executive hereunder, to use the Executive's reasonable best efforts to perform
faithfully and efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and (C)
manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct
of such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") of
$200,000, which shall be paid in accordance with the normal payroll policies of
the Company. During the Employment Period, the Annual Base Salary shall be
reviewed no more than 12 months after the last salary increase awarded to the
Executive prior to the Effective Date and thereafter at least annually. Any
increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall not
be reduced after any such increase and the term Annual Base Salary as utilized
in this Agreement shall refer to Annual Base Salary as so increased. As used
in this Agreement, the term "affiliated companies" shall include any company
controlled by, controlling or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base
Salary, the Executive shall be awarded, for each fiscal year ending during the
Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal
to the Executive's highest bonus from the Company for the last full fiscal year
prior to the Effective Date. Each such Annual Bonus shall be paid in the
fiscal year in which it is awarded or, at the Executive's option, no later than
the end of the third month of the fiscal year next following the fiscal year
for which the Annual Bonus is awarded, unless the Executive shall elect to
defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and programs
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than those
provided to Executive as of the Effective Date. It shall not be a violation of
this Section for the
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Company to provide, in lieu of the grant of stock options, an incentive bonus
program that is based on objective performance goals established by the Board
or a committee of the Board.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under welfare
benefit plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated companies, and in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than those provided
to Executive as of the Effective Date.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the most favorable
policies, practices and procedures in effect for other peer executives of the
Company and its affiliated companies and in no event less favorable than those
policies, practices and procedures in effect as of the Effective Date.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits, including, without
limitation, payment of club dues, and use of an automobile and payment of
related expenses, in accordance with the most favorable plans, practices,
programs and policies of the Company and its affiliated companies in effect for
other peer executives of the Company and its affiliated companies and in no
event less favorable than those benefits provided to Executive as of the
Effective Date.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office of a size and
with furnishings and other appointments, and secretarial and other assistance,
at least comparable to that provided to Executive as of the Effective Date.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to four weeks paid vacation per year.
5. Termination of Employment.
(a) Death or Disability. The Executive's employment
shall terminate automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the Disability of the
Executive has occurred during the Employment Period (pursuant to the definition
of Disability set forth below), it may give to the Executive written notice in
accordance with Section 12(b) of this Agreement of its
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intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties.
For purposes of this Agreement, "Disability" shall mean the absence of the
Executive from the Executive's duties with the Company on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness which is determined to be total and permanent by a physician
selected by the Company or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(i) the willful and continued failure of the
Executive to perform substantially the Executive's duties with the Company
(other than any such failure resulting from incapacity due to physical or
mental illness), for at least 30 days after a written demand for substantial
performance is delivered to the Executive by the Board or the Executive
Committee of the Company which specifically identifies the manner in which the
Board or the Executive Committee believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in
illegal conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Executive Committee,
the Chief Executive Officer or a senior officer of the Company or based upon
the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Executive in good faith and in the best
interests of the Company. The cessation of employment of the Executive shall
not be deemed to be for Cause unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the Board at a meeting
of the Board called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity, together
with counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of this Agreement,
"Good Reason" shall
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mean:
(i) the assignment to the Executive of any duties
materially inconsistent with the Executive's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of this Agreement, or any
other action by the Company which results in a material diminution in such
position, authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice thereof given by
the Executive;
(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be
based at any office or location other than as provided in Section 4(a)(i)(B)
hereof or the Company's requiring the Executive to travel on Company business
to a substantially greater extent than required immediately prior to the
Effective Date;
(iv) any termination by the Company of the
Executive's employment otherwise than for Cause, Death or Disability; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of
"Good Reason" made by the Executive shall be conclusive. Anything in this
Agreement to the contrary notwithstanding, a termination by the Executive for
any reason at least 90 but not more than 120 days following consummation of a
Change of Control or during the 30-day period immediately following the first
anniversary of a Change of Control shall be deemed to be a termination for Good
Reason for all purposes of this Agreement. If at any time prior to a Change of
Control, the Executive gives written notice of his probable intention to
terminate employment during the first such window period, there shall be
deposited into escrow immediately prior to the Change of Control the cash
amounts payable to the Executive pursuant to Section 6(a) of this Agreement.
If the Executive in fact terminates his employment during such window period,
the escrowed funds will be released to him at that time. If he does not
terminate his employment during such first window period, the escrowed funds
will be released to the Company at the end of such window period, without
prejudice to the Company's obligation to pay such amounts when and if they
later become due under Section 6(a). Any interest earned on the escrowed funds
during escrow will be paid to the Company.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be communicated
by Notice of Termination
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to the other party hereto given in accordance with Section 12(b) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
30 days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any
right of the Executive or the Company, respectively, hereunder or preclude the
Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i)
if the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the
case may be.
6. Obligations of the Company upon Termination.
(a) Good Reason; Other Than for Cause, Death or
Disability. If, during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the Executive
shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump
sum in cash within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's
Annual Base Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the Annual Bonus paid or payable,
including any bonus or portion thereof which has been earned but deferred, for
the most recently completed fiscal year during or prior to the Employment
Period and (y) a fraction, the numerator of which is the number of days in the
current fiscal year through the Date of Termination, and the denominator of
which is 365, and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid (the sum of the
amounts described in clauses (1), (2), and (3) shall be hereinafter referred to
as the "Accrued Obligations"); and
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B. the amount equal to the product of
(1) two and (2) the sum of (x) the Executive's Annual Base Salary and (y) the
Annual Bonus paid or payable to the Executive, including any bonus or portion
thereof which has been earned but deferred, for the most recently completed
fiscal year during or prior to the Employment Period; and
(ii) for two years after the Executive's Date of
Termination, or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall continue
benefits to the Executive and/or the Executive's family at least equal to those
which would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive becomes re-employed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until two years after
the Date of Termination and to have retired on the last day of such period;
(iii) the Company shall, at its sole expense as
incurred, provide the Executive with outplacement services the scope and
provider of which shall be selected by the Executive in his sole discretion;
(iv) the Company shall pay the balance necessary to
purchase the automobile then being leased for the Executive for his use and
shall transfer title of such automobile to the Executive;
(v) if such termination occurs within one year
prior to a Change in Control, the Company shall pay to the Executive in a lump
sum in cash on the date immediately prior to such Change in Control the amount
specified in Section 10(e) as compensation for the Restrictive Covenants set
forth in Section 10 of this Agreement; and
(vi) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies (such other amounts and
benefits shall be hereinafter referred to as the "Other Benefits"), and, in
this regard, in the event of a Change in Control, all of the Executive's
outstanding options to acquire stock of the Company shall be treated
consistently with all other similar options held by other employees of the
Company.
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(b) Death. If the Executive's employment is terminated
by reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(b) shall include without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to receive, benefits
at least equal to the most favorable benefits provided by the Company and
affiliated companies to the estates and beneficiaries of peer executives of the
Company and such affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with respect to other
peer executives and their beneficiaries at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive's estate and/or the Executive's beneficiaries, as in effect on the
date of the Executive's death with respect to other peer executives of the
Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the Employment
Period, this Agreement shall terminate without further obligations to the
Executive, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 6(c) shall include, and the Executive shall be
entitled after the Disability Effective Date to receive, disability and other
benefits at least equal to the most favorable of those generally provided by
the Company and its affiliated companies to disabled executives and/or their
families in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its affiliated
companies and their families.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the Employment
Period, this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay to the Executive (x) his Annual Base
Salary through the Date of Termination, (y) the amount of any compensation
previously deferred by the Executive, and (z) Other Benefits, in each case to
the extent theretofore unpaid. If the Executive voluntarily terminates
employment during the Employment Period, excluding a termination for Good
Reason, this Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment or
provision of Other Benefits. In such case, all Accrued Obligations shall be
paid to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
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7. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies and for which the Executive may qualify, nor, subject to
Section 12(f), shall anything herein limit or otherwise affect such rights as
the Executive may have under any contract or agreement with the Company or any
of its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract
or agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Executive or others. 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
and such amounts shall not be reduced whether or not the Executive obtains
other employment. The Company agrees to pay as incurred, to the full extent
permitted by law, all legal fees and expenses which the Executive may
reasonably incur (i) in connection with the review, negotiation and completion
of this Agreement and/or (ii) as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as
amended (the "Code").
9. Limitation of Benefits.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any benefit, payment
or distribution by the Company to or for the benefit of the Executive (whether
payable or distributable pursuant to the terms of this Agreement or otherwise)
(a "Payment") would, if paid, be subject to the excise tax imposed by Section
4999 of the Code (the "Excise Tax"), then the Payment shall be reduced to the
extent necessary of avoid the imposition of the Excise Tax. The Executive may
select the Payments to be limited or reduced.
(b) All determinations required to be made under this
Section 9, including whether an Excise Tax would otherwise be imposed and the
assumptions to be utilized in arriving at such determination, shall be made by
Ernst & Young LLP or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the
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Executive that a Payment is due to be made, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the Change
of Control, the Executive may appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and expenses
of the Accounting Firm shall be borne solely by the Company. Any determination
by the Accounting Firm shall be binding upon the Company and the Executive. As
a result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it is
possible that Payments hereunder will have been unnecessarily limited by this
Section 9 ("Underpayment"), consistent with the calculations required to be
made hereunder. The Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of the Executive.
10. Restrictions on Conduct of the Executive.
(a) General. The Executive and the Company understand
and agree that the purpose of the provisions of this Section 10 is to protect
legitimate business interests of the Company, as more fully described below,
from and after a Change of Control and is not intended to impair or infringe
upon the Executive's right to work, earn a living, or acquire and possess
property from the fruits of his labor. The Executive hereby acknowledges that
the post-employment restrictions set forth in this Section 10 are reasonable
and that they do not, and will not, unduly impair his ability to earn a living
after the termination of this Agreement. Therefore, subject to the limitations
of reasonableness imposed by law upon the restrictions set forth herein, the
Executive shall be subject to the restrictions set forth in this Section 10.
(b) Definitions. The following capitalized terms used in
this Section 10 shall have the meanings assigned to them below, which
definitions shall apply to both the singular and the plural forms of such
terms:
"Competitive Services" means any of the following services
provided by the Company through its medical products and leather tannery
businesses: (i) the manufacture, marketing, import, sale and distribution of
durable medical equipment products for the acute, long-term and home health
care markets, including beds, patients aids, specialty seating, bathroom safety
products, mobility products, vacuum systems, therapeutic support systems and
heat and cold packs for medical and consumer use (the "Medical Products
Services"), and (ii) the tanning and finishing of leather from cowhide for
manufacturers of shoes, handbags, furniture and personal leather goods (the
"Leather Business Services").
"Confidential Information" means any confidential or
proprietary information possessed by the Company or its affiliated companies or
relating to its or their business, including without limitation, any
confidential "know-how", customer lists,
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details of client or consultant contracts, current and anticipated customer
requirements, pricing policies, price lists, market studies, business plans,
operational methods, marketing plans or strategies, product development
techniques or plans, computer software programs (including object code and
source code), data and documentation, data base technologies, systems,
structures and architectures, inventions and ideas, past, current and planned
research and development, compilations, devices, methods, techniques,
processes, financial information and data, business acquisition plans, new
personnel acquisition plans and any other information that would constitute a
trade secret under the common law or statutory law of the State of Delaware.
"Determination Date" means the date of termination of the
Executive's employment with the Company for any reason whatsoever or any
earlier date (during the Restricted Period) of an alleged breach of the
Restrictive Covenants by the Executive.
"Person" means any individual or any corporation, partnership,
joint venture, association or other entity or enterprise.
"Principal or Representative" means a principal, owner,
partner, shareholder, joint venturer, investor, member, trustee, director,
officer, manager, employee, agent, representative or consultant.
"Protected Customer" means a customer of the Company or its
affiliated companies who or which obtained goods or services from the Company
or its affiliated companies within one (1) year prior to the Determination
Date.
"Protected Employees" means employees of the Company or its
affiliated companies who were employed by the Company or its affiliated
companies at any time within six (6) months prior to the Determination Date.
"Restricted Period" means that portion of the Employment
Period from and after a Change of Control plus a period extending two (2) years
from the Date of Termination.
"Restricted Territory" means (i) with respect to the Medical
Products Services, the area within a 20-mile radius of the Company's current
corporate headquarters in Atlanta, Georgia, the areas within a 20-mile radius
of each of the Company's current medical products facilities in Atlanta,
Georgia, Bay Shore, New York, Fond du Lac, Wisconsin, and Rancho Cucumonga,
California, and the area within a 20-mile radius of the current medical
products facility of the Company's subsidiary, Prism Enterprises, Inc., in San
Antonio, Texas, and (ii) with respect to the Leather Business Services, the
area within a 20-mile radius of the Company's current corporate headquarters in
Atlanta, Georgia, and the areas within a 20-mile radius of the current leather
tannery and fabrication facilities of the Company's subsidiary, Irving Tanning
Company, in Hartland, Maine.
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"Restrictive Covenants" means the restrictive covenants
contained in Section 10(c) hereof.
(c) Restrictive Covenants.
(i) Restriction on Disclosure and Use of
Confidential Information. The Executive understands and agrees that the
Confidential Information constitutes a valuable asset of the Company and its
affiliated entities, and may not be converted to the Executive's own use.
Accordingly, the Executive hereby agrees that the Executive shall not, directly
or indirectly, at any time during the Restricted Period reveal, divulge, or
disclose to any Person not expressly authorized by the Company any Confidential
Information, and the Executive shall not, directly or indirectly, at any time
during the Restricted Period use or make use of any Confidential Information in
connection with any business activity other than that of the Company. The
parties acknowledge and agree that this Agreement is not intended to, and does
not, alter either the Company's rights or the Executive's obligations under any
state or federal statutory or common law regarding trade secrets and unfair
trade practices.
(ii) Nonsolicitation of Protected Employees. The
Executive understands and agrees that the relationship between the Company and
each of its Protected Employees constitutes a valuable asset of the Company and
may not be converted to the Executive's own use. Accordingly, the Executive
hereby agrees that during the Restricted Period the Executive shall not
directly or indirectly on the Executive's own behalf or as a Principal or
Representative of any Person or otherwise solicit or induce any Protected
Employee to terminate his or her employment relationship with the Company.
(iii) Nonsolicitation of Protected Customers. The
Executive understands and agrees that the relationship between the Company and
each of its Protected Customers constitutes a valuable asset of the Company and
may not be converted to the Executive's own use. Accordingly, the Executive
hereby agrees that, during the Restricted Period, the Executive shall not,
without the prior written consent of the Company, directly or indirectly, on
the Executive's own behalf or as a Principal or Representative of any Person or
otherwise, solicit a Protected Customer for the purpose of providing or selling
Competitive Services; provided, however, that the prohibition of this covenant
shall apply only to Protected Customers with whom Executive had Material
Contact on the Company's behalf during the twelve (12) months immediately
preceding the Date of Termination. For purposes of this Agreement, Executive
had "Material Contact" with a Protected Customer if (a) he had business
dealings with the Protected Customer on Company's behalf; (b) he was
responsible for supervising or coordinating the dealings between the Company
and the Protected Customer; or (c) he obtained Confidential Information about
the Protected Customer as a result of his association with the Company.
(iv) Noncompetition with the Company. During the
Restricted
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15
Period and within the applicable Restricted Territory, the Executive shall not,
directly or indirectly, on his own or on behalf of any Person, provide
strategic planning, policy making or management services for any entity which
provides Competitive Services in competition with the Company or its affiliated
companies. Notwithstanding the above, it shall not be a violation of this
covenant for the Executive, after the Date of Termination, to join an
investment banking, venture capital, financial advisory or accounting firm that
represents, or engages in any business or investment activity with, an entity
that provides Competitive Services, as long as the Executive is not directly
involved in such representation, engagement or activity.
(d) Exceptions from Disclosure Restrictions. Anything
herein to the contrary notwithstanding, the Executive shall not be restricted
from disclosing or using Confidential Information that: (i) is or becomes
generally available to the public other than as a result of an unauthorized
disclosure by the Executive or his agent; (ii) becomes available to the
Executive in a manner that is not in contravention of applicable law from a
source (other than the Company or its affiliated entities or one of its or
their officers, employees, agents or representatives) that is not bound by a
confidential relationship with the Company or its affiliated entities or by a
confidentiality or other similar agreement; (iii) was known to the Executive on
a non-confidential basis and not in contravention of applicable law or a
confidentiality or other similar agreement before its disclosure to the
Executive by the Company or its affiliated entities or one of its or their
officers, employees, agents or representatives; or (iv) is required to be
disclosed by law, court order or other legal process; provided, however, that
in the event disclosure is required by law, the Executive shall provide the
Company with prompt notice of such requirement so that the Company may seek an
appropriate protective order prior to any such required disclosure by the
Executive.
(e) Consideration for the Restrictive Covenants. In
consideration for the Executive entering into the Restrictive Covenants, the
Company shall pay to the Executive the amount of $555,000, payable in a lump
sum on the date immediately prior to a Change of Control which occurs not later
than one year after the Employment Period.
(f) Enforcement of the Restrictive Covenants.
(i) Rights and Remedies Upon Breach. In the
event the Executive breaches, or threatens to commit a breach of, any of the
provisions of the Restrictive Covenants, the Company shall have the following
rights and remedies, which shall be independent of any others and severally
enforceable, and shall be in addition to, and not in lieu of, any other rights
and remedies available to the Company at law or in equity:
A. the right and remedy to enjoin,
preliminarily and permanently, the Executive from violating or
threatening to violate the Restrictive Covenants and to have the
Restrictive Covenants specifically enforced by any
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16
court of competent jurisdiction, it being agreed that any breach or
threatened breach of the Restrictive Covenants would cause irreparable
injury to the Company and that money damages would not provide an
adequate remedy to the Company; and
B. the right and remedy to require the
Executive to account for and pay over to the Company a prorata portion
of the consideration paid for the Restricted Covenants, based on the
number of days remaining in the Restricted Period; provided, that the
Company's right and remedy under this clause B shall not apply unless
the Company shall have given the Executive notice of the breach of the
Restrictive Covenants and the Executive shall not have cured such
breach, if curable, within 30 days after receipt of such notice.
(ii) Severability of Covenants. The Executive
acknowledges and agrees that the Restrictive Covenants are reasonable and valid
in time and scope and in all other respects. If any court determines that any
of the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the Restrictive Covenants shall not thereby be affected and
shall be given full effect, without regard to the invalid portions.
11. Successors.
(a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than-by a
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17
written agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Xxxxx X. Xxxxxxxx, Xx.
000 Xxxxxxxxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
If to the Company:
Xxxxx Enterprises, Inc.
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: President
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed
to be a waiver of such provision or right or any other provision or right of
this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written agreement between
the Executive and the Company, the employment of the Executive by the Company
is "at will.". From and after the Effective Date, this Agreement shall
supersede any other agreement between the
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parties with respect to the subject matter hereof.
(g) Sections 6, 7, 8, 9 and 10 of this Agreement shall
survive the termination of Executive's Employment under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the
Company has caused these presents to be executed in its name on its behalf, all
as of the day and year first above written.
/s/ Xxxxx X. Xxxxxxxx, Xx.
----------------------------------
Xxxxx X. Xxxxxxxx, Xx.
XXXXX ENTERPRISES, INC.
By: /s/ J. Xxx Xxxxx
----------------------------------
J. Xxx Xxxxx
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