EXHIBIT 10.5
CHANGE IN CONTROL
AGREEMENT
THIS AGREEMENT is made as of the 30th day of June, 2004 by and between XxXxxxxxx
International, Inc., a corporation duly organized under the laws of the Republic
of Panama (the "Company") and Xxxx X. Fees ("Executive".)
In consideration of the mutual covenants and agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby expressly acknowledged, the parties hereto agree as follows:
I. Obligations of the Company Upon Termination of Executive After Change
In Control. Following the Effective Date of a Change In Control, in the
event Executive's employment by the Company is terminated before the
one-year anniversary of the Effective Date of a Change In Control
either (i) by the Company for any reason other than Cause, or (ii) by
the Executive for Good Reason, then subject to the provisions of
paragraph (b) below, the Company shall:
(a) Pay to the Executive within thirty days after the
date of termination of Executive's employment (or
such earlier time as may be required by law) the
Accrued Benefits;
(b) In the event that a bonus is paid after the date of
Executive's termination of employment under the
Company's Executive Incentive Compensation Plan
("EICP") for the year prior to the year in which the
termination takes place (the "Measurement Period"),
pay to the Executive in a lump sum, at the same time
such bonus is paid to other EICP participants, a cash
bonus equal to the product of the multiplier used for
President and Chief Operating Officer and Executive's
annual base salary for the Measurement Period.
(c) Pay to Executive in a lump sum in cash within thirty
days after the date of termination of Executives
employment a payment equal to the product of
Executive's target bonus under EICP for the year in
which the termination takes place and a fraction, the
numerator of which is the number of days that have
elapsed in the year in which the termination takes
place through the date of termination of Executive's
employment and the denominator of which is 365.
(d) Pay to Executive in a lump sum in cash as soon as
administratively practicable after the date of
termination of Executive's employment 200% of the sum
of (1) Executive's annual base salary as in effect
immediately prior to the date of termination of
Executive's employment, and (2) Executive's target
bonus under EICP for the year in which the
termination takes place.
(e) In the event that it is determined that any payment
or distribution of any type to or for the benefit of
the Executive made by the Company, by any of its
affiliates, by any person who acquires ownership or
effective control or ownership of a substantial
portion of the Company's assets (within the meaning
of section 280G of the Internal Revenue Code of 1986,
as amended, and the
regulations thereunder (the "Code")) or by 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")
would be subject to the excise tax imposed by Section
4999 of the Code (the "Excise Tax"), then the
Executive shall be entitled to receive an additional
payment (an "Excise Tax Restoration Payment") in an
amount that shall fund the payment by the Executive
of any Excise Tax on the Total Payments as well as
all income taxes imposed on the Excise Tax
Restoration Payment, and any Excise Tax imposed on
the Excise Tax Restoration Payment.
II. Participation In Other Company Programs.
Nothing in this Agreement shall prevent or limit Executive's continuing
or future participation in any plan, program, policy or practice
provided by the Company for which Executive may qualify, nor, subject
to paragraph (d) of Section X, shall anything herein limit or otherwise
affect such rights as Executive may have under any contract or
agreement with the Company. Amounts which are vested benefits or which
Executive is otherwise entitled to receive under any plan, policy,
practice or program of or any contract or agreement with the Company at
or subsequent to the date of termination of Executive's employment
shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this
Agreement. Notwithstanding the foregoing, it is expressly understood
and acknowledged by Executive that any payment by the Company under
Section I hereof shall be in lieu of any obligation on the part of the
Company for payment of severance benefits under the Severance Plan for
Employees of XxXxxxxxx Incorporated and Participating Subsidiary and
Affiliated Companies or any successor thereto or any other plan, policy
or agreement of the Company in the event of termination of Executive's
employment as provided in Section I hereof with the Company during the
one-year period following the Effective Date of a Change In Control.
III. Confidential and Proprietary Information.
Executive acknowledges and agrees that any and all non-public
information regarding the Company, any of its Subsidiaries and its or
their customers (including but not limited to any and all information
relating to its or their business practices, products, services,
finances, management, strategy, profits and overhead) is confidential
and the unauthorized disclosure of such confidential information will
result in irreparable harm to the Company. Executive shall not, during
his employment by the Company or any of its Subsidiaries and for a
period of five years after termination of such employment (or such
shorter period as may be required by law), disclose or permit the
disclosure of any such confidential information to any person other
than an employee of the Company or its Subsidiaries or an individual
engaged by the Company or its Subsidiaries to render professional
services to the Company or its Subsidiaries under circumstances that
require such person to maintain the confidentiality of such
information, except as such disclosure may be
required by law. The provisions of this Section III shall survive any
termination of this Agreement. For purposes of this Section III, the
term "confidential information" shall not include information that was
or becomes generally available to the public other than as a result of
disclosure by Executive. Executive acknowledges that the execution of
this Agreement and the payments described in Section I herein
constitute consideration for the limitations on activities set forth in
this Section III, the adequacy of which is hereby expressly
acknowledged by Executive. Executive understands and agrees that the
Company shall suffer irreparable harm if Executive breaches Section III
hereof, and that monetary damages shall be inadequate to address any
such breach. Accordingly, Executive agrees that the Company shall have
the right, to the extent permitted by applicable law, and in addition
to any other rights or remedies it may have, to obtain from any court
of competent jurisdiction, injunctive relief to restrain any breach or
threatened breach hereof or otherwise to specifically enforce the
provisions hereof.
IV. Notices.
All notices and other communications provided for by this Agreement
shall be in writing and shall be deemed to have been duly given when
(a) delivered by hand, (b) sent by facsimile or email to the facsimile
number or email address given below, provided that a copy is also sent
by a nationally recognized overnight delivery service, (c) the day
after being sent by a nationally recognized overnight delivery service,
or (d) three days after being mailed by United States Certified Mail,
return receipt requested, postage prepaid, addressed as follows:
If to Executive:
Xxxx X. Fees
0000 Xxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Email: xxxxxx@xxxx.xxx
Facsimile: 000-000-0000
If to the Company:
XxXxxxxxx International, Inc.
c/o Xxxxx X. Xxxxxxx
Senior Vice President, Human Resources
000 X. Xxxxxxxx Xxxxxxx
Xxxxxxx, XX 00000
Email: xxxxxxxxx@xxxxxxxxx.xxx
Facsimile: 000-000-0000
or to such other address as any party may have furnished to the other
in writing in accordance with this Agreement.
V. Governing Law.
The provisions of this Agreement shall be interpreted and construed in
accordance with, and enforcement may be made under, the law of the
State of Texas without reference to principles of conflict of laws.
VI. Successors and Assigns.
(a) This Agreement is personal to Executive and, without the prior
written consent of the Company, shall not be assignable by
Executive otherwise than by will or the laws of descent and
distribution.
(b) This Agreement shall be binding upon and shall inure to the
benefit of the Company and its successors and assigns.
(c) The Company will require that any successor to all or
substantially all of its business and/or assets (whether such
successor acquires such business and/or assets directly or
indirectly, and whether by purchase, merger, consolidation or
otherwise) expressly assume 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 herein defined and any successor to its
business and/or assets.
VII. Employment by Subsidiaries.
If Executive is not employed by XxXxxxxxx International, Inc., but is
only employed by one or more Subsidiaries of XxXxxxxxx International,
Inc., then (a) the "Company" as defined herein shall be deemed to
include such Subsidiary or Subsidiaries, and (b) termination of
employment shall be determined with reference to Executive's employment
by all such Subsidiaries. Further, the Company agrees that it will
perform its obligations hereunder without regard to whether Executive
is employed by the Company or by a Subsidiary or Subsidiaries of the
Company.
VIII. Severability.
If any provision or portion of this Agreement shall be determined to be
invalid or unenforceable for any reason, the remaining provisions of
this Agreement shall be unaffected thereby and shall remain in full
force and effect to the fullest extent permitted by applicable law.
IX. Entire Agreement; Amendment.
This Agreement sets forth the entire Agreement of the parties hereto
and supersedes all prior agreements, understandings and covenants
between the parties with respect to the subject matter hereof. Except
as provided in Section X, paragraphs (d) and (f) or Section XI, this
Agreement may be amended or terminated only by mutual agreement of the
parties in writing.
X. Miscellaneous.
(a) The captions and headings of this Agreement are not part of
the provisions hereof and shall have no force or effect.
(b) The Company shall be entitled to withhold from any amounts
payable under this Agreement such Federal, state, local,
foreign or excise taxes as shall be required or permitted to
be withheld pursuant to any applicable law or regulation.
(c) 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 Executive or the Company may have
hereunder, including, without limitation, the right of
Executive to terminate employment for Good Reason pursuant to
paragraph (g) of Section XII 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.
(d) Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement
between Executive and the Company, the employment of Executive
by the Company is "at will" and, subject to the last sentence
of paragraph (f) of Section XII hereof, Executive's employment
may be terminated by either Executive or the Company at any
time prior to the Effective Date of a Change In Control, in
which case this Agreement shall terminate as provided in
Section XI below and Executive shall have no further rights
under this Agreement.
(e) For purposes of this Agreement, the date of termination of
Executive's employment shall be: (i) if Executive's employment
is terminated by the Company for Cause, the date on which the
Company delivers to Executive the resolution referred to in
the last sentence of Section XII, paragraph (c), or, with
respect to a termination under Section XII, paragraph
(c)(iii), the date on which the Company notifies Executive of
such termination, (ii) if Executive's employment is terminated
by the Company because of Executive's Disability or for a
reason other than Cause or Executive's death or Disability,
the date on which the Company notifies Executive of such
termination, (iii) if executive's employment is terminated by
Executive for Good Reason, the date on which Executive
notifies the Company of such termination (after having given
the Company notice and a thirty-day cure period), or (iv) if
Executive's employment is terminated by reason of death, the
date of death of executive.
(f) The Company may terminate this Agreement at any time prior to
a Change In Control upon giving Executive written notice of
such termination at least thirty days prior to the date of
termination if
either of the following circumstances take place: (i)
Executive's position with the Company is changed so that he
ceases to be an officer of the Company, or (ii) Executive
ceases to be a fulltime employee; provided that if a Change In
Control is announced or occurs during such thirty-day period,
the termination shall not be effective.
(g) This Agreement may be executed in two counterparts, each of
which shall be deemed an original and together shall
constitute one and the same agreement, with one counterpart
being delivered to each party hereto.
(h) In the event the Executive's employment is terminated
following the Effective Date of a Change In Control and before
the one-year anniversary of the Effective Date of a Change In
Control (i) by the Company for Cause or an a result of
Executive's death or disability, or (ii) by Executive without
Good Reason, Executive shall not be entitled to the payments
described in Section 1 hereof.
XI. Term.
This Agreement shall terminate on the earliest to occur of (i)
termination by the Company in accordance with Section X, paragraph (f)
above, (ii) the date one year after the Effective Date of a Change or
Control, or (iii) the date on which Executive's employment with the
Company is terminated (subject to the last sentence of Section XII,
paragraph (g)); provided, however, that if Executive's employment with
the Company is terminated under any of the circumstances described in
Section I hereof, Executive's rights hereunder shall continue following
the termination of his/her employment with the Company until all
benefits to which Executive is entitled hereunder has been paid and the
Company's rights hereunder shall continue until all obligations owed to
it hereunder have been satisfied.
XII. Definitions.
For purposes of this Agreement, the following terms shall have the
meanings given them in this Section XII.
(a) "Accrued Benefits" shall mean:
(i) Any portion of Executive's Annual Base Salary earned
through the date of termination of Executive's
employment and not yet paid;
(ii) Reimbursement for any and all amounts advanced in
connection with Executive's employment for reasonable
and necessary expenses incurred by Executive through
the date of termination of Executive's employment in
accordance with the Company's policies and procedures
on reimbursement of expenses;
(iii) Any earned vacation pay not theretofore used or paid
in accordance with the Company's policy for payment
of earned and unused vacation time; and
(iv) All other payments and benefits to which Executive
may be entitled under the terms of any applicable
compensation arrangement or benefit plan or program
of the Company that do not specify the time of
distribution; provided that Accrued Benefits shall
not include any entitlement to severance under any
severance policy of the Company generally applicable
to the salaried employees of the Company.
(b) "Annual Base Salary" shall mean Executive's annual rate of pay
excluding all other elements of compensation such as, without
limitation, bonuses, perquisites, expatriate or hardship
premiums, restricted stock awards, stock options and
retirement and welfare benefits.
(c) "Cause" shall mean:
(i) the willful and continued failure of Executive to
perform substantially his/her duties with the Company
(occasioned by reason other than physical or mental
illness or disability of Executive) after a written
demand for substantial performance is delivered to
Executive by the Compensation Committee of the Board
or the Chief Executive Officer of the Company which
specifically identifies the manner in which the
Compensation Committee of the Board or the Chief
Executive Officer believes that Executive has not
substantially performed his/her duties, after which
Executive shall have thirty days to defend or remedy
such failure to substantially perform his/her duties:
(ii) the willful engaging by Executive in illegal conduct
or gross misconduct which is materially and
demonstrably injurious to the Company; or
(iii) the conviction of Executive with no further
possibility of appeal or, or plea of nolo contendere
by Executive to, any felony.
The cessation of employment of Executive under subparagraph
(i) and (ii) above shall not be deemed to be for "Cause"
unless and until there shall have been delivered a Executive a
copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of
the Compensation Committee of the Board at a meeting of such
Committee called and held for such purpose (after reasonable
notice is provided to Executive and Executive is given an
opportunity, together with counsel, to be heard before the
Compensation Committee of the Board), finding that, in the
good faith opinion of the Compensation Committee of the Board,
Executive is guilty of the conduct described in subparagraph
(i) or (ii) above, and specifying the particulars thereof in
detail.
(d) "Change In Control" shall be deemed to occur if:
(i) When any "person" or "group" of persons (as such
terms are used in Section 13 and 14 of the Securities
Exchange Act of 1934, as amended from time to time
(the "Exchange Act")), other than the Company or any
employee benefit plan sponsored by the Company,
becomes the "beneficial owner" (as such term is used
in Section 13 of the Exchange Act) of 25 percent or
more of the total number of the Company's common
shares at the time outstanding; or
(ii) of the approval by the vote of the Company's
stockholders holding at least 50 percent (or such
greater percentage as may be required by the
Certificate of Incorporation or Bylaws of the Company
or by law) of the voting stock of the Company of any
merger, consolidation, sales of assets, liquidation
or reorganization in which the Company will not
survive as a publicly owned corporation or;
(iii) when the individuals who, at the beginning of any
period of two years or less, constituted the Board of
Directors of the Company cease, for any reason, to
constitute at least a majority thereof, unless the
election or nomination for election of each new
director was approved by the vote of at least a
majority of the directors then still in office who
were directors at the beginning of such period.
A Change In Control shall not result from any transaction
precipitated by the Company's insolvency, appointment of a
conservator or determination by a regulatory agency that the
Company is insolvent.
(e) "Disability" shall mean circumstances that qualify Executive
for long-term disability benefits under the Company's
Long-Term Disability Plan as in effect immediately prior to
the Change In Control.
(f) "Effective Date" with respect to a Change In Control for
purposes of this Agreement shall be the earliest to occur of
(i) the date on which the Company receives a copy of a
Schedule 13D disclosing beneficial ownership of shares in
accordance with Section XII, paragraph (d)(i) above; (ii) the
effective date of the consummation of a merger, consolidation,
share exchange or similar form of corporate transaction or
liquidation or reorganization in accordance with Section XII,
paragraph (d)(ii); or (iii) the date of the annual or special
meeting of shareholders at which the last director necessary
to meet the requirements of Section XII, paragraph (d)(iii) is
elected. Upon the occurrence of the Effective Date of a Change
In Control, the Board of Directors or its designee shall,
within thirty days thereof, provide written notice to
Executive of the Effective Date of the Change In Control.
Notwithstanding anything to the contrary in this Agreement, if
a Change In
Control occurs and if Executive's employment with the Company
is terminated within the ninety days prior to the Effective
Date of the Change In Control as determined in accordance with
the first sentence of this paragraph (f), and if it is
reasonably demonstrated by Executive that such termination of
employment was at the request of a third party who has taken
steps reasonably calculated to effect a Change In Control, or
otherwise arose in connection with or in anticipation of a
Change In Control, then for all purposes of this Agreement,
the "Effective Date" of the Change In Control shall mean the
date immediately prior to the date of such termination of
employment.
(g) "Good Reason" shall mean:
(i) the assignment to Executive of duties that are
materially inconsistent with Executive's position,
authority, duties or responsibilities immediately
prior to the Change In Control, or any other action
by the Company which results in a material diminution
in such position, authority, duties or
responsibilities;
(ii) requiring Executive, without his consent, to be based
at any office or location other than the office or
location a which Executive was employed immediately
prior to the Change In Control; provided, however,
that any such relocation requests shall not be
grounds for resignation with Good Reason if such
relocation is within a twenty-mile radius of the
location at which Executive was based prior to the
Effective Date of a Change In Control;
(iii) a reduction in Executive's Annual Base Salary in
effect immediately prior to the Change In Control or
a reduction in the target multiplier used to
calculate the annual bonus awarded to Executive below
the target multiplier used to calculate the bonus
paid to Executive under the EICP immediately prior to
the Change In Control, provided, however that in
either case a reduction in the Annual Base Salary or
the target bonus multiplier shall not be considered
"Good Reason" with respect to any year for which such
reduction is part of a reduction uniformly applicable
to all similarly situated employees;
(iv) a change in Executive's eligibility to participate in
incentive compensation plans as in effect immediately
prior to the Change In Control; or
(v) any material breach of this Agreement by the Company,
excluding for this purpose an isolated, insubstantial
or inadvertent action not taken in bad faith and
which is remedied by the Company promptly after
receipt of notice thereof given by Executive.
Upon the occurrence of any of the events described above,
Executive shall give the Company written notice that such
event constitutes Good Reason and the Company shall thereafter
have thirty days in which to cure. If the Company has not
cured in that time, the event shall constitute Good Reason.
(h) "Subsidiaries" shall mean every, limited liability company,
partnership or other entity of which 50% or more of the total
combined voting power of all classes of voting securities or
other equity interests is owned, directly or indirectly, by
XxXxxxxxx International, Inc.
XIII. Arbitration
Any controversy or claim arising out of or relating to this Agreement
(or the breach thereof) shall be settled by final and binding
arbitration in Houston, Texas by one arbitrator selected in accordance
with the Commercial Arbitration Rules (the "Rules") of the American
Arbitration Association (the "Association") then in effect. Subject to
the following provisions, the arbitration shall be conducted in
accordance with the Rules then in effect. Any award entered by the
arbitrator shall be final and binding, and judgment may be entered
thereon by any party hereto in any court of law having competent
jurisdiction. This arbitration provision shall be specifically
enforceable. The Company and the Executive shall each pay half of the
administrative fees of the Association and the compensation of the
arbitrator and shall each be responsible for its or his/her own
attorney's fees and expenses relating to the conduct of the
arbitration.
IN WITHNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
XxXXXXXXX INTERNATIONAL, INC.
By: ________________________________________
Printed Name: _______________________________
Title: ______________________________________
Date: ____________________________________
Executive: __________________________________
Date: ______________________________________