EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into and effective
as of August 1, 2001, by and between Xxxxxxxxxxx International, Inc., a Delaware
corporation (the "Company"), and Xxxx X. Xxxxxx (the "Employee").
WITNESSETH:
WHEREAS, the Company desires to employ the Employee on the terms set forth
below to provide services to the Company, and the Employee is willing to accept
such employment and provide such services on the terms set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the parties hereto do hereby agree:
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) "Cause" shall mean:
(i) the willful and continued failure of the Employee to perform
substantially the Employee's duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Employee by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Employee has not substantially
performed the Employee's duties, or
(ii) the willful engaging by the Employee in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
No act, or failure to act, on the part of the Employee shall be
considered "willful" unless it is done, or omitted to be done, by the Employee
in bad faith or without reasonable belief that the Employee'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 Chief Executive Officer or of 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 Employee in good
faith and in the best interests of the Company. The cessation of employment of
the Employee shall not be deemed to be for Cause unless and until there shall
have been delivered to the Employee 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 Employee, and the Employee is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Employee is guilty of the conduct
described in subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.
(b) "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20 percent or more of either
(A) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) 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 (i),
the following acquisitions shall not constitute a Change of Control:
(A) any acquisition directly from the Company,
(B) any acquisition by the Company,
(C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or
(D) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and (C) of subsection
(iii) of this Section 1(b); or
(ii) 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 stockholders, 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 was 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
(iii) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of
the Company (a "Corporate Transaction") in each case, unless, following
such Corporate Transaction, (A) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction beneficially own, directly
or indirectly, more than 60 percent of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any corporation resulting from such Corporate
Transaction or any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Corporate Transaction) beneficially
owns, directly or indirectly, 20 percent or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction 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 Corporate Transaction and (C) at least a
majority of the members of the board of directors of the corporation
resulting from such Corporate Transaction were members
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of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Corporate
Transaction; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(c) "Good Reason" shall mean the occurrence of any of the following:
(i) the assignment to the Employee of any duties inconsistent in
any material respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a) of this Agreement, or any
other action by the Company which results in a 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 Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3(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 Employee;
(iii) the Company's requiring the Employee to be based at any
office or location other than as provided in Section 3(a) hereof or the
Company's requiring the Employee to travel on Company business to a
substantially greater extent than required immediately prior to the date
hereof;
(iv) any purported termination by the Company of the Employee's
employment otherwise than as expressly permitted by this Agreement;
(v) any failure by the Company to comply with and satisfy Section
10(c) of this Agreement; or
(vi) in the event of a Change of Control or merger, consolidation
or other business combination of the Company in which the Company's
securities cease to be publicly traded, the assignment to the Employee of
any position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities that are not (A) at or
with the ultimate parent company of the entity surviving or resulting from
such merger, consolidation or other business combination and (B)
substantially similar to the Employee's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities as contemplated by Section 3(a);
(d) "Board" shall mean the Board of Directors of the Company.
For purposes of this Agreement, any good faith determination of "Good
Reason" made by the Employee shall be conclusive.
2. Employment Period. The Company hereby agrees that the Company or an
affiliated company will continue the Employee in its employ, and the Employee
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement during the Employment
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Period (as defined below). The "Employment Period" shall mean the period
commencing on the Effective Date (as defined below) and ending on the third
anniversary of the Effective Date; 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 three years after such
Renewal Date, unless at least 60 days prior to the Renewal Date the Company
shall give notice to the Employee that the Employment Period shall not be so
extended. The Effective Date shall be August 1, 2001.
3. Terms of Employment.
(a) Position and Duties. During the Employment Period, (A) the
Employee's position (including status, offices, titles and reporting
requirements, authority, duties and responsibilities) shall be Senior Vice
President of the Company and President of the Company's Drilling and
Intervention Services division, (B) the Employee's services shall be performed
at the Company's principal executive offices in Houston, Texas or other
locations less than 35 miles from such location and (C) the Employee will report
directly to the Company's Chief Executive Officer.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Employee shall
receive an annual base salary of $300,000 ("Annual Base Salary"), which
shall be paid at a monthly rate. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Employee prior to the date hereof and thereafter at
least annually; provided, however, that a salary increase shall not
necessarily be awarded as a result of such review. Any increase in Annual
Base Salary may not serve to limit or reduce any other obligation to the
Employee under this Agreement. Annual Base Salary shall not be reduced
after any such increase. The term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. The Employee shall be eligible for an annual
bonus for each fiscal year ending during the Employment Period on the same
basis as other executive officers under the Company's executive officer
annual incentive program. Each such Annual Bonus shall be paid 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.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Employee shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to all executive officers of the Company and its
affiliated companies, but in no event shall such plans, practices, policies
and programs provide the Employee 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 the most favorable of those provided by the Company and its
affiliated companies for the Employee under such plans, practices, policies
and programs as in effect on the date hereof. As used in this Agreement,
the term "affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
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(iv) Welfare Benefit Plans. During the Employment Period, the
Employee and/or the Employee's family, as the case may be, shall be
eligible to participate 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, salary continuance, employee life, group
life, accidental death and travel accident insurance plans and programs) to
the extent applicable generally to all executive officers of the Company
and its affiliated companies, but in no event shall such plans, practices,
policies and programs provide the Employee with benefits which are less
favorable, in the aggregate, than such plans, practices, policies and
programs in effect for the Employee on the date hereof.
(v) Fringe Benefits. During the Employment Period, the Employee
shall be entitled to (A) a $600 per month car allowance and (B) such other
fringe benefits (including, without limitation, payment of club dues,
payment of professional fees and taxes and payment of related expenses, as
appropriate) in accordance with the most favorable plans, practices,
programs and policies of the Company in effect on the date hereof.
(vi) Vacation. During the Employment Period, the Employee shall
be entitled to at least 3 weeks paid vacation or such greater amount of
paid vacation as may be applicable to the executive officers of the Company
and its affiliated companies.
(vii) Deferred Compensation Plan. During the Employment Period,
the Employee shall be entitled to continue to participate in any deferred
compensation or similar plans in which executive officers of the Company
participate.
(c) Termination of Prior Agreement. The Employee acknowledges and
agrees that this Agreement is being executed in replacement of the Employee's
existing Employment Agreement dated October 4, 1999 (the "Prior Agreement"). As
a result, the Employee and the Company agree that the Prior Agreement is hereby
terminated and of no further force and effect.
4. Termination of Employment.
(a) Death or Disability. The Employee's employment shall terminate
automatically upon the Employee's death during the Employment Period. If the
Company determines in good faith that the Disability of the Employee has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Employee written notice in accordance with
Section 11(b) of this Agreement of its intention to terminate the Employee's
employment. In such event, the Employee's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Employee from the Employee's duties with the Company on a
full-time basis for 180 calendar 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 Employee or the
Employee's legal representative.
(b) Cause. The Company may terminate the Employee's employment during
the Employment Period for Cause.
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(c) Good Reason. The Employee's employment may be terminated by the
Employee during the Employment Period for Good Reason.
(d) Notice of Termination. Any termination during the Employment Period
by the Company for Cause, or by the Employee for Good Reason, shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 11(b) of the 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 Employee'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, in the case of a notice by the Company, shall be not more than 30
days after the giving of such notice). The failure by the Employee 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 Employee or the Company, respectively, from asserting such fact or
circumstance in enforcing the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if the Employee's employment is terminated by the Company for
Cause, or by the Employee 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 Employee's employment is terminated by the Company
other than for Cause, death or Disability, the Date of Termination shall be
the date on which the Company notifies the Employee of such termination;
and
(iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of
the Employee or the Disability Effective Date, as the case may be.
5. Obligations of the Company Upon Termination.
(a) Death. If the Employee's employment is terminated by reason of the
Employee's death during the Employment Period, the Employee's employment shall
terminate automatically without further obligations to the Employee's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and Other Benefits (as defined below) and the rights provided in
Section 6. Accrued Obligations shall be paid to the Employee's estate or
beneficiaries, as applicable, in a lump sum in cash within 30 days after the
Date of Termination. With respect to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 5(a) shall include, without
limitation, and the Employee'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 the
executive officers of the Company and such affiliated companies under such
plans, programs, practices and policies relating to death benefits, if any, in
effect on the date hereof or, if more favorable, those in effect on the date of
the Employee's death.
(b) Disability. If the Employee's employment is terminated by reason of
the Employee's Disability during the Employment Period, the Employee's
employment shall terminate without further obligations to the Employee under
this Agreement, other than for payment of Accrued Obligations
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and Other Benefits and the rights provided in Section 6. Accrued Obligations
shall be paid to the Employee in a lump sum in cash within 30 days after the
Date of Termination. With respect to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 5(b) shall include, without
limitation, and the Employee shall be entitled after the Disability Effective
Date to receive, disability and other benefits at least equal to the most
favorable benefits generally provided by the Company and its affiliated
companies to the Employee's disabled executive officers and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, in effect generally on the date hereof or, if more
favorable, those in effect at the time of the Disability.
(c) Cause; Other Than for Good Reason. If the Employee's employment is
terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Employee, other than the obligation
to pay to the Employee (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Employee and (z) Other Benefits, in each case to the extent theretofore unpaid.
(d) Termination by Employee. If the Employee voluntarily terminates his
employment during the Employment Period for any reason other than for Good
Reason, the Employee's employment shall terminate without further obligations to
the Employee, other than for payment of Accrued Obligations and Other Benefits
and the rights provided in Section 6. In such case, all Accrued Obligations
shall be paid to the Employee in a lump sum in cash within 30 days after the
Date of Termination subject to such other options or restrictions as provided by
law.
(e) Good Reason or Other than For Cause, Death or Disability. If,
during the Employment Period, the Company terminates the Employee's employment
other than for Cause, death or Disability, or the Employee terminates employment
for Good Reason:
(i) The Company shall pay to the Employee 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 Employee's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the highest Annual Bonus received by
the Employee over the preceding three year period and (II) the Annual
Bonus that would be payable in respect of the current fiscal year (and
annualized for any fiscal year consisting of less than 12 months) (such
higher amount being referred to as the "Highest Annual Bonus") 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
Employee under a plan sponsored by the Company (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");
(B) an amount equal to two times the sum of (i) the then
current Annual Base Salary of the Employee and (ii) the Highest Annual
Bonus;
(C) an amount equal to the total of the employer basic and
matching contributions credited to the Employee under the Company's
401(k) Savings Plan (the "401(k) Plan") and any other deferred
compensation plan during the 12-month period immediately preceding the
month of the Employee's Date of Termination multiplied by
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multiplied by two, such amount to be grossed up so that the amount the
Employee actually receives after payment of any federal or state taxes
payable thereon equals the amount first described above.; and
(D) the total amount of all fringe benefits received by
Employee on an annualized basis multiplied by two.
(ii) For a period of two years from the Employee'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 Employee and/or the Employee's family equal to those which
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(iv) of this Agreement if
the Employee's employment had not been terminated; provided, however, that
with respect to any of such plans, programs, practices or policies
requiring an employee contribution, the Employee shall continue to pay the
monthly employee contribution for same, and provided further, that if the
Employee becomes re-employed by 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.
(iii) All benefits and amounts under the Company's deferred
compensation plan and the 401(k) Plan and any other similar plans,
including all stock options, restricted stock or other stock-based awards
held by the Employee, not already vested shall be 100% vested.
(iv) To the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Employee any other amounts or benefits
required to be paid or provided or which the Employee is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies (collectively, the
"Other Benefits").
6. Other Rights. Except as provided herein, nothing in this Agreement shall
prevent or limit the Employee'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 Employee may qualify, nor shall anything herein
limit or otherwise affect such rights as the Employee may have under any
contract or agreement with the Company or any of its affiliated companies.
Except as provided hereinafter, amounts which are vested benefits or which the
Employee 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. It is expressly agreed by the Employee that the Employee shall have
no right to receive, and hereby waives any entitlement to, any severance pay or
similar benefit under any other plan, policy, practice or program of the
Company. In addition, if the Employee has any other employment or similar
agreement with the Company at the Date of Termination, the Employee agrees that
he shall have the right to receive all of the benefits provided under this
Agreement or such other agreement, whichever one, in its entirety, the Employee
chooses, but not both agreements, and when the Employee has made such election,
the other agreement shall be superseded in its entirety and shall be of no
further force and effect. The Employee also agrees that to the extent he may be
eligible for any severance pay or similar benefit under any laws providing for
severance or termination benefits, such other severance pay or similar benefit
shall be coordinated with the benefits owed hereunder, such that the Employee
shall not receive duplicate benefits.
7. Full Settlement.
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(a) No Rights of Offset. 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
Employee or others.
(b) No Mitigation Required. In no event shall the Employee be obligated
to seek other employment or take any other action by way of mitigation of the
amounts payable to the Employee under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not the Employee obtains other
employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Employee of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereto (including as a result of any contest by the Employee 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").
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Employee (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 8) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 8(a), if it shall be determined that the Employee is
entitled to a Gross-Up Payment, but that the Employee, after taking into account
the Payments and the Gross-Up Payment, would not receive a net after-tax benefit
of at least $1,000 (taking into account both income taxes and any Excise Tax) as
compared to the net after-tax proceeds to the Employee resulting from an
elimination of the Gross-Up Payment and a reduction of the Payments, in the
aggregate, to an amount (the "Reduced Amount") such that the receipt of Payments
would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to
the Employee and the Payments, in the aggregate, shall be reduced to the Reduced
Amount.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination shall be made by Xxxxxx
Xxxxxxxx LLP or, as provided below, such other certified public accounting firm
as may be designated by the Employee (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Employee within 15
business days after the receipt of notice from the Employee that there has been
a Payment, 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
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Change of Control, the Employee shall 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
Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the
Company to the Employee within five days after the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Employee. 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 Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 8(c) and the Employee
thereafter is required to make a payment of any Excise Tax, 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
Employee.
(c) The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service (the "IRS") that, if successful, would require the
payment by the Company of the Gross-Up Payment (or an additional Gross-Up
Payment) in the event the IRS seeks higher payment. Such notification shall be
given as soon as practicable, but no later than ten business days after the
Employee is informed in writing of such claim, and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Employee in writing
prior to the expiration of such period that it desires to contest such claim,
the Employee shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order to
effectively contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claims; provided, however, that the Company shall bear and
pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such costs and shall indemnify and
hold the Employee harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 8(c), the
Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the
Employee to pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and the Employee agrees to prosecute such
contest to determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs the
Employee to pay such claim and xxx for a refund, the Company shall advance
the amount of such payment to the
10
Employee, on an interest-free basis and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Employee with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Employee shall be
entitled to settle or contest, as the case may be, any other issues raised
by the IRS or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by the
Company pursuant to Section 8(c), the Employee becomes entitled to receive any
refund with respect to such claim, the Employee shall (subject to the Company's
complying with the requirements of Section 8(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 8(c), a determination is made that
the Employee shall not be entitled to any refund with respect to such claim and
the Company does not notify the Employee in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Employee
during the Employee's employment by the Company or any of its affiliated
companies, provided that it shall not apply to information which is or shall
become public knowledge (other than by acts by the Employee or representatives
of the Employee in violation of this Agreement), information that is developed
by the Employee independently of such information, or knowledge or data or
information that is disclosed to the Employee by a third party under no
obligation of confidentiality to the Company. After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provision of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Employee under
this Agreement.
10. Successors.
(a) This Agreement is personal to the Employee and shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Employee'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
11
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.
11. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS, 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 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 Employee: Xxxx X. Xxxxxx
0000 Xxxxxxxx Xx.
Xxxxx Xxxx, XX 00000
If to the Company: Xxxxxxxxxxx International, Inc.
000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices 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 Employee's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right to the Employee or the Company may have hereunder, including without
limitation, the right of the Employee to terminate employment for Good Reason
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) This Agreement constitutes the entire agreement and understanding
between the parties relating to the subject matter hereof and supersedes all
prior agreements between the parties relating to the subject matter hereof,
including, without limitation, the Prior Agreement.
12
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/s/ XXXX X. XXXXXX
-------------------------------------------
Xxxx X. Xxxxxx
XXXXXXXXXXX INTERNATIONAL, INC.
By: /s/ XXX X. XXXXXXXXX
---------------------------------------
Xxx X. Xxxxxxxxx
Senior Vice President - Human Resources
13
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into and effective
as of August 1, 2001, by and between Xxxxxxxxxxx International, Inc., a Delaware
corporation (the "Company"), and Xxxx X. Xxxxxxx (the "Employee").
WITNESSETH:
WHEREAS, the Company desires to employ the Employee on the terms set forth
below to provide services to the Company, and the Employee is willing to accept
such employment and provide such services on the terms set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the parties hereto do hereby agree:
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) "Cause" shall mean:
(i) the willful and continued failure of the Employee to perform
substantially the Employee's duties with the Company or one of its affiliates
(other than any such failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is delivered to the
Employee by the Board or the Chief Executive Officer of the Company which
specifically identifies the manner in which the Employee has not substantially
performed the Employee's duties, or
(ii) the willful engaging by the Employee in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the Company.
No act, or failure to act, on the part of the Employee shall be
considered "willful" unless it is done, or omitted to be done, by the Employee
in bad faith or without reasonable belief that the Employee'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 Chief Executive Officer or of 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 Employee in good
faith and in the best interests of the Company. The cessation of employment of
the Employee shall not be deemed to be for Cause unless and until there shall
have been delivered to the Employee 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 Employee, and the Employee is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Employee is guilty of the conduct
described in subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.
(b) "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20 percent or more of either
(A) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) 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 (i),
the following acquisitions shall not constitute a Change of Control:
(A) any acquisition directly from the Company,
(B) any acquisition by the Company,
(C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company, or
(D) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and (C) of subsection
(iii) of this Section 1(b); or
(ii) 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 stockholders, 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 was 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
(iii) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of
the Company (a "Corporate Transaction") in each case, unless, following
such Corporate Transaction, (A) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Corporate Transaction beneficially own, directly
or indirectly, more than 60 percent of, respectively, the then outstanding
shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Corporate Transaction, of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any corporation resulting from such Corporate
Transaction or any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Corporate Transaction) beneficially
owns, directly or indirectly, 20 percent or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Corporate Transaction 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 Corporate Transaction and (C) at least a
majority of the members of the board of directors of the corporation
resulting from such Corporate Transaction were members
2
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Corporate
Transaction; or
(iv) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
(c) "Good Reason" shall mean the occurrence of any of the following:
(i) the assignment to the Employee of any duties inconsistent in
any material respect with the Employee's position (including status,
offices, titles and reporting requirements), authority, duties or
responsibilities as contemplated by Section 3(a) of this Agreement, or any
other action by the Company which results in a 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 Employee;
(ii) any failure by the Company to comply with any of the
provisions of Section 3(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 Employee;
(iii) the Company's requiring the Employee to be based at any
office or location other than as provided in Section 3(a) hereof or the
Company's requiring the Employee to travel on Company business to a
substantially greater extent than required immediately prior to the date
hereof;
(iv) any purported termination by the Company of the Employee's
employment otherwise than as expressly permitted by this Agreement;
(v) any failure by the Company to comply with and satisfy Section
10(c) of this Agreement; or
(vi) in the event of a Change of Control or merger, consolidation
or other business combination of the Company in which the Company's
securities cease to be publicly traded, the assignment to the Employee of
any position (including status, offices, titles and reporting
requirements), authority, duties or responsibilities that are not (A) at or
with the ultimate parent company of the entity surviving or resulting from
such merger, consolidation or other business combination and (B)
substantially similar to the Employee's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities as contemplated by Section 3(a);
(d) "Board" shall mean the Board of Directors of the Company.
For purposes of this Agreement, any good faith determination of "Good
Reason" made by the Employee shall be conclusive.
2. Employment Period. The Company hereby agrees that the Company or an
affiliated company will continue the Employee in its employ, and the Employee
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement during the Employment
3
Period (as defined below). The "Employment Period" shall mean the period
commencing on the Effective Date (as defined below) and ending on the third
anniversary of the Effective Date; 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 three years after such
Renewal Date, unless at least 60 days prior to the Renewal Date the Company
shall give notice to the Employee that the Employment Period shall not be so
extended. The Effective Date shall be August 1, 2001.
3. Terms of Employment.
(a) Position and Duties. During the Employment Period, (A) the
Employee's position (including status, offices, titles and reporting
requirements, authority, duties and responsibilities) shall be Senior Vice
President of the Company and President of the Company's Completion Systems
division, (B) the Employee's services shall be performed at the Company's
principal executive offices in Houston, Texas or other locations less than 35
miles from such location and (C) the Employee will report directly to the
Company's Chief Executive Officer.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Employee shall
receive an annual base salary of $250,008 ("Annual Base Salary"), which
shall be paid at a monthly rate. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Employee prior to the date hereof and thereafter at
least annually; provided, however, that a salary increase shall not
necessarily be awarded as a result of such review. Any increase in Annual
Base Salary may not serve to limit or reduce any other obligation to the
Employee under this Agreement. Annual Base Salary shall not be reduced
after any such increase. The term Annual Base Salary as utilized in this
Agreement shall refer to Annual Base Salary as so increased.
(ii) Annual Bonus. The Employee shall be eligible for an annual
bonus for each fiscal year ending during the Employment Period on the same
basis as other executive officers under the Company's executive officer
annual incentive program. Each such Annual Bonus shall be paid 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.
(iii) Incentive, Savings and Retirement Plans. During the
Employment Period, the Employee shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
applicable generally to all executive officers of the Company and its
affiliated companies, but in no event shall such plans, practices, policies
and programs provide the Employee 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 the most favorable of those provided by the Company and its
affiliated companies for the Employee under such plans, practices, policies
and programs as in effect on the date hereof. As used in this Agreement,
the term "affiliated companies" shall include any company controlled by,
controlling or under common control with the Company.
4
(iv) Welfare Benefit Plans. During the Employment Period, the
Employee and/or the Employee's family, as the case may be, shall be
eligible to participate 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, salary continuance, employee life, group
life, accidental death and travel accident insurance plans and programs) to
the extent applicable generally to all executive officers of the Company
and its affiliated companies, but in no event shall such plans, practices,
policies and programs provide the Employee with benefits which are less
favorable, in the aggregate, than such plans, practices, policies and
programs in effect for the Employee on the date hereof.
(v) Fringe Benefits. During the Employment Period, the Employee
shall be entitled to (A) a $600 per month car allowance and (B) such other
fringe benefits (including, without limitation, payment of club dues,
payment of professional fees and taxes and payment of related expenses, as
appropriate) in accordance with the most favorable plans, practices,
programs and policies of the Company in effect on the date hereof.
(vi) Vacation. During the Employment Period, the Employee shall
be entitled to at least 3 weeks paid vacation or such greater amount of
paid vacation as may be applicable to the executive officers of the Company
and its affiliated companies.
(vii) Deferred Compensation Plan. During the Employment Period,
the Employee shall be entitled to continue to participate in any deferred
compensation or similar plans in which executive officers of the Company
participate.
(c) Termination of Prior Agreement. The Employee acknowledges and
agrees that this Agreement is being executed in replacement of the Employee's
existing Employment Agreement dated October 4, 1999 (the "Prior Agreement"). As
a result, the Employee and the Company agree that Prior Agreement is hereby
terminated and of no further force and effect.
4. Termination of Employment.
(a) Death or Disability. The Employee's employment shall terminate
automatically upon the Employee's death during the Employment Period. If the
Company determines in good faith that the Disability of the Employee has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Employee written notice in accordance with
Section 11(b) of this Agreement of its intention to terminate the Employee's
employment. In such event, the Employee's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Employee from the Employee's duties with the Company on a
full-time basis for 180 calendar 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 Employee or the
Employee's legal representative.
(b) Cause. The Company may terminate the Employee's employment during
the Employment Period for Cause.
5
(c) Good Reason. The Employee's employment may be terminated by the
Employee during the Employment Period for Good Reason.
(d) Notice of Termination. Any termination during the Employment Period
by the Company for Cause, or by the Employee for Good Reason, shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 11(b) of the 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 Employee'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, in the case of a notice by the Company, shall be not more than 30
days after the giving of such notice). The failure by the Employee 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 Employee or the Company, respectively, from asserting such fact or
circumstance in enforcing the Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if the Employee's employment is terminated by the Company for
Cause, or by the Employee 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 Employee's employment is terminated by the Company
other than for Cause, death or Disability, the Date of Termination shall be
the date on which the Company notifies the Employee of such termination;
and
(iii) if the Employee's employment is terminated by reason of
death or Disability, the Date of Termination shall be the date of death of
the Employee or the Disability Effective Date, as the case may be.
5. Obligations of the Company Upon Termination.
(a) Death. If the Employee's employment is terminated by reason of the
Employee's death during the Employment Period, the Employee's employment shall
terminate automatically without further obligations to the Employee's legal
representatives under this Agreement, other than for payment of Accrued
Obligations and Other Benefits (as defined below) and the rights provided in
Section 6. Accrued Obligations shall be paid to the Employee's estate or
beneficiaries, as applicable, in a lump sum in cash within 30 days after the
Date of Termination. With respect to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 5(a) shall include, without
limitation, and the Employee'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 the
executive officers of the Company and such affiliated companies under such
plans, programs, practices and policies relating to death benefits, if any, in
effect on the date hereof or, if more favorable, those in effect on the date of
the Employee's death.
(b) Disability. If the Employee's employment is terminated by reason of
the Employee's Disability during the Employment Period, the Employee's
employment shall terminate without further obligations to the Employee under
this Agreement, other than for payment of Accrued Obligations
6
and Other Benefits and the rights provided in Section 6. Accrued Obligations
shall be paid to the Employee in a lump sum in cash within 30 days after the
Date of Termination. With respect to the provision of Other Benefits, the term
Other Benefits as utilized in this Section 5(b) shall include, without
limitation, and the Employee shall be entitled after the Disability Effective
Date to receive, disability and other benefits at least equal to the most
favorable benefits generally provided by the Company and its affiliated
companies to the Employee's disabled executive officers and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, in effect generally on the date hereof or, if more
favorable, those in effect at the time of the Disability.
(c) Cause; Other Than for Good Reason. If the Employee's employment is
terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Employee, other than the obligation
to pay to the Employee (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Employee and (z) Other Benefits, in each case to the extent theretofore unpaid.
(d) Termination by Employee. If the Employee voluntarily terminates his
employment during the Employment Period for any reason other than for Good
Reason, the Employee's employment shall terminate without further obligations to
the Employee, other than for payment of Accrued Obligations and Other Benefits
and the rights provided in Section 6. In such case, all Accrued Obligations
shall be paid to the Employee in a lump sum in cash within 30 days after the
Date of Termination subject to such other options or restrictions as provided by
law.
(e) Good Reason or Other than For Cause, Death or Disability. If,
during the Employment Period, the Company terminates the Employee's employment
other than for Cause, death or Disability, or the Employee terminates employment
for Good Reason:
(i) The Company shall pay to the Employee 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 Employee's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the highest Annual Bonus received by
the Employee over the preceding three year period and (II) the Annual
Bonus that would be payable in respect of the current fiscal year (and
annualized for any fiscal year consisting of less than 12 months) (such
higher amount being referred to as the "Highest Annual Bonus") 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
Employee under a plan sponsored by the Company (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");
(B) an amount equal to two times the sum of (i) the then
current Annual Base Salary of the Employee and (ii) the Highest Annual
Bonus;
(C) an amount equal to the total of the employer basic and
matching contributions credited to the Employee under the Company's
401(k) Savings Plan (the "401(k) Plan") and any other deferred
compensation plan during the 12-month period immediately preceding the
month of the Employee's Date of Termination multiplied by
7
multiplied by two, such amount to be grossed up so that the amount the
Employee actually receives after payment of any federal or state taxes
payable thereon equals the amount first described above.; and
(D) the total amount of all fringe benefits received by
Employee on an annualized basis multiplied by two.
(ii) For a period of two years from the Employee'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 Employee and/or the Employee's family equal to those which
would have been provided to them in accordance with the plans, programs,
practices and policies described in Section 3(b)(iv) of this Agreement if
the Employee's employment had not been terminated; provided, however, that
with respect to any of such plans, programs, practices or policies
requiring an employee contribution, the Employee shall continue to pay the
monthly employee contribution for same, and provided further, that if the
Employee becomes re-employed by 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.
(iii) All benefits and amounts under the Company's deferred
compensation plan and the 401(k) Plan and any other similar plans,
including all stock options, restricted stock or other stock-based awards
held by the Employee, not already vested shall be 100% vested.
(iv) To the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Employee any other amounts or benefits
required to be paid or provided or which the Employee is eligible to
receive under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies (collectively, the
"Other Benefits").
6. Other Rights. Except as provided herein, nothing in this Agreement shall
prevent or limit the Employee'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 Employee may qualify, nor shall anything herein
limit or otherwise affect such rights as the Employee may have under any
contract or agreement with the Company or any of its affiliated companies.
Except as provided hereinafter, amounts which are vested benefits or which the
Employee 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. It is expressly agreed by the Employee that the Employee shall have
no right to receive, and hereby waives any entitlement to, any severance pay or
similar benefit under any other plan, policy, practice or program of the
Company. In addition, if the Employee has any other employment or similar
agreement with the Company at the Date of Termination, the Employee agrees that
he shall have the right to receive all of the benefits provided under this
Agreement or such other agreement, whichever one, in its entirety, the Employee
chooses, but not both agreements, and when the Employee has made such election,
the other agreement shall be superseded in its entirety and shall be of no
further force and effect. The Employee also agrees that to the extent he may be
eligible for any severance pay or similar benefit under any laws providing for
severance or termination benefits, such other severance pay or similar benefit
shall be coordinated with the benefits owed hereunder, such that the Employee
shall not receive duplicate benefits.
7. Full Settlement.
8
(a) No Rights of Offset. 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
Employee or others.
(b) No Mitigation Required. In no event shall the Employee be obligated
to seek other employment or take any other action by way of mitigation of the
amounts payable to the Employee under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not the Employee obtains other
employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Employee of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereto (including as a result of any contest by the Employee 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").
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company to or for the benefit of the Employee (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 8) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Employee with respect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Employee shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed with respect
to such taxes), including without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 8(a), if it shall be determined that the Employee is
entitled to a Gross-Up Payment, but that the Employee, after taking into account
the Payments and the Gross-Up Payment, would not receive a net after-tax benefit
of at least $1,000 (taking into account both income taxes and any Excise Tax) as
compared to the net after-tax proceeds to the Employee resulting from an
elimination of the Gross-Up Payment and a reduction of the Payments, in the
aggregate, to an amount (the "Reduced Amount") such that the receipt of Payments
would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to
the Employee and the Payments, in the aggregate, shall be reduced to the Reduced
Amount.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination shall be made by Xxxxxx
Xxxxxxxx LLP or, as provided below, such other certified public accounting firm
as may be designated by the Employee (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Employee within 15
business days after the receipt of notice from the Employee that there has been
a Payment, 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
9
Change of Control, the Employee shall 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
Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the
Company to the Employee within five days after the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Employee. 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 Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 8(c) and the Employee
thereafter is required to make a payment of any Excise Tax, 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
Employee.
(c) The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service (the "IRS") that, if successful, would require the
payment by the Company of the Gross-Up Payment (or an additional Gross-Up
Payment) in the event the IRS seeks higher payment. Such notification shall be
given as soon as practicable, but no later than ten business days after the
Employee is informed in writing of such claim, and shall apprise the Company of
the nature of such claim and the date on which such claim is requested to be
paid. The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Employee in writing
prior to the expiration of such period that it desires to contest such claim,
the Employee shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time,
including without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order to
effectively contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claims; provided, however, that the Company shall bear and
pay directly all costs and expenses (including additional interest and
penalties) incurred in connection with such costs and shall indemnify and
hold the Employee harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed
as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 8(c), the
Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the
Employee to pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and the Employee agrees to prosecute such
contest to determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company
shall determine; provided, however, that if the Company directs the
Employee to pay such claim and xxx for a refund, the Company shall advance
the amount of such payment to the
10
Employee, on an interest-free basis and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the
Employee with respect to which such contested amount is claimed to be due
is limited solely to such contested amount. Furthermore, the Company's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Employee shall be
entitled to settle or contest, as the case may be, any other issues raised
by the IRS or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by the
Company pursuant to Section 8(c), the Employee becomes entitled to receive any
refund with respect to such claim, the Employee shall (subject to the Company's
complying with the requirements of Section 8(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 8(c), a determination is made that
the Employee shall not be entitled to any refund with respect to such claim and
the Company does not notify the Employee in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Employee
during the Employee's employment by the Company or any of its affiliated
companies, provided that it shall not apply to information which is or shall
become public knowledge (other than by acts by the Employee or representatives
of the Employee in violation of this Agreement), information that is developed
by the Employee independently of such information, or knowledge or data or
information that is disclosed to the Employee by a third party under no
obligation of confidentiality to the Company. After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provision of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Employee under
this Agreement.
10. Successors.
(a) This Agreement is personal to the Employee and shall not be
assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Employee'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
11
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.
11. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF TEXAS, 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 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 Employee: Xxxx X. Xxxxxxx
Xx. 0, Xxx 000
Xxxxx, Xxxxx 00000
If to the Company: Xxxxxxxxxxx International, Inc.
000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices 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 Employee's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right to the Employee or the Company may have hereunder, including without
limitation, the right of the Employee to terminate employment for Good Reason
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) This Agreement constitutes the entire agreement and understanding
between the parties relating to the subject matter hereof and supersedes all
prior agreements between the parties relating to the subject matter hereof,
including, without limitation, the Prior Agreement.
12
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand and,
pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/s/ XXXX X. XXXXXXX
-------------------------------------------
Xxxx X. Xxxxxxx
XXXXXXXXXXX INTERNATIONAL, INC.
By: /s/ XXX X. XXXXXXXXX
---------------------------------------
Xxx X. Xxxxxxxxx
Senior Vice President - Human Resources
13
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into and
effective as of August 1, 2001, by and between Xxxxxxxxxxx International, Inc.,
a Delaware corporation (the "Company"), and Xxxx X. Xxxxxx (the "Employee").
WITNESSETH:
WHEREAS, the Company desires to employ the Employee on the terms set
forth below to provide services to the Company, and the Employee is willing to
accept such employment and provide such services on the terms set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the parties hereto do hereby agree:
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) "Cause" shall mean:
(i) the willful and continued failure of the Employee
to perform substantially the Employee's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Employee by the Board or the Chief Executive Officer of the
Company which specifically identifies the manner in which the Employee has not
substantially performed the Employee's duties, or
(ii) the willful engaging by the Employee in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company.
No act, or failure to act, on the part of the Employee shall
be considered "willful" unless it is done, or omitted to be done, by the
Employee in bad faith or without reasonable belief that the Employee'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 Chief Executive Officer or of 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 Employee in good
faith and in the best interests of the Company. The cessation of employment of
the Employee shall not be deemed to be for Cause unless and until there shall
have been delivered to the Employee 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 Employee, and the Employee is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Employee is guilty of the conduct
described in subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.
(b) "Change of Control" shall mean:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20 percent or more of either (A)
the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) 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
(i), the following acquisitions shall not constitute a Change of
Control:
(A) any acquisition directly from the
Company,
(B) any acquisition by the Company,
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or
(D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A), (B)
and (C) of subsection (iii) of this Section 1(b); or
(ii) 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 stockholders, 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 was 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
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Corporate Transaction") in each case,
unless, following such Corporate Transaction, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Corporate
Transaction beneficially own, directly or indirectly, more than 60
percent of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any corporation resulting from such
Corporate Transaction or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Corporate
Transaction) beneficially owns, directly or indirectly, 20 percent or
more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Corporate Transaction or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such
2
ownership existed prior to the Corporate Transaction and (C) at least a
majority of the members of the board of directors of the corporation
resulting from such Corporate Transaction 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 Corporate Transaction; or
(iv) Approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
(c) "Good Reason" shall mean the occurrence of any of the
following:
(i) the assignment to the Employee of any duties
inconsistent in any material respect with the Employee's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 3(a)
of this Agreement, or any other action by the Company which results in
a 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 Employee;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(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 Employee;
(iii) the Company's requiring the Employee to be
based at any office or location other than as provided in Section 3(a)
hereof or the Company's requiring the Employee to travel on Company
business to a substantially greater extent than required immediately
prior to the date hereof;
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this
Agreement;
(v) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement; or
(vi) in the event of a Change of Control or merger,
consolidation or other business combination of the Company in which the
Company's securities cease to be publicly traded, the assignment to the
Employee of any position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities that are
not (A) at or with the ultimate parent company of the entity surviving
or resulting from such merger, consolidation or other business
combination and (B) substantially similar to the Employee's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities as contemplated by Section 3(a);
(d) "Board" shall mean the Board of Directors of the Company.
For purposes of this Agreement, any good faith determination
of "Good Reason" made by the Employee shall be conclusive.
3
2. Employment Period. The Company hereby agrees that the Company or an
affiliated company will continue the Employee in its employ, and the Employee
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement during the Employment Period (as
defined below). The "Employment Period" shall mean the period commencing on the
Effective Date (as defined below) and ending on the third anniversary of the
Effective Date; 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 three years after such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Employee that the Employment Period shall not be so extended. The
Effective Date shall be August 1, 2001.
3. Terms of Employment.
(a) Position and Duties. During the Employment Period, (A) the
Employee's position (including status, offices, titles and reporting
requirements, authority, duties and responsibilities) shall be Vice President,
General Counsel and Secretary of the Company, (B) the Employee's services shall
be performed at the Company's principal executive offices in Houston, Texas or
other locations less than 35 miles from such location and (C) the Employee will
report directly to the Company's Chief Executive Officer.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Employee shall receive an annual base salary of $200,000 ("Annual Base
Salary"), which shall be paid at a monthly rate. During the Employment
Period, the Annual Base Salary shall be reviewed no more than 12 months
after the last salary increase awarded to the Employee prior to the
date hereof and thereafter at least annually; provided, however, that a
salary increase shall not necessarily be awarded as a result of such
review. Any increase in Annual Base Salary may not serve to limit or
reduce any other obligation to the Employee under this Agreement.
Annual Base Salary shall not be reduced after any such increase. The
term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. The Employee shall be eligible for
an annual bonus for each fiscal year ending during the Employment
Period on the same basis as other executive officers under the
Company's executive officer annual incentive program. Each such Annual
Bonus shall be paid 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.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Employee shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and
programs applicable generally to all executive officers of the Company
and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Employee 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 the
most favorable of those provided by the Company and its affiliated
companies for the Employee under such plans, practices, policies and
programs as in effect on the date hereof. As used in this
4
Agreement, the term "affiliated companies" shall include any company
controlled by, controlling or under common control with the Company.
(iv) Welfare Benefit Plans. During the Employment
Period, the Employee and/or the Employee's family, as the case may be,
shall be eligible to participate 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, salary
continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable
generally to all executive officers of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and
programs provide the Employee with benefits which are less favorable,
in the aggregate, than such plans, practices, policies and programs in
effect for the Employee on the date hereof.
(v) Fringe Benefits. During the Employment Period,
the Employee shall be entitled to (A) a $600 per month car allowance
and (B) such other fringe benefits (including, without limitation,
payment of club dues, payment of professional fees and taxes and
payment of related expenses, as appropriate) in accordance with the
most favorable plans, practices, programs and policies of the Company
in effect on the date hereof.
(vi) Vacation. During the Employment Period, the
Employee shall be entitled to at least 3 weeks paid vacation or such
greater amount of paid vacation as may be applicable to the executive
officers of the Company and its affiliated companies.
(vii) Deferred Compensation Plan. During the
Employment Period, the Employee shall be entitled to continue to
participate in any deferred compensation or similar plans in which
executive officers of the Company participate.
(c) Termination of Prior Agreement. The Employee acknowledges
and agrees that this Agreement is being executed in replacement of the
Employee's existing Change of Control Agreement dated June 10, 1998 (the "Prior
Agreement"). As a result, the Employee and the Company agree that the Prior
Agreement is hereby terminated and of no further force and effect.
4. Termination of Employment.
(a) Death or Disability. The Employee's employment shall
terminate automatically upon the Employee's death during the Employment Period.
If the Company determines in good faith that the Disability of the Employee has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Employee written notice in accordance with
Section 11(b) of this Agreement of its intention to terminate the Employee's
employment. In such event, the Employee's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Employee from the Employee's duties with the Company on a
full-time basis for 180 calendar 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 Employee or the
Employee's legal representative.
5
(b) Cause. The Company may terminate the Employee's employment
during the Employment Period for Cause.
(c) Good Reason. The Employee's employment may be terminated
by the Employee during the Employment Period for Good Reason.
(d) Notice of Termination. Any termination during the
Employment Period by the Company for Cause, or by the Employee for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 11(b) of the 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 Employee'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, in the case of a notice by the Company, shall be
not more than 30 days after the giving of such notice). The failure by the
Employee 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 Employee or the Company, respectively, from asserting
such fact or circumstance in enforcing the Employee's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if the Employee's employment is terminated by the
Company for Cause, or by the Employee 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 Employee's employment is terminated by
the Company other than for Cause, death or Disability, the Date of
Termination shall be the date on which the Company notifies the
Employee of such termination; and
(iii) if the Employee's employment is terminated by
reason of death or Disability, the Date of Termination shall be the
date of death of the Employee or the Disability Effective Date, as the
case may be.
5. Obligations of the Company Upon Termination.
(a) Death. If the Employee's employment is terminated by
reason of the Employee's death during the Employment Period, the Employee's
employment shall terminate automatically without further obligations to the
Employee's legal representatives under this Agreement, other than for payment of
Accrued Obligations and Other Benefits (as defined below) and the rights
provided in Section 6. Accrued Obligations shall be paid to the Employee's
estate or beneficiaries, as applicable, in a lump sum in cash within 30 days
after the Date of Termination. With respect to the provision of Other Benefits,
the term Other Benefits as utilized in this Section 5(a) shall include, without
limitation, and the Employee'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 the
executive officers of the Company and such affiliated companies under such
plans, programs, practices and policies relating to death benefits, if any, in
effect on the date hereof or, if more favorable, those in effect on the date of
the Employee's death.
6
(b) Disability. If the Employee's employment is terminated by
reason of the Employee's Disability during the Employment Period, the Employee's
employment shall terminate without further obligations to the Employee under
this Agreement, other than for payment of Accrued Obligations and Other Benefits
and the rights provided in Section 6. Accrued Obligations shall be paid to the
Employee in a lump sum in cash within 30 days after the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 5(b) shall include, without limitation, and the
Employee shall be entitled after the Disability Effective Date to receive,
disability and other benefits at least equal to the most favorable benefits
generally provided by the Company and its affiliated companies to the Employee's
disabled executive officers and/or their families in accordance with such plans,
programs, practices and policies relating to disability, if any, in effect
generally on the date hereof or, if more favorable, those in effect at the time
of the Disability.
(c) Cause; Other Than for Good Reason. If the Employee's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Employee, other than the
obligation to pay to the Employee (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Employee and (z) Other Benefits, in each case to the extent theretofore unpaid.
(d) Termination by Employee. If the Employee voluntarily
terminates his employment during the Employment Period for any reason other than
for Good Reason, the Employee's employment shall terminate without further
obligations to the Employee, other than for payment of Accrued Obligations and
Other Benefits and the rights provided in Section 6. In such case, all Accrued
Obligations shall be paid to the Employee in a lump sum in cash within 30 days
after the Date of Termination subject to such other options or restrictions as
provided by law.
(e) Good Reason or Other than For Cause, Death or Disability.
If, during the Employment Period, the Company terminates the Employee's
employment other than for Cause, death or Disability, or the Employee terminates
employment for Good Reason:
(i) The Company shall pay to the Employee 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 Employee's Annual
Base Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the higher of (I) the
highest Annual Bonus received by the Employee over the
preceding three year period and (II) the Annual Bonus that
would be payable in respect of the current fiscal year (and
annualized for any fiscal year consisting of less than 12
months) (such higher amount being referred to as the "Highest
Annual Bonus") 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 Employee under a
plan sponsored by the Company (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");
(B) an amount equal to two times the sum of
(i) the then current Annual Base Salary of the Employee and
(ii) the Highest Annual Bonus;
7
(C) an amount equal to the total of the
employer basic and matching contributions credited to the
Employee under the Company's 401(k) Savings Plan (the "401(k)
Plan") and any other deferred compensation plan during the
12-month period immediately preceding the month of the
Employee's Date of Termination multiplied by multiplied by
two, such amount to be grossed up so that the amount the
Employee actually receives after payment of any federal or
state taxes payable thereon equals the amount first described
above.; and
(D) the total amount of all fringe benefits
received by Employee on an annualized basis multiplied by two.
(ii) For a period of two years from the Employee'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 Employee and/or the Employee's family
equal to those which would have been provided to them in accordance
with the plans, programs, practices and policies described in Section
3(b)(iv) of this Agreement if the Employee's employment had not been
terminated; provided, however, that with respect to any of such plans,
programs, practices or policies requiring an employee contribution, the
Employee shall continue to pay the monthly employee contribution for
same, and provided further, that if the Employee becomes re-employed by
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.
(iii) All benefits and amounts under the Company's
deferred compensation plan and the 401(k) Plan and any other similar
plans, including all stock options, restricted stock or other
stock-based awards held by the Employee, not already vested shall be
100% vested.
(iv) To the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Employee any other
amounts or benefits required to be paid or provided or which the
Employee is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies (collectively, the "Other Benefits").
6. Other Rights. Except as provided herein, nothing in this Agreement
shall prevent or limit the Employee'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 Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee may have under any
contract or agreement with the Company or any of its affiliated companies.
Except as provided hereinafter, amounts which are vested benefits or which the
Employee 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. It is expressly agreed by the Employee that the Employee shall have
no right to receive, and hereby waives any entitlement to, any severance pay or
similar benefit under any other plan, policy, practice or program of the
Company. In addition, if the Employee has any other employment or similar
agreement with the Company at the Date of Termination, the Employee agrees that
he shall have the right to receive all of the benefits provided under this
Agreement or such other agreement, whichever one, in its entirety, the Employee
chooses, but not both agreements, and when the Employee has made such election,
the other agreement shall be superseded in its entirety and shall be of no
further force and effect. The Employee also agrees that to the extent he may be
eligible for any severance pay or similar benefit under any laws providing
8
for severance or termination benefits, such other severance pay or similar
benefit shall be coordinated with the benefits owed hereunder, such that the
Employee shall not receive duplicate benefits.
7. Full Settlement.
(a) No Rights of Offset. 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
Employee or others.
(b) No Mitigation Required. In no event shall the Employee be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Employee under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Employee
obtains other employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Employee of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereto (including as a result of any contest by the Employee 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").
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Employee
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 8) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Employee with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Employee shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the
Gross- Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 8(a), if it shall be
determined that the Employee is entitled to a Gross-Up Payment, but that the
Employee, after taking into account the Payments and the Gross-Up Payment, would
not receive a net after-tax benefit of at least $1,000 (taking into account both
income taxes and any Excise Tax) as compared to the net after-tax proceeds to
the Employee resulting from an elimination of the Gross-Up Payment and a
reduction of the Payments, in the aggregate, to an amount (the "Reduced Amount")
such that the receipt of Payments would not give rise to any Excise Tax, then no
Gross-Up Payment shall be made to the Employee and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination shall be made
by
9
Xxxxxx Xxxxxxxx LLP or, as provided below, such other certified public
accounting firm as may be designated by the Employee (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days after the receipt of notice from the Employee
that there has been a Payment, 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
Employee shall 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 Gross-Up Payment, as determined
pursuant to this Section 8, shall be paid by the Company to the Employee within
five days after the receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the Company and the
Employee. 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 Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 8(c) and the Employee thereafter is
required to make a payment of any Excise Tax, 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
Employee.
(c) The Employee shall notify the Company in writing of any
claim by the Internal Revenue Service (the "IRS") that, if successful, would
require the payment by the Company of the Gross-Up Payment (or an additional
Gross-Up Payment) in the event the IRS seeks higher payment. Such notification
shall be given as soon as practicable, but no later than ten business days after
the Employee is informed in writing of such claim, and shall apprise the Company
of the nature of such claim and the date on which such claim is requested to be
paid. The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Employee in writing
prior to the expiration of such period that it desires to contest such claim,
the Employee shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in
order to effectively contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claims; provided, however, that the
Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
costs and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Section 8(c), the Company shall
control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
10
direct the Employee to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and the Employee agrees to
prosecute such contest to determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Employee to pay such claim and xxx for
a refund, the Company shall advance the amount of such payment to the
Employee, on an interest-free basis and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable
year of the Employee with respect to which such contested amount is
claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and the Employee shall be entitled to settle or contest, as
the case may be, any other issues raised by the IRS or any other taxing
authority.
(d) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 8(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject to
the Company's complying with the requirements of Section 8(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee in writing of
its intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Employee
during the Employee's employment by the Company or any of its affiliated
companies, provided that it shall not apply to information which is or shall
become public knowledge (other than by acts by the Employee or representatives
of the Employee in violation of this Agreement), information that is developed
by the Employee independently of such information, or knowledge or data or
information that is disclosed to the Employee by a third party under no
obligation of confidentiality to the Company. After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provision of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Employee under
this Agreement.
10. Successors.
(a) This Agreement is personal to the Employee and shall not
be assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
11
(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.
11. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, 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 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 Employee: Xxxx X. Xxxxxx
4817 Wellford
Xxxxxxxx, Xxxxx 00000
If to the Company: Xxxxxxxxxxx International, Inc.
000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices 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 Employee's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right to the Employee or the Company may have hereunder, including without
limitation, the right of the Employee to terminate employment for Good Reason
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
12
(f) This Agreement constitutes the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes all prior agreements between the parties relating to the subject
matter hereof, including, without limitation, the Prior Agreement.
13
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/s/ XXXX X. XXXXXX
---------------------------------------------
Xxxx X. Xxxxxx
XXXXXXXXXXX INTERNATIONAL, INC.
By: /s/ XXX X. XXXXXXXXX
------------------------------------------
Xxx X. Xxxxxxxxx
Senior Vice President - Human Resources
14
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into and
effective as of August 1, 2001, by and between Xxxxxxxxxxx International, Inc.,
a Delaware corporation (the "Company"), and Xxxx X. Xxxxxxxxx (the "Employee").
WITNESSETH:
WHEREAS, the Company desires to employ the Employee on the terms set
forth below to provide services to the Company, and the Employee is willing to
accept such employment and provide such services on the terms set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the parties hereto do hereby agree:
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) "Cause" shall mean:
(i) the willful and continued failure of the Employee
to perform substantially the Employee's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Employee by the Board or the Chief Executive Officer of the
Company which specifically identifies the manner in which the Employee has not
substantially performed the Employee's duties, or
(ii) the willful engaging by the Employee in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company.
No act, or failure to act, on the part of the Employee shall
be considered "willful" unless it is done, or omitted to be done, by the
Employee in bad faith or without reasonable belief that the Employee'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 Chief Executive Officer or of 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 Employee in good
faith and in the best interests of the Company. The cessation of employment of
the Employee shall not be deemed to be for Cause unless and until there shall
have been delivered to the Employee 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 Employee, and the Employee is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Employee is guilty of the conduct
described in subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.
(b) "Change of Control" shall mean:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act") (a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20 percent or more of
either (A) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) 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 (i), the following acquisitions shall not constitute a
Change of Control:
(A) any acquisition directly from the
Company,
(B) any acquisition by the Company,
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or
(D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A), (B)
and (C) of subsection (iii) of this Section 1(b); or
(ii) 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 stockholders, 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 was 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
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Corporate Transaction") in each case,
unless, following such Corporate Transaction, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Corporate
Transaction beneficially own, directly or indirectly, more than 60
percent of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any corporation resulting from such
Corporate Transaction or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Corporate
Transaction) beneficially owns, directly or indirectly, 20 percent or
more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Corporate Transaction 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 Corporate Transaction and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Corporate
Transaction were members
2
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Corporate
Transaction; or
(iv) Approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
(c) "Good Reason" shall mean the occurrence of any of the
following:
(i) the assignment to the Employee of any duties
inconsistent in any material respect with the Employee's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 3(a)
of this Agreement, or any other action by the Company which results in
a 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 Employee;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(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 Employee;
(iii) the Company's requiring the Employee to be
based at any office or location other than as provided in Section 3(a)
hereof or the Company's requiring the Employee to travel on Company
business to a substantially greater extent than required immediately
prior to the date hereof;
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this
Agreement;
(v) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement; or
(vi) in the event of a Change of Control or merger,
consolidation or other business combination of the Company in which the
Company's securities cease to be publicly traded, the assignment to the
Employee of any position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities that are
not (A) at or with the ultimate parent company of the entity surviving
or resulting from such merger, consolidation or other business
combination and (B) substantially similar to the Employee's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities as contemplated by Section 3(a);
(d) "Board" shall mean the Board of Directors of the Company.
For purposes of this Agreement, any good faith determination
of "Good Reason" made by the Employee shall be conclusive.
2. Employment Period. The Company hereby agrees that the Company or an
affiliated company will continue the Employee in its employ, and the Employee
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement during the Employment
3
Period (as defined below). The "Employment Period" shall mean the period
commencing on the Effective Date (as defined below) and ending on the third
anniversary of the Effective Date; 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 three years after such
Renewal Date, unless at least 60 days prior to the Renewal Date the Company
shall give notice to the Employee that the Employment Period shall not be so
extended. The Effective Date shall be August 1, 2001.
3. Terms of Employment.
(a) Position and Duties. During the Employment Period, (A) the
Employee's position (including status, offices, titles and reporting
requirements, authority, duties and responsibilities) shall be Vice President -
Finance and Accounting and Controller of the Company, (B) the Employee's
services shall be performed at the Company's principal executive offices in
Houston, Texas or other locations less than 35 miles from such location and (C)
the Employee will report directly to the Company's Chief Executive Officer.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Employee shall receive an annual base salary of $200,004 ("Annual Base
Salary"), which shall be paid at a monthly rate. During the Employment
Period, the Annual Base Salary shall be reviewed no more than 12 months
after the last salary increase awarded to the Employee prior to the
date hereof and thereafter at least annually; provided, however, that a
salary increase shall not necessarily be awarded as a result of such
review. Any increase in Annual Base Salary may not serve to limit or
reduce any other obligation to the Employee under this Agreement.
Annual Base Salary shall not be reduced after any such increase. The
term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. The Employee shall be eligible for
an annual bonus for each fiscal year ending during the Employment
Period on the same basis as other executive officers under the
Company's executive officer annual incentive program. Each such Annual
Bonus shall be paid 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.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Employee shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and
programs applicable generally to all executive officers of the Company
and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Employee 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 the
most favorable of those provided by the Company and its affiliated
companies for the Employee under such plans, practices, policies and
programs as in effect on the date hereof. As used in this Agreement,
the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
4
(iv) Welfare Benefit Plans. During the Employment
Period, the Employee and/or the Employee's family, as the case may be,
shall be eligible to participate 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, salary
continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable
generally to all executive officers of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and
programs provide the Employee with benefits which are less favorable,
in the aggregate, than such plans, practices, policies and programs in
effect for the Employee on the date hereof.
(v) Fringe Benefits. During the Employment Period,
the Employee shall be entitled to (A) a $600 per month car allowance
and (B) such other fringe benefits (including, without limitation,
payment of club dues, payment of professional fees and taxes and
payment of related expenses, as appropriate) in accordance with the
most favorable plans, practices, programs and policies of the Company
in effect on the date hereof.
(vi) Vacation. During the Employment Period, the
Employee shall be entitled to at least 3 weeks paid vacation or such
greater amount of paid vacation as may be applicable to the executive
officers of the Company and its affiliated companies.
(vii) Deferred Compensation Plan. During the
Employment Period, the Employee shall be entitled to continue to
participate in any deferred compensation or similar plans in which
executive officers of the Company participate.
4. Termination of Employment.
(a) Death or Disability. The Employee's employment shall
terminate automatically upon the Employee's death during the Employment Period.
If the Company determines in good faith that the Disability of the Employee has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Employee written notice in accordance with
Section 11(b) of this Agreement of its intention to terminate the Employee's
employment. In such event, the Employee's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Employee from the Employee's duties with the Company on a
full-time basis for 180 calendar 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 Employee or the
Employee's legal representative.
(b) Cause. The Company may terminate the Employee's employment
during the Employment Period for Cause.
(c) Good Reason. The Employee's employment may be terminated
by the Employee during the Employment Period for Good Reason.
(d) Notice of Termination. Any termination during the
Employment Period by the Company for Cause, or by the Employee for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 11(b) of the Agreement. For purposes of this
5
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 Employee'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, in the case of a notice by the Company, shall be
not more than 30 days after the giving of such notice). The failure by the
Employee 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 Employee or the Company, respectively, from asserting
such fact or circumstance in enforcing the Employee's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if the Employee's employment is terminated by the
Company for Cause, or by the Employee 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 Employee's employment is terminated by
the Company other than for Cause, death or Disability, the Date of
Termination shall be the date on which the Company notifies the
Employee of such termination; and
(iii) if the Employee's employment is terminated by
reason of death or Disability, the Date of Termination shall be the
date of death of the Employee or the Disability Effective Date, as the
case may be.
5. Obligations of the Company Upon Termination.
(a) Death. If the Employee's employment is terminated by
reason of the Employee's death during the Employment Period, the Employee's
employment shall terminate automatically without further obligations to the
Employee's legal representatives under this Agreement, other than for payment of
Accrued Obligations and Other Benefits (as defined below) and the rights
provided in Section 6. Accrued Obligations shall be paid to the Employee's
estate or beneficiaries, as applicable, in a lump sum in cash within 30 days
after the Date of Termination. With respect to the provision of Other Benefits,
the term Other Benefits as utilized in this Section 5(a) shall include, without
limitation, and the Employee'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 the
executive officers of the Company and such affiliated companies under such
plans, programs, practices and policies relating to death benefits, if any, in
effect on the date hereof or, if more favorable, those in effect on the date of
the Employee's death.
(b) Disability. If the Employee's employment is terminated by
reason of the Employee's Disability during the Employment Period, the Employee's
employment shall terminate without further obligations to the Employee under
this Agreement, other than for payment of Accrued Obligations and Other Benefits
and the rights provided in Section 6. Accrued Obligations shall be paid to the
Employee in a lump sum in cash within 30 days after the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 5(b) shall include, without limitation, and the
Employee shall be entitled after the Disability Effective Date to receive,
disability and other benefits at least equal to the most favorable benefits
generally provided by the Company and its affiliated companies to the Employee's
disabled executive officers and/or their families in accordance with such plans,
programs,
6
practices and policies relating to disability, if any, in effect generally on
the date hereof or, if more favorable, those in effect at the time of the
Disability.
(c) Cause; Other Than for Good Reason. If the Employee's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Employee, other than the
obligation to pay to the Employee (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Employee and (z) Other Benefits, in each case to the extent theretofore unpaid.
(d) Termination by Employee. If the Employee voluntarily
terminates his employment during the Employment Period for any reason other than
for Good Reason, the Employee's employment shall terminate without further
obligations to the Employee, other than for payment of Accrued Obligations and
Other Benefits and the rights provided in Section 6. In such case, all Accrued
Obligations shall be paid to the Employee in a lump sum in cash within 30 days
after the Date of Termination subject to such other options or restrictions as
provided by law.
(e) Good Reason or Other than For Cause, Death or Disability.
If, during the Employment Period, the Company terminates the Employee's
employment other than for Cause, death or Disability, or the Employee terminates
employment for Good Reason:
(i) The Company shall pay to the Employee 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 Employee's Annual
Base Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the higher of (I) the
highest Annual Bonus received by the Employee over the
preceding three year period and (II) the Annual Bonus that
would be payable in respect of the current fiscal year (and
annualized for any fiscal year consisting of less than 12
months) (such higher amount being referred to as the "Highest
Annual Bonus") 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 Employee under a
plan sponsored by the Company (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");
(B) an amount equal to two times the sum of
(i) the then current Annual Base Salary of the Employee and
(ii) the Highest Annual Bonus;
(C) an amount equal to the total of the
employer basic and matching contributions credited to the
Employee under the Company's 401(k) Savings Plan (the "401(k)
Plan") and any other deferred compensation plan during the
12-month period immediately preceding the month of the
Employee's Date of Termination multiplied by multiplied by
two, such amount to be grossed up so that the amount the
Employee actually receives after payment of any federal or
state taxes payable thereon equals the amount first described
above.; and
(D) the total amount of all fringe benefits
received by Employee on an annualized basis multiplied by two.
7
(ii) For a period of two years from the Employee'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 Employee and/or the Employee's family
equal to those which would have been provided to them in accordance
with the plans, programs, practices and policies described in Section
3(b)(iv) of this Agreement if the Employee's employment had not been
terminated; provided, however, that with respect to any of such plans,
programs, practices or policies requiring an employee contribution, the
Employee shall continue to pay the monthly employee contribution for
same, and provided further, that if the Employee becomes re-employed by
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.
(iii) All benefits and amounts under the Company's
deferred compensation plan and the 401(k) Plan and any other similar
plans, including all stock options, restricted stock or other
stock-based awards held by the Employee, not already vested shall be
100% vested.
(iv) To the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Employee any other
amounts or benefits required to be paid or provided or which the
Employee is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies (collectively, the "Other Benefits").
6. Other Rights. Except as provided herein, nothing in this Agreement
shall prevent or limit the Employee'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 Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee may have under any
contract or agreement with the Company or any of its affiliated companies.
Except as provided hereinafter, amounts which are vested benefits or which the
Employee 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. It is expressly agreed by the Employee that the Employee shall have
no right to receive, and hereby waives any entitlement to, any severance pay or
similar benefit under any other plan, policy, practice or program of the
Company. In addition, if the Employee has any other employment or similar
agreement with the Company at the Date of Termination, the Employee agrees that
he shall have the right to receive all of the benefits provided under this
Agreement or such other agreement, whichever one, in its entirety, the Employee
chooses, but not both agreements, and when the Employee has made such election,
the other agreement shall be superseded in its entirety and shall be of no
further force and effect. The Employee also agrees that to the extent he may be
eligible for any severance pay or similar benefit under any laws providing for
severance or termination benefits, such other severance pay or similar benefit
shall be coordinated with the benefits owed hereunder, such that the Employee
shall not receive duplicate benefits.
7. Full Settlement.
(a) No Rights of Offset. 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
Employee or others.
8
(b) No Mitigation Required. In no event shall the Employee be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Employee under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Employee
obtains other employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Employee of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereto (including as a result of any contest by the Employee 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").
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Employee
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 8) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Employee with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Employee shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 8(a), if it shall be
determined that the Employee is entitled to a Gross-Up Payment, but that the
Employee, after taking into account the Payments and the Gross-Up Payment, would
not receive a net after-tax benefit of at least $1,000 (taking into account both
income taxes and any Excise Tax) as compared to the net after-tax proceeds to
the Employee resulting from an elimination of the Gross-Up Payment and a
reduction of the Payments, in the aggregate, to an amount (the "Reduced Amount")
such that the receipt of Payments would not give rise to any Excise Tax, then no
Gross-Up Payment shall be made to the Employee and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination shall be made
by Xxxxxx Xxxxxxxx LLP or, as provided below, such other certified public
accounting firm as may be designated by the Employee (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days after the receipt of notice from the Employee
that there has been a Payment, 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
Employee shall 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 Gross-Up Payment, as determined
pursuant to this Section 8, shall be paid by the Company to the Employee within
five days after the receipt of the Accounting Firm's determination. Any
determination by the
9
Accounting Firm shall be binding upon the Company and the Employee. 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
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Employee thereafter is required to make a payment of any
Excise Tax, 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 Employee.
(c) The Employee shall notify the Company in writing of any
claim by the Internal Revenue Service (the "IRS") that, if successful, would
require the payment by the Company of the Gross-Up Payment (or an additional
Gross-Up Payment) in the event the IRS seeks higher payment. Such notification
shall be given as soon as practicable, but no later than ten business days after
the Employee is informed in writing of such claim, and shall apprise the Company
of the nature of such claim and the date on which such claim is requested to be
paid. The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Employee in writing
prior to the expiration of such period that it desires to contest such claim,
the Employee shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in
order to effectively contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claims; provided, however, that the
Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
costs and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Section 8(c), the Company shall
control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and the Employee agrees to
prosecute such contest to determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Employee to pay such claim and xxx for
a refund, the Company shall advance the amount of such payment to the
Employee, on an interest-free basis and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable
year of the Employee with respect to which such contested amount
10
is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and the Employee shall be entitled to settle or contest, as
the case may be, any other issues raised by the IRS or any other taxing
authority.
(d) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 8(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject to
the Company's complying with the requirements of Section 8(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee in writing of
its intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Employee
during the Employee's employment by the Company or any of its affiliated
companies, provided that it shall not apply to information which is or shall
become public knowledge (other than by acts by the Employee or representatives
of the Employee in violation of this Agreement), information that is developed
by the Employee independently of such information, or knowledge or data or
information that is disclosed to the Employee by a third party under no
obligation of confidentiality to the Company. After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provision of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Employee under
this Agreement.
10. Successors.
(a) This Agreement is personal to the Employee and shall not
be assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Employee'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.
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11. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, 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 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 Employee: Xxxx X. Xxxxxxxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxxxx Xxxx, XX 00000
If to the Company: Xxxxxxxxxxx International, Inc.
000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices 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 Employee's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right to the Employee or the Company may have hereunder, including without
limitation, the right of the Employee to terminate employment for Good Reason
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) This Agreement constitutes the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes all prior agreements between the parties relating to the subject
matter hereof.
12
IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/s/ XXXX X. XXXXXXXXX
---------------------------------------------
Xxxx X. Xxxxxxxxx
XXXXXXXXXXX INTERNATIONAL, INC.
By: /s/ XXX X. XXXXXXXXX
------------------------------------------
Xxx X. Xxxxxxxxx
Senior Vice President - Human Resources
13
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is entered into and
effective as of August 1, 2001, by and between Xxxxxxxxxxx International, Inc.,
a Delaware corporation (the "Company"), and Xxxxx X. Parmigiano (the
"Employee").
WITNESSETH:
WHEREAS, the Company desires to employ the Employee on the terms set
forth below to provide services to the Company, and the Employee is willing to
accept such employment and provide such services on the terms set forth in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the parties hereto do hereby agree:
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) "Cause" shall mean:
(i) the willful and continued failure of the Employee
to perform substantially the Employee's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial performance
is delivered to the Employee by the Board or the Chief Executive Officer of the
Company which specifically identifies the manner in which the Employee has not
substantially performed the Employee's duties, or
(ii) the willful engaging by the Employee in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company.
No act, or failure to act, on the part of the Employee shall
be considered "willful" unless it is done, or omitted to be done, by the
Employee in bad faith or without reasonable belief that the Employee'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 Chief Executive Officer or of 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 Employee in good
faith and in the best interests of the Company. The cessation of employment of
the Employee shall not be deemed to be for Cause unless and until there shall
have been delivered to the Employee 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 Employee, and the Employee is given an
opportunity, together with counsel, to be heard before the Board), finding that,
in the good faith opinion of the Board, the Employee is guilty of the conduct
described in subparagraph (i) or (ii) above, and specifying the particulars
thereof in detail.
(b) "Change of Control" shall mean:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20 percent or more of
either (A) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (B) 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 (i), the following acquisitions shall not constitute a
Change of Control:
(A) any acquisition directly from the
Company,
(B) any acquisition by the Company,
(C) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company, or
(D) any acquisition by any corporation
pursuant to a transaction which complies with clauses (A), (B)
and (C) of subsection (iii) of this Section 1(b); or
(ii) 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 stockholders, 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 was 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
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Corporate Transaction") in each case,
unless, following such Corporate Transaction, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Corporate
Transaction beneficially own, directly or indirectly, more than 60
percent of, respectively, the then outstanding shares of common stock
and the combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding Company Common
Stock and the Outstanding Company Voting Securities, as the case may
be, (B) no Person (excluding any corporation resulting from such
Corporate Transaction or any employee benefit plan (or related trust)
of the Company or such corporation resulting from such Corporate
Transaction) beneficially owns, directly or indirectly, 20 percent or
more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Corporate Transaction 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 Corporate Transaction and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Corporate
Transaction were members
2
of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Corporate
Transaction; or
(iv) Approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
(c) "Good Reason" shall mean the occurrence of any of the
following:
(i) the assignment to the Employee of any duties
inconsistent in any material respect with the Employee's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 3(a)
of this Agreement, or any other action by the Company which results in
a 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 Employee;
(ii) any failure by the Company to comply with any of
the provisions of Section 3(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 Employee;
(iii) the Company's requiring the Employee to be
based at any office or location other than as provided in Section 3(a)
hereof or the Company's requiring the Employee to travel on Company
business to a substantially greater extent than required immediately
prior to the date hereof;
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this
Agreement;
(v) any failure by the Company to comply with and
satisfy Section 10(c) of this Agreement; or
(vi) in the event of a Change of Control or merger,
consolidation or other business combination of the Company in which the
Company's securities cease to be publicly traded, the assignment to the
Employee of any position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities that are
not (A) at or with the ultimate parent company of the entity surviving
or resulting from such merger, consolidation or other business
combination and (B) substantially similar to the Employee's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities as contemplated by Section 3(a);
(d) "Board" shall mean the Board of Directors of the Company.
For purposes of this Agreement, any good faith determination
of "Good Reason" made by the Employee shall be conclusive.
2. Employment Period. The Company hereby agrees that the Company or an
affiliated company will continue the Employee in its employ, and the Employee
hereby agrees to remain in the employ of the Company or an affiliate subject to
the terms and conditions of this Agreement during the Employment
3
Period (as defined below). The "Employment Period" shall mean the period
commencing on the Effective Date (as defined below) and ending on the third
anniversary of the Effective Date; 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 three years
after such Renewal Date, unless at least 60 days prior to the Renewal Date the
Company shall give notice to the Employee that the Employment Period shall not
be so extended. The Effective Date shall be August 1, 2001.
3. Terms of Employment.
(a) Position and Duties. During the Employment Period, (A) the
Employee's position (including status, offices, titles and reporting
requirements, authority, duties and responsibilities) shall be Vice President -
Operational Controller of the Company, (B) the Employee's services shall be
performed at the Company's principal executive offices in Houston, Texas or
other locations less than 35 miles from such location and (C) the Employee will
report directly to the Presidents of the Company's Completion Systems and
Drilling and Intervention Services divisions.
(b) Compensation.
(i) Base Salary. During the Employment Period, the
Employee shall receive an annual base salary of $185,004 ("Annual Base
Salary"), which shall be paid at a monthly rate. During the Employment
Period, the Annual Base Salary shall be reviewed no more than 12 months
after the last salary increase awarded to the Employee prior to the
date hereof and thereafter at least annually; provided, however, that a
salary increase shall not necessarily be awarded as a result of such
review. Any increase in Annual Base Salary may not serve to limit or
reduce any other obligation to the Employee under this Agreement.
Annual Base Salary shall not be reduced after any such increase. The
term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. The Employee shall be eligible for
an annual bonus for each fiscal year ending during the Employment
Period on the same basis as other executive officers under the
Company's executive officer annual incentive program. Each such Annual
Bonus shall be paid 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.
(iii) Incentive, Savings and Retirement Plans. During
the Employment Period, the Employee shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and
programs applicable generally to all executive officers of the Company
and its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Employee 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 the
most favorable of those provided by the Company and its affiliated
companies for the Employee under such plans, practices, policies and
programs as in effect on the date hereof. As used in this Agreement,
the term "affiliated companies" shall include any company controlled
by, controlling or under common control with the Company.
4
(iv) Welfare Benefit Plans. During the Employment
Period, the Employee and/or the Employee's family, as the case may be,
shall be eligible to participate 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, salary
continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable
generally to all executive officers of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and
programs provide the Employee with benefits which are less favorable,
in the aggregate, than such plans, practices, policies and programs in
effect for the Employee on the date hereof.
(v) Fringe Benefits. During the Employment Period,
the Employee shall be entitled to (A) a $600 per month car allowance
and (B) such other fringe benefits (including, without limitation,
payment of club dues, payment of professional fees and taxes and
payment of related expenses, as appropriate) in accordance with the
most favorable plans, practices, programs and policies of the Company
in effect on the date hereof.
(vi) Vacation. During the Employment Period, the
Employee shall be entitled to at least 3 weeks paid vacation or such
greater amount of paid vacation as may be applicable to the executive
officers of the Company and its affiliated companies.
(vii) Deferred Compensation Plan. During the
Employment Period, the Employee shall be entitled to continue to
participate in any deferred compensation or similar plans in which
executive officers of the Company participate.
4. Termination of Employment.
(a) Death or Disability. The Employee's employment shall
terminate automatically upon the Employee's death during the Employment Period.
If the Company determines in good faith that the Disability of the Employee has
occurred during the Employment Period (pursuant to the definition of Disability
set forth below), it may give to the Employee written notice in accordance with
Section 11(b) of this Agreement of its intention to terminate the Employee's
employment. In such event, the Employee's employment with the Company shall
terminate effective 30 days after receipt of such notice by the Employee (the
"Disability Effective Date"), provided that within the 30-day period after such
receipt, the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean the
absence of the Employee from the Employee's duties with the Company on a
full-time basis for 180 calendar 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 Employee or the
Employee's legal representative.
(b) Cause. The Company may terminate the Employee's employment
during the Employment Period for Cause.
(c) Good Reason. The Employee's employment may be terminated
by the Employee during the Employment Period for Good Reason.
(d) Notice of Termination. Any termination during the
Employment Period by the Company for Cause, or by the Employee for Good Reason,
shall be communicated by Notice of Termination to the other party hereto given
in accordance with Section 11(b) of the Agreement. For purposes of this
5
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 Employee'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, in the case of a notice by the Company, shall be
not more than 30 days after the giving of such notice). The failure by the
Employee 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 Employee or the Company, respectively, from asserting
such fact or circumstance in enforcing the Employee's or the Company's rights
hereunder.
(e) Date of Termination. "Date of Termination" shall mean:
(i) if the Employee's employment is terminated by the
Company for Cause, or by the Employee 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 Employee's employment is terminated by
the Company other than for Cause, death or Disability, the Date of
Termination shall be the date on which the Company notifies the
Employee of such termination; and
(iii) if the Employee's employment is terminated by
reason of death or Disability, the Date of Termination shall be the
date of death of the Employee or the Disability Effective Date, as the
case may be.
5. Obligations of the Company Upon Termination.
(a) Death. If the Employee's employment is terminated by
reason of the Employee's death during the Employment Period, the Employee's
employment shall terminate automatically without further obligations to the
Employee's legal representatives under this Agreement, other than for payment of
Accrued Obligations and Other Benefits (as defined below) and the rights
provided in Section 6. Accrued Obligations shall be paid to the Employee's
estate or beneficiaries, as applicable, in a lump sum in cash within 30 days
after the Date of Termination. With respect to the provision of Other Benefits,
the term Other Benefits as utilized in this Section 5(a) shall include, without
limitation, and the Employee'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 the
executive officers of the Company and such affiliated companies under such
plans, programs, practices and policies relating to death benefits, if any, in
effect on the date hereof or, if more favorable, those in effect on the date of
the Employee's death.
(b) Disability. If the Employee's employment is terminated by
reason of the Employee's Disability during the Employment Period, the Employee's
employment shall terminate without further obligations to the Employee under
this Agreement, other than for payment of Accrued Obligations and Other Benefits
and the rights provided in Section 6. Accrued Obligations shall be paid to the
Employee in a lump sum in cash within 30 days after the Date of Termination.
With respect to the provision of Other Benefits, the term Other Benefits as
utilized in this Section 5(b) shall include, without limitation, and the
Employee shall be entitled after the Disability Effective Date to receive,
disability and other benefits at least equal to the most favorable benefits
generally provided by the Company and its affiliated companies to the Employee's
disabled executive officers and/or their families in accordance with such plans,
programs,
6
practices and policies relating to disability, if any, in effect generally on
the date hereof or, if more favorable, those in effect at the time of the
Disability.
(c) Cause; Other Than for Good Reason. If the Employee's
employment is terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Employee, other than the
obligation to pay to the Employee (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously deferred by the
Employee and (z) Other Benefits, in each case to the extent theretofore unpaid.
(d) Termination by Employee. If the Employee voluntarily
terminates his employment during the Employment Period for any reason other than
for Good Reason, the Employee's employment shall terminate without further
obligations to the Employee, other than for payment of Accrued Obligations and
Other Benefits and the rights provided in Section 6. In such case, all Accrued
Obligations shall be paid to the Employee in a lump sum in cash within 30 days
after the Date of Termination subject to such other options or restrictions as
provided by law.
(e) Good Reason or Other than For Cause, Death or Disability.
If, during the Employment Period, the Company terminates the Employee's
employment other than for Cause, death or Disability, or the Employee terminates
employment for Good Reason:
(i) The Company shall pay to the Employee 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 Employee's Annual
Base Salary through the Date of Termination to the extent not
theretofore paid, (2) the product of (x) the higher of (I) the
highest Annual Bonus received by the Employee over the
preceding three year period and (II) the Annual Bonus that
would be payable in respect of the current fiscal year (and
annualized for any fiscal year consisting of less than 12
months) (such higher amount being referred to as the "Highest
Annual Bonus") 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 Employee under a
plan sponsored by the Company (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");
(B) an amount equal to two times the sum of
(i) the then current Annual Base Salary of the Employee and
(ii) the Highest Annual Bonus;
(C) an amount equal to the total of the
employer basic and matching contributions credited to the
Employee under the Company's 401(k) Savings Plan (the "401(k)
Plan") and any other deferred compensation plan during the
12-month period immediately preceding the month of the
Employee's Date of Termination multiplied by multiplied by
two, such amount to be grossed up so that the amount the
Employee actually receives after payment of any federal or
state taxes payable thereon equals the amount first described
above.; and
(D) the total amount of all fringe benefits
received by Employee on an annualized basis multiplied by two.
7
(ii) For a period of two years from the Employee'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 Employee and/or the Employee's family
equal to those which would have been provided to them in accordance
with the plans, programs, practices and policies described in Section
3(b)(iv) of this Agreement if the Employee's employment had not been
terminated; provided, however, that with respect to any of such plans,
programs, practices or policies requiring an employee contribution, the
Employee shall continue to pay the monthly employee contribution for
same, and provided further, that if the Employee becomes re-employed by
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.
(iii) All benefits and amounts under the Company's
deferred compensation plan and the 401(k) Plan and any other similar
plans, including all stock options, restricted stock or other
stock-based awards held by the Employee, not already vested shall be
100% vested.
(iv) To the extent not theretofore paid or provided,
the Company shall timely pay or provide to the Employee any other
amounts or benefits required to be paid or provided or which the
Employee is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies (collectively, the "Other Benefits").
6. Other Rights. Except as provided herein, nothing in this Agreement
shall prevent or limit the Employee'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 Employee may qualify, nor shall anything
herein limit or otherwise affect such rights as the Employee may have under any
contract or agreement with the Company or any of its affiliated companies.
Except as provided hereinafter, amounts which are vested benefits or which the
Employee 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. It is expressly agreed by the Employee that the Employee shall have
no right to receive, and hereby waives any entitlement to, any severance pay or
similar benefit under any other plan, policy, practice or program of the
Company. In addition, if the Employee has any other employment or similar
agreement with the Company at the Date of Termination, the Employee agrees that
he shall have the right to receive all of the benefits provided under this
Agreement or such other agreement, whichever one, in its entirety, the Employee
chooses, but not both agreements, and when the Employee has made such election,
the other agreement shall be superseded in its entirety and shall be of no
further force and effect. The Employee also agrees that to the extent he may be
eligible for any severance pay or similar benefit under any laws providing for
severance or termination benefits, such other severance pay or similar benefit
shall be coordinated with the benefits owed hereunder, such that the Employee
shall not receive duplicate benefits.
7. Full Settlement.
(a) No Rights of Offset. 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
Employee or others.
8
(b) No Mitigation Required. In no event shall the Employee be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Employee under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not the Employee
obtains other employment.
(c) Legal Fees. The Company agrees to pay as incurred, to the
full extent permitted by law, all legal fees and expenses which the Employee may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company or the Employee of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of performance
thereto (including as a result of any contest by the Employee 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").
8. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding
and except as set forth below, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of the Employee
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, but determined without regard to any additional
payments required under this Section 8) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by the Employee with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Employee shall be entitled to receive
an additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Employee of all taxes (including any interest or penalties
imposed with respect to such taxes), including without limitation, any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 8(a), if it shall be
determined that the Employee is entitled to a Gross-Up Payment, but that the
Employee, after taking into account the Payments and the Gross-Up Payment, would
not receive a net after-tax benefit of at least $1,000 (taking into account both
income taxes and any Excise Tax) as compared to the net after-tax proceeds to
the Employee resulting from an elimination of the Gross-Up Payment and a
reduction of the Payments, in the aggregate, to an amount (the "Reduced Amount")
such that the receipt of Payments would not give rise to any Excise Tax, then no
Gross-Up Payment shall be made to the Employee and the Payments, in the
aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 8(c), all
determinations required to be made under this Section 8, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination shall be made
by Xxxxxx Xxxxxxxx LLP or, as provided below, such other certified public
accounting firm as may be designated by the Employee (the "Accounting Firm")
which shall provide detailed supporting calculations both to the Company and the
Employee within 15 business days after the receipt of notice from the Employee
that there has been a Payment, 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
Employee shall 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 Gross-Up Payment, as determined
pursuant to this Section 8, shall be paid by the Company to the Employee within
five days after the receipt of the Accounting Firm's determination. Any
determination by the
9
Accounting Firm shall be binding upon the Company and the Employee. 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
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 8(c) and the Employee thereafter is required to make a payment of any
Excise Tax, 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 Employee.
(c) The Employee shall notify the Company in writing of any
claim by the Internal Revenue Service (the "IRS") that, if successful, would
require the payment by the Company of the Gross-Up Payment (or an additional
Gross-Up Payment) in the event the IRS seeks higher payment. Such notification
shall be given as soon as practicable, but no later than ten business days after
the Employee is informed in writing of such claim, and shall apprise the Company
of the nature of such claim and the date on which such claim is requested to be
paid. The Employee shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Employee in writing
prior to the expiration of such period that it desires to contest such claim,
the Employee shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time
to time, including without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in
order to effectively contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claims; provided, however, that the
Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such
costs and shall indemnify and hold the Employee harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on
the foregoing provisions of this Section 8(c), the Company shall
control all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and the Employee agrees to
prosecute such contest to determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however,
that if the Company directs the Employee to pay such claim and xxx for
a refund, the Company shall advance the amount of such payment to the
Employee, on an interest-free basis and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto) imposed with
respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable
year of the Employee with respect to which such contested amount
10
is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable
hereunder and the Employee shall be entitled to settle or contest, as
the case may be, any other issues raised by the IRS or any other taxing
authority.
(d) If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 8(c), the Employee becomes entitled
to receive any refund with respect to such claim, the Employee shall (subject to
the Company's complying with the requirements of Section 8(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Employee of an amount advanced by the Company pursuant to Section 8(c), a
determination is made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee in writing of
its intent to contest such denial of refund prior to the expiration of 30 days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
9. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective businesses, which shall have been obtained by the Employee
during the Employee's employment by the Company or any of its affiliated
companies, provided that it shall not apply to information which is or shall
become public knowledge (other than by acts by the Employee or representatives
of the Employee in violation of this Agreement), information that is developed
by the Employee independently of such information, or knowledge or data or
information that is disclosed to the Employee by a third party under no
obligation of confidentiality to the Company. After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no event shall an
asserted violation of the provision of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Employee under
this Agreement.
10. Successors.
(a) This Agreement is personal to the Employee and shall not
be assignable by the Employee otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Employee'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.
11
11. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, 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 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 Employee: Xxxxx X. Parmigiano
--------------------------
--------------------------
If to the Company: Xxxxxxxxxxx International, Inc.
000 Xxxx Xxx Xxxx., Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notices 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 Employee's or the Company's failure to insist upon
strict compliance with any provision of this Agreement or the failure to assert
any right to the Employee or the Company may have hereunder, including without
limitation, the right of the Employee to terminate employment for Good Reason
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
(f) This Agreement constitutes the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes all prior agreements between the parties relating to the subject
matter hereof.
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IN WITNESS WHEREOF, the Employee has hereunto set the Employee's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.
/s/ XXXXX X. PARMIGIANO
--------------------------------------------
Xxxxx X. Parmigiano
XXXXXXXXXXX INTERNATIONAL, INC.
By: /s/ XXX X. XXXXXXXXX
-----------------------------------------
Xxx X. Xxxxxxxxx
Senior Vice President - Human Resources
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