EXHIBIT 10.1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement"), dated
December 31, 1997, by and between Xxxxxxxxx Technologies Inc. (the "Company")
and Xxxxxxx X. Xxxxxx (the "Executive"), residing at 00 Xxxxx Xxxx, Xxxxxxx, Xxx
Xxxxxx 00000.
W I T N E S S E T H:
WHEREAS, on December 31, 1997, the Executive and the Company originally
entered into this Agreement, which set forth the terms and conditions upon which
the Executive shall continue to serve as the Chairman of the Board and Chief
Executive Officer of the Company; and
WHEREAS, the Executive and the Company wish to amend and restate certain of
the provisions of this Agreement to correctly reflect the current understanding
of the parties with respect to such terms and conditions, all as more fully set
forth herein;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
Section 1. Term of Employment. The Executive's employment under this
Agreement shall commence on January 1, 1998 (the "Commencement Date") and,
subject to earlier termination pursuant to Section 6 hereof, shall continue
until December 31, 2002 (the "Term"). The Executive hereby represents and
warrants that (i) he has the legal capacity to execute and perform this
Agreement, (ii) this Agreement is a valid and binding obligation of the
Executive enforceable against him in accordance with its terms, (iii) the
Executive's service hereunder will not conflict with, or result in a breach of,
any agreement, understanding, order, judgment or other obligation to which the
Executive is presently a party or by which he may be bound, and (iv) the
Executive is not subject to, or bound by, any covenant against competition,
confidentiality obligation or any other agreement, order, judgment or other
obligation which would conflict with, restrict or limit the performance of the
services to be provided by him hereunder.
Section 2. Position and Duties. During the Term, the Executive shall serve
as the Chairman and Chief Executive Officer of the Company and shall have such
powers and duties as are commensurate with such position and as may be conferred
upon him from time to time by the Board of Directors of the Company (the
"Board"). During the Term, and except for illness or incapacity and reasonable
vacation periods consistent with Section 3 below, the Executive shall reasonably
devote all of his business time, attention, skill and efforts exclusively to the
business and affairs of the Company and its subsidiaries and affiliates;
provided, however, that the Executive may engage in charitable, educational,
religious, civic and similar types of activities (all of which shall be deemed
to benefit the Company), speaking engagements, membership on the board of
directors of other organizations (to the extent approved in advance by the
Board), and similar activities to the extent that such activities do not inhibit
or prohibit the performance
of his duties hereunder or inhibit or conflict with the business of the Company,
its subsidiaries and affiliates.
Section 3. Compensation. For all services rendered by the Executive in any
capacity required hereunder during the Term, including, without limitation,
services as an executive officer, director, or member of any committee of the
Company or any subsidiary, affiliate or division thereof, the Executive shall be
compensated as follows:
(a) The Company shall pay the Executive a fixed salary at the rate of
$250,000 per annum or such higher (but never lower) annual amount as is being
paid from time to time pursuant to the terms hereof ("Base Salary"). The Base
Salary shall be subject to such periodic review and such periodic increases as
the Board shall deem appropriate in accordance with the Company's customary
procedures and practices regarding the salaries of senior officers. Base Salary
shall be payable in accordance with the customary payroll practices of the
Company, but in no event less frequently than bi-weekly.
(b) Provided that the Executive remains actively employed by the Company on
a full-time basis, the Company shall pay the Executive a special bonus (each, a
"Special Bonus") in the respective amounts set forth below if, in any fiscal
year during the Term, "EBITDA" for such fiscal year at least equals "Targeted
EBITDA" for such fiscal year; provided, however, that the Executive shall not be
entitled to receive more than three Special Bonuses during the Term.
Special Bonus Number Special Bonus Amount
One $65,000
Two $65,000
Three $70,000
Any Special Bonus payable to the Executive hereunder shall accrue as of the end
of the applicable fiscal year but shall be paid no later than March 31 of the
year immediately succeeding the end of the fiscal year in respect of which such
Special Bonus has been earned.
For purposes of this Section 3(b), "EBITDA" means, for any period, the sum
(without duplication) of (i) Consolidated Net Income, (ii) to the extent
Consolidated Net Income has been reduced thereby, all income taxes of the
Company and its subsidiaries paid or accrued for such period (other than income
taxes attributable to extraordinary, unusual or non-recurring gains or losses),
all interest expenses, amortization expenses and depreciation expenses of the
Company and its subsidiaries paid or accrued for such period, and (iii) other
non-cash items reducing Consolidated Net Income, less other non-cash items
increasing Consolidated Net Income, all as determined on a consolidated basis
for the Company and its subsidiaries in conformity with generally accepted
accounting principles, consistently applied for all relevant periods.
"Consolidated Net Income" means, for any period, the aggregate net income (or
loss) of the Company and its subsidiaries for such period on a consolidated
basis, determined in accordance with generally accepted accounting principles,
consistently applied for all relevant
periods, less (i) gains and losses from any sale, lease, conveyance, transfer or
other disposition of any assets or property of the Company and its subsidiaries,
other than in the ordinary course of business, including the tax effects
thereof, (ii) items classified under generally accepted accounting principles,
consistently applied for all relevant periods, as extraordinary or non-recurring
gains and losses, and the related tax effects thereof, and (iii) the net income
or loss of any entity acquired in a transaction accounted for as a pooling of
interests accrued prior to the date such entity is acquired by the Company.
"Targeted EBITDA" for any fiscal year shall be as set forth in the annual budget
for such fiscal year prepared by management of the Company (including the
Executive) and approved by the Board.
All determinations of EBITDA hereunder shall be made by the Company's
independent public accountants, which determinations shall be final, binding and
conclusive on the Executive and the Company, absent clear mistake or other
manifest error.
(c) The Executive shall be entitled to participate in the Company's Annual
Incentive Plan or any successor plan (the "Annual Incentive Plan"), which plan
provides for the payment of incentive cash compensation to key officers based
upon the performance of the Company and the officer's individual performance.
The Company shall pay the Executive such amounts, if any, as shall become due to
the Executive from time to time under the Annual Incentive Plan. A summary
description of the terms of the Annual Incentive Plan is attached hereto as
Exhibit A.
(d) The Executive also shall be entitled to participate in the Company's
Supplemental Executive Retirement Plan or any successor plan (the "SERP Plan"),
which plan provides for contributions by the Company to accounts maintained for
the benefit of certain senior executive officers of the Company based upon the
performance of the Company. The Company shall pay to the Executive's account
such amounts, if any, as shall become due from time to time under the SERP Plan.
A summary description of the terms of the SERP Plan is attached hereto as
Exhibit B.
(e) Within 30 days of the date hereof, the Executive Compensation Committee
of the Board (the "Committee") shall, pursuant to the terms of the Company's
1997 Stock Compensation Program (the "Program"), grant to the Executive options
(the "Options") covering 50,000 shares of the Company's common stock, par value
$.01 per share (the "Common Stock"). The Options may be incentive stock options
or non-qualified options, as determined by the Committee. The Options shall have
an exercise price (subject to adjustment as specified in the Program) equal to
the Fair Market Value (as such term is defined in the Program) of the Common
Stock underlying the Options on the date of grant, and shall be governed by and
subject to the terms and conditions of the Program (except as otherwise provided
for in Section 6 hereof).
(f) Subject to compliance with the terms of Section 4 hereof, the Company
shall reimburse the Executive for the Executive's actual out-of-pocket expenses
of leasing a car of the Executive's choice and all related maintenance, repairs,
insurance and other expenses, subject to a monthly cap of $750.
(g) The Base Salary in effect from time to time shall be increased by any
premiums paid by the Executive to obtain and maintain a disability insurance
policy (together with any replacement disability insurance policy, the
"Disability Policy") providing the Executive with payments equal to not more
than 65% of his Base Salary as in effect from time to time in the event that the
Executive becomes permanently disabled and containing such terms and conditions
as the Board or the Executive Compensation Committee of the Board may approve.
The Executive shall be the owner of the Disability Policy and the Company shall
have no obligation to maintain the Disability Policy or incur any out-of-pocket
expense in connection therewith. The Executive shall provide the Company with a
true and complete copy of any Disability Policy maintained by the Executive and
shall provide the Company with such other information (including access to such
medical and other records relating to the Executive) as the Company may
reasonably request from time to time.
(h) The Company shall maintain a term insurance policy (the "Term Policy")
insuring the life of the Executive with a mutually acceptable insurance company
in an amount of not less than $1,000,000 at no cost to the Executive (except any
associated tax liability) with the beneficiary to be designated by the
Executive. In the event that the Executive's employment is terminated pursuant
to the terms hereof, the Company shall assign its rights under the Term Policy
to the Executive for no additional consideration and, subject to the terms of
the Term Policy, the Executive shall have the right to assume the Company's
obligations thereunder. Upon such assignment, the Company shall have no further
obligation with respect to the Term Policy.
(i) Subject to compliance with the terms of Section 4 hereof, the Company
shall reimburse the Executive for the actual out-of-pocket expenses incurred by
the Executive in obtaining personal financial planning, tax or legal services,
subject to a cap of $15,000 for expenses incurred prior to the first anniversary
of the Commencement Date and $5,000 for expenses incurred in each remaining
calendar year during the Term.
(j) The Executive shall be entitled to five weeks of vacation in each
calendar year during the Term; provided, however, that the Executive shall not
be entitled to carryover vacation from one year to any other year or to any
payment in respect of any unused or accrued vacation.
(k) The Company also will furnish the Executive, without cost to him except
any associated tax liability, with perquisites consistent with those afforded
other senior executives holding positions with the Company comparable to the
position held by the Executive.
(l) Except as expressly modified by the terms hereof, the Executive shall
be entitled to participate in all compensation and employee benefit plans or
programs, and to receive all benefits, perquisites and emoluments, for which any
salaried employees of the Company are eligible under any plan or program now or
hereafter established and maintained by the Company, to the fullest extent
permissible under the general terms and provisions of such plans or programs
and in accordance with the provisions thereof. Notwithstanding the foregoing,
nothing in this Agreement shall preclude the amendment or termination of any
such plan or program, including, without limitation, the Annual Incentive Plan
and the SERP Plan; provided, that, such amendment or termination is applicable
generally to the senior officers of the Company or any subsidiary or affiliate.
Section 4. Business Expenses. Subject to any applicable limitations set
forth in Section 3, the Company shall pay or reimburse the Executive for all
reasonable travel or other expenses incurred by the Executive in connection with
the performance of his duties and obligations under this Agreement, subject to
the Executive's presentation of appropriate vouchers in accordance with such
procedures as the Company may from time to time establish for senior officers
and to preserve any deductions for Federal income taxation purposes to which the
Company may be entitled.
Section 5. Reserved.
Section 6. Termination of Employment; Effects Thereof.
(a) The Company shall have the right, upon delivery of written notice to
the Executive, to terminate the Executive's employment hereunder prior to the
expiration of the Term (i) pursuant to a Termination for Cause, (ii) upon the
Executive's becoming Permanent Disabled, or (iii) pursuant to a Without Cause
Termination; provided, however, that, without the Executive's written consent,
no Without Cause Termination shall be effective until 60 days after receipt by
the Executive of written notice of termination from the Company. The Executive
shall have the right, upon delivery of written notice to the Company, to
terminate the Executive's employment hereunder prior to the expiration of the
Term (i) pursuant to a termination for Good Reason, (ii) following the
occurrence of Change in Control Event upon compliance with the procedures set
forth in Section 6(f), or (iii) in the Executive's sole discretion; provided,
however, that, without the Company's written consent, no termination of the
Executive's employment pursuant to this sentence shall be effective without the
Company's consent until 90 days after receipt by the Company of written notice
of termination from the Executive. The Executive's employment hereunder shall
terminate automatically without action by any party hereto upon the Executive's
death.
(b) In the event that the Company terminates the Executive's employment
pursuant to a Without Cause Termination, or the Executive terminates his
employment for Good Reason, the Company shall pay the Executive a lump sum equal
to 2.99 times the Executive's annual Base Salary as in effect at the time of
such termination, together with any earned but unpaid Base Salary as of the date
of termination of employment. In addition, subject to the provisions of Section
3(l), the Company shall pay the Executive an amount determined under the Annual
Incentive Plan in respect of the year in which the termination of employment is
effective assuming (i) the Executive has met all of his personal objectives pro
rated for such year, and (ii) the total bonus pool under the Annual Incentive
Plan for such year is based upon the level of the Company's performance through
the end of the month immediately preceding the effective date of such
termination with such performance being annualized for the year in which the
termination of employment is effective. The Company also shall pay to the
Executive (or as the Executive may otherwise direct) all amounts which the
Executive is entitled to pursuant to the SERP Plan (whether vested or unvested).
Further, notwithstanding the terms of the Company's stock compensation programs
or the terms of any agreement between the Company and the Executive evidencing
an award to the Executive, (i) all stock options and other awards previously
granted to the Executive shall become immediately payable (in the case of any
awards which do not require further payment or exercise by the Executive) or
exercisable for a period of six months following the effective date of the
termination of the Executive's employment, and (ii) any stock options or other
awards previously granted to the Executive which have not been exercised on or
before the end of such six-month period shall expire and shall be null and void.
The Company shall continue to provide the Executive and his spouse with
continued group hospitalization, health and medical insurance coverage
consistent with and pursuant to the terms of the medical plan, if any, then
maintained by the Company for its employees until the Executive reaches age 65
or, in the event the Executive dies prior to attaining age 65, until his spouse
becomes eligible for medical benefits provided pursuant to Medicare or any
successor program. Neither the Executive nor his spouse shall be required to
contribute to the cost of such coverage (except for any deductibles and
co-payments generally applicable to participants in such medical plan). The
Executive acknowledges that the medical benefits coverage provided to him and
his spouse hereunder shall run concurrently with any period of coverage to which
the Executive or his spouse may be entitled under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"). Any period of
continuation coverage under COBRA shall be measured from the effective date of
the termination of the Executive's employment hereunder. The Executive and his
spouse will have the statutory period after the termination of his employment to
elect continued COBRA coverage. No other payments shall be made, or benefits
provided, by the Company under this Agreement except as otherwise required by
law.
(c) In the event that the Company terminates the Executive's employment
pursuant to a Permanent Disability, the Company shall pay the Executive any
earned but unpaid Base Salary as of the date of termination of employment and,
subject to the provisions of Section 3(l), shall pay the Executive an amount
determined under the Annual Incentive Plan in respect of the year in which the
termination of employment is effective assuming (i) the Executive has met all of
his personal objectives pro rated for such year, and (ii) the total bonus pool
under the Annual Incentive Plan for such year is based upon the level of the
Company's performance through the end of the month immediately preceding the
effective date of such termination with such performance being annualized for
the year in which the termination of employment is effective. The Company also
shall pay to the Executive (or as the Executive may otherwise direct) all
amounts which the Executive is entitled to pursuant to the SERP Plan (whether
vested or unvested). All stock options or other awards previously granted to the
Executive that have not vested on or before the effective date of the
termination of the Executive's employment will immediately expire and shall be
null and void as of the date of termination and all options or awards previously
granted to the Executive that have vested on or before the effective date of the
termination of the Executive's employment shall be payable or exercisable as
specified in the stock compensation program or other arrangement pursuant to
which such options or awards were granted to the Executive. No other payments
shall be made, or benefits provided, by the Company under this Agreement except
as otherwise required by law.
(d) In the event that the Company terminates the Executive's employment
hereunder due to a Termination for Cause or the Executive terminates his
employment with the Company other than for Good Reason (including, without
limitation, pursuant to any retirement plan or policy then maintained by the
Company), the Company shall pay the Executive any earned but unpaid Base Salary
as of the date of termination of employment. The Company also shall pay to the
Executive (or as the Executive may otherwise direct) all amounts then credited
to the Executive's account pursuant to the SERP Plan that have vested on or
before the effective date of the termination of the Executive's employment and
all amounts then so credited that have not vested on or before the effective
date of the termination of the Executive's employment shall be forfeited. The
Executive shall not be entitled to participate in the Annual Incentive Plan in
respect of the year in which termination of his employment occurs or any
subsequent year. Notwithstanding the terms of the Company's stock compensation
programs or the terms of any agreement between the Company and the Executive
evidencing an award to the Executive, (i) all stock options and other awards
previously granted to the Executive that have not vested on or before the
effective date of the termination of the Executive's employment shall expire and
shall be null and void, (ii) all stock options and other awards previously
granted to the Executive that have vested on or prior to the effective date of
the termination of the Executive's employment shall be payable (in the case of
any awards which do not require further payment or exercise by the Executive) or
exercisable for a period of three months following the effective date of the
termination of the Executive's employment, and (iii) any such stock options or
other awards which have not been exercised on or before the end of such
three-month period shall expire and shall be null and void. No other payments
shall be made, or benefits provided, by the Company whether under this Agreement
or otherwise except to the extent required by law.
(e) In the event that the Executive's employment hereunder is terminated
due to the Executive's death, the Company shall pay the Executive's executor or
other legal representative (the "Representative") any earned but unpaid Base
Salary as of the date of termination of employment and, subject to the
provisions of Section 3(l), shall pay the Representative an amount determined
under the Annual Incentive Plan in respect of the year in which the Executive's
death occurs assuming (i) the Executive has met all of his personal objectives
pro rated for such year, and (ii) the total bonus pool under the Annual
Incentive Plan for such year is based upon the level of the Company's
performance through the end of the month immediately preceding the Executive's
death with such performance being annualized for the year in which the
Executive's death occurs; provided, that, the amount paid to the Representative
shall be pro rated for the number of complete months preceding the Executive's
death. In addition, the Company shall pay to the Representative (or as the
Representative may otherwise direct) all amounts which the Executive is entitled
to pursuant to the SERP Plan (whether vested or unvested). All stock options or
other awards previously granted to the Executive that have not vested on or
before the Executive's death will immediately expire and shall be null and void
as of the date of death and all options or awards previously granted to the
Executive that have vested on or before the Executive's death shall be payable
or exercisable by the Representative as specified in the stock compensation
program or other arrangement pursuant to which such options or awards were
granted to the Executive. No other payments shall be
made, or benefits provided, by the Company under this Agreement except as
otherwise required by law.
(f) If a Change in Control Event occurs, the Executive shall have the
right, in his sole discretion, to elect to terminate his employment by providing
written notice of his election to the Company within 180 days after the
occurrence of such Change in Control Event. Any termination of employment by the
Executive pursuant to this Section 6(f) shall be deemed to be a termination for
Good Reason and shall have the effects set forth in Section 6(b) hereof.
(g) For purposes of this Agreement, the following terms have the following
meanings:
(i) The term "Termination for Cause" means, to the maximum extent
permitted by applicable law, a termination of the Executive's
employment by the Company because the Executive has (a) materially
breached or materially failed to perform his duties under applicable
law and such breach or failure to perform causes material damage to
the Company or constitutes self-dealing or willful misconduct, (b)
intentionally committed an act of dishonesty in the performance of his
duties hereunder that either constitutes self-dealing, willful
misconduct, a breach of duty to the Company or a violation of
applicable law, (c) engaged in conduct detrimental to the business of
the Company which causes material damage to the Company, (d) been
convicted of a felony, (e) been convicted of a misdemeanor involving
moral turpitude, (f) materially breached or materially failed to
perform his obligations and duties hereunder, which breach or failure
the Executive shall fail to remedy within 30 days after written demand
from the Company, or (g) violated in any material respect the
representations made in Section 1 above or the provisions of Section 7
below.
(ii) The term "Good Reason" means a termination of the
Executive's employment by the Executive due to a failure of the
Company or its successors without the prior consent of the Executive
to fulfill its obligations under this Agreement in any material
respect, including (a) any failure to elect or re-elect or to appoint
or reappoint the Executive to the office of Chairman of the Board and
Chief Executive Officer (or any equivalent title with substantially
similar duties), (b) any other material change by the Company in the
functions, duties or responsibilities of the Executive's position with
the Company which would materially reduce the ranking or level,
dignity, responsibility, importance or scope of such position, or (c)
the termination or amendment of either the Annual Incentive Plan or
the SERP Plan so as to materially diminish the benefits expected to be
enjoyed by the Executive thereunder; provided, however, that for
purposes of this clause (c), "Good Reason" shall not exist if the
termination or amendment (i) occurs in connection with the adoption or
modification of another plan having a purpose similar to the Annual
Incentive Plan or the SERP Plan, as the case may be, in which the
Executive is eligible to participate and, after giving effect to the
adoption or modification of such other plan, the aggregate net benefit
expected to
be enjoyed by the Executive under such plans is not diminished
materially, or (ii) was reasonably required in order to comply with
applicable law, rule or regulation.
(iii) The term "Without Cause Termination" means a termination of
the Executive's employment by the Company other than due to (i) a
Termination for Cause, (ii) Permanent Disability, (iii) the
Executive's death, or (iv) the expiration of this Agreement.
(iv) The term "Permanent Disability" means permanently disabled
so as to qualify for full benefits under the Disability Policy;
provided, however, that if no Disability Policy is in effect on the
date of determination, "Permanent Disability" shall mean the inability
of the Executive to perform his duties hereunder on a full-time basis
for a period of six full calendar months during any eight consecutive
calendar months due to illness or injury of a physical or mental
nature, supported by the completion by the Executive's attending
physician (or a physician selected by the Company and reasonably
satisfactory to the Executive or his legal representative if the
Executive's physician is unable or unwilling to provide the necessary
certification) of a medical certification form outlining the
disability and treatment.
(v) The term "Change in Control Event" means any of the following
events:
(A) Any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934,
as amended, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the
right to acquire, whether such right is exercisable immediately
or only after the passage of time), directly or indirectly, of
50% or more of the total voting power of the Company's
outstanding capital stock;
(B) The individuals who (i) as of the date of this Agreement
constitute the Board of Directors (the "Original Directors"),
(ii) thereafter are elected to the Board of Directors and whose
election or nomination for election to the Board of Directors was
approved by a vote of at least 2/3 of the Original Directors then
still in office (such Directors being called "Additional Original
Directors"), or (iii) are elected to the Board of Directors and
whose election or nomination for election to the Board of
Directors was approved by a vote of at least 2/3 of the Original
Directors and Additional Original Directors then still in office,
cease for any reason to constitute a majority of the members of
the Board of Directors;
(C) The Company shall consummate a merger, consolidation,
recapitalization, or reorganization of the Company, other than
any such transaction which results in holders of outstanding
voting securities of the Company immediately prior to the
transaction having beneficial ownership of at least 50% of the
total voting power represented by the voting securities of the
surviving entity outstanding immediately after such transaction,
with the voting power of each such continuing holder relative to
such other continuing holders being not altered substantially in
the transaction; or
(D) The Company shall consummate a plan of complete
liquidation of the Company or an agreement for the sale,
assignment, conveyance, transfer, lease or other disposition by
the Company of all or substantially all of its assets to any
person, or group of related persons, in one or a series of
related transactions.
(h) Any payments to be made or benefits to be provided by the Company
pursuant to Section 6(b) or (f) hereof are subject to the receipt by the Company
of an effective general release and agreement not to xxx in a form reasonably
satisfactory to the Company (the "Release") pursuant to which the Executive
agrees (i) to release all claims against the Company and certain related parties
(excluding claims for any severance benefits payable hereunder), (ii) not to
maintain any action, suit, claim or proceeding against the Company and certain
related parties, and (iii) to be bound by certain confidentiality and mutual
non-disparagement covenants specified therein. Notwithstanding the due date of
any post-employment payment, the Company shall not be obligated to make any
payments under Section 6(b) or (f) until after the expiration of any revocation
period applicable to the Release.
Section 7. Other Duties of Executive During and After Term. (a) The
Executive recognizes and acknowledges that all information pertaining to the
affairs, business, clients, or customers of the Company or any of its
subsidiaries or affiliates (any or all of such entities being hereinafter
referred to as the "Business"), as such information may exist from time to time,
other than information that the Company has previously made publicly available,
is confidential information and is a unique and valuable asset of the Business,
access to and knowledge of which are essential to the performance of the
Executive's duties under this Agreement. In consideration of the payments made
to him hereunder, the Executive shall not, except to the extent reasonably
necessary in the performance of his duties under this Agreement, divulge to any
person, firm, association, corporation, or governmental agency, any information
concerning the affairs, businesses, clients, or customers of the Business
(except such information as is required by law to be divulged to a government
agency or pursuant to lawful process), or make use of any such information for
his own purposes or for the benefit of any person, firm, association or
corporation (except the Business) and shall use his reasonable best efforts to
prevent the disclosure of any such information by others. All records,
memoranda, letters, books, papers, reports, accountings, experience or other
data, and other records and documents relating to the Business, whether made by
the Executive or otherwise coming into his possession, are confidential
information and are, shall be, and shall remain the property of the Business. No
copies thereof shall be made which are not retained by the Business, and the
Executive agrees, on
termination of his employment or on demand of the Company, to deliver the same
to the Company.
(b) The Executive recognizes and acknowledges that the Company shall own
all Work Product created by the Executive during the Term. As used herein, "Work
Product" includes, but is not limited to, all intellectual property rights, U.S.
and international copyrights, patentable inventions, creations, discoveries and
improvements, works of authorship and ideas, whether or not patentable or
copyrightable and regardless of their form or state of development. All Work
Product shall be considered work made for hire by the Executive and shall be
owned by the Company.
If any of the Work Product may not, by operation of law, be considered a
work made for hire by the Executive for the Company, or if ownership of all
right, title and interest of the intellectual property rights therein shall not
otherwise vest exclusively in the Company, the Executive shall assign, and upon
creation thereof shall be deemed to have automatically assigned, without further
consideration, the ownership of all such Work Product to the Company and its
successors and assigns. The Company, its successors and assigns shall have the
right to obtain and hold in its or their own name copyrights, patents,
registrations and other protections available to the Work Product. The Executive
shall, at the Company's expense, assist the Company in obtaining and maintaining
patent, copyright, trademark and other appropriate protection for all Work
Product in all countries. The Executive hereby irrevocably relinquishes for the
benefit of the Company, its successors and assigns any moral rights in the Work
Product recognized under applicable law.
The Executive shall disclose all Work Product promptly to the Company and
shall not disclose the Work Product to anyone other than authorized Company
personnel without the Company's prior written consent. The Executive shall not
disclose to the Company or induce the Company to use any secret or confidential
information or material belonging to others.
The provisions of this Section 7(b) cover Work Product of any kind that is
conceived or made by the Executive that (i) results from tasks assigned to the
Executive by the Company, its subsidiaries and affiliates, or (ii) are conceived
or made with the use of facilities or materials provided by the Company, its
subsidiaries and affiliates.
(c) In consideration of the payments made to him hereunder, during the
two-year period commencing on the effective date of the termination of his
employment for any reason, the Executive shall not, without express prior
written approval of the Board, directly or indirectly, own or hold any
proprietary interest in, or be employed by or receive remuneration from, any
corporation, limited liability company, business trust, partnership, sole
proprietorship or other entity engaged in competition with the Company or any of
its affiliates (a "Competitor"), other than severance-type or retirement-type
benefits from entities constituting prior employers of the Executive. The
Executive also shall not, during such two-year period, solicit for the account
of any Competitor, any customer or client of the Company or its affiliates, or
any entity or individual that was such a customer or client during the
twelve-month period immediately preceding the termination of the Executive's
employment. The Executive also shall not, during
such two-year period, act on behalf of any Competitor to interfere with the
relationship between the Company or its subsidiaries and affiliates and their
respective employees.
For purposes of the preceding paragraph, (i) the term "proprietary
interest" means legal or equitable ownership, whether through stockholding or
otherwise, of an equity interest in a business, firm or entity other than
ownership of less than two percent of any class of equity interest in a publicly
held business, firm or entity and (ii) an entity shall be considered to be
"engaged in competition" if such entity is, or is a holding company for, a
company engaged in the business of designing, manufacturing, assembling, selling
or servicing trace chemical detection equipment or related software or supplies
anywhere in the world.
(d) The Executive acknowledges that the restrictions contained in this
Section 7 are reasonable and necessary to protect the legitimate interests of
the Company and that any breach by the Executive of any provision contained in
this Section 7 will result in irreparable injury to the Company for which a
remedy at law would be inadequate. Accordingly, the Executive acknowledges that
the Company shall be entitled to temporary, preliminary and permanent injunctive
relief against the Executive in the event of any breach or threatened breach by
the Executive of the provisions of this Section 7, in addition to any other
remedy that may be available to the Company whether at law or in equity.
(e) The Company's obligation to make payments, or provide for any benefits
under this Agreement (except to the extent vested or exercisable) shall cease
upon a violation by the Executive of the provisions of this Section 7. The
provisions of this Section 7 shall survive any termination of the Executive's
employment with the Company.
Section 8. Excise Taxes. Notwithstanding anything herein to the contrary,
if it is determined that any payment, coverage or benefit provided to the
Executive would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any interest or
penalties with respect to such excise tax (such excise tax, together with any
interest or penalties thereon, is herein referred to as an "Excise Tax"), then
the Executive shall be entitled to one or more additional payments (each, a
"Gross-up Payment") in an amount that will place the Executive in the same
after-tax economic position that he would have enjoyed if the Excise Tax had not
been imposed. The amount of each Gross-up Payment shall be determined in good
faith by the Company in accordance with the formula {(E x (1 - M) / (1 - T)) -
E} (or such other formula as the Company reasonably determines is appropriate to
achieve the same result), where
E equals the payment, coverage or benefit which is determined to be "excess
parachute payments" within the meaning of Section 280G(b)(i) of the Code;
M equals the sum of the highest marginal federal and state income tax rates
then applicable to the Executive, net of the effect, if any, of the deduction of
state income taxes on the Executive's federal income tax return; and
T equals M plus the rate of Excise Tax applicable to the payment, coverage
or benefit.
Any Gross-Up Payment shall be paid to the Executive in sufficient time to
enable the Executive to pay any Excise Tax imposed on the Executive.
Section 9. Withholdings. The Company may directly or indirectly withhold
from any payments made under this Agreement all Federal, state, city or other
taxes and all other deductions as shall be required pursuant to any law or
governmental regulation or ruling or pursuant to any contributory benefit plan
maintained by or on behalf of the Company.
Section 10. Consolidation, Merger, or Sale of Assets. Nothing in this
Agreement shall preclude the Company from consolidating or merging into or with,
or transferring all or substantially all of its assets to, or engaging in any
other business combination with, any other person or entity which assumes this
Agreement and all obligations and undertakings of the Company hereunder. Upon
such a consolidation, merger, transfer of assets or other business combination
and assumption, the term "Company" as used herein shall mean such other person
or entity and this Agreement shall continue in full force and effect.
Section 11. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be given in writing and
shall be deemed to have been duly given if delivered or mailed, postage prepaid,
by same day or overnight mail (i) if to the Executive, at the address set forth
above with a copy to Xxxxxxx, Calamari & Xxxxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000, attention: Xxxxxxx X. Xxxxxxxx, or (ii) if to the Company, as
follows:
Xxxxxxxxx Technologies Inc.
000 Xxxxx Xxxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
or to such other address as either party shall have previously specified in
writing to the other.
Section 12. No Attachment. Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect; provided, however, that nothing in this Section
12 shall preclude the assumption of such rights by executors, administrators or
other legal representatives of the Executive or his estate and their assigning
any rights hereunder to the person or persons entitled thereto.
Section 13. Expenses. Except as set forth herein, each party hereto shall
pay its own expenses incident to the preparation, negotiation, administration
and enforcement of this Agreement and the transactions contemplated herein.
Notwithstanding the foregoing, the Company shall reimburse the Executive for the
reasonable out-of-pocket expenses incurred by
the Executive in connection with the preparation, negotiation and execution of
this Agreement, subject to receipt of appropriate invoices and such other
documentation as the Company may reasonably request.
Section 14. Source of Payment. Subject to the terms of the SERP Plan, all
payments provided for under this Agreement shall be paid in cash from the
general funds of the Company. Except as may be required pursuant to the SERP
Plan, the Company shall not be required to establish a special or separate fund
or other segregation of assets to assure such payments, and, if the Company
shall make any investments to aid it in meeting its obligations hereunder, the
Executive shall have no right, title or interest whatever in or to any such
investments except as may otherwise be expressly provided in a separate written
instrument relating to such investments. Nothing contained in this Agreement,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship, between the Company and
the Executive or any other person. To the extent that any person acquires a
right to receive payments from the Company hereunder, such right, without
prejudice to rights which employees may have, shall be no greater than the right
of an unsecured creditor of the Company.
Section 15. Binding Agreement; No Assignment. This Agreement shall be
binding upon, and shall inure to the benefit of, the Executive and the Company
and their respective permitted successors, assigns, heirs, beneficiaries and
representatives. This Agreement is personal to the Executive and may not be
assigned by him without the prior written consent of the Company. Any attempted
assignment in violation of this Section 15 shall be null and void.
Section 16. Dispute Resolution. At the option of either the Company or the
Executive, any dispute, controversy or question arising under, out of or
relating to this Agreement or the breach thereof, other than pursuant to Section
7 hereof, shall be referred for decision by arbitration in the State of New
Jersey by a neutral arbitrator mutually selected by the parties hereto. Any
arbitration proceeding shall be governed by the Rules of the American
Arbitration Association then in effect or such rules last in effect (in the
event such Association is in existence). If the parties are unable to agree upon
such a neutral arbitrator within 21 days after either party has given the other
written notice of the desire to submit the dispute, controversy or question for
decision as aforesaid, then either party may apply to the American Arbitration
Association for a final and binding appointment of a neutral arbitrator,
however, if such Association is not then in existence or does not act in the
matter within 45 days of any such application, either party may apply to the
Presiding Judge of the Superior Court of any county in New Jersey for an
appointment of a neutral arbitrator to hear the parties and such Judge is hereby
authorized to make such appointment. In the event that either party exercises
the right to submit a dispute, controversy or question arising hereunder to
arbitration, the decision of the neutral arbitrator shall be final, conclusive
and binding on all interested persons and no action at law or in equity shall be
instituted or, if instituted, further prosecuted by either party other than to
enforce the award of the neutral arbitrator. The award of the neutral arbitrator
may be entered in any court that has jurisdiction. The Executive and the Company
shall each bear all their own
costs (including the fees and disbursements of counsel) incurred in connection
with any such arbitration and shall each pay one-half of the costs of any
arbitrator appointed hereunder.
Section 17. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New Jersey,
without reference to the choice of law principles thereof.
Section 18. Entire Agreement. This Agreement shall constitute the entire
agreement among the parties with respect to the matters covered hereby and shall
supersede all previous written, oral or implied understandings among them with
respect to such matters, including, but not limited to, the Employment
Agreement, dated as of July 10, 1989, between the Company and the Executive.
Section 19. Amendments. This Agreement may only be amended or otherwise
modified, and compliance with any provision hereof may only be waived, by a
writing executed by all of the parties hereto. The provisions of this Section 19
may only be amended or otherwise modified by such a writing.
Section 20. Severability. The invalidity of any provision hereof shall not
affect the validity, force or effect of the remaining provisions hereof. In the
event that an arbitrator designated pursuant to the provisions of Section 16 or
a court of competent jurisdiction determines that any provision contained herein
is not enforceable as written because of the breadth or duration of such
provision, such arbitrator or court shall have the authority to modify the terms
of such provision so that, as so modified, such provision shall be enforceable
to the maximum extent permitted by applicable law.
Section 21. No Strict Construction. Each of the parties hereto acknowledges
that this Agreement has been prepared jointly by the parties hereto, each of
whom has been represented by counsel, and shall not be strictly construed
against either party.
Section 22. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, and all of which shall together
constitute one and the same instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed by the undersigned, thereunto duly authorized, and the Executive has
signed this Agreement, all as of the date first written above.
XXXXXXXXX TECHNOLOGIES INC.
By:/s/Xxxxx X. XxXxxxx
_________________________________
Xxxxx X. XxXxxxx, Chairman of the
Executive Compensation Committee
of the Board of Directors
/s/Xxxxxxx X. Xxxxxx
_________________________________
Xxxxxxx X. Xxxxxx
EXHIBIT A
XXXXXXXXX TECHNOLOGIES, INC.
ANNUAL INCENTIVE PLAN for
EXECUTIVE MANAGEMENT POSITIONS
Purpose
The purpose of this plan is to relate compensation for Executive to the
performance of the company and their own performance. In addition, this plan
should assist in attracting and retaining outstanding Executive by rewarding
outstanding performance. This plan is also intended to xxxxxx the spirit of
teamwork by the officer group.
General Description
The basic format of this plan is to base incentives on the establishment and
accomplishment of team and individual goals for each of the Executives covered
under the plan. In addition, the plan protects the interest of shareholders by
limiting the total amount paid in incentives to 10% of net income.
Eligibility for the Plan
The current eligibility for the plan includes the four officers of the company;
the Chief Executive Officer, the Executive Vice President, the Vice President &
Secretary, and the Vice President, Finance-Chief Financial Officer. Additional
eligibility may be determined by the Compensation Committee of the Board of
Directors upon the recommendation of the Chief Executive Officer.
Amounts
Because each of the Executives has a different impact on the overall results of
the organization, the target incentive award varies for each position and is
expressed as a percentage of actual base salary effective for that year. In
addition to the target percentage, there will be the ability to increase the
annual incentive by up to 50% for accomplishment of goals beyond expectations,
provided the overall results warrant this acceleration. Should target
performance not be fully met by individuals, partial bonuses up to 50% of the
targeted amount should be paid if some but not all of the goals are met.
The following table summarizes the amounts:
Partial
Accomplishment
Position Target Incentive of Target Maximum Incentive
CEO 50% 25% 100%
EVP 40% 20% 100%
VP 35% 17-1/2% 100%
CFO 30% 15% 100%
If group targets are not met, then no incentive (0%) should be paid. If targets
are exceeded, then an interpolation between the target amount and the maximum
can be made.
Net Income Limitation
In no case should the amount of incentive paid out under this plan exceed 10% of
net income. The following table illustrates this point:
Target Annual Target Annual
Position Base Salary Incentive Incentive in Dollars
CEO $250,000 50% $125,000
EVP 167,000 40% 66,800
VP 136,000 35% 47,600
CFO 125,000 35% 43,750
TOTAL $678,000 42% $283,150
This payout of $283,150 would only be applicable if net income for the year
exceeded $2,831,500 using the formula of 10% of net income as the limit. To the
extent that net income is less than this amount, each individual award would be
scaled back by the ratio of actual net income compared to the income necessary
for a full payout. For example, if the total annual incentive $'s computed are
$350,000 and net income was $1,500,000, then, each award would be multiplied by:
$1,500,000 - actual net income =42.8%
$3,500,000 - net income necessary for a full payout
In this way, each award will be scaled back to 42.8% of the computed amount and
the total awards will be limited to 10% of net income:
$350,000 x 42.8% = $150,000
Goals
Goals should be established at the beginning of the year. The CEO and the
Executives as a group will establish team goals which will be approved by the
Executive Compensation Committee. An example of team goals would be the
following:
1) Achievement of plan/budget
2) Accuracy of sales forecasts
3) Accuracy of production completion schedule
4) Achievement of growth strategy (internal growth and/or acquisition)
5) Successful completion of financing plans
6) New product development (optional)
In addition, each of the officers should have individual goals. The individual
goals should be made up of two components. The first component should be that
officer's portion of the team goals for which they have primary responsibility.
For example, the Executive Vice President would have sales and production goals
and the Vice President would have marketing and sales goals. The second
component of individual goals will be personal goals. Examples of personal goals
would be; increase involvement in industry associations, develop staff
abilities, hire or designate a replacement, etc. Personal goals will be agreed
to by each of the officers with the Chief Executive Officer and for the Chief
Executive Officer, with the Chairman of the Executive Compensation Committee.
Equal weight should be given to the team and the individual goals. Within the
individual goals, superior weight should be given to the individual's portion of
the team goals and less to the personal goals, although there is no formula for
weighing the importance of the goals. The formula is 50% for team goals and 50%
for individual goals.
The illustration attached is offered to further clarify this plan.
Administration of the Plan
The plan is administered by the Executive Compensation Committee of the Board
which has the right to interpret, amend, or cancel the plan at any time. The CEO
will recommend to the Committee the results of the plan for the year, with the
exception of his own award. Amounts should be accrued during the year and
payment, if any, should be at the end of the year.
ILLUSTRATION
Xxxxxx
The base salary of the V.P. for Marketing and Sales is $167,000. The target
incentive is 35%. The computed payout to all executives is $275,000.
Goals
The team goals were:
1. Achievement of plan/budget - net income of $2,900,000.
2. Accuracy of sales forecast - 100 units
3. Produce 100 units
The V.P. for Marketing and Sales individual goals were:
1. Accuracy of sales forecast - 100 units (one of the team goals)
2. Personal goals of
hire and develop a technical sales person
increase industry involvement with speaking engagements
improve communications with major customers
Results
The sales goals of 100 units were achieved. Unforeseen supply problems limited
production to 85 units. All else went well and the net income was $3,000,000.
All personal goals were accomplished.
Computation
The annual incentive for the V.P. would be:
1/2 of incentive based on team goal
(team goals was partially on target = 1/2 x 35% x 50% = 8.75%
since production goal was only partially achieved
1/2 of incentive based on individual goal (including personal goals)
(individual was on target = 1/2 x 35% = 17.5%
Total = 26.25%
26.25% x $167,000 = $43,837.50
The limitation on annual incentive would be:
Company earned $3,000,000. For target payout to all executives, the company must
earn $2,750,000. Therefore the payout of $43,837.50 is not modified.
If earnings were only $2,000,000, then the award would be adjusted by:
$2,000,000 actual net income = 72.7%
2,750,000 the amount needed for a full payout
The individual award for the V.P. for Marketing and Sales would be:
$43,837.50 x 72.7% = $31,870.
And the total incentives for all executives would be $200,000. (10% of net
income)
EXHIBIT B
XXXXXXXXX TECHNOLOGIES
Supplemental Executive Retirement Plan
Purpose: The purpose of this plan is to provide a reasonable replacement of
income for Executives of the company upon retirement. The amounts are contingent
on the performance of the company as well as the individual Executive.
General Description: This is a defined contribution plan in which a defined
percentage of each executive's annual pay is contributed annually to an account
in the executive's name. The percentage is contingent on company performance.
Since the annual incentive is included in the definition of pay, the
contribution is also contingent on the executive's performance. The plan
supplements the existing retirement plan for all employees which is qualified
under section 401(k) of the IRS code as well as Social Security. This
Supplemental Executive Retirement Plan is not qualified for special tax
treatment, and contributions to the plan are not deductible for tax purposes
until actual amounts are paid out as compensation expenses. Contributions are
not taxed to the executives until received. Contributions are charged to
earnings for the year the contributions are made.
Eligibility: Eligibility is determined by the Executive Compensation Committee
of the Board of Directors. The initial eligibility includes:
Xxxxxxx X. Xxxxxx Chief Executive Officer
Xxxx X. Xxxxxx Executive Vice President
Xxxxxxx X. Xxxxx Vice President and Secretary
Xxxxxxx X. Xxxxxxxxx Vice President, Finance -
Chief Financial Officer
Contributions: Contributions will be made annually to an account in the name of
each individual in the plan as soon after the final accounting of the company's
annual results as is practical.
The amount of the annual contribution will be a percentage of the base salary
and annual incentive of each individual for the year just ended. The percentage
will be determined by the Executive Compensation Committee of the Board of
Directors with the following guidelines:
If no net If Target net income Maximum Contribution if
income is achieved net income exceeds Target
Xxxx Xxxxxx 0% 20% 22%
Xxxx Xxxxxx 0% 20% 22%
Xxx Xxxxx 0% 8% 10%
Xxxx Xxxxxxxxx 0% 8% 10%
Contributions will be on a sliding scale. The Compensation Committee will
interpolate between the percentages between the guidelines where necessary using
as guidance the amount of net income, the relationship of net income to past
years, the overall economic environment, and other factors they consider
relevant.
Investment of Account Balances. Account balances will be invested by the Company
in the same investment options available in the Company's 401(k) plan. The
Executives may indicate the investment options of their choice, although the
Executive Compensation Committee will make the designation of how the funds will
be invested. The earnings accrue to the account of the named Executive. Earnings
of the account are taxable to the Company when they are earned. Earnings are
deductible by the Company and taxable to the Executives when they are paid out
as retirement income to the individual.
The fund balance is made up of Company contributions which are made annually and
earnings or losses which are accrued periodically according to the investment
choice. Mutual funds are valued daily, etc.
Vesting: Full vesting is 100% after 5 years of plan participation.
Distribution:
Retirement
The minimum age for retirement distribution is age 60 with 5 years of
plan participation.
Amount
The individual will be distributed a lump sum equal to the account
balance, which includes both Company contributions and earnings or
losses, or a life annuity purchased with the account balance.
Death or Permanent
Disability Benefit
In the case of death or permanent disability, the individual or
designated beneficiary will receive the account balance on that date,
whether or not the individual is vested.
Discharge without Cause or
Resignation for Good Reason
The individual receives the balance of the account on the designated
date whether or not the individual is vested.
Voluntary Resignation
The individual, if vested, receives distribution at the later of date
of termination or age 60. If individual is not vested, account balance
is forfeited.
Termination for Cause
The individual, if vested, receives distribution at the later of the
date of termination or age 60. If individual is not vested, account
balance is forfeited.
Change of Control
If the individual leaves under the conditions of a change of control,
the age and service requirements are waived and the individual
received the current balance whether or not the individual is vested.
