Exhibit 10.8
CHANGE IN CONTROL AGREEMENT
This EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT ("Agreement"),
effective as of July 25, 2000, by and between CONSOLIDATED GRAPHICS, INC., a
Texas corporation (the "Company"), and XXX X. XXXXX (the "Executive"), evidences
that;
WHEREAS, the Executive is a senior executive of the Company and has
made and/or is expected to make or continue to make significant contributions to
the profitability, growth and financial strength of the Company;
WHEREAS, the Company desires to assure itself of both present and
future continuity of management in the event of a Change in Control (as defined
hereafter) and desires to establish certain minimum compensation rights with
respect to its key senior executives, including the Executive, applicable in the
event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior executives are
not practically disabled from discharging their duties upon a Change in Control;
WHEREAS, this Agreement is not intended to alter materially the
compensation and benefits which the Executive could reasonably expect to receive
from the Company absent a Change in Control and, accordingly, although effective
and binding as of the date hereof, this Agreement shall become operative only
upon the occurrence of a Change in Control; and
WHEREAS, the Executive is willing to render services to the Company on
the terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Operation of Agreement:
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(a) Sections 1 and 8 through 21 of this Agreement shall
be effective and binding as of the Effective Date,
but, anything in this Agreement to the contrary
notwithstanding, Sections 2, 3, 4, 5, 6 and 7 of this
Agreement shall not be effective and binding unless
and until there shall have occurred a Change in
Control. For purposes of this Agreement, a "Change in
Control" will be deemed to have occurred if at any
time during the Term (as hereinafter defined) any of
the following events shall occur:
(i) The Company is merged, consolidated,
converted or reorganized into or with
another corporation or other legal entity,
and as a result of such merger,
consolidation, conversion or reorganization
less than a majority of the combined voting
power of the then outstanding securities of
the Company or such corporation or other
legal entity immediately after such
transaction are held in the aggregate by the
holders of Voting Stock (as hereinafter
defined)
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of the Company immediately prior to
such transaction and/or such voting power is
not held by substantially all of such
holders in substantially the same
proportions relative to each other;
(ii) The Company sells (directly or indirectly)
all or substantially all of its assets
(including, without limitation, by means of
the sale of the capital stock or assets of
one or more direct or indirect subsidiaries
of the Company) to any other corporation
or other legal entity, of which less than
a majority of the combined voting power of
the then outstanding voting securities
(entitled to vote generally in the election
of directors or persons performing similar
functions on behalf of such other
corporation or legal entity) of such other
corporation or legal entity is held in the
aggregate by the holders of Voting Stock of
the Company immediately prior to such sale
and/or such voting power is not held by
substantially all of such holders in
substantially the same proportions relative
to each other;
(iii) Any person (as the term "person" is used in
Section 13(d)(3) or Section 14(d)(2) of the
Securities Exchange Act of 1934, as amended
(the "Exchange Act")) becomes (subsequent to
the Effective Date) the beneficial owner (as
the term "beneficial owner" is defined under
Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange
Act) of securities representing fifty
percent (50%) or more of the combined voting
power of the then-outstanding securities
entitled to vote generally in the election
of directors of the Company ("Voting
Stock");
(iv) The Company files a report or proxy
statement with the Securities and Exchange
Commission pursuant to the Exchange Act
disclosing in response to Form 8-K, Schedule
14A or Schedule 14C (or any successor
schedule, form or report or item therein)
that a change in control of the Company has
occurred;
(v) If during any one (1)-year period,
individuals who at the beginning of any such
period constitute the directors of the
Company cease for any reason to constitute
at least a majority thereof, unless the
election, or the nomination for election by
the Company's shareholders, of each director
of the Company first elected during such
period was approved by a vote of at least
two-thirds of (i) the directors of the
Company then still in office who were
directors of the Company at the beginning of
any such period or (ii) directors of the
Company whose nomination and/or election was
approved by the directors referenced in
clause (i) immediately preceding; or
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(vi) The shareholders of the Company approve a
plan contemplating the liquidation or
dissolution of the Company.
Notwithstanding the foregoing provisions of
Subsection 1(a)(iii) or 1(a)(iv) hereof, a "Change in
Control" shall not be deemed to have occurred for
purposes of this Agreement solely because (i) the
Company, (ii) a corporation or other legal entity in
which the Company directly or indirectly beneficially
owns 100% of the voting securities of such entity, or
(iii) any employee stock ownership plan or any other
employee benefit plan of the Company or any
wholly-owned subsidiary of the Company, either files
or becomes obligated to file a report or a proxy
statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K, Schedule 14A or Schedule
14C (or any successor schedule, form or report or
item therein) under the Exchange Act, disclosing
beneficial ownership by it of shares of Voting Stock,
or because the Company reports that a change in
control of the Company has occurred by reason of such
beneficial ownership.
(b) Upon occurrence of a Change in Control at any time
during the Term, Sections 2, 3, 4, 5, 6 and 7 of this
Agreement shall become immediately binding and
effective.
(c) The period during which this Agreement shall be in
effect (the "Term") shall commence as of the date
hereof and shall expire as of the later of (i) the
close of business on the third anniversary of the
date hereof, or (ii) the expiration of the Period of
Employment (as hereinafter defined); provided,
however, that (A) subject to Section 9 hereof, if,
prior to a Change in Control, the Executive ceases
for any reason to be an employee of the Company (or
a parent or subsidiary thereof), thereupon the
Term shall be deemed to have expired and this
Agreement shall immediately terminate and be of no
further effect and (B) commencing on the first
anniversary of the date hereof and each anniversary
thereafter, the Term of this Agreement shall
automatically be extended for an additional year.
2. Employment; Period of Employment:
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(a) Subject to the terms and conditions of this
Agreement, upon the occurrence of a Change in
Control, the Company shall continue the Executive in
its employ and the Executive shall remain in the
employ of the Company for the period set forth in
Subsection 2(b) hereof (the "Period of Employment"),
in the position and with substantially the same
duties and responsibilities that the Executive had
immediately prior to the Change in Control, or to
which the Company and the Executive may hereafter
mutually agree in writing. Throughout the Period of
Employment, the Executive shall devote substantially
all of the
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Executive's time during normal business hours
(subject to vacations, sick leave and other
absences in accordance with the policies of the
Company as in effect for senior executives
immediately prior to the Change in Control) to the
business and affairs of the Company, but nothing in
this Agreement shall preclude the Executive from
devoting reasonable periods of time during normal
business hours to (i) serving as a director, trustee
or member of or participant in any organization or
business so long as such activity would not
constitute Competitive Activity (as hereinafter
defined) if conducted by the Executive after the
Executive's Termination Date (as hereinafter
defined), (ii) engaging in charitable and community
activities, or (iii) managing the Executive's
personal investments.
(b) The Period of Employment shall commence on the date
on which a Change in Control occurs and, subject only
to the provisions of Section 4 hereof, shall continue
until the expiration of the second anniversary of the
occurrence of the Change in Control.
3. Compensation During Period of Employment:
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(a) During the Period of Employment, the Executive shall
receive (i) annual base salary at a rate not less
than the Executive's highest annual fixed or base
compensation paid during or payable with respect to
any calendar year during the three calendar years
immediately preceding the year in which the Change in
Control occurred, or such higher rate as may be
determined from time to time by the Board of
Directors of the Company (the "Board") or the
Compensation Committee thereof (the "Committee")
(which base salary at such rate is herein referred to
as "Base Pay") and (ii) an annual amount equal to not
less than the highest aggregate annual bonus,
incentive or other payments of cash compensation paid
to the Executive in addition to the amounts referred
to in clause (i) above made or to be made in or with
respect to any calendar year during the three
calendar years immediately preceding the year in
which the Change in Control occurred pursuant to any
bonus, incentive, profit-sharing, performance,
discretionary pay or similar policy, plan, program or
arrangement of the Company ("Incentive Pay") which
contemplates cash payments other than Employee
Benefits (as hereinafter defined); provided, however,
that in no event shall any increase in the
Executive's aggregate cash compensation or any
portion thereof in any way diminish any other
obligation of the Company under this Agreement. The
Executive's Base Pay shall be payable monthly. The
Executive's Incentive Pay shall be paid annually as
soon as reasonably practicable following
determination of the amount payable but in no event
later than the date which is sixty (60) days
following the last day of the fiscal year during
which such Incentive Pay is deemed earned.
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(b) During the Period of Employment the Executive shall,
on the same basis as the Executive participated
therein immediately prior to the Change in Control,
be a full participant in, and shall be entitled to
the perquisites, benefits and service credit for
benefits as provided under any and all employee
retirement income and welfare benefit policies,
plans, programs or arrangements in which senior
executives of the Company and/or any parent or
subsidiary participate generally, including without
limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental
executive retirement or other retirement income or
welfare benefit, deferred compensation, incentive
compensation, group and/or executive life, accident,
health, dental, medical/hospital or other insurance
(whether funded by actual insurance or self-insured
by the Company), disability, salary continuation,
expense reimbursement and other employee benefit
policies, plans, programs or arrangements that may
exist immediately prior to the Change in Control or
any equivalent successor policies, plans, programs
or arrangements that may be adopted thereafter by the
Company and/or any parent or subsidiary
(collectively, "Employee Benefits"); provided,
however, that, except as set forth in Section 5(a)(v)
hereof, the Executive's rights thereunder shall be
governed by the terms thereof and shall not be
enlarged hereunder or otherwise affected hereby.
Subject to the proviso in the immediately preceding
sentence, if and to the extent such perquisites,
benefits or service credit for benefits are not
payable or provided under any such policy, plan,
program or arrangement as a result of the amendment
or termination thereof subsequent to or after a
Change in Control, then the Company shall itself
pay or provide such Employee Benefits. Nothing in
this Agreement shall preclude improvement or
enhancement of any such Employee Benefits, provided
that no such improvement shall in any way diminish
any other obligation of the Company under this
Agreement.
(c) The Company has determined that the amounts payable
pursuant to this Section 3 constitute reasonable
compensation. Accordingly, notwithstanding any other
provision hereof, unless such action would be
expressly prohibited by applicable law, if any amount
paid or payable pursuant to this Section 3 is subject
to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the
"Code"), the Company will pay to the Executive an
additional amount in cash equal to the amount
necessary to cause the aggregate remuneration
received by the Executive under this Section 3,
including such additional cash payment (net of all
federal, state and local income and other taxes and
all taxes payable as the result of the application of
Sections 280G and 4999 of the Code) to be equal to
the aggregate remuneration the Executive would have
received under this Section 3, excluding such
additional payment (net of all federal, state and
local income and other taxes), as if
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Sections 280G and 4999 of the Code (and any successor
provisions thereto) had not been enacted into law.
4. Termination Following a Change in Control:
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(a) In the event of the occurrence of a Change in
Control, this Agreement may be terminated by the
Company during the Period of Employment only upon the
occurrence of one or more of the following events:
(i) If the Executive is unable to perform the
essential functions of the Executive's job
(with or without reasonable accommodation)
because the Executive has become permanently
disabled within the meaning of, and actually
begins to receive disability benefits
pursuant to, a long-term disability plan
maintained by or on behalf of the Company
for senior executives generally or, if
applicable, employees of the Company
immediately prior to the Change in Control;
or
(ii) For "Cause," which for purposes of this
Agreement shall mean that, prior to any
termination pursuant to Subsection 4(b)
hereof, the Executive shall have committed:
(A) an intentional act of material fraud,
embezzlement or theft in connection
with the Executive's duties or in the
course of the Executive's employment
with the Company;
(B) intentional, wrongful damage to
material property of the Company;
(C) intentional, wrongful disclosure of
material secret processes or
confidential information of the
Company; or
(D) intentional wrongful engagement in
any Competitive Activity;
and any such act shall have been
materially harmful to the Company.
For purposes of this Agreement, no
act, or failure to act, on the part
of the Executive shall be deemed
"intentional" if it was due primarily
to an error in judgment or
negligence, but shall be deemed
"intentional" only if done, or
omitted to be done, by the Executive
not in good faith and without
reasonable belief that the
Executive's action or omission was in
the best interest of the Company.
Notwithstanding the foregoing, the
Executive shall not be deemed to have
been terminated for "Cause" hereunder
unless and until there shall have
been delivered to the
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Executive a copy of a resolution duly
adopted by the affirmative vote of
not less than three-quarters of the
Board then in office at a meeting of
the Board called and held for such
purpose (after reasonable notice to
the Executive and an opportunity for
the Executive, together with the
Executive's counsel, to be heard
before the Board), finding that, in
the good faith opinion of the Board,
the Executive has committed an act
set forth above in this Subsection
4(a)(ii) and specifying the
particulars thereof in detail.
Nothing herein shall limit the right
of the Executive or the Executive's
beneficiaries to contest the validity
or propriety of any such
determination.
(b) In the event of the occurrence of a Change in
Control, this Agreement may be terminated by the
Executive during the Period of Employment with the
right to benefits as provided in Section 5 hereof
upon the occurrence of one or more of the following
events as determined by the Executive in the sole
discretion of the Executive:
(i) Any termination by the Company of the
employment of the Executive for any reason
other than for Cause or as a result of the
death of the Executive or by reason of the
Executive's disability and the actual
receipt of disability benefits in accordance
with Subsection 4(a)(i) hereof; or
(ii) Termination by the Executive of the
Executive's employment with the Company (or
any successor to or affiliate thereof)
during the Period of Employment upon the
occurrence of any of the following events:
(A) Failure to elect or reelect the
Executive to the office(s) which the
Executive held immediately prior to a
Change in Control, or failure to
elect or reelect the Executive as a
director of the Company (or any
successor to parent entity thereof)
or the removal of the Executive as a
director of the Company (or any
successor thereto), if the Executive
shall have been a director of the
Company immediately prior to the
Change in Control;
(B) An adverse change in the nature or
scope of the authorities, powers,
functions, responsibilities or duties
attached to the position(s) which the
Executive held immediately prior to
the Change in Control; a reduction in
the Executive's Base Pay and/or
Incentive Pay received from the
Company; or the termination of the
Executive's rights to any Employee
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Benefits to which the Executive was
entitled immediately prior to the
Change in Control or a reduction in
scope or value thereof without the
prior written consent of the
Executive, any of which is not
remedied within ten (10) calendar
days after receipt by the Company of
written notice from the Executive of
such change, reduction or
termination, as the case may be;
(C) A determination by the Executive
that, following a Change in Control,
as a result of a change in
circumstances significantly affecting
the Executive's position(s),
including without limitation, a
change in the scope of the business
or other activities for which the
Executive was responsible
immediately prior to a Change in
Control, the Executive has been
rendered substantially unable to
carry out, has been substantially
hindered in the performance of, or
has suffered a substantial reduction
in any of the authorities, powers,
functions, responsibilities or duties
attached to the position(s) held by
the Executive immediately prior to
the Change in Control, which
situation is not remedied within ten
(10) calendar days after written
notice to the Company from the
Executive of such determination;
(D) The liquidation, dissolution, merger,
consolidation or reorganization of
the Company or transfer of all or a
significant portion of its business
and/or assets (including, without
limitation, by means of the sale of
the capital stock or assets of one or
more direct or indirect subsidiaries
of the Company), unless the successor
(by liquidation, merger,
consolidation, reorganization or
otherwise) to which all or a
significant portion of its business
and/or assets have been transferred
(directly or by operation of law)
shall have assumed all duties and
obligations of the Company under this
Agreement pursuant to Section 11
hereof (in which case, such entity
shall be deemed to be the "Company"
hereunder);
(E) The Company shall require (I) that
the principal place of work of the
Executive or the appropriate
principal executive office of the
Company or the Company's operating
division or subsidiary for which the
Executive performed the majority of
his services during the twelve
(12)-month period preceding the
Change in Control be changed to any
location which is in excess of forty
(40) miles from the location thereof
immediately prior to the Change in
Control or (II) that the Executive
travel away from the Executive's
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office in the course of discharging
the Executive's responsibilities or
duties hereunder more (in terms of
either consecutive days or aggregate
days in any calendar year) than was
required of the Executive prior to
the Change in Control, without, in
either case, the Executive's prior
consent; or
(F) Any material breach of this Agreement
by the Company or any successor
thereto.
(c) A termination by the Company pursuant to Subsection
4(a) hereof or by the Executive pursuant to
Subsection 4(b) hereof shall not affect any rights
which the Executive may have pursuant to any
agreement, policy, plan, program or arrangement of
the Company providing Employee Benefits, which rights
shall be governed by the terms thereof. If this
Agreement or the employment of the Executive is
terminated under circumstances in which the Executive
is not entitled to any payments under Sections 3 or 5
hereof, then notwithstanding anything herein to the
contrary, the Executive shall have no further
obligation or liability to the Company hereunder with
respect to the Executive's prior or any future
employment by the Company.
5. Severance Compensation:
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(a) If, following the occurrence of a Change in Control,
(x) the Company shall terminate the Executive's
employment during the Period of Employment other than
pursuant to Subsection 4(a) hereof, or (y) the
Executive shall terminate the Executive's employment
during the Period of Employment pursuant to
Subsection 4(b) hereof, or (z) the Executive dies
during the Period of Employment, the Company shall
pay to the Executive (or the Executive's estate, as
applicable) the amount specified in Subsection
5(a)(i) hereof within five business days after the
date (the "Termination Date") that the Executive's
employment is terminated (the effective date of which
shall be the date of termination or death, or such
other date that may be specified by the Executive if
the termination is pursuant to Subsection 4(b)
hereof):
(i) In lieu of any further payments under
Subsection 3(a) to the Executive for periods
subsequent to the Termination Date, but
without affecting the rights of the
Executive referred to in Subsection 5(b)
hereof, a lump sum payment (the "Severance
Payment") in an amount equal to a multiple
of three (3) times the sum of (A) the
Executive's Base Pay (at the highest rate in
effect during the Term prior to the
Termination Date), plus (B) the Executive's
Incentive Pay (based upon the greatest
amount of
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Incentive Pay paid or payable to the
Executive for any year during the Term prior
to the Termination Date).
(ii) (A) for the remainder of the Period of
Employment the Company shall arrange to
provide the Executive with Employee Benefits
identical to those which the Executive was
receiving or entitled to receive immediately
prior to the Termination Date (and if and to
the extent that such benefits shall not or
cannot be paid or provided under any policy,
plan, program or arrangement of the Company
solely due to the fact that the Executive is
no longer an officer or employee of the
Company, then the Company shall itself pay
to the Executive and/or the Executive's
dependents and beneficiaries, such Employee
Benefits) and (B) without limiting the
generality of the foregoing, the remainder
of the Period of Employment shall be
considered service with the Company for the
purpose of service credits under the
Company's retirement income, supplemental
executive retirement and other benefit plans
applicable to the Executive and/or the
Executive's dependents and beneficiaries
immediately prior to the Termination Date.
Without otherwise limiting the purposes or
effect of Section 6 hereof, Employee
Benefits payable to the Executive pursuant
to this Subsection 5(a)(ii) by reason of any
"welfare benefit plan" of the Company (as
the term "welfare benefit plan" is defined
in Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended)
shall be reduced to the extent comparable
welfare benefits are actually received by
the Executive from another employer during
such period following the Executive's
Termination Date until the expiration of the
Period of Employment.
(iii) In addition to all other compensation due to
the Executive hereunder, the following shall
occur immediately prior to the occurrence of
a Change in Control:
(A) all Company stock options held by the
Executive prior to a Change in
Control shall become exercisable,
regardless of whether or not the
vesting/performance conditions set
forth in the relevant agreements
shall have been satisfied in full;
(B) all restrictions on any restricted
securities granted by the Company to
the Executive prior to a Change in
Control shall be removed and the
securities shall become fully vested
and freely transferable, regardless
of whether the vesting/performance
conditions set forth in the relevant
agreements shall have been satisfied
in full;
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(C) the Executive shall have an immediate
right to receive all performance
shares or bonuses granted prior to a
Change in Control, and such
performance shares and bonuses shall
become fully vested and freely
transferable or payable without
restrictions, regardless of whether
or not specific performance goals set
forth in the relevant agreements
shall have been attained; and
(D) all performance units granted to the
Executive prior to a Change in
Control shall become immediately
payable in cash or Common Stock, at
the Executive's sole option,
regardless of whether or not the
relevant performance cycle has been
completed, and regardless of whether
any other terms and conditions of the
relevant agreements shall have been
satisfied in full;
provided, that if the terms of any plan or
agreement providing for such options,
restricted securities, performance shares or
bonuses, or performance units do not allow
such acceleration or payment as described
above, the Company shall take or cause to be
taken any action required to allow such
acceleration or payment or to separately pay
the value of such benefits.
(b) (i) Anything in this Agreement to the contrary
notwithstanding, in the event a public
accounting firm selected by the Executive
(the "Accounting Firm") shall
determine that any payment, benefit, or
distribution by the Company to the Executive
(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 Subsection 5(b)
(a "Payment") is subject to the excise tax
imposed by Section 4999 of the Code, or any
interest or penalties are incurred by the
Executive 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 Company shall pay
to the Executive an additional payment
(a "Gross-Up Payment") in an amount such
that after payment by the Executive 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 the
Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
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(ii) Subject to the provisions of Subsection
5(b)(iii), all determinations required to be
made under this Subsection 5(b), 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 the Accounting Firm which shall
provide detailed supporting calculations
both to the Company and the Executive as
soon as possible following a request made by
the Executive or the Company. In the event
that the Accounting Firm is serving as
accountant or auditor for the individual,
entity or group effecting the Change in
Control, the Executive shall appoint another
nationally recognized public 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 Subsection 5(b), shall be
paid by the Company to the Executive within
five (5) days of the receipt of the
Accounting Firm's determination. If the
Accounting Firm determines that no Excise
Tax is payable by the Executive, it shall
furnish the Executive with a written opinion
that failure to report the Excise Tax on the
Executive's applicable federal income tax
return would not result in the imposition of
a negligence or similar penalty. Any
determination by the Accounting Firm shall
be binding upon the Company and the
Executive. As a result of the uncertainty in
the application of Section 4999 of the Code
at the time of the initial determination by
the Accounting Firm hereunder, it is
possible that 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 Subsection
5(b)(iii) and the Executive 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 Executive.
(iii) The Executive shall notify the Company in
writing of any claim by the Internal Revenue
Service that, if successful, would require
the payment by the Company of the Gross-Up
Payment. Such notification shall be given as
soon as practicable but no later than ten
(10) business days after the Executive 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 Executive shall
not pay such claim prior to the expiration
of the ten (10)-day period following the
date on which the Executive
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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
Executive in writing prior to the expiration
of such period that it desires to contest
such claim, the Executive shall:
(A) give the Company any information
reasonably requested by the Company
relating to such claim,
(B) 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,
(C) cooperate with the Company in good
faith to effectively contest such
claim, and
(D) permit the Company to participate in
any proceedings relating to such
claim;
provided, however, that the Company shall
bear and pay directly all costs and expenses
(including additional interest and
penalties) incurred in connection with such
contest and shall indemnify and hold the
Executive 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 Subsection 5(b)(iii), the Company shall
control all proceedings taken in connection
with such contest and, at its sole option,
may pursue or forgo 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
Executive to pay the tax claimed and xxx for
a refund or contest the claim in any
permissible manner, and the Executive agrees
to prosecute such contest to a determination
before any administrative tribunal, in a
court of initial jurisdiction and in one or
more appellate courts, as the Company shall
determine; provided further, that if the
Company directs the Executive to pay such
claim and xxx for a refund, the Company
shall advance the amount of such payment to
the Executive on an interest-free basis and
shall indemnify and hold the Executive
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
13
such advance; and provided further, that any
extension of the statute of limitations
relating to payment of taxes for the taxable
year of the Executive 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 Executive shall be
entitled to settle or contest, as the case
may be, any other issue raised by the
Internal Revenue Service or any other taxing
authority.
(iv) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to
this Subsection 5(b), the Executive becomes
entitled to receive, and receives, any
refund with respect to such claim, the
Executive shall (subject to the Company's
complying with the requirements of this
Subsection 5(b)) 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 Executive of any amount
advanced by the Company pursuant to
Subsection 5(b), a determination is made
that the Executive shall not be entitled to
any refund with respect to such claim and
the Company does not notify the Executive in
writing of its intent to contest such denial
of refund prior to the expiration of thirty
(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.
(c) There shall be no right of set-off or counterclaim in
respect of any claim, debt or obligation against any
payment to or benefit (including Employee Benefits)
of the Executive provided for in this Agreement.
(d) Without limiting the rights of the Executive at law
or in equity, if the Company fails to make any
payment required to be made hereunder on a timely
basis, the Company shall pay interest on the amount
thereof (and on any interest accrued hereunder) at an
annualized rate of interest equal to the Highest
Lawful Rate as hereafter defined. "Highest Lawful
Rate" means, at any time and with respect to the
Executive, the maximum rate of interest under
applicable law that the Executive may charge the
Company. The Highest Lawful Rate shall be calculated
in a manner that takes into account any and all fees,
payments, and other charges in respect of this
greement that constitute interest under applicable
law. Each change in any interest rate provided for
herein based upon the Highest Lawful Rate resulting
from a change in the Highest Lawful Rate shall take
effect without notice to the Company at the time of
such change in the Highest Lawful Rate. For purposes
of determining the Highest Lawful Rate under
14
Texas law, the applicable rate ceiling shall be the
indicated rate ceiling described in, and computed in
accordance with the Texas Finance Code.
Notwithstanding anything to the contrary contained
herein, no provisions of this Agreement shall require
the payment or permit the collection of interest in
excess of the Highest Lawful Rate. If any excess of
interest in such respect is herein provided for, or
shall be adjudicated to be so provided, in this
Agreement or otherwise in connection with this loan
transaction, the provisions of this paragraph shall
govern and prevail, and neither the Company nor the
sureties, guarantors, successors or assigns of the
Company shall be obligated to pay the excess amount
of such interest, or any other excess sum paid for
the use, forbearance or detention of sums loaned
pursuant hereto. If for any reason interest in excess
of the Highest Lawful Rate shall be deemed charged,
required or permitted by any court of competent
jurisdiction, any such excess shall be applied as a
payment and reduction of the principal of
indebtedness evidenced by this Agreement; and, if the
principal amount hereof has been paid in full, any
remaining excess shall forthwith be paid to the
Company. In determining whether or not the interest
paid or payable exceeds the Highest Lawful Rate, the
Company and the Executive shall, to the extent
permitted by applicable law, (a) characterize any
non-principal payment as an expense, fee, or premium
rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and (c)
amortize, prorate, allocate, and spread in equal or
unequal parts the total amount of interest throughout
the entire contemplated term of the indebtedness
evidenced by this Agreement so that the interest for
the entire term does not exceed the Highest Lawful
Rate.
6. No Mitigation Obligation: The Company hereby acknowledges that it
will be difficult, and may be impossible, for the Executive to find reasonably
comparable employment following the Termination Date and that the noncompetition
covenant contained in Section 7 hereof will further limit the employment
opportunities for the Executive. Accordingly, the parties hereto expressly agree
that the payment of the severance compensation and benefits by the Company to
the Executive in accordance with the terms of this Agreement will be liquidated
damages, and that the Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, nor shall any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise, except as
expressly provided in Subsection 5(a)(ii) hereof.
7. Competitive Activity: During a period ending one year following the
Termination Date (or, if less, a period equal to the remaining Period of
Employment and beginning on the Termination Date), if the Executive shall have
received or shall be receiving benefits under Subsection 5(a) hereof, the
Executive shall not, without the prior written consent by the Company, directly
or indirectly engage in any "Competitive Business" (as hereinafter defined)
within any metropolitan area served by the Company during the twelve (12)-month
period
15
immediately preceding termination of the Executive's employment with the
Company nor will the Executive engage, within such geographical area(s), in the
design, development, distribution, manufacture, assembly or sale of a product or
service in competition with any product or service marketed or planned by the
Company immediately prior to the Termination Date, the plans, designs or
specifications of which have been revealed to the Executive ("Competitive
Activity"). The Executive acknowledges that these limited prohibitions are
reasonable as to time, geographical area and scope of activities to be
restrained and that the limited prohibitions do not impose a greater restraint
than is necessary to protect the Company's goodwill, proprietary information and
other business interests. "Competitive Activity" shall not include (i) the mere
ownership of a de minimis amount of securities in any such enterprise and
exercise of rights appurtenant thereto or (ii) participation in management of
any such enterprise or business operation thereof other than in connection with
the competitive operation of such enterprise. For purposes of this Section 7,
the term "Competitive Business" means any person or entity engaged in a business
that produces any of the following products or performs any of the following
services: general commercial printing services, including digital imaging,
off-set lithography, binding and finishing services and fulfillment of printed
materials, including any products or services manufactured, developed, or
distributed during the Term and the Term of Employment by the Company and/or its
affiliates, predecessors, or successors.
8. Legal Fees and Expenses: It is the intent of the Company that the
Executive not be required to incur the expenses associated with the enforcement
of the Executive's rights under this Agreement by litigation or other legal
action because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder. Accordingly, if it
should appear to the Executive that the Company has failed to comply with any of
its obligations under this Agreement or in the event that the Company or any
other person takes any action to declare this Agreement void or unenforceable,
or institutes any litigation designed to deny, or to recover from, the Executive
the benefits intended to be provided to the Executive hereunder, the Company
irrevocably authorizes the Executive from time to time to retain counsel of the
Executive's choice, at the expense of the Company as hereafter provided, to
represent the Executive in connection with the litigation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, shareholder or other person affiliated with the Company, in
any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive's entering into an attorney-client relationship with
such counsel, and in connection therewith the Company and the Executive agree
that a confidential relationship shall exist between the Executive and such
counsel. The Company shall pay or cause to be paid and shall be solely
responsible for any and all attorneys' and related fees and expenses incurred by
the Executive as a result of the Company's failure to perform this Agreement or
any provision thereof or as a result of the Company or any person contesting the
validity or enforceability of this Agreement or any provision thereof as
aforesaid.
9. Employment Rights: Nothing expressed or implied in this Agreement
shall create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company prior to any Change
in Control; provided, however, that any actual or constructive termination of
employment of the Executive or removal of the Executive
16
as an officer of the Company following the commencement of any discussion with
or receipt of an offer from a third person that ultimately results in a Change
in Control shall be deemed to be a termination or removal of the Executive after
a Change in Control for purposes of this Agreement.
10. Withholding of Taxes: The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or government regulation or ruling.
11. Successors and Binding Agreement:
--------------------------------
(a) The Company shall require any successor (whether
direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or
substantially all of the business and/or assets of
the Company, to expressly assume and agree to perform
this Agreement in the same manner and to the same
extent the Company would be required to perform if no
such succession had taken place. This Agreement shall
be binding upon and inure to the benefit of the
Company and any successor to the Company, including
without limitation any persons acquiring directly or
indirectly all or substantially all of the business
and/or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the
"Company" for the purposes of this Agreement). This
Agreement shall not otherwise be assignable,
transferable or delegable by the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators,
successors, heirs, distributees and/or legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the
other, assign, transfer or delegate this Agreement or
any rights or obligations hereunder except as
expressly provided in Subsection 11(a) hereof.
Without limiting the generality of the foregoing, the
Executive's right to receive payments hereunder shall
not be assignable, transferable or delegable, whether
by pledge, creation of a security interest or
otherwise, other than by a transfer by the
Executive's will or by the laws of descent and
distribution and, in the event of any attempted
assignment or transfer contrary to this Subsection
11(c), the Company shall have no liability to pay any
amount so attempted to be assigned, transferred or
delegated.
(d) The Company and the Executive recognize that each
Party will have no adequate remedy at law for breach
by the other of any of the agreements contained
herein and, in the event of any such breach, the
Company and the Executive hereby agree and consent
that the other shall be entitled to a
17
decree of specific performance, mandamus or other
appropriate remedy to enforce performance of this
Agreement.
12. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF CONFLICTS OF LAW
PRINCIPLES OF ANY STATE) AND THE LAWS OF THE UNITED STATES OF AMERICA AND WILL,
TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR PERFORMANCE IN XXXXXX
COUNTY, TEXAS. COURTS WITHIN THE STATE OF TEXAS WILL HAVE JURISDICTION OVER ANY
AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING
OUT OF OR RELATING TO THIS AGREEMENT. THE PARTIES CONSENT TO AND AGREE TO SUBMIT
TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH DISPUTE, WHETHER IN
FEDERAL OR STATE COURT, WILL BE LAID IN XXXXXX COUNTY, TEXAS. EACH OF THE
PARTIES HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH
PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III)
ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
13. Notices. All notices, demands, requests or other communications
that may be or are required to be given, served or sent by either party to the
other party pursuant to this Agreement will be in writing and will be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram or facsimile transmission
addressed as follows:
(a) If to the Company: Consolidated Graphics, Inc.
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxx X. Xxxxx
with a copy (which will
not constitute notice) to: Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Facsimile No.: (000) 000-0000
Attn: R. Xxxxx Xxxxxx, Xx., Esq.
(b) If to the Executive: Xxx X. Xxxxx
c/o Consolidated Graphics, Inc.
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
18
Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
14. Gender. Words of any gender used in this Agreement will be held and
construed to include any other gender, and words in the singular number will be
held to include the plural, unless the context otherwise requires.
15. Amendment. This Agreement may not be amended or supplemented except
pursuant to a written instrument signed by the parties hereto. Nothing contained
in this Agreement will be deemed to create any agency, joint venture,
partnership or similar relationship between the parties to this Agreement.
Nothing contained in this Agreement will be deemed to authorize either party to
this Agreement to bind or obligate the other party.
16. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed to be an original and all of which
will be deemed to be a single agreement. This Agreement will be considered fully
executed when all parties have executed an identical counterpart,
notwithstanding that all signatures may not appear on the same counterpart.
17. Severability. If any of the provisions of this Agreement are
determined to be invalid or unenforceable, such invalidity or unenforceability
will not invalidate or render unenforceable the remainder of this Agreement, but
rather the entire Agreement will be construed as if not containing the
particular invalid or unenforceable provision or provisions, and the rights and
obligations of the parties will be construed and enforced accordingly. The
parties acknowledge that if any provision of this Agreement is determined to be
invalid or unenforceable, it is their desire and intention that such provision
be reformed and construed in such manner that it will, to the maximum extent
practicable, be deemed to be valid and enforceable.
18. Third Parties. Except as expressly set forth or referred to in this
Agreement, nothing in this Agreement is intended or will be construed to confer
upon or give to any party other than the parties to this Agreement and their
successors and permitted assigns, if any, any rights or remedies under or by
reason of this Agreement.
19. Waiver. No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right.
20. Prior Agreements: This Agreement is voluntarily entered into and
upon the occurrence of a Change in Control will supersede and take the place of
any prior change in control agreements between the parties hereto. The parties
hereto expressly agree and hereby declare that any and all prior change in
control agreements between the parties are terminated and of no force or effect.
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19
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
COMPANY:
CONSOLIDATED GRAPHICS, INC.
By: /s/Xxx X. Xxxxx
-----------------------------------------------------------
Name: Xxx X. Xxxxx
---------------------------------------------------------
Title: CEO
--------------------------------------------------------
EXECUTIVE:
/s/Xxx X. Xxxxx
------------------------------------------------------------------
Xxx X. Xxxxx
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