1
[XXXXXX INDUSTRIES INC. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
Mr. X. Xxxxx Xxxxxxx July 2nd, 1998
0000 Xxxxxxxx Xxxxx
Xxxxxxxxx Xxx., Xxxx 00000
Dear Xxxxx:
This letter sets forth our agreement (the "Agreement") for your employment at
Xxxxxx Industries, Inc. ("Xxxxxx") and your position as an officer of Paragon
Corporate Holdings Inc.("Paragon"), the parent holding company of Xxxxxx, on the
following terms:
1. Effective as of June 1, 1998, you will be elected to the
office of President and Chief Executive Officer of Xxxxxx to
serve in such capacity and for such time as the Board of
Directors of Xxxxxx (the "Board") may determine, in its sole
and absolute discretion. You will also be responsible for such
additional or substitute matters as the Board or the Chairman
of the Board of Xxxxxx may assign to you from time to time.
2. At the discretion of the Board of Directors of Paragon, you
will have such duties as may be assigned to you from time to
time, and such title as is determined, by such Board or
Paragon's Chairman of the Board. At this time you will
continue to have the title of Vice President at Paragon.
3. Your initial base salary will be at the rate of $200,000.00
per year, subject to adjustment in the sole and absolute
discretion of the Board, payable in accordance with Xxxxxx'x
payroll system, subject to applicable withholding obligations.
You will receive 90 days notice of any reduction in base
salary.
4. If you voluntarily terminate your employment for any reason,
it shall only become effective 90 days after delivery of
notice thereof to the Board or its Chairman; however no such
notice may be given before September 6, 1998. If your
employment is terminated by Xxxxxx or Paragon for any reason
other than your death, disability, or for "cause", then Xxxxxx
shall provide you 90 days prior written notice of such
termination. In the event of your voluntary termination, your
death, or permanent disability while employed, or if
terminated by Xxxxxx or Paragon for any reason other than
cause, you will be entitled to severance payments (paid in the
same manner and with the same withholding obligations as base
salary) for twenty-four (24) months following termination. For
purposes of this Agreement, "cause" or "for cause" shall mean
either (a) your fraud, dishonesty, willful misconduct, or
deliberate disregard or injury to Xxxxxx or Paragon or any
Subsidiary (as hereinafter defined); or (b) your repeated
refusal or failure to perform duties assigned to you and
consistent with your position as an executive.
2
The amount of your monthly severance payments shall be based
on your previous year's base salary plus an earn-out (by
employment) of your most recent salary increase, in accordance
with the following formula:
-------- ---------
| --- --- |
Previous | | Current Previous | |
Annual + | Number of months worked | Annual Annual | |
Base | since last salary increase* X | Base Less Base | |
Salary | --------------------------- | Salary Salary | |
| 12 --- --- |
-------- ---------
--------------------------------------------------------------------------------------------
12
*May not exceed twelve (12)
If deferred bonus payments exist under any bonus plan, you
will also receive any bonuses earned or awarded for prior
periods, but not yet paid, including the pro rata portion of
any bonus designated as earned under any applicable bonus plan
for the portion of the year elapsed to the date of
termination. Such payment will be made at the time and in the
manner required by the relevant plan.
In the event that you die while receiving severance payments
under this Paragraph 4, your spouse will continue to receive
all such payments as set forth herein. In the event of your
spouse's death after your death, any remaining compensation
payments would be made to your estate. These severance
benefits are in lieu of any other benefits provided now or
hereafter by Xxxxxx relating to termination of employment.
5. You will be eligible to participate in the bonus compensation
plan applicable to executive officers of Xxxxxx; the plan is
subject to change or termination at any time by the Board.
Executive officers= bonuses are determined in the sole and
absolute discretion of the Board.
6. All employee benefit plans and executive benefits are subject
to change or termination at any time by the Board. You will
receive 90 days notice of any reduction in benefit plans or
executive benefits. In the event of your voluntary
termination, your death, or permanent disability while
employed, or if terminated by Xxxxxx or Paragon for any reason
other than cause, you will continue to participate in all
employee benefit plans or programs in which you were
participating on the date of termination of employment, until
the earlier of: (i) the expiration of twenty-four (24) months
after termination of employment, or (ii) the date the
executive receives substantially comparable coverage and
benefits under other plans and programs of a subsequent
employer.
2
3
7. If any compensation payments under this Agreement would result
in an Aexcess parachute payment@ within the meaning of Section
280G(b) of the U. S. Internal Revenue Code, as later amended,
then compensation payments under this Agreement will be
limited to the highest amount permitted without resulting in
an "excess parachute payment."
8. In consideration of the foregoing and your employment by
Xxxxxx and your position at Paragon, and acknowledging your
understanding that the covenants and agreements contained in
this Paragraph 8 are a condition to Xxxxxx'x agreement to
employ you and Paragon's electing you an officer, you covenant
and agree as follows:
1) For a period of twelve (12) months following
termination of your employment with Xxxxxx for any
reason, you will not:
(i) directly or indirectly, for yourself or as a
director, officer, employee, agent, or
otherwise on behalf of any person, firm,
corporation, or other business entity,
engage in business competition with Xxxxxx,
Paragon, or any of their Subsidiaries;
(ii) have any interest in any person, firm, or
corporation that directly or indirectly
engages in competition with Xxxxxx, Paragon,
or any of their Subsidiaries, other than
ownership of up to one percent (1%) of the
stock of a publicly-held entity;
(iii) employ, assist in employing, or otherwise
associate in business with any then (at the
time of termination) employee, officer, or
agent of Xxxxxx, Paragon, or any of their
Subsidiaries;
(iv) induce any person who is an employee,
officer, or agent of Xxxxxx, Xxxxxxx, or any
of their Subsidiaries to terminate such
relationship.
2) For the purposes of this Agreement, the phrase
"engage in business competition" with Xxxxxx,
Paragon, or any of their Subsidiaries means engaging
in (1) the distribution of industrial maintenance
products, fasteners, automotive replacement parts and
security products (including, without limitation, key
blanks, key duplicating machines, and key code
cutters), to the extent such distribution would
target the same types of customers or product sales
opportunities that Xxxxxx, Paragon or its
Subsidiaries have targeted, or actively considered,
studied or investigated targeting, during the
executives's employment with the company, or (2)
engaging in direct competition with any other
business of Xxxxxx, Paragon, or its Subsidiaries as
conducted at the time of termination of employment,
if you have actively engaged in that business, or
provided supervision and oversight as an executive.
3
4
c) All records of the accounts of customers and any
other records and books relating in any way
whatsoever to the customers or suppliers of Xxxxxx,
Paragon, or any of their Subsidiaries, and all
records, pricing information, price lists, drawings,
product specifications, computer printouts, marketing
plans, or information, data, samples, models,
engineering data, or other trade secrets (or copies
or extracts thereof) involving Xxxxxx, Paragon, or
any of their Subsidiaries' operations,
investigations, research, or business, whether
prepared by you or otherwise coming into your
possession, constitute proprietary and confidential
information of Xxxxxx, Paragon, or their Subsidiaries
(the "Confidential Information"), are and will remain
at all times hereafter the exclusive property of
Xxxxxx, Paragon, or their Subsidiaries, and you will
not disclose, divulge, copy, or otherwise use in any
manner whatsoever any of the Confidential
Information. On such termination, you will return all
such written Confidential Information, together with
all copies thereof, to Xxxxxx, Paragon, or a
Subsidiary thereof, whichever is applicable.
d) The remedy at law for any breach of this Paragraph 8
will be inadequate and the damages flowing from such
breach are not readily susceptible to being measured
in monetary terms. Therefore, it is acknowledged that
upon proof of a violation of any legally enforceable
provision of this Paragraph 8, Xxxxxx, Paragon, and
their Subsidiaries will be entitled, jointly and
severally, to immediate injunctive relief and may
obtain a temporary order restraining any threatened
or future breach, in addition to any other available
legal or equitable remedies. You further agree and
understand that in the event of any breach of this
Paragraph 8, Xxxxxx, Paragon, and their Subsidiaries
will be relieved of any obligation to pay any amounts
then due and owing to you.
e) You agree that the restrictions imposed by this
Paragraph 8 are reasonable, designed to limit unfair
competition, do not stifle your skill and experience,
and will not operate as a bar to your means of
support.
f) This Paragraph 8 is of the essence of this Agreement
and will be construed independently from all other
provisions of this Agreement. Any claim you may have
against Xxxxxx, Paragon, or any of their
Subsidiaries, whether based on a breach of this
Agreement or otherwise, will not constitute a defense
to the enforcement of this Paragraph 8, except that
any material breach of the severance pay obligation
under Section 4 of this Agreement shall operate to
release you from the restrictions of this Paragraph 8
if you provide to Xxxxxx written notice of facts
which establish a breach of the obligations in
Paragraph 4, and the same are not resolved to the
mutual satisfaction of the parties, or paid or
performed within 21 days of receipt of such written
notice.
g) In the event you violate any legally enforceable
provisions of this Paragraph 8 as to which there is a
specific time period during which
4
5
you are prohibited from taking certain actions or
from engaging in certain activities, as set forth in
such provision, then, in such event, such violation
shall toll the running of such time period from the
date of such violation until such violation shall
cease.
h) The term "Subsidiary" or "Subsidiaries" is deemed for
purposes of this Paragraph 8 to include all entities
owned at least 50% by either or all of Xxxxxx,
Paragon, and their at the time of, or within one (1)
year prior to, such termination.
(i) You agree that you shall keep the terms of this
Agreement confidential, except you may disclose them
to your spouse and your legal, tax, and financial
advisors, or as may be required in order to assure
compliance with any provision hereof.
9. Notwithstanding anything contained in this letter or otherwise
provided to you, as with other Xxxxxx employees, your
employment will be on an "at-will" basis; this may not be
changed except by written authorization from Xxxxxx'x Board.
"At-will" refers to employment that can be terminated by you
or Xxxxxx at any time with or without cause therefor. Each
party shall be required to give the other 90 days prior
written notice of termination of employment, except if
termination is by Xxxxxx or Paragon for cause (as earlier
defined herein).
10. You will have no obligation to mitigate damages, or seek other
employment or compensation in the event of termination of
employment governed by this Agreement, and payments due to you
under this Agreement will not be offset by compensation from
other sources, unless expressly provided herein.
11. The provisions of this Agreement are severable and if any one
or more provisions are determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions
and any partially unenforceable provision to the extent
enforceable in any jurisdiction shall, nevertheless, be
binding and enforceable.
12. The rights and obligations of Xxxxxx, Paragon, and their
Subsidiaries under this Agreement shall inure to the benefit
of, and shall be binding upon, Xxxxxx, Paragon, and their
Subsidiaries and their respective successors and assigns, and
your rights and obligations under this Agreement shall inure
to the benefit of, and shall be binding upon, you and your
heirs, personal representatives, and estate.
13. The failure of any party to enforce any provision or
provisions of this Agreement shall in no way be construed as a
waiver of any such provision or provisions as to any future
violations thereof, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement.
The rights granted the parties herein are cumulative and the
waiver of any single remedy shall not constitute a waiver of
such party's right to assert all other legal remedies
available to it under the circumstances.
5
6
14. This Agreement supersedes and replaces all prior agreements
and understandings between the parties, including but not
limited to your letter agreement dated June 5, 1992, and your
Severance and Non-Competition Agreement dated February 28,
1996, each with Xxxxxx. No modification, termination, or
attempted waiver of this Agreement shall be valid unless in
writing and signed by the party against whom the same is
sought to be enforced. This Agreement shall be governed by and
construed according to the laws of the State of Ohio.
If the foregoing understanding respecting the Agreement between you and
the undersigned is acceptable to you, please indicate your approval thereof by
signing a copy of this letter in the space provided below and return it to the
undersigned.
Sincerely, Sincerely,
XXXXXX INDUSTRIES, INC. PARAGON CORPORATE HOLDINGS INC.
By: /s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxxxxxx
--------------------------------- -------------------------------
Xxxxxx X. Xxxxxxx, Chairman Xxxx X. Xxxxxxxx, Chairman
THE TERMS AND PROVISIONS OF THE FOREGOING AGREEMENT ARE HEREBY APPROVED AND
ACCEPTED THIS 2ND DAY OF JULY, 1998.
/s/ X. Xxxxx Xxxxxxx
------------------------------
X. Xxxxx Xxxxxxx
6
