Exhibit 10.6
CHANGE IN CONTROL AGREEMENT
This EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT ("Agreement"), effective as
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of July 25, 2000, by and between CONSOLIDATED GRAPHICS, INC., a Texas
corporation (the "Company"), and XXXXXXX XXXXX (the "Executive"), evidences
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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
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and binding as of the Effective Date, but, anything in this
Agreement to the contrary notwithstanding, Sections 2, 3, 4, 5, 6
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and 7 of this Agreement shall not be effective and binding unless
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and until there shall have occurred a Change in Control. For
purposes of this Agreement, a "Change in Control" will be deemed
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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) of
the Company immediately prior to such transaction and/or
such
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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
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(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");
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(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
(vi) The shareholders of the Company approve a plan contemplating
the liquidation or dissolution of the Company.
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Notwithstanding the foregoing provisions of Subsection 1(a)(iii)
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or 1(a)(iv) hereof, a "Change in Control" shall not be deemed to
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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
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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
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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
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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)
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hereof (the "Period of Employment"), in the position and with
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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 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
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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
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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
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the Compensation Committee thereof (the "Committee") (which base
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salary at such rate is herein referred to as "Base Pay") and (ii)
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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
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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.
(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
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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,
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except as set forth in Section 5(a)(v) hereof, the Executive's
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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,
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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
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excise tax imposed by Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), the Company will pay to the
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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
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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,
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state and local income and other taxes), as if 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:
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(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
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that, prior to any termination pursuant to Subsection 4(b)
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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 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
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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.
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(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
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(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 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;
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(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
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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 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
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or by the Executive pursuant to Subsection 4(b) hereof shall not
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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
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which the Executive is not entitled to any payments under
Sections 3 or 5 hereof, then notwithstanding anything herein
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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)
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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
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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
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date (the "Termination Date") that the Executive's employment is
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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)
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hereof):
(i) In lieu of any further payments under Subsection 3(a) to the
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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
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"Severance Payment") in an amount equal to a multiple of
two (2) 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 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
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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
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"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;
(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
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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
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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
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"Payment") is subject to the excise tax imposed by Section
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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
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Tax"), then the Company shall pay to the Executive an
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additional payment (a "Gross-Up Payment") in an amount such
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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.
(ii) Subject to the provisions of Subsection 5(b)(iii), all
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determinations required to be made under this
Subsection 5(b), including whether and when a Gross-Up
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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
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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
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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
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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 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
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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
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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
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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
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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 such advance; and provided further, that any
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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),
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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.
13
(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 Agreement 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
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
14
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 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
15
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 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
16
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 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
17
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: Xxxxxxx Xxxxx
c/o Consolidated Graphics, Inc.
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
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
18
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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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
-----------------------------------------
Xxx X. Xxxxx,
Chairman and Chief Executive Officer
EXECUTIVE:
/s/Xxxxxxx Xxxxx
--------------------------------------------
Xxxxxxx Xxxxx
19
