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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 18th day of April,
1999, by and between XXXXXX INTERNATIONAL, INC., a Delaware corporation (the
"Company"), and XXXX X. PANETTIERE ("Executive").
W I T N E S S E T H:
WHEREAS, the Company and Executive have previously entered into an
agreement ("Prior Agreement") providing for Executive's employment by the
Company and specifying the terms and conditions of such employment; and
WHEREAS, the Company entered into an Agreement and Plan of Merger and
Recapitalization (the "Recapitalization Agreement") dated the date hereof
with Red Dog Acquisition Corp. ("Newco"), a wholly owned subsidiary of Xxxxxx
Brothers Merchant Banking Partners II L.P. ("LB MBP II"); and
WHEREAS, pursuant to the Recapitalization Agreement, the Company will be
recapitalized through a merger with and into Newco, following which
substantially all of the outstanding capital stock of the Company will be held
by LB MBP II; and
WHEREAS, the Company desires to recognize Executive's superior performance
and continuing value to the Company and its shareholders by modifying the Prior
Agreement and restating such agreement in a single document as hereinafter
provided; and
WHEREAS, Executive desires to continue his employment with the Company
on the terms and conditions provided herein;
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NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties hereby agree as follows:
1. Purpose and Effectiveness.
(a) The purpose of this Agreement is to amend the Prior Agreement,
to recognize Executive's significant contributions to the overall financial
performance and success of the Company, and to provide a single, integrated
document which shall provide the basis for Executive's continued employment by
the Company;
(b) This Agreement shall not be effective until the Effective Time
(as defined in the Recapitalization Agreement), and this Agreement shall
terminate immediately if the Recapitalization Agreement is terminated in
accordance with its terms prior to the Effective Time.
2. Employment and Term.
(a) Subject to the terms and conditions of this Agreement, the
Company hereby employs Executive, and Executive hereby accepts employment, as
Chairman of the Board, President and Chief Executive Officer of the Company and
shall have such responsibilities, duties and authority that are consistent with
such position as may from time to time be assigned to Executive by the Board.
Executive shall continue to serve as a Director of the Company and the Company
agrees to continue to nominate Executive for election as Chairman of the Board
and a Director during the Term of this Agreement. Executive hereby agrees that
during the Term of this Agreement he will devote substantially all his working
time, attention and energies to the diligent performance of his duties as
Chairman of the Board, President and Chief Executive Officer of the Company,
provided that the Executive may also serve on the
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boards of directors or trustees of other companies and organizations on which he
currently serves, as long as such service does not materially interfere with the
performance of his duties hereunder. With the consent of the Board of Directors,
the Executive may serve as a director on the boards of directors or trustees of
additional companies and organizations.
(b) Unless earlier terminated as provided herein, Executive's
employment under this Agreement shall commence at the Effective Time, and shall
end on July 31, 2002 (the "Term"), unless the Term is extended in accordance
with subsection (c) below (in which case such extended period shall constitute
the Term). Executive shall have the unilateral right to elect to terminate this
Agreement, effective July 31, 2001, by giving the Company written notice of such
election prior to January 1, 2001, in which event the Term of this Agreement
shall cease on July 31, 2001.
(c) Not less than ninety (90) days prior to the end of the initial
Term (and any 12-month extension of the initial Term), the Company may offer to
extend the Term for an additional 12-month period on such terms and conditions
as may be specified in the offer (which may be on the same terms and conditions
as provided herein). If Executive desires to accept such offer, he shall notify
the Company in writing within thirty (30) days of receipt of the offer and the
Agreement shall be extended on the terms and conditions agreed upon.
3. Compensation and Benefits. As compensation for his services during the
Term of this Agreement, Executive shall be paid and receive the amounts and
benefits set forth in subsections (a) through (h) below:
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(a) An annual base salary ("Base Salary") of Eight Hundred
Seventy-Five Thousand and No/100 Dollars ($875,000.00), prorated for any partial
year of employment. Executive's salary shall be payable in substantially equal
installments on a bi-monthly basis, or in accordance with the Company's regular
payroll practices in effect from time to time for executive officers of the
Company.
(b) Executive shall be eligible to participate in the Executive
Management Target Incentive Plan and such other annual incentive plans as may be
established by the Company from time to time for its executive officers. The
Board or a committee of the Board will establish performance goals each year
under the incentive plans, and Executive's annual Target Bonus shall be 65% of
Base Salary; the maximum award for exceeding the performance goals (which will
be determined in accordance with the current plan design) shall be 130% of Base
Salary. The annual incentive bonus payable under this subsection (b) shall be
payable as a lump sum at the same time bonuses are paid to other senior
executives after certification by the Compensation Committee of the Board, that
the applicable performance objectives have been met, unless Executive elects to
defer all or a portion of such amount pursuant to any deferral plan established
by the Company for such purpose.
(c) Promptly upon commencement of the Term, Executive shall make a
minimum investment in the equity ("Purchased Equity") of the Company of 60% of
the aggregate amount of the net proceeds remaining after all applicable taxes
have been paid, resulting from cancellation of his outstanding stock options in
accordance with Section 2.2 of the Recapitalization Agreement. The Company and
Executive shall endeavor to structure such investment in the most tax and
accounting efficient manner
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reasonably possible under the relevant circumstances. In respect of such
investment, the Company will grant Executive 365,000 options to purchase shares
of the Company's Common Stock that will vest over time ("Time Options") and the
Company will grant Executive performance-based options for 365,000 shares of the
Company's Common Stock ("Performance Options") (the Time Options and the
Performance Options are collectively referred to herein as "Options"). The terms
and conditions of the Time Options and the Performance Options shall be as set
forth on the Summary of Terms, attached hereto as Exhibit A (the "Term Sheet"),
and the Company will enter into separate Option Agreements with Executive
covering the grant of such Options. Executive will be eligible to participate in
such other stock option programs as may be established from time to time by the
Company for its executive officers. Executive will participate in any long-term
incentive plans established by the Company for executive officers at his level.
The other terms and conditions applicable to the Purchased Equity
and the Options shall be as provided in the Term Sheet and the parties agree to
enter into an Employee Shareholders Agreement which will include the items
covered in the Term Sheet and contain such other customary terms and conditions
as are appropriate for such an agreement and are mutually agreeable to Executive
and Company (and to LB MBP II, where applicable). The Purchased Equity and the
Options will be subject to put and call rights and restrictions as set forth in
Schedule A.
(d) Executive shall continue to be (i) covered by a Supplemental
Executive Retirement Plan ("Individual SERP"), providing for the benefits set
forth in the amended and restated SERP Agreement attached hereto as Exhibit B,
(ii) a participant
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in the Xxxxxx, Inc. and Subsidiaries Supplemental Retirement Benefit Plan
("SERP"), and (iii) a participant in the Executive Supplemental Retirement Plan
of Xxxxxx International, Inc. ("Executive SERP").
(e) Executive shall be entitled to participate in, or receive
benefits under, any "employee benefit plan" (as defined in Section 3(3) of
ERISA) or employee benefit arrangement made generally available by the Company
to its executive officers, including plans providing retirement, 401(k)
benefits, deferred compensation, health care (including executive medical), life
insurance, disability and similar benefits.
(f) The Company will provide membership dues and assessments at
recreational and social clubs commensurate with past practice for Executive and
his family. Executive will be provided an automobile commensurate with past
practice at Company expense, and the Company will pay all insurance,
maintenance, fuel, oil and related operational expenses for such automobile.
Executive will receive six weeks vacation during the Term. Executive will be
provided an annual physical examination and a financial/tax consultant for
personal financial and tax planning. Executive will be promptly reimbursed by
the Company for all reasonable business expenses he incurs in carrying out his
duties and responsibilities under this Agreement.
(g) Executive shall continue to participate in the Company's
Executive Life Insurance Program, which will provide a benefit equal to 2 l/2
times Executive's total compensation (as determined from time to time), subject
to a maximum benefit of $2.5 million. This insurance will be paid-up on the date
Executive attains 65 and will be delivered to Executive as a paid-up insurance
policy upon his retirement from the Company at or after age 65. The life
insurance provided to Executive under the
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Executive Life Insurance Program shall be in addition to any life insurance he
receives under the Company's group term policy under subsection (e) above.
(h) Executive will be paid a tax gross-up amount by the Company to
cover any additional federal or state income taxes he incurs as a result of
being required to include in taxable income the amount of the premiums or costs
for, or personal usage of, the items described in subsections (f) and (g) above
and for the use of the Company's airplane.
4. Confidentiality and Noncompetition.
(a) Executive acknowledges that, prior to and during the Term of
this Agreement, the Company has furnished and will furnish to Executive
Confidential Information which could be used by Executive on behalf of a
competitor of the Company to the Company's substantial detriment. Moreover, the
parties recognize that Executive during the course of his employment with the
Company may develop important relationships with customers and others having
valuable business relationships with the Company. In view of the foregoing,
Executive acknowledges and agrees that the restrictive covenants contained in
this Section are reasonably necessary to protect the Company's legitimate
business interests and good will.
(b) Executive agrees that he shall protect the Company's
Confidential Information and shall not disclose to any Person, or otherwise use,
except in connection with his duties performed in accordance with this
Agreement, any Confidential Information at any time, including following the
termination of his employment with the Company for any reason; provided,
however, that Executive may make disclosures required by a valid order or
subpoena issued by a court or
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administrative agency of competent jurisdiction, in which event Executive will
promptly notify the Company of such order or subpoena to provide the Company an
opportunity to protect its interests. Executive's obligations under this Section
4(b) shall survive any expiration or termination of this Agreement for any
reason, provided that Executive may after such expiration or termination
disclose Confidential Information with the prior written consent of the Board.
(c) Upon the termination or expiration of his employment hereunder,
Executive agrees to deliver promptly to the Company all Company files, customer
lists, management reports, memoranda, research, Company forms, financial data
and reports and other documents supplied to or created by him in connection with
his employment hereunder (including all copies of the foregoing) in his
possession or control, and all of the Company's equipment and other materials in
his possession or control. Executive's obligations under this Section 4(c) shall
survive any expiration or termination of this Agreement.
(d) Upon the termination or expiration of his employment under this
Agreement, Executive agrees that for a period of one (1) year from his date of
termination or until the end of the period for which he is entitled to receive
compensation under Section 5.1(a) below, whichever is longer, he shall not (i)
enter into or engage in the design, manufacture, marketing or sale of any
products similar to those produced or offered by the Company or its affiliates
in the area of North America, either as an individual, partner or joint
venturer, or as an employee, agent or salesman, or as an officer, director, or
shareholder of a corporation, (ii) divert or attempt to divert any person,
concern or entity which is furnished products or services by the Company
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from doing business with the Company or otherwise change its relationship with
the Company, or (iii) solicit, lure or attempt to hire away any of the employees
of the Company with whom the Executive interacted directly or indirectly while
employed with the Company.
(e) Executive acknowledges that if he breaches or threatens to
breach this Section 4, his actions may cause irreparable harm and damage to the
Company which could not be compensated in damages. Accordingly, if Executive
breaches or threatens to breach this Section 4, the Company shall be entitled to
seek injunctive relief, in addition to any other rights or remedies of the
Company. The existence of any claim or cause of action by Executive against the
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by the Company of Executive's agreement under this
Section 4(e).
5. Termination.
5.1 By Executive. Executive shall have the right to terminate his
employment hereunder at any time by Notice of Termination (as described in
Section 7). If Executive terminates his employment because (i) the Company has
materially breached this Agreement, and such breach has not been cured within
thirty (30) days after written notice of such breach is given by Executive to
the Company; or (ii) Executive has determined that his termination is for Good
Reason (as defined in Section 6.7), Executive shall be entitled to receive the
compensation and benefits set forth in subsections (a) through (i) below. If
Executive terminates his employment other than pursuant to clauses (i) or (ii)
of this Section 5.1, the Company's obligations under this Agreement shall cease
as of the date of such termination. The time periods in (a)
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through (i) below shall be the time period remaining from the date of
Executive's termination to the end of the Term of this Agreement ("Severance
Period"). The Company agrees that if Executive terminates employment and is
entitled to compensation and benefits under this Section 5.1, he shall not be
required to mitigate damages by seeking other employment, nor shall any amount
he earns reduce the amount payable by the Company hereunder.
(a) Base Salary - Executive will continue to receive his Base Salary
as then in effect (subject to withholding of all applicable taxes) for the
Severance Period in the same manner as it was being paid as of the date of
termination; provided, however, that the salary payments provided for hereunder
shall be paid in a single lump sum payment, to be paid not later than 30 days
after his termination of employment; provided, further, that the amount of such
lump sum payment shall be determined by taking the salary payments to be made
and discounting them to their Present Value (as defined in Section 6.9) on the
date Executive's employment under this Agreement is terminated.
(b) Bonuses and Incentives - Executive shall receive bonus payments
from the Company for each month of the Severance Period in an amount for each
such month equal to one-twelfth of the average of the bonuses earned by him for
the two fiscal years in which bonuses were paid immediately preceding the year
in which such termination occurs. Any bonus amounts that Executive had
previously earned from the Company but which may not yet have been paid as of
the date of termination shall be payable on the date such amounts are payable to
other executives and Executive's termination shall not affect the payment of
such bonus. Executive shall also receive a
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prorated bonus for any uncompleted fiscal year at the date of termination
(assuming the Target Award level has been achieved), based upon the number of
days that he was employed during such fiscal year. The bonus amounts determined
herein shall be paid in a single lump sum payment, to be paid not later than 30
days after termination of employment; provided, that the amount of such lump sum
payment representing the monthly bonus payments shall be determined by taking
the monthly bonus payments to be made and discounting them to their Present
Value on the date Executive's employment under this Agreement is terminated.
(c) Health and Life Insurance Coverage - The health (including
executive medical) and group term life insurance benefits coverage provided to
Executive at his date of termination shall be continued for the Severance Period
at the same level and in the same manner as then provided to actively employed
executive participants as if his employment under this Agreement had not
terminated. Any additional coverages Executive had at termination, including
dependent coverage, will also be continued for such period on the same terms, to
the extent permitted by the applicable policies or contracts. Any costs
Executive was paying for such coverages at the time of termination shall be paid
by Executive by separate check payable to the Company each month in advance. If
the terms of any benefit plan referred to in this Section, or the laws
applicable to such plan, do not permit continued participation by Executive,
then the Company will arrange for other coverage at its expense providing
substantially similar benefits (including the same deductible and co-payment
levels provided under the Company's policy). The Company agrees that at the end
of the Severance Period, Executive (and his dependents) will be covered by the
Company's
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retiree medical plan on the same basis then provided to other retired executive
employees. Nothing herein shall be construed as limiting the Company's ability
to modify or terminate any retiree health benefit plans which it determines to
make available to executive employees, provided that any such modifications or a
termination apply to executive employees generally.
(d) Employee Retirement Plans - To the extent permitted by the
applicable plan, Executive will be entitled to continue to participate,
consistent with past practices, in all employee retirement and deferred
compensation plans maintained by the Company in effect as of his date of
termination, including, to the extent such plans are still maintained by the
Company, the Xxxxxx Retirement Plan, the Xxxxxx 401(k) Plan, the Xxxxxx Excess
401(k) Plan, the Individual SERP, the SERP and the Executive SERP. Executive's
participation in such retirement plans shall continue for the Severance Period
and the compensation payable to Executive under (a) and (b) above shall be
treated (unless otherwise excluded) as compensation under the plan as if it were
paid on a monthly basis. For purposes of the Xxxxxx 401(k) Plan and the Xxxxxx
Excess 401(k) Plan, he will receive an amount equal to the Company's
contributions to the plan, assuming Executive had participated in such plan at
the maximum permissible contributions level. If continued participation in any
plan is not permitted by the plan or by applicable law, the Company shall pay to
Executive or, if applicable, his beneficiary a supplemental benefit equal to the
present value on the date of termination of employment under this Agreement
(calculated as provided in the plan) of the excess of (i) the benefit Executive
would have been paid under such plan if he had continued to be covered for the
Severance Period (less any amounts Executive would have been
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required to contribute), over (ii) the benefit actually payable under such plan.
The Company shall pay the Present Value of such additional benefits (if any) in
a lump sum within 30 days of his termination of employment.
(e) Effect of Lump Sum Payment. The lump sum payment under (a) or
(b) above shall not alter the amounts Executive is entitled to receive under the
benefit plans described in this section. Benefits under such plans shall be
determined as if Executive had remained employed and received such payments over
the Severance Period.
(f) Individual SERP, SERP and Executive SERP. On his date of
termination, Executive shall be treated for purposes of determining his benefit
under the Individual SERP, SERP and Executive SERP as if he had earned
additional years of benefit service equal to the length of the Severance Period
and had attained age 65.
(g) Executive Life Insurance Program. On Executive's date of
termination, the Company will pay an amount into the policy as if Executive had
continued in employment for the Severance Period at the same total compensation
and had attained age 65. At Executive's option, the policy shall be delivered to
Executive or he shall be paid the cash value thereof (after the payment referred
to in the preceding sentence).
(h) Stock Options. As of his date of termination, all of the Time
Options and the Performance Options, and any other outstanding stock options
granted to Executive by the Company, shall become vested and exercisable as
provided in the Term Sheet.
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(i) Office Space; Secretarial. Executive will be provided
appropriate office space, his then current administrative assistant (such
assistant shall be paid or provided similar compensation and benefits to that
being provided at the time Executive terminates employment), and reasonable
expenses related thereto for the Severance Period.
5.2 By Company. The Company shall have the right to terminate
Executive's employment under this Agreement at any time during the Term by
Notice of Termination (as described in Section 7). If the Company terminates
Executive's employment under this Agreement (i) for Cause, as defined in Section
6.2, (ii) if Executive becomes Disabled, or (iii) upon Executive's death, the
Company's obligations under this Agreement shall cease as of the date of
termination; provided, however, that Executive will be entitled to whatever
benefits are payable pursuant to the terms of any health, life insurance,
disability, welfare, retirement or other plan or program maintained by the
Company. If the Company terminates Executive during the Term of this Agreement
other than pursuant to clauses (i) through (iii) of this Section 5.2, Executive
shall be entitled to receive the compensation and benefits provided in
subsections (a) through (i) of Section 5.1 above for the Severance Period, and
subject to the provisions (including the nonmitigation provision) and
limitations therein.
5.3 Tax Equalization Payment.
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined (as hereafter provided) that any payment or
distribution to or for the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or pursuant to or by
reason of any other agreement,
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policy, plan, program or arrangement, or similar right (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code (or any successor
provisions thereto), or any interest or penalties with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive or have paid on his behalf an additional payment or
payments (a "Gross-Up Payment") from the Company. The total amount of the
Gross-Up Payment shall be an amount such that, after payment by (or on behalf
of) the Executive of any Excise Tax and all federal, state and other taxes
(including any interest or penalties imposed with respect to such taxes) imposed
upon the Gross-Up Payment, the remaining amount of the Gross-Up Payment is equal
to the Excise Tax imposed upon the Payments. For purposes of clarity, the amount
of the Gross-Up Payment shall be that amount necessary to pay the Excise Tax in
full and all taxes assessed upon the Gross-Up Payment.
(b) An initial determination as to whether a Gross-Up Payment is
required pursuant to this subsection (b) and the amount of such Gross-Up Payment
shall be made by an accounting firm selected by the Company and reasonably
acceptable to Executive which is then designated as one of the five largest
accounting firms in the United States (the "Accounting Firm"). The Accounting
Firm shall provide its determination (the "Determination"), together with
detailed supporting calculations and documentation to the Company and the
Executive as promptly as practicable after such calculation is requested by the
Company or by the Executive, and if the Accounting Firm determines that no
Excise Tax is payable by the Executive with respect to a Payment or Payments, it
shall furnish the Executive with a substantial
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authority opinion reasonably acceptable to the Executive that no Excise Tax will
be imposed with respect to any such Payment or Payments. Within fifteen (15)
days of the delivery of the Determination to the Executive, the Executive shall
have the right to dispute the Determination (the "Dispute"). The Gross-Up
Payment, if any, as determined pursuant to this Section 5.3 shall be paid by the
Company to the Executive for his benefit within fifteen (15) days of the receipt
of the Accounting Firm's Determination. The existence of the Dispute shall not
in any way affect the right of the Executive to receive the Gross-Up Payment in
accordance with the Determination. If there is no Dispute, the Determination
shall be binding, final and conclusive upon the Company and the Executive
subject to the application of this subsection (b).
(c) As a result of the uncertainty in the application of
Sections 4999 and 280G of the Code, it is possible that a Gross-Up Payment (or a
portion thereof) will be paid which should not have been paid (an "Excess
Payment") or a Gross-Up Payment (or a portion thereof) which should have been
paid will not have been paid (an "Underpayment"). An Underpayment shall be
deemed to have occurred upon the earliest to occur of the following events: (1)
upon notice (formal or informal) to the Executive from any governmental taxing
authority that the tax liability of the Executive (whether in respect of the
then current taxable year of the Executive or in respect of any prior taxable
year of the Executive) may be increased by reason of the imposition of the
Excise Tax on a Payment or Payments with respect to which the Company has failed
to make a sufficient Gross-Up Payment, (2) upon a determination by a court, (3)
by reason of a determination by the Company (which shall include the position
taken by the Company, or its consolidated group, on its federal income tax
return), or (4) upon
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the resolution to the satisfaction of the Executive of the Dispute. If any
Underpayment occurs, the Executive shall promptly notify the Company and the
Company shall pay to the Executive within fifteen (15) days of the date the
Underpayment is deemed to have occurred under (1), (2), (3) or (4) above, but in
no event less than five days prior to the date on which the applicable
government taxing authority has requested payment, an additional Gross-Up
Payment equal to the amount of the Underpayment plus any interest and penalties
imposed on the Underpayment.
An Excess Payment shall be deemed to have occurred upon a "Final
Determination" (as hereinafter defined) that the Excise Tax shall not be imposed
upon a Payment or Payments (or portion of a Payment) with respect to which the
Executive had previously received a Gross-Up Payment. A Final Determination
shall be deemed to have occurred when the Executive has received from the
applicable government taxing authority a refund of taxes or other reduction in
his tax liability by reason of the Excess Payment and upon either (i) the date a
determination is made by, or an agreement is entered into with, the applicable
governmental taxable authority which finally and conclusively binds the
Executive and such taxing authority, or in the event that a claim is brought
before a court of competent jurisdiction, the date upon which a final
determination has been made by such court and either all appeals have been taken
and finally resolved or the time for all appeals has expired, or (ii) the
statute of limitations with respect to the Executive's applicable tax return has
expired. If an Excess Payment is determined to have been made, the amount of the
Excess Payment shall be treated as a loan by the Company to the Executive and
the Executive shall pay to the Company within 15 days following demand (but not
less than 30 days after the
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determination of such Excess Payment) the amount of the Excess Payment plus
interest at an annual rate equal to the rate provided for in Section
1274(b)(2)(B) of the Code from the date the Gross-Up Payment (to which the
Excess Payment relates) was paid to the Executive until the date of repayment to
the Company.
(d) Notwithstanding anything contained in this Agreement to the
contrary, in the event that, according to the Determination, an Excise Tax will
be imposed on any Payment or Payments, the Company shall pay to the applicable
government taxing authorities as Excise Tax withholding, the amount of any
Excise Tax that the Company has actually withheld from the Payment or Payments;
provided that the Company's payment of withheld Excise Tax shall not change the
Company's obligation to pay the Gross-Up Payment required under this Section
5.3.
(e) The Executive and the Company shall each provide the Accounting
Firm access to and copies of any books, records and documents in the possession
of the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the Determination contemplated by
subsection (b) hereof.
(f) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by subsection
(b) shall be paid by the Company.
6. Definitions. For purposes of this Agreement the following terms shall
have the meanings specified below:
6.1 "Board" or "Board of Directors". The Board of Directors of the
Company.
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6.2 "Cause". The involuntary termination of Executive by the Company for
the following reasons shall constitute a termination for Cause:
(a) If the termination shall have been the result of an act or acts by
Executive which have been found in an applicable court of law to constitute a
felony (other than traffic-related offenses);
(b) If the termination shall have been the result of an act or acts by
Executive which are in the good faith judgment of the Board to be in violation
of law or of policies of the Company and which result in demonstrably material
injury to the Company;
(c) If the termination shall have been the result of an act or acts of
proven dishonesty by Executive resulting or intended to result directly or
indirectly in significant gain or personal enrichment to the Executive at the
expense of the Company; or
(d) Upon the willful and continued failure by the Executive
substantially to perform his duties with the Company (other than any such
failure resulting from incapacity due to mental or physical illness not
constituting a Disability, as defined herein), after a demand in writing for
substantial performance is delivered by the Board, which demand specifically
identifies the manner in which the Board believes that Executive has not
substantially performed his duties.
With respect to clauses (b), (c) or (d) above of this Section, Executive
shall not be deemed to have been involuntarily terminated for Cause unless and
until there shall have been delivered to him a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of
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the Board (after reasonable notice to Executive and an opportunity for him,
together with his counsel, to be heard before the Board), finding that, in the
good faith opinion of the Board, Executive was guilty of conduct set forth above
in clauses (b), (c) or (d) and specifying the particulars thereof in detail. For
purposes of this Agreement, no act or failure to act by Executive shall be
deemed to be "willful" unless done or omitted to be done by Executive not in
good faith and without reasonable belief that Executive's action or omission was
in the best interests of the Company.
6.3 "Change in Control". Either
(a) the acquisition, directly or indirectly, by any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than LB MBP II or any of its affiliates, of securities of the
Company representing an aggregate of more than fifty percent (50%) of the
combined voting power of the Company's then outstanding securities (excluding
the acquisition by persons who own such amount of securities on the date hereof,
or acquisitions by persons who acquire such amount through inheritance), or
(b) during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, cease for any reason to
constitute at least a majority thereof, unless the election of each new director
was approved in advance by a vote of at least a majority of the directors then
still in office who were directors at the beginning of the period; or
(c) consummation of (i) a merger, consolidation or other business
combination of the Company with any other "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) or
affiliate
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thereof, other than a merger, consolidation or business combination which would
result in the outstanding common stock of the Company immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into common stock of the surviving entity or a parent or affiliate thereof) more
than fifty percent (50%) of the outstanding common stock of the Company, or such
surviving entity or parent or affiliate thereof, outstanding immediately after
such merger, consolidation or business combination, or (ii) a plan of complete
liquidation of Company or an agreement for the sale or disposition by Company of
all or substantially all of Company's assets;
(d) a Public Offering as defined in the Term Sheet; or
(e) a sale of more than 50% of the assets of the Company; provided
that none of the events described in clauses (b) through (e) shall be deemed a
Change in Control if, immediately following such event, LB MBP II and its
affiliates own 50% or more of the combined voting power of the Company's then
outstanding securities.
6.4 "Code". The Internal Revenue Code of 1986, as it may be amended from
time to time.
6.5 "Confidential Information". All technical, business, and other
information relating to the business of the Company or its subsidiaries or
affiliates, including, without limitation, technical or nontechnical data,
formulae, compilations, programs, devices, methods, techniques, processes,
financial data, financial plans, product plans, and lists of actual or potential
customers or suppliers, which (i) derives economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other Persons, and (ii) is the subject of efforts that
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are reasonable under the circumstances to maintain its secrecy or
confidentiality. Such information and compilations of information shall be
contractually subject to protection under this Agreement whether or not such
information constitutes a trade secret and is separately protectable at law or
in equity as a trade secret. Confidential Information does not include
confidential business information which does not constitute a trade secret under
applicable law two years after any expiration or termination of this Agreement.
6.6 "Disability" or "Disabled". Executive's inability as a result of
physical or mental incapacity to substantially perform his duties for the
Company on a full-time basis for a period of six (6) months.
6.7 "Good Reason". A "Good Reason" for termination by Executive of
Executive's employment shall mean the occurrence during the Term (without the
Executive's express written consent) of any one of the following acts by the
Company, or failures by the Company to act, and such act or failure to act has
not been corrected within thirty (30) days after written notice of such act or
failure to act is given by Executive to the Company:
(i) the assignment to Executive of any duties inconsistent with
Executive's status as the Chairman of the Board, Chief Executive Officer and
President of the Company, or a substantial adverse alteration in the nature or
status of the Executive's responsibilities from those on the date hereof;
(ii) a reduction by the Company in Executive's Base Salary as in
effect on the date hereof or as the same may be increased from time to time;
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23
(iii) the relocation of the Company's principal executive offices to
a location more than fifty (50) miles from Montgomery, Alabama, or the Company's
requiring Executive to be based anywhere other than the Company's principal
executive offices, except for reasonably required travel on the Company's
business, provided, that the Company's principal executive offices may be
relocated to Birmingham, Alabama, or Atlanta, Georgia, under terms (such as
relocation allowance, housing allowance (including selling of existing home and
acquisition of new home), and travel allowances) reasonably acceptable to
Executive, in which case, such 50 mile limitation shall apply to such city;
(iv) the failure by the Company, without Executive's consent, to pay
to Executive any portion of Executive's current compensation (including Base
Salary and bonus), or to pay to the Executive any other compensation within
seven (7) days of the date such compensation is due;
(v) the failure by the Company to continue in effect any compensation
plan in which Executive participates on the date hereof, which is material to
Executive's total compensation, including but not limited to the Company's
Executive Management Target Incentive Plan, any long-term incentive plan, the
Individual SERP, the SERP and the Executive SERP, or any substitute plans,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the failure by the
Company to continue the Executive's participation in such plan (or in such
substitute or alternative plan) on a basis not materially less favorable in
terms of the amount of benefits provided;
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(vi) the failure by the Company to continue to provide Executive with
benefits substantially similar to those enjoyed by Executive on the date hereof
under any of the Company's pension, life insurance (including the Executive Life
Insurance Program), medical, health and accident or disability plans, the taking
of any action by the Company which would directly or indirectly materially
reduce any of such benefits or deprive Executive of any material fringe benefit
enjoyed by Executive on the date hereof, or the failure by the Company to
provide Executive with the number of paid vacation days to which the Executive
is entitled under this Agreement; or
(vii) any purported termination of Executive's employment which is
not effected pursuant to a Notice of Termination satisfying the requirements of
Section 7.1 (for purposes of this Agreement, no such purported termination shall
be effective).
The Executive's right to terminate the Executive's employment for
Good Reason shall not be affected by the Executive's incapacity due to physical
or mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
6.8 "Person". Any individual, corporation, bank, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
other entity.
6.9 "Present Value". The term "Present Value" on any particular date shall
have the same meaning as provided in Section 280G(d)(4) of the Code.
7. Termination Procedures.
7.1 Notice of Termination. During the Term of this Agreement, any
purported termination of Executive's employment (other than by reason of death)
shall
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be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 11. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is required to include the
information set forth in Section 6.2.
7.2 Date of Termination. "Date of Termination," with respect to any
purported termination of Executive's employment during the Term of this
Agreement, shall mean (i) if Executive's employment is terminated by his death,
the date of his death, (ii) if Executive's employment is terminated for
Disability, thirty (30) days after Notice of Termination is given (provided that
Executive shall not have returned to the full-time performance of Executive's
duties during such thirty (30) day period), and (iii) if Executive's employment
is terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall not be
less than thirty (30) days (except in the case of a termination for Cause) and,
in the case of a termination by the Executive, shall not be less than thirty
(30) days nor more than sixty (60) days, respectively, from the date such Notice
of Termination is given); provided, however, that the "Date of Termination" for
purposes of this Agreement shall not be the last day of the Company's fiscal
year and, in the event the last day of the fiscal year is designated as the
"Date of Termination", the "Date of Termination" for purposes hereof shall
automatically be the first day of the next following fiscal year.
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26
8. Contract Non-Assignable. The parties acknowledge that this Agreement
has been entered into due to, among other things, the special skills of
Executive, and agree that this Agreement may not be assigned or transferred by
Executive, in whole or in part, without the prior written consent of the
Company.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon any successor
to, or transferor of, the Company, the Company will require any successor to, or
transferor of, all or substantially all of the business and/or assets of the
Company (whether direct or indirect, by purchase, merger, reorganization,
liquidation, consolidation or otherwise) to expressly assume and agree to
perform this Agreement, in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in the same amount
and on the same terms as the Executive would be entitled to hereunder if the
Executive were to terminate the Executive's employment for Good Reason, except
that, for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be enforceable by
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees and by the Company's
successors and assigns. If Executive shall die while any amount would still be
payable to Executive
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hereunder (other than amounts which, by their terms, terminate upon the death of
Executive) if Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to the executors, personal representatives or administrators of
Executive's estate.
10. Other Agents. Nothing in this Agreement is to be interpreted as
limiting the Company from employing other personnel on such terms and conditions
as may be satisfactory to the Company.
11. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered or seven days after mailing if mailed, first class,
certified mail, postage prepaid:
To the Company: Xxxxxx International, Inc.
0000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
ATTN: _________________________
With a copy to: Xxxxxxx X. Xxxxxx, III
Xxxxxx International, Inc.
0000 Xxxxxxxxx Xxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000-0000
To the Executive: Xxxx X. Panettiere
000 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxx 00000
With a copy to: Xxxxxxxxxx Xxxxxxxx LLP
ATTN: Xxxxxxx X. Xxxxxx, Xx.
Suite 2800
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 000000-0000
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Any party may change the address to which notices, requests, demands and other
communications shall be delivered or mailed by giving notice thereof to the
other party in the same manner provided herein.
12. Provisions Severable. If any provision or covenant, or any part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable, either in whole or in part, such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
the remaining provisions or covenants, or any part thereof, of this Agreement,
all of which shall remain in full force and effect.
13. Waiver. Failure of either party to insist, in one or more instances,
on performance by the other in strict accordance with the terms and conditions
of this Agreement shall not be deemed a waiver or relinquishment of any right
granted in this Agreement or the future performance of any such term or
condition or of any other term or condition of this Agreement, unless such
waiver is contained in a writing signed by the party making the waiver.
14. Indemnification. During the term of this Agreement and after
Executive's termination for the period of time set forth in Section 6.7 of the
Recapitalization Agreement, the Company shall indemnify Executive and hold
Executive harmless from and against any claim, loss or cause of action arising
from or out of Executive's performance as an officer, director or employee of
the Company or any of its subsidiaries or other affiliates or in any other
capacity, including any fiduciary capacity, in which Executive serves at the
Company's request, in each case to the maximum extent permitted by law and under
the Company's Articles of Incorporation and By-Laws (the "Governing Documents"),
provided that in no event shall the protection
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afforded to Executive hereunder be less than that afforded under the Governing
Documents as in effect on the date of this Agreement except from changes
mandated by law. During the Term and for the period of time set forth in Section
6.7 of the Recapitalization Agreement, Executive shall be covered by any policy
of directors and officers liability insurance maintained by the Company for the
benefit of its officers and directors.
15. Amendments and Modifications. This Agreement may be amended or
modified only by a writing signed by both parties hereto.
16. Governing Law. The validity and effect of this Agreement shall be
governed by and construed and enforced in accordance with the laws of the State
of Delaware.
17. Arbitration of Disputes; Expenses. All claims by Executive for
compensation and benefits under this Agreement shall be directed to and
determined by the Board and shall be in writing. Any denial by the Board of a
claim for benefits under this Agreement shall be delivered to Executive in
writing and shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Board shall afford a reasonable
opportunity to Executive for a review of a decision denying a claim and shall
further allow Executive to appeal to the Board a decision of the Board within
sixty (60) days after notification by the Board that Executive's claim has been
denied. To the extent permitted by applicable law, any further dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Atlanta, Georgia, in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the
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arbitrator's award in any court having jurisdiction. In the event the Executive
incurs legal fees and other expenses in seeking to obtain or to enforce any
rights or benefits provided by this Agreement and is successful, in whole or in
part, in obtaining or enforcing any material rights or benefits through
settlement, arbitration or otherwise, the Company shall promptly pay Executive's
reasonable legal fees and expenses incurred in enforcing this Agreement and the
fees of the arbitrator. Except to the extent provided in the preceding sentence,
each party shall pay its own legal fees and other expenses associated with any
dispute.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
EXECUTIVE:
/s/ XXXX X. PANETTIERE
_________________________________
XXXX X. PANETTIERE
COMPANY:
By: /s/ XXXXXX INTERNATIONAL, INC.
______________________________
XXXXXX INTERNATIONAL, INC.
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31
SCHEDULE A to
Employment Agreement
PUT AND CALL RIGHTS OF THE
EXECUTIVE AND THE COMPANY
Capitalized terms which are used in this Schedule A and which are not
otherwise defined shall have the meanings ascribed to such terms in the
Agreement to which this Schedule is attached and of which it forms a part,
except where specifically noted that any such term has the meaning ascribed to
such term in the Employee Shareholders Agreement being entered into by and among
the Company, Xxxxxx Brothers Merchant Banking Partners II L.P. ("LB MBP II"),
the Executive and other executives and key employees of the Company (a term
sheet for which is attached hereto).
A. Triggering Events
1. Termination by the Company for Cause; Voluntary Termination without
Good Reason. If, during the Term, the Executive's employment is either (x)
involuntarily terminated by the Company for Cause or (y) terminated by the
Executive without Good Reason:
(a) All shares of Company common stock ("Common Stock") purchased by the
Executive pursuant to the exercise of stock options ("Options") granted to the
Executive ("Option Shares") may be called by the Company at the lesser of (x)
the purchase price paid by the Executive therefor (the "Exercise Price") and (y)
Fair Market Value (as defined in Section D hereof).
(b) All Options then held by the Executive shall be forfeited, without any
consideration being paid therefor by the Company, as of the Executive's date of
termination of employment with the Company ("Termination Date").
(c) All shares of Common Stock owned by the Executive, other than Option
Shares ("Purchased Shares"), may be called by the Company at Fair Market Value.
(d) The Executive shall have no right to put his Option Shares or
Purchased Shares to the Company as a result of such termination of employment.
2. Termination by the Company Without Cause; Termination by the Executive
with Good Reason; Retirement. If, during the Term, the Executive's employment
with the Company is either (x) involuntarily terminated by the Company without
Cause, (y) terminated by the Executive for Good Reason or (z) terminated as a
result of the Executive's Retirement (as defined in the Employee Shareholders
Agreement) from employment with the Company at or after attainment of age 65 (or
such earlier retirement age as permitted under any agreement entered into after
Effective Time (as defined in the Employment Agreement) between the Company and
the Executive or if the Board shall consent thereto in writing):
(a) All Option Shares held for at least six months by the Executive may be
called by the Company at Fair Market Value.
32
2
(b) All Purchased Shares held for at least six months by the Executive may
be called at Fair Market Value.
(c) The Executive shall have no right to put his Option Shares or
Purchased Shares to the Company as a result of such termination of employment.
(d) Except as provided under clauses (a) and (b) above, the Company shall
have no right to call Options, Option Shares or Purchased Shares upon a
termination of employment covered by this Section 2.
Notwithstanding the foregoing, if the Executive elects, he may override the
calls made pursuant to paragraphs (a) or (b) above and retain all or any portion
of his Option Shares and Purchased Shares by giving the Company written notice
of such override within 30 days of his receipt of the call notice.
3. Termination due to Death or Disability. If, during the Term, the
Executive's employment is terminated due to his death or Disability, the
Executive (or his legal representative or the legal representative of his
estate, if applicable) may put all Options, Option Shares and Purchased Shares
to the Company or the Company may call such Options, Option Shares and Purchased
Shares, in each case at Fair Market Value (in the case of Options, net of the
Exercise Price); provided, however, that if the Executive elects, he may
override such call and retain all or any portion of his Options, Option Shares
and Purchased Shares by providing the Company with a written notice of such
override within 30 days of his receipt of the Company's call notice.
[4. Sale of a Company Division. If the Company shall sell the business
division in which the Executive is principally employed (a "Sale"), the Company
may call the Executive's Options, Option Shares and Purchased Shares at Fair
Market Value; provided, however, that if the Executive elects, he may override
such call by the Company and retain all or any portion of his Options, Option
Shares and Purchased Shares by providing the Company with a written notice of
such override within 30 days of his receipt of the Company's call notice. The
Executive shall have no right to put his Options, Option Shares or Purchased
Shares to the Company as a result of such a Sale.](1)
B. Notice of Puts and Calls; Exercise Rights.
1. If the Company intends to call any or all of the Executive's Options,
Option Shares or Purchased Shares as provided herein, it will provide prior
written notice to the Executive (or the Executive's legal representative or the
legal representative of the Executive's estate, as applicable), such notice to
include the Fair Market Value of the Options, Option Shares or Purchased
Shares, as the case may be, and to be given no later than 75 days after the
--------
(1) Include only for employees employed in any of the three business
divisions.
33
3
Executive's Termination Date [or Sale (as applicable)](2). If the Executive (or
the Executive's legal representative or the legal representative of his estate,
as applicable) is entitled to put any or all of his Options, Option Shares or
Purchased Shares, notice of such intent must be given by the Executive no later
than 90 days after the Company gives notice that it will not exercise its call.
2. Neither the Executive nor the Company shall have any put or call rights
following a Public Offering (as such term is defined in the Employee
Shareholders Agreement).
3. Any exercise of put or call rights may be for all or a portion of the
Options, Option Shares and Purchased Shares subject thereto, as determined in
the sole discretion of the holder of such rights.
C. Limitation on Put and Call Rights. Notwithstanding anything in this Schedule
A to the contrary, the Company shall not be required to purchase any Options,
Option Shares or Purchased Shares (whether through the exercise of a put or a
call) if such purchase would be, or would result in, a violation of the terms of
its then existing debt agreements or any applicable law or regulation. In
addition, no such put or call will occur if, in the reasonable discretion of the
Board, such purchase would be reasonably likely to (i) impair the Company's
available cash, (ii) require unsuitable additional debt to be incurred by the
Company or (iii) result in any other adverse economic or financial condition, in
each case only to the extent that any such event described in clauses (i), (ii)
or (iii), individually or in the aggregate, would have or would reasonably be
expected to have a material adverse effect on the financial condition of the
Company.
D. Fair Market Value. For purposes hereof, the term "Fair Market Value" shall
mean, in respect of each share of Common Stock:
(i) To the extent the call or put, as the case may be, occurs concurrently
with or within 30 days of a Public Offering, the offering price to the
public per share of common stock of such Public Offering;
(ii) To the extent the call or put, as the case may be, occurs concurrently
with or within 30 days of a Change of Control, the value of the Company's
total equity, as determined based upon the price per share paid in
connection with such Change of Control, divided by the total number of
shares of Common Stock then outstanding;
(iii) To the extent clauses (i) and (ii) do not apply and a regular trading
market for the Company's common stock exists following a Public Offering,
the average closing price of such common stock for 10 consecutive trading
days ending on the trading day immediately prior to such call or put; and
(iv) At all other times, the fair market value of the Company's total equity,
as determined by the Board in good faith divided by the total number of
--------
(2) Include bracketed language only for division employees.
34
shares of Common Stock then outstanding; provided, however, that if the
Executive disputes the Board's determination, within 10 days of the
Executive's receipt of notice of the Board's determination, the Executive
and the Board shall jointly select a qualified independent financial
advisor to make such determination, which determination shall be final and
binding upon the parties, provided, further, that the fees and costs of
such financial advisor in connection with its determination shall be borne
equally by the Company and the Executive unless such financial advisor's
fair market value determination is 10% or more greater than the Board's
determination, in which case such fees and costs shall be borne entirely
by the Company.
35
EXHIBIT A to
Employment Agreement
SUMMARY OF TERMS
EMPLOYEE SHAREHOLDERS AGREEMENT
Set forth below is a summary of certain terms of agreements ancillary to
the Employment Agreement (the "Employment Agreement") to which this Summary of
Terms is attached and of which it forms a part, including the Employee
Shareholders Agreement and the related Option Agreements. Capitalized terms used
and not otherwise defined herein shall have the meanings set forth in the
Employment Agreement.
EQUITY OWNERSHIP
FOLLOWING
RECAPITALIZATION
Purchased Shares After the closing contemplated by the Recapitalization
Agreement, no less than $15.0 million of the fully
diluted equity of the Company will be purchased by the
top 21 executives and key employees (the "Managers") and
approximately 20 other management employees at a
purchase price equal to the price per share of Company
common stock paid in connection with the
recapitalization, which is $30.00 per share (the
"Purchased Shares").
OPTION AGREEMENT
Stock Options As soon as practicable after the closing of the
recapitalization, the Company shall grant the Managers
nonqualified options (the "Options") exercisable for
common stock to purchase an aggregate of 8.0% of the
Company's initial fully-diluted common stock. One-half
of such Options shall be granted as "Time Options";
one-half of such Options shall be granted as
"Performance Options", which will be earned upon
achievement of the "Management Case" performance as
described below.
The Company shall reserve for possible future issuance
to Managers and other executives options to purchase an
aggregate of 100,000 shares of the Company's common
stock at times and on terms to be determined by the
Compensation Committee of the Board of Directors.
36
2
Except as otherwise provided herein, the terms of the
option plans and agreements governing the Options shall
be substantially similar to the Company's 1998 Option
Plan.
--Option Term The option term of the Options shall be 10 years from
the Effective Time (as defined in the Recapitalization
Agreement) and 10 years after the grant with respect to
options subsequently granted; provided, however, that
exercisable options shall expire earlier upon
termination of employment as follows:
Termination for Cause/Voluntary Termination by Executive
Without Good Reason: Immediately upon termination of
employment.
Termination Without Cause/ Termination by Executive with
Good Reason/Death/Disability/Sale of Division: One year
after termination of employment.
Retirement: At the end of the option term.
Unexercisable Options will terminate upon termination of
employment, unless acceleration in connection with such
termination is explicitly provided for.
Upon a Change-in-Control, the Compensation Committee may
terminate the Options, so long as the Executives are
cashed out of, or are permitted to exercise, their
exercisable Options prior to the Change-in-Control.
--Option Exercise Options shall be granted at an exercise price equal to
Price the price per share of Company common stock paid in
connection with the recapitalization, which is $30.00
per Share.
--Dilution of Options Option holders shall be subject to the same dilution as
the common stockholders.
--Reallocation Shares subject to Options that are forfeited may be
reallocated to other employees as determined by the
Compensation Committee in its sole discretion.
Transfer Options may be transferred to Permitted Transferees (as
defined below) so long as
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3
such Permitted Transferee agrees to be bound by the
terms of all applicable agreements.
Vesting of Equity Rights
--Normal Vesting of Except as provided in the next paragraph, Time Options
Time Options shall become exercisable with respect to 20% of the
shares subject to such Options on each of the first five
anniversaries of the Effective Time as and when the
Executive's employment continues through and including
the date of each such anniversary. Time Options shall
expire and no longer be exercisable as provided under
the "Option Term" section herein, but all Time Options
shall accelerate and become fully exercisable as
provided under the "Accelerated Vesting of Options"
section herein.
The Time Options for Executives who are age 61 or older
at the Effective Time shall vest with respect to 331/3%
of the shares subject to such Options on each of the
first three anniversaries of the Effective Time,
provided that the Executive's employment continues
through and including the date of each such anniversary;
and provided, further, that full vesting at Retirement
for such Executives shall only occur if Retirement
occurs three or more years after the Effective Time.
Nothing herein shall be construed as affecting any
liquidity rights or restrictions on transfer
specifically set forth herein.
--Normal Vesting of Performance Options shall become exercisable at the end
Performance Options of six years, whether or not the EBITDA (as defined
below) targets are achieved, but become exercisable
earlier with respect to up to 20% of the shares subject
to the Performance Options, on each of the first five
anniversaries of the Effective Time, to the extent the
EBITDA for the fiscal year most recently completed (the
"Fiscal Year") equals or exceeds the EBITDA targets
(each, a "Target"), as set forth in Schedule A attached
hereto.
For executives who are age 61 or older at the Effective
Time, the applicable vesting percentage for Performance
Options shall be
38
4
33 1/3% for each of the first three anniversaries of the
Effective Time, using the EBITDA Targets on Schedule A,
and 331/3% shall be substituted for 20% each place in
this section where 20% appears. Notwithstanding the
foregoing, Performance Options shall vest on the
following dates at the following minimum percentages (to
the extent not already vested) for such Executives if
Retirement occurs three or more years after the
Effective Time: (i) the date that is three years after
the Effective Time, 50% of the aggregate shares subject
to the Performance Options; (ii) the date that is four
years after the Effective Time, 66.70% of the aggregate
shares subject to the Performance Options; (iii) the
date that is five years after the Effective Time, 83.30%
of the aggregate shares subject to the Performance
Options and (iv) the date that is six years after the
Effective Time, 100% of the aggregate shares subject to
the Performance Options. Nothing herein shall be
construed as affecting any liquidity rights or
restrictions on transfer specifically set forth herein.
If the Company's EBITDA for a Fiscal Year is less than
100% of the Target for such Fiscal Year (a "Missed
Year"), such Performance Options shall become
exercisable with respect to a portion of the shares
subject to Performance Options in an amount equal to the
product of (a) 20% of the total number of shares subject
to Executive's Performance Options multiplied by (b) the
Applicable Percentage (as set forth in Schedule B
attached hereto).
If either all or a portion of the Executive's
Performance Options do not become exercisable in any
year pursuant to the above, the Executive may "catch-up"
if the Cumulative EBITDA Targets (as set forth in
Schedule A attached hereto) are satisfied. The amount
that would vest is equal to 40% if in year 2, 60% if in
year 3, 80% if in year 4 and 100% if in year 5, less the
number of Executive's Performance Options which had
previously vested.
Accelerated Vesting
of Options
39
5
--Time Options Unvested Time Options shall become fully exercisable
upon (i) death, (ii) disability, (iii) Change-in-Control
or (iv) Retirement (as defined below). In addition, upon
a Termination without Cause or a Termination by
Executive with Good Reason, Time Options shall become
fully exercisable in the event the Executive had been
employed by the Company for at least three years from
the date of the Effective Time.
--Performance Options Performance Options shall become fully exercisable upon
a Change-in-Control if, and only if, (a) 100% or more of
the EBITDA Target has been achieved in each Fiscal Year
prior to such Change-in-Control or (b) 100% of the
Cumulative EBITDA Target has been achieved in the Fiscal
Year immediately preceding such Change-in-Control.
Except for the above and any other acceleration
occurring by reason of the attainment of the EBITDA
Targets, vesting of Performance Options shall not
accelerate for any reason. In addition, upon a
Termination without Cause or for a Termination by
Executive with Good Reason, Performance Options shall
become fully exercisable in the event the Executive had
been employed by the Company for at least three years
from the date of the Effective Time.
Adjustments In the event of any change in the outstanding Common
Stock by reason of a stock split, spin-off, stock
dividend, stock combination or reclassification,
recapitalization, consolidation or merger, or similar
event, the Compensation Committee shall adjust
appropriately the number of shares subject to Options
and make other revisions as it deems are equitably
required.
EMPLOYEE
SHAREHOLDERS
AGREEMENT
Transfer Restrictions Except as provided below, transfers of Purchased Shares
or shares purchased upon exercise of Options ("Option
Shares") will not be permitted prior to the fifth
anniversary of the Effective Time. Option Shares and
Purchased Shares may be transferred prior to the fifth
anniversary of the Effective Time (i) to a
40
6
Permitted Transferee so long as such Permitted
Transferee agrees to be bound by the terms of all
applicable agreements, (ii) pursuant to an exercise of
"Tag-Along" or "Drag-Along" Rights described below,
(iii) pursuant to an exercise of call or put rights set
forth in the Employment Agreement, (iv) pursuant to an
exercise of the registration rights described below or
(v) in connection with a Change-in-Control so long as
long as such transfers are on a pro rata basis with
transfers made by Xxxxxx Brothers Merchant Banking
Partners II L.P. ("LB MBP II") in connection with such
Change-in-Control. Except as provided hereinabove or as
agreed to by the Compensation Committee, Options will be
nontransferable, but may be exercised after an
Optionholder's death by his or her designated
beneficiary or estate.
In addition to the transfer restrictions of the Employee
Stockholder Agreement, any sale of Purchased Shares or
Option Shares shall in all cases be completed in
compliance with applicable securities laws. The Company
will register all Option Shares on Form S-8 under the
Securities Act of 1933.
Right of First Refusal The Company shall have a right of first refusal on all
management equity rights (which rights the Company may
assign to LB MBP II) until the transfer restrictions
expire. Such right shall not apply to any transfer to a
Permitted Transferee so long as such Permitted
Transferee agrees to be bound by the terms of all
applicable agreements.
Registration Rights Each Executive will have "piggy back" registration
rights if (i) the Company is registering shares of its
common stock under the Securities Act of 1933 for its
own account (subject to customary exceptions for
registrations related to exchange offers or benefit
plans), provided that such rights shall only be
available if LB MBP II is selling shares of common stock
for its own account in connection with such
registration, in each case on a pro rata basis with LB
MBP II or (ii) in any Public Offering in which shares
owned by LB MBP II are offered, on a pro rata basis.
41
7
Beginning on the later of a Public Offering and the
fifth anniversary of the recapitalization, each
Executive will have "demand" registration rights,
subject to customary threshold provisions and black-out
provisions.
Tagalong/Dragalong In the event that LB MBP II or one of its affiliates is
transferring any shares of common stock of the Company
to a third party, it will give each Executive notice of
such proposed transfer, including the relevant terms
thereof. Within 30 days of receipt of such notice, each
Executive may elect to sell his Option Shares or
Purchased Shares to such third party on a pro rata basis
with LB MBP II. Notwithstanding the foregoing, the
"tag-along" rights shall not apply to any sale of LB MBP
II or its affiliates pursuant to a syndication of its
equity interest in the Company during the six month
period after the Effective Time, provided that the
aggregate amount of such sale does not exceed $100
million.
In the event the LB MBP II or one of its affiliates is
transferring shares of common stock of the Company to
any third party that has made an offer to purchase such
shares, LB MBP II will have the right to cause each
Executive to sell his Option Shares or Purchased Shares
to such third party on a pro rata basis.
DEFINITIONS
EBITDA "EBITDA" shall be defined in a manner consistent with
the Company's debt instruments entered into in
connection with the recapitalization contemplated by the
Recapitalization Agreement.
Permitted Transferees "Permitted Transferees" shall mean (i) each Executive's
heirs, executors, administrators, testamentary trustees,
legatees, beneficiaries or charitable remaindermen, (ii)
a trust the beneficiaries of which include only such
Executive, such Executive's spouse, lineal descendants
or any other member of the family of such Executive; or
(iii) any person if LB MBP II has given its prior
written consent to the applicable transfer.
42
8
Public Offering "Public Offering" shall mean the sale of shares of any
class of the Company's stock to the public pursuant to
an effective registration statement (other than a
registration statement on Form S-4 or S-8 or any similar
or successor form) filed under the Securities Act of
1933 which results in an active trading market of 25% or
more of the outstanding shares of the Company's common
stock. There shall be deemed to be an "active trading
market" if the Company's common stock is listed or
quoted on a national exchange or the NASDAQ National
Market.
Retirement "Retirement" shall mean normal retirement under the
terms of any tax-qualified retirement plan of the
Company or retirement, which retirement occurs no
earlier than three years after the Effective Time,
except as permitted under any agreement between the
Company and the Executive to the extent such agreement
(i) by its terms currently provides that retirement is
to begin upon attainment of age 65 (even if earlier than
the third anniversary of the Effective Time) or provides
that retirement is to begin after age 64 (which occurs
three years after the Effective Time) or (ii) is entered
into after the Effective Time and permits the Executive
to retire prior to attainment of age 65 and the third
anniversary of the Effective Time. Except as provided in
the preceding sentence, any purported retirement prior
to the third anniversary of the Effective Time, shall be
treated the same as a voluntary termination.
Schedule A
EBITDA Targets
($ in millions)
"Management Case" Cumulative
EBITDA Target* EBITDA Target*
-------------- --------------
1999 $166.2 $166.2
2000 $223.7 $389.9
2001 $246.3 $636.2
2002 $270.7 $906.9
2003 $295.9 $1,202.8
43
9
* Upon disposition or acquisition of any business or substantial portion of the
assets of the Company or another company, the EBITDA Targets for the year of
such disposition or such acquisition and each subsequent year shall be adjusted
to eliminate or include, as the case may be, the income and expense to the
business or assets that were subject to disposition or acquisition, but only to
the extent not already done so in connection with the calculation of EBITDA.
Such adjustments must be consented to by a majority of the non-management
directors of the Board of the Company. If such directors cannot so consent, the
adjustment proposal shall be submitted to the Company's independent auditors,
who can consult with the necessary consultants for binding resolution.
44
Schedule B
Applicable Percentage
Percentage of EBITDA
Target Achieved Applicable
(annual or cumulative) (Pct.) Percentage
----------------------------- ----------
Less than 85 0.00
85 25.00
86 30.00
87 35.00
88 40.00
89 45.00
90 50.00
91 55.00
92 60.00
93 65.00
94 70.00
95 75.00
96 80.00
97 85.00
98 90.00
99 95.00
100 100.00
45
Exhibit B
XXXXXX INTERNATIONAL, INC.
AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
FOR XXXX X. PANETTIERE
1. Purpose - The purpose of this Supplemental Executive Retirement Plan (the
"SERP") is to provide Xxxx X. Panettiere (the "Executive") with a
retirement benefit payable as a supplement to his vested benefit under The
Xxxxxx Retirement Plan.
2. Definitions
x. Xxxxxx Plan is The Xxxxxx Retirement Plan, as in effect on January
1, 1992, including any future amendments or restatements adopted and
effective while Executive is an employee of the Company or its
affiliates.
b. Company shall mean Xxxxxx International, Inc. and its successors.
c. Disability shall mean periods of time during which
(i) Executive is totally and permanent disabled, and
(ii) Executive is receiving Social Security disability benefits.
d. Effective Date of this amendment and restatement of the SERP is
_________, 1999. The original effective date of this SERP was May 1,
1992.
e. Excess Benefit Plan is the Xxxxxx, Inc. and Subsidiaries
Supplemental Retirement Benefit Plan, as in effect on March 1, 1989,
including any future amendments or restatements adopted and
effective while Executive is an employee of the Company or its
affiliates.
f. Executive shall mean Xxxx X. Panettiere.
g. Internal Revenue Code shall mean the Internal Revenue Code of 1986,
as amended and in effect at Executive's Termination Date.
h. Normal Retirement Date is July 25, 2002.
i. SERP is this Supplemental Executive Retirement Plan sponsored by the
Company for Executive.
j. Termination Date is the date on which the employment relationship
between Executive and the Company (including any affiliated company
as defined in the Xxxxxx Plan) ceases.
46
3. Years of Benefit Service shall mean the years of benefit service granted
to Executive under this SERP and the years of "Benefit Service" (as that
term is defined in the Xxxxxx Plan) granted to Executive under the Xxxxxx
Plan. Years of Benefit Service shall be determined in accordance with the
following schedule:
Years of Benefit Years of Benefit Total Years
Service under the Service under the of Benefit
Age Xxxxxx Plan SERP Service
--- ----------------- ----------------- ------------
55 1 + 1 = 2
56 2 + 2 = 4
57 3 + 3 = 6
58 4 + 4 = 8
59 5 + 5 = 10
60 6 + 6 = 12
61 7 + 7 = 14
62 8 + 8 = 16
63 9 + 10 = 19
64 10 + 12 = 22
65 11 + 14 = 25
Years of Benefit Service under the SERP shall continue to accrue during
any period of Disability provided that Years of Benefit Service continue
to accrue under the Xxxxxx Plan.
4. Vested Retirement Benefits payable under this SERP shall equal (a) less
(b) where:
(f) is the monthly retirement income that would be payable to Executive
under the provisions of the Xxxxxx Plan, assuming
(i) that in determining the fraction for purposes of Section
6.1(a)(i) of the Xxxxxx Plan, the numerator shall be his total
Years of Benefit Service determined in accordance with
Paragraph 3 above, at his age when his employment terminates
and the denominator of which is 25;
(ii) that for purposes of Section 6.1(a)(ii)(A) and (B) of the
Xxxxxx Plan, the Years of Benefit Service he would accrue if
he continued to accrue Benefit Service to his Normal
Retirement Date would be 25;
(iii) that the Xxxxxx Plan does not contain the limitation on
compensation imposed by Section 401(a)(17) of the Internal
Revenue Code or the limitation on benefits imposed by Section
415 of the Internal Revenue Code;
47
and
(g) is the sum of (i), (ii), and (iii), where
(i) is the monthly retirement income actually payable to
Executive under the Xxxxxx Plan;
(ii) is the monthly retirement income actually payable to Executive
under the Excess Benefit Plan; and
(iii) is the monthly retirement income actually paid to Executive
under any pension plan maintained by a former employer of
Executive.
Vested retirement benefits are payable on or after Executive's Termination
Date provided he has obtained a fully vested interest under the Xxxxxx
Plan. No benefits shall be payable under this SERP until Executive has
obtained a fully vested interest under the Xxxxxx Plan. No benefits are
payable during continued employment. The above benefit is on a life
annuity basis. If an optional form of benefit is desired, the benefit
above will be adjusted by the actuarial factors used by the Xxxxxx Plan.
In determining benefits under this Paragraph, amounts described in
Paragraphs (b)(i), (b)(ii) and (b)(iii) above that are paid in a form
other than a straight life annuity shall be valued as a straight life
annuity using the actuarial factors used by the Xxxxxx Plan.
5. Executive shall receive the following benefits as defined in the Xxxxxx
Plan, which benefits shall be calculated on the basis of the benefit
formula set forth in Paragraph 4 above:
a. Benefits due to the pre-retirement death of Executive;
b. Normal and optional forms of payment under the Xxxxxx Plan provided
that, except as provided under Paragraph 5(d), the form of payment
under this SERP shall be the same as the form of payment elected by
Executive under the Xxxxxx Plan;
c. If Executive elects for payment of his vested retirement benefits
to commence prior to his Normal Retirement Date but after 10
Years of Benefit Service as determined under Paragraph 3, his
vested retirement benefits will be reduced by .3% for each full
month by which the date his benefits begin precedes his Normal
Retirement Date. If Executive has less than 10 Years of Benefit
Service, his vested retirement benefits shall be reduced on an
actuarially equivalent basis using the actuarial factors used by
the Xxxxxx Plan.
d. Notwithstanding the above, if Executive's employment is
terminated within 24 months following a change in control (as
such term is defined in Executive's employment agreement) under
circumstances that would
48
entitle him to benefits under his employment agreement upon such
termination, Executive may elect on such form and in such manner as
determined by the Board of Directors of the Company or if appointed
by the Board to administer the Plan, the Compensation Committee of
the Board of Directors, to receive his benefit in the form of a
single lump sum payment (regardless of the form of payment elected
by Executive under the Xxxxxx Plan and regardless of whether a lump
sum option is available under the Xxxxxx Plan). The lump sum payment
shall be actuarially equivalent to the present value of Executive's
benefit under the Plan expressed as a life annuity, calculated using
the same actuarial factors used by the Xxxxxx Plan. The lump sum
payment shall be made to Executive within 30 days of the date he
would otherwise have commenced receiving payments under Paragraph 4
above.
6. Successors and Assigns; Non-Alienation of Benefits - This Plan shall inure
to the benefit of and be binding upon the parties hereto and their
successors and assigns; provided, however, to the maximum extent permitted
by law, no benefit under this SERP shall be assignable or subject in any
manner to alienation, sale, transfer, claims of creditors, pledge,
attachment or encumbrances of any kind. In addition to any obligations
imposed by law upon any successor to the Company, the Company will require
any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to substantially all of the business or assets
of the Company to expressly agree to assume the Plan and to perform the
obligations under this Plan in the same manner that the Company would be
required to perform them.
7. Administration - The Board of Directors of the Company or, at its
discretion, the Compensation Committee of the Board of Directors, shall
administer, construe, and interpret this Plan. No member of the Board of
Directors or the Committee, as the case may be, shall be liable for any
act done or determination made in good faith. The construction and
interpretation by the Board of Directors or the Committee of any provision
of this Plan shall be final and conclusive. The Board of Directors or the
Committee may, in its discretion, delegate its duties to an officer or
employee or committee composed of officers or employees of the Company.
8. Amendment or Termination - The Board of Directors and Executive may amend
this SERP from time to time in any respect with the consent of the other
party. This Plan may not be terminated without the consent of the Company
through its Board of Directors or its designated Committee or officer and
Executive.
9. Construction of the Plan - This SERP is unfunded. This SERP shall be so
construed that it will be maintained primarily for the purpose of
providing certain retirement, death and disability benefits for Executive.
This SERP and the rights and obligations of the parties thereunder, shall
be construed in accordance with
49
applicable federal law and, to the extent not preempted by federal law, in
accordance with the laws of the State of Alabama.
10. Denied Claims
a. If any application for payment of a benefit under the SERP shall be
denied, the Company shall:
(i) Notify Executive within a reasonable time of such denial
setting forth the specific reasons therefor; and
(ii) Afford Executive a reasonable opportunity for a full and fair
review of the decision denying the claim.
b. Notice of such denial shall set forth, in addition to the specific
reasons for the denial, the following:
(i) Reference to pertinent provisions of the SERP;
(ii) Such additional information as may be relevant to denial of
claim;
(iii) An explanation of the claims review procedure;
(iv) Advice that Executive may request the opportunity to review
pertinent plan documents and submit a statement of issues and
comments
c. Within 60 days following advice of denial of his claim, upon request
made by Executive for a review of such denial, the Company shall
take appropriate steps to review its decision in light of any
further information or comments submitted by Executive. The Company
shall be empowered to hold a hearing at which Executive shall be
entitled to present the basis of his claim for review and at which
he may be represented by counsel.
d. The Company shall render a decision within 60 days after Executive's
request for review (which may be extended to 120 days if
circumstances so require) and shall advise Executive in writing of
its decision on such review, specifying its reasons and identifying
appropriate provisions of the Plan.
50
Signed and agreed to this ____ day of _________________, 199____.
XXXXXX INTERNATIONAL, INC.
By: ______________________________________
Its: _____________________________________
EXECUTIVE
__________________________________________
Xxxx X. Panettiere
