EXECUTIVE EMPLOYMENT AGREEMENT
EXHIBIT 10.1
Executive Employment Agreement (this “Agreement”) dated as of February 7, 2006, between
X.X. Xxxxx Corporation, an Ohio corporation (the “Company”), and Xxxx X. Xxxxxx (the
"Executive”).
W I T N E S S E T H:
WHEREAS, the Company desires to initially employ the Executive as Chief Operating
Officer and President of the Company and, by no later than August 7, 2006, to employ the
Executive as Chief Executive Officer and President of the Company;
WHEREAS, the Company and the Executive desire to enter into this Agreement as to the terms of
his employment by the Company;
NOW THEREFORE, in consideration of the foregoing, of the mutual promises contained herein and
of other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Position/Duties
(a) During the Transition Employment Term (as defined in Section 2), the Executive shall serve
as the Chief Operating Officer and President of the Company, as set forth in Section 2. In such
capacities, the Executive shall report to the Chief Executive Officer. Immediately subsequent to
the Transition Employment Term, the Executive shall serve as the Chief Executive Officer and
President of the Company, as set forth in Section 2. Upon appointment as Chief Executive Officer,
the Executive shall no longer serve as Chief Operating Officer but shall continue in his position
as President. In his positions as Chief Executive Officer and President, the Executive shall
report exclusively to the Board of Directors of the Company (the “Board”). At the first regularly
scheduled meeting of the Board following the end of the Transition Employment Term, the Board (and
its Governance and Nominating Committee) will consider a proposal to increase the size of the Board
from nine (9) members to ten (10) members and to appoint the Executive to serve as a member of the
Board.
(b) In each of his respective capacities the Executive shall have the duties, authorities and
responsibilities for such positions set forth in the Company’s Code of Regulations. In addition,
the Executive shall have the duties, authorities and responsibilities (to the extent not
inconsistent with the Company’s Code of Regulations) commensurate with the duties, authorities and
responsibilities of persons in similar capacities in similarly sized companies and such other
duties and responsibilities as the Chief Executive Officer or the Board, as applicable pursuant to
Section 1(a), shall designate that are consistent with the Executive’s positions under this
Agreement.
-5-
(c) During the Employment Term (as defined in Section 2), the Executive shall devote
substantially all of his business time (excluding periods of vacation and other approved leaves of
absence) to the performance of his duties with the Company, provided the foregoing shall not
prevent the Executive from (i) participating in charitable, civic, educational, professional,
community or industry affairs or, with prior written approval of the Board, serving on the boards
of directors or advisory boards of other companies, and (ii) managing his and his family’s personal
investments, so long as such activities do not materially interfere with the performance of his
duties hereunder or create a potential business conflict or the appearance thereof. If at any time
service on any board of directors or advisory board would, in the good faith judgment of the Board,
conflict with the Executive’s fiduciary duty to the Company or create any appearance thereof, the
Executive shall, as soon as reasonably practicable considering any fiduciary duty to the other
entity, resign from such other board of directors or advisory board after written notice of the
conflict is received from the Board. Service on the boards of directors or advisory boards
disclosed by the Executive to the Company on which he is serving as of the Effective Date (as
defined in Section 2) is hereby approved.
2. Employment Term
The Executive’s initial term of employment under this Agreement (the “Transition Employment
Term”) shall begin on February 7, 2006 (the “Effective Date”) with respect to the Executive’s
position as Chief Operating Officer and President and shall end by no later than August 7, 2006,
unless such term is mutually extended by the parties in writing or sooner terminated as provided in
Section 5. With respect to the Executive’s position as Chief Executive Officer and President, the
Executive’s term of employment under this Agreement (the “CEO Employment Term”) shall begin by no
later than August 7, 2006 (the “CEO Effective Date") and end on the third (3rd)
anniversary of the CEO Effective Date, unless sooner terminated as provided in Section 5. The
Transition Employment Term and the CEO Employment Term shall be collectively referred to as the
"Employment Term” hereunder, unless expressly stated otherwise. Following the initial CEO
Employment Term, the Employment Term shall automatically renew for additional one-year periods
unless terminated pursuant to Section 5 or unless either party gives the other ninety (90)
days’ prior written notice of its intent not to renew.
3. Compensation and Related Matters
(a) Annual Base Salary
With respect to the Executive’s position of Chief Operating Officer and President, the Company
agrees to pay the Executive a base salary at an annual rate of not less than $400,000 before all
customary payroll deductions and withholdings. With respect to the Executive’s position of Chief
Executive Officer and President, the Company agrees to pay the Executive a base salary at an annual
rate of not less than $450,000 before all customary payroll deductions and withholdings. Base
salary shall be payable in accordance with the regular payroll practices of the Company, but not
less frequently than monthly. The base salary in effect for the Executive from time to time during
the Employment Term shall constitute “Base Salary” for purposes of this Agreement. The Executive’s
Base Salary shall be subject to annual review by the Board (or a committee thereof) and may be
increased, but not decreased, from time to time by the Board (or a committee thereof). No
-6-
increase to Base Salary shall be used to offset or otherwise reduce any obligations of the
Company to the Executive hereunder or otherwise.
(b) Signing Bonus
Upon the Effective Date, the Executive shall be entitled to a signing bonus of $75,000,
the first half of which is payable one month after the Effective Date and the second half of
which is payable six months after the Effective Date.
(c) Annual Performance Bonus
During the Employment Term, the Executive shall be entitled to participate in the
Company’s 2005 X.X. Xxxxx Management Bonus Plan, or any successor plan, pursuant to which the
Executive shall have the opportunity to earn an annual bonus measured against Company and
individual performance of between 25% (if the threshold performance level for such plan is
achieved) and 100% of Base Salary, with a target annual bonus of 50% of Base Salary.
Notwithstanding the foregoing, for 2006, the Executive’s bonus shall be no less than 25% of
Base Salary.
(d) Equity Awards/Long Term Incentives
(i) The Executive shall be granted on or as soon as possible after the Effective Date
a nonqualified stock option to purchase 100,000 common shares of the Company. The stock
option shall be granted under the Company’s 2005 Long-Term
Incentive Plan (the “Plan”) and
shall vest in equal installments on the first, second and third anniversaries of the grant
date. The option shall have an exercise price equal to the fair market value of the
Company’s common shares on the grant date, and a seven-year term. Subject to sections
12.03 and 12.04 of the Plan, the vested portion of the option shall remain exercisable for
twelve (12) months after the Executive ceases employment with the Company and each
subsidiary of the Company for any reason other than termination for Cause (as defined
below).
(ii) Beginning January 1, 2007 and annually thereafter, the Executive shall be
entitled to participate in the Company’s Long-Term Incentive Plan (for so long as such
plan remains in effect for executives of the Company) in an amount determined annually by
the Board or a committee of the Board that is commensurate with his position, but in no
event shall such amount be less than that offered to any other executive of the Company.
Incentives shall be paid in the form of options, restricted stock units or cash, as
determined annually by the Board or a committee of the Board.
(e) Other Awards
During the Employment Term, the Executive shall be eligible to participate in any bonus
and other incentive compensation plans and programs available to the Company’s senior
executives at a level commensurate with his position, other than existing plans and programs
that have been terminated or frozen as to new participants as of the Effective Date.
-7-
4. Employee Benefits
(a) Benefit Plans
Except for plans and programs that have been terminated or frozen as to new participants
as of the Effective Date, the Executive shall be entitled to participate in all benefit plans
of the Company that are available to the Company’s senior executives, including, but not
limited to, pension, thrift, profit sharing, 401(k), medical coverage, disability, education,
or other retirement or welfare benefits that the Company has adopted or may adopt, maintain or
contribute to for the benefit of its senior executives subject to satisfying the applicable
eligibility requirements and any other terms of any such plan. Such benefits, in the
aggregate, shall be no less favorable than the level of benefits provided to the Company’s
senior executives as of the Effective Date (without taking into account any terminated or
frozen plan); provided, however, that in the event there is a reduction of employee benefits
applicable to senior executives generally, nothing herein shall preclude the Company’s ability
to reduce the Executive’s benefits consistent with such reduction. Without limiting the
generality of the foregoing, during the Employment Term, the Company shall provide the
Executive with a variable life insurance policy providing a death benefit of at least $500,000.
The Company agrees to pay all costs and premiums associated with the policy during the
Employment Term and the Executive shall retain the discretion to allocate such premiums among
investment accounts offered under the policy. Any accrued cash value of the policy shall be
held solely in the name of the Executive and his named beneficiaries.
(b) Vacations
The Executive shall be entitled to annual paid vacation in accordance with the Company’s
policy applicable to senior executives, but in no event less than four (4) weeks per calendar
year (as prorated for partial years), which vacation may be taken at such times as the Executive
elects with due regard to the needs of the Company.
(c) Perquisites
The Company shall provide to the Executive all employee and executive perquisites which other
senior executives of the Company are generally entitled to receive, in accordance with Company
policy set by the Board from time to time, including country club and health club memberships
(initiation and dues). Notwithstanding the foregoing, the Company shall reimburse the Executive
for personal financial planning and tax services annually in an amount not to exceed $15,000 per
year, and the Company shall also provide Executive with an automobile allowance of $12,000 per
year. The Company shall have no right or claim to any automobile purchased by the Executive in
whole or in part with the automobile allowance. The Company further agrees to reimburse the
Executive for all reasonable professional fees incurred in connection with the preparation, review
and negotiation of this Agreement and related arrangements up to a maximum amount of $15,000.
-8-
(d) Business and Entertainment Expenses
Upon presentation of appropriate documentation, the Executive shall be reimbursed in
accordance with the Company’s expense reimbursement policy for all reasonable and necessary
business and entertainment expenses incurred in connection with the performance of his duties
hereunder.
(e) Relocation
The Executive agrees to relocate to the Columbus, Ohio metropolitan area. The Executive shall
be entitled to relocation benefits in accordance with the Company’s relocation policy and such
additions thereto as mutually agreed to by the Executive and the Board (or a committee thereof).
Notwithstanding the foregoing, the Company shall reimburse the Executive for the costs of physical
packing and moving expenses for household goods and vehicles, temporary housing, house hunting
travel and customary closing costs on the sale of the Executive’s current residence and on the
purchase of a new residence in the Columbus, Ohio area. Until such time as the
Executive‘s immediate family relocates to the Columbus, Ohio area, Executive shall be
reimbursed for expenses incurred to visit family on weekends and holidays. The Company shall gross
up for tax purposes any income taxable to the Executive pursuant to the payment or benefits
provided under this Section 4(e) (other than for any gain on any sale of the Executive’s
residence), so that the economic benefit is the same to the Executive as if such payment or
benefits were provided on a non-taxable basis to the Executive. All amounts payable under this
Section 4(e) shall be subject to the Executive’s presentment to the Company of appropriate
documentation and otherwise in accordance with the terms of the Company’s relocation program (other
than reasonable costs that may exceed dollar limitations) applicable to senior executives.
5. Termination
The Executive’s employment and the Employment Term shall terminate on the first of the
following to occur:
(a) Disability
Upon thirty (30) days‘ prior written notice by the Company to the Executive of
termination due to Disability, provided, however, that during such thirty (30) day period, the
Executive shall not have returned to the full-time performance of his duties and responsibilities
under this Agreement. For purposes of this Agreement, “Disability” shall mean a disability which
is determined to be total and permanent by a physician selected by the Company and reasonably
acceptable to the Executive or the Executive’s legal representative.
(b) Death
Automatically on the date of death of the Executive.
-9-
(c) Cause
Upon written notice by the Company to the Executive of a termination for Cause.
“Cause” shall mean any of the following:
(i) gross negligence materially detrimental to the Company;
(ii) conviction of, or a plea of guilty/nolo contendere to, a felony or a crime
involving dishonesty;
(iii) willful and continued failure of the Executive to perform the duties or
responsibilities of the positions held by him and such failure continues for thirty (30)
days after the Executive’s receipt of written notice from the Company setting forth the
specifics of such failure, unless such failure is the result of ill health or physical or
mental disability; or
(iv) intentional misconduct of the Executive which is materially and demonstrably
injurious to the Company.
(d) Without Cause
Upon written notice by the Company to the Executive of an involuntary termination without
Cause, other than for Disability or as a result of the Executive’s death.
(e) Good Reason
Upon written notice by the Executive to the Company that he intends to terminate his
employment hereunder for Good Reason and the failure of the Company, within ten (10) days of its
receipt of such written notice, to cure the condition cited by the Executive in such notice as
constituting Good Reason. For purposes of this Agreement, “Good Reason” means the occurrence of
any one of the following events unless the Executive specifically agrees in writing that such event
shall not be Good Reason:
(i) (A) the assignment to the Executive of any duty or responsibility without the
Executive’s consent that is inconsistent in any material respect with the position
(including, without limitation, his status, office and titles), authority, duties or
responsibilities as contemplated in Section 1, or (B) any other action by the Company
without the Executive’s consent which results in a material diminution in such positions,
authority, duties or responsibilities, which in case of either (A) or (B) continues for ten
(10) days after written notice of such action from the Executive to the Company;
(ii) any reduction, directly or indirectly, in the Executive’s Base Salary or any
material reduction in the extent of Executive’s participation in the plans referred to in
Section 3 or the extent of Executive’s entitlement to the employee benefits, expense
reimbursements, fringe benefits or perquisites referred to in Section 4 (other than plans
that are terminated or frozen as to new participants on the Effective Date or any
-10-
reduction that impacts all participants or that results pursuant to the terms of any such
benefit plan);
(iii) the failure of the Company to assign this Agreement to a successor to the Company
or failure of a successor to the Company to explicitly assume and agree to be bound by this
Agreement in a writing delivered to the Executive;
(iv) requiring the Executive to be principally based at any office or location
more than thirty (30) miles from the current corporate offices of the Company in
Columbus, Ohio;
(v) any failure by the Company to appoint the Executive as Chief Executive
Officer of the Company on or before August 7, 2006; and
(vi) any failure of the Executive to be appointed or elected as a member of the
Board at the first regularly scheduled meeting of the Board following commencement of
the CEO Employment Term and any failure of the Executive thereafter to be nominated
by the Board (or the appropriate Board committee) at each subsequent election of
directors at which the Executive is up for election.
(vii) any other failure by the Company to comply with any term, condition or provision
of this Agreement which continues for ten (10) days after written notice of such failure
from the Executive to the Company.
(f) Without Good Reason
Upon thirty (30) days’ prior written notice by the Executive to the Company of the
Executive’s termination of employment without Good Reason (which the Company may, in its sole
discretion, make effective earlier than any notice date).
6. Consequences of Termination
Subject to Section 7, the following amounts and benefits shall be due to the Executive upon
termination of employment during the Employment Term:
(a) Disability
If the Executive’s employment terminates by reason of Disability, the Company shall pay or
provide to the Executive (i) any unpaid Base Salary through the date of termination, any unpaid
signing bonus and any vacation accrued in accordance with Company policy; (ii) any unpaid bonus
earned with respect to any fiscal year ending on or preceding the date of termination; (iii)
reimbursement for any unreimbursed expenses incurred through the date of termination; (iv)
reimbursement for any unpaid relocation or related travel expenses (including the related
gross-up) in accordance with Sections 4(e) and 4(f); and (v) all other payments, benefits or
fringe benefits to which the Executive may be entitled under the terms of any applicable
compensation arrangement or benefit, equity or fringe benefit plan or program or grant or this
Agreement (collectively, the “Accrued Amounts”). In addition, the Executive shall
-11-
receive a Pro Rata Bonus as defined in Section 6(d), payable at the time that annual bonuses
are next paid to other senior executives of the Company.
(b) Death
If the Executive’s employment terminates by reason of his death, the Executive’s estate (or
to the extent a beneficiary or beneficiaries has been designated, the named beneficiary(ies))
shall be entitled to any Accrued Amounts. In addition, the Executive’s beneficiary(ies) shall
receive a Pro Rata Bonus as defined in Section 6(d) below, payable at the time that annual bonuses
are next paid to other senior executives of the Company.
(c) Termination for Cause or Without Good Reason
If the Executive’s employment is terminated (i) by the Company for Cause, or (ii) by the
Executive without Good Reason, the Company shall pay to the Executive any Accrued Amounts.
(d) Termination Without Cause or for Good Reason Prior to a Change in Control
If the Executive’s employment is terminated by the Company (other than for Cause, Disability
or as a result of death) or by the Executive for Good Reason, and Section 8(b) is not applicable,
then:
(i) The Company shall pay or provide the Executive with the Accrued Amounts.
(ii) Any portion of the stock option granted to the Executive under Section 3(d) that
is unvested on the date of termination shall become fully vested and remain exercisable for
twelve (12) months following termination, subject to sections 12.03 and 12.04 of the Plan.
(iii) Following such termination of employment, the Executive shall be entitled to
receive the following payments and benefits: (A) the Company shall continue to pay to
Executive his Base Salary at the rate in effect on the employment termination date for a
period of twelve (12) months following termination of employment in accordance with the
Company’s regular payroll policies, (B) subject to his co-payment of premiums, the
Executive shall be entitled to continue his participation for one (1) year following
termination of employment in all health and welfare plans in which the Executive (and
eligible dependents) is a participant at the time of such termination upon the same terms
and conditions (except for the requirements of the Executive’s continued employment) in
effect for active employees of the Company, and (C) the Company shall continue to pay the
premiums for the variable life insurance policy maintained by the Company for the Executive
for a period of one (1) year following termination of employment. The Executive shall also
receive an amount, payable at the time that annual bonuses are next paid to other senior
executives, equal to the greater of (x) the Executive’s target bonus opportunity in effect
at the time termination of employment occurred or (y) a pro-rata portion of the Executive’s
bonus for the performance year in which the Executive’s termination occurred (determined by
multiplying the amount the
-12-
Executive would have received based upon actual performance had employment continued
through the end of the performance year by a fraction, the numerator of which is the number
of days during the performance year of termination that the Executive is employed by the
Company and the denominator of which is 365) (the “Pro Rata Bonus”). In the event that the
Executive obtains other employment that offers substantially similar or improved benefits,
as to any particular health or welfare plan, such continuation of coverage by the Company
for such similar or improved benefit under such plan under this Section (iii) shall
immediately cease, provided that in no event shall any COBRA (or COBRA-equivalent) benefits
cease but they shall become secondary to the extent permitted by law while such other
benefits are in effect. To the extent such coverage cannot be provided under the Company’s
health or welfare plans without jeopardizing the tax status of such plans, for underwriting
reasons (e.g., disability benefits) or because of the tax impact on the Executive, the
Company shall pay the Executive an amount equal to the value thereof; provided that the
“value” of benefits, if insured benefits, shall be the present value (based on the two
(2)-year U.S.Treasury rates as of the date of termination) of premiums expected for
coverage, and if not insurance benefits, shall be the present value of the expected net
cost (i.e., gross cost less any active employee premiums) to the Company to provide such
benefits. The continuation of health benefits under this subsection shall reduce and count
against the Executive’s rights under COBRA.
(iv) Upon such termination of employment, the Company shall, at its sole expense as
incurred, provide the Executive with outplacement services, the scope and provider of
which shall be selected by the Executive in his sole discretion; provided, that the total
cost to the Company in providing such services shall not exceed $20,000.
7. Mitigation/Release
The Executive shall not be required to mitigate the amount of any payment or benefit provided
for in Section 6 by seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for the Executive in Section 6 be reduced by any other compensation earned by the
Executive as the result of employment by another employer or by reason of the Executive’s receipt
of or right to receive any retirement or other benefits after the date of termination of
employment or otherwise, except as set forth in this Agreement. As a condition to receiving the
severance compensation provided for in Section 6, the Executive shall execute and deliver to the
Company a release of claims (other than claims arising under this Agreement) against the Company
in a form satisfactory to the Company so long as the Company executes and delivers to Executive a
comparable release of claims against the Executive.
8. Change in Control Benefits
(a) Definition
For purposes of this Agreement, “Change in Control” shall mean the first to occur of any of
the following events:
-13-
(i) any “person” (as defined in Section 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)), excluding for this purpose, (A) the Company or any
subsidiary of the Company, or (B) any employee benefit plan of the Company or any subsidiary
of the Company, or any person or entity organized, appointed or established by the Company
for or pursuant to the terms of any such plan which acquires beneficial ownership of voting
securities of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company representing
more than fifty percent (50%) of the combined voting power of the Company’s then outstanding
voting securities; provided, however, that no Change in Control will be deemed to have
occurred as a result of a change in ownership percentage resulting solely from an acquisition
of securities by the Company; or
(ii) persons who, as of the Effective Date, constitute the Board (the “Incumbent
Directors”) cease for any reason, including without limitation, as a result of a tender
offer, proxy contest, merger or similar transaction, to constitute at least a majority
thereof, provided that any person becoming a director of the Company subsequent to the
Effective Date shall be considered an Incumbent Director if such person’s election or
nomination for election was approved by a vote of at least fifty percent (50%) of the
Incumbent Directors; but provided further, that any such person whose initial assumption of
office is in connection with an actual or threatened election contest relating to the
election of members of the Board or other actual or threatened solicitation of proxies or
consents by or on behalf of a “person” (as defined in Section 13(d) and 14(d) of the Exchange
Act) other than the Board, including by reason of agreement intended to avoid or settle any
such actual or threatened contest or solicitation, shall not be considered an Incumbent
Director; or
(iii) consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company (a “Business
Combination”), in each case, unless, following such Business Combination, all or
substantially all of the individuals and entities who were the beneficial owners of
outstanding voting securities of the Company immediately prior to such Business Combination
beneficially own, directly or indirectly, more than fifty percent (50%) of the combined
voting power of the then outstanding voting securities entitled to vote generally in the
election of directors, as the case may be, of the company resulting from such Business
Combination (including, without limitation, a company which, as a result of such transaction,
owns the Company or all or substantially all of the Company’s assets either directly or
through one or more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the outstanding voting securities of the
Company; or
(iv) approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
(b) Effect
If, within twelve (12) months after a Change in Control of the Company, the Executive’s
employment is terminated by the Company or a successor to the Company for any
-14-
reason other than for Cause or Disability or due to the Executive’s death or if the
Executive terminates his employment for Good Reason, the Executive shall receive, within thirty
(30) days following his termination of employment, a lump sum cash payment equal to two (2) times
the sum of (i) his Base Salary at the rate in effect on the employment termination date plus (ii)
an amount equal to the Executive’s target bonus opportunity in effect at the time termination of
employment occurs. In addition, for a period of one (1) year following any such termination of
employment, the Executive shall be entitled to continue his participation in all health and
welfare plans in which the Executive (and eligible dependents) participated at the time of such
termination upon the same terms and conditions (except for the requirements of the Executive’s
continued employment) in effect for active employees of the Company, including any premium
co-payment requirements, and the Company shall continue to pay the premiums for the variable life
insurance policy maintained by the Company for the Executive. In the event that the Executive
obtains other employment that offers substantially similar or improved benefits, as to any
particular health or welfare plan, such continuation of coverage by the Company for such similar
or improved benefit under such plan under this subsection shall immediately cease, provided that
in no event shall any COBRA (or COBRA-equivalent) benefits or retiree benefits cease but they
shall become secondary to the extent permitted by law while such other benefits are in effect.
To the extent such coverage cannot be provided under the Company’s health or welfare plans
without jeopardizing the tax status of such plans, for underwriting reasons (e.g., disability
benefits) or because of the tax impact on the Executive, the Company shall pay the Executive an
amount equal to the value thereof; provided that the “value” of benefits, if insured benefits,
shall be the present value (based on the two (2)-year U.S. Treasury rates as of the date of
termination) of premiums expected for coverage, and if not insurance benefits, shall be the
present value of the expected net cost (i.e., gross cost less any active employee premiums) to
the Company to provide such benefits. The continuation of health benefits under this subsection
shall reduce and count against the Executive’s rights under COBRA. If the Executive’s employment
is terminated by the Company for Disability or Cause, if the Executive’s employment terminates
because of his death of if the Executive terminates his employment without Good Reason, and such
termination of employment occurs following a Change in Control, the effect of such termination
shall be governed by Section 6.
(c) Excise Taxes
Notwithstanding any other provision of this Agreement, if any payments or distributions in the
nature of compensation to be made to or for the benefit of the Executive, whether paid or payable
pursuant to this Agreement or otherwise (including the vesting of stock options and any other
events that result in a “payment in the nature of compensation” within the meaning of Section 280G
of the Internal Revenue Code of 1986, as amended (the “Code”)), are characterized as Excess
Parachute Payments within the meaning of Section 280G of the Code or any successor provision, then
the Company shall either (i) pay to the Executive an additional amount equal to the excise taxes
imposed by Section 4999 of the Code or any successor provision on the Executive’s Excess Parachute
Payments, if such procedure provides the Executive with an after-tax amount that is greater than
the after-tax amount produced under the following clause (ii) or (ii) reduce the amounts otherwise
payable to the Executive under this Agreement to the maximum amount that may be paid to the
Executive without any portion of any payment to the Executive under this or any other agreement
constituting an Excess Parachute Payment, if this procedure provides Executive with an after-tax
amount that is greater than the
-15-
after-tax amount produced under clause (i) above. If clause (ii) applies, within ten (10) days of
the date of termination of employment, the Company shall notify the Executive of the amount of the
reduction. Within ten (10) days of receiving that information, the Executive may propose to the
Company how (and against which benefit or payment source) the reduction may be applied. If the
Company has not received such proposal from the Executive within such ten (10) day period, or if
the Company decides in its reasonable discretion not to reduce benefits in accordance with the
Executive’s proposal, the Company shall reduce the amounts paid to the Executive under this
Agreement proportionately. All after-tax amounts determined for purposes of this Section 8(c)
shall be made by a qualified tax advisor that is acceptable to the Executive, whose fees shall be
paid by the Company.
9. (a) Confidentiality
The Executive acknowledges that the services which he will be providing to and for the Company
or its affiliates will give him access to, and the Executive hereby agrees to hold in a fiduciary
capacity for the benefit of the Company, any and all secret or confidential information, knowledge
or data relating to the Company or any of its affiliated companies, and their respective
businesses, which shall have been obtained by the Executive during the Employment Term and which
shall not be in the public knowledge (other than by acts of the Executive or his representative in
violation of this Agreement). After the expiration or earlier termination of this Agreement and
the employment of the Executive hereunder, the Executive shall not, without prior written consent
or the Company, or unless required to do so by order of a court, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this Section 9(a) constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under this Agreement.
(b) Nonsolicitation
During the Executive’s employment with the Company and for the one (1) year period thereafter,
the Executive agrees that he will not, directly or indirectly, individually or on behalf of any
other person, firm, corporation or other entity, knowingly solicit, aid or induce (i) any
managerial level employee of the Company or any of its subsidiaries or affiliates to leave such
employment in order to accept employment with, or render services to or with any other person,
firm, corporation or other entity unaffiliated with the Company or knowingly take any action to
materially assist or aid any other person, firm, corporation or other entity in identifying or
hiring any such employee (provided, that the foregoing shall not be violated by general advertising
not targeted at Company employees or by serving as a reference for an employee with regard to an
entity with which the Executive is not affiliated), or (ii) any customer of the Company or any of
its subsidiaries or affiliates to purchase goods or services then sold by the Company or any of its
subsidiaries or other affiliates from another person, firm, corporation or other entity or assist
or aid any other person or entity in identifying or soliciting any such customer.
(c) Noncompetition
During the Executive‘s employment hereunder and for the one (1) year period
thereafter, without the prior written consent of the Board, the Executive shall not, directly or
indirectly,
-16-
own, manage, operate, control, be employed by (whether as an employee, consultant,
independent contractor or otherwise, and whether or not for compensation) or render services to
any person, firm, corporation or other entity, in whatever form, that operates as a wholesaler of
one or more product lines that are directly competitive to one or more of the product lines of the
Company or any of its subsidiaries on the date of termination of employment. The geographic scope
of the restriction set forth in the immediately preceding sentence shall include the United States
and any other country in which the Company, including its subsidiaries, markets or sells such
competing product line or lines. This Section 9(c) shall not prevent the Executive from owning
not more than one percent (1%) of the total shares of all classes of stock outstanding of any
publicly held entity engaged in such business.
(d) Equitable Relief and Other Remedies
The parties acknowledge and agree that the other party’s remedies at law for a breach or
threatened breach of any of the provisions of this Section 9 would be inadequate and, in
recognition of this fact, the parties agree that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the other party, without posting any bond, shall be
entitled to obtain equitable relief in the form of specific performance, a temporary restraining
order, a temporary or permanent injunction or any other equitable remedy which may then be
available.
(e) Reformation
If it is determined by a court of competent jurisdiction in any state that any restriction in
this Section 9 is excessive in duration or scope or is unreasonable or unenforceable under the
laws of that state, it is the intention of the parties that such restriction may be modified or
amended by the court to render it enforceable to the maximum extent permitted by the law of that
state.
(f) Survival of Provisions
The obligations contained in this Section 9 shall survive the termination or expiration of
the Executive’s employment under this Agreement with the Company and shall be fully enforceable
thereafter.
10. No Assignments
(a) This Agreement is personal to each of the parties hereto. Except as provided in Section
10(b), no party may assign or delegate any rights or obligations hereunder without first
obtaining the written consent of the other party hereto.
(b) The Company may assign this Agreement to any successor to all or substantially all of
the business and/or assets of the Company provided the Company shall require such successor 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 and shall
deliver a copy of such assignment to the Executive.
-17-
11. Notice
For the purpose of this Agreement, notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given (a) on the date of
delivery if delivered by hand, (b) on the date of transmission, if delivered by confirmed
facsimile, (c) on the first business day following the date of deposit if delivered by guaranteed
overnight delivery service, or (d) on the fourth business day following the date delivered or
mailed by United States registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
|
At the address (or to the facsimile number) shown on the records of the Company | |
If to the Company:
|
X.X. Xxxxx Corporation | |
| 00000 Xxxxxxxx Xxxx X.X. | ||
| Xxxxxxxxxxxx, Xxxx 00000 |
||
| Fax No.: (000) 000-0000 |
or to such other address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be effective only upon
receipt.
12. Section Headings; Inconsistency
The section headings used in this Agreement are included solely for convenience and shall not
affect, or be used in connection with, the interpretation of this Agreement. In the event of any
inconsistency between the terms of this Agreement and any form, award, plan or policy of the
Company, the terms of this Agreement shall control; no provision in any policy, code, plan or
program related to a violation thereof being grounds for termination, or similar language, shall
result in a “cause” termination unless such violation is also Cause under this Agreement and the
provisions hereof are complied with, and the foregoing shall apply even if the Executive signs an
acknowledgment or otherwise agrees to the provisions of such policy, code, plan or program.
13. Severability
The provisions of this Agreement shall be deemed severable, and the invalidity or
unenforceability of any provision shall not affect the validity or enforceability of the other
provisions hereof.
14. Counterparts
This Agreement may be executed in several counterparts, each of which shall be deemed to
be an original but all of which together will constitute one and the same instrument. One or
more counterparts of this Agreement may be delivered by facsimile, with the intention that
delivery by such means shall have the same effect as delivery of an original counterpart
thereof.
-18-
15. Arbitration
Any dispute or controversy arising under or in connection with this Agreement, other than
injunctive relief under Section 9(d) or damages for breach of Section 9, shall be settled
exclusively by arbitration, conducted before a single arbitrator in or around the Columbus, Ohio
area, administered by the American Arbitration Association (“AAA”) in accordance with its
Commercial Arbitration Rules then in effect. The single arbitrator shall be selected by the
mutual agreement of the Company and the Executive, unless the parties are unable to agree to an
arbitrator, in which case the arbitrator will be selected under the procedures of the AAA. The
arbitrator will have the authority to permit discovery and to follow the procedures that he or she
determines to be appropriate. The arbitrator will have no power to award consequential (including
lost profits), punitive or exemplary damages. The decision of the arbitrator will be final and
binding upon the parties hereto. Judgment may be entered on the arbitrator’s award in any court
having jurisdiction. Each party shall bear its own legal fees and costs and equally divide the
forum fees and cost of the arbitrator; provided, that if the Executive is a Prevailing Party (as
defined below), the Executive shall be entitled to recover all of his reasonable attorneys’ fees
and expenses incurred in connection with the dispute. A “Prevailing Party” is one who is
successful on any material substantive issue in the action and achieves either a judgment in such
party’s favor or some other affirmative recovery.
16. Indemnification
The Company hereby agrees to indemnify the Executive and hold him harmless to the fullest
extent permitted by applicable law against and in respect to any and all actions, suits,
proceedings, claims, demands, judgments, costs, expenses (including reasonable attorneys’ fees),
losses and damages resulting from the Executive’s good faith performance of his duties and
obligations with the Company. This provision is in addition to any other rights of
indemnification the Executive may have.
17. Liability Insurance
The Company shall cover the Executive under directors and officers liability insurance both
during and, while potential liability exists, after the term of this Agreement in the same amount
and to the same extent as the Company covers its other officers and directors.
18. Miscellaneous
No provision of this Agreement may be modified, waived or discharged unless such
modification, waiver or discharge is agreed to in writing and signed by the Executive and such
officer or director as may be designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent time. This
Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter
contained herein. No agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. The validity, interpretation, construction and performance of this
-19-
Agreement shall be governed by the laws of the State of Ohio without regard to its conflicts
of law principles.
19. Code Section 409A
It is intended that any amounts payable under this Agreement and the Company’s and the
Executive’s exercise of authority or discretion hereunder shall comply with the provisions of
Section 409A of the Code and the treasury regulations relating thereto so as not to subject the
Executive to the payment of interest and additional tax which may be imposed under
Section 409A. In furtherance of this interest, to the extent that any regulations or other
guidance issued under Section 409A of the Code after the date of this Agreement would result in
the Executive being subject to payment of interest and tax penalty under Section 409A, the parties
agree to amend this Agreement in order to bring this Agreement into compliance with Section 409A,
unless and to the extent that any such amendment could have a negative financial impact on the
Executive.
20. Full Settlement
Except as set forth in this Agreement, the Company’s obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including, without limitation, set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the Executive or
others, except to the extent any amounts are due the Company or its subsidiaries or affiliates
pursuant to a judgment against the Executive.
21. Representations
(a) The Company represents and warrants to the Executive that the execution of this Agreement
and the provision of all benefits and grants provided herein have been duly authorized by the
Company, including by action of the Board and, if required, the Compensation Committee of the
Board and, upon the execution and delivery of this Agreement by the Executive, this Agreement
shall be the valid and binding obligation of the Company, enforceable in accordance with its
terms, except to the extent enforceability may be limited by applicable bankruptcy, insolvency or
similar laws affecting the enforcement of creditors’ rights generally and by the effect of general
principles of equity (regardless of whether enforceability is considered in a proceeding in equity
or at law).
(b) The Executive represents and warrants to the Company that he has the legal right to enter
into this Agreement and to perform all the obligations on his part to be performed hereunder in
accordance with its terms and that he is not a party to any agreement or understanding, written or
oral, which could prevent him from entering into this Agreement or performing all of his
obligations hereunder.
22. Withholding
The Company may withhold from any and all amounts payable under this Agreement such federal,
state and local taxes as may be required to be withheld pursuant to any applicable law or
regulation.
-20-
23. Public Announcements
The Company shall give the Executive a reasonable opportunity to review and comment on any
public announcement (including any filing with a governmental agency or stock exchange) relating
to this Agreement or the Executive’s employment by the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
written above.
| X. X. XXXXX CORPORATION | ||||||
| By: | /s/ Xxxxxx X. Xxx Xxxxxx | |||||
| Name: | Xxxxxx X. Xxx Xxxxxx | |||||
| Title: | CEO | |||||
| /s/ Xxxx Xxxx Xxxxxx | ||||||
| XXXX X. XXXXXX | ||||||
-21-
