AGREEMENT
THIS
AGREEMENT (the “Agreement”) is made and entered into effective this 30th day of
December, 2008 (the “Effective Date”), by
and between XXXXXX INDUSTRIES,
INC., a Tennessee corporation (the “Company”), and Xxxxxxx X. Xxxxxxx (the “Executive”).
W I T N E S S E T H:
WHEREAS,
the Company wishes to assure both itself and its key employees of continuity of
management and objective judgment in the event of any Change in Control (as
defined below) of the Company, and to induce its key employees to remain
employed by the Company, and the Executive is a key employee of the Company and
an integral part of its management;
WHEREAS,
this Agreement is not intended to alter materially the compensation and benefits
that the Executive reasonably could expect to receive in the absence of a Change
in Control of the Company, and this Agreement accordingly will be operative only
upon circumstances relating to a Change in Control of the Company, as set forth
herein;
WHEREAS,
Executive and the Company entered into an agreement (the “Original Agreement”)
as of September, 1998, to be operative upon a Change in Control;
and
WHEREAS,
this Agreement amends and restates the Original Agreement as of the Effective
Date in order, inter alia, to evidence formal compliance with Section 409A of
the Internal Revenue Code of 1986, as amended, and the guidance thereunder (such
Section, referenced herein as “Section 409A”; and
such code, referenced herein as the “Code”).
NOW,
THEREFORE, for and in consideration of the premises and the mutual covenants
herein contained, the parties hereby agree as follows:
I. OPERATION
OF AGREEMENT.
This
Agreement supersedes the Original Agreement and is effective immediately upon
its execution by the parties hereto, but anything in this Agreement to the
contrary notwithstanding, neither this Agreement nor any provision hereof shall
be operative unless, during the term of this Agreement, there has been a Change
in Control of the Company, as defined in Article III
below. Immediately upon such an occurrence, all of the provisions
hereof shall become operative.
II. TERM OF
AGREEMENT.
The term
of this Agreement shall be for a rolling, three (3) year term commencing on the
date hereof, and shall be deemed automatically (without further action by either
the Company or the Executive) to extend each day for an additional day such that
the remaining term of the Agreement shall continue to be three (3) years;
provided, however, that on Executive’s 62nd
birthday this Agreement shall cease to extend automatically and, on such date,
the remaining “Term” of this
Agreement shall be three (3) years; provided further, that the Company may, by
notice to the Executive, cause this Agreement to cease to extend automatically
and, upon such notice, the “Term” of this
Agreement shall be three (3) years following such notice.
III. DEFINITIONS.
1. Base Amount — The
term “Base
Amount” shall have the same meaning as ascribed to it under Section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
“Code”).
2. Board or Board of
Directors — The Board of Directors of Xxxxxx Industries, Inc., or its
successor.
3. Cause — The Term
“Cause”
as used herein shall mean: (i) Executive’s material fraud, malfeasance, gross
negligence, or willful misconduct with respect to business affairs of the
Company which is directly or materially harmful to the business or reputation of
the Company or any subsidiary of the Company, or (ii) Executive’s
conviction of or failure to contest prosecution for a felony or a crime
involving moral turpitude. A termination of Executive for “Cause”
based on clause (i) of the preceding sentence shall take effect thirty (30) days
after the Company gives written notice of such termination to Executive
specifying the conduct deemed to qualify as Cause, unless Executive shall,
during such 30-day period, remedy the events or circumstances constituting cause
to the reasonable satisfaction of the Company. A termination for
Cause based on clause (ii) above shall take effect immediately upon giving of
the termination notice.
4. Change in Control —
The term “Change
in Control” as used herein shall mean:
(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) of securities of the Company representing an aggregate of forty
percent (40%) or more 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 gift); or
(b) when,
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board of Directors of the Company, cease for any
reason to constitute at least a majority thereof, provided, however, that a
director who was not a director at the beginning of such period shall be deemed
to have satisfied the two-year requirement if such director was elected by, or
on the recommendation of or with the approval of, at least three-quarters of the
directors who were directors at the beginning of such period (either actually or
by prior operation of this Section 4(b)); or
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(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 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) at least fifty
percent (50%) of the outstanding common stock of the Company (or such surviving
entity or parent or affiliate thereof) that is outstanding immediately after
such merger, consolidation or business combination, or (ii) a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company’s assets;
or
(d) when,
through a sale, transfer or other disposition, the Company significantly reduces
or ceases its operations in the towing and recovery equipment manufacturing and
distribution industry, where a significant reduction means a disposition of at
least eighty percent (80%) of the identifiable assets used in such industry;
or
(e) the
occurrence of any other event or circumstance which is not covered by (a)
through (d) above which the Board of the Company determines affects control of
the Company and adopts a resolution that such event or circumstance constitutes
a Change in Control for the purposes of this Agreement.
5. Disability — The term
“Disability”
shall mean the 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. Excess Severance
Payment — The term “Excess
Severance Payment” shall have the same meaning as the term “excess
parachute payment” defined in Section 280G(b)(1) of the Code.
7. Severance Payment —
The term “Severance
Payment” shall have the same meaning as the term “parachute payment”
defined in Section 280G(b)(2) of the Code.
8. Present Value — The
term “Present
Value” shall have the same meaning as provided in Section 280G(d)(4) of
the Code.
9. Reasonable
Compensation — The term “Reasonable
Compensation” shall have the same meaning as provided in Section
280G(b)(4) of the Code.
IV. BENEFITS
UPON TERMINATION FOLLOWING A CHANGE IN
CONTROL.
1. Termination — If a
Change in Control occurs during the term of this Agreement and the Executive’s
employment is terminated (i) within twenty-four (24) months following the date
of the Change in Control, or (ii) within six (6) months prior to the date of the
Change in Control and is related to such Change in Control, and in either case
(i) or (ii) such termination is a result of Involuntary Termination or Voluntary
Termination, as defined below, then the benefits described in Section 2 below
shall be paid or provided to the Executive:
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(a) Involuntary
Termination — For purposes hereof, “Involuntary
Termination” shall mean termination of employment that is involuntary on
the part of the Executive and that occurs for reasons other than for Cause,
Disability or death.
(b) Voluntary Termination
— For purposes hereof, “Voluntary
Termination” shall mean termination of employment that is voluntary on
the part of the Executive, and, in the judgment of the Executive, is due to (i)
a material reduction of the Executive’s authority, duties or responsibilities
resulting from a formal change in Executive’s title or status, or from the
assignment to the Executive of any authority or duties inconsistent with his
authority, duties or responsibilities in effect within the year prior to the
Change in Control; (ii) a material reduction in the Executive’s base
compensation, or (iii) a Company-required involuntary relocation of Executive’s
place of residence. If the Executive intends to terminate his
employment as a Voluntary Termination under this Paragraph, he shall provide
written notice to the Company no more than 90 days after the occurrence of the
event or circumstance triggering Executive’s right to terminate as a Voluntary
Termination, and the Company shall have 30 days to cure such event or
circumstance. A termination shall not be considered voluntary within
the meaning of this Agreement if such termination is the result of Cause,
Disability or death of the Executive.
2. Benefits to be
Provided — If the Executive becomes eligible for benefits under Section 1
above, the Company shall pay or provide to Executive the compensation and
benefits set forth in this Section 2; provided, however, that the
compensation and benefits to be paid or provided pursuant to paragraphs (a),
(b), (c) and (d) of this Section 2 shall be reduced to the extent that the
Executive receives or is entitled to receive upon his termination the
compensation and benefits (but only to the extent he actually receives such
compensation and benefits) described in paragraphs (a), (b), (c) and (d) of this
Section 2 pursuant to the terms of an employment agreement with the Company or
as a result of a breach by the Company of the employment
agreement. All compensation payable under (a) through (d) below shall
be subject to the terms of Section VI.10. below, which may delay the payment of
the compensation for up to 6 months.
(a) Salary — The
Executive will continue to receive his current salary (subject to withholding of
all applicable taxes and any amounts referred to in Section 2(c) below) for a
period of thirty-six (36) months from his date of termination, payable in normal
payroll periods, in the same manner as it was being paid as of the date of
termination, and no less frequently than monthly. For purposes
hereof, the Executive’s “current salary” shall be the highest rate in effect
during the twelve-month period prior to the Executive’s
termination.
(b) Bonuses and
Incentives — The Executive shall be paid bonus payments from the Company
in each of the thirty-six (36) months following the month in which his
employment is terminated in an amount for each month equal to one-twelfth of the
average (“Average
Bonus”) of the bonuses paid to him for the three calendar years
immediately preceding the year in which such termination occurs. Any
bonus amounts that the Executive had previously earned from the Company but
which may not yet have been paid as of the date of termination shall not be
affected by this provision. Executive shall also receive, within 60
days after the date of his termination (subject to delay under Section VI.10.
below), a prorated bonus for any uncompleted fiscal year at the date of
termination equal to the Average Bonus multiplied by the number of days he
worked in such year divided by 365 days.
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(c) Health and Life Insurance
Coverage. The Company shall provide Executive (and any spouse
or dependents covered at the time of the Executive’s termination) with medical,
dental, life insurance and other health benefits (pursuant to the same Company
Plans that are medical, dental, life insurance and other health benefit plans
and that are in effect for active employees of the Company), for thirty-six (36)
months following the date of Executive’s termination of
employment. The coverages provided for in this paragraph shall be
applied against and reduce the period for which COBRA will be
provided.
(1) To the extent that
such medical, dental or other health benefit plan coverage is provided under a
self-insured plan maintained by the Company (within the meaning of Section
105(h) of the Code):
(A) the
charge to Executive for each month of coverage will equal the monthly COBRA
charge established by the Company for such coverage in which the Executive or
the Executive’s spouse or dependents (as applicable) are enrolled from time to
time, based on the coverage generally provided to salaried employees (less the
amount of any administrative charge typically assessed by the Company as part of
its COBRA charge), and Executive will be required to pay such monthly charge in
accordance with the Company’s standard COBRA premium payment requirements;
and
(B) on
the date of Executive’s termination of employment (subject to delay under
Section VI.10. below), the Company will pay Executive a lump sum in cash equal,
in the aggregate, to the monthly COBRA charge established by the Company for the
coverage being provided on Executive’s termination date to the Executive and, if
applicable, his spouse and dependents for each month of coverage in the 36-month
period. For this purpose, the Company’s monthly COBRA charge will be increased
by 10% on each January in the projected payment period and such increased amount
shall apply to each successive month in the calendar year in which the increase
became applicable.
(2) To the extent that
such medical, dental or other health benefit plan coverage is provided under a
fully-insured medical reimbursement plan (within the meaning of Section 105(h)
of the Code), there will be no charge to Executive for such
coverage.
(d) Stock Options and Other
Equity Awards. As of Executive’s date of termination, all
outstanding stock options, stock appreciation rights, restricted stock units,
and other equity awards granted to Executive under the Stock Option and
Incentive Plan and any other Company stock plans (the “Stock Option Plans”)
shall become 100% vested and immediately exercisable. To the extent
necessary, the provisions of this Section 2(d) shall constitute an amendment of
the Executive’s stock option or other equity compensation agreements under the
Stock Option Plans.
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(e) Lump Sum Payment under
Certain Circumstances. If Executive’s date of termination
occurs on or within two (2) years following an event that constitutes a change
in the ownership or effective control of the Company or in the ownership of a
substantial portion of the assets of the Company within the meaning of Section
409A(a)(2)(a)(vi) of the Code, except as delayed as set forth in Section VI.10.
below, the salary continuation payments provided for in Section 2(a) above and
the monthly bonus payments provided for in Section 2(b) above will be paid in a
lump sum no later than thirty (30) days after Executive’s termination of
employment. The amount of such lump sum payment shall be
determined by taking the salary payments and bonus payments to be made and
discounting them to their Present Value (as defined in Section III.8) on the
date Executive’s employment is terminated. If a lump sum payment is
made, the lump sum payment shall not alter the amounts Executive is entitled to
receive under the benefit plans described in (c) above. Benefits
under such plans shall be determined as if Executive had remained employed and
received such payments without reduction for their Present Value over a period
of thirty-six (36) months.
V. TAX
EQUALIZATION PAYMENT.
If all or
any portion of the compensation or benefits provided to Executive under this
Agreement are treated as Excess Severance Payments (whether by action of the
Internal Revenue Service or otherwise), the Company shall protect Executive from
depletion of the amount of such compensation and benefits by payment of a tax
equalization payment in accordance with this subsection. In
connection with any Internal Revenue Service examination, audit or other
inquiry, the Company and Executive agree to take actions to provide and to
cooperate in providing evidence to the Internal Revenue Service (and, if
applicable, the State of the Executive’s residence) that the compensation and
benefits provided under this Agreement do not result in the payment of Excess
Severance Payments. The tax equalization payment shall be an amount
which when added to the other amounts payable, or to be provided, to Executive
under this Agreement will place Executive in the same position as if the excise
tax penalty of Code Section 4999 (and any state tax statute), or any successor
statute of similar import, did not apply to any of the compensation or benefits
provided under this Agreement. The amount of this tax equalization
payment shall be determined by the Company’s independent accountants and shall
be paid to Executive, or remitted by the Company to the appropriate tax
authorities to the extent subject to withholding on the date any excise tax
under Code Section 4999 is due to be paid by Executive (through withholding or
otherwise), but subject to any six-month delay that is applicable in accordance
with Section VI.10. below.
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VI. MISCELLANEOUS.
1. Notices — Any notice
or other communication required or permitted under this Agreement shall be
effective only if it is in writing and shall be deemed to have been duly given
when delivered personally or seven days after mailing if mailed first class by
registered or certified mail, postage prepaid, addressed as
follows:
If to the
Company: Xxxxxx Industries,
Inc.
X.X. Xxx
000
0000
Xxxxxxx Xxxxx
Xxxxxxxx,
Xxxxxxxxx 00000
Attention: Chairman
of the Board
If to the
Executive: Xxxxxxx X.
Xxxxxxx
0000
Xxxxxx Xxxxx Xxxxx
Xxxxxxxxxxx,
Xxxxxxxxx 00000
or to
such other address as any party may designate by notice to the
others.
2. Assignment — This
Agreement shall inure to the benefit of and shall be binding upon the parties
hereto and their respective executors, administrators, heirs, personal
representatives and successors, but, except as hereinafter provided, neither
this Agreement nor any right hereunder may be assigned or transferred by either
party thereto, or by any beneficiary or any other person, nor be subject to
alienation, anticipation, sale, pledge, encumbrance, execution, levy or other
legal process of any kind against the Executive, his beneficiary or any other
person. Notwithstanding the foregoing, any person or business entity
succeeding to substantially all of the business of the Company by purchase,
merger, consolidation, sale of assets or otherwise, shall be bound by and shall
adopt and assume this Agreement and the Company shall obtain the assumption of
this Agreement by such successor. If Executive shall die while any
amount would still be payable to Executive 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.
3. No Obligation to Fund
— The agreement of the Company (or its successor) to make payments to the
Executive hereunder shall represent solely the unsecured obligation of the
Company (and its successor), except to the extent the Company (or its
successors) in its sole discretion elects in whole or in part to fund its
obligations under this Agreement pursuant to a trust arrangement or
otherwise.
4. Applicable Law — This
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Tennessee.
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5. Claims; 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. 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 such rights or benefits through settlement or otherwise, the Company shall
promptly pay Executive’s reasonable legal fees and expenses incurred in
enforcing this Agreement. Except to the extent provided in the
preceding sentence, each party shall pay its own legal fees and other expenses
associated with any dispute.
6. Conversion To Employment
Agreement — The Company reserves the right at any time in its sole
discretion to convert all or any part of its obligations under this Agreement
and restate them in an employment agreement with the Executive, provided that
such employment agreement provides compensation and benefits to the Executive
upon the basis and for the reasons stated in this Agreement that are
substantially identical to the compensation and benefits provided under this
Agreement.
7. Amendment — This
Agreement may only be amended by a written instrument signed by the parties
hereto, which makes specific reference to this Agreement.
8. Severability — If any
provision of this Agreement shall be held invalid or unenforceable by any court
of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provisions hereof.
9. Other Benefits —
Nothing in this Agreement shall limit or replace the compensation or benefits
payable to Executive, or otherwise adversely affect Executive’s rights, under
any other benefit plan, program or agreement to which Executive is a
party.
10. Section
409A.
(a) Meaning of
Termination of Employment. Solely as necessary
to comply with Section 409A, for
purposes of Article IV, “termination of employment” or “employment termination”
or similar terms shall have the same meaning as “separation from service” under
Section 409A(a)(2)(A)(i) of the Code.
(b) Installment
Payments. For purposes of Section IV.2. with respect to
amounts payable in the event of an Involuntary Termination or a Voluntary
Termination, each such payment is a separate payment within the meaning of the
final regulations under Section 409A. Each such payment that is made
within 2-1/2 months following the end of the year that contains the date of
Executive’s termination of employment is intended to be exempt from Section 409A
as a short-term deferral within the meaning of the final regulations under
Section 409A, each such payment that is made later than 2-1/2 months following
the end of the year that contains the date of Executive’s termination of
employment is intended to be exempt under the two-times separation pay exception
of Treasury Reg. § 1.409A-1(b)(9)(iii) up to the limitation on the availability
of such exception specified in such regulation, and each such payment that is
made after the two-times separation pay exception ceases to be available shall
be subject to delay in accordance with (c) below.
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(c) Six Month
Delay. This Agreement will be construed and administered to
preserve the exemption from Section 409A of payments that qualify as a
short-term deferral or that qualify for the two-times separation pay
exception. With respect to other amounts that are subject to Section
409A, it is intended, and this Agreement will be so construed, that any such
amounts payable under this Agreement and the Company’s and Executive’s exercise
of authority or discretion hereunder shall comply with the provisions of Section
409A and the treasury regulations relating thereto so as not to subject
Executive to the payment of interest and additional tax that may be imposed
under Section 409A. As a result, in the event Executive is a
“specified employee” on the date of Executive’s termination of employment (with
such status determined by the Company in accordance with rules established by
the Company in writing in advance of the “specified employee identification
date” that relates to the date of Executive’s termination of employment, or in
the absence of such rules established by the Company, under the default rules for identifying specified employees
under Section 409A), any payment that is subject to Section 409A, that is
payable to Executive in connection with Executive’s termination of employment,
shall not be paid earlier than six months after such termination of employment
(if Executive dies after the date of Executive’s termination of employment but
before any payment has been made, such remaining payments that were or could
have been delayed will be paid to Executive’s estate without regard to such
six-month delay).
(d) Expense
Reimbursements. To the extent that any expense reimbursement
provided for by this Agreement does not qualify for exclusion from Federal
income taxation, the Company will make the reimbursement only if Executive
incurs the corresponding expense during the term of this Agreement or the period
of two years thereafter and submits the request for reimbursement no later than
two months prior to the last day of the calendar year following the calendar
year in which the expense was incurred so that the Company can make the
reimbursement on or before the last day of the calendar year following the
calendar year in which the expense was incurred; the amount of expenses eligible
for such reimbursement during a calendar year will not affect the amount of
expenses eligible for such reimbursement in another calendar year, and the right
to such reimbursement is not subject to liquidation or exchange for another
benefit from the Company.
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IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed on its
behalf by its duly authorized officers and the Executive has hereunder set his
hand, as of the date first above written.
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XXXXXX
INDUSTRIES, INC.
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By:
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/s/
J. Xxxxxxx Xxxx
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J.
Xxxxxxx Xxxx
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Chief
Financial Officer
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EXECUTIVE
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/s/
Xxxxxxx X. Xxxxxxx
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Xxxxxxx
X. Xxxxxxx
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