EMPLOYMENT AGREEMENT
THIS
EMPLOYMENT AGREEMENT (this “Agreement”) is made
and entered into effective as of the 30th day of December, 2008 (the “Effective Date”), by
and between Xxxxxx Industries,
Inc., a corporation organized under the laws of the State of Tennessee,
USA (the “Company”), and Xxxxxxx X. Xxxxxxx (the “Executive”).
WHEREAS,
Executive and the Company entered into an employment agreement (the “Original Agreement”)
as of September, 1998, embodying the terms of Executive’s employment and
pursuant to which Executive has been serving as President and Co-Chief Executive
Officer of the Company; 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, in consideration of the premises and mutual covenants herein and for
other good and valuable consideration, the parties hereto agree as
follows:
1. Employment.
Subject to the terms and conditions of this Agreement, Executive shall be
employed by the Company as President and Co-Chief Executive Officer, and shall
perform such duties and functions for the Company and any company controlling,
controlled by or under common control with the Company (such companies
hereinafter collectively called “Affiliates”) as shall
be specified from time to time by the Chairman of the Board; Executive hereby
accepts such employment and agrees to perform such executive duties as may be
assigned to him.
2. Duties.
Executive shall devote his full business related time and best efforts to
accomplishing such executive duties at such locations as may be requested by the
Chairman of the Board of the Company. While employed by the Company, Executive
shall not serve as a principal, partner, employee, officer or director of, or
consultant to, any other business or entity conducting business for profit
without the prior written approval of the Chairman of the Board of the Company.
In addition, under no circumstances will Executive have any financial interest
in any competitor of the Company; provided, however, that Executive may invest
in no more than 2% of the outstanding stock or securities of any competitor
whose stock or securities are traded on a national stock exchange of any
country.
3.
Term.
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.
4.
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), (b), and (c) below:
(a) Base
Salary. An annual base salary (“Base Salary”) of
$312,033 prorated for any partial year of employment. Executive’s Base Salary
shall be subject to annual review, for adjustments at such time as the Company
conducts salary reviews for its executive officers generally. Executive’s salary
shall be payable in accordance with the Company’s regular payroll practices in
effect from time to time for executive officers of the Company.
(b) Bonus.
In addition to the Base Salary, the Executive shall be entitled to participate
in any of the Company’s present and future stock or cash based bonus plans that
are generally available to its executive officers, as such plans may exist or be
changed from time to time at the discretion of the Company
(c) Other
Benefits. Executive shall be entitled to vacation with pay, life
insurance, health insurance, fringe benefits, and such other employee benefits
generally made available by the Company to its executive officers, in accordance
with the established plans and policies of the Company, as in effect from time
to time.
5.
Termination.
(a) By
Executive. Executive may voluntarily terminate his employment hereunder
at any time, to be effective 60 days after delivery to the Company of his
signed, written resignation; Company may accept said resignation and pay
Executive in lieu of waiting for passage of the notice period. Executive hereby
agrees and acknowledges that if he voluntarily resigns from his employment prior
to the end of the Term of this Agreement, then he shall be entitled to no
payment or compensation whatsoever from the Company under this Agreement, other
than as may be due him through his last day of employment.
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(b) By
Company. Subject to the terms of this Paragraph and Paragraph 5(c) below,
the Company may terminate Executive’s employment hereunder, in its sole
discretion, whether with or without just cause (as defined in Paragraph
5(b)(viii) below and subject to the notice periods described therein), at any
time upon written notice to Executive. If the Company terminates Executive’s
employment for just cause (as defined in (viii) below), Executive shall be
entitled to no payment or compensation whatsoever from the Company under this
Agreement, other than as may be due him through his last day of employment. If,
prior to the end of the Term of this Agreement, the Company terminates
Executive’s employment without just cause (as defined in (viii) below), the
Executive shall be entitled to receive, as damages payable as a result of, and
arising from, a breach of this Agreement, the compensation and benefits set
forth in (i) through (iv) below. Except to the extent provided in (vii) below,
Executive shall not be required to mitigate damages by reducing the amounts he
is entitled to receive hereunder by earnings from subsequent employment. The
time periods in (i) through (iii) below shall be the lesser of the 36-month
period stated therein or the time period remaining from the date of Executive’s
termination to the end of the Term of this Agreement. All compensation payable
under (i) through (iv) below shall be subject to the terms of Paragraph 8 below,
which may delay the payment of the compensation for up to 6 months.
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(i) Base Salary.
The Executive will continue to receive his current salary (subject to
withholding of all applicable taxes and any amounts referred to in
paragraph (iii) 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.
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(ii) Bonus. 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 such month equal to one-twelfth of the
average (“Average Bonus”)
of the bonuses earned by 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, 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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(iii) 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.
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(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):
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(X) 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
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(Y)
on the date of Executive’s termination of employment
(subject to delay under Paragraph 8 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.
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(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.
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(iv) 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 paragraph (iv) shall
constitute an amendment of the Executive’s stock option or other equity
compensation agreements under the Stock Option Plans.
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(v) Effect of
Death. In the event of the Executive’s death after his termination
of employment by the Company under this Paragraph 5(b), the benefits
payable under (i) and (ii) of this Paragraph 5(b) shall continue for a
period of twelve (12) months, or, if shorter, until the end of the Term of
this Agreement; provided, however, such payments will be paid in a lump
sum payment within 60 days following the Executive’s death, to the
Executive’s surviving spouse, or, if none, to the Executive’s estate. In
addition, in the event of Executive’s death, any dependent coverage in
effect under (iii) of this Paragraph 5(b) shall continue, for a period of
12 months, or, if shorter, until the end of the Term of this
Agreement.
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(vi) Coordination with
Change in Control Agreement. Notwithstanding any provision of this
Agreement to the contrary, if Executive’s employment is terminated
(whether by the Company or by Executive) under circumstances that would
entitle him to receive benefits under his agreement with the Company
providing compensation and benefits for termination following a “change in
control” of the Company (as defined in such agreement), then any such
termination shall be treated under this Agreement as a termination by the
Company without just cause and the Executive shall be entitled to the
compensation and benefits set forth in (i) through (iv) above for the time
periods provided in this Paragraph 5(b), and such amounts shall be treated
as damages payable as a result of, and arising from, a breach of this
Agreement.
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(vii) Mitigation. If
Executive becomes entitled to compensation and benefits under this
Paragraph 5(b) and such payments would be considered to be severance
payments contingent upon a change in control under Code Section 280G,
Executive shall be required to mitigate damages (but only with respect to
amounts that would be treated as severance payments under Code Section
280G) by reducing the amount of severance payments he is entitled to
receive by any compensation and benefits he earns from subsequent
employment (but shall not be required to seek such
employment).
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(viii) “Just Cause”.
For purposes of this Agreement, the phrase “just cause” shall mean: (A)
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; (B) Executive’s conviction
of or failure to contest prosecution for a felony or a crime involving
moral turpitude; or (C) Executive’s material breach of this Agreement. A
termination of Executive for just cause based on clause (A) or (C) of the
preceding sentence shall take effect 30 days after the Executive receives
from Company written notice of intent to terminate and Company’s
description of the alleged cause, unless Executive shall, during such
30-day period, remedy the events or circumstances constituting cause;
provided, however, that such termination shall take effect immediately
upon the giving of written notice of termination of just cause under any
clause if the Company shall have determined in good faith that such events
or circumstances are not remediable (which determination shall be stated
in such notice).
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(c) By
Death. If Executive’s employment is terminated due to Executive’s death,
the Executive’s surviving spouse, or if none, his estate, shall receive the
benefits payable under (i) and (ii) of Paragraph 5(b) above; provided, however,
such payments shall be for a period of 12 months rather than 36 months and such
payments shall be made in a lump sum payment within 60 days of the Executive’s
death.
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(d) For
Disability. If Executive’s employment is terminated due to Executive’s
disability (as defined in the Company’s long-term disability plan or insurance
policy, or if no such plan or policy, as determined in good faith by the
Company), Executive shall be entitled to the benefits payable or to be provided
under (i), (ii), (iii) and (iv) of Paragraph 5(b); provided, however, the
benefits under (i), (ii) or (iii) of Paragraph 5(b) shall be payable or to be
provided for a period of 24 months. Executive or his estate, as the case may be,
shall not by operation of this paragraph forfeit any rights in which he is
vested at the time of his death or disability.
(e) Survival
of Restrictive Covenants. Upon termination of Executive’s employment for
any reason whatsoever (whether voluntary on the part of Executive, for just
cause, or other reasons), the obligations of Executive pursuant to Paragraphs 6
and 7 hereof shall survive and remain in effect for the periods described in
Paragraph 6.
6. Competition,
Confidentiality, and Nonsolicitation. Executive agrees to be bound by the
terms and conditions of the Noncompetition Agreement attached hereto as Exhibit
“A”, which is hereby made a part of this Agreement.
7. Injunctive
Relief. The Executive acknowledges that his services to be rendered to
the Company are of a special and unusual character which have a unique value to
the Company, the loss of which cannot adequately be compensated by damages in an
action at law. Executive further acknowledges that any breach of the terms of
Paragraph 6, including Exhibit ”A”, would result in material damage to
the Company, although it might be difficult to establish the monetary value of
the damage. Executive therefore agrees that the Company, in addition to any
other rights and remedies available to it, shall be entitled to obtain an
immediate injunction (whether temporary or permanent) from any court of
appropriate jurisdiction in the event of any such breach thereof by Executive,
or threatened breach which the Company in good faith believes will or is likely
to result in irreparable harm to 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 Paragraph and Paragraph 6
above.
8. Section
409A.
(a) Meaning
of Termination of Employment. Solely as necessary to comply with Section
409A, for purposes of Paragraph 5(b) and Paragraph 5(d), “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 Paragraph 5(b) with respect to amounts payable
in the event of termination of employment by the Company without just cause and
Paragraph 5(d) with respect to amount payable in the event of termination of
Executive’s employment for Disability, 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 Paragraph
8(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).
9. Miscellaneous.
(a) Notice.
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:
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If
to the Company:
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Xxxxxx
Industries, Inc.
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X.X.
Xxx 000
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0000
Xxxxxxx Xxxxx
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Xxxxxxxx,
Xxxxxxxxx 00000
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Attention:
Chairman of the Board
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If
to the Executive:
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Xxxxxxx
X. Xxxxxxx
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0000
Xxxxxx Xxxxx Xxxxx
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Xxxxxxxxxxx,
Xxxxxxxxx 00000
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or to
such other address as any party may designate by notice to the
others.
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(b) Entire
Agreement. This Agreement constitutes the entire agreement between the
parties hereto with respect to the Executive’s employment by the Company, and
supersedes and is in full substitution for any and all prior understandings or
agreements with respect to the Executive’s employment.
(c) Amendment.
This Agreement may be amended only by an instrument in writing signed by the
parties hereto, and any provision hereof may be waived only by an instrument in
writing signed by the party or parties against whom or which enforcement of such
waiver is sought. The failure of either party hereto to comply with any
provision hereof shall in no way affect the full right to require such
performance at any time thereafter, nor shall the waiver by either party hereto
of a breach of any provision hereof be taken or held to be a waiver of any
succeeding breach of such provision, or a waiver of the provision itself, or a
waiver of any other provision of this Agreement.
(d) Binding
Effect. This Agreement is binding on and is for the benefit of the
parties hereto and their respective successors, heirs, executors, administrators
and other legal representatives. Neither this Agreement nor any right or
obligation hereunder may be assigned by the Executive or the Company, except for
assignment by the Company to any wholly owned subsidiary.
(e) Severability
and Modification. If any provision of this Agreement or portion thereof
is so broad, in scope or duration, so as to be unenforceable, such provision or
portion thereof shall be interpreted to be only so broad as is enforceable. In
addition, to the extent that any provision of this Agreement as applied to
either party or to any circumstances shall be adjudged by a court of competent
jurisdiction to be void or unenforceable, the same shall in no way affect any
other provision of this Agreement or the validity or enforceability of this
Agreement.
(f)
Interpretation.
This Agreement shall be interpreted, construed and governed by and under the
laws of the State of Tennessee. Each party irrevocably (i) consents to the
exclusive jurisdiction and venue of the courts of Xxxxxxxx County, State of
Tennessee and federal courts in the Eastern District of Tennessee, in any action
arising under or relating to this Agreement (including Exhibit “A” hereto), and
(ii) waives any jurisdictional defenses (including personal jurisdiction and
venue) to any such action. If any provision of this Agreement is deemed or held
to be illegal, invalid, or unenforceable under present or future laws effective
during the term hereof, this Agreement shall be considered divisible and
inoperative as to such provision to the extent it is deemed to be illegal,
invalid or unenforceable, and in all other respects this Agreement shall remain
in full force and effect; provided, however, that if any provision of this
Agreement is deemed or held to be illegal, invalid or unenforceable there shall
be added hereto automatically a provision as similar as possible to such
illegal, invalid or unenforceable provision as shall be legal, valid or
enforceable. Further, should any provision contained in this Agreement ever be
reformed or rewritten by any judicial body of competent jurisdiction, such
provision as so reformed or rewritten shall be binding upon the Executive and
the Company.
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(g) Failure
to Enforce. The failure of either party hereto at any time, or for any
period of time, to enforce any of the provisions of this Agreement shall not be
construed as a waiver of such provision(s) or of the right of such party
hereafter to enforce each and every such provision.
(h) Counterparts.
This Agreement may be executed in several counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the same
instrument.
(i)
No
Conflicting Agreement. The Executive represents and warrants that he is
not party to any agreement, contract or understanding which would prohibit him
from entering into this Agreement or performing fully his obligations
hereunder.
IN WITNESS WHEREOF, the
Company and the Executive have executed this Agreement as of the date first
written above.
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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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