EXHIBIT 10.55
AGREEMENT
THIS AGREEMENT (the "Agreement"), effective this 12th day of May, 1999
(the "Effective Date"), by and between XXXXXX INDUSTRIES, INC., a Tennessee
corporation (the "Company"), and XXXXX X. XXXXXXXX (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 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; and
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.
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 shall be 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 initial term of this Agreement shall be three (3) years commencing
on the date hereof ("Effective Date") and ending on the third anniversary of the
Effective Date. Beginning with the first annual shareholders' meeting at which
directors are to be elected following the Effective Date and each annual
shareholders' meeting at which directors are to be elected thereafter,
Executive's employment and the term of this Agreement shall be extended
automatically (without further action by either the Company or the Executive)
for an additional period such that the Term of this Agreement will end on the
3rd anniversary of such shareholders' meeting, unless no later than 10 days
following the date of such shareholders' meeting, the Company provides the
Executive with written notice that the Term of this Agreement is not being
extended. Notwithstanding the above, the Term of this Agreement shall end on the
Executive's 65th birthday.
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
(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) the occurrence of any other event or circumstance which is not
covered by (a) through (c) 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:
(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
reduction of the Executive's responsibilities, title or status resulting from a
formal change in such title or status, or from the assignment to the Executive
of any duties inconsistent with his title, duties or responsibilities in effect
within the year prior to the Change in Control; (ii) a reduction in the
Executive's compensation or benefits, or (iii) a Company-required involuntary
relocation of Executive's place of residence or a significant increase in the
Executive's travel requirements. 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; and
provided, however, that notwithstanding contrary provisions in the employment
agreement, to the extent benefits are actually paid or provided under this
Agreement, the benefits shall be provided in lump sum payments where specified
in paragraphs (a) and (b) below.
(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 in the same manner as it was being paid as of the date of
termination; provided, however, that the salary payments provided for hereunder
shall be paid in a single lump sum payment, to be paid not later than 30 days
after his termination of employment; provided, further, that the amount of such
lump sum payment shall be determined by taking the salary payments to be made
and discounting them to their Present Value (as defined in Section III.8) on the
date Executive's employment is terminated. 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 receive bonus
------------------------
payments from the Company for 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 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. The bonus amounts determined herein shall be paid in a single lump sum
payment, to be paid not later than 30 days after termination of employment;
provided, further, that the amount of such lump sum payment shall be determined
by taking the bonus payments (as of the payment date) to be made and discounting
them to their Present Value (as defined in Section III.8) on the date
Executive's employment is terminated.
(c) Health and Life Insurance Coverage -- The health and life insurance
----------------------------------
benefits coverage (including any executive medical plan) provided to the
Executive at his date of termination shall be continued by the Company at its
expense at the same level and in the same manner as if his employment had not
terminated (subject to the customary changes in such coverages if the Executive
retires under a Company retirement plan, reaches age 65 or similar events and
subject to Executive's right to make any changes in such coverages that an
active employee is permitted to make), beginning on the date of such termination
and ending on the date thirty-six (36) months from the date of such termination.
Any additional coverages the Executive had at termination, including dependent
coverage, will also be continued for such period on the same terms, to the
extent permitted by the applicable policies or contracts. Any costs the
Executive was paying for such coverages at the time of termination shall be paid
by the Executive by separate check payable to the Company each month in advance.
If the terms of any benefit plan referred to in this Section do not permit
continued participation by the Executive, the Company will arrange for other
coverage at its expense providing substantially similar benefits. The coverages
provided for in this Section shall be applied against and reduce the period for
which COBRA will be provided. If the Executive is covered by a split-dollar or
similar life insurance program at the date of termination, he shall have the
option in his sole discretion to have such policy transferred to him upon
termination, provided that the Company is paid for its interest in the policy
upon such transfer.
(d) Stock Options -- As of Executive's date of termination, all
--------------
outstanding stock options granted to Executive under the Xxxxxx Industries, Inc.
Stock Option and Incentive Plan and any such similar stock option plan (the
"Stock Option Plans") shall become 100% vested and immediately exercisable. To
the extent necessary, the provisions of this subsection (d) shall constitute an
amendment of the Executive's stock option agreements under the Stock Option
Plans.
(e) Effect of Lump Sum Payment -- The lump sum payment under (a) or (b)
--------------------------
above shall not alter the amounts Executive is entitled to receive under the
benefit plans described in (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. LIMITATION OF BENEFITS.
1. 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 not later than ten (10) days prior to
the date any excise tax under Code Section 4999 is due to be paid by Executive.
2. Additional Limitation. In addition to the limits otherwise provided
---------------------
in this Section V, to the extent permitted by law, Executive may in his sole
discretion elect to reduce (or change the timing of) any payments or benefits he
may be eligible to receive under this Agreement to prevent the imposition of
excise taxes on Executive under Section 4999 of the Code or otherwise reduce or
delay liability for taxes owed under the Code.
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: Xxxxx X. XxXxxxxx
0000 Xxxxxx Xxxx Xxxxxx
Xxxxxxx, Xxxxxxx 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.
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.
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.
XXXXXX INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Title: Chairman
(Corporate Seal)
Attest: ___________________
Secretary
EXECUTIVE
/s/ Xxxxx X. XxXxxxxx
Xxxxx X. XxXxxxxx
