EXHIBIT 10.1
EMPLOYMENT AGREEMENT
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THIS AGREEMENT ("Agreement"), dated as of July 1, 2004, between
THE XXXXX XXXXXX COMPANIES INC., a Delaware corporation (the "Company"), and
XXXXXXX X. XXXXXX, a resident of New York, New York (the "Executive" or "you"),
W I T N E S S E T H:
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WHEREAS, the Company and its subsidiaries are principally
engaged in the business of manufacturing, marketing and selling skin care,
makeup, fragrance and hair care products and related services (the "Business");
and
WHEREAS, the Company and the Executive are parties to an
employment agreement dated as of January 1, 2003; and
WHEREAS, the Company desires to continue to retain the services
of the Executive, and to promote him to the office of President and Chief
Executive Officer and the Executive desires to provide services in such
capacities to the Company, upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, the Compensation Committee of the Board of Directors of
the Company (the "Compensation Committee") and the Stock Plan Subcommittee of
the Compensation Committee have approved the terms of this Agreement; and
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and obligations hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Employment Term.
The Company hereby agrees to employ the Executive, and the
Executive hereby agrees to enter into employment, as President and Chief
Executive Officer of the Company for the period commencing on July 1, 2004 and
ending June 30, 2007 unless terminated sooner pursuant to Section 6 hereof (the
"Term of Employment"). The twelve -month period commencing on July 1, 2004 and
ending on June 30, 2005 shall be the "First Contract Year" hereunder, and
subsequent twelve-month periods shall be subsequent Contract Years.
2. Duties and Extent of Services.
(a) During the Term of Employment, the Executive shall serve as
President and Chief Executive Officer of the Company, and, in such capacity,
shall render such executive, managerial, administrative and other services as
customarily are associated with and incident to such positions, and as the
Company may, from time to time, reasonably require of him consistent with such
positions. The Executive shall report directly to the Board of Directors.
(b) The Executive shall also hold such other positions and
executive offices of the Company and/or of any of the Company's subsidiaries or
affiliates as may from time to time be agreed by the Executive or assigned by
the Chairman of the Board of Directors of the Company or the Board of Directors
of the Company, provided that each such position shall be commensurate with the
Executive's standing in the business community as President and Chief Executive
Officer. The Executive shall not be entitled to any compensation other than the
compensation provided for herein for serving during the Term of Employment in
any other office or position of the Company or any of its subsidiaries or
affiliates, unless the Board of Directors of the Company or the appropriate
committee thereof shall specifically approve such additional compensation.
(c) The Executive shall be a full-time employee of the Company
and shall exclusively devote all his business time and efforts faithfully and
competently to the Company and shall diligently perform to the best of his
ability all of the duties required of him as President and Chief Executive
Officer, and in the other positions or offices of the Company or its
subsidiaries or affiliates assigned to him hereunder. Notwithstanding the
foregoing provisions of this section, the Executive may serve as a
non-management director of such business corporations (or in a like capacity in
other for-profit or not-for-profit organizations) as the Board of Directors or
Chairman of the Board of the Company may approve, such approval not to be
unreasonably withheld.
3. (a) Base Salary. As compensation for all services to be
rendered pursuant to this Agreement and as payment for the rights and interests
granted by Executive hereunder, the Company shall pay or cause any of its
subsidiaries to pay the Executive a base salary of $125,000.00 per month (which
equates to $1,500,000.00 per annum) (the "Base Salary"), subject to the
provisions of Section 3(c) below. All amounts of Base Salary provided for
hereunder shall be payable in accordance with the regular payroll policies of
the Company in effect from time to time.
(b) Incentive Bonus Compensation. The Compensation Committee has
established for the Executive opportunities (i.e., the maximum bonus that may be
awarded in respect of each fiscal year of the Company) under the Company's
Executive Annual Incentive Plan or any subsequent Bonus Plan for executives that
is approved by the stockholders of the Company (the "Bonus Plan") in respect of
each Contract Year under this Agreement. The aggregate opportunities shall be no
less than $2,000,000 in respect of each Contract Year. All such opportunities
shall be subject to the terms and conditions of the Bonus Plan, which are
incorporated herein by reference.
(c) Deferral. The Executive may elect to defer payment of all or
any part of his incentive bonus compensation payable in accordance with Section
3(b) hereof in respect of any Contract Year during the Term of Employment, by
giving to the Company written notice thereof, on or before March 31 of such
Contract Year (or such earlier date as may be necessary to comply with the
applicable tax laws and regulations). Additionally, in the event that in respect
of any fiscal year of the Company any amount of Base Salary, any amount payable
under the Bonus Plan or any other amount payable to the Executive hereunder or
otherwise shall, either alone or in combination with other amounts payable
hereunder or otherwise, result in the payment by the Company of any amount that
shall not be currently deductible by it pursuant to the provisions of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), or like or
successor provisions (a "Non-Deductible Amount"), the Company may elect to defer
the payment of the Non-Deductible Amount. Any amounts, so deferred, either by
election of the Executive or by election of the Company shall be credited to a
bookkeeping account in the name of the Executive as of the date scheduled for
payment hereunder. Such amounts shall be credited with interest as of each June
30 during the term of deferral, compounded annually, at a rate per annum, equal
to the annual rate of interest announced by Citibank, N.A. in New York, New York
as its base rate in effect on such June 30, but in no event shall such rate
exceed 9%. The entire amount credited to such bookkeeping account shall be paid
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to the Executive on a date to be chosen by the Company, but in no event later
than ninety (90) days after the termination of the Executive's employment with
the Company, unless the Executive requests prior to termination of his
employment from the Company to continue the deferral of such payments until a
later date or dates and the Company agrees to such request. The Company, in its
sole discretion, may provide an investment facility for all or a portion of such
deferred amounts, but shall not be required to do so.
4. (a) Stock Options. In respect of the First Contract Year, the
Stock Plan Subcommittee of the Compensation Committee has approved the grant to
the Executive of options to purchase no fewer than 300,000 shares of the
Company's Class A Common Stock ("Stock Options") under the Fiscal 2002 Share
Incentive Plan (the "Share Incentive Plan") and subject to the provisions of
Section 6(j) below. Such grant shall be made at such time during the Contract
Year determined by Stock Plan Subcommittee. The option grant is subject to the
terms and conditions of the Share Incentive Plan (or applicable successor plan),
which are incorporated herein by reference. The terms of the options shall be
set forth in a separate grant letter approved by the Stock Plan Subcommittee of
the Compensation Committee.
(b) Equity-Based Compensation. In respect of the Second and
Third Contract Years, the Company shall recommend to the Stock Plan Subcommittee
of the Compensation Committee that the Executive be awarded under the terms and
conditions of the Fiscal 2002 Share Incentive Plan (which are incorporated
herein by reference) or successor plan and subject to the provisions of Section
6(j) below Equity-Based Compensation awards in accordance with the policies and
procedures of the Company as in effect from time to time for its Executive
Officers. The terms of such Equity-Based Compensation awards shall be set forth
in a separate grant letter approved by the Stock Plan Subcommittee of the
Compensation Committee. The recommended equity-based compensation awards shall
be of an equivalent value to a grant of stock options with respect to 300,000
shares of the Company's Class A Common Stock determined in accordance with
procedures generally utilized by the Company for its financial reporting at the
time of grant.
(c) Certain Conditions. Executive acknowledges and agrees that
any grant of Stock Options or other Equity-Based Compensation otherwise provided
for in this Section 4 shall be effective as provided herein only to the extent
permitted by the Share Incentive Plan, and this Agreement shall not obligate the
Company to adopt any successor plan providing for the grant of Stock Options (or
other Equity-Based Compensation). If authority over the Company's equity
compensation programs is changed from the Stock Plan Subcommittee to the
Compensation Committee (or other committee), then after such change, references
herein to the Stock Plan Subcommittee shall be to the appropriate Committee.
5. Benefits.
(a) Standard Benefits. During the Term of Employment, the
Executive shall be entitled to (i) participate in any and all benefit programs
and arrangements now in effect and hereinafter adopted and made generally
available by the Company to its senior officers, including but not limited to
the Xxxxx Xxxxxx Companies 401(k) Savings Plan (the "401(k) Savings Plan"), the
Xxxxx Xxxxxx Companies Retirement Growth Account Plan (the "Qualified Plan"),
the related Xxxxx Xxxxxx Inc. Benefit Restoration Plan (the "Non-Qualified
Plan"), contributory and non-contributory Company welfare and benefit plans,
disability plans, and medical, death benefit and life insurance plans for which
the Executive shall be eligible, or may become eligible during the Term of
Employment; and (ii) paid vacations during each year of the Term of Employment
in accordance with the policies and procedures of the Company as in effect from
time to time for its senior officers.
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(b) Perquisite Reimbursement; Financial Counseling. The Company
shall reimburse the Executive for the actual expenses incurred by him in
connection with his professional standing, in accordance with the guidelines set
out in the Company's executive perquisites program. In no event shall the gross
amount of such reimbursements be greater than $20,000.00 in respect of any
fiscal year during the Term of Employment. Additionally, the Executive will
reimburse the Executive for up to $5,000.00 per year in financial counseling
services. The Executive acknowledges that participation in such programs will
result in the receipt by him of additional taxable income.
(c) Executive Auto. The Executive will participate in the
Executive Automobile program of the Company, and may elect to be provided an
automobile having an acquisition value of up to $50,000.00. Executive
acknowledges that participation in this program will result in the receipt by
him of additional taxable income.
(d) Expenses. The Company agrees to reimburse the Executive for
all reasonable and necessary travel (including first class air fare or cost of
travel on private aircraft), business entertainment and other business
out-of-pocket expenses incurred or expended by him in connection with the
performance of his duties hereunder upon presentation of proper expense
statements or vouchers or such other supporting information as the Company may
reasonably require of the Executive.
(e) Spousal Travel. The Executive may upon prior approval of the
Chairman of the Board of Directors or his designee arrange for his spouse to
accompany him on business related travel itineraries, on a reasonable basis, at
Company expense.
(f) Executive Term Life Insurance. During the Term of
Employment, the Company shall continue to pay premiums on the existing term life
insurance policy.
6. Termination.
(a) Permanent Disability. In the event of the "permanent
disability" (as hereinafter defined) of the Executive during the Term of
Employment, the Company shall have the right, upon written notice to the
Executive, to terminate the Executive's employment hereunder, effective upon the
giving of such notice (or such later date as shall be specified in such notice).
In the event of such termination, the Company shall have no further obligations
hereunder, except that the Executive shall be entitled (i) to receive any
amounts or benefits to which the Executive may otherwise have been entitled
prior to the effective date of termination; (ii) to be paid his Base Salary
under Section 3(a) hereof for a period of one (1) year from the effective date
of termination; provided, however, that the Company shall only be required to
pay that amount of the Executive's Base Salary which shall not be covered by
pension benefits or long-term disability payments, if any, to the Executive
under any Company plan or arrangement and (iii) to receive a pro-rata portion of
the annual bonus that the Executive would have been entitled to receive had he
remained in employment through the end of the Contract Year during which the
termination due to permanent disability occurred. In addition, upon termination
for permanent disability, the Executive shall continue to participate in any and
all pension, insurance and other benefit plans and programs of the Company
during the period the Executive is continuing to receive his Base Salary in
accordance with this Section 6(a). Thereafter, the Executive's rights to
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participate in such programs and plans, or to receive similar coverage, if any,
shall be as determined under such programs; provided, however, that, except as
otherwise provided in this Section 6(a), the Company will have no further
obligations under Sections 3(b) and 4 hereof. For purposes of this Section 6(a),
"permanent disability" means any disability as defined under the Company's
applicable disability insurance policy or, if no such policy is available, any
physical or mental disability or incapacity that renders the Executive incapable
of performing the services required of him in accordance with his obligations
under Section 2 hereof for a period of six (6) consecutive months or for shorter
periods aggregating six (6) months during any twelve-month period.
(b) Death. In the event of the death of the Executive during the
Term of Employment, this Agreement shall automatically terminate. In the event
of such termination the Company shall have no further obligations hereunder,
except to pay the Executive's beneficiary or legal representative (i) for a
period of one (1) year from the date of his death, the Executive's Base Salary
as established under Section 3(a) hereof as of the date of his death; (ii) (A)
bonus compensation earned but not paid under Section 3(b) hereof that relates to
any Contract Year ending prior to the date of his death and (B) a one-time
payment equal to fifty percent (50%) of the average actual bonuses paid or
payable during the Term of Employment in accordance with Section 3(b) hereof,
except that if the Executive dies during the First Contract Year, the sum of
$1,000,000.00; and (iii) any other amounts to which the Executive otherwise
would have been entitled to hereunder prior to the date of his death; provided,
however, that, except as otherwise provided in this Section 6(b), the Company
will have no further obligations under Section 3(b) hereof.
(c) Termination Without Cause. The Company shall have the right,
upon one hundred eighty (180) days' prior written notice given to the Executive,
to terminate the Executive's employment for any reason whatsoever. In the event
of such termination, for a period ending on the latest to occur of (x) a date
two (2) years from the effective date of termination or (y) June 30, 2007, the
Executive shall be entitled as damages to (i) receive his Base Salary as
established under Section 3(a) hereof; (ii) receive bonus compensation equal to
one hundred percent (100%) of the average of the actual annual bonuses paid or
payable to the Executive during the Term of Employment in accordance with
Section 3(b) hereof, or, if such termination occurs prior to the payment of any
bonus hereunder, $2,000,000; and (iii) participate in all pension, insurance and
other benefit plans, programs or arrangements, on terms identical to those
applicable to full-term senior officers of the Company. Except as otherwise
provided in this Section 6(c), the Company will have no further obligations
under Sections 3(b) and 4 hereof. In the event of termination pursuant to this
Section 6(c), the Executive shall not be required to mitigate his damages
hereunder.
(d) Cause. The Company shall have the right, upon notice to the
Executive, to terminate the Executive's employment under this Agreement for
"Cause" (as defined below), effective upon the Executive's receipt of such
notice (or such later date as shall be specified in such notice), and the
Company shall have no further obligations hereunder, except to pay the Executive
any amounts otherwise payable pursuant to Section 3 hereof and provide the
Executive any benefits to which the Executive may have been otherwise entitled
prorated to the effective date of termination. The Executive's right to
participate in any of the Company's retirement, insurance and other benefit
plans and programs shall be as determined under such programs and plans;
provided, however, that, except as otherwise provided in this Section 6(d), the
Company will have no further obligations under Sections 3(b) and 4 hereof.
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For purposes of this Agreement, "Cause" means:
(i) a material breach of, or the willful failure or refusal
by the Executive to perform and discharge duties or obligations he has agreed to
perform or assume under this Agreement (other than by reason of disability or
death) that, if capable of correction, is not corrected within ten (10) business
days following notice thereof to the Executive by the Company, such notice to
state with specificity the nature of the breach, failure or refusal;
(ii) willful misconduct by the Executive, unrelated to the
Company or any of its subsidiaries or affiliates, that could reasonably be
anticipated to have a material adverse effect on the Company or any of its
subsidiaries or affiliates (the determination of Cause to be made by the
Company's Board of Directors in its reasonable judgment);
(iii) the Executive's gross negligence, whether related or
unrelated to the business of the Company or any of its subsidiaries or
affiliates which could reasonably be anticipated to have a material adverse
effect on the Company or any of its subsidiaries or affiliates that, if capable
of correction, is not corrected within ten (10) business days following notice
thereof to the Executive by the Company, such notice to state with specificity
the nature of the conduct complained of (the determination of Cause to be made
by the Board in its reasonable judgment);
(iv) the Executive's failure to follow a lawful directive
of the Chairman of the Board of Directors of the Company that is within the
scope of the Executive's duties for a period of ten (10) business days after
notice from the of the Board of Directors of the Company specifying the
performance required;
(v) any violation by the Executive of a policy contained in
the Code of Conduct of the Company (the determination of Cause to be made by the
Company's Board of Directors in its reasonable judgment); or
(vi) drug or alcohol abuse by the Executive that materially
affects the Executive's performance of his duties under this Agreement.
(e) Termination by Executive. The Executive shall have the
right, exercisable at any time during the Term of Employment, to terminate his
employment for any reason whatsoever, upon six (6) months' prior written notice
to the Company. Upon such termination, the Company shall have no further
obligations hereunder other than to pay the executive his accrued benefits
through the date of such termination.
(f) Termination by Executive for Material Breach. The Executive
shall have the right, exercisable by notice to the Company, to terminate his
employment effective thirty (30) days after the giving of such notice, if, at
any time during the Term of Employment, the Company shall be in material breach
of its obligations hereunder; provided, however, that such notice must be
provided to the Company within thirty (30) days of the date on which the
Executive obtains knowledge of such material breach; and provided further, that
such termination will not become effective if within the thirty-day (30) notice
period the Company shall have cured all such material breaches of its
obligations hereunder. For purposes of this Section 6(f), a material breach
shall include, but not be limited to, (i) a material reduction in the
Executive's authority, functions, duties or responsibilities provided in Section
2 hereof ,(ii) the Company's failure to cause the Executive to serve in all the
positions set forth in Section 1 hereof for any time period in which he is
entitled to so serve, or (iii) the Company's failure to pay any award that the
Executive is entitled to receive pursuant to the terms of this Agreement. Such
termination shall be deemed to be a termination without cause and shall be
controlled by the provisions of Section 6(c) hereof.
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(g) Change of Control.
(i) Definitions. For purposes of this Agreement,
(A) a "Change of Control" shall be deemed to have
occurred upon any of the following events:
(1) a change in control of the direction and
administration of the Company's business of a nature that would be required to
be reported in response to Item 6(e) of Schedule 14A of Regulation 14(A)
promulgated under the Securities Exchange Act of 1934, as amended; or
(2) during any period of two (2) consecutive years,
the individuals who at the beginning of such period constitute the Company's
Board of Directors or any individuals who would be "Continuing Directors" (as
defined below) cease for any reason to constitute a majority thereof; or
(3) the Company's Class A Common Stock shall cease to
be publicly traded; or
(4) the Company's Board of Directors shall approve a
sale of all or substantially all of the assets of the Company, and such
transaction shall have been consummated; or
(5) the Company's Board of Directors shall approve any
merger, consolidation, or like business combination or reorganization of the
Company, the consummation of which would result in the occurrence of any event
described in Section 6(g)(i)(A)(2) or (3) above, and such transaction shall have
been consummated.
Notwithstanding the foregoing, (X) changes in the
relative beneficial ownership among members of the Lauder family and
family-controlled entities shall not, by itself, constitute a Change of Control
of the Company, (Y) any spin-off of a division or subsidiary of the Company to
its stockholders shall not constitute a Change of Control of the Company.
(B) "Continuing Directors" shall mean (1) the directors
in office on July 1, 2004 and (2) any successor to such directors and any
additional director who after July 1, 2004 was nominated or selected by a
majority of the Continuing Directors in office at the time of his or her
nomination or selection.
(C) "Good Reason" means the occurrence of any of the
following, without the express written consent of the Executive, after the
occurrence of a Change in Control:
(1) (a) the assignment to the Executive of any duties
inconsistent in any material adverse effect with the Executive's position,
authority or responsibilities as contemplated by Section 2 hereof, or (b) any
other material adverse change in such position, including title, authority or
responsibilities;
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(2) any failure by the Company to comply with any
provisions of Sections 3, 4 or 5 hereof, other than an insubstantial or
inadvertent failure remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(3) the Company's requiring the Executive to be based
at any office or location more than fifty (50) miles from that location at which
he performed his services specified under the provisions of Section 2
immediately prior to the Change in Control, except for travel reasonably
required in the performance of the Executive's responsibilities; or
(4) any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a successor as
contemplated by Section 14.
(ii) Termination for Good Reason. Following the occurrence
of a Change of Control, the Executive may terminate his employment for Good
Reason. Such termination shall be deemed to be a termination without cause and
shall be controlled by the provisions of Section 6(c) hereof.
(h) Certain Payments by the Company.
(i) In the event that any amount or benefit paid or
distributed to the Executive pursuant to this Agreement, taken together with any
amounts or benefits otherwise paid or distributed to the Executive by the
Company or any affiliated company (collectively, the "Covered Payments"), are or
become subject to the tax (the "Excise Tax") imposed under Section 4999 of the
Code, or any similar tax that may hereafter be imposed, the Company shall pay to
the Executive at the time specified in Section 6(h) (v) below an additional
amount (the "Tax Reimbursement Payment") such that the net amount retained by
the Executive with respect to such Covered Payments, after deduction of any
Excise Tax on the Covered Payments and any Federal, state and local income or
employment tax and Excise Tax on the Tax Reimbursement Payment provided for by
this Section 6(f), but before deduction for any Federal, state or local income
or employment tax withholding on such Covered Payments, shall be equal to the
amount of the Covered Payments.
(ii) For purposes of determining whether any of the Covered
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(A) such Covered Payments will be treated as "parachute
payments" within the meaning of Section 280G of the Code, and all "parachute
payments" in excess of the "base amount" (as defined under Section 28OG(b) (3)
of the Code) shall be treated as subject to the Excise Tax, unless, and except
to the extent that, in the good faith judgment of the Company's independent
certified public accountants appointed prior to the date of the Change in
Control or tax counsel selected by such Accountants (the "Accountants"), the
Company has a reasonable basis to conclude that such Covered Payments (in whole
or in part) either do not constitute "parachute payments" or represent
reasonable compensation for personal services actually rendered (within the
meaning of Section 28OG(b) (4) (B) of the Code) in excess of the allocable "base
amount," or such "parachute payments" are otherwise not subject to such Excise
Tax, and
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(B) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accountants in accordance with the
principles of Section 280G of the Code.
(iii) For purposes of determining the amount of the Tax
Reimbursement Payment, the Executive shall be deemed to pay:
(A) Federal income, social security, medicare and other
employment taxes at the highest applicable marginal rate of Federal income
taxation for the calendar year in which the Tax Reimbursement Payment is to be
made, and
(B) any applicable state and local income or other
employment taxes at the highest applicable marginal rate of taxation for the
calendar year in which the Tax Reimbursement Payment is to be made, net of the
maximum reduction in Federal income taxes which could be obtained by Executive
from the deduction of such state or local taxes if paid in such year.
(iv) In the event that the Excise Tax is subsequently
determined by the Accountants or pursuant to any proceeding or negotiations with
the Internal Revenue Service to be less than the amount taken into account
hereunder in calculating the Tax Reimbursement Payment made, the Executive shall
repay to the Company, at the time of such determination, the portion of such
prior Tax Reimbursement Payment that would not have been paid if such reduced
Excise Tax had been taken into account in initially calculating such Tax
Reimbursement Payment, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(b) of the Code. Notwithstanding the foregoing, in
the event any portion of the Tax Reimbursement Payment to be refunded to the
Company has been paid to any Federal, state or local tax authority, repayment
thereof shall not be required until actual refund or credit of such portion has
been made to the Executive, and interest payable to the Company shall not exceed
interest received or credited to the Executive by such tax authority for the
period it held such portion. The Executive and the Company shall mutually agree
upon the course of action to be pursued (and the method of allocating the
expenses thereof) if the Executive's good faith claim for refund or credit is
denied.
In the event that the Excise Tax is later determined by the
Accountants or pursuant to any proceeding or negotiations with the Internal
Revenue Service to exceed the amount taken into account hereunder at the time
the Tax Reimbursement Payment is made (including, but not limited to, by reason
of any payment the existence or amount of which cannot be determined at the time
of the Tax Reimbursement Payment), the Company shall make an additional Tax
Reimbursement Payment in respect of such excess (plus any interest or penalty
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
(v) The Tax Reimbursement Payment (or portion thereof)
provided for in Section 6(f) (i) above shall be paid to the Executive not later
than ten (10) business days following the payment of the Covered Payments;
provided, however, that if the amount of such Tax Reimbursement Payment (or
portion thereof) cannot be finally determined on or before the date on which
payment is due, the Company shall pay to the Executive by such date an amount
estimated in good faith by the Accountants to be the minimum amount of such Tax
Reimbursement Payment and shall pay the remainder of such Tax Reimbursement
Payment (together with interest at the rate provided in Section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined, but in no event later
than forty-five (45) calendar days after payment of the related Cover Payment.
In the event that the amount of the estimated Tax Reimbursement Payment exceeds
the amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on the fifth business
day after written demand by the Company for payment (together with interest at
the rate provided in Section 1274(b)(2)(B) of the Code).
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(i) Non-Renewal. In the event the Company does not offer the
Executive renewal of the Term of Employment on the basis of terms no less
favorable than those pending at the time of the conclusion of the Term of
Employment, the Executive shall be entitled to a severance arrangement providing
Base Salary and continuation of certain benefits for two years consistent with
Company policy at that time.
(j) Effect of Termination. In addition to the foregoing, in the
event that this Agreement shall be terminated pursuant to the provisions of
subparagraphs 6(a), 6(b), 6(c), 6(f) or 6(g) above, notwithstanding anything to
the contrary contained in the Company's Share Incentive Plan or other similar
option plan, all Stock Option awards previously made to the Executive shall vest
and Stock Options shall become immediately exercisable for the one (1) year
period from the effective date of such termination, subject to applicable share
incentive plan and option agreement provisions, after which all such option
awards shall expire and be of no further force or effect. Subject to the
preceding sentence, upon the termination of the Executive's employment hereunder
for any reason, the Company shall have no further obligations hereunder, except
as otherwise provided herein. The Executive, however, shall continue to have the
obligations provided for in Sections 7 and 8 hereof. Furthermore, upon such
termination, the Executive shall be deemed to have resigned immediately from all
offices and directorships held by him in the Company or any of its subsidiaries.
(k) Release of Claims. As a condition precedent to the receipt
of certain payments and benefits pursuant to this Section, the Executive, or, in
the case of his death or Disability that prevents the Executive from performing
his obligation under this Section 6(k), his personal representative, and his
beneficiary, if applicable, will execute an effective general release of claims
against the Company and its subsidiaries and affiliates and their respective
directors, officers, employees, attorneys and agents; provided, however, that
such release will not affect any right that the Executive, or in the event of
his death, his personal representative or beneficiary, otherwise has to any
payment or benefit provided for in this Agreement or to any vested benefits the
Executive may have in any employee benefit plan of Company or any of its
subsidiaries or affiliates, or any right the Executive has under any other
agreement between the Executive and the Company or any of its subsidiaries or
affiliates that expressly states that the right survives the termination of the
Executive's employment.
7. Confidentiality; Ownership.
(a) The Executive agrees that he shall forever keep secret and
retain in strictest confidence and not divulge, disclose, discuss, copy or
otherwise use or suffer to be used in any manner, except in connection with the
Business of the Company, its subsidiaries or affiliates and any other business
or proposed business of the Company or any of its subsidiaries or affiliates,
any "Protected Information" in any "Unauthorized" manner or for any
"Unauthorized" purpose (as such terms are hereinafter defined).
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(i) "Protected Information" means trade secrets,
confidential or proprietary information and all other knowledge, know-how,
information, documents or materials owned, developed or possessed by the Company
or any of its subsidiaries or affiliates, whether in tangible or intangible
form, pertaining to the Business or any other business or proposed business of
the Company or any of its subsidiaries or affiliates, including, but not limited
to, research and development, operations, systems, data bases, computer programs
and software, designs, models, operating procedures, knowledge of the
organization, products (including prices, costs, sales or content), processes,
formulas, techniques, machinery, contracts, financial information or measures,
business methods, business plans, details of consultant contracts, new personnel
hiring plans, business acquisition plans, customer lists, business relationships
and other information owned, developed or possessed by the Company or its
subsidiaries or affiliates; provided that Protected Information shall not
include information that becomes generally known to the public or the trade
without violation of this Section 7.
(ii) "Unauthorized" means: (A) in contravention of the
policies or procedures of the Company or any of its subsidiaries or affiliates;
(B) otherwise inconsistent with the measures taken by the Company or any of its
subsidiaries or affiliates to protect their interests in any Protected
Information; (C) in contravention of any lawful instruction or directive, either
written or oral, of an employee of the Company or any of its subsidiaries or
affiliates empowered to issue such instruction or directive; or (D) in
contravention of any duty existing under law or contract. Notwithstanding
anything to the contrary contained in this Section 7, the Executive may disclose
any Protected Information to the extent required by court order or decree or by
the rules and regulations of a governmental agency or as otherwise required by
law or to his legal counsel and, in connection with a determination under
Section 6(h), to accounting experts; provided that the Executive shall provide
the Company with prompt notice of such required disclosure in advance thereof so
that the Company may seek an appropriate protective order in respect of such
required disclosure.
(b) The Executive acknowledges that all developments, including,
without limitation, inventions (patentable or otherwise), discoveries, formulas,
improvements, patents, trade secrets, designs, reports, computer software, flow
charts and diagrams, procedures, data, documentation, ideas and writings and
applications thereof relating to the Business or any business or planned
business of the Company or any of its subsidiaries or affiliates that, alone or
jointly with others, the Executive may conceive, create, make, develop, reduce
to practice or acquire during the Term of Employment (collectively, the
"Developments") are works made for hire and shall remain the sole and exclusive
property of the Company. The Executive hereby assigns to the Company, in
consideration of the payments set forth in Section 3(a) hereof, all of his
right, title and interest in and to all such Developments. The Executive shall
promptly and fully disclose all future material Developments to the Board of
Directors of the Company and, at any time upon request and at the expense of the
Company, shall execute, acknowledge and deliver to the Company all instruments
that the Company shall prepare, give evidence and take all other actions that
are necessary or desirable in the reasonable opinion of the Company to enable
the Company to file and prosecute applications for and to acquire, maintain and
enforce all letters patent and trademark registrations or copyrights covering
the Developments in all countries in which the same are deemed necessary by the
Company. All memoranda, notes, lists, drawings, records, files, computer tapes,
programs, software, source and programming narratives and other documentation
(and all copies thereof) made or compiled by the Executive or made available to
the Executive concerning the Developments or otherwise concerning the Business
or planned business of the Company or any of its subsidiaries or affiliates
shall be the property of the Company or such subsidiaries or affiliates and
shall be delivered to the Company or such subsidiaries or affiliates promptly
upon the expiration or termination of the Term of Employment.
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(c) The provisions of this Section 7 shall, without any
limitation as to time, survive the expiration or termination of the Executive's
employment hereunder, irrespective of the reason for any termination.
8. Covenant Not to Compete. Subject to the last sentence of this
Section 8, the Executive agrees that during the Term of Employment and for a
period of two (2) years commencing upon the expiration or termination of the
Executive's employment hereunder (the "Non-Compete Period"), the Executive shall
not, directly or indirectly, without the prior written consent of the Company:
(a) solicit, entice, persuade or induce any employee,
consultant, agent or independent contractor of the Company or of any of its
subsidiaries or affiliates to terminate his, her or its employment with the
Company or such subsidiary or affiliate, to become employed by any person, firm
or corporation other than the Company or such subsidiary or affiliate or
approach any such employee, consultant, agent or independent contractor for any
of the foregoing purposes, or authorize or assist in the taking of any such
actions by any third party (for purposes of this Section 8 (a), the terms
"employee," "consultant," "agent" and "independent contractor" shall include any
persons with such status at any time during the six (6) months preceding any
solicitation in question); or
(b) directly or indirectly engage, participate, or make any
financial investment in, or become employed by or render consulting, advisory or
other services to or for any person, firm, corporation or other business
enterprise, wherever located, which is engaged, directly or indirectly, in
competition with the Business or any business of the Company or any of its
subsidiaries or affiliates as conducted or any business proposed to be conducted
at the time of the expiration or termination of the Executive's employment
hereunder; provided, however, that nothing in this Section 8(b) shall be
construed to preclude the Executive from making any investments in the
securities of any business enterprise whether or not engaged in competition with
the Company or any of its subsidiaries or affiliates, to the extent that such
securities are actively traded on a national securities exchange or in the
over-the-counter market in the United States or on any foreign securities
exchange and represent, at the time of acquisition, not more than 0.5% of the
aggregate voting power of such business enterprise.
Notwithstanding the foregoing, the Executive shall not be
subject to the terms and provisions of paragraph (b) of this Section 8 if the
Term of Employment is terminated pursuant to Section 6(c) hereof.
9. Specific Performance. The Executive acknowledges that the
services to be rendered by the Executive are of a special, unique and
extraordinary character and, in connection with such services, the Executive
will have access to confidential information vital to the Company's Business and
the other current or planned businesses of it and its subsidiaries and
affiliates. By reason of this, the Executive consents and agrees that if the
Executive violates any of the provisions of Sections 7 or 8 hereof, the Company
and its subsidiaries and affiliates would sustain irreparable injury and that
monetary damages would not provide adequate remedy to the Company and that the
Company shall be entitled to have Section 7 or 8 hereof specifically enforced by
any court having equity jurisdiction. Nothing contained herein shall be
construed as prohibiting the Company or any of its subsidiaries or affiliates
from pursuing any other remedies available to it or them for such breach or
threatened breach, including the recovery of damages from the Executive.
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10. Deductions and Withholding. The Executive agrees that the
Company or its subsidiaries or affiliates, as applicable, shall withhold from
any and all compensation paid to and required to be paid to the Executive
pursuant to this Agreement, all Federal, state, local and/or other taxes which
the Company determines are required to be withheld in accordance with applicable
statutes or regulations from time to time in effect and all amounts required to
be deducted in respect of the Executive's coverage under applicable employee
benefit plans. For purposes of this Agreement and calculations hereunder, all
such deductions and withholdings shall be deemed to have been paid to and
received by the Executive.
11. Entire Agreement. Except for the Fiscal 2002 Share Incentive
Plan, the Executive's outstanding stock option agreements, the Executive Annual
Incentive Plan, the 401(k) Savings Plan, the term life insurance arrangement
between the Company and the Executive, the Qualified Plan and the Non-Qualified
Plan and applicable successor plans or agreements, this Agreement embodies the
entire agreement of the parties with respect to the Executive's employment,
compensation, perquisites and related items and supersedes any other prior oral
or written agreements, arrangements or understandings between the Executive and
the Company or any of its subsidiaries or affiliates, and any such prior
agreements, arrangements or understandings are hereby terminated and of no
further effect. This Agreement may not be changed or terminated orally but only
by an agreement in writing signed by the parties hereto.
12. Waiver. The waiver by the Company of a breach of any
provision of this Agreement by the Executive shall not operate or be construed
as a waiver of any subsequent breach by him. The waiver by the Executive of a
breach of any provision of this Agreement by the Company shall not operate or be
construed as a waiver of any subsequent breach by the Company.
13. Governing Law; Jurisdiction.
(a) This Agreement shall be subject to, and governed by, the
laws of the State of New York applicable to contracts made and to be performed
therein.
(b) Any action to enforce any of the provisions of this
Agreement shall be brought in a court of the State of New York located in the
Borough of Manhattan of the City of New York or in a Federal court located
within the Southern District of New York. The parties consent to the
jurisdiction of such courts and to the service of process in any manner provided
by New York law. Each party irrevocably waives any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in such court and any claim that such suit, action or proceeding brought
in such court has been brought in an inconvenient forum and agrees that service
of process in accordance with the foregoing sentences shall be deemed in every
respect effective and valid personal service of process upon such party.
14. Assignability. The obligations of the Executive may not be
delegated and, except with respect to the designation of beneficiaries in
connection with any of the benefits payable to the Executive hereunder, the
Executive may not, without the Company's written consent thereto, assign,
transfer, convey, pledge, encumber, hypothecate or otherwise dispose of this
Agreement or any interest herein. Any such attempted delegation or disposition
shall be null and void and without effect. The Company and the Executive agree
that this Agreement and all of the Company's rights and obligations hereunder
may be assigned or transferred by the Company to and shall be assumed by and be
binding upon any successor to the Company. The Company shall require any
successor by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
succession had taken place. The term "successor" means, with respect to the
Company or any of its subsidiaries, any corporation or other business entity
which, by merger, consolidation, purchase of the assets or otherwise acquires
all or a majority of the operating assets or business of the Company.
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15. Severability. If any provision of this Agreement or any part
thereof, including, without limitation, Sections 7 and 8 hereof, 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 remaining part thereof, or the validity or
enforceability of this Agreement, which shall be given full effect without
regard to the invalid or unenforceable part thereof.
If any court construes any of the provisions of Section 7 or 8
hereof, or any part thereof, to be unreasonable because of the duration of such
provision or the geographic scope thereof, such court may reduce the duration or
restrict or redefine the geographic scope of such provision and enforce such
provision as so reduced, restricted or rede
16. Notices. All notices to the Company or the Executive
permitted or required hereunder shall be in writing and shall be delivered
personally, by telecopier or by courier service providing for next-day delivery
or sent by registered or certified mail, return receipt requested, to the
following addresses:
The Company:
The Xxxxx Xxxxxx Companies Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: General Counsel
Tel: (000) 000-0000
Fax: (000) 000-0000
The Executive:
Xxxxxxx X. Xxxxxx
c/o The Xxxxx Xxxxxx Companies Inc.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
With a copy to:
Xxxxx X. Xxxxxxxxx, Esq.
Pillsbury Winthrop LLP
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Tel: (000) 000-0000
14
Either party may change the address to which notices shall be sent by sending
written notice of such change of address to the other party. Any such notice
shall be deemed given, if delivered personally, upon receipt; if telecopied,
when telecopied; if sent by courier service providing for next-day delivery, the
next business day following deposit with such courier service; and if sent by
certified or registered mail, three days after deposit (postage prepaid) with
the U.S. mail service.
17. No Conflicts. The Executive hereby represents and warrants
to the Company that his execution, delivery and performance of this Agreement
and any other agreement to be delivered pursuant to this Agreement will not (i)
require the consent, approval or action of any other person or (ii) violate,
conflict with or result in the breach of any of the terms of, or constitute (or
with notice or lapse of time or both, constitute) a default under, any
agreement, arrangement or understanding with respect to the Executive's
employment to which the Executive is a party or by which the Executive is bound
or subject. The Executive hereby agrees to indemnify and hold harmless the
Company and its directors, officers, employees, agents, representatives and
affiliates (and such affiliates' directors, officers, employees, agents and
representatives) from and against any and all losses, liabilities or claims
(including interest, penalties and reasonable attorneys' fees, disbursements and
related charges) based upon or arising out of the Executive's breach of any of
the foregoing representations and warranties.
18. Paragraph Headings. The paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
19. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
THE XXXXX XXXXXX COMPANIES INC.
By: /s/Xxxxxx X. Xxxxxxxxx
---------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Senior Vice President,
Global Human Resources
/s/Xxxxxxx X. Xxxxxx
---------------------------
Xxxxxxx X. Xxxxxx
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