Exhibit 99.1
EMPLOYMENT AGREEMENT
AGREEMENT, made and entered into as of the 28th day of August, 2002 by
and between IKON Office Solutions, Inc., an Ohio corporation with its principal
office located at 00 Xxxxxx Xxxxxx Xxxxxxx, Xxxxxxx, Xxxxxxxxxxxx 00000
(together with its successors and assigns permitted under this Agreement, the
"Company"), and Xxxxxxx X. Xxxx (the "Executive");
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive and to enter into
an agreement embodying the terms of such employment;
WHEREAS, the Executive desires to accept employment with the Company,
subject to the terms and provisions of this Employment Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (together, the
"Parties") agree as follows:
1. Definitions.
(a) "Affiliate" of a Person shall mean a Person who directly
or indirectly controls, is controlled by, or is under common control with, the
Person specified.
(b) "Agreement" shall mean this Employment Agreement, which
includes for all purposes any exhibits hereto.
(c) "Base Salary" shall mean the salary provided for in
Section 4 or any increased salary granted to the Executive pursuant to Section
4.
(d) "Board" shall mean the Board of Directors of the Company.
(e) "Cause" shall mean:
(i) the Executive is convicted of a felony involving
moral turpitude; or
(ii) the Executive engages in conduct that
constitutes willful gross neglect or willful gross misconduct
in carrying out his duties under this Agreement, resulting, in
either case, in material economic harm to the Company, unless
the Executive believed in good faith that such conduct was in,
or not opposed to, the best interests of the Company.
(f) "Change in Control" shall mean the occurrence of any of
the following events:
(i) any "person," as such term is currently used in
Section 13(d) of the Securities Exchange Act of 1934, as
amended, becomes a "beneficial owner," as such
term is currently used in Rule 13d-3 promulgated under that
act, of 20% or more of the Voting Stock of the Company;
(ii) a majority of the Board consists of individuals
other than Incumbent Directors, which term means the members
of the Board on the Effective Date; provided that any
individual becoming a director subsequent to such date whose
election or nomination for election was supported by a
majority of the directors who then comprised the Incumbent
Directors shall be considered to be an Incumbent Director;
(iii) the Company adopts any plan of liquidation
providing for the distribution of all or substantially all of
its assets;
(iv) 50% or more of the assets of the Company are
disposed of pursuant to a merger, consolidation or other
transaction or series of transactions (unless the shareholders
of the Company immediately prior to such merger, consolidation
or other transaction or series of transactions beneficially
own, directly or indirectly, in substantially the same
proportion as they owned the Voting Stock of the Company, more
than 50% of the Voting Stock or other ownership interests of
the entity or entities, if any, that succeed to the business
of the Company); or
(v) the Company combines with another company and is
the surviving corporation but, immediately after the
combination, the shareholders of the Company immediately prior
to the combination hold 50% or less of the Voting Stock of the
combined company, (there being excluded from the number of
shares held by such shareholders, but not from the Voting
Stock of the combined company, any shares received by
Affiliates of such other company in exchange for stock of such
other company).
(g) "Claim" shall mean any claim, demand, request,
investigation, dispute, controversy, threat, discovery request, or request for
testimony or information.
(h) "Committee" shall mean the Human Resources Committee of
the Board.
(i) "Common Stock" shall mean common stock of the Company.
(j) "Constructive Termination Without Cause" shall mean a
termination by the Executive of his employment hereunder on 30 days written
notice given by him to the Company following the occurrence, without his prior
written consent, of any of the following events, unless the Company shall have
fully cured all grounds for such termination within 15 days after the Executive
gives notice thereof:
(i) any reduction in his then current Base Salary or
in his target or maximum annual bonus opportunity as a
percentage of Base Salary;
(ii) any material failure to timely grant, or timely
honor, any equity or long-term incentive award;
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(iii) any material breach of any of the Company's
obligations, representations or warranties in this Agreement;
(iv) any failure to appoint, elect or reelect him to
any of the positions described in the Agreement; the removal
of him from any such position; or any change in the reporting
structure so that he reports to someone other than the Board;
(v) any material diminution in his duties or the
assignment to him of duties that materially impair his ability
to perform his duties;
(vi) following any Change in Control, any relocation
of the Company's principal office, or of his own office as
assigned to him by the Company, to a location more than 50
miles from Malvern, Pennsylvania;
(vii) following any Change in Control, any failure by
the Company to continue in effect any compensation plan in
which the Executive participated immediately prior to such
Change in Control and which is material to the Executive's
total compensation, including but not limited to the Company's
stock option, incentive compensation, deferred compensation,
stock purchase, bonus and other plans or any substitute plans
adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or any failure
by the Company to continue the Executive's participation
therein (or in such substitute or alternative plan) on a basis
no less favorable to the Executive, both in terms of the
amount of benefits provided and the level of the Executive's
participation relative to other participants, as existed
immediately prior to such Change in Control;
(viii) following any Change in Control, any failure
by the Company to continue to provide the Executive with
benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance,
medical, health and accident, or disability plans in which the
Executive was participating immediately prior to such Change
in Control, the taking of any action by the Company which
would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any perquisite enjoyed by
the Executive at the time of such Change in Control, or the
failure by the Company to maintain a vacation policy with
respect to the Executive that is at least as favorable as the
vacation policy (whether formal or informal) in place with
respect to the Executive immediately prior to such Change in
Control; or
(ix) the failure of the Company to obtain the
assumption in writing of its obligation to perform this
Agreement by any successor to all or substantially all of the
assets of the Company within 15 days after a merger,
consolidation, sale or similar transaction.
If any of the changes described in Section 1(j)(vi) through
1(j)(viii) is preceded by a Potential Change in Control, such change may give
rise to a Constructive Termination Without Cause under this Section, provided
such change occurs within two years following the Potential Change in Control
and either (A) is made at the request or direction of or pursuant to
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negotiations with a Person who has entered into an agreement with the Company
the consummation of which will constitute a Change in Control; or (B) is
otherwise made in connection with or in anticipation of a Change in Control
which actually occurs.
(k) "Disability" shall mean the Executive's inability, due to
physical or mental incapacity, to substantially perform his duties and
responsibilities under this Agreement for a period of 180 consecutive days as
determined by an approved medical doctor, selected by the Parties. If the
Parties cannot agree on a medical doctor, each Party shall select a medical
doctor and the two doctors shall select a third who shall be the approved
medical doctor for this purpose.
(l) "Effective Date" shall mean August 28, 2002.
(m) "Long-Term Incentive Plan" shall mean any of the long-term
incentive plans referred to in Section 6(d).
(n) "Person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust, estate, board,
committee, agency, body, employee benefit plan, or other person or entity.
(o) "Potential Change in Control" shall mean the occurrence of
any of the following events:
(i) the Company enters into an agreement, the
consummation of which will result in the occurrence of a
Change in Control;
(ii) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if
consummated, will constitute a Change in Control; or
(iii) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in
Control has occurred.
(p) "Proceeding" shall mean any threatened or actual action,
suit or proceeding, whether civil, criminal, administrative, investigative,
appellate or other.
(q) "Pro-Rata" shall mean a fraction, the numerator of which
is the number of days that the Executive was employed in the applicable
performance period (a fiscal year in the case of an annual bonus and a
performance cycle in the case of an award under the Long-Term Incentive Plan)
and the denominator of which shall be the number of days in the applicable
performance period.
(r) "Sign-On Deferrable Restricted Stock Award" shall mean the
restricted stock award referred to in Section 6(b).
(s) "Sign-On Stock Option" shall mean the stock option
referred to in Section 6(a).
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(t) "Term of Employment" shall mean the period specified in
Section 2.
(u) "Termination Date" shall mean the date on which the
Executive's employment with the Company terminates in accordance with this (or
any subsequent) Agreement.
(v) "Voting Stock" shall mean issued and outstanding capital
stock or other securities of any class or classes having general voting power,
under ordinary circumstances in the absence of contingencies, to elect, in the
case of a corporation, the directors of such corporation and, in the case of any
other entity, the corresponding governing Person(s).
2. Term of Employment. The Company hereby employs the Executive under
this Agreement, and the Executive hereby accepts such employment, for the Term
of Employment. The Term of Employment shall commence as of the Effective Date
and shall end on August 27, 2005; provided, however, that the Term of Employment
shall thereafter be automatically extended for additional one-year periods
("extension periods") unless either Party shall give the other written notice at
least sixty (60) days prior to the expiration of the Initial Term or extension
period. Termination of Executive's employment as a result of non-renewal by the
Company shall be treated as a termination subject to the provisions of Section
8(d) (Termination without Cause) of this Agreement. Notice of non-renewal by
Executive shall be treated as a termination subject to the provisions of Section
8(g) (Voluntary Termination) of this Agreement. Notwithstanding the foregoing,
the Term of Employment may be terminated at any time prior to the expiration of
the Initial Term and/or any extension period in accordance with the provisions
of Section 8.
3. Positions, Duties and Responsibilities.
(a) During the Term of Employment, the Executive shall serve
as the President and Chief Executive Officer of the Company and shall be elected
to serve as a member of the Board on the Effective Date or as soon thereafter as
possible, consistent with the Company's Articles of Incorporation and Code of
Regulations; shall have the authority, duties and responsibilities customarily
exercised by an individual serving in those positions in a corporation of the
size and nature of the Company; shall perform such duties relating to the
management and operations of the Company, consistent with the foregoing, as may
from time to time be assigned to him by the Board; shall be assigned no duties
or responsibilities that are materially inconsistent with, or that materially
impair his ability to discharge, the foregoing duties and responsibilities; and
shall report solely and directly to the Board. In addition, on or before the
date of the Company's first annual shareholders meeting occurring after the
Effective Date, the Executive shall be elected Chairman of the Board.
(b) Anything herein to the contrary notwithstanding, nothing
shall preclude the Executive from (i) serving, with prior notice to the Board,
on the boards of directors of a reasonable number of other corporations or the
boards of a reasonable number of trade associations and/or charitable
organizations, (ii) engaging in charitable activities and community affairs, and
(iii) managing his personal investments and affairs; provided that such
activities do not materially interfere with the performance of the Executive's
duties and responsibilities hereunder.
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4. Base Salary. Commencing as of the Effective Date, the Executive
shall be paid an annualized Base Salary of $725,000, payable in accordance with
the regular payroll practices of the Company. The Base Salary shall be reviewed
no less frequently than annually for increase in the discretion of the Board.
5. Annual Incentive Awards. The Executive shall be eligible for an
annual incentive bonus award opportunity from the Company in respect of each
fiscal year of the Company that ends during the Term of Employment. His annual
target award opportunity shall be no less than 75% of his annualized Base Salary
in effect on the start of the fiscal year and his maximum annual award
opportunity shall be no less than 150% of his annualized Base Salary in effect
on the start of the fiscal year; provided that for fiscal year 2002 of the
Company, the Executive shall receive an annual incentive award of $407,812.50
(calculated as 75% of his annual target award opportunity, which payment is
being made in recognition of the fact that Executive is forfeiting certain
compensation from his current employer) and for fiscal year 2003 of the Company,
the Executive shall receive no less than the target award opportunity for such
year. The Executive shall be paid his annual incentive awards at the same time
that other senior-level executives receive their incentive awards; provided that
the Executive has not terminated his employment for reasons other than
Constructive Termination Without Cause, or the Company has not terminated the
Executive for Cause, prior to the dates on which such bonuses are paid.
6. Sign-On and Buy-Out Awards; Long-Term Incentive Awards.
(a) Sign-On Stock Option Award. As of the Effective Date, the
Company shall grant the Executive a ten-year option to purchase 300,000 shares
of Common Stock. Such option shall vest in two equal installments on the third
and the fifth anniversaries of the Effective Date subject to the terms,
conditions and adjustments set forth in the award agreement memorializing the
award and in Section 8 below.
(b) Sign-On Deferrable Restricted Stock Award. As of the
Effective Date, the Company shall grant the Executive a restricted stock award
for 290,000 shares of Common Stock, with such shares being held by the Company
until the later of (i) the date the shares vest or (ii) the date such shares are
to be delivered to the Executive pursuant to his election, as described below.
Subject to the terms, conditions and adjustments set forth in the award
agreement memorializing the award and in Section 8 below, the restricted Common
Stock shall vest in three installments as follows: (x) 125,000 shares will vest
on the third anniversary date of the Effective Date, (y) 125,000 shares will
vest on the fifth anniversary of the Effective Date, and (z) 40,000 shares will
vest on the Executive's 65th birthday. The Executive may elect prior to the
calendar year in which the shares described above vest to defer receipt of
shares, to the extent permitted by law, until the earlier of (xx) the date
specified in such election or (yy) January of the calendar year following his
termination of employment. Notwithstanding any deferral election, dividends (if
any) will begin to accrue and be paid with respect to shares only after the date
on which such shares become vested.
(c) Cash Payment. In recognition of the fact that Executive is
forfeiting certain cash compensation from his current employer, on or about
January 15, 2003, the Company shall make a lump sum cash payment to the
Executive in the amount of $850,000; provided that the Executive has not
terminated his employment for reasons other than
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Constructive Termination Without Cause, or the Company has not terminated the
Executive for Cause, prior to such date.
(d) Long-Term Incentive Plans. Subject to the terms of the
Company's Long-Term Performance Plan:
(i) The Executive shall be entitled to participate in
the Company's Long-Term Performance Plan (applying to the
performance periods of October 1, 2000 through September 30,
2003 and October 1, 2001 through September 30, 2004) on a
Pro-Rata basis calculated based on a cash/stock award target
opportunity of 90% of his annualized Base Salary as of the
Effective Date and a maximum award opportunity of 180% of his
annualized Base Salary as of the Effective Date. As set forth
above, the prorated target incentive unit amount for the
October 1, 2000 through September 30, 2003 award will be
217,500, and the prorated target incentive unit amount for the
October 1, 2001 through September 30, 2004 award will be
435,000.
(ii) For each performance period commencing under the
Company's Long-Term Performance Plan on or after the Effective
Date, the Executive shall be entitled to participate in such
Plan (or any successor plan thereto) on the same basis as, and
upon the terms and conditions applicable to, other senior
executives of the Company, consistent with the Executive's pay
and position.
(iii) The Executive shall be paid any amount due
under the Long-Term Performance Plan on the date that payouts
are made under such Plan to other senior executives of the
Company.
(e) On-Going Equity Incentives. During the Term of Employment,
the Executive shall be entitled to participate in the Company's Long-Term
Incentive Compensation Plan (or any successor plan thereto) on the same basis
as, and upon the terms and conditions applicable to, other senior executives of
the Company, consistent with the Executive's pay and position.
7. Other Benefits.
(a) Executive Compensation Plans. During the Term of
Employment, the Executive shall be entitled to participate in all compensation
plans and programs that are, from time to time, made generally available to
senior executives of the Company, including, without limitation, the Executive
Deferred Compensation Plan.
(b) Employee Benefits. During the Term of Employment, the
Executive shall participate in all employee benefit plans and programs made
available generally to the Company's senior executives, including, without
limitation, pension, savings and other retirement plans or programs, medical,
dental, hospitalization, short-term and long-term disability and life insurance
plans or programs, accidental death and dismemberment protection, travel
accident insurance, and any other employee welfare or retirement benefit plans
or programs that may be sponsored by the Company from time to time, including
any plans or programs that supplement the above-listed types of plans or
programs, whether funded or
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unfunded. The Executive shall be entitled to post-retirement welfare benefits on
the same basis as other similarly situated senior executives of the Company.
(c) Supplemental Pension. The Executive shall participate in
the Company's pension plan, supplemental retirement plan and all other
retirement plans for senior executives, except that, for purposes of determining
the Executive's benefit under the supplemental retirement plan (the
"Supplemental Pension"), the Executive shall be credited with two years of
service for each full year of the Executive's actual service with the Company,
with a maximum Supplemental Pension of 35% of final average compensation (as
defined under the supplemental retirement plan document). The Supplemental
Pension shall be offset by other qualified and non-qualified pension benefits of
the Company.
(d) Expenses. The Executive is authorized to incur reasonable
expenses in carrying out his duties and responsibilities hereunder and the
Company shall promptly reimburse him for all such expenses, subject to
documentation in accordance with reasonable policies of the Company. The Company
shall promptly reimburse the Executive for all reasonable professional fees
(including, without limitation, attorneys' fees and other charges of counsel)
incurred by him in connection with the negotiation and documentation of these
employment arrangements, up to a maximum of $10,000, grossed up for taxes. In
the event of any dispute between the Company and the Executive during or after
termination of the Executive's employment, the Company will pay all of the
Executive's reasonable professional fees, costs and expenses of such dispute if
the Executive prevails. The Executive shall be entitled to reimbursement of
expenses, and other benefits (including tax gross-up), in connection with his
relocation to the Malvern, Pennsylvania area, to the maximum extent consistent
with the Company's relocation programs and policies, including temporary living
and travel expenses for the Executive and his family between the Company's
offices and his current residence for one (1) year and the purchase of the
Executive's current residence at the appraised value at any time during the
2-year period commencing on the Effective Date.
(e) Benefits and Perquisites. During the Term of Employment,
the Executive shall participate in all benefits and perquisites available to
senior executives or other employees of the Company at the most favorable levels
and terms and conditions for each such benefit and perquisite.
(f) Vacation. The Executive shall be entitled to four weeks
paid vacation per year.
8. Termination of Employment.
(a) Termination Due to Death. In the event that the
Executive's employment hereunder is terminated due to his death, his estate or
his beneficiaries (as the case may be) shall be entitled to:
(i) Base Salary through the end of the month in which
his death occurs;
(ii) a Pro-Rata annual incentive award for the fiscal
year in which his death occurs, based on the target bonus
opportunity for the year of death, payable in a
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lump sum promptly following his death, regardless of the
Executive's and Company's performance during such fiscal year;
(iii) the continued right to exercise each
outstanding stock option for the lesser of (A) 12 months or
(B) the remainder of the original term, all such options to
become fully exercisable as of the date of his death;
(iv) any outstanding shares from his Sign-On
Deferrable Restricted Stock Award and all other restricted
stock awards shall vest as of the date of his death; provided,
however, that, notwithstanding the foregoing, unless the
40,000 shares from his Sign-On Deferrable Restricted Stock
Award which are scheduled to vest on the Executive's 65th
birthday have otherwise vested, those shares will be forfeited
as of the date of his death;
(v) immediate vesting in the Company's Retirement
Savings Plan (or any successor 401(k) plan), pension plan,
supplemental retirement plan (including the Supplemental
Pension ) and deferred compensation plans, or the cash
equivalent thereof;
(vi) Pro-Rata Long-Term Incentive Plan payouts,
payable in a lump sum, if earned, promptly following the end
of the performance periods; and
(vii) the benefits described in Section 8(h)(i).
(b) Termination Due to Disability. In the event that the
Executive's employment hereunder is terminated due to Disability, he shall be
entitled to the following:
(i) Periodic disability payments in accordance with
the Company's Long-Term Disability Plan (provided that the
Executive is and continues to be disabled as defined under
that plan);
(ii) Base Salary through the end of the month in
which the Termination Date occurs;
(iii) a Pro-Rata annual incentive award for the
fiscal year in which his employment terminates, based on his
target bonus opportunity for the year of termination, payable
in a lump sum promptly following the Termination Date,
regardless of the Executive's and Company's performance during
such fiscal year;
(iv) the continued right to exercise each outstanding
stock option for the lesser of (A) 12 months or (B) the
remainder of the original term, all such options to become
fully exercisable as of the Termination Date;
(v) any outstanding shares from his Sign-On
Deferrable Restricted Stock Award and any other restricted
stock awards shall vest as of the Termination Date; provided,
however, that notwithstanding anything in the foregoing to the
contrary, unless the 40,000 shares from his Sign-On Deferrable
Restricted Stock Award which are scheduled to vest on the
Executive's 65th birthday have otherwise vest, those shares
will be forfeited as of the Termination Date;
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(vi) Pro-Rata Long-Term Incentive Plan payouts,
payable in a lump sum, if earned, promptly following the end
of the performance periods;
(vii) continued participation, for a period of two
years from the Termination Date, in all medical, dental,
vision, hospitalization, disability and life insurance
coverages and in all other employee welfare benefit plans,
programs and arrangements in which he was participating on the
date on which his employment terminates, on terms and
conditions that are no less favorable to him than those that
applied on such date, and with COBRA benefits commencing
thereafter; provided that the Company's obligation under this
Section 8(b)(v) shall be reduced to the extent that equivalent
coverages and benefits (determined on a coverage-by-coverage
and benefit-by-benefit basis) are provided under the plans,
programs or arrangements of a subsequent employer;
(viii) immediate vesting in the Company's Retirement
Savings Plan (or any successor 401(k) plan), pension plan,
supplemental retirement plan (including the Supplemental
Pension) and deferred compensation plans, or the cash
equivalent thereof; and
(ix) the benefits described in Section 8(h)(i).
No termination of the Executive's employment for Disability shall be effective
until the Company first gives 15 days written notice of such termination to the
Executive.
(c) Termination by the Company for Cause.
(i) No termination of the Executive's employment
hereunder by the Company for Cause shall be effective unless
the provisions of this Section 8(c)(i) shall have been
complied with. The Executive shall be given written notice by
the Board of the intention to terminate him for Cause, such
notice to state in detail the particular circumstances that
constitute the grounds on which the proposed termination for
Cause is based. The Executive shall have 15 days after
receiving such notice in which to cure such grounds, to the
extent such cure is possible. If he fails to cure such
grounds, the Executive shall then be entitled to a hearing
before the Board. Such hearing shall be held within 20 days of
his receiving such notice, provided that he requests such
hearing within 15 days of receiving such notice. If, within
five days following such hearing, the Board gives written
notice to the Executive confirming that, in the judgment of at
least two-thirds of the members of the Board, Cause for
terminating his employment on the basis set forth in the
original notice exists, his employment hereunder shall
thereupon be terminated for Cause, subject to de novo review,
at the Executive's election, through arbitration in accordance
with Section 14.
(ii) In the event that the Executive's employment
hereunder is terminated by the Company for Cause in accordance
with Section 8(c)(i), he shall be entitled to:
(A) the lesser of (I) 30 days or (II) the
remainder of the original term to exercise any stock
option that is vested and exercisable on the
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Termination Date. All stock options which are not
vested and exercisable as of the Termination Date
will be forfeited, and all unvested restricted stock
which is outstanding as of the Termination Date, will
be forfeited; and
(B) the benefits described in Section
8(h)(i).
(d) Termination Without Cause. In the event that the
Executive's employment hereunder is terminated by the Company without Cause and
Sections 8(a) (death), 8(b) (Disability) and 8(f) (Change in Control) does not
apply, and provided Executive has executed a full release substantially in the
form attached hereto as Exhibit A, then the Executive shall be entitled to:
(i) Base Salary through the second anniversary of the
Termination Date, payable as provided in Section 4;
(ii) a Pro-Rata annual incentive award for the fiscal
year in which his employment terminates, based on his target
bonus opportunity for the year of termination, payable in a
lump sum promptly following the Termination Date, regardless
of the Executive's and Company's performance during such
fiscal year;
(iii) an annual incentive award for a period of 24
months following the Termination Date, based on the target
bonus opportunity for the year of termination, payable on a
Pro-Rata basis in equal installments over the 24-month period
for which Base Salary is continued;
(iv) the continued right to exercise any outstanding
stock option for the lesser of (A) 1 year or (B) the remainder
of the original term, all such options to become fully
exercisable as of the Termination Date;
(v) any outstanding shares from his Sign-On
Deferrable Restricted Stock Award and any other restricted
stock awards shall vest as of the Termination Date; provided,
however, that notwithstanding anything in the foregoing to the
contrary, unless the 40,000 shares from his Sign-On Deferrable
Restricted Stock Award which are scheduled to vest on the
Executive's 65th birthday have otherwise vested, those shares
will be forfeited as of the Termination Date;
(vi) full payout, at target award levels, for each
outstanding performance cycle period under the Long-Term
Performance Plan in which the Executive is participating as of
the Termination Date, with the payouts due in a lump sum
promptly following the Termination Date;
(vii) continued participation, through the second
anniversary of the Termination Date, in all medical, dental,
vision, hospitalization, disability and life insurance
coverages and in all other employee welfare benefit plans,
programs and arrangements in which he or his family members
were participating on such date, on terms and conditions that
are no less favorable to him than those that applied on such
date and with COBRA benefits commencing thereafter; provided
that the Company's obligation under this Section 8(d)(vi)
shall be reduced to the extent that equivalent
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coverages and benefits (determined on a coverage-by-coverage
and benefit-by-benefit basis) are provided under the plans,
programs or arrangements of a subsequent employer; and
(viii) immediate vesting in the Company's Retirement
Savings Plan (or any successor 401(k) plan), pension plan,
supplemental retirement plan (including the Supplemental
Pension) and deferred compensation plans, or the cash
equivalent thereof; and
(ix) the benefits described in Section 8(h)(i).
The Executive will not receive any additional severance or payments
other than that provided under this Section 8(d) for any term remaining under
the employment agreement.
(e) Constructive Termination Without Cause. In the event that
(x) a Constructive Termination Without Cause occurs and (y) Section 8(f) (Change
in Control) does not apply, then the Executive shall have the same entitlements
as provided under Section 8(d) for a termination by the Company without Cause,
subject to Executive's executing a full release satisfactory to the Company.
(f) Termination Without Cause Following a Change in Control or
Potential Change in Control. In the event that (x) the Executive's employment
hereunder is terminated (A) through a Constructive Termination Without Cause or
(B) by the Company without Cause and (y) the termination of employment occurs in
connection with, or within two years following, a Change in Control, and
provided that Executive has executed a full release substantially in the form
attached hereto as Exhibit A, then the Executive shall be entitled to:
(i) Base Salary through the third anniversary of the
Termination Date, payable as provided in Section 4;
(ii) a Pro-Rata annual incentive award for the fiscal
year in which his employment terminates based on the target
bonus opportunity for the year of termination, payable in a
lump sum promptly following the Termination Date, regardless
of the Executive's and Company's performance during such
fiscal year;
(iii) an annual incentive award for a period of 36
months following the Termination Date, based on the greater of
(A) his maximum incentive bonus for the year of termination
and (B) his actual bonus for the year preceding termination,
payable in equal installments over the 36-month period for
which Base Salary is continued.
(iv) the continued right to exercise any stock
option, for the lesser of (A) 24 months and (B) the remainder
of its original term, all such options to become fully
exercisable as of the Termination Date;
(v) all restricted stock awards shall vest on the
Termination Date (including the 40,000 restricted shares from
the Sign-On Deferrable Restricted Share Award which are
scheduled to vest on the Executive's 65th birthday);
12
(vi) full payout, at target levels, under each
ongoing Long-Term Performance Plan in which the Executive is
participating as of the Termination Date, with the payouts due
in a lump sum promptly following the Termination Date;
(vii) an amount equal to the Company's contributions
to which the Executive would have been entitled under the
Company's Retirement Savings Plan (or any successor thereto)
if the Executive had continued working for the Company and the
Retirement Savings Plan continued in force for 36 months
following the Termination Date at the highest annual rate of
Base Salary achieved during the Executive's period of actual
employment with the Company, and making the maximum amount of
employee contributions, if any, as are required under such
plan;
(viii) an amount equal to the excess of (A) the
present value of the benefits to which the Executive would be
entitled under the Company's pension plan and Company's
supplemental retirement plan (including the Supplemental
Pension ) (and any successor thereto) if the Executive had
continued working for the Company for a period of 36 months
following the Termination Date at the highest annual rate of
Base Salary achieved during the Executive's period of actual
employment with the Company, and the pension plan continued in
force during the 36 months following the Termination Date,
over (B) the present value of the benefits to which the
Executive is actually entitled under the Company's pension
plan and supplemental retirement plan (including the
Supplemental Pension), each computed as of the date of the
Termination Date, with present values to be determined using
the discount rate used by the Pension Benefits Guaranty
Corporation to calculate the benefit liabilities under the
pension plan in the event of a plan termination on the
Termination Date, compounded monthly, the mortality tables
prescribed in the Company's Pension Plan for determining
actuarial equivalence, and the reduction factor (if any) for
the early commencement of pension payments based on the
Executive's age on the last day of the 36th month following
the Termination Date;
(ix) immediate vesting in the Company's Retirement
Savings Plan (or any successor 401(k) plan), pension plan,
supplemental retirement plan (including the Supplemental
Pension) and deferred compensation plans, or the cash
equivalent thereof;
(x) continued participation, through the third
anniversary of the Termination Date, in all medical, dental,
vision, hospitalization, disability and life insurance
coverages and in all other employee welfare benefit plans,
programs and arrangements in which he or his family members
were participating on such date, on terms and conditions that
are no less favorable to him than those that applied on such
date and with COBRA benefits commencing thereafter, provided
that the Company's obligation under this Section 8(f)(x) shall
be reduced to the extent that equivalent coverages and
benefits (determined on a coverage-by-coverage and
benefit-by-benefit basis) are provided under the plans,
programs or arrangements of a subsequent employer; and
(xi) the benefits described in Section 8(h)(i).
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For purposes of this Section 8(f), if preceded by a Potential
Change in Control, any of the following events (if such event occurs within two
years following such Potential Change in Control) shall be deemed to be a
Termination of Executive's Employment without Cause following a Change in
Control: 1) the Executive's employment is terminated without Cause and such
termination is at the request or direction of or pursuant to negotiations with a
Person who has entered into an agreement with the Company the consummation of
which will constitute a Change in Control; 2) the Executive's employment is
terminated through a Constructive Termination Without Cause and the
circumstances or events which constitute the basis for Executive's claim of
Constructive Termination occur at the request or direction of, or pursuant to
negotiations with, such Person, or 3) the Executive's employment is terminated
without Cause and such termination is otherwise in connection with or in
anticipation of a Change in Control which actually occurs.
(g) Voluntary Termination. In the event that the Executive
terminates his employment with the Company on his own initiative, other than by
death, for Disability, or by a Constructive Termination Without Cause, then he
shall have the same entitlements as provided in Section 8(c)(ii) in the case of
a termination by the Company for Cause. A voluntary termination under this
Section 8(g) shall be effective upon written notice to the Company and shall not
be deemed a breach of this Agreement.
(h) Miscellaneous.
(i) On any termination of the Executive's employment
hereunder, he shall be entitled to:
(A) Base Salary through the Termination
Date;
(B) any amounts due him under Section 7;
(C) a lump-sum payment in respect of accrued
but unused vacation days at his Base Salary rate in
effect as of the Termination Date;
(D) payment, promptly when due, of all
amounts owed to him in connection with the
termination; and
(E) other benefits, if any, in accordance
with applicable plans, programs and arrangements of
the Company. This provision will permit the Executive
to elect to take advantage of any provisions of, or
changes to, the IKON benefit plans which are
applicable to IKON employees generally (including,
without limitation, provisions relating to the
vesting/exercisability of stock options in the event
of retirement or disability), provided that Executive
opts to have such general provisions applied on
his/her behalf instead of those set forth in this
Agreement. In no event, however, will this provision
entitle Executive to duplicative or double benefits,
nor shall he be eligible to receive payments under
any severance program of the Company applicable to
employees generally.
(ii) In the event that the Executive, or any member
of his family, is precluded from continuing full participation
in any employee benefit plan, program or
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arrangement, then the Executive shall be provided with the
after-tax economic equivalent of any benefit or coverage
foregone. For this purpose, the economic equivalent of any
benefit or coverage foregone shall be deemed to be the total
cost to the Executive of obtaining such benefit or coverage
himself on an individual basis. Payment of such after-tax
economic equivalent shall be made quarterly in advance,
without discount.
(iii) In the event of any termination of the
Executive's employment hereunder, the Executive shall be under
no obligation to seek other employment or otherwise mitigate
the obligations of the Company under this Agreement.
(iv) Any amounts due under this Section 8 are
considered to be reasonable by the Company and are not in the
nature of a penalty.
9. Change in Control.
(a) Vesting. In the event that a Change in Control occurs
after the Effective Date, then each outstanding stock option shall become fully
exercisable as of the date of such Change in Control and each outstanding
restricted stock award shall likewise become fully vested. In addition, the
Executive's full age 65 Supplemental Pension benefit shall be fully accrued and
vested. The Executive shall receive all Change in Control benefits provided to
senior executives under the Company's compensation plans or individual
agreements to the extent that the benefits, terms and conditions under such
plans or agreements are more favorable to the Executive than, and not
duplicative of, the benefits provided under this Agreement. In the event that
holders of Common Stock receive cash, securities or other property in respect to
their Common Stock in connection with a Change in Control transaction, the
Company shall use its best reasonable efforts to enable the Executive (if he so
elects) to exercise any stock option at a time and in a fashion that will
entitle him to receive in exchange for any shares thus acquired the same
consideration as is received in such Change in Control transaction by other
holders of Common Stock.
(b) Golden Parachute Tax. In the event that any payment or
benefit made or provided to or for the benefit of the Executive in connection
with this Agreement, the Executive's employment with the Company, or the
termination thereof (a "Payment") is determined to be subject to any excise tax
("Excise Tax") imposed by Section 4999 of the Code (or any successor to such
Section), the Company shall pay to the Executive, prior to the time any Excise
Tax is payable with respect to such Payment (through withholding or otherwise),
an additional amount which, after the imposition of all income, employment,
excise and other taxes, penalties and interest thereon, is equal to the sum of
(i) the Excise Tax on such Payment plus (ii) any penalty and interest
assessments associated with such Excise Tax. The determination of whether any
Payment is subject to an Excise Tax and, if so, the amount to be paid by the
Company to the Executive and the time of payment shall be made by an independent
auditor (the "Auditor") selected jointly by the Parties and paid by the Company.
Unless the Executive agrees otherwise in writing, the Auditor shall be a
nationally recognized United States public accounting firm that has not, during
the two years preceding the date of its selection, acted in any way on behalf of
the Company or any of its Affiliates. If the Parties cannot agree on the firm to
serve as the Auditor, then the Parties shall each select one accounting firm and
those two firms shall jointly select the accounting firm to serve as the
Auditor.
15
10. Indemnification; D&O Insurance.
(a) Indemnification. The Company agrees that (i) if the
Executive is made a party, or is threatened to be made a party, to any
Proceeding by reason of the fact that he is or was a director, officer,
employee, agent, manager, consultant or representative of the Company or is or
was serving at the request of the Company or any of its Affiliates as a
director, officer, member, employee, agent, manager, consultant or
representative of another Person or (ii) if any Claim is made, or threatened to
be made, that arises out of or relates to this Agreement or the Executive's
service hereunder or in any of the foregoing capacities, then the Executive
shall promptly be indemnified and held harmless by the Company for any Claims
brought by a third party against the Executive to the fullest extent legally
permitted or authorized by the Company's Articles of Incorporation, Code of
Regulations or Board resolutions or by the laws of the State of Ohio, against
any and all costs, expenses, liabilities and losses (including, without
limitation, attorneys' fees, judgments, interest, expenses of investigation,
penalties, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) incurred or suffered by the Executive in connection therewith,
and such indemnification shall continue as to the Executive even if he has
ceased to be a director, member, employee, agent, manager, consultant or
representative of the Company or other Person and shall inure to the benefit of
the Executive's heirs, executors and administrators. The Company shall advance
to the Executive all costs and expenses incurred by him in connection with any
such Proceeding or Claim within 20 days after receiving written notice
requesting such an advance. Such notice shall include, to the extent required by
applicable law, an undertaking by the Executive to repay the amount advanced if
he is ultimately determined not to be entitled to indemnification against such
costs and expenses.
(b) D&O Insurance. During the Term of Employment and for a
period of six years thereafter, the Company shall keep in place a directors' and
officers' liability insurance policy (or policies) providing comprehensive
coverage to the Executive to the extent that the Company provides such coverage
for any other senior executive or director.
11. Covenants.
(a) Confidentiality. During the Term of Employment and
thereafter, the Executive shall not, without the prior written consent of the
Company, divulge, disclose or make accessible to any Person any confidential
non-public document, record or information concerning the business or affairs of
the Company that he has acquired in the course of his employment hereunder,
except (x) to the Company or to any authorized (or apparently authorized) agent
or representative of the Company, (y) to authorized third parties in connection
with performing his duties under this Agreement, or (z) when required to do so
by law or by a court, governmental agency, legislative body, or other Person
with apparent jurisdiction to order him to divulge, disclose or make accessible
such information; provided that these restrictions shall not apply to any
document, record or other information that (i) has previously been disclosed to
the public, or is in the public domain, other than as a result of the
Executive's breach of this Section 11(a), or (ii) is known or generally
available within any trade or industry of the Company.
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(b) Non-Solicitation. During the 24-month period that
commences on the Termination Date and ends on the second anniversary of the
Termination Date, the Executive shall not without the prior consent of the
Company:
(i) solicit, on his own behalf or on behalf of any
other Person, any individual known by the Executive to be an
employee of the Company to instead become an employee of any
Person not affiliated with the Company; or
(ii) solicit, on his own behalf or on behalf of any
other Person, any Person known by the Executive to be customer
of, or vendor to, the Company to cease to be a customer or
vendor of the Company and/or to become a customer of, or
vendor to, any Person not affiliated with the Company.
(c) Non-Competition. During the 24-month period that commences
on the Termination Date and ends on the first anniversary of the Termination
Date, the Executive shall not, without the prior consent of the Company,
directly or indirectly own, manage, operate, join, control or participate in the
ownership, management, operation or control of, or be employed by or otherwise
connected in any substantial manner with any business which directly or
indirectly competes to a material extent with any line of business of the
Company or its subsidiaries which was operated by the Company or its
subsidiaries at the Termination Date; provided that nothing in this paragraph
shall prohibit the Executive from acquiring up to 5% of any class of outstanding
equity securities of any corporation whose equity securities are regularly
traded on a national securities exchange or in the "over-the-counter market."
The foregoing noncompetition restriction of this Section 11(c)
shall not apply following a Change of Control if (v) the Executive's employment
has been terminated by the Company without Cause within two years following such
Change in Control, (w) the Executive terminates his employment as the result of
a Constructive Termination within two years following such Change in Control or
(x) the Company elects, within two years following such Change in Control, not
to extend the term of employment.
The foregoing noncompetition restriction of this Section 11(c)
shall not apply following a Potential Change in Control if: 1) the Executive's
employment is terminated without Cause within two years following such Potential
Change in Control, and such termination is at the request or direction of or
pursuant to negotiations with a Person who has entered into an agreement with
the Company the consummation of which will constitute a Change in Control; 2)
the Executive's employment is terminated through a Constructive Discharge
without Cause within two years following such Potential Change in Control, and
the circumstances or events which constitute the basis for Executive's claim of
Constructive Discharge occur at the request or direction of, or pursuant to
negotiations with, such Person, 3) the Company elects, within two years
following such Potential Change in Control, not to extend the term of
employment, and such election was at the request or direction of or pursuant to
negotiations with such Person; or 4) the Executive's employment is terminated
without Cause within two years following such Potential Change in Control and
such termination is otherwise in connection with or in anticipation of a Change
in Control which actually occurs.
17
12. Assignability, Binding Nature. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors, heirs
(in the case of the Executive) and assigns. No rights or obligations of the
Company under this Agreement may be assigned or transferred by the Company
except that such rights or obligations may be assigned or transferred pursuant
to a merger or consolidation in which the Company is not the continuing entity,
or a sale or liquidation of all or substantially all of the assets of the
Company; provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company, as contained in
this Agreement, either contractually or as a matter of law. In the event of any
sale of assets or liquidation as described in the preceding sentence, the
Company shall use its best efforts to cause such assignee or transferee to
expressly assume the liabilities, obligations and duties of the Company
hereunder and perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such assignment or
succession taken place. No rights or obligations of the Executive under this
Agreement may be assigned or transferred by the Executive other than his rights
to compensation and benefits, which may be transferred only by will or operation
of law, except as provided in Section 16(e).
13. Representations.
(a) The Company's Representations. The Company represents and
warrants that (i) it is fully authorized by action of its Board (and of any
other Person or body whose action is required) to enter into this Agreement and
to perform its obligations under it; (ii) the execution, delivery and
performance of this Agreement by the Company does not violate any applicable
law, regulation, order, judgment or decree or any agreement, plan or corporate
governance document of the Company; and (iii) upon the execution and delivery of
this Agreement by the Parties, this Agreement shall be the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
(b) The Executive's Representations. The Executive represents
and warrants that, to the best of his knowledge and belief, (i) delivery and
performance of this Agreement by him does not violate any applicable law,
regulation, order, judgment or decree or any agreement to which the Executive is
a party or by which he is bound, and (ii) upon the execution and delivery of
this Agreement by the Parties, this Agreement shall be the valid and binding
obligation of the Executive, enforceable against him in accordance with its
terms, except to the extent enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
14. Resolution of Disputes. Any Claim arising out of or relating to
this Agreement or the Executive's employment with the Company or the termination
thereof shall be resolved by binding confidential arbitration, to be held in
Philadelphia, Pennsylvania, in accordance with the Commercial Arbitration Rules
of the American Arbitration Association. Judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
Company shall promptly pay all costs and expenses, including without limitation,
attorneys' fees, incurred by the Executive or his beneficiaries in resolving any
successful Claim. Pending the resolution of any Claim (and provided that
Executive is not in breach of his post-termination
18
obligations under this Agreement), the Executive (and his beneficiaries) shall
be advanced any payments which are allegedly due under the Agreement (with the
timing of such payments to be made in accordance with the terms of this
Agreement). Any amounts advanced under this Section 14 will be subject to offset
by the Company from any award obtained by the Executive (and/or reimbursement by
the Executive to the Company in the event that his award (if any) is less than
the amount advanced).
15. Notices. Any notice, consent, demand, request, or other
communication given to a Person in connection with this Agreement shall be in
writing and shall be deemed to have been given to such Person (a) when delivered
personally to such Person or (b) provided that a written acknowledgment of
receipt is obtained, two days after being sent by prepaid certified or
registered mail, or by a nationally recognized overnight courier, to the address
specified below for such Person (or to such other address as such Person shall
have specified by ten days advance notice given in accordance with this Section
15), or (c) in the case of the Company only, on the first business day after it
is sent by facsimile to the facsimile number set forth for the Company (or to
such other facsimile number as the Company shall have specified by ten days
advance notice given in accordance with this Section 15), with a confirmatory
copy sent by certified or registered mail or by overnight courier to the Company
in accordance with this Section 15.
If to the Company: IKON Office Solutions, Inc.
00 Xxxxxx Xxxxxx Xxxxxxx
Xxxxxxx, Xxxxxxxxxxxx 00000
Attn: General Counsel
Facsimile #: 000-000-0000
If to the Executive: Xxxxxxx X. Xxxx
00 Xxxxxxxxx Xxxx
Xxxxxxxx Xxxxx, XX 00000
(or the most recent address on file
with the Company)
(with a copy to the Executive at the
Company's address)
If to a beneficiary The address most recently specified by
of the Executive: the Executive or beneficiary through
notice given in accordance with this
Section 15.
16. Miscellaneous.
(a) Entire Agreement. This Agreement contains the entire
understanding and agreement between the Parties concerning the subject matter
hereof and supersedes all prior agreements, understandings, discussions,
negotiations and undertakings, whether written or oral, (including, without
limitation, the term sheet dated August 28, 2002) between the Parties with
respect thereto.
19
(b) Severability. In the event that any provision or portion
of this Agreement shall be determined to be invalid or unenforceable for any
reason, in whole or in part, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect to the fullest
extent permitted by law so as to achieve the purposes of this Agreement.
(c) Amendment or Waiver. No provision in this Agreement may be
amended unless such amendment is set forth in a writing signed by the Parties.
No waiver by either Party of any breach of any condition or provision contained
in this Agreement shall be deemed a waiver of any similar or dissimilar
condition or provision at the same or any prior or subsequent time. To be
effective, any waiver must be set forth in a writing signed by the waiving
Party.
(d) Headings. The headings of the Sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
(e) Beneficiaries/References. The Executive shall be entitled,
to the extent permitted under any applicable law, to select and change a
beneficiary or beneficiaries to receive any compensation or benefit hereunder
following the Executive's death by giving the Company written notice thereof. In
the event of the Executive's death or a judicial determination of his
incompetence, references in this Agreement to the Executive shall be deemed,
where appropriate, to refer to his beneficiary, estate or other legal
representative.
(f) Survivorship. Except as otherwise set forth in this
Agreement, the respective rights and obligations of the Parties hereunder shall
survive any termination of the Executive's employment.
(g) Governing Law/Jurisdiction. This Agreement shall be
governed, construed, performed and enforced in accordance with the laws of the
State of Pennsylvania, without reference to principles of conflict of laws.
(h) Counterparts. This Agreement may be executed in two or
more counterparts.
(i) Employee Benefit Plans. In the event that the terms of any
of the Company's employee benefit plans provide for the vesting or distribution
of benefits on a date earlier than the date set forth in this Agreement, such
earlier date shall prevail.
20
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
The Company
By: /s/ XXXXXX XXXXXX
-----------------------------
Xxxxxx Xxxxxx
On Behalf of the Board
The Executive
/s/ XXXXXXX X. XXXX
----------------------------------
Xxxxxxx X. Xxxx
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