EMPLOYMENT AGREEMENT
Exhibit 99.2
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of the 4th
day of January, 2006, by and between X. XXXXXXXX, INC., a Delaware corporation (the “Employer” or
“Company”), and Xxxx X. XxXxxxxx (the “Employee”).
WHEREAS, the Employer and the Board of Directors of the Company desire to provide for the
continued employment of the Employee as a member of the Employer’s management, in the best interest
of the Company and its stockholders. The Employee is willing to commit himself continue to serve
the Employer, on the terms and conditions herein provided;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained,
the parties hereto agree as follows:
1. DEFINED TERMS
The definitions of capitalized terms used in this Agreement (unless stated where first used)
are provided in the last Section hereof.
2. EMPLOYMENT
The Employer hereby agrees to employ Employee commencing January 23, 2006 as Vice President
for the Employer, and the Employee hereby accepts such employment on the terms and conditions
herein contained. Employer also agrees that Employee will be appointed as Vice President – Chief
Financial Officer of the Employer on or about April 17, 2006.
3. DUTIES AND CONDITIONS OF EMPLOYMENT
3.1 DUTIES. The Employee shall devote his entire business time, attention and energies to the
Employer and shall not engage in any conduct which shall reflect adversely upon the Employer. The
Employee shall perform such duties for the Employer as may be assigned to one in his executive
status and capacity by the Chief Executive Officer of the Company or the Board of the Company. The
Employee shall serve diligently and to the best of his ability.
During his employment by the Employer, the Employee shall not, without the Company’s prior
written consent, be engaged in any other business activity, whether or not such business activity
is pursued for gain, profit or other pecuniary advantage, except that notwithstanding the
foregoing, he may invest his personal funds for his own account; provided that such investment
shall be passive and not controlling in any such investment and subject to the provisions of
Section 13.2 hereof and provided further that he will not be required to provide any substantial
services on behalf of such enterprise. Notwithstanding the foregoing, the Employee may serve on the
Boards of Directors of
other corporations during the Term as long as such service does not interfere with the
performance of his duties hereunder.
3.2 CONDITIONS. The Employee shall be provided with suitable office space, furnishings,
secretarial and administrative assistance. Without the Employee’s consent, the Employee shall not
be required to report principally to an office located more than five hundred (500) miles from his
principal office at the date of this Agreement, except to the extent the Employee may be required
to report to the Company’s principal office. In addition to the foregoing, Employee shall be
entitled to receive the benefits described in Exhibit A attached hereto, the terms of which are
incorporated herein.
4. TERM OF AGREEMENT; TERMINATION OF EMPLOYMENT; ESCROW DURING DISPUTE
4.1 TERM OF AGREEMENT. The Employer hereby employs the Employee for a Term commencing as of
January 23, 2006 and ending January 31, 2009. At the end of February 2006 and at the end of each
calendar month thereafter up to and including the end of the calendar month in which Employee’s
62nd birthday occurs, this Agreement shall automatically be extended for one (1) month unless
either party shall give notice to the other of non-extension prior to the end of such calendar
month; provided, however, if a Change in Control shall have occurred during the Term of this
Agreement, Sections 7 and 8 and 10 through 20 of this Agreement shall continue in effect until at
least the end of the Change-in-Control Protective Period (whether or not the Term of the Agreement
shall have expired for other purposes).
4.2 TERMINATION OF EMPLOYMENT PRIOR TO A CHANGE IN CONTROL. Prior to any Change in Control,
the Company may terminate the employment of the Employee for Cause pursuant to this Agreement.
Prior to any Change in Control, the Employee may terminate his employment pursuant to this
Agreement if the Employer fails to make full and timely payments of all sums provided for in
Sections 5 and 6 hereof (subject to Section 7.2 hereof), or otherwise shall breach its covenants
hereunder in any material respect.
4.3 ESCROW DURING A TERMINATION DISPUTE. Prior to any Change in Control, if the Employee shall
be terminated for Cause, and, within 30 days of such termination, shall notify the Employer of his
intention to adjudicate such termination as improper, the Employer agrees that it will deposit with
KeyBank National Association, Cleveland, Ohio, as Escrow Agent the installments of the Employee’s
Base Salary (as provided in Section 5 below) as the same would have become payable but for such
termination. In the event of a final adjudication by a tribunal of competent jurisdiction that such
termination was not for Cause, then the amounts so deposited in escrow, plus any interest earned by
the Escrow Agent thereon, shall be delivered promptly to the Employee. If such adjudication shall
be in favor of the Employer, the Escrow Agent shall return the sums so deposited, plus such
interest, to the Employer.
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The escrowed salary shall not be deemed to be liquidated damages but the Employer shall be
entitled to a credit against any such award to the extent of the sums so delivered to the Employee.
5. COMPENSATION
The Employer agrees to pay to the Employee as compensation for his services hereunder a Base
Salary initially equal to the fixed annual salary as shown on Exhibit A hereto and as will be shown
on the Employer’s employment records, payable in substantially equal weekly, biweekly, bimonthly or
monthly installments, as the case may be, in the manner currently being paid to the Employee. The
Base Salary may be discretionarily increased by the Board from time to time as the Board deems
appropriate in its reasonable business judgment.
The Base Salary in effect from time to time shall not be decreased during the Term (except as
provided in Section 7.2).
It is understood and agreed that the Employee’s compensation may not be limited to his Base
Salary and that the Employee may receive an annual bonus in the amount, if any, determined annually
by the Employer.
The Employee shall also participate in employee compensation and benefit plans available
generally to executives of the Employer (including, without limitation, any tax-qualified profit
sharing plan, nonqualified profit sharing plan, life insurance plan and health insurance plan) on a
level appropriate to his position and shall receive the employee fringe benefits available
generally to executives of the Employer (including, without limitation, the use of a company car,
cellular telephone/pager, laptop computer and printer).
6. EXPENSES
The Employee is authorized to incur reasonable expenses for promoting the business of the
Employer, including expenses for entertainment, travel and similar items. The Employer shall
reimburse the Employee for all such expenses upon the presentation by the Employee, from time to
time, of an itemized account of such expenditures.
7. PRE-TERMINATION COMPENSATION; DISABILITY
7.1 NORMAL PRE-TERMINATION COMPENSATION. If the Employee’s employment shall be terminated for
any reason during the Term (or, if later, prior to the end of the Change-in-Control Protective
Period), the Employer shall pay the Employee’s Base Salary to the Employee through the Date of
Termination at the rate in effect at the time the Notice of Termination is given (subject to
Section 7.2 hereof), together with all compensation and benefits payable to the Employee through
the Date of Termination under the terms of any compensation or benefit plan, program or arrangement
maintained by the Employer during such period. Subject to Sections 8, 9, 10 and 11 hereof, after
completing the expense reimbursements required by Section 6 hereof and making the
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payments and providing the benefits required by this Section 7, the Employer shall have no
further obligations to the Employee under this Agreement.
7.2 DISABILITY ADJUSTMENT TO BASE SALARY PAYMENTS. During the Term (or, if later, at any time
prior to the end of the Change-in-Control Protective Period), during any period that the Employee
fails to perform the Employee’s full-time duties with the Employer as a result of incapacity due to
physical or mental illness (but in no event for more than twenty-four (24) months), the Employer
shall pay only sixty percent (60%) of the Employee’s Base Salary to the Employee at the rate in
effect at the commencement of any such period (less amounts, if any, payable to the Employee at or
prior to the time of any such Base Salary payment under disability benefit plans of the Employer or
under the Social Security disability insurance program). After six (6) months of Disability, the
Employer shall have the right to terminate the Employee’s employment pursuant to this Agreement and
all Base Salary payments (except the sixty percent (60%) payments pursuant to the foregoing
sentence) shall cease. Except to the extent provided in this Section 7.2, all Base Salary payments
to the Employee shall be abated during the period of Disability. Subject to Sections 8, 9, 10 and
11 hereof, after completing the expense
reimbursements required by Section 6 hereof and making the payments and providing the benefits
required by this Section 7, the Employer shall have no further obligations to the Employee under
this Agreement.
8. NORMAL POST-TERMINATION PAYMENTS; CONTINUATION PAY; TERMINATION PAY; PROMPT PAYMENT
8.1 NORMAL POST-TERMINATION PAYMENTS. If the Employee’s employment shall be terminated for any
reason during the Term of this Agreement (or, if later, prior to the end of the Change-in-Control
Protective Period), the Employer shall pay the Employee’s normal post-termination compensation and
benefits to the Employee as such payments become due. Subject to Section 10 hereof, such
post-termination compensation and benefits shall be determined under, and paid in accordance with,
the Employer’s retirement, insurance and other compensation or benefit plans, programs and
arrangements (other than this Agreement).
8.2 CONTINUATION PAY; TERMINATION PAY. Notwithstanding anything to the contrary in Section
7.2, 9.1 or 10.1(A) hereof, if the laws governing this Agreement shall require that the Employer
continue to pay or otherwise compensate the Employee for any period of time following termination
of the Employee’s employment (“Continuation Pay”) or if such laws require certain amounts of
severance pay, termination compensation or the like (collectively, “Termination Pay”), then to the
fullest extent permitted by law any payments to the Employee pursuant to Section 7.2, 9.1 or
10.1(A) hereof shall be included in the calculation of Continuation Pay and Termination Pay and
such payments shall be deducted from the amount of Continuation Pay or Termination Pay due the
Employee.
8.3 PROMPT PAYMENT. Any payments due under Section 5, 6, 7 or 9 hereof or this Section 8 shall
be made promptly after the event giving rise to the
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obligation and shall be made to the Employee or in accordance with Section 14.2 hereof, as the
case may be.
9. POST-TERMINATION PAYMENTS UPON TERMINATION (PRIOR TO A CHANGE IN CONTROL) BY DEATH OR BY
THE EMPLOYER WITHOUT CAUSE
9.1 DEATH BENEFIT. If the Employee’s employment shall be terminated by death during the Term
(or, if later, prior to the end of the Change-in-Control Protective Period), then, in addition to
the compensation and benefits provided by Sections 7.1 and 8 hereof, the Employer shall pay a lump
sum amount equal to sixty percent (60%) of the Base Salary for twenty-four (24) months in
accordance with Section 14.2.
9.2 TERMINATION BY THE EMPLOYER WITHOUT CAUSE. If the Employer shall terminate the Employee’s
employment during the Term and prior to a Change in Control, without Cause (and not for Disability
or in connection with the Employee’s death), the Employer shall pay the Employee his Base Salary
throughout the remaining Term and annual bonuses during the remaining Term, each of which bonuses
shall be equal to one-half (1/2) times either (i) the average annual bonus paid to the Employee
during the most recent five (5) calendar years of the Employee’s employment by the Company or such
shorter period during which Employee has been employed, if less than five (5) years (prorated for
any partial years in the remaining Term), or (ii) $137,500 if Employee is terminated under this
Section 9.2 prior to receiving a bonus.
10. SEVERANCE PAYMENTS; DEDUCTIBILITY.
10.1 SEVERANCE PAYMENTS. Subject to Section 10.2 hereof, the Employer shall pay the Employee
the payments described in this Section 10.1 (the “Severance Payments”) upon the termination of the
Employee’s employment following a Change in Control and prior to the end of the Change-in-Control
Protective Period, in addition to any payments and benefits to which the Employee is entitled under
Sections 5, 6, 7 and 8.1 hereof, unless such termination is (i) by the Employer for Cause, (ii) by
reason of death or Disability, or (iii) by the Employee without Good Reason. For purposes of this
Agreement, the Employee’s employment shall be deemed to have been terminated by the Employer
without Cause following a Change in Control or by the Employee with Good Reason following a Change
in Control, as the case may be, if (i) the Employee’s employment is terminated without Cause prior
to a Change in Control and such termination was at the request or direction of a Person who has
entered into an agreement with the Employer the consummation of which would constitute a Change in
Control, (ii) the Employee terminates his employment with Good Reason prior to a Change in Control
and the circumstance or event which constitutes Good Reason occurs at the request or direction of
such Person, or (iii) the Employee’s employment is terminated by the Employer without Cause prior
to a Change in Control (but following a Potential Change in Control) and such termination is
otherwise in connection with or in anticipation of a Change in Control which actually occurs. For
purposes of any determination regarding the applicability of the immediately preceding sentence,
any position taken by the Employee shall be presumed to be correct unless the Employer establishes
to the Committee by clear and convincing evidence that such position is not correct.
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(A) In lieu of any further salary payments to the Employee for periods subsequent to the
Date of Termination and in lieu of any severance benefit otherwise payable to the Employee, the
Employer shall pay to the Employee a lump sum severance payment, in cash, equal to three (3)
times the sum of (i) the higher of the Employee’s Base Salary in effect immediately prior to
the occurrence of the event or circumstance upon which the Notice of Termination is based or
the Employee’s Base Salary in effect immediately prior to the Change in Control, and (ii) the
higher of the annual bonus earned by the Employee in respect of the Employer’s fiscal year
immediately preceding that in which the Date of Termination occurs or the average annual bonus
so earned in respect of the three fiscal years immediately preceding that in which the Change
in Control occurs.
(B) Notwithstanding any provision of any annual incentive plan to the contrary, the
Employer shall pay to the Employee a lump sum amount, in cash, equal to the sum of (i) any
annual incentive compensation which has been allocated or awarded to the Employee for a
completed fiscal year preceding the Date of Termination and which, as of the Date of
Termination, is contingent only upon the continued employment of the Employee to a subsequent
date, and (ii) a pro rata portion to the Date of Termination of a deemed annual bonus for the
Employer’s fiscal year in which the Date of Termination occurs, calculated by multiplying (i)
the higher of the annual bonus earned by the Employee with respect to the immediately preceding
fiscal year or the average annual bonus earned by the Employee with respect to the immediately
preceding three fiscal years of the Employer by (ii) the fraction obtained by dividing the
number of days in the fiscal year of the Employer in which termination occurs up to and
including the Date of Termination by 365.
(C) For the thirty-six (36) month period immediately following the Date of Termination,
the Employer shall arrange to provide the Employee with life, disability, accident and health
insurance benefits substantially similar to those which the Employee is receiving immediately
prior to the Notice of Termination (without giving effect to any amendment to such benefits
made subsequent to a Change in Control, which amendment adversely affects in any manner the
Employee’s entitlement to or the amount of such benefits); PROVIDED, HOWEVER, that, unless the
Employee consents to a different method (after taking into account the effect of such method on
the calculation of “parachute payments” pursuant to Section 10.2 hereof), such health insurance
benefits shall be provided through a third-party insurer. Benefits otherwise receivable by the
Employee pursuant to this Section 10.1(C) shall be reduced to the extent comparable benefits
are actually received by or made available to the Employee without cost during the thirty-six
(36) month period following the Employee’s termination of employment (and any such benefits
actually received by or made available to the Employee shall be reported to the Employer by the
Employee). If the Severance Payments shall be decreased pursuant to Section 10.2 hereof, and
the Section 10.1(C) benefits which remain payable after the application of Section 10.2 hereof
are thereafter reduced pursuant to the immediately preceding sentence because of the receipt or
availability of comparable benefits, the Employer shall, at the time of such reduction, pay to
the Employee the least of (a) the amount of the decrease made
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in the Severance Payments pursuant to Section 10.2 hereof, (b) the amount of the
subsequent reduction in these Section 10.1(C) benefits, or (C) the maximum amount which can be
paid to the Employee without being, or causing any other payment to be, nondeductible by reason
of section 280G of the Code.
10.2 DEDUCTIBILITY.
(A) Notwithstanding any other provisions of this Agreement, in the event that any payment
or benefit received or to be received by the Employee in connection with a Change in Control or
the termination of the Employee’s employment (whether pursuant to the terms of this Agreement
or any other plan, arrangement or agreement with the Employer, any Person whose actions result
in a Change in Control or any Person affiliated with the Employer or such Person) (all such
payments and benefits, including the Severance Payments, being hereinafter called “Total
Payments”) would not be deductible (in whole or part), by the Employer, an affiliate or Person
making such payment or providing such benefit as a result of section 280G of the Code, then, to
the extent necessary to make such portion of the Total Payments deductible (and after taking
into account any reduction in the Total Payments provided by reason of section 280G of the Code
in such other plan, arrangement or agreement), the cash Severance Payments shall first be
reduced (if necessary, to zero), and the noncash Severance Payments shall thereafter be reduced
(if necessary, to zero); PROVIDED, HOWEVER, that the Employee may elect (at any time prior to
the delivery of a Notice of Termination hereunder) to have the non-cash Severance Payments
reduced (or eliminated) prior to any reduction of the cash Severance Payments.
(B) For purposes of this limitation, (i) no portion of the Total Payments the receipt or
enjoyment of which the Employee shall have effectively waived in writing prior to the delivery
of a Notice of Termination shall be taken into account, (ii) no portion of the Total Payments
shall be taken into account which in the opinion of tax counsel (the “Tax Counsel”) reasonably
acceptable to the Employee and selected by the accounting firm which was, immediately prior to
the Change in Control, the Employer’s independent auditor (the “Auditor”) does not constitute a
“parachute payment” within the meaning of section 280G(b)(2) of the Code, including by reason
of section 280G(b) (4)(A) of the Code, (iii) the Severance Payments shall be reduced only to
the extent necessary so that the Total Payments (other than those referred to in clauses (i) or
(ii)) in their entirety constitute reasonable compensation for services actually rendered
within the meaning of section 280G(b)(4)(B) of the Code or are otherwise not subject to
disallowance as deductions by reason of section 280G of the Code, in the opinion of the Tax
Counsel, and (iv) the value of any noncash benefit or any deferred payment or benefit included
in the Total Payments shall be determined by the Auditor in accordance with the principles of
sections 280G(d)(3) and (4) of the Code.
(C) If it is established pursuant to a final determination of a court or an Internal
Revenue Service proceeding that, notwithstanding the good faith of the Employee and the
Employer in applying the terms of this Section 10.2, the aggregate “parachute payments” paid to
or for the Employee’s benefit are in an amount that would result in
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any portion of such “parachute payments” not being deductible by reason of section 280G of
the Code, then the Employee shall have an obligation to pay the Employer upon demand an amount
equal to the sum of (i) the excess of the aggregate “parachute payments” paid to or for the
Employee’s benefit over the aggregate “parachute payments” that could have been paid to or for
the Employee’s benefit without any portion of such “parachute payments” not being deductible by
reason of section 280G of the Code; and (ii) interest on the amount set forth in clause (i) of
this sentence at one hundred twenty percent (120%) of the rate provided in section
1274(b)(2)(B) of the Code from the date of the Employee’s receipt of such excess until the date
of such payment.
10.3 The payments provided in Sections 10.1(A) and (B) hereof shall be made not later than the
fifth day following the Date of Termination; PROVIDED, HOWEVER, that if the amounts of such
payments, and the limitation on such payments set forth in Section 10.2 hereof, cannot be finally
determined on or before such day, the Employer shall pay to the Employee on such day an estimate,
as determined in good faith by the Employer, in accordance with Section 10.2 hereof, of the minimum
amount of such payments to which the Employee is clearly entitled and shall pay the remainder of
such payments (together with interest at one hundred twenty percent (120%) of 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 the thirtieth (30th) day after the Date of Termination. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to have been due, such excess
shall constitute a loan by the Employer to the Employee, payable on the fifth (5th) business day
after demand by the Employer (together with interest at one hundred twenty percent (120%) of the
rate provided in section 1274(b)(2)(B) of the Code). At the time that payments are made under this
Section, the Employer shall provide the Employee with a written statement setting forth the manner
in which such payments were calculated and the basis for such calculations including, without
limitation, any opinions or other advice the Employer has received from outside counsel, auditors
or consultants (and any such opinions or advice which are in writing shall be attached to the
statement). In the event the Employer should fail to pay when due the amounts described in Sections
10.1(A), (B) and (C) hereof or in Section 10.2 hereof, the Employee shall also be entitled to
receive from the Employer an amount representing interest on any such unpaid amounts from the due
date, as determined under this Section 10.3 (without regard to any extension of the Date of
Termination pursuant to Section 11.3 hereof), to the date of payment at one hundred twenty percent
(120%) of the rate provided in section 1274(b)(2)(B) of the Code.
10.4 The Employer also shall pay to the Employee all legal fees and expenses incurred by the
Employee (i) in disputing in good faith any issue relating to the termination of the Employee’s
employment following a Change in Control and prior to the end of the Change-in-Control Protective
Period, (ii) in seeking in good faith to obtain or enforce any benefit or right provided by this
Agreement, or (iii) in connection with any tax audit or proceeding to the extent attributable to
the application of section 4999 of the Code to any payment or benefit provided hereunder. Such
payments shall be made within five (5) business days after delivery of the Employee’s written
requests for payment
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accompanied with such evidence of fees and expenses incurred as the Employer reasonably may
require.
11. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
11.1 NOTICE OF TERMINATION. During the Term (and, if longer, until the end of the
Change-in-Control Protective Period), any purported termination of the Employee’s employment (other
than by reason of death) shall be communicated by written Notice of Termination from one party
hereto to the other party hereto in accordance with Section 15 hereof. For purposes of this
Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the Employee’s employment
under the provision so indicated. Further, with respect to any purported termination of the
Employee’s employment after a Change in Control and prior to the end of the Change-in-Control
Protective Period, a Notice of Termination for Cause is required to include a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board which was called and held for the purpose of considering
such termination (after reasonable notice to the Employee and an opportunity for the Employee,
together with the Employee’s counsel, to be heard before the Board) finding that, in the good faith
opinion of the Board, the Employee was guilty of conduct set forth in clause (i) or (ii) of the
definition of Cause herein, and specifying the particulars thereof in detail.
11.2 DATE OF TERMINATION. “Date of Termination,” with respect to any purported termination of
the Employee’s employment during the Term (and, if longer, prior to the end of the
Change-in-Control Protective Period), shall mean (i) if the Employee’s employment is terminated for
Disability, thirty (30) days after Notice of Termination is given (provided that the Employee shall
not have returned to the full-time performance of the Employee’s duties during such thirty (30) day
period), and (ii) if the Employee’s employment is terminated for any other reason, the date
specified in the Notice of Termination (which, in the case of a termination by the Employer, shall
not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case
of a termination by the Employee, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is given).
11.3 DISPUTE CONCERNING TERMINATION. With respect to any purported termination of the
Employee’s employment after a Change in Control and prior to the end of the Change-in-Control
Protective Period, if within fifteen (15) days after any Notice of Termination is given, or, if
later, prior to the Date of Termination (as determined without regard to this Section 11.3), the
party receiving such Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be extended until the date on which the
dispute is finally resolved, either by mutual written agreement of the parties or by a final
judgment, order or decree of a court of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has been perfected);
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PROVIDED, HOWEVER, that the Date of Termination shall be extended by a notice of dispute given
by the Employee only if such notice is given in good faith and the Employee pursues the resolution
of such dispute with reasonable diligence.
11.4 COMPENSATION DURING DISPUTE. If a purported termination occurs following a Change in
Control and prior to the end of the Change-in-Control Protective Period and the Date of Termination
is extended in accordance with Section 11.3 hereof, the Employer shall continue to pay the Employee
the full compensation in effect when the notice giving rise to the dispute was given (including,
but not limited to, salary) and continue the Employee as a participant in all compensation, benefit
and insurance plans in which the Employee was participating when the notice giving rise to the
dispute was given, until the Date of Termination, as determined in accordance with Section 11.3
hereof. Amounts paid under this Section 11.4 are in addition to all other amounts due under this
Agreement (other than those due under Section 7.1 hereof) and shall not be offset against or reduce
any other amounts due under this Agreement.
12. NO MITIGATION
The Employer agrees that, if the Employee’s employment with the Employer terminates following
a Change in Control and prior to the end of the Change-in-Control Protective Period, the Employee
is not required to seek other employment or to attempt in any way to reduce any amounts payable to
the Employee by the Employer pursuant to Section 10 hereof or Section 11.4 hereof. Further, the
amount of any payment or benefit provided for in this Agreement (other than Section 10.1(C) hereof)
shall not be reduced by any compensation earned by the Employee as the result of employment by
another employer, by retirement benefits, by offset against any amount claimed to be owed by the
Employee to the Employer, or otherwise.
13. CONFIDENTIALITY; NON-COMPETITION AND NON-SOLICITATION
13.1 CONFIDENTIALITY. The Companies’ methods, plans for doing business, processes, pricing,
compounds, customers and supplies are vital to the Companies and, to the extent not made public by
the Companies, constitute confidential information subject to the Companies’ proprietary rights
therein. The Employee covenants and agrees that during the Term and at all times thereafter, the
Employee will not, directly or indirectly, make known, divulge, furnish, make available or use,
otherwise than in the regular course of the Employee’s employment by the Employer, any invention,
product, process, apparatus or design of any of the Companies, or any knowledge or information in
respect thereof (including, but not limited to, business methods and techniques), or any other
confidential or so-called “insider” information of any of the Companies. This covenant shall apply
without regard to the time or circumstances of any termination of the Employee’s employment.
13.2 NON-COMPETITION AND NON-SOLICITATION. The Employee covenants and agrees that during the
period of one (1) year following any termination of the Employee’s employment which occurs prior to
a Change in Control, the Employee will not, directly or indirectly, either as an individual for the
Employee’s own account or
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as an investor, or other participant in, or as an employee, agent, or representative of, any
other business enterprise:
(i) solicit, employ, entice, take away or interfere with, or attempt to solicit, employ,
entice, take away or interfere with, any employee of the Employer or the Companies; or
(ii) engage or participate in or finance, aid or be connected with any enterprise which
competes with the business of the Companies, or any of them.
The geographical limitations of the foregoing shall include any country in which the Companies
or any of them shall be doing business as of such date of such termination. This covenant shall
apply without regard to the circumstances of any termination of the Employee’s employment which
occurs prior to a Change in Control.
13.3 The Employee acknowledges that the covenants contained in this Section 13 are of the
essence of this Agreement and said covenants shall be construed as independent of any other
provisions of this Agreement. Recognizing the irreparable nature of the injury that could result
from the Employee’s violation of any of the covenants and agreement to be performed and/or observed
by the Employee pursuant to the provisions of this Section 13, and that damages would be inadequate
compensation, it is agreed that any violations by the Employee of the provisions of this Section
13, shall be the proper subject for immediate injunctive and other equitable relief to the
Employer.
14. SUCCESSORS; BINDING AGREEMENT
14.1 In addition to any obligations imposed by law upon any successor to the Employer, the
Employer will require any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the Employer to
expressly assume and agree to perform this Agreement in the same manner and to the same extent that
the Employer would be required to perform it if no such succession had taken place. Failure of the
Employer to obtain such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Employee to compensation from the
Employer in the same amount and on the same terms as the Employee would be entitled to hereunder if
the Employee were to terminate the Employee’s employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which any such succession
becomes effective shall be deemed the Date of Termination. Except as provided in this Section
14.1, this Agreement shall not be assignable by either party without the written consent of the
other party hereto.
14.2 This Agreement shall inure to the benefit of and be enforceable by the Employee’s
personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Employee shall die while any amount would still be payable to the
Employee hereunder (other than amounts which, by their terms, terminate upon the death of the
Employee) if the Employee had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of
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this Agreement to the executors, personal representatives or administrators of the Employee’s
estate.
15. NOTICES
For purposes of this Agreement, notices and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed
by United States registered mail, return receipt requested, postage prepaid, addressed, if to the
Employee, to the address shown for the Employee in the personnel records of the Employer and, if to
the Employer, to the address set forth below, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of change of address
shall be effective only upon actual receipt:
| To the Employer: | ||
| Xxxxx X. Xxxxxx, President and Chief Executive Officer | ||
| X. Xxxxxxxx, Inc. | ||
| X.X. Xxx 0000 | ||
| Xxxxx, Xxxx 00000-0000 | ||
| With a copy to: | ||
| J. Xxxx Xxxxxx | ||
| Vorys, Xxxxx, Xxxxxxx and Xxxxx LLP | ||
| 000 Xxxxx Xxxx Xxxxxx, Xxxxx 0000 | ||
| Xxxxx, Xxxx 00000 |
16. MISCELLANEOUS
No provision of this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed by the Employee and such officer as
may be specifically designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes
any other agreements or representations, oral or otherwise, express or implied, with respect to the
subject matter hereof which have been made by either party, except as expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Ohio. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required under federal,
state or local law and any additional withholding to which the Employee has agreed. The obligations
of the Employer and the Employee under this Agreement which by their nature may require (partial or
total) performance after the expiration of the Term or the Change-in-Control Protective Period
(including, without
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limitation, those under Sections 5 through 11 and Section 13 hereof) shall survive such
expiration.
17. VALIDITY
The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall remain in full
force and effect.
18. COUNTERPARTS
This Agreement may be executed in several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and the same instrument.
19. SETTLEMENT OF DISPUTES AFTER CHANGE IN CONTROL; ARBITRATION
After a Change in Control and prior to the end of the Change-in-Control Protective Period, all
claims by the Employee for benefits under this Agreement shall be directed to and determined by the
Committee and shall be in writing. Any denial by the Committee of a claim for benefits under this
Agreement shall be delivered to the Employee in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement relied upon. The Committee shall
afford a reasonable opportunity to the Employee for a review of the decision denying a claim and
shall further allow the Employee to appeal to the Committee a decision of the Committee within
sixty (60) days after notification by the Committee that the Employee’s claim has been denied. Any
further dispute or controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Akron, Ohio, in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator’s award in any court having
jurisdiction. Notwithstanding any provision of this Agreement to the contrary, the Employee shall
be entitled to seek specific performance of the Employee’s right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising under or in connection with
this Agreement.
20. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings indicated below:
(A) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange
Act.
(B) “Board” shall mean the Board of Directors of the Employer.
(C) “Cause” for termination by the Employer of the Employee’s employment shall mean the
following:
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(I) with respect to a termination as to which the Notice of Termination is duly given
prior to a Change in Control, the Employee’s breach of his covenants herein contained, the
Employee’s gross neglect of his duties hereunder, the Employee’s knowingly committing
misfeasance or knowingly permitting nonfeasance of his duties in any material respect, or
the Employee’s committing a felony; and
(II) with respect to a termination as to which the Notice of Termination is duly given
following a Change in Control, (i) the willful and continued failure by the Employee to
substantially perform the Employee’s duties with the Employer (other than any such failure
resulting from the Employee’s incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice of Termination for Good Reason
by the Employee pursuant to Section 11.1 hereof) after a written demand for substantial
performance is delivered to the Employee by the Board, which demand specifically identifies
the manner in which the Board believes that the Employee has not substantially performed
the Employee’s duties, or (ii) the willful engaging by the Employee in conduct which is
demonstrably and materially injurious to the Employer or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no act, or failure
to act, on the Employee’s part shall be deemed “willful” unless done, or omitted to be
done, by the Employee not in good faith and without reasonable belief that the Employee’s
act, or failure to act, was in the best interest of the Employer and (y) in the event of a
dispute concerning the application of this provision, no claim by the Employer that Cause
exists shall be given effect unless the Employer establishes to the Committee by clear and
convincing evidence that Cause exists.
(D) A “Change in Control” shall be deemed to have occurred if the event set forth in any
one of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Employer (not including in the securities beneficially owned by such
Person any securities acquired directly from the Employer or its affiliates other than in
connection with the acquisition by the Employer or its affiliates of a business)
representing 25% or more of either the then outstanding shares of common stock of the
Employer or the combined voting power of the Employer’s then outstanding securities; or
(II) the following individuals cease for any reason to constitute a majority of the
number of directors then serving: individuals who, on the date hereof, constitute the Board
and any new director (other than a director whose initial assumption of office is in
connection with an actual or threatened election contest, including but not limited to a
consent solicitation, relating to the election of directors of the Employer) whose
appointment or election by the Board or nomination for election by the Employer’s
stockholders was approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were
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directors on the date hereof or whose appointment, election or nomination for election
was previously so approved; or
(III) the stockholders of the Employer approve a merger or consolidation of the
Employer with any other corporation or approve the issuance of voting securities of the
Employer in connection with a merger or consolidation of the Employer (or any direct or
indirect subsidiary of the Employer) pursuant to applicable stock exchange requirements,
other than (i) a merger or consolidation which would result in the voting securities of the
Employer outstanding immediately prior to such merger or consolidation continuing to
represent (either by remaining outstanding or by being converted into voting securities of
the surviving entity or any parent thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee benefit plan of the
Employer or any subsidiary of the Employer, at least 75% of the combined voting power of
the voting securities of the Employer or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Employer (or similar
transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly,
of securities of the Employer (not including in the securities Beneficially Owned by such
Person any securities acquired directly from the Employer or its subsidiaries other than in
connection with the acquisition by the Employer or its subsidiaries of a business)
representing 25% or more of either the then outstanding shares of common stock of the
Employer or the combined voting power of the Employer’s then outstanding securities; or
(IV) the stockholders of the Employer approve a plan of complete liquidation or
dissolution of the Employer or an agreement for the sale or disposition by the Employer of
all or substantially all of the Employer’s assets, other than a sale or disposition by the
Employer of all or substantially all of the Employer’s assets to an entity, at least 75% of
the combined voting power of the voting securities of which are owned by stockholders in
substantially the same proportions as their ownership of the Employer immediately prior to
such sale.
Notwithstanding the foregoing, no “Change in Control” shall be deemed to have occurred if
there is consummated any transaction or series of integrated transactions immediately following
which the record holders of the common stock of the Employer immediately prior to such
transaction or series of transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the assets of the Employer
immediately following such transaction or series of transactions.
Further, notwithstanding the foregoing, any event or transaction which would otherwise
constitute a Change in Control (a “Transaction”) shall not constitute a Change in Control for
purposes of this Agreement if, in connection with the Transaction, the Employee participates as
an equity investor in the acquiring entity or any of its affiliates (the “Acquiror”). For
purposes of the preceding sentence, the Employee shall not be deemed to have participated as an
equity investor in the
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Acquiror by virtue of (i) obtaining beneficial ownership of any equity interest in the
Acquiror as a result of the grant to the Employee of an incentive compensation award under one
or more incentive plans of the Acquiror (including, but not limited to, the conversion in
connection with the Transaction of incentive compensation awards of the Employer into incentive
compensation awards of the Acquiror), on terms and conditions substantially equivalent to those
applicable to other executives of the Employer immediately prior to the Transaction, after
taking into account normal differences attributable to job responsibilities, title and similar
matters, (ii) obtaining beneficial ownership of any equity interest in the Acquiror on terms
and conditions substantially equivalent to those obtained in the Transaction by all other
stockholders of the Employer, or (iii) passive ownership of less than three percent (3%) of the
stock of the Acquiror.
(E) “Change-in-Control Protective Period” shall mean the period from the occurrence of a
Change in Control until the later of the second anniversary of such Change in Control or, if
such Change in Control shall be caused by the stockholder approval of a merger or consolidation
described in Section 20(E)(III) hereof, the second anniversary of the consummation of such
merger or consolidation.
(F) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
(G) “Committee” shall mean (i) the individuals (not fewer than three in number) who,
immediately prior to a Potential Change in Control, constitute the Compensation Committee of
the Board, plus (ii) in the event that fewer than three individuals are available from the
group specified in clause (i) above for any reason, such individuals as may be appointed by the
individual or individuals so available (including for this purpose any individual or
individuals previously so appointed under this clause (ii)); provided, however, that the
maximum number of individuals constituting the Committee shall not exceed five.
(H) “Companies” shall mean, collectively, the Employer and each corporation which is now
and hereafter shall become a subsidiary of, or a parent of, the Employer, together with their
respective successors and assigns.
(I) “Continuation Pay” shall mean those payments so described in Section 8.2 hereof.
(J) “Date of Termination” shall have the meaning stated in Section 11.2 hereof.
(K) “Disability” shall be deemed the reason for the termination by the Employer of the
Employee’s employment, if, as a result of the Employee’s incapacity due to physical or mental
illness, the Employee shall have been absent from the full-time performance of the Employee’s
duties with the Employer for a period of six (6) consecutive months, the Employer shall have
given the Employee a Notice of Termination for Disability, and, within thirty (30) days after
such Notice of
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Termination is given, the Employee shall not have returned to the full-time performance of
the Employee’s duties.
(L) “Employee” shall mean the individual named in the first paragraph of this Agreement.
(M) “Employer” shall mean X. Xxxxxxxx, Inc. and, except in determining under Section 20(E)
hereof whether or not any Change in Control of the Employer has occurred, any successor to its
business and/or assets which assumes and agrees to perform this Agreement by operation of law,
or otherwise.
(N) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time.
(O) “Good Reason” for termination by the Employee of the Employee’s employment shall mean
the occurrence (without the Employee’s express prior written consent) after any Change in
Control, or after any Potential Change in Control under the circumstances described in the
second sentence of Section 10.1 hereof (treating all references in paragraphs (I) through (VII)
below to a “Change in Control” as references to a “Potential Change in Control”), of any one of
the following acts by the Employer, or failures by the Employer to act, unless, in the case of
any act or failure to act described in paragraph (I), (V), (VI) or (VII) below, such act or
failure to act is corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Employee of any duties inconsistent with the Employee’s
status as an executive officer of the Employer or a substantial adverse alteration in the
nature or status of the Employee’s responsibilities from those in effect immediately prior
to the Change in Control (other than any such alteration primarily attributable to the fact
that the Employer may no longer be a public company);
(II) a reduction by the Employer in the Employee’s annual base salary as in effect on
the date hereof or as the same may be increased from time to time except for
across-the-board salary reductions similarly affecting all executives of the Employer and
all executives of any Person in control of the Employer;
(III) the relocation of the Employer’s principal executive offices to a location more
than fifty (50) miles from the location of such offices immediately prior to the Change in
Control or the Employer’s requiring the Employee to be based anywhere other than the
Employer’s principal executive offices except for required travel on the Employer’s
business to an extent substantially consistent with the Employee’s present business travel
obligations;
(IV) the failure by the Employer, without the Employee’s consent, to pay to the
Employee any portion of the Employee’s current compensation, or to pay to the Employee any
portion of an installment of deferred compensation under any
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deferred compensation program of the Employer, within seven (7) days of the date such
compensation is due;
(V) the failure by the Employer to continue in effect any compensation plan in which
the Employee participates immediately prior to the Change in Control which is material to
the Employee’s total compensation, including but not limited to the Employer’s 1991 Stock
Incentive Plan and Nonqualified Profit Sharing Plan 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 the failure by
the Employer to continue the Employee’s participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of the amount of
benefits provided and the level of the Employee’s participation relative to other
participants, as existed at the time of the Change in Control;
(VI) the failure by the Employer to continue to provide the Employee with benefits
substantially similar to those enjoyed by the Employee under any of the Employer’s pension,
life insurance, medical, health and accident, or disability plans in which the Employee was
participating at the time of the Change in Control, the taking of any action by the
Employer which would directly or indirectly materially reduce any of such benefits or
deprive the Employee of any material fringe benefit enjoyed by the Employee at the time of
the Change in Control, or the failure by the Employer to provide the Employee with the
number of paid vacation days to which the Employee is entitled on the basis of years of
service with the Employer in accordance with the Employer’s normal vacation policy in
effect at the time of the Change in Control; or
(VII) any purported termination of the Employee’s employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of Section 11.1 hereof; for
purposes of this Agreement, no such purported termination shall be effective.
The Employee’s right to terminate the Employee’s employment for Good Reason shall not be
affected by the Employee’s incapacity due to physical or mental illness. The Employee’s
continued employment shall not constitute consent to, or a waiver of rights with respect to,
any act or failure to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of Good Reason, any claim by the
Employee that Good Reason exists shall be presumed to be correct unless the Employer
establishes to the Committee by clear and convincing evidence that Good Reason does not exist.
(P) “Notice of Termination” shall have the meaning stated in Section 11.1 hereof.
(Q) “Person” shall have the meaning given in Section 3(a) (9) of the Exchange Act, as
modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include
(i) the Employer or any of its subsidiaries, (ii) a trustee or other
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fiduciary holding securities under an employee benefit plan of the Employer or any of its
subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an offering of
such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of
the Employer in substantially the same proportions as their ownership of stock of the Employer.
(R) “Potential Change in Control” shall be deemed to have occurred if the event set forth
in any one of the following paragraphs shall have occurred:
(1) the Employer enters into an agreement, the consummation of which would result in
the occurrence of a Change in Control;
(2) the Employer or any Person publicly announces an intention to take or to consider
taking actions which, if consummated, would constitute a Change in Control;
(3) any Person becomes the Beneficial Owner, directly or indirectly, of securities of
the Employer representing 15% or more of either the then outstanding shares of common stock
of the Employer or the combined voting power of the Employer’s then outstanding securities;
or
(4) the Board adopts a resolution to the effect that, for purposes of this Agreement,
a Potential Change in Control has occurred.
(S) “Severance Payments” shall mean those payments described in Section 10.1 hereof.
(T) “Term” shall mean the period of time described in Section 4.1 hereof (including any
extension or continuation described therein).
(U) “Termination Pay” shall mean those payments so described in Section 8.2 hereof.
(V) “Total Payments” shall mean those payments described in Section 10.2 hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed (the
corporate signatory by the respective officer duly authorized) as of the day and year first above
written.
| EMPLOYEE: | EMPLOYER: | |||||
| /s/ Xxxx X. XxXxxxxx | X. Xxxxxxxx, Inc. | |||||
Name:
|
Xxxx X. XxXxxxxx | By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx, President | ||||||
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EXHIBIT A
| • | Upon appointment as the Vice President – Chief Financial Officer, you will be responsible for all financial matters of the Company as its principal financial officer. |
| • | Your starting salary will be $275,000 annually and you will be eligible for participation in our management bonus program initially at the 50% target level, or $137,500. You will also receive at commencement of employment an additional grant of 60,000 nonqualified stock options and a bonus of $120,000 to help compensate you for incentive compensation amounts foregone in your departure from your current company. You will also be eligible for future stock options/grants and discretionary awards and/or cash equivalents consistent with our practice and custom for executive officers under our incentive compensation plans. |
| • | We will pay for the following with respect to your relocation from Columbus, Ohio to the Akron, Ohio area: (i) real estate commissions and/or fees incurred by you as seller of your home in the Columbus area; (ii) closing costs incurred by you as buyer of your home in the Akron area; (iii) expenses incurred in moving your household effects from Columbus to Akron; and (iv) temporary housing expenses incurred by you through May 31, 2006 in order to work in the Company’s corporate offices during that time. |
| • | You will initially be eligible for four weeks of paid vacation during each calendar year as an executive officer of the Company. |
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