THE XXXXXX GROUP, INC.
0000 XXXXXXX XXXXXX
XXXXXXXXX, XXXXXXXX 00000
January 12, 2000
Xx. Xxxxxxx X. Xxxxxx, III
0000 Xxxxxxxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000
Re: Xxxxxxx X. Xxxxxx, III/
The Xxxxxx Group, Inc.
Dear Xxxx:
This letter will serve to confirm our offer and mutual agreement
pursuant to which you will serve as President and Chief Executive Officer of The
Xxxxxx Group, Inc. ("Xxxxxx") reporting directly to the Board of Directors of
Xxxxxx ("Board"), and responsible to the Board for carrying out its primary
directives. You agree to devote substantially all of your business time and
energies to the business of the Company and to faithfully, diligently and
competently perform your duties hereunder. Such mutual agreement shall encompass
the following principal terms and conditions:
1. Your annual base salary will be Two Hundred Fifty Thousand
($250,000.00) Dollars (the "Base Salary") which will be paid to you in
accordance with Xxxxxx'x standard payment policies. The Base Salary
shall be reviewed annually by the Board of Directors and shall be
subject to (a) increases to reflect inflation and (b) increases to
reflect your performance, as may be reasonably determined by the Board
of Directors.
2. In addition to your Base Salary, you will be eligible to
receive a non-capped annual performance-related bonus, upon
accomplishment of corporate goals and objectives, the identity of which
shall be jointly determined by the Board and you. The bonus equal to
fifty (50%) percent of your base salary in the event that your targeted
corporate goals and objectives are satisfied (the "Target Bonus"). For
calendar year 2000, the bonus shall be not less than One Hundred
Thousand (100,000.00) Dollars.
3. Om addition to your Base Salary and Bonus as set forth in
Sections 1 and 2 hereof, you shall receive options allowing for the
acquisition by you of 120,000 shares of Xxxxxx stock in accordance with
the terms of the Non-Qualified Stock Option Plan and Agreement
simultaneously entered into between you and Xxxxxx.
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4. Salary, bonus, options and benefits shall be reviewed
annually. In the event that the 2000 EBITDA target is achieved, it is
anticipated you will receive a favorable review relative to increases
in each of the foregoing.
5. In the event that your employment with Xxxxxx shall, at any
time, be terminated by Xxxxxx without "cause", Xxxxxx will pay to you
(or, in the event of your medical disability or death subsequent to the
termination of your employment by Xxxxxx without cause, to your legal
representative), an amount to be calculated as follows:
(a) For the date of commencement of your employment
until your first anniversary date, one times your
"total compensation" (i.e. Base Salary plus your
Target Bonus);
(b) From your first anniversary date until your second
anniversary date, one and one-half times your "total
compensation" (i.e. Base Salary plus your Target
Bonus); or
(c) From and after your second anniversary date, two
times your "total compensation" (i.e. Base Salary
plus your Target Bonus).
Such amount will be payable to you in equal monthly installments over
the following "Severance Periods" (which for purposes of this Section
shall be twelve (12) months in the event that the term of your
employment is governed by the Section 5(a) of this Agreement; and
twenty-four (24) months in the event that the term of your employment
is governed by Section 5(c) of this Agreement. In addition, during the
applicable Severance Periods, Xxxxxx will (i) continue to permit you to
participate in those medical and other insurance benefit plans the
currently provided by Xxxxxx to its executive officers on the same
terms and conditions (including employee contributions) as are made
available to its executive officers and (ii) continue to (a) provide
you with the use of the company car split dollar insurance policy
described in Section 9 (such benefits being referred to as the
"Continued Benefits". Notwithstanding the foregoing, if continuation
coverage under Xxxxxx'x medical and other insurance benefit plans for
any portion of the Severance Periods is not permitted by such plants,
in lieu of such continued coverage, Xxxxxx shall pay you an amount in
cash equal to the premium cost that would otherwise have been incurred
by Xxxxxx in providing you with such coverage during such remaining
portion of the Severance Periods. Following such a termination of
employment, you shall not be entitled to any other compensation or
benefits hereunder. Any other benefits payable during the Severance
Periods, will be determined under the employee benefit plans and
programs of Xxxxxx as in effect from time to time.
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For the purposes of this agreement, termination for "cause"
shall be limited to the following:
(a) The willful and continued failure by you to
substantially perform your duties hereunder;
(b) Gross misconduct which is or could reasonably be
expected to become materially injurious to Xxxxxx,
including, without limitation, fraud,
misappropriation of Xxxxxx property, or opportunity
or unauthorized disclosure of confidential
information;
(c) Any act or acts of dishonesty constituting a felony
under the laws of the United States or any state
thereof;
(d) Your substantial and material breach of loyalty to
Xxxxxx including, but not limited to, dishonesty
resulting or intending to result, directly or
indirectly, in personal gain or enrichment at the
expense of Xxxxxx;
(e) A final adjudication by a Court of competent
jurisdiction that you are mentally "incapacitated",
as that term is defined in accordance with the
statute or case law of the State of New York.
(f) Any other circumstances which would constitute
termination for cause under the laws of the State of
New York.
Any and all other circumstances giving rise to a termination of
employment shall be deemed termination "without cause".
In the event of the termination of your employment for cause,
or due to your voluntary resignation, or your death or disability, your
entitlement to compensation hereunder will be limited to the payment of
any accrued but unpaid Base Salary for the period preceding your
termination and any Bonus earned, but not yet paid, with respect to any
previously completed year. Any other benefits payable following such a
termination of employment will be determined under the employee benefit
plans and programs of Xxxxxx as in effect from time to time.
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6. Notwithstanding the foregoing, in the event of the
termination of your employment by Xxxxxx or its successor without
cause, or due to your "constructive termination", in either case,
within the twelve months next subsequent to a "change of control" of
Xxxxxx, you will receive, by way of lump sum payment, in lieu of the
cash payments described in Section 3, upon such termination or
constructive termination, an amount equal to the greater of two times:
(i) your then-current Base Salary plus fifty (50%
percent of your then-current Base Salary; or
(ii) your total compensation (Base Salary plus bonus)
for the prior calendar year preceding the date of your
termination.
In addition to the foregoing, those options granted to you pursuant to
Section 3 of this Agreement plus any additional options which may
hereafter be awarded to you, if not already vested, shall immediately
vested and be exercisable by you.
You shall also receive during the twenty-four (24) month period
following the exercise by you of this "change of control" provision the
Continued Benefits as described in Section 5 hereof.
For this purposes of this provision:
(i) a "change of control" shall be deemed to have occurred (a)
only on the date, if any, of any event, immediately after
which any entity has the right to appoint a majority of the
representatives to the Board of Directors of Xxxxxx or
otherwise direct or control the affairs of Xxxxxx but shall
not include Xxxxxx "going private" or any change pursuant to
which Xxxxx X. Xxxxxxx, or an entity controlled by Xxxxx X.
Xxxxxxx, remains in control of Xxxxxx; or (b) in the event
that an entity not controlled by Xxxxx X. Xxxxxxx changes your
reporting status so that you are no longer directly reporting
to the Board and charged with the responsibility for carrying
out its primary directives; or (c) in the event that an entity
controlled by Xxxxx X. Xxxxxxx changes your reporting status
so that you are no longer directly reporting to a Board of a
Gabelli-controlled entity and charged with the responsibility
for carrying out its primary directives; and
(ii) "constructive termination" shall mean your resignation
due to (a) a substantial diminution of your position or
responsibilities with Xxxxxx, including, without limitation, a
change in your reporting status so that you are no longer
directly reporting to the Board and charged with the
responsibility for carrying out its primary directives or (b)
Xxxxxx'x failure to pay you any of the compensation to which
you are entitled hereunder, in either case, which is not cured
within ten
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(10) days following Xxxxxx'x receipt of written notice from
you detailing such diminution or failure.
7. Certain Covenants.
You acknowledge that: (i) Xxxxxx conducts its business
throughout the United States and; (ii) your work for Xxxxxx will bring
you into close contact with many confidential affairs not readily
available to the public; and (iii) Xxxxxx would not execute this
agreement but for your agreements and covenants contained herein. In
order for Xxxxxx to enter into this letter agreement, you covenant and
agree that:
7.1. Covenant Not to Compete. You hereby agree that during the
term of this Agreement, and following the termination of your
employment for any reason (other than your death), you shall not, for a
period of eighteen (18) months (the :"Restrictive Period"), directly or
indirectly, as an officer, director, stockholder, partner, associate,
employee, consultant, owner, agent, creditor, co-venturer or otherwise,
become or be interested in or be associated with, nor accept any
gratuity from, any other corporation, firm or business engaged in a
business which is competitive with any material business operated by
Xxxxxx or any of its subsidiaries or affiliates in any region where, on
the date on which your employment is terminated, Xxxxxx or any of its
subsidiaries or affiliates is doing business or, to your knowledge has
developed plans to do business.
7.2 Nonsolicitation. Except with the prior written permission
of Xxxxxx, you shall not, directly or indirectly, during the term of
your employment and during the Restrictive Period (a) entice away or in
any manner cause, persuade or attempt to cause or persuade any officer,
employee or agent of Xxxxxx, or any of its subsidiaries or affiliates,
to discontinue his or her relationship with Xxxxxx, such subsidiaries
or affiliates, or (b) employ any person who is then or had been an
employee of Xxxxxx or any of its subsidiaries or affiliates at any time
within the one-year period immediately preceding the date of the
termination of your employment. In addition, during that period you
shall not directly or indirectly approach or attempt to approach any
customer or vendor of Xxxxxx, its subsidiaries or affiliates in an
attempt to change the relationship between Xxxxxx, its subsidiaries or
affiliates and any customer or vendor.
7.3 Confidentiality. You acknowledge that any information
constituting a trade secret or otherwise of a proprietary, secret or
confidential nature of or relating to the business of Xxxxxx or any of
its affiliates acquired by you during your employment by Xxxxxx is the
exclusive property of and of great value to Xxxxxx and its affiliates.
You agree that you will not at any time (whether during or
after your employment with Xxxxxx disclose or use for your own benefit
or purposes or the benefit or purposes of any other person, firm,
partnership, joint venture, association, corporation or other business
organization, entity or enterprise other than Xxxxxx and any of its
subsidiaries or
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affiliates, any trade secrets, information, data, or other confidential
information relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and
financial data, manufacturing processes, financing methods, plans, or
the business and affairs of Xxxxxx generally, or of any subsidiary or
affiliate of Xxxxxx, provided that the foregoing shall not apply to
information which is not unique to Xxxxxx or which is generally known
to the industry or the public other than as a result of your breach of
this covenant. You agree that upon termination of your employment with
Xxxxxx for any reason, you will return to Xxxxxx immediately all
memoranda, books, papers, plans, information, letters and other data,
and all copies thereof or therefrom, in any way relating to the
business of Xxxxxx and its affiliates, except that you may retain
personal notes, notebooks, and diaries. You further agree that you will
not retain or use for your account at any time any trade names,
trademark or other proprietary business designation used or owned in
connection with the business of Xxxxxx or its affiliates.
7.4 In the event the Restrictive Period, as defined in Section
7.1, is determined to be unenforceable, the Restrictive Period shall be
for a period of nine (9) months.
8. Upon the Commencement Date and during the term of your
employment hereunder, Xxxxxx will have you nominated for and will use
its best efforts to have you elected to the Xxxxxx Board of Directors.
9. You will be entitled to participate in all benefits made
available to Xxxxxx executive officers as may be in effect from time to
time. In addition, Xxxxxx will continue to maintain for your benefit
the Split-Dollar Life Insurance Plan ("Plan") in which you currently
participate. It is understood that Xxxxxx'x agreement to fund the Plan
is governed by the following terms:
(a) The annual premiums to be paid by Xxxxxx shall be
equal to twelve and one half percent (12.5%) of your
base salary and cash bonus not to exceed Fifty
Thousand Dollars ($50,000) annually;
(b) Six (6) points of the twelve and one half percent
(12.5%) are understood to be a Xxxxxx contribution
that will be matched by you on an annual basis;
(c) The balance of the points (six and one half percent
(6.5%)) will be contributed by Xxxxxx with the
understanding that such amounts will be repaid to
Xxxxxx in accordance with the terms of the Plan;
(d) In the event you contribute less than six (6) points
of the twelve and one half percent (12.5%) as
provided in Section (b), Xxxxxx'x contribution will
be reduced to an amount equal thereto; however, this
will not relieve Xxxxxx'x obligation in Section 9(c).
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(e) Your failure to contribute two (2%) or more percent
to the Plan for three (3) consecutive years will
relieve Xxxxxx of any obligation to contribute to the
Plan.
10. During the term of your employment, you will be provided
with the use of a Xxxxxx company car appropriate to your position and
consistent with Xxxxxx'x policy or, at your choosing, with an allowance
of approximately One Thousand Dollars ($1,000) per month.
11. During the term of your employment, all travel taken by
you in connection with the business and affairs of Xxxxxx will be paid
by Xxxxxx or reimbursed to you in a manner appropriate to your position
and consistent with Xxxxxx'x policy.
12. As of the date of execution of this Agreement, the
Executive Offices of Xxxxxx shall be located in Rye, New York. You
shall be provided with administrative and support staff at such
location. In addition, an office for you, with staffing, shall be
provided at Xxxxxx'x facility in Elkhart, Indiana. Hereafter, you will
be permitted to choose a location for the Executive Offices of Xxxxxx,
with the reasonable approval of the Board.
13. You will be reimbursed the sum of Five Thousand Dollars
($5,000) for attorneys' fees and costs incurred by you in connection
with the negotiation and preparation of this Agreement.
14. Entire Agreement/Amendments. This Agreement contains the
entire understanding of the parties with respect to your employment by
Xxxxxx. There are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein. This
agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
15. No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be
considered a waiver of such party's rights or deprive such party of the
right thereafter to insist upon strict adherence to that term or any
other term of this Agreement.
16. Notice. For the purpose of this Agreement, notices and
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 to (i) with respect to you, to Wiss, Xxxxx &
Xxxxxxxxxx, P.C., Attention Xxxxxxx X. Xxxx, Esq., Three University
Plaza, Xxxxx 000, Xxxxxxxxxx, Xxx Xxxxxx 00000; and (ii) with respect
to Xxxxxx, to Morgan's principal Executive Offices, to the attention of
the Corporate Secretary; or to such other address as
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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 receipt.
17. Withholding Taxes. Xxxxxx may withhold from any amounts
payable under this agreement such Federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or
regulation.
18. Governing Law. This agreement shall be governed and
construed in accordance with the laws of the State of New York.
19. Arbitration of Disputes. The parties agree that any
controversy or claim arising out of or relating to this Agreement, or
any dispute arising out of this interpretation of this Agreement, which
the parties are unable to resolve, shall be finally resolved and
settled exclusively by binding arbitration in New York City, New York
by a single arbitrator acting under the Commercial Arbitration Rules of
the American Arbitration Association ("AAA") then in effect. If the
parties cannot agree upon an arbitrator from the panel provided by the
AAA, then each party shall choose its own independent representative
and such representatives shall choose the arbitrator within thirty (30)
days of the date of the selection of the first independent
representative.
20. Counterparts. This agreement may be signed in
counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
It is my understanding that it is your intention to commence your
employment with Xxxxxx at a mutually agreeable time, but in no event later than
January 15, 2000 (the "Commencement Date").
I trust that this letter accurately reflects our discussions and that
the terms and conditions set forth herein are acceptable. If you are agreeable,
please execute the copy of this letter where indicated, and send two fully
executed copies back to me acknowledging your acceptance of the offer.
Very truly yours,
THE XXXXXX GROUP, INC.
By: /s/ Xxxxxxx X. Xxxx
------------------------------
Xxxxxxx X. Xxxx,
Chairman of the Board and
Chief Executive Officer
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Accepted and Agreed this 12th day of January, 2000.
XXXXXXX X. XXXXXX, III
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