EXHIBIT 10.2
FORM OF
EXECUTIVE OFFICER CHANGE OF CONTROL AGREEMENT
THIS EXECUTIVE OFFICER CHANGE OF CONTROL AGREEMENT (the
"Agreement") is entered into between XXXXXXX & XXXXX, INC., an Ohio corporation
(the "Company"), and___________________, an individual ("Executive"), as of the
_____ day of_________________, 2006, under the following circumstances:
The Board of Directors of the Company (the "Board") considers
the establishment and maintenance of a sound and vital management to be
essential to protecting and enhancing the best interests of the Company and its
shareholders. In this connection, the Board recognizes that, as is the case with
many publicly held corporations, the mere possibility of a change of control may
raise distracting and disrupting uncertainties and questions among management
personnel, may interfere with their whole-hearted attention and devotion to the
performance of their duties, and may even lead to their departure, all to the
detriment of the best interests of the Company and its shareholders.
Accordingly, the Board, upon the recommendation of its Compensation Committee,
has determined that the best interests of the Company and its shareholders would
be served by assuring to certain executives of the Company, including Executive,
the protection provided by an agreement which defines the respective rights and
obligations of the Company and Executive in the event of termination of
employment subsequent to a Change of Control of the Company (as defined in
Section 2 of this Agreement).
In order to induce Executive to continue in the employ of the
Company, this Agreement sets forth the severance benefits which the Company
agrees shall be provided to Executive in the event Executive's employment with
the Company [or with a Successor to the Company (as defined at Section 10(a)] is
terminated subsequent to a Change of Control under the circumstances described
below.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS
CONTAINED HEREIN, THE COMPANY AND EXECUTIVE AGREE AS FOLLOWS:
1. CERTAIN DEFINITIONS.
(a) "Affiliate" means a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified person.
(b) The "Effective Date" shall be the first date during the "Change of
Control Period" (as defined in Section 1(b) of this Agreement) on which a
Change of Control occurs, and, except as provided in the following
sentence, no amount shall be paid or benefits provided under this Agreement
if Executive's employment is terminated for any reason prior to a Change of
Control. Anything in this Agreement to the contrary notwithstanding, if
Executive's employment with the Company is terminated by the Company prior
to the date on which a Change of Control occurs, and it is reasonably
demonstrated that such termination (i) was at the
Exhibit 10.2 - 1
request of a third party who has taken steps reasonably calculated to
effect a Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control, then for all purposes of this
Agreement the "Effective Date" shall mean the date immediately prior to the
date of such termination.
(c) The "Change of Control Period" is the period commencing on the
date hereof and ending on the earlier to occur of (i) the second
anniversary of such date or (ii) the first day of the month next following
Executive's attainment of age 65 ("Normal Retirement Date"); provided,
however, that commencing on the date one (1) year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof is hereinafter referred to as the "Renewal Date"), the
Change of Control Period shall be automatically extended an additional year
so as to terminate on the earlier of (i) two (2) years from such Renewal
Date or (ii) the first day of the month next following Executive's Normal
Retirement Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice that the Change of Control Period shall not be so
extended in which event this Agreement shall continue for the remainder of
its then current term and terminate as provided herein.
(d) "Prorated Target Bonus" means the Target Bonus prorated for the
period beginning on the first day of the fiscal year in which occurs the
Date of Termination through the Date of Termination
(e) "Subsidiary" means an entity (whether or not a corporation) of
which 50% or more of the voting stock in the case of a corporation, or
other equity interest having voting power in the case of an entity that is
not a corporation, is owned or controlled, directly or indirectly, by the
Company.
(f) "Target Bonus" means an amount equal to the target bonus Executive
would have received for the fiscal year that ends on or immediately after
the Date of Termination, assuming the Company achieved the target levels
for which a bonus is paid under the Company's annual bonus plan then in
effect.
(g) "Voting Shares" means any securities of a corporation that vote
generally in the election of directors of that corporation.
2. CHANGE OF CONTROL. For the purpose of this Agreement, a "Change of
Control" shall mean and shall be deemed to have occurred the date on which one
of the following events occurs with respect to the Company (for the purposes of
this Section 2, the term "Company" means only Xxxxxxx & Xxxxx, Inc.):
(a) The Company is provided a copy of a Schedule 13D, filed pursuant
to Section 13(d) of the Securities Exchange Act of 1934 indicating that a
group or person, as defined in Rule 13d-3 under said Act, has become the
beneficial owner of 25% or more of the outstanding Voting Shares of the
Company or the date upon which the Company first learns that a person or
group has become the beneficial owner of 25% or more of the outstanding
Voting Shares of the Company if a Schedule 13D is not filed provided, in
each case, such group or person is not controlled, directly or indirectly,
by persons or entities that were, at any time this Agreement is in effect,
partners, shareholders or members of M.H.M. & Co. Ltd., an Ohio
Exhibit 10.2 - 2
limited partnership, the Xxxxxxx X. Xxxxx Co., Inc., or Xxxxxx Investments,
Inc. or Affiliates of any of them;
(b) A change in the composition of the Board such that individuals who
were members of the Board on the date two years prior to such change (or
who were subsequently elected to fill a vacancy in the Board, or were
subsequently nominated for election by the Company's shareholders, by the
affirmative vote of at least two-thirds of the directors then still in
office who were directors at the beginning of such two year period) no
longer constitute a majority of the Board;
(c) The consummation of a reorganization, merger, statutory share
exchange or consolidation involving the Company or any of its Subsidiaries
(each a "Business Combination") unless, following such Business
Combination, all or substantially all of the individuals and entities that
were the beneficial owners of the Voting Shares of the Company immediately
prior to the Business Combination beneficially own, directly or indirectly,
more than 60% of the then outstanding Voting Shares of the corporation
resulting from such Business Combination in substantially the same
proportions as their ownership immediately prior to such Business
Combination of the outstanding Voting Shares of the Company; or
(d) Shareholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company
of all, or substantially all, of the Company's assets.
3. AGREEMENT NOT EMPLOYMENT CONTRACT - EMPLOYMENT AT WILL. This Agreement
shall be considered solely as a "severance agreement" obligating the Company to
pay to Executive certain amounts of compensation in the event and only in the
event of his termination of employment after the Effective Date for the reasons
and at the time specified herein. Apart from the obligation of the Company to
provide the amounts of additional compensation as provided in this Agreement,
the Company shall at all times retain the right to terminate the employment of
Executive since the obligation of the Company to Executive shall only be
considered as an employment relationship which exists between the Company and
Executive which may be terminated at will by either party subject to the
obligation of the Company to make payment and perform its obligations as
provided in this Agreement.
4. TERMINATION.
(a) Death or Disability. This Agreement shall terminate automatically
upon Executive's death. If the Company determines in good faith that the
Disability of Executive has occurred (pursuant to the definition of
"Disability" set forth below), it may give to Executive written notice of
its intention to terminate Executive's employment. In such event,
Executive's employment with the Company shall terminate effective on the
30th day after the date of such notice, provided that, within such 30-day
period, Executive shall not have returned to full-time performance of
Executive's duties. For purposes of this Agreement, "Disability" means
disability (either physical or mental) which, at least one hundred eighty
(180) days after its commencement, is determined by a physician selected by
the Company or its insurers and acceptable to Executive or Executive's
legal representative to be total and permanent (such agreement as to
acceptability not to be withheld unreasonably).
Exhibit 10.2 - 3
(b) Cause. The Company has the right to terminate Executive's
employment for Cause, and such termination shall not be a breach of this
Agreement by the Company. "Cause" means termination of employment for one
of the following reasons: (i) the willful and continued failure of
Executive to perform substantially Executive's duties with the Company or
one of its Subsidiaries (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to Executive by the Board or Chief
Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that Executive has
failed to substantially perform his duties and such failure is not cured
within fifteen (15) days of such written notice; (ii) an act or acts of
dishonesty taken by Executive and intended to result in substantial
personal enrichment of Executive at the expense of the Company; (iii) the
willful engaging by Executive in illegal conduct or gross misconduct; or
(iv) a clearly established violation by Executive of the Company's Code of
Conduct that is materially and demonstrably injurious to the Company.
Further, for purposes of this Section (b), no act, or failure to act, on
Executive's part shall be deemed "willful" if done, or omitted to be done,
by Executive in good faith and with a reasonable belief that his action or
omission was in the best interest of the Company.
(c) Good Reason. Executive's employment may be terminated by Executive
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean
the occurrence of one or more of the following circumstances, without
Executive's express written consent, that are not remedied by the Company
within thirty (30) days of receipt of Executive's Notice of Termination:
(i) the reduction of the rate of Executive's annual base salary
in effect immediately prior to the Effective Date ("Base Salary") or
in Executive's target bonus under the Company's annual bonus plan in
effect immediately prior to the Effective Date;
(ii) a material change in Executive's duties or responsibilities
which results in or reflects a material diminution of the scope or
importance of Executive's position;
(iii) a material reduction in the level of benefits available or
awarded to Executive under employee and officer benefit plans and
programs (other than as part of reductions in such benefit plans or
programs affecting similarly situated employees of the Company); or
(iv) any failure by the Company to comply with and satisfy
Section 10(a) of this Agreement.
(d) Notice of Termination. Any termination by the Company for Cause,
or by Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12
of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provisions in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of Executive's employment under the
Exhibit 10.2 - 4
provision so indicated, and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the Date
of Termination. The failure by Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of Executive hereunder or preclude
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(e) Date of Termination. "Date of Termination" means the date Notice
of Termination is given by either the Company or Executive as the case may
be or any later date specified therein; provided, however, if Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of Executive or the effective date
of Disability, as the case may be, and in the case of a termination for
Good Reason, the Date of Termination shall be the date specified in the
Notice of Termination, which date shall not be less than thirty (30) days
nor more than forty (40) days after the Notice of Termination is given.
5. OBLIGATIONS OF THE COMPANY UPON TERMINATION FOLLOWING CHANGE OF CONTROL.
(a) Good Reason; Termination Other Than for Cause, Disability or
Death. If, within twenty-four (24) months after the Effective Date, the
Company terminates Executive's employment other than for Cause, Disability
or death, or if Executive terminates his employment for Good Reason:
(i) The Company shall pay Executive (A) his Base Salary (or
current salary then in effect if higher than his Base Salary) through
the Date of Termination, (B) any earned but unpaid bonus for any prior
fiscal year of the Company, and (C) all other unpaid amounts, if any,
to which Executive is entitled as of the Date of Termination under any
compensation plan or program of the Company, at the time such payments
are due;
(ii) The Company shall pay to Executive an amount equal to
Executive Prorated Target Bonus as defined at Section 1;
(iii) The Company shall pay to Executive an aggregate amount
equal to the product of (A) the sum of (1) Executive's Base Salary and
(2) the average annual bonus paid to Executive by the Company with
respect to the three fiscal years that immediately precede the fiscal
year in which the Date of Termination occurs (or such lesser period
that Executive was employed by the Company) and (B) the number one and
a half (1.5);
(iv) The Company shall maintain in full force and effect, for the
continued benefit of Executive (and his spouse and/or his dependents,
as applicable) for a period of eighteen (18) months following the Date
of Termination the medical, hospitalization, and dental programs, in
which Executive (and his spouse and/or his dependents, as applicable)
participated immediately prior to the Date of Termination at the level
in effect and upon substantially the same terms and conditions
(including without limitation contributions required by Executive for
such benefits) as existed
Exhibit 10.2 - 5
immediately prior to the Date of Termination; provided, if Executive
(or his spouse) is eligible for Medicare or a similar type of
governmental medical benefit, such benefit shall be the primary
provider before Company medical benefits are provided. If Executive
(or his spouse and/or his dependents) is prohibited from continued
participation in Company programs providing such benefits due to plan
limitations or governmental laws or regulations, the Company shall
arrange to provide Executive (and his spouse and/or his dependents, as
applicable) with the economic equivalent of such benefits which they
otherwise would have been entitled to receive under such plans and
programs ("Continued Benefits"). If Executive becomes reemployed with
another employer and is eligible to receive medical, hospitalization
and dental benefits under another employer-provided plan, the medical,
hospitalization and dental benefits described herein shall be
secondary to those provided under such other plan during the
applicable period;
(v) The Company shall reimburse Executive pursuant to the
Company's policy for reasonable business expenses incurred, but not
paid, prior to the Date of Termination;
(vi) All options, shares of restricted stock, performance shares
and any other equity based awards shall be and become fully vested as
of the Date of Termination and, notwithstanding any provision to the
contrary in the applicable Award Agreement, any such options may be
exercised and shall not expire until the earlier of (A) the expiration
of the option term as set forth in the Award Agreement or (B) the
first annual anniversary of the Date of Termination;
(vii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive following
termination to which he is otherwise entitled in accordance with the
terms and provisions of any plans or programs of the Company; and
(viii) The payments provided for in this Section 5(a) [other than
Sections 5(a)(i), (iv), (vi), and (vii)] shall be made no later than
the twentieth day following the Date of Termination.
(b) Termination for Cause, Disability or Death or by Executive Other
than for Good Reason. If, within twenty-four (24) months after the
Effective Date, Executive's employment is terminated for Cause, Disability,
death or by Executive other than for Good Reason:
(i) The Company shall pay Executive (i) his Base Salary (or
current salary then in effect if higher than his Base Salary) through
the Date of Termination, (ii) any earned but unpaid bonus for any
prior fiscal year of the Company within twenty (20) days of the Date
of Termination, (iii) Executive's Prorated Target Bonus as defined at
Section 1 within twenty (20) days of the Date of Termination, and (iv)
all other unpaid amounts, if any, to which Executive is entitled as of
the Date of Termination under any compensation plan or program of the
Company at the time such payments are due; provided, however, if the
termination is for Cause or by Executive
Exhibit 10.2 - 6
other than for Good Reason, then Executive shall not be entitled to,
or paid, the items listed in clauses (ii) and (iii) of this Section
5(b)(i);
(ii) The Company shall reimburse Executive pursuant to the
Company's policy for reasonable business expenses incurred, but not
paid, prior to termination of employment, unless such termination
resulted from a misappropriation of Company funds; and
(iii) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive following
termination to which he is otherwise entitled in accordance with the
terms and provisions of any plans or programs of the Company.
6. NO DUPLICATION OF BENEFITS. Notwithstanding the fact that Executive is
entitled to benefits as provided under this Agreement, if Executive is also
entitled to receive payment of benefits under a severance plan of the Company
("Severance Plan"), and payment of benefits under this Agreement, then, such
payments due upon termination of employment of Executive shall only be paid
under this Agreement or under the Severance Plan whichever is most favorable to
Executive.
7. MITIGATION. Executive shall not be required to mitigate amounts payable
under this Agreement by seeking other employment or otherwise, and there shall
be no offset against amounts due Executive under this Agreement on account of
subsequent employment except as specifically provided herein.
8. CONFIDENTIAL INFORMATION; OWNERSHIP OF DOCUMENTS; NON-COMPETITION.
(a) Confidential Information. Executive acknowledges that he has had,
and will have, access to certain Confidential Information (as hereinafter
defined) of the Company and its Subsidiaries and Executive agrees that he
will not at any time, directly or indirectly, disclose orally or in writing
or use any Confidential Information, regardless of how it may have been
acquired, unless the disclosure or use of such Confidential Information is
expressly authorized in writing in advance by the Company, is necessary in
the ordinary conduct of Executive's duties under this Agreement or is
required by law. "Confidential Information" means all information
pertaining or relating to the Company's or its Subsidiaries' business,
including, but not limited to, products, pricing, drawings and bills of
materials, manufacturing and application engineering know-how, services,
strategies, customers, customer list, customer account records, financial
information, employee compensation, marketing plans, computer software
(including all operating system and system application software) and other
proprietary business information. As used herein, Confidential Information
shall not include any information which (i) is or becomes generally known
to the public other than as a result of the disclosure or use thereof by
Executive in violation of the terms of this Agreement or (ii) is obtained
by Executive from a third party who is lawfully in possession of such
information and is not subject to any obligation to refrain from disclosing
such information. Executive acknowledges and agrees that all of the
Confidential Information is and shall continue to be the exclusive
proprietary property of the Company and its Subsidiaries whether or not
prepared in
Exhibit 10.2 - 7
whole or in part by Executive and whether or not disclosed to or entrusted
to the custody of Executive.
(b) Removal of Documents; Rights to Products; Other Property. All
records, files, drawings, documents, models, equipment, and the like
relating to the Company's business or its Subsidiaries', which Executive
has control over may not be removed from the Company's premises without its
written consent, unless removal is in the furtherance of the Company's
business or is in connection with Executive's carrying out his duties under
this Agreement and, if so removed, shall be returned to the Company
promptly after termination of Executive's employment under this Agreement.
(c) Non-Competition Provisions.
(i) Executive agrees that while employed by the Company and for
the 12-month period immediately after Executive ceases to be employed
by the Company for any reason, Executive shall not, without the prior
written consent of the Company, either directly or indirectly, perform
any services (whether advisory, consulting, employment or otherwise)
for, invest in or otherwise become associated with in any capacity,
any person, corporation, partnership or other entity which engages in
a Competitive Business (as defined in Section 8(c)(ii)); provided,
however, that nothing herein contained shall prevent Executive (A)
from purchasing and holding for investment less than 2% of the shares
of any corporation, the shares of which are regularly traded either on
a national securities exchange or in the over-the-counter market or
(B) from providing services to any corporation, partnership, or other
entity if the Competitive Business represents less than 15% of the
gross revenues of such corporation, partnership, or entity and
Executive's services are not rendered, directly or indirectly, to the
division or subsidiary which is engaged in the Competitive Business.
(ii) For purposes of this Agreement, "Competitive Business" means
the design, engineering, manufacture, marketing, distribution, sale,
or servicing in the Prohibited Territory (as defined below) of (i)
processing or packaging equipment used in the pharmaceutical industry,
(ii) wellhead, drilling, recovery and transmission equipment used in
the oil and gas industry, or (iii) progressing cavity pumps,
industrial mixers and agitators, or glass-lined reactor and storage
vessels used in any industry. "Prohibited Territory" means the
countries in which the Company or one of its Subsidiaries had
manufacturing, distribution facilities, or sales offices at any time
that Executive was employed by the Company.
(d) Non-Solicitation or Hire . Executive agrees that while employed by
the Company and for the 12-month period immediately after Executive ceases
to be employed by the Company for any reason, Executive shall not, without
the prior written consent of the Company, either directly or indirectly,
solicit or attempt to solicit or induce, directly or indirectly, (i) any
person or entity who is or was a customer of the Company or its
Subsidiaries while Executive was employed by the Company for the purpose of
marketing, selling or providing to any such person or entity any services
or products of the same general type offered by or available from the
Company or its Subsidiaries or (ii) any person who was an employee of the
Company or any of its Subsidiaries on the Date of Termination to terminate
such employee's
Exhibit 10.2 - 8
employment relationship with the Company or its Subsidiaries in order to
enter into a similar relationship with Executive, any business which then
employs Executive or to which Executive provides any services, or any
Competitive Business.
(e) Injunctive Relief. Executive acknowledges that compliance with the
covenants and provisions in this Sections 8 is necessary to protect the
Company and that a breach of these covenants will result in irreparable and
continuing damage for which there will be no adequate remedy at law.
Accordingly, Executive agrees that in the event of any breach of said
covenants or provisions, the Company and its successors and assigns shall
be entitled to injunctive relief (including specific performance) and to
such other and further equitable relief (in addition to money damages) as
is proper in the circumstances. Executive further agrees to waive the
securing or purchasing of any bond in connection with any such remedy.
(f) Judicial Modification . If any court determines that any of the
covenants in Section 8, or any part of any of them, is invalid or
unenforceable, the remainder of such covenants and parts thereof shall not
thereby be affected and shall be given full effect, without regard to the
invalid portion. If any court determines that any of such covenants, or any
part thereof, is invalid or unenforceable because of the geographic or
temporal scope of such provision, such court shall reduce such scope to the
minimum extent necessary to make such covenants valid and enforceable.
(g) Continuing Operation. Except as specifically provided in this
Section 8, the termination of Executive's employment or of this Agreement
shall have no effect on the continuing operation of this Section 8.
9. ARBITRATION; LEGAL FEES AND EXPENSES. The parties agree that Executive's
employment and this Agreement relate to interstate commerce, and that any
disputes, claims or controversies between Executive and the Company which may
arise out of or relate to Executive's employment relationship or this Agreement
shall be settled by arbitration. This agreement to arbitrate shall survive the
termination of this Agreement. Any arbitration shall be in accordance with the
Rules of the American Arbitration Association and undertaken pursuant to the
Federal Arbitration Act. Arbitration shall be held in Dayton, Ohio unless the
parties mutually agree on another location. The decision of the arbitrator(s)
shall be enforceable in any court of competent jurisdiction. The parties agree
that punitive, liquidated or indirect damages shall not be awarded by the
arbitrator(s) unless such damages would have been awarded by a court of
competent jurisdiction. Nothing in this Agreement to arbitrate, however, shall
preclude the Company from obtaining injunctive relief from a court of competent
jurisdiction prohibiting any on-going breaches by Executive of this Agreement
including, without limitation, violations of Section 8. If any contest or
dispute arises between the Company and Executive regarding any provision of this
Agreement, the Company shall reimburse Executive for all legal fees and expenses
reasonably incurred by Executive in connection with such contest or dispute,
except that the Company shall not be obligated to pay any legal fees or expenses
incurred by Executive in any contest in which the trier of fact determines that
the Executive's position was frivolous or maintained in bad faith. Such
reimbursement shall be made as soon as practicable following the final,
non-appealable resolution of such contest or dispute to the extent the Company
receives reasonable written evidence of such fees and expenses.
Exhibit 10.2 - 9
10. AGREEMENT BINDING ON SUCCESSORS.
(a) Company's Successors. No rights or obligations of the Company
under this Agreement may be assigned or transferred except that the Company
shall require any successor (whether direct or indirect, by purchase,
merger, reorganization, sale, transfer of stock, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform
it if no succession had taken place. As used in this Agreement, "Company"
means the Company as hereinbefore defined and any successor to its business
and/or assets (by merger, purchase or otherwise as provided in this Section
10(a)) which executes and delivers the agreement provided for in this
Section 10 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(b) Executive's Successors. No rights or obligations of Executive
under this Agreement may be assigned or transferred by Executive other than
his rights to payments or benefits under this Agreement, which may be
transferred only by designation of a beneficiary in accordance with this
Section 10(b) or by will or the laws of descent and distribution. Upon
Executive's death, this Agreement and all rights of Executive under this
Agreement shall inure to the benefit of and be enforceable by Executive's
beneficiary or beneficiaries, personal or legal representatives, or estate,
to the extent any such person succeeds to Executive's interests under this
Agreement. Executive shall be entitled to select and change a beneficiary
or beneficiaries to receive any benefit or compensation payable under this
Agreement following Executive's death by giving the Company written notice
thereof in a form acceptable to the Company. In the event of Executive's
death or a judicial determination of his incompetence, reference in this
Agreement to Executive shall be deemed, where appropriate, to refer to his
beneficiary(ies), estate or other legal representative(s). If Executive
should die following his Date of Termination while any amounts would still
be payable to him under this Agreement if he had continued to live, all
such amounts unless otherwise provided shall be paid in accordance with the
terms of this Agreement to such person or persons so appointed in writing
by Executive, or otherwise to his legal representatives or estate.
11. SAVINGS CLAUSE.
(a) Limitation on Payments. Sections 280G and 4999 of the Code impose
a 20% excise tax on excessive compensation received by, and deny a
deduction to the Company for the amount of excess compensation paid to,
employees who are officers, shareholders or highly compensated individuals
as a result of a change in the ownership or effective control of the
Company or in the ownership of a substantial portion of the Company's
assets (a "Change in Control"). In general, payments to an individual that
are contingent on a Change in Control will not be treated as excessive if
such payments are less than three (3) times the average annual compensation
received by such individual over the five (5) years preceding the Change in
Control. The provisions that follow are designed to maximize the amounts
payable to Executive under this Agreement in the event of a Change in
Control, taking into consideration the possible application of the
foregoing Code provisions.
Exhibit 10.2 - 10
(b) Notwithstanding anything in this Agreement to the contrary, in the
event that it is determined that any payment by the Company to Executive or
for Executive's benefit, whether paid or payable pursuant to the terms of
this Agreement or otherwise, would be taxable because of Section 4999 of
the Code, then the aggregate present value of amounts payable to Executive
or for Executive's benefit pursuant to this Agreement shall be reduced to
the Reduced Amount unless Section 11(c) below applies. For purposes of this
subparagraph, the "Reduced Amount" shall be defined as an amount expressed
in present value which maximizes the amounts payable pursuant to this
Agreement without causing any such payments to be taxable to Executive
because of Section 4999 of the Code.
(c) If the Net After Tax Benefit of all amounts payable to Executive
pursuant to this Agreement exceeds the Net After Tax Benefit of the Reduced
Amount, then this Section 11 shall not apply to limit any amount payable to
Executive. "Net After Tax Benefit" means the amount payable to Executive or
for Executive's benefit pursuant to this Agreement (whether the Reduced
Amount or the full amounts payable to Executive under this Agreement), less
the sum of (i) the amount of federal income taxes payable with respect to
such amounts and (ii) the amount of excise taxes payable on such amounts
pursuant to Section 4999 of the Code, if any. For purposes of this Section
11(c), federal income taxes payable in respect of future payments shall be
those prescribed by the Code at the time the calculation is made for the
periods in which the same shall be payable.
(d) An initial determination as to whether any reduction in payments
and benefits is necessary in order to comply with Section 11(b) above and,
if so, the calculation of the Reduced Amount shall be made by the Company
and furnished to Executive in writing within seven (7) days following the
date of the Change of Control of the Company. From time to time thereafter
as necessary and, in any event, upon termination of Executive's employment,
the Company shall re-examine its determination and recalculate the Reduced
Amount and promptly furnish information with respect to the same to
Executive in writing. The Company's determination and its calculation of
the Reduced Amount following the termination of Executive's employment will
be final and binding upon Executive unless Executive notifies the Company
within eight (8) days after Executive receives the Company's determination
and calculation that Executive disputes the same. Within ten (10) days
after Executive so notifies the Company, Executive shall deliver to the
Company a statement of the basis for Executive's opinion as to whether any
reduction in payments and benefits is necessary, pursuant to Section 11(b)
above and, if so, Executive's calculation of the Reduced Amount. If, within
ten (10) days after the Company receives such statement, the Company and
Executive are unable to agree as to whether any reduction is necessary or
as to the calculation of any amounts under this Section 11, then the
Company and Executive shall, within three (3) days thereafter, choose a
nationally recognized accounting firm to resolve any such dispute. Such
accounting firm's determination shall be made promptly and delivered to the
Company and Executive within twenty (20) days of its appointment and shall
be final and binding on the parties. All costs incurred in connection with
the accounting firm's determination shall be borne by the Company.
(e) Within ten (10) days after the date a determination and
calculation of the Reduced Amount becomes final and binding in accordance
with Section 11(d) above, Executive may elect which portion of the payments
due him under this Agreement shall be eliminated or reduced to meet such
Reduced Amount (including meeting the Reduced Amount
Exhibit 10.2 - 11
by reducing the present value of any payment and benefits through deferral
of the payment date). If Executive does not notify the Company of his
election within such ten (10) day period, the Company shall have the right
to decide how the Reduced Amount will be met.
(f) Pending a final and binding determination and calculation of the
Reduced Amount in accordance with this Section 11, Executive shall have the
right to require the Company to pay to Executive all or any undisputed
portion of the Reduced Amount, as determined and calculated by the Company,
that would be then due and payable to Executive pursuant to this Agreement.
Such payment shall be made within two (2) days after the date of receipt of
notice from Executive requesting such payment.
(g) The Company shall pay to Executive or for Executive's benefit that
portion of the Reduced Amount which is then due and payable (less any
amount previously paid pursuant to Section 11(f) above) within ten (10)
days after receipt of the election by Executive described in Section 11(e)
above or, in the absence of such an election, within fifteen (15) days
after the date upon which any determination and calculation of the Reduced
Amount becomes final and binding in accordance with Section 11(d) above.
The balance of the Reduced Amount shall be paid promptly as the same
becomes due and payable under this Agreement.
(h) In the event that the Internal Revenue Service or a court of
competent jurisdiction makes a final determination that any payments to
Executive under this Agreement are taxable to Executive pursuant to Section
4999 of the Code, and such payments should not have been made under the
terms of Sections 11(b) and (c) hereof (such taxable payments and benefits
being referred to hereinafter as an "Overpayment") or in the event that the
Code shall be amended or final regulations thereunder adopted and, as a
result thereof, payments or benefits previously made to Executive under
this Agreement should not have been made under the terms of Sections 11(b)
and (c) and are thus recharacterized as an Overpayment, the amount of such
Overpayment shall be treated for all purposes as a loan to Executive which
shall be repayable by Executive within thirty (30) days after demand by the
Company, together with interest at the applicable federal rate specified
for a demand loan in Section 7872(f)(2) of the Code, compounded
semiannually. The foregoing provision relating to Overpayments shall be
applicable notwithstanding previous compliance by the Company and Executive
with the requirements of this Section 11; provided, however, that no such
Overpayment shall be repaid by Executive to the Company if and to the
extent that, despite making such repayment, the amount which is subject to
taxation under Section 4999 of the Code would not be reduced.
12. NOTICE. For the purposes of this Agreement, notices, demands and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered either personally or by
United States certified or registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to Executive:
At his last known address evidenced on the
Company's payroll records.
Exhibit 10.2 - 12
If to the Company:
Xxxxxxx & Xxxxx, Inc.
0000 Xxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: President and Chief Executive Officer
or to such other address as any party may have furnished to the others in
writing in accordance with this Agreement, except that notices of change of
address shall be effective only upon receipt.
13. WITHHOLDING. All payments and benefits hereunder shall be subject to
any required withholding of federal, state and local taxes pursuant to any
applicable law or regulation.
14. SECTION 409A LIMITATIONS. To the extent applicable, it is intended that
this Agreement comply with the provisions of Section 409A of the Code, so as to
prevent the inclusion in gross income of any amounts payable or benefits
provided hereunder in a taxable year that is prior to the taxable year or years
in which such amounts or benefits would otherwise actually be distributed,
provided, or otherwise made available to Executive. This Agreement shall be
construed, administered, and governed in a manner consistent with this intent.
Any provision that would cause any amount payable or benefit provided under this
Agreement to be includible in the gross income of Executive under Section
409A(a)(1) of the Code shall have no force and effect. In particular, to the
extent Executive becomes entitled to receive a payment or a benefit upon an
event that does not constitute a permitted distribution event under Section
409A(a)(2) of the Code, then notwithstanding anything to the contrary in this
Agreement, such payment or benefit shall be made or provided to Executive on
Executive's "separation from service" with the Company (within the meaning of
Section 409A of the Code); provided, however, that if Executive is a "specified
employee" (within the meaning of Section 409A of the Code), (a) any amount
payable pursuant to Sections 5(a)(iv) and 9 of this Agreement shall, to the
extent necessary to implement this Section 14, either (i) be revised so that the
aggregate amount payable for the first six months following Executive's
separation from service shall be paid in the month of separation from service
and any balance shall be paid monthly commencing on the first day of the seventh
month following separation from service and on the first day of each month
thereafter until paid in full or (ii) if the approach under clause (a)(i) of
this Section 14 is not permitted by Section 409A of the Code, then such payments
shall commence on the date which is six months after the date of Executive's
separation from service with the Company and the amount payable on such day
shall be the aggregate of six months of the total amount payable and any balance
shall be payable on the first day of each month thereafter until paid in full;
and (b), to the extent necessary to implement this Section 14, any other amount
payable pursuant to Section 5(a) of this Agreement shall be paid on the date
which is six months after the date of Executive's separation of service from the
Company. Any reference in this Plan to Section 409A of the Code shall also
include any proposed, temporary, or final regulations, or any other guidance,
promulgated with respect to such Section by the U.S. Department of the Treasury
or the Internal Revenue Service.
Exhibit 10.2 - 13
15. MISCELLANEOUS. No provisions of this Agreement may be amended,
modified, or waived unless agreed to in writing and signed by Executive and by a
duly authorized officer of the Company. No waiver by either party of any breach
by the other party of any condition or provision of this Agreement shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. The respective rights and obligations of the
parties under this Agreement shall survive Executive's termination of employment
and the termination of this Agreement to the extent necessary for the intended
preservation of such rights and obligations. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Ohio without regard to its conflicts of law principles.
16. VALIDITY. The invalidity or unenforceability of any provision or
provisions 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.
17. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
18. SECTION HEADINGS. The section headings in this Agreement are for
convenience of reference only, and they form no part of this Agreement and shall
not affect its interpretation.
19. ENTIRE AGREEMENT. Except as provided elsewhere herein, this Agreement
sets forth the entire agreement of the parties with respect to its subject
matter and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party to this Agreement with respect
of such subject matter.
Exhibit 10.2 - 14
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
XXXXXXX & XXXXX, INC.
By:
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Xxxxx X. Xxxxxxx, President and Chief
Executive Officer
EXECUTIVE
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Exhibit 10.2 - 15
