Exhibit 10.10
CHANGE IN CONTROL AGREEMENT
This EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT ("Agreement"), effective
as of January 8, 2001, by and between CONSOLIDATED GRAPHICS, INC., a Texas
corporation (the "Company"), and XXXXX X. XXXX (the "Executive"), evidences
that;
WHEREAS, the Executive is a senior executive of the Company and has made
and/or is expected to make or continue to make significant contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company desires to assure itself of both present and future
continuity of management in the event of a Change in Control (as defined
hereafter) and desires to establish certain minimum compensation rights with
respect to its key senior executives, including the Executive, applicable in the
event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior executives are not
practically disabled from discharging their duties upon a Change in Control;
WHEREAS, this Agreement is not intended to alter materially the
compensation and benefits which the Executive could reasonably expect to receive
from the Company absent a Change in Control and, accordingly, although effective
and binding as of the date hereof, this Agreement shall become operative only
upon the occurrence of a Change in Control; and
WHEREAS, the Executive is willing to render services to the Company on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Operation of Agreement:
-----------------------
(a) Sections 1 and 8 through 21 of this Agreement shall
be effective and binding as of the Effective Date,
but, anything in this Agreement to the contrary
notwithstanding, Sections 2, 3, 4, 5, 6 and 7 of this
Agreement shall not be effective and binding unless
and until there shall have occurred a Change in
Control. For purposes of this Agreement, a "Change
in Control" will be deemed to have occurred if at any
time during the Term (as hereinafter defined) any of
the following events shall occur:
(i) The Company is merged, consolidated, converted or
reorganized into or with another corporation or other
legal entity, and as a result of such merger,
consolidation, conversion or reorganization less than a
majority of the combined voting power of the then
outstanding securities of the Company or such corporation
or other legal entity immediately after such transaction
are held in the aggregate by the holders of Voting Stock
(as hereinafter defined)
1
of the Company immediately prior to such transaction
and/or such voting power is not held by substantially all
of such holders in substantially the same proportions
relative to each other;
(ii) The Company sells (directly or indirectly) all or
substantially all of its assets (including, without
limitation, by means of the sale of the capital stock or
assets of one or more direct or indirect subsidiaries of
the Company) to any other corporation or other legal
entity, of which less than a majority of the combined
voting power of the then outstanding voting securities
(entitled to vote generally in the election of directors
or persons performing similar functions on behalf of such
other corporation or legal entity) of such other
corporation or legal entity is held in the aggregate by
the holders of Voting Stock of the Company immediately
prior to such sale and/or such voting power is not held by
substantially all of such holders in substantially the
same proportions relative to each other;
(iii)Any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) becomes
(subsequent to the Effective Date) the beneficial owner
(as the term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation promulgated
under the Exchange Act) of securities representing fifty
percent (50%) or more of the combined voting power of the
then-outstanding securities entitled to vote generally in
the election of directors of the Company ("Voting Stock");
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the
Exchange Act disclosing in response to Form 8-K, Schedule
14A or Schedule 14C (or any successor schedule, form or
report or item therein) that a change in control of the
Company has occurred;
(v) If during any one (1)-year period, individuals who at the
beginning of any such period constitute the directors of
the Company cease for any reason to constitute at least a
majority thereof, unless the election, or the nomination
for election by the Company's shareholders, of each
director of the Company first elected during such period
was approved by a vote of at least two-thirds of (i) the
directors of the Company then still in office who were
directors of the Company at the beginning of any such
period or (ii) directors of the Company whose nomination
and/or election was approved by the directors referenced
in clause (i) immediately preceding; or
2
(vi) The shareholders of the Company approve a plan
contemplating the liquidation or dissolution of the
Company.
Notwithstanding the foregoing provisions of Subsection
1(a)(iii) or 1(a)(iv) hereof, a "Change in Control" shall not
be deemed to have occurred for purposes of this Agreement
solely because (i) the Company, (ii) a corporation or other
legal entity in which the Company directly or indirectly
beneficially owns 100% of the voting securities of such entity,
or (iii) any employee stock ownership plan or any other
employee benefit plan of the Company or any wholly-owned
subsidiary of the Company, either files or becomes obligated to
file a report or a proxy statement under or in response to
Schedule 13D, Schedule 14D-1, Form 8-K, Schedule 14A or
Schedule 14C (or any successor schedule, form or report or item
therein) under the Exchange Act, disclosing beneficial
ownership by it of shares of Voting Stock, or because the
Company reports that a change in control of the Company has
occurred by reason of such beneficial ownership.
(b) Upon occurrence of a Change in Control at any time during the
Term, Sections 2, 3, 4, 5, 6 and 7 of this Agreement shall
become immediately binding and effective.
(c) The period during which this Agreement shall be in
effect (the "Term") shall commence as of the date
hereof and shall expire as of the later of (i) the
close of business on the third anniversary of the
date hereof, or (ii) the expiration of the Period of
Employment (as hereinafter defined); provided,
however, that (A) subject to Section 9 hereof, if,
prior to a Change in Control, the Executive ceases
for any reason to be an employee of the Company (or a
parent or subsidiary thereof), thereupon the Term
shall be deemed to have expired and this Agreement
shall immediately terminate and be of no further
effect and (B) commencing on the first anniversary of
the date hereof and each anniversary thereafter, the
Term of this Agreement shall automatically be
extended for an additional year.
2. Employment; Period of Employment:
---------------------------------
(a) Subject to the terms and conditions of this
Agreement, upon the occurrence of a Change in
Control, the Company shall continue the Executive in
its employ and the Executive shall remain in the
employ of the Company for the period set forth in
Subsection 2(b) hereof (the "Period of Employment"),
in the position and with substantially the same
duties and responsibilities that the Executive had
immediately prior to the Change in Control, or to
which the Company and the Executive may hereafter
mutually agree in writing. Throughout the Period of
Employment, the Executive shall devote substantially
all of the
3
Executive's time during normal business hours (subject
to vacations, sick leave and other absences in accordance
with the policies of the Company as in effect for senior
executives immediately prior to the Change in Control)
to the business and affairs of the Company, but nothing
in this Agreement shall preclude the Executive from
devoting reasonable periods of time during normal
business hours to (i) serving as a director, trustee
or member of or participant in any organization or
business so long as such activity would not
constitute Competitive Activity (as hereinafter
defined) if conducted by the Executive after the
Executive's Termination Date (as hereinafter
defined), (ii) engaging in charitable and community
activities, or (iii) managing the Executive's
personal investments.
(b) The Period of Employment shall commence on the date on which a
Change in Control occurs and, subject only to the provisions of
Section 4 hereof, shall continue until the expiration of the
second anniversary of the occurrence of the Change in Control.
3. Compensation During Period of Employment:
----------------------------------------
(a) During the Period of Employment, the Executive shall
receive (i) annual base salary at a rate not less
than the Executive's highest annual fixed or base
compensation paid during or payable with respect to
any calendar year during the three calendar years
immediately preceding the year in which the Change in
Control occurred, or such higher rate as may be
determined from time to time by the Board of
Directors of the Company (the "Board") or the
Compensation Committee thereof (the "Committee")
(which base salary at such rate is herein referred to
as "Base Pay") and (ii) an annual amount equal to not
less than the highest aggregate annual bonus,
incentive or other payments of cash compensation paid
to the Executive in addition to the amounts referred
to in clause (i) above made or to be made in or with
respect to any calendar year during the three
calendar years immediately preceding the year in
which the Change in Control occurred pursuant to any
bonus, incentive, profit-sharing, performance,
discretionary pay or similar policy, plan, program or
arrangement of the Company ("Incentive Pay") which
contemplates cash payments other than Employee
Benefits (as hereinafter defined); provided, however,
that in no event shall any increase in the
Executive's aggregate cash compensation or any
portion thereof in any way diminish any other
obligation of the Company under this Agreement. The
Executive's Base Pay shall be payable monthly. The
Executive's Incentive Pay shall be paid annually as
soon as reasonably practicable following
determination of the amount payable but in no event
later than the date which is sixty (60) days
following the last day of the fiscal year during
which such Incentive Pay is deemed earned.
4
(b) During the Period of Employment the Executive shall,
on the same basis as the Executive participated
therein immediately prior to the Change in Control,
be a full participant in, and shall be entitled to
the perquisites, benefits and service credit for
benefits as provided under any and all employee
retirement income and welfare benefit policies,
plans, programs or arrangements in which senior
executives of the Company and/or any parent or
subsidiary participate generally, including without
limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental
executive retirement or other retirement income or
welfare benefit, deferred compensation, incentive
compensation, group and/or executive life, accident,
health, dental, medical/hospital or other insurance
(whether funded by actual insurance or self-insured
by the Company), disability, salary continuation,
expense reimbursement and other employee benefit
policies, plans, programs or arrangements that may
ist immediately prior to the Change in Control or
any equivalent successor policies, plans, programs or
arrangements that may be adopted thereafter by the
Company and/or any parent or subsidiary
(collectively, "Employee Benefits"); provided,
however, that, except as set forth in Section 5(a)(v)
hereof, the Executive's rights thereunder shall be
governed by the terms thereof and shall not be
enlarged hereunder or otherwise affected hereby.
Subject to the proviso in the immediately preceding
sentence, if and to the extent such perquisites,
benefits or service credit for benefits are not
payable or provided under any such policy, plan,
program or arrangement as a result of the amendment
or termination thereof subsequent to or after a
Change in Control, then the Company shall itself pay
or provide such Employee Benefits. Nothing in this
Agreement shall preclude improvement or enhancement
of any such Employee Benefits, provided that no such
improvement shall in any way diminish any other
obligation of the Company under this Agreement.
(c) The Company has determined that the amounts payable
pursuant to this Section 3 constitute reasonable
compensation. Accordingly, notwithstanding any other
provision hereof, unless such action would be
expressly prohibited by applicable law, if any amount
paid or payable pursuant to this Section 3 is subject
to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the
"Code"), the Company will pay to the Executive an
additional amount in cash equal to the amount
necessary to cause the aggregate remuneration
received by the Executive under this Section 3,
including such additional cash payment (net of all
federal, state and local income and other taxes and
all taxes payable as the result of the application of
Sections 280G and 4999 of the Code) to be equal to
the aggregate remuneration the Executive would have
received under this Section 3, excluding such
additional payment (net of all federal, state and
local income and other taxes), as if
5
Sections 280G and 4999 of the Code (and any successor
provisions thereto) had not been enacted into law.
4. Termination Following a Change in Control:
------------------------------------------
(a) In the event of the occurrence of a Change in Control, this
Agreement may be terminated by the Company during the Period of
Employment only upon the occurrence of one or more of the
following events:
(i) If the Executive is unable to perform the essential
functions of the Executive's job (with or without
reasonable accommodation) because the Executive has become
permanently disabled within the meaning of, and actually
begins to receive disability benefits pursuant to, a
long-term disability plan maintained by or on behalf of
the Company for senior executives generally or, if
applicable, employees of the Company immediately prior to
the Change in Control; or
(ii) For "Cause," which for purposes of this Agreement shall
mean that, prior to any termination pursuant to Subsection
4(b) hereof, the Executive shall have committed:
(A) an intentional act of material fraud, embezzlement or
theft in connection with the Executive's duties or in
the course of the Executive's employment with the
Company;
(B) intentional, wrongful damage to material
property of the Company;
(C) intentional, wrongful disclosure of
material secret processes orconfidential
information of the Company; or
(D) intentional wrongful engagement in any
Competitive Activity;
and any such act shall have been materially harmful
to the Company. For purposes of this Agreement, no
act, or failure to act, on the part of the Executive
shall be deemed "intentional" if it was due primarily
to an error in judgment or negligence, but shall be
deemed "intentional" only if done, or omitted to be
done, by the Executive not in good faith and without
reasonable belief that the Executive's action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall
not be deemed to have been terminated for "Cause"
hereunder unless and until there shall have been
delivered to the
6
Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters
of the Board then in office at a meeting of the Board
called and held for such purpose (after reasonable
notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to
be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive has
committed an act set forth above in this Subsection
4(a)(ii) and specifying the particulars thereof in
detail. Nothing herein shall limit the right of the
Executive or the Executive's beneficiaries to contest
the validity or propriety of any such determination.
(b) In the event of the occurrence of a Change in Control, this
Agreement may be terminated by the Executive during the Period
of Employment with the right to benefits as provided in Section
5 hereof upon the occurrence of one or more of the following
events as determined by the Executive in the sole discretion of
the Executive:
(i) Any termination by the Company of the employment of the
Executive for any reason other than for Cause or as a
result of the death of the Executive or by reason of the
Executive's disability and the actual receipt of
disability benefits in accordance with Subsection 4(a)(i)
hereof; or
(ii) Termination by the Executive of the Executive's employment
with the Company (or any successor to or affiliate
thereof) during the Period of Employment upon the
occurrence of any of the following events:
(A) Failure to elect or reelect the Executive to the
office(s) which the Executive held immediately prior
to a Change in Control, or failure to elect or
reelect the Executive as a director of the Company
(or any successor to parent entity thereof) or the
removal of the Executive as a director of the Company
(or any successor thereto), if the Executive shall
have been a director of the Company immediately prior
to the Change in Control;
(B) An adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or
duties attached to the position(s) which the
Executive held immediately prior to the Change in
Control; a reduction in the Executive's Base Pay
and/or Incentive Pay received from the Company; or
the termination of the Executive's rights to any
Employee
7
Benefits to which the Executive was entitled
immediately prior to the Change in Control or a
reduction in scope or value thereof without the prior
written consent of the Executive, any of which is not
remedied within ten (10) calendar days after receipt
by the Company of written notice from the Executive
of such change, reduction or termination, as the case
may be;
(C) A determination by the Executive that, following a
Change in Control, as a result of a change in
circumstances significantly affecting the Executive's
position(s), including without limitation, a change
in the scope of the business or other activities for
which the Executive was responsible immediately prior
to a Change in Control, the Executive has been
rendered substantially unable to carry out, has been
substantially hindered in the performance of, or has
suffered a substantial reduction in any of the
authorities, powers, functions, responsibilities or
duties attached to the position(s) held by the
Executive immediately prior to the Change in Control,
which situation is not remedied within ten (10)
calendar days after written notice to the Company
from the Executive of such determination;
(D) The liquidation, dissolution, merger, consolidation
or reorganization of the Company or transfer of all
or a significant portion of its business and/or
assets (including, without limitation, by means of
the sale of the capital stock or assets of one or
more direct or indirect subsidiaries of the Company),
unless the successor (by liquidation, merger,
consolidation, reorganization or otherwise) to which
all or a significant portion of its business and/or
assets have been transferred (directly or by
operation of law) shall have assumed all duties and
obligations of the Company under this Agreement
pursuant to Section 11 hereof (in which case, such
entity shall be deemed to be the "Company"
hereunder);
(E) The Company shall require (I) that the principal
place of work of the Executive or the appropriate
principal executive office of the Company or the
Company's operating division or subsidiary for which
the Executive performed the majority of his services
during the twelve (12)-month period preceding the
Change in Control be changed to any location which is
in excess of forty (40) miles from the location
thereof immediately prior to the Change in Control or
(II) that the Executive travel away from the
Executive's
8
office in the course of discharging the Executive's
responsibilities or duties hereunder more (in terms
of either consecutive days or aggregate days in any
calendar year) than was required of the Executive
prior to the Change in Control, without, in either
case, the Executive's prior consent; or
(F) Any material breach of this Agreement by the Company
or any successor thereto.
(c) A termination by the Company pursuant to
Subsection 4(a) hereof or by the Executive pursuant
to Subsection 4(b) hereof shall not affect any rights
which the Executive may have pursuant to any
agreement, policy, plan, program or arrangement of
the Company providing Employee Benefits, which rights
shall be governed by the terms thereof. If this
Agreement or the employment of the Executive is
terminated under circumstances in which the Executive
is not entitled to any payments under Sections 3 or 5
hereof, then notwithstanding anything herein to the
contrary, the Executive shall have no further
obligation or liability to the Company hereunder with
respect to the Executive's prior or any future
employment by the Company.
5. Severance Compensation:
-----------------------
(a) If, following the occurrence of a Change in Control,
(x) the Company shall terminate the Executive's
employment during the Period of Employment other than
pursuant to Subsection 4(a) hereof, or (y) the
Executive shall terminate the Executive's employment
during the Period of Employment pursuant to
Subsection 4(b) hereof, or (z) the Executive dies
during the Period of Employment, the Company shall
pay to the Executive (or the Executive's estate, as
applicable) the amount specified in
Subsection 5(a)(i) hereof within five business days
after the date (the "Termination Date") that the
Executive's employment is terminated (the effective
date of which shall be the date of termination or
death, or such other date that may be specified by
the Executive if the termination is pursuant to
Subsection 4(b) hereof):
(i) In lieu of any further payments under Subsection 3(a) to
the Executive for periods subsequent to the Termination
Date, but without affecting the rights of the Executive
referred to in Subsection 5(b) hereof, a lump sum payment
(the "Severance Payment") in an amount equal to a multiple
of two (2) times the sum of (A) the Executive's Base Pay
(at the highest rate in effect during the Term prior to
the Termination Date), plus (B) the Executive's Incentive
Pay (based upon the greatest amount of
10
Incentive Pay paid or payable to the Executive for any
year during the Term prior to the Termination Date).
(ii) (A) for the remainder of the Period of Employment the
Company shall arrange to provide the Executive with
Employee Benefits identical to those which the Executive
was receiving or entitled to receive immediately prior to
the Termination Date (and if and to the extent that such
benefits shall not or cannot be paid or provided under any
policy, plan, program or arrangement of the Company solely
due to the fact that the Executive is no longer an officer
or employee of the Company, then the Company shall itself
pay to the Executive and/or the Executive's dependents and
beneficiaries, such Employee Benefits) and (B) without
limiting the generality of the foregoing, the remainder of
the Period of Employment shall be considered service with
the Company for the purpose of service credits under the
Company's retirement income, supplemental executive
retirement and other benefit plans applicable to the
Executive and/or the Executive's dependents and
beneficiaries immediately prior to the Termination Date.
Without otherwise limiting the purposes or effect of
Section 6 hereof, Employee Benefits payable to the
Executive pursuant to this Subsection 5(a)(ii) by reason
of any "welfare benefit plan" of the Company (as the term
"welfare benefit plan" is defined in Section 3(1) of the
Employee Retirement Income Security Act of 1974, as
amended) shall be reduced to the extent comparable welfare
benefits are actually received by the Executive from
another employer during such period following the
Executive's Termination Date until the expiration of the
Period of Employment.
(iii)In addition to all other compensation due to the Executive
hereunder, the following shall occur immediately prior to
the occurrence of a Change in Control:
(A) all Company stock options held by the Executive prior
to a Change in Control shall become exercisable,
regardless of whether or not the vesting/performance
conditions set forth in the relevant agreements shall
have been satisfied in full;
(B) all restrictions on any restricted securities granted
by the Company to the Executive prior to a Change in
Control shall be removed and the securities shall
become fully vested and freely transferable,
regardless of whether the vesting/performance
conditions set forth in the relevant agreements shall
have been satisfied in full;
11
(C) the Executive shall have an immediate right to
receive all performance shares or bonuses granted
prior to a Change in Control, and such performance
shares and bonuses shall become fully vested and
freely transferable or payable without restrictions,
regardless of whether or not specific performance
goals set forth in the relevant agreements shall have
been attained; and
(D) all performance units granted to the Executive prior
to a Change in Control shall become immediately
payable in cash or Common Stock, at the Executive's
sole option, regardless of whether or not the
relevant performance cycle has been completed, and
regardless of whether any other terms and conditions
of the relevant agreements shall have been satisfied
in full;
provided, that if the terms of any plan or agreement
providing for such options, restricted securities,
performance shares or bonuses, or performance units do not
allow such acceleration or payment as described above, the
Company shall take or cause to be taken any action
required to allow such acceleration or payment or to
separately pay the value of such benefits.
(b) Anything in this Agreement to the contrary
notwithstanding, in the event a public
accounting firm selected by the Executive (the
"Accounting Firm") shall determine that any
payment, benefit, or distribution by the Company
to the Executive (whether paid or payable or
distributed or distributable pursuant to the
terms of this Agreement or otherwise, but
determined without regard to any additional
payments required under this Subsection 5(b) (a
"Payment") is subject to the excise tax imposed
by Section 4999 of the Code, or any interest or
penalties are incurred by the Executive with
respect to such excise tax (such excise tax,
together with any such interest and penalties,
are hereinafter collectively referred to as the
"Excise Tax"), then the Company shall pay to the
Executive an additional payment (a "Gross-Up
Payment") in an amount such that after payment
by the Executive of all taxes (including any
interest or penalties imposed with respect to
such taxes), including, without limitation, any
income taxes (and any interest and penalties
imposed with respect thereto), and the Excise
Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the
Payments.
12
(ii) Subject to the provisions of Subsection 5(b)(iii), all
determinations required to be made under this Subsection
5(b), including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such
determination, shall be made by the Accounting Firm which
shall provide detailed supporting calculations both to the
Company and the Executive as soon as possible following a
request made by the Executive or the Company. In the event
that the Accounting Firm is serving as accountant or
auditor for the individual, entity or group effecting the
Change in Control, the Executive shall appoint another
nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Subsection 5(b),
shall be paid by the Company to the Executive within five
(5) days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish
the Executive with a written opinion that failure to
report the Excise Tax on the Executive's applicable
federal income tax return would not result in the
imposition of a negligence or similar penalty. Any
determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments
which will not have been made by the Company should have
been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to
Subsection 5(b)(iii) and the Executive thereafter is
required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Company to or for the
benefit of the Executive.
(iii) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after
the Executive is informed in writing of such claim and
shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration
of the ten (10)-day period following the date on which the
Executive gives
such notice to the Company (or such shorter period ending
on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it
desires to contest such claim, the Executive shall:
(A) give the Company any information reasonably
requested by the Company relating to such
claim,
(B) take such action in connection with contesting such
claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
(C) cooperate with the Company in good faith to
effectively contest such claim, and
(D) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the
foregoing provisions of this Subsection 5(b)(iii), the
Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or
forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and xxx for a
refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided further,
that if the Company directs the Executive to pay such
claim and xxx for a refund, the Company shall advance the
amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise
Tax or income tax (including interest or penalties with
respect thereto) imposed with respect to such advance or
with respect to any imputed income with respect to
13
such advance; and provided further, that any extension of
the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to
which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the
Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing
authority.
(iv) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to this Subsection 5(b),
the Executive becomes entitled to receive, and receives,
any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements
of this Subsection 5(b)) promptly pay to the Company the
amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of any amount advanced
by the Company pursuant to Subsection 5(b), a
determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the
expiration of thirty (30) days after such determination,
then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
(c) There shall be no right of set-off or counterclaim in respect
of any claim, debt or obligation against any payment to or
benefit (including Employee Benefits) of the Executive provided
for in this Agreement.
(d) Without limiting the rights of the Executive at law
or in equity, if the Company fails to make any
payment required to be made hereunder on a timely
basis, the Company shall pay interest on the amount
thereof (and on any interest accrued hereunder) at an
annualized rate of interest equal to the Highest
Lawful Rate as hereafter defined. "Highest Lawful
Rate" means, at any time and with respect to the
Executive, the maximum rate of interest under
applicable law that the Executive may charge the
Company. The Highest Lawful Rate shall be calculated
in a manner that takes into account any and all fees,
payments, and other charges in respect of this
Agreement that constitute interest under applicable
law. Each change in any interest rate provided for
herein based upon the Highest Lawful Rate resulting
from a change in the Highest Lawful Rate shall take
effect without notice to the Company at the time of
such change in the Highest Lawful Rate. For purposes
of determining the Highest Lawful Rate under
14
Texas law, the applicable rate ceiling shall be the
indicated rate ceiling described in, and computed in
accordance with the Texas Finance Code. Notwithstanding
anything to the contrary contained herein, no provisions
of this Agreement shall require the payment or permit
the collection of interest in excess of the Highest
Lawful Rate. If any excess of interest in such respect
is herein provided for, or shall be adjudicated to be
so provided, in this Agreement or otherwise in connection
with this loan transaction, the provisions of this
paragraph shall govern and prevail, and neither the
Company nor the sureties, guarantors, successors or
assigns of the Company shall be obligated to pay the
excess amount of such interest, or any other excess sum
paid for the use, forbearance or detention of sums loaned
pursuant hereto. If for any reason interest in
excess of the Highest Lawful Rate shall be deemed
charged, required or permitted by any court of
competent jurisdiction, any such excess shall be
applied as a payment and reduction of the principal
of indebtedness evidenced by this Agreement; and, if
the principal amount hereof has been paid in full,
any remaining excess shall forthwith be paid to the
Company. In determining whether or not the interest
paid or payable exceeds the Highest Lawful Rate, the
Company and the Executive shall, to the extent
permitted by applicable law, (a) characterize any
non-principal payment as an expense, fee, or premium
rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and
(c) amortize, prorate, allocate, and spread in equal
or unequal parts the total amount of interest
throughout the entire contemplated term of the
indebtedness evidenced by this Agreement so that the
interest for the entire term does not exceed the
Highest Lawful Rate.
6. No Mitigation Obligation: The Company hereby acknowledges that it will
be difficult, and may be impossible, for the Executive to find reasonably
comparable employment following the Termination Date and that the noncompetition
covenant contained in Section 7 hereof will further limit the employment
opportunities for the Executive. Accordingly, the parties hereto expressly agree
that the payment of the severance compensation and benefits by the Company to
the Executive in accordance with the terms of this Agreement will be liquidated
damages, and that the Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, nor shall any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise, except as
expressly provided in Subsection 5(a)(ii) hereof.
7. Competitive Activity: During a period ending one year following the
Termination Date (or, if less, a period equal to the remaining Period of
Employment and beginning on the Termination Date), if the Executive shall have
received or shall be receiving benefits under Subsection 5(a) hereof, the
Executive shall not, without the prior written consent by the Company, directly
or indirectly engage in any "Competitive Business" (as hereinafter defined)
within any metropolitan area served by the Company during the twelve (12)-month
period
15
immediately preceding termination of the Executive's employment with the
Company nor will the Executive engage, within such geographical area(s), in the
design, development, distribution, manufacture, assembly or sale of a product or
service in competition with any product or service marketed or planned by the
Company immediately prior to the Termination Date, the plans, designs or
specifications of which have been revealed to the Executive ("Competitive
Activity"). The Executive acknowledges that these limited prohibitions are
reasonable as to time, geographical area and scope of activities to be
restrained and that the limited prohibitions do not impose a greater restraint
than is necessary to protect the Company's goodwill, proprietary information and
other business interests. "Competitive Activity" shall not include (i) the mere
ownership of a de minimis amount of securities in any such enterprise and
exercise of rights appurtenant thereto or (ii) participation in management of
any such enterprise or business operation thereof other than in connection with
the competitive operation of such enterprise. For purposes of this Section 7,
the term "Competitive Business" means any person or entity engaged in a business
that produces any of the following products or performs any of the following
services: general commercial printing services, including digital imaging,
off-set lithography, binding and finishing services and fulfillment of printed
materials, including any products or services manufactured, developed, or
distributed during the Term and the Term of Employment by the Company and/or its
affiliates, predecessors, or successors.
8. Legal Fees and Expenses: It is the intent of the Company that the
Executive not be required to incur the expenses associated with the enforcement
of the Executive's rights under this Agreement by litigation or other legal
action because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder. Accordingly, if it
should appear to the Executive that the Company has failed to comply with any of
its obligations under this Agreement or in the event that the Company or any
other person takes any action to declare this Agreement void or unenforceable,
or institutes any litigation designed to deny, or to recover from, the Executive
the benefits intended to be provided to the Executive hereunder, the Company
irrevocably authorizes the Executive from time to time to retain counsel of the
Executive's choice, at the expense of the Company as hereafter provided, to
represent the Executive in connection with the litigation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, shareholder or other person affiliated with the Company, in
any jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive's entering into an attorney-client relationship with
such counsel, and in connection therewith the Company and the Executive agree
that a confidential relationship shall exist between the Executive and such
counsel. The Company shall pay or cause to be paid and shall be solely
responsible for any and all attorneys' and related fees and expenses incurred by
the Executive as a result of the Company's failure to perform this Agreement or
any provision thereof or as a result of the Company or any person contesting the
validity or enforceability of this Agreement or any provision thereof as
aforesaid.
9. Employment Rights: Nothing expressed or implied in this Agreement shall
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company prior to any Change in
Control; provided, however, that any actual or constructive termination of
employment of the Executive or removal of the Executive
16
as an officer of the Company following the commencement of any discussion with
or receipt of an offer from a third person that ultimately results in a Change
in Control shall be deemed to be a termination or removal of the Executive after
a Change in Control for purposes of this Agreement.
10. Withholding of Taxes: The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
11. Successors and Binding Agreement:
(a) The Company shall require any successor (whether
direct or indirect, by purchase, merger,
consolidation, reorganization 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 the Company would be required to perform if no
such succession had taken place. This Agreement
shall be binding upon and inure to the benefit of the
Company and any successor to the Company, including
without limitation any persons acquiring directly or
indirectly all or substantially all of the business
and/or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise
(and such successor shall thereafter be deemed the
"Company" for the purposes of this Agreement). This
Agreement shall not otherwise be assignable,
transferable or delegable by the Company.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees and/or legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the
other, assign, transfer or delegate this Agreement or
any rights or obligations hereunder except as
expressly provided in Subsection 11(a) hereof.
Without limiting the generality of the foregoing, the
Executive's right to receive payments hereunder shall
not be assignable, transferable or delegable, whether
by pledge, creation of a security interest or
otherwise, other than by a transfer by the
Executive's will or by the laws of descent and
distribution and, in the event of any attempted
assignment or transfer contrary to this
Subsection 11(c), the Company shall have no liability
to pay any amount so attempted to be assigned,
transferred or delegated.
(d) The Company and the Executive recognize that each
Party will have no adequate remedy at law for breach
by the other of any of the agreements contained
herein and, in the event of any such breach, the
Company and the Executive hereby agree and consent
that the other shall be entitled to a
17
decree of specific performance, mandamus or other appropriate
remedy to enforce performance of this Agreement.
12. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF CONFLICTS OF LAW
PRINCIPLES OF ANY STATE) AND THE LAWS OF THE UNITED STATES OF AMERICA AND WILL,
TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR PERFORMANCE IN XXXXXX
COUNTY, TEXAS. COURTS WITHIN THE STATE OF TEXAS WILL HAVE JURISDICTION OVER ANY
AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING
OUT OF OR RELATING TO THIS AGREEMENT. THE PARTIES CONSENT TO AND AGREE TO SUBMIT
TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH DISPUTE, WHETHER IN
FEDERAL OR STATE COURT, WILL BE LAID IN XXXXXX COUNTY, TEXAS. EACH OF THE
PARTIES HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (I) SUCH PARTY IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (II) SUCH PARTY AND SUCH
PARTY'S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR (III)
ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT FORUM.
13. Notices. All notices, demands, requests or other communications that
may be or are required to be given, served or sent by either party to the other
party pursuant to this Agreement will be in writing and will be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery, telegram or facsimile transmission
addressed as follows:
(a) If to the Company: Consolidated Graphics, Inc.
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Facsimile No.: (000) 000-0000
Attn: Xxx X. Xxxxx
with a copy (which will
not constitute notice) to: Xxxxxxxx Xxxxxxxx & Xxxxxx P.C.
000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000-0000
Facsimile No.: (000) 000-0000
Attn: R. Xxxxx Xxxxxx, Xx., Esq.
(b) If to the Executive: Xxxxx X. Xxxx
c/o Consolidated Graphics, Inc.
0000 Xxxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
18
Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
14. Gender. Words of any gender used in this Agreement will be
held and construed to include any other gender, and words in the
singular number will be held to include the plural, unless the
context otherwise requires.
15. Amendment. This Agreement may not be amended or supplemented except
pursuant to a written instrument signed by the parties hereto. Nothing contained
in this Agreement will be deemed to create any agency, joint venture,
partnership or similar relationship between the parties to this Agreement.
Nothing contained in this Agreement will be deemed to authorize either party to
this Agreement to bind or obligate the other party.
16. Counterparts. This Agreement may be executed in multiple counterparts,
each of which will be deemed to be an original and all of which will be deemed
to be a single agreement. This Agreement will be considered fully executed when
all parties have executed an identical counterpart, notwithstanding that all
signatures may not appear on the same counterpart.
17. Severability. If any of the provisions of this Agreement are
determined to be invalid or unenforceable, such invalidity or unenforceability
will not invalidate or render unenforceable the remainder of this Agreement, but
rather the entire Agreement will be construed as if not containing the
particular invalid or unenforceable provision or provisions, and the rights and
obligations of the parties will be construed and enforced accordingly. The
parties acknowledge that if any provision of this Agreement is determined to be
invalid or unenforceable, it is their desire and intention that such provision
be reformed and construed in such manner that it will, to the maximum extent
practicable, be deemed to be valid and enforceable.
18. Third Parties. Except as expressly set forth or referred to in this
Agreement, nothing in this Agreement is intended or will be construed to confer
upon or give to any party other than the parties to this Agreement and their
successors and permitted assigns, if any, any rights or remedies under or by
reason of this Agreement.
19. Waiver. No failure or delay in exercising any right hereunder will
operate as a waiver thereof, nor will any single or partial exercise thereof
preclude any other or further exercise or the exercise of any other right.
20. Prior Agreements: This Agreement is voluntarily entered into and upon
the occurrence of a Change in Control will supersede and take the place of any
prior change in control agreements between the parties hereto. The parties
hereto expressly agree and hereby declare that any and all prior change in
control agreements between the parties are terminated and of no force or effect.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
COMPANY:
CONSOLIDATED GRAPHICS, INC.
By:/s/Xxx X. Xxxxx
-------------------------------------------
Xxx X. Xxxxx,
Chief Executive Officer
EXECUTIVE:
/s/Xxxxx X. Xxxx
----------------------------------------------
Xxxxx X. Xxxx
20
