Docucorp International Employment Agreement
Exhibit 10.1
Docucorp International This Employment Agreement (this “Agreement”) is made and entered into as of the 1st day of
May, 2006 (the “Effective Date”) by and between Docucorp International, Inc., a Delaware
corporation (the “Company” or “Docucorp”), and J. Xxxxxx Xxxx, an individual residing in the State
of Texas (“Executive”):
WITNESSETH:
1. Recitals. The Company is engaged in the business of developing, designing and marketing
computer software and related products and services and has a principal business location in Dallas
County, Texas. As a result of entering into this Agreement, Executive will become an employee of
the Company. In this capacity, Docucorp agrees that it will immediately begin providing to
Executive unique and highly specialized training by the Company, with all related costs and
expenses to be paid by the Company, and will immediately provide Executive confidential and trade
secret information of Docucorp. Executive acknowledges such training and proprietary information
(i) is of a unique and specialized nature dealing with unique processes, techniques, and
information developed by the Company; and (ii) will greatly enhance Executive’s market value and
future earnings potential. This Agreement sets forth the terms and conditions upon which the
Company and Executive have agreed to create an employer-employee relationship between them.
2. Employment. The Company, commencing on the date hereof, shall employ Executive, as Senior Vice
President Finance/Administration, Chief Financial Officer, and Executive shall upon said date enter
into such employment and serve the Company in such capacity or as directed by the Company’s
President or his designee.
3. Term.
| a. | The term of this Agreement shall commence on the date hereof and shall continue until terminated by either party as provided in this Paragraph 3. This Agreement may be terminated by either party at any time by giving to the other party two weeks advance notice of termination. In the event the Company exercises its right to terminate Executive without “cause” (as described in paragraph b) or the Executive exercises his right to terminate employment for “good reason” (as described in paragraph c), Executive is entitled to compensation as provided in paragraph 12. Executive specifically recognizes and agrees that no present or future oral or written statements by the Company or any officer or agent of the Company shall in any way limit or restrict the Company’s right to terminate Executive’s employment as provided in the immediately preceding sentence, unless the Company shall agree in writing to an amendment of this Paragraph 3 and, in such writing, the Company shall specifically note its intention to amend its rights as contained in this Paragraph 3. |
| b. | Notwithstanding anything to the contrary contained in this Agreement, the Company shall have “cause” to terminate this Agreement without any prior notice to Executive, in the event of: (i)Executive’s conviction of, or pleading guilty or no contest to, a felony or misdemeanor involving dishonesty or moral turpitude; (ii) Executive materially fails to perform Executive’s duties and obligations under this Agreement; (iii) Executive’s commission of a fraudulent or dishonest act in connection with employment by the Company or misappropriation of Company property; (iv) Executive’s death or inability, as a result of a physical or mental condition impairment, to perform the essential functions of Executive’s job for a period of more than six months; (v) Executive’s use or possession of illegal drugs or performing duties for the Company while under the influence of alcohol, in violation of the Company’s Drugs and Alcohol policy, but excluding consumption of alcohol in the course of business-related social functions ; (vi) any act or failure to act by Executive which materially injures the reputation, business or business reputation of the Company or any affiliated entity; or (vii) Executive’s gross negligence or willful misconduct in the performance of Executive’s duties for the Company. Notwithstanding the foregoing, the reason for termination listed in b(ii) of this Paragraph 3 shall not constitute “cause” unless the Company first gives Executive written notice describing in reasonable detail the action, failure to act or other circumstance that the Company reasonably believes constitutes “cause” and Executive fails to cure such action, failure to act or circumstance within thirty (30) days after delivery of such notice. | ||
| c. | For purposes of this Agreement, the term “good reason” means any of the following actions if taken without Executive’s prior written consent: (i) any material failure by the Company to comply with its obligations under this Agreement; (ii) any demotion of Executive as evidenced by a material reduction in Executive’s responsibilities, duties, supervisory reporting relationship, compensation, or benefits; or (iii) the relocation of the Executive’s place of business to a location 50 miles or more from the current location. |
4. Performance of Duties. Executive shall be a full-time employee of the Company and shall devote
all of Executive’s business time, attention and best efforts to the performance of Executive’s
duties for the Company, and shall be responsible to and subject to the supervision and direction of
the President of the Company. Executive’s duties shall include, but not be limited to, duties and
responsibilities within the area of Finance and Administration. Executive shall also perform such
additional or different duties as the President of the Company may from time to time direct so long
as such additional or different duties are of a type Executive is qualified to perform and are
appropriate for a Senior Vice President level employee of the Company. All services performed by
Executive shall be performed to the best of Executive’s ability and to further the welfare and
development of the Company. It is understood that from time to time in the performance of his
responsibilities, Executive will be required to travel to other geographical areas as determined by
business needs.
5. Compensation. For all services rendered by Executive pursuant to this Agreement, Executive
shall be entitled to receive a salary of two hundred fifty thousand ($250,000) dollars per year,
paid semi-monthly, in accordance with the normal payroll procedures of the Company
2
and subject to all authorized withholding and deductions. Executive shall be eligible for a base
salary increase effective August 1, 2007, subject to approval of the Board of Directors, but in no
event shall Executive’s annual base salary be reduced below $250,000. Executive shall receive a
guaranteed bonus of $25,000 for fiscal year 2006, such bonus to be paid at the time bonuses are
paid to other Senior Vice Presidents for fiscal year 2006 performance. It is understood and agreed
that if for any reason Executive terminates or his employment is terminated prior to August 1,
2006, he shall not earn any bonus. In order to earn, and as a condition precedent to eligibility
for, the fiscal year 2006 bonus payment, Executive must be actively employed by the Company on
August 1, 2006. For fiscal year 2007, Executive shall be eligible for a target bonus of $90,000,
subject to such reasonable terms and conditions as determined by Docucorp’s Board of Directors.
Such terms and conditions may include a requirement of continued employment so long as such terms
and conditions do not conflict with the provisions of Paragraph 12 of this Agreement. In addition,
Executive shall receive, concurrent with the signing of this Agreement, 50,000 shares of restricted
stock which will vest 20% each year, with the first vesting date on May 1, 2007. The restricted
stock grant is subject to the terms and conditions of a Restricted Stock Grant Agreement in the
form of Exhibit A hereto.
6. Ownership of Assets. All programs, tapes, files, records, lists, documents and similar items
relating to the business of the Company whether prepared by or at the direction of Executive or
otherwise coming into Executive’s possession, shall remain the exclusive property of the Company,
shall be used exclusively for the benefit of the Company and shall not be removed from the offices
or places of businesses of the Company without the prior written consent of the President of the
Company except under the following conditions:
| a. | in the preparation or performance of Company business by Executive; or | ||
| b. | in the delivery or transportation of said items to a current or prospective customer for documented Company business purposes. |
7. Training/Confidential Information. Immediately upon Executive’s execution of this Agreement,
Docucorp will provide Executive with specialized knowledge and training regarding the business in
which Docucorp is involved, and will provide Executive with confidential information and trade
secrets of Docucorp (hereinafter referred to as “Confidential Information”). For purposes of this
Agreement, Confidential Information includes, but is not limited to:
| a. | Software or other technology developed by Docucorp and any research data or other documentation related to the development of such software/technology; | ||
| b. | Customer lists and prospect lists developed by Docucorp; | ||
| c. | Information regarding Docucorp’s customers including but not limited to, work performed for customer, customer contracts, customer requirements and needs, data used by Docucorp to formulate customer bids, customer financial information, and other information regarding the customer’s business; | ||
| d. | Information related to Docucorp’s business, including but not limited to marketing strategies and plans, sales procedures, operating policies and |
3
| procedures, pricing and pricing strategies, business plans, sales, profits, and other business and financial information of the Company; | |||
| e. | Training materials developed by and utilized by Docucorp; | ||
| f. | Any other information which Executive may acquire as a result of employment with Docucorp and which Executive has a reasonable basis to believe that Docucorp would not want disclosed to a business competitor or to the general public; and | ||
| g. | Any other information or document marked by the Company as “Confidential” or “Proprietary Information”. |
Notwithstanding the foregoing, Confidential Information will not include any information required
to be disclosed pursuant to a requirement of a government agency or court or by law. Executive
understands and acknowledges that such Confidential Information gives Docucorp a competitive
advantage over others who do not have this information, and that Docucorp would be harmed if the
Confidential Information were disclosed.
8. Non-Disclosure of Confidential Information. Executive agrees to hold all Confidential
Information of the Company in trust for Docucorp and will not (a) use the information for any
purpose other than the benefit of Docucorp; or (b) disclose to any person or entity any
Confidential Information of Docucorp except as necessary during the Executive’s employment with
Docucorp to perform services on behalf of Docucorp. Executive will also take reasonable steps to
safeguard such Confidential Information and prevent its disclosure to unauthorized persons.
9. Return of Company Property and Information. Upon termination of employment, or at any earlier
time as directed by Docucorp, Executive shall immediately deliver to Docucorp any and all tangible
Confidential Information in Executive’s possession and any copies, whether in print or in
electronic format, of such documents or information. Executive shall not retain any originals,
copies or summaries of any documents or materials related to Docucorp’s business which Executive
came into possession of or created as a result of employment at Docucorp. Executive acknowledges
that such information, documents and materials are the exclusive property of Docucorp. This
Paragraph does not apply to payroll stubs, benefit information, this Agreement, or other materials
provided to Executive for his personal use.
10. Restrictive Covenant. Without the prior written consent of the Company, Executive shall not,
during employment with the Company or for a period of two (2) years following the termination of
employment:
| a. | Directly or indirectly engage in (defined below) a Competing Business (defined below) within a Restricted Area (defined below). For purposes of this Agreement, Executive shall be deemed to engage in a business if Executive directly or indirectly, engages or invests in, owns, manages, operates, controls or participates in the ownership, management, operation or control of, is employed by, or associated or in any manner connected with, or renders services or advice |
4
| to any Competing Business; provided, however, that Executive may invest in stock of a Competing Business so long as the investment does not exceed 5% of the outstanding capital stock of such enterprise. For purposes of this Agreement, a Competing Business is one which provides to its customers the same or substantially similar products and services as those provided by the Company during Executive’s employment, including but not limited to (1) forms creation; (2) document automation, content assembly and management; (3) document management; and (4) archival as such processes pertaining to (i) software; (ii) professional services; and (iii) ASP (Application Service Provider) services. Because of the highly confidential and sensitive financial information to be provided to Executive as the Company’s Chief Financial Officer, such going to the very core of its finances, plans and strategies, the Restricted Area for purposes of this Agreement is the entire United States of America. |
| b. | Directly or indirectly solicit business from, attempt to do business with or do business with any Customer (defined below) of the Company which Executive called on, serviced, did business with, had significant contact with or acquired Confidential Information from during employment with the Company. For purposes of this Agreement, “Customer” means any person or entity for whom the Company performed services, or any person or entity that purchased or received products from the Company or any person or entity whom the Company was actively soliciting as a purchaser of its products or services within the lesser of (i) the twelve month period immediately prior to the termination of Executive’s employment with the Company; or (ii) the period Executive was an employee of the Company. | ||
| c. | Directly or indirectly hire, attempt to hire, or solicit any employee of the Company to accept employment elsewhere. |
11. Intellectual Property.
| a. | “Inventions” means any trade secret, invention, mask work, idea, process, formula, source and object code, data, program, other work of authorship, know-how, improvement, discovery, development, trademark, design or technique. “Proprietary Rights” means all trade secret, patent, copyright, mask work, trademark and other intellectual property rights throughout the world. | ||
| b. | Executive hereby assigns and agrees to assign in the future (when any such Inventions or Proprietary Rights are first conceived, reduced to practice, or first fixed in a tangible medium, as applicable) to the Company (or such other party as designated by the Company) all Executive’s right, title and interest in and to any and all Inventions (and all Proprietary Rights) whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by Executive, either solely or jointly with others, that (i) are developed or created by Executive and first conceived, reduced to practice, or first fixed in a tangible medium, as applicable, during the period of Executive’s employment with the Company and for a period of six (6) months thereafter, and |
5
(ii) pertain to any of the Company’s existing or future lines of business.
Inventions assigned to the Company, or to a third party as directed by the Company
pursuant to this Section, are hereinafter referred to as “Company Inventions.”
| c. | During the period of Executive’s employment and for six (6) months after termination of Executive’s employment with the Company, Executive will promptly disclose to the Company fully and in writing all Inventions authored, conceived or reduced to practice by Executive, either alone or jointly with others. In addition, Executive will promptly disclose to the Company all patent applications filed by Executive or on Executive’s behalf within a year after termination of employment. | ||
| d. | Executive acknowledges that all Company Inventions, which are original works of authorship made by Executive (solely or jointly with others) within the scope of Executive’s employment and which are protectable by copyright, are “works made for hire,” pursuant to United States Copyright Act (17 U.S.C., Section 101), consisting either of a work prepared by an employee within the scope of his or her employment, or of certain works specially ordered or commissioned by another. | ||
| e. | Executive will, at the Company’s expense, assist the Company in every proper way to obtain, and from time to time enforce, United States and foreign Proprietary Rights contained in Company Inventions in any and all countries. To that end, Executive will, at Company’s expense, execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights relating to Company Inventions and the assignment thereof. In addition, Executive will, at Company’s expense, execute, verify and deliver assignments of such Proprietary Rights contained in Company Inventions to the Company or its designee. Executive’s obligation to assist the Company with respect to Proprietary Rights relating to such Company Inventions in any and all countries shall continue beyond the termination of employment. |
In the event the Company is unable for any reason, after reasonable effort, to
secure Executive’s signature on any document needed in connection with the
assignment of Proprietary Rights contained in Company Inventions as specified in the
preceding paragraph, Executive hereby irrevocably designates and appoints the
Company and its duly authorized officers and agents as Executive’s agent and
attorney in fact, which appointment is coupled with an interest, to act for and on
Executive’s behalf to execute, verify and file any such documents and to do all
other lawfully permitted acts to further the purposes of the preceding paragraph
with the same legal force and effect as if executed by Executive. Executive hereby
waives and quitclaims to the Company any and all claims, of any nature whatsoever,
which Executive now or may hereafter have for infringement of any Proprietary Rights
assigned hereunder to the Company.
6
| f. | Executive agrees to keep and maintain adequate and current records that may be required by the Company (in the form of notes, sketches, drawings and in any other form) of all Company Inventions made or developed by Executive during the period of Executive’s employment at the Company, which records shall be available to and remain the sole property of the Company at all times. |
12. Effect of Termination on Compensation.
| a. | In the event of the termination of Executive’s employment by the Executive through resignation (other than a resignation for good reason, which is addressed below) or by the Company with cause, Executive shall be entitled to the sum of the (a) base salary earned by Executive but unpaid through the date of termination as provided for in paragraph 5 of this Agreement, and (b) the cash equivalent of any accrued but unused vacation as provided for in paragraph14, but Executive shall not be entitled to any further compensation as of the date of termination. |
In the event Executive’s employment is terminated involuntarily by the Company
without cause or by Executive with good reason, Executive will be entitled to base
salary earned by Executive but unpaid through the date of termination as provided
for in Paragraph 5 of this Agreement, as well as the cash equivalent of any accrued
but unused vacation as provided for in paragraph 14. In addition, the Company will
pay to Executive a lump-sum payment in the amount of the sum of twelve (12) months’
of base salary calculated at the rate of base salary in effect at the time of
termination. A condition precedent to Executive’s receipt of the above lump-sum
payment is that he must enter into a full and binding Release of the Company, its
officers, directors, employees and agents compliant with the Older Workers Benefit
Protection Act, such form of release to be delivered to Executive by the Company
within three (3) days of the date of termination. Payment of base salary earned but
unpaid through the date of termination and accrued but unused vacation pay will be
paid within six days following the date of termination. Payment of the lump-sum
will be made to Executive within forty (40) days following the date of termination,
subject to satisfactory compliance with the above-described condition precedent. In
the event the condition precedent is not satisfied, then the Company has no
obligation to make the lump-sum payment.
| b. | In the event Executive’s employment is terminated involuntarily by the Company, without cause or by Executive with good reason, and provided that Executive elects continued health insurance coverage for himself, his dependents or combination thereof, through a group health plan maintained by the Company or an affiliate of the Company pursuant to COBRA or similar or successor statute, the Company will pay the monthly COBRA contributions for such health insurance coverage, as they may be amended from time to time (less an amount equal to the premium contribution paid by active Company employees for the same or similar coverage), during the 12-month period subsequent to termination; provided, however, that if at any time Executive becomes covered by a group health insurance plan through subsequent employment, the Company’s health |
7
| benefit obligations shall immediately cease, and the Company shall have no further obligation to make COBRA contributions as provided herein. |
| c. | Notwithstanding anything to the contrary in this Agreement, (i) if upon the date of Executive’s termination of employment with the Company, Executive is a “specified employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and the deferral of any amounts otherwise payable under this Agreement as a result of Executive’s termination of employment is necessary in order to prevent any accelerated or additional tax to Executive under Section 409A of the Code, then the Company will defer the payment of any such amounts hereunder until the date that is six months following the date of Executive’s termination of employment with the Company at which time any such delayed amounts will be paid to Executive in a single lump sum, with interest from the date otherwise payable at the prime rate as published in The Wall Street Journal on the date of Executive’s termination of employment with the Company, and (ii) if any other payments of money or other benefits due to Executive hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code. |
13. Withholding From Final Pay. By his signature below and in compliance with applicable federal
and state law, Executive authorizes the Company to deduct debts owed by him to the Company from his
final pay, upon termination of employment, whether voluntary or involuntary. Executive agrees that
“debts” includes any unearned monies paid to him by the Company, such as any loan, monies advanced
to him for personal or business related expenses or advanced compensation, including salary and
bonuses, subject to the Company’s obligations under paragraph 15. Executive agrees that “final
pay” for purposes of this paragraph includes base salary or wages, expense reimbursements and any
other source of remuneration due to Executive upon termination of employment, unless withholding is
contrary to applicable state or federal law. If the amount owed to the Company exceeds the amount
of Executive’s final pay, he agrees to repay the balance owed to the Company under terms to be
agreed upon, in writing, at the time of termination of his employment.
14. Employment Benefits. Executive shall be entitled to receive (i) the employee benefits provided
by the Company to its employees in general; and (ii) such additional or other benefits as the Board
of Directors of the Company may from time to time specifically confer upon Executive. In addition,
Executive shall be entitled to no less than four (4) weeks vacation each year, subject to the
terms of the Company’s Vacation Policy.
15. Reimbursement of Expenses. The Company recognizes that in the performance of duties for the
Company, Executive will incur legitimate business expenses. In this regard, the Company will pay,
upon presentation of proper vouchers therefor and evidence thereof, all reasonable business
expenses authorized by the President of the Company (or his designee) and incurred by Executive in
the performance of Executive’s duties under this Agreement.
8
16. Assignment. This Agreement is personal to Executive and is not assignable in any way by
Executive. Subject to the foregoing qualification, the rights and obligations under this Agreement
shall inure to the benefit of, and shall be binding upon, the heirs, successors, representatives
and assigns of both Executive and the Company. This Agreement is specifically assignable by the
Company.
17. Severability. The parties hereto intend all provisions of this Agreement to be enforced to the
fullest extent permitted by law. Accordingly, should a court of competent jurisdiction determine
that the scope of any provision is too broad to be enforced as written, the parties intend that the
court should reform the provision to such narrower scope as it determines to be enforceable. If,
however, any provision of this Agreement is held illegal, invalid, or unenforceable under present
or future law, such provision shall be fully severable, this Agreement shall be construed and
enforced as if such illegal, invalid, or unenforceable provision were never a part hereof, and the
remaining provisions of this Agreement shall remain in full force and effect and shall not be
affected by the illegal, invalid, or unenforceable provision or by their severance.
18. Miscellaneous.
| a. | Whether or not specifically required under the terms of this Agreement, each party hereto shall execute and deliver such documents and take such further and other action as shall be necessary in order for such parry to perform all of its/his obligations specified herein or reasonably implied from the terms hereof. | ||
| b. | This Agreement is made in the State of Texas, and shall be governed by and construed under the laws of the State of Texas. | ||
| c. | This Agreement is performable in, and venue of any action related or pertaining to this Agreement shall lie in, Dallas County, Texas. | ||
| d. | This Agreement contains the entire understanding and agreement of the parties with respect to the subject matter hereof, and may not be altered, amended or rescinded, nor may any of its provisions be waived, except by an instrument in writing signed by the parties hereto, or in the case of an asserted waiver, by the party against whom the waiver is sought to be enforced. | ||
| e. | Failure by either party to this Agreement to enforce strict performance by the other party of any term or provision of this Agreement shall not be construed as a waiver of such term or provision, nor shall such failure deprive either party of the right thereafter to require strict compliance with any such term or provision. | ||
| f. | The captions of this Agreement are for convenience or reference only and shall not be considered in determining the legal effect of any term or provision of this Agreement. | ||
| g. | If the Company brings action to enforce any of the restrictions in paragraphs 8-10 of this Agreement and prevails in any such action, the Company shall be entitled to recover from Executive, in addition to all remedies available at law or in |
9
| equity, reasonable attorneys’ fees and costs incurred by the Company in enforcing the terms of this Agreement. Additionally, any period or periods of breach of paragraph 10 of this Agreement shall not count towards the two (2) year restriction, but shall instead be added to the restrictive period. |
| h. | The Company shall have the right to collect sums now or hereafter owed to it by Executive by offset against compensation or other sums payable by the Company to Executive or by any other lawful means. | ||
| i. | The terms of this Agreement have been designed to comply with the requirements of Section 409A of the Code, as amended, where applicable, and shall be interpreted and administered in a manner consistent with such intent. | ||
| j. | (1) In the event it shall be determined that any of the payments or distributions made, or benefits provided, by the Company or its affiliates to or for the benefit of the Executive (whether paid or payable or distributed or distributable or provided pursuant to the terms of this Agreement, or the Restricted Stock Grant Agreement provided for in Section 5 hereof, or any other plan, arrangement or agreement with the Company or its affiliates) are contingent upon a Change in Control (as defined below) (the “Total Payments”) would constitute a “parachute payment” as defined in Section 280G of the Code and would be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then, so long as the Excess Amount (as defined below) is one hundred thousand dollars ($100,000.00) or less, the Total Payments shall be reduced so that the aggregate present value of all payments in the nature of compensation to (or for the benefit of) the Executive which are contingent on a Change in Control (which shall mean a change in the ownership or effective control of the Company or the ownership of a substantial portion of its assets pursuant to Code Section 280G(b)(2)(A)) is One Dollar ($1.00) less than the amount which the Executive could receive without being considered to have received any parachute payment (the amount of the reduction provided herein is referred to herein as the “Excess Amount,” and the amount of Total Payments payable after reduction by the Excess Amount is referred to herein as the “Capped Amount”). The Accounting Firm referred to in Section j.(3) shall furnish the Executive with an opinion that he or she has substantial authority not to report any Excise Tax on his or her federal income tax return. The definition of Change in Control set out herein shall only be used in application of this Section 18j. |
(2) If the Excess Amount is greater than one hundred thousand dollars ($100,000.00)
or if any Excise Tax is determined to be owed by Executive, then, in lieu of the
reduction of the Total Payments to the Capped Amount as provided for in Section
j.(1), the Company shall pay to the Executive the Total Payments and an additional
amount (the “Gross-Up Payment”) such that the net amount retained by the Executive,
after deduction of any Excise Tax on the Total Payments and any federal, state and
local income and employment taxes (including hospital insurance taxes) and Excise
Tax upon the Gross-Up Payment, shall be equal to the Total Payments. For purposes
of determining the amount of
10
the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of the residence of the
Executive on the Determination Date (as defined in Section j.(3)), net of the
maximum reduction in federal income taxes which could be obtained from deduction of
such state and local taxes, and the hospital insurance tax at the rate provided
under Section 3111(b) of the Code or any successor provision thereto.
(3) All determinations required to be made under this Section j., including the
Total Payments, the Excess Amount, the Capped Amount, whether a Gross-Up Payment is
required and the amount of such Gross-Up Payment, shall be made by a
nationally-recognized independent accounting firm (the “Accounting Firm”) at the
time of the event giving rise to the Total Payments (the “Determination Date”),
which shall provide detailed supporting calculations both to the Company and the
Executive within fifteen (15) business days after the Determination Date, or such
earlier time as is requested by the Company, and any Gross-Up Payment owing to
Executive shall be made within ten (10) business days following provision of the
supporting calculations. In the event that the Accounting Firm is also serving as
accountant or auditor for the individual, entity, or group effecting the Change in
Control giving rise to the Total Payments, then the Company shall appoint another
nationally recognized public accounting firm acceptable to the Executive 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 and it shall be the Company’s obligation to
cause the Accounting Firm to take any actions required hereby. Any determinations
by the Accounting Firm shall be binding upon the Company and the Executive.
(4) The Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, (i) would result in the Executive having
received from the Company an Excess Amount of one hundred thousand dollars
($100,000.00) or less, when taken together with any Excess Amount previously
calculated pursuant to Section j.(1) above, or (ii) would require the payment by the
Company of the Gross-Up Payment (or an additional Gross-Up Payment). Such
notification shall be given as soon as practicable but no later than five (5)
business days after the Executive knows 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
thirty-(30) day period following the date on which he or she 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:
| (i) | give the Company any information reasonably requested by the Company relating to such claim, |
11
| (ii) | 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, | ||
| (iii) | cooperate with the Company in good faith in order to effectively contest such claim, | ||
| (iv) | 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 Section j.(4), 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, however, 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 such advance; and further provided 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. |
| (5)(i) | If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section j.(4), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall |
12
| (subject to the Company’s complying with the requirements of Section j.(4)) 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 an amount advanced by the Company pursuant to Section j.(4), 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 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 any Gross-Up Payment required to be paid as provided in this Subsection j.(5)(iii) hereof. |
(ii) If it is established, pursuant to a final determination of a court
or an Internal Revenue Service proceeding which has been finally and
conclusively resolved, that an Excess Amount of one hundred thousand
dollars ($100,000.00) or less, when taken together with any Excess Amount
previously calculated pursuant to Section j.(1) above, was received by
the Executive from the Company, then Executive shall repay the Excess
Amount to the Company on demand (but no less than 10 days after written
demand is received by the Executive) together with interest on the Excess
Amount at the “applicable Federal rate” (as defined in Section 1274(d) of
the Code) from the date of the Executive’s receipt of such Excess Amount
until the date of such repayment.
(iii) If it is determined that a Gross-Up Payment
which was not made by the Company should have been made
(“Underpayment”), consistent with the calculations required to be made
hereunder, the Accounting Firm shall determine the amount of the
Underpayment that has occurred, and any such Underpayment shall be paid
by the Company to or for the benefit of the Executive within ten (10)
days of such determination.
(6) Executive agrees to cooperate with, and take such actions as may be reasonably
requested by, the Company to minimize any Excise Tax payable by such Executive.
13
IN WITNESS WHEREOF, this Agreement is executed in several counterparts, each of which shall be
deemed to be as original, as of the day and year first above written.
| DOCUCORP INTERNATIONAL, INC. |
||||
| By | ||||
| Xxxxxxx X. Xxxxxxxx, President and CEO | ||||
| J. Xxxxxx Xxxx, Executive | ||||
Printed Name and Address:
|
||
14
