AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT
Exhibit 10.3
AMENDED AND RESTATED
CHANGE IN CONTROL AGREEMENT
CHANGE IN CONTROL AGREEMENT
This AMENDED AND RESTATED CHANGE IN CONTROL AGREEMENT (“Agreement”), executed on
December 29, 2008 and effective for all purposes as of January 14, 2008 (the “Effective Date”), by
and between CONSOLIDATED GRAPHICS, INC., a Texas corporation (the “Company”), and XXX X.
XXXX (the “Executive”), evidences that;
WHEREAS, the Executive is a senior executive of the Company and has made and is expected to
make significant contributions to the profitability, growth and financial strength of the Company;
WHEREAS, the Company and the Executive are parties to that certain Change in Control
Agreement, effective January 14, 2008 (the “Prior Change in Control Agreement”);
WHEREAS, the Company and the Executive entered into the Prior Change in Control Agreement to
ensure that the Executive is not practically disabled from discharging his duties upon a Change in
Control (as defined hereafter);
WHEREAS, the Company and the Executive desire to amend and restate the Prior Change in Control
Agreement solely to incorporate such terms as are deemed necessary by the parties to comply with
Section 409A of the Internal Revenue Code, as amended, and the regulations issued thereunder, and
to make certain ministerial clarifications;
WHEREAS, the terms of the Prior Change in Control Agreement, as amended and restated, are set
forth in this Agreement;
WHEREAS, this Agreement, as amended and restated, 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 Effective
Date, 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) 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 referenced in clause (i)
immediately preceding plus directors of the Company whose nomination and/or election
was approved by the directors referenced in clause (i) immediately preceding; or
(vi) The shareholders of the Company approve a plan contemplating the
liquidation or dissolution of the Company.
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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 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.
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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 two and one-half months following the last day of
the fiscal year during which such Incentive Pay is deemed no longer subject to a substantial
risk of forfeiture.
(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 exist 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)(ii) 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.
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(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 Sections 280G and 4999 of the
Code (and any successor provisions thereto) had not been enacted into law. Such payment
shall be made no later than December 31st of the year following the year during which the
Executive remits the related taxes.
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;
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(B) intentional, wrongful damage to material property of the Company;
(C) intentional, wrongful disclosure of material secret processes or
confidential 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 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;
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(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
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 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.
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(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, in the case of any payment or
benefit subject to Section 409A of the Code, the date the Executive incurs a “separation
from service” within the meaning of Section 409A(2)(A)(i) of the Code):
(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 in an amount equal to a multiple of two (2) times the Executive’s Base Pay
(at the highest rate in effect 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.
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(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;
(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) (i) 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.
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(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 and in no event later than December 31st of the year following the
year during which the Executive remits the taxes related to the Gross-Up Payment. 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 set forth in reasonable detail 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 selected by the Company,
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(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 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.
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(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 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, 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 indebtedness 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.
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(e) Notwithstanding any provision of this Agreement to the contrary, if the Executive
incurs a separation from service with the Company (other than by reason of death) and is
deemed on his date of separation from service to be a “specified employee” within the
meaning of Section 409A(a)(2)(B)(i) of the Code, then, to the extent required under Section
409A(a)(2)(B)(i) of the Code, the payments and benefits under this Agreement shall commence
or be made or provided as soon as practicable but not prior to the later of (A) the payment
date set forth in this Agreement with respect to such payment or benefit or (B) the date
that is the earliest of (i) the expiration of the six-month period measured from the date of
separation from service or (ii) the date of the Executive’s death, in either case without
interest for such delay.
(f) To the extent any reimbursements or in-kind benefits provided to the Executive
pursuant to this Agreement are subject to Section 409A of the Code, including without
limitation any health plan benefits subject to Section 409A of the Code or legal fees and
expenses paid or reimbursed pursuant to Section 8, then in accordance with Section
409A of the Code: (A) the amount of expenses eligible for reimbursement or in-kind benefits
provided during the Executive’s taxable year shall not affect the expenses eligible for
reimbursement or in-kind benefits provided in any other taxable year; (B) the reimbursement
must be made on or before the last day of the Executive’s taxable year following the taxable
year in which the expense was incurred; and (C) the right to reimbursement or in-kind
benefits is not subject to liquidation or exchange for another benefit.
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 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
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(“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 and
printing, off-set lithography (sheet fed and web), composition, electronic prepress, binding,
kitting and finishing services, fulfillment of printed materials, and direct mail services,
including any other 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 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.
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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 decree of specific performance, mandamus or other appropriate
remedy to enforce performance of this Agreement.
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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: | Xxxxxxx Xxxxxx-Xxxxxx | |||
| Xxxxxx and Xxxxx LLP | ||||
| 1 Houston Center | ||||
| 0000 XxXxxxxx Xxx, Xxxxx 0000 | ||||
| Xxxxxxx, Xxxxx 00000 | ||||
| Facsimile No. (000) 000-0000 | ||||
| If to the Executive: | Xxx X. Xxxx | |||
| c/o Consolidated Graphics, Inc. | ||||
| 0000 Xxxxxxxxxx, Xxxxx 000 | ||||
| Xxxxxxx, Xxxxx 00000 |
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.
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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.
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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, | ||||
| Chairman and Chief Executive Officer | ||||
| EXECUTIVE: |
||||
| /s/ Xxx X. Xxxx | ||||
| Xxx X. Xxxx | ||||
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