EXECUTIVE SEVERANCE/CHANGE IN CONTROL AGREEMENT
In this Executive Severance/Change in Control Agreement dated as of
January 21, 2002 (the "Agreement"), General Binding Corporation, including its
subsidiaries (collectively referred to as "GBC"), and Xxx Xxxxxx ("Executive"),
intending to be legally bound and for good and valuable consideration, agree as
follows:
(1) Severance Pay. Should Executive's employment with GBC be
involuntarily terminated from GBC for any reason other than Cause (as defined
below in Section 2(b)), death, total and permanent disability, voluntary
resignation, or retirement at or after age 65, and other than a Change in
Control Termination (as defined below in Section 2(a)), GBC agrees to pay
severance to Executive in the form of two years of salary continuation. In
addition, Executive will receive a prorated annual bonus for the year in which
such termination occurs based on the degree of achievement of goals under the
bonus program in effect at the time of termination and the portion of the year
elapsed as of the date of termination. The degree of achievement of goals shall
be determined in accordance with the bonus program, except that should any goals
be of a subjective nature, the degree of achievement therefor shall be
determined by GBC in its sole discretion. Any such bonus amount shall be paid at
the same time as annual bonuses for the year are paid to GBC's officers
generally. During the period of salary continuation, Executive and his family
shall be entitled to continue to participate in medical and dental plans as
provided by GBC to its employees generally to the same extent and on the same
cost-sharing basis as if Executive's employment had continued during such
period; provided, however, that in the event Executive becomes employed by
another employer and is covered by such employer's health benefits plan or
program, the medical and dental benefits provided by GBC hereunder shall be
discontinued. GBC agrees that, for as long as it is making salary continuation
payments to Executive, that it will maintain and provide for the aforesaid
medical and dental plans or a comparable substitute therefor. Executive shall
have the right to exercise any outstanding and fully vested stock option, stock
appreciation right, or other exercisable equity-based award until the earlier to
occur of (a) the expiration of the salary continuation period and (b) the
expiration date of such stock option, stock appreciation right or other
equity-based award as set forth in the agreement evidencing such award.
(2) Change in Control.
(a) GBC shall pay to Executive the severance described in
Section 3, and Executive shall be entitled to receive Change in Control
Severance Pay described in Section 3, if Executive's employment is terminated
under the circumstances described below (a "Change in Control Termination"):
(i) Executive's employment with GBC and all of its
subsidiaries is terminated:
(1) On the day of, or within twenty-four (24) months
after, the occurrence of a Change in Control, as such term is
defined in Appendix A; or
(2) Prior to a Change in Control but at the request
of any third party participating in or causing the Change in
Control; or
(3) Otherwise in connection with or in anticipation
of a Change in Control; and
(ii) Executive's termination of employment was not:
(1) On account of Executive's death or total and
permanent disability;
(2) For Cause (as defined below); or
(3) On account of Executive's retirement, or
Executive's resignation other than for Good Reason (as defined
below).
(b) For purposes of this Agreement, the following terms
shall have the definitions as set forth below:
(i) "Cause" shall mean (1) a material breach by
Executive of those duties and responsibilities that do not differ in
any material respect from Executive's duties and responsibilities
during the ninety (90) day period immediately prior to termination of
employment, which breach is demonstrably willful and deliberate on
Executive's part, is committed in bad faith or without reasonable
belief that such breach is in the best interests of GBC and is not
remedied in a reasonable period of time after receipt of written notice
from GBC specifying such breach, (2) the commission by Executive of a
felony involving moral turpitude, or (3) dishonesty or willful
misconduct in connection with Executive's employment; and
(ii) "Good Reason" shall mean a significant reduction in
Executive's annual base salary or annual bonus potential from those in
effect immediately prior to the Change in Control, or Executive's
mandatory relocation to an office more than 50 miles from the primary
location at which Executive is required to perform Executive's duties
immediately prior to the Change in Control, and which reduction or
relocation is not remedied in a reasonable period of time (which shall
not be greater than thirty (30) days) after receipt of written notice
from Executive specifying that "Good Reason" exists for purposes of
this Agreement.
(3) Change in Control Severance Pay.
(a) In the event of a Change in Control Termination, GBC
agrees to pay Executive's base salary and annual bonus target as previously
established by GBC's Executive Compensation Committee, prorated through the date
of the Change in Control Termination, plus severance pay equal to 2.0, provided
that Executive shall receive tenure premium of an additional .25 for more than
ten (10) years of service, multiplied by the sum of (i) Executive's annual base
salary in effect at the date of the Change in Control Termination, or, if
greater, immediately prior to the Change in Control, plus (ii) Executive's
target bonus for the year in which the Change in Control occurs or Executive's
bonus based on actual performance for the year, whichever is greater. Such
amount will be paid in an undiscounted lump sum. During the two (2) year period
(plus any applicable additional duration for tenure premium) following the
Change in Control Termination, Executive and his family shall be entitled to
continue to participate in medical and dental plans as provided by GBC to its
employees generally to the same extent and on the same cost-sharing basis as if
Executive's employment had continued during such period. GBC agrees that, during
this period, it will maintain and provide for the aforesaid medical and dental
plans or a comparable substitute therefor.
(b) Any stock awards, stock options, stock appreciation
rights or other equity-based awards that were outstanding immediately prior to
the Change in Control Termination shall, to the extent not then vested, fully
vest and become exercisable as of the date of the Change in Control Termination
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and Executive shall have the right to exercise any such stock option, stock
appreciation right, or other exercisable equity-based award until the earlier to
occur of (i) one (1) year from the date of the Change in Control Termination and
(ii) the expiration date of such stock option, stock appreciation right or other
equity-based award as set forth in the agreement evidencing such award.
(c) In addition, upon a Change in Control Termination,
Executive shall be entitled to receive an additional payment equal to the basic
and supplemental retirement plan match equal to the severance multiple-period
determined in accordance with Paragraph 3(a) multiplied by the prior two (2)
calendar years' average corporate contribution rate and will be paid in a lump
sum with the severance payment as determined in Paragraph 3(a).
(4) Gross-Up Payment. If, for any reason, any part or all of the
amounts payable to Executive under this Agreement (or otherwise, if such amounts
are in the nature of compensation paid or payable by GBC or any of its
subsidiaries after there has been a Change in Control) are deemed to be "excess
parachute payments" within the meaning of Section 280G(b)(1) of the Internal
Revenue Code of 1986, as amended (the "Code") or any successor or similar
provision, subject to the following provisions of this Section (4), GBC shall
pay to such Executive, in addition to all other amounts that he may be entitled
to receive, an amount which, after all federal, state, and local taxes (of
whatever kind) imposed on Executive with respect to such amount are subtracted
therefrom, is equal to the excise taxes (which shall include any interest and
penalties related thereto) imposed on such excess parachute payments pursuant to
Section 4999 of the Code or any successor or similar provision. In the event the
amount of excess parachute payments paid or payable to Executive do not exceed
330% of Executive's "base amount" determined pursuant to Section 280G of the
Code, then the additional payment described in the preceding sentence shall not
be paid and the severance pay payable to Executive hereunder shall be reduced
such that no amounts paid or payable to Executive shall be deemed excess
parachute payments subject to excise tax under Section 4999 of the Code.
(5) Protective Covenants. Executive acknowledges that the above
consideration, absent this Agreement, is beyond what GBC is obligated to pay.
Executive further acknowledges that this Agreement constitutes additional
consideration beyond what GBC is obligated to pay. In consideration of the
opportunity for severance benefits and special grant payments specified above,
and other good and valuable consideration, Executive agrees to the following:
(a) The confidential and proprietary information and trade
secrets of GBC are among its most valuable assets and include non-public
information relating to its business such as its customer and vendor lists,
databases, computer programs, frameworks, models, marketing programs, sales,
financial, marketing, training and technical information, and any other
information, whether communicated orally, electronically, in writing or in other
tangible forms concerning how GBC creates, develops, acquires or maintains its
products and its marketing plans, targets its potential customers and operates
its businesses and which confers an economic advantage on GBC and is not
generally known in the market place. GBC has invested, and continues to invest,
considerable amounts of time and money in obtaining and developing its external
relationships, its data systems and databases, and all the information described
in the preceding sentence (hereinafter collectively referred to as "GBC
Confidential Information"). Any misappropriation or unauthorized disclosure of
GBC Confidential Information in any form would irreparably harm GBC. Executive
will not, except as is necessary to carry on the business of GBC or except as
GBC may otherwise consent or direct in writing, reveal, disclose, sell, use,
lecture upon or publish any GBC Confidential Information. Executive's obligation
under this paragraph will cease as to any information which becomes publicly
known through a source other than Executive.
(b) Executive acknowledges and agrees that because of his
receipt of Confidential Information and because of his importance to GBC, GBC
would likely suffer irreparable harm from
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Executive's competing with GBC during his employment and for some period after
termination of employment. Executive also acknowledges and agrees that GBC has a
protectible interest in a stable workforce. Accordingly, Executive agrees that
during his employment and:
(i) in the case of involuntary termination as set forth
in Section 1 for the period during which Executive continues to receive
pay (provided, however, Executive may elect to waive such pay
continuation after receipt of one (1) year's pay in which event GBC
shall waive the restriction set forth in subparagraph (2) below for any
further period); and
(ii) in the case of any other termination, including a
Change of Control Termination, for a period of one (1) year from
Executive's last day of employment, whether or not severance is
payable,
Executive shall not, directly or indirectly (through another business or
person), engage in the following activities or assist others in such activities,
anywhere in the United States or in any other jurisdiction outside of the United
States in which GBC conducts its business at the time of termination of
Executive's active employment with GBC:
(1) Hiring, recruiting, or attempting to recruit for
any person or business entity that is a Competitor (as defined
below in paragraph (c)) of GBC, any person employed by GBC;
and
(2) Being employed by, being connected to, or
consulting for any person who or business entity which is a
Competitor of any GBC business at the time of the termination
of Executive's active employment with GBC.
The provisions of paragraph 5(b) will apply should Executive's
employment be terminated by either party for any reason (including but not
limited to resignation or retirement).
(c) For the purposes of this Agreement, "Competitor" shall
be defined as any business and any branch, office or operation thereof, which is
in material competition with GBC, including without limitation, any direct
marketing or electronic commerce business, engaged in the manufacture, direct or
indirect distribution, sale or service of binding equipment and supplies,
laminating equipment and supplies, visual communications products, paper
shredders, thermal laminating film, other products or services that GBC actively
engages in the production and/or sale of, or similar office products. Executive
acknowledges that GBC's business is global in nature, and, accordingly, a
geographic limitation will not adequately protect GBC.
(d) Executive agrees that the restrictions set forth above
are necessary to prevent the use and disclosure of GBC Confidential Information
and to otherwise protect the legitimate business interests of GBC. Executive
further agrees and acknowledges that the provisions of this Agreement are
reasonable.
(e) Irreparable harm would result from any breach by
Executive of the provisions of this Agreement, and monetary damages alone would
not provide adequate relief for any such breach. Accordingly, if Executive
breaches this Agreement, injunctive relief in favor of GBC is proper. Moreover,
any award of injunctive relief shall not preclude GBC from seeking or recovering
any lawful compensatory damages which may have resulted from a breach of this
Agreement, including a forfeiture of any payments not made.
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(f) Any waiver, or failure to seek enforcement or remedy for
any breach or suspected breach of any provision of this Agreement by GBC in any
instance shall not be deemed a waiver of such provision in the future.
(6) For a period of up to one (1) year from the date of Executive's
termination of employment, GBC shall provide outplacement services to Executive
up to a maximum cost to GBC of ten percent of Executive's base salary in effect
at the time of employment termination. Outplacement services shall be provided
by an entity mutually agreed upon by GBC and Executive.
(7) In no event shall Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to him hereunder, and except as specifically provided in Section 1 with respect
to certain medical and dental benefits, such amounts shall not be reduced
whether or not Executive obtains other employment.
(8) If any provision(s) of this Agreement shall be found invalid,
illegal, or unenforceable, in whole or in part, then such provision(s) shall be
deemed to be modified or restricted to the extent and in the manner necessary to
render the same valid and enforceable or shall be deemed excised from this
Agreement, as the case may require, and this Agreement shall be construed and
enforced to the maximum extent permitted by law, as if such provision(s) had
been originally incorporated herein as so modified or restricted or as if such
provision(s) had not been originally incorporated herein, as the case may be.
(9) THIS AGREEMENT WILL BE GOVERNED UNDER THE INTERNAL LAWS OF THE
STATE OF ILLINOIS. EXECUTIVE AGREES THAT THE STATE AND FEDERAL COURTS LOCATED IN
THE STATE OF ILLINOIS SHALL HAVE EXCLUSIVE JURISDICTION IN ANY ACTION, SUIT OR
PROCEEDING BASED ON OR ARISING OUT OF THIS AGREEMENT, AND EXECUTIVE HEREBY: (a)
SUBMITS TO THE PERSONAL JURISDICTION OF SUCH COURTS; (b) CONSENTS TO THE SERVICE
OF PROCESS IN CONNECTION WITH ANY ACTION, SUIT, OR PROCEEDING AGAINST EXECUTIVE;
AND (c) WAIVES ANY OTHER REQUIREMENT (WHETHER IMPOSED BY STATUTE, RULE OF COURT,
OR OTHERWISE) WITH RESPECT TO PERSONAL JURISDICTION, VENUE OR SERVICE OF
PROCESS.
(10) Executive and GBC agree that, in the event a dispute arises that
concerns this Agreement, the Prevailing Party shall be entitled to recover all
of their reasonable fees and expenses, including, without limitation, reasonable
attorneys' fees and expenses incurred in connection with the dispute. A
Prevailing Party is one who is successful on any significant substantive issue
in the action and achieves either a judgment in such party's favor or some other
affirmative recovery.
(11) This Agreement does not constitute a contract of employment, and
Executive acknowledges that Executive's employment with GBC is terminable at
will by either party with or without cause and with or without notice.
(12) If any provision of this Agreement conflicts with any other
agreement, policy, plan, practice or other GBC document, then the provisions of
this Agreement will control. This Agreement will supersede any prior agreement
between Executive and GBC with respect to the subject matter contained herein
and may be amended only by a writing signed by an officer of GBC and the
Executive.
(13) All compensation paid or provided to Executive under this
Agreement shall be subject to any applicable income, payroll or other tax
withholding requirements.
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(14) This Agreement shall be for the benefit of and shall be binding
upon GBC and Executive and their respective heirs, personal representatives,
legal representatives, successors and assigns.
(15) This Agreement may be executed in one or more counterparts,
which together shall constitute a valid and binding agreement.
IN WITNESS WHEREOF, Executive and GBC, by its duly authorized
representatives, have executed this Agreement effective as of the date set forth
below.
GENERAL BINDING CORPORATION
__________________________________ By:_____________________________________
Xxx Xxxxxx Xxxxxx X. Xxxxxx, Chairman, President
and Chief Executive Officer
__________________________________ ________________________________________
Date Date
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APPENDIX A
TO EXECUTIVE SEVERANCE/CHANGE IN CONTROL AGREEMENT
"Change in Control" shall mean the first to occur of:
(a) Any "person" (as defined in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), excluding for
this purpose, (i) any person who, as of June 28, 2000, was the beneficial owner
of 10% or more of the combined voting power of the voting securities of General
Binding Corporation (the "Company"), or (ii) the Company or any subsidiary of
the Company, or (iii) any employee benefit plan of the Company or any subsidiary
of the Company, or any person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan which acquires
beneficial ownership of voting securities of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly of securities of the Company representing more than 50% of the
combined voting power of the Company's then outstanding securities; provided,
however, that no Change in Control will be deemed to have occurred as a result
of a change in ownership percentage resulting solely from an acquisition of
securities by the Company; and provided further that no Change in Control will
be deemed to have occurred if a person inadvertently acquires an ownership
interest of more than 50% but then promptly reduces that ownership interest
below 50%; or
(b) During any two (2) consecutive years (not including any period
beginning prior to June 28, 2000), individuals who at the beginning of such two
(2) year period constitute the Board of Directors of the Company and any new
director (except for a director designated by a person who has entered into an
agreement with the Company to effect a transaction described elsewhere in this
definition of Change in Control) whose election by the Board or nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election was
previously so approved (such individuals and any such new director, the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, all or substantially all of the individuals and entities who were
the beneficial owners of outstanding voting securities of the Company
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the company resulting from such Business Combination
(including, without limitation, a company which as a result of such transaction
owns the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business Combination
of the outstanding voting securities of the Company; or
(d) Approval by the stockholders of the Company of a complete
liquidation or dissolution of the Company.
A-1
