EXECUTIVE SEVERANCE/CHANGE IN CONTROL AGREEMENT
In this Executive Severance/Change in Control Agreement dated as of August
26, 2000 (the "Agreement"), General Binding Corporation, including its
subsidiaries (collectively referred to as "GBC"), and Xxxxx X. 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 [_____ (__)](1) year(s) 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
For executives with less than five (5) years of service: one (1) year. For
executives with at least five (5) years of service but less than ten (10) years
of service: one (1) year and six (6) months. For executives with at least ten
(10) years of service: two (2) years.
(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.
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(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 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.
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(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 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 as identified in Appendix B.
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.
(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.
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(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:_____________________________________
Xxxxx X. Xxxxxx Govi X. Xxxxx, 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-1
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-2
