SALARY CONTINUATION AND NON-COMPETITION AGREEMENT
Exhibit
10.23
THIS SALARY CONTINUATION AND
NON-COMPETITION AGREEMENT (the “Agreement”) dated and effective as of October 1,
2010, is made and entered into by and between IEC ELECTRONICS CORP (“IEC”) and
XXXXXX X. XXXXX (“Executive”).
WITNESSETH:
WHEREAS, Executive has been an employee
and officer of IEC since November 2004 and currently serves as Senior Vice
President of Operations; and
WHEREAS, the Board of Directors
(“Board”) of IEC has elected Executive as Executive Vice President of
Operations, effective on October 1, 2010; and
WHEREAS, in recognition of such
promotion, the Board has awarded Executive 7,500 shares of restricted stock
effective on October 1, 2010; and
WHEREAS, as Executive Vice President of
Operations, Executive will report to the Chief Executive Officer (“CEO”) for
certain matters and to the President for other matters, and shall perform such
duties and exercise such powers as may be delegated from time to time by the CEO
or the President, including, but not limited to, the responsibility for the
operating performance of each of IEC’s business units, current or future;
and
WHEREAS, the Board has determined that
it is in the best interests of IEC and its shareholders to provide Executive
with certain salary continuation payments upon the circumstances described below
in order to provide Executive with enhanced financial security to assure the
continued loyalty, cooperation and services of Executive; and
WHEREAS,
the Board has conditioned Executive’s new title and responsibilities, his award
of restricted shares and the payment of salary continuation to him under certain
circumstances, on Executive’s execution of this Agreement and Executive’s
compliance with the covenants set forth in Section 3 of this Agreement;
and
WHEREAS,
Executive acknowledges the receipt of such good and valuable consideration for
his compliance with the covenants set forth in Section 3 of this
Agreement.
NOW, THERFORE, in consideration of the
mutual promises, benefits and covenants herein contained, the parties agree as
follows:
1. Employment
at Will
IEC and Executive acknowledge and agree
that Executive’s continued employment is “at will” and that their employment
relationship may be terminated by either party at any time, for any reason, with
or without cause.
Nothing contained in this Agreement
shall: (a) confer on Executive any right to continue in the employ of IEC; (b)
constitute any contract or agreement of employment; or (c) interfere in any way
with the at-will nature of Executive’s employment with IEC.
2. Salary
Continuation
2.1 If
Executive’s employment is terminated (i) by IEC without “Cause” (as defined
below); or (ii) following a Change in Control (as defined below) and without
Cause or for Good Reason (as defined below), IEC agrees to provide Executive
with salary continuation for a period of twelve (12) months at the rate in
effect immediately prior to the date of termination. All withholding
taxes and other deductions that IEC is required by law to make from wage
payments to employees will be made from such salary continuation
payments. If Executive’s employment terminates as a result of death
or Disability, such termination shall not be considered a termination without
“Cause” that will enable Executive to receive any salary continuation
payment.
2.2 Notwithstanding
Section 2.1, Executive shall not be entitled to receive salary continuation
payments (a) if he voluntarily terminates his employment with IEC except for
Good Reason following a Change in Control; (b) if his employment terminates by
reason of his death or Disability; or (c) if he is terminated by IEC for
Cause.
2.3 Executive
acknowledges and understands that IEC’s obligation to make the salary
continuation payments in Section 2.1 is conditioned upon each of the
following: (i) Executive’s continued compliance with his obligations
under Section 3 of this Agreement; and (ii) Executive’s execution, delivery and
non-revocation of a valid and enforceable general release of claims (the
“Release”) in form and substance satisfactory to IEC, which must be delivered to
IEC within ten (10) business days after termination. In the event
that Executive breaches any of the covenants set forth in Section 3 of this
Agreement, Executive will immediately return to IEC any portion of the salary
continuation payments that have been paid to Executive pursuant to this
Section. Subject to Section 2.4, the salary continuation payments
will commence to be paid to Executive as soon as practicable following the
effectiveness of the Release.
2.4 Section 409A Specified
Employee If Executive is a “specified employee” for purposes
of Xxxxxxx 000X xx xxx Xxxxxx Xxxxxx Internal Revenue Code of 1986, as amended
(the “Code”), and the regulations thereunder, to the extent required to comply
with Section 409A of the Code, any salary continuation payments required to be
made pursuant to Section 2.1 which are subject to Section 409A of the Code shall
not commence until one day after the day which is six (6) months from the date
of termination, with the first payment equaling six (6) months of salary
continuation.
2.5 Definitions For
purposes of this Agreement, the following terms shall have the following
meanings:
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2.5.1 “Cause”
shall mean any of the following: Executive’s (i) substantial and material
failure, or refusal to perform his assigned duties which is not cured within ten
(10) days of Executive receiving written notice of such failure, provided that
that a failure to meet the business plan of IEC alone, or good faith errors in
judgment made by the Executive shall not constitute grounds for termination of
the Executive for Cause; (ii) willful misconduct or gross negligence in the
performance of his employment duties; (iii) continuing failure or refusal to
observe material policies generally applicable to officers or employees of IEC
unless such failure is capable of being cured and is cured within ten (10) days
of Executive receiving written notice of such failure; (iv) failure to cooperate
with any internal investigation of IEC; (v) commission of any act of fraud,
theft, embezzlement or financial dishonesty with respect to IEC;
(vi) conviction of any felony, or an indictment for a crime which is
of such impropriety or magnitude that it substantially adversely affects the
business or the reputation of IEC; (vii) material violation of the
provisions of this Agreement unless such violation is capable of being cured and
is cured within ten (10) days of Executive receiving written notice of such
violation; or (viii) refusal to follow any legal and proper directive of the
Chief Executive Officer or President which is not cured within ten (10) days of
Executive receiving written notice.
2.5.2 “Change
in Control” shall mean (a) the date of the acquisition by any “person” (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”), excluding IEC or any of its
subsidiaries, of beneficial ownership (within the meaning of Rule 13d-3 under
the Exchange Act) of 25% or more of the combined voting power of
IEC’s then outstanding voting securities (the “Voting Securities”); or (b) the
date the individuals who constitute the board as of the effective date of this
Agreement (the “Incumbent Board”) cease for any reason to constitute at least
two-thirds of the members of the board, provided that any person becoming a
director subsequent to the effective date of this Agreement whose election, or
nomination for election by IEC’s shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board (other
than any individual whose nomination for election to the board was not endorsed
by IEC’s management prior to, or at the time of, such individual’s initial
nomination for election ) shall be, for the purposes of this Agreement,
considered as though such person were a member of the Incumbent Board; or (c)
the date of consummation of a merger, consolidation, recapitalization,
reorganization, sale or disposition of all or a substantial portion of IEC’s
assets or the issuance of shares of stock of IEC in connection with the
acquisition of the stock or assets of another entity; provided, however, that a
Change in Control shall not occur under this clause (c) if consummation of the
transaction would result in at least 51% of the total voting power represented
by the Voting Securities of IEC (or, if not IEC, the entity that succeeds to all
or substantially all of IEC’s business) outstanding immediately after such
transaction being beneficially owned (within the meaning of Rule 13d-3
promulgated pursuant to the Exchange Act) by at least 51% of the holders of
outstanding Voting Securities of IEC immediately prior to the transaction, with
the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or (d) the date
IEC files a report or proxy statement with the Securities and Exchange
Commission pursuant to the Exchange Act disclosing in response to Form 8-K or
Schedule 14A (or any successor schedule, form or report of item therein) that a
change in control of IEC has or may have occurred, or will or may occur in the
future, pursuant to any then existing contract or transaction.
Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur solely because
any person acquires beneficial ownership of more than 25% of Voting Securities
as a result of the acquisition of Voting Securities by IEC which reduces the
number of Voting Securities outstanding; provided that if after such acquisition
by IEC such person becomes the beneficial owner of additional Voting Securities
that increases the percentage of outstanding Voting Securities beneficially
owned by such person, a Change in Control shall then occur.
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2.5.3 “Good
Reason” shall mean the occurrence of any of the following events within the
two-year period following a Change in Control without the Executive’s express
written consent: (i) a material and adverse change in Executive’s
position, authority, duties or responsibilities; (ii) a reduction in Executive’s
base salary; (iii) a failure to provide Executive with a package of fringe
benefits that, though one or more elements may vary from those in effect
immediately prior thereto, is substantially comparable to such fringe benefits;
or (iv) a relocation of Executive’s principal place of employment by more than
fifty (50) miles.
2.5.4 “Disability”
shall mean Executive is entitled to receive long-term disability benefits under
the long-term disability plan of IEC in which Executive participates, or, if
there is no such plan, Executive’s inability, due to physical or mental ill
health, to perform the essential functions of Executive’s job, with or without a
reasonable accommodation, for 180 days during any 365-day period, irrespective
of whether such days are consecutive.
3. Restrictive
Covenants
The parties acknowledge that references
to IEC in this Section 3 shall be deemed to be references to IEC and its
affiliates and subsidiaries.
3.1 Unauthorized
Disclosure Executive agrees and understands that in his capacity as an
executive officer of IEC, Executive has been and will be exposed to and has and
will receive information relating to the confidential affairs of IEC, including,
without limitation, technical information, intellectual property, business and
marketing plans, strategies, customer information, software, other information
concerning the products, promotions, development, financing, expansion plans,
business policies and practices of IEC and other forms of information considered
by IEC to be confidential or in the nature of trade secrets (including, without
limitation, ideas, research and development, know-how, formulas, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and cost
information and business and marketing plans and proposals) (collectively, the
“Confidential Information”). Executive agrees that at all times
during Executive’s employment with IEC and thereafter, (i) Executive shall not
disclose such Confidential Information, either directly or indirectly, to any
individual, corporation, partnership, limited liability company, association,
trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof (each a “Person”) other than
in connection with Executive’s employment with IEC without IEC’s prior written
consent and shall not use or attempt to use any such information in any manner
other than in connection with his employment with IEC, unless required by law to
disclose such information, in which case Executive shall provide IEC with
written notice of such requirement as far in advance of such anticipated
disclosure as possible; (ii) Executive shall not delete, encrypt, password,
protect or retain electronic files containing Confidential Information, or IEC
materials (including emails and attachments) and (iii) Executive shall not take
any other action that impairs, restricts, limits or impedes IEC’s ability to
have full access and to use its Confidential Information. This
confidentiality covenant has no temporal, geographical or territorial
restriction. Upon termination of Executive’s employment with IEC,
Executive shall promptly supply to IEC all property, keys, notes, memoranda,
writings, lists, files, reports, customer lists, correspondence, tapes, disks,
cards, surveys, maps, logs, machines, technical data and any other tangible
product or document which has been produced by, received by or otherwise
submitted to Executive during Executive’s employment with IEC, and any copies
thereof in his (or capable of being reduced to his) possession. At
the end of Executive’s employment, Executive also agrees not to make IEC
materials and data difficult to access. Specifically, Executive
agrees (i) not to delete or alter any IEC documents, or destroy or throw away
materials; (ii) not to password protect or encrypt or reformat IEC documents;
(iii) not to download IEC information or forward electronic files from the IEC
computer systems to any other location; (iv) not access the IEC computer system,
email system or voicemail system, including by remote access; and (v) not to
solicit the assistance of any IEC employee or contractor to assist Executive in
connection with such actions.
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3.2 Non-Competition By
and in consideration of IEC’s entering into this Agreement and in further
consideration of (i) Executive’s promotion to Executive Vice President of
Operations of IEC; (ii) Executive’s award of restricted shares; (iii) IEC’s
agreement to pay salary continuation as set forth in Section 2; and (iv)
Executive’s exposure to the Confidential Information of IEC, Executive agrees
that he shall not, during his continuation of employment with IEC and for a
period of eighteen (18) months thereafter (the “Restriction Period”), directly
or indirectly, perform similar employment functions for or on behalf
of any Restricted Enterprise (as defined below); provided that in no
event shall ownership of one percent (1%) or less of the outstanding securities
of any class of any issuer whose securities are registered under the Securities
Exchange Act of 1934, as amended, standing alone, be prohibited by this Section
3.2, so long as Executive does not have, or exercise, any rights to manage or
operate the business of such issuer other than rights as a stockholder
thereof. For purposes of this paragraph, “Restricted Enterprise”
shall mean any Person that is
actively engaged in any geographic area in any business which is either (i) in
competition with the business of IEC; or (ii) proposed to be conducted by IEC
in IEC’s business plan as in effect at that time. During the
Restriction Period, upon request of IEC, Executive shall notify IEC of
Executive’s then current employment status. Notwithstanding the
foregoing, that it shall not be a violation of this Agreement for Executive to
serve on the boards of directors of other companies which do not compete with
IEC, with the Board’s prior written consent, which shall not be unreasonably
withheld.
3.3 Non-Solicitation of
Employees Executive acknowledges that the relationship between
IEC and its employees are valuable assets of IEC. During Executive’s
employment and during the Restriction Period, Executive agrees that Executive
will not directly or indirectly contact, induce or solicit (or assist any Person
to contact, induce or solicit) for employment any person who is, or within
twelve (12) months prior to the date of such solicitation was, an employee of
IEC.
3.4 Non-Solicitation of IEC
Customers Executive acknowledges that the relationship
between IEC and its customers are valuable assets of IEC and that IEC has a
legitimate interest in protecting the customer base it has created and
maintained at its financial expense. During Executive’s employment,
and during the Restriction Period (other than in connection with carrying out
his responsibilities for IEC), Executive agrees that he will not directly or
indirectly contact, induce or solicit (or assist any Person to contact, induce
or solicit) any customer or client of IEC (or prospective customer or client of
IEC with whom IEC is negotiating or preparing a proposal for products or
services) to terminate its business relationship or otherwise cease doing
business in whole or in part with IEC, or directly or indirectly interfere with
(or assist any Person to interfere with) any material relationship between IEC
and any of its or their customers or clients so as to cause harm to
IEC.
3.5 Extension of Restriction
Period Executive acknowledges and agrees that the
Restriction Period shall be tolled for any period during which Executive is in
breach of any of Sections 3.2, 3.3 or 3.4 hereof.
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3.6 Proprietary
Rights Executive shall disclose promptly to IEC any and all
inventions, discoveries, and improvements (whether or not patentable or
registrable under copyright or similar statutes), and all patentable or
copyrightable works, initiated, conceived, discovered, reduced to practice, or
made by him, either alone or in conjunction with others, during Executive’s
employment with IEC and related to the business or activities of IEC (the
“Developments”). Except to the extent any rights in any Developments
constitute a work made for hire under the U.S. Copyright Act, 17 U.S.C. § 101
et seq. that are owned
ab initio by IEC,
Executive assigns all of his right, title and interest in all Developments
(including all intellectual property rights therein) to IEC or its nominee
without further compensation, including all rights or benefits therefor,
including without limitation the right to xxx and recover for past and future
infringement. Executive acknowledges that any rights in any
Developments constituting a work made for hire under the U.S. Copyright Act, 17
U.S.C § 101 et seq. are owned upon creation by IEC as Executive’s
employer. Whenever requested to do so by IEC, Executive shall execute
any and all applications, assignments or other instruments which IEC shall deem
necessary to apply for and obtain trademarks, patents or copyrights of the
United States or any foreign country or otherwise protect the interests of IEC
therein. These obligations shall continue beyond the end of
Executive’s employment with IEC with respect to inventions, discoveries,
improvements or copyrightable works initiated, conceived or made by Executive
while employed by IEC, and shall be binding upon Executive’s employers, assigns,
executors, administrators and other legal representatives. In
connection with his execution of this Agreement, Executive has informed IEC in
writing of any interest in any inventions or intellectual property rights that
he holds as of the date hereof as set forth on Exhibit A hereto (the
“Existing Inventions”). Notwithstanding anything to the contrary
herein, the Developments shall not include any Existing
Inventions. If IEC is unable for any reason, after reasonable effort,
to obtain Executive’s signature on any document needed in connection with the
actions described in this Section 3.6, Executive hereby irrevocably designates
and appoints IEC and its duly authorized officers and agents as Executive’s
agent and attorney in fact to act for and on Executive’s behalf to execute,
verify and file any such documents and to do all other lawfully permitted acts
to further the purposes of this Section 3.6 with the same legal force and effect
as if executed by Executive.
3.7 Remedies Executive
agrees that any breach of the terms of this Section 3 would result in
irreparable injury and damage to IEC for which IEC would have no adequate remedy
at law; Executive therefore also agrees that in the event of said breach or any
threat of breach, IEC shall be entitled to an immediate injunction and
restraining order to prevent such breach and/or threatened breach and/or
continued breach by Executive and/or any and all Persons acting for and/or with
Executive, without having to prove damages, in addition to any other remedies to
which IEC may be entitled at law or in equity, including, without limitation,
the obligation of Executive to return any salary continuation payments made by
IEC to IEC. The terms of this paragraph shall not prevent IEC from
pursuing any other available remedies for any breach or threatened breach
hereof, including, without limitation, the recovery of damages from
Executive. Executive and IEC further agree that the provisions of the
covenants contained in this Section 3 are reasonable and necessary to protect
the business of IEC because of Executive’s access to Confidential Information
and his material participation in the operation of such business.
3.8 Litigation
Support Executive agrees to make himself reasonably available
in the event IEC needs him to participate in any litigation involving
IEC. Executive shall be entitled to full reimbursement of all
reasonable expenses incurred during such litigation support, upon presentation
of appropriate documentation to IEC in accordance with IEC’s standard
reimbursement policies and procedures.
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4. Miscellaneous
4.1 Amendments and Waivers
This Agreement and any of the provisions hereof may be amended, waived (either
generally or in a particular instance and either retroactively or
prospectively), modified or supplemented, in whole or in part, only by written
agreement signed by the parties hereto; provided that, the observance of any
provision of this Agreement may be waived in writing by the party that will lose
the benefit of such provision as a result of such waiver. The waiver
by any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a further or continuing waiver of such breach or as a
waiver of any other or subsequent breach, except as otherwise explicitly
provided for in such waiver. Except as otherwise expressly provided
herein, no failure on the part of any party to exercise, and no delay in
exercising, any right, power or remedy hereunder, or otherwise available in
respect hereof at law or in equity, shall operate as a waiver thereof, nor shall
any single or partial exercise of such right, power or remedy by such party
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy.
4.2 Notices Unless
otherwise provided herein, all notices, requests, demands, claims and other
communications provided for under the terms of this Agreement shall be in
writing. Any notice, request, demand, claim or other communication
hereunder shall be sent by (i) personal delivery (including receipted courier
service) or overnight delivery service; (ii) facsimile during normal business
hours, with confirmation of receipt, to the number indicated,
(iii) reputable commercial overnight delivery service courier; or (iv)
registered or certified mail, return receipt requested, postage prepaid and
addressed to the intended recipient as set forth below:
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If
to IEC:
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000 Xxxxx
Xxxxxx
Xxxxxx,
Xxx Xxxx 00000
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ATTENTION:
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W.
Xxxxx Xxxxxxx, Chairman of the Board and
CEO
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If
to Executive:
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to
his home address as set forth in IEC's personnel
records.
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All such notices, requests, consents
and other communications shall be deemed to have been given when
received. Either party may change its facsimile number or its address
to which notices, requests, demands, claims and other communications hereunder
are to be delivered by giving the other parties hereto notice in the manner then
set forth.
4.3 Governing
Law This Agreement shall be construed and enforced in accordance with,
and the rights and obligations of the parties hereto shall be governed by, the
laws of the State of New York, without giving effect to the conflicts of law
principles thereof.
4.4 Severability Whenever
possible, each provision or portion of any provision of this Agreement,
including those contained in Section 3 hereof, will be interpreted in such
manner as to be effective and valid under applicable law but the invalidity or
unenforceability of any provision or portion of any provision of this Agreement
in any jurisdiction shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of this Agreement, including that provision or portion of any
provision, in any other jurisdiction.
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4.5 Entire Agreement
This Agreement constitutes the entire agreement between the parties hereto, and
supersedes all prior representations, agreements and understandings (including
any prior course of dealings), both written and oral, between the parties hereto
with respect to the subject matter hereof.
4.6 Counterparts This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, but all such counterparts shall together constitute one and
the same instrument.
4.7 Binding
Effect This Agreement shall inure to the benefit of, and be
binding on, the successors of each of the parties, including, without
limitation, Executive’s heirs and the personal representatives of Executive’s
estate and any successor to all or substantially all of the business and/or
assets of IEC.
4.8 Section 4.09A
Compliance This Agreement is intended to comply with Section 409A of the
Code (to the extent applicable) and, to the extent it would not adversely impact
IEC, IEC agrees to interpret, apply and administer this Agreement in the least
restrictive manner necessary to comply with such requirements and without
resulting in any diminution in the value of payment or benefits to
Executive.
4.9 Advice of Counsel
Executive acknowledges that Executive has had the opportunity to fully review
this Agreement, and if Executive so chooses, to consult with counsel, and is
fully aware of Executive’s rights and obligations under this
Agreement.
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
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By:
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/s/ W. Xxxxx Xxxxxxx
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Name:
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W.
Xxxxx Xxxxxxx
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Title:
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Chairman
of the Board and
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Chief
Executive Officer
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/s/
Xxxxxx X. Xxxxx
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Xxxxxx
X.
Xxxxx
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Exhibit
A
Existing
Inventions
None
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