1
EXHIBIT 10.28
EXECUTIVE SEVERANCE AGREEMENT, dated as of May 24, 1999 (the
"Agreement"), between The X.X. Xxxxxxx Company, Inc., a North
Carolina corporation (the "Employer"), and Xxxxxx X. Roof (the
"Employee").
The Employer and the Employee are parties to an Amended and
Restated Employment Agreement, dated as of January 1, 1999 (the "Existing
Employment Agreement"), and desire to amend and restate, and have this Agreement
supersede, the Existing Employment Agreement in its entirety. The Employer
desires to continue to retain the Employee to supply services to the Employer,
and the Employee desires to continue provide such services to the Employer, on
the terms and subject to the conditions set forth in this Agreement.
In consideration of (i) the Employee's agreement to supply
services under this Agreement and (ii) the mutual agreements set forth below,
the sufficiency of which is hereby acknowledged, the Employer and the Employee
agree as follows:
SECTION 1. Employment Relationship.
(a) Employment by Employer. The Employer hereby employs the
Employee, and the Employee hereby agrees to be employed by the Employer, as
President and Chief Executive Officer of the Employer, and the Employee will
devote all of his business time, attention, knowledge and skills and use his
best efforts during the Employment Period to perform services and duties
consistent with his title and position (the "Services") for the Employer in
accordance with directions given to the Employee from time to time by the Board
of Directors of the Employer.
(b) Employment Period. The period commencing on the date of
this Agreement and ending on the date on which this Agreement is terminated is
referred to herein as the "Employment Period." During the Employment Period, the
Employee will be an at-will employee of the Employer. The Employment Period
shall be freely terminable for any reason by either party at any time.
SECTION 2. Compensation and Benefits. During the
Employment Period:
(a) Base Compensation. The Employer shall pay to the Employee
a base salary of $400,000 per annum (the "Base Salary"), payable in accordance
with the Employer's payroll practices. The Base Salary shall be increased (but
not decreased) subject to additional discretionary increases (but not decreases)
as determined periodically by the Board of Directors.
(b) Additional Compensation. As additional compensation for
the Services, the Employer shall pay to the Employee the following amount: (x)
with respect to calendar year 1999, an annual bonus payment at the "Minimum,"
"Plan" or "Maximum" percentage payment
2
levels, as the case may be, in accordance with the terms of the Employer's 1999
Executive Bonus Plan and (y) with respect to subsequent calendar years, other
annual incentive compensation as the Board of Directors of the Employer
determines in its sole discretion to pay the Employee, payable in all cases on
or around March 1 of the following year. The Employee will be entitled to
participate in the 1999 Executive Bonus Plan as a Level 0 Employee. The Employee
acknowledges that the Employer may terminate or modify its Executive Bonus Plan
or other incentive plans (excluding the 1999 Executive Bonus Plan as in effect
and applied to the Employee on the date hereof) at any time, although no
termination or amendment affecting the Employee will be made effective unless it
is consistently applied to other employees participating in such plans. In the
event of any conflict or inconsistency between the terms of the 1999 Executive
Bonus Plan and the terms of Section 2(b) or 3 of this Agreement, the terms of
Sections 2(b) and 3 of this Agreement shall control.
(c) Restricted Stock and Stock Options. The Employee has
purchased shares of Class A Common Stock of the Employer pursuant to the
Securities Purchase and Stockholders Agreement, dated as of May 28, 1997,
between the Employer and the Employee (the "1997 Purchase Agreement"), and the
Securities Purchase and Stockholders Agreement, dated as of the date hereof,
between the Employer and the Employee (the "1999 Purchase Agreement", and
collectively, with the 1997 Purchase Agreement, the "Purchase Agreements"), and
has been granted options to acquire shares of Class A Common Stock of the
Employer, pursuant to the Stock Option Agreement, dated as of May 28, 1997,
between the Employer and the Employee (the "1997 Stock Option Agreement"), the
Stock Option Agreement, dated as of September 26, 1998, between the Employer and
the Employee (the "1998 Stock Option Agreement") and the Stock Option Agreement,
dated as of the date hereof, between the Employer and the Employee (the "1999
Stock Option Agreement" and collectively, with the 1997 Stock Option Agreement
and the 1998 Stock Option Agreement, the "Stock Option Agreements"). The stock
options granted to the Employee under the 1997 Stock Option Agreement and the
1998 Stock Option Agreement were granted pursuant to the Employer's 1997 Stock
Option Plan and are fully vested and exercisable as of the date hereof. The
stock options granted to the Employee under the 1999 Stock Option Agreement were
granted pursuant to the Employer's 1999 Stock Option Plan and are subject to
vesting in accordance with the terms of the 1999 Stock Option Agreement. The
Purchase Agreements and the Stock Option Agreements are referred to in this
Agreement as the "Other Agreements." The Employee shall be entitled to
participate in current or future equity incentive plans adopted by the Employer
on terms substantially similar to those offered to members of the Employer's
Executive Committee or other division Presidents of the Employer. Such grants
may be awarded from time to time in the sole discretion of the Employer's Board
of Directors. Except as otherwise provided in the 1999 Stock Option Agreement
and in this Agreement with respect to payments under the Executive Bonus Plan
and except as hereafter mutually agreed by the Employer and the Employee, in the
event of a Change in Control (as defined below), to the extent not fully vested
at such time, the Employee shall become fully vested in all awards heretofore or
hereafter granted to him under all incentive compensation, deferred
compensation, stock option, stock appreciation rights, restricted stock, phantom
stock or other similar plans maintained by the Employer.
2
3
(d) Benefit Plans. During the Employment Period, the Employee
shall be entitled to receive benefits from the Employer consistent with those
currently in effect for the Employer's senior executives (including deferred
compensation plans, and company automobile and financial planning perquisites),
as those benefits are revised from time to time by the Board of Directors of the
Employer. Nothing contained herein is intended to require the Employer to
maintain any existing benefits or create any new benefits. The Employee will be
entitled to participate in the Employer's deferred compensation program as a
Level 1 Employee and to receive benefits thereunder in accordance with the terms
and conditions of such program. If the Employment Period is terminated by the
Employer or the Employee as set forth in Section 3(e)(ii) below, the Employee
and relevant family members shall be entitled to continue to participate in the
Employer's welfare benefit plans at the Employer's expense for a period of two
years after the termination date. If the Employment Period is terminated by the
Employer or the Employee as set forth in Section 3(e)(iii) below, the Employee
and relevant family members shall be entitled to continue to participate in the
Employer's welfare benefit plans at the Employer's expense for a period of three
years after the termination date. For purposes of this Section 2(d), the
Employees' relevant family members shall be those members of the Employee's
immediate family covered by the applicable welfare benefit plan immediately
prior to the termination date.
(e) Vacation and Holidays. The Employee shall be entitled to a
minimum of four weeks' vacation each year and paid holidays in accordance with
the Employer's policy.
(f) No Mitigation. The Employee shall not be required to
mitigate the amount of any payments under this Agreement (whether by seeking new
employment or in any other manner), nor shall any such payment be reduced by any
earnings that the Employee may receive from any other source.
SECTION 3. Termination.
(a) Death or Disability. If the Employee dies during the
Employment Period, the Employment Period shall terminate as of the date of the
Employee's death. If the Employee becomes unable to perform the Services for 90
consecutive days due to a physical or mental disability, (i) the Employer may
elect to terminate the Employment Period at any time thereafter, and (ii) the
Employment Period shall terminate as of the date of such election. All
disabilities shall be certified by a physician acceptable to both the Employer
and the Employee, or, if the Employer and the Employee cannot agree upon a
physician within 15 days, by a physician selected by physicians designated by
each of the Employer and the Employee. The Employee's failure to submit to any
physical examination by such physician after such physician has given reasonable
notice of the time and place of such examination shall be conclusive evidence of
the Employee's inability to perform his duties hereunder.
(b) Cause. The Employer, at its option, may terminate the
Employment Period and all of the obligations of the Employer under this
Agreement for Cause. The Employer shall have "Cause" to terminate the Employee's
employment hereunder in the event of (i) the Employee's conviction of or plea of
guilty or nolo contendere to a felony, (ii) the
3
4
Employee's gross negligence in the performance of the Services, which is not
corrected within 15 business days after written notice, (iii) the Employee's
knowingly dishonest act, or knowing bad faith or willful misconduct in the
performance of the Services, which is not corrected within 15 business days
after written notice, or (iv) the Employee's material breach of any of his
obligations under Sections 5 and 6, which is not corrected within a reasonable
period of time (determined in light of the cure, if any, appropriate to such
material breach, but in no event less than 15 business days) after written
notice. If the Employee is charged with a felony, then during the period while
such charge or related indictment remains outstanding and until finally
determined, the Employer shall have the right to suspend the Employee without
compensation.
(c) Without Cause. The Employer, at its option, may terminate
the Employment Period without Cause at any time.
(d) Termination by Employee for Good Reason. The Employee may
terminate this Agreement upon 60 days' prior written notice to the Employer for
Good Reason (as defined below) if the basis for such Good Reason is not cured
within a reasonable period of time (determined in light of the cure appropriate
to the basis of such Good Reason, but in no event less than 15 business days)
after the Employer receives written notice specifying the basis of such Good
Reason. "Good Reason" shall mean (i) the failure of the Employer to pay any
undisputed amount due under this Agreement or a reduction in Base Salary or
benefits provided under this Agreement (other than immaterial reductions in
benefits or a reduction in benefits or salary applicable to all of the
Employer's bonus eligible employees) or a termination of, or reduction in the
percentage level of, the "plan" or "target" bonus opportunity applicable to the
Employee from the "Plan" percentage level under the 1999 Executive Bonus Plan in
effect on the date hereof (the "Effective Date Plan Percentage"), (ii) a
substantial diminution in the status, position and responsibilities of the
Employee or (iii) the Employer requiring the Employee to be based at any office
or location that requires a relocation or commute greater than 50 miles from the
office or location to which the Employee is currently assigned, provided,
however, that Good Reason shall not be deemed to exist due to the travel
requirements consistent with the performance of the Employee's services
hereunder.
(e) Payments in the Event of Termination. (i) Basic
Termination Payment. Upon the termination of the Employment Period at any time
for any reason, the Employer shall pay to the Employee or his estate the Base
Salary earned to the date of termination, and if such termination occurs after
December 31st of any year for which a bonus is payable pursuant to Section 2(b)
but before such bonus has been paid, the Employer shall pay to the Employee or
his estate the bonus due for the preceding year.
(ii) Additional Involuntary Termination Payment. Upon the
termination of the Employment Period at any time by the Employer without Cause
or by the Employee for Good Reason, the Employer shall pay to the Employee
within five business days of such termination a lump-sum amount (in addition to
the amount payable under the first sentence of Section 3(e)(i)) equal to (x) the
sum of the Employee's annual Base Salary at the annual rate in effect on the
date of termination and the Severance Bonus Amount, multiplied by (y) two.
Notwithstanding the foregoing, the Employee shall be entitled to no payment
under this Section 3(e)(ii) if he is
4
5
entitled to receive a payment under Section 3(e)(iii). "Severance Bonus Amount"
means an amount equal to the Employee's Base Salary at the annual rate in effect
on the date of termination multiplied by a percentage, which is the greater of
(1) the Effective Date Plan Percentage and (2) the "plan" or "target" bonus
percentage then applicable under any executive bonus plan or other incentive
compensation program for purposes of determining the Employee's annual bonus for
the year of termination.
(iii) Additional Change in Control Payment. Upon the
termination of the Employment Period (x) by the Employer without Cause upon or
prior to a Change in Control, provided that the Employee reasonably demonstrates
that such termination occurred at the request of a third party participating in,
or otherwise in anticipation of or in connection with, such Change in Control,
or (y) by the Employee with Good Reason or by the Employer for any reason other
than for Cause within one year after a Change in Control, then the Employer
shall pay to the Employee within five business days of such termination a
lump-sum amount (in addition to the amount payable under the first sentence of
Section 3(e)(i)) equal to the sum of (A) the higher of (1) the Employee's annual
Base Salary at the date of such termination or (2) the Employee's annual Base
Salary at the time of the Change in Control, in each case multiplied by three
and (B) the Severance Bonus Amount multiplied by three. If the Employment Period
is terminated by the Employee for any reason other than with Good Reason on or
after the first anniversary of a Change in Control but no later than the 30th
day after such first anniversary, the Employee shall be entitled to 50% of the
payments specified in this Section 3(e)(iii). If the Employment Period is
terminated by the Employee with Good Reason at any time on or after the first
anniversary of a Change in Control, the Employee shall be entitled to the
payment specified in Section 3(e)(ii).
(iv) Change in Control Defined. "Change in Control"
means the first to occur of any of the following: (A) the sale (including by
merger, consolidation or sale of stock of subsidiaries or any other method) of
all or substantially all of the assets of the Employer and its consolidated
subsidiaries (taken as a whole) to any person or entity not directly or
indirectly controlled by the holders of at least 50% of the Combined Voting
Power of the then outstanding shares of capital stock of the Employer (excluding
shares owned by employees of the Employer as of the date of determination) (B)
at any time prior to the consummation of an initial public offering of Class A
Common Stock of the Employer or other common stock of the Employer having the
voting power to elect directors, a transaction (except pursuant to such initial
public offering) resulting in the Principal Shareholders owning, collectively,
less than 50% of the Combined Voting Power of the then outstanding shares of
capital stock of the Employer (excluding shares owned by employees of the
Employer as of the date of determination), (C) at any time after the
consummation of an initial public offering of Class A Common Stock of the
Employer or other common stock of the Employer having the voting power to elect
directors, the acquisition (except pursuant to such initial public offering) by
any person or entity (other than the Principal Shareholders) not directly or
indirectly controlled by the Employer's stockholders of more than 30% of the
Combined Voting Power of the then outstanding shares of capital stock of the
Employer (excluding shares owned by employees of the Employer as of the date of
determination), (D) individuals serving as directors of the Employer on the date
hereof and who were nominated or selected to serve as directors by one or more
Principal Shareholders (together
5
6
with any new directors whose election was approved by a vote of (x) such
individuals or directors whose election was previously so approved or (y)
Principal Shareholders holding a majority of the aggregate voting power of the
capital stock of the Employer held by all Principal Shareholders) cease for any
reason to constitute a majority of the Board of Directors of the Employer, (E)
the adoption of a plan relating to the liquidation or dissolution of the
Employer in connection with an equity investment or sale or a business
combination transaction or (F) any other event or transaction that the Board of
Directors of the Employer deems to be a Change in Control. "Combined Voting
Power" with respect to capital stock of the Employer means the number of votes
such stock is normally entitled (without regard to the occurrence of any
contingency) to vote in an election of directors of the Employer. "Principal
Shareholders" means (i) Charlesbank Equity Fund IV, Limited Partnership and the
investors in such fund, (ii) Charlesbank Equity Fund IV G.P. Limited
Partnership, (iii) Charlesbank Capital Partners, LLC (and any other fund managed
by Charlesbank Capital Partners, LLC), (iv) any investor (other than The 1818
Mezzanine Fund, L.P.) whose investment in the Employer is approved by the
representative of management on the board of the Employer, (v) any new investors
in the Company designated as Principal Shareholders by Charlesbank Capital
Partners, LLC within one year of the initial investment by Charlesbank Equity
Fund IV, Limited Partnership, and (vi) any corporation, partnership, limited
liability company or other entity a majority of the capital stock or other
ownership interests of which are directly or indirectly owned by any of the
foregoing.
(v) Other Provisions Applicable to Payments. Any amounts
due under this Section 3 and not paid when due shall bear interest (compounded
annually) for the period from and including the date payable to but excluding
the date paid at a rate per annum equal to the sum of (x) four percent and (y)
the rate publicly announced by BankBoston, N.A. as its "prime rate."
(f) Termination of Obligations. In the event of termination of
the Employment Period in accordance with this Section 3, all obligations of the
Employer and the Employee under this Agreement shall terminate, except for any
amounts payable by the Employer as specifically set forth in Section 3(e);
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, the provisions of Section 5 and Section 6 shall survive such
termination in accordance with their respective terms and the relevant
provisions of Section 7 shall survive such termination indefinitely. In the
event of termination of the Employment Period in accordance with this Section 3,
the Employee agrees to cooperate with the Employer in order to ensure an orderly
transfer of the Employee's duties and responsibilities.
SECTION 4. Parachute Excise Tax Gross-Up
(a) If, as a result of any payment or benefit provided under
this Agreement or under any other plan, arrangement or other agreement with the
Employer or any entity affiliated with the Employer, either alone or together
with such other payments and benefits which the Employee receives or is then
entitled to received from the Employer, the Employee becomes subject to the
excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), (together with any interest and penalties thereon an
"Excise Tax"), the Employer shall pay the Employee an amount (the "Gross-Up
Payment") sufficient to place the
6
7
Employee in the same after-tax financial position that he would have been in if
he had not incurred any tax liability under Section 4999 of the Code. For
purposes of determining whether the Employee is subject to an Excise Tax and the
amount of any Gross-Up Payment, (i) any payments or benefits received by the
Employee (whether pursuant to the terms hereof or pursuant to any plan,
arrangement or other agreement with the Employer or any entity affiliated with
the Employer) which payments ("Contingent Payments") are deemed to be contingent
on a change described in Section 280G(b)(2)(A)(i) of the Code shall be taken
into account and (ii) the Employee shall be deemed to pay federal, state and
local taxes at the highest marginal applicable rates of such taxes for the
calendar year in which the Gross-Up Payment is to be made, net of the maximum
deduction from federal income taxes which could be obtained from deduction of
any state and local taxes deemed paid by the Employee.
(b) The determination of whether the Employee is subject to
Excise Tax and the amounts of such Excise Tax and Gross-Up Payment, as well as
other calculations hereunder, shall be made at the expense of the Employer by
Xxxxxx Xxxxxxxx, which shall provide the Employee with prompt written notice
(the "Employer Notice") setting forth their determinations and calculations.
Within 30 days following the receipt by the Employee of the Employer Notice, the
Employee may notify the Employer in writing (the "Employee Notice") if the
Employee disagrees with such determinations or calculations, setting forth the
reasons for any such disagreement. If the Employer and the Employee do not
resolve such disagreement within 10 business days following receipt by the
Employer of the Employee Notice, such dispute will be resolved in accordance
with Section 7(f). The Employer shall pay all reasonable expense incurred by
either party in connection with the determinations, calculations, disagreements
or resolutions pursuant to this paragraph, including, but not limited to,
reasonable legal, consulting or other similar fees.
(c) The Employee shall notify the Employer in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Employer of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Employee is
informed in writing of such claim and shall apprise the Employer of the nature
of such claim and the date of which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30 day period
following the date on which the Employee gives such notice to the Employer (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Employer notifies the Employee in writing prior to
the expiration of such period that it desires to contest such claim, the
Employee shall:
(i) give the Employer any information reasonably
requested by the Employer relating to such claim;
(ii) take such action in connection with contesting
such claim as the Employer shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Employer and reasonably
satisfactory to the Employee;
7
8
(iii) cooperate with the Employer in good faith in
order to effectively contest such claim; and
(iv) permit the Employer to participate in any
proceedings relating to such claim;
provided, however, that the Employer shall bear and pay
directly all costs and expenses (including, but not limited to, additional
interest and penalties and related legal, consulting or other similar fees)
incurred in connection with such contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or other tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.
(d) The Employer shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego 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 Employee to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Employee 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 Employer shall
determine; provided, however, that if the Employer directs the Employee to pay
such claim and xxx for a refund, the Employer shall advance the amount of such
payment to the Employee on an interest-free basis, and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or other 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 if the Employee is required to extend the statute of
limitations to enable the Employer to contest such claim, the Employee may limit
this extension solely to such contested amount. The Employer's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee 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. In addition, no position may be taken nor
any final resolution be agreed to by the Employer without the Employee's consent
if such position or resolution could reasonably be expected to adversely affect
the Employee (including any other tax position of the Employee unrelated to the
matters covered hereby).
(e) As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Employer hereunder, it is possible that Gross-Up Payments which will not have
been made by the Employer should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Employer exhausts its remedies and the Employee thereafter is required to pay to
the Internal Revenue Service an additional amount in respect of any Excise Tax,
the Employer (in the same fashion as set forth in Section 4(b) shall determine
the amount of the Underpayment that has occurred and any such Underpayment shall
promptly be paid by the Employer to or for the benefit of the Employee.
8
9
(f) If, after the receipt by Employee of an amount advanced by
the Employer in connection with the contest of an Excise Tax claim, the Employee
becomes entitled to receive any refund with respect to such claim, the Employee
shall promptly pay to the Employer the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Employee of an amount advanced by the Employer in connection with
an Excise Tax claim, a determination is made that Employee shall not be entitled
to any refund with respect to such claim and the Employer does not notify the
Employee in writing of its intent to contest the denial of such refund prior to
the expiration of 30 days after receiving notice of such determination, such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall be offset, to the extent thereof, by the amount of the
Gross-Up Payment.
SECTION 5. Confidentiality; Non-Disclosure.
(a) (i) Non-Disclosure Obligation. Except as provided in this
Section 5(a), the Employee shall not disclose any Confidential Information of
the Employer or any of its affiliates or subsidiaries to any person, firm,
corporation, association or other entity (other than the Employer, its
subsidiaries, officers or employees, attorneys, accountants, bank lenders,
agents, advisors or representatives thereof) for any reason or purpose
whatsoever (other than in the normal course of business on a need-to-know basis
after the Employer has received assurances that the confidential or proprietary
information shall be kept confidential), nor shall the Employee make use of any
such confidential or proprietary information for his own purposes or for the
benefit of any person, firm, corporation or other entity, except the Employer.
As used in this Section, the term "Confidential Information" means all
information which is or becomes known to the Employee and relates to matters
such as trade secrets, research and development activities, new or prospective
lines of business (including analysis and market research relating to potential
expansion of the Business), books and records, financial data, customer lists,
marketing techniques, financing, credit policies, vendor lists, suppliers,
purchasers, potential business combinations, distribution channels, services,
procedures, pricing information and private processes as they may exist from
time to time; provided that the term Confidential Information shall not include
information that is or becomes generally available to the public (other than as
a result of a disclosure in violation of this Agreement by the Employee or by a
person who received such information from the Employee in violation of this
Agreement).
(ii) Compulsory Disclosures. If the Employee is requested
or (in the opinion of his counsel) required by law or judicial order to disclose
any Confidential Information, the Employee shall provide the Employer with
prompt notice of any such request or requirement so that the Employer may seek
an appropriate protective order or waiver of the Employee's compliance with the
provisions of this Section 5(a). The Employee will not oppose any reasonable
action by, and will cooperate with, the Employer to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the Confidential Information. If, failing the entry of a protective
order or the receipt of a waiver hereunder, the Employee is, in the opinion of
his counsel, compelled by law to disclose a portion of the Confidential
Information, the Employee may disclose to the relevant tribunal without
liability hereunder only that portion of the Confidential Information which
counsel advises the
9
10
Employee he is legally required to disclose, and each of the parties hereto
agrees to exercise such party's best efforts to obtain assurance that
confidential treatment will be accorded such Confidential Information. During
the Employment Period, and for matters arising from events or circumstances
occurring during the Employment Period, the Employer will provide for the
defense of matters arising under this provision.
(b) Assignment of Inventions. The Employee agrees that he will
promptly and fully disclose to the Employer all inventions, ideas, software,
trade secrets or know-how (whether patentable or copyrightable or not) made or
conceived by the Employee (either solely or jointly with others) during the
Employment Period and for a period of six months thereafter, all tangible work
product derived therefrom (collectively, the "Ideas"). The Employee agrees that
all such Ideas shall be and remain the sole and exclusive property of the
Employer. On the request of the Employer, the Employee shall, during and after
the term of this Agreement, without charge to the Employer but at the expense of
the Employer, assist the Employer in any reasonable way to vest in the Employer,
title to all such Ideas, and to obtain any related patents, trademarks or
copyrights in all countries throughout the world. In this regard, the parties
shall execute and deliver any and all documents that the Employer may reasonably
request.
SECTION 6. Non-Competition; Non-Solicitation. The Employee
acknowledges and recognizes his possession of Confidential Information and
acknowledges the highly competitive nature of the business of the Employer and
its affiliates and subsidiaries and accordingly agrees that, in consideration of
the premises contained herein, he will not, during the Employment Period and for
one year after the date of termination of the Employment Period, for any reason
whatsoever, either individually or as an officer, director, stockholder, member,
partner, agent, consultant or principal of another business firm, (x) directly
or indirectly engage in North America, or any country in which the Employer or
any of its affiliates or subsidiaries actively engages in business during the
Employment Period, in any competitive business, (y) assist others in engaging in
any competitive business in the manner described in clause (x), or (z) induce
any employee of the Employer or any of its affiliates or subsidiaries to
terminate such person's employment with the Employer or such affiliate or
subsidiary or hire any employee of the Employer or any of its affiliates or
subsidiaries to work with any businesses affiliated with the Employee. The
Employee's ownership of not more than 1% of the outstanding capital stock of any
public corporation shall not in itself be deemed to be engaging in any
competitive business for purposes of this Section 6.
SECTION 7. General Provisions.
(a) Enforceability. It is the desire and intent of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, although the Employee
and the Employer consider the restrictions contained in this Agreement to be
reasonable for the purpose of preserving the Employer's goodwill and proprietary
rights, if any particular provision of this Agreement shall be adjudicated to be
invalid or unenforceable, such provision shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable, such
deletion to apply only with respect to the operation of such
10
11
provision in the particular jurisdiction in which such adjudication is made. It
is expressly understood and agreed that although the Employer and the Employee
consider the restrictions contained in Section 6 to be reasonable, if a final
determination is made by a court of competent jurisdiction that the time or
territory or any other restriction contained in this Agreement is unenforceable
against the Employee, the provisions of this Agreement shall be deemed amended
to apply as to such maximum time and territory and to such maximum extent as
such court may judicially determine or indicate to be enforceable.
(b) Remedies. The parties acknowledge that the Employer's
damages at law would be an inadequate remedy for the breach by the Employee of
any provision of Section 5 or Section 6, and agree in the event of such breach
that the Employer may obtain temporary and permanent injunctive relief
restraining the Employee from such breach, and, to the extent permissible under
the applicable statutes and rules of procedure, a temporary injunction may be
granted immediately upon the commencement of any such suit. Nothing contained
herein shall be construed as prohibiting the Employer from pursuing any other
remedies available at law or equity for such breach or threatened breach of
Section 5 or Section 6 or for any breach or threatened breach of any other
provision of this Agreement.
(c) Withholding. The Employer shall withhold such amounts from
any compensation or other benefits payable to the Employee under this Agreement
on account of payroll and other taxes as may be required by applicable law or
regulation of any governmental authority.
(d) Employer's Successors. The Employer shall require any
successor or successors (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Employer's business and/or assets, by an agreement in substance and
form satisfactory to the Employee, to assume this Agreement and to agree
expressly to perform this Agreement in the same manner and to the same extent as
the Employer would be required to perform it in the absence of a succession. The
Employer's failure to obtain such agreement prior to the effectiveness of a
succession shall be a breach of this Agreement and shall entitle the Employee to
all of the compensation and benefits to which he would have been entitled
hereunder if the Employer had involuntarily terminated his employment without
Cause immediately after such succession become effective. For all purposes under
this Agreement, the term "Employer" shall include any successor or successors to
the Employer's business and/or assets which executes and delivers the assumption
agreement described in the subsection or which becomes bound by this Agreement
by operation of law.
(e) Employee's Successors. This Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees.
(f) Indemnity. The Employer hereby agrees to indemnify and
hold the Employee harmless consistent with the Employer's policy against any and
all liabilities, expenses (including attorneys' fees and costs), claims,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any proceeding arising out of the
11
12
Employee's employment with the Employer (whether civil, criminal, administrative
or investigative, other than proceedings by or in the right of the Employer), if
with respect to the actions at issue in the proceeding the Employee acted in
good faith and in a manner Employee reasonably believed to be in, or not opposed
to, the best interests of the Employer, and (with respect to any criminal
action) Employee had no reason to believe Employee's conduct was unlawful. Said
indemnification arrangement shall (i) survive the termination of this Agreement,
(ii) apply to any and all qualifying acts of the Employee which have taken place
during any period in which he was employed by the Employer, irrespective of the
date of this Agreement or the term hereof, including, but not limited to, any
and all qualifying acts as an officer and/or director of any affiliate while the
Employee is employed by the Employer and (iii) be subject to any limitations
imposed from time to time under applicable law.
(g) Dispute Resolution; Attorney's Fees. The Employer and the
Employee agree that any dispute arising as to the parties' rights and
obligations hereunder shall be resolved by binding arbitration before an
arbitrator to be determined by mutually agreeable means. In such event, each of
the Employer and the Employee shall have the right to full discovery. The
Employer shall bear all costs of the arbitrator in any such proceeding, and if
the arbitration is definitively decided in the Employee's favor, the Employee
shall have the right, in addition to any other relief granted by such
arbitrator, to recover reasonable attorneys' fees; provided, however, that the
Employer shall have the right, in any dispute other than a dispute relating to
the occurrence of a Change in Control or the payment of an amount under Section
3(e)(iii), in addition to any other relief granted by such arbitrator, to
recover reasonable attorneys' fees in the event that a claim brought by the
Employee is definitively decided in the Employer's favor (with the amount of
such fees being limited to those expended defending the claim or claims decided
in favor of the Employer). Any judgment by such arbitrator may be entered into
any court with jurisdiction over the dispute.
(h) Acknowledgment. The Employee acknowledges that he has been
advised by the Employer to seek the advice of independent counsel prior to
reaching agreement with the Employer on any of the terms of this Agreement. The
parties agree that no rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting the Agreement.
(i) Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification, amendment, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
(i) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by registered or certified mail, postage prepaid, return
receipt requested, sent by overnight courier, or sent by facsimile (with
confirmation of receipt), addressed as follows:
If to the Employer:
12
13
Xxxxxxx Tire Group, Inc.
0000 Xxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
and:
Charlesbank Capital Partners, LLC
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx and Xxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to:
Skadden, Arps, Slate Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
If to the Employee:
Xxxxxx X. Roof
0000 Xxxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
or at such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. If such notice
or communication is mailed, such communication shall be deemed to have been
given on the fifth business day following the date on which such communication
is posted.
(j) Descriptive Headings; Certain Interpretations. Descriptive
headings are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. Except as otherwise expressly
provided in this Agreement: (i) any reference in this Agreement to any
agreement, document or instrument includes all permitted supplements
13
14
and amendments; (ii) a reference to a law includes any amendment or modification
to such law and any rules or regulations issued thereunder; (iii) the words
"include," "included" and "including" are not limiting; and (iv) a reference to
a person or entity includes its permitted successors and assigns.
(k) Counterparts; Entire Agreement. This Agreement may be
executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all such counterparts together shall
constitute one agreement. This Agreement and the Other Agreements contain the
entire agreement among the parties with respect to the transactions contemplated
by this Agreement and the Other Agreements and supersede all other or prior
written or oral agreements or understandings among the parties with respect to
the Employee's employment by the Employer. The Existing Employment Agreement is
expressly superseded and hereby amended and restated in its entirety by this
Agreement.
(L) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA.
(M) CONSENT TO JURISDICTION. EACH OF THE EMPLOYER AND THE
EMPLOYEE HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF
NORTH CAROLINA SITTING IN MECKLENBURG COUNTY AND ALL XXXXX XXXXXX XX XXX XXXXX
XX XXXXX XXXXXXXX SITTING IN MECKLENBURG COUNTY FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, AND THE EMPLOYEE AGREES NOT TO COMMENCE ANY LEGAL
PROCEEDING RELATING THERETO EXCEPT IN SUCH COURTS. EACH OF THE EMPLOYER AND THE
EMPLOYEE IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH HE MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH COURTS AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE
PARTIES HERETO HEREBY CONSENTS TO SERVICE OF PROCESS BY NOTICE IN THE MANNER
SPECIFIED IN SECTION 7(I) AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO SERVICE OF
PROCESS IN SUCH MANNER.
14
15
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
THE X.X. XXXXXXX COMPANY, INC.
By: /s/ J. Xxxxxxx Xxxxxxx
----------------------------------------------
J. Xxxxxxx Xxxxxxx
Executive Vice President, General Counsel
and Secretary
/s/ Xxxxxx X. Roof
-------------------------------------------------
Xxxxxx X. Roof
15
16
EXECUTIVE SEVERANCE AGREEMENT, dated as of May 24, 1999 (the
"Agreement"), between The X.X. Xxxxxxx Company, Inc., a North
Carolina corporation (the "Employer"), and J.
Xxxxxxx Xxxxxxx (the "Employee").
The Employer and the Employee are parties to an Amended and
Restated Employment Agreement, dated as of January 1, 1999 (the "Existing
Employment Agreement"), and desire to amend and restate, and have this Agreement
supersede, the Existing Employment Agreement in its entirety. The Employer
desires to continue to retain the Employee to supply services to the Employer,
and the Employee desires to continue provide such services to the Employer, on
the terms and subject to the conditions set forth in this Agreement.
In consideration of (i) the Employee's agreement to supply
services under this Agreement and (ii) the mutual agreements set forth below,
the sufficiency of which is hereby acknowledged, the Employer and the Employee
agree as follows:
SECTION 1. Employment Relationship.
(a) Employment by Employer. The Employer hereby employs the
Employee, and the Employee hereby agrees to be employed by the Employer, as
Executive Vice President - Administration of the Employer, and the Employee will
devote all of his business time, attention, knowledge and skills and use his
best efforts during the Employment Period to perform services and duties
consistent with his title and position (the "Services") for the Employer in
accordance with directions given to the Employee from time to time by the Board
of Directors of the Employer.
(b) Employment Period. The period commencing on the date of
this Agreement and ending on the date on which this Agreement is terminated is
referred to herein as the "Employment Period." During the Employment Period, the
Employee will be an at-will employee of the Employer. The Employment Period
shall be freely terminable for any reason by either party at any time.
SECTION 2. Compensation and Benefits. During the Employment
Period:
(a) Base Compensation. The Employer shall pay to the Employee
a base salary of $246,000 per annum (the "Base Salary"), payable in accordance
with the Employer's payroll practices. The Base Salary shall be increased (but
not decreased) subject to additional discretionary increases (but not decreases)
as determined periodically by the Board of Directors.
(b) Additional Compensation. As additional compensation for
the Services, the Employer shall pay to the Employee an amount equal to the
greater of (x) with respect to calendar years 1999, 2000 and 2001, annual fixed
bonus payments (the "Fixed Bonus") equal to
17
15% of the Employee's Base Salary for such year, and (y) (i) with respect to
calendar year 1999, an annual bonus payment at the "Minimum", "Plan" or
"Maximum" percentage payment levels, as the case may be, in accordance with the
terms and conditions of the Employer's 1999 Executive Bonus Plan, or (ii) with
respect to subsequent calendar years, other annual incentive compensation as the
Board of Directors of the Employer determines in its sole discretion to pay the
Employee, payable in all cases on or around March 1 of the following year. The
Employee will be entitled to participate in the 1999 Executive Bonus Plan as a
Level 1 Employee. The Employee acknowledges that the Employer may terminate or
modify its Executive Bonus Plan and other incentive plans (excluding the Fixed
Bonus payable hereunder and the 1999 Executive Bonus Plan as in effect and
applied to the Employee on the date hereof) at any time, although no termination
or amendment affecting the Employee will be made effective unless it is
consistently applied to other employees participating in such plans. In the
event of any conflict or inconsistency between the terms of the 1999 Executive
Bonus Plan and the terms of Section 2(b) or 3 of this Agreement, the terms of
Sections 2(b) and 3 of this Agreement shall control.
(c) Restricted Stock and Stock Options. The Employee has
purchased shares of Class A Common Stock of the Employer pursuant to the
Securities Purchase and Stockholders Agreement, dated as of May 28, 1997,
between the Employer and the Employee (the "1997 Purchase Agreement"), and the
Securities Purchase and Stockholders Agreement, dated as of the date hereof,
between the Employer and the Employee (the "1999 Purchase Agreement", and
collectively, with the 1997 Purchase Agreement, the "Purchase Agreements"), and
has been granted options to acquire shares of Class A Common Stock of the
Employer, pursuant to the Stock Option Agreement, dated as of May 28, 1997,
between the Employer and the Employee (the "1997 Stock Option Agreement"), the
Stock Option Agreement, dated as of September 26, 1998, between the Employer and
the Employee (the "1998 Stock Option Agreement") and the Stock Option Agreement,
dated as of the date hereof, between the Employer and the Employee (the "1999
Stock Option Agreement" and collectively, with the 1997 Stock Option Agreement
and the 1998 Stock Option Agreement, the "Stock Option Agreements"). The stock
options granted to the Employee under the 1997 Stock Option Agreement and the
1998 Stock Option Agreement were granted pursuant to the Employer's 1997 Stock
Option Plan and are fully vested and exercisable as of the date hereof. The
stock options granted to the Employee under the 1999 Stock Option Agreement were
granted pursuant to the Employer's 1999 Stock Option Plan and are subject to
vesting in accordance with the terms of the 1999 Stock Option Agreement. The
Purchase Agreements and the Stock Option Agreements are referred to in this
Agreement as the "Other Agreements." The Employee shall be entitled to
participate in current or future equity incentive plans adopted by the Employer
on terms substantially similar to those offered to members of the Employer's
Executive Committee or other division Presidents of the Employer. Such grants
may be awarded from time to time in the sole discretion of the Employer's Board
of Directors. Except as otherwise provided in the 1999 Stock Option Agreement
and in this Agreement with respect to payments under the Executive Bonus Plan
and except as hereafter mutually agreed by the Employer and the Employee, in the
event of a Change in Control (as defined below), to the extent not fully vested
at such time, the Employee shall become fully vested in all awards heretofore or
hereafter granted to him under all incentive compensation, deferred
compensation, stock option, stock appreciation rights, restricted stock, phantom
stock or other similar plans maintained by the Employer.
2
18
(d) Benefit Plans. During the Employment Period, the Employee
shall be entitled to receive benefits from the Employer consistent with those
currently in effect for the Employer's senior executives (including deferred
compensation plans, and company automobile and financial planning perquisites),
as those benefits are revised from time to time by the Board of Directors of the
Employer. Nothing contained herein is intended to require the Employer to
maintain any existing benefits or create any new benefits. The Employee will be
entitled to participate in the Employer's deferred compensation program as a
Level 2 Employee and to receive benefits thereunder in accordance with the terms
and conditions of such program. If the Employment Period is terminated by the
Employer or the Employee as set forth in Section 3(e)(ii) below, the Employee
and relevant family members shall be entitled to continue to participate in the
Employer's welfare benefit plans at the Employer's expense for a period of 18
months after the termination date. If the Employment Period is terminated by the
Employer or the Employee as set forth in Section 3(e)(iii) below, the Employee
and relevant family members shall be entitled to continue to participate in the
Employer's welfare benefit plans at the Employer's expense for a period of three
years after the termination date. For purposes of this Section 2(d), the
Employees' relevant family members shall be those members of the Employee's
immediate family covered by the applicable welfare benefit plan immediately
prior to the termination date.
(e) Vacation and Holidays. The Employee shall be entitled to a
minimum of four weeks' vacation each year and paid holidays in accordance with
the Employer's policy.
(f) No Mitigation. The Employee shall not be required to
mitigate the amount of any payments under this Agreement (whether by seeking new
employment or in any other manner), nor shall any such payment be reduced by any
earnings that the Employee may receive from any other source.
SECTION 3. Termination.
(a) Death or Disability. If the Employee dies during the
Employment Period, the Employment Period shall terminate as of the date of the
Employee's death. If the Employee becomes unable to perform the Services for 90
consecutive days due to a physical or mental disability, (i) the Employer may
elect to terminate the Employment Period at any time thereafter, and (ii) the
Employment Period shall terminate as of the date of such election. All
disabilities shall be certified by a physician acceptable to both the Employer
and the Employee, or, if the Employer and the Employee cannot agree upon a
physician within 15 days, by a physician selected by physicians designated by
each of the Employer and the Employee. The Employee's failure to submit to any
physical examination by such physician after such physician has given reasonable
notice of the time and place of such examination shall be conclusive evidence of
the Employee's inability to perform his duties hereunder.
(b) Cause. The Employer, at its option, may terminate the
Employment Period and all of the obligations of the Employer under this
Agreement for Cause. The Employer shall have "Cause" to terminate the Employee's
employment hereunder in the event of (i) the Employee's conviction of or plea of
guilty or nolo contendere to a felony, (ii) the
3
19
Employee's gross negligence in the performance of the Services, which is not
corrected within 15 business days after written notice, (iii) the Employee's
knowingly dishonest act, or knowing bad faith or willful misconduct in the
performance of the Services, which is not corrected within 15 business days
after written notice, or (iv) the Employee's material breach of any of his
obligations under Sections 5 and 6, which is not corrected within a reasonable
period of time (determined in light of the cure, if any, appropriate to such
material breach, but in no event less than 15 business days) after written
notice. If the Employee is charged with a felony, then during the period while
such charge or related indictment remains outstanding and until finally
determined, the Employer shall have the right to suspend the Employee without
compensation.
(c) Without Cause. The Employer, at its option, may terminate
the Employment Period without Cause at any time.
(d) Termination by Employee for Good Reason. The Employee may
terminate this Agreement upon 60 days' prior written notice to the Employer for
Good Reason (as defined below) if the basis for such Good Reason is not cured
within a reasonable period of time (determined in light of the cure appropriate
to the basis of such Good Reason, but in no event less than 15 business days)
after the Employer receives written notice specifying the basis of such Good
Reason. "Good Reason" shall mean (i) the failure of the Employer to pay any
undisputed amount due under this Agreement or a reduction in Base Salary, Fixed
Bonus or benefits provided under this Agreement (other than immaterial
reductions in benefits or a reduction in benefits or salary applicable to all of
the Employer's bonus eligible employees) or a termination of, or reduction in
the percentage level of, the "plan" or "target" bonus opportunity applicable to
the Employee from the "Plan" percentage level under the 1999 Executive Bonus
Plan in effect on the date hereof (the "Effective Date Plan Percentage"), (ii) a
substantial diminution in the status, position and responsibilities of the
Employee or (iii) the Employer requiring the Employee to be based at any office
or location that requires a relocation or commute greater than 50 miles from the
office or location to which the Employee is currently assigned, provided,
however, that Good Reason shall not be deemed to exist due to the travel
requirements consistent with the performance of the Employee's services
hereunder.
(e) Payments in the Event of Termination. (i) Basic
Termination Payment. Upon the termination of the Employment Period at any time
for any reason, the Employer shall pay to the Employee or his estate the Base
Salary earned to the date of termination, and if such termination occurs after
December 31st of any year for which a bonus is payable pursuant to Section 2(b)
but before such bonus has been paid, the Employer shall pay to the Employee or
his estate the bonus due for the preceding year. Upon the termination of the
Employment Period at any time during calendar year 1999, 2000, or 2001 for any
reason other than the reasons set forth in Section 3(e)(ii) or 3(e)(iii) below,
the Employer shall pay to the Employee within five business days after such
termination, a lump-sum amount equal to the Fixed Bonus earned to the date of
termination. Any Fixed Bonus payable under this Section 3(e)(i) shall be
prorated if payable for periods of less than one year and shall be payable
regardless of whether the Employee is still in the employ of the Employer on the
date such bonuses are otherwise declared or payable.
4
20
(ii) Additional Involuntary Termination Payment. Upon the
termination of the Employment Period at any time by the Employer without Cause
or by the Employee for Good Reason, the Employer shall pay to the Employee
within five business days of such termination a lump-sum amount (in addition to
the amount payable under the first sentence of Section 3(e)(i)) equal to (x) the
sum of the Employee's annual Base Salary at the annual rate in effect on the
date of termination and the Severance Bonus Amount, multiplied by (y) 1.5.
Notwithstanding the foregoing, the Employee shall be entitled to no payment
under this Section 3(e)(ii) if he is entitled to receive a payment under Section
3(e)(iii). "Severance Bonus Amount" means an amount equal to the Employee's Base
Salary at the annual rate in effect on the date of termination multiplied by a
percentage, which is the greater of (1) the Effective Date Plan Percentage and
(2) the "plan" or "target" bonus percentage then applicable under any executive
bonus plan or other incentive compensation program for purposes of determining
the Employee's annual bonus for the year of termination.
(iii) Additional Change in Control Payment. Upon the
termination of the Employment Period (x) by the Employer without Cause upon or
prior to a Change in Control, provided that the Employee reasonably demonstrates
that such termination occurred at the request of a third party participating in,
or otherwise in anticipation of or in connection with, such Change in Control,
or (y) by the Employee with Good Reason or by the Employer for any reason other
than for Cause within one year after a Change in Control, then the Employer
shall pay to the Employee within five business days of such termination a
lump-sum amount (in addition to the amount payable under the first sentence of
Section 3(e)(i)) equal to the sum of (A) the higher of (1) the Employee's annual
Base Salary at the date of such termination or (2) the Employee's annual Base
Salary at the time of the Change in Control, in each case multiplied by three,
and (B) the Severance Bonus Amount multiplied by three. If the Employment Period
is terminated by the Employee for any reason other than with Good Reason on or
after the first anniversary of a Change in Control but no later than the 30th
day after such first anniversary, the Employee shall be entitled to 50% of the
payments specified in this Section 3(e)(iii). If the Employment Period is
terminated by the Employee with Good Reason at any time on or after the first
anniversary of a Change in Control, the Employee shall be entitled to the
payment specified in Section 3(e)(ii).
(iv) Change in Control Defined. "Change in Control"
means the first to occur of any of the following: (A) the sale (including by
merger, consolidation or sale of stock of subsidiaries or any other method) of
all or substantially all of the assets of the Employer and its consolidated
subsidiaries (taken as a whole) to any person or entity not directly or
indirectly controlled by the holders of at least 50% of the Combined Voting
Power of the then outstanding shares of capital stock of the Employer (excluding
shares owned by employees of the Employer as of the date of determination) (B)
at any time prior to the consummation of an initial public offering of Class A
Common Stock of the Employer or other common stock of the Employer having the
voting power to elect directors, a transaction (except pursuant to such initial
public offering) resulting in the Principal Shareholders owning, collectively,
less than 50% of the Combined Voting Power of the then outstanding shares of
capital stock of the Employer (excluding shares owned by employees of the
Employer as of the date of determination), (C) at any time after the
consummation of an initial public offering of Class A Common Stock of the
5
21
Employer or other common stock of the Employer having the voting power to elect
directors, the acquisition (except pursuant to such initial public offering) by
any person or entity (other than the Principal Shareholders) not directly or
indirectly controlled by the Employer's stockholders of more than 30% of the
Combined Voting Power of the then outstanding shares of capital stock of the
Employer (excluding shares owned by employees of the Employer as of the date of
determination), (D) individuals serving as directors of the Employer on the date
hereof and who were nominated or selected to serve as directors by one or more
Principal Shareholders (together with any new directors whose election was
approved by a vote of (x) such individuals or directors whose election was
previously so approved or (y) Principal Shareholders holding a majority of the
aggregate voting power of the capital stock of the Employer held by all
Principal Shareholders) cease for any reason to constitute a majority of the
Board of Directors of the Employer, (E) the adoption of a plan relating to the
liquidation or dissolution of the Employer in connection with an equity
investment or sale or a business combination transaction or (F) any other event
or transaction that the Board of Directors of the Employer deems to be a Change
in Control. "Combined Voting Power" with respect to capital stock of the
Employer means the number of votes such stock is normally entitled (without
regard to the occurrence of any contingency) to vote in an election of directors
of the Employer. "Principal Shareholders" means (i) Charlesbank Equity Fund IV,
Limited Partnership and the investors in such fund, (ii) Charlesbank Equity Fund
IV G.P. Limited Partnership, (iii) Charlesbank Capital Partners, LLC (and any
other fund managed by Charlesbank Capital Partners, LLC), (iv) any investor
(other than The 1818 Mezzanine Fund, L.P.) whose investment in the Employer is
approved by the representative of management on the board of the Employer, (v)
any new investors in the Company designated as Principal Shareholders by
Charlesbank Capital Partners, LLC within one year of the initial investment by
Charlesbank Equity Fund IV, Limited Partnership, and (vi) any corporation,
partnership, limited liability company or other entity a majority of the capital
stock or other ownership interests of which are directly or indirectly owned by
any of the foregoing.
(v) Other Provisions Applicable to Payments. Any
amounts due under this Section 3 and not paid when due shall bear interest
(compounded annually) for the period from and including the date payable to but
excluding the date paid at a rate per annum equal to the sum of (x) four percent
and (y) the rate publicly announced by BankBoston, N.A. as its "prime rate."
(f) Termination of Obligations. In the event of termination of
the Employment Period in accordance with this Section 3, all obligations of the
Employer and the Employee under this Agreement shall terminate, except for any
amounts payable by the Employer as specifically set forth in Section 3(e);
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, the provisions of Section 5 and Section 6 shall survive such
termination in accordance with their respective terms and the relevant
provisions of Section 7 shall survive such termination indefinitely. In the
event of termination of the Employment Period in accordance with this Section 3,
the Employee agrees to cooperate with the Employer in order to ensure an orderly
transfer of the Employee's duties and responsibilities.
6
22
SECTION 4. Parachute Excise Tax Gross-Up
(a) If, as a result of any payment or benefit provided under
this Agreement or under any other plan, arrangement or other agreement with the
Employer or any entity affiliated with the Employer, either alone or together
with such other payments and benefits which the Employee receives or is then
entitled to received from the Employer, the Employee becomes subject to the
excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), (together with any interest and penalties thereon an
"Excise Tax"), the Employer shall pay the Employee an amount (the "Gross-Up
Payment") sufficient to place the Employee in the same after-tax financial
position that he would have been in if he had not incurred any tax liability
under Section 4999 of the Code. For purposes of determining whether the Employee
is subject to an Excise Tax and the amount of any Gross-Up Payment, (i) any
payments or benefits received by the Employee (whether pursuant to the terms
hereof or pursuant to any plan, arrangement or other agreement with the Employer
or any entity affiliated with the Employer) which payments ("Contingent
Payments") are deemed to be contingent on a change described in Section
280G(b)(2)(A)(i) of the Code shall be taken into account and (ii) the Employee
shall be deemed to pay federal, state and local taxes at the highest marginal
applicable rates of such taxes for the calendar year in which the Gross-Up
Payment is to be made, net of the maximum deduction from federal income taxes
which could be obtained from deduction of any state and local taxes deemed paid
by the Employee.
(b) The determination of whether the Employee is subject to
Excise Tax and the amounts of such Excise Tax and Gross-Up Payment, as well as
other calculations hereunder, shall be made at the expense of the Employer by
Xxxxxx Xxxxxxxx, which shall provide the Employee with prompt written notice
(the "Employer Notice") setting forth their determinations and calculations.
Within 30 days following the receipt by the Employee of the Employer Notice, the
Employee may notify the Employer in writing (the "Employee Notice") if the
Employee disagrees with such determinations or calculations, setting forth the
reasons for any such disagreement. If the Employer and the Employee do not
resolve such disagreement within 10 business days following receipt by the
Employer of the Employee Notice, such dispute will be resolved in accordance
with Section 7(f). The Employer shall pay all reasonable expense incurred by
either party in connection with the determinations, calculations, disagreements
or resolutions pursuant to this paragraph, including, but not limited to,
reasonable legal, consulting or other similar fees.
(c) The Employee shall notify the Employer in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Employer of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Employee is
informed in writing of such claim and shall apprise the Employer of the nature
of such claim and the date of which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30 day period
following the date on which the Employee gives such notice to the Employer (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Employer notifies the Employee in writing prior to
the expiration of such period that it desires to contest such claim, the
Employee shall:
7
23
(i) give the Employer any information reasonably
requested by the Employer relating to such claim;
(ii) take such action in connection with contesting
such claim as the Employer shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Employer and reasonably
satisfactory to the Employee;
(iii) cooperate with the Employer in good faith in
order to effectively contest such claim; and
(iv) permit the Employer to participate in any
proceedings relating to such claim;
provided, however, that the Employer shall bear and pay
directly all costs and expenses (including, but not limited to, additional
interest and penalties and related legal, consulting or other similar fees)
incurred in connection with such contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or other tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.
(d) The Employer shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego 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 Employee to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Employee 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 Employer shall
determine; provided, however, that if the Employer directs the Employee to pay
such claim and xxx for a refund, the Employer shall advance the amount of such
payment to the Employee on an interest-free basis, and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or other 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 if the Employee is required to extend the statute of
limitations to enable the Employer to contest such claim, the Employee may limit
this extension solely to such contested amount. The Employer's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee 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. In addition, no position may be taken nor
any final resolution be agreed to by the Employer without the Employee's consent
if such position or resolution could reasonably be expected to adversely affect
the Employee (including any other tax position of the Employee unrelated to the
matters covered hereby).
(e) As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Employer hereunder, it is possible that Gross-Up Payments which will not have
been made by the Employer should have been made
8
24
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Employer exhausts its remedies and the Employee
thereafter is required to pay to the Internal Revenue Service an additional
amount in respect of any Excise Tax, the Employer (in the same fashion as set
forth in Section 4(b) shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall promptly be paid by the Employer to or
for the benefit of the Employee.
(f) If, after the receipt by Employee of an amount advanced by
the Employer in connection with the contest of an Excise Tax claim, the Employee
becomes entitled to receive any refund with respect to such claim, the Employee
shall promptly pay to the Employer the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Employee of an amount advanced by the Employer in connection with
an Excise Tax claim, a determination is made that Employee shall not be entitled
to any refund with respect to such claim and the Employer does not notify the
Employee in writing of its intent to contest the denial of such refund prior to
the expiration of 30 days after receiving notice of such determination, such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall be offset, to the extent thereof, by the amount of the
Gross-Up Payment.
SECTION 5. Confidentiality; Non-Disclosure.
(a) (i) Non-Disclosure Obligation. Except as provided in this
Section 5(a), the Employee shall not disclose any Confidential Information of
the Employer or any of its affiliates or subsidiaries to any person, firm,
corporation, association or other entity (other than the Employer, its
subsidiaries, officers or employees, attorneys, accountants, bank lenders,
agents, advisors or representatives thereof) for any reason or purpose
whatsoever (other than in the normal course of business on a need-to-know basis
after the Employer has received assurances that the confidential or proprietary
information shall be kept confidential), nor shall the Employee make use of any
such confidential or proprietary information for his own purposes or for the
benefit of any person, firm, corporation or other entity, except the Employer.
As used in this Section, the term "Confidential Information" means all
information which is or becomes known to the Employee and relates to matters
such as trade secrets, research and development activities, new or prospective
lines of business (including analysis and market research relating to potential
expansion of the Business), books and records, financial data, customer lists,
marketing techniques, financing, credit policies, vendor lists, suppliers,
purchasers, potential business combinations, distribution channels, services,
procedures, pricing information and private processes as they may exist from
time to time; provided that the term Confidential Information shall not include
information that is or becomes generally available to the public (other than as
a result of a disclosure in violation of this Agreement by the Employee or by a
person who received such information from the Employee in violation of this
Agreement).
(ii) Compulsory Disclosures. If the Employee is
requested or (in the opinion of his counsel) required by law or judicial order
to disclose any Confidential Information, the Employee shall provide the
Employer with prompt notice of any such request or requirement so that the
Employer may seek an appropriate protective order or waiver of the
9
25
Employee's compliance with the provisions of this Section 5(a). The Employee
will not oppose any reasonable action by, and will cooperate with, the Employer
to obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded the Confidential Information. If,
failing the entry of a protective order or the receipt of a waiver hereunder,
the Employee is, in the opinion of his counsel, compelled by law to disclose a
portion of the Confidential Information, the Employee may disclose to the
relevant tribunal without liability hereunder only that portion of the
Confidential Information which counsel advises the Employee he is legally
required to disclose, and each of the parties hereto agrees to exercise such
party's best efforts to obtain assurance that confidential treatment will be
accorded such Confidential Information. During the Employment Period, and for
matters arising from events or circumstances occurring during the Employment
Period, the Employer will provide for the defense of matters arising under this
provision.
(b) Assignment of Inventions. The Employee agrees that he will
promptly and fully disclose to the Employer all inventions, ideas, software,
trade secrets or know-how (whether patentable or copyrightable or not) made or
conceived by the Employee (either solely or jointly with others) during the
Employment Period and for a period of six months thereafter, all tangible work
product derived therefrom (collectively, the "Ideas"). The Employee agrees that
all such Ideas shall be and remain the sole and exclusive property of the
Employer. On the request of the Employer, the Employee shall, during and after
the term of this Agreement, without charge to the Employer but at the expense of
the Employer, assist the Employer in any reasonable way to vest in the Employer,
title to all such Ideas, and to obtain any related patents, trademarks or
copyrights in all countries throughout the world. In this regard, the parties
shall execute and deliver any and all documents that the Employer may reasonably
request.
SECTION 6. Non-Competition; Non-Solicitation. The Employee
acknowledges and recognizes his possession of Confidential Information and
acknowledges the highly competitive nature of the business of the Employer and
its affiliates and subsidiaries and accordingly agrees that, in consideration of
the premises contained herein, he will not, during the Employment Period and for
one year after the date of termination of the Employment Period, for any reason
whatsoever, either individually or as an officer, director, stockholder, member,
partner, agent, consultant or principal of another business firm, (x) directly
or indirectly engage in North America, or any country in which the Employer or
any of its affiliates or subsidiaries actively engages in business during the
Employment Period, in any competitive business, (y) assist others in engaging in
any competitive business in the manner described in clause (x), or (z) induce
any employee of the Employer or any of its affiliates or subsidiaries to
terminate such person's employment with the Employer or such affiliate or
subsidiary or hire any employee of the Employer or any of its affiliates or
subsidiaries to work with any businesses affiliated with the Employee. The
Employee's ownership of not more than 1% of the outstanding capital stock of any
public corporation shall not in itself be deemed to be engaging in any
competitive business for purposes of this Section 6.
10
26
SECTION 7. General Provisions.
(a) Enforceability. It is the desire and intent of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, although the Employee
and the Employer consider the restrictions contained in this Agreement to be
reasonable for the purpose of preserving the Employer's goodwill and proprietary
rights, if any particular provision of this Agreement shall be adjudicated to be
invalid or unenforceable, such provision shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable, such
deletion to apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication is made. It is expressly
understood and agreed that although the Employer and the Employee consider the
restrictions contained in Section 6 to be reasonable, if a final determination
is made by a court of competent jurisdiction that the time or territory or any
other restriction contained in this Agreement is unenforceable against the
Employee, the provisions of this Agreement shall be deemed amended to apply as
to such maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable.
(b) Remedies. The parties acknowledge that the Employer's
damages at law would be an inadequate remedy for the breach by the Employee of
any provision of Section 5 or Section 6, and agree in the event of such breach
that the Employer may obtain temporary and permanent injunctive relief
restraining the Employee from such breach, and, to the extent permissible under
the applicable statutes and rules of procedure, a temporary injunction may be
granted immediately upon the commencement of any such suit. Nothing contained
herein shall be construed as prohibiting the Employer from pursuing any other
remedies available at law or equity for such breach or threatened breach of
Section 5 or Section 6 or for any breach or threatened breach of any other
provision of this Agreement.
(c) Withholding. The Employer shall withhold such amounts from
any compensation or other benefits payable to the Employee under this Agreement
on account of payroll and other taxes as may be required by applicable law or
regulation of any governmental authority.
(d) Employer's Successors. The Employer shall require any
successor or successors (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Employer's business and/or assets, by an agreement in substance and
form satisfactory to the Employee, to assume this Agreement and to agree
expressly to perform this Agreement in the same manner and to the same extent as
the Employer would be required to perform it in the absence of a succession. The
Employer's failure to obtain such agreement prior to the effectiveness of a
succession shall be a breach of this Agreement and shall entitle the Employee to
all of the compensation and benefits to which he would have been entitled
hereunder if the Employer had involuntarily terminated his employment without
Cause immediately after such succession become effective. For all purposes under
this Agreement, the term "Employer" shall include any successor or successors to
the Employer's business and/or assets which executes and delivers the assumption
agreement described in the subsection or which becomes bound by this Agreement
by operation of law.
11
27
(e) Employee's Successors. This Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees.
(f) Indemnity. The Employer hereby agrees to indemnify and
hold the Employee harmless consistent with the Employer's policy against any and
all liabilities, expenses (including attorneys' fees and costs), claims,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any proceeding arising out of the Employee's
employment with the Employer (whether civil, criminal, administrative or
investigative, other than proceedings by or in the right of the Employer), if
with respect to the actions at issue in the proceeding the Employee acted in
good faith and in a manner Employee reasonably believed to be in, or not opposed
to, the best interests of the Employer, and (with respect to any criminal
action) Employee had no reason to believe Employee's conduct was unlawful. Said
indemnification arrangement shall (i) survive the termination of this Agreement,
(ii) apply to any and all qualifying acts of the Employee which have taken place
during any period in which he was employed by the Employer, irrespective of the
date of this Agreement or the term hereof, including, but not limited to, any
and all qualifying acts as an officer and/or director of any affiliate while the
Employee is employed by the Employer and (iii) be subject to any limitations
imposed from time to time under applicable law.
(g) Dispute Resolution; Attorney's Fees. The Employer and the
Employee agree that any dispute arising as to the parties' rights and
obligations hereunder shall be resolved by binding arbitration before an
arbitrator to be determined by mutually agreeable means. In such event, each of
the Employer and the Employee shall have the right to full discovery. The
Employer shall bear all costs of the arbitrator in any such proceeding, and if
the arbitration is definitively decided in the Employee's favor, the Employee
shall have the right, in addition to any other relief granted by such
arbitrator, to recover reasonable attorneys' fees; provided, however, that the
Employer shall have the right, in any dispute other than a dispute relating to
the occurrence of a Change in Control or the payment of an amount under Section
3(e)(iii), in addition to any other relief granted by such arbitrator, to
recover reasonable attorneys' fees in the event that a claim brought by the
Employee is definitively decided in the Employer's favor (with the amount of
such fees being limited to those expended defending the claim or claims decided
in favor of the Employer). Any judgment by such arbitrator may be entered into
any court with jurisdiction over the dispute.
(h) Acknowledgment. The Employee acknowledges that he has been
advised by the Employer to seek the advice of independent counsel prior to
reaching agreement with the Employer on any of the terms of this Agreement. The
parties agree that no rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting the Agreement.
(i) Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification,
12
28
amendment, waiver or consent shall be effective only in the specific instance
and for the purpose for which given.
(i) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by registered or certified mail, postage prepaid, return
receipt requested, sent by overnight courier, or sent by facsimile (with
confirmation of receipt), addressed as follows:
If to the Employer:
Xxxxxxx Tire Group, Inc.
0000 Xxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
and:
Charlesbank Capital Partners, LLC
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx and Xxxx X. Xxxxx
Facsimile: (000) 000-0000
13
29
with a copy to:
Skadden, Arps, Slate Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
If to the Employee:
J. Xxxxxxx Xxxxxxx
000 Xxxx 0xx Xxxxxx
Xxxxxx, XX 00000
or at such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. If such notice
or communication is mailed, such communication shall be deemed to have been
given on the fifth business day following the date on which such communication
is posted.
(j) Descriptive Headings; Certain Interpretations. Descriptive
headings are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. Except as otherwise expressly
provided in this Agreement: (i) any reference in this Agreement to any
agreement, document or instrument includes all permitted supplements and
amendments; (ii) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (iii) the words
"include," "included" and "including" are not limiting; and (iv) a reference to
a person or entity includes its permitted successors and assigns.
(k) Counterparts; Entire Agreement. This Agreement may be
executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all such counterparts together shall
constitute one agreement. This Agreement and the Other Agreements contain the
entire agreement among the parties with respect to the transactions contemplated
by this Agreement and the Other Agreements and supersede all other or prior
written or oral agreements or understandings among the parties with respect to
the Employee's employment by the Employer. The Existing Employment Agreement is
expressly superseded and hereby amended and restated in its entirety by this
Agreement.
(L) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA.
(M) CONSENT TO JURISDICTION. EACH OF THE EMPLOYER AND THE
EMPLOYEE HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF
NORTH CAROLINA SITTING IN MECKLENBURG COUNTY AND ALL XXXXX XXXXXX XX XXX XXXXX
XX XXXXX XXXXXXXX SITTING IN
14
30
MECKLENBURG COUNTY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND THE
EMPLOYEE AGREES NOT TO COMMENCE ANY LEGAL PROCEEDING RELATING THERETO EXCEPT IN
SUCH COURTS. EACH OF THE EMPLOYER AND THE EMPLOYEE IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH HE MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURTS
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH COURTS HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO HEREBY CONSENTS TO SERVICE
OF PROCESS BY NOTICE IN THE MANNER SPECIFIED IN SECTION 7(I) AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE TO SERVICE OF PROCESS IN SUCH MANNER.
15
31
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
THE X.X. XXXXXXX COMPANY, INC.
By: /s/ Xxxxxx X. Roof
------------------------------------------
Xxxxxx X. Roof
President and Chief Executive Officer
/s/ J. Xxxxxxx Xxxxxxx
---------------------------------------------
J. Xxxxxxx Xxxxxxx
16
32
EXECUTIVE SEVERANCE AGREEMENT, dated as of May, 1999 (the
"Agreement"), between The X.X. Xxxxxxx Company, Inc., a North
Carolina corporation (the "Employer"), and Xxxxxx X. Xxxxx
(the "Employee").
The Employer and the Employee are parties to an Amended and
Restated Employment Agreement, dated as of January 1, 1999 (the "Existing
Employment Agreement"), and desire to amend and restate, and have this Agreement
supersede, the Existing Employment Agreement in its entirety. The Employer
desires to continue to retain the Employee to supply services to the Employer,
and the Employee desires to continue provide such services to the Employer, on
the terms and subject to the conditions set forth in this Agreement.
In consideration of (i) the Employee's agreement to supply
services under this Agreement and (ii) the mutual agreements set forth below,
the sufficiency of which is hereby acknowledged, the Employer and the Employee
agree as follows:
SECTION 1. Employment Relationship.
(a) Employment by Employer. The Employer hereby employs the
Employee, and the Employee hereby agrees to be employed by the Employer, as
Senior Vice President - Sales of the Employer, and the Employee will devote all
of his business time, attention, knowledge and skills and use his best efforts
during the Employment Period to perform services and duties consistent with his
title and position (the "Services") for the Employer in accordance with
directions given to the Employee from time to time by the Board of Directors of
the Employer.
(b) Employment Period. The period commencing on the date of
this Agreement and ending on the date on which this Agreement is terminated is
referred to herein as the "Employment Period." During the Employment Period, the
Employee will be an at-will employee of the Employer. The Employment Period
shall be freely terminable for any reason by either party at any time.
SECTION 2. Compensation and Benefits. During the Employment
Period:
(a) Base Compensation. The Employer shall pay to the Employee
a base salary of $210,000 per annum (the "Base Salary"), payable in accordance
with the Employer's payroll practices. The Base Salary shall be increased (but
not decreased) subject to additional discretionary increases (but not decreases)
as determined periodically by the Board of Directors.
(b) Additional Compensation. As additional compensation for
the Services, the Employer shall pay to the Employee an amount equal to the
greater of (x) with respect to calendar years 1999, 2000 and 2001, annual fixed
bonus payments (the "Fixed Bonus") equal to
33
15% of the Employee's Base Salary for such year, and (y) (i) with respect to
calendar year 1999, an annual bonus payment at the "Minimum", "Plan" or
"Maximum" percentage payment levels, as the case may be, in accordance with the
terms and conditions of the Employer's 1999 Executive Bonus Plan, or (ii) with
respect to subsequent calendar years, other annual incentive compensation as the
Board of Directors of the Employer determines in its sole discretion to pay the
Employee, payable in all cases on or around March 1 of the following year. The
Employee will be entitled to participate in the 1999 Executive Bonus Plan as a
Level 1 Employee. The Employee acknowledges that the Employer may terminate or
modify its Executive Bonus Plan and other incentive plans (excluding the Fixed
Bonus payable hereunder and the 1999 Executive Bonus Plan as in effect and
applied to the Employee on the date hereof) at any time, although no termination
or amendment affecting the Employee will be made effective unless it is
consistently applied to other employees participating in such plans. In the
event of any conflict or inconsistency between the terms of the 1999 Executive
Bonus Plan and the terms of Section 2(b) or 3 of this Agreement, the terms of
Sections 2(b) and 3 of this Agreement shall control.
(c) Restricted Stock and Stock Options. The Employee has
purchased shares of Class A Common Stock of the Employer pursuant to the
Securities Purchase and Stockholders Agreement, dated as of May 28, 1997,
between the Employer and the Employee (the "1997 Purchase Agreement"), and the
Securities Purchase and Stockholders Agreement, dated as of the date hereof,
between the Employer and the Employee (the "1999 Purchase Agreement", and
collectively, with the 1997 Purchase Agreement, the "Purchase Agreements"), and
has been granted options to acquire shares of Class A Common Stock of the
Employer, pursuant to the Stock Option Agreement, dated as of May 28, 1997,
between the Employer and the Employee (the "1997 Stock Option Agreement"), the
Stock Option Agreement, dated as of September 26, 1998, between the Employer and
the Employee (the "1998 Stock Option Agreement") and the Stock Option Agreement,
dated as of the date hereof, between the Employer and the Employee (the "1999
Stock Option Agreement" and collectively, with the 1997 Stock Option Agreement
and the 1998 Stock Option Agreement, the "Stock Option Agreements"). The stock
options granted to the Employee under the 1997 Stock Option Agreement and the
1998 Stock Option Agreement were granted pursuant to the Employer's 1997 Stock
Option Plan and are fully vested and exercisable as of the date hereof. The
stock options granted to the Employee under the 1999 Stock Option Agreement were
granted pursuant to the Employer's 1999 Stock Option Plan and are subject to
vesting in accordance with the terms of the 1999 Stock Option Agreement. The
Purchase Agreements and the Stock Option Agreements are referred to in this
Agreement as the "Other Agreements." The Employee shall be entitled to
participate in current or future equity incentive plans adopted by the Employer
on terms substantially similar to those offered to members of the Employer's
Executive Committee or other division Presidents of the Employer. Such grants
may be awarded from time to time in the sole discretion of the Employer's Board
of Directors. Except as otherwise provided in the 1999 Stock Option Agreement
and in this Agreement with respect to payments under the Executive Bonus Plan
and except as hereafter mutually agreed by the Employer and the Employee, in the
event of a Change in Control (as defined below), to the extent not fully vested
at such time, the Employee shall become fully vested in all awards heretofore or
hereafter granted to him under all incentive compensation, deferred
compensation, stock option, stock appreciation rights, restricted stock, phantom
stock or other similar plans maintained by the Employer.
2
34
(d) Benefit Plans. During the Employment Period, the Employee
shall be entitled to receive benefits from the Employer consistent with those
currently in effect for the Employer's senior executives (including deferred
compensation plans, and company automobile and financial planning perquisites),
as those benefits are revised from time to time by the Board of Directors of the
Employer. Nothing contained herein is intended to require the Employer to
maintain any existing benefits or create any new benefits. The Employee will be
entitled to participate in the Employer's deferred compensation program as a
Level 2 Employee and to receive benefits thereunder in accordance with the terms
and conditions of such program. If the Employment Period is terminated by the
Employer or the Employee as set forth in Section 3(e)(ii) below, the Employee
and relevant family members shall be entitled to continue to participate in the
Employer's welfare benefit plans at the Employer's expense for a period of 18
months after the termination date. If the Employment Period is terminated by the
Employer or the Employee as set forth in Section 3(e)(iii) below, the Employee
and relevant family members shall be entitled to continue to participate in the
Employer's welfare benefit plans at the Employer's expense for a period of three
years after the termination date. For purposes of this Section 2(d), the
Employees' relevant family members shall be those members of the Employee's
immediate family covered by the applicable welfare benefit plan immediately
prior to the termination date.
(e) Vacation and Holidays. The Employee shall be entitled to a
minimum of four weeks' vacation each year and paid holidays in accordance with
the Employer's policy.
(f) No Mitigation. The Employee shall not be required to
mitigate the amount of any payments under this Agreement (whether by seeking new
employment or in any other manner), nor shall any such payment be reduced by any
earnings that the Employee may receive from any other source.
SECTION 3. Termination.
(a) Death or Disability. If the Employee dies during the
Employment Period, the Employment Period shall terminate as of the date of the
Employee's death. If the Employee becomes unable to perform the Services for 90
consecutive days due to a physical or mental disability, (i) the Employer may
elect to terminate the Employment Period at any time thereafter, and (ii) the
Employment Period shall terminate as of the date of such election. All
disabilities shall be certified by a physician acceptable to both the Employer
and the Employee, or, if the Employer and the Employee cannot agree upon a
physician within 15 days, by a physician selected by physicians designated by
each of the Employer and the Employee. The Employee's failure to submit to any
physical examination by such physician after such physician has given reasonable
notice of the time and place of such examination shall be conclusive evidence of
the Employee's inability to perform his duties hereunder.
(b) Cause. The Employer, at its option, may terminate the
Employment Period and all of the obligations of the Employer under this
Agreement for Cause. The Employer shall have "Cause" to terminate the Employee's
employment hereunder in the event of (i) the Employee's conviction of or plea of
guilty or nolo contendere to a felony, (ii) the
3
35
Employee's gross negligence in the performance of the Services, which is not
corrected within 15 business days after written notice, (iii) the Employee's
knowingly dishonest act, or knowing bad faith or willful misconduct in the
performance of the Services, which is not corrected within 15 business days
after written notice, or (iv) the Employee's material breach of any of his
obligations under Sections 5 and 6, which is not corrected within a reasonable
period of time (determined in light of the cure, if any, appropriate to such
material breach, but in no event less than 15 business days) after written
notice. If the Employee is charged with a felony, then during the period while
such charge or related indictment remains outstanding and until finally
determined, the Employer shall have the right to suspend the Employee without
compensation.
(c) Without Cause. The Employer, at its option, may terminate
the Employment Period without Cause at any time.
(d) Termination by Employee for Good Reason. The Employee may
terminate this Agreement upon 60 days' prior written notice to the Employer for
Good Reason (as defined below) if the basis for such Good Reason is not cured
within a reasonable period of time (determined in light of the cure appropriate
to the basis of such Good Reason, but in no event less than 15 business days)
after the Employer receives written notice specifying the basis of such Good
Reason. "Good Reason" shall mean (i) the failure of the Employer to pay any
undisputed amount due under this Agreement or a reduction in Base Salary, Fixed
Bonus or benefits provided under this Agreement (other than immaterial
reductions in benefits or a reduction in benefits or salary applicable to all of
the Employer's bonus eligible employees) or a termination of, or reduction in
the percentage level of, the "plan" or "target" bonus opportunity applicable to
the Employee from the "Plan" percentage level under the 1999 Executive Bonus
Plan in effect on the date hereof (the "Effective Date Plan Percentage"), (ii) a
substantial diminution in the status, position and responsibilities of the
Employee or (iii) the Employer requiring the Employee to be based at any office
or location that requires a relocation or commute greater than 50 miles from the
office or location to which the Employee is currently assigned, provided,
however, that Good Reason shall not be deemed to exist due to the travel
requirements consistent with the performance of the Employee's services
hereunder.
(e) Payments in the Event of Termination. (i) Basic
Termination Payment. Upon the termination of the Employment Period at any time
for any reason, the Employer shall pay to the Employee or his estate the Base
Salary earned to the date of termination, and if such termination occurs after
December 31st of any year for which a bonus is payable pursuant to Section 2(b)
but before such bonus has been paid, the Employer shall pay to the Employee or
his estate the bonus due for the preceding year. Upon the termination of the
Employment Period at any time during calendar year 1999, 2000, or 2001 for any
reason other than the reasons set forth in Section 3(e)(ii) or 3(e)(iii) below,
the Employer shall pay to the Employee within five business days after such
termination, a lump-sum amount equal to the Fixed Bonus earned to the date of
termination. Any Fixed Bonus payable under this Section 3(e)(i) shall be
prorated if payable for periods of less than one year and shall be payable
regardless of whether the Employee is still in the employ of the Employer on the
date such bonuses are otherwise declared or payable.
4
36
(ii) Additional Involuntary Termination Payment. Upon the
termination of the Employment Period at any time by the Employer without Cause
or by the Employee for Good Reason, the Employer shall pay to the Employee
within five business days of such termination a lump-sum amount (in addition to
the amount payable under the first sentence of Section 3(e)(i)) equal to (x) the
sum of the Employee's annual Base Salary at the annual rate in effect on the
date of termination and the Severance Bonus Amount, multiplied by (y) 1.5.
Notwithstanding the foregoing, the Employee shall be entitled to no payment
under this Section 3(e)(ii) if he is entitled to receive a payment under Section
3(e)(iii). "Severance Bonus Amount" means an amount equal to the Employee's Base
Salary at the annual rate in effect on the date of termination multiplied by a
percentage, which is the greater of (1) the Effective Date Plan Percentage and
(2) the "plan" or "target" bonus percentage then applicable under any executive
bonus plan or other incentive compensation program for purposes of determining
the Employee's annual bonus for the year of termination.
(iii) Additional Change in Control Payment. Upon the
termination of the Employment Period (x) by the Employer without Cause upon or
prior to a Change in Control, provided that the Employee reasonably demonstrates
that such termination occurred at the request of a third party participating in,
or otherwise in anticipation of or in connection with, such Change in Control,
or (y) by the Employee with Good Reason or by the Employer for any reason other
than for Cause within one year after a Change in Control, then the Employer
shall pay to the Employee within five business days of such termination a
lump-sum amount (in addition to the amount payable under the first sentence of
Section 3(e)(i)) equal to the sum of (A) the higher of (1) the Employee's annual
Base Salary at the date of such termination or (2) the Employee's annual Base
Salary at the time of the Change in Control, in each case multiplied by three,
and (B) the Severance Bonus Amount multiplied by three. If the Employment Period
is terminated by the Employee for any reason other than with Good Reason on or
after the first anniversary of a Change in Control but no later than the 30th
day after such first anniversary, the Employee shall be entitled to 50% of the
payments specified in this Section 3(e)(iii). If the Employment Period is
terminated by the Employee with Good Reason at any time on or after the first
anniversary of a Change in Control, the Employee shall be entitled to the
payment specified in Section 3(e)(ii).
(iv) Change in Control Defined. "Change in Control"
means the first to occur of any of the following: (A) the sale (including by
merger, consolidation or sale of stock of subsidiaries or any other method) of
all or substantially all of the assets of the Employer and its consolidated
subsidiaries (taken as a whole) to any person or entity not directly or
indirectly controlled by the holders of at least 50% of the Combined Voting
Power of the then outstanding shares of capital stock of the Employer (excluding
shares owned by employees of the Employer as of the date of determination) (B)
at any time prior to the consummation of an initial public offering of Class A
Common Stock of the Employer or other common stock of the Employer having the
voting power to elect directors, a transaction (except pursuant to such initial
public offering) resulting in the Principal Shareholders owning, collectively,
less than 50% of the Combined Voting Power of the then outstanding shares of
capital stock of the Employer (excluding shares owned by employees of the
Employer as of the date of determination), (C) at any time after the
consummation of an initial public offering of Class A Common Stock of the
5
37
Employer or other common stock of the Employer having the voting power to elect
directors, the acquisition (except pursuant to such initial public offering) by
any person or entity (other than the Principal Shareholders) not directly or
indirectly controlled by the Employer's stockholders of more than 30% of the
Combined Voting Power of the then outstanding shares of capital stock of the
Employer (excluding shares owned by employees of the Employer as of the date of
determination), (D) individuals serving as directors of the Employer on the date
hereof and who were nominated or selected to serve as directors by one or more
Principal Shareholders (together with any new directors whose election was
approved by a vote of (x) such individuals or directors whose election was
previously so approved or (y) Principal Shareholders holding a majority of the
aggregate voting power of the capital stock of the Employer held by all
Principal Shareholders) cease for any reason to constitute a majority of the
Board of Directors of the Employer, (E) the adoption of a plan relating to the
liquidation or dissolution of the Employer in connection with an equity
investment or sale or a business combination transaction or (F) any other event
or transaction that the Board of Directors of the Employer deems to be a Change
in Control. "Combined Voting Power" with respect to capital stock of the
Employer means the number of votes such stock is normally entitled (without
regard to the occurrence of any contingency) to vote in an election of directors
of the Employer. "Principal Shareholders" means (i) Charlesbank Equity Fund IV,
Limited Partnership and the investors in such fund, (ii) Charlesbank Equity Fund
IV G.P. Limited Partnership, (iii) Charlesbank Capital Partners, LLC (and any
other fund managed by Charlesbank Capital Partners, LLC), (iv) any investor
(other than The 1818 Mezzanine Fund, L.P.) whose investment in the Employer is
approved by the representative of management on the board of the Employer, (v)
any new investors in the Company designated as Principal Shareholders by
Charlesbank Capital Partners, LLC within one year of the initial investment by
Charlesbank Equity Fund IV, Limited Partnership, and (vi) any corporation,
partnership, limited liability company or other entity a majority of the capital
stock or other ownership interests of which are directly or indirectly owned by
any of the foregoing.
(v) Other Provisions Applicable to Payments. Any
amounts due under this Section 3 and not paid when due shall bear interest
(compounded annually) for the period from and including the date payable to but
excluding the date paid at a rate per annum equal to the sum of (x) four percent
and (y) the rate publicly announced by BankBoston, N.A. as its "prime rate."
(f) Termination of Obligations. In the event of termination of
the Employment Period in accordance with this Section 3, all obligations of the
Employer and the Employee under this Agreement shall terminate, except for any
amounts payable by the Employer as specifically set forth in Section 3(e);
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, the provisions of Section 5 and Section 6 shall survive such
termination in accordance with their respective terms and the relevant
provisions of Section 7 shall survive such termination indefinitely. In the
event of termination of the Employment Period in accordance with this Section 3,
the Employee agrees to cooperate with the Employer in order to ensure an orderly
transfer of the Employee's duties and responsibilities.
6
38
SECTION 4. Parachute Excise Tax Gross-Up
(a) If, as a result of any payment or benefit provided under
this Agreement or under any other plan, arrangement or other agreement with the
Employer or any entity affiliated with the Employer, either alone or together
with such other payments and benefits which the Employee receives or is then
entitled to received from the Employer, the Employee becomes subject to the
excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), (together with any interest and penalties thereon an
"Excise Tax"), the Employer shall pay the Employee an amount (the "Gross-Up
Payment") sufficient to place the Employee in the same after-tax financial
position that he would have been in if he had not incurred any tax liability
under Section 4999 of the Code. For purposes of determining whether the Employee
is subject to an Excise Tax and the amount of any Gross-Up Payment, (i) any
payments or benefits received by the Employee (whether pursuant to the terms
hereof or pursuant to any plan, arrangement or other agreement with the Employer
or any entity affiliated with the Employer) which payments ("Contingent
Payments") are deemed to be contingent on a change described in Section
280G(b)(2)(A)(i) of the Code shall be taken into account and (ii) the Employee
shall be deemed to pay federal, state and local taxes at the highest marginal
applicable rates of such taxes for the calendar year in which the Gross-Up
Payment is to be made, net of the maximum deduction from federal income taxes
which could be obtained from deduction of any state and local taxes deemed paid
by the Employee.
(b) The determination of whether the Employee is subject to
Excise Tax and the amounts of such Excise Tax and Gross-Up Payment, as well as
other calculations hereunder, shall be made at the expense of the Employer by
Xxxxxx Xxxxxxxx, which shall provide the Employee with prompt written notice
(the "Employer Notice") setting forth their determinations and calculations.
Within 30 days following the receipt by the Employee of the Employer Notice, the
Employee may notify the Employer in writing (the "Employee Notice") if the
Employee disagrees with such determinations or calculations, setting forth the
reasons for any such disagreement. If the Employer and the Employee do not
resolve such disagreement within 10 business days following receipt by the
Employer of the Employee Notice, such dispute will be resolved in accordance
with Section 7(f). The Employer shall pay all reasonable expense incurred by
either party in connection with the determinations, calculations, disagreements
or resolutions pursuant to this paragraph, including, but not limited to,
reasonable legal, consulting or other similar fees.
(c) The Employee shall notify the Employer in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Employer of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Employee is
informed in writing of such claim and shall apprise the Employer of the nature
of such claim and the date of which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30 day period
following the date on which the Employee gives such notice to the Employer (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Employer notifies the Employee in writing prior to
the expiration of such period that it desires to contest such claim, the
Employee shall:
7
39
(i) give the Employer any information reasonably
requested by the Employer relating to such claim;
(ii) take such action in connection with contesting
such claim as the Employer shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Employer and reasonably
satisfactory to the Employee;
(iii) cooperate with the Employer in good faith in
order to effectively contest such claim; and
(iv) permit the Employer to participate in any
proceedings relating to such claim;
provided, however, that the Employer shall bear and pay
directly all costs and expenses (including, but not limited to, additional
interest and penalties and related legal, consulting or other similar fees)
incurred in connection with such contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or other tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.
(d) The Employer shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego 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 Employee to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Employee 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 Employer shall
determine; provided, however, that if the Employer directs the Employee to pay
such claim and xxx for a refund, the Employer shall advance the amount of such
payment to the Employee on an interest-free basis, and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or other 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 if the Employee is required to extend the statute of
limitations to enable the Employer to contest such claim, the Employee may limit
this extension solely to such contested amount. The Employer's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee 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. In addition, no position may be taken nor
any final resolution be agreed to by the Employer without the Employee's consent
if such position or resolution could reasonably be expected to adversely affect
the Employee (including any other tax position of the Employee unrelated to the
matters covered hereby).
(e) As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Employer hereunder, it is possible that Gross-Up Payments which will not have
been made by the Employer should have been made
8
40
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Employer exhausts its remedies and the Employee
thereafter is required to pay to the Internal Revenue Service an additional
amount in respect of any Excise Tax, the Employer (in the same fashion as set
forth in Section 4(b) shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall promptly be paid by the Employer to or
for the benefit of the Employee.
(f) If, after the receipt by Employee of an amount advanced by
the Employer in connection with the contest of an Excise Tax claim, the Employee
becomes entitled to receive any refund with respect to such claim, the Employee
shall promptly pay to the Employer the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Employee of an amount advanced by the Employer in connection with
an Excise Tax claim, a determination is made that Employee shall not be entitled
to any refund with respect to such claim and the Employer does not notify the
Employee in writing of its intent to contest the denial of such refund prior to
the expiration of 30 days after receiving notice of such determination, such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall be offset, to the extent thereof, by the amount of the
Gross-Up Payment.
SECTION 5. Confidentiality; Non-Disclosure.
(a) (i) Non-Disclosure Obligation. Except as provided in this
Section 5(a), the Employee shall not disclose any Confidential Information of
the Employer or any of its affiliates or subsidiaries to any person, firm,
corporation, association or other entity (other than the Employer, its
subsidiaries, officers or employees, attorneys, accountants, bank lenders,
agents, advisors or representatives thereof) for any reason or purpose
whatsoever (other than in the normal course of business on a need-to-know basis
after the Employer has received assurances that the confidential or proprietary
information shall be kept confidential), nor shall the Employee make use of any
such confidential or proprietary information for his own purposes or for the
benefit of any person, firm, corporation or other entity, except the Employer.
As used in this Section, the term "Confidential Information" means all
information which is or becomes known to the Employee and relates to matters
such as trade secrets, research and development activities, new or prospective
lines of business (including analysis and market research relating to potential
expansion of the Business), books and records, financial data, customer lists,
marketing techniques, financing, credit policies, vendor lists, suppliers,
purchasers, potential business combinations, distribution channels, services,
procedures, pricing information and private processes as they may exist from
time to time; provided that the term Confidential Information shall not include
information that is or becomes generally available to the public (other than as
a result of a disclosure in violation of this Agreement by the Employee or by a
person who received such information from the Employee in violation of this
Agreement).
(ii) Compulsory Disclosures. If the Employee is
requested or (in the opinion of his counsel) required by law or judicial order
to disclose any Confidential Information, the Employee shall provide the
Employer with prompt notice of any such request or requirement so that the
Employer may seek an appropriate protective order or waiver of the
9
41
Employee's compliance with the provisions of this Section 5(a). The Employee
will not oppose any reasonable action by, and will cooperate with, the Employer
to obtain an appropriate protective order or other reliable assurance that
confidential treatment will be accorded the Confidential Information. If,
failing the entry of a protective order or the receipt of a waiver hereunder,
the Employee is, in the opinion of his counsel, compelled by law to disclose a
portion of the Confidential Information, the Employee may disclose to the
relevant tribunal without liability hereunder only that portion of the
Confidential Information which counsel advises the Employee he is legally
required to disclose, and each of the parties hereto agrees to exercise such
party's best efforts to obtain assurance that confidential treatment will be
accorded such Confidential Information. During the Employment Period, and for
matters arising from events or circumstances occurring during the Employment
Period, the Employer will provide for the defense of matters arising under this
provision.
(b) Assignment of Inventions. The Employee agrees that he will
promptly and fully disclose to the Employer all inventions, ideas, software,
trade secrets or know-how (whether patentable or copyrightable or not) made or
conceived by the Employee (either solely or jointly with others) during the
Employment Period and for a period of six months thereafter, all tangible work
product derived therefrom (collectively, the "Ideas"). The Employee agrees that
all such Ideas shall be and remain the sole and exclusive property of the
Employer. On the request of the Employer, the Employee shall, during and after
the term of this Agreement, without charge to the Employer but at the expense of
the Employer, assist the Employer in any reasonable way to vest in the Employer,
title to all such Ideas, and to obtain any related patents, trademarks or
copyrights in all countries throughout the world. In this regard, the parties
shall execute and deliver any and all documents that the Employer may reasonably
request.
SECTION 6. Non-Competition; Non-Solicitation. The Employee
acknowledges and recognizes his possession of Confidential Information and
acknowledges the highly competitive nature of the business of the Employer and
its affiliates and subsidiaries and accordingly agrees that, in consideration of
the premises contained herein, he will not, during the Employment Period and for
one year after the date of termination of the Employment Period, for any reason
whatsoever, either individually or as an officer, director, stockholder, member,
partner, agent, consultant or principal of another business firm, (x) directly
or indirectly engage in North America, or any country in which the Employer or
any of its affiliates or subsidiaries actively engages in business during the
Employment Period, in any competitive business, (y) assist others in engaging in
any competitive business in the manner described in clause (x), or (z) induce
any employee of the Employer or any of its affiliates or subsidiaries to
terminate such person's employment with the Employer or such affiliate or
subsidiary or hire any employee of the Employer or any of its affiliates or
subsidiaries to work with any businesses affiliated with the Employee. The
Employee's ownership of not more than 1% of the outstanding capital stock of any
public corporation shall not in itself be deemed to be engaging in any
competitive business for purposes of this Section 6.
10
42
SECTION 7. General Provisions.
(a) Enforceability. It is the desire and intent of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, although the Employee
and the Employer consider the restrictions contained in this Agreement to be
reasonable for the purpose of preserving the Employer's goodwill and proprietary
rights, if any particular provision of this Agreement shall be adjudicated to be
invalid or unenforceable, such provision shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable, such
deletion to apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication is made. It is expressly
understood and agreed that although the Employer and the Employee consider the
restrictions contained in Section 6 to be reasonable, if a final determination
is made by a court of competent jurisdiction that the time or territory or any
other restriction contained in this Agreement is unenforceable against the
Employee, the provisions of this Agreement shall be deemed amended to apply as
to such maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable.
(b) Remedies. The parties acknowledge that the Employer's
damages at law would be an inadequate remedy for the breach by the Employee of
any provision of Section 5 or Section 6, and agree in the event of such breach
that the Employer may obtain temporary and permanent injunctive relief
restraining the Employee from such breach, and, to the extent permissible under
the applicable statutes and rules of procedure, a temporary injunction may be
granted immediately upon the commencement of any such suit. Nothing contained
herein shall be construed as prohibiting the Employer from pursuing any other
remedies available at law or equity for such breach or threatened breach of
Section 5 or Section 6 or for any breach or threatened breach of any other
provision of this Agreement.
(c) Withholding. The Employer shall withhold such amounts from
any compensation or other benefits payable to the Employee under this Agreement
on account of payroll and other taxes as may be required by applicable law or
regulation of any governmental authority.
(d) Employer's Successors. The Employer shall require any
successor or successors (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Employer's business and/or assets, by an agreement in substance and
form satisfactory to the Employee, to assume this Agreement and to agree
expressly to perform this Agreement in the same manner and to the same extent as
the Employer would be required to perform it in the absence of a succession. The
Employer's failure to obtain such agreement prior to the effectiveness of a
succession shall be a breach of this Agreement and shall entitle the Employee to
all of the compensation and benefits to which he would have been entitled
hereunder if the Employer had involuntarily terminated his employment without
Cause immediately after such succession become effective. For all purposes under
this Agreement, the term "Employer" shall include any successor or successors to
the Employer's business and/or assets which executes and delivers the assumption
agreement described in the subsection or which becomes bound by this Agreement
by operation of law.
11
43
(e) Employee's Successors. This Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees.
(f) Indemnity. The Employer hereby agrees to indemnify and
hold the Employee harmless consistent with the Employer's policy against any and
all liabilities, expenses (including attorneys' fees and costs), claims,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any proceeding arising out of the Employee's
employment with the Employer (whether civil, criminal, administrative or
investigative, other than proceedings by or in the right of the Employer), if
with respect to the actions at issue in the proceeding the Employee acted in
good faith and in a manner Employee reasonably believed to be in, or not opposed
to, the best interests of the Employer, and (with respect to any criminal
action) Employee had no reason to believe Employee's conduct was unlawful. Said
indemnification arrangement shall (i) survive the termination of this Agreement,
(ii) apply to any and all qualifying acts of the Employee which have taken place
during any period in which he was employed by the Employer, irrespective of the
date of this Agreement or the term hereof, including, but not limited to, any
and all qualifying acts as an officer and/or director of any affiliate while the
Employee is employed by the Employer and (iii) be subject to any limitations
imposed from time to time under applicable law.
(g) Dispute Resolution; Attorney's Fees. The Employer and the
Employee agree that any dispute arising as to the parties' rights and
obligations hereunder shall be resolved by binding arbitration before an
arbitrator to be determined by mutually agreeable means. In such event, each of
the Employer and the Employee shall have the right to full discovery. The
Employer shall bear all costs of the arbitrator in any such proceeding, and if
the arbitration is definitively decided in the Employee's favor, the Employee
shall have the right, in addition to any other relief granted by such
arbitrator, to recover reasonable attorneys' fees; provided, however, that the
Employer shall have the right, in any dispute other than a dispute relating to
the occurrence of a Change in Control or the payment of an amount under Section
3(e)(iii), in addition to any other relief granted by such arbitrator, to
recover reasonable attorneys' fees in the event that a claim brought by the
Employee is definitively decided in the Employer's favor (with the amount of
such fees being limited to those expended defending the claim or claims decided
in favor of the Employer). Any judgment by such arbitrator may be entered into
any court with jurisdiction over the dispute.
(h) Acknowledgment. The Employee acknowledges that he has been
advised by the Employer to seek the advice of independent counsel prior to
reaching agreement with the Employer on any of the terms of this Agreement. The
parties agree that no rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting the Agreement.
(i) Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification,
12
44
amendment, waiver or consent shall be effective only in the specific instance
and for the purpose for which given.
(i) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by registered or certified mail, postage prepaid, return
receipt requested, sent by overnight courier, or sent by facsimile (with
confirmation of receipt), addressed as follows:
If to the Employer:
Xxxxxxx Tire Group, Inc.
0000 Xxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
and:
Charlesbank Capital Partners, LLC
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx and Xxxx X. Xxxxx
Facsimile: (000) 000-0000
13
45
with a copy to:
Skadden, Arps, Slate Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
If to the Employee:
Xxxxxx X. Xxxxx
00000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
or at such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. If such notice
or communication is mailed, such communication shall be deemed to have been
given on the fifth business day following the date on which such communication
is posted.
(j) Descriptive Headings; Certain Interpretations. Descriptive
headings are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. Except as otherwise expressly
provided in this Agreement: (i) any reference in this Agreement to any
agreement, document or instrument includes all permitted supplements and
amendments; (ii) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (iii) the words
"include," "included" and "including" are not limiting; and (iv) a reference to
a person or entity includes its permitted successors and assigns.
(k) Counterparts; Entire Agreement. This Agreement may be
executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all such counterparts together shall
constitute one agreement. This Agreement and the Other Agreements contain the
entire agreement among the parties with respect to the transactions contemplated
by this Agreement and the Other Agreements and supersede all other or prior
written or oral agreements or understandings among the parties with respect to
the Employee's employment by the Employer. The Existing Employment Agreement is
expressly superseded and hereby amended and restated in its entirety by this
Agreement.
(L) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA.
(M) CONSENT TO JURISDICTION. EACH OF THE EMPLOYER AND THE
EMPLOYEE HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF
NORTH CAROLINA SITTING IN MECKLENBURG COUNTY AND ALL XXXXX XXXXXX XX XXX XXXXX
XX XXXXX XXXXXXXX SITTING IN
14
46
MECKLENBURG COUNTY FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY, AND THE
EMPLOYEE AGREES NOT TO COMMENCE ANY LEGAL PROCEEDING RELATING THERETO EXCEPT IN
SUCH COURTS. EACH OF THE EMPLOYER AND THE EMPLOYEE IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH HE MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH COURTS
AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH COURTS HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO HEREBY CONSENTS TO SERVICE
OF PROCESS BY NOTICE IN THE MANNER SPECIFIED IN SECTION 7(I) AND IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR
HEREAFTER HAVE TO SERVICE OF PROCESS IN SUCH MANNER.
15
47
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
THE X.X. XXXXXXX COMPANY, INC.
By: /s/ Xxxxxx X. Roof
------------------------------------------
Xxxxxx X. Roof
President and Chief Executive Officer
/s/ Xxxxxx X. Xxxxx
---------------------------------------------
Xxxxxx X. Xxxxx
16
48
EXECUTIVE SEVERANCE AGREEMENT, dated as of May 24, 1999 (the
"Agreement"), between The X.X. Xxxxxxx Company, Inc., a North
Carolina corporation (the "Employer"), and Xxxxxxx X. Xxxxxxx
(the "Employee").
The Employer and the Employee are parties to an Employment
Agreement, dated as of May 20, 1998 (the "Existing Employment Agreement"), and
desire to amend and restate, and have this Agreement supersede, the Existing
Employment Agreement in its entirety. The Employer desires to continue to retain
the Employee to supply services to the Employer, and the Employee desires to
continue provide such services to the Employer, on the terms and subject to the
conditions set forth in this Agreement.
In consideration of (i) the Employee's agreement to supply
services under this Agreement and (ii) the mutual agreements set forth below,
the sufficiency of which is hereby acknowledged, the Employer and the Employee
agree as follows:
SECTION 1. Employment Relationship.
(a) Employment by Employer. The Employer hereby employs the
Employee, and the Employee hereby agrees to be employed by the Employer, as
President - Xxxxxxx/Itco of the Employer, and the Employee will devote all of
his business time, attention, knowledge and skills and use his best efforts
during the Employment Period to perform services and duties consistent with his
title and position (the "Services") for the Employer in accordance with
directions given to the Employee from time to time by the Board of Directors of
the Employer.
(b) Employment Period. The period commencing on the date of
this Agreement and ending on the date on which this Agreement is terminated is
referred to herein as the "Employment Period." During the Employment Period, the
Employee will be an at-will employee of the Employer. The Employment Period
shall be freely terminable for any reason by either party at any time.
SECTION 2. Compensation and Benefits. During the Employment
Period:
(a) Base Compensation. The Employer shall pay to the Employee
a base salary of $275,000 per annum (the "Base Salary"), payable in accordance
with the Employer's payroll practices. The Base Salary shall be increased (but
not decreased) subject to additional discretionary increases (but not decreases)
as determined periodically by the Board of Directors.
(b) Additional Compensation. As additional compensation for
the Services, the Employer shall pay to the Employee an amount equal to the
greater of (x) with respect to calendar years 1999, 2000 and 2001, annual fixed
bonus payments (the "Fixed Bonus") equal to 15% of the Employee's Base Salary
for such year, and (y) (i) with respect to calendar year 1999,
49
an annual bonus payment at the "Minimum", "Plan" or "Maximum" percentage payment
levels, as the case may be, in accordance with the terms and conditions of the
Employer's 1999 Executive Bonus Plan, or (ii) with respect to subsequent
calendar years, other annual incentive compensation as the Board of Directors of
the Employer determines in its sole discretion to pay the Employee, payable in
all cases on or around March 1 of the following year. The Employee will be
entitled to participate in the 1999 Executive Bonus Plan as a Level 1 Employee.
The Employee acknowledges that the Employer may terminate or modify its
Executive Bonus Plan and other incentive plans (excluding the Fixed Bonus
payable hereunder and the 1999 Executive Bonus Plan as in effect and applied to
the Employee on the date hereof) at any time, although no termination or
amendment affecting the Employee will be made effective unless it is
consistently applied to other employees participating in such plans. In the
event of any conflict or inconsistency between the terms of the 1999 Executive
Bonus Plan and the terms of Section 2(b) or 3 of this Agreement, the terms of
Sections 2(b) and 3 of this Agreement shall control.
(c) Restricted Stock and Stock Options. The Employee has
purchased shares of Class A Common Stock of the Employer pursuant the Securities
Purchase and Stockholders Agreement, dated as of the date hereof, between the
Employer and the Employee (the "Purchase Agreement"), and has been granted
options to acquire shares of Class A Common Stock of the Employer, pursuant to
the Stock Option Agreement, dated as of September 26, 1998, between the Employer
and the Employee (the "1998 Stock Option Agreement") and the Stock Option
Agreement, dated as of the date hereof, between the Employer and the Employee
(the "1999 Stock Option Agreement" and collectively, with the 1998 Stock Option
Agreement, the "Stock Option Agreements"). The stock options granted to the
Employee under the 1998 Stock Option Agreement were granted pursuant to the
Employer's 1997 Stock Option Plan and are fully vested and exercisable as of the
date hereof. The stock options granted to the Employee under the 1999 Stock
Option Agreement were granted pursuant to the Employer's 1999 Stock Option Plan
and are subject to vesting in accordance with the terms of the 1999 Stock Option
Agreement. The Purchase Agreement and the Stock Option Agreements are referred
to in this Agreement as the "Other Agreements." The Employee shall be entitled
to participate in current or future equity incentive plans adopted by the
Employer on terms substantially similar to those offered to members of the
Employer's Executive Committee or other division Presidents of the Employer.
Such grants may be awarded from time to time in the sole discretion of the
Employer's Board of Directors. Except as otherwise provided in the 1999 Stock
Option Agreement and in this Agreement with respect to payments under the
Executive Bonus Plan and except as hereafter mutually agreed by the Employer and
the Employee, in the event of a Change in Control (as defined below), to the
extent not fully vested at such time, the Employee shall become fully vested in
all awards heretofore or hereafter granted to him under all incentive
compensation, deferred compensation, stock option, stock appreciation rights,
restricted stock, phantom stock or other similar plans maintained by the
Employer.
(d) Benefit Plans. During the Employment Period, the Employee
shall be entitled to receive benefits from the Employer consistent with those
currently in effect for the Employer's senior executives (including deferred
compensation plans, and company automobile and financial planning perquisites),
as those benefits are revised from time to time by the Board of Directors of the
Employer. Nothing contained herein is intended to require the Employer to
2
50
maintain any existing benefits or create any new benefits. The Employee will be
entitled to participate in the Employer's deferred compensation program as a
Level 2 Employee and to receive benefits thereunder in accordance with the terms
and conditions of such program. If the Employment Period is terminated by the
Employer or the Employee as set forth in Section 3(e)(ii) below, the Employee
and relevant family members shall be entitled to continue to participate in the
Employer's welfare benefit plans at the Employer's expense for a period of 18
months after the termination date. If the Employment Period is terminated by the
Employer or the Employee as set forth in Section 3(e)(iii) below, the Employee
and relevant family members shall be entitled to continue to participate in the
Employer's welfare benefit plans at the Employer's expense for a period of three
years after the termination date. For purposes of this Section 2(d), the
Employees' relevant family members shall be those members of the Employee's
immediate family covered by the applicable welfare benefit plan immediately
prior to the termination date.
(e) Vacation and Holidays. The Employee shall be entitled to a
minimum of four weeks' vacation each year and paid holidays in accordance with
the Employer's policy.
(f) No Mitigation. The Employee shall not be required to
mitigate the amount of any payments under this Agreement (whether by seeking new
employment or in any other manner), nor shall any such payment be reduced by any
earnings that the Employee may receive from any other source.
SECTION 3. Termination.
(a) Death or Disability. If the Employee dies during the
Employment Period, the Employment Period shall terminate as of the date of the
Employee's death. If the Employee becomes unable to perform the Services for 90
consecutive days due to a physical or mental disability, (i) the Employer may
elect to terminate the Employment Period at any time thereafter, and (ii) the
Employment Period shall terminate as of the date of such election. All
disabilities shall be certified by a physician acceptable to both the Employer
and the Employee, or, if the Employer and the Employee cannot agree upon a
physician within 15 days, by a physician selected by physicians designated by
each of the Employer and the Employee. The Employee's failure to submit to any
physical examination by such physician after such physician has given reasonable
notice of the time and place of such examination shall be conclusive evidence of
the Employee's inability to perform his duties hereunder.
(b) Cause. The Employer, at its option, may terminate the
Employment Period and all of the obligations of the Employer under this
Agreement for Cause. The Employer shall have "Cause" to terminate the Employee's
employment hereunder in the event of (i) the Employee's conviction of or plea of
guilty or nolo contendere to a felony, (ii) the Employee's gross negligence in
the performance of the Services, which is not corrected within 15 business days
after written notice, (iii) the Employee's knowingly dishonest act, or knowing
bad faith or willful misconduct in the performance of the Services, which is not
corrected within 15 business days after written notice, or (iv) the Employee's
material breach of any of his obligations under Sections 5 and 6, which is not
corrected within a reasonable period of time
3
51
(determined in light of the cure, if any, appropriate to such material breach,
but in no event less than 15 business days) after written notice. If the
Employee is charged with a felony, then during the period while such charge or
related indictment remains outstanding and until finally determined, the
Employer shall have the right to suspend the Employee without compensation.
(c) Without Cause. The Employer, at its option, may terminate
the Employment Period without Cause at any time.
(d) Termination by Employee for Good Reason. The Employee may
terminate this Agreement upon 60 days' prior written notice to the Employer for
Good Reason (as defined below) if the basis for such Good Reason is not cured
within a reasonable period of time (determined in light of the cure appropriate
to the basis of such Good Reason, but in no event less than 15 business days)
after the Employer receives written notice specifying the basis of such Good
Reason. "Good Reason" shall mean (i) the failure of the Employer to pay any
undisputed amount due under this Agreement or a reduction in Base Salary, Fixed
Bonus or benefits provided under this Agreement (other than immaterial
reductions in benefits or a reduction in benefits or salary applicable to all of
the Employer's bonus eligible employees) or a termination of, or reduction in
the percentage level of, the "plan" or "target" bonus opportunity applicable to
the Employee from the "Plan" percentage level under the 1999 Executive Bonus
Plan in effect on the date hereof (the "Effective Date Plan Percentage"), (ii) a
substantial diminution in the status, position and responsibilities of the
Employee or (iii) the Employer requiring the Employee to be based at any office
or location that requires a relocation or commute greater than 50 miles from the
office or location to which the Employee is currently assigned, provided,
however, that Good Reason shall not be deemed to exist due to the travel
requirements consistent with the performance of the Employee's services
hereunder.
(e) Payments in the Event of Termination. (i) Basic
Termination Payment. Upon the termination of the Employment Period at any time
for any reason, the Employer shall pay to the Employee or his estate the Base
Salary earned to the date of termination, and if such termination occurs after
December 31st of any year for which a bonus is payable pursuant to Section 2(b)
but before such bonus has been paid, the Employer shall pay to the Employee or
his estate the bonus due for the preceding year. Upon the termination of the
Employment Period at any time during calendar year 1999, 2000, or 2001 for any
reason other than the reasons set forth in Section 3(e)(ii) or 3(e)(iii) below,
the Employer shall pay to the Employee within five business days after such
termination, a lump-sum amount equal to the Fixed Bonus earned to the date of
termination. Any Fixed Bonus payable under this Section 3(e)(i) shall be
prorated if payable for periods of less than one year and shall be payable
regardless of whether the Employee is still in the employ of the Employer on the
date such bonuses are otherwise declared or payable.
(ii) Additional Involuntary Termination Payment. Upon the
termination of the Employment Period at any time by the Employer without Cause
or by the Employee for Good Reason, the Employer shall pay to the Employee
within five business days of such termination a lump-sum amount (in addition to
the amount payable under the first sentence of Section 3(e)(i)) equal to (x) the
sum of the Employee's annual Base Salary at the annual rate in effect on the
date
4
52
of termination and the Severance Bonus Amount, multiplied by (y) 1.5.
Notwithstanding the foregoing, the Employee shall be entitled to no payment
under this Section 3(e)(ii) if he is entitled to receive a payment under Section
3(e)(iii). "Severance Bonus Amount" means an amount equal to the Employee's Base
Salary at the annual rate in effect on the date of termination multiplied by a
percentage, which is the greater of (1) the Effective Date Plan Percentage and
(2) the "plan" or "target" bonus percentage then applicable under any executive
bonus plan or other incentive compensation program for purposes of determining
the Employee's annual bonus for the year of termination.
(iii) Additional Change in Control Payment. Upon the
termination of the Employment Period (x) by the Employer without Cause upon or
prior to a Change in Control, provided that the Employee reasonably demonstrates
that such termination occurred at the request of a third party participating in,
or otherwise in anticipation of or in connection with, such Change in Control,
or (y) by the Employee with Good Reason or by the Employer for any reason other
than for Cause within one year after a Change in Control, then the Employer
shall pay to the Employee within five business days of such termination a
lump-sum amount (in addition to the amount payable under the first sentence of
Section 3(e)(i)) equal to the sum of (A) the higher of (1) the Employee's annual
Base Salary at the date of such termination or (2) the Employee's annual Base
Salary at the time of the Change in Control, in each case multiplied by three,
and (B) the Severance Bonus Amount multiplied by three. If the Employment Period
is terminated by the Employee for any reason other than with Good Reason on or
after the first anniversary of a Change in Control but no later than the 30th
day after such first anniversary, the Employee shall be entitled to 50% of the
payments specified in this Section 3(e)(iii). If the Employment Period is
terminated by the Employee with Good Reason at any time on or after the first
anniversary of a Change in Control, the Employee shall be entitled to the
payment specified in Section 3(e)(ii).
(iv) Change in Control Defined. "Change in Control" means the
first to occur of any of the following: (A) the sale (including by merger,
consolidation or sale of stock of subsidiaries or any other method) of all or
substantially all of the assets of the Employer and its consolidated (taken as a
whole) to any person or entity not directly or indirectly controlled by the
holders of at least 50% of the Combined Voting Power of the then outstanding
shares of capital stock of the Employer (excluding shares owned by employees of
the Employer as of the date of determination) (B) at any time prior to the
consummation of an initial public offering of Class A Common Stock of the
Employer or other common stock of the Employer having the voting power to elect
directors, a transaction (except pursuant to such initial public offering)
resulting in the Principal Shareholders owning, collectively, less than 50% of
the Combined Voting Power of the then outstanding shares of capital stock of the
Employer (excluding shares owned by employees of the Employer as of the date of
determination), (C) at any time after the consummation of an initial public
offering of Class A Common Stock of the Employer or other common stock of the
Employer having the voting power to elect directors, the acquisition (except
pursuant to such initial public offering) by any person or entity (other than
the Principal Shareholders) not directly or indirectly controlled by the
Employer's stockholders of more than 30% of the Combined Voting Power of the
then outstanding shares of capital stock of the Employer (excluding shares owned
by employees of the Employer as of the date of
5
53
determination), (D) individuals serving as directors of the Employer on the date
hereof and who were nominated or selected to serve as directors by one or more
Principal Shareholders (together with any new directors whose election was
approved by a vote of (x) such individuals or directors whose election was
previously so approved or (y) Principal Shareholders holding a majority of the
aggregate voting power of the capital stock of the Employer held by all
Principal Shareholders) cease for any reason to constitute a majority of the
Board of Directors of the Employer, (E) the adoption of a plan relating to the
liquidation or dissolution of the Employer in connection with an equity
investment or sale or a business combination transaction or (F) any other event
or transaction that the Board of Directors of the Employer deems to be a Change
in Control. "Combined Voting Power" with respect to capital stock of the
Employer means the number of votes such stock is normally entitled (without
regard to the occurrence of any contingency) to vote in an election of directors
of the Employer. "Principal Shareholders" means (i) Charlesbank Equity Fund IV,
Limited Partnership and the investors in such fund, (ii) Charlesbank Equity Fund
IV G.P. Limited Partnership, (iii) Charlesbank Capital Partners, LLC (and any
other fund managed by Charlesbank Capital Partners, LLC), (iv) any investor
(other than The 1818 Mezzanine Fund, L.P.) whose investment in the Employer is
approved by the representative of management on the board of the Employer, (v)
any new investors in the Company designated as Principal Shareholders by
Charlesbank Capital Partners, LLC within one year of the initial investment by
Charlesbank Equity Fund IV, Limited Partnership, and (vi) any corporation,
partnership, limited liability company or other entity a majority of the capital
stock or other ownership interests of which are directly or indirectly owned by
any of the foregoing.
(v) Other Provisions Applicable to Payments. Any amounts
due under this Section 3 and not paid when due shall bear interest (compounded
annually) for the period from and including the date payable to but excluding
the date paid at a rate per annum equal to the sum of (x) four percent and (y)
the rate publicly announced by BankBoston, N.A. as its "prime rate."
(f) Termination of Obligations. In the event of termination of
the Employment Period in accordance with this Section 3, all obligations of the
Employer and the Employee under this Agreement shall terminate, except for any
amounts payable by the Employer as specifically set forth in Section 3(e);
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, the provisions of Section 5 and Section 6 shall survive such
termination in accordance with their respective terms and the relevant
provisions of Section 7 shall survive such termination indefinitely. In the
event of termination of the Employment Period in accordance with this Section 3,
the Employee agrees to cooperate with the Employer in order to ensure an orderly
transfer of the Employee's duties and responsibilities.
SECTION 4. Parachute Excise Tax Gross-Up
(a) If, as a result of any payment or benefit provided under
this Agreement or under any other plan, arrangement or other agreement with the
Employer or any entity affiliated with the Employer, either alone or together
with such other payments and benefits which the Employee receives or is then
entitled to received from the Employer, the Employee becomes subject to the
excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as
6
54
amended (the "Code"), (together with any interest and penalties thereon an
"Excise Tax"), the Employer shall pay the Employee an amount (the "Gross-Up
Payment") sufficient to place the Employee in the same after-tax financial
position that he would have been in if he had not incurred any tax liability
under Section 4999 of the Code. For purposes of determining whether the Employee
is subject to an Excise Tax and the amount of any Gross-Up Payment, (i) any
payments or benefits received by the Employee (whether pursuant to the terms
hereof or pursuant to any plan, arrangement or other agreement with the Employer
or any entity affiliated with the Employer) which payments ("Contingent
Payments") are deemed to be contingent on a change described in Section
280G(b)(2)(A)(i) of the Code shall be taken into account and (ii) the Employee
shall be deemed to pay federal, state and local taxes at the highest marginal
applicable rates of such taxes for the calendar year in which the Gross-Up
Payment is to be made, net of the maximum deduction from federal income taxes
which could be obtained from deduction of any state and local taxes deemed paid
by the Employee.
(b) The determination of whether the Employee is subject to
Excise Tax and the amounts of such Excise Tax and Gross-Up Payment, as well as
other calculations hereunder, shall be made at the expense of the Employer by
Xxxxxx Xxxxxxxx, which shall provide the Employee with prompt written notice
(the "Employer Notice") setting forth their determinations and calculations.
Within 30 days following the receipt by the Employee of the Employer Notice, the
Employee may notify the Employer in writing (the "Employee Notice") if the
Employee disagrees with such determinations or calculations, setting forth the
reasons for any such disagreement. If the Employer and the Employee do not
resolve such disagreement within 10 business days following receipt by the
Employer of the Employee Notice, such dispute will be resolved in accordance
with Section 7(f). The Employer shall pay all reasonable expense incurred by
either party in connection with the determinations, calculations, disagreements
or resolutions pursuant to this paragraph, including, but not limited to,
reasonable legal, consulting or other similar fees.
(c) The Employee shall notify the Employer in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Employer of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Employee is
informed in writing of such claim and shall apprise the Employer of the nature
of such claim and the date of which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30 day period
following the date on which the Employee gives such notice to the Employer (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Employer notifies the Employee in writing prior to
the expiration of such period that it desires to contest such claim, the
Employee shall:
(i) give the Employer any information reasonably
requested by the Employer relating to such claim;
(ii) take such action in connection with contesting
such claim as the Employer shall reasonably request in writing from time to
time, including, without limitation,
7
55
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Employer and reasonably satisfactory to the Employee;
(iii) cooperate with the Employer in good faith in
order to effectively contest such claim; and
(iv) permit the Employer to participate in any
proceedings relating to such claim;
provided, however, that the Employer shall bear and pay
directly all costs and expenses (including, but not limited to, additional
interest and penalties and related legal, consulting or other similar fees)
incurred in connection with such contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or other tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.
(d) The Employer shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego 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 Employee to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Employee 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 Employer shall
determine; provided, however, that if the Employer directs the Employee to pay
such claim and xxx for a refund, the Employer shall advance the amount of such
payment to the Employee on an interest-free basis, and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or other 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 if the Employee is required to extend the statute of
limitations to enable the Employer to contest such claim, the Employee may limit
this extension solely to such contested amount. The Employer's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee 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. In addition, no position may be taken nor
any final resolution be agreed to by the Employer without the Employee's consent
if such position or resolution could reasonably be expected to adversely affect
the Employee (including any other tax position of the Employee unrelated to the
matters covered hereby).
(e) As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Employer hereunder, it is possible that Gross-Up Payments which will not have
been made by the Employer should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Employer exhausts its remedies and the Employee thereafter is required to pay to
the Internal Revenue Service an additional amount in respect of any Excise Tax,
the Employer (in the same fashion as set forth in Section 4(b) shall determine
the amount of the Underpayment
8
56
that has occurred and any such Underpayment shall promptly be paid by the
Employer to or for the benefit of the Employee.
(f) If, after the receipt by Employee of an amount advanced by
the Employer in connection with the contest of an Excise Tax claim, the Employee
becomes entitled to receive any refund with respect to such claim, the Employee
shall promptly pay to the Employer the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Employee of an amount advanced by the Employer in connection with
an Excise Tax claim, a determination is made that Employee shall not be entitled
to any refund with respect to such claim and the Employer does not notify the
Employee in writing of its intent to contest the denial of such refund prior to
the expiration of 30 days after receiving notice of such determination, such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall be offset, to the extent thereof, by the amount of the
Gross-Up Payment.
SECTION 5. Confidentiality; Non-Disclosure.
(a) (i) Non-Disclosure Obligation. Except as provided in this
Section 5(a), the Employee shall not disclose any Confidential Information of
the Employer or any of its affiliates or subsidiaries to any person, firm,
corporation, association or other entity (other than the Employer, its
subsidiaries, officers or employees, attorneys, accountants, bank lenders,
agents, advisors or representatives thereof) for any reason or purpose
whatsoever (other than in the normal course of business on a need-to-know basis
after the Employer has received assurances that the confidential or proprietary
information shall be kept confidential), nor shall the Employee make use of any
such confidential or proprietary information for his own purposes or for the
benefit of any person, firm, corporation or other entity, except the Employer.
As used in this Section, the term "Confidential Information" means all
information which is or becomes known to the Employee and relates to matters
such as trade secrets, research and development activities, new or prospective
lines of business (including analysis and market research relating to potential
expansion of the Business), books and records, financial data, customer lists,
marketing techniques, financing, credit policies, vendor lists, suppliers,
purchasers, potential business combinations, distribution channels, services,
procedures, pricing information and private processes as they may exist from
time to time; provided that the term Confidential Information shall not include
information that is or becomes generally available to the public (other than as
a result of a disclosure in violation of this Agreement by the Employee or by a
person who received such information from the Employee in violation of this
Agreement).
(ii) Compulsory Disclosures. If the Employee is requested
or (in the opinion of his counsel) required by law or judicial order to disclose
any Confidential Information, the Employee shall provide the Employer with
prompt notice of any such request or requirement so that the Employer may seek
an appropriate protective order or waiver of the Employee's compliance with the
provisions of this Section 5(a). The Employee will not oppose any reasonable
action by, and will cooperate with, the Employer to obtain an appropriate
protective order or other reliable assurance that confidential treatment will be
accorded the Confidential Information. If, failing the entry of a protective
order or the receipt of a waiver
9
57
hereunder, the Employee is, in the opinion of his counsel, compelled by law to
disclose a portion of the Confidential Information, the Employee may disclose to
the relevant tribunal without liability hereunder only that portion of the
Confidential Information which counsel advises the Employee he is legally
required to disclose, and each of the parties hereto agrees to exercise such
party's best efforts to obtain assurance that confidential treatment will be
accorded such Confidential Information. During the Employment Period, and for
matters arising from events or circumstances occurring during the Employment
Period, the Employer will provide for the defense of matters arising under this
provision.
(b) Assignment of Inventions. The Employee agrees that he will
promptly and fully disclose to the Employer all inventions, ideas, software,
trade secrets or know-how (whether patentable or copyrightable or not) made or
conceived by the Employee (either solely or jointly with others) during the
Employment Period and for a period of six months thereafter, all tangible work
product derived therefrom (collectively, the "Ideas"). The Employee agrees that
all such Ideas shall be and remain the sole and exclusive property of the
Employer. On the request of the Employer, the Employee shall, during and after
the term of this Agreement, without charge to the Employer but at the expense of
the Employer, assist the Employer in any reasonable way to vest in the Employer,
title to all such Ideas, and to obtain any related patents, trademarks or
copyrights in all countries throughout the world. In this regard, the parties
shall execute and deliver any and all documents that the Employer may reasonably
request.
SECTION 6. Non-Competition; Non-Solicitation. The Employee
acknowledges and recognizes his possession of Confidential Information and
acknowledges the highly competitive nature of the business of the Employer and
its affiliates and subsidiaries and accordingly agrees that, in consideration of
the premises contained herein, he will not, during the Employment Period and for
one year after the date of termination of the Employment Period, for any reason
whatsoever, either individually or as an officer, director, stockholder, member,
partner, agent, consultant or principal of another business firm, (x) directly
or indirectly engage in North America, or any country in which the Employer or
any of its affiliates or subsidiaries actively engages in business during the
Employment Period, in any competitive business, (y) assist others in engaging in
any competitive business in the manner described in clause (x), or (z) induce
any employee of the Employer or any of its affiliates or subsidiaries to
terminate such person's employment with the Employer or such affiliate or
subsidiary or hire any employee of the Employer or any of its affiliates or
subsidiaries to work with any businesses affiliated with the Employee. The
Employee's ownership of not more than 1% of the outstanding capital stock of any
public corporation shall not in itself be deemed to be engaging in any
competitive business for purposes of this Section 6.
SECTION 7. General Provisions.
(a) Enforceability. It is the desire and intent of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, although the Employee
and the Employer consider the restrictions contained in this Agreement to be
reasonable for the purpose of preserving the Employer's goodwill and proprietary
rights, if
10
58
any particular provision of this Agreement shall be adjudicated to be invalid or
unenforceable, such provision shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made. It is expressly understood and
agreed that although the Employer and the Employee consider the restrictions
contained in Section 6 to be reasonable, if a final determination is made by a
court of competent jurisdiction that the time or territory or any other
restriction contained in this Agreement is unenforceable against the Employee,
the provisions of this Agreement shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable.
(b) Remedies. The parties acknowledge that the Employer's
damages at law would be an inadequate remedy for the breach by the Employee of
any provision of Section 5 or Section 6, and agree in the event of such breach
that the Employer may obtain temporary and permanent injunctive relief
restraining the Employee from such breach, and, to the extent permissible under
the applicable statutes and rules of procedure, a temporary injunction may be
granted immediately upon the commencement of any such suit. Nothing contained
herein shall be construed as prohibiting the Employer from pursuing any other
remedies available at law or equity for such breach or threatened breach of
Section 5 or Section 6 or for any breach or threatened breach of any other
provision of this Agreement.
(c) Withholding. The Employer shall withhold such amounts from
any compensation or other benefits payable to the Employee under this Agreement
on account of payroll and other taxes as may be required by applicable law or
regulation of any governmental authority.
(d) Employer's Successors. The Employer shall require any
successor or successors (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Employer's business and/or assets, by an agreement in substance and
form satisfactory to the Employee, to assume this Agreement and to agree
expressly to perform this Agreement in the same manner and to the same extent as
the Employer would be required to perform it in the absence of a succession. The
Employer's failure to obtain such agreement prior to the effectiveness of a
succession shall be a breach of this Agreement and shall entitle the Employee to
all of the compensation and benefits to which he would have been entitled
hereunder if the Employer had involuntarily terminated his employment without
Cause immediately after such succession become effective. For all purposes under
this Agreement, the term "Employer" shall include any successor or successors to
the Employer's business and/or assets which executes and delivers the assumption
agreement described in the subsection or which becomes bound by this Agreement
by operation of law.
(e) Employee's Successors. This Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees.
11
59
(f) Indemnity. The Employer hereby agrees to indemnify and
hold the Employee harmless consistent with the Employer's policy against any and
all liabilities, expenses (including attorneys' fees and costs), claims,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any proceeding arising out of the Employee's
employment with the Employer (whether civil, criminal, administrative or
investigative, other than proceedings by or in the right of the Employer), if
with respect to the actions at issue in the proceeding the Employee acted in
good faith and in a manner Employee reasonably believed to be in, or not opposed
to, the best interests of the Employer, and (with respect to any criminal
action) Employee had no reason to believe Employee's conduct was unlawful. Said
indemnification arrangement shall (i) survive the termination of this Agreement,
(ii) apply to any and all qualifying acts of the Employee which have taken place
during any period in which he was employed by the Employer, irrespective of the
date of this Agreement or the term hereof, including, but not limited to, any
and all qualifying acts as an officer and/or director of any affiliate while the
Employee is employed by the Employer and (iii) be subject to any limitations
imposed from time to time under applicable law.
(g) Dispute Resolution; Attorney's Fees. The Employer and the
Employee agree that any dispute arising as to the parties' rights and
obligations hereunder shall be resolved by binding arbitration before an
arbitrator to be determined by mutually agreeable means. In such event, each of
the Employer and the Employee shall have the right to full discovery. The
Employer shall bear all costs of the arbitrator in any such proceeding, and if
the arbitration is definitively decided in the Employee's favor, the Employee
shall have the right, in addition to any other relief granted by such
arbitrator, to recover reasonable attorneys' fees; provided, however, that the
Employer shall have the right, in any dispute other than a dispute relating to
the occurrence of a Change in Control or the payment of an amount under Section
3(e)(iii), in addition to any other relief granted by such arbitrator, to
recover reasonable attorneys' fees in the event that a claim brought by the
Employee is definitively decided in the Employer's favor (with the amount of
such fees being limited to those expended defending the claim or claims decided
in favor of the Employer). Any judgment by such arbitrator may be entered into
any court with jurisdiction over the dispute.
(h) Acknowledgment. The Employee acknowledges that he has been
advised by the Employer to seek the advice of independent counsel prior to
reaching agreement with the Employer on any of the terms of this Agreement. The
parties agree that no rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting the Agreement.
(i) Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification, amendment, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
(i) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by registered
12
60
or certified mail, postage prepaid, return receipt requested, sent by overnight
courier, or sent by facsimile (with confirmation of receipt), addressed as
follows:
If to the Employer:
Xxxxxxx Tire Group, Inc.
0000 Xxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
and:
Charlesbank Capital Partners, LLC
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx and Xxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to:
Skadden, Arps, Slate Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
If to the Employee:
Xxxxxxx X. Xxxxxxx
00000 Xxxxxxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
or at such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. If such notice
or communication is mailed, such communication shall be deemed to have been
given on the fifth business day following the date on which such communication
is posted.
13
61
(j) Descriptive Headings; Certain Interpretations. Descriptive
headings are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. Except as otherwise expressly
provided in this Agreement: (i) any reference in this Agreement to any
agreement, document or instrument includes all permitted supplements and
amendments; (ii) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (iii) the words
"include," "included" and "including" are not limiting; and (iv) a reference to
a person or entity includes its permitted successors and assigns.
(k) Counterparts; Entire Agreement. This Agreement may be
executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all such counterparts together shall
constitute one agreement. This Agreement and the Other Agreements contain the
entire agreement among the parties with respect to the transactions contemplated
by this Agreement and the Other Agreements and supersede all other or prior
written or oral agreements or understandings among the parties with respect to
the Employee's employment by the Employer. The Existing Employment Agreement is
expressly superseded and hereby amended and restated in its entirety by this
Agreement.
(L) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA.
(M) CONSENT TO JURISDICTION. EACH OF THE EMPLOYER AND THE
EMPLOYEE HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF
NORTH CAROLINA SITTING IN MECKLENBURG COUNTY AND ALL XXXXX XXXXXX XX XXX XXXXX
XX XXXXX XXXXXXXX SITTING IN MECKLENBURG COUNTY FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, AND THE EMPLOYEE AGREES NOT TO COMMENCE ANY LEGAL
PROCEEDING RELATING THERETO EXCEPT IN SUCH COURTS. EACH OF THE EMPLOYER AND THE
EMPLOYEE IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH HE MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH COURTS AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE
PARTIES HERETO HEREBY CONSENTS TO SERVICE OF PROCESS BY NOTICE IN THE MANNER
SPECIFIED IN SECTION 7(I) AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO SERVICE OF
PROCESS IN SUCH MANNER.
14
62
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
THE X.X. XXXXXXX COMPANY, INC.
By: /s/ Xxxxxx X. Roof
------------------------------------------
Xxxxxx X. Roof
President and Chief Executive Officer
/s/ Xxxxxxx X. Xxxxxxx
------------------------------------------
Xxxxxxx X. Xxxxxxx
15
63
EXECUTIVE SEVERANCE AGREEMENT, dated as of May 24, 1999 (the
"Agreement"), between The X.X. Xxxxxxx Company, Inc., a North
Carolina corporation (the "Employer"), and P. Xxxxxxx Xxxxxxx
(the "Employee").
The Employer and the Employee are parties to an Employment
Agreement, dated as of November 15, 1998 (the "Existing Employment Agreement"),
and desire to amend and restate, and have this Agreement supersede, the Existing
Employment Agreement in its entirety. The Employer desires to continue to retain
the Employee to supply services to the Employer, and the Employee desires to
continue provide such services to the Employer, on the terms and subject to the
conditions set forth in this Agreement.
In consideration of (i) the Employee's agreement to supply
services under this Agreement and (ii) the mutual agreements set forth below,
the sufficiency of which is hereby acknowledged, the Employer and the Employee
agree as follows:
SECTION 1. Employment Relationship.
(a) Employment by Employer. The Employer hereby employs the
Employee, and the Employee hereby agrees to be employed by the Employer, as
President - Winston of the Employer, and the Employee will devote all of his
business time, attention, knowledge and skills and use his best efforts during
the Employment Period to perform services and duties consistent with his title
and position (the "Services") for the Employer in accordance with directions
given to the Employee from time to time by the Board of Directors of the
Employer.
(b) Employment Period. The period commencing on the date of
this Agreement and ending on the date on which this Agreement is terminated is
referred to herein as the "Employment Period." During the Employment Period, the
Employee will be an at-will employee of the Employer. The Employment Period
shall be freely terminable for any reason by either party at any time.
SECTION 2. Compensation and Benefits. During the Employment
Period:
(a) Base Compensation. The Employer shall pay to the Employee
a base salary of $230,000 per annum (the "Base Salary"), payable in accordance
with the Employer's payroll practices. The Base Salary shall be increased (but
not decreased) subject to additional discretionary increases (but not decreases)
as determined periodically by the Board of Directors.
(b) Additional Compensation. As additional compensation for
the Services, the Employer shall pay to the Employee an amount equal to the
greater of (x) with respect to calendar years 1999, 2000 and 2001, annual fixed
bonus payments (the "Fixed Bonus") equal to 15% of the Employee's Base Salary
for such year, and (y) (i) with respect to calendar year 1999,
64
an annual bonus payment at the "Minimum", "Plan" or "Maximum" percentage payment
levels, as the case may be, in accordance with the terms and conditions of the
Employer's 1999 Executive Bonus Plan, or (ii) with respect to subsequent
calendar years, other annual incentive compensation as the Board of Directors of
the Employer determines in its sole discretion to pay the Employee, payable in
all cases on or around March 1 of the following year. The Employee will be
entitled to participate in the 1999 Executive Bonus Plan as a Level 1 Employee.
The Employee acknowledges that the Employer may terminate or modify its
Executive Bonus Plan and other incentive plans (excluding the Fixed Bonus
payable hereunder and the 1999 Executive Bonus Plan as in effect and applied to
the Employee on the date hereof) at any time, although no termination or
amendment affecting the Employee will be made effective unless it is
consistently applied to other employees participating in such plans. In the
event of any conflict or inconsistency between the terms of the 1999 Executive
Bonus Plan and the terms of Section 2(b) or 3 of this Agreement, the terms of
Sections 2(b) and 3 of this Agreement shall control.
(c) Restricted Stock and Stock Options. The Employee has
purchased shares of Class A Common Stock of the Employer pursuant the Securities
Purchase and Stockholders Agreement, dated as of the date hereof, between the
Employer and the Employee (the "1999 Purchase Agreement"), and has been granted
options to acquire shares of Class A Common Stock of the Employer, pursuant to
the Stock Option Agreement, dated as of September 26, 1998, between the Employer
and the Employee (the "1998 Stock Option Agreement") and the Stock Option
Agreement, dated as of the date hereof, between the Employer and the Employee
(the "1999 Stock Option Agreement" and collectively, with the 1998 Stock Option
Agreement, the "Stock Option Agreements"). The stock options granted to the
Employee under the 1998 Stock Option Agreement were granted pursuant to the
Employer's 1997 Stock Option Plan and are fully vested and exercisable as of the
date hereof. The stock options granted to the Employee under the 1999 Stock
Option Agreement were granted pursuant to the Employer's 1999 Stock Option Plan
and are subject to vesting in accordance with the terms of the 1999 Stock Option
Agreement. The 1999 Purchase Agreement and the Stock Option Agreements are
referred to in this Agreement as the "Other Agreements." The Employee shall be
entitled to participate in current or future equity incentive plans adopted by
the Employer on terms substantially similar to those offered to members of the
Employer's Executive Committee or other division Presidents of the Employer.
Such grants may be awarded from time to time in the sole discretion of the
Employer's Board of Directors. Except as otherwise provided in the 1999 Stock
Option Agreement and in this Agreement with respect to payments under the
Executive Bonus Plan and except as hereafter mutually agreed by the Employer and
the Employee, in the event of a Change in Control (as defined below), to the
extent not fully vested at such time, the Employee shall become fully vested in
all awards heretofore or hereafter granted to him under all incentive
compensation, deferred compensation, stock option, stock appreciation rights,
restricted stock, phantom stock or other similar plans maintained by the
Employer.
(d) Benefit Plans. During the Employment Period, the Employee
shall be entitled to receive benefits from the Employer consistent with those
currently in effect for the Employer's senior executives (including deferred
compensation plans, and company automobile and financial planning perquisites),
as those benefits are revised from time to time by the Board of Directors of the
Employer. Nothing contained herein is intended to require the Employer to
2
65
maintain any existing benefits or create any new benefits. The Employee will be
entitled to participate in the Employer's deferred compensation program as a
Level 2 Employee and to receive benefits thereunder in accordance with the terms
and conditions of such program. If the Employment Period is terminated by the
Employer or the Employee as set forth in Section 3(e)(ii) below, the Employee
and relevant family members shall be entitled to continue to participate in the
Employer's welfare benefit plans at the Employer's expense for a period of 18
months after the termination date. If the Employment Period is terminated by the
Employer or the Employee as set forth in Section 3(e)(iii) below, the Employee
and relevant family members shall be entitled to continue to participate in the
Employer's welfare benefit plans at the Employer's expense for a period of three
years after the termination date. For purposes of this Section 2(d), the
Employees' relevant family members shall be those members of the Employee's
immediate family covered by the applicable welfare benefit plan immediately
prior to the termination date.
(e) Vacation and Holidays. The Employee shall be entitled to a
minimum of four weeks' vacation each year and paid holidays in accordance with
the Employer's policy.
(f) No Mitigation. The Employee shall not be required to
mitigate the amount of any payments under this Agreement (whether by seeking new
employment or in any other manner), nor shall any such payment be reduced by any
earnings that the Employee may receive from any other source.
SECTION 3. Termination.
(a) Death or Disability. If the Employee dies during the
Employment Period, the Employment Period shall terminate as of the date of the
Employee's death. If the Employee becomes unable to perform the Services for 90
consecutive days due to a physical or mental disability, (i) the Employer may
elect to terminate the Employment Period at any time thereafter, and (ii) the
Employment Period shall terminate as of the date of such election. All
disabilities shall be certified by a physician acceptable to both the Employer
and the Employee, or, if the Employer and the Employee cannot agree upon a
physician within 15 days, by a physician selected by physicians designated by
each of the Employer and the Employee. The Employee's failure to submit to any
physical examination by such physician after such physician has given reasonable
notice of the time and place of such examination shall be conclusive evidence of
the Employee's inability to perform his duties hereunder.
(b) Cause. The Employer, at its option, may terminate the
Employment Period and all of the obligations of the Employer under this
Agreement for Cause. The Employer shall have "Cause" to terminate the Employee's
employment hereunder in the event of (i) the Employee's conviction of or plea of
guilty or nolo contendere to a felony, (ii) the Employee's gross negligence in
the performance of the Services, which is not corrected within 15 business days
after written notice, (iii) the Employee's knowingly dishonest act, or knowing
bad faith or willful misconduct in the performance of the Services, which is not
corrected within 15 business days after written notice, or (iv) the Employee's
material breach of any of his obligations under Sections 5 and 6, which is not
corrected within a reasonable period of time
3
66
(determined in light of the cure, if any, appropriate to such material breach,
but in no event less than 15 business days) after written notice. If the
Employee is charged with a felony, then during the period while such charge or
related indictment remains outstanding and until finally determined, the
Employer shall have the right to suspend the Employee without compensation.
(c) Without Cause. The Employer, at its option, may terminate
the Employment Period without Cause at any time.
(d) Termination by Employee for Good Reason. The Employee may
terminate this Agreement upon 60 days' prior written notice to the Employer for
Good Reason (as defined below) if the basis for such Good Reason is not cured
within a reasonable period of time (determined in light of the cure appropriate
to the basis of such Good Reason, but in no event less than 15 business days)
after the Employer receives written notice specifying the basis of such Good
Reason. "Good Reason" shall mean (i) the failure of the Employer to pay any
undisputed amount due under this Agreement or a reduction in Base Salary, Fixed
Bonus or benefits provided under this Agreement (other than immaterial
reductions in benefits or a reduction in benefits or salary applicable to all of
the Employer's bonus eligible employees) or a termination of, or reduction in
the percentage level of, the "plan" or "target" bonus opportunity applicable to
the Employee from the "Plan" percentage level under the 1999 Executive Bonus
Plan in effect on the date hereof (the "Effective Date Plan Percentage"), (ii) a
substantial diminution in the status, position and responsibilities of the
Employee or (iii) the Employer requiring the Employee to be based at any office
or location that requires a relocation or commute greater than 50 miles from the
office or location to which the Employee is currently assigned, provided,
however, that Good Reason shall not be deemed to exist due to the travel
requirements consistent with the performance of the Employee's services
hereunder.
(e) Payments in the Event of Termination. (i) Basic
Termination Payment. Upon the termination of the Employment Period at any time
for any reason, the Employer shall pay to the Employee or his estate the Base
Salary earned to the date of termination, and if such termination occurs after
December 31st of any year for which a bonus is payable pursuant to Section 2(b)
but before such bonus has been paid, the Employer shall pay to the Employee or
his estate the bonus due for the preceding year. Upon the termination of the
Employment Period at any time during calendar year 1999, 2000, or 2001 for any
reason other than the reasons set forth in Section 3(e)(ii) or 3(e)(iii) below,
the Employer shall pay to the Employee within five business days after such
termination, a lump-sum amount equal to the Fixed Bonus earned to the date of
termination. Any Fixed Bonus payable under this Section 3(e)(i) shall be
prorated if payable for periods of less than one year and shall be payable
regardless of whether the Employee is still in the employ of the Employer on the
date such bonuses are otherwise declared or payable.
(ii) Additional Involuntary Termination Payment. Upon the
termination of the Employment Period at any time by the Employer without Cause
or by the Employee for Good Reason, the Employer shall pay to the Employee
within five business days of such termination a lump-sum amount (in addition to
the amount payable under the first sentence of Section 3(e)(i)) equal to (x) the
sum of the Employee's annual Base Salary at the annual rate in effect on the
date
4
67
of termination and the Severance Bonus Amount, multiplied by (y) 1.5.
Notwithstanding the foregoing, the Employee shall be entitled to no payment
under this Section 3(e)(ii) if he is entitled to receive a payment under Section
3(e)(iii). "Severance Bonus Amount" means an amount equal to the Employee's Base
Salary at the annual rate in effect on the date of termination multiplied by a
percentage, which is the greater of (1) the Effective Date Plan Percentage and
(2) the "plan" or "target" bonus percentage then applicable under any executive
bonus plan or other incentive compensation program for purposes of determining
the Employee's annual bonus for the year of termination.
(iii) Additional Change in Control Payment. Upon the
termination of the Employment Period (x) by the Employer without Cause upon or
prior to a Change in Control, provided that the Employee reasonably demonstrates
that such termination occurred at the request of a third party participating in,
or otherwise in anticipation of or in connection with, such Change in Control,
or (y) by the Employee with Good Reason or by the Employer for any reason other
than for Cause within one year after a Change in Control, then the Employer
shall pay to the Employee within five business days of such termination a
lump-sum amount (in addition to the amount payable under the first sentence of
Section 3(e)(i)) equal to the sum of (A) the higher of (1) the Employee's annual
Base Salary at the date of such termination or (2) the Employee's annual Base
Salary at the time of the Change in Control, in each case multiplied by three,
and (B) the Severance Bonus Amount multiplied by three. If the Employment Period
is terminated by the Employee for any reason other than with Good Reason on or
after the first anniversary of a Change in Control but no later than the 30th
day after such first anniversary, the Employee shall be entitled to 50% of the
payments specified in this Section 3(e)(iii). If the Employment Period is
terminated by the Employee with Good Reason at any time on or after the first
anniversary of a Change in Control, the Employee shall be entitled to the
payment specified in Section 3(e)(ii).
(iv) Change in Control Defined. "Change in Control"
means the first to occur of any of the following: (A) the sale (including by
merger, consolidation or sale of stock of subsidiaries or any other method) of
all or substantially all of the assets of the Employer and its consolidated
subsidiaries (taken as a whole) to any person or entity not directly or
indirectly controlled by the holders of at least 50% of the Combined Voting
Power of the then outstanding shares of capital stock of the Employer (excluding
shares owned by employees of the Employer as of the date of determination) (B)
at any time prior to the consummation of an initial public offering of Class A
Common Stock of the Employer or other common stock of the Employer having the
voting power to elect directors, a transaction (except pursuant to such initial
public offering) resulting in the Principal Shareholders owning, collectively,
less than 50% of the Combined Voting Power of the then outstanding shares of
capital stock of the Employer (excluding shares owned by employees of the
Employer as of the date of determination), (C) at any time after the
consummation of an initial public offering of Class A Common Stock of the
Employer or other common stock of the Employer having the voting power to elect
directors, the acquisition (except pursuant to such initial public offering) by
any person or entity (other than the Principal Shareholders) not directly or
indirectly controlled by the Employer's stockholders of more than 30% of the
Combined Voting Power of the then outstanding shares of capital stock of the
Employer (excluding shares owned by employees of the Employer as of the date of
5
68
determination), (D) individuals serving as directors of the Employer on the
date hereof and who were nominated or selected to serve as directors by one or
more Principal Shareholders (together with any new directors whose election was
approved by a vote of (x) such individuals or directors whose election was
previously so approved or (y) Principal Shareholders holding a majority of the
aggregate voting power of the capital stock of the Employer held by all
Principal Shareholders) cease for any reason to constitute a majority of the
Board of Directors of the Employer, (E) the adoption of a plan relating to the
liquidation or dissolution of the Employer in connection with an equity
investment or sale or a business combination transaction or (F) any other event
or transaction that the Board of Directors of the Employer deems to be a Change
in Control. "Combined Voting Power" with respect to capital stock of the
Employer means the number of votes such stock is normally entitled (without
regard to the occurrence of any contingency) to vote in an election of directors
of the Employer. "Principal Shareholders" means (i) Charlesbank Equity Fund IV,
Limited Partnership and the investors in such fund, (ii) Charlesbank Equity Fund
IV G.P. Limited Partnership, (iii) Charlesbank Capital Partners, LLC (and any
other fund managed by Charlesbank Capital Partners, LLC), (iv) any investor
(other than The 1818 Mezzanine Fund, L.P.) whose investment in the Employer is
approved by the representative of management on the board of the Employer, (v)
any new investors in the Company designated as Principal Shareholders by
Charlesbank Capital Partners, LLC within one year of the initial investment by
Charlesbank Equity Fund IV, Limited Partnership, and (vi) any corporation,
partnership, limited liability company or other entity a majority of the capital
stock or other ownership interests of which are directly or indirectly owned by
any of the foregoing.
(v) Other Provisions Applicable to Payments. Any amounts
due under this Section 3 and not paid when due shall bear interest (compounded
annually) for the period from and including the date payable to but excluding
the date paid at a rate per annum equal to the sum of (x) four percent and (y)
the rate publicly announced by BankBoston, N.A. as its "prime rate."
(f) Termination of Obligations. In the event of termination of
the Employment Period in accordance with this Section 3, all obligations of the
Employer and the Employee under this Agreement shall terminate, except for any
amounts payable by the Employer as specifically set forth in Section 3(e);
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, the provisions of Section 5 and Section 6 shall survive such
termination in accordance with their respective terms and the relevant
provisions of Section 7 shall survive such termination indefinitely. In the
event of termination of the Employment Period in accordance with this Section 3,
the Employee agrees to cooperate with the Employer in order to ensure an orderly
transfer of the Employee's duties and responsibilities.
SECTION 4. Parachute Excise Tax Gross-Up
(a) If, as a result of any payment or benefit provided under
this Agreement or under any other plan, arrangement or other agreement with the
Employer or any entity affiliated with the Employer, either alone or together
with such other payments and benefits which the Employee receives or is then
entitled to received from the Employer, the Employee becomes subject to the
excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as
6
69
amended (the "Code"), (together with any interest and penalties thereon an
"Excise Tax"), the Employer shall pay the Employee an amount (the "Gross-Up
Payment") sufficient to place the Employee in the same after-tax financial
position that he would have been in if he had not incurred any tax liability
under Section 4999 of the Code. For purposes of determining whether the Employee
is subject to an Excise Tax and the amount of any Gross-Up Payment, (i) any
payments or benefits received by the Employee (whether pursuant to the terms
hereof or pursuant to any plan, arrangement or other agreement with the Employer
or any entity affiliated with the Employer) which payments ("Contingent
Payments") are deemed to be contingent on a change described in Section
280G(b)(2)(A)(i) of the Code shall be taken into account and (ii) the Employee
shall be deemed to pay federal, state and local taxes at the highest marginal
applicable rates of such taxes for the calendar year in which the Gross-Up
Payment is to be made, net of the maximum deduction from federal income taxes
which could be obtained from deduction of any state and local taxes deemed paid
by the Employee.
(b) The determination of whether the Employee is subject to
Excise Tax and the amounts of such Excise Tax and Gross-Up Payment, as well as
other calculations hereunder, shall be made at the expense of the Employer by
Xxxxxx Xxxxxxxx, which shall provide the Employee with prompt written notice
(the "Employer Notice") setting forth their determinations and calculations.
Within 30 days following the receipt by the Employee of the Employer Notice, the
Employee may notify the Employer in writing (the "Employee Notice") if the
Employee disagrees with such determinations or calculations, setting forth the
reasons for any such disagreement. If the Employer and the Employee do not
resolve such disagreement within 10 business days following receipt by the
Employer of the Employee Notice, such dispute will be resolved in accordance
with Section 7(f). The Employer shall pay all reasonable expense incurred by
either party in connection with the determinations, calculations, disagreements
or resolutions pursuant to this paragraph, including, but not limited to,
reasonable legal, consulting or other similar fees.
(c) The Employee shall notify the Employer in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Employer of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Employee is
informed in writing of such claim and shall apprise the Employer of the nature
of such claim and the date of which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30 day period
following the date on which the Employee gives such notice to the Employer (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Employer notifies the Employee in writing prior to
the expiration of such period that it desires to contest such claim, the
Employee shall:
(i) give the Employer any information reasonably
requested by the Employer relating to such claim;
(ii) take such action in connection with contesting
such claim as the Employer shall reasonably request in writing from time to
time, including, without limitation,
7
70
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Employer and reasonably satisfactory to the Employee;
(iii) cooperate with the Employer in good faith in
order to effectively contest such claim; and
(iv) permit the Employer to participate in any
proceedings relating to such claim;
provided, however, that the Employer shall bear and pay
directly all costs and expenses (including, but not limited to, additional
interest and penalties and related legal, consulting or other similar fees)
incurred in connection with such contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or other tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.
(d) The Employer shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego 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 Employee to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Employee 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 Employer shall
determine; provided, however, that if the Employer directs the Employee to pay
such claim and xxx for a refund, the Employer shall advance the amount of such
payment to the Employee on an interest-free basis, and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or other 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 if the Employee is required to extend the statute of
limitations to enable the Employer to contest such claim, the Employee may limit
this extension solely to such contested amount. The Employer's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee 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. In addition, no position may be taken nor
any final resolution be agreed to by the Employer without the Employee's consent
if such position or resolution could reasonably be expected to adversely affect
the Employee (including any other tax position of the Employee unrelated to the
matters covered hereby).
(e) As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Employer hereunder, it is possible that Gross-Up Payments which will not have
been made by the Employer should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Employer exhausts its remedies and the Employee thereafter is required to pay to
the Internal Revenue Service an additional amount in respect of any Excise Tax,
the Employer (in the same fashion as set forth in Section 4(b) shall determine
the amount of the Underpayment
8
71
that has occurred and any such Underpayment shall promptly be paid by the
Employer to or for the benefit of the Employee.
(f) If, after the receipt by Employee of an amount advanced by
the Employer in connection with the contest of an Excise Tax claim, the Employee
becomes entitled to receive any refund with respect to such claim, the Employee
shall promptly pay to the Employer the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Employee of an amount advanced by the Employer in connection with
an Excise Tax claim, a determination is made that Employee shall not be entitled
to any refund with respect to such claim and the Employer does not notify the
Employee in writing of its intent to contest the denial of such refund prior to
the expiration of 30 days after receiving notice of such determination, such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall be offset, to the extent thereof, by the amount of the
Gross-Up Payment.
SECTION 5. Confidentiality; Non-Disclosure.
(a) (i) Non-Disclosure Obligation. Except as provided in
this Section 5(a), the Employee shall not disclose any Confidential Information
of the Employer or any of its affiliates or subsidiaries to any person, firm,
corporation, association or other entity (other than the Employer, its
subsidiaries, officers or employees, attorneys, accountants, bank lenders,
agents, advisors or representatives thereof) for any reason or purpose
whatsoever (other than in the normal course of business on a need-to-know basis
after the Employer has received assurances that the confidential or proprietary
information shall be kept confidential), nor shall the Employee make use of any
such confidential or proprietary information for his own purposes or for the
benefit of any person, firm, corporation or other entity, except the Employer.
As used in this Section, the term "Confidential Information" means all
information which is or becomes known to the Employee and relates to matters
such as trade secrets, research and development activities, new or prospective
lines of business (including analysis and market research relating to potential
expansion of the Business), books and records, financial data, customer lists,
marketing techniques, financing, credit policies, vendor lists, suppliers,
purchasers, potential business combinations, distribution channels, services,
procedures, pricing information and private processes as they may exist from
time to time; provided that the term Confidential Information shall not include
information that is or becomes generally available to the public (other than as
a result of a disclosure in violation of this Agreement by the Employee or by a
person who received such information from the Employee in violation of this
Agreement).
(ii) Compulsory Disclosures. If the Employee is
requested or (in the opinion of his counsel) required by law or judicial order
to disclose any Confidential Information, the Employee shall provide the
Employer with prompt notice of any such request or requirement so that the
Employer may seek an appropriate protective order or waiver of the Employee's
compliance with the provisions of this Section 5(a). The Employee will not
oppose any reasonable action by, and will cooperate with, the Employer to obtain
an appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information. If, failing the entry
of a protective order or the receipt of a waiver
9
72
hereunder, the Employee is, in the opinion of his counsel, compelled by law to
disclose a portion of the Confidential Information, the Employee may disclose to
the relevant tribunal without liability hereunder only that portion of the
Confidential Information which counsel advises the Employee he is legally
required to disclose, and each of the parties hereto agrees to exercise such
party's best efforts to obtain assurance that confidential treatment will be
accorded such Confidential Information. During the Employment Period, and for
matters arising from events or circumstances occurring during the Employment
Period, the Employer will provide for the defense of matters arising under this
provision.
(b) Assignment of Inventions. The Employee agrees that he will
promptly and fully disclose to the Employer all inventions, ideas, software,
trade secrets or know-how (whether patentable or copyrightable or not) made or
conceived by the Employee (either solely or jointly with others) during the
Employment Period and for a period of six months thereafter, all tangible work
product derived therefrom (collectively, the "Ideas"). The Employee agrees that
all such Ideas shall be and remain the sole and exclusive property of the
Employer. On the request of the Employer, the Employee shall, during and after
the term of this Agreement, without charge to the Employer but at the expense of
the Employer, assist the Employer in any reasonable way to vest in the Employer,
title to all such Ideas, and to obtain any related patents, trademarks or
copyrights in all countries throughout the world. In this regard, the parties
shall execute and deliver any and all documents that the Employer may reasonably
request.
SECTION 6. Non-Competition; Non-Solicitation. The Employee
acknowledges and recognizes his possession of Confidential Information and
acknowledges the highly competitive nature of the business of the Employer and
its affiliates and subsidiaries and accordingly agrees that, in consideration of
the premises contained herein, he will not, during the Employment Period and for
one year after the date of termination of the Employment Period, for any reason
whatsoever, either individually or as an officer, director, stockholder, member,
partner, agent, consultant or principal of another business firm, (x) directly
or indirectly engage in North America, or any country in which the Employer or
any of its affiliates or subsidiaries actively engages in business during the
Employment Period, in any competitive business, (y) assist others in engaging in
any competitive business in the manner described in clause (x), or (z) induce
any employee of the Employer or any of its affiliates or subsidiaries to
terminate such person's employment with the Employer or such affiliate or
subsidiary or hire any employee of the Employer or any of its affiliates or
subsidiaries to work with any businesses affiliated with the Employee. The
Employee's ownership of not more than 1% of the outstanding capital stock of any
public corporation shall not in itself be deemed to be engaging in any
competitive business for purposes of this Section 6.
SECTION 7. General Provisions.
(a) Enforceability. It is the desire and intent of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, although the Employee
and the Employer consider the restrictions contained in this Agreement to be
reasonable for the purpose of preserving the Employer's goodwill and proprietary
rights, if
10
73
any particular provision of this Agreement shall be adjudicated to be invalid or
unenforceable, such provision shall be deemed amended to delete therefrom the
portion thus adjudicated to be invalid or unenforceable, such deletion to apply
only with respect to the operation of such provision in the particular
jurisdiction in which such adjudication is made. It is expressly understood and
agreed that although the Employer and the Employee consider the restrictions
contained in Section 6 to be reasonable, if a final determination is made by a
court of competent jurisdiction that the time or territory or any other
restriction contained in this Agreement is unenforceable against the Employee,
the provisions of this Agreement shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable.
(b) Remedies. The parties acknowledge that the Employer's
damages at law would be an inadequate remedy for the breach by the Employee of
any provision of Section 5 or Section 6, and agree in the event of such breach
that the Employer may obtain temporary and permanent injunctive relief
restraining the Employee from such breach, and, to the extent permissible under
the applicable statutes and rules of procedure, a temporary injunction may be
granted immediately upon the commencement of any such suit. Nothing contained
herein shall be construed as prohibiting the Employer from pursuing any other
remedies available at law or equity for such breach or threatened breach of
Section 5 or Section 6 or for any breach or threatened breach of any other
provision of this Agreement.
(c) Withholding. The Employer shall withhold such amounts from
any compensation or other benefits payable to the Employee under this Agreement
on account of payroll and other taxes as may be required by applicable law or
regulation of any governmental authority.
(d) Employer's Successors. The Employer shall require any
successor or successors (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Employer's business and/or assets, by an agreement in substance and
form satisfactory to the Employee, to assume this Agreement and to agree
expressly to perform this Agreement in the same manner and to the same extent as
the Employer would be required to perform it in the absence of a succession. The
Employer's failure to obtain such agreement prior to the effectiveness of a
succession shall be a breach of this Agreement and shall entitle the Employee to
all of the compensation and benefits to which he would have been entitled
hereunder if the Employer had involuntarily terminated his employment without
Cause immediately after such succession become effective. For all purposes under
this Agreement, the term "Employer" shall include any successor or successors to
the Employer's business and/or assets which executes and delivers the assumption
agreement described in the subsection or which becomes bound by this Agreement
by operation of law.
(e) Employee's Successors. This Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees.
11
74
(f) Indemnity. The Employer hereby agrees to indemnify and
hold the Employee harmless consistent with the Employer's policy against any and
all liabilities, expenses (including attorneys' fees and costs), claims,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any proceeding arising out of the Employee's
employment with the Employer (whether civil, criminal, administrative or
investigative, other than proceedings by or in the right of the Employer), if
with respect to the actions at issue in the proceeding the Employee acted in
good faith and in a manner Employee reasonably believed to be in, or not opposed
to, the best interests of the Employer, and (with respect to any criminal
action) Employee had no reason to believe Employee's conduct was unlawful. Said
indemnification arrangement shall (i) survive the termination of this Agreement,
(ii) apply to any and all qualifying acts of the Employee which have taken place
during any period in which he was employed by the Employer, irrespective of the
date of this Agreement or the term hereof, including, but not limited to, any
and all qualifying acts as an officer and/or director of any affiliate while the
Employee is employed by the Employer and (iii) be subject to any limitations
imposed from time to time under applicable law.
(g) Dispute Resolution; Attorney's Fees. The Employer and the
Employee agree that any dispute arising as to the parties' rights and
obligations hereunder shall be resolved by binding arbitration before an
arbitrator to be determined by mutually agreeable means. In such event, each of
the Employer and the Employee shall have the right to full discovery. The
Employer shall bear all costs of the arbitrator in any such proceeding, and if
the arbitration is definitively decided in the Employee's favor, the Employee
shall have the right, in addition to any other relief granted by such
arbitrator, to recover reasonable attorneys' fees; provided, however, that the
Employer shall have the right, in any dispute other than a dispute relating to
the occurrence of a Change in Control or the payment of an amount under Section
3(e)(iii), in addition to any other relief granted by such arbitrator, to
recover reasonable attorneys' fees in the event that a claim brought by the
Employee is definitively decided in the Employer's favor (with the amount of
such fees being limited to those expended defending the claim or claims decided
in favor of the Employer). Any judgment by such arbitrator may be entered into
any court with jurisdiction over the dispute.
(h) Acknowledgment. The Employee acknowledges that he has been
advised by the Employer to seek the advice of independent counsel prior to
reaching agreement with the Employer on any of the terms of this Agreement. The
parties agree that no rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting the Agreement.
(i) Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification, amendment, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
(i) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by registered
12
75
or certified mail, postage prepaid, return receipt requested, sent by overnight
courier, or sent by facsimile (with confirmation of receipt), addressed as
follows:
If to the Employer:
Xxxxxxx Tire Group, Inc.
0000 Xxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
and:
Charlesbank Capital Partners, LLC
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx and Xxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to:
Skadden, Arps, Slate Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
If to the Employee:
P. Xxxxxxx Xxxxxxx
0000 Xxxx Xxxxxx Xxxxx
Xxxxxxxx Xxxxxxx, XX 00000
or at such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. If such notice
or communication is mailed, such communication shall be deemed to have been
given on the fifth business day following the date on which such communication
is posted.
13
76
(j) Descriptive Headings; Certain Interpretations. Descriptive
headings are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. Except as otherwise expressly
provided in this Agreement: (i) any reference in this Agreement to any
agreement, document or instrument includes all permitted supplements and
amendments; (ii) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (iii) the words
"include," "included" and "including" are not limiting; and (iv) a reference to
a person or entity includes its permitted successors and assigns.
(k) Counterparts; Entire Agreement. This Agreement may be
executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all such counterparts together shall
constitute one agreement. This Agreement and the Other Agreements contain the
entire agreement among the parties with respect to the transactions contemplated
by this Agreement and the Other Agreements and supersede all other or prior
written or oral agreements or understandings among the parties with respect to
the Employee's employment by the Employer. The Existing Employment Agreement is
expressly superseded and hereby amended and restated in its entirety by this
Agreement.
(L) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA.
(M) CONSENT TO JURISDICTION. EACH OF THE EMPLOYER AND THE
EMPLOYEE HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF
NORTH CAROLINA SITTING IN MECKLENBURG COUNTY AND ALL XXXXX XXXXXX XX XXX XXXXX
XX XXXXX XXXXXXXX SITTING IN MECKLENBURG COUNTY FOR PURPOSES OF ALL LEGAL
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY, AND THE EMPLOYEE AGREES NOT TO COMMENCE ANY LEGAL
PROCEEDING RELATING THERETO EXCEPT IN SUCH COURTS. EACH OF THE EMPLOYER AND THE
EMPLOYEE IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH HE MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH PROCEEDING BROUGHT IN SUCH COURTS AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH COURTS HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE
PARTIES HERETO HEREBY CONSENTS TO SERVICE OF PROCESS BY NOTICE IN THE MANNER
SPECIFIED IN SECTION 7(I) AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE TO SERVICE OF
PROCESS IN SUCH MANNER.
14
77
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
THE X.X. XXXXXXX COMPANY, INC.
By: /s/ Xxxxxx X. Roof
------------------------------------------
Xxxxxx X. Roof
President and Chief Executive Officer
/s/ P. Xxxxxxx Xxxxxxx
---------------------------------------------
P. Xxxxxxx Xxxxxxx
15
78
EXECUTIVE SEVERANCE AGREEMENT, dated as of May 24, 1999 (the
"Agreement"), between The X.X. Xxxxxxx Company, Inc., a North
Carolina corporation (the "Employer"), and J.
Xxxxx XxXxxxxx, Xx. (the "Employee").
In consideration of (i) the Employee's agreement to supply
services under this Agreement and (ii) the mutual agreements set forth below,
the sufficiency of which is hereby acknowledged, the Employer and the Employee
agree as follows:
SECTION 1. Employment Relationship.
(a) Employment by Employer. The Employer hereby employs the
Employee, and the Employee hereby agrees to be employed by the Employer, as Vice
President - Corporate Controller of the Employer, and the Employee will devote
all of his business time, attention, knowledge and skills and use his best
efforts during the Employment Period to perform services and duties consistent
with his title and position (the "Services") for the Employer in accordance with
directions given to the Employee from time to time by the Board of Directors of
the Employer.
(b) Employment Period. The period commencing on the date of
this Agreement and ending on the date on which this Agreement is terminated is
referred to herein as the "Employment Period." During the Employment Period, the
Employee will be an at-will employee of the Employer. The Employment Period
shall be freely terminable for any reason by either party at any time.
SECTION 2. Compensation and Benefits. During the Employment
Period:
(a) Base Compensation. The Employer shall pay to the Employee
a base salary of $100,000 per annum (the "Base Salary"), payable in accordance
with the Employer's payroll practices. The Base Salary shall be increased (but
not decreased) subject to additional discretionary increases (but not decreases)
as determined periodically by the Board of Directors.
(b) Additional Compensation. As additional compensation for
the Services, the Employer shall pay to the Employee the following amount: (x)
with respect to calendar year 1999, an annual bonus payment at the "Minimum,"
"Plan" or "Maximum" percentage payment levels, as the case may be, in accordance
with the terms of the Employer's 1999 Executive Bonus Plan and (y) with respect
to subsequent calendar years, other annual incentive compensation as the Board
of Directors of the Employer determines in its sole discretion to pay the
Employee, payable in all cases on or around March 1 of the following year. The
Employee will be entitled to participate in the 1999 Executive Bonus Plan as a
Level 2 Employee. The Employee acknowledges that the Employer may terminate or
modify its Executive Bonus Plan or other incentive plans (excluding the 1999
Executive Bonus Plan as in effect and applied to the
79
Employee on the date hereof) at any time, although no termination or amendment
affecting the Employee will be made effective unless it is consistently applied
to other employees participating in such plans. In the event of any conflict or
inconsistency between the terms of the 1999 Executive Bonus Plan and the terms
of Section 2(b) or 3 of this Agreement, the terms of Sections 2(b) and 3 of this
Agreement shall control.
(c) Restricted Stock and Stock Options. The Employee has
purchased shares of Class A Common Stock of the Employer pursuant to the
Securities Purchase and Stockholders Agreement, dated as of May 28, 1997,
between the Employer and the Employee (the "1997 Purchase Agreement") and has
been granted options to acquire shares of Class A Common Stock of the Employer,
pursuant to the Stock Option Agreement, dated as of May 28, 1997, between the
Employer and the Employee (the "1997 Stock Option Agreement"). The stock options
granted to the Employee under the 1997 Stock Option Agreement were granted
pursuant to the Employer's 1997 Stock Option Plan and are fully vested and
exercisable as of the date hereof. The 1997 Purchase Agreement and the 1997
Stock Option Agreement are referred to in this Agreement as the "Other
Agreements." Except as otherwise provided in this Agreement with respect to
payments under the Executive Bonus Plan and except as hereafter mutually agreed
by the Employer and the Employee, in the event of a Change in Control (as
defined below), to the extent not fully vested at such time, the Employee shall
become fully vested in all awards heretofore or hereafter granted to him under
all incentive compensation, deferred compensation, stock option, stock
appreciation rights, restricted stock, phantom stock or other similar plans
maintained by the Employer.
(d) Benefit Plans. During the Employment Period, the Employee
shall be entitled to receive benefits from the Employer consistent with those
currently in effect for the Employer's senior executives (including deferred
compensation plans, and company automobile and financial planning perquisites),
as those benefits are revised from time to time by the Board of Directors of the
Employer. Nothing contained herein is intended to require the Employer to
maintain any existing benefits or create any new benefits. The Employee will be
entitled to participate in the Employer's deferred compensation program as a
Level 3 Employee and to receive benefits thereunder in accordance with the terms
and conditions of such program. If the Employment Period is terminated by the
Employer or the Employee as set forth in Section 3(e)(ii) below, the Employee
and relevant family members shall be entitled to continue to participate in the
Employer's welfare benefit plans at the Employer's expense for a period of one
year after the termination date. If the Employment Period is terminated by the
Employer or the Employee as set forth in Section 3(e)(iii) below, the Employee
and relevant family members shall be entitled to continue to participate in the
Employer's welfare benefit plans at the Employer's expense for a period of two
years after the termination date. For purposes of this Section 2(d), the
Employees' relevant family members shall be those members of the Employee's
immediate family covered by the applicable welfare benefit plan immediately
prior to the termination date.
(e) Vacation and Holidays. The Employee shall be entitled to a
minimum of four weeks' vacation each year and paid holidays in accordance with
the Employer's policy.
2
80
(f) No Mitigation. The Employee shall not be required to
mitigate the amount of any payments under this Agreement (whether by seeking new
employment or in any other manner), nor shall any such payment be reduced by any
earnings that the Employee may receive from any other source.
SECTION 3. Termination.
(a) Death or Disability. If the Employee dies during the
Employment Period, the Employment Period shall terminate as of the date of the
Employee's death. If the Employee becomes unable to perform the Services for 90
consecutive days due to a physical or mental disability, (i) the Employer may
elect to terminate the Employment Period at any time thereafter, and (ii) the
Employment Period shall terminate as of the date of such election. All
disabilities shall be certified by a physician acceptable to both the Employer
and the Employee, or, if the Employer and the Employee cannot agree upon a
physician within 15 days, by a physician selected by physicians designated by
each of the Employer and the Employee. The Employee's failure to submit to any
physical examination by such physician after such physician has given reasonable
notice of the time and place of such examination shall be conclusive evidence of
the Employee's inability to perform his duties hereunder.
(b) Cause. The Employer, at its option, may terminate the
Employment Period and all of the obligations of the Employer under this
Agreement for Cause. The Employer shall have "Cause" to terminate the Employee's
employment hereunder in the event of (i) the Employee's conviction of or plea of
guilty or nolo contendere to a felony, (ii) the Employee's gross negligence in
the performance of the Services, which is not corrected within 15 business days
after written notice, (iii) the Employee's knowingly dishonest act, or knowing
bad faith or willful misconduct in the performance of the Services, which is not
corrected within 15 business days after written notice, or (iv) the Employee's
material breach of any of his obligations under Sections 5 and 6, which is not
corrected within a reasonable period of time (determined in light of the cure,
if any, appropriate to such material breach, but in no event less than 15
business days) after written notice. If the Employee is charged with a felony,
then during the period while such charge or related indictment remains
outstanding and until finally determined, the Employer shall have the right to
suspend the Employee without compensation.
(c) Without Cause. The Employer, at its option, may terminate
the Employment Period without Cause at any time.
(d) Termination by Employee for Good Reason. The Employee may
terminate this Agreement upon 60 days' prior written notice to the Employer for
Good Reason (as defined below) if the basis for such Good Reason is not cured
within a reasonable period of time (determined in light of the cure appropriate
to the basis of such Good Reason, but in no event less than 15 business days)
after the Employer receives written notice specifying the basis of such Good
Reason. "Good Reason" shall mean (i) the failure of the Employer to pay any
undisputed amount due under this Agreement or a reduction in Base Salary or
benefits provided under this Agreement (other than immaterial reductions in
benefits or a reduction in benefits or salary applicable to all of the
Employer's bonus eligible employees) or a termination of, or
3
81
reduction in the percentage level of, the "plan" or "target" bonus opportunity
applicable to the Employee from the "Plan" percentage level under the 1999
Executive Bonus Plan in effect on the date hereof (the "Effective Date Plan
Percentage"), (ii) a substantial diminution in the status, position and
responsibilities of the Employee or (iii) the Employer requiring the Employee to
be based at any office or location that requires a relocation or commute greater
than 50 miles from the office or location to which the Employee is currently
assigned, provided, however, that Good Reason shall not be deemed to exist due
to the travel requirements consistent with the performance of the Employee's
services hereunder.
(e) Payments in the Event of Termination. (i) Basic
Termination Payment. Upon the termination of the Employment Period at any time
for any reason, the Employer shall pay to the Employee or his estate the Base
Salary earned to the date of termination, and if such termination occurs after
December 31st of any year for which a bonus is payable pursuant to Section 2(b)
but before such bonus has been paid, the Employer shall pay to the Employee or
his estate the bonus due for the preceding year.
(ii) Additional Involuntary Termination Payment. Upon the
termination of the Employment Period at any time by the Employer without Cause
or by the Employee for Good Reason, the Employer shall pay to the Employee
within five business days of such termination a lump-sum amount (in addition to
the amount payable under the first sentence of Section 3(e)(i)) equal to (x) the
sum of the Employee's annual Base Salary at the annual rate in effect on the
date of termination and the Severance Bonus Amount, multiplied by (y) one.
Notwithstanding the foregoing, the Employee shall be entitled to no payment
under this Section 3(e)(ii) if he is entitled to receive a payment under Section
3(e)(iii). "Severance Bonus Amount" means an amount equal to the Employee's Base
Salary at the annual rate in effect on the date of termination multiplied by a
percentage, which is the greater of (1) the Effective Date Plan Percentage and
(2) the "plan" or "target" bonus percentage then applicable under any executive
bonus plan or other incentive compensation program for purposes of determining
the Employee's annual bonus for the year of termination.
(iii) Additional Change in Control Payment. Upon the
termination of the Employment Period (x) by the Employer without Cause upon or
prior to a Change in Control, provided that the Employee reasonably demonstrates
that such termination occurred at the request of a third party participating in,
or otherwise in anticipation of or in connection with, such Change in Control,
or (y) by the Employee with Good Reason or by the Employer for any reason other
than for Cause within one year after a Change in Control, then the Employer
shall pay to the Employee within five business days of such termination a
lump-sum amount (in addition to the amount payable under the first sentence of
Section 3(e)(i)) equal to the sum of (A) the higher of (1) the Employee's annual
Base Salary at the date of such termination or (2) the Employee's annual Base
Salary at the time of the Change in Control, in each case multiplied by two, and
(B) the Severance Bonus Amount multiplied by two. If the Employment Period is
terminated by the Employee for any reason other than with Good Reason on or
after the first anniversary of a Change in Control but no later than the 30th
day after such first anniversary, the Employee shall be entitled to 50% of the
payments specified in this Section 3(e)(iii). If the Employment Period is
terminated by the Employee with Good Reason at any time on or after the
4
82
first anniversary of a Change in Control, the Employee shall be entitled to the
payment specified in Section 3(e)(ii).
(iv) Change in Control Defined. "Change in Control" means
the first to occur of any of the following: (A) the sale (including by merger,
consolidation or sale of stock of subsidiaries or any other method) of all or
substantially all of the assets of the Employer and its consolidated
subsidiaries (taken as a whole) to any person or entity not directly or
indirectly controlled by the holders of at least 50% of the Combined Voting
Power of the then outstanding shares of capital stock of the Employer (excluding
shares owned by employees of the Employer as of the date of determination) (B)
at any time prior to the consummation of an initial public offering of Class A
Common Stock of the Employer or other common stock of the Employer having the
voting power to elect directors, a transaction (except pursuant to such initial
public offering) resulting in the Principal Shareholders owning, collectively,
less than 50% of the Combined Voting Power of the then outstanding shares of
capital stock of the Employer (excluding shares owned by employees of the
Employer as of the date of determination), (C) at any time after the
consummation of an initial public offering of Class A Common Stock of the
Employer or other common stock of the Employer having the voting power to elect
directors, the acquisition (except pursuant to such initial public offering) by
any person or entity (other than the Principal Shareholders) not directly or
indirectly controlled by the Employer's stockholders of more than 30% of the
Combined Voting Power of the then outstanding shares of capital stock of the
Employer (excluding shares owned by employees of the Employer as of the date of
determination), (D) individuals serving as directors of the Employer on the date
hereof and who were nominated or selected to serve as directors by one or more
Principal Shareholders (together with any new directors whose election was
approved by a vote of (x) such individuals or directors whose election was
previously so approved or (y) Principal Shareholders holding a majority of the
aggregate voting power of the capital stock of the Employer held by all
Principal Shareholders) cease for any reason to constitute a majority of the
Board of Directors of the Employer, (E) the adoption of a plan relating to the
liquidation or dissolution of the Employer in connection with an equity
investment or sale or a business combination transaction or (F) any other event
or transaction that the Board of Directors of the Employer deems to be a Change
in Control. "Combined Voting Power" with respect to capital stock of the
Employer means the number of votes such stock is normally entitled (without
regard to the occurrence of any contingency) to vote in an election of directors
of the Employer. "Principal Shareholders" means (i) Charlesbank Equity Fund IV,
Limited Partnership and the investors in such fund, (ii) Charlesbank Equity Fund
IV G.P. Limited Partnership, (iii) Charlesbank Capital Partners, LLC (and any
other fund managed by Charlesbank Capital Partners, LLC), (iv) any investor
(other than The 1818 Mezzanine Fund, L.P.) whose investment in the Employer is
approved by the representative of management on the board of the Employer, (v)
any new investors in the Company designated as Principal Shareholders by
Charlesbank Capital Partners, LLC within one year of the initial investment by
Charlesbank Equity Fund IV, Limited Partnership, and (vi) any corporation,
partnership, limited liability company or other entity a majority of the capital
stock or other ownership interests of which are directly or indirectly owned by
any of the foregoing.
(v) Other Provisions Applicable to Payments. Any amounts
due under this Section 3 and not paid when due shall bear interest (compounded
annually) for the period
5
83
from and including the date payable to but excluding the date paid at a rate per
annum equal to the sum of (x) four percent and (y) the rate publicly announced
by BankBoston, N.A. as its "prime rate."
(f) Termination of Obligations. In the event of termination of
the Employment Period in accordance with this Section 3, all obligations of the
Employer and the Employee under this Agreement shall terminate, except for any
amounts payable by the Employer as specifically set forth in Section 3(e);
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, the provisions of Section 5 and Section 6 shall survive such
termination in accordance with their respective terms and the relevant
provisions of Section 7 shall survive such termination indefinitely. In the
event of termination of the Employment Period in accordance with this Section 3,
the Employee agrees to cooperate with the Employer in order to ensure an orderly
transfer of the Employee's duties and responsibilities.
SECTION 4. Parachute Excise Tax Gross-Up
(a) If, as a result of any payment or benefit provided under
this Agreement or under any other plan, arrangement or other agreement with the
Employer or any entity affiliated with the Employer, either alone or together
with such other payments and benefits which the Employee receives or is then
entitled to received from the Employer, the Employee becomes subject to the
excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), (together with any interest and penalties thereon an
"Excise Tax"), the Employer shall pay the Employee an amount (the "Gross-Up
Payment") sufficient to place the Employee in the same after-tax financial
position that he would have been in if he had not incurred any tax liability
under Section 4999 of the Code. For purposes of determining whether the Employee
is subject to an Excise Tax and the amount of any Gross-Up Payment, (i) any
payments or benefits received by the Employee (whether pursuant to the terms
hereof or pursuant to any plan, arrangement or other agreement with the Employer
or any entity affiliated with the Employer) which payments ("Contingent
Payments") are deemed to be contingent on a change described in Section
280G(b)(2)(A)(i) of the Code shall be taken into account and (ii) the Employee
shall be deemed to pay federal, state and local taxes at the highest marginal
applicable rates of such taxes for the calendar year in which the Gross-Up
Payment is to be made, net of the maximum deduction from federal income taxes
which could be obtained from deduction of any state and local taxes deemed paid
by the Employee.
(b) The determination of whether the Employee is subject to
Excise Tax and the amounts of such Excise Tax and Gross-Up Payment, as well as
other calculations hereunder, shall be made at the expense of the Employer by
Xxxxxx Xxxxxxxx, which shall provide the Employee with prompt written notice
(the "Employer Notice") setting forth their determinations and calculations.
Within 30 days following the receipt by the Employee of the Employer Notice, the
Employee may notify the Employer in writing (the "Employee Notice") if the
Employee disagrees with such determinations or calculations, setting forth the
reasons for any such disagreement. If the Employer and the Employee do not
resolve such disagreement within 10 business days following receipt by the
Employer of the Employee Notice, such dispute will be resolved in accordance
with Section 7(f). The Employer shall pay all reasonable expense
6
84
incurred by either party in connection with the determinations, calculations,
disagreements or resolutions pursuant to this paragraph, including, but not
limited to, reasonable legal, consulting or other similar fees.
(c) The Employee shall notify the Employer in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Employer of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Employee is
informed in writing of such claim and shall apprise the Employer of the nature
of such claim and the date of which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30 day period
following the date on which the Employee gives such notice to the Employer (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Employer notifies the Employee in writing prior to
the expiration of such period that it desires to contest such claim, the
Employee shall:
(i) give the Employer any information reasonably
requested by the Employer relating to such claim;
(ii) take such action in connection with contesting
such claim as the Employer shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Employer and reasonably
satisfactory to the Employee;
(iii) cooperate with the Employer in good faith in
order to effectively contest such claim; and
(iv) permit the Employer to participate in any
proceedings relating to such claim;
provided, however, that the Employer shall bear and pay
directly all costs and expenses (including, but not limited to, additional
interest and penalties and related legal, consulting or other similar fees)
incurred in connection with such contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or other tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.
(d) The Employer shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego 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 Employee to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Employee 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 Employer shall
determine; provided, however, that if the Employer directs the Employee to pay
such claim and xxx for a refund, the Employer shall advance the amount of such
payment to the Employee on an interest-free basis, and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or other
7
85
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 if the Employee is required to extend the
statute of limitations to enable the Employer to contest such claim, the
Employee may limit this extension solely to such contested amount. The
Employer's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Employee 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. In addition, no position
may be taken nor any final resolution be agreed to by the Employer without the
Employee's consent if such position or resolution could reasonably be expected
to adversely affect the Employee (including any other tax position of the
Employee unrelated to the matters covered hereby).
(e) As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Employer hereunder, it is possible that Gross-Up Payments which will not have
been made by the Employer should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Employer exhausts its remedies and the Employee thereafter is required to pay to
the Internal Revenue Service an additional amount in respect of any Excise Tax,
the Employer (in the same fashion as set forth in Section 4(b) shall determine
the amount of the Underpayment that has occurred and any such Underpayment shall
promptly be paid by the Employer to or for the benefit of the Employee.
(f) If, after the receipt by Employee of an amount advanced by
the Employer in connection with the contest of an Excise Tax claim, the Employee
becomes entitled to receive any refund with respect to such claim, the Employee
shall promptly pay to the Employer the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Employee of an amount advanced by the Employer in connection with
an Excise Tax claim, a determination is made that Employee shall not be entitled
to any refund with respect to such claim and the Employer does not notify the
Employee in writing of its intent to contest the denial of such refund prior to
the expiration of 30 days after receiving notice of such determination, such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall be offset, to the extent thereof, by the amount of the
Gross-Up Payment.
SECTION 5. Confidentiality; Non-Disclosure.
(a) (i) Non-Disclosure Obligation. Except as provided in this
Section 5(a), the Employee shall not disclose any Confidential Information of
the Employer or any of its affiliates or subsidiaries to any person, firm,
corporation, association or other entity (other than the Employer, its
subsidiaries, officers or employees, attorneys, accountants, bank lenders,
agents, advisors or representatives thereof) for any reason or purpose
whatsoever (other than in the normal course of business on a need-to-know basis
after the Employer has received assurances that the confidential or proprietary
information shall be kept confidential), nor shall the Employee make use of any
such confidential or proprietary information for his own purposes or for the
benefit of any person, firm, corporation or other entity, except the Employer.
As used
8
86
in this Section, the term "Confidential Information" means all information which
is or becomes known to the Employee and relates to matters such as trade
secrets, research and development activities, new or prospective lines of
business (including analysis and market research relating to potential expansion
of the Business), books and records, financial data, customer lists, marketing
techniques, financing, credit policies, vendor lists, suppliers, purchasers,
potential business combinations, distribution channels, services, procedures,
pricing information and private processes as they may exist from time to time;
provided that the term Confidential Information shall not include information
that is or becomes generally available to the public (other than as a result of
a disclosure in violation of this Agreement by the Employee or by a person who
received such information from the Employee in violation of this Agreement).
(ii) Compulsory Disclosures. If the Employee is
requested or (in the opinion of his counsel) required by law or judicial order
to disclose any Confidential Information, the Employee shall provide the
Employer with prompt notice of any such request or requirement so that the
Employer may seek an appropriate protective order or waiver of the Employee's
compliance with the provisions of this Section 5(a). The Employee will not
oppose any reasonable action by, and will cooperate with, the Employer to obtain
an appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information. If, failing the entry
of a protective order or the receipt of a waiver hereunder, the Employee is, in
the opinion of his counsel, compelled by law to disclose a portion of the
Confidential Information, the Employee may disclose to the relevant tribunal
without liability hereunder only that portion of the Confidential Information
which counsel advises the Employee he is legally required to disclose, and each
of the parties hereto agrees to exercise such party's best efforts to obtain
assurance that confidential treatment will be accorded such Confidential
Information. During the Employment Period, and for matters arising from events
or circumstances occurring during the Employment Period, the Employer will
provide for the defense of matters arising under this provision.
(b) Assignment of Inventions. The Employee agrees that he will
promptly and fully disclose to the Employer all inventions, ideas, software,
trade secrets or know-how (whether patentable or copyrightable or not) made or
conceived by the Employee (either solely or jointly with others) during the
Employment Period and for a period of six months thereafter, all tangible work
product derived therefrom (collectively, the "Ideas"). The Employee agrees that
all such Ideas shall be and remain the sole and exclusive property of the
Employer. On the request of the Employer, the Employee shall, during and after
the term of this Agreement, without charge to the Employer but at the expense of
the Employer, assist the Employer in any reasonable way to vest in the Employer,
title to all such Ideas, and to obtain any related patents, trademarks or
copyrights in all countries throughout the world. In this regard, the parties
shall execute and deliver any and all documents that the Employer may reasonably
request.
SECTION 6. Non-Competition; Non-Solicitation. The Employee
acknowledges and recognizes his possession of Confidential Information and
acknowledges the highly competitive nature of the business of the Employer and
its affiliates and subsidiaries and accordingly agrees that, in consideration of
the premises contained herein, he will not, during the Employment Period and for
one year after the date of termination of the Employment Period, for
9
87
any reason whatsoever, either individually or as an officer, director,
stockholder, member, partner, agent, consultant or principal of another business
firm, (x) directly or indirectly engage in North America, or any country in
which the Employer or any of its affiliates or subsidiaries actively engages in
business during the Employment Period, in any competitive business, (y) assist
others in engaging in any competitive business in the manner described in clause
(x), or (z) induce any employee of the Employer or any of its affiliates or
subsidiaries to terminate such person's employment with the Employer or such
affiliate or subsidiary or hire any employee of the Employer or any of its
affiliates or subsidiaries to work with any businesses affiliated with the
Employee. The Employee's ownership of not more than 1% of the outstanding
capital stock of any public corporation shall not in itself be deemed to be
engaging in any competitive business for purposes of this Section 6.
SECTION 7. General Provisions.
(a) Enforceability. It is the desire and intent of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, although the Employee
and the Employer consider the restrictions contained in this Agreement to be
reasonable for the purpose of preserving the Employer's goodwill and proprietary
rights, if any particular provision of this Agreement shall be adjudicated to be
invalid or unenforceable, such provision shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable, such
deletion to apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication is made. It is expressly
understood and agreed that although the Employer and the Employee consider the
restrictions contained in Section 6 to be reasonable, if a final determination
is made by a court of competent jurisdiction that the time or territory or any
other restriction contained in this Agreement is unenforceable against the
Employee, the provisions of this Agreement shall be deemed amended to apply as
to such maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable.
(b) Remedies. The parties acknowledge that the Employer's
damages at law would be an inadequate remedy for the breach by the Employee of
any provision of Section 5 or Section 6, and agree in the event of such breach
that the Employer may obtain temporary and permanent injunctive relief
restraining the Employee from such breach, and, to the extent permissible under
the applicable statutes and rules of procedure, a temporary injunction may be
granted immediately upon the commencement of any such suit. Nothing contained
herein shall be construed as prohibiting the Employer from pursuing any other
remedies available at law or equity for such breach or threatened breach of
Section 5 or Section 6 or for any breach or threatened breach of any other
provision of this Agreement.
(c) Withholding. The Employer shall withhold such amounts from
any compensation or other benefits payable to the Employee under this Agreement
on account of payroll and other taxes as may be required by applicable law or
regulation of any governmental authority.
10
88
(d) Employer's Successors. The Employer shall require any
successor or successors (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Employer's business and/or assets, by an agreement in substance and
form satisfactory to the Employee, to assume this Agreement and to agree
expressly to perform this Agreement in the same manner and to the same extent as
the Employer would be required to perform it in the absence of a succession. The
Employer's failure to obtain such agreement prior to the effectiveness of a
succession shall be a breach of this Agreement and shall entitle the Employee to
all of the compensation and benefits to which he would have been entitled
hereunder if the Employer had involuntarily terminated his employment without
Cause immediately after such succession become effective. For all purposes under
this Agreement, the term "Employer" shall include any successor or successors to
the Employer's business and/or assets which executes and delivers the assumption
agreement described in the subsection or which becomes bound by this Agreement
by operation of law.
(e) Employee's Successors. This Agreement and all rights of
the Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees.
(f) Indemnity. The Employer hereby agrees to indemnify and
hold the Employee harmless consistent with the Employer's policy against any and
all liabilities, expenses (including attorneys' fees and costs), claims,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any proceeding arising out of the Employee's
employment with the Employer (whether civil, criminal, administrative or
investigative, other than proceedings by or in the right of the Employer), if
with respect to the actions at issue in the proceeding the Employee acted in
good faith and in a manner Employee reasonably believed to be in, or not opposed
to, the best interests of the Employer, and (with respect to any criminal
action) Employee had no reason to believe Employee's conduct was unlawful. Said
indemnification arrangement shall (i) survive the termination of this Agreement,
(ii) apply to any and all qualifying acts of the Employee which have taken place
during any period in which he was employed by the Employer, irrespective of the
date of this Agreement or the term hereof, including, but not limited to, any
and all qualifying acts as an officer and/or director of any affiliate while the
Employee is employed by the Employer and (iii) be subject to any limitations
imposed from time to time under applicable law.
(g) Dispute Resolution; Attorney's Fees. The Employer and the
Employee agree that any dispute arising as to the parties' rights and
obligations hereunder shall be resolved by binding arbitration before an
arbitrator to be determined by mutually agreeable means. In such event, each of
the Employer and the Employee shall have the right to full discovery. The
Employer shall bear all costs of the arbitrator in any such proceeding, and if
the arbitration is definitively decided in the Employee's favor, the Employee
shall have the right, in addition to any other relief granted by such
arbitrator, to recover reasonable attorneys' fees; provided, however, that the
Employer shall have the right, in any dispute other than a dispute relating to
the occurrence of a Change in Control or the payment of an amount under Section
3(e)(iii), in addition to any other relief granted by such arbitrator, to
recover reasonable attorneys' fees in the event that a claim brought by the
Employee is definitively decided in the Employer's favor (with
11
89
the amount of such fees being limited to those expended defending the claim or
claims decided in favor of the Employer). Any judgment by such arbitrator may be
entered into any court with jurisdiction over the dispute.
(h) Acknowledgment. The Employee acknowledges that he has been
advised by the Employer to seek the advice of independent counsel prior to
reaching agreement with the Employer on any of the terms of this Agreement. The
parties agree that no rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting the Agreement.
(i) Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification, amendment, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
(i) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by registered or certified mail, postage prepaid, return
receipt requested, sent by overnight courier, or sent by facsimile (with
confirmation of receipt), addressed as follows:
If to the Employer:
Xxxxxxx Tire Group, Inc.
0000 Xxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx, Xxxxx & Xxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
and:
Charlesbank Capital Partners, LLC
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx and Xxxx X. Xxxxx
Facsimile: (000) 000-0000
12
90
with a copy to:
Skadden, Arps, Slate Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
If to the Employee:
J. Xxxxx XxXxxxxx, Xx.
0000 Xxxxxx Xxxx
Xxxxxxx, XX 00000
or at such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. If such notice
or communication is mailed, such communication shall be deemed to have been
given on the fifth business day following the date on which such communication
is posted.
(j) Descriptive Headings; Certain Interpretations. Descriptive
headings are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement. Except as otherwise expressly
provided in this Agreement: (i) any reference in this Agreement to any
agreement, document or instrument includes all permitted supplements and
amendments; (ii) a reference to a law includes any amendment or modification to
such law and any rules or regulations issued thereunder; (iii) the words
"include," "included" and "including" are not limiting; and (iv) a reference to
a person or entity includes its permitted successors and assigns.
(k) Counterparts; Entire Agreement. This Agreement may be
executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all such counterparts together shall
constitute one agreement. This Agreement and the Other Agreements contain the
entire agreement among the parties with respect to the transactions contemplated
by this Agreement and the Other Agreements and supersede all other or prior
written or oral agreements or understandings among the parties with respect to
the Employee's employment by the Employer.
(L) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA.
(M) CONSENT TO JURISDICTION. EACH OF THE EMPLOYER AND THE
EMPLOYEE HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF
NORTH CAROLINA SITTING IN MECKLENBURG COUNTY AND ALL STATE COURTS OF THE STATE
OF NORTH
13
91
CAROLINA SITTING IN MECKLENBURG COUNTY FOR PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY, AND THE EMPLOYEE AGREES NOT TO COMMENCE ANY LEGAL PROCEEDING RELATING
THERETO EXCEPT IN SUCH COURTS. EACH OF THE EMPLOYER AND THE EMPLOYEE IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH HE MAY NOW
OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN
SUCH COURTS AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH COURTS HAS
BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO HEREBY
CONSENTS TO SERVICE OF PROCESS BY NOTICE IN THE MANNER SPECIFIED IN SECTION 7(I)
AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION IT
MAY NOW OR HEREAFTER HAVE TO SERVICE OF PROCESS IN SUCH MANNER.
14
92
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
THE X.X. XXXXXXX COMPANY, INC.
By: /s/ Xxxxxx X. Roof
------------------------------------------
Xxxxxx X. Roof
President and Chief Executive Officer
/s/ J. Xxxxx XxXxxxxx, Xx.
---------------------------------------------
J. Xxxxx XxXxxxxx, Xx.
15
