AMENDED & RESTATED EMPLOYMENT AGREEMENT
Exhibit
10.1
AMENDED & RESTATED
EMPLOYMENT AGREEMENT
This
Amended and Restated Employment Agreement (the “Agreement”) made this 23rd day of
December, 2008 and effective as of the 6th day of November, 2008 (the “Effective
Date”) between XXXXXXX IT
SOLUTIONS, INC., a Delaware Corporation (the “Company”) and XXXXX X. XXXXXX (the
“Executive”).
W
I T N E S S E T H:
WHEREAS, the Company and
Executive entered into an Employment Agreement, dated and made effective on
March 17, 2008;
WHEREAS, the Company and the
Executive desire to amend and restate the Employment Agreement in its entirety
to reflect certain changes agreed upon by Company and Executive regarding his
promotion to the position of Senior Vice President, Treasurer and Chief
Financial Officer and compensation incident thereto;
NOW THEREFORE, in
consideration of the continued employment of the Executive by the Company and
the benefits to be derived by the Executive hereunder, and of the Executive’s
agreement to continued employment by the Company as provided herein, the parties
hereto hereby agree as follows:
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1.
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Position/Duties.
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(a)
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Executive
shall serve as the Senior Vice President, Treasurer and Chief Financial
Officer of the Company and shall report to the President and Chief
Executive Officer of the Company. In this capacity, Executive shall have
such duties, authorities and responsibilities commensurate with the
duties, authorities and responsibilities of persons in similar capacities
in similar size companies and such other duties and responsibilities as
the President and Chief Executive Officer of the Company or the Board of
Directors of the Company (“Board”) shall from time to time assign to him
consistent with the Executive’s position as Senior Vice
President, Treasurer and Chief Financial Officer of the
Company.
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(b)
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During
the Employment Term (as defined in Section 2), the Executive shall devote
substantially all his business time and efforts to the business and
affairs of the Company and the performance of his duties
hereunder. In addition, Executive shall not render services of
a business, professional or commercial nature to any other person, firm or
corporation, whether for compensation or otherwise, during the Employment
Term.
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(c)
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Executive’s
primary workplace shall be the Company’s offices in Hebron, Kentucky,
except for usual and customary travel on the Company’s
business.
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2.
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Term of
Employment.
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This
Agreement shall be in effect beginning on the Effective Date and terminating
upon the earlier of (a) March 17, 2011 (the “Initial Term”) or (b) the Date of
Termination as defined in Section 8(g). The period of time from the
Effective Date through the Initial Term and any Renewal Term, as defined in
Section 3, or the Date of Termination, as applicable, is referred to as the
“Employment Term”.
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3.
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Renewal
Term.
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The term
of Executive’s employment and this Agreement shall automatically renew for
additional consecutive renewal terms of one (1) year unless either party gives
written notice of his/its intent not to renew the terms of the Agreement ninety
(90) days prior to the expiration of the then expiring
term. Executive’s Base Salary for each Renewal Term shall be
negotiated and mutually agreed upon by and between the Company and Executive;
however, in no event shall Executive’s Base Salary for any Renewal Term be less
than the Base Salary in effect for the prior year.
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4.
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Base
Salary.
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During
each fiscal year of the Company during the Initial Term of this Agreement, the
Company agrees to pay Executive a base salary (“Base Salary”) at an annual rate
of Two Hundred Twenty Five Thousand Dollars ($225,000.00). Said Base Salary
shall be payable in accordance with the regular payroll practices of the
Company, but not less frequently than monthly. Executive’s Base
Salary shall be subject to an annual review by the President and Chief Executive
Officer of the Company in conjunction with the Compensation Committee of the
Board (and may be increased, but not decreased, from time to time incident
thereto ).
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5.
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Bonuses.
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Each year
during the Initial Term, Executive shall have the opportunity to earn both a
quarterly and annual targeted bonus measured against financial criteria
consisting primarily of NPBT (as defined below) (as determined by the President
and Chief Executive Officer of the Company in conjunction with the Compensation
Committee of the Board)), of at least One Hundred Twenty Five Thousand Dollars
($125,000.00), with a potential bonus in excess of such amount for achievement
above target and a reduced bonus for achievement below target, all in accordance
with the applicable bonus plan. The President and Chief
Executive Officer, in conjunction with the Compensation Committee of the Board
will determine the amount of bonus potential to be based on achievement of
quarterly criteria and the amount that shall be allocated to annual attainment.
The bonus plan shall provide that under-performance in one quarter can be made
up in subsequent quarters on a year-to-date basis. The quarterly and
annual bonuses payable to Executive during the Employment Term shall be fully
paid in cash. For purposes of this Agreement, the Net Profit Before
Taxes (“NPBT”) shall be determined on a consolidated basis computed without
regard to the bonus payable to Executive pursuant to this Section 5, shall
exclude any gains or losses realized by Company on the sale or other disposition
of its assets other than in the ordinary course of business and shall exclude
any extraordinary one-time charges taken by the Company. NPBT shall
be determined by the independent accountant regularly retained by the Company,
subject to the foregoing provisions of this subparagraph and in accordance with
generally accepted accounting principles. Said determinations and
payment of any bonus shall be made no later than the fifteenth (15th) day of
the third (3rd) month
following the end of the Company’s taxable year, and the determinations by the
accountant shall be final, binding and conclusive on all parties
hereto. In the event the audited financial statements are not issued
before the fifteenth (15th) day of
the third (3rd) month
following the end of the Company’s taxable year, Company shall make any payment
due hereunder, if any, based on its best reasonable estimate of any liability
hereunder, which amount shall be recorded and shall be reconciled by both
parties once the audited financial statements are issued but in no event later
than the end of the calendar year in which the Company’s taxable year
ends. Any quarterly bonus determinations shall be determined on a
consolidated basis by the independent accountant regularly retained by the
Company subject to the foregoing provisions of this paragraph and in accordance
with generally accepted accounting principles. Any amount due
hereunder shall be paid within fifteen (15) days of the filing of Form 10-Q by
the Company for the respective quarter, but in no event later than the fifteenth
(15th) day of
the third (3rd) month
following the end of the Company’s taxable year.
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In the
event that Company acquires during any applicable fiscal year a company that had
gross revenues in excess of Twenty-Five Million Dollars ($25,000,000.00) for its
most recently concluded fiscal year, Company and Executive shall in good faith
determine whether any adjustments to the NPBT criteria, whether upward or
downward, shall be made in order to reflect the effect of such acquisition on
the operations of the Company.
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6.
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Equity
Awards.
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(a)
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Stock
Options.
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(i)
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Upon
the date that this Agreement is made and entered into, Executive shall be
awarded an option to acquire Seventeen Thousand Five Hundred (17,500)
shares of the common stock of the Company under the Company’s Amended and
Restated 2002 Stock Incentive Plan (“Plan”) at the fair market value of
such common shares as of the date of the award. For purposes of
this Agreement, the fair market value as of the applicable date shall
mean, with respect to the common shares, the closing sales price of a
share of the Company’s common stock on the over-the-counter market on the
last market trading day prior to the date on which the value is to be
determined (or the next preceding date on which sales occurred, if there
were no sales on such date). Four Thousand Three Hundred
Seventy-Five (4,375) shares shall vest immediately upon the issuance of
the stock option award under this Section 6(a)(i) of the Agreement and,
thereafter, Four Thousand Three Hundred Seventy-Five (4,375) shares shall
vest on each of the first three annual anniversaries of the stock option
Award Agreement. In the event that the Company does not renew
this Agreement at the expiration of the Initial Term of this Agreement
pursuant to the provisions of Section 3, 100% of any such options awarded
to Executive under this Section 6(a)(i) shall fully vest immediately upon
the expiration of the Initial Term of this Agreement. The term of the
award set forth above shall be for a period of five (5) years from the
date of such award. A copy of the Award Agreement is attached
hereto as Exhibit A. The options to be granted incident hereto
shall be non-qualified stock options and shall not be treated by the
Company or the Executive as an incentive stock option for federal income
tax purposes.
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(ii)
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In
the event a Change In Control (as defined in Section 10) occurs during the
Initial Term of this Agreement, then all Seventeen Thousand Five Hundred
shares shall be fully vested immediately prior to the Change In
Control.
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(iii)
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In
addition, on each annual anniversary of the Effective Date, Executive
shall be eligible for an additional stock option grant at the sole
discretion of the President and Chief Executive Officer of the Company in
conjunction with the Compensation Committee of the
Board.
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(b)
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Restricted
Stock.
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(i)
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Upon
the date that this Agreement is made and entered into, the Company shall
grant Executive an equity award of Twelve Thousand Five Hundred shares of
restricted stock under the Plan. Said restricted stock shall
vest and the restrictions thereon shall lapse in full on the fourth
(4th)
annual anniversary of the Grant Date, as defined in the Restricted Stock
Award Agreement. In the event a Change In Control occurs during the
Initial Term of this Agreement, One Hundred Percent (100%) of such
restricted stock shall fully vest and the restrictions thereon shall lapse
immediately prior to the Change In Control. In the event that
Company does not renew this Agreement at the expiration of the Initial
Term of this Agreement pursuant to the provisions of Section 3, 100% of
such restricted stock shall fully vest and the restrictions thereon shall
lapse immediately upon the expiration of the Initial Term of this
Agreement. A copy of the Restricted Stock Award Agreement
is attached hereto as Exhibit
B.
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(ii)
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In
addition, on each annual anniversary of the Effective Date, Executive
shall be eligible for an additional award of restricted stock under the
Plan at the sole discretion of the President and Chief Executive Officer
of the Company in conjunction with the Compensation Committee of the
Board.
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(c)
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Adjustments to Number
of Shares. The provisions of this Section 6 shall be
appropriately adjusted for any stock splits, reverse splits, stock
dividends, combinations or reclassifications of the Company’s common
stock, or any other similar increases or decreases in the number of issued
shares of such common stock affected without receipt of consideration by
the Company.
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(d)
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Representations and
Warranties of the Company. The Company represents and
warrants to Executive that (i) the shares he acquires pursuant to
options and restricted stock awards as provided for in this Agreement will
be issued under the Plan; (ii) the Plan and the options and
restricted stock awards to be made hereunder are covered under a Form S-8
registration statement (the effectiveness of which shall continue to be
maintained so that Executive can resell the shares he receives pursuant to
options and restricted stock awards pursuant to this Agreement on a
current basis once exercised or vested, as applicable), (iii) there
are currently, and will continue to be, adequate shares available under
the Plan for the issuance of stock pursuant to all options and the
restricted stock awards provided for in this Agreement; and (iv) the
Plan permits the contemplated provisions of such
grants.
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7.
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Fringe
Benefits.
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During
the Employment Term (, Executive shall be entitled to the following
benefits:
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(a)
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Insurance. Executive
shall be provided with standard medical, health, and other insurance
coverage in accordance with the plans from time to time maintained by the
Company for its senior management
employees.
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(b)
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Vacation. Executive
shall be entitled each year to three (3) weeks of vacation, during which
his compensation will be paid in full; provided, however, Executive shall
not take more than two weeks of vacation consecutively without the prior
written consent of the President and Chief Executive
Officer.
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(c)
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Automobile
Allowance. Company shall provide Executive with an
automobile allowance of Five Hundred and 00/100 Dollars ($500.00) per
month, which shall be paid each month on a date determined by the
Company.
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(d)
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Expenses. During
the Employment Term, Executive shall be entitled to receive prompt
reimbursement for all reasonable and customary travel and entertainment
expenses or other out-of-pocket business expenses incurred by Executive in
preparing for and fulfilling the Executive’s duties and responsibilities
hereunder, including all expenses for (i) travel while away from home
on business or at the request or in the service of the Company, (ii)
mobile phone service, (iii) email, fax and long distance
communications expenses in respect of the Executive’s home office,
provided that such expenses are incurred and accounted for in accordance
with the policies and procedures established by the
Company. Executive shall use reasonable best efforts to take
advantage of advance purchase pricing for airplane
tickets. Amounts reimbursable pursuant to this subparagraph (d)
that are taxable to Executive shall be paid within thirty (30) days
following Executive's written request for reimbursement in accordance with
policies maintained by Company; provided that Executive provides written
request no later than sixty (60) days prior to the last day of the
calendar year following the calendar year in which the expense was
incurred. In order to comply with Section 409A of the Code, the
amount of expenses eligible for reimbursement during any calendar year
shall not affect the amount of expenses eligible for reimbursement during
any other calendar year, and the right to reimbursement shall not be
subject to liquidation or exchange for another
benefit.
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(e)
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Benefit
Plans. Executive shall participate, after meeting
eligibility requirements, in any qualified retirement plans and/or welfare
plans maintained by the Company during the Employment
Term.
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(f)
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Insurance. During
the Term of Employment Agreement, Company shall maintain on the life of
the Executive, provided he is insurable at standard rates, a term life
insurance policy in the amount of Five Hundred Thousand Dollars
($500,000.00). Executive shall have the right to designate the
beneficiary of such policy. Executive agrees to take any and
all physicals that are necessary incident to the issuance and/or renewal
of said policy. In addition, Executive agrees to take any and
all physicals necessary incident to the procurement of Key Man insurance
upon his life by Company. In the event that Executive is not
insurable at standard rates during the term of this Agreement, but
Executive is able to procure rated coverage, Executive has the right to
procure coverage at a lower amount of insurance, the cost of which is
equivalent to the standard term rate cost of Five Hundred Thousand Dollars
($500,000.00) in coverage. In the event Executive is not
insurable, which determination must be made no later than the first
anniversary of the Effective Date then Company shall, within thirty (30)
days after the first anniversary of the Effective Date, pay Executive an
amount equal to the projected cost of the contemplated term insurance of
Five Hundred Thousand Dollars ($500,000.00) at standard rates in a single
lump sum. In the event that Executive should die prior to the
insurance being obtained hereunder or in the event insurance cannot be
obtained for medical reasons, Company shall have no obligation to
Executive or his beneficiary for payment of any of the death benefit
amount upon Executive’s death. Company and Executive agree to
use diligent efforts after the Effective Date to obtain the coverage upon
Executive’s life hereunder.
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(g)
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Executive
shall be responsible for all taxes owed, if any, on the fringe benefits
provided to him pursuant to this Section 7. Furthermore,
certain of the fringe benefits provided under this Section 7, shall be
subject to ordinary income tax withholding incident to the payment thereof
by Company.
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8.
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Termination.
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Executive’s
employment hereunder and the Employment Term shall be terminated under the first
of the following to occur:
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(a)
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Death. The
Executive’s employment hereunder shall automatically terminate upon the
death of the Executive.
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(b)
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Disability. The
Executive’s employment hereunder shall terminate upon written notice by
the Company to the Executive, of termination due to
Disability. For purposes of this Agreement, “Disability” or
“Disabled” shall mean the Executive’s incapacity due to physical or mental
illness to substantially perform his duties and the essential functions of
his position, with or without reasonable accommodation on a full-time
basis for One Hundred Eighty (180) days (including weekends and holidays)
in any Three Hundred Sixty-Five (365) day period. The existence
or non-existence of a physical or mental injury, infirmity or incapacity
shall be determined by an independent physician mutually agreed to by the
Company and the Executive (provided that neither party shall unreasonably
withhold their consent).
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(c)
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Cause. The
Company may terminate the Executive’s employment hereunder for
Cause. For purposes of this Agreement, the Company shall have
“Cause” to terminate the Executive’s employment hereunder
upon:
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(i)
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The
conviction of Executive of a felony or other crime involving theft,
misappropriation of funds, fraud or moral
turpitude;
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(ii)
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The
engaging by Executive in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise, including but not
limited to any material misrepresentation related to the performance of
his duties, misappropriation, fraud, including with respect to the
Company’s accounting and financial statements, embezzlement or conversion
by Executive of the Company’s or any of its subsidiaries’ property in
connection with Executive’s duties or in the course of the Executive’s
employment with the Company;
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(iii)
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Executive’s
gross negligence or gross misconduct in carrying out his duties hereunder
resulting, in either case, in material harm to the Company;
or
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(iv)
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Any
act or omission constituting a material breach by the Executive of any
material provision of this
Agreement.
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Notwithstanding
the foregoing, in the event the basis for a termination for Cause is under
subsections 8(c)(iii) or (iv) above, Executive shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
written notice from the President and Chief Executive Officer asserting that he
has engaged in the conduct set forth above in Sections 8(c)(iii) or (iv) (as
interpreted and enforced consistently with the Company’s treatment of all other
executives and senior management) and specifying the particulars thereof in
detail, and Executive shall not have cured such conduct to the reasonable
satisfaction of the Board within thirty (30) days after receipt of such
resolution.
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(d)
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Without
Cause. Upon written notice by the Company to the
Executive of an involuntary termination without Cause, other than for
death or Disability.
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(e)
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Good
Reason. Upon written notice by the Executive to the
Company of the termination of his employment hereunder for Good
Reason. “Good Reason” shall mean Executive’s resignation from
employment within thirty (30) days after the occurrence of one of the
events hereinafter enumerated; provided, however, that Executive must
provide written notice to the Company within thirty (30) days after the
occurrence of the event allegedly constituting Good Reason and the Company
shall have thirty (30) days after such notice is given to
cure: (i) a material diminution in Executive’s authority,
duties or responsibilities without Executive’s written consent; (ii) a
material diminution in Executive’s Base Salary or targeted
annual bonus at any time during the Employment Term without Executive’s
written consent; (iii) the relocation of Executive to an area that is
greater than thirty (30) miles from the Greater Cincinnati/Northern
Kentucky metropolitan area without the consent of Executive; and (iv) any
other action or inaction that constitutes a material breach by Company of
this Agreement
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(f)
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Voluntary
Termination. If Executive terminates employment with
Company without Good Reason, Executive agrees to provide the Company with
thirty (30) days prior written notice. The Company, in its sole
discretion, following its receipt of such written notice from Executive
may accelerate the termination of Executive’s employment and the right to
any further compensation to a date prior to the Thirtieth (30th)
day after such written notice is
given.
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(g)
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Date of
Termination. For purposes of this Agreement, “Date of
Termination” shall mean (i) if Executive is terminated as Senior Vice
President, Treasurer and Chief Financial Officer by the Company for
Disability, thirty (30) days after written notice of such determination is
given to Executive (provided that Executive shall not have returned to
perform his duties on a full time basis during such thirty (30) day
period); (ii) if Executive’s employment is terminated by the Company for
any other reason, the date on which a written notice of termination is
given, provided that, in the case of the termination for Cause under
Sections 8(c)(iii) or (iv), Executive shall not have cured the matter or
matters stated in the Notice of Termination within the thirty (30) day
period provided in Section 8(c)(iii) or (iv); (iii) if Executive
terminates his employment for Good Reason, the date of Executive’s
resignation, provided that the notice and cure provisions in Section 8(e)
have been complied with; (iv) if Executive terminates employment for other
than Good Reason, the date specified in Executive’s notice in compliance
with Section 8(f) or, (v) in the event of Executive’s death, the date of
death.
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(h)
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Notice of
Termination. Any termination of Executive’s employment
by the Company or by Executive under this Section 8 (other than in the
case of death) shall be communicated by a written notice (“Notice of
Termination”) to the other party hereto, indicating the specific
termination provision in this Agreement relied upon. If the termination
provision relied upon requires notice and an opportunity to cure, then the
Notice of Termination shall set forth in reasonable detail any facts and
circumstances claimed to provide a basis for termination of Executive’s
employment under the provisions so indicated. The Notice
of Termination shall specify a date of termination and shall be delivered
within the time period set forth in the various paragraphs of this Section
8, as applicable (the “Notice
Period”).
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(i)
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Compliance with
409A. To the extent any payment under Section 9 is
subject to Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”) or exempt therefrom solely by virtue of the separation pay
plan exceptions under Treasury Regulations Section 1.409A-1(b)(9), a
termination of Executive’s employment will not be deemed to occur unless
such termination constitutes a separation from service under Section 409A
of the Code and the regulations promulgated
thereunder.
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9.
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Compensation Upon
Termination.
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(a)
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Disability. In
the event the Employment Term ends on account of Executive’s Disability,
the Company shall pay or provide Executive (i) any unpaid Base Salary
through the date of termination and any accrued vacation in accordance
with Company policy; (ii) any unpaid bonus earned with respect to any
fiscal year or any fiscal quarter ending on or preceding the date of
termination; and (iii) reimbursements for any unreimbursed expenses
incurred through the date of termination (collectively “Accrued
Amounts”). In addition, Executive shall receive any Prorata
Bonus as hereinafter defined. For purposes hereof, a “Prorata
Bonus” shall be determined by calculating a prorata portion of the
Executive’s targeted bonus for the performance year in which the
Executive’s termination occurs, payable at the time the annual bonuses are
paid to the other senior executives, (determined by multiplying the amount
the Executive would have received based upon actual performance had his
employment continued through the end of the performance year, by a
fraction, the numerator of which is the number of days during the
performance year of termination that the Executive is employed by the
Company and the denominator of which is Three Hundred Sixty-Five
(365)). The Accrued Amounts shall be paid within ten (10) days
after the Date of Termination. Any Pro Rata Bonus shall be paid
at the same time other bonuses are paid with respect to the applicable
performance year. In addition,
Executive shall be entitled to the
following:
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(i)
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an
amount equal to his then-applicable full Base Salary minus Eighty-Four
Thousand Dollars ($84,000) (or such other amount as may be available to
Executive pursuant to any salary continuation benefits under an accident
and health benefit plan sponsored by the Company) to be paid within ten
(10) days after the Date of Termination;
and
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(ii)
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Executive
shall be entitled to any rights he may have under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended
(“COBRA”). Company shall reimburse Executive for any premium
for COBRA health, dental, and vision coverage paid by Executive (including
coverage for Executive’s family) for a period of one (1) year after the
Date of Termination.
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(b)
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Death. In
the event of Executive’s death, the Executive’s estate (or to the extent a
beneficiary has been designated in accordance with a program, the
beneficiary under such program) shall be entitled to any Accrued Amounts
and a Prorata Bonus (as defined in Section 9(a). Such Accrued
Amounts shall be paid within ten (10) days after the date of Executive’s
death. In addition, Executive’s beneficiary shall receive
any Prorata Bonus as defined in Section 9(a) payable in the manner set
forth in Section 9(a).
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(c)
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Termination for Cause
or Without Good Reason. If the Executive’s employment
should be terminated (i) by the Company for Cause, or (ii) by the
Executive without Good Reason, Company shall pay to the Executive any
Accrued Amounts within ten (10) days after the Date of
Termination.
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(d)
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Termination Without
Cause or For Good Reason. If Executive’s employment is
terminated by the Company without Cause or the Executive terminates his
employment for Good Reason, Executive shall be entitled to receive from
the Company all Accrued Amounts through the Date of Termination and a
Prorata Bonus (as defined in Section 9(a). Such Accrued Amounts
shall be paid within ten (10) days after the Date of
Termination. Any Prorata Bonus shall be payable in the manner
set forth in Section 9(a). Contingent upon Executive delivering
to the Company a release in the form attached hereto as Exhibit C within
45 days after the Date of Termination, and the release becoming effective
and irrevocable in accordance with its terms, Executive shall be entitled
to the following:
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(i)
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Provided
that Executive is not, at the time of payment, employed by a competitor or
otherwise in breach of this Agreement, the Company shall pay Executive an
amount equal to Executive's then-applicable full Base Salary (the
"Severance Benefit"). The Severance Benefit shall be paid in a
single lump sum during the first payroll cycle immediately following the
date that the release becomes effective and irrevocable in accordance with
its terms, but in no event later than sixty (60) days after the Date of
Termination.
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(ii)
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Executive
shall be entitled to his COBRA rights under the Company’s group health
plans. Company shall reimburse Executive for any premium for
COBRA health, dental, and vision coverage paid by Executive (including
coverage for Executive’s family) for a period of one (1) year after the
Date of Termination.
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No
amounts paid under this Section 9 will be reduced by any earnings that Executive
may receive from any other source.
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10.
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Change In Control
Benefits.
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(a)
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For
purposes of this Agreement, “Change In Control” shall mean
the first to occur of any of the following
events:
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(i)
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any
“person” (as defined in Section 13(d) and 14(d) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), excluding for this
purpose, (A) the Company or any subsidiary of the Company, or (B) any
employee benefit plan of the Company or any subsidiary of the Company, or
any person or entity organized, appointed or established by the Company
for or pursuant to the terms of any such plan, which acquires beneficial
ownership of voting securities of the Company, is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the Company’s then
outstanding securities; provided, however, that no Change In Control will
be deemed to have occurred as a result of a change in ownership percentage
resulting solely from an acquisition of securities by the Company;
or
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(ii)
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persons
who, as of the Effective Date constitute the Board (the “Incumbent
Directors”) cease for any
reason, including without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority
thereof, provided that any person becoming a director of the Company
subsequent to the Effective Date shall be considered an Incumbent Director
if such person’s election or nomination for election was approved by a
vote of at least fifty percent (50%) of the Incumbent Directors; but
provided further, that any such person whose initial assumption of office
is in connection with an actual or threatened election contest relating to
the election of members of the Board or other actual or threatened
solicitation of proxies or consents by or on behalf of a “person” (as
defined in Section 13(d) and 14(d) of the Exchange Act) other than the
Board, including by reason of agreement intended to avoid or settle any
such actual or threatened contest or solicitation, shall not be considered
an Incumbent Director; or
|
|
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(iii)
|
consummation
of a reorganization, merger or consolidation or sale or other disposition
of at least eighty percent (80%) of the assets of the Company (a “Business Combination”),
unless, in each case, following such Business Combination, all or
substantially all of the individuals and entities who were the beneficial
owners of outstanding voting securities of the Company immediately prior
to such Business Combination beneficially own, directly or indirectly,
more than fifty percent (50%) of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election
of directors of the Company resulting from such Business Combination
(including, without limitation, a company which, as a result of such
transaction, owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior
to such Business Combination, of the outstanding voting securities of the
Company; or
|
-11-
|
|
(iv)
|
approval
by the stockholders of the Company of a complete liquidation or
dissolution of the Company.
|
|
|
(b)
|
Upon
a Change In Control of the Company, the Executive shall be entitled to
receive the following:
|
|
|
(i)
|
All
of Executive’ stock options and restricted shares shall vest according to
terms contained in the respective award agreements (executed incident to
the grant of such options or restricted
shares).
|
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(ii)
|
Executive
shall be entitled to the benefits set forth in Section 9(d) if his
employment is terminated Without Cause or For Good Reason after such
Change in Control. For purposes of clarity, a failure by
Company to have the acquiring company assume this Agreement in accordance
with Section 16(a) shall constitute a material breach of this Agreement
within the meaning of Section 8(e)(iv) (relating to the definition of Good
Reason).
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(iii)
|
Anything
in this Agreement to the contrary notwithstanding, in the event that it is
determined that any payment (other than the Gross-Up payments provided for
in this subsection) or distribution by the Company or any of its
affiliates to or for the benefit of the Executive, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise pursuant to or by reason of any other agreement, policy, plan,
program or arrangement, including without limitation any stock option or
similar right, or the lapse or termination of any restriction on or the
vesting or exercisability of any of the foregoing (a “Payment”), would be
subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the “Code”) (or any successor provision
thereto) by reason of being considered “contingent on a change in
ownership or control” of Company or any of its affiliates, within the
meaning of Section 280G of the Code (or any successor provision
thereto) or to any similar tax imposed by state or local law, or any
interest or penalties with respect to such tax (such tax
or taxes, together with any such interest and penalties, being
hereafter collectively referred to as the “Excise Tax”), then the
Executive will be entitled to receive an additional payment or payments
(collectively, a “Gross-Up Payment”). The Gross-Up Payment will
be in an amount such that, after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed
upon the Payment. The Gross-Up Payment shall be made to
Executive on or as soon as practicable following the date of the closing
of the transaction resulting in such change in control, and in no event
later than the end of the calendar year next following the calendar year
in which Executive pays the Excise
Taxes.
|
-12-
The
determination of whether an Excise Tax would be imposed, the amount of such
Excise Tax, and the calculation of the amounts referred to above will be made by
the Company’s regular independent accounting firm (as in effect immediately
prior to the transaction that gives rise to the Excise Tax) at the expense of
the Company or, at the election of Executive, another nationally recognized
independent accounting firm, which shall provide detailed supporting
calculations.
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|
11.
|
Confidentiality,
Competition, etc.
|
|
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(a)
|
Confidentiality. The
Executive agrees that he shall not, directly or indirectly, make
available, sell, disclose or otherwise communicate to any person, other
than in the course of the Executive’s employment and for the benefit of
the Company (as determined by the Executive in good faith), either during
the period of the Executive’s employment or at any time thereafter, any
nonpublic, proprietary or confidential information, knowledge or data
relating to the Company, any of its subsidiaries, affiliated companies or
businesses, which shall have been obtained by the Executive during the
Executive’s employment by the Company. The foregoing shall not apply to
information that (i) was known to the public prior to its disclosure to
the Executive; (ii) becomes known to the public subsequent to disclosure
to the Executive through no wrongful act of the Executive or any
representative of the Executive; or (iii) the Executive is required to
disclose by applicable law, regulation or legal process (provided that the
Executive provides the Company with prior notice of the contemplated
disclosure and reasonably cooperates with the Company at its expense in
seeking a protective order or other appropriate protection of such
information). Notwithstanding clauses (i) and (ii) of the preceding
sentence, the Executive’s obligation to maintain such disclosed
information in confidence shall not terminate where only portions of the
information are in the public
domain.
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|
|
(b)
|
Nonsolicitation.
During the Executive’s employment with the Company and for the one (1)
year period thereafter, the Executive agrees that he will not, directly or
indirectly, individually or on behalf of any other person, firm,
corporation or other entity, knowingly solicit, aid or induce (i) any
managerial level employee of the Company or any of its subsidiaries or
affiliates to leave such employment in order to accept employment with or
render services to or with any other person, firm, corporation or other
entity unaffiliated with the Company or knowingly take any action to
materially assist or aid any other person, firm, corporation or other
entity in hiring any such employee (provided, that the foregoing shall not
be violated by general advertising not targeted at Company employees nor
by serving as a reference for an employee with regard to an entity with
which the Executive is not affiliated), or (ii) any customer of the
Company or any of its subsidiaries or affiliates to purchase goods or
services then sold by the Company or any of its subsidiaries or affiliates
from another person, firm, corporation or other entity or assist or aid
any other persons or entity in identifying or soliciting any such customer
(provided, that the foregoing shall not apply to any product or service
which is not covered by the noncompetition provision set forth In Section
11(c), below).
|
-13-
|
|
(c)
|
Noncompetition. The Executive
acknowledges that he performs services of a unique nature for the Company
that are irreplaceable, and that his performance of such services to a
competing entity that (i) is a value added reseller of computer hardware
or software or (ii) provides product services, consulting services
and professional services, including but not limited to advisory services,
deployment services, staffing services and information technology
outsourcing services (collectively, “Infrastructure Solutions Services”)
will result in irreparable harm to the Company. Accordingly, during the
Executive’s employment hereunder, and, except as provided in Section
11(h), and for the one (1) year period thereafter, the Executive agrees
that the Executive will not, directly or indirectly, own, manage, operate,
control, be employed by (whether as an employee, consultant, independent
contractor or otherwise, and whether or not for compensation), or render
services to, any person, firm, corporation or other entity, in whatever
form, that is (i) a value added reseller of computer hardware or
software or (ii) an Infrastructure Solution Services provider, and,
in either case, provides goods or services primarily to customers in North
America. This Section 11(c) shall not prevent the Executive
from (i) owning not more than one percent (1%) of the total shares of all
classes of stock outstanding of any publicly traded entity that is a value
added reseller of computer hardware or software, (ii) rendering services
to charitable organizations, as such term is defined in Section 501(c) of
the Code, or (iii) directly or indirectly owning, managing, operating,
controlling, or being employed by (whether as an employee, consultant,
independent contractor or otherwise, and whether or not for compensation),
or rendering services to, any person, firm, corporation or other entity,
in whatever form, that is in any of the following businesses:
(A) developing computer software (but not such a developer that sells
software directly to end users), (B) selling computer hardware or software
to persons or entities other than end users, and (C) providing consulting
services to clients in industries to which the Company has not provided
Infrastructure Solution Services during the year preceding termination of
the Executive’s employment with the
Company.
|
|
|
(d)
|
Nondisparagement. Each of the
Executive and the Company (for purposes hereof, “the Company” shall mean
only (i) the Company by press release or other formally released
announcement and (ii) the executive officers and directors thereof and not
any other employees) agrees that during the Employment Term and for five
(5) years thereafter not to make any public statements that disparage the
other party, or in the case of the Company, its respective affiliates,
employees, officers, directors, products or
services. Notwithstanding the foregoing, statements made in the
course of sworn testimony in administrative, judicial or arbitral
proceedings (including, without limitation, depositions in connection with
such proceedings) shall not be subject to this Section 11(d). This
provision shall also not cover normal competitive statements which do not
cite the Executive’s employment by the
Company.
|
-14-
|
|
(e)
|
Equitable Relief and
Other Remedies. The parties acknowledge and agree that the other
party’s remedies at law for a breach or threatened breach of any of the
provisions of this Section would be inadequate and, in recognition of this
fact, the parties agree that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the other party, without
posting any bond, shall be entitled to obtain equitable relief in the form
of specific performance, temporary restraining order, a temporary or
permanent injunction or any other equitable remedy which may then be
available.
|
|
|
(f)
|
Reformation. If
it is determined by a court of competent jurisdiction in any state that
any restriction in this Section 11 is excessive in duration or scope or is
unreasonable or unenforceable under the laws of that state, it is the
intention of the parties that such restriction may be modified or amended
by the court to render it enforceable to the maximum extent permitted by
the law of that state.
|
|
|
(g)
|
Survival of
Provisions. The obligations contained in this Section 11 shall
survive the termination or expiration of the Executive’s employment with
the Company and shall be fully enforceable
thereafter.
|
|
|
(h)
|
Non-Competition Not
Applicable. The one (1) year non-competition provision
set forth in Section 11(c) commencing on the date of Executive’s
termination of employment shall not be applicable if Company does not
renew this Agreement upon the expiration of the Initial Term of this
Agreement or any Renewal Term; provided, however, such one (1) year
non-competition provision shall be applicable in any such instance if the
Company elects in writing to compensate Executive pursuant to Section
11(i) of this Agreement.
|
|
|
(i)
|
Optional Payment for
Non-Competition. In the event that (i) the Company does
not renew this Agreement upon the expiration of the Initial Term of this
Agreement or any Renewal Term with notice to Executive of such nonrenewal
at least ninety (90) days prior to the expiration of the
Initial Term or any Renewal Term, Company shall have the option
to pay Executive an amount equal to his Base Salary that was in effect
prior to such non-renewal in consideration for Executive not competing
with Company for a period of twelve (12) months from the date of the
expiration of this Agreement. Such payment shall be made
within ten (10) days after the Date of
Termination.
|
|
|
12.
|
Continued Availability
and Cooperation.
|
|
|
(a)
|
Following
termination of the Executive’s employment with the Company, the Executive
shall cooperate fully with the Company and with the Company’s counsel in
connection with any present and future actual or threatened litigation,
administrative proceeding or investigation involving the Company that
relates to events, occurrences or conduct occurring (or claimed to have
occurred) during the period of the Executive’s employment by the Company.
Cooperation will include, but is not limited
to:
|
-15-
|
|
(i)
|
making
himself reasonably available for interviews and discussions with the
Company’s counsel as well as for depositions and trial
testimony;
|
|
|
(ii)
|
if
depositions or trial testimony are to occur, making himself reasonably
available and cooperating in the preparation therefore, as and to the
extent that the Company or the Company’s counsel reasonably
requests;
|
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|
(iii)
|
refraining
from impeding in any way the Company’s prosecution or defense of such
litigation or administrative proceeding;
and
|
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|
(iv)
|
cooperating
fully in the development and presentation of the Company’s prosecution or
defense of such litigation or administrative
proceeding.
|
The
Company will reimburse the Executive for reasonable travel, lodging, telephone
and similar expenses, as well as reasonable attorneys’ fees (if independent
legal counsel is necessary), incurred in connection with any cooperation,
consultation and advice rendered under this Agreement after the Executive’s
termination of employment; provided that (i) Executive shall not be required to
make himself available for such purposes for more than three days in any
calendar month, (ii) the Company and the Executive must mutually agree on which
days the Executive will make himself available, and (iii) the Company shall pay
in advance to the Executive (a) all reasonably anticipated travel and other
expenses, subject to subsequent submission of supporting documentation and, if
applicable, the refund by the Executive of any remaining balance of the advance
after he has been reimbursed fully for the actual expenses incurred, and (b) a
per diem, not accountable, of One Thousand Five Hundred Dollars ($1,500.00) per
day.
This
Section 12(a) shall apply during the period commencing on the Date of
Termination and ending on Executive's death. Any payments shall be made no later
than thirty (30) days after the Company's request for services under this
Section 12(a) and in no event later than the last day of the calendar year
following the calendar year in which the expense was incurred. In
order to comply with Section 409A of the Code, the amount of expenses eligible
for reimbursement during any calendar year shall not affect the amount of
expenses eligible for reimbursement during any other calendar year, and the
right to reimbursement shall not be subject to liquidation or exchange for
another benefit.
|
|
13.
|
Dispute
Resolution.
|
|
|
(a)
|
In
the event that the parties are unable to resolve any controversy or claim
arising out of or in connection with this Agreement or breach thereof,
either Party shall refer the dispute to binding arbitration, which shall
be the exclusive forum for resolving such claims. Such arbitration will be
administered by Judicial Arbitration and Mediation Services, Inc. (“JAMS”)
pursuant to its Employment Arbitration Rules and Procedures and governed
by Kentucky law. The arbitration shall be conducted by a single arbitrator
selected by the parties according to the rules of JAMS. In the event that
the parties fail to agree on the selection of the arbitrator within thirty
(30) days after either party’s request for arbitration, the arbitrator
will be chosen by JAMS. The arbitration proceeding shall commence on a
mutually agreeable date within ninety (90) days after the request for
arbitration, unless otherwise agreed by the parties, and shall be
conducted in the Commonwealth of
Kentucky.
|
-16-
|
|
(b)
|
The
parties agree that each will bear their own costs and attorneys’ fees. The
arbitrator shall not have authority to award attorneys’ fees or costs to
any party.
|
|
|
(c)
|
The
arbitrator shall have no power or authority to make awards or orders
granting relief that would not be available to a party in a court of law.
The arbitrator’s award is limited by and must comply with this Agreement
and applicable federal, state, and local laws. The decision of the
arbitrator shall be final and binding on the
parties.
|
|
|
(d)
|
Notwithstanding
the foregoing, no claim or controversy for injunctive or equitable relief
contemplated by or allowed under applicable law pursuant to Section 11 of
this Agreement will be subject to arbitration under this Section 13, but
will instead be subject to determination in a court of competent
jurisdiction in the state of the place of performance, which court shall
apply Kentucky law consistent with Section 13 of this Agreement, where
either party may seek injunctive or equitable
relief.
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|
|
14.
|
Other
Agreements.
|
No
agreements (other than the exhibits hereto and agreements evidencing any grants
of equity awards or the Special Change In Control Bonus Agreement) or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. Each party to this Agreement acknowledges that no
representations, inducements, promises, or other agreements, orally or
otherwise, have been made by any party, or anyone acting on behalf of any party,
pertaining to the subject matter hereof, which are not embodied herein, and that
no prior and/or contemporaneous agreement, statement or promise pertaining to
the subject matter hereof that is not contained in this Agreement shall be valid
or binding on either party.
|
|
15.
|
Withholding of
Taxes.
|
The
Company will withhold from any amounts payable under this Agreement all federal,
state, city or other taxes as the Company is required to withhold pursuant to
any law or government regulation or ruling.
-17-
|
16.
|
Successors and Binding
Agreement.
|
|
|
(a)
|
The
Company will require any successor (whether direct or indirect, by
purchase of assets or stock, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business or assets of the
Company expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would be required to
perform if no such succession had taken place. This Agreement will be
binding upon and inure to the benefit of the Company and any successor to
the Company, including without limitation any persons acquiring directly
or indirectly all or substantially all of the business or assets of the
Company whether by purchase, merger, consolidation, reorganization or
otherwise (and such successor shall thereafter be deemed the “Company” for
the purposes of this Agreement), but will not otherwise be assignable,
transferable or delegable by the Company, except that the Company may
assign and transfer this Agreement and delegate its duties thereunder to a
wholly owned Subsidiary; provided that following any such assignment the
Company shall remain fully liable with respect to all of its obligations
under this Agreement.
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|
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(b)
|
This
Agreement will inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees and
legatees.
|
|
|
(c)
|
This
Agreement is personal in nature and neither of the parties hereto shall,
without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly
provided in Sections 16(a) and 16(b). Without limiting the generality or
effect of the foregoing, the Executive’s right to receive payments
hereunder will not be assignable, transferable or delegable, whether by
pledge, creation of a security interest, or otherwise, other than by a
transfer by the Executive’s will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer
contrary to this Section 16(c), the Company shall have no liability to pay
any amount so attempted to be assigned, transferred or
delegated.
|
|
|
17.
|
Notices.
|
All
communications, including without limitation notices, consents, requests or
approvals, required or permitted to be given hereunder will be in writing and
will be duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof confirmed), or five (5) business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three (3) business days after having been sent by
a nationally recognized overnight courier service such as Federal Express or
UPS, addressed to the Company (to the attention of the General Counsel of the
Company) at its principal executive offices and to the Executive at his
principal residence, or to such other address as any party may have furnished to
the other in writing and in accordance herewith, except that notices of changes
of address shall be effective only upon receipt.
-18-
|
|
18.
|
Governing Law and
Choice of Forum.
|
|
|
(a)
|
This
Agreement will be construed and enforced according to the laws of the
Commonwealth of Kentucky, without giving effect to the conflict of laws
principles thereof.
|
|
|
(b)
|
To
the extent not otherwise provided for by Section 13 of this Agreement, the
Executive and the Company consent to the jurisdiction of all state and
federal courts located in Xxxxx County, Kentucky, as well as to the
jurisdiction of all courts of which an appeal may be taken from such
courts, for the purpose of any suit, action, or other proceeding arising
out of, or in connection with, this Agreement or that otherwise arises out
of the employment relationship. Each party hereby expressly waives any and
all rights to bring any suit, action, or other proceeding in or before any
court or tribunal other than the courts described above and covenants that
it shall not seek in any manner to resolve any dispute other than as set
forth in this paragraph and Section 13 of this Agreement. Further, the
Executive and the Company hereby expressly waive any and all objections
either may have to venue, including, without limitation, the inconvenience
of such forum, in any of such courts. In addition, each of the parties
consents to the service of process by personal service or any manner in
which notices may be delivered hereunder in accordance with this
Agreement.
|
|
|
19.
|
Validity/Severability.
|
If
any provision of this Agreement or the application of any provision is held
invalid, unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision will not be affected, and the provision so
held to be invalid, unenforceable or otherwise illegal will be reformed to the
extent (and only to the extent) necessary to make it enforceable, valid or
legal. To the extent any provisions held to be invalid, unenforceable or
otherwise illegal cannot be reformed, such provisions are to be stricken
herefrom and the remainder of this Agreement will be binding on the parties and
their successors and assigns as if such invalid or illegal provisions were never
included in this Agreement from the first instance.
|
|
20.
|
Survival of
Provisions.
|
Notwithstanding
any other provision of this Agreement, the parties’ respective rights and
obligations under Sections 8, 9, 10, 11, 12, 13, 17, 18, 20, and 21, will
survive any termination or expiration of this Agreement or the termination of
the Executive’s employment with the Company.
|
|
21.
|
Liability
Insurance.
|
The
Company shall cover the Executive under directors and officers liability
insurance both during and, while potential liability exists, after the term of
this Agreement in the same amount and to the same extent as the Company covers
its other officers and directors. The Company shall provide a
certificate of insurance confirming this coverage promptly upon receipt of a
request for same from Executive.
-19-
|
|
22.
|
Public
Announcements.
|
The
Company shall give the Executive a reasonable opportunity to review and comment
in advance on any public announcement (including any filing with a governmental
agency or stock exchange) relating to this Agreement or the Executive’s
employment by the Company.
|
|
23.
|
Compliance with Code
Section 409A.
|
This
Agreement is intended to comply with the requirements of Code Section 409A and
the regulations and guidance issued thereunder and shall be interpreted and
administered in a manner consistent with that intent. Any provision
of this Agreement to the contrary notwithstanding, if Executive is a “specified
employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code as of the
date of his separation from service with the Company, no distribution that is
subject to and not otherwise exempt from Code Section 409A shall be made or
commence under this Agreement sooner than six months from the date of
Executive’s separation from service (or, if earlier, the date of the Executive’s
death). In such case, any payments that were otherwise required to be
made within such six-month period shall be accumulated and paid in a single lump
sum on the first day of the month immediately following the end of such
six-month period.
IN
WITNESS WHEREOF, the parties have made and entered into this Agreement as of the
day and year first above written.
|
XXXXXXX
IT SOLUTIONS, INC.
|
||
|
By:
|
||
|
Xxxxx
X. Xxxxxx
|
||
|
Its:
|
President
and Chief Executive Officer
|
|
|
Xxxxx
X. Xxxxxx
|
||
-20-
