EXHIBIT 10.5
EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT by and between Pentacon, Inc. (the "Company") and Xxxxxx X. Xxxx
(the "Employee"), dated as of 1st day of February, 2001.
The Board of Directors of the Company (the "Board") has determined that it
is in the best interests of the Company and its shareholders to assure that the
Company will have the continued dedication of the Employee, notwithstanding the
possibility, threat, or occurrence of a Change of Control (as defined below) of
the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Employee by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control, to encourage the
Employee's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Employee with compensation arrangements upon a Change of Control which provide
the Employee with individual financial security and which are competitive with
those of other corporations and, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions.
(a) The "Effective Date" shall be the first date during the "Change
of Control Period" (as defined in Section 1(b)) on which a Change of
Control occurs. Anything in this Agreement to the contrary
notwithstanding, if the Employee's employment with the Company is
terminated involuntarily prior to the date on which a Change of Control
occurs, and it is reasonably demonstrated that such termination (1) was at
the request of a third party who has taken steps reasonably calculated to
effect a Change of Control or (2)
otherwise arose in connection with or in anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective Date"
shall mean the date immediately prior to the date of such termination.
(b) The "Change of Control Period" is the period commencing on the
date hereof and ending on the fifth anniversary of such date.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(i) The acquisition (other than from the Company) by any person, entity or
"group", within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934 (the "Exchange Act"), of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act), of 30% or more of
either the then outstanding shares of common stock or the combined voting power
of the Company's then outstanding voting securities entitled to vote generally
in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the Board (as of
the date hereof the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided, however, that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board (other than an
election or nomination of an individual whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of the Directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall be, for purposes of
this Agreement, considered as though such person were a member of the Incumbent
Board; or
2
(iii) Approval by the shareholders of the Company of a reorganization,
merger or consolidation, in each case, with respect to which persons who were
the stockholders of the Company immediately prior to such reorganization, merger
or consolidation do not, immediately thereafter, own more than 50% of the
combined voting power entitled to vote generally in the election of directors of
the reorganized, merged or consolidated company's then outstanding voting
securities, or a liquidation or dissolution of the Company or the sale of all or
substantially all of the assets of the Company; provided, however, that a
judicially supervised reorganization under 11 U.S.C. ss.101 et seq. shall not be
considered a Change of Control.
3. Employment Period. The Company hereby agrees to continue the Employee
in its employ, and the Employee hereby agrees to remain in the employ of the
Company, in accordance with the terms and provisions of this Agreement for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
4. Terms of Employment.
(a) Position and Duties.
(i) During the Employment Period, (A) the Employee's position
(including status, offices, titles and business unit reporting
requirements), authority, duties and responsibilities shall be at
least commensurate in all material respects with the most
significant of those held, exercised and assigned at any time during
the 90-day period immediately preceding the Effective Date and (B)
the Employee's services shall be performed at the location where the
Employee was employed immediately preceding the Effective Date or
any office or location which is the corporate or division
headquarters of the Company and is less than thirty-five (35) miles
from such pre-Effective Date location.
3
(ii) During the Employment Period, and excluding any periods
of vacation and sick leave to which the Employee is entitled, the
Employee agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities
assigned to the Employee hereunder, to use the Employee's reasonable
best efforts to perform faithfully and efficiently such
responsibilities (all commensurate with activities prior to the
Change of Control). During the Employment Period it shall not be a
violation of this Agreement for the Employee during non-regular
business hours to (A) serve on corporate, civic or charitable boards
or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal
investments, so long as such activities do not interfere with the
performance of the Employee's responsibilities as an employee of the
Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities
have been conducted by the Employee during regular hours prior to
the Effective Date, the continued conduct of such activities during
regular hours (or the conduct of activities similar in nature and
scope thereto) subsequent to the Effective Date shall not thereafter
be deemed to interfere with the performance of the Employee's
responsibilities to the Company.
(b) Compensation.
(i) Base Salary. During the Employment Period, the Employee
shall receive an annual base salary (the "Annual Base Salary") which
shall be paid in equal installments on a monthly basis, at least
equal to twelve times the highest
4
monthly base salary paid or payable to the Employee by the Company
and its subsidiaries in respect of the twelve month period
immediately preceding the month in which the Effective Date occurs.
During the Employment Period, the Annual Base Salary shall be
reviewed at least annually and shall be increased at any time and
from time to time as shall be substantially consistent with
increases in base salary awarded in the ordinary course of business
to other key employees of the Company and its subsidiaries. Any
increase in Annual Base Salary shall not serve to limit or reduce
any other obligation to the Employee under this Agreement. Annual
Base Salary shall not be reduced after any such increase and the
term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so increased.
(ii) Annual Bonus. In addition to Annual Base Salary, the
Employee shall be eligible to be awarded (in a manner consistent
with executives holding similar responsibilities), for each fiscal
year during the Employment Period, an annual bonus (an "Annual
Bonus") in cash (or cash and stock if the Employee is then required
to take a percentage of his bonus in stock pursuant to the Company's
executive stock ownership policy) at least equal to the highest
annual bonus payable to the Employee from the Company and its
subsidiaries in respect of the three fiscal years immediately
preceding the fiscal year in which the Effective Date occurs (or the
annualized bonus for any fiscal year consisting of less than twelve
full months or with respect to which the Employee has been employed
by the Company for less than twelve full months).
5
(iii) Incentive Savings and Retirement Plans. In addition to
Annual Base Salary and Annual Bonus payable as herein provided, the
Employee shall be entitled to participate during the Employment
Period in all incentive, savings and retirement plans, practices,
policies and programs applicable generally to other key employees of
the Company and its subsidiaries. Such plans, practices, policies
and programs, in the aggregate, shall provide the Employee with
compensation, benefits and reward opportunities at least as
favorable as the most favorable of such combination of compensation,
benefits and reward opportunities provided by the Company and its
subsidiaries for the Employee under such plans, practices, policies
and programs as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Employee, as provided at any time thereafter with respect to
other key employees of the Company and its subsidiaries.
(iv) Welfare Benefit Plans. During the Employment Period, the
Employee and/or the Employee's family, as the case may be, shall be
eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by
the Company and its subsidiaries (including, without limitation,
medical, prescription, dental, disability, salary continuance,
employee life, group life, accidental death and travel accident
insurance plans and programs), at least as favorable as the most
favorable of such plans, practices, policies and programs in effect
at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the
6
Employee and/or the Employee's family, as in effect at any time
thereafter with respect to other key employees of the Company and
its subsidiaries.
(v) Expenses. During the Employment Period, the Employee shall
be entitled to receive prompt reimbursement for all reasonable
employment expenses incurred by the Employee in accordance with the
most favorable policies, practices and procedures of the Company and
its subsidiaries in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Employee, as in effect at any time thereafter with respect to
other key employees of the Company and its subsidiaries.
(vi) Fringe Benefits. During the Employment Period, the
Employee shall be entitled to fringe benefits in accordance with the
most favorable plans, practices, programs and policies of the
Company and its subsidiaries in effect at any time during the 90-day
period immediately preceding the Effective Date or, if more
favorable to the Employee, as in effect at any time thereafter with
respect to other key employees of the Company and its subsidiaries.
(vii) Office and Support Staff. During the Employment Period,
the Employee shall be entitled to an office or offices of a size and
with furnishings and other appointments commensurate with his/her
status in the acquiring company, and to secretarial and other
assistance, at least equal to the most favorable of the foregoing
provided to the Employee by the Company and its subsidiaries at any
time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Employee, as provided at any time
7
thereafter with respect to other key employees of the Company and
its subsidiaries.
(viii) Vacation. During the Employment Period, the Employee
shall be entitled to paid vacation in accordance with the most
favorable plans, policies, programs and practices of the Company and
its subsidiaries as in effect for the Employee at any time during
the 90-day period immediately preceding the Effective Date or, if
more favorable to the Employee, as in effect at any time thereafter
with respect to other key employees of the Company and its
subsidiaries.
5. Termination of Employment.
(a) Death or Disability. The Employee's employment shall terminate
automatically upon the Employee's death during the Employment Period. If
the Company determines in good faith that Disability of the Employee has
occurred during the Employment Period (pursuant to the definition of
"Disability" set forth below), it may give to the Employee written notice
of its intention to terminate the Employee's employment. In such event,
the Employee's employment with the Company shall terminate effective on
the 30th day after receipt of such notice by the Employee (the "Disability
Effective Date"), provided that, within the 30 days after such receipt,
the Employee shall not have returned to full-time performance of the
Employee's duties. For purposes of this Agreement, "Disability" shall mean
the absence of the Employee from the Employee's duties with the Company on
a full-time basis for 180 calendar days as a result of incapacity due to
mental or physical illness which is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to
the
8
Employee or the Employee's legal representatives (such agreement as to
acceptability not to be withheld unreasonably).
(b) Cause. The Company may terminate the Employee's employment
during the Employment Period for "Cause." For purposes of this Agreement,
"Cause" means (i) an act or acts of personal dishonesty taken by the
Employee and intended to result in personal enrichment of the Employee at
the expense of the Company, (ii) repeated material breaches or significant
and intentional deterioration in performance by the Employee of the
Employee's obligations under Section 4(a) of this Agreement (other than as
a result of incapacity due to physical or mental illness) which are
demonstrably willful and deliberate on the Employee's part and which are
not remedied in a reasonable period of time after receipt of written
notice from the Company specifying such breach or (iii) the conviction of
the Employee of a felony.
(c) Good Reason. The Employee's employment may be terminated by the
Employee during the Employment Period for Good Reason. For purposes of
this Agreement, "Good Reason" means:
(i) The assignment to the Employee of any duties inconsistent
in any material respect with the Employee's position (including
status, offices, titles and reporting requirements), authority,
duties or responsibilities as contemplated by Section 4(a) of this
Agreement, or any other action by the Company or any affiliate which
results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice
thereof given by the Employee;
9
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Employee;
(iii) the Company's requiring the Employee to be based at any
office or location other than that described in Section 4(a)(i)(B)
hereof, except for travel reasonably required in the performance of
the Employee's responsibilities;
(iv) any purported termination by the Company of the
Employee's employment otherwise than as expressly permitted by this
Agreement; or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Employee shall be conclusive. Moreover, as used in this
Agreement, the term "affiliate" shall include any company which controls, is
controlled by, or is under common control with the Company.
(d) Notice of Termination. Any termination by the Company for Cause
or by the Employee for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section
12(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Employee's employment under the provisions so
indicated, and (iii) if the Date of Termination (as defined below) is
other than the date of receipt of such notice, specifies
10
the termination date (which date shall be not more than fifteen (15) days
after the giving of such notice). The failure by the Employee or the
Company to set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not waive any
right of the Employee or the Company hereunder or preclude the Employee or
the Company from asserting such fact or circumstance in enforcing the
Employee's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means the date of
receipt of the Notice of Termination or any later date specified therein,
as the case may be; provided, however, that (i) if the Employee's
employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Employee of such termination, and (ii) if the Employee's
employment is terminated by reason of death or Disability, the Date shall
be the date of death of the Employee or the Disability Effective Date, as
the case may be.
6. Obligations of the Company Upon Termination.
(a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the Employee's
employment other than for Cause, Disability or death or if the Employee
shall terminate his employment for Good Reason:
(i) The Company shall pay to the Employee in a lump sum in
cash within 30 days after the Date of Termination the aggregate of
the following amounts:
(A) to the extent not theretofore paid, the Employee's
Annual Base Salary through the Date of Termination; and
11
(B) the product of (x) the Annual Bonus (computed as if
any bonus amount paid in stock pursuant to the Company's
executive stock ownership policy was paid in cash) paid to the
Employee for the last full fiscal year (if any) ending during
the Employment Period or, if higher, the Annual Bonus paid to
the Employee for the last fiscal year prior to the Effective
Date (as applicable, the "Recent Bonus") and (y) a fraction,
the numerator of which is the number of days in the current
fiscal year through the Date of Termination and the
denominator of which is 365; and
(C) in the case of compensation previously deferred by
the Employee, all amounts previously deferred (together with
any accrued interest thereon) and not yet paid by the Company,
and any accrued vacation pay not yet paid by the Company (the
sum of the amounts in clauses (A), (B), and (C) shall be
hereinafter referred to as the "Accrued Obligations"); and
(D) the product of (x) 2.00 and (y) the sum of (i) the
Annual Base Salary and (ii) the Recent Bonus; and
(E) all amounts in the Employee's retirement plan
accounts which will become fully vested upon the Date of
Termination notwithstanding the existing vesting schedule.
(ii) For two years from the Date of Termination, or such
longer period as any plan, program, policy or practice may provide,
the Company shall continue to provide benefits to the Employee
and/or the Employee's family at least equal to
12
those which would have been provided to them in accordance with the
plans, programs, practices and policies described in Section
4(b)(iv) of this Agreement if the Employee's employment had not been
terminated, including health insurance and life insurance, in
accordance with the most favorable plans, programs, practices or
policies of the Company and its subsidiaries during the 90-day
period immediately preceding the Effective Date or, if more
favorable to the Employee and/or the Employee's family, as in effect
at any time thereafter with respect to other key employees of the
Company and its subsidiaries and/or their families, and for purposes
of eligibility for retiree benefits pursuant to such plans,
programs, practices and policies, the Employee shall be considered
to have remained employed until the end of the Employment Period and
to have retired on the last day of such period. If the terms of any
benefit plan referred to in this section do not permit continued
participation by the Employee, then the Company will arrange for
other coverage, providing substantially similar benefits.
(iii) All options and similar awards granted to the Employee
by the Company shall immediately vest notwithstanding any vesting
schedule in any option or award agreement.
(b) Death. If the Employee's employment is terminated by reason of
the Employee's death during the Employment Period, this Agreement shall
terminate without further obligations to the Employee's legal
representatives under this Agreement, other than payment of the Accrued
Obligations. All such Accrued Obligations shall be paid to the Employee's
estate or beneficiary, as applicable, in a lump sum in cash within thirty
(30) days of the Date of Termination. Anything in this Agreement to the
contrary
13
notwithstanding, the Employee's family shall be entitled to receive
benefits at least equal to the most favorable benefits provided by the
Company and its subsidiaries to surviving families of employees of the
Company and such subsidiaries under such plans, programs, practices and
policies relating to family death benefits, if any, in accordance with the
most favorable plans, programs, practices, and policies of the Company and
its subsidiaries in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the
Employee and/or the Employee's family, as in effect on the date of the
Employee's death with respect to other key employees of the Company and
its subsidiaries and/or their families.
(c) Disability. If the Employee's employment is terminated by reason
of the Employee's Disability during the Employment Period, this Agreement
shall terminate without further obligations to the Employee, other than
payment of all Accrued Obligations. All such Accrued Obligations shall be
paid to the Employee in a lump sum in cash within 30 days of the Date of
Termination. Anything in this Agreement to the contrary notwithstanding,
the Employee shall also be entitled after the Disability Effective Date to
receive disability and other benefits at least equal to the most favorable
of those provided by the Company and its subsidiaries to disabled
employees and/or their families under such plans, programs, practices and
policies relating to disability, if any, in accordance with the most
favorable plans, programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Employee and/or
the Employee's family, as in effect at any time thereafter with respect to
other key employees of the Company and its subsidiaries and/or their
families.
14
(d) Cause; Other than for Good Reason. If the Employee's employment
shall be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Employee other than the
obligation to pay to the Employee the Annual Base Salary through the Date
of Termination plus the amount of any compensation previously deferred by
the Employee (together with accrued interest thereon) in each case to the
extent theretofore unpaid. If the Employee terminates employment other
than for Good Reason, this Agreement shall terminate without further
obligations to the Employee, other than those obligations accrued or
earned and vested (if applicable) by the Employee through the Date of
Termination, including for this purpose, all Accrued Obligations. All such
Accrued Obligations shall be paid to the Employee in a lump sum in cash
within 30 days of the Date of Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in any benefit, bonus,
incentive or other plans, programs, policies or practices provided by the
Company or any of its subsidiaries and for which the Employee may qualify, nor
shall anything herein limit or otherwise affect such rights as the Employee may
have under any stock option or other agreements with the Company or any of its
subsidiaries. Amounts which are vested benefits or which the Employee is
otherwise entitled to receive under any plan, program, policy or practice of the
Company or any of its subsidiaries at or subsequent to the Date of Termination
shall be payable in accordance with such plan, program, policy or practice.
8. Full Settlement; Resolution of Disputes.
(a) The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall
not be affected by
15
any set-off, counterclaim, recoupment, defense or other claim, right or
action which the Company may have against the Employee or others. In no
event shall the Employee be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Employee
under any of the provisions of this Agreement. The Company agrees to pay,
to the full extent permitted by law, all legal fees and expenses which the
Employee may incur as a result of any contest (regardless of the outcome
thereof) by the Company or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
performance thereof, plus in each case interest at the applicable Federal
rate provided for in Section 7872(f)(2) of the Code for any period during
which the Company is in default in its obligation to make any payment
hereunder.
(b) If there shall be any dispute between the Company and the
Employee (i) in the event of any termination of the Employee's employment
by the Company, whether such termination was for Cause, or (ii) in the
event of any termination of employment by the Employee, whether Good
Reason existed, then, unless and until there is a final, nonappealable
judgment by a court of competent jurisdiction declaring that such
termination was for Cause or that the determination by the Employee of the
existence of Good Reason was not made in good faith, the Company shall pay
all amounts, and provide all benefits, to the Employee's family or other
beneficiaries, as the case may be, that the Company would be required to
pay or provide pursuant to Section 6 as though such termination were by
the Company without Cause or by the Employee for Good Reason; provided,
however, that the Company shall not be required to pay any disputed
amounts pursuant to this paragraph except upon receipt of an undertaking
by or on behalf
16
of the Employee to repay all such amounts to which the Employee is
ultimately adjudged by such court not to be entitled.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Employee, whether paid or payable or
distributable pursuant to the terms of this Agreement or otherwise (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 interest
or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, and hereinafter collectively
referred to as the "Excise Tax"), then the Employee shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such
that after payment by the Employee of all taxes, including any income or
Excise Tax imposed upon the Gross-Up Payments, the net amount payable to
Employee hereunder shall be equal to the aggregate amount Employee would
have received hereunder if such Excise Tax were not applicable.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether a Gross-Up
Payment is required and the amount of such Gross-Up Payment, shall be made
by Xxxxxx Xxxxxxxx & Co. (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Employee
within 25 days of the Date of Termination, if applicable, or such earlier
time as is requested by the Company. The initial Gross-Up Payment, if any,
as determined pursuant to this Section 9(b), shall be paid to the Employee
within 5 days of the receipt of the Accounting Firm's determination. If
the Accounting Firm
17
determines that no Excise Tax is payable to the Employee, it shall furnish
the Employee with an opinion that he has substantial authority not to
report any Excise Tax on his federal income tax return. Any determination
by the Accounting Firm shall be binding upon the Company and the Employee.
As a result of the uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 9(c) and the Employee
thereafter is required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Employee.
(c) The Employee shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than 10 business days after the
Employee knows of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid.
The Employee shall not pay such claim prior to the expiration of the
thirty-day period following the date on which the Employee gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company
notifies the Employee in writing prior to the expiration of such period
that it desires to contest such claim, the Employee shall:
18
(i) give the Company any information reasonably requested by
the Company relating to such claim;
(ii) take such action in connection with contesting such claim
as the Company 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
Company;
(iii) cooperate with the Company in good faith in order to
effectively contest such claim;
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including attorneys fees and any additional interest and
penalties) incurred in connection with such contest and shall indemnify
and hold the Employee harmless, on an after-tax basis, for any Excise Tax
or income tax, including interest and penalties with respect thereto,
imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section
9(c), the Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo 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 Company shall determine; provided, however, that if
19
the Company directs the Employee to pay such claim and xxx for a refund,
the Company 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 income tax, including
interest or penalties with respect thereto, imposed with respect to any
imputed income with respect to such advance; and further provided, that
any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Employee with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company'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
authority.
(d) If, after the receipt by the Employee of an amount advanced by
the Company pursuant to Section 9(c), the Employee becomes entitled to
receive any refund with respect to such claim, the Employee shall (subject
to the Company's complying with the requirements of Section 9(c)) promptly
pay to the Company 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 Company pursuant to
Section 9(c), a determination is made that the employee shall not be
entitled to any refund with respect to such claims and the Company does
not notify the Employee in writing of its intent to contest such denial of
refund prior to the expiration of thirty days after such determination,
then such advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.
20
10. Confidential Information. The Employee shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its subsidiaries, and their
respective businesses, which shall have been obtained by the Employee during the
Employee's employment by the Company or any of its subsidiaries and which shall
not be or become public knowledge (other than by acts by the Employee or his
representatives in violation of this Agreement). After termination of the
Employee's employment with the Company, the Employee shall not, without the
prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Employee under this Agreement.
11. Successors.
(a) This Agreement is personal to the Employee and without the prior
written consent of the Company shall not be assignable by the Employee
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Employee's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no
such succession had taken place. As used in this Agreement, "Company"
21
shall mean the Company as hereinbefore defined and any successor to its
business and/or assets.
12. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Texas without reference to principles of
conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may
not be amended or modified otherwise than by a written agreement executed
by the parties hereto and their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Employee:
Xxxxxx X. Xxxx
0000 Xxxxxxxx Xxxx
Xxx Xxxx, XX 00000
If to the Company:
Pentacon, Inc.
00000 Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addresses.
22
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Employee's or the Company's failure to insist upon strict
compliance with any provision hereof shall not be deemed to be a waiver of
such provision or any other provision hereof.
(f) This Agreement contains the entire understanding of the Company
and the Employee with respect to the subject matter hereof.
(g) The Employee and the Company acknowledge the employment of the
Employee by the Company is "at will", and, prior to the Effective Date,
may be terminated by either the Employee or the Company at any time. Upon
a termination of the Employee's employment prior to the Effective Date,
there shall be no further rights under this Agreement.
[Remainder of page intentionally left blank - signature page follows.]
23
IN WITNESS WHEREOF, the Employee has hereunto set his hand and, pursuant
to the authorization from its Board of Directors, the Company has caused these
presents to be executed in its name on its behalf, all as of the date and year
first above written.
/s/ XXXXXX X. XXXX
------------------------------
Name: XXXXXX X. XXXX
PENTACON, INC.
By: /s/ XXXX X. XXXXXXX
--------------------------
Name: Xxxx X. Xxxxxxx
Title: Chairman of the Board &
Chief Executive Officer
