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Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (as amended, modified or otherwise
supplemented from time to time, the "AGREEMENT") is entered into as of December
17, 1998 among Xxxx National Corporation, a Delaware corporation ("PARENT"),
Xxxx National Group, Inc., a Delaware corporation ("CNG"), Xxxx Vision
Corporation, a Delaware corporation ("XXXX VISION"), Pearle, Inc., a Delaware
Corporation ("PEARLE"), Things Remembered, Inc., a Delaware corporation ("THINGS
REMEMBERED") (collectively, CNG, Xxxx Vision, Pearle and Things Remembered are
the "SUBSIDIARIES"), and Xxxxxxx X. Xxxx, an individual residing in the State of
Ohio ("XXXX").
PRELIMINARY STATEMENTS:
X. Xxxx is currently serving as an employee of Xxxx Vision and
Things Remembered pursuant to an Employment Agreement dated April 1, 1996 among
Xxxx, the Parent and the Subsidiaries (the "EMPLOYMENT Agreement"), and
presently is the Chairman and Chief Executive Officer of the Parent and Chairman
of the Board of each of the Subsidiaries.
B. The parties desire to provide for the eventual transition
of Xx. Xxxx from his present positions to retirement.
X. Xxxx and the parties desire to terminate the Employment
Agreement and to enter into a new agreement providing for the employment of Xxxx
with the Subsidiaries.
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
AGREEMENT:
1. EMPLOYMENT. Each of the Subsidiaries hereby employs Xxxx,
and Xxxx hereby accepts employment with each of the Subsidiaries, on the terms
and conditions set forth in this Agreement.
2. TERM. (a) The term (the "TERM") of Xxxx'x employment under
this Agreement will be for three (3) years commencing on the date of this
Agreement (the "EFFECTIVE DATE") and ending on its third anniversary; PROVIDED,
HOWEVER, that on the first anniversary of the Effective Date and on each
succeeding anniversary of the Effective Date until and including the anniversary
that falls in the year in which Xxxx turns 65 years of age, the Term will be
automatically extended by an additional year, unless 60 days prior to any such
succeeding anniversary either Xxxx or the Subsidiaries has given the other
written notice to the contrary (which notice is not rescinded before such
anniversary date) or this Agreement has otherwise been terminated as provided in
this Agreement.
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(b) Xxxx'x services to the Subsidiaries under this Agreement
will not be terminated by Xxxx or any of the Subsidiaries (while such entity
remains a subsidiary of Parent) unless such termination is with respect to his
services to all of the Subsidiaries.
3. POSITIONS AND DUTIES. (a) Xxxx will serve in such offices
or positions to which he is elected or appointed by the Board of Directors of
each of the Subsidiaries and the Parent. Xxxx initially will serve as Chairman
of the Board of Directors of each of the Subsidiaries and of Parent and as Chief
Executive Officer of CNG and Parent. Xxxx'x service as an officer or director of
the Parent and of any of the direct or indirect, wholly or partially owned
subsidiaries of the Parent or of any of the Subsidiaries, will be encompassed
within any reference made in this Agreement to employment with the Subsidiaries.
(b) Xxxx will, subject to the powers and authority reserved in
or by the Board of Directors of the Parent and of the respective Subsidiaries,
have the authority and responsibility customarily attending each corporate
office held by him pursuant to Section 3(a). In addition, Xxxx will hold such
other offices in and perform such other executive and administrative duties for
the Parent as he and the Board of Directors of Parent agree are appropriate.
Xxxx shall devote his principal time, energy, and attention, consistent with
past practices, to the affairs and operations of the Parent and the
Subsidiaries, but may engage in any unrelated business and activities that are
not prohibited by Section 8 of this Agreement.
4. COMPENSATION. During the Term:
(a) SALARY. The Subsidiaries shall pay Xxxx an aggregate
annual base salary (from all of the Subsidiaries combined) not less than his
current aggregate base salary of $725,000, subject to such increases that the
Board of Directors of each of the Subsidiaries, with the concurrence of the
Board of Directors of the Parent, may grant to him as a result of merit,
performance, inflation or otherwise.
(b) BONUS. Xxxx will receive bonuses from time to time in
accordance with the existing bonus programs for senior management of the
Subsidiaries or Parent or any future bonus programs adopted for senior
management of the Subsidiaries or Parent. Xxxx will participate in such programs
at a level to be fixed from time to time by either (a) the Board of Directors of
each of the Subsidiaries, with the concurrence of the Board of Directors or
appropriate compensation committee of the Board of Directors of the Parent, or
(b) the Board of Directors or appropriate compensation committee of the Board of
Directors of the Parent. Such participation may be more favorable but will in no
event be less favorable than the participation of any other similarly situated
participant. In the event that Xxxx would be eligible to participate in more
than one bonus program for a particular year, Xxxx will participate in each such
program to the extent of his allocable salary with respect to such Subsidiary.
(c) EXPENSES AND ALLOWANCES. Xxxx is authorized, in carrying
out his responsibilities and duties under this Agreement, to incur reasonable
business expenses for the benefit of the Subsidiaries, including business
expenses for transportation, entertainment, travel, lodging, club memberships
and expenses and similar items, all of comparable types and at comparable levels
to those he has previously incurred in his employment with the Subsidiaries.
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Xxxx will be provided with a current model automobile, of comparable style and
quality to that which has previously been provided to him in his employment with
the Subsidiaries. All such expenses referred to above will either be paid
directly by the Subsidiaries or the Subsidiaries shall promptly reimburse Xxxx
for expenditures upon the submission, from time to time, of itemized accountings
for such expenditures. To the extent such expenses and allowances are not
attributable to duties performed on behalf of a single Subsidiary, such expenses
and allowance are to be allocated among the Subsidiaries on the basis described
in Section 10. Xxxx will also be permitted to make personal use of the corporate
aircraft consistent with current practice to the extent one is available and not
otherwise required for corporate business. Parent shall also reimburse Xxxx for
up to $15,000 per year for personal tax, estate and financial planning.
(d) VACATIONS. Xxxx will be entitled to 5 weeks of vacation in
each calendar year or such greater amount of vacation as may be permitted under
the employment policies of the Subsidiaries in effect from time to time;
PROVIDED, HOWEVER, that the Subsidiaries will not be obligated to provide, and
Xxxx will not be entitled to receive, in the aggregate, more vacation time than
that permitted under the most permissive employment policy of any of the
Subsidiaries in effect from time to time.
(e) INSURANCE AND EMPLOYEE BENEFIT PLANS. Xxxx will be
entitled to have group term and other term life insurance maintained on his life
by the Subsidiaries, the beneficiary of which Xxxx will be allowed to designate,
at least in such amounts as are currently maintained on his life on the
Effective Date. Such life insurance policy, or any successor policy or policies
thereto, will not be terminated by the Subsidiaries without first offering Xxxx
the right to purchase the same at the cash surrender value thereof, if any. Xxxx
will also be entitled to participate in any of the employee compensation and
pension and welfare benefit plans and arrangements in which senior management or
executive employees of the Subsidiaries participate from time to time (including
without limitation, retirement plans and supplemental arrangements; sick pay
plans and medical expense and medical reimbursement plans; disability benefit
and accident insurance plans; and employee discount and loan programs, employee
savings and investment plans and stock ownership plans (collectively, the
"EMPLOYEE PLANS")), as the same may be modified, supplemented or replaced
without material reduction in total value of the benefits to Xxxx. Xxxx will
participate in such Employee Plans at a level to be fixed from time to time by
the Board of Directors of each of the Subsidiaries, with the concurrence of the
Board of Directors of the Parent; such participation may be more favorable but
shall in no event be less favorable than the participation of any other
similarly situated participant. It is the Parent's current intention to obtain
(prior to June 30, 1999) collateral assignment split-dollar life insurance in
the amount of $4 million for Xxxx. When such split-dollar insurance has been put
into place, the obligation to maintain separate group term and other term life
insurance will terminate.
5. DEATH OR DISABILITY DURING EMPLOYMENT. (a) If Xxxx dies or
is disabled during the term of this Agreement, the Subsidiaries shall pay to
Xxxx, in lieu of the compensation described in Section 4(a) and 4(b) of this
Agreement, in case of his disability, or to the beneficiary or beneficiaries
designated by Xxxx in case of his death, or if Xxxx is legally incompetent or no
such designation of death beneficiary has been made, then to Xxxx'x personal
representative, an amount (from all of the Subsidiaries combined), equal to the
greater of (i) the
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aggregate compensation that would otherwise be payable to Xxxx pursuant to
Section 4(a) and 4(b) of this Agreement for the full fiscal year in which his
death or disability occurred as if Xxxx were not dead or disabled, his
employment continued for the full fiscal year and his bonus were an amount equal
to the average of Xxxx'x bonus for the five (5) consecutive fiscal years
preceding the fiscal year in which his death or disability occurred, or (ii) the
product of (A) seventy-five percent (75) of the amount determined pursuant to
clause (i) immediately preceding and (B) the number of years from the first day
of the month in which this death or disability occurs through the date of
termination of the remaining Term (the "TERMINATION DATE") (for which it will be
assumed that the automatic extension of the Agreement under Section 2(a) of this
Agreement will be discontinued upon such death or disability, if such automatic
extension has not already discontinued pursuant to Section 2(a)), prorated on
the basis of a 360 day year for partial years. The amount so determined will be
paid in equal monthly installments commencing in the month in which Xxxx'x death
or disability occurs through the earlier of the Termination Date or the
cessation of his disability. The obligations of the Subsidiaries under this
Section 5(a) are to be offset by and reduced to the extent of any other
corresponding death or disability benefits (excluding life insurance), if any,
that the Parent or the Subsidiaries, or any of them, provide at their expense to
Xxxx under benefit plans or arrangements in place at the time of his death or
disability. Xxxx is entitled to receive, in the aggregate, the greater of (x)
the benefits specified in this Section 5(a) excluding any such offset or (y) the
benefits to which he would otherwise be entitled under other benefit plans or
arrangements.
(b) For the purpose of this Agreement, Xxxx will be considered
disabled only when and if (i) he is adjudicated legally incompetent by a court
of competent jurisdiction, or (ii) (A) a physician selected by Xxxx or his legal
guardian and reasonably satisfactory to the Board of Directors of the Parent
certifies that Xxxx suffers from a physical or mental disability; and (B) as a
result of such disability the Board of Directors of the Parent, in the exercise
of its reasonable judgment based on such physician's report, determines that
Xxxx is unable to perform his duties under this Agreement for at least ninety
(90) days out of a one hundred twenty (120) successive day period. For the
purpose of determining whether he is disabled, Xxxx agrees that, if requested by
Parent, he will submit to a physical examination not more frequently than once
every year during the Term by a physician mutually acceptable to Xxxx and the
Board of Directors of the Parent, the costs of such examination to be paid by
the Subsidiaries.
(c) In the event of Xxxx'x disability during the term of this
Agreement, he will (i) continue to be treated as an active employee for purposes
of those Employee Plans that provide life insurance and medical insurance, and
will be entitled to continue participation in such Employee Plans at levels and
costs to him that are at least as favorable as those provided to other active
senior management or executive employees (other than any executive officers who
are named or employed, at any time following the commencement of Xxxx'x
disability, to fill positions with the Subsidiaries of substantially equivalent
rank as the positions held by Xxxx immediately prior to the commencement of his
disability) and, in any case, that are no less favorable than the levels and
costs provided to Xxxx at the commencement of such disability; (ii) continue to
receive all the benefits and allowances provided in Section 4(c); and (iii)
continue to accrue benefit and vesting service under the Xxxx National
Corporation Retirement Plan and any supplemental retirement or supplemental
pension plan (the "RETIREMENT PLANS"), in either case, until the earlier of the
Termination Date or the cessation of his disability. With respect to the
benefits described in clause (iii) above, the Subsidiaries shall provide Xxxx
with a benefit equal to
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the difference between (x) the benefit he would otherwise have accrued under the
Retirement Plans if such additional service were actually credited to him under
the Retirement Plans (assuming for this purpose that the compensation earned by
Xxxx in the year prior to his disability), and (y) the benefit he actually
accrues under the Retirement Plans for the period of his disability. Such
benefit is to be provided from the Subsidiaries' general assets.
(d) In the event of Xxxx'x death during the Term, the
Subsidiaries shall continue to provide Xxxx'x eligible dependents with coverage
under those Employee Plans, if any, that then provide medical insurance at
levels and costs to such dependents that are no less favorable than the levels
and costs provided to such dependents at Xxxx'x death for the period from Xxxx'x
date of death until the date on which Xxxx would have attained age 65; PROVIDED,
HOWEVER, that the Subsidiaries will not be required to expend amounts for such
benefits in any year (expressed in terms of premium costs to the Subsidiaries)
in excess of the annual cost of such benefits at the time of Xxxx'x death
increased over time by annual adjustments equal to the change in the Consumer
Price Index (or any replacement index) as published from time to time by the
United States government.
6. OTHER TERMINATION. (a) Upon the termination of Xxxx'x
employment with the Subsidiaries except:
(i) a termination by reason of his death or disability as
provided in Section 5; or
(ii) his voluntary resignation (other than (x) a voluntary
resignation that occurs following Constructive Termination, or (y) such
resignation tendered pursuant to Section 6(c)); or
(iii) the expiration of the Term; or
(iv) termination "for cause";
the Subsidiaries shall pay Xxxx at the time of such termination, in a lump sum,
an amount equal to the sum of:
(A) three times (3x) Xxxx'x aggregate annual base salary as
in effect under Section 4(a) at the time of such termination, plus
(B) three times (3x) an amount equal to the average of
Xxxx'x bonus for the five (5) fiscal years preceding the fiscal year of such
termination (the "TERMINATION PAYMENT"), plus
(C) the average of Xxxx'x bonus for the five (5)
consecutive fiscal years preceding the fiscal year of such termination prorated
for the months in the current fiscal year prior to the termination.
If such termination is "for cause," nothing will be payable
pursuant to this Section 6(a). For purposes of this Agreement, Xxxx'x
termination will be "for cause" only if there
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is a final, non-appealable order in a proceeding before a court of competent
jurisdiction or a final order in an administrative proceeding before the
Securities and Exchange Commission (a "PROCEEDING") finding that Xxxx (i)
committed any willful misconduct, fraud or criminal activity (excluding traffic
violations or other minor offenses) which commission is materially inimical to
the interests of any of the Subsidiaries or the Parent, whether for his personal
benefit or in connection with his duties for the Parent or the Subsidiaries or
(ii) intentionally or knowingly violated any antifraud provision of the federal
or state securities laws ("ADVERSE FINAL ORDER"). Xxxx'x employment under this
Agreement may be terminated immediately by the Board of Directors of each of the
Subsidiaries if such Boards reasonably believe that Xxxx has committed any of
the acts referred to in the previous sentence, PROVIDED THAT if Xxxx'x
termination is alleged by the Subsidiaries to be for cause, the Subsidiaries
shall deposit, at the time of such termination, the amount otherwise payable to
Xxxx if said termination were not for cause, with an escrow agent reasonably
satisfactory to Xxxx and the Subsidiaries. Such amount is to be invested from
time to time in 90 day U.S. Treasury obligations or such other investments as
Xxxx and the Subsidiaries mutually may approve. The principal amount, plus
interest earned thereon, will be distributed by the escrow agent to the
Subsidiaries if an Adverse Final Order is entered, or to Xxxx on the earlier of
(i) the time when there has been entered in a Proceeding a final, non-appealable
order on the merits of the matter, which is not an Adverse Final Order or, (ii)
the expiration of sixty (60) days after Xxxx'x termination if, at the end of
such period, there is not pending any Proceeding and no Adverse Final Order has
been entered. The fees of the escrow agent will be paid by Xxxx if an Adverse
Final Order is entered and otherwise by the Subsidiaries. Xxxx and the
Subsidiaries shall provide the escrow agent with customary indemnities and shall
jointly execute and deliver customary and reasonable escrow instructions.
(b) Upon the expiration of the Term and other termination of
Xxxx'x employment without cause other than
(i) a termination by reason of his death as provided
in Section 5 or
(ii) his voluntary resignation (other than (x) a
voluntary resignation that occurs following
Constructive Termination, or (y) such resignation
tendered pursuant to Section 6(c)),
the Subsidiaries shall, for the period from the expiration of the Term or other
termination of Xxxx'x employment without cause until his death:
(A) continue to provide Xxxx and his eligible dependents
with coverage under those Employee Plans that provide life insurance, medical
insurance, medical expense and reimbursement at levels and costs to the
beneficiary that are no less favorable than the levels and costs provided to
Xxxx immediately prior to the time of his termination of employment under this
Agreement; PROVIDED, HOWEVER, that the Subsidiaries will not be required to
expend amounts for such benefits in any year in excess of the annual cost of
such benefits at the time of such termination increased over time by annual
adjustments equal to the change in the Consumer Price Index (or any replacement
index) as published from time to time by the United States government, and
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(B) provide Xxxx with an office at the headquarters of
Parent, comparable to his office at the time of his termination, for his use,
and provide Xxxx with secretarial services substantially equivalent to those
provided to him prior to termination, and
(C) provide Xxxx with continuing financial, estate and tax
consulting services in an amount not to exceed $15,000 per year; and
(D) provide Xxxx with title to the automobile then
provided to him under the Subsidiaries' automobile leasing program; and
(E) for the period from Xxxx'x termination of employment
to the earlier of his death or the occurrence of a change of control, provide
Xxxx with continuing access to the corporate aircraft, if any, for personal use
for a maximum of 50 flight hours per year and otherwise on a basis consistent
with the policy applicable to him prior to his termination of employment.
(F) Notwithstanding the foregoing provisions of this
Section 6(b), upon the expiration of the Term or other termination of employment
without cause other than
(i) a termination by reason of his death as provided
in Section 5 or
(ii) his voluntary resignation (other than (x) a
voluntary resignation that occurs following
Constructive Termination, or (y) such
resignation tendered pursuant to Section 6(c)),
Xxxx may elect at any time, by written notice to the Subsidiaries, to receive in
lieu of the benefits to be provided under (A), (B), (C), (D) and (E) of this
Section 6(b), a lump sum payment from the Subsidiaries in an amount equal to the
then present value of the benefits to be provided to Xxxx and his eligible
dependents under (A), (B), (C) and (E) of this Section 6(b). The foregoing sum
shall be referred to as the "Benefit Payment".
For purposes of this Section 6(b)(F), present value and life expectancy for
purposes of determining the Benefit Payment shall be determined using the
mortality tables and interest rates used on the date hereof under the Parent's
qualified defined benefit retirement plan, and such other factors as may be
determined by the actuary providing services with respect to such Plan on such
date, or such other actuary as may be selected by Xxxx and reasonably
satisfactory to the Subsidiaries.
(c) In the event of a "CHANGE OF CONTROL," which will be
deemed to have taken place upon the occurrence of any of the following:
(i) the Parent merges into itself, or is merged or
consolidated with, another corporation and as a
result of such merger or consolidation less than
51% of the voting power of the then-outstanding
voting securities of the surviving or resulting
corporation immediately after such transaction
are owned in the aggregate by the former
stockholders of the Parent immediately prior to
such transaction;
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(ii) all or substantially all the assets accounted
for on the Consolidated Balance Sheet of the
Parent are sold or transferred to one or more
corporations or persons, and as a result of such
sale or transfer less than 51% of the voting
power of the then-outstanding voting securities
of such corporation or person immediately after
such sale or transfer is directly or indirectly
beneficially held in the aggregate by the former
stockholders of the Parent immediately prior to
such transaction or series of transactions;
(iii) A person, within the meaning of Section 3(a)(9)
or 13(d)(3) (as in effect on the date of this
Agreement) of the Securities Exchange Act of
1934, become the beneficial owner (as defined in
Rule 13d-3 of the Securities and Exchange
Commission pursuant to the Securities Exchange
Act of 1934) of (i) 15% or more of the voting
power of the then outstanding voting securities
of the Parent or (ii) 35% or more of the voting
power of the then-outstanding voting securities
of the Parent; PROVIDED, HOWEVER, that the
foregoing does not apply to any such acquisition
that is made by (w) any subsidiary of the
Parent; (x) any employee benefit plan of the
Parent or any Subsidiary; or (y) any person or
group of which employees of the Parent or of any
Subsidiary control a greater than 25% interest
unless the Board of Directors of the Parent
determines that such person or group is making a
"hostile acquisition;" or (z) any person or
group of which Xxxx is an affiliate; or
(iv) a majority of the members of the Board of
Directors of the Parent or of any Subsidiary are
not Continuing Directors, where a "CONTINUING
DIRECTOR" is any member of the Board of
Directors of the Parent or, with respect to a
Subsidiary, of such Subsidiary who (x) was a
member of the Board of Directors of the Parent
or, with respect to a Subsidiary, of such
Subsidiary on the date of this Agreement or (y)
was nominated for election or elected to such
Board of Directors with the affirmative vote of
a majority of the Continuing Directors who were
members of such Board at the time of such
nomination or election;
Xxxx may terminate his employment with the Subsidiaries for any reason, or
without reason, during the ninety (90) day period commencing six (6) months
after such change of control, on which termination the Subsidiaries shall pay
Xxxx, in a lump sum, the sum of the Termination Payment, plus at the election of
Xxxx, to be made as provided in Section 6(b)(F), the Benefit Payment.
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(d) The provisions of this Section 6 are in lieu of and not in
addition to, any benefits Xxxx would otherwise be entitled to receive under any
severance policy in effect or hereafter adopted by the Subsidiaries unless such
Employee Plan or policy specifically provides otherwise.
(e) As used in this Agreement, "Constructive Termination"
means either
(i) a substantial, nonconsensual adverse change in Xxxx'x
employment duties (which will, however, not include the relinquishment of Xxxx'x
status as Chief Executive Officer if he remains the Chairman of the Board of the
Parent), or
(ii) the moving of the Parent's executive headquarters
more than 50 miles from its present location without Xxxx'x consent.
(f) Following Xxxx'x termination of employment, if a change of
control occurs, and if Xxxx is then receiving the benefits and payments provided
for in Section 6(b)(A), (B), (C), (D), and (E), Xxxx may elect, in the manner
specified in Section 6(b)(F), the Benefit Payment.
7. EXCISE TAX GROSS-UP. (a) In the event that it is determined
(as provided in this Agreement) that any payment or distribution by the
Subsidiaries pursuant to or for the benefit of Xxxx pursuant to the terms of
this Agreement or otherwise (a "PAYMENT"), would be subject to the excise tax
imposed by Section 4999 (or any successor thereto) 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,
are collectively referred to as the "EXCISE TAX"), then Xxxx 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 Xxxx of
all taxes (including any interest or penalties imposed with respect to such
taxes), including any Excise Tax imposed upon the Gross-Up Payment equal to the
Excise Tax, Xxxx retains a portion of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment.
(b) Subject to the provisions of Section 7(e), all
determinations required to be made under this Section 7, including whether an
Excise Tax is payable by Xxxx and the amount of such Excise Tax, and whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, will be
made be a nationally recognized firm of certified public accountants (the
"ACCOUNTING FIRM") selected by Xxxx and approved by the Parent (such approval
not to be unreasonably withheld). Xxxx shall direct the Accounting Firm to
submit its determination and detailed supporting calculations to both the
Subsidiaries and Xxxx within 15 calendar days after the effective date of Xxxx'x
termination of employment, if applicable, or such earlier time or times as may
be requested by the Subsidiaries or Xxxx. If the Accounting Firm determines that
any Excise
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Tax is payable by Xxxx, the Subsidiaries shall pay the required Gross-Up Payment
to Xxxx within five business days after receipt of the aforesaid determination
and calculations. If the Accounting Firm determines that no Excise Tax is
payable by Xxxx, it shall, at the same time as it makes such determination,
furnish Xxxx 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 as to the amount of the Gross-Up Payment to be paid by the Subsidiaries
within such 15 calendar-day period will be binding upon the Subsidiaries and
Xxxx. As a result of the uncertainty in the application of Section 4999 (or any
successor thereto) of the Code at the time of the initial determination by the
Accounting Firm under this Agreement, it is possible that Gross-Up Payment that
will not have been made by the Subsidiaries should have been made
("UNDERPAYMENT"), or that Gross-Up Payments will be made that are subsequently
refunded as overpayments of the amounts actually due ("OVERPAYMENTS"),
consistent with the calculations required to be made under this Agreement. In
the event that the Subsidiaries exhaust their remedies pursuant to Section 7(e)
and Xxxx thereafter is required to make payment of any excise Tax, Xxxx shall
direct the Accounting Firm to determine the amount of the Underpayment that has
occurred and to submit its determination and detailed supporting calculations to
both the Subsidiaries and Xxxx as promptly as possible. Any such Underpayment
shall be promptly paid by the Subsidiaries to or for the benefit of Xxxx within
three calendar days after receipt of such determination and calculations. In the
event that Xxxx receives any refund of an Overpayment for which he has
previously been reimbursed by the Subsidiaries, Xxxx shall promptly pay an
amount equal to the amount of such refund to the Subsidiaries within three
calendar days after receipt of such determination and calculations.
(c) The Subsidiaries and Xxxx shall each cooperate with the
Accounting Firm in connection with the preparation and issuance of the
determination provided for in Section 7(b). Such cooperation will include,
without limitation, providing the Accounting Firm access to and copies of any
books, records and documents in the possession of the Subsidiaries or Xxxx, as
the case may be, that are reasonably requested by the Accounting Firm. Xxxx will
provide the Subsidiaries and the Accounting Firm, copies of portions of such
returns, other filings or correspondence relating to the payment of any Excise
Tax as the Subsidiaries and the Accounting Firm may reasonably request.
(d) The fees and expenses of the Accounting Firm for its
services in connection with the determinations and calculations provided for in
Section 7(b) shall be paid by Xxxx. The Subsidiaries shall reimburse Xxxx for
his payment of such costs and expenses within five business days after receipt
from Xxxx of a statement therefor and evidence of his payment thereof.
(e) Xxxx shall notify the Subsidiaries in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Subsidiaries of a Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than 10 business days after Xxxx receives
notice of such claim and shall apprise the Subsidiaries of the nature of such
claim and the date on which such
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claim is requested to be paid. Xxxx shall not pay such claim prior to the
earlier of (i) the expiration of the 30 calendar-day period following the date
on which he gives such notice to the Subsidiaries or (ii) the date that any
payment of taxes with respect to such claim is due. If the Subsidiaries notify
Xxxx in writing prior to the expiration of such period that they desire to
contest such claim Xxxx shall:
(i) give the Subsidiaries any information reasonably requested
by the Subsidiaries relating to such claim;
(ii) take such action in connection with contesting such claim
as the Subsidiaries 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
Subsidiaries;
(iii) cooperate with the Subsidiaries in good faith in order
effectively to contest such claim; and
(iv) permit the Subsidiaries to participate in any proceeding
relating to such claim;
PROVIDED, HOWEVER, that the Subsidiaries shall bear and pay directly all costs
and expenses (including additional interest and penalties incurred in connection
with such contest) and shall indemnify and hold Xxxx 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 of the foregoing provisions of this Section
7(e), the Subsidiaries will control all proceedings taken in connection with
such contest and, at their sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conference with the taxing
authority in respect of such claim (but Xxxx may participate therein at his own
cost and expense) and may, at their sole option, either direct Xxxx to pay the
tax claimed and xxx for a refund or contest the claim in any permissible manner,
and Xxxx 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 Subsidiaries determine; PROVIDED, HOWEVER, that if the
Subsidiaries direct Xxxx to pay the tax claimed and xxx for a refund, the
Subsidiaries shall advance the amount of such payment to Xxxx on an
interest-free basis and shall indemnify and hold Xxxx harmless, on an after-tax
basis, from any Excise Tax or income tax, including interest or penalties with
respect thereto, imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and FURTHER PROVIDED that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of Xxxx with respect to which the contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the
Susidiaries' control of such contest will be limited to issues with respect to
which a Gross-Up Payment would be payable under this Agreement, and Xxxx will be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
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(f) If, after the receipt by Xxxx of an amount advanced by the
Subsidiaries pursuant to Section 7(e), Xxxx receives any refund with respect to
such claim, Xxxx shall (subject to the Subsidiaries' complying with the
requirements of Section 7(e)) promptly pay to the Subsidiaries the amount of
such refund (together with any interest paid or credited thereon after any taxes
applicable thereto). If, after the receipt by Xxxx of any amount advanced by the
Subsidiaries pursuant to Section 7(e), a determination is made that Xxxx is not
entitled to any refund with respect to such claim and the Subsidiaries do not
notify Xxxx in writing of their intent to contest such denial or refund prior to
the expiration of 30 calendar days after such determination, then such advance
will be forgiven and will 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.
8. (a) CONFIDENTIALITY. During the Term and at any time
thereafter, Xxxx shall not disclose, furnish, disseminate, make available, or,
except in the ordinary course of performing his duties on behalf of the
Subsidiaries or the Parent, use any trade secrets or confidential business and
technical information of the Subsidiaries, the Parent, any direct or indirect,
wholly or partially owned subsidiaries of the Parent or any of the Subsidiaries,
or customers of any of the Subsidiaries, without limitation as to when it was
acquired by him or whether it was compiled or obtained by or furnished to him
while he was employed by the Subsidiaries. Such trade secrets and confidential
business and technical information are considered to include, without
limitation, the vendor lists, vendor terms and programs, merchandise costs,
financial statistics, research data, or any other statistics and plans contained
in monthly and annual review books, profit plans, capital plans, critical
issues, annual plans, strategic plans, or merchandising, marketing, real estate,
or store operations plans. Xxxx specifically acknowledges that all such
information, whether reduced to writing or maintained in his mind or memory and
whether compiled by the Subsidiaries and/or the Parent and/or him, derives
independent economic value from not being readily known to or ascertainable by
proper means by others who can obtain economic value from its disclosure or use,
that reasonable efforts have been put forth by the Subsidiaries or the Parent to
maintain the secrecy of such information, that such information is and will
remain the sole property of the Subsidiaries or the Parent and that any
retention and use of such information during or after the termination of his
employment relationship with the Subsidiaries or the Parent (except in the
course of performing his duties) under this Agreement will constitute a
misappropriation of the trade secrets of the Subsidiaries on the Parent;
PROVIDED, HOWEVER, that his restriction will not apply to information which is
in the public domain or otherwise made public by other through no fault of Xxxx,
or as may be required by law.
(b) NON-COMPETITION. Except as may otherwise be approved in
advance by the Parent's Board of Directors, during the Term and for the period
during which he receives consulting fees pursuant to Section 9(a), and for a
period of three (3) years after the termination of his employment either for
cause or by his voluntary
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resignation, Xxxx shall not compete, directly or indirectly with any of the
Subsidiaries or the Parent. Without limiting the generally of the foregoing,
Xxxx shall not:
(i) enter into or engage in any business which competes
with business of any of the Subsidiaries or the Parent;
(ii) solicit customers, business, patronage, or orders
for, or sell, any products in competition with, or for any business that
competes with, the business of any of the Subsidiaries or the Parent; or
(iii) divert, entice, or otherwise take away any
customers, business, patronage or orders of any of the Subsidiaries or the
Parent or attempt to do so; or
(iv) promote or assist, financially or otherwise, any
person, firm, association, partnership, corporation, or any other entity engaged
in any business which he competes with the business of any of the Subsidiaries
or the Parent.
For the purposes of this Section 8(b), Xxxx understands, acknowledges and agrees
that he will be competing if he engages in any or all of the activities set
forth in this Section 8(b) directly as an individual for his own account, or
indirectly as a partner, joint venture, employee, agent, salesman, consultant,
officer and/or director of any firm, association, corporation, or other entity,
or as a stockholder of any corporation in which he owns, directly or indirectly,
individually or in the aggregate, more than one percent (1%) of the outstanding
stock.
(c) NON-SOLICITATION. During the Term and for the period
during which he receives consulting fees pursuant to Section 9(a), and for a
period of three (3) years after the termination of his employment either for
cause or by his voluntary resignation, Xxxx shall not directly or indirectly
solicit or induce or attempt to solicit or induce any employee(s) or any sales
representative(s), agent(s) or consultant(s) of any of the Subsidiaries, the
Parent or any direct or indirect, wholly or partially owned subsidiaries of the
Parent or any of the Subsidiaries to terminate their employment, representation
or other association with such entity.
(d) COOPERATION AND ASSISTANCE. During the Term and
thereafter, Xxxx will provide reasonable cooperation to the Parent and the
Subsidiaries in litigation and regulatory matters that relate to events that
occurred during his periods of employment with the Parent, the Subsidiaries and
its or their predecessors, and will provide reasonable assistance to the Parent
and the Subsidiaries with matters relating to their corporate history from the
periods of his employment with them or their predecessors. Xxxx will be entitled
to reasonable additional compensation and reimbursement of reasonable costs and
expenses relating to any such cooperation or assistance that occurs following
the Term.
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(e) REMEDIES. Xxxx expressly acknowledges and agrees that the
remedy at law for any breach by him of his obligations under this Section 8 will
be inadequate and that the damages flowing from such breach are not readily
susceptible to being measured in monetary terms. Accordingly, he acknowledges
and agrees that upon his violation of any obligation in this Section 8, the
Subsidiaries and/or Parent will be entitled to immediate injunctive relief and
may obtain a temporary order restraining any threatened or further breach
without the necessity of proof of actual damage. Nothing in this Agreement will
be deemed to limit the remedies of the Subsidiaries or the Parent at law or in
equity for any breach by Xxxx of any of the obligations in this Section 8 that
may be pursued or availed of by the Subsidiaries or the Parent.
9. POST-RETIREMENT CONSULTING SERVICES. Upon expiration of the
Term or if Xxxx voluntarily resigns from all offices and positions he holds at
such time with Parent and Subsidiaries (other than (x) a voluntary resignation
that occurs following Constructive Termination, or (y) if such resignation is
tendered pursuant to Section 6(c)), Xxxx will provide consulting services to the
Parent and the Subsidiaries upon the following terms and provisions:
(a) until the earlier of Xxxx'x death or the tenth
anniversary of Xxxx'x termination of employment (but
in no event after the date on which he turns 75), the
Subsidiaries shall pay Xxxx a consulting fee of at
least $150,000 per year for the first three (3)
years; $100,000 for the next four (4) years, and $75,
000 for the next three (3) years of such consulting
period whether or not they use Xxxx'x services
pursuant to Section 9(b); and
(b) Xxxx shall make himself available to provide such
reasonable consulting services as are agreed upon at
the time of such resignation or the expiration of the
Term, but not more than 30 days per year, such
services to be provided upon reasonable notice and
with all travel and other legitimate business
expenses to be reimbursed.; and
(c) Such other terms and conditions as may be agreed.
If, after Xxxx becomes a consultant under this Section 9, there is a change of
control as defined in Section 6(c), the obligations of Parent and Subsidiary for
the remaining term of the consulting arrangement under this Section 9 will
accelerate and will be paid immediately to Xxxx in a lump sum, and Xxxx'x
obligations under this Section 9 will terminate.
10. DIVISION OF OBLIGATIONS. (a) Subject to Sections 10(b) and
10(c), the performance of the obligations of the Subsidiaries to Xxxx under this
Agreement is allocated among the Subsidiaries as follows:
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(b) In the event that any of the Subsidiaries ceases to be a
direct or indirect subsidiary of the Parent, such Subsidiary will thereupon be
relieved of any obligations under this Agreement and the performance of the
Subsidiaries' obligations to Xxxx under this Agreement will be reallocated,
without reducing the amount of aggregated compensation or benefits payable under
this Agreement, by the Board of Directors of the Parent; PROVIDED, HOWEVER, that
in the event that both Xxxx Vision and Things Remembered cease to be direct or
indirect subsidiaries of the Parent, provision will be made, immediately prior
to such event, by such subsidiaries or by the Parent, to provide Xxxx with
financial assurances (which may include the establishment of an escrow or trust
fund, or the provision of letters of credit from financial institutions
reasonably to Xxxx) on terms reasonably acceptable to Xxxx for the fulfillment
of the monetary obligations of the Subsidiaries under this Agreement. Except for
such financial assurances, nothing in this Section 10 is to be construed as
restricting the Parents' right to dispose of its interests in the Subsidiaries
(except as may be provided in other agreements with Xxxx).
(c) With respect to any obligations of the Subsidiaries not
expressed directly in monetary terms, including, without limitation, those
described in Sections 4(c), 4(e), 5 and 6(b), each of the Subsidiaries shall
bear its proportionate percentage as provided in Sections 10(a) or 10(b), as
applicable.
(d) CNG hereby guarantees the performance by each of the
Subsidiaries of its obligations under this Agreement.
(e) Each of the obligations incurred under this Agreement by
the Subsidiaries will be borne PRO RATA by each Subsidiary in its proportionate
share as provided in this Section 10, and each of the Subsidiaries will be
entitled to contributions from the other Subsidiaries for any amounts paid in
connection with any of the obligations in excess of such Subsidiary's respective
proportionate share. This Section 10(e) is intended only to define the relative
rights of the Subsidiaries, and nothing set forth in this Section 10(e) is
intended to or will impair the obligations of the Subsidiaries to pay to Xxxx
amounts in connection with the obligations as and when the same become due and
payable under this Agreement in accordance with the terms of this Agreement.
(f) In the event that all of the Subsidiaries cease to be
direct or indirect subsidiaries of the Parent, the obligations of the
Subsidiaries to provide continuing health insurance and life insurance benefits
pursuant to any section of the Agreement must be satisfied by delivery to Xxxx
of any annuity in an amount and with terms reasonably acceptable to Xxxx (or his
dependents or legal guardian, as applicable) and to the Board of Directors of
the Parent.
11. TERMINATION OF EXISTING AGREEMENT. Immediately upon the
effectiveness of this Agreement, the Employment Agreement shall terminate. Such
termination shall not (a) prejudice any rights Xxxx many have under such
Employment
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Agreement relating to obligations to have been performed by the Parent or the
Subsidiaries prior to the date of this Agreement and (b) cause Xxxx to receive
or become eligible for any additional payments or rights that might otherwise be
triggered by a termination of the Employment Agreement or the termination of
Xxxx'x employment under this Agreement.
12. CHARTER PROVISIONS. (a) The Certificates of Incorporation
and By-laws of each Parent and of the Subsidiaries with respect to
indemnification and limitations on liability of officers and directors may not
be amended insofar as they relate to Xxxx without his consent (which will not be
unreasonably withheld).
(b) During the Term and for a period of five years following
the termination of Xxxx'x employment with the Subsidiaries (other than
termination for cause), Parent will not change its corporate name without the
consent of Xxxx. This Section 12(b) will not apply if Xxxx has been terminated
"for cause" or following a change of control. The Parent acknowledges and agrees
that the remedy at law to Xxxx from a breach by the Parent of this provision
will be inadequate and that the damages flowing from such breach are not readily
susceptible to being measured in monetary terms. Accordingly, the Parent
acknowledges and agrees that upon Parents' violation of this provision, (i) Xxxx
will be entitled to immediate injunctive relief and may obtain a temporary order
restraining any threatened or further breach without the necessity of proof of
actual damage and in addition, (ii) Xxxx will be released from further
obligations under Section 8. Nothing in this Agreement will be deemed to limit
the remedies of Xxxx at law or in equity for any breach by Parent of any of the
obligations in this provision that may be pursued or availed of by Xxxx.
13. CHOICE OF LAW. This Agreement was entered into, and the
negotiations proceeding this Agreement were conducted in Cleveland, Ohio, and
this Agreement is intended to be performed within the State of Ohio, which is
the principal residence of Xxxx. Accordingly, the validity and interpretation of
this Agreement will be determined in accordance with the internal laws of the
State of Ohio.
14. NOTICES. Any notices required or permitted to the given
under this Agreement is to be in writing and either given by personal delivery
or deemed to be delivered three (3) days after deposit, postage pre-paid, in the
U.S. certified or registered mail, return receipt requested, addressed as
follows:
If to the Subsidiaries: Xxxx National Corporation
0000 Xxxxxxxxxxx Xxxxx
Xxxxxxxx Xxx., Xxxx 00000
Attention: General Counsel
If to Xxxx: Xxxxxxx X. Xxxx
0000 Xxxxx Xxxxxxx Xxxxx
Xxxxxxxxx, Xxxx 00000
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or at such other address as is specified in written notice given in the manner
required in this Agreement.
15. WAIVER OF BREACH. The waiver by either the Subsidiaries or
Xxxx of a breach of any provision of this Agreement will not operate or be
construed as a waiver of any subsequent breach by either party.
16. BINDING EFFECT. This Agreement will be binding upon and
shall inure to the benefit of both Xxxx and the Subsidiaries and their
respective successors, heirs and legal representatives, but neither this
Agreement nor any rights under this Agreement may be assigned by Xxxx or the
Subsidiaries without the written consent of the other.
17. SEVERABILITY. If any portion of this Agreement is invalid
or illegal, such invalidity or illegality will not render this Agreement invalid
or illegal as a whole but the invalid or illegal portions 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.
18. AMENDMENTS. No amendment or variation of the terms of this
Agreement will be valid unless the same are in writing signed by all parties.
19. SECTION REFERENCES. Unless otherwise specified, all
references in this Agreement to section will be construed to refer to sections
of this Agreement.
20. SETOFF. The obligations to pay Xxxx following termination
of his employment may be setoff at the Parent's election by the amount of any
payments then owing to the Parent or any of its subsidiaries pursuant to loans
then outstanding from the Parent or any of its subsidiaries, but only to the
extent, and when and as, such payments become due in accordance with the terms
of such loans (including by any acceleration events). Xxxx may, from time to
time, elect to not make any payment under such loans when due by notifying the
lender in advance of the due date for such loan payment of his election to
forego a payment then due to him under this Agreement in the amount of such loan
payment.
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This Employment Agreement has been executed by the parties on
the date and year first above written.
XXXX NATIONAL CORPORATION
By: /s/ Xxxxxx X. Xxxx
--------------------------------
Title: Sr. Vice President
XXXX NATIONAL GROUP, INC.
By: /s/ Xxxxxx X. Xxxx
--------------------------------
Title: Sr. Vice President
PEARLE, INC.
By: /s/ Xxxxxx X. Xxxx
--------------------------------
Title: Sr. Vice President
XXXX VISION CORPORATION
By: /s/ Xxxxxx X. Xxxx
--------------------------------
Title: Sr. Vice President
THINGS REMEMBERED, INC.
By: /s/ Xxxxxx X. Xxxx
--------------------------------
Title: Sr. Vice President
/s/ Xxxxxxx X. Xxxx
-----------------------------------
Xxxxxxx X. Xxxx
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