Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 10th day of December, 1997, by and between XXXX'X INTERNATIONAL, INC., a
Delaware corporation with its principal offices in Orange, California
("Corporation"), and XXXXX XXXXXXX, an individual residing in Lebanon, Tennessee
("Executive").
W I T N E S S E T H :
WHEREAS, Executive presently serves as Chairman of the Board and Chief
Executive Officer of Corporation pursuant to an employment agreement dated as of
January 1, 1995 between Corporation and Executive (the "Prior Employment
Agreement"); and
WHEREAS, Corporation desires to continue to retain the services of
Executive, whose experience, knowledge and abilities with respect to the
business and affairs of Corporation and its subsidiaries are extremely valuable
to Corporation; and
WHEREAS, the Board of Directors of Corporation (the "Board of Directors")
and the Compensation Committee (the "Committee") of the Board of Directors
recognize that the continuing possibility of an unsolicited tender offer or
other takeover bid for Corporation is unsettling to Executive and other senior
executives of Corporation and, therefore, to enhance the value of Corporation
for the benefit of its stockholders, desire to make arrangements to help assure
the continuing dedication by Executive to Executive's duties to Corporation,
notwithstanding the occurrence of a tender offer or takeover bid; and
WHEREAS, in particular, the Board of Directors and the Committee believe it
is important, should Corporation receive proposals from third parties with
respect to its future, to enable Executive, without being influenced by the
uncertainties of Executive's own situation, to assess and advise the Board of
Directors whether such proposals would be in the best interests of Corporation
and its stockholders, and to take such other action regarding such proposals as
the Board of Directors might determine to be appropriate; and
WHEREAS, the Board of Directors and the Committee also wish to demonstrate
to Executive and other senior executives of Corporation that Corporation is
concerned with the welfare of its executives and intends to see that loyal
executives are treated fairly; and
WHEREAS, in view of the foregoing and in further consideration of
Executive's employment with Corporation, the Board of Directors and the
Committee have determined that it is in the best interests of Corporation and
its stockholders for
Corporation to agree to pay Executive termination compensation in the event
Executive should leave the employ of Corporation under certain circumstances;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
and promises of the parties set forth below, the parties hereby agree as
follows:
1. DUTIES.
(a) Corporation hereby continues to employ Executive as Chairman of
the Board and Chief Executive Officer of Corporation during the term of
this Agreement, with powers and duties consistent with such positions.
Executive, during the term of this Agreement, shall perform such additional
or different duties, and accept the election or appointment to such other
offices or positions, as may be mutually agreeable to Executive and the
Board of Directors. Executive agrees to serve in such executive offices
and directorships in other subsidiaries or affiliated companies of
Corporation as he may be requested to do throughout the term of this
Agreement without additional fixed compensation.
(b) Executive shall be employed at Corporation's headquarters in
Orange County, California, and shall devote substantially his full time and
efforts to perform his duties faithfully, diligently and to the best of his
ability to advance the interests of Corporation; subject, however, to
reasonable working hours, conditions and vacations as are consistent with
his position and with due regard to the preservation of his good health.
Nothing herein shall be deemed to preclude or prohibit Executive from
performing during regular business hours services within the business and
civic community which are customary for persons in similar capacities,
including, without limitation, serving on boards of other companies,
advisory groups, committees and panels, but only in furtherance of and not
to the detriment of his principal duties hereunder. Further, Corporation
shall give Executive a reasonable opportunity to perform his duties and
shall not expect Executive to devote more time hereunder, nor assign duties
or functions to Executive, other than as may be customary and reasonable
for an executive in Executive's position.
2. COMPENSATION.
(a) Effective as of December 29, 1997, and during the entire term of
this Agreement, Corporation shall pay to Executive an annual salary of not
less than Five Hundred Sixty-Six Thousand Five Hundred Dollars
($566,500.00), payable in equal installments on Corporation's regular
payroll dates, for any and all services which Executive may render to
Corporation.
(b) The Board of Directors annually shall review the amount of
Executive's salary, and shall, when the Board of Directors in its sole
judgment
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deems it appropriate, make adjustments in the amount of such
salary. Any such adjustments shall take effect on the date established by
the Board of Directors. Nothing herein shall be construed to authorize or
empower any reduction of Executive's salary below his then current rate of
salary by the Board of Directors or otherwise during the term of this
Agreement. The Committee, in accordance with customary policy, shall make
such recommendations to the Board of Directors as it believes are
appropriate with respect to salary adjustments hereunder.
3. EXPENSES. Corporation will reimburse Executive for all usual,
reasonable and necessary expenses paid or incurred by him in the performance of
his duties hereunder, subject to the right of Corporation at any time to place
reasonable limitations on expenses thereafter to be incurred or reimbursed.
4. EMPLOYEE BENEFITS. Executive shall be entitled to and shall receive
all other benefits of employment generally available to other executives of
Corporation, including, among other things, participation in any hospital,
surgical, medical or other group health and accident benefit plans, life
insurance benefits, and Corporation's annual vacation plan. In addition,
Executive will be entitled to participate in all incentive compensation, stock
option, profit sharing, pension, retirement or bonus plans as from time to time
may be in existence during the term of this Agreement in accordance with their
respective terms and provisions, but, to the extent participation or the amount
of participation is at the discretion of the Board of Directors or any committee
thereof, then Executive's participation shall likewise be solely subject to such
discretion.
5. TERM AND TERMINATION.
(a) The term of this Agreement shall commence on the date hereof and
shall terminate upon the first to occur of the following events:
(i) December 31, 1999 (the "Last Day of the Stated Term");
(ii) The death or permanent disability of Executive;
(iii) The 30th day following written notice from Corporation
to Executive; or
(iv) Executive is discharged for Cause.
(b) If Executive dies or becomes permanently disabled during the term
of this Agreement, this Agreement shall terminate on the last day of the
month during which his death or permanent disability, as the case may be,
occurred. Commencing thirty (30) days after the date of such termination,
there shall be paid to Executive or Executive's representative in the event
of permanent disability, or to his executor or estate in the event of
death, an amount equal to
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one year of Executive's then current salary, payable in twelve (12) equal
monthly installments. If Executive is absent from employment or unable to
render services hereunder on a full-time basis by reason of physical or
mental illness or disability for six (6) months or more in the aggregate in
any twelve (12) month period during the term of this Agreement, Executive
shall be considered permanently disabled.
(c) If Corporation should terminate this Agreement pursuant to
Section 5(a)(iii):
(i) Executive shall immediately cease to be Chairman of the
Board and Chief Executive Officer of Corporation, and each ch other
office or position Executive then holds, and if requested by a
majority of the Board of Directors of Corporation, shall
immediately resign from the Board of Directors and from any of the
Boards of Directors of any of Corporation's subsidiaries of which
Executive may be a member.
(ii) Corporation shall be obligated and shall continue to pay
Executive an amount equal to his then current salary but at a rate
of not less than Five Hundred Sixty-Six Thousand Five Hundred
Dollars ($566,500.00) per annum from the date of such termination
until the Last Day of the Stated Term. Such payments shall be made
in installments payable as provided in Section 2(a) hereof.
Corporation also immediately shall pay Executive in a lump sum an
amount equal to the amount of the remaining unpaid portion of any
yearly incentive compensation award, and the amount, if any, of any
forfeiture of Executive's interest in any profit sharing plan in
which Executive is a participant.
(iii) For the purposes of participation in any hospital,
surgical, medical or other group health and accident insurance and
group life insurance plans maintained by Corporation, Executive
shall continue to be an employee of Corporation through the Last
Day of the Stated Term. Except for such purposes, unless the Board
of Directors otherwise determines by resolution, Executive shall
not continue to be an employee of Corporation for any other
purposes and shall not be entitled to continue to participate in
Corporation's Retirement Plan or 401(k) Plan, or in any other
plans, programs and benefits of Corporation; provided, however,
nothing herein shall preclude Executive from any vested rights or
benefits he may have in such plans on the effective date of
termination. If a contrary determination is made by the Board of
Directors, the duties of Executive shall be only as mutually agreed
upon by Executive and Corporation, and may be refused by Executive
without penalty hereunder.
(iv) If termination shall be without Cause under Section
5(a)(iii), all stock options granted to Executive prior to the date
of this
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Agreement under any stock option plan of Corporation (other than
Corporation's Employee Stock Purchase Plan), notwithstanding the
provisions of any stock option plan or agreement, shall vest
immediately and become exercisable by Executive. Nothing herein shall
otherwise affect the obligations of Corporation or Executive under the
terms of such stock option agreement, which, except for the provisions
hereof, shall be otherwise enforceable in accordance with its terms.
(v) Any benefits of indemnification provided by the By-Laws
of Corporation or in any Indemnification Agreement between
Corporation and Executive shall be continued for the benefit of
Executive, and any officers' and directors' liability insurance
which may be maintained by Corporation and outstanding on the date
of termination shall be continued for the benefit of Executive for
such reasonable period of time as may be determined by the Board of
Directors to afford protection to Executive.
(d) Corporation agrees that its obligations for the continuation of
Executive's salary and other benefits in accordance with Sections 5(c)(ii)
through 5(c)(v) above shall be absolute and unconditional, and the amounts
due under Sections 5(c)(ii) and 5(c)(iii) above or Section 15 shall not be
subject to offset, reduction or mitigation for any reason whatsoever;
provided, however, that if Executive should breach any other provision of
this Agreement while he is receiving benefits pursuant to Sections 5(c)(ii)
through 5(c)(v) above, all obligations of Corporation hereunder shall cease
to be effective on the actual date of such breach.
(e) "Cause" as used in Section 5(a)(iv) shall mean only gross
negligence, dishonesty, incompetence, a willful breach of this Agreement,
or violation of any reasonable rule or regulation of the Board of
Directors, the violation of which results in significant damage to
Corporation and with respect to which, except in the case of incompetence
or dishonesty, Executive fails to correct or make reasonable efforts to
correct within a reasonable time after receipt of written notice thereof.
"Cause" shall be determined only by the affirmative vote of a majority of
the authorized number of the Board of Directors (excluding, for this
purpose, Executive) at a meeting for which notice has been given that it is
proposed to consider the issue of "Cause" or at a meeting occurring not
less than seven (7) days after a meeting at which one or more directors
indicate an intention to present a motion to such effect.
(f) If Corporation should terminate this Agreement pursuant to
Section 5(a)(iv), this Agreement shall terminate immediately or at such
later date as shall be designated by the Board of Directors and all of
Executive's rights hereunder shall terminate effective upon such
termination. Except as otherwise specified in any notice of termination,
Executive shall not continue thereafter to
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be an employee of Corporation for any purpose and all rights Executive
might thereafter have as an employee pursuant to any plan or
understanding shall cease.
6. CONFIDENTIAL INFORMATION. Executive agrees that he will not at any
time, both during and after the term of this Agreement, divulge, furnish or make
accessible to any party (except to an entity which shall succeed to the business
of Corporation or its subsidiaries, and except as may be required in the conduct
of the regular course of business of Corporation or its subsidiaries, or as
specifically authorized by the Board of Directors or as may be required by law)
any trade secrets, patents, patent applications, inventions or customers of
Corporation or of any subsidiary of Corporation until such time as such
information has been disclosed to the public otherwise than by Executive.
7. RESTRICTIVE COVENANT DURING TERM. Executive agrees that until the
Last Day of the Stated Term, he will neither directly nor indirectly engage in a
business competing with any of the businesses conducted by Corporation or any of
its subsidiaries, nor without the prior written consent of the Board of
Directors, directly or indirectly, have any interest in, own, manage, operate,
control, be connected with as a stockholder, joint venturer, officer, employee,
partner or consultant, or otherwise engage, invest or participate in any
business which shall be competitive with any of the businesses conducted by
Corporation, or by any subsidiary of Corporation; provided, however, nothing
contained in this Section 7 shall prevent Executive from investing or trading in
stocks, bonds, commodities, securities, real estate, or other forms of
investment for his own benefit (directly or indirectly), so long as such
investment activities do not significantly interfere with Executive's services
to be rendered hereunder and, to the extent that such investment activities
would, but for this proviso, be prohibited hereby, would not be material either
to Executive or the concern in which such investment is made.
8. APPROVAL BY CORPORATION. This Agreement has been approved by the
Board of Directors in accordance with the authority granted and restrictions
imposed by action of the Board of Directors. It shall be executed by the
President and Chief Operating Officer or other duly qualified officer.
9. WAIVER OR MODIFICATION. Any waiver, alteration or modification of any
of the provisions of this Agreement or cancellation or replacement of this
Agreement shall not be valid unless made in writing and signed by the parties
hereto.
10. CONSTRUCTION. Except as to matters of internal corporate policy and
regulation, which shall be governed by the laws of the State of Delaware (the
state of incorporation of Corporation), this Agreement shall be governed by the
laws of the State of California. If any litigation shall occur between
Executive and Corporation which litigation arises out of or as a result of this
Agreement or the acts of the parties hereto pursuant to this Agreement, or which
seeks an interpretation of this Agreement, the prevailing party shall be
entitled to recover all costs and expenses of such litigation, including
reasonable attorneys' fees and costs.
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11. BINDING EFFECT.
(a) The rights and obligations of Corporation under this Agreement
shall be binding upon any successor or assigns of Corporation. In the
event of any consolidation or merger of Corporation into or with another
corporation, such other corporation shall assume this Agreement and shall
become obligated to perform all of the terms and conditions hereof, and
Executive's obligations hereunder shall continue in favor of such other
corporation.
(b) If Corporation shall adopt a plan of liquidation or be or become
a party to any action which has the substantive effect of finally
terminating its business and affairs, all sums which would have been
payable to Executive during the remaining term of this Agreement (assuming
the continuation of Executive's then salary through the Last Day of the
Stated Term) shall become due and payable to Executive not later than the
effective date of such plan or action; except in the case of a liquidation
of Corporation into an acquiring company or subsidiary of such acquiring
company after a consolidation or merger of Corporation into or with another
corporation, and the rights and obligations of Corporation under this
Agreement are expressly assumed by the acquiring company as part of the
plan of liquidation.
(c) This Agreement supersedes all prior and contemporaneous
agreements, amendments, memoranda or understandings, express or implied and
written or oral, between Corporation and Executive.
12. WAIVER. Waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of any other provision of this Agreement.
13. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, each of which shall be construed as an original for all
purposes, but all of which taken together shall constitute one and the same
Agreement.
14. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to be effective (i) upon
receipt if delivered in person, (ii) upon receipt if sent by registered or
certified United States mail, return receipt requested and postage and fees
prepaid, to the addresses of the parties set forth below, or such other address
as shall be furnished by notice hereunder by any such party or (iii) twenty-four
hours after having been sent by Federal Express or other overnight delivery
service to such address:
Corporation: 000 Xxxxx Xxxxx Xxxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
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Executive: 000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxx 00000
No failure or refusal to accept delivery of any envelope containing such notice
shall affect the validity of such notice or the giving thereof.
15. TERMINATION AFTER CHANGE IN CONTROL.
(a) Cumulative to any other provision of this Agreement, if, within
two years after a change in control of Corporation, Executive's employment
with Corporation terminates for any reason, either voluntarily or
involuntarily, other than by death, permanent disability or retirement at
or after Executive's normal retirement date under Corporation's Retirement
Plan, Corporation promptly will pay Executive, upon Executive's request, as
termination compensation, a lump sum amount, determined as provided in
subsection (b) of this Section 15, and such other amounts as are provided
in subsection (c) of this Section 15. For purposes of this Section, a
"change in control of Corporation" shall mean a change in control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"); provided that, without
limitation, such a change in control of Corporation shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly
or indirectly, of securities of Corporation representing 40% or more of the
combined voting power of Corporation's then outstanding securities; or (ii)
during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board of Directors of Corporation
cease for any reason to constitute at least a majority thereof unless the
election of each new director was approved by a vote of at least two-thirds
of the directors then still in office who were directors at the beginning
of the period.
(b) The lump sum compensation payable to Executive (the "Severance
Payment") shall be equal to the average annual compensation (including
salary and bonuses under the Corporate Management Incentive Compensation
Plan or any predecessor or successor annual incentive compensation plan)
paid or payable by Corporation to Executive during the five most recent
calendar years ending before the date of the change in control of
Corporation (the "Base Amount") multiplied by 2.99; provided, however, if
Executive voluntarily terminates his employment with Corporation, except
after (i) any material adverse change in Executive's duties, location of
employment or benefits, or (ii) any material adverse change to Executive in
the application of the formula of the Corporate Management Incentive
Compensation Plan or any modification in Corporation's accounting methods
or practices materially adverse to Executive, including the assessment of a
management fee, then the Severance Payment shall be equal to
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the highest annual compensation (including salary and bonuses under the
Corporate Management Incentive Compensation Plan or any successor annual
incentive compensation plan) paid or payable by Corporation to Executive
for services rendered in any one of the three calendar years ending with
the year of such termination.
(c) In addition, if Executive's employment with Corporation so
terminates within two (2) years after such a change in control of
Corporation:
(i) any bonus awards previously made to Executive and not
previously paid immediately shall vest upon such termination and
shall be paid;
(ii) Executive's participation in, and terminating
distributions and vested rights under, any applicable retirement
plan, profit sharing plan and stock incentive plan of Corporation
or any of its subsidiaries shall be governed by the terms of those
respective plans; and
(iii) In the event of termination of employment under the
circumstances described in subsection (a) of this Section 15, the
arrangements provided for by this Section 15, by any stock option
or other agreement between Corporation and Executive in effect at
the time and by any other applicable plan of Corporation shall
constitute the entire obligation of Corporation to Executive and
performance thereof shall constitute full settlement of any claim
that Executive might otherwise assert against Corporation on
account of such termination, provided, however, that this provision
and this Agreement shall have no impact on the obligations of
Corporation under that certain Indemnification Agreement dated
August 4, 1993 between Corporation and Executive.
(d) Notwithstanding any provision in this Agreement to the contrary,
in the event that any payment or benefit received or to be received by
Executive in connection with a change in control of Corporation or the
termination of Executive's employment, whether payable pursuant to the
terms of this Agreement or any other plan, arrangement or agreement with
Corporation (collectively the "Total Payments"), would not be deductible
(in whole or part) as a result of Section 280G of the Code, the Severance
Payment shall be reduced until no portion of the Total Payments is not
deductible as a result of Section 280G of the Code, or the Severance
Payment is reduced to zero. For purposes of this limitation, (i) no
portion of the Total Payments, the receipt or enjoyment of which Executive
shall have effectively waived in writing prior to the date of payment of
the Severance Payment, shall be taken into account, (ii) no portion of the
Total Payments shall be taken into account which, in the opinion of tax
counsel selected by Corporation's independent auditors and acceptable to
Executive, does not constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the
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Code, (iii) the Severance Payment shall be reduced only to the extent
necessary so that the Total Payments (excluding payments referred to
in clause (i) or (ii)) in their entirety constitute reasonable
compensation for services actually rendered within the meaning
of Section 280G(b)(4) of the Code, in the opinion of the tax counsel
referred to in clause (ii); and (iv) the value of any non-cash benefit or
any deferred payment or benefit included in the Total Payments shall be
determined by Corporation's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
16. CANCELLATION OF PRIOR EMPLOYMENT AGREEMENT. Corporation and Executive
agree that the Prior Employment Agreement hereby is canceled as of the date
hereof and shall be of no further force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
CORPORATION:
XXXX'X INTERNATIONAL, INC.
By: XXXX X. XXXXX
-------------------------------------
Xxxx X. Xxxxx
President and Chief Operating Officer
EXECUTIVE:
XXXXX XXXXXXX
-----------------------------------------
XXXXX XXXXXXX
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