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EXHIBIT 10.31
EXECUTIVE SEVERANCE AGREEMENT, dated as of May 25, 2000 (the
"Agreement"), between Xxxxxxx Tire Group, Inc., a Delaware
corporation (the "Employer"), and Xxxxxxx X. Xxxx (the
"Employee").
The Employer desires to retain the Employee to supply services
to the Employer in connection with Employer's business of marketing and
distributing wholesale and retail tires and related products (the "Business"),
and the Employee desires to provide such services to the Employer, on the terms
and subject to the conditions set forth in this Agreement.
In consideration of (i) the Employee's agreement to supply
services under this Agreement and (ii) the mutual agreements set forth below,
the sufficiency of which is hereby acknowledged, the Employer and the Employee
agree as follows:
SECTION 1. Employment Relationship.
(a) Employment by Employer. The Employer hereby employs
the Employee, and the Employee hereby agrees to be employed by the Employer, as
President of the T.O. Xxxx Division of the Employer (the "Division"), and the
Employee will devote all of his business time, attention, knowledge and skills
and use his best efforts during the Employment Period to perform services and
duties consistent with his title and position (the "Services") for the Employer
in accordance with directions given to the Employee from time to time by the
Board of Directors of the Employer.
(b) Employment Period. The period commencing on the date
of this Agreement and ending on the date on which this Agreement is terminated
is referred to herein as the "Employment Period." During the Employment Period,
the Employee will be an at-will employee of the Employer. The Employment Period
shall be freely terminable for any reason by either party at any time.
SECTION 2. Compensation and Benefits. During the Employment
Period:
(a) Base Compensation. The Employer shall pay to the
Employee a base salary of $175,000 per annum (the "Base Salary"), payable in
accordance with the Employer's payroll practices. The Base Salary shall be
increased (but not decreased) subject to additional discretionary increases (but
not decreases) as determined periodically by the Board of Directors.
(b) Additional Compensation. As additional compensation
for the Services, the Employer shall pay to the Employee an amount equal to an
annual bonus payment at the "Minimum", "Plan" or "Maximum" percentage payment
levels, as the case may be, in accordance with the terms and conditions of the
Employer's then existing Executive Bonus Plan or such other annual incentive
compensation as the Board of Directors of the Employer determines in its sole
discretion to pay the Employee, payable in all cases on or around March 1 of the
following year. The Employee will be entitled to participate in any Executive
Bonus Plan as a Level 1 Employee. The Employee acknowledges that the Employer
may terminate or
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modify its Executive Bonus Plan and other incentive plans at any time, although
no termination or amendment affecting the Employee will be made effective unless
it is consistently applied to other employees participating in such plans. In
the event of any conflict or inconsistency between the terms of the any
Executive Bonus Plan and the terms of Section 2(b) or 3 of this Agreement, the
terms of Sections 2(b) and 3 of this Agreement shall control.
(c) Retention Payments. In addition to the compensation
set forth in Section 2(a) and (b) above, during the first three years of the
Employment Period, the Employer shall pay to the Employee a bonus (the "Stay-Put
Bonus"), subject to the provisions of Section 3(e)(ii), the Stay-Put Bonus for
any year shall only be payable in the event the Employee is employed by the
Employer as of December 31 of such year. The Stay-Put Bonus for the calendar
year ending December 31, 2000 shall be equal to $287,250. The Stay-Put Bonus for
the calendar year ending December 31, 2001 shall be equal to $670,250. The
Stay-Put Bonus for the calendar year ending on December 31, 2002 shall be equal
to $957,500. Subject to the provisions of Section 3(e)(ii) hereinbelow, the
Stay-Put Bonus for each applicable year shall be payable on or before the
anniversary date of the date hereof in the following year.
(d) Stock Options. The Employee has been granted options
to acquire shares of Class A Common Stock of the Employer, pursuant to the Stock
Option Agreement, dated as of the date hereof, between the Employer and the
Employee (the "1999 Stock Option Agreement"). The stock options granted to the
Employee under the 1999 Stock Option Agreement are granted pursuant to the
Employer's 1999 Stock Option Plan and are subject to vesting in accordance with
the terms of the 1999 Stock Option Agreement Except as otherwise provided in the
1999 Stock Option Agreement and in this Agreement with respect to payments under
the Executive Bonus Plan and except as hereafter mutually agreed by the Employer
and the Employee, in the event of a Change in Control (as defined below), to the
extent not fully vested at such time, the Employee shall become fully vested in
all awards heretofore or hereafter granted to him under all incentive
compensation, deferred compensation, stock option, stock appreciation rights,
restricted stock, phantom stock or other similar plans maintained by the
Employer.
(e) Benefit Plans. During the Employment Period, the
Employee shall be entitled to receive benefits from the Employer consistent with
those currently in effect for the Employer's senior executives (including
deferred compensation plans, and company automobile and financial planning
perquisites), as those benefits are revised from time to time by the Board of
Directors of the Employer. Nothing contained herein is intended to require the
Employer to maintain any existing benefits or create any new benefits. The
Employee will be entitled to participate in the Employer's deferred compensation
program at the level of contribution of $16,000 per year and to receive benefits
thereunder in accordance with the terms and conditions of such program. If the
Employment Period is terminated by the Employer or the Employee as set forth in
Section 3(e)(ii) below, the Employee and relevant family members shall be
entitled to continue to participate in the Employer's welfare benefit plans at
the Employer's expense for a period of 18 months after the termination date. If
the Employment Period is terminated by the Employer or the Employee as set forth
in Section 3(e)(iii) below, the Employee and relevant family members shall be
entitled to continue to participate in the Employer's welfare benefit plans at
the Employer's expense for a period of three years after the termination date.
For purposes of this Section 2(d), the Employees' relevant family members shall
be those members
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of the Employee's immediate family covered by the applicable welfare benefit
plan immediately prior to the termination date.
(f) Vacation and Holidays. The Employee shall be entitled
to a minimum of four weeks' vacation each year and paid holidays in accordance
with the Employer's policy.
(g) No Mitigation. The Employee shall not be required to
mitigate the amount of any payments under this Agreement (whether by seeking new
employment or in any other manner), nor shall any such payment be reduced by any
earnings that the Employee may receive from any other source.
SECTION 3. Termination.
(a) Death or Disability. If the Employee dies during the
Employment Period, the Employment Period shall terminate as of the date of the
Employee's death. If the Employee becomes unable to perform the Services for 90
consecutive days due to a physical or mental disability, (i) the Employer may
elect to terminate the Employment Period at any time thereafter, and (ii) the
Employment Period shall terminate as of the date of such election. All
disabilities shall be certified by a physician acceptable to both the Employer
and the Employee, or, if the Employer and the Employee cannot agree upon a
physician within 15 days, by a physician selected by physicians designated by
each of the Employer and the Employee. The Employee's failure to submit to any
physical examination by such physician after such physician has given reasonable
notice of the time and place of such examination shall be conclusive evidence of
the Employee's inability to perform his duties hereunder.
(b) Cause. The Employer, at its option, may terminate the
Employment Period and all of the obligations of the Employer under this
Agreement for Cause. The Employer shall have "Cause" to terminate the Employee's
employment hereunder after (this will be the date that coincides with the end of
non compete period from the stock purchase agreement) in the event of (i) the
Employee's conviction of or plea of guilty or nolo contendere to a felony, (ii)
the Employee's gross negligence in the performance of the Services, which is not
corrected within 15 business days after written notice, (iii) the Employee's
knowingly dishonest act, or knowing bad faith or willful misconduct in the
performance of the Services, which is not corrected within 15 business days
after written notice, or (iv) the Employee's material breach of any of his
obligations under Section 5, which is not corrected within a reasonable period
of time (determined in light of the cure, if any, appropriate to such material
breach, but in no event less than 15 business days) after written notice. If the
Employee is charged with a felony, then during the period while such charge or
related indictment remains outstanding and until finally determined, the
Employer shall have the right to suspend the Employee without compensation.
(c) Without Cause. The Employer, at its option, may
terminate the Employment Period without Cause at any time.
(d) Termination by Employee for Good Reason. The Employee
may terminate this Agreement upon 60 days' prior written notice to the Employer
for Good Reason (as defined below) if the basis for such Good Reason is not
cured within a reasonable period of time (determined in light of the cure
appropriate to the basis of such Good Reason, but in no
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event less than 15 business days) after the Employer receives written notice
specifying the basis of such Good Reason. "Good Reason" shall mean (i) the
failure of the Employer to pay any undisputed amount due under this Agreement or
a reduction in Base Salary, Fixed Bonus or benefits provided under this
Agreement (other than immaterial reductions in benefits or a reduction in
benefits or salary applicable to all of the Employer's bonus eligible employees)
or a termination of, or reduction in the percentage level of, the "plan" or
"target" bonus opportunity applicable to Employee from the "Plan" percentage
level applicable to a Level 1 Employee under the 2000 Executive Bonus Plan in
effect on the date hereof (the "Effective Date Plan Percentage"), (ii) a
substantial diminution in the status, position and responsibilities of the
Employee or (iii) the Employer requiring the Employee to be based at any office
or location that requires a relocation or commute greater than 50 miles from the
office or location to which the Employee is currently assigned, provided,
however, that Good Reason shall not be deemed to exist due to the travel
requirements consistent with the performance of the Employee's services
hereunder.
(e) Payments in the Event of Termination. (i) Basic
Termination Payment. Upon the termination of the Employment Period at any time
for any reason, the Employer shall pay to the Employee or his estate the Base
Salary earned to the date of termination, and if such termination occurs after
December 31st of any year for which a bonus is payable pursuant to Section 2(b)
but before such bonus has been paid, the Employer shall pay to the Employee or
his estate the bonus due for the preceding year.
(ii) Additional Involuntary Termination Payment.
Upon the termination of the Employment Period at any time by the Employer
without Cause or by the Employee for Good Reason, the Employer shall pay to the
Employee within five business days of such termination a lump-sum amount (in
addition to the amount payable under the first sentence of Section 3(e)(i))
equal to (x) the sum of the Employee's annual Base Salary at the annual rate in
effect on the date of termination and the Severance Bonus Amount, multiplied by
(y) 1.5. Additionally, upon a termination of the Employment Period at any time
by the Employer without Cause or by Employee for Good Reason, the Employer shall
pay to the Employee a lump sum amount equal to the sum of all Stay-Put Bonuses
not yet paid. Notwithstanding the foregoing, the Employee shall be entitled to
no payment under this Section 3(e)(ii) if he is entitled to receive a payment
under Section 3(e)(iii). "Severance Bonus Amount" means an amount equal to the
Employee's Base Salary at the annual rate in effect on the date of termination
multiplied by a percentage, which is the greater of (1) the Effective Date Plan
Percentage and (2) the "plan" or "target" bonus percentage then applicable under
any executive bonus plan or other incentive compensation program.
(iii) Additional Change in Control Payment. Upon
the termination of the Employment Period (x) by the Employer without Cause upon
or prior to a Change in Control, provided that the Employee reasonably
demonstrates that such termination occurred at the request of a third party
participating in, or otherwise in anticipation of or in connection with, such
Change in Control, or (y) by the Employee with Good Reason or by the Employer
for any reason other than for Cause within one year after a Change in Control,
then the Employer shall pay to the Employee within five business days of such
termination a lump-sum amount (in addition to the amount payable under the first
sentence of Section 3(e)(i)) equal to the sum of (A) the higher of (1) the
Employee's annual Base Salary at the date of such termination or (2) the
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Employee's annual Base Salary at the time of the Change in Control, in each case
multiplied by three, (B) the Severance Bonus Amount multiplied by three and (C)
the aggregate amount of any remaining Stay-Put Bonuses not yet paid to Employee.
If the Employment Period is terminated by the Employee for any reason other than
with Good Reason on or after the first anniversary of a Change in Control but no
later than the 30th day after such first anniversary, the Employee shall be
entitled to 50% of the payments specified in this Section 3(e)(iii). If the
Employment Period is terminated by the Employee with Good Reason at any time on
or after the first anniversary of a Change in Control, the Employee shall be
entitled to the payment specified in Section 3(e)(ii).
(iv) Change in Control Defined. "Change in
Control" means the first to occur of any of the following: (A) the sale
(including by merger, consolidation or sale of stock of subsidiaries or any
other method) of all or substantially all of the assets of the Employer and its
consolidated subsidiaries (taken as a whole) to any person or entity not
directly or indirectly controlled by the holders of at least 50% of the Combined
Voting Power of the then outstanding shares of capital stock of the Employer
(excluding shares owned by employees of the Employer as of the date of
determination) (B) at any time prior to the consummation of an initial public
offering of Class A Common Stock of the Employer or other common stock of the
Employer having the voting power to elect directors, a transaction (except
pursuant to such initial public offering) resulting in the Principal
Shareholders owning, collectively, less than 50% of the Combined Voting Power of
the then outstanding shares of capital stock of the Employer (excluding shares
owned by employees of the Employer as of the date of determination), (C) at any
time after the consummation of an initial public offering of Class A Common
Stock of the Employer or other common stock of the Employer having the voting
power to elect directors, the acquisition (except pursuant to such initial
public offering) by any person or entity (other than the Principal Shareholders)
not directly or indirectly controlled by the Employer's stockholders of more
than 30% of the Combined Voting Power of the then outstanding shares of capital
stock of the Employer (excluding shares owned by employees of the Employer as of
the date of determination), (D) individuals serving as directors of the Employer
on the date hereof and who were nominated or selected to serve as directors by
one or more Principal Shareholders (together with any new directors whose
election was approved by a vote of (x) such individuals or directors whose
election was previously so approved or (y) Principal Shareholders holding a
majority of the aggregate voting power of the capital stock of the Employer held
by all Principal Shareholders) cease for any reason to constitute a majority of
the Board of Directors of the Employer, (E) the adoption of a plan relating to
the liquidation or dissolution of the Employer in connection with an equity
investment or sale or a business combination transaction or (F) any other event
or transaction that the Board of Directors of the Employer deems to be a Change
in Control. "Combined Voting Power" with respect to capital stock of the
Employer means the number of votes such stock is normally entitled (without
regard to the occurrence of any contingency) to vote in an election of directors
of the Employer. "Principal Shareholders" means (i) Charlesbank Equity Fund IV,
Limited Partnership and the investors in such fund, (ii) Charlesbank Equity Fund
IV G.P. Limited Partnership, (iii) Charlesbank Capital Partners, LLC (and any
other fund managed by Charlesbank Capital Partners, LLC), (iv) any investor
(other than The 1818 Mezzanine Fund, L.P.) whose investment in the Employer is
approved by the representative of management on the board of the Employer, (v)
any new investors in the Company designated as Principal Shareholders by
Charlesbank Capital Partners, LLC within one year of the initial investment by
Charlesbank Equity Fund IV, Limited Partnership, and (vi) any
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corporation, partnership, limited liability company or other entity a majority
of the capital stock or other ownership interests of which are directly or
indirectly owned by any of the foregoing
(v) Other Provisions Applicable to Payments. Any
amounts due under this Section 3 and not paid when due shall bear interest
(compounded annually) for the period from and including the date payable to but
excluding the date paid at a rate per annum equal to the sum of (x) four percent
and (y) the rate publicly announced by BankBoston, N.A. as its "prime rate."
(f) Termination of Obligations. In the event of
termination of the Employment Period in accordance with this Section 3, all
obligations of the Employer and the Employee under this Agreement shall
terminate, except for any amounts payable by the Employer as specifically set
forth in Section 3(e); provided, however, that notwithstanding anything to the
contrary contained in this Agreement, the provisions of Section 5 shall survive
such termination in accordance with their respective terms and the relevant
provisions of Section 6 shall survive such termination indefinitely. In the
event of termination of the Employment Period in accordance with this Section 3,
the Employee agrees to cooperate with the Employer in order to ensure an orderly
transfer of the Employee's duties and responsibilities.
SECTION 4. Parachute Excise Tax Gross-Up
(a) If, as a result of any payment or benefit provided
under this Agreement or under any other plan, arrangement or other agreement
with the Employer or any entity affiliated with the Employer, either alone or
together with such other payments and benefits which the Employee receives or is
then entitled to received from the Employer, the Employee becomes subject to the
excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), (together with any interest and penalties thereon an
"Excise Tax"), the Employer shall pay the Employee an amount (the "Gross-Up
Payment") sufficient to place the Employee in the same after-tax financial
position that he would have been in if he had not incurred any tax liability
under Section 4999 of the Code. For purposes of determining whether the Employee
is subject to an Excise Tax and the amount of any Gross-Up Payment, (i) any
payments or benefits received by the Employee (whether pursuant to the terms
hereof or pursuant to any plan, arrangement or other agreement with the Employer
or any entity affiliated with the Employer) which payments ("Contingent
Payments") are deemed to be contingent on a change described in Section
280G(b)(2)(A)(i) of the Code shall be taken into account and (ii) the Employee
shall be deemed to pay federal, state and local taxes at the highest marginal
applicable rates of such taxes for the calendar year in which the Gross-Up
Payment is to be made, net of the maximum deduction from federal income taxes
which could be obtained from deduction of any state and local taxes deemed paid
by the Employee.
(b) The determination of whether the Employee is subject
to Excise Tax and the amounts of such Excise Tax and Gross-Up Payment, as well
as other calculations hereunder, shall be made at the expense of the Employer by
Xxxxxx Xxxxxxxx, which shall provide the Employee with prompt written notice
(the "Employer Notice") setting forth their determinations and calculations.
Within 30 days following the receipt by the Employee of the Employer Notice, the
Employee may notify the Employer in writing (the "Employee Notice") if the
Employee disagrees with such determinations or calculations, setting forth the
reasons for any such
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disagreement. If the Employer and the Employee do not resolve such disagreement
within 10 business days following receipt by the Employer of the Employee
Notice, such dispute will be resolved in accordance with Section 6(f). The
Employer shall pay all reasonable expense incurred by either party in connection
with the determinations, calculations, disagreements or resolutions pursuant to
this paragraph, including, but not limited to, reasonable legal, consulting or
other similar fees.
(c) The Employee shall notify the Employer in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Employer of a Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Employee is
informed in writing of such claim and shall apprise the Employer of the nature
of such claim and the date of which such claim is requested to be paid. The
Employee shall not pay such claim prior to the expiration of the 30 day period
following the date on which the Employee gives such notice to the Employer (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Employer notifies the Employee in writing prior to
the expiration of such period that it desires to contest such claim, the
Employee shall:
(i) give the Employer any information reasonably
requested by the Employer relating to such claim;
(ii) take such action in connection with
contesting such claim as the Employer shall reasonably request in writing from
time to time, including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the Employer and
reasonably satisfactory to the Employee;
(iii) cooperate with the Employer in good faith in
order to effectively contest such claim; and
(iv) permit the Employer to participate in any
proceedings relating to such claim; provided, however, that the Employer shall
bear and pay directly all costs and expenses (including, but not limited to,
additional interest and penalties and related legal, consulting or other similar
fees) incurred in connection with such contest and shall indemnify and hold the
Employee harmless, on an after-tax basis, for any Excise Tax or other tax
(including interest and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expenses.
(d) The Employer shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Employee to pay the tax claimed and xxx for a refund or contest the
claim in any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Employer shall
determine; provided, however, that if the Employer directs the Employee to pay
such claim and xxx for a refund, the Employer shall advance the amount of such
payment to the Employee on an interest-free basis, and shall indemnify and hold
the Employee harmless, on an after-tax basis, from any Excise Tax or other
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tax (including interest or penalties with respect thereto) imposed with respect
to such advance or with respect to any imputed income with respect to such
advance; and provided, further, that if the Employee is required to extend the
statute of limitations to enable the Employer to contest such claim, the
Employee may limit this extension solely to such contested amount. The
Employer's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Employee shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority. In addition, no position
may be taken nor any final resolution be agreed to by the Employer without the
Employee's consent if such position or resolution could reasonably be expected
to adversely affect the Employee (including any other tax position of the
Employee unrelated to the matters covered hereby).
(e) As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Employer hereunder, it is possible that Gross-Up Payments which will not have
been made by the Employer should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Employer exhausts its remedies and the Employee thereafter is required to pay to
the Internal Revenue Service an additional amount in respect of any Excise Tax,
the Employer (in the same fashion as set forth in Section 4(b) shall determine
the amount of the Underpayment that has occurred and any such Underpayment shall
promptly be paid by the Employer to or for the benefit of the Employee.
(f) If, after the receipt by Employee of an amount
advanced by the Employer in connection with the contest of an Excise Tax claim,
the Employee becomes entitled to receive any refund with respect to such claim,
the Employee shall promptly pay to the Employer the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Employee of an amount advanced by the
Employer in connection with an Excise Tax claim, a determination is made that
Employee shall not be entitled to any refund with respect to such claim and the
Employer does not notify the Employee in writing of its intent to contest the
denial of such refund prior to the expiration of 30 days after receiving notice
of such determination, such advance shall be forgiven and shall not be required
to be repaid and the amount of such advance shall be offset, to the extent
thereof, by the amount of the Gross-Up Payment.
SECTION 5. Confidential Information; Non-Competition.
(a) Stock Purchase Agreement. The Employee acknowledges
and agrees that pursuant to that certain Stock Purchase Agreement (herein "Stock
Purchase Agreement"), dated April 14, 2000 among Employee and others and that
certain Non-Competition Agreement dated as of May, 2000 between Employer and
Employee, Employee agreed to certain Confidentiality and Non-Competition
provisions which are hereby ratified and affirmed by Employee and Employer, and
nothing in this Agreement shall affect the validity of such provisions.
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(b) Non-Disclosure of Confidential Information.
(i) For the Employment Period and at all times
thereafter, the Employee covenants and agrees that he will not disclose
"Confidential Information" (as herein defined) to persons other than
Employer and its Affiliates and their employees .and except as
necessary in connection with the advancement of the interests of
Employer. For purposes of this Agreement, "Confidential Information"
shall mean all confidential, proprietary or secret information whether
or not reduced to writing relating to the products, equipment or
business of Employer and its Affiliates submitted to the Employee or
received, compiled, developed, designed, produced or otherwise
discovered by the Employee from time to time during the Employment
Period. Confidential Information may include, without limitation, all
plans, records, customer lists, forms, formulae, designs,
specifications, drawings, computer programs, inventions, discoveries,
methods of manufacture, price lists, trade secrets and business
secrets. Confidential Information shall not include information which
(i) is or becomes available to the public from a source other than the
Employee; or (ii) becomes known by Employee from a third party source
having the right to disclose the information.
(ii) The Employee specifically acknowledges that
Confidential Information, whether compiled or created by Employer or by
the Employee or otherwise, derives independent economic value from not
being readily known to or ascertainable by proper means by others who
can obtain economic value from the disclosure of Confidential
Information and that any retention and/or disclosure or other use of
Confidential Information by Employee during or after the termination of
the Employee's employment with Employer (except in the regular course
of performing his duties hereunder) will constitute a misappropriation
of Confidential Information belonging to Employer.
(iii) The Employee agrees that upon termination of
his employment with Employer, for any reason, voluntary or involuntary,
with or without Cause, he will immediately return to Employer any
Confidential Information, copies of the same, and any other property
belonging to Employer, within his possession, and will not at any time
thereafter copy, reproduce or otherwise facilitate the future
disclosure of the same. The Employee agrees that, following such
termination of employment, he shall not disclose or use any
Confidential Information which he receives, compiles, develops,
designs, produces or otherwise discovers from time to time during the
Employment Period and that all embodiments of such information shall
belong to Employer or its affiliates, as the case may be. The Employee
further agrees that he will not retain or use for his account at any
time any trade names, trade xxxx, service xxxx, or other proprietary
business designation used or owned in connection with the business of
Employer or any of its affiliates.
(iv) The Employee's obligations under this
Section 5(b) will survive termination of his employment for any reason.
The Employee shall not be prohibited from disclosing Confidential
Information to the extent required by law or judicial or
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administrative proceeding (after providing Employer with notice and an
opportunity to contest such requirement) to make disclosure.
(c) Noncompetition.
(i) Period of Covenant. The term of the
following noncompetition covenant shall be during the Employment Period
and a period of two (2) years after the termination of the Employment
Period for any reason. Such period is hereinafter referred to as the
"Noncompetition Period".
(ii) Nature and Scope of Covenant. The Employee
covenants and agrees not to carry on or engage in, directly or
indirectly, on his own behalf or by or through any other person or
entity, any business or other activity in competition with the Business
(as defined below) during the Noncompetition Period within the United
States (the "Restricted Territory"). Without limiting the generality of
the foregoing, the Employee covenants and agrees that during the
Noncompetition Period and except in connection with his employment by
Employer he will not, directly or indirectly, engage in any of the
following activities:
(A) own any interest in (other than ownership of
less than five percent (5%) of the voting securities of a
publicly traded company), manage or serve as an employee of or
consultant, business advisor or independent contractor, either
directly or indirectly, for any individual, corporation,
partnership, association, joint venture or other entity which
is engaged in a business in competition with the Business;
(B) solicit business similar to the Business
from any customer that has done business with, or potential
customers that have been in contact with Employer during the
Employment Period.
(C) make a loan to, or guarantee the obligations
of, any individual or entity engaged in a business in
competition with the Business or make a loan to, or guarantee
the obligations of, any owner, officers, director, partner or
shareholder thereof;
(D) request, induce or attempt to influence any
customer or any supplier of goods or services to the Employer
to curtail or cancel any business it transacts with the
Employer with respect to the Business; or
(E) request, induce or attempt to influence any
employee of the Employer to terminate his or her employment
with the Employer, or attempt to dissuade any then current
employee of the Employer from continuing employment with the
Employer.
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SECTION 6. General Provisions.
(a) Enforceability. It is the desire and intent of the
parties hereto that the provisions of this Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, although the Employee
and the Employer consider the restrictions contained in this Agreement to be
reasonable for the purpose of preserving the Employer's goodwill and proprietary
rights, if any particular provision of this Agreement shall be adjudicated to be
invalid or unenforceable, such provision shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable, such
deletion to apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication is made. It is expressly
understood and agreed that although the Employer and the Employee consider the
restrictions contained in Section 5 to be reasonable, if a final determination
is made by a court of competent jurisdiction that the time or territory or any
other restriction contained in this Agreement is unenforceable against the
Employee, the provisions of this Agreement shall be deemed amended to apply as
to such maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable.
(b) Remedies. The parties acknowledge that the Employer's
damages at law would be an inadequate remedy for the breach by the Employee of
any provision of Section 5, and agree in the event of such breach that the
Employer may obtain temporary and permanent injunctive relief restraining the
Employee from such breach, and, to the extent permissible under the applicable
statutes and rules of procedure, a temporary injunction may be granted
immediately upon the commencement of any such suit. Nothing contained herein
shall be construed as prohibiting the Employer from pursuing any other remedies
available at law or equity for such breach or threatened breach of Section 5 or
for any breach or threatened breach of any other provision of this Agreement.
(c) Withholding. The Employer shall withhold such amounts
from any compensation or other benefits payable to the Employee under this
Agreement on account of payroll and other taxes as may be required by applicable
law or regulation of any governmental authority.
(d) Employer Successors. The Employer shall require any
successor or successors (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Employer's business and/or assets, by an agreement in substance and
form satisfactory to the Employee, to assume this Agreement and to agree
expressly to perform this Agreement in the same manner and to the same extent as
the Employer would be required to perform it in the absence of a succession. The
Employer's failure to obtain such agreement prior to the effectiveness of a
succession shall be a breach of this Agreement and shall entitle the Employee to
all of the compensation and benefits to which he would have been entitled
hereunder if the Employer had involuntarily terminated his employment without
Cause immediately after such succession become effective. For all purposes under
this Agreement, the term "Employer" shall include any successor or successors to
the Employer's business and/or assets which executes and delivers the assumption
agreement described in the subsection or which becomes bound by this Agreement
by operation of law.
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(e) Employee's Successors. This Agreement and all rights
of the Employee hereunder shall inure to the benefit of, and be enforceable by,
the Employee's personal or legal representatives, executors, administrators,
successors, heirs, distributee, devisees and legatees.
(f) Indemnity. The Employer hereby agrees to indemnify
and hold the Employee harmless consistent with the Employer's policy against any
and all liabilities, expenses (including attorneys' fees and costs), claims,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any proceeding arising out of the Employee's
employment with the Employer (whether civil, criminal, administrative or
investigative, other than proceedings by or in the right of the Employer), if
with respect to the actions at issue in the proceeding the Employee acted in
good faith and in a manner Employee reasonably believed to be in, or not opposed
to, the best interests of the Employer, and (with respect to any criminal
action) Employee had no reason to believe Employee's conduct was unlawful. Said
indemnification arrangement shall (i) survive the termination of this Agreement,
(ii) apply to any and all qualifying acts of the Employee which have taken place
during any period in which he was employed by the Employer, irrespective of the
date of this Agreement or the term hereof, including, but not limited to, any
and all qualifying acts as an officer and/or director of any affiliate while the
Employee is employed by the Employer and (iii) be subject to any limitations
imposed from time to time under applicable law.
(g) Dispute Resolution; Attorney's Fees. The Employer and
the Employee agree that any dispute arising as to the parties' rights and
obligations hereunder shall be resolved by binding arbitration before an
arbitrator to be determined by mutually agreeable means. In such event, each of
the Employer and the Employee shall have the right to full discovery. The
Employer shall bear all costs of the arbitrator in any such proceeding, and if
the arbitration is definitively decided in the Employee's favor, the Employee
shall have the right, in addition to any other relief granted by such
arbitrator, to recover reasonable attorneys' fees; provided, however, that the
Employer shall have the right, in any dispute other than a dispute relating to
the occurrence of a Change in Control or the payment of an amount under Section
3(e)(iii), in addition to any other relief granted by such arbitrator, to
recover reasonable attorneys' fees in the event that a claim brought by the
Employee is definitively decided in the Employer's favor (with the amount of
such fees being limited to those expended defending the claim or claims decided
in favor of the Employer). Any judgment by such arbitrator may be entered into
any court with jurisdiction over the dispute.
(h) Acknowledgment. The Employee acknowledges that he has
been advised by the Employer to seek the advice of independent counsel prior to
reaching agreement with the Employer on any of the terms of this Agreement. The
parties agree that no rule of construction shall apply to this Agreement which
construes ambiguous language in favor of or against any party by reason of that
party's role in drafting the Agreement.
(i) Amendments and Waivers. No modification, amendment or
waiver, of any provision of, or consent required by, this Agreement, nor any
consent to any departure herefrom, shall be effective unless it is in writing
and signed by the parties hereto. Such modification, amendment, waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.
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(j) Notices. All notices or other communications which
are required or permitted hereunder shall be in writing and sufficient if
delivered personally or sent by registered or certified mail, postage prepaid,
return receipt requested, sent by overnight courier, or sent by facsimile (with
confirmation of receipt), addressed as follows:
If to the Employer:
Xxxxxxx Tire Group, Inc.
0000 Xxxxx Xxxxx Xxxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxxx & Xxxxxxx
1330 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxx
Facsimile: (000) 000-0000
and:
Charlesbank Capital Partners, LLC
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attention: Xxxx X. Xxxxx and Xxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy to:
Skadden, Arps, Slate Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx
If to the Employee:
Xxxxxxx X. Xxxx
X.X. Xxx 00000
Xxxxxxx, XX 00000
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With a copy to:
Xxxxxx, Xxxxxx, Xxxxx & Xxxxxxx
0000X Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xxxxxxx Xxxxx
Facsimile: 000-000-0000
or at such other address as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
If such notice or communication is mailed, such communication shall be deemed to
have been given on the fifth business day following the date on which such
communication is posted.
(k) Descriptive Headings; Certain Interpretations.
Descriptive headings are for convenience only and shall not control or affect
the meaning or construction of any provision of this Agreement. Except as
otherwise expressly provided in this Agreement: (i) any reference in this
Agreement to any agreement, document or instrument includes all permitted
supplements and amendments; (ii) a reference to a law includes any amendment or
modification to such law and any rules or regulations issued thereunder; (iii)
the words "include," "included" and "including" are not limiting; and (iv) a
reference to a person or entity includes its permitted successors and assigns.
(l) Counterparts; Entire Agreement. This Agreement may be
executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all such counterparts together shall
constitute one agreement. This Agreement and the 1999 Stock Option Agreement
contain the entire agreement among the parties with respect to the transactions
contemplated by this Agreement and the 1999 Stock Option Agreement and supersede
all other or prior written or oral agreements or understandings among the
parties with respect to the Employee's employment by the Employer.
(M) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NORTH
CAROLINA.
(N) CONSENT TO JURISDICTION. EACH OF THE PARTIES TO THIS
AGREEMENT AGREES TO BE BOUND BY THE PROVISIONS SET FORTH IN EXHIBIT C TO THIS
AGREEMENT. EACH OF EMPLOYEE AND EMPLOYER HEREBY IRREVOCABLY AND UNCONDITIONALLY
SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT IN
CHARLOTTE, NORTH CAROLINA FOR THE PURPOSES OF ALL LEGAL PROCEEDINGS WHICH ARISE
OUR OF OR RELATE TO THIS AGREEMENT, AND EACH OF EMPLOYEE AND EMPLOYER AGREES NOT
TO COMMENCE ANY LEGAL PROCEEDING RELATED THERETO EXCEPT IN SUCH COURT. EACH OF
EMPLOYEE AND EMPLOYER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, ANY OBJECTION WHICH IT MAY NOW OF HEREAFTER HAVE TO THE LAYING OF VENUE IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
XXXXXXX TIRE GROUP, INC.
By: /s/ Xxxxxx X. Roof
--------------------------------------
Xxxxxx X. Roof
President and Chief Executive Officer
/s/ Xxxxxxx X. Xxxx
-----------------------------------------
Xxxxxxx X. Xxxx, Employee
