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EXHIBIT 10.17A
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of July 1, 1997, by and between
XXXXXXX COMPUTER SERVICES, INC., a Delaware corporation, (hereinafter called
the "Corporation") and XXXXXX X. XXXXXX, (hereinafter called the "Executive").
WITNESSETH THAT:
WHEREAS, the Corporation desires to continue to employ the Executive as
its President and Chief Executive Officer, and the Executive desires to
continue in such employment;
NOW, THEREFORE, the Corporation and the Executive, each intending to be
legally bound, hereby mutually covenant and agree as follows:
1. Employment and Term.
(a) Employment. The Corporation shall employ the Executive as the
President and Chief Executive Officer of the Corporation, and the Executive
shall so serve, for the term set forth in Paragraph 1(b).
(b) Term. The term of the Executive's employment under this Agreement
shall commence on July 1, 1997 and end on June 30, 2000, subject to the
extension of such term as hereinafter provided and subject to earlier
termination as provided in Paragraph 9. The term of this Agreement shall be
extended automatically for one (1) additional year as of July 1, 1998 and each
annual anniversary date thereof unless, no later than ninety (90) days prior to
any such renewal date, either the Board of Directors of the Corporation (the
"Board"), on behalf of the Corporation, or the Executive gives written notice
to the other, in accordance with Paragraph 16, that the term of this Agreement
shall not be so extended.
2. Duties. During the period of employment as provided in Paragraph 1(b)
hereof, the Executive shall serve as President and Chief Executive Officer of
the Corporation and have all powers and duties consistent with such positions,
subject to the reasonable direction of the Board. The Executive shall also
continue to serve as a member of the Board if elected as such, and the parties
anticipate (but make no commitment) that, in the absence of a significant
change in circumstances, the Executive will be elected in November 1997 to the
additional position of Chairman of the Board. The Executive shall devote
substantially his entire time during reasonable business hours (reasonable sick
leave and vacations excepted) and such additional time as is necessary to
fulfill faithfully, responsibly and to the best of his ability his duties
hereunder.
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3. Salary.
(a) Base Salary. For services performed by the Executive for the
Corporation pursuant to this Agreement during the period of employment as
provided in Paragraph 1(b) hereof, the Corporation shall pay the Executive a
base salary at the rate of four hundred fifty-eight thousand six hundred
forty-six dollars ($458,646) per year, payable in substantially equal
installments in accordance with the Corporation's regular payroll practices.
The Executive's base salary (with any increases under paragraph (b), below)
shall not be subject to reduction. Any compensation which may be paid to the
Executive under any additional compensation or incentive plan of the
Corporation or which may be otherwise authorized from time to time by the Board
(or an appropriate committee thereof) shall be in addition to the base salary
to which the Executive shall be entitled under this Agreement.
(b) Salary Increases. During the period of employment as provided in
Paragraph 1(b) hereof, the base salary of the Executive shall be reviewed no
less frequently than annually by the Board to determine whether or not the same
should be increased in light of the duties and responsibilities of the
Executive and the performance thereof, and if it is determined that an increase
is merited, such increase shall be promptly put into effect and the base salary
of the Executive as so increased shall constitute the base salary of the
Executive for purposes of Paragraph 3(a).
4. Annual Bonuses. For each fiscal year during the term of employment,
the Executive shall be eligible to receive a cash bonus based on the
Corporation's achievement of certain operating and/or financial goals, with an
annual target bonus amount equal to 60% of the Executive's then current annual
base salary, in accordance with the terms of a bonus plan adopted and
administered by the Board for senior executives of the Corporation, which plan
may be amended from time to time by the Board in its discretion.
5. Payment of Bonuses. Whenever any annual bonus or any other cash bonus
is awarded to Executive, payment of such bonus shall be made in accordance with
the following provisions:
(a) Prior to the commencement of any fiscal year, Executive may advise
the Compensation Committee of the Board of his election to be paid any annual
bonus or any other cash bonus to be awarded to him for such fiscal year on a
current or deferred basis. If no such election is made, Executive shall be
deemed to have elected to be paid such bonus on a current basis.
(b) Any bonus payable on a current basis shall be paid to Executive
within sixty (60) days of the date of the award, subject to normal withholdings
and deductions.
(c) Any bonus payable on a deferred basis shall be accrued and paid to
Executive as follows:
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(i) Effective as of the date of the award, the Corporation shall
credit the amount of any deferred bonus to the book reserve account known as the
"Deferred Compensation Account of Xxxxxx X. Xxxxxx" (hereinafter referred to as
the "Deferred Compensation Account"). There shall also be credited to the
Deferred Compensation Account, effective as of the date hereof, all deferred
bonuses and interest accrued thereon credited to Executive prior to the date
hereof.
(ii) Interest shall accrue on all amounts credited to the Deferred
Compensation Account from the date credited to such account until the date paid
to Executive as provided in paragraph (iii), below. Such interest shall be
computed quarterly on the last day of each calendar quarter based upon the
interest rate payable on ninety (90) day certificates of deposit of The First
National Bank of Chicago prevailing as of the first day of such calendar
quarter. Interest shall be credited to the Deferred Compensation Account, and
thereafter accrue interest as provided in this paragraph (ii), effective as of
the first day of each calendar year. Any other provision of this subparagraph
(ii) to the contrary notwithstanding, in the event the Corporation shall
implement deferred compensation provisions in connection with its incentive
compensation programs which provide for deferred payments thereunder in the
form of, or based on the rate of return of the Corporation's common stock, the
Executive shall be provided with a similar deferred payment opportunity with
regard to the Deferred Compensation Account.
(iii) The amounts of deferred bonus and other amounts credited to the
Deferred Compensation Account shall be paid to Executive, subject to normal
withholdings and deductions, in one hundred twenty (120) equal monthly
installments, with interest on the unpaid balance at the rate specified in
paragraph (ii), above, commencing in the month immediately following the
termination of Executive's employment with the Corporation; provided, however,
that if Executive should die before all amounts credited to the Deferred
Compensation Account have been paid to him, the full unpaid amount then
credited to the Deferred Compensation Account and all interest accrued thereon
shall be immediately paid in a lump sum to his designated beneficiary or, if no
beneficiary is designated, to his estate.
(d) Any other provision of this Agreement to the contrary
notwithstanding, Executive may at any time or from time to time request the
payment to him of all or any portion of the amounts then credited to the
Deferred Compensation Account, but the Corporation shall make a payment to
Executive pursuant to such a request only if and to the extent that such
request is approved by the Board.
(e) The Corporation shall designate the provisions of this Agreement and
the Change of Control Agreement (described in Paragraph 23 below) relating to
the Deferred Compensation Account as a "Plan" subject to the provisions of the
Xxxxxxx Computer Services, Inc. Benefit Trust (the "Benefit Trust").
6. Equity Incentive Compensation. During the term of employment hereunder
the
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Executive shall be eligible to participate, in an appropriate manner relative
to other senior executives of the Corporation, in any equity-based incentive
compensation plan or program approved by the Board from time to time, including
(but not by way of limitation) any plan providing for the granting of (a)
options to purchase stock of the Corporation, (b) restricted stock of the
Corporation or (c) similar equity-based units or interests.
7. Other Benefits. In addition to the compensation described in
Paragraphs 3, 4 and 6, above, the Executive shall also be entitled to the
following:
(a) Participation in Benefit Plans. The Executive shall be entitled to
participate in all of the various retirement, welfare, fringe benefit,
executive perquisite, and expense reimbursement plans, programs and
arrangements of the Corporation to the extent the Executive is eligible for
participation under the terms of such plans, programs and arrangements, except
that the Executive shall not participate in the Supplemental Retirement Plan of
the Corporation.
(b) Uninsured Medical Expenses. Continuing until Executive's death,
or if later, the death of Executive's spouse, the Corporation shall reimburse
Executive upon request for expenses incurred by Executive for or in respect of
medical care (as defined in Section 213 of the Internal Revenue Code of 1986,
as amended (the "Code")) of Executive and his spouse; provided, however, that
Executive shall be entitled to reimbursement of medical expenses as set forth
in this paragraph (b) if and so long as (and only if and so long as) (i)
Executive does not, at any time while he is an employee of the Corporation or
at any time thereafter, violate the confidentiality, noncompetition or
nonsolicitation covenants set forth in Paragraph 8, below, and (ii) Executive
does not commit any action that would permit the Corporation to terminate his
employment for "Cause" (as defined in Paragraph 9(d)(ii), below). The
Corporation may, in its discretion, pay any such medical expenses directly in
lieu of making reimbursement therefor. The reimbursement or payment of such
medical expenses on behalf of Executive and/or his spouse shall be limited to
an aggregate of $500,000, and reimbursement or payment of such medical expenses
shall be made by the Corporation only in the event and to the extent that such
reimbursement or payment is not then provided under any insurance policy or
policies, whether owned by the Corporation or Executive, or under any other
private or public health and accident plan or program under which Executive or
his spouse, as the case may be, is then eligible for benefits; provided,
however, that, if Executive's employment terminates:
(i) Before his 55th birthday, there shall be no reimbursement or
payment of medical expenses on behalf of Executive and/or his spouse after his
employment terminates,
(ii) On or after his 55th but before his 60th birthday, the
reimbursement or payment of medical expenses on behalf of Executive and/or his
spouse shall be limited to an aggregate of $150,000, or
(iii) On or after his 60th but before his 65th birthday, the
reimbursement or payment of medical expenses on behalf of Executive and/or his
spouse shall be limited to an
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aggregate of $300,000.
Upon the request of the Corporation, Executive shall submit to the Corporation
hospitalization, doctor, dental or other medical bills, including premium
notices for accident or health insurance, for verification by the Corporation.
(c) Supplemental Retirement Benefit. Except as described in paragraph
(ii), below, the Corporation shall pay to the Executive after the termination
of his employment a Supplemental Retirement Benefit ("SRB") determined and paid
as follows:
(i) The monthly amount of the SRB shall be the excess of (A) the
amount determined by multiplying (1) the Executive's Recent Average Monthly
Compensation (as described in paragraph (iii), below) by (2) the Executive's
Supplemental Retirement Percentage (as described in paragraph (ii), below) over
(B) the sum (but not to exceed 70% of the amount determined under the
immediately preceding clause (A)) of (1) the Executive's monthly Social
Security retirement benefits, if any, and (2) the monthly amount payable under
a single-life annuity for the Executive's life which is the actuarial
equivalent of the benefits payable to the Executive under any retirement or
profit-sharing plan or program provided by the Corporation, to the extent such
benefits are attributable to contributions by the Corporation other than
contributions by the Corporation on behalf of the Executive under a salary
reduction agreement.
(ii) The Executive's Supplemental Retirement Percentage shall be
25%, plus an additional 2.5% for each additional year of age attained by the
Executive after age 55, up to a maximum Supplemental Retirement Percentage of
50% upon attaining age 65; but the Supplemental Retirement Percentage shall be
0% if the Executive's employment with the Corporation and its subsidiaries
terminates prior to age 55 and such termination is for Cause (as defined in
Paragraph 9(d)(ii), below) or because of the Executive's resignation without
Good Reason (as defined in Paragraph 9(d)(v), below).
(iii) The Executive's Recent Average Monthly Compensation shall be
the monthly average of his cash compensation for the last 60 months of his
full-time employment by the Corporation. Cash compensation shall consist of
salary, current and deferred bonuses, and contributions paid on the Executive's
behalf by the Corporation pursuant to a salary reduction agreement but shall
not include amounts attributable to equity-participation awards or payments
made during that 60-month period pursuant to deferral from a previous period.
(iv) The SRB shall be payable in monthly installments for the life
of the Executive but in any event for a minimum period of 10 years after the
termination of employment. If the Executive dies before the completion of 120
monthly payments, the remaining payments shall be made to his designated
beneficiary or, if none is designated, to his estate. If the Executive dies
prior to termination of employment, the SRB shall be calculated as of the date
of the Executive's death and shall be paid for a period of 10 years to the
Executive's designated beneficiary or, if none is designated, to his estate.
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(v) The Corporation's shall designate the provisions of this
Agreement and the Change in Control Agreement relating to the SRB as a "Plan"
subject to the provisions of the Benefit Trust.
8. Covenants of the Executive. In order to induce the Corporation to
enter into this Agreement, the Executive hereby agrees as follows:
(a) Confidentiality. Except for and on behalf of the Corporation with
the consent of or as directed by the Board, the Executive shall keep
confidential and shall not divulge to any other person or entity, during the
term of employment or thereafter, any of the business secrets or other
confidential information regarding the Corporation and its subsidiaries which
has not otherwise become public knowledge; provided, however, that nothing in
this Agreement shall preclude the Executive from disclosing information (i) to
an appropriate extent to parties retained to perform services for the
Corporation or its subsidiaries or (ii) under any other circumstances to the
extent such disclosure is, in the reasonable judgment of the Executive,
appropriate or necessary to further the best interests of the Corporation or
its subsidiaries or (iii) as may be required by law.
(b) Records. All papers, books and records of every kind and
description relating to the business and affairs of the Corporation and its
subsidiaries, whether or not prepared by the Executive, other than personal
notes prepared by or at the direction of the Executive, shall be the sole and
exclusive property of the Corporation, and the Executive shall surrender them
to the Corporation at any time upon request by the Board.
(c) Noncompetition and Nonsolicitation. The Executive hereby agrees
with the Corporation that during the term of his employment hereunder, and in
certain instances, as provided below, for a period of two (2) years following
termination of his employment hereunder, (i) he shall not, directly or
indirectly, engage in, or be employed by, or act as a consultant to, or be a
director, officer, owner or partner of, or acquire a substantial interest in,
any business activity or entity which competes significantly with the
Corporation or any of its subsidiaries; provided that, after the termination of
his employment with the Corporation, "significant" competition shall not
include involvement in any line of business that contributes less than five
percent (5%) of the gross revenues of the Corporation and its subsidiaries or
contributes less than five percent (5%) of the gross revenues of another
business entity or activity with which Executive becomes associated, (ii) he
shall not solicit any employee of the Corporation or any of its subsidiaries to
leave the employment thereof or in any way interfere with the relationship of
such employee with the Corporation or its subsidiaries, unless he believes in
good faith that such action during the term of his employment by the
Corporation is in the best interests of the Corporation, and (iii) he shall not
induce or attempt to induce any customer, supplier, licensee or other
individual, corporation or other business organization having a business
relation with the Corporation or its subsidiaries to cease doing business with
the Corporation or its subsidiaries or in any way interfere with the
relationship between any such customer, supplier, licensee or other person and
the Corporation or its subsidiaries; provided, however, that as to the period
after termination of the
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Executive's employment with the Corporation, the restrictive covenants set
forth in part (i) of this paragraph (c) shall apply only if such termination
results from the Executive's resignation without Good Reason (as defined in
Paragraph 9(d)(v), below) or from discharge for Cause (as defined in Paragraph
9(d)(ii), below).
(d) Enforcement. The Executive recognizes that the provisions of this
Paragraph 8 are vitally important to the continuing welfare of the Corporation
and its subsidiaries and that money damages would constitute an inadequate
remedy for any violation thereof. Accordingly, in the event of any such
violation by the Executive, the Corporation and its subsidiaries, in addition
to any other remedies they may have, shall have the right to compel specific
performance thereof or to seek an injunction restraining any action by the
Executive in violation of this Paragraph 8.
9. Termination. Unless earlier terminated in accordance with the
following provisions of this Paragraph 9, the Corporation shall continue to
employ the Executive and the Executive shall remain employed by the Corporation
during the entire term of this Agreement as set forth in Paragraph 1(b).
Paragraph 10 hereof sets forth certain obligations of the Corporation in the
event that the Executive's employment hereunder is terminated. Certain
capitalized terms used in this Paragraph 9 and in Paragraph 10 hereof are
defined in Paragraph 9(d), below.
(a) Death or Disability. Except to the extent otherwise provided in
Paragraph 10 with respect to certain post-Date of Termination payment
obligations of the Corporation, this Agreement shall terminate immediately as
of the Date of Termination in the event of the Executive's death or in the
event that the Executive becomes disabled. The Executive will be deemed to be
disabled upon the earlier of (i) the end of a six (6)-consecutive month period,
or of an aggregate period of nine (9) months out of any consecutive twelve (12)
months, during which, by reason of physical or mental injury or disease, the
Executive has been unable to perform substantially all of his usual and
customary duties under this Agreement or (ii) the date that a reputable
physician selected by the Board, and as to whom the Executive has no reasonable
objection, determines in writing that the Executive will, by reason of physical
or mental injury or disease, be unable to perform substantially all of the
Executive's usual and customary duties under this Agreement for a period of at
least six (6) consecutive months. If any question arises as to whether the
Executive is disabled, upon reasonable request therefor by the Board, the
Executive shall submit to reasonable medical examination for the purpose of
determining the existence, nature and extent of any such disability. The Board
shall promptly give the Executive written notice of any such determination of
the Executive's disability and of any decision of the Board to terminate the
Executive's employment by reason thereof. In the event of disability, until
the Date of Termination, the base salary payable to the Executive under
Paragraph 3 hereof shall be reduced dollar-for-dollar by the amount of
disability benefits, if any, paid to the Executive in accordance with any
disability policy or program of the Corporation.
(b) Discharge for Cause. In accordance with the procedures hereinafter
set forth, the Board may discharge the Executive from his employment hereunder
for Cause. Except
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to the extent otherwise provided in Paragraph 10 with respect to certain
post-Date of Termination obligations of the Corporation, this Agreement shall
terminate immediately as of the Date of Termination in the event the Executive
is discharged for Cause. Any discharge of the Executive for Cause shall be
communicated by a Notice of Termination to the Executive given in accordance
with Paragraph 16 of this Agreement.
(c) Termination for Other Reasons. The Corporation may discharge the
Executive without Cause by giving written notice to the Executive in accordance
with Paragraph 16 at least thirty (30) days prior to the Date of Termination.
The Executive may resign from his employment, without liability to the
Corporation, by giving written notice to the Corporation in accordance with
Paragraph 16 at least thirty (30) days prior to the Date of Termination.
Except to the extent otherwise provided in Paragraph 10 with respect to certain
post-Date of Termination obligations of the Corporation, this Agreement shall
terminate immediately as of the Date of Termination in the event the Executive
is discharged without Cause or resigns.
(d) Definitions. For purposes of this Agreement, the following
capitalized terms shall have the meanings set forth below:
(i) "Accrued Obligations" shall mean, as of the Date of Termination,
the sum of (A) the Executive's base salary under Paragraph 3 through the Date of
Termination to the extent not theretofore paid, (B) the amount of any bonus,
incentive compensation, deferred compensation and other cash compensation
accrued by the Executive as of the Date of Termination to the extent not
theretofore paid, (C) any vacation pay, expense reimbursements and other cash
entitlements accrued by the Executive as of the Date of Termination to the
extent not theretofore paid, and (D) all other benefits which have accrued as
of the Date of Termination, including any applicable retiree benefits
(including, but not by way of limitation, medical expense reimbursement
benefits under Paragraph 7(b), above, and supplemental retirement benefits
under Paragraph 7(c), above) and including any applicable life insurance or
disability insurance benefits. For the purpose of this Paragraph 9(d)(i),
amounts shall be deemed to accrue ratably over the period during which they are
earned, but no discretionary compensation shall be deemed earned or accrued
until it is specifically approved by the Board in accordance with the
applicable plan, program or policy.
(ii) "Cause" shall mean (A) the Executive's willful and continued
failure to perform substantially the duties of his employment; or (B) the
Executive's willful engaging in illegal conduct or gross misconduct which is
materially and demonstrably injurious to the Corporation; or (C) the
Executive's conviction of a felony involving moral turpitude, but specifically
excluding any conviction based entirely on vicarious liability (with "vicarious
liability" meaning liability based on acts of the Corporation for which the
Executive is charged solely as a result of his offices with the Corporation and
in which he was not directly involved and did not have prior knowledge of such
actions or intended actions); provided, however, that no act or failure to act,
on the part of the Executive, shall be considered "willful" unless it is done,
or omitted to be done, by the Executive in bad faith or without reasonable
belief that the Executive's
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action or omission was in the best interests of the Corporation; and provided
further that no act or omission by the Executive shall constitute Cause
hereunder unless the Corporation has given detailed written notice thereof to
the Executive, and the Executive has failed to remedy such act or omission
within 30 days after receiving such notice. Termination for Cause must be
evidenced by a specific resolution adopted by at least a three-fourths vote of
the Board after the Executive is given an opportunity prior to the expiration
of such 30-day period, together with his legal counsel, to be heard before the
Board.
(iii) "Change of Control" shall mean:
(A) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or
more of either (i) the then outstanding shares of capital stock of the
Corporation (the "Outstanding Corporation Capital Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Corporation
Voting Securities"); provided, however, that (X) any acquisition by or from the
Corporation or any of its subsidiaries, (Y) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the Corporation or
any of its subsidiaries or (Z) any acquisition by any corporation with respect
to which, following such acquisition, more than 65% of the then outstanding
shares of capital stock of such corporation and the combined voting power of
the then outstanding voting securities of such corporation entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Corporation
Capital Stock and Corporation Voting Securities immediately prior to such
acquisition, in substantially the same proportion as their ownership,
immediately prior to such acquisition, of the Outstanding Corporation Capital
Stock and Corporation Voting Securities, as the case may be, shall not
constitute a Change of Control; or
(B) Individuals who, as of September 6, 1995, constituted the
Board of Directors of the Corporation (the "Incumbent Board") cease for any
reason to constitute at least a majority of such Board; provided, however, that
any individual who becomes a member of the Board of Directors of the
Corporation subsequent to such date whose election, or nomination for election
by the stockholders of the Corporation, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be deemed
to be a member of the Incumbent Board; but provided further, that no individual
whose election or initial assumption of office as a director of the Corporation
occurs as a result of an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act)
with respect to the election or removal of directors, or any other actual or
threatened solicitation of proxies or consents by or on behalf of any person
other than the Board of Directors of the Corporation, shall be deemed to be a
member of the Incumbent Board; or
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(C) Approval by the stockholders of the Corporation of a
reorganization, merger or consolidation (a "Business Combination") with respect
to which all or substantially all of the individuals and entities who were the
respective beneficial owners of the Outstanding Corporation Capital Stock and
Corporation Voting Securities immediately prior to such Business Combination do
not, following such Business Combination, beneficially own, directly or
indirectly, more than 65% of, respectively, the then outstanding shares of
capital stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from the Business Combination, in
substantially the same proportion as their ownership immediately prior to such
Business Combination of the Outstanding Corporation Capital Stock and
Corporation Voting Securities, as the case may be; or
(D) Approval by the stockholders of the Corporation of a sale
or other disposition of all or substantially all of the assets of the
Corporation other than to a corporation with respect to which, following such
sale or disposition, more than 65% of, respectively, the then outstanding
shares of capital stock and the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of directors is
then owned beneficially, directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial owners, respectively, of
the Outstanding Corporation Capital Stock and Corporation Voting Securities
immediately prior to such sale or disposition, in substantially the same
proportion as their ownership of the Outstanding Corporation Capital Stock and
Corporation Voting Securities, as the case may be, immediately prior to such
sale or disposition; or
(E) A complete liquidation or dissolution of the Corporation.
Any other provision of this Agreement to the contrary notwithstanding, "Change
of Control" shall not include any transaction described in subparagraphs (A),
(C) or (D) of this paragraph (iii) where, in connection with such transaction,
the Executive or any party acting in concert with the Executive substantially
increases his or its, as the case may be, ownership interest in the Corporation
or a successor to the Corporation.
(iv) "Date of Termination" shall mean (A) in the event of a
discharge of the Executive by the Board for Cause, the date the Executive
receives a Notice of Termination, or any later date specified in such Notice of
Termination, as the case may be, (B) in the event of a discharge of the
Executive without Cause or a resignation by the Executive, the date specified
in the written notice to the Executive (in the case of discharge) or the
Corporation (in the case of resignation), which date shall be no less than
thirty (30) days from the date of such written notice, (C) in the event of the
Executive's death, the date of the Executive's death, and (D) in the event of
termination of the Executive's employment by reason of disability pursuant to
Paragraph 9(a), the date the Executive receives written notice of such
termination.
(v) "Good Reason" shall mean the occurrence of any of the following
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without the Executive's consent: (A) the failure to maintain (I) the Executive
in the positions set forth in Paragraph 1(a) above, (II) as a director of the
Corporation, or (III) following Executive's election as Chairman of the Board,
as Chairman of the Board; (B) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's positions with the Corporation
as set forth in this Agreement (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by
Paragraph 2, or any action by the Corporation which results in substantial
diminution in such positions, authority, duties or responsibilities, excluding
for this purpose any isolated, insubstantial and inadvertent action not taken
in bad faith and which is remedied by the Corporation promptly after receipt of
written notice thereof given by the Executive in accordance with Paragraph 16;
or (C) any failure by the Corporation to comply with any of the provisions of
this Agreement, other than any isolated, insubstantial and inadvertent failure
not occurring in bad faith and which is remedied by the Corporation promptly
after receipt of written notice thereof given by the Executive in accordance
with Paragraph 16; or (D) the Corporation giving notice to the Executive
pursuant to Paragraph 1(b) that the term of this Agreement shall not be
extended upon the expiration of the then-current term; or (E) the Corporation
requiring the Executive to be based at an office or location which is more than
50 miles from the Executive's office as of July 1, 1997; or (F) the Corporation
giving notice to the Executive that the term of the Change of Control Agreement
which is described in Paragraph 23, below, shall not be extended upon the
expiration of its then current term.
(vi) "Notice of Termination" shall mean a written notice which (A)
indicates the specific termination provision in this Agreement relied upon, (B)
sets forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Executive's employment under the provision so
indicated and (C) if the Date of Termination is to be other than the date of
receipt of such notice, specifies the termination date.
10. Obligations of the Corporation Upon Termination. The following
provisions describe the obligations of the Corporation to the Executive under
this Agreement upon termination of his employment. However, except as
explicitly provided in this Agreement, nothing in this Agreement shall limit or
otherwise adversely affect any rights which the Executive may have under
applicable law, under any other agreement with the Corporation or any of its
subsidiaries, or under any compensation or benefit plan, program, policy or
practice of the Corporation or any of its subsidiaries.
(a) Death, Disability, Discharge for Cause, or Resignation Without Good
Reason. In the event this Agreement terminates pursuant to Paragraph 9(a) by
reason of the death or disability of the Executive, or pursuant to Paragraph
9(b) by reason of the discharge of the Executive by the Corporation for Cause,
or pursuant to Paragraph 9(c) by reason of the resignation of the Executive
other than for Good Reason, the Corporation shall pay to the Executive, or his
heirs or estate, in the event of the Executive's death, all Accrued Obligations
in a lump sum in cash within thirty (30) days after the Date of Termination;
provided, however, that any portion of the Accrued Obligations which consists
of bonus, deferred compensation, incentive compensation, insurance benefits or
other employee benefits shall be determined and paid in
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accordance with the terms of the relevant plan or policy as applicable to the
Executive; and, provided further, that all long-term incentive compensation
awards (such as (i) options to purchase stock of the Corporation, (ii)
restricted stock of the Corporation, or (iii) similar equity-based units or
interests, shall, if not otherwise vested, vest in full upon such termination
of this Agreement due to death or disability.
(b) Discharge Without Cause or Resignation with Good Reason. In the
event that this Agreement terminates pursuant to Paragraph 9(c) by reason of the
discharge of the Executive by the Corporation other than for Cause or
disability or by reason of the resignation of the Executive for Good Reason:
(i) The Corporation shall pay all Accrued Obligations to the
Executive in a lump sum in cash within thirty (30) days after the Date of
Termination; provided, however, that any portion of the Accrued Obligations
which consists of bonus, deferred compensation, incentive compensation,
insurance benefits or other employee benefits shall be determined and paid in
accordance with the terms of the relevant plan or policy as applicable to the
Executive;
(ii) Within thirty (30) days after the Date of Termination, the
Corporation shall pay to the Executive a cash bonus for the year during which
termination occurs, calculated as a prorata portion of his then current target
annual bonus amount;
(iii) Continuation for a period of two (2) years of his then current
annual base salary and his then current target annual bonus amount, both
payable in substantially equal installments in accordance with the
Corporation's regular payroll practices;
(iv) For a period of two (2) years after the Date of Termination, the
Corporation shall continue to provide benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs and arrangements referred to in
Paragraph 7(a) of this Agreement if the Executive's employment with the
Corporation had continued for those two (2) years;
(v) All long-term incentive compensation awards to the Executive,
including (but not by way of limitation) all equity-based incentive
compensation awards (such as (A) options to purchase stock of the Corporation,
(B) restricted stock of the Corporation, or (C) similar equity-based units or
interests) shall, if not otherwise vested, vest in full upon such termination
of this Agreement, and Executive shall be considered to have terminated his
employment by reason of retirement for purposes of determining the exercise
period applicable to any options following such termination of this Agreement;
and
(vi) The Corporation shall, at its sole expense, provide the
Executive with outplacement services the scope and provider of which shall be
selected by the Executive.
11. Certain Additional Payments by the Corporation.
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(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the
Corporation to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Paragraph 11) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, (the
"Code") or if any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest
and penalties, being hereinafter collectively referred to as the "Excise Tax"),
then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that, after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payment.
(b) Subject to the provisions of paragraph (c), below, all
determinations required to be made under this Paragraph 11, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by the accounting firm then serving as the Corporation's independent
auditing firm (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Corporation and the Executive within fifteen (15)
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Corporation. In the event
that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as
determined pursuant to this Paragraph 11, shall be paid by the Corporation to
the Executive within five (5) days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. Any good faith determination by the Accounting Firm shall be binding
upon the Corporation and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial
determination by the Accounting Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Corporation should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Corporation exhausts its remedies pursuant to
paragraph (c), below, and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Corporation to or for the benefit of the Executive.
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(c) The Executive shall notify the Corporation in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Corporation of a Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than fifteen (15) business days after the
Executive is informed in writing of such claim and shall apprise the
Corporation of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to the
expiration of the thirty (30)-day period following the date on which Executive
gives such notice to the Corporation (or such shorter period ending on the date
that any payment of taxes with respect to such claim is due). If the
Corporation notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(i) Give the Corporation any information reasonably requested by the
Corporation relating to such claim,
(ii) Take such action in connection with contesting such claim as the
Corporation 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 Corporation,
(iii) Cooperate with the Corporation in good faith in order
effectively to contest such claim, and
(iv) Permit the Corporation to participate in any proceedings
relating to such claim;
provided, however, that the Corporation 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 the Executive
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 limiting the
foregoing provisions of this paragraph (c), the Corporation 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 Executive to pay the tax claimed and xxx for a
refund or contest the claim in any permissible manner; and the Executive 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 Corporation shall determine; provided, however, that if the
Corporation directs the Executive to pay such claim and xxx for a refund, the
Corporation shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive 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 the Executive with respect to which such
contested amount is claimed to be due is limited solely to
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such contested amount. Furthermore, the Corporation's control of the contest
shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive 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.
(d) If, after the receipt by the Executive of an amount advanced by the
Corporation pursuant to paragraph (c), above, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Corporation's complying with the requirements of said paragraph (c))
promptly pay to the Corporation the amount of such refund (together with any
interest paid or credited thereon, after taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the Corporation pursuant
to said paragraph (c), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Corporation does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of thirty (30) days after such determination, then such
advance shall be forgiven and shall not be required to be repaid; and the
amount of such advance shall offset, to the extent thereof, the amount of the
Gross-Up Payment required to be paid.
12. No Mitigation. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement, and
such amounts shall not be reduced whether or not the Executive obtains other
employment.
13. Payment of Certain Expenses. The Corporation agrees to pay promptly
as incurred, to the fullest extent permitted by law, all legal fees and
expenses which the Executive may reasonably incur in connection with the
preparation of this Agreement or as a result of any contest by the Corporation,
the Executive or others of the validity or enforceability of, or liability
under, any provision of this Agreement (including as a result of any contest
initiated by the Executive about the amount of any payment due pursuant to this
Agreement) (together with an additional amount such that after payment by the
Executive of Executive's applicable Federal, state and local taxes on such
additional amount, Executive shall retain an amount equal to the total of
Executive's applicable Federal, state and local taxes arising due to the
payment of legal fees and expenses under this Paragraph 13), plus in each case
interest on any delayed payment at the interest rate applicable from time to
time under the Corporation's primary revolving credit agreement, or in the
absence of such a rate, at the applicable federal rate provided for in Section
7872(f)(2)(A) of the Code; provided, however, that the Corporation shall not be
obligated to make such payment of fees and expenses with respect to any contest
in which the Corporation prevails over the Executive.
14. Indemnification. To the fullest extent permitted by law, the
Corporation shall, during and after the Executive's term of employment,
indemnify the Executive (including the advancement of expenses) for any
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees, incurred by the Executive in connection with the defense of
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any lawsuit or other claim to which he is made a party by reason of being or
having been an officer, director or employee of the Corporation or any of its
subsidiaries.
15. Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the heirs and representatives of the Executive and the successors
and assigns of the Corporation. The Corporation shall require any successor
(whether direct or indirect, by purchase, merger, reorganization,
consolidation, acquisition of property or stock, liquidation, or otherwise) to
all or a substantial portion of its assets, by agreement in form and substance
reasonably satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform this Agreement if no such succession
had taken place. Regardless of whether such an agreement is executed, this
Agreement shall be binding upon any successor of the Corporation in accordance
with the operation of law, and such successor shall be deemed the "Corporation"
for purposes of this Agreement.
16. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or by reputable commercial delivery service or mailed within
the continental United States by first class certified mail, return receipt
requested, postage prepaid, addressed as follows:
(a) If to the Board or the Corporation, to:
Xxxxxxx Computer Services, Inc.
0000 Xxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
(b) If to the Executive, to:
Xx. Xxxxxx X. Xxxxxx
000 Xxxxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxx 00000
with a copy to:
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx
0000 Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxx
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
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17. Tax Withholding. The Corporation shall provide for the withholding of
any taxes required to be withheld by federal, state, or local law with respect
to any payment in cash, shares of stock and/or other property made by or on
behalf of the Corporation to or for the benefit of the Executive under this
Agreement or otherwise. The Corporation may, at its option: (a) withhold such
taxes from any cash payments owing from the Corporation to the Executive, (b)
require the Executive to pay to the Corporation in cash such amount as may be
required to satisfy such withholding obligations and/or (c) make other
satisfactory arrangements with the Executive to satisfy such withholding
obligations.
18. Arbitration. Except as to actions described in Paragraph 8(d), any
controversy or claim arising out of or relating to this Agreement or the breach
hereof shall be settled by arbitration in Chicago, Illinois in accordance with
the laws of the State of Illinois, without regard to the choice of law
provisions of such laws. The arbitration shall be conducted in accordance with
the rules of the American Arbitration Association before an arbitrator
appointed by the then President of The Chicago Bar Association. The costs and
expenses of the arbitrator shall be borne by the Corporation. The award of the
arbitrator shall be binding upon the parties. Judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction.
19. No Assignment. Except as otherwise expressly provided herein, this
Agreement is not assignable by any party and no payment to be made hereunder
shall be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or other charge.
20. Execution in Counterparts. This Agreement may be executed by the
parties hereto in two (2) or more counterparts, each of which shall be deemed
to be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
21. Jurisdiction and Governing Law. Except as provided in Paragraph 18,
jurisdiction over disputes with regard to this Agreement shall be exclusively
in the courts of the State of Illinois, and this Agreement shall be construed
and interpreted in accordance with and governed by the laws of the State of
Illinois, without regard to the choice of laws provisions of such laws.
22. Severability. If any provision of this Agreement shall be adjudged by
any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement. Furthermore, if the scope of any restriction or requirement
contained in this Agreement is too broad to permit enforcement of such
restriction or requirement to its full extent, then such restriction or
requirement shall be enforced to the maximum extent permitted by law, and the
Executive consents and agrees that any court of competent jurisdiction may so
modify such scope in any proceeding brought to enforce such restriction or
requirement.
23. Effect of Change of Control. Upon the occurrence of a Change of
Control (as defined in Paragraph 9(d)(iii), above), this Agreement shall
automatically terminate and be
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superseded by a separate Change of Control Agreement made and entered into as
of July 1, 1997 by the Executive and the Corporation, in substantially the form
attached hereto as Exhibit A.
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24. Prior Understandings. This Agreement embodies the entire
understanding of the parties hereto, and supersedes all prior oral or written
agreements or understandings between them, regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by each of the parties hereto. The headings in this Agreement are for
convenience and reference only and shall not be construed as part of this
Agreement or to limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
Attest: XXXXXXX COMPUTER SERVICES, INC.
/s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxxxx X. Xxxx III
-------------------------- ----------------------------------------
Title:Chairman of the Compensation Committee
--------------------------------------
XXXXXX X. XXXXXX
/s/ Xxxxxx X. Xxxxxx
--------------------------------------------
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