EMPLOYMENT AGREEMENT

Committee but unpaid; (iii) any accrued but untaken and unpaid vacation; (iv) reimbursement for unreimbursed business expenses properly incurred to the date of termination; (v) such employee benefits for which the Executive may be eligible under the terms of such employee benefit plans; and (vi) any rights with respect to Company equity (or equity derivatives), in accordance with the terms contained therein.

substantially performed his duties; (b) Executive engaging in willful and serious misconduct that has caused or would reasonably be expected to result in material injury to the Company or any of its affiliates; (c) Executive is convicted of, or enters a plead of nolo contendere, to a crime that constitutes a felony; (d) Executive engaging in (i) repeated acts of insubordination, or (ii) an act of dishonesty which is inconsistent with the standard of behavior expected of the Chairman of the Board and Chief Executive Officer of a public corporation, or (iii) a material violation by the Executive of any provision of the Company’s Code of Conduct.

nothing in this paragraph shall prevent the Executive from (A) discussing any matter in the good faith performance of his duties, (B) responding publicly to incorrect, disparaging or derogatory public statements to the extent reasonably necessary to correct or refute such public statements, and (C) making any truthful statement to the extent (i) necessary with respect to any litigation, arbitration or mediation involving this Agreement, including but not limited to the enforcement of this Agreement or (ii) required by law or by any court, arbitrator, mediator or administrative or legislative body (including any committee thereof) with actual or apparent jurisdiction to order such person to disclose or make accessible such information.  The Executive, in the good faith performance of his duties, may, for example, criticize an employee, or groups of employees, products, services, corporate policies, current or former officers or employees, customers, suppliers, or business partners or associates, and such negative comments, if in the course of performing an evaluation or other business related purpose, shall not be considered engaging in a Prohibited Activity.

broadcast, television transmission, internet posting, social media, and/or any other electronic media, or communicating with any representative of the media, relating to confidential matters regarding the business or affairs of the Company;

disclosure and cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information; (B) Where Executive reasonably relies and acts on the written advice of Company legal counsel; (C) For the Executive to passively invest in pooled accounts, provided that the Executive does not violate any Company investment policy;  (D) Provided the Executive complies with his obligations concerning Confidential Information and does not commit or engage in what would otherwise be a Prohibited Activity, he may render services (i) as a director of an entity with a de minimis overlap with the business of the Company, (ii) to a private equity firm, but may not render services that relate to any business, product, Trade Secret, or invention of the Company, (iii)  to a private equity firm’s portfolio company, provided the portfolio company is not engaged in any business that relates to, or competes with, any business, product, Trade Secret, or invention of the Company, or any business or product of the Company that was in planning and not abandoned during the Term.  The caveats contained in this sub-paragraph, and the time limits set forth in Section 13(b)(i), shall apply to every Prohibited Activity, restrictive covenant, definition of Cause, equity and equity derivative award document and any other agreement, plan or program applicable to the Executive.

 

(b) Performance.  The Executive shall, after the Start Date, devote substantially all of the Executive’s business time to the Company and not engage in any activity that (i) conflicts with the interests of the Company,  (ii) interferes with the proper and efficient performance of the Executive’s duties to the Company, (iii) interferes with the Executive’s exercise of judgment in the Company’s best interests, (iv) or which could otherwise materially interfere or conflict with the Executive performing his duties as Chief Executive Officer, President and Chairman of the Company (“Disqualifying Activities”). However, provided that, in the aggregate, such activities do not rise to the level of Disqualifying Activities, the Executive may, (i)  until January 1, 2015, continue to

 

be employed as a director and Chairman of RSG and (ii) after January 1, 2015, may serve as a director of RSG (or, if he ceases to be a director of RSG, he may serve as a director of another company, subject to the approval of the Board).  Executive shall resign from any other board of directors on which he serves on or before August 1, 2014 or promptly thereafter unless the Board shall approve otherwise.  The Executive may also be involved in charitable, civic and professional activities, including, subject to the approval of the Company’s Board of Directors, serving on the board of a charitable organization.  Subject to the guidelines of the Company’s legal and compliance departments, the Executive may manage his and his family’s passive investments.

(c) Principal Place of Employment.  The Executive’s principal place of employment shall be at the Company’s principal headquarters in Allentown, PA, although the Executive understands and agrees that his business duties and responsibilities will require that he travel often.

 

 

During the Term of Employment, the Executive shall be eligible to receive the following compensation:

 

(a)           Base Salary.  In accordance with the regular payroll practices of the Company, the Executive shall receive a salary at the rate of $1,200,000 per

 

entire year, as adjusted in accordance with this Section from time to time (“Base Salary”).  The Board, or such committee of the Board as is responsible for setting compensation of senior executive officers, shall review the Executive’s performance at the conclusion of each fiscal year and, may increase but not decrease the Base Salary, except that the Company may reduce the Executive’s Base Salary prospectively if such reduction is no less favorable to the Executive than the average annual percentage reduction during the applicable fiscal year for all Highly Compensated Employees; provided further that the Company may adjust its normal payroll practices with respect to the payment of the Executive’s Salary provided that such adjustment is applicable to all Highly Compensated Employees.

 

(b)           Annual Bonus. The Executive shall be eligible to participate in the Annual Incentive Plan and for a target annual cash bonus of one hundred thirty percent (130%) of Base Salary ($1,560,000).   Actual annual incentive awards will be determined by the Board or a committee of the Board following the fiscal year and may be above or below the target bonus depending upon the Company’s fiscal year performance as measured by the performance measures and goals established by the Committee at the beginning of the fiscal year, and the Company’s achievement of certain nonfinancial objectives. Actual annual

 

 

The Executive shall be eligible to receive a pro-rata Annual Bonus for the fiscal year ending September 30, 2014 in an amount equal to the product of $1,560,000 and the Company wide payout factor determined by the Committee, multiplied by a fraction, the numerator being the number of days the Executive is employed by the Company from the Start Date to the end of the 2014 fiscal year, the denominator being 365.   The Annual Bonus, if any, shall be paid to the Executive at the same time as bonuses are generally payable to other senior executives of the Company, subject to the Executive’s continuous employment through the applicable payment date, but in no event later than the date that is two and one-half (2½) months following the last day of the year to which such bonus relates.

 

 

(i) $4.5 million in Stock Options (as defined in the LTIP), vesting in equal thirds on each of the first, second, and third annual anniversaries of the Executive’s Start Date, provided the Executive is employed by the Company on such date or, if he is not so employed, it is because the Executive died, was terminated due to Disability, resigned with Good Reason, or was terminated without Cause. The value of each option will be calculated based on the volume weighted average price of a Company common share for the ten (10) days leading up to and including the date of the Agreement, and based on the other inputs used for valuing option grants to all employees.

 

(ii) $4.5 million in Restricted Shares (as defined in the LTIP). The value of a share will be calculated based on the volume weighted average price of a  Company common share for the 10 trading days leading up to and including the date of the Agreement. These Restricted Shares will be vested when granted and their restrictions will lift on one-third of the shares on each of the first, second, and third annual anniversaries of the Executive’s Start Date, in each instance provided the Executive is employed

 

by the Company on such date or, if he is not employed, it is because the Executive died, was terminated due to Disability, resigned with Good Reason, or was terminated without Cause prior to the third (3rd) annual anniversary of the Executive’s Start Date.  Dividends on Restricted Shares are paid in cash.  Restricted Shares are marketable only as provided by the Company.  If the Executive’s employment is terminated for Cause or by the Executive without Good Reason, then, at the Company’s discretion,  Restricted Shares that have not become unrestricted are forfeitable, but the number of forfeitable Restricted Shares shall not exceed the product of the number of Make Whole Restricted Shares, multiplied by a fraction, the numerator of which is the number of days from the termination of the Executive’s employment to three years from the Start Date, and the denominator of which is 1,095.  Dividends are subject to forfeiture to the same extent that the underlying shares are forfeited.

 

(iii) Make Whole Awards are otherwise subject to the rules and definitions of the LTIP, as modified herein.

 

 

The Executive shall be eligible to participate in the Company’s Defined Contribution Plan (“DCP”) and Retirement Savings Plan (“RSP”).

 

 

During the Term of Employment, the Executive shall be eligible to participate in such health, dental, disability insurance, life insurance and other benefits as provided from time to time by the Company upon terms and conditions and at coverage levels and coverage scope (including domestic partners, spouses and dependents) substantially equivalent, taken as a whole, to those provided generally to Highly Compensated Employees of the Company. The Company may reduce or adjust the aggregate benefits payable to the Executive if such reduction is on a basis no less favorable to the Executive than the basis on which the Company reduces aggregate benefits payable with respect to Highly Compensated Employees.  Nothing contained herein shall be construed to limit the Company’s ability to amend, suspend, or terminate any employee benefit plan or policy at any time without providing the Executive notice, and the right to do so is expressly reserved.

 

 

 

The Executive is authorized to incur reasonable business expenses in carrying out his duties and responsibilities under this Agreement, and the Company shall promptly reimburse him for all such reasonable business expenses, subject to documentation and in accordance with the Company’s generally applicable policies on reimbursement of employee business expenses, as in effect from time to time.

 

 

insurance in the same amount and to the same extent as the Company covers its other officers and directors.

indemnification and director’s and officer’s insurance in the same amount and to the same extent as the Company covers its other officers and directors.

covenants shall be limited to the Term of Employment and the one (1) year immediately following the conclusion of the Term of Employment.

 

(b) (i)  Prohibited Activities.  The Executive agrees and understands that he may not, at any time during the Term of Employment and within one (1) year after the termination of the Executive’s employment (the “Restricted Period”), for any reason, engage in Prohibited Activity. In the event that the Executive has engaged in a Prohibited Activity during the Restricted Period, the Company may forfeit, cancel, modify, rescind, suspend, withhold, or otherwise limit or restrict any unexpired, unpaid, unexercised, or deferred awards held by the Executive at the time of such engagement, and any exercise, payment, or delivery of an award or shares pursuant to such an award may be rescinded. In the event of any such rescission, the Executive shall pay to the Company the amount of any gain realized or payment received as a result of the rescinded exercise, payment, or delivery, in such manner and on such terms as may be required by the Company, and the Company shall be entitled to reduce any amount owed to the Executive by the Company by such gain or payment.  This is not the Company’s sole remedy to the Executive’s engagement in Prohibited Activity, and the Executive understands, acknowledges and agrees that the

 

Company may seek the remedy under this subsection without limitation. The provisions of this Section are in addition to, and shall not supersede, the terms of any other agreement entered at the time the Executive is employed by the Company. The Executive expressly acknowledges and agrees that the foregoing provisions of this Section are material and important terms of this Agreement and that the Executive’s agreement to be bound by the terms of this Section is a condition precedent to the Company’s consummation of this Agreement.

 

 (B).           The Company agrees that its directors and Named Executive Officers shall not during the Term of Employment and for one year thereafter, publicly disparage the Executive with regard to his performance as Chairman, Chief Executive Officer, or President of the Company.  Notwithstanding the foregoing, nothing in this paragraph shall prevent the Company and its employees, executive officers and directors from (1) discussing any matter with any of the Company's  directors, executive officers, employees, legal,  compliance or human resources officers; (2) responding publicly to incorrect, disparaging or derogatory public statements to the extent reasonably necessary to correct or refute such public statements, (iii) making any truthful statement to the extent necessary (a) with respect to any litigation, arbitration or mediation involving this Agreement, including but not limited to the enforcement of this Agreement,  or

 

 

(c)  Injunction.  The Executive acknowledges and agrees that, because of the unique and extraordinary nature of his services, any breach or threatened breach of any of the above provisions of this Section will cause the Company irreparable injury and incalculable harm and, therefore, the Company will have no adequate remedies at law. The Executive, therefore, agrees in advance that Company shall be entitled to injunctive and other equitable relief for such breach or threatened breach and that resort by the Company to such injunctive or other equitable relief shall not be deemed to waive or to limit in any respect any right or remedy which the Company may have with respect to such breach or threatened breach.  The Executive agrees that in such action, if the Company makes a prima facie showing that the Executive has violated or apparently intends to violate any of the provisions of this Section, the Company need not prove either damage or irreparable injury in order to obtain injunctive relief.  The Company and the Executive agree that any such action for injunctive or equitable relief shall be heard in a state or federal court situated in the

 

Commonwealth of Pennsylvania and each of the parties hereto agrees to accept service of process by any form of notice described in Section 23 of this Agreement, and to consent to the jurisdiction of such courts.

 

(d) Severability.  If any provision contained within this Section is found to be unenforceable by reason of the extent, duration or scope thereof, or otherwise, then such restriction shall be enforced to the maximum extent permitted by law, and the Executive agrees that such extent, duration or scope may be modified in any proceeding brought to enforce such restriction.

 

 

Executive represents and warrants to the Company that:

 

(a) The Executive is entering into this Agreement voluntarily and that his employment hereunder and compliance with the terms and conditions hereof will not conflict with or result in the breach by him of any agreement to which he is a party or by which he may be bound;

 

(b) The Executive has not violated, and in connection with his employment with the Company will not violate any non-solicitation, non-competition, or other similar covenant or agreement of a prior employer by which he was, is, or may be bound;

 

 

(c) In connection with his employment with the Company, the Executive will not be in violation of any agreement with any prior employer regarding the use of any confidential or proprietary information he may have obtained in connection with employment with any prior employer;

 

(d) To the best of his knowledge, the Executive is not, and has not been, the subject of any investigation, whether by any prior employer, any governmental or regulatory authority, or any self-regulatory organization; and

 

(e) The Executive has had a full and complete opportunity to consult with counsel of the Executive’s own choosing concerning the terms, enforceability and implications of this Agreement, and the Company made no representations or warranties to the Executive concerning the terms, enforceability or implications of this Agreement other than as stated in this Agreement.

 

 

The terms and conditions of the Executive’s employment are governed by the Company’s standard policies and procedures except where otherwise stated in this Agreement.  The Executive must acquaint himself with all such standard policies and comply with them during the Executive’s employment.  In addition, as a condition of this offer and Executive’s employment with the

 

Company the Executive will be required to participate in the Company’s stock retention program, and shall, as a condition precedent to this agreement, execute and comply with the terms of the Company’s Employee Patent and Confidential Information Agreement.

 

 

The Company may withhold from any payments made under this Agreement all applicable taxes, including but not limited to income, employment, and social insurance taxes, as shall be required by law.  The Executive acknowledges and represents that the Company has not provided any tax advice to him in connection with this Agreement and that he has been advised by the Company to seek tax advice from his own tax advisors regarding this Agreement and payments that may be made to him pursuant to this Agreement, including specifically, the application of the provisions of Section 409A of the Code (“Section 409A”) to such payments.

 

Section 17. Section 409A.

 

 

It is intended that the provisions of this Agreement comply with Section 409A, and all provisions of this Agreement shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes or penalties under Section 409A.

 

Neither the Executive nor any of the Executive’s creditors or beneficiaries shall have the right to subject any deferred compensation (within the meaning of Section 409A) payable under this Agreement or under any other plan, policy, arrangement or agreement of or with the Company or any of its affiliates (this Agreement and such other plans, policies, arrangements and agreements, the “Company Plans”) to any anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment.  Except as permitted under Section 409A, any deferred compensation (within the meaning of Section 409A) payable to the Executive or for the Executive’s benefit under any Company Plan may not be reduced by, or offset against, any amount owing by the Executive to the Company or any of its affiliates.

 

If, at the time of the Executive’s separation from service (within the meaning of Section 409A), (i) the Executive shall be a specified employee (within the meaning of Section 409A and using the identification methodology selected by the Company from time to time) and (ii) an amount payable under a Company

 

Plan constitutes deferred compensation (within the meaning of Section 409A) the payment of which is required to be delayed pursuant to the six-month delay rule as set forth in Section 409A in order to avoid taxes or penalties under Section 409A, then the Company shall not pay such amount on the otherwise scheduled payment date but shall instead accumulate such amount and pay it, without interest, on the first business day after such six-month period (provided, in all events, the Non-Compete Period shall be computed as if the payment of such amount(s) had not been delayed).

 

Notwithstanding any provision of any Company Plan to the contrary, in light of the uncertainty with respect to the proper application of Section 409A, after consultation with the Executive, the Company reserves the right to make amendments to this Agreement and any other Company Plan as the Company deems necessary or desirable to avoid the imposition of taxes or penalties under Section 409A.  In any case, the Executive is solely responsible and liable for the satisfaction of all taxes and penalties that may be imposed on the Executive for the Executive’s account in connection with any Company Plan (including any taxes and penalties under Section 409A).

 

Notwithstanding any provision in this Agreement to the contrary: (i) each payment in a series of payments hereunder shall be deemed to be a

 

separate payment for purposes of Section 409A of the Code; and (ii) to the extent that any right to reimbursement of expenses or payment of any benefit in-kind under this Agreement constitutes nonqualified deferred compensation (within the meaning of Section 409A of the Code), (A) any such expense reimbursement shall be made by the Company no later than the last day of the taxable year following the taxable year in which such expense was incurred by the Executive, (B) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit, and (C) the amount of expenses eligible for reimbursement or in-kind benefits provided during any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits to be provided in any other taxable year; provided that the foregoing clause shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are subject to a limit related to the period the arrangement is in effect.

 

 

 

(a)           Notwithstanding any other provision of this Agreement to the contrary, and except as provided in this Section, to the extent that any payment or distribution of any type to or for the benefit of the Executive by the Company (or by any affiliate of the Company, any person or entity who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company’s assets, within the meaning of Section 280G of the Code, and the regulations thereunder), or any affiliate of such person or entity, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the “Total Payments”), is or will be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then the Total Payments shall be reduced (but not below zero) only if and to the extent that a reduction in the Total Payments would result in the Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the Excise Tax), than if the Executive received the entire amount of such Total Payments. Unless the Executive shall have given prior written notice specifying a different order to the Company to effectuate the foregoing, the Company shall reduce or eliminate the Total Payments, by first reducing or eliminating the portion of the Total Payments which are not payable in cash and then by reducing or eliminating vesting of whole shares not subject to Treasury Regulation 280G-1,

 

 

(b)           The determination of whether the Total Payments shall be reduced as provided in this Section and the amount of such reduction shall be made at the Company’s expense by an accounting firm jointly selected by the Company and the Executive from among its independent auditors and the five (5) largest accounting firms (an “Eligible Accounting Firm”) in the United States (the “Accounting Firm”). The Accounting Firm shall provide its determination (the “Determination”), together with detailed supporting calculations and documentation to the Company and the Executive within ten (10) days of the last day of the Executive’s employment. If the Accounting Firm determines that no Excise Tax is payable by the Executive with respect to the Total Payments, it shall furnish the Executive with an opinion reasonably acceptable to the Executive that

 

no Excise Tax will be imposed with respect to any such payments and, absent manifest error, such Determination shall be binding, final and conclusive upon the Company and the Executive. If the Accounting Firm determines that an Excise Tax would be payable, the Executive shall have the right to accept the Determination of the Accounting Firm as to the extent of the reduction, if any, pursuant to this Section, or to have such Determination reviewed by another Eligible Accounting Firm selected by the Executive, at the expense of the Company, in which case the determination of such second accounting firm shall be binding, final and conclusive upon the Company and the Executive.

 

 

The Company shall reimburse all reasonable and documented legal fees and commercially reasonable expenses incurred in connection with the drafting, negotiation and execution of the Executive’s employment agreement.  In order to be entitled to reimbursement:  (i) the Executive must execute this Agreement and commence employment; and (ii) the Company must receive a bill from the Executive’s counsel which is sufficiently detailed to enable the Company to assess the reasonableness of any fees and costs but without the narrative as to any time entries or work performed.

 

 

 

(a) Assignability.  This Agreement, and the Executive’s rights and obligations hereunder, may not be assigned by the Executive.  The Company may assign its rights, together with its obligations hereunder only to a successor to all or substantially all of the business and/or assets of the Company, provided that the Company shall require such successor to expressly assume and agree in writing to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  This Agreement shall inure to the benefit of and be binding upon the Company and its successors.

 

(b) No Third-Party Beneficiaries.  Except as otherwise set forth herein, nothing expressed or referred to in this Agreement will be construed to give any Person other than the Company and the Executive any legal or equitable right, remedy, or Claim under or with respect to this Agreement or any provision of this Agreement.

 

 

Any waiver, alteration, amendment, or modification of any of the terms of this Agreement shall be valid only if made in writing and signed by each of the parties hereto; provided, however, that any such waiver, alteration,

 

amendment, or modification must be consented to on the Company’s behalf by the Board.  No waiver by either of the parties hereto of their rights hereunder shall be deemed to constitute a waiver with respect to any subsequent occurrences or transactions hereunder unless such waiver specifically states that it is to be construed as a continuing waiver.

 

All sections of this Agreement survive beyond the Term of Employment except as otherwise specifically stated.

 

 

This agreement is governed by and is to be construed under the laws of the Commonwealth of Pennsylvania, without regard to its conflict of laws jurisprudence. Any dispute arising hereunder or concerning or relating to the Executive’s employment shall be finally settled by the state and federal courts sitting in the Commonwealth of Pennsylvania and each of the parties hereto agrees to accept service of process by registered mail and to otherwise consent to the jurisdiction of such courts.

 

 

(a) Place of Delivery.  Every notice or other communication relating to this Agreement shall be in writing, and shall be mailed to or delivered

 

 

to the party for whom or which it is intended at such address as may from time to time be designated by it in a notice mailed or delivered to the other party as herein provided. Unless and until some other address be so designated, all notices and communications by the Executive to the Company shall be mailed or delivered to the Company at its principal executive office, with a copy (which shall not constitute notice) to: Steven Eckhaus, Esq., Cadwalader, Wickersham & Taft, LLP, 1 World Financial Center, New York, New York 10281; and all notices and communications by the Company to the Executive may be given to the Executive personally or may be mailed to the Executive at the Executive’s last known address, as reflected in the Company’s records, with a copy (which shall not constitute notice) to: Michael Sirkin, Esq., Proskauer Rose LLP, Eleven Times Square, New York, NY 10036.

 

(b) Date of Delivery.  Any notice so addressed shall be deemed to be given (i) if delivered by hand, or by e-mail, on the date of such delivery, (ii) if mailed by courier or by overnight mail, on the first business day following the date of such mailing, and (iii) if mailed by registered or certified mail, on the third business day after the date of such mailing.

 

 

 

The headings of the sections and subsections of this Agreement are inserted for convenience only and shall not be deemed to constitute a part thereof or affect the meaning or interpretation of this Agreement or of any term or provision hereof.

 

 

This Agreement has been thoroughly negotiated and there is no presumption that either party drafted this agreement.

 

 

This Agreement, together with the attached exhibits and Company Plans and programs referred to herein, constitutes the entire understanding and agreement of the parties hereto regarding the employment of the Executive.  This Agreement supersedes all prior negotiations, discussions, correspondence, communications, understandings, and agreements between the parties relating to the subject matter of this Agreement.

 

 

This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which together shall

 

 

 

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