Exhibit 10.2
CHANGE IN CONTROL AGREEMENT
This EMPLOYMENT AND CHANGE IN CONTROL AGREEMENT (“Agreement”), executed on
December 17, 2007 but effective as of the Effective Date, by and between
CONSOLIDATED GRAPHICS, INC., a Texas corporation (the “Company”), and JON C.
BIRO (the “Executive”), evidences that;
WHEREAS, the Executive will become a senior executive of the Company and is
expected to make significant contributions to the profitability, growth and
financial strength of the Company;
WHEREAS, the Company desires to assure itself of both present and future
continuity of management in the event of a Change in Control (as defined
hereafter) and desires to establish certain minimum compensation rights with
respect to its key senior executives, including the Executive, applicable in the
event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior executives are not
practically disabled from discharging their duties upon a Change in Control;
WHEREAS, this Agreement is not intended to alter materially the compensation and
benefits which the Executive could reasonably expect to receive from the Company
absent a Change in Control and, accordingly, although effective and binding as
of the Effective Date (as such term is defined in that certain Employment
Agreement of even date herewith between Executive and Company), this Agreement
shall become operative only upon the occurrence of a Change in Control; and
WHEREAS, the Executive is willing to render services to the Company on the terms
and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Operation of Agreement:
(a) Sections 1 and 8 through 21 of this Agreement shall be effective and binding
as of the Effective Date, but, anything in this Agreement to the contrary
notwithstanding, Sections 2, 3, 4, 5, 6 and 7 of this Agreement shall not be
effective and binding unless and until there shall have occurred a Change in
Control. For purposes of this Agreement, a “Change in Control” will be deemed to
have occurred if at any time during the Term (as hereinafter defined) any of the
following events shall occur:
(i) The Company is merged, consolidated, converted or reorganized into or with
another corporation or other legal entity, and as a result of such merger,
consolidation, conversion or reorganization less than a majority of the combined
voting power of the then outstanding securities of the Company or such
corporation or other legal entity immediately after such transaction are held in
the aggregate by the holders of Voting Stock (as hereinafter defined) of the
Company immediately prior to such transaction and/or such voting power is not
held by substantially all of such holders in substantially the same proportions
relative to each other;

 

 

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(ii) The Company sells (directly or indirectly) all or substantially all of its
assets (including, without limitation, by means of the sale of the capital stock
or assets of one or more direct or indirect subsidiaries of the Company) to any
other corporation or other legal entity, of which less than a majority of the
combined voting power of the then outstanding voting securities (entitled to
vote generally in the election of directors or persons performing similar
functions on behalf of such other corporation or legal entity) of such other
corporation or legal entity is held in the aggregate by the holders of Voting
Stock of the Company immediately prior to such sale and/or such voting power is
not held by substantially all of such holders in substantially the same
proportions relative to each other;
(iii) Any person (as the term “person” is used in Section 13(d)(3) or Section
14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) becomes (subsequent to the Effective Date) the beneficial owner (as the
term “beneficial owner” is defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of securities representing fifty
percent (50%) or more of the combined voting power of the then-outstanding
securities entitled to vote generally in the election of directors of the
Company (“Voting Stock”);
(iv) The Company files a report or proxy statement with the Securities and
Exchange Commission pursuant to the Exchange Act disclosing in response to Form
8-K, Schedule 14A or Schedule 14C (or any successor schedule, form or report or
item therein) that a change in control of the Company has occurred;
(v) If during any one (1)-year period, individuals who at the beginning of any
such period constitute the directors of the Company cease for any reason to
constitute at least a majority thereof, unless the election, or the nomination
for election by the Company’s shareholders, of each director of the Company
first elected during such period was approved by a vote of at least two-thirds
of (i) the directors of the Company then still in office who were directors of
the Company at the beginning of any such period or (ii) directors referenced in
clause (i) immediately preceding plus directors of the Company whose nomination
and/or election was approved by the directors referenced in clause
(i) immediately preceding; or
(vi) The shareholders of the Company approve a plan contemplating the
liquidation or dissolution of the Company.
Notwithstanding the foregoing provisions of Subsection 1(a)(iii) or 1(a)(iv)
hereof, a “Change in Control” shall not be deemed to have occurred for purposes
of this Agreement solely because (i) the Company, (ii) a corporation or other
legal entity in which the Company directly or indirectly beneficially owns 100%
of the voting securities of such entity, or (iii) any employee stock

 

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ownership plan or any other employee benefit plan of the Company or any
wholly-owned subsidiary of the Company, either files or becomes obligated to
file a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K, Schedule 14A or Schedule 14C (or any successor
schedule, form or report or item therein) under the Exchange Act, disclosing
beneficial ownership by it of shares of Voting Stock, or because the Company
reports that a change in control of the Company has occurred by reason of such
beneficial ownership.
(b) Upon occurrence of a Change in Control at any time during the Term,
Sections 2, 3, 4, 5, 6 and 7 of this Agreement shall become immediately binding
and effective.
(c) The period during which this Agreement shall be in effect (the “Term”) shall
commence as of the date hereof and shall expire as of the later of (i) the close
of business on the third anniversary of the date hereof, or (ii) the expiration
of the Period of Employment (as hereinafter defined); provided, however, that
(A) subject to Section 9 hereof, if, prior to a Change in Control, the Executive
ceases for any reason to be an employee of the Company (or a parent or
subsidiary thereof), thereupon the Term shall be deemed to have expired and this
Agreement shall immediately terminate and be of no further effect and
(B) commencing on the first anniversary of the date hereof and each anniversary
thereafter, the Term of this Agreement shall automatically be extended for an
additional year.
2. Employment; Period of Employment:
(a) Subject to the terms and conditions of this Agreement, upon the occurrence
of a Change in Control, the Company shall continue the Executive in its employ
and the Executive shall remain in the employ of the Company for the period set
forth in Subsection 2(b) hereof (the “Period of Employment”), in the position
and with substantially the same duties and responsibilities that the Executive
had immediately prior to the Change in Control, or to which the Company and the
Executive may hereafter mutually agree in writing. Throughout the Period of
Employment, the Executive shall devote substantially all of the Executive’s time
during normal business hours (subject to vacations, sick leave and other
absences in accordance with the policies of the Company as in effect for senior
executives immediately prior to the Change in Control) to the business and
affairs of the Company, but nothing in this Agreement shall preclude the
Executive from devoting reasonable periods of time during normal business hours
to (i) serving as a director, trustee or member of or participant in any
organization or business so long as such activity would not constitute
Competitive Activity (as hereinafter defined) if conducted by the Executive
after the Executive’s Termination Date (as hereinafter defined), (ii) engaging
in charitable and community activities, or (iii) managing the Executive’s
personal investments.
(b) The Period of Employment shall commence on the date on which a Change in
Control occurs and, subject only to the provisions of Section 4 hereof, shall
continue until the expiration of the second anniversary of the occurrence of the
Change in Control.

 

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3. Compensation During Period of Employment:
(a) During the Period of Employment, the Executive shall receive (i) annual base
salary at a rate not less than the Executive’s highest annual fixed or base
compensation paid during or payable with respect to any calendar year during the
three calendar years immediately preceding the year in which the Change in
Control occurred, or such higher rate as may be determined from time to time by
the Board of Directors of the Company (the “Board”) or the Compensation
Committee thereof (the “Committee”) (which base salary at such rate is herein
referred to as “Base Pay”) and (ii) an annual amount equal to not less than the
highest aggregate annual bonus, incentive or other payments of cash compensation
paid to the Executive in addition to the amounts referred to in clause (i) above
made or to be made in or with respect to any calendar year during the three
calendar years immediately preceding the year in which the Change in Control
occurred pursuant to any bonus, incentive, profit-sharing, performance,
discretionary pay or similar policy, plan, program or arrangement of the Company
(“Incentive Pay”) which contemplates cash payments other than Employee Benefits
(as hereinafter defined); provided, however, that in no event shall any increase
in the Executive’s aggregate cash compensation or any portion thereof in any way
diminish any other obligation of the Company under this Agreement. The
Executive’s Base Pay shall be payable monthly. The Executive’s Incentive Pay
shall be paid annually as soon as reasonably practicable following determination
of the amount payable but in no event later than the date which is seventy-five
(75) days following the last day of the fiscal year during which such Incentive
Pay is deemed earned.
(b) During the Period of Employment the Executive shall, on the same basis as
the Executive participated therein immediately prior to the Change in Control,
be a full participant in, and shall be entitled to the perquisites, benefits and
service credit for benefits as provided under any and all employee retirement
income and welfare benefit policies, plans, programs or arrangements in which
senior executives of the Company and/or any parent or subsidiary participate
generally, including without limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement or other
retirement income or welfare benefit, deferred compensation, incentive
compensation, group and/or executive life, accident, health, dental,
medical/hospital or other insurance (whether funded by actual insurance or
self-insured by the Company), disability, salary continuation, expense
reimbursement and other employee benefit policies, plans, programs or
arrangements that may exist immediately prior to the Change in Control or any
equivalent successor policies, plans, programs or arrangements that may be
adopted thereafter by the Company and/or any parent or subsidiary (collectively,
“Employee Benefits”); provided, however, that, except as set forth in
Section 5(a)(ii) hereof, the Executive’s rights thereunder shall be governed by
the terms thereof and shall not be enlarged hereunder or otherwise affected
hereby. Subject to the proviso in the immediately preceding sentence, if and to
the extent such perquisites, benefits or service credit for benefits are not
payable or provided under any such policy, plan, program or arrangement as a
result of the amendment or termination thereof subsequent to or after a Change
in Control, then the Company shall itself pay or provide such Employee Benefits.
Nothing in this Agreement shall preclude improvement or enhancement of any such
Employee Benefits, provided that no such improvement shall in any way diminish
any other obligation of the Company under this Agreement.

 

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(c) The Company has determined that the amounts payable pursuant to this Section
3 constitute reasonable compensation. Accordingly, notwithstanding any other
provision hereof, unless such action would be expressly prohibited by applicable
law, if any amount paid or payable pursuant to this Section 3 is subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the “Code”), the Company will pay to the Executive an additional amount
in cash equal to the amount necessary to cause the aggregate remuneration
received by the Executive under this Section 3, including such additional cash
payment (net of all federal, state and local income and other taxes and all
taxes payable as the result of the application of Sections 280G and 4999 of the
Code) to be equal to the aggregate remuneration the Executive would have
received under this Section 3, excluding such additional payment (net of all
federal, state and local income and other taxes), as if Sections 280G and 4999
of the Code (and any successor provisions thereto) had not been enacted into
law.
4. Termination Following a Change in Control:
(a) In the event of the occurrence of a Change in Control, this Agreement may be
terminated by the Company during the Period of Employment only upon the
occurrence of one or more of the following events:
(i) If the Executive is unable to perform the essential functions of the
Executive’s job (with or without reasonable accommodation) because the Executive
has become permanently disabled within the meaning of, and actually begins to
receive disability benefits pursuant to, a long-term disability plan maintained
by or on behalf of the Company for senior executives generally or, if
applicable, employees of the Company immediately prior to the Change in Control;
or
(ii) For “Cause,” which for purposes of this Agreement shall mean that, prior to
any termination pursuant to Subsection 4(b) hereof, the Executive shall have
committed:
(A) an intentional act of material fraud, embezzlement or theft in connection
with the Executive’s duties or in the course of the Executive’s employment with
the Company;
(B) intentional, wrongful damage to material property of the Company;
(C) intentional, wrongful disclosure of material secret processes or
confidential information of the Company; or
(D) intentional wrongful engagement in any Competitive Activity;

 

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and any such act shall have been materially harmful to the Company. For purposes
of this Agreement, no act, or failure to act, on the part of the Executive shall
be deemed “intentional” if it was due primarily to an error in judgment or
negligence, but shall be deemed “intentional” only if done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that the
Executive’s action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
terminated for “Cause” hereunder unless and until there shall have been
delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the Board then in office at
a meeting of the Board called and held for such purpose (after reasonable notice
to the Executive and an opportunity for the Executive, together with the
Executive’s counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive has committed an act set forth above
in this Subsection 4(a)(ii) and specifying the particulars thereof in detail.
Nothing herein shall limit the right of the Executive or the Executive’s
beneficiaries to contest the validity or propriety of any such determination.
(b) In the event of the occurrence of a Change in Control, this Agreement may be
terminated by the Executive during the Period of Employment with the right to
benefits as provided in Section 5 hereof upon the occurrence of one or more of
the following events as determined by the Executive in the sole discretion of
the Executive:
(i) Any termination by the Company of the employment of the Executive for any
reason other than for Cause or as a result of the death of the Executive or by
reason of the Executive’s disability and the actual receipt of disability
benefits in accordance with Subsection 4(a)(i) hereof; or
(ii) Termination by the Executive of the Executive’s employment with the Company
(or any successor to or affiliate thereof) during the Period of Employment upon
the occurrence of any of the following events:
(A) Failure to elect or reelect the Executive to the office(s) which the
Executive held immediately prior to a Change in Control, or failure to elect or
reelect the Executive as a director of the Company (or any successor to parent
entity thereof) or the removal of the Executive as a director of the Company (or
any successor thereto), if the Executive shall have been a director of the
Company immediately prior to the Change in Control;
(B) An adverse change in the nature or scope of the authorities, powers,
functions, responsibilities or duties attached to the position(s) which the
Executive held immediately prior to the Change in Control; a reduction in the
Executive’s Base Pay and/or Incentive Pay received from the Company; or the
termination of the Executive’s rights to any Employee Benefits to which the
Executive was entitled immediately prior to the Change in Control or a reduction
in scope or value thereof without the prior written consent of the Executive,
any of which is not remedied within ten (10) calendar days after receipt by the
Company of written notice from the Executive of such change, reduction or
termination, as the case may be;

 

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(C) A determination by the Executive that, following a Change in Control, as a
result of a change in circumstances significantly affecting the Executive’s
position(s), including without limitation, a change in the scope of the business
or other activities for which the Executive was responsible immediately prior to
a Change in Control, the Executive has been rendered substantially unable to
carry out, has been substantially hindered in the performance of, or has
suffered a substantial reduction in any of the authorities, powers, functions,
responsibilities or duties attached to the position(s) held by the Executive
immediately prior to the Change in Control, which situation is not remedied
within ten (10) calendar days after written notice to the Company from the
Executive of such determination;
(D) The liquidation, dissolution, merger, consolidation or reorganization of the
Company or transfer of all or a significant portion of its business and/or
assets (including, without limitation, by means of the sale of the capital stock
or assets of one or more direct or indirect subsidiaries of the Company), unless
the successor (by liquidation, merger, consolidation, reorganization or
otherwise) to which all or a significant portion of its business and/or assets
have been transferred (directly or by operation of law) shall have assumed all
duties and obligations of the Company under this Agreement pursuant to
Section 11 hereof (in which case, such entity shall be deemed to be the
“Company” hereunder);
(E) The Company shall require (I) that the principal place of work of the
Executive or the appropriate principal executive office of the Company or the
Company’s operating division or subsidiary for which the Executive performed the
majority of his services during the twelve (12)-month period preceding the
Change in Control be changed to any location which is in excess of forty
(40) miles from the location thereof immediately prior to the Change in Control
or (II) that the Executive travel away from the Executive’s office in the course
of discharging the Executive’s responsibilities or duties hereunder more (in
terms of either consecutive days or aggregate days in any calendar year) than
was required of the Executive prior to the Change in Control, without, in either
case, the Executive’s prior consent; or
(F) Any material breach of this Agreement by the Company or any successor
thereto.

 

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(c) A termination by the Company pursuant to Subsection 4(a) hereof or by the
Executive pursuant to Subsection 4(b) hereof shall not affect any rights which
the Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights shall be
governed by the terms thereof. If this Agreement or the employment of the
Executive is terminated under circumstances in which the Executive is not
entitled to any payments under Sections 3 or 5 hereof, then notwithstanding
anything herein to the contrary, the Executive shall have no further obligation
or liability to the Company hereunder with respect to the Executive’s prior or
any future employment by the Company.
5. Severance Compensation:
(a) If, following the occurrence of a Change in Control, (x) the Company shall
terminate the Executive’s employment during the Period of Employment other than
pursuant to Subsection 4(a) hereof, or (y) the Executive shall terminate the
Executive’s employment during the Period of Employment pursuant to Subsection
4(b) hereof, or (z) the Executive dies during the Period of Employment, the
Company shall pay to the Executive (or the Executive’s estate, as applicable)
the amount specified in Subsection 5(a)(i) hereof within five business days
after the date (the “Termination Date”) that the Executive’s employment is
terminated (the effective date of which shall be the date of termination or
death, or such other date that may be specified by the Executive if the
termination is pursuant to Subsection 4(b) hereof):
(i) In lieu of any further payments under Subsection 3(a) to the Executive for
periods subsequent to the Termination Date, but without affecting the rights of
the Executive referred to in Subsection 5(b) hereof, a lump sum payment in an
amount equal to a multiple of two (2) times the Executive’s Base Pay (at the
highest rate in effect during the Term prior to the Termination Date).
(ii) (A) For the remainder of the Period of Employment the Company shall arrange
to provide the Executive with Employee Benefits identical to those which the
Executive was receiving or entitled to receive immediately prior to the
Termination Date (and if and to the extent that such benefits shall not or
cannot be paid or provided under any policy, plan, program or arrangement of the
Company solely due to the fact that the Executive is no longer an officer or
employee of the Company, then the Company shall itself pay to the Executive
and/or the Executive’s dependents and beneficiaries, such Employee Benefits) and
(B) without limiting the generality of the foregoing, the remainder of the
Period of Employment shall be considered service with the Company for the
purpose of service credits under the Company’s retirement income, supplemental
executive retirement and other benefit plans applicable to the Executive and/or
the Executive’s dependents and beneficiaries immediately prior to the
Termination Date. Without otherwise limiting the purposes or effect of Section 6
hereof, Employee Benefits payable to the Executive pursuant to this Subsection
5(a)(ii) by reason of any “welfare benefit plan” of the Company (as the term
“welfare benefit plan” is defined in Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended) shall be reduced to the extent
comparable welfare benefits are actually received by the Executive from another
employer during such period following the Executive’s Termination Date until the
expiration of the Period of Employment.

 

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(iii) In addition to all other compensation due to the Executive hereunder, the
following shall occur immediately prior to the occurrence of a Change in
Control:
(A) all Company stock options held by the Executive prior to a Change in Control
shall become exercisable, regardless of whether or not the vesting/performance
conditions set forth in the relevant agreements shall have been satisfied in
full;
(B) all restrictions on any restricted securities granted by the Company to the
Executive prior to a Change in Control shall be removed and the securities shall
become fully vested and freely transferable, regardless of whether the
vesting/performance conditions set forth in the relevant agreements shall have
been satisfied in full;
(C) the Executive shall have an immediate right to receive all performance
shares or bonuses granted prior to a Change in Control, and such performance
shares and bonuses shall become fully vested and freely transferable or payable
without restrictions, regardless of whether or not specific performance goals
set forth in the relevant agreements shall have been attained; and
(D) all performance units granted to the Executive prior to a Change in Control
shall become immediately payable in cash or Common Stock, at the Executive’s
sole option, regardless of whether or not the relevant performance cycle has
been completed, and regardless of whether any other terms and conditions of the
relevant agreements shall have been satisfied in full;
provided, that if the terms of any plan or agreement providing for such options,
restricted securities, performance shares or bonuses, or performance units do
not allow such acceleration or payment as described above, the Company shall
take or cause to be taken any action required to allow such acceleration or
payment or to separately pay the value of such benefits.
(b) (i) Anything in this Agreement to the contrary notwithstanding, in the event
a public accounting firm selected by the Executive (the “Accounting Firm”) shall
determine that any payment, benefit, or distribution by the Company to 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 Subsection 5(b) (a “Payment”) is subject
to the excise tax imposed by Section 4999 of the Code, or 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, are hereinafter
collectively referred to as the “Excise Tax”), then the Company shall pay to the
Executive 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 the
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 Payments.

 

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(ii) Subject to the provisions of Subsection 5(b)(iii), all determinations
required to be made under this Subsection 5(b), 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 which shall provide detailed supporting calculations both to
the Company and the Executive as soon as possible following a request made by
the Executive or the Company. In the event that the Accounting Firm is serving
as accountant or auditor for the individual, entity or group effecting the
Change in Control, the Executive shall appoint another nationally recognized
public 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 Company.
Any Gross-Up Payment, as determined pursuant to this Subsection 5(b), shall be
paid by the Company 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 determination by the Accounting Firm shall be
binding upon the Company 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 Company should have been made
(“Underpayment”), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Subsection 5(b)(iii) 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 Company to or for the benefit of the Executive.
(iii) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the Executive is
informed in writing of such claim and shall set forth in reasonable detail the
Company 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 ten (10)-day period following the date on which the Executive
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:

 

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(A) give the Company any information reasonably requested by the Company
relating to such claim,
(B) take such action in connection with contesting such claim as the Company
shall reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such claim by an
attorney selected by the Company,
(C) cooperate with the Company in good faith to effectively contest such claim,
and
(D) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company 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 limitation on the foregoing provisions of
this Subsection 5(b)(iii), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo 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 sue 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 Company shall
determine; provided further, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company 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 provided further, 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 such contested
amount. Furthermore, the Company’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.
(iv) If, after the receipt by the Executive of an amount advanced by the Company
pursuant to this Subsection 5(b), the Executive becomes entitled to receive, and
receives, any refund with respect to such claim, the Executive shall (subject to
the Company’s complying with the requirements of this Subsection 5(b)) promptly
pay to the Company 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 any amount advanced by the Company pursuant to Subsection 5(b), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company 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 Gross-Up Payment required to
be paid.

 

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(c) There shall be no right of set-off or counterclaim in respect of any claim,
debt or obligation against any payment to or benefit (including Employee
Benefits) of the Executive provided for in this Agreement.
(d) Without limiting the rights of the Executive at law or in equity, if the
Company fails to make any payment required to be made hereunder on a timely
basis, the Company shall pay interest on the amount thereof (and on any interest
accrued hereunder) at an annualized rate of interest equal to the Highest Lawful
Rate as hereafter defined. “Highest Lawful Rate” means, at any time and with
respect to the Executive, the maximum rate of interest under applicable law that
the Executive may charge the Company. The Highest Lawful Rate shall be
calculated in a manner that takes into account any and all fees, payments, and
other charges in respect of this Agreement that constitute interest under
applicable law. Each change in any interest rate provided for herein based upon
the Highest Lawful Rate resulting from a change in the Highest Lawful Rate shall
take effect without notice to the Company at the time of such change in the
Highest Lawful Rate. For purposes of determining the Highest Lawful Rate under
Texas law, the applicable rate ceiling shall be the indicated rate ceiling
described in, and computed in accordance with the Texas Finance Code.
Notwithstanding anything to the contrary contained herein, no provisions of this
Agreement shall require the payment or permit the collection of interest in
excess of the Highest Lawful Rate. If any excess of interest in such respect is
herein provided for, or shall be adjudicated to be so provided, in this
Agreement, the provisions of this paragraph shall govern and prevail, and
neither the Company nor the sureties, guarantors, successors or assigns of the
Company shall be obligated to pay the excess amount of such interest, or any
other excess sum paid for the use, forbearance or detention of indebtedness
pursuant hereto. If for any reason interest in excess of the Highest Lawful Rate
shall be deemed charged, required or permitted by any court of competent
jurisdiction, any such excess shall be applied as a payment and reduction of the
principal of indebtedness evidenced by this Agreement; and, if the principal
amount hereof has been paid in full, any remaining excess shall forthwith be
paid to the Company. In determining whether or not the interest paid or payable
exceeds the Highest Lawful Rate, the Company and the Executive shall, to the
extent permitted by applicable law, (a) characterize any non-principal payment
as an expense, fee, or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) amortize, prorate, allocate, and
spread in equal or unequal parts the total amount of interest throughout the
entire contemplated term of the indebtedness evidenced by this Agreement so that
the interest for the entire term does not exceed the Highest Lawful Rate.

 

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6. No Mitigation Obligation: The Company hereby acknowledges that it will be
difficult, and may be impossible, for the Executive to find reasonably
comparable employment following the Termination Date and that the noncompetition
covenant contained in Section 7 hereof will further limit the employment
opportunities for the Executive. Accordingly, the parties hereto expressly agree
that the payment of the severance compensation and benefits by the Company to
the Executive in accordance with the terms of this Agreement will be liquidated
damages, and that the Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, nor shall any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise, except as
expressly provided in Subsection 5(a)(ii) hereof.
7. Competitive Activity: During a period ending one year following the
Termination Date (or, if less, a period equal to the remaining Period of
Employment and beginning on the Termination Date), if the Executive shall have
received or shall be receiving benefits under Subsection 5(a) hereof, the
Executive shall not, without the prior written consent by the Company, directly
or indirectly engage in any “Competitive Business” (as hereinafter defined)
within any metropolitan area served by the Company during the twelve (12)-month
period immediately preceding termination of the Executive’s employment with the
Company nor will the Executive engage, within such geographical area(s), in the
design, development, distribution, manufacture, assembly or sale of a product or
service in competition with any product or service marketed or planned by the
Company immediately prior to the Termination Date, the plans, designs or
specifications of which have been revealed to the Executive (“Competitive
Activity”). The Executive acknowledges that these limited prohibitions are
reasonable as to time, geographical area and scope of activities to be
restrained and that the limited prohibitions do not impose a greater restraint
than is necessary to protect the Company’s goodwill, proprietary information and
other business interests. “Competitive Activity” shall not include (i) the mere
ownership of a de minimis amount of securities in any such enterprise and
exercise of rights appurtenant thereto or (ii) participation in management of
any such enterprise or business operation thereof other than in connection with
the competitive operation of such enterprise. For purposes of this Section 7,
the term “Competitive Business” means any person or entity engaged in a business
that produces any of the following products or performs any of the following
services: general commercial printing services, including digital imaging and
printing, off-set lithography (sheet fed and web), composition, electronic
prepress, binding, kitting and finishing services, fulfillment of printed
materials, and direct mail services, including any other products or services
manufactured, developed, or distributed during the Term and the Term of
Employment by the Company and/or its affiliates, predecessors, or successors.
8. Legal Fees and Expenses: It is the intent of the Company that the Executive
not be required to incur the expenses associated with the enforcement of the
Executive’s rights under this Agreement by litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder. Accordingly, if it
should appear to the Executive that the Company has failed to comply with any of
its obligations under this Agreement or in the event that the Company or any
other person takes any action to declare this Agreement void or unenforceable,
or institutes any litigation designed to deny, or to recover from, the Executive
the benefits intended to be provided to the Executive hereunder, the Company
irrevocably authorizes the Executive from time to time to retain counsel of the
Executive’s choice, at the expense of the Company as hereafter provided, to
represent the Executive in connection with the litigation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, shareholder or other

 

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person affiliated with the Company, in any jurisdiction. Notwithstanding any
existing or prior attorney-client relationship between the Company and such
counsel, the Company irrevocably consents to the Executive’s entering into an
attorney-client relationship with such counsel, and in connection therewith the
Company and the Executive agree that a confidential relationship shall exist
between the Executive and such counsel. The Company shall pay or cause to be
paid and shall be solely responsible for any and all attorneys’ and related fees
and expenses incurred by the Executive as a result of the Company’s failure to
perform this Agreement or any provision thereof or as a result of the Company or
any person contesting the validity or enforceability of this Agreement or any
provision thereof as aforesaid.
9. Employment Rights: Nothing expressed or implied in this Agreement shall
create any right or duty on the part of the Company or the Executive to have the
Executive remain in the employment of the Company prior to any Change in
Control; provided, however, that any actual or constructive termination of
employment of the Executive or removal of the Executive as an officer of the
Company following the commencement of any discussion with or receipt of an offer
from a third person that ultimately results in a Change in Control shall be
deemed to be a termination or removal of the Executive after a Change in Control
for purposes of this Agreement.
10. Withholding of Taxes: The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
11. Successors and Binding Agreement:
(a) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all or
substantially all of the business and/or assets of the Company, to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. This Agreement shall be binding upon and inure to the benefit of the
Company and any successor to the Company, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business and/or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor shall thereafter
be deemed the “Company” for the purposes of this Agreement). This Agreement
shall not otherwise be assignable, transferable or delegable by the Company.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive’s personal or legal representatives, executors, administrators,
successors, heirs, distributees and/or legatees.
(c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Subsection 11(a) hereof. Without limiting the generality of the foregoing, the
Executive’s right to receive payments hereunder shall not be assignable,
transferable or delegable, whether by pledge, creation of a security interest or
otherwise, other than by a transfer by the Executive’s will or by the laws of
descent and distribution and, in the event of any attempted assignment or
transfer contrary to this Subsection 11(c), the Company shall have no liability
to pay any amount so attempted to be assigned, transferred or delegated.

 

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(d) The Company and the Executive recognize that each Party will have no
adequate remedy at law for breach by the other of any of the agreements
contained herein and, in the event of any such breach, the Company and the
Executive hereby agree and consent that the other shall be entitled to a decree
of specific performance, mandamus or other appropriate remedy to enforce
performance of this Agreement.
12. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF CONFLICTS OF LAW
PRINCIPLES OF ANY STATE) AND THE LAWS OF THE UNITED STATES OF AMERICA AND WILL,
TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR PERFORMANCE IN HARRIS
COUNTY, TEXAS. COURTS WITHIN THE STATE OF TEXAS WILL HAVE JURISDICTION OVER ANY
AND ALL DISPUTES BETWEEN THE PARTIES HERETO, WHETHER IN LAW OR EQUITY, ARISING
OUT OF OR RELATING TO THIS AGREEMENT. THE PARTIES CONSENT TO AND AGREE TO SUBMIT
TO THE JURISDICTION OF SUCH COURTS. VENUE IN ANY SUCH DISPUTE, WHETHER IN
FEDERAL OR STATE COURT, WILL BE LAID IN HARRIS COUNTY, TEXAS. EACH OF THE
PARTIES HEREBY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUCH DISPUTE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY CLAIM THAT (i) SUCH PARTY IS NOT
PERSONALLY SUBJECT TO THE JURISDICTION OF SUCH COURTS, (ii) SUCH PARTY AND SUCH
PARTY’S PROPERTY IS IMMUNE FROM ANY LEGAL PROCESS ISSUED BY SUCH COURTS OR
(iii) ANY LITIGATION COMMENCED IN SUCH COURTS IS BROUGHT IN AN INCONVENIENT
FORUM.
13. Notices. All notices, demands, requests or other communications that may be
or are required to be given, served or sent by either party to the other party
pursuant to this Agreement will be in writing and will be mailed by first-class,
registered or certified mail, return receipt requested, postage prepaid, or
transmitted by hand delivery, telegram or facsimile transmission addressed as
follows:

             
 
  (a)   If to the Company:   Consolidated Graphics, Inc.
 
          5858 Westheimer, Suite 200 
 
          Houston, Texas 77057 
 
          Facsimile No.: (713) 787-0974 
 
          Attn: Joe R. Davis

 

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      with a copy (which will    
 
      not constitute notice) to:   Winstead PC
 
          1100 JP Morgan Chase Tower
 
          600 Travis Street
 
          Houston, Texas 77002 
 
          Facsimile No.: (713) 650-2400 
 
          Attn: R. Clyde Parker, Jr., Esq.
 
           
 
      If to the Executive:   Jon C. Biro
 
          c/o Consolidated Graphics, Inc.
 
          5858 Westheimer, Suite 200 
 
          Houston, Texas 77057 

Either party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
14. Gender. Words of any gender used in this Agreement will be held and
construed to include any other gender, and words in the singular number will be
held to include the plural, unless the context otherwise requires.
15. Amendment. This Agreement may not be amended or supplemented except pursuant
to a written instrument signed by the parties hereto. Nothing contained in this
Agreement will be deemed to create any agency, joint venture, partnership or
similar relationship between the parties to this Agreement. Nothing contained in
this Agreement will be deemed to authorize either party to this Agreement to
bind or obligate the other party.
16. Counterparts. This Agreement may be executed in multiple counterparts, each
of which will be deemed to be an original and all of which will be deemed to be
a single agreement. This Agreement will be considered fully executed when all
parties have executed an identical counterpart, notwithstanding that all
signatures may not appear on the same counterpart.
17. Severability. If any of the provisions of this Agreement are determined to
be invalid or unenforceable, such invalidity or unenforceability will not
invalidate or render unenforceable the remainder of this Agreement, but rather
the entire Agreement will be construed as if not containing the particular
invalid or unenforceable provision or provisions, and the rights and obligations
of the parties will be construed and enforced accordingly. The parties
acknowledge that if any provision of this Agreement is determined to be invalid
or unenforceable, it is their desire and intention that such provision be
reformed and construed in such manner that it will, to the maximum extent
practicable, be deemed to be valid and enforceable.

 

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18. Third Parties. Except as expressly set forth or referred to in this
Agreement, nothing in this Agreement is intended or will be construed to confer
upon or give to any party other than the parties to this Agreement and their
successors and permitted assigns, if any, any rights or remedies under or by
reason of this Agreement.
19. Waiver. No failure or delay in exercising any right hereunder will operate
as a waiver thereof, nor will any single or partial exercise thereof preclude
any other or further exercise or the exercise of any other right.
20. Prior Agreements: This Agreement is voluntarily entered into and upon the
occurrence of a Change in Control will supersede and take the place of any prior
change in control agreements between the parties hereto. The parties hereto
expressly agree and hereby declare that any and all prior change in control
agreements between the parties are terminated and of no force or effect.
21. Effectiveness of Agreement. This Agreement shall become effective only upon
and as of the Effective Date, it being expressly acknowledged and agreed by the
parties hereto that this Agreement shall not be binding on the parties until the
Executive officially commences work with Company at its principal offices in
Houston, Texas (currently expected to be in January 2008 or before), provided,
however, that if Executive does not commence work with Company by January 31,
2008, this Agreement shall be null and void for all purposes, and neither party
shall have any liability to the other party hereunder.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date first above written.

              COMPANY:
 
            CONSOLIDATED GRAPHICS, INC.
 
       
 
  By:   /s/ Joe R. Davis
 
       
 
      Joe R. Davis,
 
      Chairman and Chief Executive Officer
 
            EXECUTIVE:
 
 
/s/ Jon C. Biro           Jon C. Biro

 

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