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1 Exhibit (c)(3)
EMPLOYMENT AND CONSULTING AGREEMENT
THIS AGREEMENT, made of the 27th day of April, 1998, by and
between Snap-on Incorporated, a Delaware corporation ("SSS"), Xxxx-Xxxxxx
Corporation, a Wisconsin corporation ("HHH") and Xxxxxx X. Xxxxxxx (the
"Executive").
A. Contemporaneously with the execution of this
Agreement SSS and Snap-on Pace Company, a Wisconsin corporation ("Sub"), and a
wholly-owned subsidiary of SSS, are entering into an Agreement and Plan of
Merger (the "Merger Agreement") with HHH. The Merger Agreement provides for
the acquisition (the "Acquisition") by Sub of all of the issued and outstanding
shares of HHH.
B. Executive has been employed by HHH for many years and
is currently President and CEO of HHH. Executive's services are valuable to
the conduct of the business of HHH.
C. Because of, among other matters, Executive's
knowledge of HHH and the collision repair business, SSS desires that Executive
be available to SSS following the acquisition.
D. Executive is willing to be available to SSS and HHH
on the terms and conditions provided for herein.
E. Executive has previously entered into an agreement
with HHH dated January 27, 1984 (the "Agreement") pursuant to which Executive
would have been entitled, following the Acquisition and upon the termination of
Executive's employment with HHH, to a payment of approximately $1,200,000.
F. The Agreement has been recently amended by Amendment
No. 1 dated April 27, 1998 (the Agreement as amended is hereinafter referred to
as the "Employment Agreement") to provide that upon a "Change of Control of
Company" (as defined in the Employment Agreement), Executive will immediately
be entitled to receive a lump sum payment in the amount of $995,000.
In consideration of the covenants and agreements of the
parties herein contained, and subject to the condition that, pursuant to the
Merger Agreement, Sub shall acquire sufficient shares of HHH so that there is a
Change of Control of Company (the date of such acquisition being referred to
herein as the "SSS Acquisition Date"), the parties hereto agree as follows:
1. Employment of Executive
1.1. Employment and Duties. During the Employment Term
(as hereafter defined) HHH hereby agrees to employ Executive as President of
HHH, reporting directly to SSS's Senior Vice-President (presently Xxxxxx
Xxxxxxx), and Executive agrees to be so employed by HHH. In addition, without
any additional compensation to that provided hereunder,
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Executive shall assist in coordinating the collision repair business with other
businesses of SSS. Executive agrees during the Employment Term to devote
substantially his full business time and effort to the performance of his
duties hereunder, including, without limitation, cooperating in attracting and
retaining key employees of SSS and HHH, in accordance with such reasonable
standards expected of employees with comparable positions in SSS's organization
and as may be established from time to time by the Board of Directors of HHH.
SSS shall guarantee all HHH's monetary obligations under this Agreement.
1.2. Term. The term of Executive's employment hereunder
shall commence on the SSS Acquisition Date and shall continue until December
31, 1998 and may continue thereafter by mutual agreement of the parties (the
"Employment Term").
1.3. Compensation.
(a) Base Salary. As compensation for his
services hereunder, Executive shall receive a salary of
$25,000 per month, payable monthly.
(b) Fringe Benefits. Executive shall also be
entitled to receive all benefits presently received or
available to Executive as an executive of HHH, which include,
but are not limited to, the benefits set forth in Schedule I
hereto.
2. Consulting Services.
2.1. Services. During the Consulting Term (as hereinafter
defined) SSS agrees to retain Executive as a consultant to the collision repair
businesses of HHH and/or SSS. During the Consulting Term Executive agrees to
make himself available to consult with employees of SSS and its subsidiaries
with regard to the collision repair businesses upon reasonable notice and at
such reasonable times and places as shall be reasonably agreed to by Executive.
Executive shall not be required to perform consulting services for in excess of
1,500 hours during the 12- month period ending December 31, 1999 and for in
excess of 1,000 hours during the 12-month period ending December 31, 2000.
Executive shall not be required to provide consulting services during the
months of July or August.
2.2. Term. The term of Executive's service as a
consultant to SSS shall commence at the termination of the Employment Term and
shall continue until December 31, 2000 (the "Consulting Term").
2.3. Consulting Fees. As compensation for Executive's
services during the Consulting Term, consultant shall be entitled to receive a
monthly consulting fee equal to $20,835 per month each month of the Consulting
Term in the year 1999 (annually $250,000) and $16,670 per month for each month
of the Consulting Term in the year 2000 (annually $200,000). The monthly
consulting fee shall be pro-rated for any partial month. In addition, during
the Consulting Term SSS shall without cost to Executive provide to Executive
the benefits described in Schedule I, provided that Executive's continued
participation is possible under the
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general terms and provisions of such benefit plans. In the event that
Executive's participation in any such plan is barred, SSS shall pay or cause to
be paid to Executive an amount equal to the total aggregate costs to SSS or
HHH, as applicable, of providing Executive with benefits under such plan were
his continued participation not barred.
3. Termination.
(a) Right to Terminate. During the Employment Term and
the Consulting Term (together the "Term"), (i) SSS shall be entitled to
terminate Executive's services hereunder (A) for Cause, (B) by reason of the
Executive's disability pursuant to Section 6, or (C) for any other reason, and
(ii) the Executive shall be entitled to terminate the Executive's services
hereunder (A) during the Employment Term only for Good Reason, or (B) during
the Consulting Term, for any reason. Any such termination shall be subject to
the procedures set forth in Section 7 and shall be subject to any consequences
of such termination set forth in this Agreement.
(b) Termination for Cause or Without Good Reason. If
there is a termination of Executive's services hereunder for Cause or due to
the Executive's voluntarily terminating Executive's services other than for
Good Reason, then the Executive shall be entitled to receive only Accrued
Benefits, and neither SSS nor HHH shall have any further obligations under this
Agreement.
(c) Termination Giving Rise to a Termination Payment. If
there is a termination of Executive's services hereunder by the Executive for
Good Reason, or by SSS other than by reason of (i) death, (ii) disability
pursuant to Section 6, or (iii) Cause, then the Executive shall be entitled to
receive, and SSS shall promptly pay, Accrued Benefits and, in lieu of further
base salary or consulting fees for periods following the Termination Date, as
liquidated damages and in consideration of the covenant of the Executive set
forth in Section 8(a), the Termination Payment pursuant to Section 4(a).
4. Payments Upon Termination.
(a) Termination Payment. (i) For purposes of this
Agreement, the "Termination Payment" shall be an amount equal to the
aggregate of (a) the product obtained by multiplying $25,000 by the
number of months, if any, remaining in the Employment Term following
the Termination Date, plus (b) the product obtained by multiplying
$20,835 by the number of months, if any, of the Consulting Term
remaining in the year 1999 following the Termination Date, plus (c)
the product obtained by multiplying $16,670 by the number of months,
if any, in the Consulting Term remaining in the year 2000 following
the Termination Date. The Termination Payment shall be paid to the
Executive in cash equivalent not later than ten business days after
the Termination Date. The Executive shall not be required to mitigate
the amount of the Termination Payment by securing other employment or
otherwise, nor will such Termination Payment be reduced by reason of
the Executive securing other employment
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or for any other reason. The Termination Payment shall be in lieu of
any other severance payments, if any, to which the Executive may be
entitled under either SSS's or HHH's severance policies and practices.
(b) Additional Benefits. If there is a termination of
Executive's services hereunder and the Executive is entitled to Accrued
Benefits and the Termination Payment, then the Executive shall be entitled to
the following additional benefits: Until the end of the Consulting Term the
Executive shall continue to be covered, at the expense of SSS, by the most
favorable life insurance, hospitalization, medical and dental coverage and
other welfare benefits provided to the Executive and the Executive's family
immediately prior to the date Notice of Termination is given, provided that
Executive's continued participation is possible under the general terms and
provisions of such benefit plans. In the event that Executive's participation
in any such plan is barred, SSS shall pay or cause to be paid to Executive an
amount equal to the total aggregate costs to SSS or HHH as applicable, of
providing Executive with benefits under such plan were his continued
participation not barred.
5. Death. In the event of a termination of Executive's
services hereunder due to the Executive's death, the Executive's estate, heirs
and beneficiaries shall receive all the Executive's Accrued Benefits through
the Termination Date.
6. Termination for Disability. If, during the Term, as
a result of the Executive's disability due to physical or mental illness or
injury (regardless of whether such illness or injury is job-related), the
Executive shall have been absent from the Executive's duties hereunder on a
full-time basis for the entire period of 90 consecutive days, or for an
aggregate period of 182 days and, within thirty days after SSS notifies the
Executive in writing that it intends to terminate the Executive's services
(which notice shall not constitute the Notice of Termination contemplated
below), the Executive shall not have returned to the performance of the
Executive's duties hereunder on a full-time basis, then SSS may terminate
Executive services for purposes of this Agreement pursuant to a Notice of
Termination. If the Executive's services are terminated on account of the
Executive's disability in accordance with this Section, then the Executive
shall receive Accrued Benefits in accordance with Section 7(a) and shall remain
eligible for all benefits provided by any long term disability programs of SSS
or HHH in effect at the time SSS sends notice to the Executive of its intent to
terminate pursuant to this Section.
7. Termination Notice and Procedure. (a) Any
termination of Executive's services by SSS or the Executive shall be
communicated by written Notice of Termination to the Executive, if such Notice
is given by SSS, and to SSS, if such Notice is given by the Executive, all in
accordance with the following procedures and those set forth in Section 7:
(i) If such termination is for disability, Cause or Good
Reason, the Notice of Termination shall indicate in reasonable detail the facts
and circumstances alleged to provide a basis for such termination.
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(ii) If the Notice is given by the Executive for Good
Reason, then the Executive may cease performing the Executive's services
hereunder on or after the date 15 days after the delivery of Notice of
Termination (unless the Notice of Termination is based upon clause (vii) of the
definition of "Good Reason" in Exhibit A, in which case the Executive may cease
performing his duties at the time the Executive's services are terminated) and
shall in any event cease services on the Termination Date, if any, arising from
the delivery of such Notice. If the Notice is given by SSS, then the Executive
may cease performing the services hereunder on the date of receipt of the
Notice of Termination, subject to the Executive's rights hereunder.
(iv) The recipient of any Notice of Termination shall
personally deliver or mail in accordance with Section 14 written notice of any
dispute relating to such Notice of Termination to the party giving such Notice
within fifteen days after receipt thereof. After the expiration of such fifteen
days, the contents of the Notice of Termination shall become final and not
subject to dispute.
8. Further Obligations of the Executive.
(a) Competition. In consideration of the continued
employment of Executive pursuant to this Agreement, Executive agrees that, in
the event that (i) SSS or HHH terminates Executive's services, or (ii)
Executive terminates his services for any reason, the Executive shall not, for
a period commencing on the SSS Acquisition Date and ending on the later of
December 31, 2000 or two years from the applicable Termination Date, engage in
any Competitive Activity.
(b) Confidentiality. During and following the Term
hereof, the Executive shall hold in confidence and not directly or indirectly
disclose or use or copy or make lists of any Confidential Information, except
to the extent authorized in writing by a Senior Executive Officer of SSS or
required by any court or administrative agency, other than to an employee of
SSS or a person to whom disclosure is reasonably necessary or appropriate in
connection with the performance by the Executive of services hereunder.
"Secret or Confidential Information" shall mean secret or confidential
information of SSS or HHH (including secret or confidential information of
subsidiaries and affiliates), including but not limited to lists of
distributors and customers; identity of distributors and customers; identity of
prospective distributors and customers; contract terms; bidding information and
strategies; pricing methods; computer software; computer software methods and
documentation; hardware; salary information with respect to employees; product
design information; business plans, methods of operation; the procedures, forms
and techniques used in serving distributors and customers; all Intellectual
Property (as defined in the Merger Agreement); and all other documents or
information which are required to be maintained in confidence for continued
business success, provided that secret or confidential information shall not
include information reasonably available to the general public. All records,
files, documents and materials, or copies thereof, relating to the business of
SSS and its subsidiaries and affiliates which the Executive shall prepare, or
use, or come into contact with, shall be and remain the sole property of SSS
and shall be promptly returned to SSS
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upon termination of this Agreement. SSS shall be entitled to specific
performance and injunctive relief to enforce this Section 8.
9. Severability. The provisions of this Agreement shall
be regarded as divisible, and if any of said provisions or any part hereof are
declared invalid or unenforceable by a court of competent jurisdiction, then
the validity and enforceability of the remainder of such provisions or parts
hereof and the applicability thereof shall not be affected thereby.
10. Amendment. This Agreement may not be amended or
modified at any time except by written instrument executed by SSS and the
Executive.
11. Withholding. SSS or HHH, as the case may be, shall
be entitled to withhold from amounts to be paid to the Executive hereunder any
federal, state or local withholding or other taxes or charges which it is from
time to time required to withhold; provided, that the amount so withheld shall
not exceed the minimum amount required to be withheld by law. SSS shall be
entitled to rely on an opinion of nationally recognized tax counsel if any
question as to the amount or requirement of any such withholding shall arise.
12. Certain Rules of Construction. No party shall be
considered as being responsible for the drafting of this Agreement for the
purpose of applying any rule construing ambiguities against the drafter or
otherwise. No draft of this Agreement shall be taken into account in
construing this Agreement. Any provision of this Agreement which requires an
agreement in writing shall be deemed to require that the writing in question be
signed by the Executive and an authorized representative of SSS.
13. Governing Law; Resolution of Disputes. (a) This
Agreement and the rights and obligations hereunder shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin
(excluding any choice of law rules that may direct the application of the laws
of another jurisdiction) except that Section 13(b) shall be construed in
accordance with the Federal Arbitration Act.
(b) Any dispute arising out of this Agreement shall be
determined by arbitration under the rules of the American Arbitration
Association then in effect (but subject to any evidentiary standards set forth
in this Agreement), in which case both parties shall be bound by the
arbitration award. The venue for the arbitration shall be Milwaukee, Wisconsin
or, at the Executive's election, if the Executive is no longer residing or
working in the Milwaukee, Wisconsin metropolitan area, in the judicial district
encompassing the city in which the Executive resides. The parties consent to
personal jurisdiction in each trial court in the selected venue having subject
matter jurisdiction notwithstanding their residence or situs, and each party
irrevocably consents to service of process in the manner provided hereunder for
the giving of notices.
14. Notice. Notices given pursuant to this Agreement
shall be in writing and, except as otherwise provided by Section 7(a)(iii),
shall be deemed given when actually received
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by the Executive or actually received by SSS's Secretary or any officer of SSS
other than the Executive. If mailed, such notices shall be mailed by United
States registered or certified mail, return receipt requested, addressee only,
postage prepaid, if to SSS, to SSS, Attention: Vice President and General
Counsel, 00000 Xxxxxxxxx Xxxxx, X.X. Xxx 0000, Xxxxxxx, Xxxxxxxxx 00000-0000,
or if to the Executive, at the address set forth below the Executive's
signature to this Agreement, or to such other address as the party to be
notified shall have theretofore given to the other party in writing.
15. Definitions. The following terms are used in this
Agreement as defined in Exhibit A:
Accrued Benefits
Cause
Competitive Activity
Good Reason
Person
Termination Date
16. No Waiver. The Executive's or SSS's failure to
insist upon strict compliance with any provision of this Agreement or the
failure to assert any right the Executive or SSS may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason, shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
17. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of SSS and its successors and assigns and
Executive and his heirs, executors, administrators and legal representatives.
18. Headings. The headings herein contained are for
reference only and shall not affect the meaning or interpretation of any
provision of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first written above.
SNAP-ON INCORPORATED
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------------
President and Chief Executive Officer
Attest: /s/ Xxxxxxx X. XxXxxxxxx
----------------------------------------
Secretary
XXXX-XXXXXX CORPORATION
By: /s/Xxxxxxx X. Xxxxxx
----------------------------------------
Senior Vice President
EXECUTIVE
/s/ Xxxxxx X. Xxxxxxx
------------------------------------------------
Xxxxxx X. Xxxxxxx
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SCHEDULE I
HHH FRINGE BENEFITS
1. Health and Dental Insurance for the benefit of Executive and
Executive's Family.
2. Use of existing "company" automobile.
3. Term Life Insurance with death benefit of not less than $400,000
payable to Executive's estate or to such other beneficiary as
Executive shall from time to time designate in a notice to SSS.
4. Accidental Death and Disability Insurance in the amount of not less
than $400,000 payable in the event of Executive's death to Executive's
estate or such other beneficiary as Executive shall from time to time
designate in a notice to SSS.
5. Travel [Life] Insurance in the amount of not less than $375,000
payable to Executive's Estate or such other beneficiary as Executive
shall from time to time designate in a notice to SSS.
6. Long Term Disability Insurance providing for a monthly benefit of not
less than $14,000 per month for the remaining Term of this agreement
and on terms not less favorable to Executive than the Long Term
Disability Insurance Policy presently provided by HHH.
7. Reimbursement of authorized out-of-pocket expenses incurred by
Executive in the performance of services under this Agreement.
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Exhibit A
CERTAIN DEFINED TERMS
(a) Accrued Benefits. The term "Accrued Benefits" shall
include the following amounts, payable as described herein: (i) all earned and
unpaid base salary and consulting fees for the time period ending with the
Termination Date; (ii) reimbursement for any and all monies advanced in
connection with the Executive's services for reasonable and necessary expenses
incurred by the Executive on behalf of SSS or HHH and its Affiliates for the
time period ending with the Termination Date; (iii) any and all other base
salary and consulting fees earned through the Termination Date and deferred at
the election of the Executive or pursuant to any deferred compensation plan
then in effect; and (iv) all other payments and benefits to which the Executive
(or in the event of the Executive's death, the Executive's surviving spouse or
other beneficiary) may be entitled or under the terms of any benefit plan in
which Executive is entitled to participate through the Termination Date.
Payment of Accrued Benefits shall be made promptly in accordance with SSS's
prevailing practice with respect to clauses (i) and (ii) or, with respect to
clauses (iii) and (iv), pursuant to the terms of the benefit plan or practice
establishing such benefits.
(b) Cause. SSS may terminate the Executive's services
hereunder for "Cause" only if the conditions set forth in paragraphs (i) and
(ii) have been met and SSS otherwise complies with this Agreement:
(i) (A) the Executive has committed any act of
fraud, embezzlement or theft in connection with the Executive's duties
hereunder or in the course of performing duties for SSS hereunder; (B)
the Executive has grossly and repeatedly failed to perform the
Executive's duties hereunder (other than any such failure resulting
from incapacity due to physical or mental illness or injury,
regardless of whether such illness or injury is job-related), which
shall not have been remedied within 30 days after the Chief Executive
Officer of SSS has delivered a written notice from SSS specifying such
failure; (C) the Executive has willfully engaged in illegal conduct or
gross misconduct that is materially and demonstrably injurious to SSS;
(D) the Executive has willfully and wrongfully disclosed any
Confidential Information; or (E) the Executive has engaged in any
Competitive Activity.
For purposes of this provision, (1) 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 action or
omission was in the best interests of SSS and (2) any act, or failure
to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer of SSS or based upon the advice of counsel
for SSS shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of SSS.
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(ii) SSS terminates the Executive's employment by
delivering a Notice of Termination to the Executive.
(c) Competitive Activity. The Executive shall engage in
a "Competitive Activity" if the Executive (i) engages or becomes interested in
any capacity, directly or indirectly (whether as proprietor, stockholder,
director, partner, employee, consultant or any other capacity) in any business
enterprise worldwide that engages in substantial competition with the collision
repair business of SSS or HHH, or any of their subsidiaries; provided, however,
that owning stock or other securities of a competitor amounting to less than
one percent of the outstanding capital stock of such competitor shall not be a
"Competitive Activity" or (ii) recruits or solicits for employment any person
who is then employed by SSS or HHH.
(d) Good Reason. The Executive shall have a "Good
Reason" for termination of Executive's services hereunder if the Executive
determines in good faith that any of the following events has occurred:
(i) any material breach of this Agreement by SSS,
including specifically any breach by SSS of its agreements contained
in Section 1, Section 2 or Section 4, other than an isolated,
inadvertent failure not occurring in bad faith that if not remedied
within 30 days after receipt of notice thereof given by the Executive;
(ii) any reduction in the Executive's base salary
or consulting fees, or benefits (or payments in lieu thereof), to be
provided to Executive pursuant to this Agreement;
(iii) during the Employment Term, a material
adverse change, without the Executive's prior written consent, in the
assignment to Executive or any duties or responsibilities inconsistent
in any material respect with Executive's position, duties and
responsibilities set forth in Section 1.1 of this Agreement, but
excluding for this purpose an isolated, insubstantial and inadvertent
event not occurring in bad faith that SSS remedies within 30 days
after receipt of notice thereof given by the Executive;
(iv) the relocation of the Executive's principal
place of employment or performance of consulting services to a
location outside of Waukesha, Milwaukee or Kenosha Counties,
Wisconsin; or
(v) SSS requires the Executive to travel on SSS
or HHH business to a materially greater extent than was required
during the 180-day period prior to the date of this Agreement.
Any election by the Executive to terminate Executive's services hereunder for
Good Reason shall not be deemed a voluntary termination of Executive's services
hereunder by the Executive for purposes of any other benefit or other plan.
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(e) Person. The term "Person" shall have the meaning
given in Section 3(a)(9) of the Act.
(f) Termination Date. Except as otherwise provided in
the Agreement, the term "Termination Date" means (i) if the Executive's
services are terminated by the Executive's death, the date of death; (ii) if
the Executive's services are terminated for purposes of this Agreement by
reason of disability pursuant to Section 7, thirty days after the Notice of
Termination is given; (iv) if the Executive's services are terminated by the
Executive voluntarily (other than for Good Reason), the date the Notice of
Termination is given; and (v) if the Executive's employment is terminated by
SSS (other than by reason of disability pursuant to Section 7) or by the
Executive for Good Reason, thirty days after the Notice of Termination is
given. Notwithstanding the foregoing,
(A) If the Executive shall in good faith give a Notice of
Termination for Good Reason and SSS notifies the Executive that a dispute
exists concerning the termination within the fifteen-day period following
receipt thereof, then the Executive may elect to continue the Executive's
services hereunder during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that the Executive terminated the Executive's services
hereunder for Good Reason in accordance with this Agreement, then the
Termination Date shall be the earlier of (1) the date on which the dispute is
finally determined, either (x) by mutual written agreement of the parties or
(y) in accordance with Section 14 or (2) the date of the Executive's death. If
the Executive so elects and it is thereafter determined that the Executive did
not terminate the Executive's services hereunder for Good Reason in accordance
with this Agreement, then the services of the Executive hereunder shall
continue after such determination as if the Executive had not delivered the
Notice of Termination asserting Good Reason and there shall be no Termination
Date arising out of such Notice. In either case, this Agreement continues,
until the Termination Date, if any, as if the Executive had not delivered the
Notice of Termination except that, if it is finally determined that the
Executive terminated the Executive's services hereunder for Good Reason in
accordance with this Agreement, then the Executive shall in no case be denied
the benefits described in Section 8 (including a Termination Payment) based on
events occurring after the Executive delivered the Executive's Notice of
Termination.
(B) Except as provided in paragraph (A) above, if the
party receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the fifteen-day period
following receipt thereof and it is finally determined that termination of the
Executive's services for the reason asserted in such Notice of Termination was
not in accordance with this Agreement, then (1) if such Notice was delivered by
the Executive, then the Executive will be deemed to have voluntarily terminated
the Executive's services hereunder other than for Good Reason by means of such
Notice and (2) if delivered by SSS, then SSS will be deemed to have terminated
the Executive's services hereunder other than by reason of death, disability or
Cause by means of such Notice.
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