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April 7, 2000
Xxxxxx Industries, Inc.
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Re: Retention and Termination Agreement
Dear ______________:
Xxxxxx Industries, Inc. (the "Company") considers the establishment and
maintenance of a quality senior management team to be essential to protecting
and enhancing the interests of the Company and its stockholders. In this
connection, the Company recognizes that the possibility of a change in control
exists, and that such possibility, and the uncertainty and questions which it
raises among management, may result in the departure or distraction of
management personnel to the detriment of the Company and its stockholders.
Accordingly, the Board of Directors of the Company (the "Board") has determined
that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's senior management,
including yourself, to their assigned duties without distraction in the face of
the potentially disturbing circumstances arising from the possibility of a
change in control of the Company.
In order to induce you to remain in the employ of the Company and in
consideration of your agreeing to remain in the employ of the Company subject to
the terms and conditions set forth below, this letter agreement sets forth the
retention and severance benefits which the Company agrees will be provided to
you in the event of a successful completion of a "change in control of the
Company" (as defined in Section 2 of this letter agreement) and, additionally,
in the event your employment with the Company is terminated subsequent to a
change in control of the Company under the circumstances described below.
1. COMPANY'S RIGHT TO TERMINATE. During the term of this
Agreement, you agree that you will not voluntarily leave the employ of the
Company except as may be permitted hereunder, and will continue to perform your
regular duties as____________________ of the Company. Notwithstanding the
foregoing, the Company may terminate your employment at any time, subject to
providing the benefits hereinafter specified in accordance with the terms
hereof.
2. CHANGE IN CONTROL. No benefits shall be payable under this
letter agreement unless there shall have been a change in control of the
Company, as set forth below. For purposes of this
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Agreement, a "change in control of the Company" shall mean, if subsequent to the
date of this Agreement:
(i) Any Person (as defined below) becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) of (A) 20% or more, but no
greater than 50%, of the outstanding voting capital stock of the
Company, unless prior thereto, the Continuing Directors (as defined
below) approve the transaction that results in the Person becoming the
beneficial owner of 20% or more, but no greater than 50%, of the
outstanding voting capital stock of the Company, or (B) more than 50%
of the outstanding voting capital stock of the Company, regardless
whether the transaction or event by which the foregoing 50% level is
exceeded is approved by the Continuing Directors; or
(ii) At any time Continuing Directors no longer constitute a
majority of the directors of the Company; or
(iii) The consummation of (A) a merger or consolidation of the
Company, statutory share exchange, or other similar transaction with
another corporation, partnership, or other entity or enterprise in
which either the Company is not the surviving or continuing corporation
(other than such a transaction that is solely for the purpose of
changing the domicile of the Company) or shares of common stock of the
Company are to be converted into or exchanged for cash, securities
other than common stock of the Company, or other property or (B) a sale
or disposition of all or substantially all of the assets of the
Company.
For purposes of this Agreement, "Continuing Directors" means
directors who were directors of the Company at the beginning of the 12-month
period ending on the date the determination is made (the "Period") or whose
election, or nomination for election by the Company's stockholders, was approved
by at least a majority of the directors who are in office at the time of the
election or nomination and who either (i) were directors at the beginning of the
Period, or (ii) were elected, or nominated for election, by at least a majority
of the directors who were in office at the time of the election or nomination
and were directors at the beginning of the Period.
For purposes of this Agreement, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act as modified and used in
Sections 13(d)(3) and 14(d)(2) thereof; except that a Person shall not include
(i) the Company or any subsidiary, (ii) any employee benefit plan or employee
stock ownership plan maintained by the Company or any of its subsidiaries or any
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any subsidiary, or (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities.
3. RETENTION BONUS. If you remain employed by the Company through
the completion of a change in control of the Company, the Company shall pay to
you on the twenty-first (21st) day following the completion of the change in
control transaction a lump sum amount (less required tax withholdings) equal to
the product of your annual base salary at the highest rate in effect during the
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twelve (12) months immediately preceding the date of the completion of the
change in control of the Company multiplied by fifty percent (50%).
4. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in Section 5
hereof upon the subsequent termination of your employment if such termination
occurs within the period beginning on the date that the change of control is
completed (the "Date of Completion") and ending on the 365th day thereafter (the
"Protection Period") unless such termination is (a) because of your death or
Retirement, (b) by the Company for Cause or Disability or (c) by you other than
for Good Reason (such termination within such period, as limited by clauses (a)
through (c), being sometimes referred to hereinafter as a "Payment Trigger").
(i) Disability; Retirement.
(A) Termination by the Company of your
employment based on "Disability" shall mean termination because of your absence
from your duties with the Company on a full time basis for 90 consecutive
business days, as a result of your incapacity due to physical or mental illness,
unless within thirty (30) days after Notice of Termination (as hereinafter
defined) is given following such absence you shall have returned to the full
time performance of your duties.
(B) Termination by the Company or you of your
employment based on "Retirement" shall mean termination in accordance with the
Company's retirement policy, including early retirement, generally applicable to
its salaried employees.
(ii) Cause. Termination by the Company of your employment
for "Cause" shall mean termination upon (A) the willful and continued failure by
you to substantially perform your duties with the Company (other than any such
failure resulting from your incapacity due to physical or mental illness), after
a demand for substantial performance is delivered to you by the Chief Executive
Officer of the Company or the Compensation Committee of the Board, which
specifically identifies the manner in which such executive or committee believes
that you have not substantially performed your duties, or (B) the willful
engaging by you in misconduct which is materially injurious to the Company,
monetarily or otherwise. For purposes of this paragraph, no act, or failure to
act, on your part shall be considered "willful" unless done, or omitted to be
done, by you not in good faith and without reasonable belief that your action or
omission was in the best interest of the Company. Notwithstanding the foregoing,
you shall not be deemed to have been terminated for Cause unless and until there
shall have been delivered to you a copy of a Notice of Termination from the
Chief Executive Officer of the Company or the Compensation Committee of the
Board, after reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Compensation Committee of the Board (or, if
there be no such committee or such committee delivers the Notice of Termination,
the Board of Directors), finding that in the good faith opinion of such
committee (or the Board) you were guilty of conduct set forth above in clauses
(A) or (B) of the first sentence of this paragraph and specifying the
particulars thereof in detail.
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(iii) Good Reason. Termination by you of your employment
for "Good Reason" shall mean termination, subsequent to a change in control of
the Company and during the Protection Period, based on:
(A) a reduction by the Company in your base
salary as in effect on the date hereof or as the same may be increased from time
to time; or
(B) a failure by the Company to continue any
bonus plans in which you are presently entitled to participate (the "Bonus
Plans") as the same may be modified from time to time but substantially in the
forms currently in effect, or a failure by the Company to continue you as a
participant in the Bonus Plans on at least the same basis as you presently
participate in accordance with the Bonus Plans; or
(C) the failure by the Company to continue in
effect any life insurance plan, health-and-accident plan or disability plan in
which you are participating at the time of a change in control of the Company
(or plans providing you with substantially similar benefits), the taking of any
action by the Company which would materially adversely affect your participation
in or materially reduce your benefits under any of such plans, or the failure by
the Company to provide you with the number of paid vacation days to which you
are then entitled in accordance with the Company's normal vacation policy in
effect on the date hereof; or
(D) the failure by the Company to obtain the
assumption of the agreement to perform this Agreement by any successor as
contemplated in Section 8 hereof; or
(E) any purported termination of your employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of paragraph (iv) below (and, if applicable, paragraph (ii) above).
Any transfer of your employment from the Company to a subsidiary, from a
subsidiary to the Company, or from one subsidiary to another subsidiary shall
not constitute a termination of your employment for purposes of this Agreement.
(iv) Notice of Termination. Any purported termination by
the Company pursuant to paragraph (i) or (ii) above or by you pursuant to
paragraph (iii) above shall be communicated by written Notice of Termination to
the other party hereto. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(v) Date of Termination. "Date of Termination" shall mean
(A) if your employment is terminated for Disability, thirty (30) days after
Notice of Termination is given (provided that you shall not have returned to the
performance of your duties on a full-time basis during such thirty (30) day
period), (B) if your employment is terminated pursuant to paragraph (ii) above,
the date specified in the Notice of Termination, and (C) if your employment is
terminated for any other reason, the date on which a Notice of Termination is
given; provided that if within fifteen
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(15) days after any Notice of Termination is given the party receiving such
Notice of Termination notifies the other party that a dispute exists concerning
the termination, the Date of Termination shall be the date on which the dispute
is finally determined, either by mutual written agreement of the parties, or by
a final judgment, order or decree of a court of competent jurisdiction (the time
for appeal therefrom having expired and no appeal having been perfected);
provided further, however, that if such disputed termination constitutes a
Payment Trigger, the Protection Period shall not run pending resolution of the
dispute but shall recommence upon the date that the dispute is finally
determined (as set forth in the preceding proviso).
5. CERTAIN BENEFITS UPON TERMINATION. If, after a change in
control of the Company shall have occurred, as defined in Section 2 above, your
employment by the Company shall be terminated within the Protection Period (a)
by the Company other than for Cause, Disability or Retirement or (b) by you for
Good Reason, then you shall be entitled to the benefits provided below:
(i) the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time Notice of
Termination is given plus credit for any vacation earned but not taken and the
amount, if any, of any bonus for a past fiscal year which has been earned but
not yet been paid to you under the Bonus Plans; and
(ii) in lieu of any further salary or severance payments
to you for periods subsequent to the Date of Termination, the Company shall pay
severance pay to you on the fifth (5th) day following the Date of Termination in
a lump sum amount (less required tax withholdings) equal to 50% of your annual
base salary in effect immediately before the Date of Completion; if the Date of
Termination occurs after the expiration of the Protection Period you will not be
entitled to any severance payments under this Agreement, but you will be
entitled to severance payments under any severance plan, policy or practice
maintained by the Company at the time of your Date of Termination for which you
are then eligible.
You shall not be required to mitigate the amount of any payment
provided for in this Section 5 by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Section 5 be reduced by any
compensation earned by you as the result of employment by another employer after
the Date of Termination, or otherwise.
6. REDUCTION OF PARACHUTE PAYMENTS. Notwithstanding any provision
hereof to the contrary, in the event the total amount of "parachute payments,"
as hereinafter defined, to be made by the Company to you would not be deductible
as a result of Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), the amount of payments or benefits otherwise to be made or
provided hereunder (or, if mutually agreed between you and the Company and
consistent with the terms of any other plan, arrangement or agreement, then
under such other plan, arrangement or agreement) shall be reduced until no
portion of the parachute payments is not deductible as a result of Section 280G
of the Code. "Parachute payment" shall mean any payment or benefit which is
provided, or to be provided to you, in connection with a change in control of
the Company or the termination of your employment (whether payable pursuant to
the terms of this Agreement or any other plan, arrangement or agreement) to the
extent that such payment or benefit constitutes a "parachute payment" within the
meaning of Section 280G(b)(2) of the Code in the opinion of tax counsel selected
by the Company and which does not, in the opinion of such tax counsel,
constitute
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reasonable compensation for personal services to be rendered on or after the
date of the change described in paragraph (2)(A)(i) of Section 280G(b) of the
Code. The value of any non-cash benefit or any deferred payment or benefit
included in the parachute payments shall be determined by the Company's
independent auditors in accordance with the principles of Sections 280G(d)(3)
and (4) of the Code.
7. TERM OF AGREEMENT. This Agreement shall become effective on
the date hereof and shall continue in effect until the earliest of the
following:
(i) a Date of Termination in accordance with Section 4 or
your death shall have occurred prior to a change in control of the
Company;
(ii) if a Payment Trigger shall have occurred during the
term of this Agreement, the performance by the Company of all its
obligations under this Agreement;
(iii) the one year anniversary of the date of this
Agreement if, as of that one year anniversary, a change in control of
the Company shall not have occurred and be continuing; or
(iv) in the event, as of the one year anniversary of the
date of this Agreement, a change in control of the Company shall have
occurred and be continuing, either the expiration of the Protection
Period thereafter within which a Payment Trigger does not occur or the
ensuing occurrence of a Payment Trigger during the Protection Period
and the performance by the Company of all of its obligations and
liabilities under this Agreement.
8. SUCCESSORS; BINDING AGREEMENT.
(i) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company,
by agreement in form and substance satisfactory to you, to expressly
assume and agree 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. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be
entitled hereunder if you terminated your employment for Good Reason,
except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which executes and delivers the agreement
provided for in this Section 8 or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If you should die while any amount would still be payable to you
hereunder if you had
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continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there be no such designee, to your estate.
9. NOTICE. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered personally or mailed by
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be directed to the
attention of the President of the Company with a copy to the Secretary of the
Company, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
10. MISCELLANEOUS. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing signed by you and such officer as may be specifically
designated by the Board of Directors of the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement; provided, however, that this Agreement shall not
supersede or in any way limit the rights, duties or obligations you may have
under any other written agreement with the Company. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Delaware without regard to principles regarding
conflicts of laws.
11. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
12. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
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If this letter correctly sets forth our agreement on the subject matter
hereof, kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
XXXXXX INDUSTRIES, INC.
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Xxxxxx X. Xxxxxxx
President and
Chief Executive Officer
AGREED TO THIS 7th DAY OF
April, 2000.
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