EXHIBIT 99(c)(3)
CONSULTING AGREEMENT
This Consulting Agreement (the "Agreement") is made as of October 20,
1999, by and among Ferrofluidics Corporation (the "Company"), a Massachusetts
corporation with its principal place of business at 00 Xxxxx Xxxxxx, Xxxxxx, Xxx
Xxxxxxxxx, Ferrotec Corporation ("Ferrotec"), a corporation organized under the
laws of Japan and having its principal place of business at Sumitomo Xxxx. #0,
0-00-0 Xxxxxxx Xxxx, Xxxxx-Xx, Xxxxx 000-0000, Japan, Ferrotec Acquisition,
Inc., a Massachusetts corporation and a wholly-owned subsidiary of Ferrotec
("Merger Sub" and, together with Ferrotec, the "Acquiror"), and Xxxx X. Xxxxx,
Xx. ("Consultant") of 000 Xxxxxxxxxx Xxxx, Xxxxxxxxxx, Xxx Xxxxxxxxx.
WHEREAS, Consultant has been employed by the Company as its Chairman of
the Board of Directors, Chief Executive Officer and President pursuant to that
certain Employment Agreement dated as of June 3, 1998, as amended and
supplemented by those certain agreements dated as of June 3, 1999 and September
9, 1999 by and between the Company and Consultant (the "Employment Agreement");
WHEREAS, the Company is a party to that certain Agreement and Plan of
Merger (the "Merger Agreement") with Ferrotec and Merger Sub, pursuant to which
Merger Sub will be merged (the "Merger") with and into the Company upon the
terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, in connection with the Merger, Merger Sub will make a cash
tender offer (the "Offer") to acquire all of the issued and outstanding common
stock, par value $.004 per share, of the Company (the "Common Stock") in
accordance with the terms and subject to the conditions set forth in the Merger
Agreement;
WHEREAS, the parties desire to terminate the Employment Agreement and
the Consultant's employment with the Company effective as of the Acceptance Date
(as hereinafter defined);
WHEREAS, the Company desires to retain Consultant to render consulting
and advisory services to the Company on an independent contractor basis and on
the terms and conditions set forth herein;
WHEREAS, Consultant desires to furnish such consulting and advisory
services to the Company on an independent contractor basis and on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual promises, terms, provisions and conditions set forth in this Agreement,
the parties hereby agree:
1. Termination of Employment; Engagement of Consultant. The parties
acknowledge and agree that Consultant's employment with the Company pursuant to
the Employment Agreement and any other agreement or understanding pursuant to
which Consultant is providing services to or on behalf of the Company and/or its
subsidiaries (other than the letter agreement referred to in Section 11 hereof)
shall be terminated effective as of the Acceptance Date (as such term is defined
in the Merger Agreement); and that the Employment Agreement and any of such
other agreements or understandings pursuant to which Consultant is providing
services to or on behalf of the Company and/or its subsidiaries (other than the
letter agreement referred to in Section 11 hereof) shall be deemed to have been
terminated as of the Acceptance Date and shall be of no further force or effect
thereafter. Subject to the terms and conditions set forth in this Agreement, the
Company hereby retains Consultant for the term set forth in Section 2 as a
consultant and advisor to the Company.
2. Term. This Agreement shall commence as of the Acceptance Date and
shall continue for a period of three (3) years thereafter (such period being
referred to as the "Consultation Period"), unless sooner terminated in
accordance with the provisions of Section 5. The parties hereto may extend the
Consultation Period upon mutual written agreement.
3. Services. Consultant agrees to perform such consulting, advisory and
related services for the Company as may be reasonably requested from time to
time by the Company (the "Services"). During the Consultation Period, Consultant
shall perform the Services under the direction and restriction of the Company.
4. Compensation.
a. Consulting and Advisory Fees. During the Consultation Period, the
Company shall pay to Consultant consulting fees at a rate of $10,000 per month,
payable in arrears on the last day of each month; payment for any partial month
shall be prorated.
b. Auto Lease. The Company shall promptly pay all monthly lease
payments of Consultant or promptly reimburse Consultant for such lease payments
in connection with Consultant's current automobile lease for the remaining term
of such lease which expires on May 25, 2001.
c. Certain Severance Benefits. The parties agree and acknowledge
that Consultant will receive from the Company an amount equal to $250,000 as of
the Acceptance Date. At Consultant's option, payment of such amount may be made
over the thirty-six (36) month term of the Consultation Period at a rate of
$6,944.44 per month, payable in arrears on the last day of each month.
Consultant hereby agrees to release the Company, Ferrotec and Merger Sub and
their respective officers, directors, shareholders and affiliates from any and
all claims and/or liabilities arising under the Employment Agreement or arising
from Consultant's employment or retention by the Company and/or its subsidiaries
prior to the Acceptance Date; provided, however, that nothing herein shall in
any way limit Consultant's indemnification rights under Section 6.6 of the
Merger Agreement or under the Articles of Organization or Bylaws of the Company.
d. Life Insurance. The Company agrees that it shall pay all premiums
that become due or payable for the two years following the Acceptance Date
relating to that certain term life insurance policy (Policy # 41019258) on the
life of Consultant in the amount of $1,000,000 (the "Life Insurance Policy")
such that the Life Insurance Policy remains in full force and effect through the
second anniversary of the Acceptance Date (the "Second Anniversary Date"),
subject to Consultant's continued eligibility to be so covered by such policy.
The parties agree that after the Second Anniversary Date the Company shall have
no obligation to maintain such policy; provided, however, that Consultant shall
be entitled to assume the Company's obligations under the Life Insurance Policy
and continue to maintain such policy in accordance with its terms following the
Second Anniversary Date. Each of the Company and Consultant shall use its or his
best efforts to arrange for the assumption by Consultant on the Second
Anniversary Date of the Company's obligations under the Life Insurance Policy,
subject to any restrictions under the policy on assignment and subject to
Consultant's continued eligibility to be so covered by such policy.
e. Retirement Plans. In connection with the termination of
Consultant's employment with the Company at the Acceptance Date, Consultant
shall be entitled to participate in and enjoy the benefit of the Company's
retirement, supplementary retirement, deferred compensation or similar plans,
programs or arrangements as available to the Company's management as of the
Acceptance Date, subject to Consultant's eligibility to so
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participate based on his consultant and/or independent contractor status.
f. Health, Medical and Welfare Plans. The Company shall continue
Consultant's group health insurance and shall pay all of the premiums to
properly maintain such insurance for a period of ninety (90) days following the
Acceptance Date. Thereafter, Consultant may, at his sole expense, elect to
continue his group health insurance pursuant to COBRA.
g. 401(k) Plan. The Company shall use its best efforts to assist
Consultant in the roll over or withdrawal of his interest in the Company's Tax
Savings and Deposit and Investment Plan (the "401(k) Plan"), all in accordance
with and subject to applicable law and the terms of the 401(k) Plan.
h. Reimbursement of Expenses. The Company shall reimburse Consultant
for all reasonable and necessary expenses incurred or paid by Consultant in
connection with, or related to, the performance of the Services under this
Agreement; provided, however, that the Company shall provide all airline tickets
to Consultant on a prepaid basis in connection with all travel by Consultant for
purposes of performance of the Services hereunder. Consultant shall submit to
the Company itemized monthly statements, in a form reasonably satisfactory to
the Company, of such expenses incurred in the previous month. The Company shall
pay to Consultant amounts shown on each such statement within thirty (30) days
after receipt thereof.
i. Accrued Vacation. The Company shall, on the Acceptance Date, pay
Consultant for all accrued vacation time as of the Acceptance Date in accordance
with Company policy.
5. Termination of Consultancy and Termination Compensation.
a. General Termination Compensation. If Consultant's consultancy is
terminated pursuant to Sections 5b or 5d, the Company shall continue to make all
payments to Consultant (or, if applicable, to Consultant's beneficiary) provided
for in Section 4 for the balance of the Consultation Period.
b. Death or Disability. In the event Consultant dies or becomes
disabled during the Consultation Period, his consultancy hereunder shall
automatically terminate. For the purpose of this Agreement, "disability" shall
refer to a situation in which Consultant is totally disabled from performing
Services for the Company during a period of thirteen (13) consecutive weeks.
If any question shall arise as to whether during any period Consultant
has suffered a disability, Consultant may, and at the request of the Company
will, submit to the Company a certification in reasonable detail by a physician
selected by Consultant or his guardian to whom the Company has no reasonable
objection as to whether Consultant was so disabled and such certification shall
for the purposes of this Agreement be conclusive of the issue. If such question
shall arise and Consultant shall fail to submit such certification, the
Company's determination of such issue shall be binding on Consultant.
c. By the Company for Cause. The Company may terminate Consultant's
consultancy hereunder for cause at any time upon notice to Consultant setting
forth in reasonable detail the nature of such cause. The following, as
determined by the Board of Directors of the Company in its good faith and
reasonable judgment, shall constitute "cause" for termination:
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(1) Consultant's embezzlement of funds of or theft from the
Company or other material dishonesty with respect to the Company,
Acquiror or any of their respective affiliates; or
(2) Conviction of, or plea of nolo contendere to, a felony or
other crime involving moral turpitude (it being understood that
violation of a motor vehicle code does not constitute such a crime); or
(3) Conduct engaged in or action taken or omitted to be taken
by Consultant which is in material breach of this Agreement, in which
case where such breach is incapable of being cured and remains uncured
after written notice by the Company to Consultant; or
(4) Gross or willful misconduct of Consultant with respect to
the Company, Acquiror or any subsidiary or affiliate thereof.
Upon the giving of notice of termination of Consultant's consultancy
hereunder for cause, the Company shall have no further obligation or liability
to Consultant, other than the payment of consulting fees earned and unpaid at
the date of termination and the remaining payments under Section 4c hereof.
d. By the Company Other Than for Cause. The Company may terminate
Consultant's consultancy hereunder other than for cause at any time upon sixty
(60) days' written notice to Consultant.
e. By Consultant. Consultant may terminate his consultancy hereunder
at any time upon sixty (60) days' written notice to the Company.
6. Independent Contractor Status. Consultant shall perform all services
under this Agreement as an "independent contractor" and not as an employee or
agent of the Company. Consultant is not authorized to assume or create any
obligation or responsibility, express or implied, on behalf of, or in the name
of, the Company or to bind the Company in any manner.
7. Covenant of Non-Disclosure and Non-Competition.
(a) The Consultant acknowledges that the success of the business of
the Company depends upon both the absence of competition from Consultant and the
continued preservation of the confidentiality of certain information possessed
by Consultant, that an absence of such competition and the preservation of the
confidentiality of such information is an essential term of this Agreement, and
that the Company would be unwilling to enter into this Agreement in the absence
of this Section. Accordingly, Consultant hereby agrees with the Company as
follows:
(a) Consultant will not, at any time, directly or indirectly,
without the prior written consent of the Company, disclose or use, in any way
harmful to the business, operations, assets, prospects or condition, financial
or otherwise, of the Company, or otherwise contrary to the interests of the
Company, any proprietary or Confidential Information (as defined below)
involving or relating to the Company past, present or future, actual or
prospective; provided, however, that such information shall not include any
information known generally to the public (other than as a result of disclosure
in violation hereof by the Consultant); and provided, further, that the
provisions of this Section shall not prohibit any disclosure required by law in
connection with any
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judicial or administrative proceeding or inquiry. "Confidential Information"
includes, but is not limited to, information relating to the Company which is
not generally known to those outside of the Company relating to (i) the
business, conduct or operations of the Company, (ii) any materials, apparatus,
processes, methods, ways of business, programs, formulae, technology, research,
development, or intellectual property, (iii) any customer lists, or customer
requirements and preferences, (iv) any supplier lists or supplier requirements
and preferences, (v) financial information or business plans, or (vi) any other
information about or generated by the Company which could, if disclosed, be
useful to any competitors of the Company.
(b) During the term hereof and for a period of two (2) years
thereafter (or, if Consultant's consultancy hereunder is terminated, two (2)
years from the date of such termination), irrespective of the reasons for any
such termination (the "Non-Competition Term"), the Consultant shall not,
directly or indirectly, (i) acquire, own, manage, operate, control or
participate directly or indirectly in any manner in the acquisition, ownership,
management, operation or control of, or be connected as an officer, employee,
partner, director, principal, consultant, agent or otherwise with, or have any
financial interest in (other than solely as an owner for investment purposes of
not more than 5% of the outstanding capital stock of any company engaged in the
same business as that of the Company), or aid or assist anyone else in the
conduct of, any business, venture or activity whose activities, products or
services are competitive with the current activities, products or services of
the Company or Ferrotec or the contemplated activities, products or services set
forth in the Company's Annual Operating Plan for Fiscal 2000, (ii) recruit or
otherwise seek to induce any employee or consultant of the Company to terminate
his or her employment or consulting relationship with the Company, (iii) solicit
or encourage any person who is a customer or supplier of the Company to
terminate its relationship with the Company, or (iv) encourage any of the
Company employees or consultants to become engaged or retained by or on behalf
of any person whose activities, products or services are competitive with the
current activities, products or services of the Company or Ferrotec or the
contemplated activities, products or services set forth in the Company's Annual
Operating Plan for Fiscal 2000.
(c) The Consultant acknowledges and agrees that, because the legal
remedies of the Company may be inadequate in the event of a breach of, or other
failure to perform, any of the covenants and obligations set forth in this
Section, the Company may, in addition to obtaining any other remedy or relief
available to it (including without limitation, consequential and other damages
at law), enforce this Section by injunction and other equitable remedies.
(d) The parties agree that the provisions set forth in this Section,
including without limitation as to duration and geographic scope, are reasonable
to protect the legitimate interests of the Company. The provisions of this
Section are severable, and in the event that any provision hereof should, for
any reason, be held invalid or unenforceable in any respect, it shall not
invalidate, render unenforceable or otherwise affect any other provision hereof,
and such invalid or unenforceable provision shall be construed by limiting it so
as to be valid and enforceable to the maximum extent compatible with, and
possible under, applicable law.
8. Assignment. Neither the Company nor Consultant may make any
assignment of this Agreement or any interest herein, by operation of law or
otherwise, without the prior written consent of the other party; provided,
however, that (i) the Company may assign its rights and obligations under this
Agreement without the consent of Consultant in the event that the Company shall
hereafter effect a reorganization, consolidate with, or merge into, any other
person or entity or transfer all of its properties or assets to any other person
or entity, and (ii) Consultant may assign its rights and obligations under this
Agreement without the consent of the Company to X.X. Xxxxx Corporation.
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This Agreement shall inure to the benefit of and be binding upon the Company and
Consultant, their respective successors, executors, administrators, heirs and
permitted assigns.
9. Severability. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
10. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
11. Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
deemed given when delivered by hand, telex or facsimile, or if mailed, five days
after mailing (two business days in the case of courier service), to the parties
as follows:
If to Consultant: Xxxx X. Xxxxx, Xx.
000 Xxxxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
If to the Company: Ferrofluidics Corporation
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxx
If to Acquiror: Ferrotec Corporation
Sumitomo Xxxx. #0
0-00-0 Xxxxxxx Xxxx
Xxxxx-Xx, Xxxxx 000-0000, Xxxxx
Attn: Xxxxx Xxxxxxxx
12. Entire Agreement. This Agreement and the letter agreement of even
date herewith by and among the Company, Ferrotec, Merger Sub and Consultant
constitute the entire agreement between the parties and supersede all prior
communications, agreements and understandings, written or oral, with respect to
the terms and conditions of Consultant's consultancy and prior employment with
the Company.
13. Amendment. This Agreement may be amended or modified only by a
written instrument signed by Consultant and by an expressly authorized
representative of the Company.
14. Headings. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope of or content of any
provision of this Agreement.
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15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
16. Governing Law. This is a Massachusetts contract and shall be
construed and enforced under and be governed in all respects by the laws of the
Commonwealth of Massachusetts, without regard to the conflict of laws principles
thereof.
17. Effectiveness. This Agreement is conditioned upon and shall become
effective only upon the occurrence of the Acceptance Date, and shall not become
effective in the event that the Offer is terminated or abandoned or the Merger
Agreement is terminated in accordance with its terms.
[END OF TEXT]
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company, Ferrotec and Merger Sub, by their respective duly
authorized representatives, and by Consultant, as of the date first above
written.
CONSULTANT FERROFLUIDICS CORPORATION
By:
----------------------- ----------------------------------
Xxxx X. Xxxxx, Xx. Name: Xxxxxxx X. Xxxx
Title: Chief Financial Officer
FERROTEC CORPORATION
By:
----------------------------------
Name:
Title:
FERROTEC ACQUISITION, INC.
By:
----------------------------------
Name:
Title:
Ferrofluidics Corporation
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
October 20, 1999
Ferrotec Corporation
0-00-0
Xxxxxxx-Xxxx
Xxxxx-xx
Xxxxx, Xxxxx 000-0000
Attn: Xxxxx Xxxxxxxx
Ladies and Gentlemen:
In connection with and as a condition to entering into the transactions
contemplated by the Agreement and Plan of Merger (the "Merger Agreement") by and
between Ferrofluidics Corporation (the "Company"), a Massachusetts corporation,
Ferrotec Corporation ("Ferrotec"), a corporation organized under the laws of
Japan, and Ferrotec Acquisition, Inc., a Massachusetts corporation and a
wholly-owned subsidiary of Ferrotec ("Merger Sub"), the Company, Ferrotec,
Merger Sub and the undersigned individual, Xxxx X. Xxxxx, Xx. ("Xxxxx"), hereby
agree that, notwithstanding any other arrangement between any of the foregoing
parties, from and after the Acceptance Date (as defined in the Merger
Agreement), Xxxxx shall perform such advisory and related services for the
Company as may be reasonably requested from time to time by the Company (the
"Services"). Xxxxx shall perform the Services under the direction and
restriction of the Company. The Company shall pay to Xxxxx an advisory fee of
$50,000 per annum payable monthly in arrears commencing on the first day of the
next month after the date first set forth above. The parties further agree that
the Company or Xxxxx may terminate Xxxxx'x engagement as an advisor hereunder at
any time upon thirty (30) days' written notice to the other parties hereto,
whereupon upon such termination all payments due hereunder shall cease.
[signature page to follow]
Please acknowledge your agreement to the foregoing by countersigning
this agreement in the place provided below and returning it to the undersigned.
Very truly yours,
---------------------------
Xxxx X. Xxxxx, Xx.
Accepted and Agreed to,
this 20th day of October, 1999
FERROTEC CORPORATION
By:
-----------------------------
Name:
Title:
FERROTEC ACQUISITION, INC.
By:
-----------------------------
Name:
Title:
FERROFLUIDICS CORPORATION
By:
-----------------------------
Name: Xxxxxxx X. Xxxx
Title: Chief Financial Officer
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