CHANGE IN CONTROL AGREEMENT
FOR
[OFFICER]
This Agreement is made as of August 4, 1998 (the "Effective Date"), between
[Xxxx](the "Company"), a wholly owned subsidiary of Xxxx Industries, Inc. and
President of Subsidiary (the "Executive").
WHEREAS, the Executive is a valued employee of the Company; and
WHEREAS, the Company desires to enter into this Change in Control Agreement
with the Executive to provide the Executive with contractual assurances to
induce the Executive to remain as an employee of the Company notwithstanding the
possibility, threat or occurrence of a Change in Control (as defined below) of
Xxxx Industries, Inc., provided that the Executive remains in his current
position at the time of a Change in Control;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the Executive and the Company agree as follows:
1. Employment and Duties. The Company hereby employs Executive as President
with all powers and authority as are customary to this position, and Executive
hereby accepts employment with the Company in accordance with the terms and
conditions set forth herein. Executive shall have such executive
responsibilities as is customary with this position and as the Company's Board
of Directors shall from time to time assign to him. Executive agrees to devote
his full time (excluding annual vacation time), skill, knowledge, and attention
to the business of the Company and the performance of his duties under this
Agreement.
2. Termination and Severance Pay.
a. As used in this Agreement, a Change in Control means:
(i) a sale of over 50% of the stock of Xxxx Industries, Inc.
measured in terms of voting power, other than in a public offering or
in connection with acquisition by Xxxx Industries, Inc. of a business
filing reports under Section 13 or 15(d) of the Securities Exchange
Act of 1934; or
(ii) the sale by Xxxx Industries, Inc. of over 50% of its
business or assets in one or more transactions over a consecutive 12-
month period; or
(iii) a merger or consolidation of Xxxx Industries, Inc. with or
into any other corporation or corporations such that the shareholders
of Xxxx Industries, Inc.
prior to the merger or consolidation do not own at least 50% of the
surviving entity measured in terms of voting power; or
(iv) the acquisition by any means of more than 25% of the voting
power or common stock of Xxxx Industries, Inc. by any person or group
of persons; or
(v) the election of directors constituting a majority of the
board of directors of Xxxx Industries, Inc. pursuant to a proxy
solicitation not recommended by its board of directors.
b. As used in this Agreement, a Triggering Event means:
(i) a reduction in the compensation amount paid by the Company to
the Executive or a reduction in the fringe benefits received by the
Executive from the Company from the levels received by the Executive
at the time of a Change in Control or during the 120 day period
immediately preceding the Change in Control; or
(ii) a material change in the Executive's position or duties,
Executive's reporting responsibilities, or persons reporting to the
Executive from the levels existing at the time of a Change in Control
or during the 120 day period immediately preceding the Change in
Control; or
(iii) a change in the location or headquarters where the
Executive is expected to provide services of 30 or more miles from the
previous location existing at the time of the Change in Control or
during the 120 day period immediately preceding the Change in Control.
c. After a Change in Control and if a Triggering Event occurs within
12 months of the date of a Change in Control, the Executive may terminate his
services, voluntarily or involuntarily. Upon such termination the Company shall:
(i) continue to provide insurance benefits as customarily offered by the Company
to the Executive at the Change in Control for a one year period after the date
of termination at no cost to the Executive; and (ii) pay in one lump sum within
30 days after the termination date the total amount that would be received by
the Executive over a period of one year after the termination (based upon the
higher of the compensation amount paid to the Executive at the date of the
Change in Control or during the 120 day period immediately preceding the Change
in Control) including amounts that would be paid for bonuses during the year of
the termination (provided the bonus amount shall not be less than the prior
year's bonus amount paid to the Executive).
d. In the event that the severance benefits payable to the Executive
under this section or any other payments or benefits received or to be
received by the Executive from the Company (whether payable pursuant to the
terms of this Agreement, any other plan,
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agreement or arrangement with the Company) or any corporation ("Affiliate")
affiliated with the Company within the meaning of Section 1504 of the
Internal Revenue Code of 1986, as amended (the "Code"), in the opinion of
tax counsel selected by the Company's independent auditors and reasonably
acceptable to the Executive, constitute "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and the present value of such
"parachute payments" equals or exceeds three times the average of the
annual compensation payable to the Executive by the Company (or an
Affiliate) and includable in the Executive's gross income for federal
income tax purposes for the five calendar years preceding the year in which
a Change in Control of the Company occurred ("Base Amount"), such Severance
Benefits shall be reduced to an amount the present value of which (when
combined with the present value of any other payments or benefits otherwise
received or to be received by the Executive from the Company (or an
Affiliate) that are deemed "parachute payments") is equal to $1 less than
the Base Amount, notwithstanding any other provision to the contrary in
this Agreement. The Severance Benefits shall not be reduced to the extent
that (A) the Executive shall have effectively waived his receipt or
enjoyment of any such payment or benefit which triggered the applicability
of this section, or (B) in the opinion of tax counsel, the Severance
Benefits (in their full amount or as partially reduced, as the case may be)
plus all other payments or benefits which constitute "parachute payments"
within the meaning of Section 280G(b)(2) of the Code are reasonable
compensation for services actually rendered, within the meaning of Section
280G(b)(4) of the Code, and such payments are deductible by the Company.
The Base Amount shall include every type and form of compensation
includable in the Executive's gross income in respect of his employment by
the Company (or an Affiliate), except to the extent otherwise provided in
temporary or final regulations promulgated under Section 280G(b) of the
Code. For purposes of this section only, a Change in Control shall have the
meaning of a "change in ownership or control" as set forth in Section
280G(b) of the Code and any temporary or final regulations promulgated
thereunder. The present value of any non-cash benefit or any deferred cash
payment shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(b)(3) and (4) of the Code.
e. The Executive shall have the right to request that the Company
obtain a ruling from the Internal Revenue Service ("Service") as to whether
any or all payments or benefits determined by such tax counsel are, in the
view of the Service, "parachute payments" under Section 280G. If a ruling
is sought pursuant to the Executive's request, no Severance Benefits
payable under this Agreement shall be made to the Executive until after 15
days from the date of such ruling. For purposes of this section, the
Executive and the Company agree to be bound by the Service's ruling as to
whether payments constitute "parachute payments" under Section 280G. If the
Service declines, for any reason, to provide the ruling requested, the tax
counsel's opinion provided in this section with respect to what payments or
benefits constitute "parachute payments" shall control, and the period
during which the Severance Benefits may be deferred shall be extended to a
date 15 days from the date of the Service's notice indicating that no
ruling would be forthcoming.
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In the event that Section 280G, or any successor statute, is
repealed, this Section shall cease to be effective on the effective date of
such repeal. The parties to this Agreement recognize that final regulations
under Section 280G of the Code may affect the amounts that may be paid
under this Agreement and agree that, upon issuance of such final
regulations, this Agreement may be modified as in good faith deemed
necessary in light of the provisions of such regulations to achieve the
purposes of this Agreement, and that consent to such modifications shall
not be unreasonably withheld.
f. Notwithstanding any provision herein, no amounts will be due under
this Agreement in the event the Executive's employment is terminated by the
Company for cause. The term "for cause" shall mean solely the following
events:
(i) Executive has been convicted of a felony which has adversely
affected the Company's reputation;
(ii) Executive has materially misappropriated Company funds,
property or opportunities; or
(iii) Executive has materially breached any of the provisions of
this Agreement having been provided by written notice a reasonable
opportunity (not less than 15 business days) to cure such breach.
3. Confidential Information. Executive acknowledges that all Confidential
Information is and shall continue to be the exclusive proprietary property of
the Company, whether or not disclosed to or entrusted to the custody of
Executive. Executive will not, either during the term hereof or at any time
thereafter, disclose any Confidential Information, in whole or in part, to any
person or entity other than to employees or affiliates of the Company, for any
reason or purpose, unless the Company gives its prior written consent to such
disclosure or is required to carry out the duties. Executive also will not,
either during the term hereof or at any time thereafter, use in any manner any
Confidential Information for his own purposes or for the benefit of any person
or entity except the Company and its affiliates whether such use consists of
duplication, removal, oral communication, disclosure, transfer or other
unauthorized use thereof, unless the Company gives its prior written consent to
such use. As used herein, the term "Confidential Information" refers to all
information and materials not in the public domain belonging to, used by or in
the business of the Company (the "Business") relating to its business
strategies, products, pricing, customers, technology, programs, costs, employee
compensation, marketing plans, developmental plans, computer programs, computer
systems, inventions, developments, formulae, processes, designs, drawings, trade
secrets of every kind and character and competitive information. "Confidential
Information" also includes confidential information belonging to other companies
and disclosed to the Executive by the Company.
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4. Non-competition and Inventions.
a. During the period of employment of Executive and for a period of
one year after Executive's termination of employment for any reason,
Executive shall not directly or indirectly as a principal, agent, owner,
employee, consultant, advisor, trustee, beneficiary, distributor, partner,
co-venturer, officer, director, stockholder or in any other capacity, nor
will any entity owned by Executive:
(i) divert or attempt to divert any business from the Company or
engage in any act likely to cause any customer or supplier of the
Company to discontinue or curtail its business with the Company or to
do business with another entity, firm, business, activity or
enterprise directly or indirectly competitive with the Company; or
(ii) contact, sell or solicit to sell or attempt to contact, sell
or solicit to sell products competitive to those sold by the Company
to any customer of the Company with which Executive had contact while
performing services for the Company.
Notwithstanding the provisions above, Executive may acquire securities
of any entity the securities of which are publicly traded, provided that
the value of the securities of such entity held directly or indirectly by
Executive immediately following such acquisition is less than 5% of the
total value of the then outstanding class or type of securities acquired.
b. Executive acknowledges and agrees that the restrictions set forth
in this section 4 are founded on valuable consideration and are reasonable
in duration and geographic area in view of the circumstances under which
this Agreement is executed and that such restrictions are necessary to
protect the legitimate interests of the Company. If, in any judicial
proceeding, a court shall refuse to enforce any separate covenant set forth
herein, then such unenforceable covenant shall be deemed eliminated from
this section 4 for the purpose of that proceeding to the extent necessary
to permit the remaining separate covenants to be enforced.
c. The Executive hereby sells, transfers and assigns to the Company
the entire right, title and interest of the Executive in and to all
inventions, ideas, disclosures and improvements, whether patented or
unpatented, and copyrightable materials, made or conceived by the
Executive, solely or jointly, or in whole or in part, during the period
Executive is bound by this Agreement which (i) relate to methods,
apparatus, designs, products, processes or devices sold, leased, used or
under construction or development by the Company or any subsidiary or (ii)
otherwise relate to or pertain to the business, functions or operations of
the Company or any subsidiary, or (iii) arise (wholly or partly) from the
efforts of the Executive during the Term hereof in connection with his
performance of his duties hereunder. The Executive shall communicate
promptly and disclose to the Company, in such form as the Company requests,
all information, details and data pertaining to the
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aforementioned inventions, ideas, disclosures and improvements; and, whether
during the term hereof or thereafter, the Executive shall execute and deliver to
the Company such formal transfers and assignments and such other papers and
documents as may be required of the Executive to permit the Company to file and
prosecute the patent applications and, as to copyrightable material, to obtain
copyright thereon. This provision does not relate to any invention for which (i)
no equipment, supplies, facilities or trade secret information of the Company
was used and which was developed entirely on the Executive's own time and which
does not relate (A) directly to the business of the Company, or (B) to the
Company's actual or demonstrably anticipated research or development; or (ii)
does not result in any work performed by the Executive for the Company.
5. Miscellaneous.
a. This Agreement shall be governed by and construed in accordance with
the internal laws of the State of Minnesota, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
b. All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive, to his address appearing on the records of the Company.
If to the Company:
CENTRAL ENGINEERING COMPANY
0000 Xxxxxxx Xxxx
Xxxxxxxxxxx, XX 00000
Attention: Board of Directors
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
c. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
d. The Company may withhold from any amounts payable under this Agreement
such federal, state, local or foreign taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
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e. The Executive's or the Company's failure to insist upon strict
compliance with any provisions hereof or any other provision of this
Agreement or the failure to assert any right the Executive or the Company
may have hereunder, including, without limitation, the right of the
Executive to terminate employment for cause pursuant to this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
f. The Executive and the Company acknowledge that, except as may
otherwise be provided herein or under any other written agreement between
the Executive and the Company, the employment of the Executive by the
Company is "at will" and, except in connection with or within 12 months
following a Change in Control, the Executive's employment and this
Agreement may be terminated by the Company at any time, in which case the
Executive shall have no further rights under this Agreement.
g. The Company agrees that if it breaches any payment obligation
hereunder, the Company will pay all reasonable attorney fees and costs
incurred by Executive in enforcing Executive's rights hereunder.
h. 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 shall
constitute one and the same instrument.
6. Injunctive Relief. Executive acknowledges and agrees that irreparable
injury will result to the Company in the event Executive breaches any covenant
contained in this Agreement and that the remedy at law for such breach will be
inadequate. Therefore, if Executive engages in any act in violation of the
provisions of this Agreement, the Company shall be entitled, in addition to such
other remedies and damages as may be available to it by law or under this
Agreement, to injunctive or other equitable relief to enforce the provisions
hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
date first above written.
Central Engineering Company
By:
--------------------------------
A Director
[Officer]
--------------------------------
President
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