1
EXHIBIT 10.12
-------------
EMPLOYMENT AGREEMENT
--------------------
ESSEF Corporation ("ESSEF"), an Ohio corporation, Pac-Fab, Inc.
("Pac-Fab"), a Delaware corporation and a subsidiary of ESSEF, and Xxxxxxx X.
Xxxxxxxxx (the "Executive") agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) Pac-Fab agrees to employ the Executive, and the Executive
agrees to serve Pac-Fab and ESSEF, as the President of Pac-Fab. The Executive
shall be the senior executive officer of Pac-Fab and shall report to ESSEF's
Chief Operating Officer and shall have supervision and control over, and
responsibility for, the day-to-day general operations of Pac-Fab and such other
powers and duties commensurate with such senior officer position as may from
time to time be prescribed by the ESSEF's Chief Executive Officer, Chief
Operating Officer and the Board of Directors of ESSEF (the "Board").
(b) The Executive shall (i) perform such duties commensurate
with the position of senior officer of Pac-Fab as may be assigned by the Chief
Operating Officer, the Chief Executive Officer, and the Board, (ii) devote
substantially all of his working time to the business and affairs of Pac-Fab,
and (iii) use his best efforts to advance the interests of Pac-Fab and ESSEF
and to improve the value of Pac-Fab and ESSEF to their shareholders.
2. TERM. Pac-Fab's employment of the Executive shall commence on
January 3, 1995 (the "Commencement Date") and shall expire on the second
anniversary of the Commencement Date, unless terminated or extended according
to the terms stated in this Agreement. Until terminated by thirty (30) days
prior written notice by either party or otherwise terminated as provided in
Section 9 hereof, this Agreement shall be extended automatically as of the
anniversary of the Commencement Date in each year thereafter for an additional
one (1) year period with such modified terms as mutually agreed.
3. COMPENSATION.
(a) The Executive's annual base salary ("base salary") during
the term of this Agreement shall be Two Hundred Thousand Dollars (USD 200,000),
such base salary to be reviewed annually by the Compensation
Page 53 of 68 sequentially numbered pages
2
Committee of the Board (the "Compensation Committee").
(b) In addition to the base salary, Pac-Fab shall pay the
Executive an annual bonus based upon the Executive's performance. The
Executive's target bonus shall be equal to forty percent (40%) of the
Executive's base salary (the "Target Bonus"). For each year that this
Agreement remains in effect, the Compensation Committee shall determine an
appropriate percentage of the Target Bonus that Pac-Fab shall pay to the
Executive based upon Pac-Fab's attainment of certain budget targets established
from time to time by the Compensation Committee. Pac-Fab shall pay the bonus
within thirty (30) days after the date that Pac-Fab's audited financial
statements become available. The Executive shall have the right to bonus
payments earned so long as the Executive was actually employed by Essef and/or
Pac-Fab at the end of the fiscal year regardless of whether the Executive
continues to be employed on the bonus payment date. The Executive's bonus
payment for fiscal 1995 shall be determined on the basis of the payment matrix
attached as Exhibit A; provided, however, that such bonus for fiscal 1995 shall
not be less than Forty Thousand Dollars (USD 40,000).
4. OPTIONS.
(a) INITIAL OPTIONS.
(i) Subject to the limitation in (iii) below, ESSEF
hereby grants to the Executive options (the "Initial Options") to purchase
Fifteen Thousand (15,000) shares of ESSEF's common stock (the "Shares") at the
price and subject to the following terms and conditions. The Initial Options
shall vest as of the Commencement Date.
(ii) The exercise price per Share for the Initial Options
shall be the higher of (aa) the average closing price per Share as reported by
NASDAQ during the five (5) trading dayimmediately preceding the Page 54 of 68
sequentially numbered pages Commencement Date or (bb) Sixteen Dollars and
Thirty-Two and One-Half Cents (USD 16.325) per Share.
(iii) Except in the case of a Change of Control as
provided in (a)(iv) below, the Executive may exercise not more than the
following percentage of the total number of Initial Options during the periods
set forth below:
Page 54 of 68 sequentially numbered pages
3
0% prior to the first anniversary of the Commencement Date;
20% at any time after the first anniversary of the Commencement
Date;
40% at any time after the second anniversary of the Commencement
Date;
60% at any time after the third anniversary of the Commencement
Date;
80% at any time after the fourth anniversary of the Commencement
Date; and
100% at any time after the fifth anniversary of the Commencement
Date.
(iv) Notwithstanding the limitations in (iii) above, the
Executive may exercise one hundred percent (100%) of the Initial Options
immediately upon the occurrence of a Change of Control. As used in this
Agreement, a Change of Control shall mean the acquisition by any individual or
entity of beneficial ownership of fifty-one percent (51%) or more of the
Shares; provided, however, that the following shall not constitute a Change of
Control: (aa) any acquisition by ESSEF or any entity controlled by ESSEF, (bb)
any acquisition by any employee benefit or welfare plan or related trust
sponsored or maintained by ESSEF or by any company controlled by ESSEF, (cc)
any acquisition by any entity pursuant to a reorganization, merger, or
consolidation of ESSEF following which sixty percent (60%) or more of the
common stock of the corporation resulting from such reorganization, merger, or
consolidation is beneficially owned, directly or indirectly, by substantially
the same individuals and entities that are the beneficial owners of the Shares
immediately prior to such reorganization, merger, or consolidation, or (dd)
approval by the beneficial owners of a majority of the Shares of either the
liquidation or dissolution of ESSEF. For the purposes of this Subsection. For
purposes of this Subsection (a)(iv) and Subsection (b)(iv), "acquisition" shall
mean any purchase, exchange, merger, consolidation, or succession, and
"control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management of a particular entity, whether
through the ownership of shares, voting securities, partnership or other
ownership interests, agreements, or otherwise.
(B) PERFORMANCE OPTIONS.
(i) ESSEF hereby grants the Executive options (the
"Performance Options") to purchase an additional Twenty-Five Thousand (25,000)
Shares. The Performance Options shall vest as of the fiscal year end for which
the net income per Share (fully diluted) of ESSEF as reported by ESSEF for such
fiscal year equals or exceeds Two Dollars and Forty Cents (USD 2.40) (the
"Vesting Date").
Page 55 of 68 sequentially numbered pages
4
(ii) The exercise price per Share for the Performance
Options shall be the higher of (x) the price determined under Section 4(a)(ii)
above and (y) the average closing price per Share as reported by NASDAQ for the
five (5) trading days prior to the first anniversary of the Commencement Date.
However, such price shall not exceed Seventeen Dollars (USD 17.00) per Share
unless the number computed in (x) exceeds Seventeen Dollars (USD 17.00) per
Share, in which case the maximum price shall be equal to the amount computed in
(x).
(iii) The Executive may exercise not more than the
following percentage of the total number of Performance Options during the
periods set forth below:
0% prior to the first anniversary of the Vesting Date;
20% at any time after the first anniversary of the Vesting Date;
40% at any time after the second anniversary of the Vesting Date;
60% at any time after the third anniversary of the Vesting Date;
80% at any time after the fourth anniversary of the Vesting Date;
and
100% at any time after the fifth anniversary of the Vesting Date.
(iv) Notwithstanding the limitations in (iii) above, the
Executive may exercise one hundred percent (100%) of the Performance Options
subject to the following: (aa) the Vesting Date has occurred and (bb) a Change
of Control has occurred, provided that the Compensation Committee that is in
office immediately prior to the Change of Control has determined that no
extenuating circumstances exist that should operate to preclude such exercise.
(c) TRANSFERABILITY OF OPTIONS. Neither the Initial Options
nor the Performance Options are transferable by the Executive other than by
will or by the laws of descent and distribution, and all such options are
exercisable, during the lifetime of the Executive, only by the Executive or his
guardian or legal representative.
(d) TERM OF OPTIONS. Subject to the terms and conditions
hereof, the Initial Options and/or the Page 56 of 68 sequentially numbered
pages Performance Options (collectively, the "Options") may be exercised at any
time prior to the tenth (10th) anniversary of the Commencement Date by
delivering to ESSEF at its principal place of business a written notice, signed
by the person entitled to exercise the options, stating the Executive's
election to exercise the Options and stating the number of Options to be
exercised. Such notice shall, as an essential part thereof, be accompanied
Page 56 of 68 sequentially numbered pages
5
by the payment of the full purchase price of the Shares then to be purchased
and the amount, if any, required to be withheld for federal, state and local
tax purposes on account of the exercise of the Options. The Options shall be
deemed exercised as of the date that ESSEF receives such notice and payment.
Payment of the full purchase price must be made in cash or by certified check.
Promptly after the proper exercise of an Option, ESSEF or its transfer agent
shall issue in the name of the person exercising the Option, and deliver to
him, a certificate or certificates for the Shares purchased. As holder of the
Options, the Executive shall have no rights as Shareholder or otherwise in
respect of any of the Shares as to which the Options shall not have effectively
been exercised.
(e) RESTRICTIONS ON EXERCISE. No Option shall be exercisable
if such exercise would violate:
(i) any generally applicable state securities laws;
(ii) any applicable registration or other requirements
under the Securities Act of 1993, as amended (the
"Act"), or applicable requirements of NASDAQ; or
(iii) any generally applicable legal requirement of any
other governmental authority.
Furthermore, if a registration statement with respect to the Shares to be
issued upon the exercise of the Options is not in effect and if counsel for
ESSEF deems it necessary or desirable in order to avoid possible violation of
the Act, ESSEF may require, as a condition to its issuance and delivery of
certificates for the Shares, the delivery to ESSEF of a commitment in writing
by the person exercising the Options that at the time of such exercise it is
his intention to acquire such Shares for his own account for investment only
and not with a view to, or for resale in connection with, the distribution
thereof; that such person understands the Shares may be "restricted securities"
as defined in Rule 144 of the Securities and Exchange Commission; and that any
resale, transfer or other disposition of said Shares will be accomplished only
in compliance with Rule 144, the Act, or other or subsequently applicable Rules
and Regulations thereunder. ESSEF may place on the certificates evidencing
such Shares an appropriate legend reflecting the aforesaid commitment and may
refuse to permit transfer of such certificates until it has been furnished
evidence satisfactory to it that no violation of the Act or the Rules and
Regulations thereunder would be involved in such transfer.
5. Benefits. During the term of this Agreement, the Executive and
his eligible dependents shall be
Page 57 of 68 sequentially numbered pages
6
entitled to participate in and receive benefits under any profit-sharing plan,
health, disability, medical insurance or other employee welfare plan or
arrangement made generally available by ESSEF during the term of this Agreement
to its executives and key management employees.
6. CAR. During the term of this Agreement, Pac-Fab shall
provide the Executive with an automobile and shall pay for operating
expenses incurred in connection with the use of the automobile,
including the costs of insurance, gas, maintenance and car phone.
7. VACATION. The Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Board from time to time,
but not less than twenty (20) business days in any calendar year.
8. RIGHT OF FIRST REFUSAL.
(a) If the Executive wishes to sell, assign or otherwise
transfer to a single purchaser Twenty-Five Thousand (25,000) or more Shares,
the Executive shall first comply with the terms of the following right of first
refusal.
(b) The Executive may sell such Shares if the Shares proposed
to be sold are first offered for purchase to ESSEF. Such offer of purchase
shall be delivered by the Executive to ESSEF by a written notice containing (i)
a true copy of the offer of the proposed purchaser of the Shares (the "Offer"),
which offer shall set forth the number of Shares to be purchased, the price for
those Shares and the name and address of the proposed purchaser and (ii) a
written offer by the Executive to sell all of the Shares covered by the Offer
to ESSEF in accordance with the terms of this Agreement and the Offer.
(c) Upon approval by the Board, ESSEF or its nominee shall have
the right to accept the Executive's offer in writing within sixty (60) days
after the date of the notice. If such offer is accepted, the Shares shall be
sold to ESSEF or such nominee at the office of ESSEF at a mutually convenient
time within twenty (20) days after the acceptance of the offer. At the Closing
of such sale, the Executive shall deliver the certificates
Page 58 of 68 sequentially numbered pages
7
representing the Shares free of any adverse claims, liens or encumbrances
whatsoever, duly endorsed for transfer, and ESSEF or its nominee, as the case
may be, shall deliver to the Executive the purchase price relating to the
Shares being purchased.
(d) If ESSEF fails to exercise its purchase rights under this
Section 8 for a period of thirty (30) days after the termination of the period
within which ESSEF had the right to purchase the Shares, the Executive may
transfer the Shares that are the subject of the Offer to the proposed
purchaser, but only in strict accordance with the Offer. If such sale is
consummated within a sixty (60) day period thereafter, the Shares in the hands
of the proposed purchaser shall no longer be subject to the provisions of this
right of first refusal. If such sale is not so consummated, the Shares shall
continue to be subject to all of the provisions of this Agreement.
9. DISABILITY OR DEATH; RESIGNATION; TERMINATION FOR CAUSE; OTHER
TERMINATIONS.
(a) DISABILITY OR DEATH. If the Executive is incapacitated for
a period of three (3) consecutive months so that he cannot perform his duties
hereunder on a full-time basis, then either ESSEF or the Executive may give
written notice to the other terminating the Executive's employment effective
thirty (30) days thereafter (the "Disability Termination Date"). ESSEF shall
continue to provide salary, medical coverage and group life insurance to the
Executive for six (6) months after the Disability Termination Date. If the
Executive dies prior to the termination of his employment or if notice of
termination for disability is given as provided above, ESSEF's obligations
hereunder shall terminate as of the earlier of the Executive's death or the
Disability Termination Date; provided that, in either case, the Executive or
his estate shall be paid the pro rata share of any bonus earned prior to the
Executive's death or Disability Termination Date. In the event of the
Executive's death or termination by reason of disability, his estate or he may
exercise any Options vested at the date of death or Disability Termination Date
for one (1) year after such death or Disability Termination Date.
(b) RESIGNATION. If the Executive's employment is terminated
by reason of his voluntary resignation, all of the obligations of ESSEF and
Pac-Fab hereunder shall terminate. All unexercised Options, both vested and
unvested, shall be automatically forfeited and canceled by ESSEF.
Page 59 of 68 sequentially numbered pages
8
(c) TERMINATION FOR CAUSE. If the Executive's employment is
terminated for cause (as defined below), all of the obligations of ESSEF and
Pac-Fab hereunder shall immediately terminate. All unexercised Options, both
vested and unvested, shall be automatically forfeited and canceled by ESSEF.
As used herein, "for cause" shall mean (i) gross misconduct by the Executive
that is materially inconsistent with the terms hereof, (ii) material failure by
the Executive to perform his duties, or (iii) the Executive's conviction for
committing a felony.
(d) OTHER TERMINATIONS. If the Executive's employment is
terminated by ESSEF and Pac-Fab other than for cause, including withou
limitation, at the end of a term, the obligations of ESSEF, Pac-Fab, and the
Executive hereunder shall immediately terminate; provided, however, that (i)
the Executive may exercise within one (1) year from the date ESSEF and Pac-Fab
deliver notice of termination (the "Termination Date") any vested Options
notwithstanding any exercise restrictions held by him on the Termination Date,
and (ii) ESSEF shall continue to provide salary and medical, group life and
disability insurance (collectively, "insurance benefits") to the Executive
until the later of (x) the later of December 31, 1996 or one (1) year after the
Termination Date or (y) the Executive begins receiving salary and/or insurance
benefits through other employment.
10. TRADE SECRETS; CONFIDENTIAL AND PROPRIETARY INFORMATION. The
Executive shall not at any time or in any manner, either directly or
indirectly, divulge, disclose or communicate to any person, firm, company,
corporation or business in any manner whatsoever any confidential information
relating to the business of ESSEF or Pac-Fab, including without limitation,
ESSEF's or Pac-Fab's pricing policies, trade secrets, know-how, strategic plans
and similar types of information: provided, however, that the Executive may,
without liability under this Section, comply with orders and other legal
process required by the courst of competent jurisdiction over the Executive..
This Section 10 shall remain in full force and effect for a period of ten (10)
years after expiration or termination of this Agreement for any reason.
11. COVENANT NOT TO COMPETE. During the term of this Agreement and
for a period of five (5) years thereafter the Executive will not, without
ESSEF's prior written consent, directly or indirectly engage in, make any
investment in or have any interest in any business in competition with the
business of ESSEF; and the Executive will not advise, assist or render services
either directly or indirectly to any person, firm, company,
Page 60 of 68 sequentially numbered pages
9
corporation or business other than ESSEF or Pac-Fab with reference to any
business in competition with the businesses engaged in by ESSEF or Pac-Fab
during the Executive's employment under this Agreement. Notwithstanding the
foregoing, the ownership of securities of any business competing with ESSEF or
Pac-Fab, if such securities are publicly traded on a national securities market
and constitute less than five percent (5%) of the outstanding stock thereof,
shall not constitute a violation of this provision. For purposes of this
Section 11, a business in competition with ESSEF or Pac-Fab shall mean any
business engaged in the manufacture, design, processing, sale or distribution
of products that are the same as or similar to those of ESSEF or Pac-Fab at any
time during the term of this Agreement. This Agreement shall inure to the
benefit of, and be enforceable by, the parties' successors, representatives,
executors, administrators or assignees.
12. NOTICES. All notices, requests, demands and other communications
made or given in connection with this Agreement shall be in writing and shall
be deemed to have been duly given (a) if delivered, at the time delivered or
(b) if mailed, at the time mailed at any general or branch United States Post
Office enclosed in a registered or certified postage paid envelope addressed to
the address of the respective parties as follows:
To ESSEF or Pac-Fab:
ESSEF Corporation
000 Xxxx Xxxxx
Xxxxxxx, Xxxx 00000
Attention: Chief Operating Officer
To the Executive: Xxxxxxx X. Xxxxxxxxx
_____________________
_____________________
or to such other addresses as the party to whom notice is to be given may have
previously furnished to the other
Page 61 of 68 sequentially numbered pages
10
party in writing in the manner set forth above, provided that notices of
changes of address shall only be effective upon receipt.
13. MODIFICATIONS AND WAIVERS. No provisions of this Agreement may be
modified or discharged unless such modification or discharge is authorized by
the Board of Directors of ESSEF and is agreed to in writing and signed by each
party; provided, however, that the Executive may not sign on behalf of Pac-Fab.
No waiver by a party hereto of any breach by another party hereto or 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.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto relating to the subject matter hereof, and
there are no written or oral terms or representations made by any party other
than those contained herein.
15. GOVERNING LAW. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the
laws of the State of Ohio.
16. INVALIDITY. The unenforceability or invalidity of any provision
of this Agreement shall not affect the enforceability or validity of the
balance of the Agreement. In the event that any such provision should be or
becomes invalid for any reason, such provision shall remain effective to the
maximum extent permissible, and the parties shall consult and agree on a
legally acceptable modification giving effect to the commercial objectives of
the unenforceable or invalid provision, and every other provision of this
Agreement shall remain in full force and effect.
Page 62 of 68 sequentially numbered pages
11
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on December
21, 1994.
Xxxxxxx X. Britelle
ESSEF CORPORATION
By:
------------------------
Its: Chief Operating Officer
PAC-FAB, INC.
By:
-------------------------
Its: Assistant Treasurer.
Page 63 of 68 sequentially numbered pages
