CHANGE-IN-CONTROL AGREEMENT
Exhibit 10.6
AGREEMENT, made and entered into as of the first day of May, 2004 (the “Effective Date”), by
and between SL Industries, Inc., a New Jersey corporation (the “Company”), and Xxxxx X. Xxxxxx (the
“Employee”).
WHEREAS, the Employee is the Chief Operating Officer of the Company; and
WHEREAS, the Company desires to provide certain protection to the Employee in the event of a
change-in-control of the Company, in order to induce the Employee to remain in the employ of the
Company notwithstanding any risks and uncertainties created by a potential change-in- control;
NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for
other good and valuable consideration, the receipt of which is mutually acknowledged, the Company
and the Employee agree as follows:
1. EFFECTIVENESS; TERM
This Agreement shall become effective as of the date hereof and shall terminate on the seventh
anniversary of the date hereof, or on such other date as the parties hereto mutually agree in
writing.
2. TERMINATION OF EMPLOYMENT FOLLOWING A CHANGE-IN-CONTROL
(a) If the Employee’s employment is terminated by the Company or its successor without Cause
(as hereinafter defined), or the Employee terminates his employment with the Company or its
successor for Good Reason (as hereinafter defined), and either termination occurs within one year
following a Change-in-Control (as hereinafter defined), or within one year following execution by
the Company of a definitive agreement contemplating a Change-in-Control that occurs, whichever is
later (the date of such termination hereinafter the “Termination Date”), the Employee shall be
entitled to receive a Change-in-Control Payment (as hereinafter defined) with respect to such
termination. Termination of employment shall have the same meaning as separation from service under
Code Section 409A and Regulation Section 1.409A-1(h).
(b) Notwithstanding the foregoing, the Employee shall not be entitled to receive the
Change-in-Control Payment if any of the Circumstances of Ineligibility (as hereinafter defined)
apply to the Employee.
(c) “Change-in-Control Payment” means the product of two times the Employee’s annual base
salary in effect as of the Termination Date. In the case of a termination of employment for Good
Reason based on a reduction of the Employee’s annual base salary, the annual base salary shall be
calculated as the Employee’s annual base salary in effect immediately prior to such reduction.
(d) “Change-in-Control” means that any of the following has occurred within a 12 month period:
| (i) | the stockholders of the Company approve (aa) the sale of the
Company; (bb) the sale of all or substantially all of the assets of the Company;
or (cc) a consolidation or merger of the Company with another corporation, the
consummation of which would result in the stockholders of the Company
immediately before the occurrence of the consolidation or merger owning, in the
aggregate, fifty percent (50%) or less of the Voting Stock of the surviving
entity; and such transaction occurs; |
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| (ii) | any person or other entity, including any person as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934 as amended (the
“Exchange Act”), becomes the beneficial owner, as defined in Rule 13d-3 under
the Exchange Act, directly or indirectly, of at least thirty percent (30%) or
more of the total combined voting power of all classes of capital stock of the
Company entitled to vote for the election of directors of the Company (the
“Voting Stock”); or |
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| (iii) | a change in the Company’s Board of Directors occurs with the
result that the members of such Board on the Effective Date (the “Incumbent
Directors”) no longer constitute a majority of such Board, provided that any
person becoming a director (other than a director whose initial assumption of
office is in connection with an actual or threatened election contest or the
settlement thereof, including but not limited to a consent solicitation relating
to the election of directors of the Company) whose election or nomination for
election was supported by two-thirds (2/3) of the then Incumbent Directors shall
be considered an Incumbent Director for purposes hereof. |
(e) “Cause” means, and shall be subject to the procedures set forth herein:
| (i) | conviction of the Employee for (x) any crime constituting a
felony in the jurisdiction in which committed, (y) any crime involving moral
turpitude (whether or not a felony) or (z) any criminal act against the Company
or any affiliate of the Company involving dishonesty whether or not a felony; |
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| (ii) | substance abuse (including drunkenness) by the Employee which is
repeated after written notice from the Company to the Employee identifying such
abuse; |
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| (iii) | the failure or the refusal of the Employee to follow lawful and
proper directives of the Board of Directors or Chief Executive Officer of the
Company which is not corrected within thirty (30) days after written notice from
such Board or Chief Executive Officer to the Employee identifying such failure
or refusal; or |
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| (iv) | willful malfeasance or gross misconduct by the Employee which may
discredit or damage the Company or any affiliate of the Company. |
(f) “Good Reason” means the occurrence of any of the following without the prior written
consent of the Employee:
| (i) | removal from the most senior position held by the Employee with
respect to the Company on the 181st day prior to the Change-in-Control or any
more senior position that the Employee subsequently achieves (the “Measuring
Position”); |
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| (ii) | the assignment of duties or responsibilities materially
inconsistent with those customarily associated with the Measuring Position, or
any other action by the Company or a successor that results in a material
diminution of the Employee’s position, authority, duties or responsibilities
compared to the Measuring Position, other than an isolated action that is not
taken in bad faith and is remedied by the Company or a successor promptly after
receipt of written notice thereof from the Employee; |
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| (iii) | a reduction in the Employee’s annual base salary, any portion of
the Employee’s target bonus, or any other material benefit provided to the
Employee by the Company at the time of the Change-in-Control; or |
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| (iv) | the involuntary relocation of the Employee’s principal place of
employment to a location more than thirty (30) miles from the Employee’s
principal place of employment immediately prior to the Change-in-Control, except
for required travel on the Company’s business to an extent substantially
consistent with the Employee’s business travel obligations as of such date. |
A voluntary termination of employment for Good Reason must occur within two years of the initial
occurrence of one or more of the preceding conditions. In such event, the Employee shall notify the
Company within 90 days of the occurrence of such condition, whereupon the Company shall have 30
days from the receipt of such notice to cure the condition.
(g) “Circumstances of Ineligibility” means any one or more of the following circumstances:
| (i) | if the Employee’s employment with the Company or its successor is
terminated due to death or disability (defined as the inability or incapacity of
the Employee, due to any medically determined physical or mental impairment, to
perform the Employee’s duties and responsibilities for the Company for a total
of one hundred eighty (180) days); |
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| (ii) | if the Employee elects to voluntarily terminate the Employee’s
employment, including a termination due to retirement, with the Company or its
successor, unless such termination by the Employee is for Good Reason; or |
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| (iii) | if the Employee’s employment with the Company or a successor is
terminated for Cause at any time preceding or following a Change-in-Control. |
3. TIME OF PAYMENT OF CHANGE-IN-CONTROL PAYMENT
(a) Any Change-in-Control Payment to which the Employee is entitled under Section 2 above
shall be paid to the Employee in cash (subject to appropriate withholding) in a lump sum. Such
payment shall be made no later than the effective date of the release of claims executed by the
Employee pursuant to Section 6(c) below, or the thirtieth (30th) day after the
Termination Date, whichever date is later. If, at the time of the Change in Control payment, the
Employee is a specified employee as defined in Code Section 409A and Regulation Section
1.409A-1(i), the lump sum shall be the lesser of the amount to which he would be entitled under
Section 2, and the maximum amount payable under the Regulation Section 1.409A-1(b)(9)(iii). The
difference, if any, shall be paid six months after the Change in Control payment date.
(b) Notwithstanding the foregoing, in the event that the payment of a Change-in-Control
Payment would cause the Company to violate the terms of one or more financial covenants set forth
in any credit agreement then in effect between the Company and its lenders of funded debt, such
payment shall be deferred until the earliest practicable date without causing such violation.
(c) The Employee shall be paid interest, compounded daily, at the prime lending rate as
announced from time to time by PNC Bank or its successor on all or any part of the
Change-in-Control Payment that is not paid when due.
4. CONTINUATION OF WELFARE BENEFITS
Notwithstanding anything contained herein to the contrary, if the Employee is entitled to
receive the Change-in-Control Payment, the Company or its successor shall continue to pay premiums
on behalf of the Employee, as if the Employee were still an employee of the Company, in the
medical, dental, hospitalization and life insurance programs and/or arrangements of the Company or
any of its subsidiaries in which the Employee was participating on the Termination Date on the same
terms and conditions as other employees under such plans, programs and/or arrangements until the
earlier of (i) the end of the twenty-four (24) month period following the Termination Date or (ii)
the date, or dates, the Employee is entitled to receive substantially equivalent coverage and
benefits under the plans, programs and/or arrangements of a subsequent employer (such coverage and
benefits to be determined on a coverage-by-coverage or benefit-by-benefit basis). The Employee
shall be eligible to continue his benefits through COBRA at his own expense, to the extent provided
by law.
5. NON-COMPETE AND NON-SOLICITATION
(a) In consideration of the Company entering into this Agreement and providing the
compensation and benefits to be provided by the Company to the Employee, the Employee agrees that
the Employee will not, from the Effective Date until one (1) year after the Termination Date,
engage in any Competitive Activity. For purposes of this Agreement, the term “Competitive
Activity” shall mean (i) serving as a director of any Competitor (as hereinafter defined); (ii)
directly or indirectly through one or more intermediaries, either (x) controlling any Competitor or
(y) owning any equity or debt interests in any Competitor (other than equity or debt instruments
that are public traded and, at the time of any acquisition, when combined with other holdings, do
not exceed five percent (5%) of the particular class of interests outstanding) (it being understood
that, if interests in any Competitor are owned by an investment vehicle or other entity in which
the Employee owns an equity interest, a portion of the
interests in such Competitor owned by such entity shall be attributed to the Employee, such portion
determined by applying the percentage of the equity interest in such entity); (iii) employment by
(including serving as an officer or partner of), providing consulting services to (including,
without limitation, as an independent contractor), or managing or operating the business or affairs
of, or being a lender to, any Competitor; or (iv) participating in the ownership, management,
operation or control of any Competitor. For purposes of this Agreement, the term “Competitor”
shall mean any person (other than the Company or any majority-owned subsidiary of the Company) that
engages in any business (as determined at the time of termination of employment) in the United
States in competition with the Company. For purposes of this Agreement, the term business shall
include any activity engaged in by any subsidiary or division of the Company.
(b) The Employee agrees that, if the Employee receives a Change-in-Control Payment as set
forth in Section 2 above, the Employee shall not directly or indirectly through another entity (i)
induce or attempt to induce any employee of the Company or of any affiliate of the Company to leave
the employ of the Company or such affiliate, or in any way interfere with the relationship between
the Company and such affiliate and any employee thereof, or (ii) induce or attempt to induce any
customer, supplier, licensee, licensor, franchisee or other business relation of the Company (or
any affiliate of the Company) to cease doing business with the Company (or any affiliate of the
Company), or in any way interfere with the relationship between such customer, supplier, licensee
or business relation of the Company (or any affiliate of the Company). For purposes of this
Agreement, a customer, supplier, licensee, licensor, franchisee or business relation means any
person or entity which at the time of determination is, or has been within one (1) year prior to
such time, a customer, supplier, licensee, licensor, franchisee or other business relation of the
Company (or any affiliate of the Company).
(c) In the event of a Change-in-Control Payment, the Company may value the non-competition and
non-solicitation covenants and allocate the Payment accordingly.
(d) The Employee agrees that any violation of this Agreement will cause immediate and
irreparable harm to the Company, the amount of which will be impossible to estimate or determine.
The Employee further agrees that the Company shall have the right to equitable relief by injunction
or otherwise (without the necessity of posting bond or other security) and the Employee hereby
knowingly waives the claim or defense that the Company has an adequate remedy at law. The rights
and remedies of the Company under this Agreement are cumulative and are in addition to all other
rights and remedies the Company may have under any local, state or federal law, rule or regulation
or otherwise. It shall not be a defense to the Company’s enforcement of this Agreement that the
Company did breach or may have breached this Agreement or any other agreement with the Employee,
any such defense to the Company’s enforcement of this Agreement being hereby waived.
6. MISCELLANEOUS
(a) NO EMPLOYMENT AGREEMENT. This Agreement does not constitute a contract of employment or
impose on the Company any obligation to retain the Employee as an employee.
(b) DEDUCTIONS AND WITHHOLDING. The Employee agrees that the Company shall withhold from any
and all compensation required to be paid to the Employee pursuant to this Agreement all federal,
state, local and/or other taxes which the Company determines are required to be withheld in
accordance with applicable statutes and regulations from time to time in effect.
(c) WAIVER AND RELEASE. The Employee acknowledges that (i) this Agreement provides benefits
greater than the benefits that the Employee would otherwise be entitled to receive under any
employment or severance agreement, plan, program or arrangement of the Company or between the
Company and the Employee, and (ii) the Company has no obligation to enter into this Agreement. In
consideration of the Company assuming these additional obligations and entering into this
Agreement, the Employee agrees to execute a release of all claims related to the Employee’s
employment or termination thereof prior to payment of the Change-in-Control Payment. Such release
will become effective on the eighth day after it has been executed by the Employee, unless it has
been revoked beforehand.
(d) ARBITRATION. Except for enforcement of the Employee’s covenants under Section 5, any
dispute or controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration conducted in New Jersey under the Commercial Arbitration Rules then
prevailing of the American Arbitration Association and such submission shall request the American
Arbitration Association to: (i) appoint an arbitrator experienced and knowledgeable concerning the
matter then in dispute; (ii) require the testimony to be transcribed; (iii) require the award to be
accompanied by findings of fact and a statement of reasons for the decision; and (iv) request the
matter to be handled by and in accordance with the expedited procedures provided for in the
Commercial Arbitration Rules. The determination of the arbitrators, which shall be based upon a de
novo interpretation of this Agreement, shall be final and binding and judgment may be entered on
the arbitrators’ award in any court having jurisdiction. All costs of the American Arbitration
Association and the arbitrator shall be borne by the Company, unless the position advanced by the
Employee is determined by the arbitrator to be frivolous in nature.
(e) LEGAL FEES. Except for legal fees the Employee incurs in defending Company’s enforcement
of the Employee’s covenants under Section 5, the Company or its successor shall pay to the Employee
all reasonable legal fees and expenses incurred by the Employee in disputing in good faith any
issues hereunder relating to the termination of the Employee’s employment, or in seeking in good
faith to obtain or enforce any benefit or right provided by this Agreement. Such payments shall be
made within thirty (30) days after delivery of the Employee’s written request for payment
accompanied with such evidence of fees and expenses incurred as the Company reasonably may require.
(f) NO DUTY TO MITIGATE/SET-OFF. The Company agrees that in order for the Employee to receive
payments or benefits under this Agreement, the Employee shall not be required to seek other
employment. Further, the amount of any such payment or benefit shall not be reduced by any
compensation earned by the Employee or any benefit provided to the Employee as the result of
employment by another employer or otherwise, except as provided in Section 4 or 6(g) hereof. The
Company’s obligations to make any payment or provide any benefit under this Agreement shall not be
affected by any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Company or a successor may have against the Employee.
(g) OFFSET. The Change-in-Control Payment shall be reduced by any severance cash payment made
by the Company or any subsidiary of the Company to the Employee pursuant to (i) any severance plan,
program, policy or arrangement of the Company or any subsidiary of the Company, (ii) any employment
or consulting agreement between the Company or any subsidiary of the Company and the Employee, and
(iii) any federal, state or local statute, rule, regulation or ordinance.
(h) ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the parties with respect
to any payment and benefit which may become due or owing to the Employee in the event of a
termination in connection with a Change-in-Control and supersedes any other prior oral or written
agreements between the Employee and the Company with respect thereto, including the provision
captioned “CHANGE IN CONTROL” in the letter agreement dated December 16, 1999, between the Employee
and the Company and the Change-in-Control Agreement between the parties dated May 1, 2001. To the
extent that any payment or benefit conferred upon the Employee herein are invalidated or rendered
unenforceable by a court of competent jurisdiction, the payment or benefit provided in such other
agreements shall remain in full force and effect.
(i) OTHER AGREEMENTS. Except as provided in paragraph (h) above, nothing in this Agreement
shall affect or modify (i) any obligations the Employee has under any agreement with the Company
with respect to confidential information, assignment of inventions and discoveries,
non-solicitation of employees and/or customers, non-competition, or otherwise or (ii) any payments
or benefits the Employee may be entitled to receive under any agreement with respect to severance
payments, the acceleration of options or other Stock Awards, or otherwise, and all such agreements
shall remain in full force and effect.
(j) AMENDMENTS. No party may amend, modify or terminate this Agreement without the express
written consent of the other party.
(k) BINDING AGREEMENT. This Agreement shall be binding upon the Company and its successors and
assigns and shall inure to the benefit of and be enforceable by the Employee’s personal or legal
representatives, executors, administrators, heirs, distributees, devises and legatees and the
Company’s successors and assigns.
(l) LEGAL ADVICE. The Employee acknowledges that (i) he has been strongly encouraged by the
Company to review this Agreement with his personal attorney and has either done so or has knowingly
and voluntarily waived his right to do so and (ii) he understands all of the terms and conditions
of this Agreement and agrees to be bound by its terms and conditions.
(m) GOVERNING LAW; VENUE AND JURISDICTION. This Agreement shall be governed and construed in
accordance with the laws of the State of New Jersey without reference to conflict of laws
principles. The Employee does hereby irrevocably consent that any legal action or proceeding
arising out of or in any manner relating to this Agreement, or any other document delivered in
connection herewith, shall be brought exclusively in any state court or in any federal court in New
Jersey. The Employee further irrevocably consents to the service of any complaint, summons, notice
or other process relating to any such action or proceeding by delivery thereof to the Employee by
hand or by any other manner provided for below. The Employee hereby expressly and irrevocably
waives any claim or defense in any such action or proceeding based on any alleged lack of personal
jurisdiction, improper venue or forum non conveniens or any similar basis.
(n) NOTICES. All notices required or permitted by this Agreement shall be in writing and
shall be given by personal delivery or sent by registered or certified mail, postage prepaid,
return receipt requested, or by reputable overnight courier, prepaid, receipt acknowledged, to the
following addresses:
| If to the Company: | ||||
| SL Industries, Inc. | ||||
| 000 Xxxxxxxxxx Xxxx, X-000 | ||||
| Xx. Xxxxxx, XX 00000 | ||||
| Attention: | Xxxxx X. Xxxxxx | |||
| Compensation Committee Chairman | ||||
| If to the Employee: | ||||
| Xxxxx X. Xxxxxx | ||||
| 00 Xxxxxxxxx Xxxxx, Xxxx X-00 | ||||
| Xxx Xxxxx | ||||
| Xxxxxxxxxxxx, XX 00000 | ||||
(o) COUNTERPARTS. This Agreement may be executed and delivered in separate counterparts, each
of which when so executed and delivered shall be deemed an original and all of which taken together
shall constitute one and the same agreement. Delivery of an executed counterpart of the signature
page to this Agreement by facsimile transmission shall be effective as manual delivery of an
executed counterpart. Any party so delivering this Agreement by facsimile transmission shall
promptly manually deliver an executed counterpart, provided that any failure to do so shall not
affect the validity of the counterpart delivered by facsimile transmission.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first
written above.
| SL INDUSTRIES, INC. |
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| By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx | ||||
| Compensation Committee Chairman | ||||
| By: | /s/ Xxxxx X. Xxxxxx | |||
| Xxxxx X. Xxxxxx | ||||
