EMPLOYMENT AGREEMENT
This Agreement is made effective the 31st day of October 1997, between
XXXXX PRODUCTS CO. (the "Company"), and Xxxxxx X. Xxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive and the Executive
desires to be employed by the Company on the terms set forth herein;
NOW, THEREFORE, in consideration of the provisions contained herein and
intending to be legally bound hereby, the Company and the Executive agree as
follows:
1. Definitions. The following words and phrases shall have the meanings set
forth below for the purposes of this Agreement (unless the context clearly
indicates otherwise):
(a) "Base Salary" shall have the meaning set forth in Section 5.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Cause" shall mean the Executive has --
(1) materially failed to perform his stated duties and not cured
such failure (if curable) within 15 days of his receipt of written notice
of the failure;
(2) materially breached any provision of this Agreement and not
cured such breach (if curable) within 15 days of his receipt of written
notice of the breach;
(3) demonstrated his personal dishonesty;
(4) engaged in willful misconduct;
(5) engaged in a breach of fiduciary duty involving personal profit;
(6) willfully violated any law, rule or regulation, or final
cease-and-desist order (other than traffic violations or similar offenses);
or
(7) engaged in other serious misconduct of such a nature that his
continued employment may reasonably be expected to affect the Company
adversely.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Disability" shall mean the Executive's inability to perform his
duties hereunder by reason of any medically determinable physical or mental
impairment which is expected to result in death or which has lasted or is
expected to last for a continuous period of not fewer than 6 months, provided
the Executive is also eligible to receive disability benefit payments under the
Company's short-term and long-term disability plans.
(f) "Principal Executive Office" shall mean the Company's principal
office for executives, presently located at Xxxxxxxxxx Xxxx, Xxxxxx Xxxxx,
Xxxxxxxxxxxx 00000.
(g) "Termination Date" shall mean the date specified in the Termination
Notice.
(h) "Termination Notice" shall mean a dated notice which (i) indicates
the specific termination provision in this Agreement relied upon (if any), (ii)
sets forth in reasonable detail the facts and circumstances claimed to provide a
basis for the termination of the Executive's employment under such provision,
(iii) specifies a Termination Date not fewer than 30 nor more than 90 days after
such Termination Notice is given (except in the case of the Company's
termination of the Executive's employment for Cause); and (iv) is given in the
manner specified in Section 22(h).
2. Employment. The Company hereby employs the Executive as Chief
Executive Officer and President and the Executive hereby accepts such
employment and agrees to render services to the Company in such capacities
on the terms and conditions set forth in this Agreement. The Executive's
primary place of employment shall be at the Principal Executive Office.
3. Term
(a) Term and Renewal of Agreement. The initial term of employment under
this Agreement shall be three years, commencing on November 3, 1997 and, subject
to subsection (b), shall be deemed automatically, without further action, to
extend for an additional year on each subsequent November 3.
(b) Extended Term. The Term of this Agreement shall extend in the manner
set forth in subsection (a) unless either the Board does not approve the
extension and provides written notice to the Executive of such event, or the
Executive gives written notice to the Company of the Executive's election not to
extend the term. In either case, the written notice
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shall be given on or prior to the November 3 on which the term would otherwise
extend under subsection (a). References herein to the term of this Agreement
shall refer both to the initial term and extensions thereof.
4. Duties. The Executive shall:
(a) faithfully and diligently perform all such acts and duties, and
furnish all such services as are assigned to the Executive as of the date this
Agreement is signed, and such additional or different acts, duties, and services
as the Board may assign to the Executive in the future; and
(b) devote his full professional time, energy, and skill to the business
of the Company and to the promotion of the Company's best interests, except for
vacations and for absences made necessary because of illness.
5. Compensation. The Company shall compensate the Executive for his
services at a minimum base salary of $250,000 per year ("Base Salary"). The
Executive's Base Salary may be increased from time to time in such amounts as
may be determined by the Compensation Committee of the Board, but may not be
decreased without the Executive's express written consent (unless the decrease
is pursuant to a general compensation reduction applicable to all executive
officers of the Company). In addition to his Base Salary, the Executive shall be
entitled to receive such bonus payments and stock options as may be determined
under Sections 6 and 7, respectively.
6. Incentive Bonus. For calendar years after 1997, the Executive shall be
entitled to an incentive bonus equal to at least 25 percent of the Executive's
Base Salary if the Company meets its operating plan each year. The Board may, in
its discretion, award the Executive a larger incentive bonus, but not in excess
of 50 percent of the Executive's Base Salary. For 1997, the Executive shall be
entitled to an incentive bonus equal to $10,000 if the Company meets its 1997
business plan for operating income.
7. Stock Options. The Executive shall be granted stock options under the
Company's stock option plan in accordance with the separate stock option
agreement entered into by the Company and the Executive.
8. Welfare Benefit Plans. The Executive shall be entitled to participate in
and receive benefits under those employee welfare benefit plans (including
medical, disability and life insurance) generally covering executives of the
Company. Executive's coverage under such employee benefit plans shall commence
following the expiration of any waiting period required under the plan or, if
none, on the date of the Executive's employment.
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9. Retirement Benefit Plans.
(a) The Executive shall be entitled to retirement benefits in accordance
with the retirement package established by the Company for all employees. Within
the first two years of the Executive's term of employment, the Company shall
consider and decide whether to establish a supplemental executive retirement
plan to make up, to the extent determined by the Company, for the limits on
tax-qualified plan benefits that are imposed on employees earning in excess of
the Internal Revenue Code limit on compensation ($160,000 for 1998).
(b) In addition to the normal Company retirement plan, the Executive
shall receive special retirement consideration if the Company establishes an
Employee Stock Ownership Plan. Details of such consideration have not been
determined at the execution of this agreement but will be determined at the
future point in time that such Plan is established.
10. Vacation. The Executive shall be entitled to paid annual vacation in
accordance with the policies established from time to time by the Board, which
shall in no event be fewer than four weeks per annum. The Executive shall not be
entitled to extra cash payments for any vacation he does not utilize.
11. Automobile. The Company shall provide the Executive with the use of a
Company-owned automobile of a type the Board deems reasonable for the
Executive's position. The Company shall pay all costs associated with such
automobile, including registration, licensing, insurance, and costs of
operation.
12. Moving Expenses
(a) The company will reimburse the Executeve for relocation per Company
Relocation Plan Section 3.9, "Transfer of Employees to a New Location" (Issued
1/1/95).
(b) If the Executive voluntarily terminates his employment with the
Company within two (2) years of the date of his employment, the Executive shall
reimburse the Company for any closing costs, tax gross-up payment, and moving
expenses which the Company paid on the Executive's behalf or reimbursed to the
Executive under this Section.
13. Expenses. The Company shall reimburse the Executive or otherwise pay
for all reasonable expenses incurred by the Executive in furtherance of or in
connection with the business of the Company, including, but not limited to,
automobile and traveling expenses and all reasonable entertainment expenses,
subject to such reasonable documentation and other limitations as may be
established by the Board.
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14. Termination
(a) Termination without Salary Continuation. In the event (i) the
Executive terminates his employment hereunder, (ii) the Executive's employment
is terminated by the Board for Cause or due to his Disability, or (iii) the
Executive dies, the Executive shall have no right to compensation or other
benefits pursuant to this Agreement for any period after his last day of active
employment. In the event of Executive disability or death terms under Section 18
will apply.
(b) Termination with Salary Continuation. In the event the Executive's
employment is terminated by the Board, or as a result of a merger or
acquisition, for a reason other than Cause or Disability, then the Company
shall, subject to the provisions of Section 15 (if applicable):
(1) pay the Executive a severance amount equal to the Executive's
Base Salary for one year (determined without regard to any reduction in
violation of Section 5) as of his last day of active employment plus any
bonus(es), to the extent earned; the severance amount that is equal to the
Executive's Base Salary for one year shall be paid in equal installments
over a one-year period beginning immediately following the Termination Date
and on the Executive's normal payroll cycle (so that each installment will
equalthe Executive's pay preceding the Termination Date); the severance
amount that is equal to the Executive's bonus(es), to the extent earned,
shall be paid in a single sum(s) on the date(s) it(they) would normally be
paid; and
(2) pay the Executive for any unused vacation days at the
Executive's base pay rate; and
(3) vest in full all granted stock options which are scheduled to
become exercisable within one year of the Executive's termination; and
(4) maintain and provide to the Executive, at no cost to the
Executive, for a period of 12 months from the Executive's last day of
active employment, continued participation in all employee welfare benefit
plans (including life insurance) in which the Executive would have been
entitled to participate had his employment with the Company continued
throughout such period, provided that such participation is not prohibited
by the terms of the plan or by the Company for legal reasons. Additionally,
the executive split dollar life insurance policy which the Company
maintains on behalf of the Executive shall be transferred to the Executive.
(c) Termination Notice. Except in the event of the Executive's death, a
termination under this Agreement shall be effected by means of a Termination
Notice.
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15. Limitation on Severance Benefits. If the payments and benefits under
Section 14, either alone or together with other payments and benefits the
Executive has a right to receive from the Company, would constitute a "parachute
payment" under section 280G of the Code, the payments and benefits under Section
14 shall be reduced, in a manner determined by the Executive, by the minimum
amount necessary to render all of the payments and benefits deductible by the
Company pursuant to section 280G of the Code and not subject to the excise tax
imposed under section 4999 of the Code.
The amount of any reduction in the payments and benefits to be made under
Section 14 shall be based upon the opinion (the "Opinion") of independent tax
counsel selected by the Company's independent public accountants and paid by the
Company. Such counsel shall promptly prepare the Opinion, but in no event later
than 60 days from the Termination Date; and may use such actuaries as such
counsel deems necessary or advisable for the purpose.
In the event the Company and/or the Executive does not agree with the
Opinion, (i) the Company shall pay to the Executive the maximum amount of
payments and benefits under Section 14 which the Opinion indicates will be
deductible by the Company and not subject to the excise tax imposed under
section 4999 of the Code; and (ii) the Company may request, and the Executive
shall have the right to demand that the Company request, a ruling from the
Internal Revenue Service as to whether the disputed remaining payments and
benefits under Section 14 will be deductible.
Any such request for a ruling from the Internal Revenue Service shall be
promptly prepared and filed by the Company, but in no event later than 60 days
from the date of the Opinion. The request for a ruling shall be subject to the
Executive's approval prior to filing, and such approval shall not be
unreasonably withheld. The Company and the Executive agree to be bound by any
ruling received from the Internal Revenue Service and to make appropriate
payments to each other to reflect any such rulings, together with interest at
the applicable federal rate provided for in section 7872(f)(2)(B) of the Code.
16. Withholding. The Company shall have the right to withhold from all
payments made pursuant to this Agreement any federal, state, or local taxes
required by law to be withheld from such payments.
17. Assignability. The Company may assign this Agreement and its rights and
obligations hereunder in whole, but not in part, to any entity to which the
Company may transfer all or substantially all of its assets, if in any such case
said entity shall expressly in writing assume all obligations of the Company
hereunder as fully as if it had been originally made a party hereto. The Company
may not otherwise assign this Agreement or its rights and obligations hereunder.
This Agreement is personal to the Executive and his rights and duties hereunder
shall not be assigned except as expressly agreed to in writing by the Company.
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18. Disability or Death of Executive.
(a) In the event that the Executive is unable to perform duties under
this agreement due to a disability, the Executive shall be compensated in
accordance with terms of the Company's short-term and long-term disability
plans.
(b) Any amounts due the Executive under this Agreement (not including
any Base Salary not yet earned by the Executive) unpaid as of the date of the
Executive's death, shall be paid in a single sum as soon as practicable after
the Executive's death to the Executive's surviving spouse, or if none, to the
duly appointed personal representative of his estate.
(c) Stock option exercise will be in accordance with the Xxxxx Products
Co. Non-qualified Stock Option Agreement entered into by the Company and the
Executive.
19. Covenant Not to Compete. During the term of this Agreement, and for a
period of one year following the termination of his employment, the Executive
shall not:
(a) engage in, work for, participate in the ownership, management,
operation, or control of, be connected with, or have any financial interest in
the following instrumentation and controls divisions -- the Xxxxxx-Rosemount
Group, Honeywell Industrial Automation & Controls, Xxxxx Control Systems,
Foxboro, Elsag Xxxxxx Process Automation, ABB Industrial Automation, Yokogawa,
Eurotherm, Siemens, Bristol Xxxxxxx, and Xxxxxxx & Xxxxxx, or a result of a
merger or combination of the competitors listed in this subsection;
(b) interfere with the relationship of the Company with any of its
employees, agents, or representatives (including, but not limited to, causing or
helping another business to hire any employee of the Company);
(c) directly or indirectly divert or attempt to divert from the Company
any business in which the Company has been actively engaged during the term
hereof, nor interfere with the relationship of the Company with any of its
customers; or
(d) in the event the Executive is terminated by the Company without
Cause; or the Executive's contract is not extended beyond the initial 3-year
term; or the Executive is terminated due to a change in control of the Company;
then the Covenant Not to Compete, Sections 19, 19 (a), 19 (b), and 19 (c), is
voided.
20. Nondisclosure Covenant. The Executive shall not (other than in the good
faith performance of his services to the Company before his termination of
employment) disclose or make known to anyone other than employees of the
Company, or use for the benefit of himself or any other person, firm, operation,
or entity unrelated to the Company, any knowledge, information, or materials,
whether tangible or intangible, belonging to the Company, about its products,
services, know-how, customers, business plans, or financial, marketing, pricing,
and compensation, or about other proprietary matters relating to the Company. On
or before the
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Executive's termination of employment with the Company, he shall promptly
deliver to the Company any and all tangible, confidential information in his
possession
21. Breach of Covenant. Any breach or violation of the provisions in
Section 19 or Section 20 by the Executive will result in forfeiture by the
Executive and all other persons of all rights to any further payments or
benefits under this Agreement, and in such event the Company shall have no
further obligation to pay any amounts related thereto. The Executive expressly
acknowledges that damages alone will be an inadequate remedy for any breach or
violation of any of the provisions of Section 19 or Section 20 and that the
Company, in addition to all other remedies, shall be entitled as a matter of
right to equitable relief, including injunctions and specific performance, in
any court of competent jurisdiction. If any of the provisions of Section 19 or
Section 20 are held to be in any respect unenforceable, then they shall be
deemed to extend only over the maximum period of time, geographic area, or range
of activities as to which they may be enforceable.
22. Miscellaneous
(a) Amendment. No provision of this Agreement may be amended unless
such amendment is signed by the Executive and such officer as may be
specifically designated by the Board to sign on its behalf.
(b) Nature of Obligations. Nothing contained herein shall create or
require the Company to create a trust of any kind to fund any benefits which may
be payable hereunder, and to the extent that the Executive acquires a right to
receive benefits from the Company hereunder, such right shall be no greater than
the right of any unsecured general creditor of the Company.
(c) Prior Employment. The Executive represents and warrants that his
acceptance of employment with the Company has not breached, and the performance
of his duties hereunder will not breach, any duty owed by him to any prior
employer or other person.
(d) Headings. The Section headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. In the event of a conflict between a heading
and the content of a Section, the content of the Section shall control.
(e) Gender and Number. Whenever used in this Agreement, a masculine
pronoun is deemed to include the feminine and a neuter pronoun is deemed to
include both the masculine and feminine, unless the context clearly indicates
otherwise. The singular form, whenever used herein, shall mean or include the
plural form where applicable.
(f) Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable under
any applicable law, such event shall not affect or render invalid or
unenforceable any other provision of this
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Agreement and shall not affect the application of any provision to other persons
or circumstances.
(g) Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, assigns,
heirs, executors, and administrators.
(h) Notice. For purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth below:
To the Company: Secretary & Treasurer
Xxxxx Products Co.
Xxxxxxxxxx Xxxx
Xxxxxx Xxxxx, XX 00000
To the Executive: Xxxxxx X. Xxxxx
000 Xxxxxxxxx Xxxxx
Xxxx Xxxx, XX 00000
(i) Entire Agreement. This Agreement sets forth the entire
understanding of the parties and supersedes all prior agreements, arrangements,
and communications, whether oral or written, pertaining to the subject matter
hereof.
(j) Governing Law. The validity, interpretation, construction, and
performance of this Agreement shall be governed by the laws of the United States
where applicable and otherwise by the laws of the Commonwealth of Pennsylvania.
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IN WITNESS WHEREOF, this Agreement has been executed April 30, 1999.
Attest: XXXXX PRODUCTS CO.
/s/ R. E. Xxxxxxxxxx By: /s/ X. X. Xxxxx
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R. E. Xxxxxxxxxx X. X. Xxxxx
Secretary & Treasurer Chairman of the
Compensation Committee
Witness: EXECUTIVE
/s/ X. X. Xxxxxx /s/ X. X. Xxxxx
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X. X. Xxxxx
