EXHIBIT 10.5(c)
TERMINATION AGREEMENT
THIS TERMINATION AGREEMENT ("AGREEMENT") is made between Innovative
Valve Technologies, Inc. a Delaware corporation (the "COMPANY") and Xxxxxxx X.
Xxxxxxxxxx, Xx., an individual (the "EXECUTIVE"). As of the 21st day of August,
1998 with respect to the following facts:
RECITALS:
A. The Executive is a principal officer of the Company and an
integral part of its management.
B. The Company wishes to assure both itself and the Executive of
continuity of management in the event of any actual or
threatened change in control of the Company.
C. This Agreement is not intended to alter materially the
compensation and benefits that the Executive could reasonably
expect in the absence of a change in control of the Company
and, accordingly, this Agreement, though taking effect upon
execution thereof, will be operative only upon a change of
control of the Company, as that term is defined herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
agreements of the parties contained herein, the parties do hereby agree as
follows:
1. OPERATION OF AGREEMENT
This Agreement shall be effective immediately upon its execution by the
parties hereto. Anything in this Agreement to the contrary notwithstanding,
neither this Agreement nor any provision thereof shall be operative unless and
until there has been a "Change in Control" of the Company as defined in SECTION
5 below. Upon such a Change in Control of the Company, this Agreement and all
provisions hereof shall become operative immediately.
2. PURPOSE AND INTENT
The Board of Directors of the Company (the "BOARD") recognizes that the
possibility of a Change in Control of the Company exists and that such
possibility, and the uncertainty and questions which it necessarily raises among
management, may result in the departure or distraction
-1-
of key management personnel to the detriment of the Company and its shareholders
in this period when their undivided attention and commitment to the best
interests of the Company and its shareholders are particularly important.
Accordingly, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change in Control of the Company.
3. TERM OF AGREEMENT
This Agreement shall be effective upon the execution thereof by the
parties, and shall remain in effect until August 31, 2002, at which time it
shall terminate; provided, however, that the term of this Agreement shall be
extended by one day for each day after August 31, 2000 that notice of
termination by either party has not been given to the other, so that at all
times after August 31, 2000, if neither party has given notice of termination
then this Agreement shall have a one (1) year remaining term. Either party may
give notice of termination of this Agreement at any time, with or without cause.
If any notice of termination is given on or before August 31, 2000, then this
Agreement shall terminate August 31, 2002. If any notice of termination is given
after August 31, 2000, then this Agreement shall terminate on that date one year
after such notice is given.
4. TERMINATION FOLLOWING CHANGE IN CONTROL
For purposes hereof only, a termination of the Executive's employment
following a Change in Control (" TERMINATION FOLLOWING CHANGE IN CONTROL") shall
be deemed to occur if at any time during the one-year period immediately
following a Change in Control:
(a) there has been an actual termination by the Company of the
Executive's employment, other than "For Cause" as such term is
defined in Section 7;
(b) the Company reduces the Executive's base salary, bonus
computation or title;
(c) the Company substantively reduces the Executive's
responsibilities as in effect prior to the Change in Control
or as the same may be increased from time to time, or there is
a material change in employment conditions deemed by the
Executive to be materially adverse as compared to those in
effect prior to the Change in Control, any of which is not
remedied within 30 days after receipt by the Company of notice
by the Executive, of such reduction in responsibilities or
change in employment conditions;
(d) the Company requires the Executive to be based anywhere other
than Houston, Texas metropolitan area, except for required
travel on the Company's business to an extent substantially
consistent with that prior to the Change in Control;
-2-
(e) the Company fails to obtain the assumption of the performance
of this Agreement by any successor of the Company;
(f) a failure by the Company to comply with any material provision
of the Employment Agreement between the Company and the
Executive which has not been cured within ten (10) days after
notice of such noncompliance has been given by the Executive
to the Company;
(g) the failure by the Company to continue in effect any
compensation plan in which Executive participates unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan in
connection with a Change in Control or the failure of the
Company to continue Executive's participation therein or the
taking of any action by the Company which would materially and
adversely affect Executive's participation in any such plan or
reduce Executive's benefits thereunder;
(h) the failure by the Company to continue to provide Executive
with benefits not less than those enjoyed under any of the
Company's pension, life insurance, medical, health and
accident, or disability plans in which Executive was
participating or entitled to participate at the time of a
Change in Control or the taking of any action by the Company
which would directly or indirectly materially reduce any such
benefits; including, but not limited to, the failure to pay
any premiums with respect to such benefits borne by the
Company (or any increase to the Executive in the premiums or
other amounts borne by the Executive) at the time of the
Change in Control;
(i) the Company takes any action which would deprive the Executive
of any other material fringe benefit enjoyed by the Executive
at the time of the Change in Control, or the Company fails to
provide the Executive with the number of paid vacation days to
which the Executive is then entitled in accordance with the
Company's normal vacation policy in effect on the date of the
Change in Control.
The voluntary termination by the Executive of his employment by the Company
shall in no event constitute a "Termination Following Change in Control."
5. DEFINITION OF CHANGE IN CONTROL
A Change in Control will be deemed to have occurred if:
(a) any "person" or "group" as such terms are used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934 (the
"EXCHANGE ACT"), becomes a beneficial owner, directly or
indirectly, of securities of the Company representing 30% or
-3-
more of the combined voting power of the Company's then
outstanding equity securities;
(b) there is a merger or consolidation of the Company in which the
Company does not survive as an independent public company; or
(c) the business or businesses of the Company for which the
Executive's services are principally performed are disposed of
by the Company pursuant to a partial or complete liquidation
of the Company, a sale of assets (including stock of a
subsidiary) of the Company, or otherwise.
6. COMPENSATION FOLLOWING TERMINATION
(a) Subject to the terms and conditions of this Agreement, upon a
Termination Following Change in Control, as defined in SECTION
4, which occurs during the term of this Agreement, the
Executive shall be entitled to (i) a lump sum payment, within
fifteen (15) days following such termination, in an amount
equal to two times the highest annual level of salary during
the three calendar years ended immediately prior to such
termination, (ii) the immediate vesting of all previously
granted but unvested stock options to acquire securities from
the Company which were outstanding on the date of the
termination, and (iii) continuing health coverage for a period
of twenty-four (24) months, at a level commensurate with that
which the Executive enjoyed with the Company immediately prior
to such Change in Control. Notwithstanding the foregoing, any
lump sum cash payment with respect to salary under subclause
(i) of the second sentence of Section 9 of the Employment
Agreement shall be credited against any lump sum payment under
this Paragraph 6(a) the intention of the Parties being to
limit all severance compensation with respect to salary to two
full years of salary.
(b) The Executive shall not be required to mitigate the amount of
any payment provided for in this SECTION 6 by seeking other
employment or otherwise, nor shall the amount of any payment
or benefit provided for in this SECTION 6 be reduced by any
amounts to which the Executive shall be entitled by law (nor
shall payment hereunder be deemed in lieu of such amounts), by
any compensation earned by the Executive as the result of
employment by another employer or by retirement benefits after
the date of termination or voluntary termination, or
otherwise.
(c) Anything to the contrary notwithstanding, all payments
required to be made by the Company hereunder to the Executive
or his estate or beneficiaries shall be subject to the
withholding of such amounts, if any, relating to tax and other
payroll deductions as the Company may reasonably determine it
should withhold pursuant to any applicable law or regulation.
In lieu of withholding such amounts, the
-4-
Company may accept other provisions to the end that it has
sufficient funds to pay all taxes required by law to be
withheld in respect of any or all of such payments.
7. DEFINITION OF "FOR CAUSE"
The Termination of the Executive's employment by the Company shall be
deemed "For Cause" if it results from:
(a) the willful or continued failure by the Executive
substantially to perform his duties hereunder or regular
failure to follow the specific directives of the Chief
Executive Officer, President or Chief Financial Officer, after
demand for substantial performance that specifically
identifies the manner in which the Company believes the
Executive has not substantially performed his duties is
delivered by the Company;
(b) misappropriated funds or property of the Company or otherwise
engaged in acts of dishonesty, fraud, misrepresentation or
other acts of moral turpitude, even if not in connection with
the performance of his duties hereunder, which would result in
serious prejudice to the interests of the Company if he were
retained as an employee or secured any personal profit not
thoroughly disclosed to and approved by the Company in
connection with any transaction entered into on behalf of or
with the Company or any affiliate of the Company;
(c) the Executive's death; or
(d) an accident or illness which renders the Executive unable, for
a period of at least six (6) consecutive months, to perform
the essential functions of his job, notwithstanding the
provision of reasonable accommodation by Company.
For purposes of this section, no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by him not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company. Notwithstanding the foregoing,
the Executive shall not be deemed to have been terminated For Cause under
subsection (a)without (i) reasonable notice to the Executive setting forth the
reasons for the Company's intention to terminate For Cause, (ii) an opportunity
for the Executive, together with his counsel, to be heard before the Chief
Executive Officer, President or Chief Financial Officer, and (iii) delivery to
the Executive of a notice of termination from the Chief Executive Officer,
President or Chief Financial Officer finding that, in the good faith opinion of
the Chief Executive Officer, President or the Chief Financial Officer, the
Executive was guilty of conduct set forth above in clause (a) of the preceding
sentence and specifying the particulars thereof in detail.
-5-
8. TAX TREATMENT
It is the intention of the parties that no portion of the payment made
under SECTION 6 hereof (The "TERMINATION PAYMENT") or any other payment under
this Agreement, or payments to or for the Executive's benefit under any other
agreement or plan, be deemed to be an excess parachute payment as defined in
Section 280G of the Internal Revenue Code of 1986, as amended (the "CODE"), or
its successors. It is agreed that the present value of the Termination Payment
and any other payment to or for the Executive's benefit in the nature of
compensation, receipt of which is contingent on the Change in Control of the
Company, and to which Section 280G of the Code or any successor provision
thereto applies (in the aggregate "Total Payments") shall not exceed an amount
equal to one dollar less than the maximum amount which the Executive may receive
without becoming subject to the tax imposed by Section 4999 of the Code or any
successor provisions or which the Company may pay without loss of deduction
under Section 280G of the Code or any successor provision. Present value for
purposes of this Agreement shall be calculated in accordance with Section
1274(b)(2) the Code or any successor provision.
Within six (6) days following delivery of written notice by the Company
to the Executive of the Company's belief that there is a payment or benefit due
which will result in an excess parachute payment as defined in Section 280G of
the Code or any successor provision, the Company and the Executive, at the
Company's expense, shall obtain the opinion of legal counsel and certified
public accountants, as the Company and Executive may mutually agree upon, which
opinions need not be unqualified, which sets forth (i) the amount of the
Executive's Base Period Income, as defined in Section 280G of the Code, (ii) the
present value of Total Payments, and (iii) the amount and present value of any
excess parachute payments.
In the event such opinions determine that there would be an excess
parachute payment, the Termination Payment hereunder, or any other payment
determined by such counsel to be includable in Total Payments, shall be reduced
or eliminated in the following order: (i) by the amount of any options to
purchase securities of the Company which have had their vesting rights
accelerated hereunder, and (ii) by the amount of any cash received hereunder, so
that under the bases of calculation set forth in such opinions there will be no
excess parachute payment. The provisions of this Section, including the
calculations, notices and opinions provided herein, shall be based upon the
conclusive presumption that (i) the compensation and benefits provided herein
and (ii) any other compensation, including but not limited to any accrued
benefits, earned by the Executive prior to the Change in Control of the Company
pursuant to the Company's compensation programs, would have been reasonable if
made in the future in any event, even though the timing of such payment is
triggered by the Change in Control of the Company. In the event such legal
counsel so requests in connection with the Section 280G opinion required by this
Section, the Company and Executive shall obtain, at the Company's expense, the
advice of a firm of recognized executive compensation consultants concerning the
reasonableness of any item of compensation to be received by the Executive, on
which advice legal counsel may rely in providing their opinion. In the event
that the provisions of Sections 280G and 4999 of the Code
-6-
or any successor provision are repealed without succession, this Section shall
be of no further force or effect.
9. MISCELLANEOUS
(a) INTENT. This Agreement is made by the Company in order to induce
the Executive to remain in the Company's employ, with the Company's
acknowledgment and intent that it will be relied upon by the Executive, and in
consideration of the services to be performed by the Executive from time to time
hereafter. However, this Agreement is not an agreement to employ the Executive
for any period of time or at all, and the terms and conditions of the
Executive's employment, other than those expressly addressed herein, shall be
subject to and governed by a separate agreement of employment between the
Company and the Executive. This Agreement is intended only as an agreement to
provide the Executive with a specified compensation and benefits if he is
terminated following a Change in Control.
(b) ARBITRATION. Any and all disputes or controversies whether of law
or fact and of any nature whatsoever arising from or respecting this Agreement
shall be decided by arbitration by the American Arbitration Association in
accordance with its Commercial Rules except as modified herein.
(i) The arbitrator shall be elected as follows: in the event
the Company and the Executive agree on one arbitrator, the arbitration
shall be conducted by such arbitrator. In the event the Company and the
Executive do not so agree, the Company and the Executive shall each
select one independent, qualified arbitrator and the two arbitrators so
selected shall select the third arbitrator (the arbitrator(s) are
herein referred to as the "Panel"). The Company reserves the right to
object to any individual arbitrator who shall be employed by or
affiliated with a competing organization.
(ii) Arbitration shall take place at Houston, Texas, or any
other location mutually agreeable to the Parties. At the request of
either Party, arbitration proceedings will be conducted in the utmost
secrecy; in such case all documents, testimony and records shall be
received, heard and maintained by the arbitrators in secrecy, available
for inspection only by the Company or the Executive and their
respective attorneys and their respective experts who shall agree in
advance and in writing to receive all such information in secrecy until
such information shall become generally known. The Panel shall be able
to award any and all relief, including relief of an equitable nature,
provided that punitive damages shall not be awarded. The award rendered
by the Panel may be enforceable in any court having jurisdiction
thereof.
(iii) Reasonable notice of the time and place of arbitration
shall be given to all Parties and any interested persons as shall be
required by law.
-7-
(c) ATTORNEY'S FEES. If any action at law or in equity is commenced to
enforce any of the provisions or rights under this Agreement, the unsuccessful
party to such litigation, as determined by the court in a final judgment or
decree, shall pay the successful party all costs, expenses and reasonable
attorneys' fees incurred by the successful party or parties (including, without
limitation, costs, expenses and fees on any appeals), and if the successful
party recovers judgment in any such action or proceeding, such costs, expenses
and attorneys' fees shall be included as part of the judgment.
(d) GOVERNING LAW. This Agreement shall be governed by and construed
and interpreted in accordance with the laws of the State of Texas.
(e) SUCCESSORS AND ASSIGNS.
(i) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree in writing to perform this Agreement.
Failure of the Company to obtain such assumption and agreement prior to
the effectiveness of any such succession shall be a breach of this
Agreement and shall require the Company to pay to the Executive
compensation from the Company in the same amount and on the same terms
as the Executive would be entitled hereunder in the event of a
Termination Following Change in Control of the Company, except that for
purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed to be the date on which
the Executive shall receive such compensation from the Company. As used
in this Agreement, "Company" shall mean the Company as herein above
defined and any successor to its business and/or assets as aforesaid
which assumes and agrees to perform this Agreement by operation or law
or otherwise.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees
and legatees. If the Executive should die while any amount would still
be payable to the Executive hereunder if the Executive had continued to
live, all such amounts, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to Executive's devisee,
legatee or other designee or, if there is no such designee, to
Executive's estate.
(f) NOTICES. Except as otherwise expressly provided herein, any notice,
demand or payment required or permitted to be given or paid shall be deemed duly
given or paid only if personally delivered or sent by United States mail and
shall be deemed to have been given when personally delivered or two (2) days
after having been deposited in the United States mail, certified mail, return
receipt requested, properly addressed with postage prepaid. All notices or
demands shall be effective only if given in writing. For the purpose hereof, the
addresses of the parties hereto (until notice of a change thereof is given as
provided in this Section 9(e)), shall be as follows:
-8-
The Company: Innovative Valve Technologies, Inc.
0 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
Attn: President
Executive: Xxxxxxx X. Xxxxxxxxxx, Xx.
0 Xxxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx 00000
(g) SEVERABILITY. In the event any provision in this Agreement
shall be invalid, illegal or unenforceable, such provision shall be severed from
the rest of this Agreement and the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
(h) ENTIRETY. This Agreement constitutes the entire agreement
of the parties with respect to the subject matter hereof and supersedes any
prior or contemporaneous agreement or understandings relating to the subject
matter hereof.
(i) AMENDMENT. This Agreement may be amended only by a written
instrument signed by the parties hereto, which makes specific reference to this
Agreement.
(j) SETOFF. There shall be no right of setoff or counterclaim,
in respect of any claim, debt or obligation, against any payments to the
Executive, his dependents, beneficiaries or estate provided for in this
Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
THE COMPANY: INNOVATIVE VALVE TECHNOLOGIES, INC.
By:_______________________________________
Xxxxxxx X. Xxxxxx, President
EXECUTIVE: __________________________________________
Xxxxxxx X. Xxxxxxxxxx
-9-
