EXHIBIT 10(a)
TRANSITION AGREEMENT
This Transition Agreement is entered into this 30th day of January, 1997
and is by and between the executive executing this agreement on the last page
hereof ("Executive") and Omega Environmental, Inc. ("Company").
WHEREAS, the employment arrangements currently in place between Executive
and Company do not address or provide any protection for Executive or Company in
the event of a Change in Control of Company; and
WHEREAS, should Company receive any proposal from a third person concerning
a possible business combination with, or acquisition of equity securities of,
Company, the Board of Directors of Company believes it imperative that Company
be able to rely on Executive's advice as to the best interest of Company and its
shareholders without concern that Executive might be distracted by the personal
uncertainties and risks created by such a proposal.
NOW, THEREFORE, Executive and Company hereby agree as follows:
1. In the event a third person begins a tender or exchange offer,
circulates a proxy to shareholders, or takes another step to effect a Change of
Control (as defined in Section 9 hereof) of Company, Executive agrees that he
will not voluntarily leave the employ of Company, and will render the services
as contemplated in his employment offer, until the third person has abandoned or
terminated his efforts to effect a Change of Control or until a Change of
Control has occurred.
2. In the event Executive's employment with the Company (including its
subsidiaries) is involuntarily terminated (as defined in Section 7 hereof),
other than as a consequence of his death or disability, or of his retirement at
or after his normal retirement date under Company's pension or other retirement
plans, within one and one-half (1 1/2) years after a Change of Control of
Company (a "Covered Termination"), each of the following payments, less required
withholding taxes, shall be made by Company to Executive not later than thirty
(30) days after the date of such Covered Termination:
(a) BASE SALARY. An amount in cash equal to two (2) times the amount
of Executive's base salary (as defined below). Base Salary is the greater of
the Executive's annual base salary (x) immediately prior to the Change in
Control or (y) on the effective date of his Covered Termination. Any payments
made hereunder are in lieu of any lump sum payment of base salary required under
any employment arrangements currently existing between Executive and Company.
(b) BONUS. An amount in cash equal to the amount of Executive's
Target Incentive Level for an Award under the Company's Performance Compensation
System as in effect on his date of Covered Termination, or, if greater, as in
effect immediately prior to the Change in Control.
(c) 401 (K) PLAN. An amount in cash equal to the amount contributed
by Company under the Company's 401(k) Retirement Plan (the "401(k) Plan") to
Executive's "Company Contribution Account," as such term is defined in the
401(k) Plan, for the year ending immediately prior to the Change in Control.
(d) In the event of Executive's re-employment by the Company or any
new parent company within one year of a Covered Termination, the Executive
agrees to return a prorated portion of the payments in 2(a)-2(c) above remaining
after Executive's taxes on such payments, such proration being determined on a
monthly basis over the first year following a Covered Termination. Executive
also agrees that his Benefits would promptly revert to the level normally
provided other Executives.
3. BENEFITS. Company agrees that for the period beginning on the date of
Executive's Covered Termination and ending on the first to occur of (i) the date
of Executive's re-employment or (ii) the last day of the twelfth (12th) month
following the date of Executive's Covered Termination, Company shall provide
under Executive's COBRA election medical and dental insurance, life insurance,
accidental death and dismemberment insurance and disability protection no less
favorable to (including with respect to any costs borne by Executive) than the
better of (a) the coverage provided by Company immediately prior to the Change
of Control or (b) the coverage provided by Company immediately prior to
Executive's date of Covered Termination.
4. SUPPORT. Without in any way limiting any pre-existing agreements
between Company and Executive, in the event of a Covered Termination, Company
(a) will assist Executive with executive outplacement up to a cost of $50,000,
and (b) will provide secretarial assistance and office space from which
Executive may conduct employment efforts for a period of up to one year at no
cost to Executive.
5. STOCK OPTIONS. Upon a Change in Control, all of Executive's stock
options become fully vested and exercisable immediately for a period of the
lesser of one year or their current remaining term. In the event of a Covered
Termination, Company shall pay to Executive, in respect of each option to
purchase common stock of the Company granted to Executive under Company's 1990
Stock Option Plan, as amended (the "Stock Option Plan") that is then outstanding
(and that has not been exercised) an amount in cash equal to the excess, if any,
of the higher of (a) the Closing Price per share of Company's common stock on
the Executive's termination date or (b) the highest per share price actually
paid in connection with any Change of Control (such higher amount being
hereinafter referred to as "Fair Market Value") over the exercise price,
multiplied by the total number of shares of Company's common stock subject to
such option. Such payment shall be in consideration of a cancellation of any
rights which Executive may have in said stock options.
6. EMPLOYEE'S COMMITMENT. In consideration for the benefits accorded
Executive hereunder, Executive agrees that:
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(a) During the life of this agreement Executive will faithfully
perform his duties to the best of his ability and in accordance with the
directions of the Board, provided that after a Change in Control of the Company
such directions do not constitute good reason for Executive to terminate his
employment; and Executive will devote to the performance of his duties his full
working time, attention and energies;
(b) Executive will not at any time during the life of this Agreement,
or thereafter, communicate or disclose to any unauthorized person, or use for
his own account, without the written consent of the Company, any processes,
equipment or products of the Company or any subsidiary, or other information
concerning their business or affairs, suppliers or customers, it being
understood, however, that the obligations of this paragraph shall not apply to
the extent that the aforesaid matters become generally known to and available
for use by the public otherwise than by Executive's act or omission.
7. INVOLUNTARY TERMINATION. For purpose of this agreement, Executive's
employment with Company (including its subsidiaries) shall be deemed to have
been involuntarily terminated by Company if (a) Executive's employment is
terminated by Company for a reason other than for cause (which for purposes of
this Transition Agreement shall mean Executive's gross negligence, habitual
neglect or willful misconduct in performance of the duties and services required
of him pursuant to his employment offer or Executive's final conviction of a
felony or of a misdemeanor involving moral turpitude) or (b) Executive
terminates his employment with Company within sixty (60) days of the occurrence
of one or more of the following events: (i) a substantial adverse alteration in
the nature or status of Executive's responsibilities from those in effect
immediately prior to the Change in Control (other than any such alteration
primarily attributable to the fact that Company may no longer be a public
company); (ii) the assignment to Executive of any duties inconsistent with his
status as an executive officer of Company; (iii) a reduction by Company in
Executive's annual base salary as in effect on the date hereof or as the same
may be increased from time to time except for across-the-board salary reductions
similarly affecting all executives of Company and all executives of any person
in control of Company; (iv) Company's requiring Executive to be permanently
based anywhere other than the continental United States except for required
travel on Company's business to an extent substantially consistent with
Executive's present business travel obligations; (v) the failure by Company to
continue in effect compensation plans that, in the aggregate, provide Executive
with benefits not materially less favorable than those provided to Executive
immediately prior to the Change in Control under Company's pension, profit
sharing, bonus, incentive, life insurance, health, accident, disability and
other employee benefit plans, programs or arrangements (other than stock-based
compensation plans, programs or arrangements); or (vi) the taking of any action
by Company that would materially adversely affect the physical conditions
existing at the time of the Change in Control in or under which Executive
performs his employment duties; PROVIDED, HOWEVER, that a termination of
employment by Executive pursuant to clause (ii), (iii), (iv), (v) or (vi) of
this Section 7 shall not fail to constitute an involuntary termination within
the meaning of this Section 7 merely because the event set forth in any such
clause is primarily attributable to the fact that Company is no longer a public
company; and PROVIDED, FURTHER, that for purposes of this subsection (b), any
good faith determination of an event described in clauses (i)-(vi) made by the
Executive shall be
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conclusive; or (c) Executive's employment is terminated by the Company for a
reason other than for cause in anticipation of a Change in Control or at the
request of a third party seeking to cause a Change in Control.
8. OTHER AGREEMENTS. Upon a Change in Control, the provisions of
Executive's Confidentiality, Noncompetition And Nonsolicitation Agreement shall
not be construed to prohibit Executive from seeking or continuing employment
with any third person who may acquire 50% or more of the outstanding common
shares of the Company nor shall the provisions of Section 1 (Noncompetition) be
enforced by the Company.
9. DEFINITION OF CHANGE OF CONTROL. A "Change in Control" shall mean
any of the following events:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (1), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any acquisition
by the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by an corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) below; or
(b) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case, unless
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners of the outstanding
Company voting securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of
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the Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions their ownership, immediately prior to such
Business Combination of the outstanding Company voting securities, (ii) no
Person (excluding any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 50% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existing prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the action of
the Board, providing for such Business Combination.
10. RELATION TO OTHER BENEFIT PLANS. Except for the specific references
above to the existing employment arrangements between Executive and Company,
nothing in this Transition Agreement shall be deemed to alter or be in lieu of
any entitlements due Executive under the benefit plan or policies of Company in
existence on the date hereof. In the event any benefit plan or policy of
Company shall provide for earlier vesting or payment to Executive (e.g., stock
options, stock appreciation rights or stock grants) than set forth herein then
the terms of the plan or policy shall govern.
11. SUCCESSORS. This Transition Agreement shall be binding upon and inure
to the benefit of the Executive and his estate, and the Company and its
successors or assigns, but neither this Transition Agreement nor any rights
arising hereunder may be assigned or pledged by the Executive.
12. REDUCTION IN PAYMENTS
(a) For purposes of this section, (i) "Payment" shall mean any
payment or distribution in the nature of compensation to or for the benefit of
Executive, whether paid or payable pursuant to this Transition Agreement or
otherwise; (ii) "Agreement Payment" shall mean a Payment paid or payable
pursuant to this Transition Agreement (disregarding this Section); (iii) "Net
After Tax Receipt" shall mean the Present Value of a Payment net of all taxes
imposed on Executive with respect thereto under Sections 1 and 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), determined by applying
the highest marginal rate under Section 1 of the Code which applied to the
Executive's taxable income for the immediately preceding taxable year; (iv)
"Present Value" shall mean such value determined in accordance with Section 280G
(d)(4) of the Code; and (v) "Safe Harbor" shall mean the sum of $1.00 less than
three times the Executive's "base amount" within the meaning of that term in
Section 280G of the Code.
(b) Anything in this Transition Agreement to the contrary
notwithstanding, in the event KPMG Peat Marwick LLP (the "Accounting Firm")
shall determine that receipt of all Payments would subject Executive to tax
under Section 4999 of the Code, it shall determine whether the receipt of the
Safe Harbor would result in greater Net After Tax Receipts to the Executive
than receipt of all the Agreement Payments. If said firm determines that the
receipt of
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the Safe Harbor would so result, the aggregate Agreement Payments shall be
reduced to the Safe Harbor.
If the Accounting firm determines that aggregate Agreement Payments
should be reduced to the Safe Harbor, the Company shall promptly give Executive
notice to that effect and a copy of the detailed calculation thereof, and the
Executive may then elect, in his sole discretion, which and how much of the
Agreement Payments shall be eliminated or reduced (as long as after such
election the present value of the aggregate Agreement Payments equals the Safe
Harbor), and shall advise the Company in writing of his election within ten days
of his receipt of notice. If no such election is made by the Executive within
such ten-day period, the Company may elect which of such Agreement Payments
shall be eliminated or reduced (as long as after such election the present value
of the aggregate Agreement Payments equals the Safe Harbor) and shall notify the
Executive promptly of such election. All determinations made by the Accounting
Firm under this Section shall be binding upon Company and Executive and shall be
made within 60 days of a termination of employment of the Executive. As
promptly as practicable following such determination, the Company shall pay to
or distribute for the benefit of Executive such Agreement Payments as are then
due to Executive under this Transition Agreement and shall promptly pay to or
distribute for the benefit of Executive in the future such Agreement Payments as
become due to Executive under this Transition Agreement.
(c) While it is the intention of the Company and the Executive to
reduce the amounts payable or distributable to Executive hereunder only if the
aggregate Net After Tax Receipts to Executive would thereby be increased, as a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that amounts will not have been paid or distributed by the Company to
or for the benefit of Executive pursuant to this Transition Agreement which
should not have been so paid or distributed ("Overpayment") or that additional
amounts which will have not been paid or distributed by the Company to or for
the benefit of Executive pursuant to this Transition Agreement could have been
so paid or distributed ("Underpayment"), in each case, consistent with the
calculation of the Reduced Amount hereunder. In the event that the Accounting
Firm, based either upon the assertion of a deficiency by the Internal Revenue
Service against the Company or Executive which the Accounting Firm believes has
a high probability of success determines that an Overpayment has been made, any
such Overpayment paid or distributed by the Company to or for the benefit of
Executive shall be treated for all purposes as a loan to Executive which
Executive shall repay to the Company together with interest at the applicable
federal rate provided for in Section 7872 (f) (2) of the Code; provided,
however, that no such loan shall be deemed to have been made and no amount shall
be payable by Executive to the Company if and to the extent such deemed loan and
payment would not either reduce the amount on which the Executive is subject to
tax under Section 1 and Section 4999 of the Code or generate a refund of such
taxes. In the event that the Accounting Firm, based upon controlling precedent
or substantial authority, determines than an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive together with interest at the applicable federal rate provided for in
Section 7872 of the Code.
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13. REIMBURSEMENT. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses (up to a maximum amount of
$75,000) which the Executive may reasonably incur as a result of any content
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Transition Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any payment pursuant
to this Transition Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872 of the Code.
14. MISCELLANEOUS. No provision of this Transition Agreement may be
modified, waived or discharged except in writing specifically referring to such
provision and signed by an officer of the Company specially designated by the
Board of Directors of the Company. No waiver at any time by either party hereto
of the breach of any condition or provision of this Transition Agreement, or of
compliance by the other party with the same, shall be deemed a waiver of any
other condition or provision at the same or at any other time. No agreement or
representation, oral or otherwise, express or implied, with respect to the
subject matter hereof has been made by either party other than those set forth
expressly in this Transition Agreement. The validity, interpretation,
construction and performance of this Transition Agreement shall be governed by
the laws of the State of Washington.
15. ARBITRATION. Any dispute or controversy arising under or in
connection with this Transition Agreement shall be settled exclusively by
arbitration in King County, Washington by one arbitrator in accordance with the
rules of the American Arbitration Association then in effect. Pending the
resolution of such dispute or controversy, the Company will continue to pay
Executive his full base salary in effect when the notice giving rise to the
dispute was given and continue Executive as a participant in all thrift,
incentive, compensation, pension, life insurance, health and accident or
disability plans in which Executive was participating when the notice giving
rise to the dispute was given. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided, however, that (a) Executive
shall be entitled to seek specific performance of his right to be paid until the
Date of Termination during the pendency of any dispute or controversy arising
under or in connection with this Transition Agreement and (b) in the event the
Arbitrator confirms Executive's termination as not being a Covered Termination,
the Executive agrees to promptly return the after-tax cash payments received by
Executive pursuant to this section.
IN WITNESS WHEREOF, the parties have executed this Transition Agreement as
of the day and year first above written.
OMEGA ENVIRONMENTAL, INC. EXECUTIVE
By: /s/ Xxx X. Xxxxxxxxxxx /s/ Xxxxx X. Xxxxxxx
----------------------- -------------------------
Its: CFO Xxxxx X. Xxxxxxx
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