RELEASE AND CONSULTING AGREEMENT
AGREEMENT dated as of November 22, 2000 between Xxxxx X. Xxxxxxxxx
residing at 000 Xxxxxxxx Xxxx, Xxxxxx Xxxxxx Xxxxx, XX 00000 (the "Executive")
and MascoTech, Inc., a Delaware corporation with its principal place of business
at 00000 Xxx Xxxx Xxxx, Xxxxxx, Xxxxxxxx 00000 (the "Company").
A. The Executive is presently the Vice Chairman and Chief Executive
Officer of the Company.
B. The Company has entered into an agreement with an affiliate of
Heartland Industrial Partners that will result, subject to approval of Company
shareholders, in MascoTech becoming a private company (the "Transaction").
C. The Executive has advised the Board of Directors of the Company that
he intends to resign his position to pursue other opportunities, including a
continuing relationship with the Company's affiliate, Masco Corporation. The
Executive, at the request of the Company, has agreed to provide consulting
services to the Company through December 31, 2003, on the terms and conditions
provided herein.
D. The Executive and the Company desire to memorialize the terms and
conditions of their agreement.
NOW, THEREFORE, in consideration of the foregoing and of the promises
and mutual covenants contained herein, it is hereby agreed between the Executive
and the Company as follows:
1. Effectiveness of Agreement. This Agreement will become effective
upon the earlier of (i) the closing of the Transaction, or (ii) December 20,
2000 (the "Effective Date").
2. Consulting Services. (a) The consulting relationship shall commence
on the day immediately following the Effective Date and ending on December 31,
2003 (the "Consulting Period"). During the Consulting Period, the Company shall
retain the Executive as a consultant, and the Executive shall perform and
discharge well and faithfully for the Company and its subsidiaries, such
consulting services as may be requested from time to time by the Board of
Directors of the Company. Notwithstanding the foregoing, it is understood and
agreed that the Executive will be engaging in other activities unrelated to the
Company and any request by the Company for services by the Executive will give
due consideration to the Executive's other commitments.
(b) It is agreed that during the Consulting Period the Executive
shall be an independent contractor, shall not be an employee, servant, agent,
partner or joint venturer of the Company or any of its subsidiaries, officers,
directors or employees, and shall have no authority to assume or create any
obligation or liability, express or implied, on behalf of the Company or its
subsidiaries, or in its or their name or to bind them in any manner
whatsoever; provided, however, that to the extent payments pursuant to paragraph
3 are made to the Executive with no payment by the Employer of the Employer's
portion of social security taxes, the Company shall increase the payments under
paragraph 3 by an amount, equal to one-half of Executive's self-employment tax
on a fully grossed-up basis.
3. Consulting Fees. (a) In full satisfaction for any and all services
rendered and covenants made by the Executive hereunder, and in full payment for
the covenant of Executive set forth in Section 6 below, the Company shall pay
the Executive $1,500,000, payable in three equal installments of $500,000 each
on January 4, 2001, January 4, 2002 and January 4, 2003. If after the Effective
Date the Executive dies or becomes disabled, then all consulting payments
hereunder scheduled for payment on or following the date of death or the date of
disability shall cease and any obligation to provide Employment or Consulting
Services thereafter shall cease. For the purposes of this Agreement, the date of
disability is the date the Executive first perfects his eligibility (or the date
he would have first perfected such eligibility, but for his termination of
employment with the Company or his loss of coverage under the Company's long
term disability program) for extended long term disability benefits requiring
him to be unable to perform any gainful occupation pursuant to the Company's
long term disability program.
(b) If at anytime after the Transaction closes and during the
Consulting Period there occurs a subsequent Change in Control, then promptly
following such Change in Control the Company (or its successors or assigns)
shall pay to the Executive in a single lump sum the present value (utilizing an
8% discount factor compounded annually) of all the cash payments then not yet
paid pursuant to paragraph 3(a), and all other provisions of this Agreement
shall thereupon continue in full force and effect. For the purposes hereof,
"Change in Control" means the occurrence, following the date of the Transaction,
of an event as a result of which a "person" or "group of persons", as such terms
are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, who are not affiliated with or are not controlled by Heartland
Industrial Partners, L.P., directly or indirectly are the "beneficial owners"
(as defined in Rule 13d-3 under the Exchange Act) or have the right to acquire
such beneficial ownership (whether or not such right is exercisable immediately,
with the passage of time or subject to any condition) of voting securities
representing 50% or more of the combined voting power of all outstanding voting
securities of the Company.
(c) The Executive acknowledges that his employment will terminate
as of the Effective Date and he will cease to be an active participant under the
benefit plans of the Company on such date pursuant to the terms of the
applicable benefit plans, and no additional Company-provided benefits shall
accrue to him after such date, other than salary earned through the Effective
Date which has not yet been paid. Nothing contained herein shall restrict the
Executive's receipt of benefits under the Company's employee fringe benefit
programs accrued during the Executive's employment with the Company.
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4. Options and Awards. All of the restricted stock awards and options
heretofore granted to the Executive under the Company's restricted stock award
and option plans will be treated in the same manner as the awards and options of
other employees of the Company in the Transaction who continue as employees of
the Company.
5. Gross-Up. In the event that, as a result of the payment to the
Executive under paragraph 3 hereof and/or the vesting of stock awards or options
in connection with the Transaction, Executive becomes subject to excise tax (the
"Excise Tax") under Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), the Company shall pay to Executive as an additional
payment an amount (the "Gross-Up Payment") equal to an amount which, after
payment by Executive of all taxes (including any federal, state and local income
tax and excise tax upon such amount) would allow the Executive to retain an
amount equal to the Excise Tax, unless, if the reduction of the payments under
paragraph 3(a) to Executive by no more than 5% would avoid the imposition of
Excise Tax, then the Company shall so reduce such payments to Executive and no
Gross-Up Payment will be made.
For purposes of determining whether Executive will be subject to the
Excise Tax and the amount of such Excise Tax, the following criteria shall
apply:
(a) All determinations required to be made under this Section 5 shall
be made by the Company's independent auditors (the "Accounting Firm"), which
shall provide detailed supporting calculations to both the Company and Executive
within 15 business days after the Effective Date or such earlier time as is
requested by the Company provided that any determination that an Excise Tax is
payable by Executive shall be made on the basis of substantial authority. If the
Accounting Firm determines that no Excise Tax is payable by Executive, it shall
furnish Executive with a written opinion that Executive has substantial
authority not to record any Excise Tax on his federal income tax return. Any
determination by the Accounting Firm meeting the requirements of this Section
5(a) shall, subject to possible adjustment as set forth in Section 5(c) below,
be binding upon the Company and Executive.
(b) The value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Accounting Firm in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, Executive shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of Executive's residence on the date on which the Excise Tax is
incurred, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes.
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(c) In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder, Executive shall repay to the
Company, at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to such reduction
(plus that portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state, and local income tax deduction) plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional payment in respect of such excess at the time that the amount
of such excess finally is determined. In the case of any payment that the
Company is required to make to Executive pursuant to the preceding sentence (a
"Later Payment"), the Company shall also pay to Executive an additional amount
such that after payment by Executive of all of Executive's applicable federal,
state and local taxes, including any interest and penalties assessed by any
taxing authority, on such additional amount, Executive will retain an amount
equal to the total of Executive's applicable federal, state and local taxes,
including any interest and penalties assessed by any taxing authority, arising
due to the Later Payment. Executive and the Company each shall reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax.
Notwithstanding any provision of this Agreement to the contrary,
Executive shall pay his ordinary federal, state and local income taxes to which
he is subject as a result of the Transaction (including but not limited to the
accelerated vesting of stock options).
6. Non-Competition; Non-Solicitation; Confidentiality. (a) Executive
acknowledges and recognizes the highly competitive nature of the business of the
Company and accordingly agrees that, in consideration of this Agreement, the
rights conferred hereunder, and the payments hereunder, during the Non-Compete
Term, Executive will not engage, either directly or indirectly, as an employee,
consultant or independent contractor, or as a principal for his own account or
jointly with others, or as a stockholder in any corporation or joint stock
association which designs, develops, manufactures, distributes, sells or markets
the type of products or services sold, distributed or provided by the Company or
its subsidiaries during the two year period prior to the Effective Date (the
"Business"); provided, that nothing herein shall prevent Executive from owning,
directly or indirectly, not more than 5% of the outstanding shares of, or any
other equity interest in, any entity engaged in the Business and listed or
traded on a national securities exchanges or in an over-the-counter securities
market.
(b) During the period from the date of this Agreement until December
31, 2003 ("Non-Compete Term"), Executive will not (i) directly or indirectly
employ or solicit, or receive or accept the performance of services by, any
active employee of the Company or any of its subsidiaries who is employed
primarily in connection with the Business, except in connection with general,
non-targeted recruitment efforts such as advertisements and job listings or (ii)
solicit for business (relating to the Business) any person who is a customer or
former customer of the Company or any of its subsidiaries,
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unless such person shall have ceased to have been such a customer for a period
of at least six months.
(c) Executive will not at any time disclose or use for his own benefit
or purposes or the benefit or purposes of any other person, firm, partnership,
joint venture, association, corporation or other business organization, entity
or enterprise other than the Company and any of its subsidiaries, any trade
secrets, information, data, or other confidential information relating to
customers, development programs, costs, marketing, trading, investment, sales
activities, promotion, credit and financial data, financing methods, plans, or
the business and affairs of the Company generally, or of any subsidiary of the
Company, unless required to do so by applicable law or court order, subpoena or
decree or otherwise required by law, with reasonable evidence of such
determination promptly provided to the Company. The preceding sentence of this
sub-clause (c) shall not apply to information which is not unique to the Company
or which is generally known to the industry or the public other than as a result
of Executive's breach of this covenant. Executive agrees that within 10 days
after the Effective Date, he will return to the Company immediately all
memoranda, books, papers, plans, information, letters and other data, and all
copies thereof or therefrom, in any way relating to the business of the Company
and its subsidiaries, except that he may retain personal notes, notebooks and
diaries. Executive further agrees that he will not retain or use for his account
at any time any trade names, trademark or other proprietary business designation
used or owned in connection with the business of the Company or its
subsidiaries.
(d) It is expressly understood and agreed that although Executive and
the Company consider the restrictions contained in this Section 6 to be
reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in
this Agreement is an unenforceable restriction against Executive, the provisions
of this Agreement shall not be rendered void but shall be deemed amended to
apply as to such maximum time and territory and to such maximum extent as such
court may judicially determine or indicate to be enforceable. Alternatively, if
any tribunal of competent jurisdiction finds that any restriction contained in
this Agreement is unenforceable, and such restriction cannot be amended so as to
make it enforceable, such finding shall not affect the enforceability of any of
the other restrictions contained herein.
7. Remedies. Executive acknowledges and agrees that the Company's
remedies at law for a breach or threatened breach of any of the provisions of
Section 6 would be inadequate and, in recognition of this fact, Executive agrees
that, in the event of such a breach or threatened breach, in addition to any
remedies at law, the Company, without posting any bond, shall be entitled to
seek equitable relief in the form of specific performance, temporary restraining
order, temporary or permanent injunction or any other equitable remedy which may
then be available.
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8. No Disparagement. Executive agrees not to criticize, disparage or
otherwise demean in any way the Company, any of its subsidiaries or their
respective products, officers, directors or employees. Likewise, the Company
agrees not to criticize, discourage or otherwise demean in any way the
Executive.
9. RELEASE. IN CONSIDERATION OF THE PAYMENTS TO BE MADE AND BENEFITS
PROVIDED BY THE COMPANY AND OTHER AGREEMENTS HEREUNDER, EXECUTIVE ON EXECUTIVE'S
OWN BEHALF AND ON BEHALF OF EXECUTIVE'S HEIRS, EXECUTORS, AGENTS, SUCCESSORS AND
ASSIGNS, RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS SUBSIDIARIES AND
THEIR RESPECTIVE OFFICERS, AGENTS, CURRENT AND FORMER EMPLOYEES, SUCCESSORS,
PREDECESSORS AND ASSIGNS AND ANY OTHER PERSON, FIRM, CORPORATION OR LEGAL ENTITY
IN ANY WAY RELATED TO THE COMPANY AND ITS SUBSIDIARIES (THE "RELEASED PARTIES"),
OF AND FROM ALL CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, STATUTORY RIGHTS,
DUTIES, DEBTS, SUMS OF MONEY, SUITS, RECKONINGS, CONTRACTS, AGREEMENTS,
CONTROVERSIES, PROMISES, DAMAGES, OBLIGATIONS, RESPONSIBILITIES, LIABILITIES AND
ACCOUNTS OF WHATSOEVER KIND, NATURE OR DESCRIPTION, DIRECT OR INDIRECT, IN LAW
OR IN EQUITY, IN CONTRACT OR IN TORT OR OTHERWISE, WHICH EXECUTIVE EVER HAD OR
WHICH EXECUTIVE NOW HAS OR HEREAFTER CAN, SHALL OR MAY HAVE, AGAINST ANY OF THE
RELEASED PARTIES, FOR OR BY REASON OF ANY MATTER, CAUSE, OR THING WHATSOEVER UP
TO THE PRESENT TIME, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED AT THE
PRESENT TIME, OR WHICH MAY BE BASED UPON PRE-EXISTING ACTS, CLAIMS OR EVENTS
OCCURRING AT ANY TIME UP TO THE DATE HEREOF WHICH MAY RESULT IN FUTURE DAMAGES,
INCLUDING WITHOUT LIMITATION ALL DIRECT OR INDIRECT CLAIMS EITHER FROM DIRECT OR
CONSEQUENTIAL DAMAGES OF ANY KIND WHATSOEVER AND RIGHTS OR CLAIMS ARISING UNDER
TITLE VII, ANY STATE CIVIL-RIGHTS LEGISLATION, CLAIMS OF HANDICAP
DISCRIMINATION, CLAIMS RELATING TO THE TERMINATION OF EMPLOYMENT AS REFERRED TO
HEREIN, AND CLAIMS OF AGE DISCRIMINATION UNDER THE AGE DISCRIMINATION IN
EMPLOYMENT ACT OF 1967, AS AMENDED ("ADEA"), AGAINST ANY OF THE RELEASED
PARTIES, OTHER THAN (A) CLAIMS ARISING UNDER THE EXPRESS PROVISIONS OF THIS
AGREEMENT, AND (B) THE RIGHT TO RECEIVE BENEFITS, IF ANY, ACCRUED THROUGH THE
EFFECTIVE DATE UNDER THE COMPANY'S BENEFIT PLANS. THE EXECUTIVE AGREES NOT TO
XXX OR TO FILE ANY LAWSUITS AGAINST ANY RELEASED PARTY WITH RESPECT TO CLAIMS
COVERED BY THIS RELEASE.
10. Notices. Any notice required or permitted to be given under this
Agreement shall be deemed properly given if in writing and delivered by hand and
receipt is acknowledged by the party to whom said notice shall be directed, or
if mailed by certified or registered mail, postage prepaid with return receipt
requested, or sent by express courier service, charges prepaid by shipper, to
the addresses of each party stated above (or to such other address as a party is
directed pursuant to written notice from the other party) and in the case of
notices to the Company, to the attention of its Vice President - General
Counsel, at 00000 Xxx Xxxx Xxxx, Xxxxxx, Xxxxxxxx 00000.
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11. Assignment. This Agreement shall not be assignable by either party.
Notwithstanding the foregoing, the Company shall assign this Agreement to any
successor to substantially all of the stock, assets or business of the Company
and any such successor must assume in writing all of the obligations of the
Company under this Agreement.
12. Acceptance and Revocation. Pursuant to provisions of ADEA, the
Executive has been given at least 21 days from the date this Agreement was first
communicated to the Executive to review and sign this Agreement.
The Executive understands he may revoke his acceptance of this
Agreement within seven calendar days after the date of the Executive's signature
set forth below. This Agreement will not be effective until the seven-day
revocation period has expired. The Executive understands that to be effective
any such revocation must be in writing, signed by the Executive and hand
delivered or post-marked within such seven-day period addressed to the Vice
President - General Counsel, MascoTech, Inc., 00000 Xxx Xxxx Xxxx, Xxxxxx,
Xxxxxxxx 00000. If revocation is by mail, certified mail return receipt
requested is recommended to show proof of mailing.
13. Mediation/Arbitration. The parties hereto agree that pursuant to
the Company's Corporate Dispute Resolution Policy (the "CDRP"), mediation, and,
if unsuccessful, arbitration, will apply to the employment and consulting
relationship hereunder and will be the sole and exclusive remedies for any
claims which may arise between the parties (other than allegations by the
Company of breach of Sections 6 or 8) in any way relating to this Agreement or
for the breach thereof to the extent such claims are covered by the CDRP, and
the Executive agrees not to pursue any such claims through a court or a jury.
The Executive hereby acknowledges that he has had an opportunity to review the
CDRP, and agrees that all proceedings held in accordance with the CDRP will be
conducted in the Detroit, Michigan metropolitan area. Notwithstanding the
foregoing, any determinations of whether or not the Executive is disabled shall
be made in the first instance by the Committee established under the MascoTech,
Inc. Key Employee Retention Plan.
14. Entire Agreement. This instrument contains the entire agreement of
the parties relating to the subject matter hereof, supersedes and replaces in
its entirety any existing employment agreement or consulting agreement of the
Executive and may not be waived, changed, modified, extended or discharged
orally but only by agreement in writing signed by the party against whom
enforcement of any such waiver, change, modification, extension or discharge is
sought. The waiver by the Company of a breach of any provision of this Agreement
by the Executive shall not operate or be construed as a waiver of a breach of
any other provision or of any subsequent breach by the Executive.
15. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan.
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16. Attorney Fees. In the event of a dispute by the Company, Executive
or others as to the validity or enforceability of, or liability under, any (i)
provision of this Agreement, the Company shall reimburse Executive for all
reasonable legal fees and expenses incurred by him in connection with such
dispute if Executive substantially prevails in the dispute and (ii) if Executive
has not substantially prevailed in such dispute as set forth in (i), one-half
the amount of all reasonable legal fees and expenses incurred by him in
connection with such dispute except to the extent Executive's position is found
by a tribunal of competent jurisdiction to have been frivolous.
17. Headings. The headings of the Sections are for convenience only and
shall not control or affect the meaning or construction or limit the scope of
intent of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first above written.
MASCOTECH, INC.
By /s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
Its Chairman
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Date: November 22, 2000 /s/ Xxxxx X. Xxxxxxxxx
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Xxxxx X. Xxxxxxxxx
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