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Exhibit B
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AMENDED EMPLOYMENT AGREEMENT
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AGREEMENT made this 13th day of January, 1992 between Sudbury, Inc.,
a Delaware corporation with its principal office at 00000 Xxxxxxx Xxxx Xxxxx,
Xxxxx 000, Xxxxxxxxx, Xxxx 00000 (the "Company"), and Xxxxxxx X. Xxxxxx, whose
residential address is 0000 Xxxxxxx Xxxx Xxxx, Xxxxx, Xxxx 00000 ("Sardas"),
as amended as of April 16, 1992.
RECITALS
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The Company is a holding company with subsidiaries engaged in the
manufacture and sale of a broad range of industrial products, including metal,
rubber and plastic products, coating applications, solid waste disposal and
material handling equipment, special machine tools and systems, lubricants, and
precision machined components.
Shortly prior to the execution of this Agreement, the Company intends
to file a voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code. The Company intends to continue to operate its business and
manage its properties as a debtor-in-possession during its bankruptcy
proceedings, to implement an aggressive asset disposition program and to
improve operations of retained assets.
The Company desires to employ and utilize the experience, ability and
services of Sardas as its president and Chief Executive Officer, and Sardas
desires to be so employed.
The parties agree as follows:
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1. Employment
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The Company agrees to employ Sardas, and Sardas agrees to be so
employed, in the capacity of President and Chief Executive Officer, with such
duties and authority as are customary for such offices. Employment shall be
for a four-year term, commencing January 13, 1992 and ending on the earlier of
the consummation and closing of an Exit Transaction, as defined in Paragraph 3
herein, or January 12, 1996. In addition, Sardas shall be elected as a
Director of the Company and serve as a member of the Company's Executive
Committee, and shall so serve for the designated term of the directorship to
which he is elected, or until his earlier resignation or termination of
employment hereunder.
2. Time and Efforts
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Sardas shall diligently and conscientiously devote his full
business time and attention and best efforts in discharging his duties as the
Company's President and Chief Executive Officer. It is understood that Sardas
may serve as a director of one or more other business entities upon consent by
the Company's Board of Directors.
3. Compensation
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(a) CASH COMPENSATION. The Company shall pay to Sardas a base
salary at a rate of $360,000 per year, subject to withholding tax,
payable at the same times as payments to other salaried corporate
employees. Such salary may be increased from time to time at the
discretion of the Board of Directors, in conjunction with salary
adjustments of others in the Company's corporate management group.
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(b) BONUSES. The Company shall pay to Sardas in a lump sum
payment within ninety (90) calendar days following the end of each
fiscal year of employment after fiscal year 1992, an annual target
bonus of fifty percent (50%) of his base salary for each year during
the term of his employment. Each such payment shall be conditioned
on Sardas' being employed at the time of payment, provided that in
the event that Sardas' employment is terminated by reason of his
death or disability, prior to payment but after such bonus is fully
earned, such payment shall be made to Sardas or his estate, as the
case may be. Achievement of the full amount of such bonus will
depend on Sardas' performance with respect to corporate goals and
objectives, as set by the Board of Directors after consultation with
Sardas no later than August 31st of each fiscal year. With respect
to the portion of fiscal year 1992 during which Sardas will be
employed, he shall receive a bonus of $90,000, payable on August 31,
1992.
(c) EQUITY. Sardas shall be entitled to receive common equity
of the Company pursuant to options for New Common Stock to be granted
on the terms herein, and as further reflected in an option agreement
in the form attached hereto as Exhibit A executed and delivered by
the Company and Sardas on the "Discharge Date," as defined below.
"New Common Stock" identifies the common stock that shall be issued
upon the Company's discharge from the bankruptcy proceeding (the
"Discharge Date") to current equity holders, certain debt holders,
and others, and shall represent all of the comnon equity of the
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Company as of the Discharge Date. As part of its plan of
reorganization to be filed with the Bankruptcy Court, the Company
shall allocate and reserve fifteen percent (15%) of its New Common
Stock to provide Sardas options as follows:
(i) The Company shall grant to Sardas on the Discharge Date
options for fifteen percent (15%) of the Company's New Common
Stock, which shall vest on the following schedule, provided that
Sardas continues to be employed by the Company on each such date:
(A) options for five percent (5%) of the New Common
Stock upon the Discharge Date; and
(B) options for an additional ten percent (10%) of the
New Common Stock upon the later of the Discharge Date, or six
(6) months from the date of this Agreement.
(ii) Such options shall have an exercise price of $.01 per
share of New Common Stock and shall have terms of five (5) years
from the Discharge Date.
(iii) None of such options shall be exercisabie prior to six
(6) months after the Discharge Date and such options shall be
nontransferrable. Furthermore, half of the options described
under clause (i) (B) herein (the "Last Options") covering five
percent (5%) of the New Common Stock shall become exercisable in
incremental amounts of one percent (1%) on the Valuation Date as
defined in clause (iv) below, if the "Fair Market Value" of the
Company, as defined in clause (v) below, then meets or exceeds
values indicated in the following schedule:
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FAIR MARKET ADDITIONAL STOCK
VALUE LEVEL OPTION EXERCISABLE
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More than $15 million and up to $20 million 1%
More than $20 million and up to $25 million 1%
More than $25 million and up to $30 million 1%
More than $30 million and up to $35 million 1%
More than $35 million 1%
(iv) The "Valuation Date" shall be the earlier of (A) the
consummation and closing of a transaction involving the sale or
disposition of substantially all of the then remaining assets or
substantially all of the New Common Stock of the Company (whether
by sale, merger, public offering by the then holders of New
Common Stock, leveraged buy out, or other similar transaction)
(an "Exit Transaction"), or (B) January 12, 1996; provided that
solely for purposes of determining whether the Last Options are
exercisable, Sardas shall have one opportunity at any time during
the term of his employment, to require the Company to engage an
investment banking firm or appraiser to determine whether the
Targeted Amount has been achieved and sustained for a period of
at least six months, in which event such Last Options will become
exercisable at the end of such six month period.
(v) The "Fair Market Value" of the Company shall be deemed
to be (A) the total value and/or consideration received
(including debt then assumed or being paid off) by the then
holders of New Common Stock in the event of an Exit Transaction;
or (B) the appraised value of the Company as determined by an
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investment banking firm or appraiser mutually acceptable to the
Board of Directors and Sardas in the event that no Exit
Transaction occurs by January 12, 1996.
(d) CASH OVERRIDE. In the event that the Fair Market Value of
the Company as of the Valuation Date exceeds the Targeted Amount, the
Company shall pay to Sardas within sixty calendar days after the
Valuation Date a cash amount equal to five percent (5%) of any
incremental net fair market value in excess of $35 million.
4. Benefits
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Sardas shall be entitled to benefits and perquisites generally
provided by the Company to its executive officers and such benefits and
perquisites as are recommended by the Compensation Committee and approved by
the Board of Directors.
5. Payment Upon Termination
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(a) In the event of voluntary resignation by Sardas or
termination by the Company for "Cause" prior to January 12, 1996,
Sardas shall receive no severance pay or additional compensation
other than the fixed compensation and benefits earned and accrued as
of such termination date pursuant to Paragraphs 3 and 4 herein. For
the purposes of this Agreement, the Company shall have "Cause" to
terminate employment hereunder only (i) if termination shall have
been the result of an act or acts of dishonesty by Sardas constitu-
ting a felony and resulting or intended to result directly or
indirectly in substantial gain or personal enrichment at the expense
of the Company; or (ii) upon the willful and continued failure by
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Sardas substantially to perform his duties with the Company (other
than any such failure resulting from incapacity due to mental or
physical illness) after a demand in writing for substantial
performance is delivered by the Board, which demand specifically
identifies the manner in which the Board believes that Sardas has not
substantially performed his duties, and such failure results in
demonstrably material injury to the Company. Sardas' employment
shall in no event be considered to have been terminated by the
Company for Cause if such termination took place as the result of (i)
bad judgment or negligence, or (ii) any act or omission without
intent of gaining therefrom directly or indirectly a profit to which
Sardas was not legally entitled, or (iii) any act or omission
believed in good faith to have been in or not opposed to the interest
of the Company, or (iv) any act or omission in respect of which a
determination be made that Sardas met the applicable standard of
conduct prescribed for indemnification or reimbursement or payment of
expenses under the by-laws of the Company or the laws of the State of
Delaware, in each case as in effect at the time of such act or
omission. Sardas shall not be deemed to have been terminated for
Cause unless and until there shall have been delivered to him a copy
of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of
the Board called and held for the purpose (after reasonable notice to
Sardas and an opportunity for him, together with his counsel, to be
heard before the Board), finding that in the good faith opinion of
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the Board Sardas was guilty of conduct set forth above in clauses (i)
or (ii) of the second sentence of this paragraph and specifying the
particulars thereof in detail.
(b) In the event of termination without "Cause" by the Company
prior to January 10, 1994, the Company shall pay to Sardas in two
annual installments in advance, a total of two (2) years of base
salary as severance pay.
(c) In the event of termination without "Cause" by the Company
on or after January 10, 1994, the Company shall pay to Sardas his
base salary at the rate in effect as of such termination date for the
remainder of the term of this Agreement. Payments shall be made in
annual lump sums in advance of each remaining year of the Agreement.
(d) In the event of death or permanent disability during the
term of this Agreement, this Agreement shall terminate and Sardas (or
his personal or legal representative) shall receive no severance pay
or additional compensation other than the fixed compensation and
benefits earned and accrued as of the date of such death or
termination for permanent disability, including any bonus due under
Paragraph 3(b) hereunder. Termination for permanent disability shall
occur on such date and in such circumstance that, as a result of his
incapacity due to physical or mental illness, Sardas were to have
been absent from his duty with the Company on a full-time basis for a
period of six (6) consecutive months, provided that the Company had
given Sardas thirty (30) days written notice of potential
termination, and within said thirty (30) day period after written
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notice of termination had been given, Sardas had not returned to the
full-time performance of his duties.
(e) In the event Sardas' employment is terminated by the
Company for "Cause," for reasons of Sardas' death or disability or
voluntarily by Sardas, the Company shall pay to Sardas in
cancellation of the options the appraised value of the shares
underlying the options held by Sardas and then exercisable, less
the exercise price thereof, as determined by an investment banking
firm or appraiser mutually acceptable to the Board of Directors
and Sardas.
6. Business Expenses
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The Company shall reimburse Sardas for all reasonable and
necessary expenses incurred in carrying out his duties under this Agreement.
Sardas shall present to the Company from time to time itemized accounts of
such expenses in the usual form required by the Company.
7. Indemnification
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Sardas shall be covered by the Company's indemnification policies
for Directors and Officers and shall be offered an indemnification agreement
in the form as may from time to time be in effect with other Directors and
Officers of the Company.
8. Confidentiality
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Sardas agrees to be bound by the Company's confidentiality
policy, a copy of which is attached hereto.
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9. Arbitration
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Any controversy or claim arising out of, or relating to, this
Agreement or the breach thereof shall be settled by a three-member arbitration
panel (one member selected by the Company, one member by Sardas and one member
selected by the other two members, or if not by a court of competent
jurisdiction), in accordance with the governing rules of the American
Arbitration Association. During the pendency of the Company's Chapter 11
proceedings, arbitration decisions may be appealed to the Bankruptcy Court.
In all other instances, judgment upon the award rendered shall be final and
may be entered in any court of competent jurisdiction in Cleveland, Ohio.
10. Successors; Binding Agreement
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(a) In the event of an Exit Transaction, the Company shall require
any successor by agreement in form and substance reasonably satisfactory
to Sardas, to expressly assume and agree to perform only such obligations
of this Agreement as are due and owing to Sardas as of the date of
consummation and closing of such Exit Transaction, including but not
limited to unpaid salary payments, cash override compensation,
reimbursable expenses, and accrued benefits.
(b) This Agreement and all rights of Sardas hereunder shall inure to
the benefit of, and be enforceable by Sardas' personal or legal
representatives.
11. Modifications and Waivers
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No provisions of this Agreement may be modified or discharged unless
such modification or discharge is authorized by the Board and is agreed to in
writing, signed by Sardas and by another executive officer of the Company. No
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waiver by either party hereto of any breach by the other party hereto or any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
12. Entire Agreement
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This Agreement constitutes the entire agreement of the parties
hereto relating to the subject matter hereof and there are no written or oral
terms or representations made by either party other than those contained
herein.
13. Governing Law
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The validity, interpretation, construction, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Ohio.
14. Invalidity
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The invalidity or unenforceability of any term or terms of this
Agreement shall not invalidate, make unenforceable or otherwise affect any
other term of this Agreement which shall remain in full force and effect.
15. Court Approval
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Promptly after the filing of its petition for relief under Chapter
11 of the Bankruptcy Code, the Company shall apply for the Bankruptcy Court's
approval of the Company's assumption of this Agreement. The effectiveness of
this Agreement is conditioned upon such approval.
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IN WITNESS WHEREOF the parties have executed this Agreement as
amended as of the dates indicated above.
SUDBURY, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Title: Executive Vice President
/s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
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