EXHIBIT 10.3
EXECUTION COPY
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EMPLOYMENT AND NON-COMPETITION AGREEMENT
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Xxxxxxx X. Xxxx
This EMPLOYMENT AND NON-COMPETITION AGREEMENT (this "Agreement"), dated as
of November 5, 1997, is between Elgin National Industries, Inc., a Delaware
corporation, and all related and affiliated entities, successors and assigns now
in existence or hereinafter created ("ENI"), and Xxxxxxx X. Xxxx ("Hall").
WHEREAS, Hall is currently employed pursuant to an employment agreement as
the President and Chief Operating Officer of ENI;
WHEREAS, as a result of a recapitalization, ENI will be merged into ENI
Holding Corp., ("recapitalization"), and Hall will be one of three partners of
SHC Investment Partnership ("Partnership"), which Partnership shall, in turn,
own the Common stock of ENI Holding Corp.; and
WHEREAS, in connection with the foregoing, ENI wishes to employ Hall as the
President and Chief Operating Officer of ENI, and Hall wishes to work as the
President and Chief Operating Officer of ENI, on the terms set forth below.
NOW, THEREFORE, it is hereby agreed as follows:
(S)1. EMPLOYMENT. ENI hereby employs Hall as the President and Chief
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Operating Officer of ENI and Hall hereby accepts such employment, upon the terms
and subject to the conditions hereinafter set forth.
(S)2. DUTIES. While Hall is employed by ENI, he shall serve as its
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President and Chief Operating Officer. In such capacity, Hall shall have such
executive responsibilities and duties as are assigned by ENI's Board of
Directors (the "Board") and Chairman and Chief Executive Officer and as are
consistent with his position as President and Chief Operating Officer of ENI.
Hall agrees that, while he is employed by ENI, he shall devote his full time and
best efforts to the performance of his duties for ENI. Hall will have such
authority and power as are inherent to the undertakings applicable to his
positions and necessary to carry out his responsibilities and the duties
required of him hereunder.
Subject to the foregoing provisions of this Section 2, while Hall is
employed by ENI, Hall may engage in activities other than those required under
this Agreement, such as activities involving professional, charitable,
educational, religious and similar types of organizations, speaking engagements,
membership on the boards of directors of other organizations, and similar
type activities to the extent that such other activities do not inhibit or
prohibit the performance of Hall's duties under this Agreement, or conflict in
any material way with the business of ENI.
Subject to the terms of this Agreement, Hall shall not be required to
perform services under this Agreement during any period that he is Disabled (as
defined in Section 6(a)(i)).
(S)3. TERM. The initial term of employment of Hall hereunder shall be a
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five (5) year period commencing on the date of the closing of the
recapitalization and ending five (5) years thereafter (the "Initial Term"),
unless earlier terminated pursuant to Section 6. The term of Hall's employment
hereunder shall be automatically renewed for additional successive one (1) year
terms (the Initial Term and each such additional one (1) year terms, hereinafter
referred to collectively as, the "Term") unless either party hereto delivers
written notice of its intent to terminate Hall's employment hereunder at least
one hundred eighty (180) days prior to the last day of the Term. Such notice
from ENI will require the written consent of Common Partners representing at
least 66% of the Common Percentage of the Partnership (as such terms are defined
in the SHC Partnership Agreement).
(S)4. COMPENSATION AND BENEFITS. In consideration for the services of
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Hall hereunder, ENI shall compensate Hall as follows:
(a) BASE SALARY. During the Term of the Agreement, ENI shall pay Hall a
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base salary (the "Base Salary"), which shall be paid periodically in accordance
with ENI's then current payroll practices. The Base Salary will be paid at an
annual rate of $273,489 until December 31, 1997, and shall be increased at the
commencement of each calendar year during the term of Hall's employment
hereunder by the greater of:
(i) five percent (5%) of Base Salary for the preceding year, or
(ii) the percentage increase in the consumer price index for the
preceding four (4) calendar quarters for which information has been
published by the U.S. Department of Commerce over the comparable prior four
(4) calendar quarters.
The Base Salary shall be in addition to the other benefits set forth herein.
(b) ANNUAL MANAGEMENT INCENTIVE BONUS. During the Term of this
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Agreement, ENI shall pay Hall each fiscal year a management incentive bonus (the
"Incentive Bonus") in accordance with this Section 4(b). For the fiscal years of
ENI from 1997 through 2002, Hall shall be entitled to receive an Incentive Bonus
equal to 1.50% of ENI's EBITA (as defined below) for such fiscal year. Ninety
percent (90%) of the Incentive Bonus for each fiscal year shall be paid within
thirty (30) days after the end of the fiscal year. The remaining amount of the
bonus shall be paid upon completion of ENI's audited financial statements for
such fiscal year. As used in this Agreement, "EBITA" means, with respect to any
fiscal year, the sum of the consolidated net income (or loss) of ENI and its
Subsidiaries, if any, for such fiscal year, calculated in accordance with
generally accepted accounting principles consistently applied but
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excluding any extraordinary items of income or loss or proceeds of life
insurance, plus all amounts deducted in the computation thereof on account of
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(A) income taxes, (B) interest expense, (C) amortization, and (D) the amount of
any Incentive Bonus paid to Hall hereunder or any like amount paid to Xxxx X.
Xxxxxxx and Xxxxx X. Xxxxxx under their respective employment agreements with
ENI.
(c) INSURANCE; OTHER BENEFITS. Except as otherwise expressly provided
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in this Agreement, during the Term of the Agreement Hall shall be provided with
pension benefits, welfare benefits and other fringe benefits, including without
limitation, vacations and holidays, to the same extent and on the same terms as
those benefits are provided by ENI from time to time to Xxxxxxx or the other
Common Partners in the Partnership (including spouse and dependent coverage);
provided, that Hall shall, at all times while he is employed by ENI, be provided
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with a commercially reasonable level of accident, life and health benefit
coverage, and, provided, further, that subject to the annual review and approval
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of Common Partners representing at least 66% of the Common Percentages of the
Partnership, ENI shall maintain disability income replacement coverage or
another acceptable arrangement for Hall which will provide replacement of income
at a commercially reasonable rate during any period in which Hall is Disabled if
the disability arose during Hall's employment with ENI.
(d) OFFICERS LIABILITY. ENI shall maintain directors and officers
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liability insurance in commercially reasonable amounts (as reasonably determined
by the Board), and Hall shall be covered under such insurance to the same extent
as the other Common Partners in the Partnership of ENI. Hall shall be eligible
for indemnification by ENI under the terms of its by-laws. ENI agrees that it
shall not adopt or modify its by-laws in any respect which could effectively
reduce or limit Hall's rights to such indemnification.
(S)5. EXPENSES. During his employment, Hall is authorized to incur
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reasonable expenses, chargeable to ENI, in connection with his services and
employment hereunder, including expenses for travel, entertainment and similar
items. Such expenses shall be reimbursed by ENI in accordance with its
practices and policies for Xxxxxxx or the other Common Partners in the
Partnership.
(S)6. TERMINATION.
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(a) REASONS FOR TERMINATION. Hall's employment hereunder shall
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commence on the Commencement Date and continue until the expiration of the Term,
except that Hall's employment hereunder shall be terminated upon the occurrence
of any of the events set forth below:
(i) DEATH OR DISABILITY. Upon the death of Hall during the Term
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of his employment hereunder or, at the option of ENI, in the event of
Hall's disability, upon thirty (30) days' written notice from ENI. Hall
shall be deemed "Disabled" if an independent medical doctor (selected by
ENI's health or disability insurer) certifies that Hall has for four (4)
consecutive months in any twelve (12) month period been disabled
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in a manner which seriously interferes with his ability to perform his
responsibilities under this Agreement. Any refusal by Hall to submit to a
medical examination for the purpose of certifying disability under this
Section 6(a)(i) shall be deemed to constitute conclusive evidence of Hall
being Disabled.
(ii) FOR CAUSE. For "Cause" upon written notice by ENI to Hall,
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which notice sets forth in reasonable detail the facts and circumstances
claimed to constitute "Cause". For purposes of this Agreement, the term
"Cause" shall mean (A) with respect to ENI's business, Hall shall have
embezzled or misappropriated funds or other property of ENI or offered,
paid, solicited or accepted any unlawful bribe or kickback; or (B) any of
the following actions or omissions which has a material adverse effect on
ENI:
(w) Hall shall have committed a willful violation of a fiduciary duty
owed by Hall to ENI.
(x) the willful and continued failure by Hall to substantially perform
his duties to ENI (other than any such failure resulting from Hall
being Disabled), within a reasonable period of time after a written
demand for substantial performance is delivered to Hall by the
Board, which demand specifically identifies the manner in which the
Board believes that Hall has not substantially performed his duties;
or
(y) Hall shall have breached the provisions of paragraph 10 of this
Agreement.
For purposes of this paragraph (ii), no act, or failure to act, on Hall's
part shall be deemed "willful" unless done, or omitted to be done, by Hall
not in good faith and knowing that such act or failure to act was in
violation of this Agreement.
(iii) BREACH BY ENI. In the event that Hall (x) provides written
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notice to ENI of the occurrence of a material breach of this Agreement by
ENI, which specifically identifies the manner in which Hall believes that
such material breach has occurred; (y) ENI fails to correct such material
breach within thirty (30) days after such notice; and (z) Hall resigns
within the 120-day period following the end of the 30 day period at clause
(y) above, then, for purposes of this Agreement, such resignation by Hall
shall be considered to have been involuntary. A material breach of this
Agreement by ENI shall include, without limitation:
(I) assignment by ENI of duties to Hall that are inconsistent in
any substantial respect with the position, authority, or
responsibilities associated with the position of President
and Chief Operating Officer of ENI;
(II) the failure by ENI to accord to Hall the title, authority and
responsibilities of President and Chief Operating Officer of
ENI;
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(III) the failure of ENI to provide any portion of the compensation
or benefits required under the terms of this Agreement within
thirty (30) days of the date such compensation is due.
Notwithstanding any provision of this Section 6(a)(iii) to the contrary, no
action or omission taken by ENI with the approval of Hall as a director of
ENI shall constitute a material breach of this Agreement.
(iv) OPTIONAL TERMINATION. On the last day of any Term, in the
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event that either party hereto delivers a notice to the other party to the
effect that such party wishes to terminate Hall's employment hereunder (a
"Termination Notice") on or before one hundred eighty (180) days prior to
the last day of such Term.
(v) SALE OF SHARES. This Agreement shall automatically terminate
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upon the sale or transfer of Hall's direct or indirect interest in the
common stock of ENI or the equity interest in the Partnership, in either
case that is not permitted by the SHC Partnership Agreement.
(b) RIGHTS AND REMEDIES ON TERMINATION. Upon termination, Hall shall be
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entitled to the following payments:
(i) Upon the termination of Hall pursuant to this Sections 6(a)(i)
or (iii), ENI shall remain obligated to Hall, or to his estate in the event
of his death, during the Initial Term of this Agreement, or the remainder
of a successive one (1) year term if the termination occurs during such one
year term, for the payments and benefits set forth in Sections 4(a), (b),
(c), (d) herein, and for expense reimbursements outstanding at the time of
termination. In addition, in the event of Hall's disability as defined in
Section 6(a)(i), and the failure of ENI to satisfy its obligations under
Section 4(c) above payment if his base salary shall continue until Hall
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reaches age sixty-five (65).
(ii) Upon termination of Hall's employment pursuant to Section
6(a)(ii) or the voluntary resignation of Hall, ENI shall be
obligated to Hall as follows:
(A) payment of any portion of his Base Salary owed with
respect to the period prior to his termination,
(B) payment of any expense reimbursements under Section 5
hereof for expenses incurred in the performance of his duties prior
to his termination, and payment for any accrued and unused vacation
days for such fiscal year, and
(C) an "Incentive Bonus" payment equal to the amount of the
Incentive Bonus which would have been due to Hall with respect to
such fiscal year but for the termination of his employment
multiplied by a fraction the numerator of
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which is the number of days elapsed in such fiscal year prior to the
termination of employment and the denominator of which is 365.
Payment of any prorated Incentive Bonus owed pursuant to this
Section 6(b)(ii)(C) shall be made as and when the corresponding
payments of such Incentive Bonus would have been made to Hall
pursuant to Section 4(b) hereto had Hall not been terminated.
(iii) If Hall's employment is terminated in accordance with Section
6(a)(iv) and 6(a)(v), then, in addition to the amounts payable in
accordance with Sections 6(b)(i) and 6(b)(ii), and in consideration of
Hall's non-competition obligations set forth in Section 10 hereof, Hall
shall receive from ENI for a period of one (1) year from of the date of his
termination, severance payments at a rate equal to his then current Base
Salary, in monthly or more frequent installments as is required under
Section 4(a). ENI's obligation to make severance payments at the annual
rate of Hall's Base Salary under this Section 6(b)(iii) shall cease as of
the date, if any, of a material breach by Hall of the provisions of
Sections 9 or 10 hereof.
(iv) Hall shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise, and ENI shall not be entitled to set off against the amounts
payable to Hall under this Agreement any amounts owed to ENI by Hall, any
amounts earned by Hall in other employment after termination of his
employment with ENI, or any amounts which might have been earned by Hall in
other employment had he sought such other employment.
Upon termination, Hall shall not be entitled to severance or other
compensation based on termination except as provided in this Agreement.
(S)7. GUARANTEED FUNDING. Within thirty (30) days of the date of this
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Agreement, ENI will acquire and maintain during the period Hall is employed and
during any period of disability pursuant to this Agreement and for a period of
twelve (12) months following Hall's voluntary resignation or expiration of the
Term of this Agreement or the sale, transfer or assignment of his interest in
the Partnership not permitted by the SHC Partnership Agreement, whichever occurs
first, an insurance policy or policies providing coverage payable to ENI in the
event of the death of Hall ("Insurance Policies"). The terms and issuers of the
Insurance Policies shall be subject to the annual review and approval by Common
Partners representing at least 66% of the Common Percentage of the Partnership.
Subject to such annual review and approval of the Partnership, the Insurance
Policies for Hall shall initially provide $4,000,000 of coverage, and shall
thereafter increase each year in an amount equal to the increase in Hall's (a)
Common Percentage in the Partnership and (b) preferred stock and preferred stock
units in ENI. The Company agrees to use the proceeds of such life insurance in
accordance with the redemption provisions of the SHC Partnership Agreement, to
the extent permitted by the Indenture (defined below at Section 12(i) below).
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The Company agrees to effect the redemption transactions contemplated in the SHC
Partnership Agreement, subject to any restrictions in the Indenture.
(S)8. INVENTIONS; ASSIGNMENT. All rights to discoveries, inventions,
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improvements and innovations (including all data and records pertaining thereto)
related to ENI whether or not patentable, copyrightable, registrable as a
trademark, or reduced to writing, that
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Hall may discover, invent or originate during the Term of his employment
hereunder, either alone or with others and whether or not during working hours
or by the use of the facilities of ENI, which result from work which Hall may do
for or at the request of ENI ("Inventions"), shall be the exclusive property of
ENI. Hall shall promptly disclose all Inventions to ENI, shall execute at the
request of any of ENI any assignments or other documents such as ENI may deem
necessary to protect or perfect its rights therein, and shall assist ENI, at the
expense of ENI, in obtaining, defending and enforcing the rights of any of ENI
therein. Hall hereby appoints ENI as his attorney-in-fact to execute on his
behalf any assignments or other documents deemed necessary by any of ENI to
protect or perfect its rights to any Inventions.
(S)9. CONFIDENTIAL INFORMATION. Hall recognizes and acknowledges that
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certain assets of ENI, including without limitation information regarding
customers, pricing policies, methods of operation, proprietary computer
programs, sales, products, profits, costs, markets, key personnel, formulae,
product applications, technical processes, and trade secrets (hereinafter called
"Confidential Information") are valuable, special, and unique assets of ENI.
Hall shall not, during his term of employment and the Period of Restriction as
provided in Section 10 hereof, disclose any or any part of the Confidential
Information to any person, firm, corporation, association, or any other entity
for any reason or purpose whatsoever, directly or indirectly, except as may be
required pursuant to his employment hereunder, unless and until such
Confidential Information becomes publicly available other than as a consequence
of the breach by Hall of his confidentiality obligations hereunder. In the
event of the termination of his employment, whether voluntary or involuntary and
whether by ENI or Hall, Hall shall deliver to ENI all documents and data
pertaining to the Confidential Information and shall not take with him any
documents or data of any kind or any reproductions (in whole or in part) or
extracts of any items relating to the Confidential Information.
(S)10. NON-COMPETITION. Hall acknowledges that the covenants and
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agreements in this Section 10 are in consideration of Hall's employment with ENI
under this Agreement and Hall's opportunity to increase his shareholdings in ENI
as a result of the recapitalization, and are necessary to protect the legitimate
interests of ENI, its employees, and the other shareholders of ENI. During the
Period of Restriction (as hereinafter defined), Hall will not (a) engage,
directly or indirectly, anywhere in North America, alone or as a shareholder
(other than as a holder of less than five percent (5%) of the common stock of
any publicly traded corporation), partner, officer, director, employee or
consultant of any other business organization that is engaged or becomes engaged
in a business the Designated Industry (as hereinafter defined), (b) divert to
any competitor of ENI, any customer of ENI, or (c) solicit or encourage any
officer, key employee or consultant of ENI to leave its employ for alternative
employment in the Designated Industry. For purposes of this Section 10, the term
"Designated Industry" shall mean any business activity that ENI is conducting at
the time of the termination of Hall's employment with ENI or of which Hall has
or should have knowledge that ENI then proposes to conduct, including but not
limited to (i) engineering, procurement and construction management services
relating to coal processing facilities, mineral processing facilities or
environmental projects to the extent that such services are competitive with any
services offered or provided by ENI, (ii) the design or manufacture of machinery
and equipment for use in coal processing or the processing of other minerals to
the extent that such machinery or equipment would be competitive with any
machinery and equipment designed, manufactured or distributed by ENI, and (iii)
the design,
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manufacture or distribution of any industrial threaded fasteners or similar
products that are competitive with any products designed, manufactured or
distributed by ENI.
For purposes of this Agreement, the "Period of Restriction" shall be the
period commencing on the Commencement Date and ending three (3) years from the
last day of the Term of this Agreement.
If at any time the provisions of this Section 10 shall be determined to be
invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 10 shall be considered divisible and
shall become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and Hall agrees that this
Section 10 as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
(S)11. TECHNICAL RECORDS. Immediately upon ENI's request and promptly upon
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upon termination or resignation of Hall's employment hereunder, Hall shall
deliver to ENI all memoranda, notes, records, reports, photographs, drawings,
plans, papers or other documents made or compiled by Hall or made available to
Hall during the course of the provision of services under this Agreement, and
any copies of abstracts thereof, whether or not of a secret or confidential
nature, and all of such memoranda or other documents shall, during and after the
termination of Hall's employment hereunder, be and shall be deemed to be the
property of ENI.
(S)12. GENERAL.
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(a) NOTICES. All notices and other communications hereunder shall be in
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writing or by written telecommunication, and shall be deemed to have been duly
given if delivered personally or if mailed by certified mail, return receipt
requested, postage prepaid or sent by written telecommunication or telecopy, to
the relevant address set forth below, or to such other address as the recipient
of such notice or communication shall have specified to the other party hereto
in accordance with this Section 12(a):
IF TO ENI, TO:
Elgin National Industries, Inc.
0000 Xxxxxxxxxxx Xx.
Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxx 00000-0000
WITH A COPY TO:
Xxxx Xxxxxx, Esq.
Xxxxx, Xxxxx & Xxxxx
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
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IF TO HALL, TO:
Xx. Xxxxxxx X. Xxxx
c/o Elgin National Industries
0000 Xxxxxxxxxxx Xxxx
Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxx 00000-0000
(b) EQUITABLE REMEDIES. Each of the parties hereto acknowledges and
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agrees that upon any breach by the other party of its or his obligations
hereunder, the non-breaching party will have no adequate remedy at law, and
accordingly will be entitled to specific performance and other appropriate
injunctive and equitable relief.
(c) SEVERABILITY. If any provision of this Agreement is or becomes
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invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.
(d) WAIVERS. No delay or omission by either party hereto in exercising
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any right, power or privilege hereunder shall impair such right, power or
privilege, nor shall any single or partial exercise of any such right, power or
privilege preclude any further exercise thereof or the exercise of any other
right, power or privilege.
(e) COUNTERPARTS. This Agreement may be executed in multiple
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) ASSIGNS. This Agreement shall be binding upon and inure to the
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benefit of the heirs and successors of each of the parties hereto.
(g) ENTIRE AGREEMENT. This Agreement contains the entire understanding
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of the parties, supersedes and replaces all prior agreements and understandings
relating to the subject matter hereof, including without limitation the
employment agreement between Hall and ENI dated September 24, 1993, and shall
not be amended except by a written instrument hereafter signed by each of the
parties hereto.
(h) GOVERNING LAW. This Agreement and the performance hereof shall be
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construed and governed in accordance with the laws of the State of Delaware.
(i) LIMITATION. Notwithstanding any contrary provision herein, any
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failure by the Company to make any payment, or to incur any cost, to the extent
such failure is due to restrictions in the Company's Indenture dated November 5,
1997 and governing its 11% Senior Notes due 2007, (the "Indenture"), shall not
constitute a breach of or default by the Company under this Agreement.
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(j) COUNSEL. Hall acknowledges that he has been advised to obtain
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separate legal counsel to review this Agreement and advise him regarding the
legal consequences of the same. Xxxxx, Xxxxx & Xxxxx has drafted this Agreement
as counsel for ENI with Hall's consent. Although Xxxxx, Xxxxx & Xxxxx has
represented Hall previously in other matters, Xxxxx, Xxxxx & Xxxxx is not acting
as attorney for Hall with respect to this Agreement or the transactions
contemplated herein. Xxxxx, Xxxxx & Xxxxx shall be under no obligation to
maintain the confidentiality from ENI of any matter communicated to it by Hall
with respect to this Agreement.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed as of the date and year
first above written.
ELGIN NATIONAL INDUSTRIES, INC.
By: /s/ Xxxx X. Xxxxxxx
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Title: Chairman and CEO
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/s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx
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