EXHIBIT 10.3
CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of this ___ day of
___________, 1998 (the "Effective Date"), by and among Trion, Inc., a
Pennsylvania corporation (hereinafter referred to as the "Company"), and
Xxxxxx X. Xxxxxx (the "Employee").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company (the "Board") has approved the
Company entering into agreements with certain key executives of the Company
providing for certain severance protection following a Change in Control (as
hereinafter defined);
WHEREAS, the Employee is a key executive of the Company;
WHEREAS, the Board of the Company believes that, should the possibility of a
Change in Control arise, it is imperative that the Company be able to receive
and rely upon the Employee's advice, if requested, as to the best interests of
the Company and its shareholders without concern that he might be distracted
by the personal uncertainties and risks created by the possibility of a Change
in Control; and
WHEREAS, in addition to the Employee's regular duties, he may be called upon
to assist in the assessment of a possible Change in Control, advise management
and the Board of the Company as to whether such Change in Control would be in
the best interests of the Company and its shareholders, and to take such other
actions as the Board determines to be appropriate;
NOW THEREFORE, to assure the Company that it will have the continued
dedication of the Employee and the availability of his advice and counsel
notwithstanding the possibility, threat, or occurrence of a Change in Control,
and to induce the Employee to remain in the employ of the Company, and for
other good and valuable consideration, the Company and the Employee, intending
to be legally bound, agree as follows:
Article 1. Definitions
Whenever used in this Agreement, the following terms shall have the meanings
set forth below when the initial letter of the word is capitalized:
(a) "Base Salary" shall mean the salary of record paid by the Company to the
Employee as annual salary, excluding amounts received under incentive or other
bonus plans, whether or not deferred.
(b) "Beneficiary" shall mean the persons or entities designated or deemed
designated by the Employee pursuant to Section 6.2 herein.
(c) "Cause" shall mean conviction of the Employee of (or a plea of no
contest with respect to) a felony or a misdemeanor involving moral turpitude
or a determination by the Board that the Employee has engaged in serious
misconduct (such as dishonesty, insubordination, willful failure to perform a
material or significant portion of his duties or other act or omission
materially detrimental to the business or reputation of the Company or
materially damaging to the relationships of the Company with its customers,
suppliers or employees).
(d) A "Change in Control" shall mean, and shall be deemed to have occurred
upon the occurrence of, any one of the following events:
(i) The acquisition in one or more transactions, other than from the
Company, 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")) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of either (i) 30% or more of the
outstanding Common Stock of the Company (the "Outstanding Common Stock") or
30% or more of the Company Voting Securities; provided, however, that the
following shall not constitute a Change in Control: any acquisition by (1) the
Company or any of its subsidiaries, any employee benefit plan (or related
trust) sponsored or maintained by the Company or any of its subsidiaries, or
(2) any corporation with respect to which, following such acquisition, more
than 70% of, respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Common Stock and Company Voting
Securities immediately prior to such acquisition in substantially the same
proportion as their ownership, immediately prior to such acquisition, of the
Outstanding Common Stock and Company Voting Securities, as the case may be; or
(ii) Individuals who constitute the Board as of the date of this Agreement
(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 of this Agreement whose election or nomination for
election by the Company was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (unless such nomination or
election (a) was at the request of an unrelated third party who has taken
steps reasonably calculated to effect a Change in Control, or (b) otherwise
arose in connection with or in anticipation of the Change in Control) shall be
considered as though such individual were a member of the Incumbent Board; or
(iii) Approval by the shareholders of the Company of a reorganization, merger
or consolidation, unless, following such reorganization, merger or
consolidation, all or substantially all of the individuals and entities who
were the respective beneficial owners of the Outstanding Common Stock and
Company Voting Securities immediately prior to such reorganization, merger or
consolidation, following such reorganization, merger or consolidation
beneficially own, directly or indirectly, more than 70% 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
reorganization, merger or consolidation in substantially the same proportion
as their ownership of the Outstanding Common Stock and Company Voting
Securities immediately prior to such reorganization, merger or consolidation,
as the case may be; or
(iv) Approval by the shareholders of the Company of (i) a complete
liquidation or dissolution of the Company or (ii) a sale or other disposition
of 60% or more by value of the assets of the Company other than to a
corporation with respect to which, following such sale or disposition, more
than 70% 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 is then owned beneficially,
directly or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Common Stock and Company Voting Securities immediately prior to such sale or
disposition in substantially the same proportion as their ownership of the
Outstanding Common Stock and Company Voting Securities, as the case may be,
immediately prior to such sale or disposition.
(e) "Company Voting Securities" shall mean the combined voting power of all
outstanding voting securities of the Company entitled to vote generally in the
election of directors for the Board.
(f) "Effective Date of Termination" shall mean the date on which the
Employee's employment terminates in a circumstance in which Section 2.1
provides for Severance Benefits (as defined in Section 2.1).
(g) "Termination Without Cause" shall mean a discharge by the Company of the
Employee from his employment without Cause.
(h) "Resignation With Good Reason" shall mean any termination by the
Employee of the Employee's employment within one (1) year after the occurrence
of any of the following:
(i) A substantial reduction in the base salary, benefits or perquisites
provided the Employee;
(ii) A relocation of the Employee's principal place of business to a location
which is more than 50 miles from its current location;
(iii) The assignment to the Employee of any duties inconsistent in any
respect with the Employee's current position with the Company (including
status, offices, titles and reporting requirements), or any action by the
Company which results in diminution in such positions, or the Employee's
current authority, duties or responsibilities, but excluding for this purpose
any isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company, promptly after receipt of written notice
thereof given by the Employee in accordance with this Agreement; or
(iv) Any failure by the Company to comply with and satisfy Article 4 of this
Agreement.
Article 2. Severance Benefits
2.1. Right to Severance Benefits. The Employee shall be entitled to receive
from the Company the severance benefits as described in Section 2.2
("Severance Benefits") if a Change in Control shall occur and within two years
after the Change in Control there shall occur a Termination Without Cause or a
Resignation With Good Reason.
2.2. Severance Benefits. In the event that the Employee becomes entitled to
receive Severance Benefits, as provided in Section 2.1, the Company shall
provide the Employee with total Severance Benefits as follows (but subject to
Sections 2.5 and 2.6):
(a) The Employee shall receive a single lump sum payment within thirty (30)
days of the Effective Date of Termination in an amount equal to sum of (i) the
product of two (2) times the sum of (A) the highest Base Salary during the
term of this Agreement and (B) the full "Target Award" fixed for the Employee
under the Company's incentive bonus program for the then current fiscal year,
(ii) an amount equal to the full "Target Award" fixed for the Employee under
the Company's incentive bonus program for the then current fiscal year
multiplied by a fraction, the numerator of which is the number of days in the
then current fiscal year through the Effective Date of Termination and the
denominator of which is 365 and (iii) an amount equal to the sum of (A) the
maximum contributions that could have been made by the Company on the
Employee's behalf to all defined contribution plans of the Company (assuming
that the Employee had made the maximum allowable contributions to such plans)
and (B) the present value of the benefits that the Employee could have accrued
under all defined benefit plans of the Company, had the Employee continued to
participate in such plans for the three (3)-year period following the
Effective Date of Termination.
(b) The Employee shall receive an amount, paid within thirty (30) days of
the Effective Date of Termination, equal to the sum of (A) the Employee's Base
Salary through the Effective Date of Termination to the extent not theretofore
paid, (B) the amount of any bonus, incentive compensation, deferred
compensation and other cash compensation accrued by the Employee as of the
Effective Date of Termination to the extent not theretofore paid and (C) any
vacation pay, expense reimbursements and other cash entitlements accrued by
the Employee as of the Effective Date of Termination to the extent not
theretofore paid.
(c) For a period of two (2) years, the Company shall arrange to provide the
Employee, at the Company's cost, with life, disability and health-and-accident
insurance coverage providing substantially similar benefits to those which the
Employee was receiving immediately prior to the Effective Date of Termination,
to the extent the Company continues to maintain benefit plans providing for
such benefits for executives generally; provided, however, that the Company
may cease providing such benefits at such time as the Employee is provided
with substantially equivalent benefits by another employer.
2.3. Termination for any other Reason. If the Employee's employment with the
Company is terminated under any circumstances other than those set forth in
Section 2.1, including without limitation by reason of retirement, death,
disability, discharge for Cause or resignation other than a Resignation With
Good Reason, or any termination for any reason that occurs prior to a Change
in Control or after two years following a Change in Control, the Employee
shall have no right to receive the Severance Benefits under this Agreement or
to receive any payments in respect of this Agreement. In such event
Employee's benefits, if any, in respect of such termination shall be
determined in accordance with the Company's retirement, survivor's benefits,
insurance, and other applicable plans, programs, policies and practices then
in effect. Anything in this Agreement to the contrary notwithstanding, if the
Employee's employment with the Company is terminated prior to the date on
which a Change in Control occurs either (i) by the Company other than for
Cause or (ii) by the Employee for Good Reason, and it is reasonably
demonstrated that termination of employment (a) was at the request of an
unrelated third party who has taken steps reasonably calculated to effect a
Change in Control, or (b) otherwise arose in connection with or in
anticipation of the Change in Control, then for all purposes of this Agreement
the termination shall be deemed to have occurred upon a Change in Control and
the Employee will be entitled to Severance Benefits as provided in Section 2.2
hereof.
2.4. Notice of Termination. Any termination by the Company for Cause or by
the Employee for Good Reason shall be communicated by Notice of Termination to
the other party. For purposes of this Agreement, a "Notice of Termination"
shall mean a written notice which shall indicate the specific termination
provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination
of the Employee's employment under the provision so indicated.
2.5. Withholding of Taxes. The Company shall withhold from any amounts
payable under this Agreement all Federal, state, local, or other taxes as
legally shall be required to be withheld.
2.6. Certain Limitations on Payments by the Company. Notwithstanding the
foregoing or any other provision of this Agreement to the contrary, if tax
counsel selected by the Company and acceptable to the Employee determines that
any portion of any payment under this Agreement would constitute an "excess
parachute payment," then the payments to be made to the Employee under this
Agreement shall be reduced (but not below zero) such that the value of the
aggregate payments that the Employee is entitled to receive under this
Agreement and any other agreement or plan or program of the Company shall be
one dollar ($1) less than the maximum amount of payments which the Employee
may receive without becoming subject to the tax imposed by Section 4999 of the
Internal Revenue Code; provided, however, that the foregoing limitation shall
not apply in the event that such tax counsel determines that the benefits to
the Employee under this Agreement on an after-tax basis (i.e., after federal,
state and local income and excise taxes) if such limitation is not applied
would exceed the after-tax benefits to the Employee if such limitation is
applied.
Article 3. Unconditional Obligations; Dispute Resolution.
The Company's obligation to make the payments provided for under this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Employee or others.
Any controversy or claim arising out of or relating to this Agreement or the
breach thereof (including the arbitrability of any controversy or claim),
shall be settled by arbitration in accordance with the internal laws of the
State of North Carolina by three arbitrators, one of whom shall be appointed
by the Board, one by the Employee and the third of whom shall be appointed by
the first two arbitrators. If the first two arbitrators cannot agree on the
appointment of a third arbitrator, then the third arbitrator shall be
appointed by the American Arbitration Association. The arbitration shall be
conducted in accordance with the rules of the American Arbitration
Association, except with respect to the selection of arbitrators which shall
be as provided in this Article 3. The cost of any arbitration proceeding
hereunder shall be borne equally by the Company and the Employee. The award
of the arbitrators shall be binding upon the parties. Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
Article 4. Binding Effect; Successors
This Agreement is personal to the Employee and without the prior written
consent of the Company shall not be assignable by the Employee otherwise than
by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by the Employee's legal representatives.
This Agreement shall inure to the benefit of and be binding upon the Company
and its successors and assigns. The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
Article 5. Term of Agreement
The term of this Agreement shall commence on the Effective Date and shall
continue in effect for three (3) full years. However, in the event a Change
in Control occurs during the term, this Agreement will remain in effect for
the longer of: (i) twenty-four (24) months beyond the month in which such
Change in Control occurred; or (ii) until all obligations of the Company
hereunder have been fulfilled, and until all benefits required hereunder have
been paid to the Employee or other party entitled thereto. The term of this
Agreement may be extended by written agreement of the parties.
Article 6. Miscellaneous
6.1. Employment Status. Neither this Agreement nor any provision hereof
shall be deemed to create or center upon the Employee any right to be retained
in the employ of the Company or any subsidiary or other affiliate thereof.
6.2. Beneficiaries. The Employee may designate one or more persons or
entities as the primary and/or contingent Beneficiaries of any Severance
Benefits owing to the Employee under this Agreement. Such designation must be
in the form of a signed writing acceptable to the Board of Directors of the
Company. The Employee may make or change such designation at any time.
6.3. Entire Agreement. This Agreement contains the entire understanding of
the Company and the Employee with respect to the subject matter hereof. The
payments provided for under this Agreement in the event of the Employee's
termination of employment shall be in lieu of any severance benefits payable
under any severance plan, program, or policy of the Company to which he might
otherwise be entitled.
6.4. Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall
include the singular, and the singular shall include the plural.
6.5. Notices. All notices, requests, demands, and other communications
hereunder must be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first-
class certified mail, return receipt requested, postage prepaid, to the other
party, addressed as follows:
(a) if to the Company:
Trion, Inc.
000 XxXxxxx Xxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000-0000
(b) if to Employee, to him at the address set forth at the end of this
Agreement. Addresses may be changed by written notice sent to the other party
at the last recorded address of that party.
6.6. Execution in Counterparts. This Agreement may be executed by the
parties hereto in counterparts, each of which shall be deemed to be original,
but all such counterparts shall constitute one and the same instrument, and
all signatures need not appear on any one counterpart.
6.7. Severability. In the event any provision of this Agreement shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Agreement, and the Agreement shall be
construed and enforced as if the illegal or invalid provision had not been
included. Further, the captions of this Agreement are not part of the
provisions hereof and shall have no force and effect.
6.8. Modification. No provision of this Agreement may be modified, waived,
or discharged unless such modification, waiver, or discharge is agreed to in
writing and signed by the Employee and on behalf of the Company.
6.9. Applicable Law. To the extent not preempted by the laws of the United
States, the laws of the State of North Carolina, other than the conflict of
law provisions thereof, shall be the controlling law in all matters relating
to this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
TRION, INC.
By:
Title:
EMPLOYEE
Name: Xxxxxx X. Xxxxxx
Address: 0000 Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
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PI-166928.01
