Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of this 3rd day of
January, 1996, by and between NUMATICS, INCORPORATED, a Michigan corporation
with its principal offices at 0000 Xxxxx Xxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxx 00000
(the "Company"), and XXXX X. XXXXXX, an individual residing at 4340 Chevron,
Xxxxxxxx, Xxxxxxxx 00000 ("Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to employ Employee, and wishes to have
available and to be assured of his services on the terms and conditions
hereinafter set forth; and
WHEREAS, Employee wishes to be employed by the Company and to provide his
services on the terms and conditions hereinafter set forth; and
WHEREAS, the Company would be severely injured if the Employee should
directly or indirectly, for himself or in the service of others, engage in
certain activities in competition with the Company and the Company desires
certain covenants to protect its reasonable competitive business interests;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements of the parties hereto, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Employment. The Company hereby agrees to employ Employee as the
President and Chief Executive Officer of the Company and Employee hereby agrees
to serve the Company in such capacity during the term of the Agreement. Employee
shall have the duties, responsibilities and authority commensurate with and
normally attending such position, as well as such additional powers and
administrative duties as may be reasonably designated from time to time by the
Board of Directors of the Company. Employee shall be in charge of the day-to-day
operations of the business of the Company and all personnel shall report to
Employee or his designees.
2. Extent and Place of Services. Employee shall, subject to the
reasonable vacation periods compatible with his position (the duration of which
shall be determined from time to time by the Board of Directors of the Company
but shall not be less than one
(1) month each year), periods of illness and the like, devote substantially full
time and attention to his duties hereunder. Employee shall perform his duties
hereunder at such a place or places as the Board of Directors shall reasonably
request from time to time; provided, however, Employee shall not be required to
perform any services under this Agreement which will necessitate moving his
residence from the metropolitan area of Highland, Michigan.
3. Term of Employment/Compensation.
(a) Term. The term of Employee's employment hereunder shall be
effective from the date hereof, and shall continue until and including
December 31, 2003, unless his employment is terminated earlier as
hereinafter provided.
(b) Salary. During the period from the date of this Agreement to
December 31, 1996, Employee will receive as compensation for his services a
salary equal to an annualized salary of TWO HUNDRED AND FIFTY THOUSAND
DOLLARS ($250,000.00) payable twice each month, or as the Company normally
pays, subject to normal federal, state and local tax withholding.
Thereafter, Employee shall receive the following annual salaries payable as
above:
(i) Salary effective January 1, 1997, shall be TWO HUNDRED AND
SEVENTY-FIVE THOUSAND DOLLARS ($275,000.00);
(ii) Salary effective January 1, 1998 shall be THREE HUNDRED
THOUSAND DOLLARS ($300,000.00);
(iii) Salary effective January 1, 1999, shall be THREE HUNDRED
AND TWENTY-FIVE THOUSAND DOLLARS ($325,000.00);
(iv) Salary effective January 1, 2000 shall be THREE HUNDRED
AND FIFTY THOUSAND DOLLARS ($350,000.00);
(v) Salary effective January 1, 2001 shall be THREE HUNDRED
AND EIGHTY THOUSAND DOLLARS ($380,000.00);
(vi) Salary effective January 1, 2002 shall be FOUR HUNDRED AND
TEN THOUSAND DOLLARS ($410,000.00); and
(iv) Salary effective January 1, 2003 through and including
December 31, 2003, shall be FOUR HUNDRED AND FORTY THOUSAND DOLLARS
($440,000.00).
(c) Performance Bonus. Employee shall receive a performance bonus,
or additional compensation (over and above and in addition to the salary
specified in paragraph 3(b)
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above and any additional discretionary bonus awarded pursuant to paragraph
3(d) below) in respect of each of the Company's calendar years during the
term hereof, commencing with the calendar year ending December 31, 1996,
calculated as follows:
(i) Employee's salary shall be supplemented each year pursuant
to this paragraph 3(c) based on the achieved profits of the Company.
For the purposes of this Agreement, should the pretax, pre-interest
consolidated profits of the Company exceed seventy-five (75%) of the
forecasted amount set forth in the business plan annually submitted to
the Board of Directors and approved thereby, a performance bonus will
be earned. The amount of the performance bonus will be a percent of
Employee's salary for each year in which more than seventy-five (75%)
percent of the forecasted pre-tax, pre-interest consolidated business
plan profit of the Company (the "Forecast Profit") is achieved. The
amount of the performance bonus will be determined by multiplying (A)
the ratio of (x) the amount by which the profits actually achieved
exceeds 75% of the Forecast Profit for such year divided by (y) 25% of
the Forecast Profit for such year times (B) seventy percent (70%) of
Employee's salary; provided, however, no performance bonus shall be
earned if the pretax, pre-interest consolidated profits of the Company
are less than or equal to seventy-five percent (75%) of the Forecast
Profit for any such year.
(ii) For any year the pretax, pre-interest consolidated profits
actually achieved will be determined before any charges for bonuses to
any shareholders of the Company, including any bonuses payable
hereunder, and before any Federal, foreign, state or local income tax
charges, including, but not limited to, any charge for Michigan Single
Business Tax or the German trade or income tax.
(iii) Such performance bonus for any fiscal year shall be paid
within seventy-five (75) days of the close of such fiscal year;
provided, however, that in the event of termination of the employment
of Employee for any reason or in the event the Company's fiscal year
is changed during the term of this Agreement and a performance bonus
is thereby based on less than a full fiscal year, then the performance
bonus shall be prorated (on a monthly basis) for the portion of the
fiscal year during which Employee was employed based upon actual
performance through the end of the most recently-completed fiscal
month ending on or prior to the date of such termination or the end of
the short fiscal year as
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compared to Forecast Profit for the portion of the fiscal year ended
at the end of such fiscal month.
(d) Discretionary Bonus. At the end of each fiscal year of the
Company after the Company's fiscal year ending December 31, 1996, Employee
shall be considered by the Board of Directors for additional discretionary
bonus compensation. In reaching its decision as to the amount of any such
discretionary bonus, the Board of Directors shall take into account the
performance of the Company and the Employee. The amount of any such
discretionary bonus payment shall be within the sole discretion of the
Board of Directors acting by unanimous consent of all of its members. The
Board of Directors will take into account the state of the economy in the
previous fiscal year in deciding whether or not to award a bonus under this
Section 3(d).
(e) Business Expenses. Upon proper substantiation and documentation
(for all items over $25.00) by Employee, the Company shall reimburse
Employee promptly and not less frequently than once each month for all
reasonable travel, lodging, food, entertainment and other related business
expenses incurred by him in the performance of his duties hereunder
pursuant to the Company's normal and customary policy.
(f) Benefits. During the term of this Agreement, Employee shall be
eligible to participate in any and all medical and dental reimbursement,
wage continuation, profit-sharing, pension, stock option, stock purchase
and other similar plans or fringe benefits of the Company, as the same may
be amended from time to time, on the same basis as other executive officers
of the Company. During the term of this Agreement, the Company agrees to
purchase or lease for the sole use of Employee an automobile at least
comparable to that presently being provided Employee by the Company which
shall be replaced at least every two (2) years. During the term of this
Agreement, the Company agrees to obtain and keep in force public liability
and property damage insurance on such automobile, in amounts and with
insurers reasonably satisfactory to Employee, with Employee named as party
insured.
(g) Salary and Benefit Continuation in the Event of Disability. In
the event of any disability, illness or incapacity during the term hereof
which does not constitute "permanent disability" as defined in Section 4(c)
of this Agreement, Employee shall continue to receive the salary and all
benefits then in effect during the continuance of such disability, illness,
or incapacity.
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(h) Maximum Salary. In any given calendar year, the Employee's total
compensation under this section 3 shall not exceed 300% of that year's base
salary.
4. Termination of Employment. Notwithstanding the provisions of Section
3 of this Agreement, Employee's employment hereunder and all salary and benefits
referred to in paragraph 3, unless otherwise expressly provided herein shall
terminate on the earliest of the following dates:
(a) The date of the death of Employee, provided that payments of
Employee's regular salary in effect in the year of his death as provided in
paragraph 3(b) shall continue to be paid twice a month for sixty (60) days
after Employee's death;
(b) Not less than thirty (30) days after the date on which the
Company shall have given Employee notice of the termination of his
employment by reason of failure to perform his duties hereunder due to
permanent disability; provided, however, the Company shall only be allowed
to exercise this termination option if the Company shall have obtained and
shall have kept in full force and effect a disability insurance policy
which will pay Employee the greater of fifty percent (50%) of his then
current salary or $15,000.00 per month until his normal retirement date or
until the disability or incapacity shall cease, whichever shall occur
earlier. The term "permanent disability" for purposes of this Agreement
shall mean that Employee is substantially incapable, as established on the
basis of a written medical opinion from a physician acceptable to Employee,
of performing the duties required of him under this Agreement because of
physical or mental impairment for a continuous period of one hundred eighty
(180) days; or
(c) Sixty (60) days after the date on which the Company shall have
given Employee written notice of the termination of his employment for any
reason (including, without limitation, permanent disability with respect to
which the insurance referred to in paragraph 4(b) is not maintained) other
than "for cause" as defined below. If Employee's employment shall be
terminated pursuant to this Section 4(c), Employee's regular salary (less
the proceeds of disability insurance payable, if any, to Employee) for the
year in which Employee is terminated, as provided in paragraph 3(b) shall
be paid for a one year period (payable twice a month) beginning on the
effective date of the Employee's termination of employment.
(d) The date on which the Company shall have given Employee a written
notice of termination, terminating his employment for cause. The term
"cause" as used in this Agreement shall mean: (1) Employee's conviction of
a felony;
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(2) the willful and gross neglect by Employee of his duties; or (3) serious
misconduct involving dishonesty in the course of employment. In the event
that a member of the Board of Directors believes that "cause" for
Employee's termination exists, such Board member shall give a written
statement of such belief to Employee, the Company and all other members of
the Board. A reasonable determination of whether "cause" for termination
exists shall then be made by the Board of Directors (excluding Employee)
after reasonable notice of not less than ten (10) days to Employee and an
opportunity for Employee to be heard by the Board of Directors. Except as
provided hereafter, if following the hearing the Board of Directors
determines that cause exists, it may then send a written notice of
termination to Employee. In the event cause is based solely on an item
falling under clause (2) above, Company agrees that after its hearing,
Employee shall be given written notice of the event or activity warranting
termination hereunder for cause and shall be given thirty (30) days after
the Board of Directors' determination that cause exists to cure any such
event or cease any such activity delineated in the notice. If the grounds
for cause has not then been ceased or cured, the Board may then send a
written notice of termination to Employee. In the event of any such cure or
cessation, the Company shall no longer be able to terminate Employee on the
basis that such event or activity constituted cause.
(e) The date of Employee's voluntary resignation or retirement.
5. Conventions and Meetings. Employee shall be entitled to attend, at
Company's expense, such conventions, seminars and similar business meetings
which, in his reasonable judgment, he deems necessary or desirable in connection
with the performance of his duties for the Company.
6. Competitive Activities.
(a) Except as provided in Section 6(c) hereof, Employee shall not,
during his employment with the Company and for a period of one (1) year
from the date of the termination of his employment with the Company, either
directly or indirectly, as an employee, director, officer, co-venture, co-
marketer, shareholder, partner, advisor or consultant of any business,
engage in any commercial activity or participate in any venture of any kind
that competes with the Company with respect to the Fluid Power Products
Business, within the United States, Canada, Germany, the United Kingdom or
any other country, territory or jurisdiction or with respect to any other
business in which the Company shall be engaged at any time within two years
prior to termination of the
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Employee's employment with the Company. For purposes of this Agreement,
"Fluid Power Products Business" shall mean the manufacture, marketing and
distribution of air valves, actuators, air preparation equipment, filters,
lubricators, regulators and other fluid power products (as they pertain to
compressed air systems) to customers, including original equipment
manufacturers and end users.
(b) Employee acknowledges that the Company has expended substantial
time and expense in the research and development of processes, technology,
techniques and products which are unique to the Company or not generally
known to others and which could be unfairly taken or used by others in
competition with the Company, and he further acknowledges that competition
with the Company is not based on geographical location. Accordingly,
Employee agrees that the restrictions contained in this Agreement are
reasonable and appropriate to protect the Company's reasonable competitive
business interests.
(c) Notwithstanding anything herein stated, (i) Section 6(a) of this
Agreement shall not prohibit Employee from owning, with respect to any
corporation, not more than 1% of any class of its securities listed on a
national securities exchange or quoted on the National Association of
Securities Dealers Automated Quotation System and (ii) Section 6(a) of this
Agreement shall apply only if the employee's employment with the Company or
a subsidiary is terminated by Resignation. Resignation means the voluntary
termination of employment with the Company or a subsidiary, including
without limitation such termination after the age of sixty-five.
(d) Employee acknowledges and understands that a breach by him of
provisions 6(a) and 6(b) of this Agreement may cause the Company
irreparable injury and damage which cannot be reasonably or adequately
compensated by damages at law. Employee therefore agrees that the Company
shall be entitled, in addition to any other remedies legally available, to
injunctive and/or other equitable relief to prevent a breach of provisions
6(a) and 6(b) of this Agreement, and reasonable attorneys' fees in
enforcing the provisions of 6(a) and 6(b) of this Agreement.
7. Confidential Information.
(a) Except by written permission from the Company, Employee shall not
disclose or use any Confidential Information of the Company or any of its
subsidiaries of which Employee becomes informed during, or within five
years after termination of, his employment, whether or not generated by
Employee, except as required by his duties to the Company. The term
Confidential Information for purposes of this
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Agreement shall mean any information of the Company or any of its
subsidiaries or customers of any of the foregoing, including any formula,
pattern, compilation, program, device, method, technique or process that
derives independent economic value from not being generally known to, and
not being readily ascertainable by proper means by, other persons who can
derive economic value from its disclosure or use. Information does not lose
its confidential status merely because it was known by a limited number of
persons or entities or because it was not entirely the origin of the
Company or its subsidiaries. Such non-disclosure and non-use shall mean,
without limiting the generality of the foregoing, that Employee shall not,
during such period, publish, disclose or use, or authorize anyone else to
publish, disclose or use, such Confidential Information.
(b) Upon termination of this employment with the Company, Employee
agrees to deliver to the Company all materials that include Confidential
Information, including without limitation customer cards or lists, product
formulations, instruction sheets, drawings, manuals, letters, notes,
notebooks, reports and copies thereof, and all other materials which are
under his control and which relate to the Fluid Power Products Business or
to any other aspect of the business of the Company or its subsidiaries (if
any), including any product, apparatus, or process owned, manufactured,
used, developed, or investigated by the Company or any subsidiary of the
Company during the course of his employment. Employee agrees and
understands that the same and all information contained therein shall be at
all times the property of the Company. Further, upon termination of his
employment with the Company, Employee agrees to make available to any
person designated by the Company all information concerning pending or
preceding transactions that may affect the operation of the Company or any
subsidiary of the Company about which Employee has knowledge. The
obligations of Employee contained in this paragraph are in addition to the
obligation of Employee to return to the Company, upon the termination of
his employment, all property of the Company then in his possession.
8. Assignment of Inventions. Employee shall promptly disclose to the
Company all inventions, discoveries, improvements, designs, processes,
techniques, equipment, trademarks and copyrightable matter conceived or made by
him during his employment and related to the Fluid Power Products Business or
any other aspect of the business of the Company, and Employee hereby assigns all
of his interest therein, including the good will of the business symbolized by
any trademarks, to the Company. Employee further agrees to execute any
applications, assignments and other instruments which the Company shall deem
necessary to obtain
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letters patent, trademark registration or copyright registration in the United
States or any foreign country or to otherwise protect the Company's interests
therein. Nothing contained in this provision shall apply to any invention for
which no equipment, supplies, facilities or trade secret information of the
Company or any subsidiary of the Company was used and which was developed
entirely on the Employee's own time, and which does not relate (1) to the Fluid
Power Products Business or to any other aspect of the business of the Company or
any subsidiary of the Company or (2) to the actual or anticipated research or
development of the Company or any subsidiary of the Company.
9. Governing Law. This Agreement shall be construed in accordance with,
and shall be governed by, the laws of the State of Michigan other than the
choice of law rules thereof.
10. Entire Agreement/Binding Effect. This instrument contains the entire
understanding and agreement between the parties relating to the subject matter
hereof and supersedes any prior employment agreement between the parties,
whether written or oral. Neither this Agreement nor any provision hereof may be
waived, modified, amended, changed, discharged or terminated, except by an
agreement in writing signed by the party against whom enforcement of any waiver,
modification, change, amendment, discharge or termination is sought. This
Agreement shall inure to the benefit of and shall be binding upon the parties
hereto and their respective successors and assigns, and in the case of Employee,
Employee's heirs and/or personal representatives.
11. Assignment. The Employee shall not assign any of his obligations
under this Agreement.
12. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, and such counterparts shall together
constitute a single Agreement.
13. Provisions Severable. To the extent that any one or more of the
provisions of this Agreement shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby.
14. Construction. Whenever possible, each provision of this Agreement
shall be interpreted so that is valid under applicable law. If any provision of
this Agreement is to any extent found to be invalid, illegal or unenforceable in
any respect under applicable law, that provision shall still be effective to the
extent it remains valid, and the remainder of this Agreement also will continue
to be valid. If any restriction contained in this Agreement is found to be too
broad to permit enforcement of such restriction to its fullest extent, then such
restriction shall be
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construed or re-written so as to be enforceable to the maximum extent permitted
by law.
15. Headings. The section headings herein are for convenience only and
shall not be used in interpreting or construing this Agreement.
16. Notices. Any notice required or permitted to be given under the
provisions of this Agreement shall be deemed properly given if in writing and
delivered personally or if mailed certified or registered mail, return receipt
requested, sufficient postage prepaid, to the following persons at the following
addresses, or to such other person or other address as either party may
designate by notice in writing to the other party to this Agreement:
(a) To Employee:
Xxxx X. Xxxxxx
4340 Chevron
Xxxxxxxx, Xxxxxxxx 00000
(b) To the Company:
Numatics, Incorporated
0000 Xxxxx Xxxxxxx Xxxx
Xxxxxxxx, Xxxxxxxx 00000
With a copy to:
Xxxxxxx X. Xxxxxxxx
Harvard Private Capital Group, Inc.
000 Xxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
IN WITNESS WHEREOF, the parties hereto have set their hands and executed
this Agreement as of the day and year first above written.
NUMATICS, INCORPORATED
By: /S/ XXXXXX X. XXXXXXX
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Its: VICE-PRESIDENT
/S/ XXXX X. XXXXXX
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Xxxx X. Xxxxxx
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