EXHIBIT 10.4
EXECUTION COPY
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EMPLOYMENT AND NON-COMPETITION AGREEMENT
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Xxxxx X. Xxxxxx
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 Xxxxx X. Xxxxxx ("Xxxxxx").
WHEREAS, Xxxxxx is currently employed pursuant to an employment agreement
as the Chief Financial Officer of ENI;
WHEREAS, as a result of a recapitalization, ENI will be merged into ENI
Holding Corp., ("recapitalization"), and Xxxxxx 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 Xxxxxx as
the Chief Financial Officer of ENI, and Xxxxxx wishes to work as the Chief
Financial Officer of ENI, on the terms set forth below.
NOW, THEREFORE, it is hereby agreed as follows:
(S)1. EMPLOYMENT. ENI hereby employs Xxxxxx as the Chief Financial
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Officer of ENI and Xxxxxx hereby accepts such employment, upon the terms and
subject to the conditions hereinafter set forth.
(S)2. DUTIES. While Xxxxxx is employed by ENI, he shall serve as its Vice
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President and Chief Financial Officer. In such capacity, Xxxxxx 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 Chief Financial Officer of ENI. Xxxxxx 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. Xxxxxx 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 Xxxxxx is
employed by ENI, Xxxxxx 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 Xxxxxx'x duties under
this Agreement, or conflict in any material way with the business of ENI.
Subject to the terms of this Agreement, Xxxxxx 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 Xxxxxx 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 Xxxxxx'x
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 Xxxxxx'x 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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Xxxxxx hereunder, ENI shall compensate Xxxxxx as follows:
(a) BASE SALARY. During the Term of the Agreement, ENI shall pay Xxxxxx
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a 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 $158,016 until December 31, 1997, and shall be
increased at the commencement of each calendar year during the term of Xxxxxx'x
employment hereunder by the greater of:
(i) five percent (5%) of Base Salary for the preceding year, or
(ii) the percentage increase in the consumers 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 Xxxxxx 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, Xxxxxx 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,
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calculated in accordance with generally accepted accounting principles
consistently applied but excluding any extraordinary items of income or loss or
proceeds of life insurance, plus all amounts deducted in the computation thereof
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on account of (A) income taxes, (B) interest expense, (C) amortization, and (D)
the amount of any Incentive Bonus paid to Xxxxxx hereunder or any like amount
paid to Xxxx X. Xxxxxxx and Xxxxxxx X. Xxxx 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 Xxxxxx 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 other Common
Partners in the Partnership of ENI (including spouse and dependent coverage);
provided, that Xxxxxx shall, at all times while he is employed by ENI, be
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provided with a commercially reasonable level of accident, life and health
benefit coverage; and, provided further, that, subject to the annual review and
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approval by a two thirds vote of the Partnership, ENI shall maintain disability
income replacement coverage for Xxxxxx, which will provide replacement of income
at a commercially reasonable rate during any period in which Xxxxxx is Disabled
if the disability arose during Xxxxxx'x 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 Xxxxxx shall be covered under such insurance to the same
extent as Xxxxxxx or the other Common Partners in the Partnership. Xxxxxx 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 Xxxxxx'x rights to such indemnification.
(S)5. EXPENSES. During his employment, Xxxxxx 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. Xxxxxx'x employment hereunder shall
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commence on the Commencement Date and continue until the expiration of the Term,
except that Xxxxxx'x employment hereunder shall be terminated upon the
occurrence of any of the events set forth below:
(i) DEATH OR DISABILITY. Upon the death of Xxxxxx during the
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Term of his employment hereunder or, at the option of ENI, in the event of
Xxxxxx'x disability, upon thirty (30) days' written notice from ENI. Xxxxxx
shall be deemed "Disabled" if an independent medical doctor (selected by
ENI's health or disability insurer) certifies that Xxxxxx has for four (4)
consecutive months in any twelve (12) month period been
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disabled in a manner which seriously interferes with his ability to perform
his responsibilities under this Agreement. Any refusal by Xxxxxx 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
Xxxxxx being Disabled.
(ii) FOR CAUSE. For "Cause" upon written notice by ENI to Xxxxxx,
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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, Xxxxxx 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) Xxxxxx shall have committed a willful violation of a fiduciary duty
owed by Xxxxxx to ENI.
(x) the willful and continued failure by Xxxxxx to substantially perform
his duties to ENI (other than any such failure resulting from Xxxxxx
being Disabled), within a reasonable period of time after a written
demand for substantial performance is delivered to Xxxxxx by the
Board, which demand specifically identifies the manner in which the
Board believes that Xxxxxx has not substantially performed his
duties; or
(y) Xxxxxx shall have breached the provisions of paragraph 10 of this
Agreement.
For purposes of this paragraph (ii), no act, or failure to act, on Xxxxxx'x
part shall be deemed "willful" unless done, or omitted to be done, by
Xxxxxx 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 Xxxxxx (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 Xxxxxx believes
that such material breach has occurred; (y) ENI fails to correct such
material breach within thirty (30) days after such notice; and (z) Xxxxxx
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
Xxxxxx 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 Xxxxxx that are inconsistent
in any substantial respect with the position, authority, or
responsibilities associated with the position of Chief
Financial Officer of ENI;
(II) the failure by ENI to accord to Xxxxxx the title, authority
and responsibilities of Chief Financial 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 Xxxxxx 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 Xxxxxx'x 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 Xxxxxx'x 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, Xxxxxx shall
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be entitled to the following payments:
(i) Upon the termination of Xxxxxx pursuant to this Sections
6(a)(i) or (iii), ENI shall remain obligated to Xxxxxx, 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.
(ii) Upon termination of Xxxxxx'x employment pursuant to Section
6(a)(ii) or the voluntary resignation of Xxxxxx, ENI shall be obligated to
Xxxxxx 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 Xxxxxx with respect to
such fiscal year but for the termination of his employment
multiplied by a fraction the numerator of which is the number of
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days elapsed in such fiscal year prior to the termination of
employment and the denominator of which is 365. Payment of any
prorated
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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 Xxxxxx pursuant to Section 4(b) hereto had
Xxxxxx not been terminated.
(iii) If Xxxxxx'x 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
Xxxxxx'x non-competition obligations set forth in Section 10 hereof, Xxxxxx
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 Xxxxxx'x Base Salary under this Section 6(b)(iii) shall cease as of
the date, if any, of a material breach by Xxxxxx of the provisions of
Sections 9 or 10 hereof.
(iv) Xxxxxx 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 Xxxxxx under this Agreement any amounts owed to ENI by Xxxxxx,
any amounts earned by Xxxxxx in other employment after termination of his
employment with ENI, or any amounts which might have been earned by Xxxxxx
in other employment had he sought such other employment.
Upon termination, Xxxxxx 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 Xxxxxx is employed
and during any period of disability pursuant to this Agreement and for a period
of twelve (12) months following Xxxxxx'x voluntary resignation or expiration of
the Term of this Agreement or the sale, transfer or assignment of his interest
in the Partnership whichever occurs first, an insurance policy or policies
providing coverage payable to ENI in the event of the death of Xxxxxx
("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 Xxxxxx shall
initially provide $4,000,000 of coverage, and shall thereafter increase each
year in an amount equal to the increase in Xxxxxx'x (a) Common Percentage in the
Partnership and (b) preferred stock and preferred stock units in ENI. The
Company agrees to apply any proceeds of such life insurance in accordance with
the redemption provisions of the SHC Partnership Agreement, to the extent
permitted by the Indenture (defined at Section 12(i) below). The Company agrees
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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 Xxxxxx 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
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ENI, which result from work which Xxxxxx may do for or at the request of ENI
("Inventions"), shall be the exclusive property of ENI. Xxxxxx 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. Xxxxxx
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. Xxxxxx 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.
Xxxxxx 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 Xxxxxx of his confidentiality obligations hereunder. In the
event of the termination of his employment, whether voluntary or involuntary and
whether by ENI or Xxxxxx, Xxxxxx 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. Xxxxxx acknowledges that the covenants and
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agreements in this Section 10 are in consideration of Xxxxxx'x employment with
ENI under this Agreement and Xxxxxx'x 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), Xxxxxx 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 Xxxxxx'x employment with ENI or of
which Xxxxxx 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, manufacture or distribution of any
industrial threaded fasteners or
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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 Xxxxxx 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
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upon termination or resignation of Xxxxxx'x employment hereunder, Xxxxxx shall
deliver to ENI all memoranda, notes, records, reports, photographs, drawings,
plans, papers or other documents made or compiled by Xxxxxx or made available to
Xxxxxx 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 Xxxxxx'x 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 XXXXXX, TO:
Xx. Xxxxx X. Xxxxxx
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
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exercising 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
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understanding of the parties, supersedes and replaces all prior agreements and
understandings relating to the subject matter hereof, including without
limitation the employment agreement between Xxxxxx 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.
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(i) COUNSEL. Xxxxxx 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 Xxxxxx'x consent. Although Xxxxx, Xxxxx & Xxxxx has
represented Xxxxxx previously in other matters, Xxxxx, Xxxxx & Xxxxx is not
acting as attorney for Xxxxxx 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 Xxxxxx
with respect to this Agreement.
(j) 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.
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/ Xxxxx X. Xxxxxx
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Xxxxx X. Xxxxxx
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