EXHIBIT 10 (xviii)
[LETTERHEAD OF LUMEX, INC.]
May 9, 1996
Mr. X. Xxxxxxx Xxxxxxx
6169-5th Line Eramosa Township
Wellington County, Ontario NOB 2KO
Dear Xxx:
This letter confirms our agreement to amend and restate the terms of
your employment with Lumex, Inc. (the "Company"), as follows:
1. Term. Your employment will be for a term of three years beginning
September 1, 1995 through August 31, 1998 (the "Term"). If the Company does not
extend or renew this Agreement at the end of the Term, the Company shall make a
termination payment equal to your Base Salary, at the annual rate in effect at
the time of such termination, for a period of 12 months after the effective date
of termination. In this case, the Base Salary shall be paid to you in such
intervals and in the same manner as it was paid immediately prior to the end of
the Term.
2. Duties.
(a) You shall serve as the Company's President and Chief Executive
Officer, which shall be the most senior officer of the Company. As such, you
shall have all the functions, duties and responsibilities of a President and
Chief Executive Officer, and all other senior executives of the Company shall
report to you.
(b) During the Term, you shall devote your full business time and
energies to the business and affairs of the Company, and shall not accept other
employment, except that, if approved by the Company's Board of Directors (the
"Board"), you may serve as a member of one of the boards of directors of other
companies. You shall use your best efforts and abilities to promote the
interests of the Company, to serve as a director or officer of any subsidiary of
the Company to which you are elected and you shall perform such duties
consistent with your status as Chief Executive Officer as may be assigned to you
by the Board.
(c) So long as you shall comply with your obligations under this
Agreement and you continue to be employed by the Company as its President and
Chief Executive Officer, throughout the Term, you shall be proposed for election
to the Board. As an executive of the
Mr. X. Xxxxxxx Xxxxxxx
May 9, 1996
Page 2
Company and a member of the Board, you will be a "covered person" under the
Company's policy of directors' and officers' liability insurance.
(d) You will perform your services principally at the Company's
principal executive office in or near Colorado Springs, Colorado, acknowledging
that the nature of your duties will require reasonable domestic and
international travel from time to time.
3. Compensation. Your compensation shall consist of the salary and
benefits described below:
(a) A base salary at the annual rate of $300,000 ("Base Salary").
The Compensation Committee of the Board shall review the Base Salary in 1997,
and depending upon the Company's 1996 Results of Operations, Base Salary shall
be subject to an increase in 1997. Such review shall occur not later than March
31, 1997, and shall be effective as of January 1, 1997. Thereafter, Base Salary
shall be reviewed in accordance with the Company's customary practices
respecting executive compensation, but which in any event will occur at least
once in each calendar year.
(b) You shall participate in the Company's Bonus Incentive
Compensation Plan (the "BIC Plan") in accordance with its terms, except that the
following special provisions shall be applicable to you:
(i) Your "Target" shall be 50%, your "Maximum" 100% and your
"Max-Max" 150%, as each term is defined in the BIC Plan.
(ii) Whether or not the 1996 Target is achieved, you shall
receive on September 1, 1996 a minimum, non-forfeitable allowance of $70,000
under the BIC Plan for the year ending December 31, 1996, and if it develops
that you are entitled under the BIC Plan to more than $70,000 for such year,
such balance shall be paid in 1997 in accordance with the terms of the BIC Plan;
and
(iii) At your election, you may receive between 10% and 40% of
the amount payable to you under the BIC Plan in the form of the Company's common
stock, converted at a value equal to 85% of its market value, all in accordance
with the BIC Plan.
(c) You shall be granted the following under the Company's 1995
Omnibus Incentive Plan, based on the value of the Company's common stock as of
the close of trading on August 2, 1995:
(i) A restricted stock grant of 25,000 shares of restricted
common stock, in accordance with the terms of a Restricted Stock Award agreement
which will provide, among other things, that 20% of such restricted common stock
will vest on each anniversary date of your
Mr. X. Xxxxxxx Xxxxxxx
May 9, 1996
Page 3
employment, but if any "Change of Control" (as defined in paragraph 9) occurs
sooner, all 25,000 shares of the restricted stock will vest on the effective
date of the Change of Control;
(ii) A restricted stock grant of 20,000 shares of restricted
common stock, in accordance with the terms of a Restricted Stock Award agreement
which will provide, among other things, that 100% of such restricted common
stock will vest on the earliest of (A) February 8, 1995, (B) the effective date
of a Change of Control and (C) if a "Partial Sale" (as defined in paragraph 9)
occurs, on the effective date of the Partial Sale;
(iii) A non-qualified stock option for 25,000 shares of common
stock, in accordance with a grant letter which will provide, among other things,
that such options will vest at the rate of 25% each year beginning on the first
anniversary of your employment, but if any Change of Control or Partial Sale
occurs sooner, the option will 100% vest on the effective date of the Change of
Control or Partial Sale.
(d) You shall receive reimbursement for your reasonable
out-of-pocket expenses in connection with searching for a residence in the
vicinity of the Company's principal executive office, which shall be in the
Colorado Springs area. This shall include real estate broker's fees or
commissions for the sale of your current residence, mortgage "points" and your
actual out-of-pocket moving costs. You also will receive all other amounts which
are payable in accordance with the Company's re-location policies covering its
most senior executives.
(e) The Company will arrange to have your existing residence in
Ontario, Canada purchased through either its relocation service, PHH Home Equity
or a suitable relocation service of your choosing. The Company also shall pay
you up to $35,000 to reimburse you for your "Market Loss" (defined below)
associated with purchasing your existing residence through the relocation
service. Market Loss shall be computed by subtracting from the actual gross
sales price of such residence the market value of same, as determined averaging
two appraisals by companies selected by the relocation service. The Company
shall tax protect you for the amount of the Market Loss it pays to you, by
paying you additional compensation sufficient to reimburse you for the federal
and state income tax, at your highest marginal rate, that you are required to
pay on any Market Loss payment to you under this paragraph ("Tax
Reimbursement"). The amount of the Tax Reimbursement shall be determined by and
set forth in a certificate of your tax accountant, subject to review by the
Company's accountants.
(f) You shall be reimbursed for your actual ordinary and reasonable
out-of-pocket expenses incurred in the conduct of the Company's business. You
shall either receive an annual automobile allowance (payable in monthly
installments) or be furnished with a company-leased automobile, in either case
commensurate with your position as and in accordance with the policies and
procedures that the Company applies to its most senior executive officer.
Mr. X. Xxxxxxx Xxxxxxx
May 9, 1996
Page 4
(g) A supplemental insurance benefit which will provide you with up
to $10,000 to be used for any one or more of the following purposes:
(i) either (A) your purchase of an individual policy of health
insurance covering any gaps in the coverage for you and your family that is
available under the Company's group health insurance plan or (B) your expenses
for providing medical care to you and your family members that are not paid or
reimbursed under the Company's group health insurance plan due to the
application of deductibles, co-insurance or exclusions;
(ii) your purchase of life insurance to provide benefits up to
three times your Base Salary; and
(iii) a policy of disability insurance which would reduce or
eliminate the waiting period under the Company's group disability program and/or
increase the monthly benefit available to you under that program.
(h) All compensation and benefits shall be subject to all
withholdings that the Company determines are required by federal, state or local
law, and to such deductions as may be applicable under the various benefit plans
in which you participate.
4. Other Benefits. In addition to the compensation and benefits
described in paragraph 3, you shall receive paid vacation of four weeks in each
calendar year, in accordance with the policies and procedures that the Company
applies to a senior executive officer. You shall be eligible for and participate
in sick leave and coverage under any life, health, dental, disability or other
insurance programs made available to other senior executive officers
("Benefits"). You shall also be eligible to participate in any pension,
profit-sharing, restricted stock award, stock option or other future employment
benefit, incentive or compensation program made available to senior executive
officers of the Company, and where appropriate, with special application to you
as Chief Executive Officer ("Executive Benefits").
5. Termination. Termination of employment can occur in the following
manner:
(a) The Company shall have the right to terminate this Agreement
"for cause", which as used herein shall be limited to one or more of the
following:
(i) fraud or embezzlement, or conviction of a felony or the
entry of a plea (including a plea of nolo contendere) for any felony.
(ii) breach of your material obligations under the
confidentiality or non-competition obligations described in paragraph 8;
Mr. X. Xxxxxxx Xxxxxxx
May 9, 1996
Page 5
(iii) any act of moral turpitude or willful misconduct which
either results in your personal enrichment at the Company's expense or, in the
reasonable judgment of the Board, has a material adverse impact on the business
or reputation of the Company or any of its affiliates; or
(iv) your material breach of or willful failure or refusal to
perform your obligations under this Agreement. You will not be considered to
have materially breached this Agreement or willfully failed to perform your
obligations if you correct the same 30 days after the Board provides notice to
you specifying the nature of the breach, failure or refusal, or if the Board
determines that you did not act in bad faith or that your action or inaction was
based on your reasonable belief that it was in the Company's best interests.
(b) If you should die during the Term.
(c) If you become "disabled" during the Term. For the purpose of
this Agreement, disability shall mean either any disability as defined under the
Company's disability insurance policy that is applicable to you, or if no such
policy is available, a determination by a licensed physician practicing in New
York City or Long Island that you have suffered any physical or mental
disability or incapacity which causes you to be incapable of performing the
services required under paragraph 2. You will be considered "disabled" if the
disability actually prevents you from performing such services for a period of
three consecutive months or a total of three months during any twelve-month
period.
(d) The Company may terminate this Agreement other than for cause,
in which case you shall receive your Base Salary, at the annual rate in effect
at the time of such termination, for a period equal to the greater of (i) the
balance of the Term after the effective date of termination, or (ii) 12 months
from such date ("Severance Pay"). In this case, 50% of the Severance Pay shall
be paid to you in equal payments over three months, and the balance in equal
payments over the applicable Severance Pay continuation period, in such
intervals and in the same manner as Base Salary was paid at the time of
termination. If the Company terminates other than for cause, you also shall
receive a bonus under the BIC Plan if you reach the Target at the date
termination occurs. Any bonus under the BIC Plan will be pro rata, based upon
the month of termination, and shall be paid in the same manner and at the same
time as it would have been paid if you were still employed at the date the BIC
Plan bonus was awarded.
(e) Subject to the provisions of paragraph 9, you shall have the
right to terminate this Agreement if there is a Change of Control.
6. Other Termination Provisions.
(a) Upon any termination of your employment or non-renewal of the
Term, you shall immediately resign from all positions and offices with the
Company and its subsidiaries,
Mr. X. Xxxxxxx Xxxxxxx
May 9, 1996
Page 6
whether or not you submit a formal letter of resignation. Any termination or
non-renewal shall not affect your confidentiality or non-disclosure obligations
referred to in paragraph 8. At any termination or non-renewal, you shall receive
any restricted stock grants which are then vested, and you shall be entitled to
exercise any stock options which are then exercisable in accordance with the
terms of your stock option grant letter with the Company.
(b) Any termination shall be by notice given in accordance with
paragraph 10(e), shall specify the effective date of termination, and shall
provide the reasons for such action, as required by paragraph 5.
(c) If termination occurs as a result of death, the Company shall
pay to your spouse, if she survives you, or to such persons as your legal
representative may direct if your spouse does not survive you, an amount equal
to your then effective Base Salary and such other compensation or benefits to
which you are entitled, prorated to the date of death. If termination occurs
under paragraphs 5(a), 5(c) or 5(f), the Company's obligations shall be limited
to paying you your then effective Base Salary and any other compensation or
benefits prorated to the effective date of termination.
7. Representations and Covenants.
(a) You represent and warrant to the Company that you are not now
subject to any non-competition, restrictive covenant or other restriction or
agreement which would prevent, limit or impair in any way your ability to
perform all your obligations under this Agreement. You have no obligation to any
former employer or other person which is inconsistent with or conflicts with
your duties and obligations hereunder, and the terms and conditions of the
services to be performed for the Company, as set forth herein. You have not ever
applied for and been denied a resident visa for employment in the United States,
and you know of no reason why you would not be able to obtain the resident visa
necessary for you to enter into this Agreement and perform your services as
contemplated by it.
(b) At the Company's request, you shall complete reasonable medical
examinations from time to time if necessary to obtain insurance on your life for
any "keyman" insurance policy the Company may apply for, or if required under
any Company sponsored benefit plan.
8. Confidentiality, Ownership and Non-Competition Agreements. You
shall sign the same agreements with the Company concerning confidentiality,
ownership of inventions and other discoveries, and non-competition which the
Company customarily requires of its senior executive officers at the same time
you sign this Agreement. A copy of that form of that agreement is annexed.
However, to the extent the non-competition provisions of that agreement cover a
shorter time, the period shall be enlarged to extend through the end of any
period you continue to receive payments under this Agreement, including payments
on Change of Control.
Mr. X. Xxxxxxx Xxxxxxx
May 9, 1996
Page 7
9. Change of Control.
(a) "Change of Control" means any one of the following:
(i) a change of control of a nature that would be required to
be reported in the Company's proxy statement under the Securities Exchange Act
of 1934, as amended (the "Exchange Act");
(ii) the approval by the Board of a sale of all or
substantially all of the Company's assets to any unrelated third party and the
consummation of such transaction;
(iii) the consummation of any merger, consolidation, or like
business combination or reorganization of the Company which is approved by the
Board and which results either in an event described in clause (i) above.
Change of Control excludes the sale or other disposition (by spin-off, split-off
or otherwise) of all or substantially all of the assets of one of the two
divisions known today as the Lumex and Cybex Divisions of the Company ("Partial
Sale"), under circumstances where you continue to be employed by the remaining
division pursuant to all the terms and conditions of this Agreement. A Partial
Sale, followed by a sale or other disposition of the remaining division does
constitute a Change of Control.
(b) If you wish to exercise your right to terminate your employment
upon a Change of Control you must give the Company at least 90 days' notice not
more than 30 days after any event constituting a Change of Control occurs. Your
failure to give such notice shall preclude you from terminating employment upon
a Change of Control, but only with respect to that occurrence. During the 90 day
period following the delivery of your notice of termination, you shall cooperate
fully with the Company (or its successor) to effect the orderly transfer of your
duties to another person or persons. Notwithstanding the foregoing, upon receipt
of your notice of termination upon a Change of Control, the Company may cause
your termination to become effective prior to the end of the 90 day period (or
if later, the date specified in your notice of termination) upon not less than
two business days' notice.
(c) If you terminate employment upon a Change of Control, the
Company (or its successor) shall pay you an amount equal to the Base Salary, at
the annual rate in effect at the time of such termination, multiplied by 2.99.
Of the amount so determined, 50% shall be paid to you in equal installments for
a period of 12 months after the effective date of termination, and the balance
in equal installments over the next 24 months. In both cases, payments shall be
in such intervals and in the same manner as Base Salary was paid at the time of
termination. In addition, upon your termination of employment due to a Change of
Control, the Company's successor shall for a period of one year after
termination continue for you, and your family where
Mr. X. Xxxxxxx Xxxxxxx
May 9, 1996
Page 8
applicable, benefits and benefit plans which are essentially equivalent to the
Benefits and Executive Benefits.
(d) Notwithstanding the foregoing, you shall have no right to
terminate upon a Change of Control if you are offered continued employment for
at least three full years following the Change of Control in a comparable
position, with comparable responsibilities at comparable total compensation, all
as provided herein. If, within the three-year period following the Change of
Control, you are offered and accept such comparable employment but (i) you are
subsequently demoted to non-comparable employment, (ii) you are terminated
without Cause (as defined in paragraph 5(a)) or (iii) you terminate for "Good
Reason" (determined below), the Company (or its successor) shall pay to you, in
a single installment, an amount equal to the difference between (i) the amount
you actually received in the new employment following the Change of Control and
(ii) your Base Salary, at the annual rate in effect at the time the Change of
Control occurred, multiplied by 2.99. Good Reason means (i) the assignment of
any duties inconsistent in any material respect with the your position
immediately prior to the Change of Control (including office, titles and
reporting requirements), (ii) material decrease in your authorities, duties and
responsibilities, (iii) any material negative changes to Base Salary, annual
bonuses, incentives, stock plans, savings and incentive plans, welfare/benefits
plans, expense policies, fringe benefits, or your office, support staff, (iv)
failure of the Company's successor to take all measures necessary to maintain in
full force and effect the current status of your H/1B visa (or equivalent status
necessary to enable you to continue to be employed in the United States as
contemplated by this Agreement) or (v) any requirement that you relocate to an
office other than the principal executive office of the Company or its successor
or that you move your personal residence from the Colorado Springs area. Also,
you would have Good Reason to terminate if there was an attempt to terminate
your employment other than for cause, as expressly permitted by paragraph 5(a)
of this Agreement.
(e) If there is a Change of Control prior to May 1, 1997 and at that
time you had not yet sold your Ontario residence, the Company shall pay you for
the full amount of your Market Loss (and Tax Reimbursement), without regard to
the $35,000 limitation described in paragraph 3(e).
10. Miscellaneous.
(a) Your obligations under this Agreement are not assignable (except
as provided in paragraph 6(c)) and shall not be delegated. This Agreement and
all of the Company's rights and obligations hereunder may be assigned or
transferred to and shall be assumed by and be binding upon any corporation or
other business entity which, by merger, consolidation, purchase of the assets or
otherwise, including after a Change of Control, acquires all or a material part
of the assets of the Company.
Mr. X. Xxxxxxx Xxxxxxx
May 9, 1996
Page 9
(b) If any provision contained in this Agreement or the agreements
referred to in paragraph 8 is determined to be unenforceable for any reason, the
remainder of this Agreement or such other agreements shall be construed as if
such provision was not included, and the remaining parts shall continue in full
effect. If the unenforceability relates to the scope, duration or the area
covered by any non-competition agreement, we agree that the court making such
determination shall have the power to reduce the breadth of its scope or the
duration or area of such restriction, and in reduced form, such restriction
shall then be enforceable.
(c) This Agreement is executed and delivered in the State of New
York and shall be interpreted in accordance with New York law, without regard to
its principles of conflicts of laws. Any action or proceeding to enforce any
provisions of this Agreement may be brought in a federal or state court located
in the Denver/Colorado Springs vicinity, and any such action may be commenced
and process served as provided in the laws or rules applicable to the federal or
state court where the action is brought.
(d) This Agreement and those referred to in paragraph 8 constitute
the entire understanding of the parties with respect to your employment with the
Company, and they may not be amended, and none of their respective provisions
may be waived other than by a writing signed by both of us.
(e) All notices and other communications required or permitted
hereunder shall be in writing and shall be sufficient if delivered personally,
sent by any national overnight courier or mailed by certified mail, return
receipt requested, to the addresses indicated on page one. Any item delivered in
accordance with the provisions of this paragraph shall be deemed to have been
delivered (i) on the date of personal delivery, (ii) on the business day
following the date sent by overnight courier or (iii) on the fifth business day
following the date on which it was so mailed, as the case may be. Notice to the
Company shall be to the attention of its Chief Financial Officer.
(f) You shall receive all your payments in and all dollar references
in this letter are to U.S. dollars.
(g) Subject to your compliance with the agreements referred to in
paragraph 8, your right to receive the payments set forth herein on termination
or non-renewal is otherwise unconditional. Accordingly, you shall not be
required to mitigate by seeking new employment or substitute sources of income.
Further, your obtaining other employment or positions (subject to compliance
with the agreements referred to in paragraph 8) shall not affect your right to
receive and the Company's obligation to pay or provide you with all the
termination or non-renewal payments and benefits provided herein.
Mr. X. Xxxxxxx Xxxxxxx
May 9, 1996
Page 10
Please countersign this letter where indicated, whereupon it will
become effective to amend and restate your Employment Agreement, effective the
date hereof.
Sincerely,
LUMEX, INC.
By: /s/ Xxxx X. Xxxxxx
--------------------------------
Name: Xxxx X. Xxxxxx
Title: Chairman of the Board
Accepted and Agreed to:
/s/ X. Xxxxxxx Xxxxxxx
------------------------------
X. Xxxxxxx Xxxxxxx
