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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
the 12th day of July, 1999 by and between TRION, INC. (the "Company"), a
Pennsylvania corporation with principal executive offices in Sanford, North
Carolina, and XXXXXX X. XXXXXX, an individual residing in Sanford, North
Carolina (the "Executive");
RECITALS
Pursuant to an Agreement and Plan of Merger (the "Merger Agreement")
among the Company, TI Acquisition Corp. (the "Purchaser") and Fedders
Corporation ("Fedders"), of even date herewith, Fedders has agreed to acquire
the capital stock of the Company.
The Executive has been employed by the Company as its Vice President
and Chief Financial Officer.
The Company and Fedders desire to continue such employment and the
Executive desires to continue to serve in the aforesaid capacity under the terms
and conditions provided in this Agreement.
This Agreement replaces and supersedes that certain Change in Control
Agreement between the Executive and the Company.
The execution and delivery of this Agreement has been duly authorized
by the Company's Board of Directors (the "Board").
NOW, THEREFORE, the Company and the Executive, each intending to be
legally bound, hereby mutually covenant and agree as follows:
1. Termination of Change in Control Agreement; Term.
(a) This Agreement replaces and supersedes that certain Change
in Control Agreement dated as of May 19, 1998 between the Company and
the Executive and, upon execution hereof, such agreement shall be
terminated and of no further force or effect.
(b) The term of the Executive's employment shall commence on
the date hereof and continue until August 31, 2002, subject to the
earlier expiration of such term as provided in Paragraph 5. The term of
this Agreement will be extended automatically for one (1) year as of
August 31, 2002 and each annual anniversary date thereof unless, no
later than ninety (90) days prior to any such date, either the Company
or the Executive gives written notice to the other, in accordance with
Paragraph 11 hereof, that the terms of this Agreement shall not be so
extended.
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2. Duties. During the period of employment as provided in Paragraph 1
hereof, the Executive shall serve as Vice President and Chief Financial Officer
of the Company and perform all duties consistent with such position at the
direction of the Chairman and Chief Executive Officer of the Indoor Air Quality
unit of Fedders. The Executive's duties shall include, but not be limited to,
duties similar to those performed by the Executive for the Company prior to the
Company's merger with Fedders, and will include an increased emphasis on merger
and acquisition-related work. The Executive shall devote his entire time during
reasonable business hours (reasonable sick leave and vacations excepted) and
best efforts to fulfill faithfully, responsibly and satisfactorily his duties
hereunder.
3. Base Salary. For services performed by the Executive for the Company
pursuant to this Agreement during the period of employment as provided in
Paragraph 1 hereof, the Company shall pay the Executive a base salary of at
least $113,400 per year (the "Base Salary"), subject to review and adjustment by
the Company and payable in accordance with the Company's regular practices. The
Base Salary may be reviewed from time to time by the Company and may be
increased at the Company's discretion.
4. Other Benefits. In addition to the Base Salary to be paid to the
Executive pursuant to Paragraph 3 hereof, any compensation which may be paid to
the Executive under any additional compensation or incentive plan of the Company
or which may be otherwise authorized from time to time by the Company shall be
in addition to the Base Salary to which the Executive shall be entitled under
this Agreement. In addition to any other compensation, the Executive shall be
entitled to the following:
(a) Participation in Plans. The Executive shall be eligible
for participation in all incentive compensation plans, bonuses or
programs as may be in effect from time to time at the Company offered
to other executives with the Company who have similar responsibilities
and for which he is otherwise qualified to participate in (collectively
referred to as "Incentive Compensation") including, but not limited to,
the Trion 1999 Management Incentive Plan, which provides as follows:
(i) an annual Target Incentive of 35% of the Executive's Base Salary
(the "Target Incentive"), (ii) 80% of the Target Incentive will be
based upon the performance of the Company and 20% of the Target
Incentive will be based upon the individual performance of the
Executive measured against individual performance targets established
by the Chairman and Chief Executive Officer of Indoor Air Quality, and
(iii) the performance of the Company will be based 40% on net sales and
60% on operating income. Acquisitions made by the Company are not
included in the calculation. To the extent he is otherwise qualified to
do so, the Executive shall, also participate in the various retirement
benefit and other plans maintained in force by the Company from time to
time.
(b) Additional Incentive Compensation. In addition to the
Incentive Compensation provided for above, the Executive shall be
entitled to receive additional incentive compensation payments in an
amount equal to 1/8% of the total purchase price
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of acquisitions by the Company. The "total purchase price" is defined
as the purchase price for the equity or assets of such acquisition plus
debt assumed in the acquisition minus the cash on hand of the business
acquired on the date of closing of the acquisition. These payments will
be earned by the Executive upon the successful closing of the
acquisition and will be payable to the Executive in accordance with the
Company's policy for paying such bonuses regardless of whether the
Executive is employed by the Company at the time of such payment.
(c) Fringe Benefits. The Executive shall be entitled to such
perquisites of office, fringe benefits and other similar benefits as
are in effect and offered by the Company to executives with similar
duties and responsibilities from time to time during the term of this
Agreement.
(d) Expense Reimbursement. The Company shall reimburse the
Executive, upon proper accounting, for reasonable business expenses and
disbursements incurred by him in the course of the performance of his
duties under this Agreement and in accordance with the Company's
policies, as are in effect from time to time.
(e) Vacation. The Executive shall be entitled to three (3)
weeks of vacation during each year of this Agreement, or such greater
period as the Company shall approve, without reduction in salary or
other benefits.
(f) Stock Options. The Executive will be granted options to
purchase 25,000 shares of Fedders Class A Stock at a price equal to the
closing price of such stock on the New York Stock Exchange on the date
of the Merger in accordance with the Stock Option Agreement, a copy of
which is attached at Tab A of this Agreement. One-third of such options
to vest each year on the anniversary date of this Agreement. In
addition, the Executive shall also have the right to convert his
options to purchase the Company's stock into options to purchase Class
A Stock of Fedders upon the terms provided in the Merger Agreement in
accordance with the Stock Option Agreement.
5. Termination. Unless earlier terminated in accordance with the
following provisions of this Paragraph 5, the Company shall continue to employ
the Executive and the Executive shall remain employed by the Company during the
entire term of this Agreement as set forth in Paragraph 1. Certain capitalized
terms used in this Paragraph 5 and Paragraph 6 hereof are defined in Paragraph
5(e) below.
(a) Death or Disability. Except to the extent otherwise
expressly stated herein, this Agreement shall terminate immediately as
of the Date of Termination in the event of the Executive's death or in
the event that the Executive becomes disabled. The Executive will be
deemed to be disabled upon the earlier of: (i) the end of a six (6)
consecutive month period during which, by reason of physical or mental
injury or disease, the Executive has been unable to perform
substantially the Executive's usual and customary duties under this
Agreement with or without a reasonable accommodation and
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(ii) the date that the Company determines, on the basis of such
evidence as it may reasonably deem sufficient, that the Executive will,
by reason of physical or mental injury or disease, be unable to perform
substantially the Executive's usual and customary duties under this
Agreement for a period of at least six (6) consecutive months with or
without a reasonable accommodation. The Company shall promptly give the
Executive written notice of any such determination of the Executive's
disability and of its decision to terminate the Executive's employment
by reason thereof. In the event of disability, until the Date of
Termination the Base Salary payable to the Executive under Paragraph 3
hereof shall be reduced dollar-for-dollar by the amount of disability
benefits, if any, paid to the Executive in accordance with any
disability policy or program of the Company.
(b) Discharge for Cause. The Company may terminate the
Executive from his employment hereunder for cause. Any Discharge for
Cause of the Executive by the Company shall be communicated in writing
to the Executive in accordance with Paragraph 11 of this Agreement and
shall specify the basis for the discharge.
(c) Discharge Without Cause. The Company may terminate the
Executive from his employment hereunder upon ninety (90) days advanced
notice of Discharge Without Cause. The notice shall be communicated in
writing to the Executive in accordance with Paragraph 11 of this
Agreement.
(d) Resignation With Good Reason. The Executive may terminate
his employment with the Company upon ninety (90) days advance notice of
his Resignation With Good Reason. The notice shall be communicated in
writing to the Company in accordance with Paragraph 11 of this
Agreement.
(e) Definitions. For purposes of this Paragraph 5 and
Paragraph 6 hereof, the following capitalized terms shall have the
meanings set forth below:
(i) "Accrued Obligations" shall mean, as of the Date
of Termination, the sum of: (A) the Executive's Base Salary
under Paragraph 3 through the Date of Termination to the
extent not theretofore paid; (B) the amount of any Incentive
Compensation, including the Target Incentive (paid on a pro
rata basis through the date of termination), bonuses, deferred
compensation and other cash compensation earned by the
Executive as of the Date of Termination to the extent not
theretofore paid; (C) severance pay in accordance with the
Company's then existing severance policy for executives with
similar responsibilities; and (D) any vacation pay, expense
reimbursements and other cash entitlements earned by the
Executive as of the Date of Termination to the extent not
theretofore paid.
(ii) "Discharge for Cause" shall mean any termination
by the Company resulting from the conviction of the Executive
of (or a plea of no contest with respect to) a felony or
misdemeanor involving moral turpitude or a determination by
the Company that the Executive has engaged in serious
misconduct (such as
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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 Fedders or materially damaging to the
relationships of the Company or Fedders with its customers,
suppliers or employees). However, prior to a final
determination by the Company that the Executive has engaged in
serious misconduct, the Company will provide notice to the
Executive of the basis for its belief that the Executive has
engaged in serious misconduct and will allow the Executive an
opportunity to rebut any and all claims of serious misconduct.
The notice shall be communicated in writing to the Executive
in accordance with Paragraph 11 of this Agreement.
(iii) "Date of Termination" shall mean: (A) in the
event of a Discharge for Cause or resignation (other than for
good reason), the date the Executive (in the case of Discharge
for Cause) or the Company (in the case of resignation other
than for good reason) receives written notice of such
discharge or resignation of employment or any later date
specified therein or agreed to by the parties (which date
shall be not more than fifteen (15) days after the giving of
such notice); (B) in the event of the Executive's death, the
date of the Executive's death; (C) in the event of termination
of the Executive's employment by reason of Disability pursuant
to Paragraph 5(a), the date the Executive receives written
notice of such termination by the Company; and (D) in the
event of Discharge Without Cause or Resignation With Good
Reason, the ninety first (91st) day after the Executive (in
the case of Discharge Without Cause) or the Company (in the
case of Resignation With Good Reason) receives written notice
of such discharge or resignation of employment or any later
date agreed to by the parties.
(iv) Resignation With Good Reason shall mean any
termination by the Executive of his employment with the
Company within one (1) year after the occurrence of any of the
following:
(A) A reduction in the Base Salary, the
benefits or perquisites provided to the Executive
under this Agreement;
(B) A relocation of the Executive's
principal place of business to a location which is
more than 50 miles from its current location;
(C) The assignment to the Executive of any
duties inconsistent in any respect with the
Executive's current position and duties with the
Company as modified by Paragraph 2 hereof (including
status, offices, titles and reporting requirements),
or any action by the Company which results in
diminution in such position, or the Executive's
authority, duties or responsibilities, but excluding
for this purpose any isolated, insubstantial and
inadvertent action not taken in bad faith and which
is
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remedied by the Company, promptly after receipt of
written notice thereof given by the Executive in
accordance with this Agreement; or
(D) Any material breach of this Agreement by
the Company.
(v) "Discharge Without Cause" shall mean a
termination by the Company of the Executive from his
employment that is not a Discharge for Cause.
6. Obligations of the Company Upon Termination.
(a) Death, Disability, Resignation (Other than a Resignation
With Good Reason) or Discharge For Cause. If the Executive's employment
with the Company terminates because of death, disability, resignation
(other than a Resignation With Good Reason) or a Discharge For Cause:
(i) the Company shall pay to the Executive all
Accrued Obligations in a lump sum in cash within thirty (30)
days after the Date of Termination; and
(ii) the Executive shall be entitled to receive all
benefits earned by him as of the Date of Termination under the
Company's retirement, incentive, or other benefit plans in
which the Executive was participating as of the Date of
Termination, including accrued benefits payable by reason of
the Executive's death or disability, if applicable (but only
to the extent not previously paid or distributed to the
Executive) in such manner and at such time as are provided
under the terms of such plans and arrangements; and
(iii) except as otherwise provided in Paragraph 15
hereof, all other obligations of the Company hereunder shall
cease forthwith.
(b) Termination Without Cause or Resignation With Good Reason.
In the event of a Termination Without Cause (other than in the case of
disability) or a Resignation With Good Reason:
(i) the Company shall pay all Accrued Obligations to
the Executive in a lump sum in cash within thirty (30) days
after the Date of Termination; and
(ii) the Company shall pay to the Executive an amount
equal to the balance of Base Salary for the remainder of the
Agreement and any Incentive Compensation including the Target
Incentive then in effect for the year in which such
termination occurs and each year remaining during the term of
this Agreement. Said amount shall be paid to the Executive in
a lump sum in cash within thirty (30) days after the Date of
Termination; and
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(iii) an amount equal to the sum of the maximum
contributions that could have been made by the Company on the
Executive's behalf to all defined contribution plans of the
Company on the same basis as in effect on the Date of
Termination for the remainder of the Agreement shall be paid
to the trustees of such plan(s) within thirty (30) days after
the Date of Termination, however, in the event any such
plan(s) will not allow such payment(s) the Company shall pay
to the Executive in lump sum in cash within thirty (30) days
after the Date of Termination the total amount not accepted by
any such plan(s); and
(iv) the Executive shall be entitled to receive all
benefits accrued by him as of the Date of Termination under
the Company's retirement, incentive or other benefit plans in
which the Executive was participating as of the Date of
Termination (but only to the extent not previously paid or
distributed to the Executive) in such manner and at such time
as are provided under the terms of such plans; and
(v) the Company agrees that in the event the
Executive and/or his dependents elect to continue health
coverage under COBRA and remain eligible for COBRA coverage
continuation, the Company will pay all premium costs for such
coverage continuation for the Executive and/or his dependants
to the full extent and duration allowed by COBRA.
(vi) the Company agrees that in the event the
Executive is so terminated or resigns during the initial three
(3) year term of this Agreement, any stock options granted to
the Executive pursuant to Paragraph 4(g) hereof which at that
point have not fully vested, shall vest immediately and the
Executive shall have thirty (30) days from the Date of
Termination (as defined above) to exercise such options.
(vii) except as otherwise provided in Paragraph 15
hereof, all other obligations of the Company hereunder shall
cease forthwith.
(c) Limitation on Payments. Notwithstanding the foregoing or
any other provision of this Agreement to the contrary, if tax counsel
selected by the Company and acceptable to the Executive determines that
any portion of any payment under this Agreement would constitute an
"excess parachute payment," then the payments to be made to the
Executive under this Agreement shall be reduced (but not below zero)
such that the value of the aggregate payments that the Executive 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 Executive 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 Executive under this Agreement on an
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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 Executive if such limitation is applied.
7. Indemnification. The Company shall defend and hold the Executive
harmless to the fullest extent permitted by applicable law in connection with
any claim, action, suit, investigation or proceeding arising out of or relating
to performance by the Executive of services for, or action of the Executive as
an officer or employee of the Company, or of any other person or enterprise for
which the Executive serves or acts in such capacity at the request of the
Company. Expenses incurred by the Executive in defending a claim, action, suit
or investigation or criminal proceeding shall be paid by the Company in advance
of the final disposition thereof upon the receipt by the Company of an
undertaking by or on behalf of the Executive to repay said amount if it shall
ultimately be determined that the Executive is not entitled to be indemnified
hereunder. The foregoing shall be in addition to any indemnification rights the
Executive may have by law, contract, charter, by-law or otherwise.
8. Confidential Information. The Executive will not, during or after
the term of this Agreement, disclose to any firm or person any information,
except as otherwise required by law, including but not limited to information
about the Company, its affiliates and its customers, that is treated as
confidential by the Company or an affiliate, to which the Executive has gained
or gains access by reason of his position as an employee of the Company or of an
affiliate of the Company. Except as otherwise required by law, the Company will
not, without the Executive's written consent, disclose to any person any
personal or confidential information about the Executive.
9. Right to Injunctive Relief. The Executive acknowledges that the
Company will suffer irreparable injury, not readily susceptible of valuation in
monetary damages, if the Executive breaches any of his obligations under
Paragraph 8 above. Accordingly, the Executive agrees that the Company will be
entitled to seek injunctive relief against any breach or prospective breach by
the Executive of the Executive's obligations under Paragraph 8 in any Federal or
State court of competent jurisdiction sitting in the State of New Jersey. The
Executive hereby submits to the jurisdiction of such courts for the purposes of
any actions or proceedings instituted by the Company to obtain such injunctive
relief, and agrees that process may be served on the Executive by registered
mail, addressed to the last address of the Executive known to the Company, or in
any manner authorized by law.
10. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
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(c) 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.
11. Notices. All notices, requests, demands and other communications
hereunder shall 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, addressed as follows:
(a) to the Company or the Board, to:
Trion Inc.
C/o Fedders Corporation
000 Xxxxxxxxxxxx Xxxx
Xxxxxxx Xxxxxx, Xxx Xxxxxx 00000
Attn.: Corporate Secretary
(b) to the Executive, to:
Xxxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Addresses may be changed by written notice sent to the other party at the last
recorded address of that party.
12. Execution in Counterparts. This Agreement may be executed by the
parties hereto in two or more counterparts, each of which shall be deemed to be
an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
13. Unconditional Obligations; Dispute Resolution.
(a) 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
Executive or others.
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(b) 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 New Jersey by three
arbitrators, one of whom shall be appointed by the Company, one by the
Executive 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 Paragraph 13. The cost
of any arbitration proceeding hereunder shall be borne equally by the
Company and the Executive. 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.
14. Governing Law. Any disputes with regard to this Agreement shall be
governed by, construed and enforced in accordance with the laws of the State of
New Jersey, without regard to conflict of law principles.
15. Survival. The provisions of this Paragraph 15 and Paragraphs 6
through 10, 13, 14, 16, and 17 shall survive the termination of this Agreement
to the extent necessary to effectuate the respective purposes of such
provisions.
16. Severability. If any provision of this Agreement shall be adjudged
by any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement.
17. Miscellaneous. This Agreement, and any Stock Option Agreements
between the parties hereto, embody the entire understanding of the parties
hereto, and supersede all other oral or written agreements or understandings
between them regarding the subject matter hereof. No change, alteration or
modification hereof may be made except in a writing, signed by each of the
parties hereto. The headings in this Agreement are for convenience of reference
only and shall not be construed as part of this Agreement or to limit or
otherwise affect the meaning hereof.
18. Condition Precedent. The execution and effectiveness of this
Agreement is subject to successful completion of the tender offer described in
Merger Agreement.
19. Proration. The parties acknowledge that Fedders' fiscal year ends
on August 31 and that the Company's fiscal year has previously ended on December
31. The parties agree to equitably prorate the amount due under the Trion, Inc.
1999 Management Incentive Plan as of August 31, 1999 in order that a new
incentive compensation plan using the criteria described in Paragraph 4(a) will
be established to cover the fiscal year ending August 31, 2000.
(Signatures appear on following page.)
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
ATTEST: TRION, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
Title: President & Chief Executive Officer
WITNESS: EXECUTIVE
/s/ Xxxx X. Xxxxx /s/ Xxxxxx X. Xxxxxx
