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EXHIBIT 10.26
EMPLOYMENT AGREEMENT
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This Employment Agreement (the "Agreement"), dated September 23, 1996, is
entered into by and between Ferrofluidics Corporation (the "Company"), a
Massachusetts corporation with its principal place of business at 00 Xxxxx
Xxxxxx, Xxxxxx, Xxx Xxxxxxxxx, and Xxxxxxx X. Xxxx ("Employee"), of 0 Xxxxx
Xxxx, Xxxxxxxxxx, Xxxxxxxxxxxxx 00000.
WHEREAS, the financial operations of the Company are a complex matter
requiring direction and leadership in a variety of areas;
WHEREAS, Employee possesses the experience and expertise to provide the
direction and leadership required by the Company; and
WHEREAS, subject to the terms and conditions hereinafter set forth, the
Company, therefore, wishes to establish the terms of employment of Employee as
its Vice President and Chief Financial Officer, and Employee agrees to so
establish such terms of this employment;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises, terms, provisions and conditions set forth in this Agreement, the
parties hereby agree:
1. EMPLOYMENT. Subject to the terms and conditions set forth in this
Agreement, the Company hereby offers and Employee hereby accepts employment on
the terms and conditions set forth in this Agreement.
2. EFFECTIVE DATE. The effective date (the "Effective Date") of this
Agreement shall be September 23, 1996.
3. Capacity and Performance.
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a. Employee shall be employed by the Company as its Vice President and
Chief Financial Officer, and shall have all powers and duties consistent
with those positions, subject to the direction of the Company's Board of
Directors.
b. Employee shall devote his best efforts, business judgment, skill
and knowledge to the advancement of the business and interests of the
Company and its affiliates, and to the discharge of his duties and
responsibilities hereunder. In accordance with the foregoing, Employee
shall not engage in any other business activity, except as may be approved
by the Board of Directors; PROVIDED, HOWEVER, that nothing herein shall be
construed as preventing Employee from investing his assets in a manner not
otherwise prohibited by this Agreement, and in such form or manner as shall
not require any material services on his part in the operations or affairs
of the companies or other entities in which such investments are made.
c. Except for required travel on the Company's business, Employee
shall not be required to work on a regular basis at any location outside of
Hillsborough County in the State of New Hampshire.
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4. Compensation and Benefits.
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a. BASE SALARY. The Company shall pay Employee a base salary at an
annual rate (the "Base Salary") equal to $140,000 per year, payable in
accordance with the payroll practices of the Company for its executives,
subject to annual salary reviews by the Compensation Committee of the
Company's Board of Directors (the "Compensation Committee") or the
President, as appropriate, on October 1st of each year for the duration of
the Term of this Agreement.
b. BONUS. Employee shall be entitled to participate in the Company's
Cash Incentive Plan (the "Bonus Plan"), whereby Employee will be eligible
to, and may, in the sole discretion of the Compensation Committee, earn as
an annual bonus a percentage of his Base Salary based 50% upon the
percentage of the Bonus Plan goals, as established by the Board of
Directors of the Company, achieved by the Company and 50% on individual
goals established by the President of the Company, in any given year, as
follows:
Percentage of Bonus Plan Percentage of Base Salary
Goals Achieved* Earned as Bonus
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80% 0%
100% 20%
120% 40%
* For percentages between 80% and 120%, the percentage of Base
Salary that may be earned by Employee will be determined by
linear interpolation.
c. On the Effective Date of this Agreement, Employee will be awarded
an incentive stock option to purchase 30,000 shares of Common Stock (the
"Stock Option") pursuant to the Company's 1995 Stock Option and Incentive
Plan (the "Stock Option Plan"). The Stock Option will be granted to
Employee at the market price of the shares of Common Stock underlying such
Stock Option as of the Effective Date and shall vest as follows:
Percentage of Shares Cumulative
Vesting Date Becoming Vested Percentage Vested
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September 23, 1997 25% 25%
September 23, 1998 25% 50%
September 23, 1999 25% 75%
September 23, 2000 25% 100%
As provided in Section 15 of the Stock Option Plan, all of the shares subject to
the Stock Option above shall become immediately vested and exercisable in full,
whether or not the Stock Option or any portion thereof is vested and exercisable
at such time, upon the occurrence of a "Change of Control" of the Company as
such term is defined in the Stock Option Plan.
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d. VACATIONS. Employee shall be entitled to the number of paid
vacation days to which he would be entitled in accordance with the
Company's normal vacation policy, to be taken at such times and intervals
as shall be determined by Employee, subject to the reasonable business
needs of the Company.
e. RETIREMENT PLANS. Employee shall be entitled to participate in and
enjoy the benefit of the Company's retirement, supplementary retirement,
deferred compensation or similar plans, programs or arrangements as
available to the Company's management from time to time.
f. HEALTH, WELFARE AND FRINGE BENEFIT PLANS, ETC. Employee shall be
entitled to participate in and enjoy the benefit of all the health,
medical, dental, cafeteria, reimbursement, death (including life
insurance), accident, travel insurance, long-term disability, short-term
disability, sick leave, other leaves of absence, holidays and other similar
welfare, fringe-benefit or employment-related plans, programs,
arrangements, policies or perquisites available to the Company's management
from time to time. Participation shall be subject to the terms of the
applicable plan documents and the discretion of the Board of Directors or
any administrative or other committee provided for in or contemplated by
such plan. The Company may alter, modify, add to or delete its employee
benefit plans as they apply to the Company's management at such times and
in such manner as the Company determines to be appropriate, without
recourse by Employee.
g. BUSINESS EXPENSES. The Company shall pay or reimburse Employee for
reasonable business expenses incurred or paid by him in the performance of
his duties and responsibilities hereunder, subject to any restrictions on
such expenses set by the Board of Directors and to such reasonable
substantiation and documentation as may be specified by the Company from
time to time.
h. MOVING EXPENSES. The Company shall reimburse Employee for
reasonable moving expenses incurred in connection with Employee's
relocation to New Hampshire, including without limitation costs and
expenses of moving furniture and family.
5. Termination of Employment and Severance Benefits.
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a. GENERAL SEVERANCE BENEFITS. The Company or Employee may terminate
this employment at will upon six (6) months prior written notice if such
notice is given within one year of Employee's employment hereunder, or
upon one year's prior written notice if such notice is given after the
first year of Employee's employment hereunder.
b. Change of Control Benefits.
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(1) If the Company undergoes a Change of Control (as defined
below) during the Term of this Agreement, and a Terminating Event
(as defined below) occurs within twelve (12) months after the
date on which such Change of Control occurs, Employee shall be
entitled to receive an amount equal to six (6) months' Base
Salary at the rate then in effect under this Agreement if such
Terminating Event occurs within the first year of Employee's
employment hereunder, and an amount equal to twelve (12) months'
Base Salary at the rate then in effect under
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this Agreement if such Terminating Event occurs after the first
year of Employee's employment hereunder.
(2) "Change of Control" shall mean the occurrence of any one
of the following events:
(i) any "person" (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Act")) becomes a "beneficial owner" (as
such term is defined in Rule 13d-3 promulgated under the
Act) (other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company),
directly or indirectly, of securities of the Company
representing 15% or more of the combined voting power of
the Company's then outstanding securities; or
(ii) persons who, as of the Effective Date, constituted
the Company's Board of Directors (the "Incumbent Board")
cease for any reason, including without limitation as a
result of a tender offer, proxy contest, merger or similar
transaction, to constitute at least a majority of the Board
of Directors, provided that any person becoming a director
of the Company subsequent to the Effective Date whose
election was approved by at least a majority of the
directors then comprising the Incumbent Board shall, for
purposes of this Agreement, be considered a member of the
Incumbent Board; or
(iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation
or other entity, other than (a) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
more than 50% of the combined voting power of the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation
or (b) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more
than 50% of the combined voting power of the Company's then
outstanding securities; or
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially
all of the Company's assets.
(3) A "Terminating Event" shall mean any voluntary or
involuntary termination of Employee's employment occurring
subsequent to a Change of Control, other than the termination of
Employee's employment pursuant to Section 5d hereunder.
c. DEATH OR DISABILITY. In the event Employee dies or becomes
disabled during the Term this Agreement, his employment hereunder
shall automatically terminate. In such case, the Company shall pay to
Employee or his beneficiary, as the case may be, any earned but unpaid
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salary as of the date of his death or disability. For the purpose of
this Agreement, "disability" shall refer to a situation in which
Employee is totally disabled from performing his duties for the
Company during a period of thirteen (13) consecutive weeks.
If any question shall arise as to whether during any period
Employee has suffered disability, Employee may, and at the request of
the Company will, submit to the Company a certification in reasonable
detail by a physician selected by Employee or his guardian to whom the
Company has no reasonable objection as to whether Employee was so
disabled and such certification shall for the purposes of this
Agreement be conclusive of the issue. If such question shall arise and
Employee shall fail to submit such certification, the Company's
determination of such issue shall be binding on Employee.
d. BY THE COMPANY FOR CAUSE. The Company may terminate Employee's
employment hereunder for cause at any time upon notice to Employee
setting forth in reasonable detail the nature of such cause. The
following, as determined by the Board of Directors in its reasonable
judgment, shall constitute "cause" for termination:
(1) Employee's falsification of the accounts of the Company,
embezzlement of funds of the Company or other material dishonesty
with respect to the Company or any of its affiliates; or
(2) Conviction of, or plea of nolo contendere to, a felony
or other crime involving moral turpitude (it being understood
that violation of a motor vehicle code does not constitute such a
crime); or
(3) Conduct engaged in or action taken or omitted to be
taken by Employee which is in material breach of this Agreement;
or
(4) Material failure to perform a substantial portion of
Employee's duties and responsibilities hereunder, which failure
continues for more than thirty (30) days after written notice
given to Employee pursuant to a vote of the Board of Directors,
such vote to set forth in reasonable detail the nature of such
failure; or
(5) Gross or willful misconduct of Employee' with respect to
the Company or any subsidiary or affiliate thereof.
Upon the giving of notice of termination of Employee's employment
hereunder for cause, the Company shall have no further obligation or
liability to Employee, other than the payment of salary earned and unpaid
at the date of termination and the contribution by the Company to the cost
of Employee's participation (subject to any required employee contribution
by Employee under the terms of the applicable plans) in the Company's group
medical and dental insurance plans as the same are in effect from time to
time for so long as Employee is entitled to continue such participation
under applicable law and plan terms.
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e. LIMITATION OF BENEFITS. It is the intention of Employee and of the
Company that no payments by the Company to or for the benefit of Employee
under this Agreement or any ether agreement or plan pursuant to which he is
entitled to receive payments or benefits shall be non-deductible to the
Company by reason of the operation of Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code") relating to "parachute payments,"
Accordingly, and notwithstanding any other provision of this Agreement or
any such agreement or plan, if by reason of the operation of said Section
280G, any such payments exceed the amount which can be deducted by the
Company, the payments which Employee is entitled to receive under this
Agreement shall be reduced by that amount which exceeds the maximum amount
deductible by the Company under Section 280G. To the extent that payments
exceeding such maximum deductible amount have been made to or for the
benefit of Employee, such excess payments shall be refunded to the Company
with interest thereon at the applicable federal rate determined under
Section 1274(d) of the Code, compounded annually, or at such other rate as
may be required in order that no such payments shall be non-deductible to
the Company by reason of the operation of said Section 280G.
6. WITHHOLDING. All payments made by the Company under this Agreement shall
be reduced by any tax or other amounts required to be withheld by the Company
under applicable law.
7. ASSIGNMENT. Neither the Company nor Employee may make any assignment of
this Agreement or any interest herein, by operation of law or otherwise,
without the prior written consent of the other; provided, however, that the
Company may assign its rights and obligations under this Agreement without the
consent of Employee in the event that the Company shall hereafter affect a
reorganization, consolidate with, or merge into, any other person or entity or
transfer all of its properties or assets to any other person or entity. This
Agreement shall inure to the benefit of and be binding upon the Company and
Employee, their respective successors, executors, administrators, heirs and
permitted assigns.
8. SEVERABILITY. If any portion or provision of this Agreement shall to any
extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
9. WAIVER. No waiver of any provision hereof shall be effective unless made
in writing and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this Agreement, or the
waiver by either party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
10. NOTICES. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
deemed given when delivered by hand, telex or facsimile, or if mailed, five days
after mailing (two business days in the case of courier service), to the parties
as follows: to Employee at his last known address on the books of
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the Company and, in the case of the Company, to its principal place of business,
attention of Clerk or to such other address as either party may specify by
notice to the other.
11. ENTIRE AGREEMENT. This Agreement and the Non-Disclosure/Non-Compete
Agreement executed by Employee constitute the entire agreement between the
parties and supersedes all prior communications, agreements and understandings,
written or oral, with respect to the terms and conditions of Employee's
employment.
12. AMENDMENT. This Agreement may be amended or modified only by a written
instrument signed by Employee and by an expressly authorized representative of
the Company.
13. HEADINGS. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope of or content of any
provision of this Agreement.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
15. GOVERNING LAW. This is a Massachusetts contract and shall be construed
and enforced under and be governed in all respects by the laws of The
Commonwealth of Massachusetts, without regard to the conflict of laws principles
thereof.
[END OF TEXT]
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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company, by its duly authorized representative, and by Employee, as of
the date first above written.
FERROFLUIDICS CORPORATION
/s/ Xxxxxxx X. Xxxx By: /s/ Xxxxxxxxx X. Xxxxxxxxxxx
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Xxxxxxx X. Xxxx Xxxxxxxxx X. Xxxxxxxxxxx
President and Chief Executive
Officer
