Exhibit 10.38
TRANSITION AGREEMENT, RELEASE AND WAIVER
THIS TRANSITION AGREEMENT, RELEASE AND WAIVER ("Agreement") is executed
this 7th day of January, 2004, by and between XXXXXXX XXXXXXX, an individual
residing at 00000 Xxxxxxxx Xxxx Xxxx, Xxxxxxx, Xxxx 00000, referred to in this
Agreement as "Xxxxxxx", and XXXX CORPORATION, a Delaware corporation whose
principal address is 000 Xxxxxx Xxxxxx, Xxxxx 00-0000, Xxxxxxxxx, Xxxx 00000,
referred to in this Agreement as "Hawk."
R E C I T A L S :
Xxxxxxx was originally employed by Hawk as President of its Powder
Metal Group in August of 2001. He is currently employed as President of Hawk
Precision Components Group, Inc. ("HPCG").
Xxxxxxx now desires to phase out of his employment with Hawk and its
affiliated companies, and Hawk is willing to accommodate that desire, upon the
terms and conditions hereinafter set forth. Accordingly, Xxxxxxx and Xxxx agree
as follows:
1. CONTINUING EMPLOYMENT, TERMINATION OF EMPLOYMENT RELATIONSHIP;
CONSULTING.
(a) Xxxxxxx shall remain in his current position until
the effective date of the installation of a new President of HPCG, which the
parties now contemplate to take place on or about January 1, 2004.
(b) During the period from January 1, 2004 through March
31, 2004, Xxxxxxx will serve as an advisor to the President of HPCG on a full
time basis, at his present rate of pay and fringe benefits. Line authority will
be vested in the new President, and Xxxxxxx'x time will be devoted to assisting
in and supporting the transition of the group to new leadership. Xxxxxxx'x time
will also be spent working on such other projects as may be assigned by the
chairman of Hawk, so long as such assignments are consistent with Xxxxxxx'x
position as a former group president. Specific areas of focus will include, but
will not necessarily be limited to; sales support and the smooth transition of
third party relationships such as with Hoganas, Hoeganaes, Hydropulsor, and SMS
Meer to the new President.
(c) Xxxxxxx agrees that (i) he will not accept any full
time employment (other than the employment described in this Agreement) until
March 31, 2004, and (ii) after that date, if he does accept other employment
Xxxxxxx will provide Hawk with at least thirty (30) days prior notice before he
leaves Hawk and begins other full time employment. In the event Xxxxxxx does
accept other full time employment, his compensation from Hawk will cease
immediately.
(d) If Xxxxxxx has not accepted other fulltime
employment, during the period from April 1, 2004 through June 30, 2004, Xxxxxxx
will continue to serve as an employee of Hawk, as an advisor to the president of
HPCG, and reporting to that president. Xxxxxxx will be compensated by a salary
equal to seventy five percent (75%) of his current rate of base compensation.
(e) Through June 30, 2004, Xxxxxxx will continue to
receive fringe benefits such as health insurance, car allowance, etc., but he
will not be entitled to receive any additional stock options or incentive
compensation. On June 30, 2004, Xxxxxxx'x tenure as an employee of Hawk and its
affiliates shall formerly end, and June 30, 2004 is sometimes referred to in
this Agreement as the "Termination Date."
(f) Beginning on July 1, 2004, Xxxxxxx will become a
consultant of Hawk, on an as needed basis. He will be compensated for consulting
services at the rate of $2,000 per day.
2. HEALTH INSURANCE. Hawk will continue to provide health
insurance coverage to Xxxxxxx, through the end of June, 2004 (the "Coverage
Period"), on the same basis as such coverage is provided to employees of Hawk in
general, but in no event shall Hawk be required to provide greater coverage than
that which was in effect immediately prior to the date hereof. Xxxxxxx must make
any required employee contributions or co-payments in a timely fashion in order
to maintain this coverage. At the end of the Coverage Period, Xxxxxxx shall have
such rights of conversion and/or continuation as may be provided by the terms of
the applicable health insurance contract and as may be required under applicable
law.
3. RELEASE AND WAIVER. With respect to any and all events arising
out of or related to the employment relationship between Xxxxxxx and Xxxx, HPCG
and any entity affiliated with Hawk or HPCG (such entities being referred to
collectively hereinafter as "Employer"), occurring on or before the date of this
Agreement:
(a) Xxxxxxx hereby releases and forever discharges
Employer from any and all claims, demands and causes of action; this includes,
among other things, claims based on the legal theories of wrongful or unjust
termination, breach of contract (express or implied, including without
limitation a certain letter agreement dated on or about August 7, 2001),
promissory estoppel, negligent or intentional (tortious) conduct, negligent or
intentional infliction of emotional distress, defamation, breach of any implied
covenant of good faith and fair dealing, and any and all forms of employment
discrimination, and including claims for attorneys' fees, expenses and costs
related to any of the foregoing;
(b) Xxxxxxx hereby releases and forever discharges
Employer from any and all claims, demands and causes of action, and waives any
rights he may have, under Title VII of the Civil Rights Act of 1964, under 42
U.S.C. Section 1981, under the Age Discrimination in Employment Act ("ADEA"),
under the Americans With Disabilities Act, under the Family and Medical Leave
Act of 1993, under the Civil Rights Attorney's Fees Awards Act of 1976, under
Chapter 4112 of the Ohio Revised Code, or under any other federal, state or
local statute prohibiting discrimination in employment, or to request that a
lawsuit be instituted pursuant to 29 U.S.C. Section 206(d); and
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(c) Xxxxxxx agrees not to institute a lawsuit with
respect to any matters released or any rights waived in this Agreement.
(d) Nothing contained in this Agreement is intended to
constitute a release or waiver of any claim arising out of or related to a
party's breach of any of his/its obligations pursuant to the terms of this
Agreement.
4. CONFIDENTIALITY OF AGREEMENT. Each party agrees that the
existence of this Agreement and its terms and conditions are confidential and
are to be held in strict confidence by the parties and their counsel; provided,
however, that (i) the parties shall be entitled to disclose such terms to their
respective attorneys and accountants, (ii) Xxxxxxx may disclose such terms to
his spouse, so long as she also agrees to hold such information confidential,
(iii) Hawk may disclose such terms to those executive level employees who have a
reasonable need to know, in connection with the performance of their job duties,
so long as each such employee also agrees to hold such information confidential
and (iv) disclosure shall be permitted if required by legal process, but not
before the third business day after such party has both received notice of such
process and has delivered a copy thereof to the other party hereto. No party
will voluntarily reveal or engage in any action which it knows or should know
will result in the revelation of any information to any third party concerning
the existence of this Agreement, the contents of this Agreement, or the basis
upon which the claims of the parties have been settled and compromised; the
party may indicate only that all matters have been settled. Notwithstanding the
foregoing, Hawk shall be entitled to make any disclosure concerning this
Agreement and its terms and conditions that it believes to be required under
laws or regulations applicable to reporting by publicly-held companies.
5. COVENANTS OF NON-COMPETITION AND NON-SOLICITATION.
(a) Xxxxxxx agrees that, during the two (2) year period
beginning on the date of this Agreement (the "Restricted Period"), Xxxxxxx shall
not, directly or indirectly, either within any state of the United States of
America in which Employer has done business or with respect to any customer
serviced or solicited by Employer during Xxxxxxx'x employment, compete with
Employer in any aspect of "the Company's Business" as hereinafter defined, on
behalf of himself or any other person, firm, business, corporation or other
entity (each such person, firm, business or other entity being referred to
hereinafter as a "Person"), including, without limitation, that Xxxxxxx shall
not (i) engage in the Company's Business for his own account; (ii) enter the
employ of, or render any services to, any Person engaged in the Company's
Business; (iii) become interested in any Person engaged in the Company's
Business as an owner, partner, shareholder, officer, director, licensor,
licensee, employee, agent, employee, trustee, or in any other relationship or
capacity; provided, however, that Xxxxxxx may own, directly or indirectly,
solely as an investment, securities of any corporation which are traded on any
national securities exchange if he (A) is not a controlling person of, or a
member of a group which controls, such corporation, or (B) does not, directly or
indirectly, own 1% more of any class of securities of such corporation; or (iv)
request or instigate any account or customer of Employer to withdraw, diminish,
curtail or cancel any of its business with Employer. In the event of Xxxxxxx'x
breach of any provision of this paragraph, the running of the Restricted Period
shall be automatically tolled (i.e., no part of the Restricted Period shall
expire) from and after the date of the first such breach. The Company Business
shall
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mean the business of manufacturing, distributing or selling (i) any products
made of powder metal or using a metal injection molding process, or (ii)
friction products, in each case in which Employer was engaged at any time during
Xxxxxxx'x employment with Employer, or the conducting of research and
development directed toward any aspect of such businesses.
(b) Xxxxxxx agrees that, prior to the later of December
31, 2004 or one year from the date of this Agreement (the "No Hire Period"),
Xxxxxxx shall not, directly or indirectly, hire, solicit for employment or
encourage to leave the employment of Employer any person who (i) is then an
employee of Employer, (ii) had been an employee of Employer at any time during
the preceding six (6) months, and in either case (iii) was an employee of
Employer on the date of this Agreement. In the event of Xxxxxxx'x breach of any
provision of this paragraph, the running of the No Hire Period shall be
automatically tolled (i.e., no part of the No Hire Period shall expire) from and
after the date of the first such breach.
(c) Both parties recognize that, if Xxxxxxx breaches, or
threatens to commit a breach of, any of the provisions of paragraphs 4, 5 and 6
(the "Restrictive Covenants"), then Hawk shall have, in addition to, and not in
lieu of, any other rights and remedies available to Hawk under law or in equity,
the right to specific performance and/or injunctive relief, it being
acknowledged and agreed that any such breach or threatened breach will cause
irreparable injury to Hawk and that money damages will not provide an adequate
remedy to Hawk.
6. CONFIDENTIAL INFORMATION. Xxxxxxx recognizes and acknowledges
that confidential information, including, without limitation, information,
knowledge or data (i) of a technical nature such as but not limited to methods,
know-how, formulae, compositions, processes, machinery (including computer
hardware), discoveries, inventions, products, product specifications, computer
programs and similar items or research projects; (ii) of a business nature such
as but not limited to information about products, cost, purchasing or suppliers,
profits, market, sales or customers, including lists of customers, and the
financial condition of Employer; (iii) pertaining to future developments such as
but not limited to strategic planning, research and development or future
marketing or merchandising, and trade secrets of Employer; and (iv) all other
matters which Employer treats as confidential (the items described above being
referred to collectively hereinafter as "Confidential Information"), are
valuable, special and unique assets of Employer. During and after the Restricted
Period, Xxxxxxx shall keep secret and retain in strictest confidence, and shall
not use for the benefit of himself or others except in connection with the
business and affairs of Employer, any and all Confidential Information learned
by Xxxxxxx before or after the date of this Agreement, and shall not disclose
such Confidential Information to anyone outside of Employer either during or
after employment by Employer, except as required in the course of performing
duties of his employment with Employer, without the express written consent of
Employer or as required by law. Xxxxxxx further agrees to return all such
information which is in his possession or under his control to Hawk within five
(5) business days after the Termination Date, and all copies thereof (including
any Confidential Information contained on the computer described in paragraph 13
below). Information shall not be considered to be "Confidential Information" if
Xxxxxxx can show that such information was, at the time of disclosure, or
subsequently became through no act or omission of Xxxxxxx, known to the general
public, through publication or otherwise.
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7. XXXXXXX COOPERATION. At no cost to Hawk or Xxxxxxx, Xxxxxxx
agrees to provide reasonable cooperation to Hawk regarding any pending or
subsequently filed litigation, claims or other disputed items involving Employer
that relate to matters within the knowledge or responsibility of Xxxxxxx during
his employment, other than claims brought by or on behalf of Xxxxxxx that have
not been released hereunder. Without limiting the foregoing, Xxxxxxx agrees (i)
to meet with Hawk's representatives, its counsel or other designees at mutually
convenient times and places in the Greater Cleveland area with respect to any
items within the scope of this provision, (ii) to provide truthful testimony
regarding same to any court, agency or other adjudicatory body, and (iii) to
provide Hawk with notice of contact by any adverse party. Xxxxxxx further agrees
that he will not assist any such adverse party or such adverse party's
representatives except as may be required by law.
8. DISPARAGING COMMUNICATIONS.
(a) Xxxxxxx agrees not to make false representations of
fact, or defame, disparage, discredit or deprecate Employer, or any of its
owners or employees, or otherwise communicate with any person in a manner
tending to damage Employer or any of its owners or employees, in its/their
reputation, office, trade, business or means of earning a livelihood.
(b) Hawk agrees not to make false representations of
fact, or defame, disparage, discredit or deprecate Xxxxxxx, or otherwise
communicate with any person in a manner tending to damage Xxxxxxx, in his
reputation, office, trade, business or means of earning a livelihood.
9. XXXXXXX'X CONSULTING BUSINESS. The parties understand that
Xxxxxxx intends to begin a consulting business, in which he will offer his
services as a business consultant, to assist companies in the development and
implementation of strategies to do business in China (the "Xxxxxxx Consulting
Business"). In connection therewith:
(a) Xxxxxxx covenants that, during the period from April
1, 2004 through June 30, 2004, he will not spend more than twenty-five percent
(25%) of his business time and effort engaging in the Xxxxxxx Consulting
Business, and that the time he spends engaging in the Xxxxxxx Consulting
Business during that period of time shall not interfere with his performance of
his obligations pursuant to paragraph 1(d) of this Agreement. Xxxxxxx further
covenants that, after June 30, 2004, his engaging in the Xxxxxxx Consulting
Business shall not interfere with his performance of his obligations pursuant to
this Agreement.
(b) Hawk acknowledges that, in general, Xxxxxxx'x
engaging in the Xxxxxxx Consulting Business does not constitute a violation of
the terms of paragraph 5(a) of this Agreement; provided, however, that if a
customer or client of the Xxxxxxx Consulting Business is also engaged in an
aspect of the Company Business (as defined in paragraph 5(a) of this Agreement),
a violation would be deemed to occur.
(c) In the event that a customer or client of the Xxxxxxx
Consulting Business is also either using or prospectively using powder metal
parts, metal injection molded parts or friction materials, (i) if the customer
of the Xxxxxxx Consulting Business is also a customer of Hawk or its affiliates,
Xxxxxxx shall not in any way supply or advise the customer with respect to
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the acquisition or use of powdered metals, except to encourage the customer to
remain a customer of Hawk or its affiliates; and (ii) ) if the customer of the
Xxxxxxx Consulting Business is not already a customer of Hawk or its affiliates,
Xxxxxxx shall use his best efforts to cause that customer to become a customer
of Hawk or its affiliates, including, without limitation, that Xxxxxxx will
arrange an opportunity for Hawk or its affiliates to bid on that customer's
business, and to have a "last look" if possible.
10. STOCK OPTIONS.
(a) The parties hereto are also parties to a certain
Incentive Stock Option Agreement entered into as of August 7, 2001 (the "August
2001 Option Agreement"). Xxxxxxx acknowledges that 12,000 of the options under
the August 2001 Option Agreement have vested in accordance with the terms of the
August 2001 Option Agreement and may be exercised at any time by Xxxxxxx in
accordance with the August 2001 Option Agreement. Nevertheless, Xxxxxxx hereby
agrees to forgo any and all rights he may have under the August 2001 Option
Agreement, including the rights to exercise the vested options. Therefore,
effective as of the date of this Agreement, the August 2001 Option Agreement is
hereby terminated in its entirety.
(b) Hawk acknowledges that Xxxxxxx has recommended that
the total amount of options, vested and unvested, that he was originally granted
under the August 2001 Option Agreement and which he has now agreed to surrender
in accordance with paragraph 9(a) be granted to key HPCG personnel. Without any
legal or other obligation on its part, Hawk will take Xxxxxxx'x recommendation
under advisement.
(c) Hawk confirms to Xxxxxxx that the certain Incentive
Stock Option Agreement entered into as of October 5, 2001 (the "October 2001
Option Agreement") remains in full force and effect. Xxxxxxx at his discretion
may determine whether or not to exercise the options granted thereunder. Any
such exercise by Xxxxxxx shall be made in accordance with the terms of the
October 2001 Option Agreement.
11. TERMS OF OFFER; REVOCATION.
(a) This Agreement has been delivered to Xxxxxxx on the
29th day of December, 2003. The offer contained herein shall remain open until
the end of the twenty-first full day after delivery.
(b) After execution of this Agreement, Xxxxxxx may revoke
his agreement hereto by delivering written notice of revocation to Hawk at any
time during the period from the date of Xxxxxxx'x execution through the end of
the seventh full day after such execution (the "Revocation Period").
12. COUNSEL. Hawk advises and encourages Xxxxxxx to consult with
an attorney prior to signing this Agreement.
13. COMPUTER. At the Termination Date, so long as Xxxxxxx has not
breached this Agreement, the computer which Hawk has supplied to Xxxxxxx for his
use during his employment
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shall be transferred to Xxxxxxx, in consideration of the promises of Xxxxxxx
contained in this Agreement. No further action by any party shall be required to
effect the transfer of that computer to Xxxxxxx; provided, however, that as a
condition precedent to such transfer, all Confidential Information of Hawk and
its affiliates which may be contained on that computer shall be permanently
deleted from its memory, shall not be retained by Xxxxxxx in any form or format,
and Xxxxxxx shall provide Hawk with such access to that computer as Hawk may
reasonably deem necessary or appropriate to verify compliance with this
provision.
14. NO LIABILITY. Nothing contained in this Agreement is intended
to constitute an admission by Employer of liability of any nature whatsoever to
Xxxxxxx, and Employer expressly denies any such liability.
15. GOVERNING LAW; JURISDICTION. This Agreement shall be governed
by and shall be interpreted in accordance with the laws of the State of Ohio,
and the parties hereby confer jurisdiction upon the courts of any jurisdiction
within the State of Ohio to determine any dispute arising out of or related to
this Agreement, or the breach hereof.
16. COSTS OF ACTION. In the event that any party to this Agreement
brings any action or proceeding in connection with this Agreement, the
prevailing party in such action shall be entitled to recover, as part of such
action or proceeding, its costs therein including reasonable attorneys' fees.
17. COUNTERPARTS. This Agreement may be executed by the parties in
one or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. The execution of
counterparts shall not be deemed to constitute delivery of this Agreement by a
party until both of the parties have executed and delivered their respective
counterparts.
18. HEADINGS. The section and other headings contained in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
19. SEVERABILITY. It is the intention of the parties that the
terms and provisions of this Agreement be construed to be separable and
severable. If any term or provision of this Agreement shall be held void,
invalid, unenforceable or in conflict with any applicable law, all of the other
terms and provisions of this Agreement shall remain valid and fully enforceable.
20. ENTIRE AGREEMENT; AMENDMENTS. This Agreement embodies the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, oral or written,
with respect thereof. This Agreement may not be changed orally, but may be
amended, superseded, cancelled, renewed or extended, and the terms hereof may be
waived, only by an instrument in writing signed by each of the parties, or, in
the case of a waiver, signed by the party against whom enforcement of such
waiver is being sought.
21. ACKNOWLEDGEMENT. Xxxxxxx acknowledges that he has carefully
read all of the terms of this Agreement, that such terms have been fully
explained to him and that he understands
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the consequences of each and every term, that he has had sufficient time and an
opportunity to consult with his own legal advisor prior to signing this
Agreement, and that he specifically understands that by signing this Agreement
he is giving up any and all rights he may have against Hawk under the laws and
legal theories referred to above with respect to events occurring on or before
this date.
THIS TRANSITION AGREEMENT, RELEASE AND WAIVER signed at Cleveland, Ohio
on the date set forth in the first paragraph above.
/s/ Xxxxxxx Xxxxxxx
---------------------------------------
XXXXXXX XXXXXXX
HAWK CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------------------
Its: Chairman
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