Exhibit 10.2
May 21, 2004
Xxxxx X. Xxxxxxx
000 Xxxx Xxxxx Xxx
Xxxxxx Xxxx, XX 00000
RE: Salary Continuation Agreement
Dear Xxxxx:
This letter sets forth the terms of the agreement between Xxxxxxx & Xxxxx,
Inc. (the "Company") and you with regard to the circumstances under which you
are entitled to receive from the Company a continuation of your salary in the
event of a termination of your employment with the Company and certain other
specified matters.
In consideration of your acceptance on May 21, 2004 of the appointment as
President and Chief Executive Officer of the Company and your agreement that so
long as you are an executive officer of the Company, you will perform to the
best of your abilities the duties of your office, the Company agrees with you as
follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the meanings set forth below:
(a) "Affiliate(s)" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of
1934.
(b) "Base Salary" means $500,000 or your annual salary as most
recently fixed by the Board of Directors of the Company.
(c) "Change of Control" means and shall be deemed to have occurred
on (i) the date of the merger or consolidation of the Company with or into
another entity (or other similar reorganization), whether or not the
Company is the surviving corporation, in which the shareholders of the
Company immediately prior to the effective date of such transaction own
less than 50% of the voting power in the surviving entity; (ii) the date
of the sale or other disposition of all or substantially all of the assets
of the Company, or a complete liquidation or dissolution of the Company;
(iii) the date upon which a Person becomes, directly or indirectly, the
beneficial owner of 20% or more of the outstanding voting power of the
Company provided such Person is not controlled, directly or indirectly, by
persons related to Xxxxxxx X. Xxxxx XX by blood or marriage; or (iv) the
date of a change in the composition of the Board of Directors of the
Xxxxx X. Xxxxxxx
May 21, 2004
Page 2
Company such that individuals who were members of the Board of Directors
on the date two years prior to such change (or who were subsequently
elected to fill a vacancy in the Board, or were subsequently nominated for
election by the Company's shareholders, by the affirmative vote of at
least two thirds of the directors then still in office who were directors
at the beginning of such two year period) no longer constitute a majority
of the Board of Directors of the Company. For purposes of the preceding
definition, "Person" shall mean any individual, firm, company,
partnership, other entity or group, but excluding the Company, its
Affiliates, any employee benefit plan maintained by the Company, or an
underwriter temporarily holding securities pursuant to an offering of such
securities.
(d) "Misconduct" means (i) a willful failure or refusal on your part
to perform properly the duties of your employment to the extent of your
ability to do so; (ii) dishonesty or disloyalty in relation to the
Company; or (iii) your engaging in, or rendering services or assistance
to, a business which is in competition with any business conducted the
Company.
2. Termination of Employment. If your employment with the Company is
terminated either (i) by action of the Board of Directors of the Company
otherwise than for your Misconduct, (ii) by your resignation with the consent of
the Board of Directors of the Company, or (iii) by reason of a sale or other
disposition by the Company of its business (including a discontinuance of
operations), the Company shall pay to you an amount equal to your Base Salary;
provided, however, that if your termination of employment under this paragraph
occurs within two years after a Change of Control, then the Company shall pay
you an amount equal to two times your Base Salary.
3. Executive Officer Status. If you shall be removed from, or shall
fail to be re-elected to, an executive office with the Company otherwise than by
reason of Misconduct and if you shall resign from your employment with the
Company within thirty (30) days following the date on which you cease to be an
executive officer of the Company, the Company will pay to you an amount equal to
your Base Salary; provided, however, that if your termination of employment
under this paragraph occurs within two years after a Change of Control, then the
Company shall pay you an amount equal to two times your Base Salary.
4. Salary Reduction. If your Base Salary shall be reduced by more
than fifteen percent (15%) other than in the course of a general temporary
salary reduction, affecting all or substantially all of the executives of the
Company, due to adverse business conditions or a financial crisis on the part of
the Company, and if you shall resign from your employment with the Company
within thirty (30) days after receiving notice of such salary reduction, the
Company will pay to you an amount equal to your Base Salary; provided, however,
that if your termination of employment under this paragraph occurs within two
years after a Change of Control, then the
Xxxxx X. Xxxxxxx
May 21, 2004
Page 3
Company shall pay you an amount equal to two times your Base Salary. For the
purposes of this paragraph, any such reduction in your Base Salary will be
considered to meet the foregoing requirements if such reduction, together with
all other similar reductions in your Base Salary which occurred during the
period of two (2) years immediately preceding the date of such reduction, shall
aggregate more than fifteen percent (15%) of your Base Salary in effect at the
beginning of such two-year period together with any increases in your salary
which shall have occurred during such period.
5. Payment; Termination of Agreement and Payments at Age 65. In the
event the Company becomes obligated pursuant to the terms of this Agreement to
pay you an amount equal to your Base Salary or two times your Base Salary, then
such amounts shall be paid in consecutive equal monthly installments, with the
number of monthly installments being twelve (12) in the event the amount to be
paid is equal to your Base Salary and twenty-four (24) installments in the event
the amount to be paid is equal to two times your Base Salary. The first
installment shall be paid on the 15th day of the month following the month in
which your employment is terminated.
On the date you reach age 65, this Agreement shall automatically
terminate and be null and void. In the event you are receiving payments under
this Agreement at the time you reach age 65, no further payments shall he made
to you pursuant to this Agreement after you reach age 65.
6. Binding on Successors. This Agreement shall inure to the benefit
of, and be binding upon, any successor, whether by merger, consolidation or
purchase, to the business or all or substantially all of the assets of the
Company. It is acknowledged that if the Company should be a party to a merger or
consolidation with another corporation that this Agreement shall be binding upon
the surviving entity by operation of law. In the event the Company sells all or
substantially all of its assets, then the Company shall require the purchasing
party to expressly assume and agree to perform this Agreement. In the event the
Company fails to obtain such agreement of the purchasing party in form and
substance reasonably satisfactory to you prior to the acquisition of such assets
of the Company by the purchasing party and if, within six months after the
acquisition of such assets by the purchasing party, you cease to be employed by
the Company and are not employed by the purchasing party for any reason,
including your resignation from any such employment, your employment shall be
considered for all purposes of this Agreement as having been terminated by
reason of the sale by the Company of its business after a Change of Control as
provided in clause (iii) of paragraph 2.
7. Non-Competition Provisions.
(a) You agree that while employed by the Company and for the
12-month period immediately after you cease to be employed by the Company you
will not, without the prior written consent of the Company, either directly or
indirectly, perform any services (whether advisory, consulting, employment or
otherwise) for, invest in or otherwise become associated
Xxxxx X. Xxxxxxx
May 21, 2004
Page 4
with in any capacity, any person, corporation, partnership or other entity which
engages in a Competitive Business (as defined below); provided, however, that
nothing herein contained shall prevent you (1) from purchasing and holding for
investment less than 2% of the shares of any corporation, the shares of which
are regularly traded either on a national securities exchange or in the
over-the-counter market or (2) from providing services to any corporation,
partnership, or other entity if the Competitive Business represents less than
15% of the gross revenues of such corporation, partnership, or entity and your
services are not rendered, directly or indirectly, to the division or subsidiary
which is engaged in the Competitive Business.
(b) For purposes of this Agreement, "Competitive Business" means the
design, engineering, manufacture, marketing, distribution, sale, or servicing in
the Prohibited Territory (as defined below) of processing, packaging, printing,
or security equipment used in the pharmaceutical industry, wellhead, drilling
and recovery equipment used in the oil and gas industry, progressing cavity
pumps, industrial mixers and agitators, or glass-lined reactor and storage
vessels. "Prohibited Territory" means the countries in which the Company or one
of its Affiliates had manufacturing or distribution facilities or sales offices
at any time that you were employed by the Company.
8. Annual Cash Bonus. You will be a participant in the Company's
Annual Cash Bonus Plan. For the Company's fiscal year ending August 31, 2005,
your target bonus will be guaranteed and will be 60% of your Base Salary or
$300,000. This amount will be prorated over your initial 14 months of
employment, with the result that your total bonus will be $350,000. This
$350,000 amount will be paid to you promptly following the release of the
Company's results for the fiscal year ending August 31, 2005.
9. Arbitration. Any controversy or claim arising out of or relating
to this Agreement, or the breach thereof (other than a controversy or claim
involving Paragraph 7 of this Agreement), shall be settled by arbitration in
Dayton, Ohio, in accordance with the Rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof.
10. Savings Clause. In the event that it is determined that any
payment by the Company to or for your benefit (whether paid or payable pursuant
to the terms of this Agreement or otherwise) would be subject to the 20% tax
pursuant to Section 4999 of the Internal Revenue Code, as amended (the "Code"),
then the aggregate present value of amounts payable to or for your benefit
pursuant to this Agreement (such payments pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced to the Reduced
Amount. For purposes of this section, the "Reduced Amount" shall be defined as
an amount expressed in present value, which maximizes the aggregate present
value of Agreement Payments without causing any payments to be subject to the
20% tax pursuant to Section 4999 of the Code. The foregoing provisions of this
paragraph shall not apply and shall be null and void if within 10 days after the
termination of your employment with the Company, you notify the Company in
writing
Xxxxx X. Xxxxxxx
May 21, 2004
Page 5
that the application of the foregoing provisions of this paragraph 10 would, on
an after-tax basis, likely result in an economic detriment to you.
When executed by you, this Agreement shall become effective as of
July 12, 2004. If the foregoing accurately sets forth your agreement with the
Company, please so indicate your agreement and acceptance by signing in the
space provided below.
Very truly yours,
/s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
Vice Chairman of the Board
ACCEPTED AND AGREED TO:
/s/ Xxxxx X. Xxxxxxx
--------------------
Xxxxx X. Xxxxxxx
Dated: May 21, 2004
