1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of the
1st day of June, 1996 by and between X.X. Xxxxx, an individual
("Employee"), and FAIRFIELD MANUFACTURING COMPANY, INC., an Indiana
corporation (the "Company").
In consideration of the premises and mutual agreements
hereinafter set forth, and upon the terms and subject to the
conditions contained herein, Employee and the Company hereby agree as
follows:
Section 1. Employment.
1.1 Term. The Company shall employ Employee, and Employee shall
serve the Company, for a two year term beginning on the date of this
Agreement and ending on June 1, 1998, unless sooner terminated
pursuant to the provisions of this Agreement (the "Term of
Employment").
1.2 Duties.
(a) Capacity. During the Term of Employment, Employee shall be
employed in an executive capacity and shall assume and perform such
reasonable executive and managerial responsibilities and duties as may
be assigned to him hereafter from time to time by the Chairman of the
Executive Committee or the Board of Directors of the Company or their
respective successors. Employee will serve as President and Chief
Operating Officer of the Company and will report to the Chairman of
the Executive Committee or the Board of Directors of the Company and
it is the intention of the Company that he remain so employed during
the Term of Employment. Such employment shall be changed only to a
position of equal or greater executive status and only with the
consent of Employee.
(b) Schedule and Location. During the Term of Employment,
Employee shall be employed on a full-time basis. Employee's services
during the Term of Employment shall be rendered in accordance with
such policies as the Company may establish for the conduct of its
respective officers and employees. Employee shall not be required to
relocate himself or his office from Lafayette, Indiana in connection
with the performance of his duties hereunder without his consent.
(c) Exclusivity. Without limiting the generality of the
foregoing, during the Term of Employment, Employee shall not, without
prior written approval of the Chairman of the Executive Committee or
the Board of Directors of the Company, render services of a business,
professional or commercial nature for compensation to any other entity
or person.
1.3 Compensation. During the Term of Employment, as
compensation for the services to be rendered during such period and
the other obligations undertaken by Employee hereunder, Employee shall
be entitled to the following compensation:
(a) Salary. The Company shall pay to Employee an annual base
salary (the "Base Salary") of $200,000 or such greater amount as may
be determined upon a review of Employee's performance to be undertaken
by the Chairman of the Executive Committee or the Board of Directors
of the Company on an annual basis. During the Term of Employment,
Employee's Base Salary shall be payable in accordance with the
Company's policy.
(b) Expenses; Vacation. The Company shall reimburse Employee
for his travel and entertainment expenses in connection with his
employment hereunder in accordance with the policies of the Company in
effect from time to time. During the Term of Employment, Employee
shall be entitled to three (3) weeks of vacation and such other fringe
benefits, including paid holidays, provided to Company executives as
of the effective date of this Agreement.
(c) Incentive Compensation. During the Term of Employment,
Employee shall be entitled to participate in any annual bonus program
such as the "1996 Management Incentive Compensation Plan" that may be
implemented during the Employee's Term of Employment. Under such
annual bonus program that may be implemented, the Employee's target
bonus percentage, based on operating performance at the 100% level,
will not be less than 40 percent (40%) of his annual salary for such
year. In the event the Annual Bonus shall be payable with respect to
a period in the year in which the Term of Employment expires that is
less than an entire year, the Annual Bonus for such period shall be a
pro rata bonus determined by multiplying the Annual Bonus which
Employee would have received for the entire year in which the Term of
Employment expires, by a fraction, the numerator of which shall be the
number of days in that calendar year preceding the expiration of the
Term of Employment and the denominator of which shall be 365.
(d) Additional Benefits. Employee also shall be entitled to
receive all benefits for which he is eligible under the terms of any
stock option plan, stock purchase plan, bonus or extra compensation
plan, pension plan, profit sharing plan, life and medical insurance
and reimbursement programs, disability plans and any other plans or
arrangements, which plans, programs, or arrangements the Company or
its subsidiaries may provide for its executives ("Additional
Benefits") from time to time. Additional Benefits shall in all
respects be paid in accordance with the then-existing plans, or
policies, programs, and/or arrangements establishing or governing such
Additional Benefits. The Company and its subsidiaries reserve the
right to add, terminate, and/or amend any existing plans, policies,
programs, and/or arrangements during the Term of Employment and at any
other time.
(e) Club Membership. Employee shall be provided with a
membership to the Lafayette Country Club. Annual dues, monthly
assessment fees, special assessments and any business related expenses
shall be paid by the Company during the Term of Employment.
Section 2. Termination of Employment.
2.1 Right to Terminate.
(a) Death. This Agreement shall terminate upon Employee's
death.
(b) Disability. In the event that Employee, because of
accident, disability or physical or mental illness, is incapable of
performing his duties hereunder, the Company shall have the right to
terminate Employee's employment hereunder upon 30 days prior written
notice to Employee. For purposes of this Section 2.1 (b), Employee
shall be deemed to have become incapable of performing his duties
hereunder if he shall have been incapable of so doing for (a) a
continuous period of 120 days and remain so incapable at the end of
such 120-day period, or (b) periods amounting in the aggregate to 120
days within any one period of 365 days and remain so incapable at the
end of such aggregate period of 120 days.
(c) Cause. The Company shall have the right to terminate
Employee's employment hereunder for cause. The term "cause" shall
mean (i) the willful and negligent failure or refusal by Employee to
perform his duties hereunder, (ii) the willful engaging by Employee in
misconduct which is materially injurious to the Company, monetarily or
otherwise, or (iii) the
conviction of the Employee of, or the entering of a plea of nolo
contendere by Employee with respect to, a felony.
(d) Other. The Company shall have the right to terminate
Employee's employment hereunder for any other reason not specified in
this Section 2.1 upon 30 days' prior written notice to Employee.
(e) By Employee For Cause. Employee shall have the right to
terminate this Agreement upon 30 days' prior written notice to the
Company if at any time during the Term of Employment (i) another
person shall be appointed as President without Employee's consent or
Employee shall be assigned duties materially inconsistent with and
inferior to the duties of his position as described in Section 1.2
(a), (ii) the principal executive offices of the Company shall be
transferred or attempted to be transferred from the geographical
vicinity of Lafayette, Indiana without Employee's consent, or (iii)
the Company shall materially breach or fail to comply with a material
provision of the Agreement which, if curable, remains uncured for 30
days after notice thereof from Employee.
(f) Otherwise By Employee. Employee shall have the right to
terminate his employment hereunder for any other reason not specified
in this Section 2.1 upon 30 days' prior written notice to the Company.
2.2 Rights of Employee Upon Termination.
(a) Upon the death of Employee, the Company and its subsidiaries
shall have no further obligation to Employee under this Agreement
except to reimburse Employee's estate for expenses incurred by
Employee prior to his death and to distribute to Employee's estate or
designated beneficiary Employee's Base Salary due pursuant to Section
1.3 (a) hereof up to the date of the next payment period subsequent to
his death and the pro rata portion of the Annual
Bonus that would have been paid to Employee with respect to such year
in accordance with Section 1.3 (c).
(b) Upon the termination of Employee's employment pursuant to
Sections 2.1 (b),
2.1 (c) or 2.1 (f), the Company and its subsidiaries shall have no
further obligation to Employee under this Agreement except to
reimburse him for expenses incurred prior to the date of termination
and distribute to Employee Employee's Base Salary due pursuant to
Section 1.3 (a) hereof up to the date of termination and, in the case
of termination pursuant to Section 2.1 (b), the pro rata portion of
the Annual Bonus payable with respect to such year in accordance with
Section 1.3 (c).
(c) Upon the termination of Employee's employment pursuant to
Section 2.1 (d) or (e) hereof, the Company shall be obligated to
reimburse Employee for expenses incurred prior to the date of
termination and to distribute to Employee Employee's Base Salary due
pursuant to Section 1.3 (a) hereof up to June 1, 1998 and the pro rata
portion of the Annual Bonus payable with respect to the year in which
termination of Employee's employment occurred in accordance with
Section 1.3 (c).
(d) Nothing in this Agreement shall limit the right of Employee
and his family to continue to receive Additional Benefits for which he
or his family are eligible at the time of his death or other
termination of employment under the terms of the then existing plans,
policies, programs or arrangements. For purposes of eligibility for
retiree benefits pursuant to such plans, policies, programs, and
arrangements, Employee shall be considered to have remained employed
until June 1, 1998 and to have retired on that day unless termination
of Employee's employment is pursuant to Sections 2.1 (c) or 2.1 (f)
hereof, in which case the actual date of termination of employment
shall govern. Amounts which are vested benefits or which Employee is
otherwise entitled to receive under any plan, policy, program or
arrangement at or subsequent to the date of termination of employment
shall be payable in accordance with such plan, policy, program or
arrangement.
Section 3. Miscellaneous.
3.1 Amendment. This Agreement may be amended only by a writing
executed by the parties hereto.
3.2 Entire Agreement. This Agreement and the other agreements
expressly referred to herein set forth the entire understanding of the
parties hereto regarding the subject matter hereof and supersede all
prior contracts, agreements, arrangements, communications,
discussions, representations and warranties, whether oral or written,
between the parties regarding the subject matter hereof.
3.3 Notices. Any notice, request, consent and other
communication required or permitted hereunder shall be in writing and
shall be deemed to have been duly given (a) when received if
personally delivered, or (b) within 5 days after being sent by
registered or certified mail, return receipt requested, postage
prepaid, to the parties (and to the persons to whom copies shall be
sent) at their respective addresses set forth below.
If to the Company:
c/o Lancer Industries Inc.
000 Xxxxxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
If to the Employee:
Xxx Xxxxx
000 Xxxxx Xxx
Xxxx Xxxxxxxxx, XX 00000
Any party by written notice to the other party may change the address
or the persons to whom notices or copies thereof shall be directed.
3.4 Assignment. This Agreement shall be binding upon and inure
to the benefit of the heirs, successors, representatives and assigns
of each party hereto, but no rights, obligations or liabilities of
Employee hereunder shall be assignable without the prior written
consent of the Company.
3.5 GOVERNING LAW. THIS AGREEMENT SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF INDIANA. EACH PARTY AGREES TO SUBMIT TO THE PERSONAL JURISDICTION
OF THE STATE AND FEDERAL COURTS LOCATED IN THE STATE OF INDIANA.
3.6 Severability. Each section and subsection of this Agreement
constitutes a separate and distinct provision hereof. It is the
intent of the parties hereto that the provisions of this Agreement be
enforced to the fullest extent permissible under the laws and public
policies applicable in each jurisdiction in which enforcement is
sought. Accordingly, if any provision of this Agreement shall be
adjudicated to be invalid, ineffective or unenforceable, the remaining
provisions shall not be affected thereby. The invalid, ineffective or
unenforceable provision shall, without further action by the parties,
be automatically amended to effect the original purpose and intent of
the invalid, ineffective or unenforceable provision; provided,
however, that such amendment shall apply only with respect to the
operation of such provision in the particular jurisdiction with
respect to which such adjudication is made.
3.7 Waivers. Any waiver by any party of any violation of,
breach of or default under any provision of this Agreement, by the
other party shall not be construed as, or constitute, a continuing
waiver of such provision, or waiver of any other violation of, breach
of or default under any other provision of this Agreement.
3.8 Headings. The headings in this Agreement are solely for
convenience of reference and shall not be given any effect in the
construction or interpretation of this Agreement.
3.9 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, and
all of which together with constitute one and the same instrument.
3.10 Subsidiaries, Divisions and Affiliates. For the purposes of
this Agreement, including, without limitation, Section 2 hereof, the
"Company" shall include its subsidiaries, divisions, parents and
affiliates as they may exist from time to time. For the purposes of
this Agreement, the term "affiliate" shall mean any firm or
corporation that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control
with, the person specified.
3.11 Third Parties. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give
any person or entity other than the Company and Employee and his
estate and the members of his family as specifically provided herein
any rights or remedies under, or by reason of, this Agreement.
3.12 Income Tax Reporting. Employee shall report the Base Salary
to be paid hereunder as earned income for Federal, State and local tax
income tax purposes.
3.13 Survival of Certain Obligations. The obligations of the
Company and Employee set forth in this Agreement which by their terms
extend beyond or survive the termination of the Term of Employment
shall not be affected or diminished in any way by the termination of
the Term of Employment.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
duly executed and delivered by its duly authorized officer, and
Employee has duly executed and delivered this Agreement, as of the
date first written above.
X.X. Xxxxx
FAIRFIELD MANUFACTURING COMPANY, INC.
By:
Xxxxxxxxx Xxxxxxx
Chairman of the Board
