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EXHIBIT 10.42
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (this "Agreement") by and between
Durakon Industries, Inc., a Michigan corporation (the "Company"), with offices
at 0000 X. Xxxxxx Xxxx, Xxxxxx, Xxxxxxxx 00000-0000 and Xxxxx X. Xxxx (the
"Executive"), an individual residing at 0000 Xxxx Xxxxx Xxxxx, Xxxxxx, Xxxxxxxx
00000, dated as of the 1st day of March, 1999.
R E C I T A L S:
WHEREAS, the Company recognizes that the current business environment
makes it difficult to attract and retain highly qualified executives unless a
certain degree of security can be offered to such individuals against
organizational and personnel changes which frequently follow changes in control
of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause executives to
consider major career changes in an effort to assure financial security for
themselves and for their families; and
WHEREAS, the Company desires to assure fair treatment of its executives
in the event of a Change in Control (as defined below) and to allow them to make
critical career decisions without undue time pressure and financial uncertainty,
thereby increasing their willingness to remain with the Company notwithstanding
the outcome of a possible Change in Control transaction; and
WHEREAS, the Company recognizes that its executives will be involved in
evaluating or negotiating any offers, proposals or other transactions which
could result in Changes in Control of the Company and believes that it is in the
best interest of the Company and its stockholders for such executives to be in a
position, free from personal financial and employment considerations, to be able
to assess objectively and pursue aggressively the interests of the Company's
stockholders in making these evaluations and carrying on such negotiations; and
WHEREAS, the Compensation Committee of the Board of Directors (the
"Committee") of the Company believes it is essential to provide the Executive
with compensation arrangements upon a Change in Control which are competitive
with those of other corporations, and in order to accomplish these objectives,
the Committee has caused the Company to enter into this Agreement.
NOW THEREFORE, the parties, for good and valuable consideration and
intending to be legally bound, agree as follows:
1. Operation and Term of Agreement. This Agreement shall be effective
immediately upon its execution. This Agreement may be terminated by the Company
upon 18 months advance written notice to the Executive; provided, however, that
after a Change in Control of the Company during the term of this Agreement, this
Agreement shall remain in effect
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until all of the obligations of the parties hereunder are satisfied and the
Protection Period has expired. Prior to a Change in Control, this Agreement
shall immediately terminate upon termination of the Executive's employment,
except in the case of such termination under circumstances set forth in Section
2(e) below.
2. Certain Definitions. For purposes of this Agreement, the following
definitions shall have the following meanings:
(a) "Cause" shall mean (i) actual dishonesty intended to result in
substantial personal enrichment at the expense of the Company, (ii) conviction
of a felony or (iii) repeated willful and deliberate failure or refusal to
perform the duties normally associated with the Executive's position which is
not remedied in a reasonable period of time after receipt of written notice from
the Company.
(b) "Change in Control" shall mean:
(i) on or after the date of execution of this Agreement, any
person (which, for all purposes hereof, shall include, without limitation, an
individual, sole proprietorship, partnership, unincorporated association,
unincorporated syndicate, unincorporated organization, trust, body corporate and
a trustee, executor, administrator or other legal representative) (a "Person")
or any group of two or more Persons acting in concert becomes the beneficial
owner, directly or indirectly, of securities of the Company representing, or
acquires the right to control or direct, or to acquire through the conversion of
securities or the exercise of warrants or other rights to acquire securities,
more than 50% of the combined voting power of the Company's then outstanding
securities; provided that for the purposes of the Plan, (A) "voting power" means
the right to vote for the election of directors, and (B) any determination of
percentage combined voting power shall be made on the basis that (x) all
securities beneficially owned by the Person or group or over which control or
direction is exercised by the Person or group which are convertible into
securities carrying voting rights have been converted (whether or not then
convertible) and all options, warrants or other rights which may be exercised to
acquire securities beneficially owned by the Person or group or over which
control or direction is exercised by the Person or group have been exercised
(whether or not then exercisable), and (y) no such convertible securities have
been converted by any other Person and no such options, warrants or other rights
have been exercised by any other Person; or
(ii) at any time subsequent to the date of execution of this
Agreement there shall be elected or appointed to the Board of Directors of the
Company (the "Board") any director or directors whose appointment or election by
the Board or nomination for election by the Company's shareholders was not
approved by a vote of at least a majority of the directors then still in office
who were either directors on the date of execution of this Agreement or whose
election or appointment or nomination for election was previously so approved;
or
(iii) a reorganization, merger, consolidation, combination,
corporate restructuring or similar transaction (an "Event"), in each case, in
respect of which the beneficial owners of the outstanding Company voting
securities immediately prior to such Event do not, following such Event,
beneficially own, directly or indirectly, more than 50% of the combined
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voting power of the then outstanding voting securities entitled to vote
generally in the election of directors of the Company and any resulting Parent
in substantially the same proportions as their ownership, immediately prior to
such Event, of the outstanding Company voting securities; or
(iv) an Event involving the Company as a result of which 50%
or more of the members of the board of directors of the Parent or the Company
are not persons who were members of the Board immediately prior to the earlier
of (x) the Event, (y) execution of an agreement the consummation of which would
result in the Event, or (z) announcement by the Company of an intention to
effect the Event; or
(v) at any time subsequent to the date of this Agreement, if
(A) the Company or a subsidiary of the Company (including, without limitation,
Xxxx-Xxx Corporation) sell, convey or otherwise transfer to a third party
substantially all of the assets of the division or subsidiary by which the
Executive is then employed, or (B) the Company shall sell, convey or otherwise
transfer to a third party (including, without limitation, a transfer by way of
merger or share exchange) more than 50% of the voting securities of any
subsidiary of the Company (including, without limitation, Xxxx-Xxx Corporation)
by which Executive is then employed; or
(vi) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Change in Control has occurred.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Disability," for purposes of this Agreement, shall apply to
an Executive who has applied for and is determined to be eligible to receive
disability benefits under the Company's long term disability plan.
(e) The "Change in Control Date" shall be any date during the term
of this Agreement on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if the Executive's employment with
the Company is terminated within six months prior to the date on which a Change
in Control occurs, then unless such employment with the Company is terminated
(i) for cause, or (ii) voluntarily by the Executive, for all purposes of this
Agreement the "Change in Control Date" shall mean the date immediately prior to
the date of such termination.
(f) "Good Reason" means:
(i) the assignment to the Executive within the Protection
Period of any duties inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements, authority, duties
or responsibilities), or any other action which results in a diminution in such
position, authority, duties or responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(ii) a reduction by the Company in the Executive's base salary
in effect immediately before the beginning of the Protection Period or as
increased from time to time
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thereafter,
(iii) a failure by the Company to maintain plans providing
benefits at least as beneficial as those provided by any benefit or compensation
plan (including, without limitation, any incentive compensation plan, bonus plan
or program, retirement, pension or savings plan, stock option plan, life
insurance plan, health and dental plan or disability plan) in which the
Executive is participating immediately before the beginning of the Protection
Period, or if the Company has taken any action which would adversely affect the
Executive's participation in or reduce the Executive's opportunity to benefit
under any of such plans or deprive the Executive of any material fringe benefit
enjoyed by him immediately before the beginning of the Protection Period;
provided, however, that a reduction in benefits under the Company's
tax-qualified retirement, pension or savings plans or its life insurance plan,
health and dental plan, disability plans or other insurance plans which
reduction applies equally to all participants in the plans and has a de minimis
effect on the Executive shall not constitute "Good Reason" for termination by
the Executive;
(iv) the Company's requiring the Executive, without the
Executive's written consent, to be based at any office or location in excess of
50 miles from his office location immediately before the beginning of the
Protection Period, except for travel reasonably required in the performance of
the Executive's responsibilities;
(v) any purported termination by the Company of the
Executive's employment for Cause otherwise than as expressly permitted by
Section 9 of this Agreement; or
(vi) any failure by the Company to obtain the assumption of
the obligations contained in this Agreement by any successor as contemplated in
Section 8(c) of this Agreement.
(g) "Parent" means any entity which directly or indirectly through
one or more other entities owns or controls more than 50% of the voting stock or
common stock of the Company.
(h) "Protection Period" means the period beginning on the Change
in Control Date and ending on the day which is 18 months after the Change in
Control Date.
(i) "Subsidiary" means a company 50% or more of the voting
securities of which are owned, directly or indirectly, by the Company.
3. Benefits Upon Termination Within a Protection Period. If, during a
Protection Period, the Executive's employment shall be terminated by the Company
other than for Cause or Disability or other than as a result of the Executive's
death or if the Executive shall terminate his employment for Good Reason, the
Company shall provide the following benefits:
(a) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the date of termination the Executive's full base salary
accrued but unpaid through the date of termination at the rate in effect at the
time of the termination plus an amount equal to the
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product of (i) $42,000, multiplied by (ii) a fraction, the numerator of which is
the number of days in such fiscal year through the date of termination and the
denominator of which is 365; and
(b) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the date of termination a severance payment in an amount
equal to 100% of the Executive's "Annual Compensation." For purposes of this
Agreement, "Annual Compensation" shall be an amount equal to the aggregate of
the Executive's annual cash compensation (other than bonus) from the Company and
its Subsidiaries in effect immediately prior to the date of termination plus the
sum of $42,000; and
(c) Within 30 days after the date of termination, upon surrender
by the Executive of his outstanding options to purchase common shares of the
Company ("Common Shares") granted to the Executive pursuant to the stock option
plans of the Company (the "Outstanding Options"), the Company shall pay the
Executive an amount in respect of each Outstanding Option (whether or not
vested) equal to the difference between the exercise price of such Outstanding
Options and the higher of (x) the fair market value of the Common Shares at the
time of such termination, and (y) the highest price paid for Common Shares or,
in the cases of securities convertible into Common Shares or carrying a right to
acquire Common Shares, the highest effective price (based on the prices paid for
such securities) at which such securities are convertible into Common Shares or
at which Common Shares may be acquired, by any person or group whose acquisition
of voting securities has resulted in a Change in Control of the Company. In the
alternative, the Executive may exercise his Outstanding Options (whether or not
vested).
4. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plans, practices, policies or programs provided by the
Company or any of its Subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
Subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, practice, policy or program of the
Company or any of its Subsidiaries at or subsequent to the date of termination
shall be payable in accordance with such plan, practice, policy or program.
5. Full Settlement; Legal Expenses. The Company's obligation to make
the payments provided for in 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. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement.
The Company agrees to pay, upon written demand therefor by the Executive, all
legal fees and expenses which the Executive may reasonably incur as a result of
any dispute or contest by or with the Company or others regarding the validity
or enforceability of, or liability under, any provision of this Agreement, if
the Executive is the prevailing party in such action. In any such action brought
by the Executive for damages or to enforce any provisions of this Agreement, he
shall be entitled to seek both legal and equitable relief and remedies,
including, without limitation, specific performance of the Company's obligations
hereunder, in his sole discretion.
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6. Parachute Payments. Notwithstanding anything in this Agreement to
the contrary, in the event it shall be determined that any payment or
distribution by the Company or any other person or entity to or for the benefit
of the Executive is a "parachute payment" (within the meaning of Section
280G(b)(2) of the Code), whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection with, or
arising out of, his employment with the Company or a change in ownership or
effective control of the Company or a substantial portion of its assets (a
"Payment"), and would be subject to the excise tax imposed by Section 4999 of
the Code (the "Excise Tax"), the Payments shall be reduced to an amount such
that no "parachute payment" is required to be made to the Executive. If the
application of the preceding sentence should require a reduction in the Payments
or other "parachute payments," unless the Executive shall have designated
otherwise, such reduction shall be implemented first, by reducing any non-cash
benefits to the extent necessary and, second, by reducing any cash benefits to
the extent necessary. In each case, the reductions shall be made starting with
the payment or benefit to be made on the latest date as of which any Payment
would be made and reducing Payments in reverse chronological order therefrom.
All determinations concerning the application of this Section 6 shall be made by
a nationally recognized firm of independent accountants, selected by the
Executive and satisfactory to the Company, whose determination shall be
conclusive and binding on all parties. The fees and expenses of such accountants
shall be borne by the Company.
7. Confidential Information; Consulting and Non-Competition.
(a) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all proprietary or confidential information, knowledge or
data relating to the Company or any of its Subsidiaries, and their respective
businesses, which shall have been obtained by the Executive during the
Executive's employment by the Company or any of its Subsidiaries and which shall
not be or become public knowledge (other than by acts of the Executive or his
representatives in violation of this Agreement). After the date of termination
of the Executive's employment with the Company, the Executive shall not, without
the prior written consent of the Company, communicate or divulge any such
information, knowledge or data to anyone other than the Company and those
designated by it.
(b) If, during a Protection Period, the Executive's employment
shall be terminated by the Company other than for Cause or Disability and other
than as a result of the Executive's death, or if the Executive shall terminate
his employment during a Protection Period for Good Reason, then:
(i) For a period of two years following the termination of his
employment, the Executive shall make himself available by phone upon reasonable
notice, and shall also make himself available in person, at such location as the
Company and the Executive shall agree, upon reasonable notice, subject to the
Executive's prior commitments; provided, however, that the Executive shall not
be required to make himself available for more than five days per month. The
Executive shall consult with the Company with respect to matters raised by the
Company within his knowledge or experience.
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(ii) The Company shall pay or reimburse the Executive for all
reasonable expenses actually incurred or paid by the Executive in the
performance of the Executive's services under Section 7(b)(i) this Agreement
upon presentation of expense statements or vouchers or such other supporting
information as the Company may reasonably require. If the Executive shall agree
to consult at a location away from the metropolitan area of his then current
residence, the Company shall pay his reasonable travel and lodging expenses in
connection therewith.
(iii) For a period of two years following the termination of
his employment, the Executive shall not, either directly or indirectly, through
any person or entity:
(A) engage in any activities or conduct any businesses
which are in competition with the activities engaged in or business conducted by
the Company during the term of the Executive's employment with the Company, or
(B) hire any person who is then employed by or is a
consultant to the Company or who was employed by or a consultant to the Company
at any time during the three months prior to the date of such hiring, or
encourage, induce or attempt to induce, or aid, assist or abet any other party
or person in encouraging, inducing or attempting to induce, any such employee or
consultant to alter or terminate his or her employment or consultation with the
Company; or
(C) be engaged by, consult with, or invest in, any
person or entity wherever located, which conducts a business in competition with
the business conducted by the company during the term of the Executive's
employment with the Company, except that the Executive may, at any time, own
stock in a corporation which may be in competition with the Company, whose
shares are listed for trading on a national or regional stock exchange or trade
on the over-the-counter market, provided that the Executive owns, in the
aggregate, fewer than 5% of the issued and outstanding shares of such
corporation.
(iv) The covenants and obligations contained in this Section 7
of this Agreement relate to matters which are of a special, unique and
extraordinary character and a violation of any of the terms of such Sections
shall cause irreparable injury to the Company, the amount of which shall be
difficult if not impossible to estimate or determine and which cannot be
adequately compensated. Therefore, the Company shall be entitled to an
injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining any violation or threatened violation of any
of such terms by the Executive and such other persons as the court orders.
8. 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 or Successor(s) in Interest. The Executive may designate a
Successor (or Successors) in Interest to receive any and all amounts due the
Executive in
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accordance with this Agreement should the Executive be deceased at any time of
payment. Such designation of Successor(s) in Interest shall be made in writing
and signed by the Executive, and delivered to the Company pursuant to Section
10(b) hereof. Any such designation may be made to any legal person, persons,
trust or the Executive's' estate as he shall determine in his sole discretion.
In the event any designation shall be incomplete, or in the event the Executive
shall fail to designate a Successor in Interest, his estate shall be deemed to
be his Successor in Interest to receive such portion of all of the payments due
hereunder. The Executive may amend, change or revoke any such designation at any
time and from time to time, in the same manner. This Section 8(a) shall not
supersede any designation of beneficiary or successor in interest made by the
Executive, or separately covered, under any other plan, practice, policy or
program of the Company.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company will 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 and any Parent of
the Company or any successor and without regard to the form of transaction
utilized by the Parent to acquire the business 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 or Parentage had taken place. As used in this Agreement, "Company"
shall mean the Company as herein before defined and any successor to its
business and/or assets as aforesaid (and any Parent of the Company or any
successor) which is required by this clause to assume and agree to perform this
Agreement or which otherwise assumes and agrees to perform this Agreement.
9. Notice of Termination. Any termination of the Executive's
employment by the Company for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 10(b) of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the date of termination is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than 15
days after the giving of such notice). The failure by the Executive to set forth
in the Notice of Termination any fact or circumstance which contributes to a
showing of Good Reason shall not waive any right of the Executive hereunder or
preclude the Executive from asserting such fact or circumstance in enforcing his
rights hereunder.
10. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
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(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, to the addresses
for each party as first written above or to such other address as either party
shall have furnished to the other in writing in accordance herewith. Notices and
communications to the Company shall be addressed to the attention of the
Company's President. Notice and communications shall be effective when actually
received by the addressee.
(c) Whenever reference is made herein to any specific plan or
program of the Company, to the extent that the Executive is not a participant
therein or has no benefit accrued thereunder, whether vested or contingent, as
of the Change in Control Date, then such reference herein shall be null and void
and of no effect, and the Executive shall acquire no additional benefit as a
result of such reference.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(e) The Executive's failure to insist upon strict compliance with
any provision hereof shall not be deemed to be a waiver of such provision or any
other provision thereof.
(f) This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter hereof, and it
supersedes any prior agreements between the Executive and the Company, including
any Change of Control Agreement dated January 25, 1999.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from the Committee, the Company has caused these
presents to be executed as of the day and year first above written.
EXECUTIVE DURAKON INDUSTRIES, INC.
/s/ Xxxxx X. Xxxx By /s/ Xxxxxxx Xx. Xxxxxx
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Name: Xxxxx X. Xxxx Xxxxxxx Xx. Xxxxxx
Its: Chairman of the Board of Directors
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