FORM OF CHANGE OF CONTROL AGREEMENT
March 3, 1998
BMC Industries, Inc. considers the establishment and maintenance of a sound
and vital management to be essential to protecting and enhancing the best
interests of the Company and its stockholders. In this connection, the Company
recognizes that, as is the case with many publicly held corporations, the
possibility of a Change in Control may arise and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company
and its stockholders.
Accordingly, the Board has determined that appropriate steps should be
taken to minimize the risk that Company management will depart prior to a Change
in Control, thereby leaving the Company without adequate management personnel
during such a critical period, and to reinforce and encourage the continued
attention and dedication of members of the Company's management to their
assigned duties without distraction in circumstances arising from the
possibility of a Change in Control. In particular, the Board believes it
important, should BMC Industries, Inc., or its stockholders receive a proposal
for transfer of control, that you be able to continue your management
responsibilities and assess and advise the Board whether such proposal would be
in the best interests of BMC Industries, Inc. and its stockholders and to take
other action regarding such proposal as the Board might determine to be
appropriate, without being influenced by the uncertainties of your own personal
situation.
The Board recognizes that continuance of your position with the Company
involves a substantial commitment to the Company in terms of your personal life
and professional career and the possibility of foregoing present and future
career opportunities, for which the Company receives substantial benefits.
Therefore, to induce you to remain in the employ of the Company, this Agreement,
which has been approved by the Board, sets forth the benefits which the Company
agrees will be provided to you in the event your employment with the Company is
terminated in connection with a Change in Control under the circumstances
described below.
1. DEFINITIONS. The following terms will have the meaning set forth
below unless the context clearly requires otherwise. Terms defined elsewhere in
this Agreement will have the same meaning throughout this Agreement.
(a) "AGREEMENT" means this letter agreement as amended, extended or
renewed from time to time in accordance with its terms.
(b) "BOARD" means the board of directors of the Parent Corporation duly
qualified and acting at the time in question.
(c) "CAUSE" means: (i) the willful and continued failure by you to
perform substantially your duties with the Company after a demand for
substantial performance is delivered to you by the President and Chief Executive
Officer which specifically identifies the manner in which such person
March 3, 1998
Page 2 of 9
believes that you have not substantially performed your duties; or (ii) your
conviction (including a plea of nolo contendere) of willfully engaging in
illegal conduct constituting a felony or gross misdemeanor under federal or
state law which is materially and demonstrably injurious to the Company. For
purposes of this definition, no act, or failure to act, on your part will be
considered "willful" unless done, or omitted to be done, by you in bad faith
and without reasonable belief that your action or omission was in, or not
opposed to, the best interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution duly adopted by the Board
(or a committee thereof) or based upon the advice of counsel for the Company
will be conclusively presumed to be done, or omitted to be done, by you in
good faith and in the best interests of the Company. It is also expressly
understood that your attention to matters not directly related to the
business of the Company will not provide a basis for termination for Cause so
long as the Board did not expressly disapprove in writing of your engagement
in such activities either before or within a reasonable period of time after
the Board knew or could reasonably have known that you engaged in those
activities. Notwithstanding the foregoing, you will not be deemed to have
been terminated for Cause unless and until there has been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board at a meeting of the Board
called and held for the purpose (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the
Board), finding that in the good faih opinion of the Board you were guilty of
the conduct set forth above in clauses (i) or (ii) of this definition and
specifying the particulars thereof in detail.
(d) "CHANGE IN CONTROL" means any of the following: (i) the sale, lease,
exchange, or other transfer of all or substantially all of the assets of the
Parent Corporation, in one transaction or in a series of related transactions,
to any Person; (ii) the approval by the stockholders of the Parent Corporation
of any plan or proposal for the liquidation or dissolution of the Parent
Corporation; (iii) any Person is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent
(50%) or more of the combined voting power of the Parent Corporation's
outstanding securities ordinarily having the right to vote at elections of
directors; (iv) individuals who constitute the Board on the date of this
Agreement (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided that any person becoming a director subsequent to the
date of this Agreement whose election, or nomination for election, by the Parent
Corporation's stockholders, was approved by a vote of at least a majority of the
directors comprising the Incumbent Board (either by a specific vote or by
approval of the proxy statement of the Parent Corporation in which such person
is named as a nominee for director, without objection to such nomination) will,
for purposes of this clause (iv), be deemed to be a member of the Incumbent
Board; or (v) a change in control of a nature that is determined by independent
legal counsel to the Company to be required to be reported (assuming such event
has not been "previously reported") in response to Item 1(a) of the Current
Report on Form 8-K, as in effect on the date hereof, pursuant to section 13 or
15(d) of the Exchange Act, whether or not the Parent Corporation is then subject
to such reporting requirement.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
(f) "COMPANY" means the Parent Corporation, any Subsidiary and any
Successor.
(g) "CONFIDENTIAL INFORMATION" means information which is proprietary to
the Company or proprietary to others and entrusted to the Company, whether or
not trade secrets. It includes information relating to business plans and to
business as conducted or anticipated to be conducted, and to past or current or
anticipated products or services. It also includes, without limitation,
information concerning research, development, purchasing, accounting, marketing
and selling. All information which you have a reasonable basis to consider
confidential is Confidential Information, whether or not originated by you and
without regard to the manner in which you obtain access to that and any other
proprietary information.
March 3, 1998
Page 3 of 9
(h) "DATE OF TERMINATION" following a Change in Control (or prior to a
Change in Control if your termination was either a condition of the Change in
Control or was at the request or insistence of any Person (other than the
Company) related to the Change in Control) means: (i) if your employment is to
be terminated by the Company for Cause or by you for Good Reason, the date
specified in the Notice of Termination; (ii) if your employment is to be
terminated by the Company for any reason other than Cause, Disability, death or
Retirement, the date specified in the Notice of Termination, which in no event
may be a date earlier than sixty (60) calendar days after the date on which a
Notice of Termination is given, unless an earlier date has been expressly agreed
to by you in writing either in advance of, or after, receiving such Notice of
Termination; or (iii) if your employment is terminated by reason of death or
Retirement, the date of death or Retirement, respectively. In the case of
termination by the Company of your employment for Cause, if you have not
previously expressly agreed in writing to the termination, then within thirty
(30) calendar days after receipt by you of the Notice of Termination with
respect thereto, you may notify the Company that a dispute exists concerning the
termination, in which event the Date of Termination will be the date set either
by mutual written agreement of the parties or by the arbitrators in a proceeding
as provided in Section 12 of this Agreement. During the period beginning on the
date you or the Company, as the case may be, receive Notice of Termination and
ending on the Date of Termination, the Company will continue to pay you your
full compensation and benefits and cause your continued participation in all
Plans, in effect immediately prior to the time the Notice of Termination is
given and until the dispute is resolved in accordance with Section 12 of this
Agreement.
(i) "DISABILITY" means a disability as defined in the Company's long-term
disability plan as in effect immediately prior to the Change in Control or, in
the absence of such a plan, means permanent and total disability as defined in
section 22(e)(3) of the Code.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(k) "GOOD REASON" means:
(i) an adverse change in your status or position(s) as an
executive of the Company as in effect immediately prior to the Change in
Control, including, without limitation, any adverse change in you status
or position(s) as a result of a material diminution in your duties or
responsibilities (other than, if applicable, any such change directly
attributable to the fact that the Company is no longer publicly owned)
or the assignment to you of any duties or responsibilities which, in
your reasonable judgement, are inconsistent with such status of
position(s), or any removal of you from or any failure to reappoint or
reelect you to such position(s) (except in connection with the
termination of your employment for Cause, Disability or Retirement or as
a result of your death or by you other than for Good Reason);
(ii) a reduction by the Company in your rate of total
compensation (including, without limitation, salary and bonuses), or an
adverse change in the form of timing of the payment thereof, as in
effect immediately prior to the Change in Control;
(iii) the failure by the Company to continue in effect any Plan in
which you (and/or your family or dependents) are participating at any
time during the ninety (90)-calendar-day period immediately preceding
the Change in Control (or Plans providing you (and/or your family or
dependents) with at least substantially similar benefits) other than as
a result of the normal expiration of any such Plan in accordance with
its terms as in effect immediately prior to the ninety (90)-calendar-day
period immediately preceding the time of the Change in Control, or the
taking of any action, or the failure to act, by the Company which would
adversely affect your (and/or your family's or dependent's) continued
participation in any of such Plans on at least as favorable a basis to
you (and/or your family or dependents) as is the case on the date of the
Change in Control or which would materially reduce your (and/or your
family's or dependent's) benefits in the future under any of such Plans
or deprive you (and/or
March 3, 1998
Page 4 of 9
your family or dependents) of any material benefit enjoyed by you (and/or
your family or dependents) at the time of the Change in Control;
(iv) the Company's requiring you to be based anywhere other than
where your office is located immediately prior to the Change in Control,
except for required travel on the Company's business, and then only to
the extent substantially consistent with the business travel obligations
which you undertook on behalf of the Company during the ninety
(90)-calendar-day period immediately preceding the Change in Control
(without regard to travel related to or in anticipation of the Change in
Control);
(v) the failure by the Company to obtain from any Successor the
assent to this Agreement contemplated by Section 5 of this Agreement;
(vi) any purported termination by the Company of your employment
which is not properly effected pursuant to a Notice of Termination and
pursuant to any other requirements of this Agreement, and for purposes
of this Agreement, no such purported termination will be effective; or
(vii) any refusal by the Company to continue to allow you to
attend to matters or engage in activities not directly related to the
business of the Company which, at any time prior to the Change in
Control, you were not expressly prohibited in writing by the Board from
attending to or engaging in.
Notwithstanding anything in the foregoing to the contrary, your termination
of employment with the Company for any reason other than death, Disability or
Retirement within the thirty (30) day period beginning on the one hundred eighty
first (181st) calendar day following a Change in Control and ending on the two
hundred tenth (210th) calendar day following a Change in Control will be
conclusively deemed to be for Good Reason.
(l) "MONTHLY BASE COMPENSATION" means your monthly base cash salary from
the Company attributable to services rendered as an employee of the Company at
the rate in effect immediately prior to the Change in Control, determined
without regard to the amount of contributions made by the Company with respect
to you under any qualified cash or deferred arrangement or cafeteria plan that
is not then includable in your income by operation of section 402(a)(8) or
section 125 of the Code and without regard to amounts deferred, whether
voluntarily or involuntarily and whether vested or nonvested, pursuant to any
Plan.
(m) "NOTICE OF TERMINATION" means a written notice which indicates the
specific termination provision in this Agreement pursuant to which the notice is
given. Any purported termination by the Company or by you following a Change in
Control (or prior to a Change in Control if your termination was either a
condition of the Change in Control or was at the request or insistence of any
Person (other than the Company) related to the Change in Control) must be
communicated by written Notice of Termination.
(n) "PARENT CORPORATION" means BMC Industries, Inc. and any Successor.
(o) "PERSON" means and includes any individual, corporation, partnership,
group, association or other "person," as such term is used in section 14(d) of
the Exchange Act, other than the Parent Corporation, a wholly-owned subsidiary
of the Parent Corporation or any employee benefit plan(s) sponsored by the
Parent Corporation or a wholly-owned subsidiary of the Parent Corporation.
March 3, 1998
Page 5 of 9
(p) "PLAN" means any compensation plan (such as a stock option, restricted
stock plan or other equity-based plan), or any employee benefit plan (such as a
thrift, pension, profit sharing, medical, dental, disability, accident, life
insurance, relocation, salary continuation, expense reimbursements, vacation,
fringe benefits, office and support staff plan or policy) or any other plan,
program, policy or agreement of the Company intended to benefit employees
(and/or their families or dependents) generally, management employees (and/or
their families or dependents) as a group or you (and/or your family or
dependents) in particular.
(q) "RETIREMENT" means termination of your employment with the Company on
or after the day on which you attain the age of sixty-five (65).
(r) "SUBSIDIARY" means any corporation at least a majority of whose
securities having ordinary voting power for the election of directors is at the
time owned by the Company and/or one (1) or more Subsidiaries or any operating
division of the Company.
(s) "SUCCESSOR" means any Person that succeeds to, or has the practical
ability to control (either immediately or with the passage of time), the Parent
Corporation's business directly, by merger, consolidation or other form of
business combination, or indirectly, by purchase of the Parent Corporation's
voting securities, all or substantially all of its assets or otherwise.
2. BENEFITS UPON A CHANGE IN CONTROL TERMINATION. If your employment
with the Company is terminated for any reason other than death, Cause,
Disability or Retirement, or if you terminate your employment with the
Company for Good Reason either: (a) within the two hundred ten (210)
calendar-day-period immediately following a Change in Control; or (b) prior
to a Change in Control if your termination was either a condition of the
Change in Control or was at the request or insistence of a Person (other than
the Company) related to the Change in Control, then:
(i) CASH PAYMENTS. Within five (5) business days following the Date
of Termination, the Company will make a lump-sum cash payment to you in an
amount equal to the product of (A) your Monthly Base Compensation
multiplied by (B) twelve (12).
(ii) LIMITATION ON PAYMENTS AND BENEFITS. Notwithstanding anything in
this Agreement to the contrary, if any of the payments to be made in
connection with this Agreement, together with any other payments or
benefits which you have the right to receive from the Company or any
corporation which is a member of an "affiliated group" (as defined in
section 1504(a) of the Code without regard to section 1504(b) of the Code)
of which the Company is a member, constitute an "excess parachute payment"
(as defined in section 280G(b) of the Code), the payments to be made in
connection with this Agreement shall be reduced to the extent necessary to
prevent any portion of such payments or benefits from becoming subject to
the excise tax imposed under section 4999 of the Code; provided, that such
reduction shall be made only if the aggregate amount of the payments after
such reduction exceeds the difference between (A) the amount of such
payments absent such reduction minus (B) the aggregate amount of the excise
tax imposed under section 4999 of the Code attributable to any such excess
parachute payments arising in connection with such Change in Control. The
determination as to whether any such decrease in the payments to be made in
connection with this Agreement is necessary must be made in good faith by
legal counsel or a certified public accountant selected by you and
reasonably acceptable to the Company, and such determination will be
conclusive and binding upon you and the Company. In the event that a
reduction is necessary, you will have the right to designate the particular
payments or benefits that are to be reduced or eliminated so that no
portion of the payments or benefits to be made or provided to you in
connection with this Agreement will be excess parachute payments subject to
the excise tax under Code section 4999. The
March 3, 1998
Page 6 of 9
Company will pay or reimburse you on demand for the reasonable fees,
costs and expenses of the counsel or accountant selected to make the
determinations under this clause (ii).
For purposes of this Section 2, your employment with the Company will be deemed
to have been terminated on the date on which the Company or you, as the case may
be, receives Notice of Termination notwithstanding that your Date of Termination
occurs following the expiration of the two hundred ten (210) calendar-day-period
referenced in clause (a).
3. INDEMNIFICATION. Following a Change in Control, the Company will
indemnify and advance expenses to you to the full extent permitted by law and
the Company's articles of incorporation and bylaws for damages, costs and
expenses (including, without limitation, judgements, fines, penalties,
settlements and reasonable fees and expenses of your counsel) incurred in
connection with all matters, events and transactions relating to your service to
or status with the Company and any other corporation, employee benefit plan or
other entity with whom you served at the request of the Company.
4. CONFIDENTIALITY. You will not use, other than in connection with your
employment with the Company, or disclose any Confidential Information to any
person not employed by the Company or not authorized by the Company to receive
such Confidential Information, without the prior written consent of the Company;
and you will use reasonable and prudent care to safeguard and protect and
prevent the unauthorized disclosure of Confidential Information. Nothing in
this Agreement will prevent you from using, disclosing or authorizing the
disclosure of any Confidential Information: (a) which is or hereafter becomes
part of the public domain or otherwise becomes generally available to the public
through no fault of yours; (b) to the extent and upon the terms and conditions
that the Company may have previously made the Confidential Information available
to certain persons; or (c) to the extent that you are required to disclose such
Confidential Information by law or judicial or administrative process.
5. SUCCESSORS. The Company will seek to have any Successor, by agreement
in form and substance satisfactory to you, assent to the fulfillment by the
Company of the Company's obligations under this Agreement. Failure of the
Company to obtain such assent at least three (3) business days prior to the time
a Person becomes a Successor (or where the Company does not have at least three
(3) business days' advance notice that a Person may become a Successor, within
one (1) business day after having notice that such Person may become or has
become a Successor) will constitute Good Reason for termination by you of your
employment.
6. FEES AND EXPENSES. The Company, upon demand, will pay or reimburse
you for all reasonable legal fees, court costs, experts' fees and related costs
and expenses incurred by you in connection with any actual, threatened or
contemplated litigation or legal, administrative, arbitration or other
proceeding relating to this Agreement to which you are or reasonably expect to
become a party, whether or not initiated by you, including, without limitation:
(a) all such fees and expenses, if any, incurred in contesting or disputing any
such termination; or (b) your seeking to obtain or enforce any right or benefit
provided by this Agreement; provided, however, you will be required to repay
(without interest) any such amounts to the Company to the extent that a court
issues a final and non-appealable order setting forth the determination that the
position taken by you was frivolous or advanced by you in bad faith.
7. BINDING AGREEMENT. This Agreement inures to the benefit of, and is
enforceable by, you, your personal and legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
die after you become entitled to, but before you receive, any amounts payable to
you under this Agreement, all such amounts, unless otherwise provided in this
Agreement, will be paid in accordance with the terms of this Agreement to your
devisee, legatee or other designee or, it there be no such designee, to your
estate.
March 3, 1998
Page 7 of 9
8. NO MITIGATION. Except as expressly provided in clause (i) of Section
2 of this Agreement, you will not be required to mitigate the amount of any
payments the Company becomes obligated to make to you in connection with this
Agreement by seeking other employment or otherwise and the payments to be made
to you in connection with this Agreement may not be reduced, offset or subject
to recovery by the Company by any payments or benefits you may receive from
other employment or otherwise.
9. NO SETOFF. Except as provided in Section 10 of this Agreement, the
Company will have no right to setoff payments owed to you under this Agreement
against amounts owed or claimed to be owed by you to the Company under this
Agreement or otherwise.
10. TAXES. All payments to be made to you in connection with this
Agreement will be subject to required withholding of federal, state and local
income, excise and employment-related taxes which withholding shall be
consistent with the determination described in clause (ii) of Section 2 of this
Agreement.
11. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in, or required under, this Agreement must be in
writing and will be deemed to have been duly given when personally delivered or
when mailed by United States registered or certified mail, return receipt
requested, postage prepaid and addressed to each party's respective address set
forth on the first page of this Agreement (provided that all notices to the
Company must be directed to the attention of the President and Chief Executive
Officer), or to such other address as either party may have furnished to the
other in writing in accordance with these provisions, except that notice of
change of address will be effective only upon receipt.
12. DISPUTES. Any dispute, controversy or claim for damages arising under
or in connection with the Agreement shall be settled exclusively by arbitration
in Minneapolis, Minnesota by three (3) arbitrators in accordance with the rules
of the American Arbitration Association then in effect. Judgement may by
entered on the arbitrators' award in any court having jurisdiction. The Company
will be entitled to seek an injunction or restraining order in a court of
competent jurisdiction (within or without the State of Minnesota) to enforce the
provisions of Section 4 of this Agreement.
13. JURISDICTION. Except as specifically provided otherwise in the
Agreement, the parties agree that any action or proceeding arising under or in
connection with this Agreement must be brought in a court of competent
jurisdiction in the State of Minnesota, and hereby consent to the exclusive
jurisdiction of said courts for this purpose and agree not to assert that such
courts are an inconvenient forum.
14. RELATED AGREEMENTS. To the extent that any provision of any other
Plan or agreement between the Company and you limits, qualifies or is
inconsistent with any provision of this Agreement, then for purposes of this
Agreement, while such other Plan or agreement remains in force, the provision of
this Agreement will control and such provision of such other Plan or agreement
will be deemed to have been superseded, and to be of no force or effect, as if
such other agreement had been formally amended to the extent necessary to
accomplish such purpose. Nothing in this Agreement prevents or limits your
continuing or future participation in any Plan provided by the Company and for
which you may qualify, and nothing in this Agreement limits or otherwise affects
the rights you may have under any Plans or other agreements with the Company.
Amounts which are vested benefits or which you are otherwise entitled to receive
under any Plan or other agreement with the Company at or subsequent to the Date
of Termination will be payable in accordance with such Plan or other agreement.
March 3, 1998
Page 8 of 9
15. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement is
intended to provide you with any right to continue in the employ of the Company
for any period of specific duration or interfere with or otherwise restrict in
any way your rights or the rights of the Company, which rights are hereby
expressly reserved by each, to terminate your employment at any time for any
reason or no reason whatsoever, with or without cause.
16. CHANGE OF SUBSIDIARY STATUS. In the event that, prior to a Change
in Control: (a) a Subsidiary is sold, merged, transferred or in any other
manner or for any other reason ceases to be a Subsidiary; (b) your primary
employment duties are with the Subsidiary at the time of the occurrence of
such event; and (c) you do not, in conjunction therewith, transfer employment
directly to theCompany or another Subsidiary, then this Agreement will become
null and void.
17. SURVIVAL. The respective obligations of, and benefits afforded to,
the Company and you which by their express terms or clear intent survive
termination of your employment with the Company or termination of this
Agreement, as the case may be, including, without limitation, the provisions of
Sections 2, 3, 4, 5, 6, 9, 10, 11 and 12 of this Agreement, will survive
termination of your employment with the Company or termination of this
Agreement, as the case may be, and will remain in full force and effect
according to their terms.
18. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such modification, waiver or discharge is agreed to in a
writing signed by you and the President and Chief Executive Officer. No waiver
by any party to this Agreement at any time of any breach by another party to
this Agreement of, or of compliance with, any condition or provision of this
Agreement to be performed by such party will be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter to this Agreement have been made by any party
which are not expressly set forth in this Agreement. This Agreement and the
legal relations among the parties as to all matters, including, without
limitation, matters of validity, interpretation, construction, performance and
remedies, will be governed by and construed exclusively in accordance with the
internal laws of the State of Minnesota (without regard to the conflict of laws
provisions of the State of Minnesota or of any other jurisdiction), except to
the extent that the provisions of the corporate law of Minnesota may apply to
the internal affairs of the Company. Headings are for purposes of convenience
only and do not constitute a part of this Agreement. The parties to this
Agreement agree to perform, or cause to be performed, such further acts and
deeds and to execute and deliver, or cause to be executed and delivered, such
additional or supplemental documents or instruments as may be reasonably
required by the other party to carry into effect the intent and purpose of this
Agreement. The invalidity or unenforceability of all or any part of any
provision of this Agreement will not affect the validity or enforceability of
the remainder of such provision or of any other provision of this Agreement,
which will remain in full force and effect. This Agreement may be executed in
several counterparts, each of which will be deemed o be an original, but all of
which together will constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject matter
discussed above, kindly sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
By: --------------------------------
Xxxx X. Xxxxx
Chairman, President & CEO
March 3, 1998
Page 9 of 9
Agreed to this ____ day of
_____________, 1998.
------------------------------------
