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EXHIBIT 10 (ii)
EXECUTIVE EMPLOYMENT AGREEMENT
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This AGREEMENT, effective as of July 1, 1997, is by and
between XXXX XXXXXXXXXXX (the "Executive") and AMERICAN PRECISION INDUSTRIES
INC (the "Company").
1. EMPLOYMENT.
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The Company agrees to continue the Executive in
the Company's employ, and the Executive agrees to remain in the employ of the
Company, for the period and on the other terms and conditions set forth below.
2. PERIOD OF EMPLOYMENT.
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The period of employment under this Agreement
shall commence on July 1, 1997 and continue until the close of business on June
30, 2003 (the "Period of Employment").
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3. POSITIONS AND RESPONSIBILITIES;
PLACE OF PERFORMANCE.
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(a) During the Period of Employment, the
Executive agrees to serve the Company and the Company agrees to employ the
Executive as its President and Chief Executive Officer, as such positions are
defined in the Company's By-Laws as they may be amended from time to time. The
Executive also agrees to serve during all or part of the Period of Employment,
as requested by the Company, as a Director of the Company and as an officer and
director of any of the Company's subsidiaries or affiliates, without any
compensation therefor other than that specified in this Agreement. During the
Period of Employment, the Executive shall devote all of his normal work week,
attention, skill and efforts to the faithful performance of his duties
hereunder.
(b) In connection with his employment hereunder,
the Executive shall be based at the principal office of the
Company in Buffalo, New York.
(c) The Executive shall be subject to the terms,
conditions and benefits set out in the Company's Handbook for Salaried
Employees and its policies relating to its employees, as amended from time to
time, which are not inconsistent with the terms and conditions of this
Agreement.
(d) In the event the Company's Board of
Directors determines that it is in the Company's best interest that the
Executive become a citizen of the United States, the Executive shall use his
best efforts to apply for and obtain United
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States citizenship.
4. REGULAR COMPENSATION.
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(a) For the performance of his duties under this
Agreement during the Period of Employment the Company shall pay the Executive a
fixed annual salary of $300,000 ("Initial Annual Salary").
(b) The Executive's Initial Annual Salary shall
be reviewed annually by the Compensation Committee of the Board of Directors of
the Company, subject to approval by the Company's Board of Directors, but shall
not be reduced without his written consent below the Initial Annual Salary
during the Period of Employment.
(c) The Executive's salary shall be payable in
accordance with the Company's customary practice for its other executives.
Notwithstanding the foregoing, the Executive shall be entitled to defer the
receipt of his salary and/or bonus pursuant to procedures adopted or plans
maintained by the Company.
5. PARTICIPATION IN ECONOMIC VALUE ADDED BONUS PLAN.
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The Executive shall continue to participate in the
Company's Economic Value Added Bonus Plan, as the same may be in effect from
time to time.
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6. PARTICIPATION IN SUPPLEMENTAL BENEFIT PLAN.
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The Executive shall continue to participate in the
Company's Executive Supplemental Death Benefit and Retirement Plan, as the same
may be in effect from time to time (the "Supplemental Plan").
7. ADDITIONAL BENEFITS.
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(a) In addition to the benefits provided in
paragraphs 5 and 6 above, the Executive shall be eligible to participate in and
receive benefits under any incentive compensation plan or arrangement, any
defined benefit retirement plan, defined contribution retirement plan,
supplemental retirement plan, health and dental plan, disability plan, survivor
income plan, and other employee benefit or compensation plan or arrangement
(collectively, "Benefit Plans"), made available by the Company or a subsidiary
or affiliate to all of its senior executives from time to time, subject to and
on a basis consistent with the terms, conditions and overall administration of
such Benefit Plans.
(b) The Executive shall be entitled to four (4)
weeks of paid vacation during each calendar year during the Period of
Employment, plus all paid holidays given by the Company to its other senior
executives.
(c) The Company shall reimburse the Executive
for the periodic dues and assessments paid by the Executive in connection
with his membership in a country club and city club in the Buffalo, New York
area, which clubs are approved by
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the Compensation Committee of the Board of Directors of the Company as suitable
for Company-related entertaining and other functions.
(d) The Company shall provide the Executive with
an automobile approved by the Compensation Committee of the Board of Directors
of the Company as suitable to his executive position.
(e) The Company shall provide the Executive with
disability insurance policies which shall cover 60% of his annual compensation
(subject to maximum disability benefit payments imposed by the insurers) until
he reaches age 65 in the event that he is totally disabled for more than 180
days. The Executive shall pay the premium applicable to the disability coverage
offered by the Company to its other employees, and the Company shall pay the
premium applicable to the disability coverage in excess of that coverage.
(f) The Company shall promptly pay (or reimburse
the Executive for) all reasonable expenses incurred by him in the performance
of his duties hereunder, including business travel and entertainment expenses.
The Executive shall furnish to the Company such receipts and records as the
Company may require to verify the foregoing expenses.
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8. TERMINATION PRIOR TO A CHANGE IN CONTROL;
SEVERANCE AND DEATH BENEFITS.
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(a) Subject to the terms and conditions set
forth in this paragraph 8, the Company or the Executive may terminate the
employment of the Executive prior to a "change in control," as that term is
defined in the Change in Control Agreement between the Company and the
Executive dated as of July 1, 1996 (the "Change in Control Agreement"), and
thereby end the Period of Employment, by giving at least thirty (30) days'
written notice to the other, unless a different notice period is otherwise
specifically provided for in this paragraph 8. The date of termination of
employment shall not be more than forty-five (45) days after the date of
notice. Terminations of employment, other than termination caused by the
Executive's death, after a "change in control" shall be governed by the Change
in Control Agreement.
(b) If the employment of the Executive is
terminated by the Company for any reason other than (i) for "cause" or (ii) as
a result of the death of the Executive, or (iii) as a result of the total
"disability" of the Executive, then the Executive shall be entitled to the
following benefits:
A. All unpaid salary for the balance of the
Period of Employment, subject to a maximum amount equal to
three (3) times his "Annual Compensation" (as defined below)
and a minimum amount equal to one (1) times his "Annual
Compensation", PLUS credit for any vacation earned but not
taken, PLUS the amount of any bonus which has been
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earned but not paid under any existing bonus plan
(notwithstanding any provisions of any such plan to the
contrary), PLUS all benefits in which he is vested as of the
date of termination under all Benefit Plans including the
Supplemental Plan (notwithstanding any provisions of any such
plans to the contrary), PLUS reimbursement for expenses not
previously reimbursed through the date of termination. For
purposes of this subparagraph A, "Annual Compensation" shall
be an amount equal to the aggregate of the Executive's annual
base salary from the Company and its subsidiaries as set by
the Board of Directors and in effect immediately prior to the
date of termination of employment plus the highest bonus
accrued by the Company for the Executive in any of the
Company's three fiscal years preceding the date of
termination of employment. Except as set forth below, all of
these payments will be paid on the dates that they would
otherwise have been paid if the Executive's employment with
the Company had not been terminated. At the Company's sole
option, any amounts due under this subparagraph A may be paid
in a lump sum rather than over a period of time, discounted
at the prime rate of interest published at that time in the
WALL STREET JOURNAL and computed over the time periods that
the payments would otherwise be paid if the Executive's
employment with the Company was not terminated.
B. The Company shall maintain at its cost,
for the balance of the Period of Employment but not beyond
the time that the
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Executive secures other full- time employment, any group
health insurance and group term life insurance coverage which
was in effect with respect to the Executive and his family on
the date of termination of the Executive's employment
hereunder, to the extent that such group coverage is
available following the termination of the Executive's
employment. If such group coverage is not available, the
Company shall reimburse the Executive for the reasonable cost
he incurs in obtaining coverage which is substantially
similar to the coverage provided by or through the Company
immediately prior to the Executive's termination.
(c) Upon the total "disability" of the Executive
for a continuous period of 180 days, the Company may terminate the employment
of the Executive, the term of employment shall end immediately, and the Company
shall pay him his salary through the end of the month in which such termination
occurs plus credit for any vacation earned but not taken and the amount of any
bonus for the past year which has not been paid under any existing bonus plan
together with reimbursement for expenses not previously reimbursed and the
Company shall have no further obligations to the Executive under this
Agreement. "Disability," as used herein, shall mean the physical or mental
incapacity of the Executive which prevents him from substantially performing
his duties as President and Chief Executive Officer of the Company for a period
of at least 180 days and the incapacity is expected to be permanent and
continuous through the Executive's 65th birthday.
(d) Upon the death of the Executive, the Period
of Employment
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shall end immediately.
(e) If the employment of the Executive is
terminated by the Company for "cause," the Executive's salary (at the rate most
recently determined) together with reimbursement for expenses not previously
reimbursed shall be paid through the date of termination of employment, and the
Company shall have no further obligation to the Executive under this Agreement.
(f) If the employment of the Executive is
terminated by the Executive for "good reason" the Executive shall be entitled
to the same benefits he would receive under subparagraphs 8(b)A and B above, as
if his employment had been terminated by the Company under paragraph 8(b)
above; provided, however, the Executive shall have the option to have any
amounts due under subparagraph 8(A) paid in a lump sum rather than over a
period of time, discounted at the prime rate of interest published at that time
in the WALL STREET JOURNAL and computed over the time periods that the payments
would otherwise be paid if the Executive's employment was not terminated by him
for "good reason."
(g) "Cause" means (i) the continued failure by
the Executive to perform his material responsibilities and duties hereunder
(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness), (ii) the engaging by the Executive in willful or
reckless conduct which is demonstrably injurious to the Company monetarily or
otherwise, (iii) the conviction of the Executive of a felony, or (iv) the
commission or omission of any act by the Executive that is materially inimical
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to the best interests of the Company and that constitutes on the part of the
Executive common law fraud or malfeasance, misfeasance or nonfeasance of duty;
provided, however, that "cause" shall not include the Executive's lack of
professional qualifications. For purposes of this subparagraph 8(g), an act, or
failure to act, on the Executive's part shall be considered "willful" or
"reckless" only if done, or omitted to be done, by him not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company. The Executive's employment shall not be deemed to have been
terminated for "cause" unless the Company shall have given or delivered to the
Executive (A) reasonable notice setting forth the reasons for the Company's
intention to terminate the Executive's employment for "cause," (B) a reasonable
opportunity, at any time during the thirty-day period after the Executive's
receipt of such notice, for the Executive, together with his counsel, to be
heard before the Board of Directors of the Company, and (C) a Notice of
Termination (as defined below) stating that, in the good faith opinion of not
less than a majority of the entire membership of the Board, the Executive was
guilty of the conduct set forth in clauses (i), (ii), (iii) or (iv) of the
first sentence of this subparagraph 8(g).
(h) "Good reason" shall mean any of the
following (i) any assignment to the Executive without his express written
consent of any material duties, functions, authority or responsibilities with
respect to the Company other than those contemplated by, or any material
limitation or expansion without the Executive's express written consent of the
material duties, functions, authority or responsibilities of the Executive with
respect to the Company in any respect not contemplated by,
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paragraph 3(a) hereof, any such assignment, limitation or expansion being
deemed a continuing breach of this Agreement, (ii) a reduction in the
Executive's annual salary or any other material failure by the Company to
comply with paragraph 4 hereof or (iii) failure by the Company to obtain the
assumption of, and the agreement to perform, this Agreement by any successor or
assign as contemplated in paragraph 15 hereof, and such assignment, limitation
or expansion described in the foregoing clause (i), reduction described in the
foregoing clause (ii) or failure described in the foregoing clauses (ii) or
(iii), as the case may be, is not cured within thirty (30) days after receipt
by the Company of written notice from the Executive describing such event, (iv)
any removal of the Executive from, or any failure to re-designate or re-elect
the Executive to the positions of President and Chief Executive Officer of the
Company, except in connection with termination of the Executive's employment
hereunder pursuant to paragraph 8(e) hereof, or (v) recurring interference with
the material functions, duties, authority or responsibilities of the Executive
with respect to the Company, or engaging in activities which are materially
disruptive to the management or employees of the Company or its subsidiaries or
unrequested participation or attempts to participate in daily operational
matters by any individual member of the Board or by any person acting under the
authority of a member of the Board of the Company, if such interference,
activities or participation is or are not discontinued within thirty (30) days
after receipt by the Company of written notice from the Executive describing
such conduct with particularity, and such continued interference, activity or
participation shall be deemed a continuing breach of this Agreement; provided
that in any event set forth
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in this subparagraph 8(h), the Executive shall have elected to terminate his
employment under this Agreement upon not less than thirty (30) days' advance
written notice to the Company, given, except in the case of a continuing
breach, within three calendar months after (A) failure to be so elected or
re-elected, or such removal, or (B) expiration of the thirty-day cure period
with respect to such event. An election by the Executive to terminate his
employment given under the provisions of this subparagraph 8(h) shall not be
deemed a voluntary termination of employment by the Executive for the purpose
of this Agreement or any plan or practice of the Company.
(i) Any termination by the Company for "cause"
shall be communicated by Notice of Termination to the Executive, and any
termination by the Executive for "good reason" shall be communicated by Notice
of Termination to the Company; in each instance the Notice of Termination shall
be given in accordance with paragraph 12 of this Agreement. For purposes of
this Agreement, a "Notice of Termination" means a written notice which (i)
indicates the specific termination provision of 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) specifies the termination date (which date
shall, except as otherwise expressly provided herein, be not more than fifteen
(15) days after the giving of such notice). In the event of a termination by
the Company for "cause," the Notice of Termination shall not be effective
unless delivered in accordance with requirements set forth in the last sentence
of subparagraph 8(g).
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9. DISCLOSURE OF INFORMATION.
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(a) The Executive will not at any time use or
disclose to any third party any confidential information or trade secrets
relating to the business of the Company, including business methods and
techniques, patents, copyrights, trade secrets, manufacturing know-how,
research data, marketing and sales information, customer lists, vendor lists,
investment strategies, compensation plans, pricing data, and any other
information concerning the business of the Company, its manner of operation,
its plans, or other information not disclosed to the general public or known in
the industries in which the Company is engaged (hereinafter collectively
referred to as "Confidential Information"), except for disclosure necessary for
the Executive to perform his duties hereunder and carry on the work of the
Company, or disclosure required by any law, rule, regulation or court order, or
disclosure which the Executive reasonably believes would subject him or the
Company to liability if not made. This covenant will survive the termination of
this Agreement.
(b) The Executive agrees to deliver promptly to
the Company on termination of his employment with the Company for any reason or
at any time the Company may so request all memoranda, notes, records, reports,
manuals, financial reports and documents relating to Confidential Information
and the Company's business which he may then possess or have under his control.
10. COVENANT NOT TO COMPETE.
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(a) The Executive will not, directly or
indirectly, own,
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manage, operate, control, or participate in the ownership, management,
operation, or control of, or be connected as an officer, employee, partner,
director, consultant, or otherwise with, or have any financial interest in, or
aid or assist anyone else in the conduct of, any business that is in
substantial competition with any business conducted by the Company or any of
its subsidiaries or affiliates during the period of the Executive's employment
with the Company or within sixty (60) days thereafter. Ownership of one percent
(1%) or less of the voting stock of any publicly held corporation shall not
constitute a violation of this paragraph.
(b) The Executive's covenant set forth in
paragraph 10(a) shall apply (i) during the Period of Employment, (ii) for a
period of one (1) year after the end of the Period of Employment or the
termination of the Executive's employment if the Executive terminates his
employment other than for "good reason," or the Company terminates his
employment for "cause," or (iii) for a period of six (6) months after the
termination of the Executive's employment by the Company for other than
"cause."
11. ENTIRE AGREEMENT.
The terms and provisions of this Agreement constitute the
entire agreement between the parties and supersede any previous oral or written
communications, representations, or agreements with respect to the subject
matter hereof.
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12. NOTICE.
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Any notices given hereunder shall be in writing and shall be
given by personal delivery or by certified or registered mail, return receipt
requested, addressed to:
If to the Company:
American Precision Industries Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Chairman of the Compensation
Committee of the Board of Directors
If to the Executive:
Xx. Xxxx Xxxxxxxxxxx
000 Xxxxxxxxxx Xxxx
Xxxx Xxxxxx, Xxx Xxxx 00000
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13. EXECUTIVE ASSIGNMENT.
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No interest of the Executive or his spouse or any
other beneficiary under this Agreement, or any right to receive any payments or
distributions hereunder, shall be subject in any manner to sale, transfer,
assignment, pledge, attachment, garnishment, or other alienation or encumbrance
of any kind, nor may such interest or right to receive a payment or
distribution be taken, voluntarily or involuntarily, for the satisfaction of
the obligations or debts of, or other claims against, the Executive or his
spouse or other beneficiary, including claims for alimony, support, separate
maintenance, and claims in bankruptcy proceedings.
14. WAIVER.
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No waiver by any party at any time of any breach
by another party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party shall be deemed a waiver of any
other provisions or conditions at the same time or at any prior or subsequent
time.
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15. BINDING ON SUCCESSOR.
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 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, "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. As
used in this Agreement, "Company" shall mean the Company as hereinbefore
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 paragraph
to assume and agree to perform this Agreement or which otherwise assumes and
agrees to perform this Agreement.
16. APPLICABLE LAW.
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This Agreement shall be construed and interpreted
in accordance with the internal substantive laws of the State of Delaware
without taking into account its laws on the conflict of law.
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17. ARBITRATION.
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The Company and the Executive shall attempt to resolve
between them any dispute which arises hereunder. If they cannot agree within
ten (10) days after either party submits a demand for arbitration to the other
party, then the issue shall be submitted to arbitration with each party having
the right to appoint one (1) arbitrator and those two (2) arbitrators mutually
selecting a third arbitrator. The rules of the American Arbitration Association
for the arbitration of commercial disputes shall apply and the decision of 2 of
the 3 arbitrators shall be final. The arbitration shall take place in Buffalo,
New York. The arbitrators shall apply Delaware law.
18. NO PAYMENTS WHILE IN DEFAULT.
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The Company shall not be required to make any
payments to the Executive otherwise required under this Agreement if prior to
or at the time such payment is due the Executive is in breach of his
obligations under paragraphs 9 or 10 of this Agreement.
19. DEFINITION OF AFFILIATE.
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An "affiliate" of, or person "affiliated" with a specified
person, as used in this Agreement, shall mean a person that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, the person specified.
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20. AMENDMENT.
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This Agreement shall be amended only by a written document
signed by each party hereto.
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21. REDUCTION OF PARACHUTE PAYMENTS AND
EXCESSIVE EMPLOYEE REMUNERATION.
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(a) In the event that a determination is made by
the independent firm of public accountants regularly employed by the Company
that (i) the Executive would, except for this paragraph 21, be subject to the
excise tax provisions of Section 4999 of the Internal Revenue Code of 1986 (the
"Code"), or any successor sections thereof, as a result of a "parachute
payment" (as defined in Section 280G(b)(2)(A) of the Code) made by the Company
to the Executive pursuant to this Agreement or any other agreement, plan or
arrangement, or (2) a federal income tax deduction would not be allowed to the
Company for all or a part of such payments by reason of Section 280G(a) of the
Code (or any successor provision), the payments to which the Executive would
otherwise be entitled hereunder shall be reduced, eliminated, or postponed in
such amounts as are required to reduce the aggregate "present value" (as
defined in Section 280G(d)(4) of the Code) of such payments to one dollar less
than an amount equal to three times the Executive's "base amount" (as defined
in Sections 280G(b)(3)(A) and 280G(d)(1) and (2) of the Code), to the end that
the Executive is not subject to tax pursuant to such Section 4999 and no
deduction is disallowed by reason of such Section 280G(a). To achieve such
reduction in aggregate present value, the Executive shall determine which item
or items payable hereunder shall be reduced, eliminated, or postponed, the
amount of each such reduction, elimination, or postponement, and the period of
each postponement. The Company shall direct its independent public accountants
to review the payments made to the Executive and shall provide to the Executive
such information as is reasonably necessary for the Executive to make the
determinations contemplated in this
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paragraph.
(b) In the event that a determination is made by
the independent firm of public accountants regularly employed by the Company
that the Company would not be allowed to deduct remuneration payable to the
Executive as a result of the limits imposed by Section 162(m) of the Code, or
any successor sections thereof, the payments to which the Executive would
otherwise be entitled hereunder shall be reduced, eliminated, or postponed in
such amounts as are required to avoid the limits imposed by Section 162(m). The
procedures set forth in subparagraph 21(a) to accomplish such reduction,
elimination or postponement shall apply to this subparagraph 21(b).
22. INCONSISTENT PROVISIONS.
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In the event that there is any inconsistency or conflict
between the terms, provisions or conditions of this Agreement and the Change in
Control Agreement, the terms, provisions or conditions in the Change in Control
Agreement shall control.
IN WITNESS WHEREOF, the parties have executed this Executive
Employment Agreement on the dates set opposite their signatures below.
THE EXECUTIVE:
Dated: April 25, 1997 ______________________________
XXXX XXXXXXXXXXX
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AMERICAN PRECISION INDUSTRIES INC.
Dated: April 25, 1997 By_________________________________
XXXXXXX X. XxxXXXXXX
Chairman of the
Compensation Committee
of the Board of Directors
Dated: April 25, 1997 By_________________________________
XXXX X. XXXXXX
Vice President -
Finance and Treasurer
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