EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated as of October 25,
2002, is entered into by and between TELEX COMMUNICATIONS, INC., a Delaware
corporation (the "Company"), and XXX X. XXXXXXX ("Executive").
INTRODUCTION
The Company desires to employ Executive, and Executive desires to
accept such employment, under the terms and conditions set forth in this
Agreement.
In consideration of the mutual covenants contained in this Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
ARTICLE I
EMPLOYMENT; TERM; DUTIES
1.1 Employment. The Company agrees to continue the employment of
Executive as the Chief Executive Officer of the Company under the terms
set forth in this Agreement. This Agreement supersedes and replaces any
and all other agreements concerning Executive's employment with the
Company or any of its affiliates, including, but not limited to the
Employment Agreement dated August 26, 1998 by and between Executive and
Telex Communications Group, Inc. ("Group") and the Incentive
Compensation Agreement dated March 14, 2000 by and between Executive
and Group, and such other agreements and any other agreements are
deemed terminated as of the date of this Agreement, with no liability
for such termination under any such agreement or agreements by the
Company or its affiliates (including Group) to Executive.
1.2 Term. Executive's employment under this Agreement shall commence at
the beginning of the last regular payroll period for the Company in
December 2002 and terminate on December 31, 2003.
1.3 Duties. Executive shall perform such executive duties for the
Company as may be assigned to him from time to time by the Board of
Directors.
ARTICLE II
COMPENSATION
2.1 Base Salary. Executive's base salary shall be Four Hundred Fifty
Thousand and 00/100 Dollars ($450,000.00) ("Base Salary") per year,
payable by the Company in accordance with the Company's normal payroll
practices applicable to senior executives, but no less frequently than
monthly.
2.2 Bonus. In addition to the Base Salary, Executive shall be eligible
to receive a bonus payable under the Company's Management Incentive
Compensation ("MIC") Plan under such terms as are established by the
Company's Board of Directors from time to time. Executive's "Minimum,"
"Target" and "Maximum" bonus payable under such MIC Plan shall be 50%,
100% and 200%, respectively, of his Base Salary. Executive shall be
guaranteed payment of the Minimum Bonus for the fiscal year ended
December 31, 2003, which bonus shall be payable in one lump sum on
January 1, 2004. In the event the Company achieves performance
objectives for the fiscal year ended December 31, 2003 that would allow
Executive to earn more than the Minimum bonus to which he is entitled
pursuant to the preceding sentence, Executive shall be entitled to
receive such additional amount, up to and including the Maximum bonus
amount. Any bonus in excess of the guaranteed Minimum bonus payable
under this Agreement shall be "earned" based on the Company's receipt
of audited financial results and as and when approved for payment by
the Company's Board of Directors.
2.3 Relocation Expenses. Upon Executive's termination or retirement
from the Company, or upon Executive's death or disability (as defined
below), the Company shall pay the actual, reasonable closing costs on
the sale of Executive's current home in Minnesota and his actual and
reasonable expenses in connection with the relocation of his household
goods from Minnesota to Executive's new home.
2.4 Additional Income Tax Liability. "Additional Income Tax Liability"
shall mean the amount of federal, state or local taxes that the
Executive is required to pay in connection with compensation received
under to Section 2.3. If a payment is made to Executive under Section
2.3 that causes Additional Income Tax Liability, the Company shall pay
to Executive the Gross-Up Amount calculated according to the formula in
Exhibit "A". The Gross-Up Amount shall be reduced by the aggregate
amount of any tax saving (if any) actually realized by the Executive,
and Executive shall reimburse such excess to the Company.
2.5 Business Travel. Executive has the option, when appropriate, to
travel in "business class" for international flights.
ARTICLE III
TERMINATION; REASSIGNMENT; DEATH; DISABILITY
3.1 Termination by Company With Cause. In addition to any other
remedies available to the Company at law, in equity or as set forth in
this Agreement, the Company shall have the right, upon sixty (60) days'
written notice to Executive, to terminate his employment immediately
without any further liability or obligation to him in respect of his
employment (other than its obligation to pay Base Salary actually
earned and vacation time accrued but unpaid, each calculated as of the
date of termination; and any accrued prorata MIC Plan bonus that has
been earned based on the Company's receipt of audited financial
results, if approved for payment to Executive by the Company's Board of
Directors), if Executive: (a) breaches any material provision of this
Agreement; or (b) is convicted of or pleads nolo contendere to any
felony; or (c) is convicted of or pleads nolo
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contendere to any misdemeanor involving moral turpitude and the conduct
underlying such misdemeanor has a detrimental effect on the Company, as
determined by the Board of Directors of the Company; or (d) has
committed any act of fraud, misappropriation of funds or embezzlement
in connection with his employment (a "Termination With Cause").
Executive acknowledges that the Company's obligations to pay
Base Salary, vacation time, MIC Plan Bonus, and reimbursement of
certain expenses as described above, together with any rights or
benefits under any written plan or agreement which have vested on or
prior to the termination date of Executive's employment under this
Section 3.1, constitute the only payments which Executive shall be
entitled to receive from the Company, or any of its affiliates, and
neither the Company nor any of its affiliates shall have any further
liability or obligation to him hereunder or otherwise in respect of his
employment with the Company or any of its affiliates after such
termination.
3.2 Termination by Company Without Cause; Voluntary Retirement; or
Death or Disability of Executive. In the event of any of the following:
(a) the termination of Executive's employment by the Company at any
time for any reason other a Termination with Cause (a "Termination
Without Cause"), (b) the voluntary retirement of Executive from the
Company, or (c) upon the death or disability of Executive (as defined
below), the Company shall pay Executive (or Executive's beneficiaries,
in the event of the death of Executive) an amount equal to the sum of
the following:
(i) any Base Salary and vacation time that would have
been earned and accrued as of the end of the month in
which termination, retirement, death or disability
occur;
(ii) an amount (the "Severance Payment") equal to a
prorata portion (calculated at the end of the month
in which termination, retirement, death or disability
occur) of (a) Executive's Minimum Bonus, and (b) any
additional bonus amount actually "earned" in excess
of the Minimum Bonus, up to and including the Maximum
Bonus.
The Severance Payment shall be made in one lump sum promptly
following Executive's termination under this Section 3.2 (provided that
payment of any bonus amount in excess of the prorata Minimum Bonus
shall be made upon confirmation of such amount following the conclusion
of the Company's annual audit).
In the event of a Termination Without Cause or Executive's
retirement, Executive shall also be entitled to receive the sum of
$30,000.00 per month for twelve (12) months, provided that Executive
agrees to provide consulting services to the Company upon terms
mutually agreeable to Executive and the Company.
Executive acknowledges that the payments and benefits referred
to in Article II and Section 3.2, together with any rights or benefits
under any written plan or agreement which have vested on or prior to
the termination date of Executive's employment under
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Section 3.2, constitute the only payments which Executive
shall be entitled to receive from the Company or any of its affiliates
hereunder in the event of any termination of his employment under any
of the provisions of Section 3.2, and neither the Company nor any of
its affiliates shall have any further liability or obligation to him.
At all times, Executive shall be entitled to full indemnification as an
officer of the Company as provided under Delaware law and the Company's
Certificate of Incorporation, Bylaws, policies and directors' and
officers' liability insurance.
For the purposes of this Agreement, Executive shall be deemed
to be "Disabled" or have a "Disability" if, because of Executive's
physical or mental disability, he has been substantially unable to
perform his duties under this Agreement for twelve (12) work weeks in
any twelve (12) month period ("Period of Disability"). The Term shall
be deemed to have ended as of the close of business on the last day of
such period. Executive shall be considered to have been substantially
unable to perform his duties only if he is either (a) unable to
reasonably and effectively carry out his duties with reasonable
accommodations by the Company or (b) unable to reasonably and
effectively carry out his duties because any reasonable accommodation
which may be required would cause the Company undue hardship and the
Company has determined not to provide such accommodation for such
reason. In the event of a disagreement concerning Executive's perceived
Disability, Executive shall submit to such examinations as are deemed
appropriate by three practicing physicians specializing in the area of
Executive's Disability, one selected by Executive, one selected by the
Company, and one selected by both such physicians. The majority
decision of such three physicians shall be final and binding on the
parties. Nothing in this paragraph is intended to limit the Company's
right to invoke the provisions of this paragraph with respect to any
perceived Disability of Executive.
ARTICLE IV
NON-DISCLOSURE, INVENTIONS AND NON-COMPETE
4.1 Non-Disclosure. Executive shall not at any time disclose to anyone,
other than in connection with the business of the Company, any
confidential or trade secret information about the business of the
Company ("Confidential Information"); provided, however, that Executive
may disclose such information (i) at the request of any governmental
regulatory authority or in connection with an examination of Executive
by any such authority, (ii) pursuant to subpoena or other court
process, (iii) when required to do so in accordance with the provisions
of any applicable law or regulation, or (iv) if such information has
otherwise been made generally available to the public other than by
reason of Executive's breach of this paragraph 4.1. Upon termination of
Executive's employment for any reason, Executive or his legal
representative shall promptly deliver to the Company all property
relating to the business of the Company, including all Confidential
Information, and all copies thereof that are in the possession or
control of Executive.
4.2 Non-Disparagement. During Executive's employment with the Company
and thereafter, Executive agrees not to make any negative or
disparaging remarks or
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comments about the Company, its affiliated or related companies, or any
of the foregoing entities' directors, officers, employees or products.
The Company agrees that it shall direct its directors, officers, and
key employees not to make any negative or disparaging remarks or
comments about Executive.
4.3 Injunctive Relief with Respect to Covenants. Executive acknowledges
that irreparable damage would result to the Company if the provisions
of Article IV were not specifically enforced, and agrees that the
Company shall be entitled to any appropriate legal, equitable or other
remedy, including injunctive relief, a restraining order or other
equitable relief (without the requirement to post bond) with respect to
any failure of Executive to comply with the provisions of such Article.
ARTICLE V
MISCELLANEOUS
5.1 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective legal representatives,
heirs, distributees, successors and assigns; provided that the rights
and obligations of Executive hereunder shall not be assignable.
5.2 Notices. Any notice provided for herein shall be in writing and
shall be deemed to have been given or made when personally delivered or
three (3) days following deposit for mailing by first class registered
or certified mail, return receipt requested, or if delivered by
facsimile transmission, upon confirmation of receipt of the
transmission, to the address of the other party set forth below or to
such other address as may be specified by notice given in accordance
with this Section 5.2:
(a) If to the Company:
Telex Communications, Inc.
00000 Xxxxxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Financial Officer
Fax No.: (000) 000-0000
(b) If to Executive:
Xxx X. Xxxxxxx
0000 Xxxx Xxxxx Xxxxx
Xxxx Xx. Xxxx, XX 00000
5.3 Severability. If any provision of this Agreement is invalidated or
determined to be unenforceable by a court of competent jurisdiction,
such invalidity or unenforceability shall affect only such provision,
and this Agreement shall be carried out as if any such invalid or
unenforceable provision were not contained in this Agreement. In
addition, any such invalid or unenforceable provision shall be deemed,
without further action on
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the part of the parties, modified, amended or limited to the extent
necessary to render the same valid and enforceable.
5.4 No Trust Created. Nothing contained in this Agreement and no action
taken pursuant to the provisions of this Agreement shall create or be
construed to create a trust fund of any kind. Any funds that may be set
aside or provided for in this Agreement shall continue for all purposes
to be part of the general funds of the Company and no person other than
the Company shall by virtue of the provisions of this Agreement have
any interest in such funds. To the extent that any person acquires a
right to receive payments from the Company under this Agreement, such
right shall be no greater than the right of any unsecured general
creditor of the Company.
5.5 Full Discharge of Company Obligations. The amounts payable to
Executive under Sections 3.1 and 3.2 following termination of his
employment shall constitute liquidated damages with respect to any and
all rights and claims of Executive under this Agreement and, upon
Executive's receipt of such amounts, the Company shall be released and
discharged from any and all liability to Executive in connection with
this Agreement or otherwise in connection with Executive's employment
with the Company and its affiliates.
5.6 Arbitration of Disputes. The parties agree that any controversy or
claim arising out of or relating to this Agreement, or any dispute
arising out of the interpretation or application of this Agreement,
which the parties are unable to resolve, shall be finally resolved and
settled exclusively by arbitration in Minnesota by a single arbitrator
under the American Arbitration Association's Commercial Arbitration
Rules then in effect and in accordance with the substantive laws of the
State of Minnesota. If the parties cannot agree upon an arbitrator,
then for the sole purpose of selecting an arbitrator, each party shall
choose its own independent representative and those independent
representatives shall in turn choose the single arbitrator within
thirty (30) days of the date of the selection of the first independent
representative. The parties severally recognize and consent to the
jurisdiction over each of them by the courts of the State of Minnesota.
The legal expenses of Executive shall be reimbursed to Executive if an
award is rendered in favor of Executive or if the arbitrator finds that
Executive acted reasonably and exercised good faith in demanding
arbitration of any such dispute.
5.7 Confidentiality. The parties agree that they will not disclose to
any other person or entity the terms or conditions of this Agreement
without the prior written consent of the other party or as required by
law, regulatory authority or as necessary for either party to obtain
personal loans or financing. Approval of the Company and of Executive
shall be required with respect to any press releases regarding this
Agreement and the employment of Executive.
5.8 Professional Fees. The Company will pay for reasonable fees of
Executive's professional advisors in connection with the review and
negotiation of this Agreement.
5.9 Waiver. No waiver by either party to this Agreement of a breach or
default by the other party shall be considered valid unless in writing
signed by the first party, and no
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such waiver shall be deemed a waiver of any subsequent breach or
default of the same or any other nature.
5.10 Entire Agreement. This Agreement sets forth the entire agreement
between the parties with respect to the subject matter hereof, and
supersedes any and all prior agreements or understanding between the
Company, Telex Communications Group, Inc. and Executive, whether
written or oral, fully or partially performed relating to any or all
matters covered by and contained or otherwise dealt with in this
Agreement.
5.11 Amendment. No modification, change or amendment of this Agreement
or any of its provisions shall be valid unless in writing and signed by
the party against whom such claimed modification, change or amendment
is sought to be enforced.
5.12 Applicable Law. This Agreement, and all of the rights and
obligations of the parties in connection with the employment
relationship established hereby, shall be governed by and construed in
accordance with the substantive laws of the State of Minnesota without
giving effect to principles relating to conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"COMPANY"
TELEX COMMUNICATIONS, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxxx, Xx.
-------------------------
Name: Xxxxx X. Xxxxxxx, Xx.
Title: Chairman, Board of Directors
"EXECUTIVE"
/s/ Xxx X. Xxxxxxx
------------------
Xxx X. Xxxxxxx
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EXHIBIT "A"
CALCULATION OF GROSS-UP AMOUNT
The term "GROSS-UP AMOUNT" is the amount calculated in accordance with
the following formula:
GROSS-UP AMOUNT = ( a ) - (a)
-------
( (1 - r) )
a = The amount required to be grossed up under Section
2.7.
r = The sum of (x) the highest marginal federal income
tax rates applicable to individuals at the time the
Additional Tax Payment is required to be made (the
"Federal Rate"), plus (y) the product of: (i) the
highest marginal Minnesota income tax rates
applicable to individuals at the time the Additional
Tax Payment is required to be made, multiplied by
(ii) one minus the Federal Rate. However, subsection
(ii) shall be equal to one (1) if Minnesota income
taxes are not deductible for federal income tax
purposes at the time the Additional Tax Payment is
required to be made.
For example, if (i) the Additional Income Tax Liability is equal to
$1,000,000; (ii) the highest Federal Rate applicable to individuals at
the time the Additional Tax Payment is required to be made is equal to
40%; (iii) the highest Minnesota income tax rate applicable to
individuals at the time the Additional Tax Payment is required to be
made is equal to 9%, then the Gross-Up Amount would equal $831,501.80
calculated as follows:
r = 0.40 + (0.09 x (.60)
r = 0.454
$831,501.80 = $1,000,000 - $(1,000,000)
----------
(1 - 0.454)
Accordingly, the total compensation paid (compensation plus Gross-Up
Amount) would equal $1,831,501.80 (i.e., $1,000,000 + $831,501.80).
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