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EXHIBIT 12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), dated as of the 11th day of
December, 1997, by and between Impact Systems, Inc., a California corporation
(the "Company"), and Xxxx X. Xxxxx, III, the undersigned executive (the
"Executive").
Recital
A. The Company desires to retain the services of Executive, and Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth in this Agreement;
B. Simultaneously with the execution hereof, Voith Sulzer Paper Technology, Inc.
("Voith") and Company are entering into an Agreement and Plan of Merger of even
date herewith (the "Merger Agreement"), which provides in part, that Voith will
offer to purchase any and all of the shares of Common Stock of the Company
pursuant to a cash tender offer (the "Tender Offer"). Capitalized terms not
otherwise defined herein shall have the meanings set forth in the Merger
Agreement.
NOW, THEREFORE, in consideration of the foregoing recital and the
respective undertakings of the Company and Executive set forth below, the
Company and Executive agree as follows:
1. Effectiveness of Agreement; Employment.
(a) Effective of Agreement. This Agreement shall become effective
as of the Effective Time. In the event that the Merger is not consummated, this
Agreement shall be null and void.
(b) Duties. The Company agrees to employ the Executive as Vice
President, Operations, and the Executive agrees to perform such reasonable
responsibilities and duties as may be required of him by the Company. The
Executive shall carry out his duties and responsibilities hereunder in a
diligent and competent manner and shall devote the requisite amount of his
business time, attention and energy thereto. Executive shall report directly to
the Chief Executive Officer of the Company.
(c) Term of Employment. Executive's employment shall be for an
initial term beginning the Effective Time and ending September 30, 2001.
2. Compensation and Benefits.
(a) Base Compensation. The Company shall pay the Executive as
compensation for his services a base salary at the annualized rate of $175,000.
The Board of Directors of the Company (the "Board") shall review Executive's
salary annually and, in its discretion, increase Executive's salary; provided,
however, that the Board shall increase Executive's base salary at least three
percent (3%) per year. Such salary shall be subject to applicable tax
withholding and shall be
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paid periodically in accordance with normal Company payroll practices as of the
date hereof. The annual compensation specified in this Section 2, together with
any increases in such compensation that the Company may, in its sole discretion,
grant from time to time, is referred to in this Agreement as "Base
Compensation."
(b) Bonus. Executive shall be eligible for a bonus as determined
annually by the Compensation Committee of the Board. In addition, Executive
shall participate in the Incentive Bonus Plan which shall provide for a
guaranteed bonus of $290,000 payable on September 30, 2001.
(c) Executive Benefits. Executive shall be eligible to
participate in the employee benefit plans which are available or which become
available, to other executives of the Company of a comparable level, subject in
each case to the generally applicable terms and conditions of the plan or
program in question and to the determination of any committee administering such
plan or program; provided, however, that the Company shall provide to Executive
health benefits at least equal to Executive's health benefits immediately prior
to the Effective Time.
(d) Vacation. Executive shall initially be entitled to four (4)
weeks of vacation per year in accordance with the normal vacation policies of
the Company.
(e) Automobile. Executive shall receive a car allowance of $800
per month, plus all repairs and normal maintenance, fuel, oil changes, and car
wash costs.
(f) Life Insurance. The Company will obtain and pay premiums for,
during the term of Executive's employment hereunder, term life insurance for
Executive in the amount of $500,000 plus two (2) times Executive's Base
Compensation, payable to the beneficiary designated by Executive.
(g) Expenses. The Company will pay or reimburse Executive for
reasonable travel, entertainment or other expenses incurred by Executive in the
furtherance of or in connection with the performance of Executive's duties
hereunder in accordance with the Company's established policies; provided,
however, that the Company shall reimburse Executive for all business class
airfare incurred by Executive in the furtherance of or in connection with the
performance of Executive's duties hereunder.
(h) Trade Association and Club Fees. Executive shall be
reimbursed for all fees related to industry trade associations. Club membership
fees shall be reimbursed for an amount not to exceed $1,000 per year.
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3. Severance Payments.
(a) Payments upon Involuntary Termination. If the Executive's
employment terminates as a result of an Involuntary Termination prior to the end
of the term of this Agreement pursuant to Section 1(c), then the Company shall
pay Executive within thirty (30) days of Executive's termination (including the
Bonus pursuant to Section 2(b)) all amounts Executive is entitled to under this
Agreement as if he had continued in the employ of the Company for the remainder
of the term of this Agreement.
(b) Benefits. In the event the Executive is entitled to severance
benefits pursuant to Section 3(a), then in addition to such severance benefits,
the Executive shall receive health, dental and life insurance coverage as
provided to Executive immediately prior to the Executive's termination ( the
"Company-Paid Coverage"). If such coverage included the Executive's dependents
immediately prior to the Executive's termination, such dependents shall also be
covered to the extent covered prior to Executive's termination. Company-Paid
Coverage shall continue until the earlier of (i) the longer of (A) the term of
this agreement pursuant to Section 1(b) or (B) twelve (12) months following the
notice date for the Involuntary Termination, (ii) eighteen (18) months, or (iii)
the date the Executive becomes covered under another employer's group health,
dental and life insurance plans (to the extent covered under such plans). The
Executive's rights under the Consolidated Omnibus Budget Reconciliation Act of
1985 shall begin at the end of such coverage period.
(c) Miscellaneous. In addition, in the event of Employee's
termination for any reason, (i) the Company shall pay the Executive any unpaid
Base Compensation due for periods prior to the date of Executive's termination;
(ii) the Company shall pay the Executive all of the Executive's accrued and
unused vacation through the date of Executive's termination; and (iii) following
submission of proper expense reports by the Executive, the Company shall
reimburse the Executive for all expenses reasonably and necessarily incurred by
the Executive in connection with the business of the Company prior to
termination. These payments shall be made promptly upon termination and within
the period of time mandated by applicable law.
(d) Voluntary Resignation. If the Executive's employment
terminates by reason of Executive's voluntary resignation, in addition to the
payments provided in Section 3(c), Employee shall be entitled to Company-Paid
Coverage until the earlier of (i) three (3) months following the effective date
of such voluntary termination, or (ii) the date the Executive becomes covered
under another employer's group health, dental or life insurance plan (to the
extent covered under such plans).
(e) Definition of Involuntary Termination. "Involuntary
Termination" shall mean: (i) termination by the Company of Executive's
employment with the Company other than for Just Cause (as defined below); (ii) a
five percent (5%) or greater reduction in Executive's Base Compensation; (iii) a
significant reduction by the Company in the kind or level of employee benefits
in the aggregate (other than salary and bonus) to which Executive is entitled
immediately prior to such reduction with the result that Executive's overall
benefits package (other than salary and bonus) is reduced; (iv) any material
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breach by the Company of any material provision of this Agreement which
continues uncured for thirty (30) days following notice thereof; (v) a material
reduction in Executive's responsibilities, authority or duties with the Company;
(vi) the relocation of Executive's base of employment more than twenty-five (25)
miles from Executive's present place of employment; provided, that none of the
foregoing shall constitute Involuntary Termination to the extent Executive has
agreed thereto.
(f) Termination for Death or Just Cause.
(i) Payment. In the event Executive is terminated for
death or Just Cause, Executive shall receive the bonus pursuant to Section 2(b).
Following termination of Executive for Just Cause or death, except as otherwise
provided in Section 3(c) or Section 3(f), Executive shall be entitled to no
other payments or benefits hereunder.
(ii) Just Cause. "Just Cause" for termination by
Company of Executive's employment shall mean (A) the willful and continued
failure by Executive to substantially perform his duties with Company (other
than any such failure caused by Executive's incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to
Executive by the Board, which demand identifies the manner in which the Board
believes that Executive has not substantially performed his duties and sixty
(60) days for Executive to comply with such demand; (B) the willful engaging by
Executive in conduct which is demonstrably and materially injurious to Company
or its subsidiaries and affiliates, monetarily or otherwise; or (C) a
conviction, pleas of nolo contendere, guilty plea or confession by Executive to
an act of fraud, misappropriation or embezzlement, or to a felony.
4. Confidential Information.
(a) Company Information. Executive agrees at all times during the
term of Executive's employment and thereafter, to hold in strictest confidence,
and not to use, except for the benefit of the Company, or to disclose to any
person, firm or corporation without written authorization of the Board of
Directors of the Company, any Confidential Information of the Company. Executive
understands that "Confidential Information" means any Company proprietary
information, trade secrets or know-how, including, but not limited to, market
research, product plans, products, services, customer lists and customers
(including, but not limited to, customers of the Company to whom Executive
becomes acquainted during the term of Executive's employment), markets,
developments, marketing, finances or other business information disclosed to
Executive by the Company either directly or indirectly in writing, orally or by
drawings or observation of parts or equipment. Executive further understands
that Confidential Information does not include any of the foregoing items which
has become publicly known and made generally available through no wrongful act
of Executive or of others who were under confidentiality obligations as to the
item or items involved.
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(b) Third Party Information. Executive recognizes that the
Company has received and in the future will receive from third parties their
confidential or proprietary information subject to a duty on the Company's part
to maintain the confidentiality of such information and to use it only for
certain limited purposes. Executive agrees to hold all such confidential or
proprietary information in the strictest confidence and not to disclose it to
any person, firm or corporation or to use it except as necessary in carrying out
Executive's work for the Company consistent with the Company's agreement with
such third party.
5. Prior Agreements. Executive represents that Executive has not entered
into any agreements, understandings, or arrangements with any person or entity
which would be breached by Executive as a result of, or that would in any way
preclude or prohibit Executive from entering into this Agreement with the
Company or performing any of the duties and responsibilities provided for in
this Agreement. Executive's General Change in Control Agreement shall be
superseded as of the Acceptance Date and no payment shall be made thereunder as
a result of shares of Common Stock acquired as of the Acceptance Date pursuant
to the Tender Offer.
6. Returning Company Documents. Executive agrees that, at the time of
leaving the employ of the Company, Executive will deliver to the Company (and
will not keep in Executive's possession, recreate or deliver to anyone else) any
and all devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, materials, equipment, other documents or
property, or reproductions of any aforementioned items developed by Executive
pursuant to Executive's employment with the Company or otherwise belonging to
the Company, its successors or assigns.
7. Notices. Any and all notices permitted or required to be given under
this Agreement must be in writing. Notices will be deemed given (i) when
personally received or when sent by facsimile transmission (to the receiving
party's facsimile number), (ii) on the first business day after having been sent
by commercial overnight courier with written verification of receipt, or (iii)
on the third business day after having been sent by registered or certified mail
from a location on the United States mainland, return receipt requested, postage
prepaid, whichever occurs first, at the address set forth below or at any new
address, notice of which will have been given in accordance with this Section
7(a):
If to Company: Impact Systems Inc.
00000 Xxxxxxxxxx Xxxx.
Xxx Xxxxx, XX 00000
Attn: Chief Executive Officer
If to Executive, at Executive's address in the personnel records of
Company.
8. Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the law of California, as applied to agreements
entered into, and to be performed entirely in such state, by residents of such
state.
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9. Amendments. This Agreement shall not be changed or modified in whole
or in part except by an instrument in writing signed by each party hereto.
10. Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.
11. Successors.
(a) Company's Successors. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the obligations under this Agreement and agree
expressly to perform the obligations under this Agreement in the same manner and
to the same extent as the Company would be required to perform such obligations
in the absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and/or assets
which executes and delivers the assumption agreement described in this
subsection (a) or which becomes bound by the terms of this Agreement by
operation of law.
(b) Executive's Successors. The terms of this Agreement and all
rights of the Executive hereunder shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successor, heirs, distributees, devisees or legatees.
12. Entire Agreement. This Agreement, the Employee Confidentiality
Agreement with Voith, and the Incentive Bonus Plan shall supersede and replace
all prior agreements or understandings relating to the subject matter hereof,
and no agreement, representations or understandings (whether oral or written or
whether express or implied) which are not expressly set forth in these
agreements have been made or entered into by either party with respect to the
relevant matter hereof.
13. Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original, but which together shall constitute one and the
same agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
IMPACT SYSTEMS, INC.
By: /S/ XXXXXXX X. XXXXXX
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Title: President
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XXXX X. XXXXX, III
/s/ XXXX X. XXXXX, III
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(Signature)
[SIGNATURE PAGE OF XXXXX EMPLOYMENT AGREEMENT]
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