EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement by and among Rohm and Xxxx Company, a
Delaware corporation ("Parent"), Xxxxxx International, Inc., an Indiana
corporation (the "Company") and S. Xxx Xxxxxxx (the "Executive") is dated
as of the 31st day of January, 1999.
WHEREAS, the Company, Parent and Gershwin Acquisition Company, an
Indiana corporation and a wholly owned subsidiary of Parent ("Sub"),
have entered into an Agreement and Plan of Merger dated as of the 31st
day of January, 1999 (the "Merger Agreement"), pursuant to which Sub
will merge with and into the Company (the "Merger"), following which the
Company will be a wholly owned subsidiary of Parent; and
WHEREAS, the Executive and the Company are parties to an Executive
Employment Agreement dated as of April 1, 1994 (the "Current Employment
Agreement"); and
WHEREAS, it is acknowledged by the parties hereto that upon either
the consummation of the Offer (as defined in the Merger Agreement) or
the approval of the Merger by the shareholders of the Company, the
Executive will have "Good Reason" to terminate his employment pursuant
to the Current Employment Agreement; and
WHEREAS, the Company and Parent have determined that it is in the
best interests of their respective shareholders to set forth, and the
Executive has agreed to set forth, their mutual agreements as to the
rights and entitlements of the Executive under the Current Employment
Agreement from and after the Effective Time and to provide for the
continuing availability to the Company and Parent of the Executive's
services and expertise, all on the terms and conditions set forth below;
NOW, THEREFORE, it is hereby agreed as follows:
1. Effect of this Agreement; Continued Employment. (a) Effective
Time. This Agreement shall become effective at the Effective Time (as
defined in the Merger Agreement).
(b) Position and Duties. From and after the date on which this
Agreement becomes effective until the first anniversary thereof (the
"Employment Term"), the Executive shall serve as a member of the Board
of Directors of Parent (the "Board"), and Parent shall employ the
Executive; and the Executive shall serve as a Vice Chairman of the
Board, reporting directly to the Chairman of the Board and Chief
Executive Officer of the Company and to the Board. The Executive's
primary duties and responsibilities shall be to work to ensure a smooth
transition and integration of the businesses of Parent and the Company,
with such other duties and responsibilities not inconsistent with his
position as may be assigned to him from time by the Chairman of the
Board and Chief Executive Officer of the Company and the Board.
(c) Full-Time Employment. During the Employment Term, and excluding
any periods of vacation and sick leave to which the Executive is
entitled, the Executive shall devote reasonable attention and time
during normal business hours to the business and affairs of
Parent and the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of
the foregoing for the Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee
of the Company in accordance with this Agreement.
(d) Location. During the Employment Term, the Executive shall be
based at the Company's office in Chicago, Illinois, and shall be
required to be absent therefrom on travel status or otherwise only to
the extent reasonably necessary to discharge his duties hereunder.
2. Compensation. (a) Cash Compensation. During the Employment
Term, the Executive shall receive cash compensation, payable at such
intervals as Parent pays the base salary of its other senior executives,
equal to $1,950,000 on an annual basis (which sum represents the
aggregate of (i) his current annual base salary of $745,000, (ii) his
target annual bonus under the Company's 1999 fiscal year annual
incentive plan of $540,000, and (iii) his target long-term incentive
plan award for the award cycle that ends at the end of the Company's
1999 fiscal year of $665,000).
(b) Other Benefits. During the Employment Term: (i) the Executive
shall be entitled to participate in, and shall receive all benefits
under, savings and retirement plans, practices, policies and programs on
the same basis as other senior executives of Parent; and (ii) the
Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in, and shall receive all benefits under,
welfare benefit plans, practices, policies and programs (including,
without limitation, medical, prescription, dental, disability, salary
continuance, employee life insurance, group life insurance, accidental
death and travel accident insurance plans and programs) on the same
basis as other senior executives of Parent.
(c) Expenses. During the Employment Term, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses
incurred by him (in accordance with the policies and procedures
established for the senior executive officers of Parent) in performing
services hereunder, provided that the Executive properly accounts
therefor in accordance with Parent policy.
(d) Vacations. During the Employment Term, the Executive shall be
entitled to the number of paid vacation days determined by Parent for
its senior executive officers, but not less than five weeks in any
calendar year or portion thereof during which the Executive is employed.
The Executive shall also be entitled to all paid holidays given by the
Company to its senior executive officers.
(e) Perquisites. During the Employment Period, the Executive shall
be entitled to continue to receive all perquisites that he is receiving
from the Company as of the date hereof.
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3. Termination of Employment. (a) Upon any termination of the
Executive's employment for any reason after the Effective Time (whether
or not during the Employment Term), the Executive (or the Executive's
family or estate, as applicable) shall be entitled to the payments and
benefits set forth below in this Section 3. The date of such termination
of employment is hereinafter referred to as the "Date of Termination."
(b) The Company shall pay to the Executive (or the Executive's
estate, as applicable), in a lump sum in cash within 30 days after the
Date of Termination, the product of (i) $2,185,000 (which represents the
annualized amount of cash severance, calculated based upon current
compensation, to which he is entitled under the Current Employment
Agreement) times (ii) a fraction, the numerator of which is the number
of days from the Date of Termination through and including September 30,
2003, and the denominator of which is 365.
(c) From the Date of Termination through and including September 30,
2003, or such longer period as any plan, program, practice, or policy
may provide, Parent shall continue welfare and fringe benefits and
perquisites to the Executive and/or the Executive's family at least
equal in value to those that would have been provided in accordance with
the plans, programs, practices and policies described in clause (i) of
Section 2(b) and in Section 2(e) if the Executive's employment and the
Employment Term had continued through September 30, 2003. From and
after October 1, 2003, the Executive and his spouse shall be entitled to
receive retiree medical benefits ("Retiree Medical Benefits") for life
at least equal in value to those in effect as of the date hereof for
senior executives of the Company who retire with full benefits.
Notwithstanding the foregoing, the Executive may elect for himself and
his family (or his surviving spouse may elect) to cease receiving
medical benefits pursuant to the first sentence of this Section 3(c) and
begin receiving medical benefits pursuant to the second sentence of this
Section 3(c) at any time after the Date of Termination and before
September 30, 2003.
(d) Beginning immediately following the Date of Termination, Parent
shall provide the Executive and the Executive's beneficiaries with
supplemental pension benefits ("Contract Pension Benefits") such that
the Monthly Contract Pension Benefits, plus the monthly pension benefits
received by them pursuant to all qualified and nonqualified defined
benefit pension plans of Parent and the Company, are not less than the
monthly benefits set forth in Schedule I hereto, computed in accordance
with Schedule I. Although the Contract Pension Benefits will begin
immediately following the Date of Termination, they shall not be subject
to any actuarial reduction for early payment.
(e) To the extent not theretofore paid or provided, or otherwise
specified in this Agreement, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to be paid or
provided or which the Executive is eligible to receive under any plan,
program, policy or practice or contract or agreement of Parent, the
Company or their respective affiliates, in accordance with the terms
thereof.
(f) The Executive shall not be required to mitigate the amount of
any payment, benefit or perquisite provided for in this Section 3 by
seeking other employment or otherwise, nor shall the amount of any
payment, benefit or perquisite provided for in this Section 3 be
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reduced by any compensation earned by the Executive as the result of
employment by another employer after the Date of Termination, or
otherwise.
4. Unauthorized Disclosure; Inventions. (a) The Executive shall
not, without the written consent of the Board or a person authorized
thereby, use for his own purposes or disclose to any person, other than
an employee of Parent or the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance
by the Executive of his duties hereunder, any confidential information
obtained by him while in the employ of Parent or the Company, including
without limitation confidential information with respect to any of
Parent's or the Company's products, improvements, formulas, designs or
styles, processes, customers, methods of distribution or methods of
manufacture; provided, however, that confidential information shall not
include any information known generally to the public (other than as a
result of unauthorized disclosure by the Executive).
(b) (i) Any and all inventions made, developed or created by the
Executive (whether at the request or suggestion of Parent or the Company
or otherwise, whether alone or in conjunction with others, and whether
during regular hours of work or otherwise) during the Employment Term,
which may be directly or indirectly useful in, or relate to, the
business of or tests being carried out by Parent or the Company or any
of its subsidiaries or affiliates, will be promptly and fully disclosed
by the Executive to an appropriate executive officer of Parent and shall
be Parent's exclusive property as against the Executive, and the
Executive will promptly deliver to an appropriate officer of Parent all
papers, drawings, models, data and other material relating to any
invention made, developed or created by him as aforesaid.
(ii) The Executive will, upon Parent's request and without any
payment therefor, execute any document necessary or advisable in the
opinion of Parent's counsel to direct issuance of patents to the Company
with respect to such inventions as are to be Parent's exclusive property as
against the Executive under this Section 4(b) or to vest in Parent title to
such inventions as against the Executive, the expense of securing any
patent, however, to be borne by Parent.
(c) The foregoing provisions of this Section 4 shall be subject to and
modified by any applicable law providing employee ownership of or rights in
inventions under certain circumstances, and shall be binding upon the
Executive's heirs, successors and legal representatives.
5. Certain Additional Payments. (a) Anything in this Agreement to the
contrary notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by Parent, the Company
or their respective affiliates to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"),
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then the Executive shall be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be
made by Ernst & Young LLP (the "Accounting Firm") which shall provide
detailed supporting calculations to Parent, the Company and the Executive
within 15 business days of the receipt of notice from the Executive that
there has been a Payment, or such earlier time as is requested by Parent or
the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the
Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the Accounting Firm
hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by Parent. Any Gross-Up Payment, as determined pursuant to this
Section 5, shall be paid by Parent to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it shall furnish
the Executive with a written opinion that failure to report the Excise Tax
on the Executive's applicable federal income tax return would not result in
the imposition of a negligence or similar penalty. Any determination by
the Accounting Firm shall be binding upon Parent, the Company and the
Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have
been made by Parent or the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the
event that Parent exhausts its remedies pursuant to Section 5(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine that amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by Parent or the
Company to or for the benefit of the Executive.
(c) The Executive shall notify Parent in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment of
the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise Parent of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to Parent (or such
shorter period ending on the date that any payment of taxes with respect to
such claim is due). If Parent notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:
(i) give Parent any information reasonably requested by Parent
relating to such claim.
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(ii) take such action in connection with contesting such claim as
Parent shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by Parent,
(iii) cooperate with Parent in good faith in order effectively to
contest such claim, and
(iv) permit Parent to participate in any proceedings relating to
such claim;
provided, however, that Parent shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto) imposed as a result
of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5(c), Parent shall
control all proceedings taken in connection with such contest and, at its
sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the Executive to
pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Parent shall
determine; provided, however, that if Parent directs the Executive to pay
such claim and xxx for a refund, Parent shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, Parent's
control of the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised
by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
Parent pursuant to Section 5(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall promptly pay to
Parent the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by Parent pursuant to Section 5(c), a
determination is made that the Executive shall not be entitled to any
refund with respect to such claim and Parent does not notify the Executive
in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
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6. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of Parent shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
Parent, the Company and their respective successors and assigns.
(c) Parent and the Company shall each require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all
or substantially all of their respective businesses and/or assets to assume
expressly and agree to perform this Agreement in the same manner and to the
same extent that Parent or the Company (as applicable) would be required to
perform it if no such succession had taken place. As used in this
Agreement, "Parent" and the "Company" shall mean Parent and the Company,
respectively, as hereinbefore defined and any successor to their respective
businesses and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
7. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the Executive:
S. Xxx Xxxxxxx
0000 Xxxx Xxxx
Xxxx Xxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
If to Parent:
Rohm and Xxxx Company
000 Xxxxxxxxxxxx Xxxx Xxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Attention: Corporate Secretary
Facsimile: (000) 000-0000
with an additional copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Company:
Xxxxxx International, Inc.
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Corporate Secretary
Facsimile: (000) 000-0000
with an additional copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications shall
be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision (or portion
thereof) of this Agreement shall not affect the validity or enforceability
of any other provision (or portion thereof) of this Agreement.
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(d) The Company may withhold from any amounts payable under this
Agreement such federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
(e) From and after the Effective Time, this Agreement shall supersede
any other agreement between the parties with respect to the subject matter
hereof, including without limitation the Current Employment Agreement.
(f) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute
but one and the same instrument.
(g) The provisions of Sections 3, 4, 5, 6 and 7 of this Agreement shall
survive the end of the Employment Term, the termination of the Executive's
employment, and the termination of this Agreement for any reason, except as
specified in Section 7(h) below.
(h) This Agreement shall be null and void, ab initio, and of no further
effect if the Merger Agreement is terminated before the Effective Time.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from their respective Boards of
Directors, Parent and the Company have each caused these presents to be
executed in its name on its behalf, all as of the day and year first above
written.
/s/ S. Xxx Xxxxxxx
By ---------------------------------
S. Xxx Xxxxxxx
XXXXXX INTERNATIONAL, INC.
/s/ Xxxxxxxxxxx X. Xxxxxxx
By ---------------------------------
ROHM AND XXXX COMPANY
/s/ J. Xxxxxxxx Xxxxxx
---------------------------------
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