Exhibit 10.21
CHANGE OF CONTROL AND NONCOMPETITION AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into this 21st day of
January, 2002, by and between XXXXXX X. XXXX ("Employee") and NN, INC., a
Delaware corporation, including its wholly-owned subsidiaries and affiliated
companies (collectively, "Employer").
RECITALS
WHEREAS, the Board of Directors of Employer (the "Board") has
determined that it is in the best interests of Employer to reinforce and
encourage the continuity of management personnel in anticipation of a possible
or potential Change of Control (as defined below); and
WHEREAS, the Board believes this objective can best be served by
providing for a compensation arrangement for Employee upon Employee's
termination of employment under certain circumstances in the event of a Change
of Control.
NOW, THEREFORE, in consideration of the mutual promises and covenants
as hereinafter set forth, the parties agree as follows:
AGREEMENT
1. General. Employer is engaged in the (i) manufacture and supply
of precision steel balls and rollers to domestic and international anti-friction
bearing manufacturers, automotive original equipment manufacturers and the
automotive aftermarket, the gas and mining industries, producers of drilling
bits for oil, gas and water xxxxx and producers of stainless steel valves and
pumps, (ii) full-service design and manufacture of plastic injection molded
components to the bearing, automotive, electronic, leisure and consumer markets,
and (iii) the manufacture and supply of rubber seals to domestic and
international anti-friction bearing manufacturers. Employee is employed by
Employer in a senior management position in which Employee has or will have
access to the Employer's confidential information and trade secrets.
2. Employment Relationship. Except as specifically set forth herein,
the terms and conditions of Employee's employment are set forth in the
Employment Agreement dated January 21, 2002 between Employee and Employer (the
"Employment Agreement"), a copy of which is attached hereto as Exhibit A.
3. Termination Upon Change of Control.
(a) Severance Benefits. In the event that Employee's employment
is terminated within two (2) years following a "Change of Control" (as
defined below) and such termination is either (i) Without Cause (as
defined below), or (ii) is a Constructive Termination (as defined
below), Employee shall receive, in addition to all compensation due
and payable to or accrued for the benefit of Employee as of the date
of termination:
(i) a lump sum payment equal to an amount set forth on
Schedule A to this Agreement ("Severance Payment"). The Severance
Payment shall be made by wire transfer of immediately available
funds to an account designated by Employee within seven (7)
business days following the date of termination;
(ii) a payment equal to the annual bonus to which Employee
would have been entitled but for Employee's termination of
employment for the year of Employee's termination, pro-rated for
the portion of the year during which he was employed by Employer
("Pro-rated Bonus"). The Pro-rated Bonus shall be payable to
Employee at the end of the calendar year for which the bonus is
payable, in accordance with Employer's normal bonus procedures;
and
(iii) for a period of twenty-four months after such
termination (the "Coverage Period"), medical, dental,
prescription drug, life, accidental death and disability
insurance coverage substantially similar to the coverage which
Employee was receiving or entitled to receive immediately prior
to the date of the termination of Employee's employment
("Insurance Benefits"). Notwithstanding the foregoing, Employee
shall not be entitled to receive the Insurance Benefits (or a
portion thereof) to the extent that Employee obtains other
employment that provides equal or greater benefits during the
Coverage Period.
The Severance Payment, Pro-rated Bonus and Insurance Benefits are collectively
referred to in this Agreement as the "Severance Benefit."
(b) Excise Tax.
(i) Notwithstanding anything to the contrary set forth in
this Agreement, in no event shall a Severance Benefit payable
pursuant to this Section 3 exceed an amount equal to the lesser
of (i) 2.99 times the "base amount" (as defined in Section
280G(b)(3) of the Internal Revenue Code of 1986, as amended (the
"Code")) of Employee's compensation, or (ii) such other amount
which would constitute a "parachute payment" (as defined in
Section 280G of the Code). In the event that it shall be
determined that any Severance Benefit to Employee (whether paid
or payable or distributed or distributable) would be subject to
the excise tax imposed by Section 4999 of the Code, or any
successor provision thereto (the "Excise Tax"), then Employee
shall be entitled to receive from Employer an additional payment
(the "Gross-Up Payment") in an amount such that the net amount of
the Severance Benefit and the Gross-Up Payment retained by
Employee after the calculation and deduction of all Excise Taxes
(including any interest or penalties imposed with respect to such
taxes) on the payment and all Federal, state and local income
tax, employment tax and Excise Tax (including any interest or
penalties imposed with respect to such taxes) or the Gross-Up
Payment provided for in this Section, and taking into account any
lost or reduced tax deductions on account of the Gross-Up
Payment, shall be equal to the Severance Benefit.
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(ii) Employee shall notify Employer in writing of any claim
by the Internal Revenue Service that, if successful, would
require the payment by Employer of the Gross-Up Payment. Such
notification shall be given as soon as practicable after Employee
is informed in writing of such claim and shall apprise Employer
of the nature of such claim and the date on which such claim is
requested to be paid. Employee shall not pay such claim prior to
the expiration of the 30-day period following the date on which
Employee gives such notice to Employer (or such shorter period
ending on the date that any payment of taxes, interest and/or
penalties with respect to such claim is due). If Employer
notifies Employee in writing prior to the expiration of such
period that it desires to contest such claim, Employee shall:
(A) give Employer any information reasonably requested
by Employer relating to such claim;
(B) take such action in connection with contesting such
claim as Employer 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 Employer;
(C) cooperate with Employer in good faith in order to
effectively contest such claim; and
(D) permit Employer to participate in any proceedings
relating to such claims;
provided, however, that Employer shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify Employee for and hold
Employee harmless from, on an after-tax basis, any Excise Tax or income
tax (including interest and penalties with respect thereto) imposed as
a result of such representation and payment of all related costs and
expenses. Without limiting the foregoing provisions of this section,
Employer 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 Employee to pay the tax claimed and xxx for a refund or
contest the claim in any permissible manner, and Employee 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 Employer shall determine; provided, however, that
if Employer directs Employee to pay such claim and xxx for a refund,
Employer shall advance the amount of such payment to Employee, on an
interest-free basis, and shall indemnify Employee for and hold Employee
harmless from, on an after-tax basis, 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 (including as a result of any forgiveness by
Employer of such advance); provided, further, that any extension of the
statute of limitations relating to the payment of taxes for the taxable
year of Employee with respect to which such contested amount is claimed
to
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be due is limited solely to such contested amount. Furthermore,
Employer's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and
Employee 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.
(c) Change of Control. "Change of Control" shall mean: (i) a
person, corporation, entity or group (A) makes a tender or exchange
offer for the issued and outstanding voting stock of Employer and
beneficially owns thirty percent (30%) or more of the issued and
outstanding voting stock of Employer after such tender or exchange
offer, or (B) acquires, directly or indirectly, the beneficial
ownership of thirty percent (30%) or more of the issued and
outstanding voting stock of Employer in a single transaction or a
series of transactions (other than any person, corporation, entity or
group for which a Schedule 13G is on file with the Securities and
Exchange Commission, so long as such person, corporation, entity or
group has beneficial ownership of less than fifty percent (50%) of the
issued and outstanding voting stock of Employer); (ii) Employer is a
party to a merger, consolidation or similar transaction and following
such transaction, fifty percent (50%) or more of the issued and
outstanding voting stock of the resulting entity is not beneficially
owned by those persons, corporations or entities that constituted the
stockholders of Employer immediately prior to the transaction; (iii)
Employer sells fifty percent (50%) or more of its assets to any other
person or persons (other than an affiliate or affiliates of Employer);
or (iv) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least
seventy-five percent (75%) of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof, whose
election or nomination was approved by a majority of the directors
then comprising the Incumbent Board, shall be considered a member of
the Incumbent Board, but not including any individual whose initial
Board membership is a result of an actual or threatened election
contest (as that term is used in Rule 14a-11 promulgated under the
Securities Act of 1934, as amended) or an actual or threatened
solicitation of proxies or consents by or on behalf of a party other
than the Board.
(d) Termination Without Cause. Termination "Without Cause" shall
mean termination of Employee by Employer for reasons other than: (i)
the willful, persistent failure of Employee (after thirty (30) days
written notice and a reasonable opportunity to cure) to perform his
material duties for reasons other than death or disability; (ii) the
breach by Employee of any material provision of this Agreement; or
(iii) Employee's conviction of a felony involving dishonesty, deceit
or moral turpitude by a trial court of competent jurisdiction, whether
or not an appeal is taken.
(c) Constructive Termination. "Constructive Termination" shall
mean: (i) a material, adverse change of Employee's responsibilities,
authority, status, position, offices, titles, duties or reporting
requirements (including directorships); (ii) an adverse change in
Employee's annual compensation or benefits; (iii) a requirement to
relocate in excess of fifty (50) miles from Employee's then current
place of employment; or (iv) the breach by Employer of any material
provision of this Agreement, other than a breach that is remedied by
Employer within 10 days after receipt of notice thereof from Employee.
For purposes of this definition, Employee's responsibilities,
authority, status, position,
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offices, titles, duties and reporting requirements are to be
determined as of the date of this Agreement. For purposes of this
Section, all determinations of Constructive Termination shall be made
in good faith by Employee and shall be conclusive.
(f) Other Severance Benefits. The Severance Benefit payable to
Employee pursuant to this Section 3 shall be reduced by any severance
benefits to which Employee is entitled under Employer's severance
policies for terminated employees generally or any termination
payments payable to Employee under Employee's Employment Agreement.
4. Employee's Acknowledgments and Covenants.
(a) Confidential Materials and Information. Employer has
developed confidential information, strategies and programs, which
include customer lists, prospects, lists, expansion and acquisition
plans, market research, sales systems, marketing programs, computer
systems and programs, product development strategies, manufacturing
strategies and techniques, budgets, pricing strategies, identity and
requirements of national accounts, customer lists, methods of
operating, service systems, training programs and methods, other trade
secrets and other information about the business in which employer is
engaged that is not known to the public and gives Employer an
opportunity to obtain an advantage over competitors who do not know of
such information (collectively, "Confidential Information"). In
performing duties for Employer, Employee regularly will be exposed to
and work with the Confidential Information. Employee acknowledges that
such Confidential Information is critical to Employer's success and
that Employer has invested substantial sums of money in developing the
Confidential Information. While Employee is employed by Employer and
after such employment ends for any reason, Employee will never
reproduce, publish, disclose, use, reveal, show or otherwise
communicate to any person or entity any Confidential Information
unless specifically directed by Employer to do so in writing.
(b) Nonsolicitation of Employees. While Employee is employed by
Employer and for twenty-four (24) months after such employment ends
for any reason, Employee, acting either directly or indirectly, or
through any other person, firm, or corporation, will not hire contract
with or employ any employee of Employer or induce or attempt to induce
or influence any employee of Employer to terminate employment with
Employer. Such nonsolicitation restriction shall not apply to Employee
in the case of the solicitation of his or her immediate family
members.
(c) Covenant Against Unfair Competition. While Employee is
employed by Employer and for twenty-four (24) months after such
employment ends for any reason, Employee will not, directly or
indirectly, or through any other person, firm or corporation (i) be
employed by, consult for, have any ownership interest in or engage in
any activity on behalf of any competing business, or (ii) call on,
solicit or communicate with any of Employer's customers (whether
actual or potential) for the purpose of selling precision steel balls
and rollers and other related items to such customer other than for
the benefit of Employer. As used in this Agreement, the term
"competing business" means a business that is a manufacturer and
supplier of precision steel balls and rollers to anti-
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friction bearing manufacturers (excluding any ball and roller
manufacturers who manufacture such products for use in their business
or the business of their affiliates and do not supply such products to
third parties) and the term "customer" means any customer (whether
actual or potential) with whom Employee or any other employee of
Employer had business contact on behalf of Employer during the
eighteen (18) months immediately before Employee's employment with
Employer ended). Notwithstanding the foregoing, this paragraph shall
not be construed to prohibit Employee from owning less than five
percent (5%) of the outstanding securities of a corporation which is
publicly traded on a securities exchange or over-the-counter.
(d) Return of Confidential Materials and Information. Employee
agrees that whenever Employee's employment with Employer ends for any
reason, all documents containing or referring to Confidential
Information as may be in Employee's possession or control will be
delivered by Employee to Employer immediately, with no request being
required.
(e) Acknowledgments; Irreparable Harm. Employee agrees that the
restrictions on competition, solicitation and disclosure in this
Agreement are fair, reasonable and necessary for the protection of the
interests of Employer. Employee further agrees that a breach of any of
the covenants set forth in this Section 4 will result in irreparable
injury and damage to Employer for which Employer would have no
adequate remedy at law, and Employee further agrees that in the event
of a breach, Employer will be entitled to an immediate restraining
order and injunction to prevent such violation or continued violation,
without having to prove damages, in addition to any other remedies to
which Employer may be entitled at law or equity.
(f) Notification to Subsequent Employers. Employee grants
Employer the right to notify any future employer or prospective
employer of Employee concerning the existence of and terms of this
Agreement and grants Employer the right to provide a copy of this
Agreement to any such subsequent employer or prospective employer.
5. Mitigation. Employer's obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which Employer may have against Employee or others. In no event
shall Employee be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to Employee under any of the provisions
of this agreement and such amounts shall not be reduced whether or not Employee
obtains other employment.
6. Resolution of Disputes. Any dispute or claim arising out of or
relating to this Agreement shall be settled by final and binding arbitration in
Johnson City, Tennessee in accordance with the Commercial Arbitration rules of
the American Arbitration Association, and judgment upon the award rendered by
the arbitrators may be entered in any court having jurisdiction thereof.
Employer agrees to pay promptly as incurred, to the full extent permitted by
law, all legal fees and expenses which Employee may reasonably incur as a result
of any dispute (regardless of the outcome thereof) by Employer, Employee or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of
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performance thereof (including as a result of any dispute by Employee regarding
the amount of any payment pursuant to this agreement), plus in each case
interest on any delayed payment at the rate published from time to time in The
Wall Street Journal as the prime rate of interest plus two percent (2%).
7. Withholding. Employer may withhold from any amounts payable under
this Agreement the minimum Federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
8. Successors. This Agreement is binding on, and shall inure to the
benefit of Employee and Employer, and all successors and assigns of Employer.
Employer 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 Employer to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that Employer would be
required to perform it if no such succession had taken place. Failure of
Employer to obtain such agreement prior to the effectiveness of any such
succession shall be a material breach of this Agreement and shall entitle
Employee to any Severance Benefit payable pursuant to Section 3(a) hereof.
9. Applicable Law. This Agreement will be interpreted, governed and
enforced according to the law of the State of Tennessee.
10. Separability. If any portion of this Agreement is held to be
invalid or unenforceable in any respect, Employee and Employer agree that such
invalid and unenforceable part will be modified to permit the Agreement to be
enforced to the maximum extent permitted by the court, with the remaining
portions unaffected by the invalidity or unenforceability of any part of this
Agreement.
11. Waiver. This Agreement may be modified, supplemented or amended,
and any provision of this Agreement can be waived, only by written instrument
making specific reference to this Agreement signed by the party against whom
enforcement of any such modification, supplement, amendment or waiver is sought.
12. Complete Agreement. This Agreement contains the entire agreement
between Employer and Employee as to the subject matter hereof. This Agreement
shall not be subject to the terms and conditions of any agreement concerning
arbitration or dispute resolution between Employer and Employee.
EMPLOYEE ACKNOWLEDGES THAT HE/SHE HAS READ THE ENTIRE CONTENTS OF THIS
AGREEMENT AND THAT HE/SHE UNDERSTANDS ITS TERMS.
[Signatures on following page]
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first written above.
EMPLOYEE:
/s/ Xxxxxx X. Xxxx
-------------------------------------------
Name: Xxxxxx X. Xxxx
NN, INC.,
including its subsidiaries and affiliates
By: /s/ Xxxxxxxx X. Xxxx
--------------------------------------
Xxxxxxxx X. Xxxx
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Schedule A
Employee's Severance Payment shall be a lump sum payment equal to:
1. 2 times such Employee's base salary (as of the date of Employee's
termination); plus
2. 2 times such Employee's median bonus available at the following bonus
target percentage: 35%; plus
3. An amount equal to 2 times Employee's annual automobile allowance or the
annual cost to Employee of obtaining a motor vehicle comparable to that
provided by Employer to Employee.
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