Exhibit 10.31
EMPLOYMENT AGREEMENT
This Employment Agreement, dated as of the 1st day of January, 2000,
between Xxxxxx X. Xxxxxxxx (the "Executive") and Memry Corporation, a Delaware
corporation (the "Company").
W I T N E S S E T H,
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WHEREAS, the Company and the Executive are currently party to a Letter
Agreement, dated as of March 18, 1999 (the "Letter Agreement"), by which the
Executive is currently employed as the Company's President and Chief Operating
Officer, and is a member of the Company's Board of Directors; and
WHEREAS, the Company and the Executive desire to enter into an employment
agreement on the terms and conditions set forth below (this "Agreement") in
substitution for the Letter Agreement; and
WHEREAS, in consideration of the commencement of the performance described
in this Agreement, the Company has issued to the Executive 275,000 incentive
stock options, 50,000 of which are immediately vested, with the remainder
vesting equally in annual installments over four years.
NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements set forth herein, the parties agree as follows:
1. Employment and Duties.
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(a) The Company hereby agrees to employ the Executive, and the
Executive hereby accepts employment, upon the terms and conditions set
forth herein. During the period during which he is employed hereunder (the
"Period of Employment"), the Executive shall diligently and faithfully
serve the Company in the capacity of President and Chief Operating Officer,
or in such other and/or lesser executive capacity or capacities as the
Board of Directors and the Executive may, from time to time, agree.
(b) During the term hereof, the Executive shall, at the request of
the Company, serve as a director of the Company, as well as an officer
and/or director of direct and indirect subsidiaries, and other affiliates,
of the Company as the Company, acting through its Board of Directors, shall
request from time to time.
(c) The Executive shall devote his best efforts and substantially all
of his business time, services and attention to the advancement of the
Company's business and interests. The restrictions in this Section 1 shall
in no way prevent the Executive from (except as set forth in the
immediately succeeding sentence) pursuing other activities, so long as all
of such other activities do not, in the aggregate, materially interfere
with the Executive's duties hereunder (including his obligation to devote
substantially all of his business time, services and attention to the
Company). Notwithstanding the foregoing, however, the Executive shall not
accept any outside directorships without the prior consent of the Company's
Board of Directors.
(d) The Executive shall, at all times during the Period of
Employment, diligently and faithfully carry out the policies, programs and
directions of the Company. The Executive shall comply with the directions
and instructions made or given by or under the authority of the Company's
Chief Executive Officer and whenever requested to do so shall give an
account of all transactions, matters and things related to the Company and
its affiliates and their affairs with which the Executive is entrusted.
2. Term. The initial term of this Agreement shall commence on the date
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hereof, and shall terminate on the day before the second anniversary of such
date (the "Initial Term"). Thereafter, the term of this Agreement shall be
automatically renewed for successive one-year periods, each commencing on the
month and day of this Agreement in the appropriate year and terminating on the
day before such date in the subsequent year, unless either party notifies the
other in writing of such party's intention not to renew at least ninety (90)
days prior to the date on which the term of this Agreement would otherwise
terminate. The Initial Term and such other periods for which the term hereof
has been extended as aforesaid is collectively referred to herein as the "Term."
Subject to Section 8(f) below, in the event the Company elects not to renew this
Agreement at the end of any Term, then the Company shall pay to the Executive
his base salary for a period of eighteen (18) months following termination of
this Agreement, as and when the same would otherwise be due; provided, however,
that such payment shall not be paid by the Company if such non-renewal is "for
cause" (as defined below); and, provided further, that if such non-renewal by
the Company follows within two (2) years a Change in Control (as defined below),
then the Company shall also pay to the Executive, in one lump sum on the last
day of the Term, an amount equal to the sum of (x) two (2) times the Executive's
base salary as then in effect, plus (y) two (2) times the Executive's target
bonus, as then in effect.
3. Compensation. In consideration of the services rendered and to be
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rendered by the Executive, the Company agrees to compensate the Executive as
follows:
(a) From the date hereof the Company shall pay to the Executive an
annual base salary of $195,000, payable in equal installments every two
weeks. The Executive's base salary may be increased from time to time by
the Board in accordance with normal business practices of the Company.
(b) The Executive shall also be entitled to receive additional
compensation in the form of an annual target bonus of $91,500 and annual
long term incentive awards having a target value of $325,000, determined by
and in the sole discretion of the Board of Directors of the Company. Such
target amounts are based upon the Executive meeting all personal and
Company performance goals and objectives. Such grants may be made pursuant
to any bonus and/or incentive compensation programs that may be established
by the Company, including without limitation the Company's current
incentive plans; provided, however, that nothing set forth in this sentence
will in any way limit the Board of Directors discretion to approve or
reject any bonus that the Executive would otherwise be due under any such
plans.
(c) The Executive shall be entitled to an automobile allowance of
$500 per month, to be paid in accordance with the Company's policy for
paying automobile allowances as in effect from time to time.
(d) The Executive shall also be entitled to receive up to $15,000 per
year from the Company towards retirement and/or deferred compensation
benefits. Said amount may be used for split dollar life insurance, a
retirement plan, a rabbi trust or such other method or methods as may
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be selected by the Executive subject to the consent of the Company (not to
be unreasonably withheld).
(e) The Executive shall be entitled to other fringe benefits
comparable to the benefits afforded to other executive employees of the
Company, including but not limited to reasonable sick leave and coverage
under any health, dental, accident, hospitalization, disability,
retirement, life insurance, 401(k), and annuity plans, programs or policies
maintained by the Company. In addition, and without limiting the
foregoing, the Company shall provide the Executive with twenty working days
of vacation per calendar year, no more than thirty of which (in the
aggregate) may be carried over from one year to the next.
(f) The Executive shall be entitled to reimbursement, in accordance
with Company policy, of all reasonable out-of-pocket expenses which he
incurs on behalf of the Company in the course of performing his duties
hereunder, subject to furnishing appropriate documentation of such expenses
to the Company's Chief Financial Officer. Such reimbursement shall
include, without limitation, the Executive's expenses associated with
business travel to Company headquarters and accommodations while visiting
Company headquarters.
(g) Upon the Executive's relocation to Connecticut, the Company shall
reimburse the Executive for all customary relocation expenses, in
accordance with Company policy, including a reasonable number of trips made
to Connecticut for the purpose of finding a home. In addition, prior to
the Executive's relocation to Connecticut, the Company shall reimburse the
Executive for customary office expenses incurred by the Executive at his
home office in Eden Prairie, Minnesota.
(h) Upon the Executive's relocation, the Company shall make to the
Executive a $200,000 interest-free loan to be used by the Executive toward
a down payment on a new home. One fourth of the principal amount of such
loan will be forgiven by the Company if (and only if) the Executive remains
in the employ of the Company on each of the third, fourth, fifth and sixth,
respectively, anniversaries of the date hereof such that, if the Period of
Employment has continued through the sixth anniversary of the date hereof,
the full amount of such loan shall have been forgiven.
4. Covenant Not to Compete; Nonsolicitation.
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(a) Except as specifically set forth in this Section 4, during the
Period of Employment, the Executive will not engage, directly or
indirectly, anywhere in the United States (including its territories,
possessions and commonwealths) or Canada in any business which competes or
could reasonably be expected to compete with the Company and/or its
affiliates and, for a period of one year after the termination of the
Period of Employment, any business which competes or could reasonably be
expected to compete with the Company and/or its affiliates as of the date
of termination; provided, however, that (i) the ownership by the Executive
of less than 2% of the outstanding stock of any publicly traded corporation
shall not be deemed solely by reason thereof to cause the Executive to be
engaged in any businesses being conducted by such publicly traded
corporation; and (ii) the Company, at its sole discretion, may, by written
notice to the Executive no more than six (6) months and no less than three
(3) months prior to the end of the one-year period described above, extend
such one-year period for a second year, in which case the Company will be
obligated to pay the Executive, quarterly in advance, at the rate of the
Executive's base salary in
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effect on the last day of the Period of Employment, for such additional
one-year non-compete period. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this Section 4(a) is
invalid or unenforceable, the parties agree that the court making the
determination of invalidity or unenforceability shall have the power to
reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term
or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as
so modified after the expiration of the time within which the judgment may
be appealed.
(b) During the Period of Employment and for a period of three years
thereafter, the Executive will not, directly or indirectly, either for
himself or for any other person or entity (i) solicit (A) any employee of
the Company or any affiliate of the Company to terminate his or her
employment with the Company or such affiliate during his or her employment
with the Company or such affiliate or (B) any former employee of the
Company or an affiliate of the Company for a period of one year after such
individual terminates his or his employment with the Company or such
affiliate, (ii) solicit any customer or client of the Company or any such
affiliate (or any prospective customer or client of the Company or such
affiliate) as of the termination of the Period of Employment to terminate
its relationship with the Company or such affiliate, or do business with
any third parties, or (iii) take any action that is reasonably likely to
cause injury to the relationships between the Company or any such affiliate
or any of their respective employees and any lessor, lessee, vendor,
supplier, customer, distributor, employee, consultant or other business
associate of the Company or any such affiliate as such relationship relates
to the Company's or such affiliate's conduct of its business.
5. Covenant Not to Disclose Information. The Executive agrees that
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during the Period of Employment and thereafter, he will not use or disclose,
other than to another employee of the Company, qualified by the Company to
receive that information in the normal course of business, any then confidential
information or trade secrets of the Company or any affiliate of the Company
which were made known to him by the Company, its officers or employees or
affiliates, or learned by him while in the Company's employ, without the prior
written consent of the Company, and that upon termination of his employment for
any reason, he will promptly return to the Company any and all properties,
records, figures, calculations, letters, papers, drawings, schematics or copies
thereof or other confidential information of the Company and its affiliates of
any type or description. It is understood that the term "trade secrets" as used
in this Agreement is deemed to include, without limitation, lists of the
Company's and its affiliates' respective customers, information relating to
their practices, know-how, processes and inventions, and any other information
of whatever nature which gives the Company or any affiliate an opportunity to
obtain an advantage over its competitors who do not have access to such
information.
6. Remedy at Law Inadequate. The Executive acknowledges that any remedy
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at law for breach of any of the restrictive covenants (Sections 4 and 5)
contained in this Agreement would be inadequate and the Company shall be
entitled to injunctive relief in the event of any such breach.
7. Inventions and Improvements. With respect to any and all inventions
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(as defined in Section 7(e) below) made or conceived by the Executive, whether
or not during his hours of employment, either solely or jointly with others,
during the Period of Employment, without additional consideration:
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(a) The Executive shall promptly inform the Company of any such
invention.
(b) Any such invention, whether patentable or not, shall be the
property of the Company, and the Executive hereby assigns and agrees to
assign to the Company all his rights to any such invention, and to any
United States and/or foreign letters patent granted upon any such invention
or any application therefor.
(c) The Executive shall apply, at the Company's request and expense,
for United States and/or foreign letters patent either in the Executive's
name or otherwise as the Company may desire.
(d) The Executive shall acknowledge and deliver promptly to the
Company, without charge to the Company but at its expense, all sketches,
drawings, models and figures and other information and shall perform such
other acts, such as giving testimony in support of his inventorship, as may
be necessary in the opinion of the Company to obtain and maintain United
States and/or foreign letters patent and to vest the entire right and title
thereto in the Company.
(e) For purposes of this Section, the term "invention" shall be
deemed to mean any discovery, concept or idea (whether patentable or not),
including but not limited to processes, methods, formulas, techniques,
hardware developments and software developments, as well as improvements
thereof or know-how related thereto, (i) concerning any present or
prospective activities of the Company and its affiliates and (ii) (A) which
the Executive becomes acquainted with as a result of his employment by the
Company, (B) which results from any work he may do for, or at the request
of, the Company or any of its affiliates, (C) which relate to the Company's
or any affiliates' business or actual or demonstrably anticipated research
and development, or (D) which are developed in any part by use of the
Company's or any such affiliates' equipment, supplies, facilities or trade
secrets.
The parties hereto agree that the covenants and agreements contained in this
Section 7 are, taken as a whole, reasonable in their scope and duration, and no
party shall raise any issue of the reasonableness of the scope or duration of
any such covenants in any proceeding to enforce any such covenants.
8. Termination of Employment.
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(a) The Executive's Period of Employment hereunder may not be
terminated prior to the expiration of the Term except in accordance with
the provisions of this Section 8.
(b) The Executive's Period of Employment may be terminated by the
Company for cause. For purposes of this Agreement, "for cause" means that
termination occurs in connection with a determination, made at a meeting of
the Board of Directors at which the Executive (and, at the Executive's
option, his counsel) shall have had a right to participate, that the
Executive has (i) committed an act of gross negligence or willful
misconduct, or a gross dereliction of duty, that has materially and
adversely affected the overall performance of his duties hereunder; (ii)
committed fraud upon the Company in his capacity as an employee hereunder;
(iii) been convicted of, or pled guilty (or nolo contendere) to, a felony
that the Board of Directors, acting in good faith, determines is or would
reasonably be expected to have a material adverse effect upon the business,
operations, reputation, integrity, financial condition or prospects of the
Company; (iv) any material breach by the Executive of the terms hereof; (v)
failure to follow instructions from a person authorized to give
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them pursuant to Section 1(d) above that is lawful and not inconsistent
with the terms hereof; (vi) the Executive's habitual drunkenness or
habitual substance abuse; (vii) civil or criminal violation of any state or
federal government statute or regulation, or of any state or federal law
relating to the workplace environment (including without limitation laws
relating to sexual harassment or age, sex or other prohibited
discrimination), or any violation of any Company policy adopted in respect
of any of the foregoing; or (viii) a failure by the Executive to meet the
minimum objectives established in the annual "Memry Sharing Plan" to
receive any bonus pursuant to Section 3(b) above with respect to two
consecutive fiscal years. "For cause" termination must be accompanied by a
written notice to that effect. If the Executive is terminated for cause,
the Executive shall be paid through the date of his termination.
(c) If the Executive dies, the Period of Employment shall terminate
effective at the time of his death; provided, however, that such
termination shall not result in the loss of any benefit or rights which the
Executive may have accrued through the date of his death. If the Period of
Employment is terminated prior to the expiration of the Term due to the
Executive's death, the Company shall make a severance payment to the
Executive or his legal representatives equal to the Executive's regular
salary payments through the end of the month in which such death occurs.
In addition, the Company shall make a severance payment to the Executive or
his legal representative equal to the Executive's target bonus described in
Section 3(b), pro rated for the portion of such fiscal year completed prior
to the Executive's death; provided, however, that such pro rated portion of
the Executive's target bonus shall be paid to the Executive following the
completion of such fiscal year at the time similar bonuses are paid to
other employees of the Company.
(d) If the Executive becomes disabled, the Period of Employment may
be terminated, at the Company's option, at the end of the calendar month
during which his disability is determined; provided, however, that such
termination shall not result in the loss of any benefits or rights which
the Executive may have accrued through the date of his disability. If the
Period of Employment is terminated prior to the expiration of the Term due
to the Executive's disability, the Company shall make a severance payment
to the Executive or his legal representative equal to the Executive's
regular salary payments for a period of six (6) months from the date of
such termination or, if sooner, until payments begin under any disability
insurance policy maintained by the Company for the benefit of the
Executive. For the purposes of this section, the definition of "disability"
shall be the same as the definition of a "permanent disability" contained
in any long-term disability insurance policy maintained by the Company in
effect at the time of the purported disability, or last in effect, if no
policy is then in effect.
(e) Subject to Section 8(f) below, if the Executive's Period of
Employment with the Company is terminated by the Executive for "Good
Reason," as hereinafter defined, or is terminated by the Company without
cause (and the Company may terminate the Executive's employment without
cause at any time) other than at the end of the Term, then, in addition to
the other rights to which the Executive is entitled upon a termination as
provided for herein, the Executive shall also be entitled to the following
payments: (i) one and one half (1 1/2) times the Executive's annual salary,
at the rate of salary in effect immediately prior to the effective date of
such termination (without regard to any purported or attempted reduction of
such rate by the Company), such amounts to be paid to the Executive as and
when they would otherwise be due absent the termination of the Period of
Employment, and (ii) one hundred fifty percent (150%) of the amount of the
target cash bonus for the Executive in the fiscal year that the termination
occurs, the first two-thirds of such amount to be due on the date on which
the Executive would have next received a cash bonus pursuant to
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Section 3(b) above absent the termination of the Period of Employment, and
the remaining one-third of such amount to be due on the first anniversary
of the date on which the first two-thirds was due (it being agreed that, as
to the payment of each amount specified in this clause (ii), the Company
may elect to pay up to one-third of such amount by delivering to the
Executive shares of the Company's common stock having an equivalent value
(determined based on the last reported trade price on the day three (3)
business days prior to the date on which said payment would otherwise be
due)); provided, however, that if the Good Reason or termination without
cause follows within two (2) years of a Change of Control, then the
Executive shall instead be entitled to a lump sum payment equal to the sum
of (i) two (2) times the Executive's annual salary, at the rate of salary
in effect immediately prior to the effective date of such termination
(without regard to any purported or attempted reduction of such rate by the
Company), plus (ii) two hundred percent (200%) of the amount of the target
cash bonus for the Executive in the fiscal year that the termination
occurs. For purposes of this Agreement, the term "Good Reason" shall mean:
(i) the failure by the Company to observe or comply with any of the
provisions of this Agreement if such failure has not been cured within ten
(10) days after written notice thereof has been given by the Executive to
the Company; or (ii) at the election of the Executive, upon a Change in
Control of the Company, as defined in Section 10(f) (which election can be
made at any time upon thirty (30) days' prior written notice given within
two (2) years following the date on which the Change in Control of the
Company occurred) if, subsequent to such Change in Control, there is a
material diminution in the position, duties and/or responsibilities of the
Executive; or (iii) the relocation of the Executive's principal place of
business to a location more than sixty (60) miles from both (A) Brookfield,
Connecticut and (B) the location of the home to which the Executive
relocates, without the Executive's prior consent. Further, in the event of
a termination pursuant to this Section 8(e), or pursuant to Section 8(c) or
Section 8(d) above, to the extent allowable under the provisions of the
Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder, and the plans pursuant to which the same were
granted, all incentive and non-qualified stock options then held by the
Executive still subject to any vesting requirements shall have such vesting
requirements terminated (such that all such options are then immediately
exercisable).
(f) Notwithstanding anything to the contrary in either Section 2 or
Section 8(e) above, the Executive will not be entitled to any severance or
other similar payments for a termination of the Period of Employment by the
Executive for Good Reason, or by the Company without cause (whether or not
at the end of the Term), occurring on or after August 31, 2000, unless,
prior to August 31, 2000, the Executive and his immediate family shall have
relocated their primary residence to a location within sixty (60) miles of
the Corporation's Brookfield, Connecticut headquarters.
9. Effect of Termination. Upon termination of the Executive's employment
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for any reason whatsoever, all rights and obligations of the parties under this
Agreement shall cease, except that the Executive shall continue to be bound by
the covenants set forth in Sections 4, 5, 6 and 7 hereof, and the Company shall
be bound to pay to the Executive accrued compensation, including salary and
other benefits, to the date of termination and any severance payments which may
be owed under the provisions of Section 8 hereof.
10. Miscellaneous.
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(a) This Agreement may not be assigned by the Executive. The Company
may assign this Agreement in connection with a Sale of the Company.
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(b) In the event that any provision of this Agreement is found by a
court of competent jurisdiction to be invalid or unenforceable, such
provision shall be, and shall be deemed to be, modified so as to become
valid and enforceable, and the remaining provisions of this Agreement shall
not be affected.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the State of Connecticut.
(d) No modification of this Agreement shall be effective unless in a
writing executed by both parties.
(e) This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof, and supercedes all prior
agreements, representations and promises by either party or between the
parties, including without limitation, the Prior Employment Agreement,
notwithstanding any provisions therein which state that certain provisions
shall survive the termination of the Prior Employment Agreement.
(f) For purposes of this Agreement, "Change in Control of the
Company" shall mean: (i) any merger or consolidation or other corporate
reorganization of the Company in which the Company is not the surviving
entity; or (ii) any sale of all or substantially all of the Company's
assets, in either a single transaction or a series of transactions; or
(iii) a liquidation of all or substantially all of the Company's assets; or
(iv) a change within one twelve-month period of a majority of the directors
constituting the Company's Board of Directors at the beginning of such
twelve-month period; or (v) if a single person or entity, or a related
group of persons or entities, at any time beneficially owns 25% or more of
the Company's outstanding voting securities; unless, with respect to any
event described in clauses (i) through (v), the Executive agrees in
writing, prior to the consummation of the event giving rise to the Change
in Control of the Company, that such event or events does not for purposes
of this Agreement constitute a Change in Control of the Company and unless,
with respect to clause (iv), the change of directors is approved by the
Board of Directors as constituted prior to such change.
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IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
date first above written.
MEMRY CORPORATION
By: /s/ Xxxxx X. Xxxxx
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Name: X. X. Xxxxx
Title: Chairman & CEO
/s/ Xxxxxx X. Xxxxxxxx
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Xxxxxx X. Xxxxxxxx
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