EXHIBIT 10.38
1996 FORM 10-K
EMPLOYMENT AGREEMENT
This Employment Agreement is made and entered into as of this 7th day of
November, 1996, by and between Bucyrus International, Inc., a Delaware
corporation (the "Company"), and Xxxxxx X. Smoke (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to employ Executive as Chief Financial
Officer; and
WHEREAS, Executive desires to accept the employment offered by the
Company.
NOW, THEREFORE, in consideration of the premises and for the mutual
consideration hereinafter set forth, the parties hereto do covenant and agree
as follows:
1. Employment. The Company hereby offers and Executive hereby
accepts employment as Chief Financial Officer of the Company upon the terms
and conditions contained herein.
2. Duties.
(a) Executive shall perform all duties consistent with the
position of Chief Financial Officer of the Company, as well as any other
duties on behalf of the Company as the President of the Company may reasonably
direct. Executive shall report to and be responsible to the President of the
Company. Executive will devote his full time and reasonable best efforts to
faithfully, responsibly and satisfactorily fulfill those duties and to further
the Company's best interests.
(b) During his employment, Executive shall not engage in any
business activities which are in any way in competition with the activities of
the Company, or which may in any way interfere in any material respect with
the performance of his duties or responsibilities to the Company.
(c) In the performance of his duties, Executive shall be bound
by and comply with any and all obligations imposed by Company policy and those
imposed by law, regulation and ordinance, orders and decrees of any court, and
any other lawful restriction of any kind.
3. Base Salary and Bonuses. In exchange for Executive's promises
contained herein, the Company shall compensate him in the following manner:
(a) Base Salary. The Company shall compensate Executive at the
base salary rate of One Hundred Seventy-Five Thousand Dollars ($175,000) per
annum, payable in equal monthly installments or on the same basis as other
senior salaried officers of the Company (the "Base Salary"). The Base Salary
may be increased in the future by such amounts and at such times as the Board
of Directors of the Company ("Board") shall deem appropriate.
(b) Annual Bonus. Commencing with calendar year 1997, Executive
shall be eligible to participate in the Company's bonus program for management
as approved annually by the Board ("Bonus Plan"), such program to provide for
an annual cash incentive bonus equal to (i) 35% of Base Salary in the event of
achievement of targeted performance, as defined in the Bonus Plan, and (ii) a
maximum of 70% of Base Salary in the event of exceptional performance, as
determined in accordance with the Bonus Plan.
(c) The amounts set forth herein are subject to appropriate
deductions required by law.
4. Relocation Allowance; Temporary Housing and Travel Expenses.
Within ninety (90) days of the date of this Agreement, Executive shall
relocate his permanent residence from Holland, Michigan to a location within
reasonable daily commuting distance of the Company's headquarters. The
Company shall reimburse Executive for reasonable costs incurred by him in
connection with such relocation to the extent provided under the Company's
Relocation of Salaried Employees Policy, except that the relocation allowance
provided under Paragraph V(A) of such policy shall be two (2) months Base
Salary instead of one (1) month.
5. Stock Options. Pursuant to the terms of the Company's 1996
Employees' Stock Incentive Plan (the "Stock Incentive Plan"), Executive shall
be granted options to purchase an aggregate of Thirty Thousand (30,000) shares
of the Company's common stock at an exercise price equal to one hundred
percent (100%) of the last sale price for the Company's common stock ("Common
Stock") on the Nasdaq National Market System on the date immediately prior to
the date that Executive commences employment with the Company, or if such date
is not a trading date, then at the last sale price on the next preceding date
on which the Common Stock is traded. Such stock options shall be evidenced by
the Non-Qualified Stock Option Agreement attached hereto as Exhibit A ("Stock
Option Agreement"), and the grant of such stock options shall be subject to
approval (which approval will not be unreasonably withheld or delayed) of the
Committee ("Committee") designated by the Board of Directors to administer the
Stock Incentive Plan. Executive may receive such future grants of stock
options under the Stock Incentive Plan or any other similar plan involving
Common Stock as the Company's Board of Directors, or the Committee, shall
award, in its sole discretion, consistent with the terms of the Stock
Incentive Plan or such similar plan.
6. Stock Appreciation Rights. Pursuant to the terms of the Stock
Incentive Plan, Executive will be granted Stock Appreciation Rights (as
defined in the Stock Incentive Plan) to Fifty Thousand (50,000) shares. Such
Stock Appreciation Rights shall be evidenced by the Stock Appreciation Rights
Agreement attached hereto as Exhibit B ("Stock Appreciation Rights
Agreement"), and the grant of such Stock Appreciation Rights shall be subject
to approval of the Committee. Executive may receive such future grants of
stock appreciation rights under the Stock Incentive Plan or any similar plan
as the Company's Board of Directors, or the Committee, shall award, in is sole
discretion, consistent with the terms of the Stock Incentive Plan or such
similar plan.
7. Benefit Plans. During the Term of this Employment Agreement,
Executive shall be entitled to participate in such employee benefits and
fringe benefits plans of the Company as the Company shall provide during the
term hereof for its senior executives. Insurance benefits shall commence on
date of employment.
8. Other Benefits. Executive shall be provided the following
additional benefits:
(a) Club Membership. The Company agrees to reimburse Executive
for the cost of his non-refundable initiation fee in one country club in the
Milwaukee, Wisconsin area or other area in which Executive's new permanent
residence described in Paragraph 4 hereof is located (but not in excess of
$12,500) and the annual dues for such club (but not in excess of $5,000).
(b) Vacation. Executive shall be entitled to four (4) weeks
vacation each year of this Employment Agreement, without reduction in salary.
(c) Car. In accordance with the provisions of the Company's
executive auto program, Executive shall be entitled to the use of a Company
car.
9. Duration and Termination.
(a) Duration and Termination by Company. The term ("Initial
Term") of this Employment Agreement and the term of employment shall begin on
the date hereof and continue until the first anniversary of the date hereof
unless sooner terminated as herein provided. At the end of the Initial Term,
this Agreement shall automatically renew, for additional one year terms (each,
"Additional Terms") unless the Company gives at least two months' written
notice to Executive that his employment under this Agreement shall terminate
on the last day of the Initial Term or any Additional Term, as the case may
be. The Initial Term and any Additional Terms are sometimes herein
collectively referred to as the "Term" of this Employment Agreement. In
addition to the foregoing, the Company shall have the right to terminate
Executive's employment under this Employment Agreement at any time without
"Cause" (as defined in Paragraph 9(e) hereof) during the Initial Term or any
Additional Term by giving at least two months' written notice to Executive
that his employment under this Agreement shall terminate on the date specified
in such notice, in which event such termination shall be considered a
termination other than for "Cause."
(b) Termination by Executive. Executive may terminate his
employment under this Employment Agreement at any time upon giving at least
ninety (90) days' written notice to the Company of his intent to do so. Upon
giving such notice, Executive shall continue in employment with the Company
for the full ninety (90) days of the notice period, or at the discretion of
the Company, Executive's period of employment may be shortened provided that
Executive shall in such event, be paid his salary and have his benefits
hereunder continued for such ninety (90) day period, or any part thereof, in
lieu of continued employment. In the event such 90 day period is shortened by
the Company in its discretion, Executive shall make himself available to the
Company for advice and assistance during the remaining portion of such 90 day
period. At the end of the ninety (90) day period, all rights of Executive
under this Agreement shall terminate except as otherwise expressly provided
herein. Failure of Executive to provide the full ninety (90) day notice shall
permit the Company to immediately cease the compensation and benefits provided
for herein.
(c) Termination Upon Death or Disability of Executive.
Executive's employment under this Employment Agreement shall immediately
terminate in the event of Executive's death or Disability (as hereinafter
defined). For purposes of this Agreement, Executive shall be deemed to have
suffered a "Disability" in the event that a physician selected by the Company
determines that Executive, due to a physical or mental condition, is unable to
substantially perform his duties hereunder for a period of either (i) three
consecutive months or (ii) an aggregate of six (6) months in any twelve (12)
month period. Upon the termination of Executive's employment by reason of
death, the Executive's estate shall be entitled to receive Executive's Base
Salary to the date of Executive's death, or, by reason of Executive's
Disability, Executive shall be entitled to receive Base Salary and employee
benefits until the earlier to occur of (i) six months after the commencement
of such Disability or, (ii) the date of eligibility for long term disability
benefits, if any.
(d) Compensation upon Termination. In the event of termination
of Executive's employment under this Agreement for any reason, all of the
Company's obligation to pay Executive compensation and provide benefits under
this Agreement shall terminate, except that in the event of termination of
Executive's employment by the Company pursuant to Paragraph 9(a), Executive
shall be entitled to continuation of his Base Salary and insurance benefits
(to the extent coverage terms permit) for a period of one (1) year from the
date of such termination. Such period is hereinafter called the "Severance
Period." The amount payable pursuant to this Paragraph 9(d) shall be payable
in the manner and at such times as such Base Salary would have been paid
during the Severance Period but for the termination of Executive's employment.
The Company's obligation to provide the payments described in this Paragraph
9(d) is conditioned upon the Executive's compliance with the restrictions
contained in Paragraph 11 hereof. The Company shall have the right to
discontinue such payments in the event the Executive breaches the restrictions
in Paragraph 11 or a court determines any such restriction is unenforceable in
any respect.
(e) Termination by the Company for Cause. The Company, by
notice from the President of the Company or the Board to Executive, shall have
the right to terminate Executive's employment under this Employment Agreement
in the event of any of the following (which shall constitute "Cause"): (i)
Executive's willful failure to perform his duties under this Agreement, if
such failure continues unremedied to the reasonable satisfaction of the
President of the Company for thirty (30) days after written notice thereof has
been sent from the President of the Company to Executive specifying the acts
constituting the willful failure to perform and requesting that they be
remedied; (ii) Executive engaging in an act of fraud, dishonesty or gross
misconduct in connection with the business of the Company; (iii) Executive is
convicted by a court of law having jurisdiction over Executive of a felony or
criminal misconduct against the Company or others; or (iv) Conduct by
Executive constituting a material breach of this Agreement. Upon a
termination for Cause: (w) the Company shall pay Executive the Base Salary due
up to the date of termination; (x) Executive shall forfeit all unexercised
stock options, whether or not vested, granted to him by the Company, with
respect to the Company's Common Stock; (y) Executive shall forfeit all Stock
Appreciation Rights, whether or not vested, granted to him under the Stock
Incentive Plan; and (z) except as otherwise expressly provided herein, all
rights of Executive of any kind to any other compensation, benefits or other
payments for periods subsequent to such termination shall cease.
(f) No provision of this Agreement governing the effects of any
termination of Executive's employment hereunder shall limit or eliminate any
benefit under any employee benefit plan of the Company in which Executive
participates, if such benefit, by the terms of the applicable plan, continues
after a termination of Executive's employment.
10. Change of Control.
(a) Definitions. For purposes of this Paragraph 10:
(i) "Act" shall mean the Securities Act of 1934.
(ii) A "Change of Control" of the Company shall be deemed
to have occurred when:
(A) Securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding voting securities are acquired, directly or
indirectly, by any Person who did not on the date of this
Agreement own, directly or indirectly, 5% or more of the combined
voting power of the Company's voting securities outstanding on the
date of this Agreement.
(B) The shareholders of the Company approve a merger
or consolidation of the Company with any other corporation as a
result of which less than 50% of the outstanding voting securities
of the surviving or resulting entity are owned by the former
shareholders of the Company (other than a shareholder who is an
"affiliate," as defined in the Act, of any party to such
consolidation or merger).
(C) The shareholders of the Company approve the sale
of substantially all of the Company's assets to a corporation
which is not a wholly-owned subsidiary of the Company.
(D) During any period of two consecutive years,
individuals who, at the beginning of such period, constituted the
Board of Directors of the Company cease, for any reason, to
constitute at least a majority thereof, unless the election or
nomination for election of each new director was approved by the
vote of at least two-thirds of the directors then still in office
who were directors at the beginning of the period.
(E) Xxxxxxx National Life Insurance Company ("JNL")
or any "affiliate" of JNL as defined in the Act, shall sell,
exchange, transfer or otherwise dispose of more than sixty-six
percent (66%) of the shares of Common Stock of the Company owned
by JNL on the date of this Agreement other than to JNL or any such
affiliate of JNL.
(F) The Company shall become eligible, pursuant to
Section 12(g)(4) of the Act, to terminate the registration under
the Act of any class of its securities then registered under the
Act.
(iii) "Person" shall have the meaning used in Section
3(a)(9) of the Act.
(iv) "Effective Date" shall mean the date a Change of
Control becomes effective.
(v) "Good Reason" shall mean the occurrence of any one or
more of the following events without the Executive's express written
consent:
(A) (1) The assignment of the Executive to duties
materially inconsistent with the Executive's authorities, duties,
responsibilities, and status (including offices, titles, and
reporting requirements) as the Chief Financial Officer of the
Company, (2) a material reduction or material alteration in the
nature or status of the Executive' authorities, duties, or
responsibilities from those in effect during the immediately
preceding fiscal year, or (3) being required to relocate his
permanent residence.
(B) A reduction by the Company in the Executive's
Base Salary as in effect on the Effective Date.
(C) A material reduction in the Executive's level of
participation in any of the Company's short- and/or long-term
incentive compensation plans, or employee benefit or retirement
plans, policies, practices, or arrangements in which the Executive
participates as of the Effective Date.
(vi) "Qualifying Termination" shall mean any termination of
the Executive's employment other than: (A) by the Company for Cause (as
defined in Paragraph 9(e) hereof); (B) by reason of death, Disability
(as defined in Paragraph 9(c) hereof), or Retirement (as such term is
then defined in the Company's tax qualified defined benefit retirement
plan); or (C) by the Executive without Good Reason, including without
limitation, termination by Executive upon expiration of the Initial Term
or any Additional Term pursuant to Paragraph 9(a) hereof. In the event
the Executive shall terminate this Agreement for Good Reason, his notice
of termination required pursuant to Paragraph 9(b) shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for such termination.
(b) Employment Termination in Connection with a Change of
Control. In the event of a Qualifying Termination on, or within six (6)
months after, the Effective Date, then in lieu of all other compensation or
benefits provided to Executive under the provisions of this Agreement, the
Company shall, as a severance benefit, continue Executive's Base Salary and
insurance benefits (to the extent coverage terms permit) for a period of
eighteen (18) months ("Severance Benefit").
(c) Limitation on Termination Payment.
(i) Notwithstanding any other provision of this Paragraph
10, if any portion of the Severance Benefit or any other payment or
transfer of property under this Agreement, or under any other agreement
with or plan of the Company, including but not limited to the vesting of
the Stock Options and Stock Appreciation Rights granted to Executive
under the Stock Incentive Plan ("Options and SARs"), which payment or
transfer of property is contingent upon a Change of Control of the
Company, (in the aggregate "Total Payments") and would constitute an
"excess parachute payment," then the payments to be made to the
Executive under this Paragraph 10 shall be reduced and, if necessary,
transferred property forfeited (including, without limitation,
forfeiture of Options and SARs) such that the value of the aggregate
Total Payments that the Executive is entitled to receive shall be one
dollar ($l) less than the maximum amount which the Executive may receive
without becoming subject to the tax imposed by Section 4999 of the
Internal Revenue Code of 1986 ("Code") or any successor provision, or
which the Company may pay without loss of deduction under Section
280G(a) of the Code or any successor provision; provided, however, that
the payments to be made to the Executive under this Agreement shall be
reduced and, if necessary, other transferred property forfeited, if and
only if so reducing the payments and forfeiting transferred property
results in the Executive receiving a greater net benefit than he would
have received had a reduction not occurred and an excise tax been paid
pursuant to Code Section 4999 or any successor provision. For purposes
of this Paragraph 10, the terms "excess parachute payment" and
"parachute payments" shall have the meanings assigned to them in Section
280G of the Code and any successor provision, and such "parachute
payments" shall be valued as provided therein.
(ii) Within sixty (60) days following delivery of the
notice of termination (as described in Paragraph 9 hereof) or notice by
the Company to the Executive of its belief that there is a payment or
benefit due the Executive which will result in an "excess parachute
payment" as defined in Section 280G of the Code or any successor
provision, the Executive and the Company, at the Company's expense,
shall obtain the opinion of such legal counsel, which need not be
unqualified, as the Executive may choose, which sets forth: (A) the
amount of the Executive's "annualized includible compensation for the
base period" (as defined in Code Section 280G(d)(1) or any successor
provision); (B) the present value of the Total Payments; and (C) the
amount and present value of any "excess parachute payment." The opinion
of such legal counsel shall be supported by the opinion of a certified
public accounting firm and, if necessary in the opinion of the Company,
a firm of recognized executive compensation consultants. Such opinion
shall be binding upon the Company and the Executive. Subject to the
proviso in second last sentence of subparagraph 10(c)(i) hereof, in the
event that such opinion determines that there would be an "excess
parachute payment," the Severance Benefits hereunder, and any other
payment or transferred property determined by such counsel to be
includible in Total Payments, shall be reduced, eliminated or forfeited
as specified by the Executive in writing delivered to the Company within
thirty (30) days of his receipt of such opinion, or, if the Executive
fails to so notify the Company, then as the Company shall reasonably
determine, so that under the basis of calculations set forth in such
opinion, there will be no "excess parachute payment." The provisions of
this Paragraph 10(c), including the calculations, notices, and opinion
provided for herein shall be based upon the conclusive presumption that:
(x) the compensation and benefits provided for in Paragraphs 3-8 herein;
and (y) any other compensation earned prior to the effective date of
termination of the Executive's employment hereunder pursuant to the
Company's compensation programs (if such payments would have been made
in the future in any event, even though the timing of such payment is
triggered by the Change of Control), are reasonable.
(d) Vesting of Options and SARs on Change of Control. In the
event of a Change of Control, all unvested Stock Options and Stock
Appreciation Rights shall automatically be fully vested and exercisable as of
the Effective Date, subject to forfeiture as provided in Paragraph 10(c)
hereof.
11. Executive Covenants; Covenant Not to Compete. In order to induce
the Company to enter into this Employment Agreement, Executive hereby agrees
as follows:
(a) Except when it is in the interest of the Company, or with
the consent of or as directed by the President of the Company or the Board,
Executive will keep confidential and shall not divulge to any other person or
entity, during the term of employment or thereafter, any Confidential
Information. For purposes hereof "Confidential Information" shall mean any of
the business secrets, policies, methods, or other confidential information
regarding the Company except for (i) information which was in the public
domain on the date of this Agreement or (ii) information which came into the
public domain through no direct or indirect act or omission of the Executive
after the date of this Agreement.
(b) All papers, books and records and other property of every
kind and description relating to the business and affairs of the Company,
whether or not prepared by Executive, shall be the sole and exclusive property
of the Company, and Executive shall surrender them to the Company, as
applicable, at any time upon request by the Company.
(c) During the Term of this Employment Agreement and for a
period of one (1) year thereafter (exclusive of any period of breach),
Executive will not, without the prior written consent of the Board: (i)
participate, directly or indirectly, either individually or as an employee,
agent, partner, shareholder, consultant or in any other capacity, or have any
direct or indirect material financial interest as a creditor, in any
corporation, partnership or other entity that engages in a business
competitive with the business of manufacturing, marketing, distributing or
selling any surface mining equipment that the Company or any of its
subsidiaries or affiliates manufactures, markets, distributes or sells at the
time Executive ceases to be employed by the Company (such business being the
"Bucyrus Business"); provided, however, that this paragraph shall not restrict
Executive from holding up to two (2%) percent of the outstanding capital stock
or other securities of any publicly traded entity; or (ii) directly or
indirectly solicit or cause to be solicited for employment or consultation,
for or on behalf of himself or third parties, any person who was at the time
of the cessation of Executive's employment hereunder, an executive of the
Company.
(d) Executive acknowledges and agrees that the geographic scope
of the Bucyrus Business for purposes of the foregoing covenants includes each
State and every other country where the Company has done any material amount
of Bucyrus Business within the one-year period immediately preceding the
termination of Executive's employment. The Company agrees to provide to
Executive a list of all such states and countries within thirty (30) days
following receipt of a written request from Executive.
(e) By his execution of this Agreement, Executive expressly
acknowledges and agrees that (i) the consideration for the covenants contained
in this Paragraph 11 is fair and adequate, (ii) such covenants are fair, just
and reasonable, both as to geographic scope and period of duration; and (iii)
such covenants are reasonably necessary in order to protect the legitimate
business interests of the Company.
(f) The parties agree that the Company shall, in addition to
other remedies provided by law, have the right and remedy to have the
provisions of this Paragraph 11 specifically enforced by any court having
equity jurisdiction by means of injunctive relief, it being acknowledged and
agreed that any breach or threatened breach of the provisions of this
paragraph will cause irreparable injury to the Company and that money damages
will not provide an adequate remedy. Nothing contained herein shall be
construed as prohibiting the Company from pursuing any other remedies
available to it for such breach or threatened breach including any recovery of
damages from Executive. The parties hereto also consent to and direct any
court finding any provision of this Paragraph 11 unenforceable to narrow the
scope of such provision in order to enforce its intent to the broadest extent
permissible. The parties hereto understand and intend that each restriction
agreed to by Executive hereinabove shall be construed as separable and
divisible from every other restriction, and the unenforceability, in whole or
in part, of any such restriction, will not affect the enforceability of the
remaining restrictions and that one or more of all of such restrictions may be
enforced in whole or in part as the circumstances warrant. Notwithstanding
any other provisions contained in this Agreement, the provisions of this
Paragraph 11 shall survive any termination of Executive's employment
hereunder.
12. Conflicting Agreements. Executive hereby represents and warrants
to the Company that his entering into this Employment Agreement, and the
obligations and duties undertaken by him hereunder, will not conflict with,
constitute a breach of, or otherwise violate the terms of, any other
employment or other agreement to which he is a party.
13. Successors and Assigns. The rights of the Company hereunder shall
run in favor of the Company, its successors, assigns, nominees or other legal
representatives. Termination of Executive's employment shall not operate to
relieve him of any remaining obligations hereunder, and all such obligations
are binding upon his heirs, executors, administrators and other legal
representatives. This Agreement shall be binding upon any successor in
accordance with the operation of law and such successor shall be deemed the
"Company" for purposes of this Agreement.
14. Notices. All notices hereunder must be in writing and shall be
delivered by hand, mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, or telecopied, to
the other party, addressed as follows:
(i) if to the Company:
Bucyrus International, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxx Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Corporate Secretary
Telecopy No. (000) 000-0000
(ii) if to Executive:
Xxxxxx X. Smoke
000 Xxxxxxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone No. (000) 000-0000
All such notices shall be effective (x) if delivered, upon delivery; (y) if
mailed, when received or three (3) business days after being deposited in the
mail, whichever occurs first or (z) if telecopied, when transmitted and
confirmed by telephone. Addresses may be changed by written notice sent to
the other party at the last recorded address of that party.
15. Severability. If any provision of this Employment Agreement shall
be adjudged by any court of competent jurisdiction to be invalid or
unenforceable for any reason, such judgment shall not affect, impair or
invalidate the remainder of this Agreement.
16. Prior Understandings. This Employment Agreement between the
Company and Executive embodies the entire understanding of the parties hereto,
and supersedes all other oral or written agreements or understandings between
them regarding the subject matter hereof. No change, alteration or
modification hereof may be made except in writing, signed by the requisite
representatives of both parties hereto.
17. Headings. The headings in this Employment Agreement are for
convenience and reference only and shall not be construed as part of this
Agreement or to limit or otherwise affect the meaning hereof.
18. Execution in Counterparts. This Employment Agreement may be
executed by the parties hereto in counterparts, each of which shall be deemed
to be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
19. Choice of Law. Except as provided in Paragraph 11 hereof,
jurisdiction over disputes with regard to this Employment Agreement shall be
exclusively in the courts of the State of Wisconsin. This Employment
Agreement shall be construed in accordance with and governed by the laws of
the State of Wisconsin without giving effect to the principles of conflicts of
laws.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Employment Agreement in Wisconsin as of the day and year first above written.
BUCYRUS INTERNATIONAL, INC.
By: /s/X. X. Xxxxxxxxxx
Title: President & CEO
/s/Xxxxxx X. Smoke
XXXXXX X. SMOKE, Executive
