Exhibit 10.7
CHANGE OF CONTROL AGREEMENT
Agreement made as of the 23rd day of December, 2000, between
Quipp, Inc., a Florida corporation ("Quipp"), Quipp Systems, Inc., a Florida
corporation ("Quipp Systems") (Quipp and Quipp Systems are collectively referred
to as the "Company") and Xxxxxxxx X. Xxxxxxx one of the officers or senior level
employees of Quipp and/or Quipp Systems, (the "Officer").
WHEREAS, the Officer is one of Quipp's and/or Quipp Systems'
officers or senior level employees; and
WHEREAS, the Company has determined that appropriate steps
should be taken to reinforce and encourage the continued attention and
dedication of the Officer to his assigned duties without distraction; and
WHEREAS, in consideration of the Officer's continued
employment with the Company or any successor thereto, the Company agrees that
the Officer shall receive the compensation set forth in this Agreement to
protect against the adverse financial and career impact on the Officer in the
event the Officer's employment with the Company terminates under specified
circumstances upon or following a Change in Control (as defined herein);
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the
following terms shall have the meanings specified in this Section unless the
context clearly otherwise requires:
(a) "Board" shall mean the Company's Board of
Directors.
(b) "Cause" shall mean a finding by the Company that
the Officer has: (i) performed his assigned duties in a grossly negligent manner
and does not remedy such breach within thirty (30) days after receiving written
notice specifying the details thereof; (ii) been engaged in disloyalty to the
Company, including, fraud, embezzlement, theft, commission of a felony, or
proven dishonesty in the course of his employment or service; or (iii) violated
the confidentiality provisions of Section 6 or the noncompetition provisions of
Section 7.
(c) "Change of Control" shall be deemed to have
occurred, unless the Board, a majority of which is comprised of Incumbent Board
Members, determines otherwise, if:
(1) Any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) other than the Company becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing more than twenty
percent (20%) of the voting power of the then outstanding
securities of the Company.
(2) Substantially all of the assets of the
Company are sold or other otherwise disposed of.
(3) A transaction is consummated in which
the stockholders of the Company immediately before the transaction will not
beneficially own, immediately after the transaction, shares entitling such
stockholders to eighty percent (80%) or more of all votes to which all
stockholders of the surviving entity would be entitled in the election of
directors or other governing persons (without consideration of the rights of any
class of stock to elect directors by a separate class vote).
(4) A change in the composition of the Board
such that Incumbent Board Members cease for any reason to constitute at least a
majority of the Board.
(d) "Change of Control Payment" shall equal two times
the Officer's base salary, exclusive of bonus and other remuneration. A Change
of Control Payment shall be subject to the reduction requirement as set forth in
Section 5 of this Agreement.
(e) "Company" means Quipp, Inc. and, unless the
context indicates otherwise, any subsidiary of Quipp (including Quipp Systems,
Inc.) and, for purposes of Section (1)(f), Section(1)(j), Section 6 and Section
7, shall include any successor to Quipp or Quipp Systems.
(f) "Confidential Information" shall mean
confidential information relating to the business of the Company, including
processes, drawings, reports, manuals, invention records, financial information,
business plans, customer lists, facts relating to prospective customers,
inventory lists, arrangements with suppliers and customers, computer programs,
or other material embodying trade secrets of the Company, other than any
information (i) that is in the public domain through no act or omission of the
Officer, or (ii) that the Officer is authorized to disclose or required to
disclose in connection with legal or administrative proceedings.
(g) "Constructive Termination Without Cause" shall
mean the Officer's resignation of employment following the occurrence, without
his prior written consent, of one or more of the following events: (i) a
material reduction in the Officer's compensation; (ii) a significant diminution
in the Officer's duties and responsibilities, or the assignment to the Officer
of duties and responsibilities that are materially and adversely inconsistent
with the duties and responsibilities held by the Officer on the date of this
Agreement; or (iii) the required geographical relocation of the Officer out of
the greater Miami, Florida area, in each case except as is due to Cause or as a
result of the disability (within the meaning of Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended) of the Officer.
(h) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended.
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(i) "Incumbent Board Members" shall mean those
individuals who, as of the date of this Agreement, constitute the Board;
provided, that any individual who becomes a member of the Board subsequent to
the effective date of this Agreement whose election, or nomination for election
by the Company's shareholders, was approved by a vote of at least a majority of
those individuals who are Incumbent Board Members shall be considered as though
such individual is an Incumbent Board Member.
(j) "Restricted Business" shall mean any of the
business activities in which the Company shall have been engaged at any time
during the one (1) year prior to the Termination Date.
(k) "Restricted Period" shall mean the period
commencing on the Termination Date and continuing for a two (2) year period
thereafter.
(l) "Termination Date" shall mean the date of the
Officer's termination of employment with the Company.
(m) "Termination of Employment" shall mean the
termination of the Officer's employment by the Company.
(n) "Territory" shall mean any part of North America
in which the Company engages in the Restricted Business during the Restricted
Period.
2. Change of Control Benefits Upon Termination.
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(a) If, within the period commencing ninety (90) days
prior to a Change of Control and ending twelve (12) months following such Change
of Control, (i) the Officer suffers a Termination of Employment for any reason
other than Cause, or (ii) the Officer suffers a Constructive Termination Without
Cause, the Company shall pay to the Officer a Change of Control Payment in one
lump sum within three (3) months of the Termination Date. Interest shall be
credited on the Change of Control Payment for the time it remains unpaid after
three months following the Termination Date at a rate equal to three (3)
percentage points plus the prime rate quoted in the Wall Street Journal on the
Termination Date or, if not available on such date, the next prime rate quoted
in the Wall Street Journal. The Change of Control Payment shall be made by mail
to the last known address provided by the Officer to the Company. In the event
the Company rehires the Officer within twelve (12) months of his termination,
the Officer shall return the Change of Control Payment to the Company.
(b) If the Officer becomes entitled to a Change of
Control Payment, the Company shall reimburse the Officer for the cost of any
COBRA health insurance continuation coverage under the Company's health plan for
a period of twelve (12) months following the Termination Date. The Company may
require the Officer to provide proof of payment for such continuation coverage
before making any reimbursement hereunder.
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(c) If the Officer becomes entitled to a Change of
Control Payment, the Company shall continue to provide any automobile or
automobile allowance made available to the Officer immediately prior to the
Change of Control for a period of twelve (12) months following the Termination
Date.
3. Other Benefits. Nothing in this Agreement shall prevent or
limit the Officer's continuing or future participation in or rights under any
benefit, bonus, incentive, or other plan or program provided by the Company, and
for which the Officer may qualify, from the date hereof through the Termination
Date. Without limiting the foregoing, if the Officer is a participant in the
Quipp, Inc. Management Incentive Compensation Plan (the "Plan"), the Officer
shall be entitled to receive payment in accordance with the provisions of
Section 9 of the Plan ("Section 9"), provided, that, following a Change of
Control, the term "cause" as used in Section 9 shall have the meaning set forth
in Section 1(b) of this Agreement, and a Constructive Termination Without Cause
shall not be deemed to be a "voluntary resignation" for the purposes of Section
9.
4. Taxes. Any Change of Control Payment required under this
Agreement shall be subject to all requirements of the law with regard to the
withholding of taxes, filing, making of reports, and the like, and the Company
shall use its best efforts to satisfy promptly all such requirements.
5. Certain Reduction of Payments.
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(a) Notwithstanding anything in this Agreement to the
contrary, in the event that it shall be determined that any payments or
distributions by Quipp or Quipp Systems to the Officer, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise, would constitute "excess parachute payments" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, the Change of Control Payment to or for the benefit of
the Officer pursuant to this Agreement shall be reduced (but not below zero) to
the extent necessary so that such payments or distributions shall not constitute
"excess parachute payments."
(b) All determinations to be made under Section 5(a)
shall be made by the Company's independent certified public accounting firm
immediately prior to the Change of Control (the "Accounting Firm"). The
Accounting Firm shall provide its determinations and any supporting calculations
to both the Company and the Officer within sixty (60) days of the Termination
Date, and such determinations shall be binding upon the Company and the Officer.
All of the fees and expenses incurred by the Accounting Firm in performing the
determinations above shall be borne solely by the Company.
6. Confidentiality.
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(a) During or after the Termination Date, the Officer
shall not (i) use or exploit in any manner Confidential Information for himself
or any person, partnership, association, corporation, or other entity other than
the Company; (ii) remove any Confidential
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Information, or any reproduction thereof, from the possession or control of the
Company; or (iii) treat Confidential Information other than in a confidential
manner.
(b) All Confidential Information developed, created,
or maintained by the Officer, alone or with others while employed by the
Company, and all Confidential Information maintained by the Officer thereafter,
shall remain at all times the exclusive property of the Company. The Officer
shall return to the Company all Confidential Information, and reproductions
thereof, whether prepared by him or others, that are in his possession
immediately upon request and in any event upon the termination of his employment
with the Company.
7. Agreement Not to Compete.
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(a) During the Restricted Period, the Officer shall
not, at any time within the Territory, directly or indirectly, engage in, or
have any interest on behalf of himself or others in, any firm, corporation, or
business (whether as Officer, officer, director, agent, security holder,
creditor, partner, joint venturer, beneficiary under a trust, investor,
consultant, or otherwise) that engages within the Territory in a Restricted
Business; provided, however, that nothing contained herein shall prevent or
prohibit the Officer from owning of record or beneficially up to one percent
(1%) of the stock or equity of any corporation or other business entity engaged
in the Restricted Business if such corporation or other entity is traded on the
New York Stock Exchange, the American Stock Exchange, or the NASDAQ National
Market. In addition, during the Restricted Period, the Officer shall not
directly or indirectly solicit or otherwise encourage any of the Company's
employees to terminate their employment with the Company.
(b) If a court determines that the foregoing
restrictions are too broad or otherwise unreasonable under applicable law,
including with respect to time, space or business, the court is hereby requested
and authorized by the parties hereto to revise the foregoing restriction to
include the maximum restrictions allowable under applicable law. The Officer
acknowledges, however, that this Section 9 has been negotiated by the parties
hereto and that the geographical and time limitations, as well as the limitation
on activities, are reasonable in light of the circumstances pertaining to the
business of the Company.
8. Cumulative Remedies; No Waiver.
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(a) In the event the Officer violates either Section
6 or Section 7, the Officer shall immediately repay any Change of Control
Payment received under this Agreement to the Company.
(b) The Officer expressly acknowledges that the
remedy at law for any breach of Sections 6 or 7 will be inadequate and that upon
any such breach or threatened breach, the Company shall be entitled as a matter
of right to injunctive relief in any court of competent jurisdiction, in equity
or otherwise, and to enforce the specific performance of the Officer's
obligations under these provisions without having to prove actual damage to the
Company or the inadequacy of a legal remedy.
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(c) No right conferred upon a party by this Agreement
is intended to be exclusive of any other right or remedy, and each and every
such right or remedy shall be cumulative and shall be in addition to any other
right or remedy given hereunder or now or hereafter existing at law or in
equity. No delay or omission by a party in exercising any right, remedy, or
power hereunder or existing at law or in equity shall be construed as a waiver
thereof.
9. Notice. All notices and other communications required or
permitted hereunder or necessary or convenient in connection herewith shall be
in writing and shall be delivered personally or mailed by registered or
certified mail, return receipt requested, or by overnight express courier
service, as follows:
If to the Company, to:
Quipp, Inc.
0000 XX 000xx Xxxxxx
Xxxxx, XX 00000-0000
Attention: President
With a copy to:
Xxxx Xxxxxx, Esq.
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
If to the Officer, to:
Xxxxxxxx X. Xxxxxxx
00000 XX 00 Xxxxx
Xxxxx, XX 00000
or to such other names or addresses as the Company or the Officer, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section. Any such notice shall be deemed delivered and
effective when received in the case of personal delivery, five (5) days after
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.
10. Governing Law. This Agreement shall be governed by and
interpreted under the laws of the State of Florida without giving effect to any
conflict of laws provisions.
11. Contents of Agreement; Amendment; Assignment.
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(a) This Agreement supersedes all prior agreements,
sets forth the entire understanding between the parties hereto with respect to
the subject matter hereof and cannot be changed, modified, extended, or
terminated except upon written amendment executed by the Officer and the
Company.
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(b) Nothing in this Agreement shall be construed as
giving the Officer any right to be retained in the employ of the Company.
(c) This Agreement shall be binding upon, and shall
inure to the benefit of, the Company and the Officer, and their respective
successors and assigns. The Company shall have the right to assign its rights
hereunder to any successor in interest, whether by merger, consolidation, sale
of assets, or otherwise.
12. No Mitigation. The Company agrees that, if the Officer's
employment with the Company terminates during the term of this Agreement, the
Officer is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Officer by the Company pursuant to the terms
hereof. Further, the amount of any payment or benefit provided for in this
Agreement shall not be reduced by any compensation earned by the Officer as the
result of employment by another employer, by retirement benefits, by offset
against any amount claimed to be owed by the Officer to the Company, or
otherwise.
13. Severability. Any invalidity, illegality, or limitation of
the enforceability with respect to any one or more of the provisions of this
Agreement, or any part thereof, shall in no way affect or impair the validity,
legality, or enforceability of any other provisions of this Agreement. In case
any provision of this Agreement shall be invalid, illegal, or unenforceable, it
shall, to the extent practicable, be modified so as to make it valid, legal, and
enforceable and to retain as nearly as practicable the intent of the parties,
and the validity, legality, and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
14. Term of Agreement. This Agreement shall commence on the
date hereof and shall continue in effect until twenty-four (24) months beyond
the month in which a Change in Control occurs.
15. Survivorship. The respective rights and obligations of the
parties under this Agreement shall survive any termination of the Officer's
employment to the extent necessary for the preservation of such rights and
obligations. Without limiting the foregoing, the right to receive a Change of
Control Payment under Section 2 of this Agreement shall survive the termination
of this Agreement.
16. Miscellaneous. All section headings are for convenience
only. This Agreement may be executed in several counterparts, each of which is
an original. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
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IN WITNESS WHEREOF, the undersigned, intending to be legally
bound, have executed this Agreement as of the date first above written.
QUIPP, INC.
By: /s/ Xxxxxxx X. Xxxx
----------------------
Its: President
QUIPP SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxx
----------------------
Its: President
OFFICER
/s/ Xxxxxxxx X. Xxxxxxx
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Xxxxxxxx X. Xxxxxxx
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