EXHIBIT 10.28
EXECUTIVE CHANGE OF CONTROL AGREEMENT
This EXECUTIVE CHANGE OF CONTROL AGREEMENT ("Agreement") is made as of the
1st day of August, 2001, between CIRCOR, Inc., a Massachusetts corporation (the
"Company"), and Xxxx X. Xxxxxxxxx ("Executive").
WHEREAS, the Company presently employs the Executive in which capacity the
Executive serves as a divisional officer of the Company and its Parent (as
defined below); and
WHEREAS, the Board of Directors of the Parent (the "Board") recognizes the
valuable services rendered to the Company, the Parent and their respective
affiliates by the Executive; and
WHEREAS, the Board has determined that it is in the best interests of the
Company, the Parent and their affiliates to encourage in advance the continued
loyalty of the Executive as well as the Executive's continued attention to his
assigned duties and objectivity in the event of a threatened or possible change
in control of the Parent;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms shall have
the following meanings:
"Cause" shall mean: (a) conduct by Executive constituting a material act of
willful misconduct in connection with the performance of his duties, including,
without limitation, misappropriation of funds or property of the Company or any
of its affiliates other than the occasional, customary and de minimis use of
Company property for personal purposes; (b) criminal or civil conviction of
Executive, a plea of nolo contendere by Executive or conduct by Executive that
would reasonably be expected to result in material injury to the reputation of
the Company if he were retained in his position with the Company, including,
without limitation, conviction of a felony involving moral turpitude; (c)
continued, willful and deliberate non-performance by Executive of his duties
hereunder (other than by reason of Executive's physical or mental illness,
incapacity or disability) which has continued for more than thirty (30) days
following written notice of such non-performance from the Chief Executive
Officer; or (d) a violation by Executive of the Company's employment policies
which has continued following written notice of such violation from the Chief
Executive Officer.
"CHANGE IN CONTROL" shall mean any of the following:
(a) Any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Act") (other than the Parent,
any of its subsidiaries, any member of the Xxxxx Family Group (as defined
herein) or any trustee, fiduciary or other person or entity holding securities
under any employee benefit plan or trust of the Parent or any of its
subsidiaries), together with all "affiliates" and "associates" (as such terms
are defined in Rule 12b-2 under the Act) of such person, shall become the
"beneficial owner" (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Parent representing twenty-five
percent (25%) or more of either (A) the combined voting power of the Parent's
then outstanding securities having the right to vote in an election of the
Parent's Board ("Voting Securities") or (B) the then outstanding shares of
Parent's common stock, par value $0.01 per share ("Common Stock") (other than as
a result of an acquisition of securities directly from the Parent); or
(b) Incumbent Directors (as defined below) cease for any reason, including,
without limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board; or
(c) The stockholders of the Parent shall approve (A) any consolidation or merger
of the Parent where the stockholders of the Parent, immediately prior to the
consolidation or merger, would not, immediately after the consolidation or
merger, beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate fifty percent (50%)
or more of the voting shares of the Parent or other party issuing cash or
securities in the consolidation or merger (or of its ultimate parent
corporation, if any), (B) any sale, lease, exchange or other transfer (in one
transaction or a series of transactions contemplated or arranged by any party as
a single plan) of all or substantially all of the assets of the Parent or (C)
any plan or proposal for the liquidation or dissolution of the Parent.
Notwithstanding the foregoing, a "Change of Control" shall not be deemed to
have occurred for purposes of the foregoing clause (a) solely as the result of
an acquisition of securities by the Parent which, by reducing the number of
shares of Common Stock or other Voting Securities outstanding, increases the
proportionate number of shares beneficially owned by
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any person to twenty-five percent (25%) or more of either (A) the combined
voting power of all of the then outstanding Voting Securities or (B) Common
Stock; provided, however, that if any person referred to in this sentence shall
thereafter become the beneficial owner of any additional shares of Voting
Securities or Common Stock (other than pursuant to a stock split, stock
dividend, or similar transaction or as a result of an acquisition of securities
directly from the Parent) and immediately thereafter beneficially owns twenty-
five percent (25%) or more of either (A) the combined voting power of all of the
then outstanding Voting Securities or (B) Common Stock, then a "Change of
Control" shall be deemed to have occurred for purposes of the foregoing clause
(a).
"GOOD REASON" shall mean that Executive has complied with the "Good Reason
Process" (hereinafter defined) following the occurrence of any of the following
events: (a) a substantial diminution or other substantive adverse change, not
consented to by Executive, in the nature or scope of Executive's
responsibilities, authorities, powers, functions or duties; (b) any removal,
during the term of this Agreement from Executive of his titles as an officer of
the Parent; (c) an involuntary reduction in Executive's Base Salary except for
across-the-board reductions similarly affecting all or substantially all
management employees; (d) a breach by the Company of any of its other material
obligations under this Agreement and the failure of the Company to cure such
breach within thirty (30) days after written notice thereof by Executive; or (e)
the involuntary relocation of the Company's offices at which Executive is
principally employed or the involuntary relocation of the offices of Executive's
primary workgroup to a location more than thirty (30) miles from such offices,
or the requirement by the Company that Executive be based anywhere other than
the Company's offices at such location on an extended basis, except for required
travel on the Company's business to an extent substantially consistent with
Executive's business travel obligations. "Good Reason Process" shall mean that
(i) Executive reasonably determines in good faith that a "Good Reason" event has
occurred; (ii) Executive notifies the Company in writing of the occurrence of
the Good Reason event; (iii) Executive cooperates in good faith with the
Company's efforts, for a period not less than ninety (90) days following such
notice, to modify Executive's employment situation in a manner acceptable to
Executive and Company; and (iv) notwithstanding such efforts, one or more of the
Good Reason events continues to exist and has not been modified in a manner
acceptable to Executive. If the Company cures the Good Reason event in a manner
acceptable to Executive during the ninety (90) day period, Good Reason shall be
deemed not to have occurred.
"INCUMBENT DIRECTORS" shall mean persons who, as of the Commencement Date,
constitute the Board; provided that any person becoming a director of the Parent
subsequent to the Commencement Date shall be considered an Incumbent Director if
such person's election was approved by or such person was nominated for election
by a vote of at least a majority of the Incumbent Directors; but provided
further, that any such person whose initial assumption of office is in
connection with an actual or threatened election contest relating to the
election of members of the Board or other actual or threatened solicitation of
proxies or consents by or on behalf of a person other than the Board, including
by reason of agreement intended to avoid or settle any such actual or threatened
contest or solicitation, shall not be considered an Incumbent Director.
"PARENT" shall mean CIRCOR International, Inc., a Delaware corporation as well
as its successors by merger or otherwise.
"XXXXX FAMILY GROUP" shall mean Xxxxxxx X. Xxxxx and the Xxxxxx X. Xxxxx Voting
Trust.
2. Term. The term of this Agreement shall extend from the date hereof (the
"Commencement Date") until the first anniversary of the Commencement Date;
provided, however, that the term of this Agreement shall automatically be
extended for one additional year on the first anniversary of the Commencement
Date and each anniversary thereafter unless, not less than 90 days prior to each
such date, either party shall have given notice to the other that it does not
wish to extend this Agreement; provided, further, that if a Change in Control
occurs during the original or extended term of this Agreement, the term of this
Agreement shall continue in effect for a period of not less than twelve (12)
months beyond the month in which the Change in Control occurred.
3. CHANGE IN CONTROL PAYMENT. The provisions of this Paragraph 3 set forth
certain terms of an agreement reached between Executive and the Company
regarding Executive's rights and obligations upon the occurrence of a Change in
Control of the Parent. These provisions are intended to assure and encourage in
advance Executive's continued attention and dedication to his assigned duties
and his objectivity during the pendency and after the occurrence of any such
event. These provisions shall terminate and be of no further force or effect
beginning twelve (12) months after the occurrence of a Change of Control.
(a) CHANGE IN CONTROL.
(i) If within twelve (12) months after the occurrence of the first event
constituting a Change in Control, Executive's employment is terminated by the
Company without Cause as defined in Section 1 or Executive terminates his
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employment for Good Reason as provided in Section 1, then the Company shall pay
Executive a lump sum in cash in an amount equal to one (1) times the sum of (A)
Executive's current Base Salary plus (B) Executive's most recent annual
incentive compensation under the Company's Executive Bonus Incentive Plan for
the most recent fiscal year, excluding any sign-on bonus, retention bonus or any
other special bonus; and
(ii) Notwithstanding anything to the contrary in any applicable option
agreement or stock-based award agreement, upon a Change in Control, all stock
options and other stock-based awards granted to Executive by the Parent shall
immediately accelerate and become exercisable or non-forfeitable as of the
effective date of such Change in Control. In addition, all restricted stock
units held by the Executive pursuant to the Management Stock Purchase Plan shall
become fully vested upon a Change of Control and the Executive shall be entitled
to receive the shares of stock represented by such restricted stock units.
Executive shall also be entitled to any other rights and benefits with respect
to stock-related awards, to the extent and upon the terms provided in the
employee stock option or incentive plan or any agreement or other instrument
attendant thereto pursuant to which such options or awards were granted; and
(iii) If the Executive is otherwise eligible for participation in the
Company's Supplemental Executive Retirement Plan ("SERP"), the Executive shall
be fully vested in his accrued benefit under the SERP as of the Date of
Termination; and
(iv) The Company shall, for a period of one (1) year commencing on the
Date of Termination, pay such health insurance premiums as may be necessary to
allow Executive, Executive's spouse and dependents to continue to receive health
insurance coverage substantially similar to the coverage they received prior to
the Date of Termination.
(b) ADDITIONAL LIMITATION.
(i) Anything in this Agreement to the contrary notwithstanding, in the
event that any compensation, payment or distribution by the Company to or
for the benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the
"Severance Payments"), would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
the following provisions shall apply:
(A) If the Severance Payments, reduced by the sum of (1) the Excise
Tax and (2) the total of the Federal, state and local income and employment
taxes payable by Executive on the amount of the Severance Payments which
are in excess of the Threshold Amount, are greater than or equal to the
Threshold Amount, Executive shall be entitled to the full benefits payable
under this Agreement.
(B) If the Threshold Amount is less than (x) the Severance Payments,
but greater than (y) the Severance Payments reduced by the sum of (1) the
Excise Tax and (2) the total of the Federal, state, and local income and
employment taxes on the amount of the Severance Payments which are in
excess of the Threshold Amount, then the benefits payable under this
Agreement shall be reduced (but not below zero) to the extent necessary so
that the maximum Severance Payments shall not exceed the Threshold Amount.
To the extent that there is more than one method of reducing the payments
to bring them within the Threshold Amount, Executive shall determine which
method shall be followed; provided that if Executive fails to make such
determination within 45 days after the Company has sent Executive written
notice of the need for such reduction, the Company may determine the amount
of such reduction in its sole discretion.
For the purposes of this Paragraph 3, "Threshold Amount" shall mean three
times Executive's "base amount" within the meaning of Section 280G(b)(3) of
the Code and the regulations promulgated thereunder less one dollar
($1.00); and "Excise Tax" shall mean the excise tax imposed by Section 4999
of the Code, and any interest or penalties incurred by Executive with
respect to such excise tax.
(ii) The determination as to which of the alternative provisions of
Paragraph 3(b)(i) shall apply to Executive shall be made by KPMG LLP or any
other nationally recognized accounting firm selected by the Company (the
"Accounting Firm"), which shall provide detailed supporting calculations
both to the Company and Executive within 15 business days of the Date of
Termination, if applicable, or at such earlier time as is reasonably
requested by the Company or Executive. For purposes of determining which
of the alternative provisions of Paragraph 3(b)(i) shall apply, Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals for the calendar year in
which the determination is to be made, and state and local income taxes at
the highest marginal rates of individual taxation in the state and locality
of Executive's residence on the Date of Termination, net of the maximum
reduction in federal income taxes which could be obtained from deduction of
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such state and local taxes. Any determination by the Accounting Firm shall
be binding upon the Company and Executive.
4. UNAUTHORIZED DISCLOSURE. Executive acknowledges that in the course of his
employment with the Company (and, if applicable, its predecessors), he has been
allowed to become, and will continue to be allowed to become, acquainted with
the Company's and the Parent's business affairs, information, trade secrets, and
other matters which are of a proprietary or confidential nature, including but
not limited to the Company's, the Parent's and their affiliates' and
predecessors' operations, business opportunities, price and cost information,
finance, customer information, business plans, various sales techniques,
manuals, letters, notebooks, procedures, reports, products, processes, services,
and other confidential information and knowledge (collectively the "Confidential
Information") concerning the Company's, the Parent's and their affiliates' and
predecessors' business. The Company agrees to provide on an ongoing basis such
Confidential Information as the Company deems necessary or desirable to aid
Executive in the performance of his duties. Executive understands and
acknowledges that such Confidential Information is confidential, and he agrees
not to disclose such Confidential Information to anyone outside the Company or
the Parent except to the extent that (i) Executive deems such disclosure or use
reasonably necessary or appropriate in connection with performing his duties on
behalf of the Company and the Parent, (ii) Executive is required by order of a
court of competent jurisdiction (by subpoena or similar process) to disclose or
discuss any Confidential Information, provided that in such case, Executive
shall promptly inform the Company or the Parent, as appropriate, of such event,
shall cooperate with the Company or the Parent, as appropriate, in attempting to
obtain a protective order or to otherwise restrict such disclosure, and shall
only disclose Confidential Information to the minimum extent necessary to comply
with any such court order; (iii) such Confidential Information becomes generally
known to and available for use in the Company's industry (the "Fluid-Control
Industry"), other than as a result of any action or inaction by Executive; or
(iv) such information has been rightfully received by a member of the Fluid-
Control Industry or has been published in a form generally available to the
Fluid-Control Industry prior to the date Executive proposes to disclose or use
such information. Executive further agrees that he will not during employment
and/or at any time thereafter use such Confidential Information in competing,
directly or indirectly, with the Company or the Parent. At such time as
Executive shall cease to be employed by the Company, he will immediately turn
over to the Company or the Parent, as appropriate, all Confidential Information,
including papers, documents, writings, electronically stored information, other
property, and all copies of them provided to or created by him during the course
of his employment with the Company. The provisions of this Paragraph 4 shall
survive termination of this Agreement for any reason.
5. COVENANT NOT TO COMPETE. In consideration of the benefits afforded the
Executive under the terms provided in this Agreement and as a means to aid in
the performance and enforcement of the terms of the provisions of Paragraph 4,
Executive agrees that
(A) during the term of Executive's employment with the Company and for a period
of twelve (12) months thereafter, regardless of the reason for termination of
employment, Executive will not, directly or indirectly, as an owner, director,
principal, agent, officer, employee, partner, consultant, servant, or otherwise,
carry on, operate, manage, control, or become involved in any manner with any
business, operation, corporation, partnership, association, agency, or other
person or entity which is engaged in a business that is competitive with any of
the Company's or the Parent's products which are produced by the Company or the
Parent or any affiliate of either entity as of the date of Executive's
termination of employment with the Company, in any area or territory in which
the Company or the Parent or any affiliate of either entity conducts operations;
provided, however, that the foregoing shall not prohibit Executive from owning
up to one percent (1%) of the outstanding stock of a publicly held company
engaged in the Fluid-Control Industry; and
(B) during the term of Executive's employment with the Company and for a period
of twelve (12) months thereafter, regardless of the reason for termination of
employment, Executive will not directly or indirectly solicit or induce any
present or future employee of the Company or the Parent or any affiliate of
either entity to accept employment with Executive or with any business,
operation, corporation, partnership, association, agency, or other person or
entity with which Executive may be associated, and Executive will not employ or
cause any business, operation, corporation, partnership, association, agency, or
other person or entity with which Executive may be associated to employ any
present or future employee of the Company or the Parent without providing the
Company or the Parent, as appropriate, with ten (10) days' prior written notice
of such proposed employment.
Should Executive violate any of the provisions of this Paragraph, then in
addition to all other rights and remedies available to the Company at law or in
equity, the duration of this covenant shall automatically be extended for the
period of time from which Executive began such violation until he permanently
ceases such violation.
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6. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive:
At his home address as shown
in the Company's personnel records;
if to the Company:
CIRCOR, Inc.
00 Xxxxxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Board of Directors of CIRCOR International, Inc.
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. NOT AN EMPLOYMENT CONTRACT. This Agreement is intended only to provide
those benefits for the Executive as set forth in Paragraph 3 in connection with
a Change of Control. As such, this Agreement is not intended to and does not in
any way constitute an employment agreement or other contract which would cause
the employee to be considered anything other than an employee at will or to in
any way be entitled to any specific payments or benefits from the Company in the
event of a termination of employment not subject to Paragraph 3 of this
Agreement.
8. MISCELLANEOUS. No provisions of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by Executive and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, unless specifically
referred to herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the Commonwealth of Massachusetts (without regard to
principles of conflicts of laws).
9. VALIDITY. The invalidity or unenforceability of any provision or provisions
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect. The
invalid portion of this Agreement, if any, shall be modified by any court having
jurisdiction to the extent necessary to render such portion enforceable.
10. COUNTERPARTS. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
11. ARBITRATION; OTHER DISPUTES. In the event of any dispute or controversy
arising under or in connection with this Agreement, the parties shall first
promptly try in good faith to settle such dispute or controversy by mediation
under the applicable rules of the American Arbitration Association before
resorting to arbitration. In the event such dispute or controversy remains
unresolved in whole or in part for a period of thirty (30) days after it arises,
the parties will settle any remaining dispute or controversy exclusively by
arbitration in Boston, Massachusetts, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding the above,
the Company shall be entitled to seek a restraining order or injunction in any
court of competent jurisdiction to prevent any continuation of any violation of
Paragraph 4 or 5 hereof.
12. LITIGATION AND REGULATORY COOPERATION. During and after Executive's
employment, Executive shall reasonably cooperate with the Company and the Parent
in the defense or prosecution of any claims or actions now in existence or which
may be brought in the future against or on behalf of the Company and/or the
Parent which relate to events or occurrences that transpired while Executive was
employed by the Company; provided, however, that such cooperation shall not
materially and adversely affect Executive or expose Executive to an increased
probability of civil or criminal litigation. Executive's cooperation in
connection with such claims or actions shall include, but not be limited to,
being available to meet with counsel to prepare for discovery or trial and to
act as a witness on behalf of the Company and/or the
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Parent at mutually convenient times. During and after Executive's employment,
Executive also shall cooperate fully with the Company and the Parent in
connection with any investigation or review of any federal, state or local
regulatory authority as any such investigation or review relates to events or
occurrences that transpired while Executive was employed by the Company. The
Company shall also provide Executive with compensation on an hourly basis (to be
derived from the sum of his Base Compensation and Average Incentive
Compensation) for requested litigation and regulatory cooperation that occurs
after his termination of employment, and reimburse Executive for all costs and
expenses incurred in connection with his performance under this Paragraph 12,
including, but not limited to, reasonable attorneys' fees and costs.
13. GENDER NEUTRAL. Wherever used herein, a pronoun in the masculine gender
shall be considered as including the feminine gender unless the context clearly
indicates otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement effective on
the date and year first above written.
CIRCOR, INC.
By: /s/ XXXXX X. XXXXX
-------------------
Xxxxx X. Xxxxx, Xx.
President
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EXECUTIVE
/s/ XXXX X. XXXXXXXXX
----------------------
Xxxx X. Xxxxxxxxx
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