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EXHIBIT 10.4
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is
executed as of this 15th day of September, 1998, by and between ALLEGHENY
TELEDYNE INCORPORATED, a Delaware corporation with its principal place of
business at 00xx Xxxxx, Xxx XXX Xxxxx, Xxxxxxxxxx, XX 00000 (with all of its
direct and indirect subsidiaries, "ATI" or, together with the Company and the
Parent Company referred to below, as the case may be, "Employer"), and XXXXXXX
X. XXXXXX, an individual residing in the State of California (the "Executive").
RECITALS:
A. ATI and the Executive entered into an Employment Agreement dated the 15th day
of September, 1998 (the "Original Agreement") and, since that time, Executive
has been employed as the President and Chief Executive Officer of ATI's Consumer
Segment.
B. Since the date of the Original Agreement, the order of the transactions under
which ATI proposes to accomplish the transformation which was referred to in the
Original Agreement as the "IPO/Spin-off" has changed and the parties desire to
enter into this Agreement to reflect such change which is summarized in the
paragraphs that follow.
C. Laars and Water Pik are operating companies of ATI involved in the
manufacture and sale of consumer products, the assets and liabilities of which
are currently owned by indirect subsidiaries of ATI. For the purposes of this
Agreement, the "Company" refers to prior to the IPO/Spin-off (as defined below),
Laars and Water Pik as operating companies of ATI and after the IPO/Spin-off
refers to the corporations formed in the proposed transformation of ATI that
hold the assets of such operating companies after the IPO/Spin-off.
D. ATI is contemplating a transaction involving the incorporation of the Laars
and Water Pik operating companies (the "Company") into two new companies and the
subsequent spin-off of the outstanding common stock of the Company (or the
corporate parent of the Company whose primary assets will be the stock of the
Company, hereinafter referred to as the "Parent Company," as the case may be) to
the stockholders of ATI (the "Spin-off") followed by a public offering of shares
of common stock of the Company or the Parent Company (the "IPO/Spin-off").
E. The Executive is experienced in the manufacture and sale of consumer products
and is desirous of becoming the most senior executive responsible for the
Company and the Parent Company in light of the contemplated IPO/Spin-off.
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F. ATI believes the Executive will contribute to the growth and profitability of
the Company, as a part of ATI pending the IPO/Spin-off and as an independent
company following the IPO/Spin-off, and desires to employ the Executive as the
most senior executive responsible.
G. Prior to the execution of the Original Agreement, the Executive provided ATI
with a copy of an unsigned employment agreement (the "Agreement") dated as of
June 26, 1998 between Windemere-Durable Holdings, Inc. ("Windemere") and the
Executive, the Executive gave 60 days written notice (the "Notice") of his
termination of the Agreement pursuant to Section 11 thereof. The Executive
believes that, after the expiration of such 60 day notice period or such earlier
time as Windemere shall agree, he has no further obligations under the Agreement
other than the provisions of Section 6 of the Agreement. The Executive also
believes that HPG Group (as defined in the Agreement) does not directly or
indirectly engage in competition with the Company.
H. ATI agrees that it shall not require Executive to engage in any conduct which
would violate any of the Executive's post-termination obligations to Windemere
arising under the Agreement between Executive and Windemere.
I. The Executive is willing to make his services available to ATI on the terms
and conditions hereinafter set forth.
AGREEMENT
Therefore, in consideration of the premises, mutual covenants and
agreements of the parties contained herein, and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged,
Employer and the Executive hereby agree as follows:
1. Employment. Commencing on the 60th day after the Notice or sooner if
Windemere shall agree, (the "Effective Date"), Employer, in reliance on such
representations, shall employ the Executive and the Executive shall accept
employment by Employer, upon the terms and conditions set forth in this
Agreement.
2. Term. The term of employment (the "Term") of this Agreement shall
begin on the Effective Date and, except as otherwise provided in Sections 7, 8,
9, 10, 11 and 12 below, shall end on December 31, 2002. The Term shall be
automatically extended for one additional month commencing on December 31, 2001
and on the last day of each calendar month thereafter (each, an "Extension
Date") unless one party gives written notice to the other on or before an
Extension Date. As of the last day of the month in which a notice not to renew
is delivered, the Term of this Agreement shall be twelve months and shall not be
further extended. The last day of the calendar month in which the Term hereof,
as extended from time to time, is then due to expire is hereinafter referred to
as the "Expiration Date".
3. Duties. The Executive will serve as the President and Chief
Executive Officer of the Company and shall report to the Chief Executive Officer
of ATI (the "CEO"). As President of the Company, the Executive shall have the
primary responsibility to manage and direct the day-to-day business of the
Company, including the generation of income and control of expenses. The
Executive shall perform such duties as are consistent with the role of President
of the Company and such other duties as may be reasonably assigned to him by the
CEO. With the
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consent of the CEO, the Executive may (i) devote a reasonable amount of time and
effort to charitable, industry or community organizations (which shall include
without requirement of further consent, the Young Presidents Club of Southern
California which is hereinafter referred to as the "YPO") and (ii) subject
further to the provisions of Section 6 hereof, the Executive may serve as a
director of other companies.
4. Compensation. During the Term, Executive shall be compensated as
follows:
(a) Salary. Executive shall be paid an annual salary of
$400,000 (the "Annual Base Salary"), to be distributed in equal periodic
installments according to Employer's customary payroll practices. Nothing
contained herein shall be construed to prevent Employer from increasing
Executive's Annual Base Salary more often than annually. The Annual Base Salary
will be reviewed annually by the CEO and increased (but not decreased) if the
CEO, in his or her discretion, determines an increase to be appropriate, based
on the types of factors the CEO usually takes into account in reviewing
executive level salaries, including, but not limited to, cost-of-living factors.
(b) Annual Incentive Compensation. Pending the IPO/Spin-off,
ATI will provide the Executive with a target bonus opportunity of 60% of Annual
Base Salary (the "Performance Bonus") under the ATI annual incentive bonus plan.
(c) SARP. Pending the IPO/Spin-off, ATI will make the
Executive eligible for participation in ATI's Stock Acquisition and Retention
Program under the terms and conditions applicable to all other participants,
subject to the approval of the Personnel and Compensation Committee of the
Board.
(d) Certain Additional Payments. In addition to the above
payments,
(i) ATI shall pay the Executive the aggregate sum of
$240,000 in cash, in three equal annual installments, beginning on the first
anniversary of the Effective Date and on each of the next two anniversary dates
thereafter.
(ii) Upon the first to occur of a distribution of
shares of the common stock of the Company or the Parent Company in the Spin-off
or in a public offering during the Term in accordance with a registration
statement filed under the Securities Act of 1933, as amended (a "Public
Offering"), ATI will cause the company whose shares are being distributed in the
Spin-off or sold in the Public Offering, as the case may be, to grant to the
Executive options to purchase three percent (3%) of the shares of common stock
of such company outstanding after giving effect to the completion of the
Spin-off or Public Offering (including, to the extent exercised, shares of
common stock issued upon the exercise of any overallotment option by the
underwriters of the Public Offering), and assuming the shares underlying such
option are outstanding, on the terms and conditions described herein. The
options shall be issued effective as of the completion of the Spin-off or Public
Offering, whichever shall first occur (the "Closing Date") and shall have a
10-year term. The purchase price for the shares issuable upon exercise of the
options shall equal the average of the high and low sales prices of a share of
common stock of the Company or the Parent Company, as the case may be, on the
Closing Date. The options would be issued pursuant to a plan, the shares of
which will be registered on a
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registration statement on Form S-8 with the Securities and Exchange Commission,
which registration statement shall be declared effective prior to the earliest
exercise date. The options shall become exercisable cumulatively in accordance
with the following schedule: 10% of the shares covered herein at any time after
the first anniversary of the Closing Date, an additional 20% of the shares
covered herein at any time after the second anniversary of the Closing Date, and
the remaining 70% of the shares covered herein at any time after the third
anniversary of the Closing Date. If, however, a Public Offering is closed during
the Term but the Closing Date is at least one year after the first anniversary
of the Effective Date, the options shall become exercisable cumulatively in
accordance with the following schedule: 10% of the shares covered herein at any
time after the Closing Date, an additional 20% of the shares covered herein at
any time after the second anniversary of the Effective Date, and the remaining
70% of the shares covered herein at any time after the third anniversary of the
Effective Date. Vested options must be exercised within 30 days after the date
the Executive's employment with the Employer terminates.
(iii) If, (A) within thirty months of the Effective
Date, the Spin-off or a Public Offering has not been completed, and (B) by
written notice to ATI within sixty days after the expiration of such thirty
month period the Executive terminates the Term and his employment hereunder
pursuant to Section 11 hereof, ATI shall pay or cause to be paid to the
Executive, at the effective time of the termination, cash in an amount equal to
two times the sum of the Annual Base Salary and the Performance Bonus in effect
at the time of such termination. If such Spin-off or Public Offering has not
occurred within such thirty month period because all or substantially all of the
stock or assets of the Company is sold to a company not affiliated with ATI, in
addition to any payments required to be made pursuant to Sections 7 though 11
hereof, but in lieu of the payment described in the preceding sentence, (x) ATI
agrees to pay or cause the Company or the Parent Company to pay to the Executive
$500,000 in cash and, in addition thereto, for each percent by which the selling
price received by ATI on the sale of the Company exceeds the minimum selling
price specified by the Board of Directors of ATI in a written notice to the
Executive (the "Minimum Selling Price"), an additional $10,000 in cash; and (y)
the options described in Section 5(c) shall become fully exercisable on the
terms and conditions described in the option plan.
5. Expense Reimbursement and Other Benefits.
(a) Reimbursement of Expenses. During the term of Executive's
employment hereunder, Employer, upon the Executive's submission of proper
substantiation in accordance with Employer's standard procedure, including
copies of all relevant invoices, receipts or other evidence reasonably requested
by Employer, by the Executive, shall reimburse the Executive for all reasonable
expenses actually paid or incurred by the Executive in the course of and
pursuant to the business of Employer, including first class or business class
air travel.
(b) Employee Benefits. Pending the IPO/Spin-Off, (i) Executive
shall participate in the Group Health and Hospitalization Plan, Group Life
Insurance Plan, Group Disability Insurance Plan and all other insurances, or
insurance plans and all employee benefit plans provided to employees of the
Company (collectively, the "Welfare Benefits"), and executive benefits and
bonuses covering employees of the Company as are now or may in the future be in
effect, subject to applicable eligibility requirements; (ii) ATI shall provide
Executive
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with life insurance on the terms provided for other company presidents of ATI;
(iii) ATI shall pay for (A) the Executive's annual dues in a country club and a
city club and (B) tax preparation and financial planning for the Executive on an
annual basis up to a maximum of $10,000; (iv) ATI shall pay for Executive's
membership in the YPO, including reasonable travel and meal expenses incurred in
connection with the Executive's attendance at YPO meetings and university and
seminar participation; and (v) the Executive shall participate in accordance
with their respective terms in the defined benefit and defined contribution
plans provided to employees of the Company.
(c) Stock Options. Pending the IPO/Spin-off, the Executive
shall be included as a participant under the ATI stock option plan, eligible to
be granted options to acquire 20,000 shares of the common stock of Allegheny
Teledyne Incorporated ("ATI Common Stock" or the "Common Stock of ATI") at the
target award level under (and subject to all terms and conditions of) the ATI
stock option plan as then in effect, and all rules and regulations of the
Securities and Exchange Commission applicable to stock option plans. Such
options will contain such restrictions as required by the Board or the
applicable committee of the Board charged with administration of the ATI stock
option plan. The number of shares of Common Stock subject to the stock options
shall be adjusted for any subsequent stock splits, stock dividends or similar
recapitalizations of the ATI Common Stock which results in an increase or
decrease of the number of shares of outstanding Common Stock of ATI on the terms
specified in the stock option plan. The number of options and terms and
conditions of options shall be determined in the sole discretion of the Board,
or applicable committee thereof, and shall be based on several factors,
including the performance of the Company.
(d) Automobile. During the Term, Employer shall provide the
Executive with a leased automobile, of the class of a Buick Park Avenue or
equivalent, or, at the option of the Executive, in lieu thereof, the cash
equivalent of the lease payments therefor.
(e) Vacation. During the Term, the Executive will be entitled
to four weeks' paid vacation for each year. The Executive will also be entitled
to the paid holidays and other paid leave set forth in Employer's policies.
Vacation days and holidays during any fiscal year that are not used by the
Executive during such fiscal year may not be carried over and used in any
subsequent fiscal year.
(f) Relocation. The Executive shall be eligible to participate
in the ATI relocation policy applicable to executive new hires. In addition, ATI
will compensate the Executive for the loss on the sale of his principal
residence in Weston, Connecticut, subject to receipt of reasonable documentation
of such loss.
(g) Meaning of Certain Terms. For the purposes of this
Agreement, references to matters "pending" or "prior to" the IPO/Spin-off refers
to a period prior to the first to occur of the IPO or Spin-off and references to
matters "after" or "on or after" or "subsequent to" the IPO/Spin-off refers to a
period on or after the first to occur of such IPO or Spin-off.
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6. Restrictions.
(a) Non-competition. During the Term and for a one year period
after the termination of the Term for any reason, the Executive shall not,
directly or indirectly, engage in or have any interest in any sole
proprietorship, partnership, corporation or business or any other person or
entity (whether as an executive, officer, director, partner, agent, security
holder, creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the Company (for this
purpose, any business that engages in the manufacture or distribution of
products similar to those products manufactured or distributed by the Company at
the time of termination of the Agreement shall be deemed to be in competition
with the Company provided that such product or products constitute at least 10%
of the gross revenues of the Company at the time of termination of the
Agreement); provided that such provision shall not apply to the Executive's
ownership of Common Stock of ATI or the acquisition by the Executive, solely as
an investment, of securities of any issuer that are registered under Section
12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the
"Securities Exchange Act"), and that are listed or admitted for trading on any
United States national securities exchange or that are quoted on the NASDAQ
Stock Market, or any similar system or automated dissemination of quotations of
securities prices in common use, so long as the Executive does not control,
acquire a controlling interest in or become a member of a group which exercises
direct or indirect control or, more than five percent of any class of capital
stock of such corporation.
(b) Nondisclosure. During the Term and for a one year period
after the termination of the Term for any reason, the Executive shall not at any
time divulge, communicate, use to the detriment of ATI or the Company or for the
benefit of any other person or persons, or misuse in any way, any Confidential
Information (as hereinafter defined) pertaining to the business of ATI or the
Company. Any Confidential Information or data now or hereafter acquired by the
Executive with respect to the business of ATI or the Company (which shall
include, but not be limited to, information concerning ATI's or the Company's
financial condition, prospects, technology, customers, suppliers, sources of
leads and methods of doing business) shall be deemed a valuable, special and
unique asset of ATI or the Company that is received by the Executive in
confidence and as a fiduciary, and Executive shall remain a fiduciary to ATI and
the Company with respect to all of such information. For purposes of this
Agreement, "Confidential Information" means information disclosed to the
Executive or known by the Executive as a consequence of or through his
employment by ATI or the Company (including information conceived, originated,
discovered or developed by the Executive) prior to or after the date hereof, and
not generally known, about ATI or the Company or its or their respective
businesses. Notwithstanding the foregoing, nothing herein shall be deemed to
restrict the Executive from disclosing Confidential Information to the extent
required by law. None of the foregoing obligations and restrictions apply to any
Confidential Information that the Executive demonstrates was or became generally
available to the public other than as a result of disclosure by the Executive.
(c) Nonsolicitation of Employees and Clients. During the Term
and for a one year period after the termination of the Term for any reason, the
Executive shall not, directly or indirectly, for himself or for any other
person, firm, corporation, partnership, association or other entity, other than
in connection with the performance of Executive's duties under this Agreement,
(i) solicit for employment or attempt to employ or enter into any contractual
arrangement with any employee or former employee of Employer, unless such
employee or former employee has
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not been employed by Employer for a period in excess of six months, (ii) call on
or solicit any of the actual or targeted prospective clients of Employer on
behalf of any person or entity in connection with any business competitive with
the business of Employer, and/or (iii) make known the names and addresses of
such clients or any information relating in any manner to Employer's trade or
business relationships with such customers (unless the Executive can demonstrate
that such information was or became generally available to the public other than
as a result of a disclosure by the Executive).
(d) Ownership of Developments. All copyrights, patents, trade
secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed or
created by Executive during the course of performing work for Employer or its
customers (collectively, the "Work Product") shall belong exclusively to
Employer and shall, to the extent possible, be considered a work made by the
Executive for hire for Employer within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by
the Executive for hire for Employer, the Executive agrees to assign, and
automatically assign at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of Employer, the
Executive shall take such further actions, including execution and delivery of
instruments of conveyance, as may be appropriate to give full and proper effect
to such assignment.
(e) Books and Records. All books, records, and accounts
relating in any manner to the customers of Employer, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of Employer and shall be returned immediately to Employer on
termination of the Executive's employment hereunder or on Employer's request at
any time.
(f) Definition of Company. Solely for purposes of this Section
6, the term "Company" also shall include, along with all current direct and
indirect subsidiaries, the Parent Company and any existing or future
subsidiaries of the Company or the Parent Company that are operating during the
time periods described herein and any other entities that directly or
indirectly, through one or more intermediaries, control, are controlled by or
are under common control with the Company (including the Parent Company) or
Parent Company during the periods described herein.
(g) Acknowledgment by Executive. The Executive acknowledges
and confirms that (i) the restrictive covenants contained in this Section 6 are
reasonably necessary to protect the legitimate business interest of Employer
including the legitimate interests of the Company, and (ii) the restrictions
contained in this Section 6 (including without limitation the length of the term
of the provisions of this Section 6) are not overbroad, over long, or unfair and
are not the result of overreaching, duress or coercion of any kind. The
Executive further acknowledges and confirms that his full, uninhibited and
faithful observance of each of the covenants contained in this Section 6 will
not cause him any undue hardship, financial, or otherwise, and that enforcement
of each of the covenants contained herein will not impair his ability to obtain
employment commensurate with his abilities and on terms fully acceptable to him
or otherwise to obtain income required for the comfortable support of him and
his family and the satisfaction of the needs of his creditors. The Executive
acknowledges and confirms that
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his special knowledge of the business of the Company is such as would cause
Employer serious injury or loss if he were to use such ability and knowledge to
the benefit of a competitor or were to compete with the Company in violation of
the terms of this Section 6. The Executive further acknowledges that the
restrictions contained in this Section 6 are intended to be, and shall be, for
the benefit of and shall be enforceable by, Employer's successors and assigns.
(h) Reformation by Court. In the event that a court of
competent jurisdiction shall determine that any provision of this Section 6 is
invalid or more restrictive than permitted under the governing law of such
jurisdiction, then only as to enforcement of this Section 6 within the
jurisdiction of such court, such provision shall be interpreted and enforced as
if it provided for the maximum restriction permitted under such governing law.
(i) Extension of Time. If the Executive shall be in violation
of any provision of this Section 6 then each time limitation set forth in this
Section 6 shall be extended for a period of time equal to the period of time
during which such violation or violations occur. If Employer seeks injunctive
relief from such violation in any court, then the covenants set forth in this
Section 6 shall be extended for a period of time equal to the pendency of such
proceeding including all appeals by the Executive.
(j) Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Death. The Term shall terminate upon the death of Executive and be
of no further force or effect. Upon such termination, Employer will pay the
Executive's estate a lump sum equal to the sum of (A) the Annual Base Salary at
the date of termination multiplied by the larger of (i) the number of years
including fractions thereof remaining in the Term or (ii) two, and (B) the
product of the Performance Bonus multiplied by the larger of (i) the number of
years remaining in the Term or (ii) two. Employer reserves the right to provide
this amount through a policy of insurance on the life of the Executive.
8. Disability. If during the Term Executive is unable to perform his
services, by reason of illness or incapacity, for a period of 180 consecutive
days or more, Employer may, at its option, upon written notice to Executive,
terminate the Term and his employment hereunder. If the Term is terminated as a
result of the Executive's disability, Employer will pay the Executive (A) his
Annual Base Salary at the date of termination for the period remaining in the
Term, but in no event for less than two years, to be distributed in periodic
installments according to Employer's customary payroll practices, and (B) a lump
sum equal to the product of the Performance Bonus multiplied by the larger of
(i) the number of years remaining in the Term or (ii) two, to be paid at the
time of such termination. Employer shall also continue to pay the premiums for
the same or substantially similar Welfare Benefits for the longer of (i) the
remainder of the Term or (ii) two years. Such termination shall not affect any
rights of Executive to insurance payments due to Executive as a result of the
insurance coverage provided for in Section 5(b) above. Notwithstanding the
foregoing, if the Executive shall find other employment during the period he is
receiving payments pursuant to this Section 8, then the Executive shall promptly
notify Employer in writing of the date and terms of such employment and Employer
shall be entitled to reduce the amount payable to the Executive pursuant to this
Section 8 during the period from the commencement of such other employment by
the cash compensation
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received and to be received by the Executive for services rendered in connection
with such other employment. Employer reserves the right to provide this benefit
through a policy of insurance.
9. Termination for Cause.
(a) Employer shall have the right to terminate the Term and
the Executive's employment hereunder for Cause (as defined below). Upon any
termination pursuant to this Section 9, Employer shall pay to the Executive any
unpaid Annual Base Salary through the effective date of termination specified in
such notice. Employer shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however, to the provisions of Section 5(a)).
(b) For purposes hereof, the term "Cause" shall mean the
Executive's conviction of a felony, the Executive's personal dishonesty directly
affecting ATI or the Company, willful misconduct (which shall require prior
written notice to the Executive from the CEO unless not curable or such
misconduct is materially injurious to Employer), breach of a fiduciary duty
involving personal profit to the Executive or intentional failure to
substantially perform his duties after written notice to the Executive from the
CEO that, in the reasonable judgment of the CEO, the Executive has failed to
perform specific duties.
10. Termination Without Cause. At any time Employer shall have the
right to terminate the Term and the Executive's employment hereunder by written
notice to the Executive. Upon any termination pursuant to this Section 10 (that
is not a termination under any of Sections 7, 8, 11 or 12), Employer shall pay
to the Executive a lump sum equal to the sum of (A) the Annual Base Salary at
the date of termination multiplied by the larger of (i) the number of years
remaining in the Term or (ii) two, and (B) the product of the Performance Bonus
multiplied by the larger of (i) the number of years remaining in the Term or
(ii) two. Employer shall also continue to pay the premiums for the same or
substantially similar Welfare Benefits and the Executive shall be entitled to
the other benefits set forth in Section 5(b), (d) and (e) for the longer of (i)
the remainder of the Term or (ii) two years. In the event such entitlement is
not allowed by law, the Executive shall be entitled to the cash equivalent of
that benefit. Further any ATI stock option granted to Executive shall be
exercisable immediately and the ATI Common Stock acquired pursuant to such
exercise may be sold by Executive subject to no restrictions by ATI whatsoever
(other than those imposed by federal and state securities laws). The Company
shall have no further liability hereunder (other than for reimbursement for
reasonable business expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 5(a)). The Executive shall be entitled to
receive all severance payments and benefits hereunder regardless of any future
employment undertaken by the Executive as long as he is in full compliance with
the terms of this Agreement.
11. Termination by Executive.
(a) The Executive shall at all times have the right, upon 60
days' written notice to Employer, to terminate the Term and his employment
hereunder.
(b) Upon any termination pursuant to this Section 11 by the
Executive without Good Reason (as defined below), Employer shall pay to the
Executive any unpaid Annual Base
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Salary through the effective date of termination specified in such notice.
Employer shall have no further liability hereunder (other than for reimbursement
for reasonable business expenses incurred prior to the date of termination,
subject, however, to the provisions of Section 5(a)). The Executive shall be
entitled to receive all severance payments and benefits hereunder regardless of
any future employment undertaken by the Executive as long as he is in full
compliance with the terms of this Agreement.
(c) Upon any termination pursuant to this Section 11 by the
Executive for Good Reason, Employer shall pay to the Executive the same amounts
that would have been payable by Employer to the Executive under Section 10 of
this Agreement if the Executive's employment had been terminated by Employer
without Cause. Employer shall have no further liability hereunder (other than
for reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however, to the provisions of Section 5(a)).
(d) For purposes of this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any material respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 3 of
this Agreement, or any other action by Employer which results in a
material diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and which is remedied by
Employer promptly after receipt of notice thereof given by the
Executive;
(ii) any failure by Employer to comply with any of
the material provisions of Section 4 of this Agreement, other than an
isolated, insubstantial and inadvertent failure not occurring in bad
faith and which is remedied by Employer promptly after receipt of
notice thereof given by the Executive; or
(iii) in the event that (A) a Change in Control (as
defined in Section 12 hereof) in Employer shall occur during the Term
and (B) prior to the earlier of the expiration of the Term and one year
after the date of the Change in Control, the Term and Executive's
employment with Employer is terminated by Employer without Cause, as
defined in Section 9(b) (and other than pursuant to Section 7 by reason
of the Executive's death or Section 8 by reason of the Executive's
disability) or the Executive terminates the Term and his employment for
Good Reason, as defined in Section 11(d)(i) or (ii) or because of the
relocation of the Executive to another location more than 50 miles from
Orange County, California without his consent.
It is specifically agreed that the Executive may resign and receive the amount
set forth in Subsection 4(d)(iii) hereof if the Public Offering or the
IPO/Spin-off has not occurred within the time periods specified in such
Subsection, and the Executive gives Employer the notice of termination described
in Section 4(d)(iii) hereof; however, such a resignation shall not be a
termination for Good Reason as such term is defined in this Section 11 and the
amount payable upon resignation by the Executive in such event shall be
determined and paid pursuant to Subsection 4(d)(iii) and not pursuant to this
Section 11.
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12. Change in Control.
(a) For purposes of this Agreement, the term "Change in
Control" shall mean:
(i) Subsequent to the IPO/Spin-off, approval by the
stockholders of Employer of (x) a reorganization, merger, consolidation
or other form of corporate transaction or series of transactions, in
each case, with respect to which persons who were the stockholders of
Employer immediately prior to such reorganization, merger or
consolidation or other transaction do not, immediately thereafter, own
more than 50% of the combined voting power entitled to vote generally
in the election of directors of the reorganized, merged or consolidated
company's then outstanding voting securities, or (y) a liquidation or
dissolution of Employer or (z) the sale of all or substantially all of
the assets of Employer (unless such reorganization, merger,
consolidation or other corporate transaction, liquidation, dissolution
or sale is subsequently abandoned); or
(ii) Individuals who, as of the date hereof,
constitute the Board of Directors of ATI or who, immediately after the
IPO/Spin-off, constitute the Board of Directors of the Company or
Parent Company, as the case may be, (each, the "Incumbent Board") cease
for any reason to constitute at least a majority of the Incumbent
Board, provided that any person becoming a director subsequent to the
date hereof or, if applicable, the date of the IPO/Spin-off, whose
election, or nomination for election by stockholders, was approved by a
vote of at least a majority of the directors then comprising the
Incumbent Board (other than an election or nomination of an individual
whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors,
as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Securities Exchange Act) shall be, for purposes of this
Agreement, considered as though such person were a member of the
Incumbent Board; or
(iii) The acquisition (other than from Employer) by
any person, entity or "group," within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act (excluding, for this
purpose, Employer or its subsidiaries, or any executive benefit plan of
Employer or its subsidiaries) which acquires beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act), of 20% or more of either the then outstanding shares of
ATI Common Stock (prior to the IPO/Spin-off) or common stock of the
Company or the Parent Company, as the case may be, (after the
IPO/Spin-off) or the combined voting power of the then outstanding
voting securities entitled to vote generally in the election of
directors of the applicable entity.
(b) The payments made pursuant to the provisions of Section 11
as a result of a termination by the Executive for the Good Reason described in
Section 11(d)(iii) above shall be in lieu of any and all compensation due to
Executive for the years that would otherwise be remaining in the Term. Upon
receipt of said lump sum payment, this Agreement and all rights and duties of
the parties shall be terminated, except as follows. In consideration for such
lump sum payment and for the right to terminate under the conditions set forth
above, Executive agrees to consult with Employer (or its successors), and its
officers if requested to do so for a period of at least two years from the date
of such termination. However, Executive shall be required to
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devote only such part of his time to such services as Executive believes
reasonable in Executive's sole discretion, and the time and date such services
are offered shall be determined by Executive so long as that time and date is
within a reasonable period of time after the request. It is expressly agreed
that ATI's rights to avail itself of the advice and consultation services of
Executive shall at all times be exercised in a reasonable manner, that adequate
notice shall be given to Executive in such events, and that non-compliance with
any such request by Executive for good reason, including, but not limited to,
ill health or prior commitments, shall not constitute a breach or violation of
this Agreement. Executive agrees that, except for reimbursement of all
reasonable expenses incurred by him with respect to such consultation and
advisory services, payable as such consultation and advisory services are
rendered, he shall not be entitled to any further compensation. It is understood
that in furnishing any advisory and consulting services provided herein,
Executive shall not be an executive of Employer but shall act in the capacity of
independent contractor.
13. Waivers. It is understood that either party may waive the strict
performance of any covenant or agreement made herein; however, any waiver made
by a party hereto must be duly made in writing in order to be considered a
waiver, and the waiver of one covenant or agreement shall not be considered a
waiver of any other covenant or agreement unless specifically in writing as
aforementioned.
14. Savings Provisions. The invalidity, in whole or in part, of any
covenant or restriction, or any section, subsection, sentence, clause, phrase or
word, or other provisions of this Agreement, as the same may be amended from
time to time shall not affect the validity of the remaining portions thereof.
15. Governing Law. This Agreement shall be construed in accordance with
and governed by the laws of the Commonwealth of Pennsylvania without giving
effect to its choice of law provision.
16. Notices. If either party desires to give notice to the other in
connection with any of the terms and provisions of this Agreement, said notice
must be in writing and shall be deemed given when (a) delivered by hand (with
written confirmation of receipt), (b) sent by facsimile (with written
confirmation of receipt), provided that a copy is mailed by registered mail,
return receipt requested, or (c) when received by the addressee, if sent by a
nationally recognized overnight delivery service (receipt requested), in each
case addressed to the party for whom it is intended as follows (or such other
addresses as either party may designate by notice to the other party and, after
the IPO/Spin-off, at the Parent Company's or Company's then principal executive
offices):
If to Employer Allegheny Teledyne Incorporated
00xx Xxxxx, Xxx XXX Xxxxx
Xxxxxxxxxx, XX 00000
Attn: Chief Executive Officer
with a copy to: Xxx X. Xxxxxx
Senior Vice President, General Counsel
and Secretary
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Allegheny Teledyne Incorporated
00xx Xxxxx, Xxx XXX Xxxxx
Xxxxxxxxxx, XX 00000
If to Executive: At the most recent home address of
Executive on the official records
of Employer
17. Default. In the event either party defaults in the performance of
its obligations under this Agreement, the non-defaulting party may, after giving
30 days' notice to the defaulting party to provide a reasonable opportunity to
cure such default, proceed to protect its rights by suit in equity, action at
law, or, where specifically provided for herein, by arbitration, to enforce
performance under this Agreement or to recover damages for breach thereof,
including all costs and attorneys' fees, whether settled out of court,
arbitrated, or tried (at both trial and appellate levels).
18. Section 162(m) Limits. Notwithstanding any other provision of this
Agreement, if and to the extent that any remuneration payable by Employer to the
Executive for any year would exceed the maximum amount of such remuneration that
Employer may deduct for that year by reason of Section 162(m) of the Code,
payment of the portion of the remuneration for that year that would not be so
deductible under Section 162(m) shall, in the sole discretion of the Board, be
deferred so that it shall become payable at such time or times as the Board
reasonably determines that it would be deductible by Employer under Section
162(m), with interest at the "short-term applicable federal rate" as such term
is defined in Section 1274(d) of the Code.
19. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment,
distribution or other action by Employer to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise, determined with regard to any additional
payments required under this Section 19) (a "Payment") would be subject to an
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any interest or penalties are incurred by the Executive
with respect to any such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), Employer shall make a payment to the Executive (a "Gross-Up Payment") in
an amount equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of paragraph (c) of this Section
19, all determinations required to be made under this Section 19, including
whether and when a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by Ernst & Young LLP, or such other independent public accounting
firm regularly engaged by Employer from time to time (the "Accounting Firm"),
which shall provide detailed supporting calculations both to Employer and the
Executive within 20 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by Employer.
In the event that the Accounting Firm is serving as accountant or auditor for
the individual, entity or group effecting the Change of Control, Employer shall
appoint another nationally recognized accounting firm to
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make the determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by Employer. Any Gross-Up Payment, as
determined pursuant to this Section 19, shall be paid by Employer to the
Executive within five days of the receipt of the Accounting Firm's
determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive's applicable federal and state
income tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon Employer
and the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by Employer should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that Employer exhausts
its remedies pursuant to Section 19 and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment shall be
promptly paid by Employer to or for the benefit of the Executive.
(c) The Executive shall notify Employer in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by Employer of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise Employer of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to Employer (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If Employer notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the Executive shall:
(i) give Employer any information reasonably
requested by Employer relating to such claim,
(ii) take such action in connection with contesting
such claim as Employer shall reasonably request in writing from time to
time, including, without limitation, accepting legal representation
with respect to such claim by an attorney reasonably selected by
Employer,
(iii) cooperate with Employer in good faith in order
effectively to contest such claim, and
(iv) permit Employer to participate in any
proceedings relating to such claim;
provided, however, that Employer shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this
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Section 19(c), Employer shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and xxx for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as Employer shall determine;
provided, however, that if Employer directs the Executive to pay such claim and
xxx for a refund, Employer shall advance the amount of such payment to the
Executive, on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such advance
or with respect to any imputed income with respect to such advance; and further
provided that any extension of the statute of limitations relating to payment of
taxes for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, Employer's control of the contest shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and the Executive
shall be entitled to settle or contest, as the case may be, any other issue
raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by Employer pursuant to Section 19(c), the Executive becomes entitled
to receive any refund with respect to such claim, the Executive shall (subject
to Employer's complying with the requirements of Section 19(c)) promptly, after
receipt by Executive of such refund, pay to Employer the amount of such refund
(together with any interest paid or credited thereon after taxes applicable
thereto). If, after the receipt by the Executive of an amount advanced by
Employer pursuant to Section 19(c), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and Employer does
not notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
20. Executive's Legal Counsel; Reimbursement of Attorneys Fees.
Executive has been advised by legal counsel in connection with the negotiation,
preparation and execution of this Agreement. Promptly upon the Executive's
demand (accompanied by reasonable documentation), Employer shall reimburse the
Executive his reasonable attorney's fees and costs relating to the negotiation,
preparation and execution of this Agreement and the consummation of the
transactions contemplated thereby.
21. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than Employer, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
22. Waiver of Jury Trial. ALL PARTIES KNOWINGLY WAIVE THEIR RIGHTS TO
REQUEST A TRIAL BY JURY IN ANY LITIGATION IN ANY COURT OF LAW, TRIBUNAL OR LEGAL
PROCEEDING INVOLVING THE PARTIES HERETO OR ANY DISPUTES ARISING OUT OF OR
RELATED TO THIS AGREEMENT.
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23. Successors.
(a) This Agreement shall inure to the benefit of and be
binding upon the Executive and the Executive's assigns, heirs, representatives
or estate.
(b) This Agreement shall be binding upon and inure to the
benefit of ATI (including therein each direct and indirect subsidiary) and its
successors and assigns. In the event of a Public Offering, ATI shall cause the
corporation whose stock is sold in the Public Offering (the "Offered Company")
to accept this Agreement as its obligation and this Agreement shall be binding
upon and inure to the benefit of the Offered Company and its direct and indirect
subsidiaries and their respective successors and assigns. In the event that this
Agreement is adopted by the Offered Company, ATI will have no obligation
thereafter to perform or to make payments to the Executive, except for payments
earned, due and owning as of the date of such Public Offering under this
Agreement or under any one or more plans, programs and arrangements in which the
Executive then participates.
IN WITNESS WHEREOF, ATI, by its appropriate officer, signed this
Agreement and Executive has signed this Agreement, as of the day and year first
above written.
ALLEGHENY TELEDYNE INCORPORATED
By: _______________________________________________
Xxxxxxx X. Xxxxxxx
Chairman, President and Chief Executive Officer
EXECUTIVE
____________________________________________________
Xxxxxxx X. Xxxxxx
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