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Exhibit 10 (xvi)
RETENTION AGREEMENT
This Retention Agreement is made and entered into at Willoughby, Ohio by
and among Figgie International Inc., a Delaware corporation (the "Company") and
Xxxx X. Xxxxxxxxx (the "Executive") as of this 17th day of July, 1996.
WHEREAS, the Executive has been and continues to serve the Company as
President of its Xxxxx Aviation division (the "Business Unit"); and
WHEREAS, the Company (collectively with the Business Unit, "Figgie") has
determined to explore and evaluate strategic alternatives to enhance stockholder
value and such alternatives may include a merger, consolidation or a sale of the
Business Unit or of the Company; and
WHEREAS, the Company has determined that it is in its and its stockholders'
best interests to assure that the Company and the Business Unit will have the
continued dedication and service of the Executive during the term of this
Agreement; and
WHEREAS, the Company has determined that the best way to assure that Figgie
will have the continued service and dedication of the Executive is to continue
his employment as "employment at will" but to provide incentives for him to
remain an employee of Figgie subject to the terms hereof;
NOW THEREFORE, the Executive and the Company agree as follows:
1. Definitions
For the purposes of this Agreement:
(a) "Sale of the Company"shall mean the first to occur of the following:
(A) any person (including any individual, firm, partnership,
association, trust, trustee, personal representative, group as
defined in Rule 13d-5 under the Securities Exchange Act of 1934,
as amended, body corporate, corporation, unincorporated
organization, syndicate or other entity) (other than the Company)
is or becomes the beneficial owner, directly or indirectly, of
(i) securities of the Company representing 50% or more of the
combined voting power of the Company's then outstanding
securities or (ii) assets of the Company comprising 50% or more
of such assets; or
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(B) the consummation of any consolidation or merger of the Company
with any other entity, other than a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of the Company, at least 50% of the
combined voting power of the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation.
(b) "Sale of the Business Unit" shall have occurred when any person (other
than the Company or any subsidiary of the Company) is or becomes the
beneficial owner, directly or indirectly, of assets of the Business Unit
comprising 50% or more of such assets.
(c)"Net Proceeds" shall mean all cash consideration and the fair market
value of other consideration (at the time such consideration is received)
received by the Company in connection with the Sale of the Business Unit,
or, as applicable, the aggregate cash consideration and the fair market
value of other consideration (at the time such consideration is received)
received by the stockholders of the Company (or received by the Company if
such consideration is first received by the Company and then distributed to
its stockholders) in connection with the Sale of the Company (excluding,
if applicable, holdbacks and amounts deposited in escrow which amounts have
not been release ("Holdbacks")), less the legal fees, investment banking
fees and other costs associated with the Sales of the Business Unit or the
Sale of the Company, as applicable. "Net Proceeds" shall also include the
value of any long-term liabilities (including any and all debt obligations)
of the Company or Business Unit, as applicable, indirectly or directly
assumed by the buyer or successor entity, as applicable, in connection with
the Sales of the Business Unit or the Sale of the Company, as applicable.
Net Proceeds shall be approved by the Management Development, Compensation
and Nominating Committee of the Board of Directors of the Company and
shall be final. At such time as any Holdbacks are released to the
stockholders (or to the Company if such Holdbacks are first released to
the Company and then distributed to its stockholders) such holdbacks
shall constitute a portion of the Net Proceeds.
2. Employment At Will
(a) The Company hereby agrees to continue the Executive as an employee of
Figgie and the Executive agrees to remain in such employ as an employment
at-will employee of Figgie. Subject to the terms and conditions of this
Agreement, Figgie retains the right to terminate the
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services of the Executive at any time without cause (as defined below) and
the Executive retains the right to terminate his services for Figgie at any
time; provided, however, that if the Executive's employment with Figgie is
terminated by Figgie without cause (as defined below), in the event that a
Sale of the Company or a Sale of the Business Unit occurs during the period
that would have constituted the term of this Agreement absent such
termination of employment, the Executive shall be entitled to the
transaction bonus described in paragraph 4 (a) hereof.
(b) For the purposes of this Agreement, "cause" shall be determined by the
Company in the exercise of good faith and reasonable judgement and will
include any breach of the Agreement by the Executive or any act by him of
gross personal misconduct, insubordination, misappropriation of Company
funds, fraud, dishonesty, gross neglect of or failure to perform the duties
reasonably required of him pursuant to this Agreement or any conduct which
is in willful violation of any applicable law or regulation pertaining to
the business of the Company.
(c) Any activity which the Executive shall undertake for the acquiror of
the Business Unit shall not be deemed to be a violation of the
noncompetition, nondisclosure and other covenants contained in Article 3 of
the Management Agreement.
3. Salary and Benefits
The payments provided for in this Agreement are in addition to and not in
lieu of any and all other benefits and compensation which the Executive is
currently receiving as an employee of Figgie.
4. Continued Service Bonus
As of the earlier of (i) Sale of the Company and (ii) Sale of the Business
Unit (such earlier date, the "Release Date"):
(a) the Company shall pay to the Executive in a cash lump sum a
transaction bonus determined as follows:
(i) if paid upon the Sale of the Business Unit, the transaction bonus
shall equal two tenths of one percent (0.2%) of the Net Proceeds:
(ii) if paid upon the Sale of the Company, the transaction bonus shall
equal two tenths of one percent (0.2%) of the portion of the Net
Proceeds of the Sale of the Company which is allocable to the
Business Unit, the amount and method of which allocation shall be
determined by the acquiror and approved by the Management
Development, Compensation and Nominating Committee of the Board
of Directors of the Company and shall be final;
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(b) the Company shall pay to the Executive in a cash lump sum those
presently unpaid installments, if any, of all bonuses previously awarded
to the Executive pursuant to the Compensation Plan for Executives (the
"Bonus Plan"); and
(c) the Company shall pay to the Executive in a cash lump sum a pro-rata
bonus under the Bonus Plan with respect to the year in which the Release
Date occurs, which bonus shall be based on the Executive's performance
through the date of sale under the Xxxxx Aviation business plan for such
year.
5. Nature of Payments under this Agreement
No amount paid or payable to the Executive under this Agreement shall
constitute salary or compensation for the purposes of any employee benefit plan
maintained by Figgie.
6. Tax Indemnity
(a) In the event that any payment or benefit received or to be received by
the Executive in connection with a "change in ownership or control" (as
defined in Section 280G(b) (2) (A) (i) of the Internal Revenue Code of
1986, as amended (the"Code"))) of the Company ( a "Change in Control") or
the termination of the Executive's employment (whether pursuant to the
terms of this Agreement, Management Agreement between the Executive and the
Company date December 9, 1994 ("Management Agreement"), or any other plan,
arrangement or agreement with the Company, any person whose actions result
in a Change in Control or any person affiliated with the Company or such
person) becomes subject to the excise tax (the "Excise Tax") pursuant to
Section 4999 of the Code, the Company shall promptly pay Executive the
amount or amounts (a "Gross-Up Payment") that are necessary to place the
Executive in the same after-tax (taking into account federal, state and
local income and employment taxes) financial position that he would have
been in if he had not incurred any tax liability under Section 4999 of
the Code.
(b) Each party will notify the other in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-Up Payment. Such notification shall be given as
soon as practicable but no later than ten business days after such party is
informed in writing of such a claim and such party shall apprise the other
party of the nature of such claim and the date on which such claim is
requested to be paid.
(c) The Company shall bear and pay directly all costs and expenses
(including legal fees and additional interest and penalties) incurred in
connection with any such claim or proceeding, to the extent related to the
Excise Tax, and shall indemnify and hold the Executive harmless,
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on an after tax basis, as provided in Section 6 (a), 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.
7. Termination of Agreement
This Agreement will continue in full force and effect from the date hereof
until the earliest of:
a. the death of the Executive;
b. the determination by the Company upon reasonable medical evidence that
the Executive, due to disability, is no longer able to effectively
perform the customary duties of his position;
c. the completion of any payments to the Executive under this Agreement;
d. the termination of the employment of the Executive's employment for
any reason, except to the extent set forth in paragraph 2 (b); or
e. May 31, 1997.
Upon the termination of this Agreement, all rights and obligations of the
Executive and the Company will terminate and the provisions hereof will be of no
further force or effect, except that the Company will continue to be obligated
to make any payments provided for in this Agreement to which the Executive
became entitled during the term of this Agreement.
8. Successors
This Agreement is personal to the Executive and may not be assigned by
him. This Agreement may be assigned or transferred to and will be binding upon
and inure to the benefit of any Successor of the Company. As used herein, the
term "Successor" will include any person, firm, corporation or business entity
which acquires all or substantially all of the assets or succeeds to the
business of the Company or the Business Unit.
In the event a Successor fails to assume this Agreement, such failure shall
be deemed to constitute a termination of the Executive's employment by the
Company for reason other than for Cause under the Management Agreement and shall
entitle the Executive to the payments described in Section 2.4 of the Management
Agreement and to the payments described in paragraph 4 hereof.
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9. Modification
This Agreement may not be varied, altered, modified, canceled, changed or
in any way amended except by the mutual agreement of the Executive and the
Company set forth in a written instrument executed by them or their respective
legal representatives.
00.Xxx Withholding
The Company may withhold from any amounts payable under this Agreement all
federal, state, city or other taxes as may be required by law or any
governmental regulation or ruling.
11.Governing Law
To the extent not preempted by federal law, the provisions of this
Agreement will be construed and enforced in accordance with the laws of the
State of Ohio.
12.Entire Agreement
This Agreement and the Management Agreement supersede any prior agreements
or understandings oral or written between the Executive and the Company
pertaining to the subject matter hereof and constitute the entire agreement
between them with respect thereto.
Figgie International Inc. Executive:
By: /s/ /s/
Xxxxxxx X. Xxxxxxx Xxxx X. Xxxxxxxxx
