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Exhibit 10.8
EMPLOYMENT AGREEMENT
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ESSEF Corporation, an Ohio corporation (the "Company"), and Xxxxxx X.
Xxxxxx (the "Executive") agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company agrees to employ the Executive, and the Executive
agrees to serve the Company, as the Company's Executive Vice President and Chief
Financial Officer. The Executive shall report to the Company's Chief Executive
Officer and the Board of Directors of the Company and shall have supervision and
control over, and responsibility for, the accounting, treasury and financial
control matters of the Company and such other powers and duties as are
customarily performed by Executive Vice Presidents and Chief Financial Officers
of companies similar in size to the Company, together with such other duties,
consistent with his position as set forth above, as may be reasonably requested
by the Chief Executive Officer or the Board of Directors.
(b) On a day-to-day basis, the Executive shall, subject to the
parameters set forth in Section 1(a), (i) perform such duties as may be assigned
by the Chief Executive Officer, the Chief Operating Officer and the Board of
Directors, (ii) devote substantially all of his working time to the business and
affairs of the Company (provided, however, that, so long as it does not
unreasonably interfere with his employment obligations to the Company hereunder,
the Executive shall be entitled to attend to outside investments, and subject to
prior approval of the Board of Directors, serve as a director of a corporation
which does not compete with the Company (as provided in Section 11 hereof) or as
a director, trustee or officer of or otherwise participate in educational,
welfare, social, religious, charitable and civic organizations, and (iii) use
his good faith efforts to advance the interests of the Company and to improve
the value of the Company to its shareholders.
2. TERM. The Company's employment of the Executive shall commence on
September 3, 1996 (the "Commencement Date") and expire on September 30, 1998.
Unless terminated as provided in Section 9 hereof, this Agreement shall be
extended automatically as of each September 30 thereafter for one (1) additional
"fiscal year"
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period with such modified terms as mutually agreed. The term
"fiscal year" means the period beginning on October 1 in one year and ending on
September 30 in the next year.
3. COMPENSATION.
(a) The Executive's annual base salary ("base salary") during the
term of this Agreement shall be at least Two Hundred Thousand Dollars (USD
200,000), such base salary to be reviewed annually by the Compensation Committee
of the Board of Directors or an authorized subcommittee thereof (the
"Committee").
(b) In addition to the base salary, the Company shall pay the
Executive a bonus targeted at Fifty percent (50%) of his base salary for each
fiscal year ("Target Bonus"), and the Committee shall determine the appropriate
target earnings per share ("Targeted Earnings Per Share") or other performance
measure for bonus purposes. For fiscal year 1997 the Target Bonus shall be
calculated as follows: ((actual earnings per share less 75% of Targeted Earnings
Per Share) divided by (Targeted Earnings Per Share less 75% of Targeted Earnings
Per Share)) multiplied by the Target Bonus amount. For example, if Targeted
Earnings Per Share were $2.00 and actual earnings per share were $2.50 the
Executive would earn 200% of his Target Bonus.
There shall be no cap on bonus potential. For purposes of bonus
calculations, net income from the Fame note shall not be included for purposes
of determining the actual and target goal. Such bonus shall be determined and
paid within thirty (30) days after the Company's audited financial statements
become available. For fiscal year 1997, the Executive shall be paid a bonus of
the greater of Fifty Thousand Dollars (USD 50,000) (the "Guaranteed Bonus") or
the bonus calculated as set forth above for his performance during fiscal year
1997.
4. OPTIONS.
(a) INITIAL OPTIONS.
(i) Subject to the limitation in (iii) below, the Company
hereby grants to the Executive options (the "Initial Options") to purchase Fifty
Thousand (50,000) shares of the Company's common stock (the "Shares") at the
price and subject to the following terms and conditions. The Initial Options
shall vest as of the Commencement
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Date.
(ii) The exercise price per Share for the Initial Options shall
be the higher of (aa) the average closing price per Share as reported by NASDAQ
during the five (5) trading days immediately preceding the Commencement Date or
(bb) Seventeen Dollars and Fifty Cents (USD 17.50) per Share.
(iii) Regardless of the fact that Initial Options are deemed to
vest in the Executive on the Commencement Date, the Executive may exercise
Initial Options only in the percentages and at the times set forth below:
0% prior to the first anniversary of the Commencement Date;
20% at any time after the first anniversary of the Commencement Date;
40% at any time after the second anniversary of the Commencement Date;
60% at any time after the third anniversary of the Commencement Date;
80% at any time after the fourth anniversary of the Commencement Date;
and
100% at any time after the fifth anniversary of the Commencement Date.
(b) PERFORMANCE OPTIONS.
(i) The Company hereby grants the Executive options (the
"Performance Options") to purchase an additional Seventy-Five Thousand (75,000)
Shares. The Performance Options shall vest in three (3) tranches of Twenty-Five
Thousand (25,000) Performance Options each on the later of (aa) the fifth (5th)
anniversary of the Commencement Date or (bb) the following dates for each
tranche:
(xx) First Tranche -- when the average closing price of the
Shares as reported by NASDAQ for twenty (20) consecutive trading days
reaches Twenty-Six Dollars and Twenty-Five Cents (USD 26.25);
(yy) Second Tranche -- when the average closing price of the
Shares as reported by NASDAQ for twenty (20) consecutive trading days
reaches Thirty-Five Dollars (USD 35.00);
(zz) Third Tranche -- when the average closing price of the
Shares as reported by NASDAQ for twenty (20) consecutive trading days
reaches Forty-Three Dollars and Seventy-Five Cents (USD 43.75).
(ii) The exercise price per Share for the Performance Options shall be
the higher of (aa) the
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average closing price per Share as reported by NASDAQ during the five (5)
trading days immediately preceding the Commencement Date or (bb) Seventeen
Dollars and Fifty Cents (USD 17.50) per Share.
(c) TRANSFERABILITY OF OPTIONS. Neither the Initial Options nor the
Performance Options are transferable by the Executive other than by will, the
laws of descent and distribution or by gift to members of the Executive's
immediate family comprised of his spouse and children ("immediate family") or by
transfer to a trust for the benefit of his immediate family.
(d) TERM OF OPTIONS. Subject to the terms and conditions hereof, the
Initial Options and/or the Performance Options (collectively, the "Options") may
be exercised after they vest at any time prior to the tenth (10th) anniversary
of the Commencement Date by delivering to the Company at its principal place of
business a written notice, signed by the person entitled to exercise the
options, stating the Executive's election to exercise the Options and stating
the number of Options to be exercised. Such notice shall, as an essential part
thereof, be accompanied by the payment of the full purchase price of the Shares
then to be purchased and the amount, if any, required to be withheld for
federal, state and local tax purposes on account of the exercise of the Options.
The Options shall be deemed exercised as of the date that the Company receives
such notice and payment. Payment of the full purchase price must be made in cash
or by certified check. Promptly after the proper exercise of an Option, the
Company or its transfer agent shall issue in the name of the person exercising
the Option, and deliver to him, a certificate or certificates for the Shares
purchased. As holder of the Options, the Executive shall have no rights as
Shareholder or otherwise in respect of any of the Shares as to which the Options
shall not have effectively been exercised.
(e) RESTRICTIONS ON EXERCISE. No Option shall be exercisable if such
exercise would violate:
(i) any generally applicable state securities laws;
(ii) any applicable registration or other requirements under the
Securities Act of 1933, as amended (the "Act"), or applicable
requirements of NASDAQ; or
(iii) any generally applicable legal requirement of any other
governmental authority.
Furthermore, if a registration statement with respect to the Shares to be issued
upon the exercise of the Options is not in effect and if counsel for the Company
reasonably deems it necessary or desirable in order to avoid possible violation
of the Act, the Company may require, as a condition to its issuance and delivery
of certificates for the Shares, the delivery to the Company of a commitment in
writing by the person exercising the Options that at the time of such exercise
it is his intention to acquire such Shares for his own account for investment
only and not with a view
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to, or for resale in connection with, the distribution thereof; that such person
understands the Shares may be "restricted securities" as defined in Rule 144 of
the Securities and Exchange Commission; and that any resale, transfer or other
disposition of said Shares will be accomplished only in compliance with Rule
144, the Act, or other or subsequently applicable Rules and Regulations
thereunder. The Company may place on the certificates evidencing such Shares an
appropriate legend reflecting the aforesaid commitment and may refuse to permit
transfer of such certificates until it has been furnished evidence reasonably
satisfactory to it that no violation of the Act or the Rules and Regulations
thereunder would be involved in such transfer.
The Company shall use its best efforts to cause the underlying Shares to
be registered under the Act prior to, or concurrently with, the exercise by the
Executive of the Initial Options and Performance Options.
(f) TAXES. If all or any of the amounts payable to the Executive under
this Agreement (together with all other payments of cash or property, whether
pursuant to this Agreement or otherwise, including, without limitation, the
issuance of Shares or Options) constitutes "excess parachute payments" within
the meaning of Section 280G of the Code that are subject to the excise tax
imposed by Section 4999 of the Code (or any similar tax or assessment), the
amounts payable hereunder shall be increased to the extent necessary to place
the Executive in the same after-tax position as he would have been in had no
such tax assessment been imposed on any such payment paid or payable to the
Executive under this Agreement or any other payment that the Executive may
receive in connection therewith. The determination of the amount of any such tax
or assessment and the incremental payment required hereby in connection
therewith shall be made by the accounting firm employed by the Executive within
thirty (30) calendar days after such payment and said incremental payment shall
be made within five (5) calendar days after determination has been made. If,
after the date upon which the payment required by this Section 4(f) has been
made, it is determined (pursuant to final regulations or published rulings of
the Internal Revenue Service, final judgment of a court of competent
jurisdiction, Internal Revenue Service audit assessment, or otherwise) that the
amount of excise or other similar taxes or assessments payable by the Executive
is greater than the amount initially so
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determined, then the Company shall pay the Executive an amount equal to the sum
of: (i) such additional excise or other taxes, PLUS (ii) any interest, fines and
penalties resulting from such underpayment, PLUS (iii) an amount necessary to
reimburse the Executive for any income, excise or other tax assessment payable
by the Executive with respect to the amounts specified in (i) and (ii) above,
and the reimbursement provided by this clause (iii), in the manner described
above in this Section 4(f). Payment thereof shall be made within five (5)
calendar days after the date of such subsequent determination. If, after the
date upon which the payment required by this Section 4(f) has been made to the
Executive, it is determined that Executive is entitled to receive a refund of
all or part of such payment, then the Executive shall pay to the Company all
amounts received by the Executive as a refund of any such overpayment of excise
or other taxes.
(g) ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES PURCHASABLE. If
the Company shall at any time after the date hereof: (i) declare a dividend on
the Shares payable in shares of its capital stock (whether common shares or of
capital stock of any other class), (ii) subdivide its outstanding Shares, or
(iii) combine its outstanding Shares into a smaller number of Shares, the
exercise price in effect at the time of the record date for that dividend or of
the effective date of that subdivision or combination, and/or the number and
kind of Shares issuable on that date pursuant to an exercise of the Option,
shall be proportionately adjusted so that the Executive shall be entitled to
receive the aggregate number and kind of Shares which, if the Option had been
exercised immediately prior to that date, the Executive would have owned upon
such exercise and been entitled to receive by virtue of that dividend,
subdivision, combination, consolidation or merger. The foregoing adjustment
shall be made successively whenever any event listed above shall occur. The
Compensation Committee shall have sole discretion to determine the most
appropriate manner and amount of adjustments hereunder.
5. BENEFITS. During the term of this Agreement, the Executive and his
eligible dependents shall be entitled to participate in and receive benefits
under any profit-sharing plan, health, disability, medical insurance or other
employee welfare or benefit plan or arrangement made generally available by the
Company during the term of
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this Agreement to its executives and key management employees. The Executive
shall also be a participant in the Company's "Performance Share Plan" with a
target award of Fifty Thousand Dollars (USD 50,000) per year over a two (2) to
three (3) year performance period, as determined by the Compensation Committee.
Such Performance Share Plan is currently being developed by the Compensation
Committee for final consideration by the Board of Directors and submission to
shareholders for approval, if required.
6. CAR. During the term of this Agreement, the Company shall provide
the Executive with an automobile and shall pay for operating expenses incurred
in connection with the use of the automobile, including the costs of insurance,
gas, maintenance and car phone.
7. VACATION. The Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Board from time to time.
8. RIGHT OF FIRST REFUSAL.
(a) If the Executive wishes to sell, assign or otherwise transfer to a
single purchaser Twenty-Five Thousand (25,000) or more Shares, the Executive
shall first comply with the terms of the following right of first refusal.
(b) The Executive may sell such Shares if the Shares proposed to be
sold are first offered for purchase to the Company. Such offer of purchase shall
be delivered by the Executive to the Company by a written notice containing
(i) a true copy of the offer of the proposed purchaser of the Shares (the
"Offer"), which offer shall set forth the number of Shares to be purchased,
the price for those Shares and the name and address of the proposed purchaser
and (ii) a written offer by the Executive to sell all of the Shares
covered by the Offer to the Company in accordance with the terms of this
Agreement and the Offer.
(c) Upon approval by the Board, the Company or its nominee shall have
the right to accept the Executive's offer in writing within sixty (60) days
after the date of the notice. If such offer is accepted, the Shares shall be
sold to the Company or such nominee at the office of the Company at a mutually
convenient time within
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twenty (20) days after the acceptance of the offer. At the Closing of such
sale, the Executive shall deliver the certificates representing the Shares
free of any adverse claims, liens or encumbrances whatsoever, duly endorsed
for transfer, and the Company or its nominee, as the case may be, shall
deliver to the Executive the purchase price relating to the Shares being
purchased.
(d) If the Company fails to exercise its purchase rights under this
Section 8 for a period of thirty (30) days after the termination of the period
within which the Company had the right to purchase the Shares, the Executive may
transfer the Shares that are the subject of the Offer to the proposed purchaser,
but only in strict accordance with the Offer. If such sale is consummated within
a sixty (60) day period thereafter, the Shares in the hands of the proposed
purchaser shall no longer be subject to the provisions of this right of first
refusal. If such sale is not so consummated, the Shares shall continue to be
subject to all of the provisions of this Agreement.
9. DISABILITY OR DEATH; RESIGNATION; TERMINATION FOR CAUSE; OTHER
TERMINATIONS.
(a) DISABILITY OR DEATH. If the Executive is incapacitated for a
period of three (3) consecutive months so that he cannot perform his duties
hereunder on a full-time basis, then either the Company or the Executive may
give written notice to the other terminating the Executive's employment
effective thirty (30) days thereafter (the "Disability Termination Date"). The
Company shall continue to provide salary, medical coverage, disability and group
life insurance to the Executive for six (6) months after the Disability
Termination Date. If the Executive dies prior to the termination of his
employment or if notice of termination for disability is given as provided
above, the Company's obligations hereunder shall terminate as of the earlier of
the Executive's death or the Disability Termination Date. In the event of the
Executive's death, his estate may exercise any Options vested and exercisable at
the date of death for one (1) year after such death. In the event of disability,
the Executive may exercise any options vested and exercisable at the Disability
Termination Date for a period of three (3) months after the Disability
Termination Date. In the event of death or disability, the number of Performance
Options that may be exercised is the number of Performance Options that have met
the Share price hurdles, multiplied by a fraction not to exceed the
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whole number one (1), the numerator of which shall be the number of whole months
since the Commencement Date and the denominator of which shall be sixty (60). In
the event of death or disability, the Company shall pay to the Executive the
prorated portion (through the applicable termination date) of the Executive's
Target Bonus that would have been paid had the Executive been employed by the
Company at the end of the fiscal year in which the applicable termination date
occurred. Such Target Bonus shall be calculated according to actual Company
results for the respective fiscal year and paid at the same time other Company
bonuses are paid.
(b) RESIGNATION. If the Executive's employment is terminated by reason
of his voluntary resignation, all of the Company's obligations hereunder shall
terminate as of the termination date. All unexercised Options, both vested and
unvested, shall be automatically forfeited and canceled by the Company.
(c) TERMINATION FOR CAUSE. If the Company terminates the Executive's
employment for cause (as defined below), all of the Company's obligations
hereunder shall immediately terminate as of the termination date. All
unexercised Options, both vested and unvested, shall be automatically forfeited
and canceled by the Company. As used herein, "for cause" shall mean (i) gross
misconduct by the Executive that is materially inconsistent with the terms
hereof, or (ii) material failure by the Executive to perform his duties, either
of which continues after written notice thereof and a fifteen (15) day chance to
cure or (iii) the Executive's conviction for committing a felony.
(d) OTHER TERMINATIONS. If the Company terminates the Executive's
employment other than for cause (including failing to extend the term at the end
of any fiscal year), both the Company's and the Executive's obligations
hereunder shall immediately terminate as of the termination date; provided,
however, that (i) the Executive may exercise within one (1) year from the date
the Company delivers notice of termination (the "Termination Date") any Initial
Options held by him on the Termination Date, and any Performance Options that
have met the Share price hurdles prior to the Termination Date, multiplied by a
fraction not to exceed the whole number one (1), the numerator of which shall be
the number of whole months since the Commencement Date and the denominator of
which shall be sixty (60) and the Company shall continue to provide salary and
medical, group life and disability
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insurance (collectively, "insurance benefits") to the Executive until the
later of September 30, 1998 or one (1) year after the Termination Date. In
addition the Company shall pay the prorated portion (through the Termination
Date) of the Executive's Target Bonus that would have been paid had the
Executive been employed by the Company at the end of the fiscal year in which
the Termination Date occurred. Such Target Bonus will be calculated according
to actual Company results for the fiscal year and paid at the same time other
Company bonuses are paid.
If (i) the Company materially changes the Executive's duties and
responsibilities as set forth in Section 1 without his consent; or (ii) there
occurs a "change in control" (as hereinafter defined) of the Company, then in
any such event the Executive shall have the right to terminate his employment
with the Company, but such termination shall not be considered a voluntary
resignation or termination of such employment or of this Agreement by the
Executive but rather a discharge of the Executive by the Company without "cause"
under this Section 9(d).
The term "change in control" means the first to occur of the following
events:
(i) when any "person" as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) thereof, including
a "group" as defined in Section 13(d) of the Exchange Act, but
excluding the Company and any employee benefit plan sponsored or
maintained by the Company (including any trustee of such plan acting as
trustee), directly or indirectly, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act, as amended from time to
time), of securities of the Company representing more than fifty
percent (50%) of the combined voting power of the Company's then
outstanding securities; or
(ii) The completion of a transaction requiring shareholder
approval for the acquisition of substantially all of the stock or
assets of the Company by an entity other than the Company or any merger
of the Company into another company and the Company is not the
surviving company.
Notwithstanding anything to the contrary contained in this Agreement, including
without limitation, anything contained in Subsections 4(a) or 4(b) hereof, upon
the occurrence of a "change of control" of the Company the Initial
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Options shall immediately become exercisable by the Executive at any
time and the Performance Options may be exercised by the Executive to the extent
that the price of the Shares had reached the required levels of Subsections
4(b)(i)(xx), (yy) or (zz) as of the date of such change of control.
10. TRADE SECRETS; CONFIDENTIAL AND PROPRIETARY INFORMATION. The
Executive shall not at any time or in any manner, either directly or indirectly,
divulge, disclose or communicate to any person, firm, company, corporation or
business in any manner whatsoever any confidential information relating to the
business of the Company, including without limitation, the Company's pricing
policies, trade secrets, know-how, strategic plans and similar types of
information. This Section 10 shall be interpreted with the Executive's role as
Chief Financial Officer and liaison with the securities markets and the
investing public in general in mind. The foregoing restrictions shall not apply
to the extent that such information (a) is obtainable in the public domain, (b)
becomes obtainable in the public domain, except by reason of the breach by the
Executive of the terms hereof, or (c) is required to be disclosed by rule of law
or by order of a court or governmental body or agency. This Section 10 shall
remain in full force and effect for a period of ten (10) years after expiration
or termination of this Agreement for any reason.
11. COVENANT NOT TO COMPETE. During the term of this Agreement and for a
period of five (5) years thereafter the Executive will not, without the
Company's prior written consent, directly or indirectly engage in, make any
investment in or have any interest in any business in competition with the
business of the Company; and the Executive will not advise, assist or render
services either directly or indirectly to any person, firm, company, corporation
or business other than the Company with reference to any business in competition
with the business engaged in by the Company during the Executive's employment by
the Company. Notwithstanding the foregoing, the ownership of securities of any
business competing with the Company, if such securities are publicly traded on a
national securities market and constitute less than five percent (5%) of the
outstanding stock thereof, shall not constitute a violation of this provision.
For purposes of this Section 11, a business in competition with the Company
shall mean any business engaged in the manufacture, design, processing, sale or
distribution of products that are the
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same as or similar to those of the Company at any time during the term of this
Agreement. This Agreement shall inure to the benefit of, and be enforceable by,
the parties' successors, representatives, executors, administrators or
assignees.
12. NOTICES. All notices, requests, demands and other communications
made or given in connection with this Agreement shall be in writing and shall be
deemed to have been duly given (a) if delivered, at the time delivered or (b) if
mailed, at the time mailed at any general or branch United States Post Office
enclosed in a registered or certified postage paid envelope addressed to the
address of the respective parties as follows:
To the Company:
ESSEF Corporation
000 Xxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Chief Executive Officer
To the Executive:
Xxxxxx X. Xxxxxx
0000 Xxxxxxxxx Xxxx
Xxxxx Xxxxx, XX 00000
or to such other addresses as the party to whom notice is to be given may have
previously furnished to the other party in writing in the manner set forth
above, provided that notices of changes of address shall only be effective upon
receipt.
13. MODIFICATIONS AND WAIVERS. No provisions of this Agreement may be
modified or discharged unless such modification or discharge is authorized by
the Board of Directors and is agreed to in writing, signed by the Executive and
by another executive officer of the Company. No waiver by either party hereto of
any breach by the other party hereto or 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.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties hereto relating to the subject matter hereof, and there are no
written or oral terms or representations made by either party other than those
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contained herein.
15. GOVERNING LAW. The validity, interpretation, construction,
performance and enforcement of this Agreement shall be governed by the laws of
the State of Ohio.
16. INVALIDITY. The unenforceability or invalidity of any provision of
this Agreement shall not affect the enforceability or validity of the balance of
the Agreement. In the event that any such provision should be or becomes invalid
for any reason, such provision shall remain effective to the maximum extent
permissible, and the parties shall consult and agree on a legally acceptable
modification giving effect to the commercial objectives of the unenforceable or
invalid provision, and every other provision of this Agreement shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
August 16, 1996.
ESSEF CORPORATION
By:
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Xxxxxx X. Xxxxxx Xxxxxx X. Xxxx, Executive Vice
President and Chief Operating Officer
