Exhibit 10.4
Pittway Corporation
December 31, 1998
Form 10-K
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 1, 1998, between Pittway
Corporation, a Delaware corporation (the "Company"), and Xxxx X. Xxxxxxxx
("Executive").
In consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ
Executive, and Executive accepts continued employment with the Company,
upon the terms and conditions set forth in this Agreement for the period
beginning on the date hereof and ending as provided in paragraph 5 hereof
(the "Employment Period").
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as
the chief financial officer and chief accounting officer of the Company,
and shall have the normal duties, responsibilities and authority of an
executive serving in such position, subject to the power of the Board of
Directors of the Company (the "Board") to expand or limit such duties,
responsibilities and authority, either generally or in specific instances.
Executive shall have the title Financial Vice President, Chief Financial
Officer and Treasurer of the Company, subject to the power of the Board to
change such title from time to time. During the Employment Period,
Executive shall also serve as a director of any affiliate of the Company
designated by the Board for so long as the Board causes him to be elected
to such position.
(b) Executive shall report to the President of the Company
(the "President").
(c) During the Employment Period, Executive shall devote his
best efforts and his full business time and attention (except for
permitted vacation periods, reasonable periods of illness or other
incapacity and, provided such activities do not exceed those in which
Executive has engaged in the past, participation in charitable and civic
endeavors and management of Executive's personal investments and business
interests) to the business and affairs of the Company, its subsidiaries
and affiliates. Executive shall perform his duties and responsibilities
to the best of his abilities in a diligent, trustworthy, businesslike and
efficient manner.
(d) Executive shall perform his duties and responsibilities
principally in the Chicago metropolitan area, and shall not be required to
travel outside that area any more extensively than he has done in the past
in the ordinary course of the business of the Company.
3. Salary and Benefits.
(a) The Company agrees to pay Executive a salary during the
Employment Period, in monthly installments.
(b) Executive's initial salary shall be $290,000 per annum.
(c) Executive's salary may be increased by the Board from
time to time.
(d) The Board may, in its sole discretion, award a bonus to
Executive for any calendar year during the Employment Period.
(e) The Company shall reimburse Executive for all reasonable
expenses incurred by him in the course of performing his duties under this
Agreement which are consistent with the Company's policies in effect from
time to time with respect to travel, entertainment and other business
expenses, subject to the Company's requirements with respect to reporting
and documentation of such expenses.
(f) In addition to the salary and any bonus(es) payable to
Executive pursuant to this paragraph, Executive shall be entitled during
the Employment Period to participate, on the same basis as other
executives of the Company (but subject to variations among executives
resulting from differences in the levels of benefits made available to
employees at particular business units under the Company's 401(k) plan or
any other plan of the Company), in the Company's Standard Executive
Benefits Package. The Company's "Standard Executive Benefits Package"
means those benefits (including insurance, vacation, company car or car
allowance and/or other benefits) for which substantially all of the
executives of the Company are from time to time generally eligible, as
determined from time to time by the Board.
(g) In addition to participation in the Company's Standard
Executive Benefits Package pursuant to this paragraph, Executive shall be
entitled during the Employment Period to:
(i) additional term life insurance coverage in an amount
equal to Executive's salary; but only if and so long as
such additional coverage is available at standard rates
from the insurer providing term life insurance coverage
under the Standard Executive Benefits Package or from a
comparable insurer acceptable to the Company;
(ii) supplementary long-term disability coverage in an amount
which will increase maximum covered annual compensation
to $330,000 and the maximum monthly payments to $18,333;
but only if and so long as such supplementary coverage is
available at standard rates from the insurer providing
long-term disability coverage under the Standard
Executive Benefits Package or a comparable insurer
acceptable to the Company; and
(iii) participation in the Pittway Corporation
Supplemental Executive Retirement Plan effective January
1, 1996 (the "SERP"), a copy of which, as currently in
effect, is attached hereto as Exhibit A, except that the
beginning date for accrual of a benefit shall be January
1, 1998.
4. Adjustments. Notwithstanding any other provision of this
Agreement, it is expressly understood and agreed that if there is a
significant reduction in the level of the business to which Executive's
duties under this Agreement relate, but Executive thereafter remains an
employee of the Company, the Board may make adjustments in Executive's
duties, responsibility and authority, and in Executive's compensation, as
the Board deems appropriate to reflect such reduction.
5. Employment Period.
(a) Except as hereinafter provided, the Employment Period
shall continue until, and shall end upon, the third anniversary of the
date hereof.
(b) On each anniversary of the date hereof which precedes
Executive's sixty-fifth birthday by more than two years, unless the
Employment Period shall have ended early pursuant to (c) below or either
party shall have given the other party written notice that the extension
provision in this sentence shall no longer apply, the Employment Period
shall be extended for an additional calendar year (unless Executive's
sixty-fifth birthday occurs during such additional calendar year, in which
event the Employment Period shall be extended only until such birthday).
In no event shall the Employment Period be extended beyond the Executive's
sixty-fifth birthday except by mutual written agreement of the Company and
Executive.
(c) Notwithstanding (a) and (b) above, the Employment Period
shall end early upon the first to occur of any of the following events:
(i) Executive's death;
(ii) Executive's retirement upon or after reaching age 65
("Retirement");
(iii) the Company's termination of Executive's employment
on account of Executive's having become unable (as
determined by the Board in good faith) to regularly
perform his duties hereunder by reason of illness or
incapacity for a period of more than six (6) consecutive
months ("Termination for Disability");
(iv) the Company's termination of Executive's employment for
Cause ("Termination for Cause");
(v) the Company's termination of Executive's employment other
than a Termination for Disability or a Termination for
Cause ("Termination without Cause");
(vi) Executive's termination of Executive's employment for
Good Reason, by means of advance written notice to the
Company at least thirty (30) days prior to the effective
date of such termination identifying such termination as
a Termination by Executive for Good Reason ("Termination
by Executive for Good Reason") (it being expressly
understood that Executive's giving notice that the
extension provision in the first sentence of paragraph 5
(b) hereof shall no longer apply shall not constitute a
"Termination by Executive for Good Reason"); or
(vii) Executive's termination of Executive's employment
for any reason other than Good Reason, by means of
advance written notice to the Company at least one
hundred eighty (180) days prior to the effective date of
such termination identifying such termination as a
Termination by Executive with Advance Notice
("Termination by Executive with Advance Notice") (it
being expressly understood that Executive's giving notice
that the extension provision in the first sentence of
paragraph 5 (b) hereof shall no longer apply shall not
constitute a "Termination by Executive with Advance
Notice").
(d) For purposes of this Agreement, "Cause" shall mean:
(i) the commission by Executive of a felony or a crime
involving moral turpitude;
(ii) the commission by Executive of a fraud;
(iii) the commission by Executive of any act involving
dishonesty or disloyalty with respect to the Company or
any of its subsidiaries or affiliates;
(iv) conduct by Executive tending to bring the Company or any
of its subsidiaries or affiliates into substantial public
disgrace or disrepute;
(v) gross negligence or willful misconduct by Executive with
respect to the Company or any of its subsidiaries or
affiliates;
(vi) repudiation of this Agreement by Executive or Executive's
abandonment of his employment with the Company (it being
expressly understood that a Termination by Executive for
Good Reason or a Termination by Executive with Advance
Notice shall not constitute such a repudiation or
abandonment);
(vii) breach by Executive of any of the agreements in
paragraph 10 hereof; or
(viii) any other breach by Executive of this Agreement
which is material and which is not cured within thirty
(30) days after written notice thereof to Executive from
the Company.
(e) For purposes of this Agreement, "Good Reason" shall mean:
(i) a reduction by the Company in Executive's salary to an
amount less than "Executive's Reference Salary" (i.e.,
Executive's initial salary or, in the event the
Employment Period has been extended pursuant to paragraph
5(b) hereof, Executive's salary on the date on which the
most recent such extension occurred); or
(ii) any breach by the Company of this Agreement which is
material and which is not cured within thirty (30) days
after written notice thereof to the Company from
Executive.
6. Post-Employment Period Payments.
(a) If the Employment Period ends on the date on which
(without any extension thereof) it is then scheduled to end pursuant to
paragraph 5 hereof, or if the Employment Period ends early pursuant to
paragraph 5 hereof for any reason, Executive shall cease to have any
rights to salary, bonus (if any) or benefits other than: (i) any salary
which has accrued but is unpaid, and any expenses which have been incurred
but are unpaid, as of the end of the Employment Period, (ii) (but only to
the extent provided in the SERP any other benefit plan in which Executive
has participated as an employee of the Company) any plan benefits which by
their terms extend beyond termination of Executive's employment and (iii)
any other amounts(s) payable pursuant to the succeeding provisions of this
paragraph 6.
(b) If the Employment Period ends pursuant to paragraph 5
hereof on Executive's sixty-fifth birthday, or if the Employment Period
ends early pursuant to paragraph 5 hereof on account of Executive's death,
Retirement or Termination for Disability, the Company shall make no
further payments to Executive except as contemplated in (a) (i) and (ii)
above.
(c) If the Employment Period ends early pursuant to paragraph
5 hereof on account of Termination for Cause, the Company shall pay
Executive an amount equal to that Executive would have received as salary
(based on Executive's salary then in effect) had the Employment Period
remained in effect until the later of the effective date of the Company's
termination of Executive's employment or the date thirty days after the
Company's notice to Executive of such termination.
(d) If the Employment Period ends early pursuant to paragraph
5 hereof on account of a Termination without Cause or a Termination by
Executive for Good Reason, the Company shall pay to Executive amounts
equal to the amounts Executive would have received as salary (based on
Executive's salary then in effect or, if greater, Executive's Reference
Salary) had the Employment Period remained in effect until the date on
which (without any extension thereof) it was then scheduled to end, at the
times such amounts would have been paid (in the event Executive is
entitled during the payment period to any payments under any disability
benefit plan or the like in which Executive has participated as an
employee of the Company, less such payments); provided, however, that in
the event of Executive's death during the payment period, the Company
shall not be obligated to pay any subsequent such amounts, but the Company
shall pay to Executive's estate (or such person or persons as Executive
may designate in a written instrument signed by him and delivered to the
Company prior to his death) either (i) amounts during the remainder of the
payment period equal to one-half of the amounts which would have been paid
to Executive but for his death or (ii) if so elected by the payee(s) by
written notice to the Company within the period of sixty (60) days after
the date of Executive's death, a lump sum amount equivalent to the
discounted present value of such reduced amounts, discounted at the
publicly announced reference rate for commercial lending of Bank of
America in effect at the date of notice to the Company of such election,
with said amount to be paid on a date no later than thirty (30) days
following the date of notice to the Company of such election. It is
expressly understood that the Company's payment obligations under this (d)
shall cease in the event Executive breaches any of his agreements in
paragraph 7, 9 or 10 hereof.
(e) If the Employment Period ends early pursuant to
paragraph 5 hereof on account of a Termination by Executive with Advance
Notice, the Company shall make no further payments to Executive except as
contemplated in (a) (i) and (ii) above.
7. Inventions and Other Intellectual Property. Executive
agrees that all inventions, innovations, improvements, developments,
methods, designs, analyses, drawings, reports, trademarks, slogans,
product or other designs, advertising or marketing programs, and all
similar or related information which relate to the Company's or any of its
subsidiaries' or affiliates' actual or anticipated business, research and
development or existing or future products or services and which are (or
were prior to the date of this Agreement) conceived, developed or made by
Executive, whether alone or jointly with others, while employed by the
Company or any such subsidiary or affiliate or any predecessor thereof
("Work Product") belong to the Company or such subsidiary or affiliate.
Executive will promptly disclose such Work Product to the President and
perform all actions reasonably requested by the President (whether during
or after the Employment Period) to establish and confirm such ownership
(including, without limitation, assignments, consents, powers of attorney
and other instruments).
8. Limitation/Illinois Disclosure. Paragraph 7 of this
Agreement regarding the ownership of inventions and other intellectual
property does not apply to the extent application thereof is prohibited by
any law the benefits of which cannot be waived by Executive. Executive
hereby waives the benefits of any such law to the maximum extent permitted
by law. In accordance with Section 2872 of the Illinois Employee Patent
Act, Ill. Rev. Stat. Chap. 140, Sec. 301 et. seq. (1983), Executive is hereby
advised that in the event and to the extent such Act is applicable to
Executive, paragraph 7 of this Agreement regarding the ownership of
inventions and other intellectual property does not apply to any invention
for which no equipment, supplies, facilities or trade secret information
of the Company or any of its subsidiaries or affiliates was used and which
was developed entirely on Executive's own time, unless (i) the invention
relates to the business of the Company or any of its subsidiaries or
affiliates or to the Company's or any of its subsidiaries' or affiliates'
actual or demonstrably anticipated research or development or (ii) the
invention results from any work performed by Executive for the Company or
any of its subsidiaries or affiliates.
9. Confidential Information. Executive acknowledges that
the information, observations and data obtained by him while employed by
the Company pursuant to this Agreement as well as those obtained by him
while employed by the Company or any of its subsidiaries or affiliates or
any predecessor thereof prior to the date of this Agreement, concerning
the business or affairs of the Company or any of its subsidiaries or
affiliates or any predecessor thereof (unless and except to the extent
the foregoing become generally known to and available for use by the
public other than as a result of Executive's acts or omissions to act,
"Confidential Information") are the property of the Company or such
subsidiary or affiliate. Therefore, Executive agrees that he shall not
disclose any Confidential Information without the prior written consent
of the President unless and except to the extent that such disclosure is
(i) made in the ordinary course of Executive's performance of his duties
under this Agreement or (ii) required by any subpoena or other legal
process (in which event Executive will give the Company prompt notice of
such subpoena or other legal process in order to permit the Company to
seek appropriate protective orders), and that he shall not use any
Confidential Information for his own account without the prior written
consent of the President. Executive shall deliver to the Company at the
termination of the Employment Period, or at any other time the Company may
request, all memoranda, notes, plans, records, reports, computer tapes and
software and other documents and data (and copies thereof) relating to the
Confidential Information, the Work Product or the business of the Company
or any of its subsidiaries or affiliates which he may then possess or have
under his control.
10. Non-Compete, Non-Solicitation.
(a) Executive acknowledges that in the course of his
employment with the Company pursuant to this Agreement he will become
familiar, and during the course of his employment by the Company or any of
its subsidiaries or affiliates or any predecessor thereof prior to the
date of this Agreement he has become familiar, with trade secrets and
customer lists of and other confidential information concerning the
Company and its subsidiaries and affiliates and predecessors thereof and
that his services have been and will be of special, unique and
extraordinary value to the Company.
(b) Executive agrees that during the Employment Period and
for two years thereafter he shall not in any manner, directly or
indirectly, through any person, firm or corporation, alone or as a member
of a partnership or as an officer, director, stockholder, investor or
employee of or in any other corporation or enterprise or otherwise, engage
or be engaged in, or assist any other person, firm, corporation or
enterprise in engaging or being engaged in, any business then actively
being conducted by the Company or any of its subsidiaries or affiliates,
in any geographic area in which the Company or any of its subsidiaries or
affiliates is then conducting such business (whether through manufacturing
or production, calling on customers or prospective customers, or
otherwise). Notwithstanding the foregoing, subsequent to the Employment
Period Executive may engage or be engaged in, or assist any other person,
firm, corporation or enterprise in engaging or being engaged in, any
business activity which is not competitive with a business activity being
conducted by the Company or any of its subsidiaries or affiliates at the
time subsequent to the Employment Period Executive first engages or
assists in such business activity (a "Non-competitive Business Activity").
(c) Executive further agrees that during the Employment
Period and for two years thereafter he shall not in any manner, directly
or indirectly, (i) induce or attempt to induce any employee of the Company
or of any of its subsidiaries or affiliates to quit or abandon his employ,
or any customer of the Company or of any of its subsidiaries or affiliates
to quit or abandon its relationship, for any purpose whatsoever, or
(ii) in connection with any business to which the first sentence of (b)
above applies, except where such activity constitutes a Non-competitive
Business Activity, call on, service, solicit or otherwise do business with
any then current or prospective customer of the Company or of any of its
subsidiaries or affiliates.
(d) Nothing in this paragraph 10 shall prohibit Executive
from being: (i) a stockholder in a mutual fund or a diversified investment
company or (ii) a passive owner of not more than 2% of the outstanding
stock of any class of a corporation which is publicly traded, so long as
Executive has no active participation in the business of such corporation.
(e) If, at the time of enforcement of this paragraph, a court
holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum
period, scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and that the
court shall be allowed to revise the restrictions contained herein to
cover the maximum period, scope and area permitted by law.
11. Enforcement. Because Executive's services are unique and
because Executive has access to Confidential Information and Work Product,
the parties hereto agree that the Company would be damaged irreparably in
the event any of the provisions of paragraph 7, 9 or 10 hereof were not
performed in accordance with their specific terms or were otherwise
breached and that money damages would be an inadequate remedy for any such
non-performance or breach. Therefore, the Company or its successors or
assigns shall be entitled, in addition to other rights and remedies
existing in their favor, to an injunction or injunctions to prevent any
breach or threatened breach of any of such provisions and to enforce such
provisions specifically (without posting a bond or other security).
12. Executive Representations. Executive represents and
warrants to the Company that (i) the execution, delivery and performance
of this Agreement by Executive does not and will not conflict with,
breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which Executive is a party or by
which he is bound, (ii) Executive is not a party to or bound by any
employment agreement, noncompete agreement or confidentiality agreement
with any other person or entity and (iii) upon the execution and delivery
of this Agreement by the Company, this Agreement shall be the valid and
binding obligation of Executive, enforceable in accordance with its terms.
13. Survival. Paragraphs 7, 9 and 10 hereof shall survive
and continue in full force in accordance with their terms notwithstanding
any termination of the Employment Period.
14. Notices. Any notice provided for in this Agreement shall
be in writing and shall be either personally delivered, or mailed by first
class mail, return receipt requested, to the recipient at the address
below indicated:
Notices to Executive:
Xx. Xxxx X. Xxxxxxxx
0000 XXX Xxxxxxxx Xxxxx
Xxxx Xxxxx, XX 00000
Notices to the Company:
Xx. Xxxx Xxxxxx
President
Pittway Corporation
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
or such other address or to the attention of such other person as the
recipient party shall have specified by prior written notice to the
sending party. Any notice under this Agreement will be deemed to have
been given when so delivered or mailed.
15. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
16. Payment of Certain Costs and Expenses. In the event that
there is a Change of Control of the Company, if the Company thereafter
wrongfully withholds from Executive any amount payable to Executive
pursuant to this Agreement or the SERP and Executive obtains a final
judgment against the Company for such amount, the Company shall reimburse
Executive for any costs and expenses (including without limitation
attorneys' fees) reasonably incurred by Executive in obtaining such
judgment and shall pay Executive interest on the amount of each such cost
or expense from the date of payment thereof by Executive to the date of
reimbursement by the Company at a floating rate per annum equal to the
publicly announced reference rate for commercial lending of Bank of
America in effect from time to time. For purposes of the foregoing, a
"Change of Control of the Company" will be deemed to have occurred if but
only if, for purposes of Section 13(d) of the Securities Exchange Act of
1934, as amended, a person or group other than one or more members of the
Xxxxxx Group (as currently defined in the Company's Restated Certificate
of Incorporation, as amended) becomes the beneficial owner of stock of
the Company possessing a majority of the voting power under ordinary
circumstances with respect to the election of directors.
17. Complete Agreement. This Agreement embodies the complete
agreement and understanding between the parties with respect to the
subject matter hereof and effective as of its date supersedes and preempts
any prior understandings, agreements or representations by or between the
parties, written or oral, which may have related to the subject matter
hereof in any way.
18. Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed to be an original and both of
which taken together shall constitute one and the same agreement.
19. Successors and Assigns. This Agreement shall bind and
inure to the benefit of and be enforceable by Executive, the Company and
their respective heirs, executors, personal representatives, successors
and assigns, except that neither party may assign any of his or its rights
or delegate any of his or its obligations hereunder without the prior
written consent of the other party. Executive hereby consents to the
assignment by the Company of all of its rights and obligations hereunder
to any successor to the Company by merger or consolidation or purchase of
all or substantially all of the Company's assets; in each case provided
such transferee or successor assumes the liabilities of the Company
hereunder.
20. Choice of Law. This Agreement shall be governed by the
internal law, and not the laws of conflicts, of the State of Illinois.
21. Amendment and Waiver. The provisions of this Agreement
may be amended or waived only with the prior written consent of the
Company and Executive, and no course of conduct or failure or delay in
enforcing the provisions of this Agreement shall affect the validity,
binding effect or enforceability of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
PITTWAY CORPORATION
By ___________________________
Its __________________________
______________________________
XXXX X. XXXXXXXX
Exhibit A
to Exhibit 10.5
Pittway Corporation
December 31, 1998
Form 10-K
PITTWAY CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
SECTION 1
Introduction
1.1 The Plan and Its Effective Date. This Pittway Corporation
Supplemental Executive Retirement Plan (the "plan") has been established
by Pittway Corporation (the "company"), effective January 1, 1996.
1.2 Purpose. The company maintains the Pittway Corporation
Retirement Plan (As Amended and Restated Effective as of January 1, 1989)
(as the same may hereafter be amended, the "retirement plan"), which is
intended to meet the requirements of a "qualified plan" under the
Internal Revenue Code of 1986, as amended (the "Code"). While the Code
places limitations on the maximum benefits which may be paid from a
qualified plan and the maximum amount of an employee's compensation that
may be taken into account for determining benefits payable under a
qualified plan, the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), permits the payment under an "unfunded plan" of
benefits which may not be paid under a qualified plan because of such
limitations. The purpose of the plan is to provide certain key employees
of the company and its subsidiaries with certain benefits which may not
be provided under the retirement plan because of the maximum
compensation limitation of the Code.
SECTION 2
Eligibility and Benefits
2.1 Eligibility. Each key employee of the company or a subsidiary
of the company (a "participant") who participates in the retirement plan
and who is a party to an employment agreement with the company or a
subsidiary of the company substantially in the form attached hereto as
Exhibit 1 (as the same may hereafter be amended, his "Employment
Agreement") that provides for his participation in the plan shall
participate in the plan, subject to the conditions and limitations of the
plan. It is expressly understood that variations among the participants'
Employment Agreements may result in differences in the numberedparagraphs
thereof in which corresponding provisions appear (for example, the non-
competition provisions which are in paragraph 10 of Exhibit 1 attached
hereto, or variations thereof, may be in paragraph 10 of certain of the
Employment Agreements but in paragraph 9 of others). Accordingly, each
reference in the plan to a particular numbered paragraph of a
participant's Employment Agreement shall be deemed to be a reference to
the paragraph thereof, if any, which corresponds to the identically
numbered paragraph of Exhibit 1.
2.2 Accrued Benefit. For 1995 and for each full calendar year and
any final fraction of a calendar year of a participant's Employment
Period (as such term is defined in such participant's Employment
Agreement), the participant shall accrue a benefit under the plan equal
to 1.85 percent of that portion of his earnings (as defined in section
2.3 below) for such year or fraction that is in excess of the "maximum
dollar limitation" (as defined below) for such year or fraction and is
less than $300,000. For purposes of
the plan, "maximum dollar limitation" means, for any year or fraction of
a year, the greater of $150,000 or the dollar amount of any higher
maximum limitation on annual compensation taken into account under a
qualified plan for such year or fraction of a year determined by the
Secretary of Treasury or his delegate or by law under section 401(a)(17)
of the Code; it being understood that annual compensation for purposes of
such limitation is computed differently from "earnings" for purposes of
the plan. A participant's accrued benefits under the plan shall be
referred to hereinafter as the participant's "supplemental retirement
benefits."
2.3 Earnings. For purposes of the plan, a participant's "earnings"
for any year or fraction means his total, regular cash compensation paid
for such year or fraction for services rendered to the Pittway Companies
(as such term is defined in the retirement plan) during such year or
fraction, consisting solely of his salary and his annual discretionary
cash bonus, if any, for such year. It is expressly understood that a
participant's "earnings" do not include any other compensation,
including, without limitation, any of the following:
(a) Long-term incentive compensation;
(b) Unused vacation pay;
(c) Special cash bonuses;
(d) Any income realized for Federal income tax purposes as a result
of the grant or exercise of an option or options to acquire shares of
stock of a Pittway Company, the receipt or exercise of any stock
appreciation right or payment, or the disposition of shares acquired by
the exercise of such an option or right;
(e) Any noncash compensation, including any amounts contributed by
the participant's employer(s) for his benefit under the retirement plan
or any other retirement or benefit plan, arrangement, or policy
maintained by his employer(s);
(f) Any reimbursements for medical, dental or travel expenses,
automobile allowances, relocation allowances, educational assistance
allowances, awards and other special allowances;
(g) Any income realized for Federal income tax purposes as a result
of (i) group life insurance, (ii) the personal use of an employer-owned
automobile, or (iii) the transfer of restricted shares of stock or
restricted property of a Pittway Company, or the removal of any such
restrictions;
(h) Any severance pay paid as a result of the participant's
termination of employment (it being expressly understood that any
amount(s) taken into account pursuant to the final sentence of section
2.8 below shall not be deemed severance pay for purposes hereof); or
(i) Any compensation paid or payable to the participant, or to any
governmental body or agency on account of the participant, under the
terms of any state, Federal or foreign law requiring the payment of such
compensation because of the participant's voluntary or involuntary
termination of employment with any Pittway Company.
Notwithstanding the foregoing, a participant's "earnings" do include (i)
any salary reduction amount elected by the participant and credited to a
cafeteria plan (as defined in section 125(c) of the Code) or a qualified
cash or deferred arrangement (as defined in section 401(k) of the Code)
and (ii) the initial value ascribed to any performance shares award the
participant elects to receive in lieu of a portion of his annual
discretionary cash bonus.
2.4 Payment of Benefits. Each participant's Employment Agreement
provides that in no event shall his Employment Period be extended beyond
his 65th birthday except by mutual agreement of the participant and his
employer. Subject to the conditions and limitations of the plan, upon a
participant's attainment of age 65 years, he shall be entitled to a
monthly benefit payable for his life commencing upon his attainment of
age 65 years in an amount equal to one-twelfth (1/12) of the sum of the
participant's accrued supplemental retirement benefits. A participant's
supplemental retirement benefits shall be paid to him in the form
described below that applies to the participant; provided, however, that
in lieu of payment in the normal form described below, the participant
may irrevocably elect, within thirty (30) days after his commencement of
participation in the plan, to receive his supplemental retirement
benefits in a single lump sum as soon as practicable after his attainment
of age 65 years. A participant's "supplemental retirement benefit
commencement date" means the date as of which the initial payment (or, in
the case of a single lump sum, full payment) of the supplemental
retirement benefits to which the participant is entitled is payable.
Subject to the conditions and limitations of the plan, a participant's
supplemental retirement benefit commencement date shall normally be the
first day of the calendar month coincident with or next following the
participant's attainment of age 65 years. Notwithstanding the immediately
preceding sentence, if a participant's Employment Period under his
Employment Agreement terminates prior to his attainment of age 65 years
and he is eligible, and elects, to receive early retirement benefits
under the retirement plan, and if the participant requests a supplemental
retirement benefit commencement date prior to his attainment of age 65
years, then with (but only with) the consent of the committee (as defined
in section 3.1 below), the participant's supplemental retirement benefit
commencement date shall be such earlier date, if any, selected by the
committee. Supplemental retirement benefits that are paid in a lump sum,
or commence, before the participant's attainment of age 65 years, if any,
shall be subject to actuarial reduction in accordance with section 2.5
below.
(a) Life Annuity. If a participant does not have a spouse (as
defined in section 2.7 below) on his supplemental retirement benefit
commencement date, and if he has not elected pursuant to the preceding
provisions of this section 2.4 to receive his supplemental retirement
benefits in a single lump sum, payment of his supplemental retirement
benefits shall be during his lifetime on a life annuity basis.
(b) Joint and Survivor Annuity. If a participant has a spouse (as
defined in section 2.7 below) on his supplemental retirement benefit
commencement date, payment of his supplemental retirement benefits shall
be in the form of a joint and 50 percent survivor annuity unless the
participant has theretofore elected pursuant to the preceding provisions
of this section 2.4 to have his benefits provided in a single lump sum.
Such joint and 50 percent survivor annuity shall consist of a reduced
monthly benefit continuing during the participant's lifetime, and if such
spouse is living at the time of the participant's death, payment of 50
percent of such monthly benefit shall be made to such spouse until such
spouse's death occurs. The amount of the participant's and such spouse's
benefits under this subsection shall be calculated so that it is the
actuarial equivalent of the supplemental retirement benefits to which the
participant would otherwise be entitled under the plan. If such spouse
predeceases the participant, or if the participant and such spouse cease
to be married after the participant's supplemental retirement benefit
commencement date, there shall be no adjustment to the participant's
monthly payments and no supplemental retirement benefits shall be payable
to any person after the participant's death.
2.5 Actuarial Equivalent. A benefit shall be actuarially equivalent
to another benefit if the actuarial reserve required to provide such
benefit is equal to the actuarial reserve required to provide such other
benefit, computed on the basis of the same actuarial assumptions,
interest rates, tables, methods and procedures, including reduction
factors for commencement of payments prior to attainment of age 65 years,
that are used for purposes of the retirement plan as in effect on the
applicable date that a benefit payment amount is determined.
2.6 Pre-Retirement Surviving Spouse Benefit. If a participant
dies prior to his supplemental retirement benefit commencement date, no
supplemental retirement benefits under the plan shall be paid or payable
with respect to the participant; provided, however, that if the
participant has a spouse (as defined in section 2.7 below) at the time of
his death, such spouse shall be entitled to receive a monthly benefit for
such spouse's lifetime equal to 50 percent of the amount of monthly
benefit that would have been payable to the participant in the form of a
joint and 50 percent survivor annuity if he had terminated employment as
of the date of his death with entitlement to supplemental retirement
benefits under the plan and the committee (as defined in section 3.1
below) had permitted his supplemental retirement benefit commencement
date to occur on the first day of the calendar month coincident with or
next following the date of his death, taking into account actuarial
reduction for commencement prior to the participant's attainment of age
65 years. The first payment to the spouse shall be made as of the first
day of the calendar month coincident with or next following the date of
the participant's death and the final payment shall be made as of the
first day of the calendar month during which the spouse's death occurs.
If, prior to the participant's death, the participant had elected
pursuant to section 2.4 above to receive his supplemental retirement
benefits in a single lump sum, in lieu of the monthly payments described
above, such spouse shall be entitled to receive a single lump sum equal
to 50 percent of the lump sum value of the participant's supplemental
retirement benefits as of the date of his death, taking into account
actuarial factors for payment prior to the participant's attainment of
age 65 years. Such lump sum payment shall be made to such spouse as soon
as practicable following the participant's death.
2.7 Spouse. For purposes of the plan, a person will be considered
the "spouse" of a participant as of any date if and only if such person
and the participant have been married in a religious or civil ceremony
recognized under the laws of the state where the marriage was contracted
and the marriage remains legally effective. Any person who is not, or
who has ceased to be, a participant's "spouse" on the participant's
supplemental retirement benefit commencement date (or, in the event of
the participant's death prior to his supplemental retirement benefit
commencement date, the date of his death) shall not be considered the
participant's "spouse" for purposes of the plan.
2.8 Forfeiture; Early Termination of Employment Period. If the
participant's Employment Period ends early pursuant to paragraph 5 of his
Employment Agreement on account of a Termination for Cause or a
Termination by Executive with Advance Notice (as such terms are defined,
respectively, in his Employment Agreement), or if after the participant's
Employment Period ends (whether or not early and regardless of the
reason) the participant breaches any of his agreements in paragraph 7, 9
or 10 of his Employment Agreement, the participant shall forfeit all of
his supplemental retirement benefits, if any, under the plan, no benefit
under the plan shall thereafter be payable to or with respect to the
participant or his spouse, and any benefit under the plan theretofore
paid to or with respect to the participant or his spouse must be repaid
to the company by the participant or his spouse promptly upon demand. If
the participant's Employment Period ends early pursuant to paragraph 5 of
his Employment Agreement on account of a Termination without Cause or a
Termination by Executive for Good Reason (as such terms are defined,
respectively, in his Employment Agreement), the participant's
supplemental retirement benefits under the plan shall be the supplemental
retirement benefits the participant would have been entitled to under the
plan had his Employment Period remained in effect until the earlier of
the date on which (without any extension thereof) such Employment Period
was then scheduled to end pursuant to his Employment Agreement or the
date of his death and had the participant's salary in effect as of the
last day of his Employment Period (or, if greater, his Executive's
Reference Salary (as such term is defined in his Employment Agreement))
continued until the earlier of such dates and been paid at the times such
salary would have been paid, and had the participant received no further
annual cash bonus.
2.9 Funding. The plan is intended to be non-qualified for purposes
of the Code and unfunded for purposes of the Code and ERISA. Benefits
payable under the plan to a participant and/or his spouse, as the case
may be, shall be paid directly by the company. The company shall not be
required to segregate on its books or otherwise any amount to be used for
payment of supplemental retirement benefits under the plan. Each
participant and spouse is solely an unsecured creditor of the company
with respect to any benefit payable with respect to a participant
hereunder.
SECTION 3
General Provisions
3.1 Committee. The plan shall be administered by the plan
administrative committee of the retirement plan (the "committee"). The
committee shall have, to the extent appropriate, the same powers, rights,
duties and obligations with respect to the plan as it has with respect to
the retirement plan. Each determination provided for in the plan shall
be made by the committee under such procedure as may from time to time be
prescribed by the committee and shall be made in the absolute discretion
of the committee. Any determination so made shall be conclusive.
3.2 Employment Rights. Neither the establishment of, nor
participation in, the plan shall be construed to give any participant the
right to be retained in the service of the Pittway Companies or to any
benefits not specifically provided by the plan.
3.3 Taxes and Withholding. Each participant (or his spouse, as
applicable) shall be responsible for any taxes imposed on him (or his
spouse) ("taxes") by reason of the establishment of, or his participation
in, the plan, including, without limitation, any Federal, state and/or
local income or employment taxes imposed on benefits or potential
benefits under the plan (or on the value thereof) in advance of the
participant's receipt of such benefits or potential benefits. The
company or a subsidiary of the company may deduct any taxes from payroll
or other payments due the participant or his spouse. The committee shall
deduct from all payments under the plan any taxes required to be
withheld, including, without limitation, any Federal, state and/or local
income or employment taxes. In the event that such deductions and/or
withholdings are not sufficient to pay the taxes, the participant (or his
spouse) shall promptly remit the deficit to the company upon its request.
3.4 Interests Not Transferable. Except as to withholding of any tax
under the laws of the United States or any state, the interests of
participants and their spouses under the plan are not subject to the
claims of their creditors and may not be voluntarily or involuntarily
transferred, assigned, alienated or encumbered. No participant shall
have any right to any benefit payments hereunder prior to his termination
of employment with the Pittway Companies.
3.5 Payment with Respect to Incapacitated Participants or
Beneficiaries. If any person entitled to benefits under the plan is
under a legal disability or in the committee's opinion is incapacitated
in any way so as to be unable to manage his financial affairs, the
committee may direct the payment of such benefit to such person's legal
representative or to a relative or friend of such person for such
person's benefit, or the committee may direct the application of such
benefits for the benefit of such person in any manner which the committee
may select that is consistent with the plan. Any payments made in
accordance with the foregoing provisions of this section shall be a full
and complete discharge of any liability for such payments.
3.6 Limitation of Liability. To the extent permitted by law, no
person (including the company, any subsidiary of the company, the Board
of Directors of the company (the "Board"), the board of directors of any
subsidiary of the company, the committee, any present or former member of
the Board or of the board of directors of any subsidiary of the company
or of the committee, and any present or former officer of the company or
of any subsidiary of the company) shall be personally liable for any act
done or omitted to be done in good faith in the administration of the
plan.
3.7 Controlling Law. The plan shall be construed in accordance with
the provisions of ERISA and other Federal laws, to the extent such
provisions are applicable to the plan. To the extent not inconsistent
therewith, the plan shall be construed in accordance with the laws of the
State of Illinois.
3.8 Gender and Number. Where the context admits, words in the
masculine gender shall include the feminine and neuter genders, the
plural shall include the singular and the singular shall include the
plural.
3.9 Action by the Company. Any action required of or permitted by
the company under the plan, including action by the company to amend the
plan, shall be by resolution of the Board or by a duly authorized
committee of the Board or by a person or persons authorized by resolution
of the Board or such committee. The procedure for amending the plan is
that the plan shall be amended by the company's taking appropriate
corporate action to effectuate any amendment considered by it to be
advisable to be made. Appropriate corporate action includes action by
resolution of the Board, by a committee authorized by the Board, or by a
person or persons authorized by the Board or such committee, as provided
above.
3.10 Successor to the Company. The term "company" as used in the
plan shall include any successor to the company by reason of merger,
consolidation, the purchase of all or substantially all of the company's
assets or otherwise.
3.11 Miscellaneous. The plan shall be binding upon and inure to the
benefit of the parties, their legal representatives, successors and
assigns, and all persons entitled to benefits hereunder. Any notice
given in connection with the plan shall be in writing and shall be
delivered in person or by registered mail, return receipt requested. Any
notice given by registered mail shall be deemed to have been given upon
the date of delivery indicated on the registered mail return receipt, if
correctly addressed.
SECTION 4
Amendment and Termination
While the company expects to continue the plan, it must necessarily
reserve, and hereby does reserve, the right, either in general or as to
one or more particular participants, to amend the plan from time to time
or to terminate the plan at any time; provided (i) that no amendment of
the plan with respect to a participant that reduces or eliminates any
benefits such participant has accrued as of the effective date of such
amendment shall be effective unless such participant consents to such
amendment; and (ii) no amendment of the plan with respect to a
participant whose Employment Period under his Employment Agreement has
not yet ended that adversely affects such participant, or termination of
the plan with respect to such a participant, by the company on any date
shall be effective prior to the date on which (without any extension
thereof) such participant's Employment Period is then scheduled to end
pursuant to his Employment Agreement unlesss the participant consents to
such amendment or termination.
IN WITNESS WHEREOF, this plan has been executed on behalf of the company
by its duly authorized officers as of the day and year first above
written.
PITTWAY CORPORATION
By:
Its:
Date:
ATTEST
By _________________________________
Its _____________________________
Date_____________________________
Exhibit 1
to Exhibit A
of Exhibit 10.5
Pittway Corporation
December 31, 1998
Form 10-K
EMPLOYMENT AGREEMENT
AGREEMENT made as of January 1, 1996, between Pittway Corporation, a
Delaware corporation (the "Company"), and ___________ ("Executive").
In consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Employment. The Company shall employ Executive, and Executive
accepts continued employment with the Company, upon the terms and
conditions set forth in this Agreement for the period beginning on the
date hereof and ending as provided in paragraph 5 hereof (the "Employment
Period").
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as the
____________ of the ___________________ Group of the Company or any
successor to such Group, in each case as constituted from time to time
(the "Group"), and shall have the normal duties, responsibilities and
authority of an executive serving in such position, subject to the power
of the Board of Directors of the Company (the "Board") or the President
of the Company to expand or limit such duties, responsibilities and
authority, either generally or in specific instances. Executive shall
have the title ____________________ of the Group, subject to the power of
the Board to change such title from time to time. During the Employment
Period, Executive shall also serve as a director of the Company for so
long as the Board nominates him to that position and he is elected to it,
as a ____________ of the Company for so long as the Board elects or
appoints him to that position and as a director of any affiliate of the
Company designated by the Board for so long as the Board causes him to be
elected to such position.
(b) Executive shall report to the President of the Company.
(c) During the Employment Period, Executive shall devote his best
efforts and his full business time and attention (except for permitted
vacation periods, reasonable periods of illness or other incapacity and,
provided such activities do not exceed those in which Executive has
engaged in the past, participation in charitable and civic endeavors and
management of Executive's personal investments and business interests) to
the business and affairs of the Group and the business and affairs of any
other group of the Company, any division of the Company, or any
subsidiary or affiliate of the Company (or any group or division
thereof), engaged in the security, alarm or monitoring products business
or any other business the same as or similar to or related to that then
engaged in by the Group. Executive shall perform his duties and
responsibilities to the best of his abilities in a diligent, trustworthy,
businesslike and efficient manner.
(d) Executive shall perform his duties and responsibilities
principally in the __________________ area, and shall not be required to
travel outside that area any more extensively than he has done in the
past in the ordinary course of the business of the Company.
3. Salary and Benefits.
(a) The Company agrees to pay Executive a salary during the
Employment Period, in monthly installments.
(b) Executive's initial salary shall be $_______ per annum.
(c) Executive's salary may be increased by the Board from time to
time.
(d) The Board may, in its sole discretion, award a bonus to
Executive for any calendar year during the Employment Period.
(e) The Company shall reimburse Executive for all reasonable
expenses incurred by him in the course of performing his duties under
this Agreement which are consistent with the Company's policies in effect
from time to time with respect to travel, entertainment and other
business expenses, subject to the Company's requirements with respect to
reporting and documentation of such expenses.
(f) In addition to the salary and any bonus(es) payable to
Executive pursuant to this paragraph, Executive shall be entitled during
the Employment Period to participate, on the same basis as other
executives of the Company (but subject to variations among executives
resulting from differences in the levels of benefits made available to
employees at particular business units under the Company's 401(k) plan or
any other plan of the Company), in the Company's Standard Executive
Benefits Package. The Company's "Standard Executive Benefits Package"
means those benefits (including insurance, vacation, company car or car
allowance and/or other benefits) for which substantially all of the
executives of the Company are from time to time generally eligible, as
determined from time to time by the Board.
(g) In addition to participation in the Company's Standard
Executive Benefits Package pursuant to this paragraph, Executive shall be
entitled during the Employment Period to a supplemental executive
retirement program, the principal terms of which are set forth in Exhibit
A attached hereto:
(i) additional term life insurance coverage in an amount equal to
Executive's salary; but only if and so long as such additional coverage
is available at standard rates from the insurer providing term life
insurance coverage under the Standard Executive Benefits Package or from
a comparable insurer acceptable to the Company;
(ii) supplementary long-term disability coverage in an amount
which will increase maximum covered annual compensation to $330,000 and
the maximum monthly payments to $18,333; but only if and so long as such
supplementary coverage is available at standard rates from the insurer
providing long-term disability coverage under the Standard Executive
Benefits Package or a comparable insurer acceptable to the Company; and
(iii) participation in the Pittway Corporation Supplemental
Executive Retirement Plan (the "SERP"), a copy of which, as currently in
effect, is attached hereto as Exhibit A.
4. Adjustments. Notwithstanding any other provision of this
Agreement, it is expressly understood and agreed that if there is a
significant reduction in the level of the business to which Executive's
duties under this Agreement relate, or if all or any significant part of
such business is disposed of by the Company and/or its subsidiaries or
affiliates during the Employment Period but Executive thereafter remains
an employee of the Company, the Board may make adjustments in Executive's
duties, responsibility and authority, and in Executive's compensation, as
the Board deems appropriate to reflect such reduction or disposition.
5. Employment Period.
(a) Except as hereinafter provided, the Employment Period shall
continue until, and shall end upon, the third anniversary of the date
hereof.
(b) On each anniversary of the date hereof which precedes
Executive's sixty-fifth birthday by more than two years, unless the
Employment Period shall have ended early pursuant to (c) below or either
party shall have given the other party written notice that the extension
provision in this sentence shall no longer apply, the Employment Period
shall be extended for an additional calendar year (unless Executive's
sixty-fifth birthday occurs during such additional calendar year, in
which event the Employment Period shall be extended only until such
birthday). In no event shall the Employment Period be extended beyond
the Executive's sixty-fifth birthday except by mutual written agreement
of the Company and Executive.
(c) Notwithstanding (a) and (b) above, the Employment Period
shall end early upon the first to occur of any of the following events:
(i) Executive's death;
(ii) Executive's retirement upon or after reaching age 65
("Retirement");
(iii) the Company's termination of Executive's employment on
account of Executive's having become unable (as determined by the Board
in good faith) to regularly perform his duties hereunder by reason of
illness or incapacity for a period of more than six (6) consecutive
months ("Termination for Disability");
(iv) the Company's termination of Executive's employment for Cause
("Termination for Cause");
(v) the Company's termination of Executive's employment other
than a Termination for Disability or a Termination for Cause
("Termination without Cause");
(vi) Executive's termination of Executive's employment for Good
Reason, by means of advance written notice to the Company at least thirty
(30) days prior to the effective date of such termination identifying
such termination as a Termination by Executive for Good Reason
("Termination by Executive for Good Reason") (it being expressly
understood that Executive's giving notice that the extension provision in
the first sentence of paragraph 5 (b) hereof shall no longer apply shall
not constitute a "Termination by Executive for Good Reason"); or
(vii) Executive's termination of Executive's employment for any
reason other than Good Reason, by means of advance written notice to the
Company at least one hundred eighty (180) days prior to the effective
date of such termination identifying such termination as a Termination by
Executive with Advance Notice ("Termination by Executive with Advance
Notice") (it being expressly understood that Executive's giving notice
that the extension provision in the first sentence of paragraph 5 (b)
hereof shall no longer apply shall not constitute a "Termination by
Executive with Advance Notice").
(d) For purposes of this Agreement, "Cause" shall mean:
(i) the commission by Executive of a felony or a crime involving
moral turpitude,
(ii) the commission by Executive of a fraud;
(iii) the commission by Executive of any act involving dishonesty
or disloyalty with respect to the Company or any of its subsidiaries or
affiliates;
(iv) conduct by Executive tending to bring the Company or any of
its subsidiaries or affiliates into substantial public disgrace or
disrepute;
(v) gross negligence or willful misconduct by Executive with
respect to the Company or any of its subsidiaries or affiliates;
(vi) repudiation of this Agreement by Executive or Executive's
abandonment of his employment with the Company (it being expressly
understood that a Termination by Exxecutive for Good Reason or a
Termination by Executive with Advance Notice shall not constitute such a
repudiation or abandonment);
(vii) breach by Executive of any of the agreements in paragraph 10
hereof; or
(viii) any other breach by Executive of this Agreement which is
material and which is not cured within thirty (30) days after written
notice thereof to Executive from the Company.
(e) For purposes of this Agreement, "Good Reason" shall mean:
(i) a reduction by the Company in Executive's salary to an amount
less than "Executive's Reference Salary" (i.e., Executive's initial
salary or, in the event the Employment Period has been extended pursuant
to paragraph 5(b) hereof, Executive's salary on the date on which the
most recent such extension occurred); or
(ii) any breach by the Company of this Agreement which is material
and which is not cured within thirty (30) days after written notice
thereof to the Company from Executive.
6. Post-Employment Period Payments.
(a) If the Employment Period ends on the date on which (without
any extension thereof) it is then scheduled to end pursuant to paragraph
5 hereof, or if the Employment Period ends early pursuant to paragraph 5
hereof for any reason, Executive shall cease to have any rights to
salary, bonus (if any) or benefits other than: (i) any salary which has
accrued but is unpaid, and any expenses which have been incurred but are
unpaid, as of the end of the Employment Period, (ii) (but only to the
extent provided in the SERP or any other benefit plan in which Executive
has participated as an employee of the Company) any plan benefits which
by their terms extend beyond termination of Executive's employment and
(iii) any other amount(s) payable pursuant to the succeeding provisions
of this paragraph 6.
(b) If the Employment Period ends pursuant to paragraph 5 hereof
on Executive's sixty-fifth birthday, or if the Employment Period ends
early pursuant to paragraph 5 hereof on account of Executive's death
Retirement or Termination for Disability, the Company shall make no
further payments to Executive except as contemplated in (a) (i) and (ii)
above.
(c) If the Employment Period ends early pursuant to paragraph 5
hereof on account of Termination for Cause, the Company shall pay
Executive an amount equal to that Executive would have received as salary
(based on Executive's salary then in effect) had the Employment Period
remained in effect until the later of the effective date of the Company's
termination of
Executive's employment or the date thirty days after the Company's notice
to Executive of such termination.
(d) If the Employment Period ends early pursuant to paragraph 5
hereof on account of a Termination without Cause or a Termination by
Executive for Good Reason, the Company shall pay to Executive amounts
equal to the amounts Executive would have received as salary (based on
Executive's salary then in effect or, if greater, Executive's Reference
Salary) had the Employment Period remained in effect until the date on
which (without any extension thereof) it was then scheduled to end, at
the times such amounts would have been paid (in the event Executive is
entitled during the payment period to any payments under any disability
benefit plan or the like in which Executive has participated as an
employee of the Company, less such payments); provided, however, that in
the event of Executive's death during the payment period, the Company
shall not be obligated to pay any subsequent such amounts, but the
Company shall pay to Executive's estate (or such person or persons as
Executive may designate in a written instrument signed by him and
delivered to the Company prior to his death) either (i) amounts during
the remainder of the payment period equal to one-half of the amounts
which would have been paid to Executive but for his death or (ii) if so
elected by the payee(s) by written notice to the Company within the
period of sixty (60) days after the date of Executive's death, a lump sum
amount equivalent to the discounted present value of such reduced
amounts, discounted at the publicly announced reference rate for
commercial lending of Bank of America Illinois in effect at the date of
notice to the Company of such election, with said amount to be paid on a
date no later than thirty (30) days following the date of notice to the
Company of such election. It is expressly understood that the Company's
payment obligations under this (d) shall cease in the event Executive
breaches any of his agreements in paragraph 7, 9 or 10 hereof.
(e) If the Employment Period ends early pursuant to paragraph 5
hereof on account of a Termination by Executive with Advance Notice, the
Company shall make no further payments to Executive except as
contemplated in (a) (i) and (ii) above.
7. Inventions and Other Intellectual Property. Executive agrees
that all inventions, innovations, improvements, developments, methods,
designs, analyses, drawings, reports, trademarks, slogans, product or
other designs, advertising or marketing programs, and all similar or
related information which relate to the Company's or any of its
subsidiaries' or affiliates' actual or anticipated business, research and
development or existing or future products or services and which are (or
were prior to the date of this Agreement) conceived, developed or made by
Executive, whether alone or jointly with others, while employed by the
Company or any such subsidiary or affiliate or any predecessor thereof
("Work Product") belong to the Company or such subsidiary or affiliate.
Executive will promptly disclose such Work Product to the President of
the Company and perform all actions reasonably requested by the President
of the Company (whether during or after the Employment Period) to
establish and confirm such ownership (including, without limitation,
assignments, consents, powers of attorney and other instruments).
8. Limitation/Illinois Disclosure. Paragraph 7 of this
Agreement regarding the ownership of inventions and other intellectual
property does not apply to the extent application thereof is prohibited
by any law the benefits of which cannot be waived by Executive.
Executive hereby waives the benefits of any such law to the maximum
extent permitted by law. In accordance with Section 2872 of the Illinois
Employee Patent Act, Ill. Rev. Stat. Chap. 140, Sec. 301 et. seq. (1983),
Executive is hereby advised that in the event and to the extent such Act
is applicable to Executive, paragraph 7 of this Agreement regarding the
ownership of inventions and other intellectual property does not apply to
any invention for which no equipment, supplies, facilities or trade
secret information of the Company or any of its subsidiaries or
affiliates was used and which was developed entirely on Executive's own
time, unless (i) the invention relates to the business of the Company or
any of its subsidiaries or affiliates or to the Company's or any of its
subsidiaries' or affiliates' actual or demonstrably anticipated research
or development or (ii) the invention results from any work performed by
Executive for the Company or any of its subsidiaries or affiliates.
9. Confidential Information. Executive acknowl-edges that the
information, observations and data obtained by him while employed by the
Company pursuant to this Agreement, as well as those obtained by him
while employed by the Company or any of its subsidiaries or affiliates or
any predecessor thereof prior to the date of this Agreement, concerning
the business or affairs of the Company or any of its subsidiaries or
affiliates or any predecessor thereof (unless and except to the extent
the foregoing become generally known to and available for use by the
public other than as a result of Executive's acts or omissions to act,
"Confidential Information") are the property of the Company or such
subsidiary or affiliate. Therefore, Executive agrees that he shall not
disclose any Confidential Information without the prior written consent
of the President of the Company unless and except to the extent that
such disclosure is (i) made in the ordinary course of Executive's
performance of his duties under this Agreement or (ii) required by any
subpoena or other legal process (in which event Executive will give the
Company prompt notice of such subpoena or other legal process in order to
permit the Company to seek appropriate protective orders), and that he
shall not use any Confidential Information for his own account without
the prior written consent of the President of the Company. Executive
shall deliver to the Company at the termination of the Employment Period,
or at any other time the Company may request, all memoranda, notes,
plans, records, reports, computer tapes and software and other documents
and data (and copies thereof) relating to the Confidential Information,
the Work Product or the business of the Company or any of its
subsidiaries or affiliates which he may then possess or have under his
control.
10. Non-Compete, Non-Solicitation.
(a) Executive acknowledges that in the course of his employment
with the Company pursuant to this Agreement he will become familiar, and
during the course of his employment by the Company or any of its
subsidiaries or affiliates or any predecessor thereof prior to the date
of this Agreement he has become familiar, with trade secrets and customer
lists of and other confidential information concerning the Company and
its subsidiaries and affiliates and predecessors thereof and that his
services have been and will be of special, unique and extraordinary value
to the Company.
(b) Executive agrees that during the Employment Period and for
two years thereafter he shall not in any manner, directly or indirectly,
through any person, firm or corporation, alone or as a member of a
partnership or as an officer, director, stockholder, investor or employee
of or in any other corporation or enterprise or otherwise, engage or be
engaged in, or assist any other person, firm, corporation or enterprise
in engaging or being engaged in, the security, alarm or monitoring
products business or any other business then actively being conducted by
the Group, in any geographic area in which the Group is then conducting
such business (whether through manufacturing or production, calling on
customers or prospective customers, or otherwise). Notwithstanding the
foregoing, subsequent to the Employment Period Executive may engage or be
engaged in, or assist any other person, firm, corporation or enterprise
in engaging or being engaged in, any business activity which is not
competitive with a business activity being conducted by the Group at the
time subsequent to the Employment Period Executive first engages or
assists in such business activity (a "Non-competitive Business
Activity").
(c) Executive further agrees that during the Employment Period
and for two years thereafter he shall not in any manner, directly or
indirectly, (i) induce or attempt to induce any employee of the Company
or of any of its subsidiaries or affiliates to quit or abandon his
employ, or any customer of the Company or of any of its subsidiaries or
affiliates to quit or abandon its relationship, for any purpose
whatsoever, or (ii) in connection with any business to which the first
sentence of (b) above applies, except where such activity constitutes a
Non-competitive Business Activity, call on, service, solicit or otherwise
do business with any then current or prospective customer of the Company
or of any of its subsidiaries or affiliates.
(d) Nothing in this paragraph 10 shall prohibit Executive from
being: (i) a stockholder in a mutual fund or a diversified investment
company or (ii) a passive owner of not more than 2% of the outstanding
stock of any class of a corporation which is publicly traded, so long as
Executive has no active participation in the business of such
corporation.
(e) If, at the time of enforcement of this paragraph, a court
holds that the restrictions stated herein are unreasonable under
circumstances then existing, the parties hereto agree that the maximum
period, scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and that the
court shall be allowed to revise the restrictions contained herein to
cover the maximum period, scope and area permitted by law.
11. Enforcement. Because Executive's services are unique and
because Executive has access to Confidential Information and Work
Product, the parties hereto agree that the Company would be damaged
irreparably in the event any of the provisions of paragraph 7, 9 or 10
hereof were not performed in accordance with their specific terms or were
otherwise breached and that money damages would be an inadequate remedy
for any such non-performance or breach. Therefore, the Company or its
successors or assigns shall be entitled, in addition to other rights and
remedies existing in their favor, to an injunction or injunctions to
prevent any breach or threatened breach of any of such provisions and to
enforce such provisions specifically (without posting a bond or other
security).
12. Executive Representations. Executive represents and warrants
to the Company that (i) the execution, delivery and performance of this
Agreement by Executive does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument,
order, judgment or decree to which Executive is a party or by which he is
bound, (ii) Executive is not a party to or bound by any employment
agreement, noncompete agreement or confidentiality agreement with any
other person or entity and (iii) upon the execution and delivery of this
Agreement by the Company, this Agreement shall be the valid and binding
obligation of Executive, enforceable in accordance with its terms.
13. Survival. Paragraphs 7, 9 and 10 hereof shall survive and
continue in full force in accordance with their terms notwithstanding any
termination of the Employment Period.
14. Notices. Any notice provided for in this Agreement shall be
in writing and shall be either personally delivered, or mailed by first
class mail, return receipt requested, to the recipient at the address
below indicated:
Notices to Executive:
___________________
___________________
___________________
Notices to the Company:
Xx. Xxxx Xxxxxx
President
Pittway Corporation
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
or such other address or to the attention of such other person as the
recipient party shall have specified by prior written notice to the
sending party. Any notice under this Agreement will be deemed to have
been given when so delivered or mailed.
15. Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement is
held to be invalid, illegal or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality
or unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision had never been contained herein.
16. Payment of Certain Costs and Expenses. In the event that
there is a Change of Control of the Company, if the Company thereafter
wrongfully withholds from Executive any amount payable to Executive
pursuant to this Agreement or the SERP and Executive obtains a final
judgment against the Company for such amount, the Company shall reimburse
Executive for any costs and expenses (including without limitation
attorneys' fees) reasonably incurred by Executive in obtaining such
judgment and shall pay Executive interest on the amount of each such cost
or expense from the date of payment thereof by Executive to the date of
reimbursement by the Company at a floating rate per annum equal to the
publicly announced reference rate for commercial lending of Bank of
America Illinois in effect from time to time. For purposes of the
foregoing, a "Change of Control of the Company" will be deemed to have
occurred if but only if, for purposes of Section 13(d) of the Securities
Exchange Act of 1934, as amended, a person or group other than one or
more members of the Xxxxxx Group (as currently defined in the Company's
Restated Certificate of Incorporation, as amended) becomes the beneficial
owner of stock of the Company possessing a majority of the voting power
under ordinary circumstances with respect to the election of directors.
17. Complete Agreement. This Agreement embodies the complete
agreement and understanding between the parties with respect to the
subject matter hereof and effective as of its date supersedes and
preempts any prior understandings, agreements or representations by or
between the parties, written or oral, which may have related to the
subject matter hereof in any way.
18. Counterparts. This Agreement may be executed in separate
counterparts, each of which shall be deemed to be an original and both of
which taken together shall constitute one and the same agreement.
19. Successors and Assigns. This Agreement shall bind and inure
to the benefit of and be enforceable by Executive, the Company and their
respective heirs, executors, personal representatives, successors and
assigns, except that neither party may assign any of his or its rights or
delegate any of his or its obligations hereunder without the prior
written consent of the other party. Executive hereby consents to the
assignment by the Company of all of its rights and obligations hereunder
to: (i) any subsidiary or affiliate of the Company in the event all or
any substantial part of the business to which Executive's duties under
this Agreement relate are transferred thereto and (ii) any successor to
the Company by merger or consolidation or purchase of all or in each case
provided such transferee or successor assumes the liabilities of
the Company hereunder.
20. Choice of Law. This Agreement shall be governed by the
internal law, and not the laws of conflicts, of the State of Illinois.
21. Amendment and Waiver. The provisions of this Agreement may
be amended or waived only with the prior written consent of the Company
and Executive, and no course of conduct or failure or delay in enforcing
the provisions of this Agreement shall affect the validity, binding
effect or enforceability of this Agreement.
* * * * *
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date first written above.
PITTWAY CORPORATION
By ___________________________
Its __________________________
______________________________
[EXECUTIVE]
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