EXHIBIT 99.3
CHANGE OF CONTROL AGREEMENT
Agreement made as of the 28th day of October, 2005, between Quipp, Inc., a
Florida corporation ("Quipp"), Quipp Systems, Inc., a Florida corporation
("Quipp Systems") (Quipp and Quipp Systems are collectively referred to as the
"Company") and Xxxx Xxxxx, one of the officers or senior level employees of
Quipp and/or Quipp Systems (the "Officer").
WHEREAS, the Officer is one of Quipp's and/or Quipp Systems' officers or
senior level employees; and
WHEREAS, the Company has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of the Officer
to his assigned duties without distraction; and
WHEREAS, in consideration of the Officer's continued employment with the
Company or any successor thereto, the Company agrees that the Officer shall
receive the compensation set forth in this Agreement to protect against the
adverse financial and career impact on the Officer in the event the Officer's
employment with the Company terminates under specified circumstances upon or
following a Change in Control (as defined herein);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth and intending to be legally bound hereby,
the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:
(a) "Board" shall mean the Company's Board of Directors.
(b) "Cause" shall mean a finding by the Company that the Officer
has: (i) performed his assigned duties in a grossly negligent manner and does
not remedy such breach within thirty (30) days after receiving written notice
specifying the details thereof; (ii) been engaged in disloyalty to the Company,
including, fraud, embezzlement, theft, commission of a felony, or proven
dishonesty in the course of his employment or service; or (iii) violated the
confidentiality provisions of Section 6 or the noncompetition provisions of
Section 7.
(c) "Change of Control" shall be deemed to have occurred, unless the
Board, a majority of which is comprised of Incumbent Board Members, determines
otherwise, if:
(1) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) other than the Company becomes a "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing more than twenty percent (20%) of the
voting power of the then outstanding securities of the Company.
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(2) Substantially all of the assets of the Company are sold or
other otherwise disposed of.
(3) A transaction is consummated in which the stockholders of
the Company immediately before the transaction will not beneficially own,
immediately after the transaction, shares entitling such stockholders to eighty
percent (80%) or more of all votes to which all stockholders of the surviving
entity would be entitled in the election of directors or other governing persons
(without consideration of the rights of any class of stock to elect directors by
a separate class vote).
(4) A change in the composition of the Board such that
Incumbent Board Members cease for any reason to constitute at least a majority
of the Board.
(d) "Change of Control Payment" shall equal two times the Officer's
base salary, exclusive of bonus and other remuneration. A Change of Control
Payment shall be subject to the reduction requirement as set forth in Section 5
of this Agreement.
(e) "Company" means Quipp, Inc. and, unless the context indicates
otherwise, any subsidiary of Quipp (including Quipp Systems, Inc.) and, for
purposes of Section 1(f), Section 1(j), Section 6 and Section 7, shall include
any successor to Quipp or Quipp Systems.
(f) "Confidential Information" shall mean confidential information
relating to the business of the Company, including processes, drawings, reports,
manuals, invention records, financial information, business plans, customer
lists, facts relating to prospective customers, inventory lists, arrangements
with suppliers and customers, computer programs, or other material embodying
trade secrets of the Company, other than any information (i) that is in the
public domain through no act or omission of the Officer, or (ii) that the
Officer is authorized to disclose or required to disclose in connection with
legal or administrative proceedings.
(g) "Constructive Termination Without Cause" shall mean the
Officer's resignation of employment following the occurrence, without his prior
written consent, of one or more of the following events: (i) a material
reduction in the Officer's compensation; (ii) a significant diminution in the
Officer's duties and responsibilities, or the assignment to the Officer of
duties and responsibilities that are materially and adversely inconsistent with
the duties and responsibilities held by the Officer on the date of this
Agreement; or (iii) the required geographical relocation of the Officer out of
the greater Miami, Florida area, in each case except as is due to Cause or as a
result of the disability (within the meaning of Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended) of the Officer.
(h) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(i) "Incumbent Board Members" shall mean those individuals who, as
of the date of this Agreement, constitute the Board; provided, that any
individual who becomes a member of the Board subsequent to the effective date of
this Agreement whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of those individuals
who are Incumbent Board Members shall be an Incumbent Board Member.
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(j) "Restricted Business" shall mean any of the business activities
in which the Company shall have been engaged at any time during the one (1) year
prior to the Termination Date.
(k) "Restricted Period" shall mean the period commencing on the
Termination Date and continuing for a two (2) year period thereafter.
(l) "Termination Date" shall mean the date of the Officer's
termination of employment with the Company.
(m) "Termination of Employment" shall mean the termination of the
Officer's employment by the Company.
(n) "Territory" shall mean any part of North America in which the
Company engages in the Restricted Business during the Restricted Period.
2. Change of Control Benefits Upon Termination.
(a) If, within the period commencing 90 days prior to a Change of
Control and ending 12 months following such Change of Control, the Officer
suffers a Termination of Employment without Cause or the Officer suffers a
Constructive Termination Without Cause, the Company shall provide to the Officer
the following payments, provided the Officer executes and does not revoke a
Release as described in subsection (d) below:
(1) The Company shall pay to the Officer a Change of Control
Payment in one lump sum cash payment.
(2) The Company shall reimburse the Officer for the cost of
any COBRA health insurance continuation coverage under the Company's health plan
for a period of 12 months following the Officer's Termination Date. The Company
may require the Officer to provide proof of payment for such continuation
coverage before making any reimbursement hereunder. The reimbursement payment
shall be made as of the first day of each month beginning after the Termination
Date and shall continue for 12 months.
(b) Payment of the amounts described in subsection (a) above shall
begin immediately after the end of the revocation period for the Release or, if
required by section 409A of the Code, six months after the date of the Officer's
separation from service with the Company. If payment is delayed pursuant to
section 409A of the Code, the accumulated amounts withheld on account of section
409A of the Code shall be paid on the first business day after the end of the
six-month period. If the Officer dies during such six-month period, the amounts
withheld on account of section 409A of the Code shall be paid to the personal
representative of the Officer's estate as soon as practicable, but no later than
60 days, after the date of the Officer's death. Payments under this Agreement
shall be made by mail to the last address provided for notices to the Officer
pursuant to Section 9 of this Agreement.
(c) If payment of the amounts described in subsection (a) are
delayed pursuant to section 409A of the Code, the Company shall pay interest on
the postponed payments from the Officer's Termination Date to the date of
payment at the prime rate quoted in the Wall
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Street Journal on the Termination Date or, if not available on such date, the
next prime rate quoted in the Wall Street Journal (the "Prime Rate"). However,
if the payments required to be made under subsection (a) are not made on the due
date specified in subsection (b), interest shall be paid on the unpaid payments
for the time they remain unpaid after the due date at a rate equal to the Prime
Rate plus three percentage points.
(d) The Release shall be a release of claims in a form acceptable to
the Company, but substantially in the form attached hereto as Exhibit A (subject
to adjustments reasonably determined by the Company to be necessary to comply
with applicable law at the time of the Officer's termination), and shall be a
release of any and all claims against the Company and all related parties with
respect to all matters arising out of the Officer's employment by the Company,
or the termination thereof (other than amounts payable under Sections 2 and 3 of
this Agreement).
(e) Notwithstanding anything in this Agreement to the contrary, the
Company shall not pay benefits under this Agreement earlier than the earliest
date permitted by section 409A of the Code, or later than the latest day
permitted by section 409A of the Code, in order to enable the Officer to avoid
taxation under section 409A.
3. Other Benefits. Nothing in this Agreement shall prevent or limit the
Officer's continuing or future participation in or rights under any benefit,
bonus, incentive, or other plan or program provided by the Company, and for
which the Officer may qualify, from the date hereof through the Termination
Date. Without limiting the foregoing, if the Officer is a participant in the
Quipp, Inc. Management Incentive Compensation Plan (the "Plan"), the Officer
shall be entitled to receive payment in accordance with the provisions of
Section 9 of the Plan, provided, that, following a Change of Control, the term
"cause" as used in Section 9 of the Plan shall have the meaning set forth in
Section 1(b) of this Agreement, and a Constructive Termination Without Cause
shall not be deemed to be a "voluntary resignation," and shall instead be
considered a termination by the Company without Cause, for purposes of Section 9
of the Plan.
4. Taxes. Any Change of Control Payment required under this Agreement
shall be subject to all requirements of the law with regard to the withholding
of taxes, filing, making of reports, and the like, and the Company shall use its
best efforts to satisfy promptly all such requirements.
5. Certain Reduction of Payments.
(a) Notwithstanding anything in this Agreement to the contrary, in
the event that it shall be determined that any payments or distributions by
Quipp, Quipp Systems or any subsidiary to the Officer, whether paid or payable
or distributed or distributable pursuant to the terms of this Agreement or
otherwise, would constitute "excess parachute payments" within the meaning of
Section 280G of the Code and the regulations thereunder, the Change of Control
Payment to or for the benefit of the Officer pursuant to this Agreement shall be
reduced (but not below zero) to the extent necessary so that such payments or
distributions shall not constitute "excess parachute payments." The value of the
noncompetition covenant described in Section 7 below, as determined by an
independent valuation expert selected by the Accounting Firm described in
subsection (b) below, shall be taken into account to the maximum extent
allowable
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under Section 280G of the Code to reduce the amounts considered to be "excess
parachute payments" under Section 280G of the Code.
(b) All determinations to be made under Section 5(a) shall be made
by the Company's independent certified public accounting firm immediately prior
to the Change of Control (the "Accounting Firm"). The Accounting Firm shall
provide its determinations and any supporting calculations to both the Company
and the Officer within sixty (60) days of the Termination Date, and such
determinations shall be binding upon the Company and the Officer. All of the
fees and expenses incurred by the Accounting Firm in performing the
determinations above shall be borne solely by the Company.
6. Confidentiality.
(a) During or after the Termination Date, the Officer shall not (i)
use or exploit in any manner Confidential Information for himself or any person,
partnership, association, corporation, or other entity other than the Company;
(ii) remove any Confidential Information, or any reproduction thereof, from the
possession or control of the Company; or (iii) treat Confidential Information
other than in a confidential manner.
(b) All Confidential Information developed, created, or maintained
by the Officer, alone or with others while employed by the Company, and all
Confidential Information maintained by the Officer thereafter, shall remain at
all times the exclusive property of the Company. The Officer shall return to the
Company all Confidential Information, and reproductions thereof, whether
prepared by him or others, that are in his possession immediately upon request
and in any event upon the termination of his employment with the Company.
7. Agreement Not to Compete.
(a) During the Restricted Period, the Officer shall not, at any time
within the Territory, directly or indirectly, engage in, or have any interest on
behalf of himself or others in, any firm, corporation, or business (whether as
Officer, officer, director, agent, security holder, creditor, partner, joint
venturer, beneficiary under a trust, investor, consultant, or otherwise) that
engages within the Territory in a Restricted Business; provided, however, that
nothing contained herein shall prevent or prohibit the Officer from owning of
record or beneficially up to one percent (1%) of the stock or equity of any
corporation or other business entity engaged in the Restricted Business if such
corporation or other entity is traded on the New York Stock Exchange, the
American Stock Exchange, or the NASDAQ National Market. In addition, during the
Restricted Period, the Officer shall not directly or indirectly solicit or
otherwise encourage any of the Company's employees to terminate their employment
with the Company.
(b) If a court determines that the foregoing restrictions are too
broad or otherwise unreasonable under applicable law, including with respect to
time, space or business, the court is hereby requested and authorized by the
parties hereto to revise the foregoing restriction to include the maximum
restrictions allowable under applicable law. The Officer acknowledges, however,
that this Section 7 has been negotiated by the parties hereto and that the
geographical and time limitations, as well as the limitation on activities, are
reasonable in light of the circumstances pertaining to the business of the
Company.
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8. Cumulative Remedies; No Waiver.
(a) The Officer expressly acknowledges that the remedy at law for
any breach of Sections 6 or 7 will be inadequate and that upon any such breach
or threatened breach, the Company shall be entitled as a matter of right to
injunctive relief in any court of competent jurisdiction, in equity or
otherwise, and to enforce the specific performance of the Officer's obligations
under these provisions without having to prove actual damage to the Company or
the inadequacy of a legal remedy.
(b) No right conferred upon a party by this Agreement is intended to
be exclusive of any other right or remedy, and each and every such right or
remedy shall be cumulative and shall be in addition to any other right or remedy
given hereunder or now or hereafter existing at law or in equity. No delay or
omission by a party in exercising any right, remedy, or power hereunder or
existing at law or in equity shall be construed as a waiver thereof.
9. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:
If to the Company, to:
Quipp, Inc.
0000 XX 000xx Xxxxxx
Xxxxx, XX 00000-0000
Attention: President
With a copy to:
Xxxx Xxxxxx, Esquire
Xxxxxx, Xxxxx & Bockius LLP
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
If to the Officer, to:
Xxxx Xxxxx
0000 XX 000 Xxxxxx
Xxxxxxxx Xxxxx, Xxxxxxx 00000
or to such other names or addresses as the Company or the Officer, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section. Any such notice shall be deemed delivered and
effective when received in the case of personal delivery, five (5) days after
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.
10. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the State of Florida without giving effect to any conflict of
laws provisions.
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11. Contents of Agreement; Amendment; Assignment.
(a) This Agreement supersedes all prior agreements, sets forth the
entire understanding between the parties hereto with respect to the subject
matter hereof and cannot be changed, modified, extended, or terminated except
upon written amendment executed by the Officer and the Company.
(b) Nothing in this Agreement shall be construed as giving the
Officer any right to be retained in the employ of the Company.
(c) This Agreement shall be binding upon, and shall inure to the
benefit of, the Company and the Officer, and their respective successors and
assigns. The Company shall have the right to assign its rights hereunder to any
successor in interest, whether by merger, consolidation, sale of assets, or
otherwise.
12. No Mitigation. The Company agrees that, if the Officer's employment
with the Company terminates during the term of this Agreement, the Officer is
not required to seek other employment or to attempt in any way to reduce any
amounts payable to the Officer by the Company pursuant to the terms hereof.
Further, the amount of any payment or benefit provided for in this Agreement
shall not be reduced by any compensation earned by the Officer as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Officer to the Company, or otherwise.
13. Severability. Any invalidity, illegality, or limitation of the
enforceability with respect to any one or more of the provisions of this
Agreement, or any part thereof, shall in no way affect or impair the validity,
legality, or enforceability of any other provisions of this Agreement. In case
any provision of this Agreement shall be invalid, illegal, or unenforceable, it
shall, to the extent practicable, be modified so as to make it valid, legal, and
enforceable and to retain as nearly as practicable the intent of the parties,
and the validity, legality, and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
14. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect until twenty-four (24) months beyond the month in
which a Change in Control occurs.
15. Survivorship. The respective rights and obligations of the parties
under this Agreement shall survive any termination of the Officer's employment
to the extent necessary for the preservation of such rights and obligations.
Without limiting the foregoing, the right to receive a Change of Control Payment
under Section 2 of this Agreement shall survive the termination of this
Agreement.
16. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
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IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first above written.
QUIPP, INC.
By: /s/ XXXXXXX X. XXXX
---------------------------------
Its: President
QUIPP SYSTEMS, INC.
By: /s/ XXXXXXX X. XXXX
---------------------------------
Its: President
OFFICER
/s/ XXXX XXXXX
-------------------------------------
Xxxx Xxxxx
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EXHIBIT A
GENERAL RELEASE
12. General Release. I, ____________, for and in consideration of the
commitments of Quipp, Inc. (the "Company") under the Change of Control Agreement
between the Company and me dated ______________, 2005 (the "Agreement") and
intending to be legally bound, do hereby REMISE, RELEASE AND FOREVER DISCHARGE
the Company, and its respective affiliates, subsidiaries and parents, and its
and their respective officers, directors, partners, shareholders, employees, and
agents, and their respective successors, predecessors, assigns, heirs,
executors, and administrators (collectively, the "Company Releasees") from all
causes of action, suits, debts, claims and demands whatsoever in law or equity,
that I ever had, now have, or hereafter may have, or which my heirs, executors
or administrators hereafter may have, whether known or unknown, suspected or
unsuspected, apparent or concealed, by reason of any matter, cause or thing
whatsoever, at any time prior to the date I sign this General Release, and
particularly, but without limitation of the foregoing general terms, any claims
arising from or relating in any way to my employment relationship with the
Company Group (as defined below) or the termination thereof, including, without
limitation, any claims arising under the Rehabilitation Act of 1973, 29 USC
Sections 701 et seq., as amended; Title VII of the Civil Rights Act of 1964, 42
USC Sections 2000e et seq., as amended; the Civil Rights Act of 1991, 2 USC
Sections 60 et seq., as applicable; the Age Discrimination in Employment Act of
1967, 29 USC Sections 621 et seq., as amended ("ADEA"); the Americans with
Disabilities Act, 29 USC Sections 706 et seq. ("ADA"); the Family and Medical
Leave Act, 29 U.S.C. Section 2601 et. seq. ("FMLA"); the Employee Retirement
Income Security Act of 1974, 29 USC Sections 301 et seq., as amended ("ERISA");
the Florida Civil Rights Act of 1992 as amended, Fla. Stat. Sections 760.01 et
seq.; the Florida Private Whistleblower Act, Fla. Stat. Section 448.101 et seq.;
Florida's Workers Compensation laws, Fla. Stat. Ch. 440; and all other claims
under any federal, state or local law, whether statutory, regulatory, or common
law, including, without limitation, any claims for discriminatory or wrongful
discharge, now or hereafter recognized, and any claims for attorneys' fees,
costs, disbursements and the like. This General Release is effective without
regard to the legal nature of the claims raised or whether such claims are based
upon tort, equity, implied or express contract, or discrimination of any sort.
Nothing in this General Release shall be deemed to be a waiver of any claims
that may arise after the date I sign this General Release, or to claims for
indemnification or advancement of expenses that I may have as a director or
officer of a Company Group member. The term "Company Group" shall mean the
Company and all of its parents, subsidiaries, affiliates and successors.
13. Waiver. Subject to the limitations of paragraph 1 above, I expressly
waive all rights afforded by any statute which expressly limits the effect of a
release with respect to unknown claims. I understand the significance of this
release of unknown claims and the waiver of statutory protection against a
release of unknown claims.
14. Termination of Employment; No Re-Hire. I hereby agree and recognize
that my employment by the Company [* OR OTHER COMPANY GROUP MEMBER] was
permanently and irrevocably severed on _______ __, _____, that I will not apply
for or otherwise seek reemployment with any Company Group member at any time,
and that neither the Company nor any other Company Group member has any
obligation, contractual or otherwise to me to hire,
rehire or reemploy me in the future. I acknowledge that the terms of the
Agreement provide me with payments and benefits which are in addition to any
amounts to which I otherwise would have been entitled.
15. No Disparagement. To the fullest extent permitted by law and unless
otherwise required by law, I agree that I shall not publicly or privately make
any disparaging comments, orally or in writing, about any member of the Company
Group and shall not make any false statements, orally or in writing, about any
of the Company Group's products or services. For purposes of this General
Release, the term "disparage" includes, without limitation, comments or
statements to the press or media or to any entity or individual with whom any
member of the Company Group has a business relationship that would adversely
affect in any manner the conduct of the business of any member of the Company
Group or the business or personal reputation, as the case may be, of any member
of the Company Group.
16. Certification. I hereby certify that I have read the terms of this
General Release and understand its terms and effects, including the fact that I
have agreed to RELEASE AND FOREVER DISCHARGE the Company Releasees from any and
all legally waivable claims. I hereby certify that I have had adequate time to
review and consider this General Release prior to signing and have signed this
General Release voluntarily and knowingly in exchange for the consideration
described in the Agreement, which is adequate and satisfactory to me. I further
certify that I have been advised by the Company and am hereby advised in writing
to consult with an attorney of my choosing prior to signing this General
Release, and I have in fact consulted with an attorney or have had adequate time
and opportunity to do so prior to signing this General Release. None of the
above named parties, nor their agents, representatives, or attorneys have made
any representations to me concerning the terms or effects of this General
Release other than those contained herein.
17. Right to Revoke. I hereby acknowledge that I have been informed that I
have the right to consider this Release for a period of 21 days prior to
execution. I also understand that I have the right to revoke this Release for a
period of seven days following execution by giving written notice to the Company
at 0000 X.X. 000 Xxxxxx, Xxxxx, XX 00000, Attention: __________________________.
18. Governing Law. This General Release shall be subject to, governed by,
interpreted in accordance with and enforced under the laws of the state of
Florida without regard to conflicts of law principles. I (a) irrevocably submit
to the jurisdiction of the United States District Court for the Southern
District of Florida and to the jurisdiction of any court of general jurisdiction
in Miami-Dade County, Florida for the purposes of any suit, action or other
proceeding arising out of or relating to this General Release, and (b) waive and
agree not to assert in any such proceeding a claim that (i) I am not personally
subject to the jurisdiction of the courts referred to above, (ii) the suit or
action was brought in an inconvenient forum, or (iii) the venue of the suit or
action is improper.
19. Survival. I hereby further acknowledge that the terms of Sections 6
and 7 of the Agreement shall continue to apply for the time periods provided
therein and that I will abide by and fully perform such obligations.
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20. Entire Agreement. This General Release sets forth the entire agreement
between the parties and fully supersedes any and all prior agreements or
understandings between them. I agree that no promises or representations have
been made to me in connection with the terms of this General Release other than
those set forth herein.
21. Binding Effect. This General Release is binding upon, and shall inure
to the benefit of, the parties and their respective heirs, administrators,
executors, successors and assigns.
22. Effective Date. This General Release shall not become binding on any
party until all parties have signed it. The effective date of this General
Release shall be the eighth day following execution of this General Release by
both parties.
Intending to be legally bound hereby, I execute the foregoing General
Release this ___ day of _____________, 20 ___.
________________________ ___________________________
Witness
NO DISPARAGEMENT AGREEMENT OF THE COMPANY
To the fullest extent permitted by law, and unless otherwise required by law,
the Company agrees that it will not publicly or privately make any disparaging
comments, orally or in writing, about _____. For this purpose, the term
"disparage" includes, without limitation, comments or statements to the press or
media or to any entity or individual with whom _____ has a business relationship
that would adversely affect in any manner the conduct of the business or
personal reputation of _____.
QUIPP, INC.
By: __________________________
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