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Exhibit 11(c)(5)
DN ACQUISITION CORPORATION
January 7, 1999
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear ▇▇. ▇▇▇▇▇▇▇▇▇▇:
We refer to the Agreement and Plan of Merger, of even date (the
"MERGER AGREEMENT"), among New Hampshire Oak, Inc., DN Acquisition Corporation
(the "PURCHASER") and Defiance, Inc. (the "COMPANY") and to the Defiance Inc.
Change of Control Policy dated July 24, 1998 attached hereto and incorporated
herein as ATTACHMENT A (the "POLICY"). Under applicable law, all rights, duties,
assets, obligations and liabilities of both the Purchaser and the Company will
be vested in the Company following the consummation of the tender offer and the
merger as contemplated by the Merger Agreement. Following the consummation of
the tender offer and/or the merger as contemplated by the Merger Agreement, you
may be entitled to receive certain benefits pursuant to the Policy. In order to
clarify these and certain other rights and obligations, we have set forth such
rights and obligations in this letter. By signing this letter, you are agreeing
to the terms set forth herein. Capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed to them in the Merger
Agreement.
1. COMPENSATION PRIOR TO TERMINATION DUE TO CHANGE OF CONTROL. You,
the Purchaser and the Company agree that the consummation of the tender offer
and/or merger contemplated in the Merger Agreement constitute a change of
control as defined in the Policy. At all times thereafter but prior to a
Termination Due to Change of Control, as defined in the Policy, Purchaser agrees
that it will cause the Company to continue, and the Company agrees to continue,
your salary, bonuses and all Current Benefits (as defined below) at no less than
current levels. If a Termination Due to Change of Control takes place at any
time other than the Company fiscal year end, the Purchaser agrees that it will
cause the Company to pay you, and the Company agrees to pay you, a pro-rata
share of your Company annual incentive bonus, which shall equal or exceed the
amount of $24,000.00, based upon the number of months and days completed in the
current Company fiscal year.
2. CURRENT COMPENSATION AND BENEFITS. You hereby represent to the
Purchaser that SCHEDULE A accurately states: (i) your base salary as of January
1, 1999, (ii) the average incentive bonus paid to you for the two years
preceding January 1, 1999 and (iii) all benefits provided to you by the Company
on January 1, 1999 ( such other benefits, the "Current Benefits").
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3. PAYMENTS UPON TERMINATION DUE TO CHANGE OF CONTROL. Upon your
Termination Due to Change of Control under the Policy, the Purchaser agrees to
cause the Company to pay you and the Company agrees to pay you for a period of
two (2) years in monthly payments: (i) your base salary immediately before your
termination date; (ii) the average monthly amount of the incentive bonuses
awarded to you during the two (2) years preceding termination; and (iii) all
Current Benefits.
4. UNAUTHORIZED DISCLOSURE. During and after your employment with the
Company or any of its affiliates, (i) you agree to keep confidential and to not
disclose to any person (other than an employee or director of the Company or any
of its affiliates, or a person to whom disclosure is reasonably necessary or
appropriate in connection with the performance by you of your duties) or use to
compete with the Company or any of its affiliates any confidential or
proprietary information, knowledge or data that is not theretofore publicly
known and in the public domain obtained by you while in the employ of the
Company or any of its affiliates with respect to the Company or any of its
affiliates or with respect to any products, improvements, customers, methods of
distribution, sales, prices, profits, costs, contracts (including the terms and
provisions of this Agreement), suppliers, business prospects, business methods,
techniques, research, trade secrets or know-how of the Company or any of its
affiliates (collectively, "PROPRIETARY INFORMATION"), and (ii) you shall use
best efforts to keep confidential any such Proprietary Information and to
refrain from making any such disclosure, in each case except as may be required
by law or as may be required in connection with any judicial or administrative
proceedings or inquiry.
5. NON-SOLICITATION OF EMPLOYEES. During the period commencing at the
time the Purchaser accepts the Shares tendered pursuant to the Offer and ending
on the date that is two years after the termination of your employment, you
shall not, directly or indirectly, for your own account or the account of any
other Person with which you shall become associated in any capacity or in which
you shall have any ownership interest, (i) solicit for employment, offer to
employ or employ any Person who, at any time during the preceding twelve (12)
months, is or was employed by the Company or any of its affiliates, regardless
of whether such employment is direct or through an entity with which such Person
is employed or associated, or otherwise intentionally interfere with the
relationship of the Company or any of its affiliates with any Person who or
which is at the time employed by or otherwise engaged to perform services for
the Company or any such affiliate, or (ii) induce any employee of the Company or
any of its affiliates to engage in any activity which you are prohibited from
engaging in under this Agreement or to terminate his or her employment with the
Company or such affiliate.
6. RIGHT TO DOCUMENTS; RETURN OF DOCUMENTS. You agree that all
records, files, memoranda, reports, fee lists, customer lists, drawings, plans,
sketches, documents and data of any nature relating to the business of the
Company, including any document containing or pertaining to any Proprietary
Information, shall remain the sole property of the Company and/or
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its affiliates (as the case may be). In the event of the termination of your
employment for any reason, you will deliver promptly to the Company all
materials, records, files, notes, plans, memoranda, drawings, designs, papers,
customer lists, sketches, documents and data of any nature pertaining to your
work with the Company and its affiliates, and you will not retain any documents
or data of any description or any reproduction thereof, or any documents
containing or pertaining to any Proprietary Information. You shall certify to
the Company that any such data in machine readable form has been removed from
any computer personally owned by you and all back up copies made by you have
been destroyed.
7. INJUNCTIVE RELIEF WITH RESPECT TO COVENANTS. You acknowledge and
agree that your covenants and obligations with respect to non-disclosure,
non-solicitation, confidentiality and the property of the Company and its
affiliates relate to special, unique and extraordinary matters and that a
violation of any of the terms of such covenants and obligations will cause the
Company and its affiliates irreparable injury for which adequate remedies are
not available at law. Therefore, you expressly agree that the Company and its
affiliates (which shall be express third-party beneficiaries of such covenants
and obligations) shall be entitled to an injunction (whether temporary or
permanent), restraining order or such other equitable relief (including the
requirement to post bond) as a court of competent jurisdiction may deem
necessary or appropriate to restrain you from committing any violation of the
covenants and obligations contained in SECTIONS 4, 5, AND 6 hereof. These
injunctive remedies are cumulative and in addition to any other rights and
remedies the Company or any such affiliate may have at law or in equity.
8. TERMINATION. In the event your employment by the Company has not
been subject to a Termination Due to a Change of Control prior to the second
anniversary of the date on which the Purchaser acquires more than 50% of the
issued and outstanding Shares on a fully diluted basis, this Agreement shall
terminate and shall have no further effect.
9. NEGOTIATION AND ARBITRATION. The parties shall attempt in good faith
to resolve any controversy, and any alleged breach or default, arising out of or
relating to this Agreement, promptly by confidential negotiations between
persons who have complete authority to settle the matter in dispute as follows
(the "Negotiations"). All Negotiations shall be treated as compromise and
settlement negotiations for purposes of the relevant rules of evidence. A party
shall give the other party certified mail return receipt requested written
notice of any dispute ("Dispute Notice"). Within ten (10) days after delivery of
the Dispute Notice, the receiving party shall submit to the other a written
response ("Response"). The Dispute Notice and the Response shall include: (a) a
statement of each party's position and a summary of arguments supporting that
position, and (b) the name of the person(s) who will represent that party and
the name of any other person who will accompany the representative(s). Within
twenty (20) days after delivery of the Response, the representatives of both
parties shall meet at a mutually acceptable time and place, and thereafter as
often as they reasonably deem necessary, attempt to resolve the dispute. The
parties agree to honor relevant reasonable requests for information within a
period of not
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more than fifteen (15) days. If the dispute, except as provided below, has not
been resolved by the negotiation procedure as provided herein within sixty (60)
days of the delivery date of the Dispute Notice, then the dispute shall be
settled by arbitration in accordance with the then current Commercial
Arbitration Rules of the American Arbitration Association. The arbitration
hearing shall be held in Cuyahoga County, Ohio. A sole neutral arbitrator will
preside if the amount in controversy is less than One Hundred Thousand and
00/100 Dollars ($100,000.00) or by three independent and impartial arbitrators
if the amount in controversy exceeds One Hundred Thousand and 00/100 Dollars
($100,000.00). The arbitrator or arbitrators will be agreed upon between the
parties within three (3) weeks of the date upon which the arbitration is
initiated. If the parties cannot agree upon an arbitrator or arbitrators within
that time period, then, within three (3) weeks, the CPR Institute for Dispute
Resolution will be asked by the sender of the Dispute Notice to select an
arbitrator or arbitrators, and the arbitration will then take place within sixty
(60) days of the appointment of the arbitrator or arbitrators. The parties agree
to fully exchange all applicable documents and exhibits three (3) weeks prior to
the arbitration hearing and to limit discovery to two (2) depositions per party,
unless a deposition is necessary to perpetuate testimony of unavailable
witnesses, in which case there will be no limitation. Should either party fail
to participate in the Negotiations, the other party may initiate arbitration
before the expiration of the sixty (60) day period noted above. All judgments of
the arbitrator or arbitrators shall be final and binding and may be entered by
any court having jurisdiction thereof. Each party hereby waives any right to
punitive, exemplary or treble damages. The party which prevails in the
arbitration or any action, suit or other proceedings to enforce the covenants of
this Agreement or to obtain money damages for the breach thereof shall be
entitled to reimbursement from the other party for all expenses, including,
without limitation, reasonable attorneys fees and disbursements actually and
reasonably incurred.
10. MISCELLANEOUS. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO AND THE PARTIES AGREE TO THE
JURISDICTION OF THE STATE OR FEDERAL COURTS IN CUYAHOGA COUNTY, OHIO. This
Agreement shall survive the period of your employment with the Company or any of
its affiliates. This Agreement shall inure to the benefit of, and the
obligations and duties created hereby shall be binding upon, the successors and
assigns of the parties hereto, PROVIDED, however, that this Agreement may not be
assigned by you. This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof, and the provisions hereof may not be
amended or modified except by a writing signed by the parties hereto. In the
event any of SECTIONS 4, 5 OR 6 is not enforceable in accordance with its terms,
you and the Purchaser agree that such Section shall be reformed to make such
Section enforceable in a manner which provides the Purchaser the maximum rights
permitted at law. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all such counterparts shall
together constitute but one and the same instrument. Notwithstanding anything
contained herein, this Agreement shall become effective only upon consummation
of the tender offer and/or the merger as contemplated by the Merger Agreement.
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Please acknowledge your agreement with the terms of this letter and
confirm the arrangements herein by signing and returning the enclosed copy by
facsimile and by messenger.
Very truly yours,
DN ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
ACCEPTED AND AGREED:
ACCEPTED AND AGREED: DEFIANCE, INC.
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President / Chief Executive Officer
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ATTACHMENT A
DEFIANCE, INC.
CHANGE OF CONTROL POLICY
This policy is set forth by the Board of Directors to ensure certain key
executives of Defiance, Inc. (the "Company") are afforded a continuing income to
facilitate the change in their lives resulting from termination from the Company
due to a Change of Control. This policy obligates the Company accordingly to
these executives subject to changes in applicable law and further actions of the
Board of Directors. The Board of Directors reserves the right, at its
discretion, to alter, amend or even terminate this policy, however, any such
change in the policy shall only take effect two (2) years after the date upon
which the Board of Directors institutes said change of the policy.
If an executive is terminated due to a Change of Control, the executive's base
salary (immediately before said termination), incentive bonuses (which bonuses
shall be the average of the incentive bonuses paid to the executive for the two
years preceding said termination), all insurance, medical benefits and company
car or car allowance (provided to the executive immediately prior to said
termination), will be continued for a period of two years from date of
termination, and all stock options outstanding will be immediately vested as
well as all contributions to the Defiance, Inc. Retirement Savings Plan (401(k)
Plan), the Defiance, Inc. Supplemental Executive Retirement Plan (SERP) and the
Defiance, Inc. Supplemental Savings and Deferred Compensation Plan (make-whole
SERP).
A "Change of Control" shall be deemed to have taken place if, as the result of a
tender offer, exchange offer, merger, consolidation, sale of assets, contested
election, or any combination of the foregoing or other similar extraordinary
transactions, the persons, who are directors one year prior to the first of any
such events to occur, shall cease to constitute a majority of the board of
directors of the Company or any parent or successor to the Company.
Termination due to a Change in Control is deemed to occur if, within two years
after the Change of Control, without the executive's written approval: (1) the
executive's employment is terminated; (2) the executive experiences any
reduction in aggregate direct remuneration, position, responsibility or duties
from those enjoyed by the executive immediately prior to the Change of Control;
(3) the executive experiences any reduction in the aggregate of employee
benefits, prerequisites, or fringe benefits from those enjoyed by the executive
immediately prior to the Change of Control; (4) the Company requires that the
executive's principal place of work is more than twenty-five (25) miles from the
executive's principal place of work immediately prior to the Change of Control
or the executive is required to travel in connection with the executive's
employment to a greater degree than was customary during the year prior to the
Change of Control; or (5) there is a liquidation, dissolution, consolidation or
merger of the Company, or transfer or all or a significant portion of its assets
unless the successor(s) assume all the duties and obligations to the executive
set forth in this policy.
This policy updates and supersedes the Change of Control policy adopted by the
Board of Directors on September 22, 1994.
The key executives to whom this policy applies as of July 24, 1998 are as
follows:
▇▇▇▇▇▇▇ ▇▇▇▇▇ - VP Finance and Chief Financial Officer, Defiance, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ - VP Marketing and Corporate Development, Defiance, Inc.
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ - President, Defiance Precision Products, Inc.
▇▇▇▇ ▇▇▇▇▇ - President, Hy-Form Products, Inc. and Binderline
Draftline, Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - President, Defiance Testing & Engineering Services, Inc.
