Exhibit 10(A)(1)
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT ("Agreement") between SERVOTRONICS, INC.
("Employer") and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇. ("Employee" ), dated July 1, 2005,
hereby supersedes the parties' Amendment to and Restatement of Employment
Agreement dated August 8, 1986 ("1986 Agreement") and all amendments thereto.
W I T N E S S E T H
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WHEREAS, the Board of Directors of Employer believes it to be in the
best interests of Employer and its shareholders to assure the Employee's
continued service to Employer, and Employee agrees to continue in the service of
Employer under the terms set forth below; and
WHEREAS, the parties believe that adoption of a new Employment
Agreement at this time is beneficial given the numerous amendments made to the
1986 Agreement and the need to update the 1986 Amendment to conform with current
laws and regulations;
NOW, THEREFORE, in consideration of his continued employment by
Employer and other good and valuable consideration and intending to be legally
bound, Employee hereby agrees to be employed by Employer, upon the following
terms and conditions:
1. Employer hereby employs Employee and Employee hereby accepts such
employment for a multi-year term extending to and including July 1, 2010, on the
terms and conditions hereinafter set forth. When one year remains on the
original or any extended term of this Agreement, the term of this Agreement will
be automatically extended for one additional year beyond its then expiration
date unless either party previously has notified the other in writing that the
term will not be extended beyond that expiration date. If Employer elects
pursuant to this paragraph not to extend this Agreement, Employee shall be
entitled to a severance payment in an amount equivalent to nine (9) months'
salary and benefits at the rate in effect at the time of termination. Such
amount shall be paid within 30 days following the date of expiration of this
Agreement under this paragraph.
2. Employee shall perform the duties and functions of Chairman and
President of Employer, which duties and functions will be similar to and
generally consistent with those Employee is performing for Employer at the date
of this Agreement.
3. Subject to the provisions of paragraphs 5, 6, 12 and 16 of this
Agreement, Employer shall pay and Employee shall accept as full compensation for
all services rendered hereunder a minimum annual salary of $397,400.00, or such
greater amount as may be hereafter fixed by the Board, payable in equal
installments every two weeks.
4. Employer will reimburse Employee for all reasonable expenses
incurred in the performance of his services hereunder.
5. In addition to the compensation provided to Employee under
paragraph 3 of this Agreement, Employee shall be entitled to participate in all
employee benefit plans, including without limitation stock options, profit
sharing, pension, bonus, participation, extra compensation, disability or
deferred compensation plans, group insurance or other benefits or arrangements,
to at least the same extent as do Employer's other senior executive officers,
except as to any plan as to which Employee has specifically consented in writing
to his exclusion therefrom. In its discretion the Board may grant Employee
benefits in addition to or greater than those enumerated above and in paragraph
16 of this Agreement.
6. Employment under this Agreement shall terminate prior to the
expiration of its term or any extended term upon the death or total disability
of Employee.
"Total disability" is Employee's inability to substantially
perform his duties and obligations under this Agreement for a consecutive period
of four months by reason of illness or physical or mental impairment. If either
party asserts that total disability has occurred and the other party disputes
that assertion, Employer and Employee shall submit the dispute (for a written
decision as described below) to a physician jointly selected by them who (i) is
licensed to practice in New York, (ii) has professional experience in the area
or branch of medicine related to the cause of the claimed disability, (iii) has
rendered no professional services to or on behalf of either party within the two
prior years and (iv) is not a shareholder, officer, director or employee of, or
in a business relationship with, Employer or Employee. Employer shall pay all
expenses incurred by both parties to resolve the dispute in this manner. After
making such examinations and investigations as he shall deem necessary, that
physician shall make his decision in writing, and the decision shall be given to
both Employer and Employee in accordance with paragraph 19. Neither party shall
contest the physician's decision, which shall be final and conclusive, except
for fraud. If the physician decides that total disability has not occurred, this
Agreement and Employee's employment hereunder shall continue as if no dispute
had occurred.
Termination of employment shall be effective upon Employee's
death. Termination of Employment for total disability shall be effective five
business days after either party has given written notice to the other of the
existence of total disability unless, before the expiration of that five-day
period, the party receiving notice shall give the other party written notice
that he or it disputes the existence of total disability; if the notice of
dispute is so given, termination of employment will occur when the physician
gives notice to both parties of his decision in accordance with paragraph 19.
In the event of termination of employment due to Employee's total
disability or death, Employer shall pay to the Employee, or in the event of
Employee's death, to Employee's designated beneficiary, or if none, to his
estate, compensation during the remainder of the term or extended term of this
Agreement at the rate of 50% of the total compensation in effect under
paragraphs 3 and 5 of this Agreement immediately prior to the termination. The
foregoing payment shall be in lieu of the 9-month severance payment required by
reason of termination of employment pursuant to paragraph 1 of this Agreement.
7. Nothing contained in this Agreement shall deprive Employee of, or
limit his entitlement to, any rights to pensions or other retirement payments,
to stock options or other rights with respect to Employer's securities or to any
other benefits granted or to be granted to Employee by Employer, whether or not
such payments, options, rights or benefits are referred to in this Agreement,
except that the disability payment provided in paragraph 6 and the severance
payment in paragraph 13 shall be in lieu of the 9-month severance payment
provided in paragraph 1.
8. Employee agrees that from and after the date of this Agreement and
during the term hereof he will not, unless acting as an officer or employee of
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Employer or with the prior written consent of Employer, directly or indirectly,
engage or participate in, or own, manage, operate, join or control, or be
connected as an officer, director, employee, partner, investor or otherwise
with, any business manufacturing or selling products or services similar to or
competing with products or services manufactured or sold by Employer or
otherwise engage directly or indirectly in competition with Employer. Employee
acknowledges that the remedy at law for any breach by him of the foregoing will
be inadequate and that Employer shall be entitled to injunctive relief. Nothing
herein contained, however, shall prevent Employee from purchasing for investment
3% or less of any outstanding class of securities of any company whose
securities are held by the general public.
9. In consideration of past and future services performed by Employee
on behalf of Employer, Employer agrees that it shall have no right to terminate
this Agreement, or to terminate any obligation of Employer hereunder, prior to
the end of the term or any extension hereof, except for the willful malfeasance
of Employee in the performance of his duties hereunder. Any such termination
shall be determined by Employer's Board of Directors at a meeting validly held
and conducted as provided by Employer's By-laws and applicable law and shall be
subject to Employee's rights set forth in paragraph 5. Employee will be entitled
to be heard by the Board of Directors prior to any determination under this
paragraph, to be advised during the hearing by an attorney of his choice and, if
he chooses, to have his attorney be heard by the Board of Directors; Employer
will pay the fees and disbursements of Employee's attorney for services rendered
in this dispute if the Employee shall be the prevailing party. A decision by the
Board of Directors hereunder is not final, but is subject to arbitration under
paragraph 18.
10. Employee may terminate his employment hereunder for any one or
more of the following reasons: (A) a change in control of Employer (as defined
below), (B) a change in the responsibilities, titles or offices of Employee as
currently in effect, without the express written consent of Employee, except in
connection with the termination of Employee's employment for disability,
retirement or pursuant to paragraph 8 above, (C) a relocation of Employee's
office or principal place of work without his express written consent to a
location more than 50 miles from ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, P.O. Box 300, ▇▇▇▇, New
York, except for required travel on Employer's business to an extent
substantially consistent with Employee's business travel practices as currently
in effect, or (D) a failure by Employer to comply with any provision of this
Agreement which has not been cured within five days after notice of such
noncompliance has been given by Employee to Employer. For purposes of this
Agreement, a "change in control of Employer" shall mean a change in control of a
nature that would be required to be reported in response to Item 5.01 of Form
8-K promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or any similar successor provision; provided that, without
limitation, such a change in control shall be deemed to have occurred if (X) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act
or any similar successor provision), other than Employee, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act or any
similar successor provision), directly or indirectly, of securities of Employer
representing 22% or more of the combined voting power of Employer's then
outstanding securities, or (Y) Employee, while living, shall cease to be a
director of Employer, unless Employee shall have voluntarily resigned his
position on the Board in writing or consented in writing to not be included in
the slate of nominees for director proposed by the Board for election at any
meeting of the shareholders of Employer at which directors are to be elected, or
(Z) if at any time more than one-third of the members of the Board shall be
persons who shall have been elected by the shareholders of Employer or appointed
by the Board in opposition to Employee's recommendation and without having
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received the affirmative vote of Employee either as a shareholder or as a
Director.
11. Any termination of Employee's employment by Employee shall be
communicated by written Notice of Termination to Employer. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision or provisions in this Agreement relied upon
(although the failure to include in such notice any other termination provision
shall not be deemed to be a waiver of such provision). No failure of Employee to
exercise his right to terminate this Agreement shall, by reason of lapse of time
or otherwise, be deemed to constitute a waiver of such right; and no Notice of
Termination in which Employee notifies Employer that he is terminating this
Agreement because of a breach of this Agreement by Employer shall be deemed to
constitute a waiver by Employee of his right to terminate the Agreement because
of a change in control of Employer, notwithstanding that a change in control may
have occurred prior to Employee's Notice of Termination.
12. "Date of Termination" shall mean, if Employee's employment is
terminated pursuant to paragraph 10 above, the date on which a Notice of
Termination is given. The date on which a Notice of Termination is given shall
be the date when hand-delivered in person to any officer of Employer except
Employee or the next business day after deposit thereof in the U.S. mail,
postage prepaid, for delivery as registered or certified mail, return receipt
requested, addressed to the corporate headquarters of Employer.
13. If (A) Employer shall terminate Employee's employment in breach of
this Agreement (it being understood that, without limitation, a breach shall
have occurred if a termination pursuant to paragraph 9 hereof is thereafter
found upon arbitration pursuant to paragraph 18 to be not justifiable or
otherwise improper) or (B) Employee shall terminate his employment for any
reason specified in paragraph 10, then
(i) Employer shall pay Employee his full salary and benefits
through the Date of Termination at the rate in effect at the time Notice of
Termination is given;
(ii) in lieu of any salary payments to Employee for periods
subsequent to the Date of Termination and in lieu of the 9-month severance pay
provided in paragraph 1, Employer shall pay as severance pay to Employee an
amount equal to the product of 2.99 multiplied by a base amount equal to the
average annual compensation paid by Employer to Employee which was includible in
Employee's gross income for federal income tax purposes for the most recent five
taxable years ending before the date on which the change in control of Employer
occurs;
(iii) the parties intend that the base amount in the preceding
subparagraph (ii) shall be the highest base amount permitted by Section 280G of
the Internal Revenue Code of 1986, as amended, or any successor provisions
without causing any portion of the severance pay to constitute an "excess
parachute payment" thereunder, and if any amendment of Section 280G or any
successor provision defines such a base amount so as to permit a greater amount
than defined in the preceding sentence, the greater base amount permitted by the
amended provision shall be applicable, provided, however, that (1) nothing
contained herein shall reduce the severance payment below the amount resulting
from applying the base amount set forth in subparagraph (ii) and (2) this
subparagraph (iii) shall not be applicable after July 1, 2010 unless the parties
hereto expressly agree in writing to the extension of the applicability of this
subparagraph;
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(iv) if termination of Employee's employment arises out of a
breach by Employer of this Agreement, Employer shall pay all other damages to
which Employee may be entitled as a result of such breach, including but not
limited to damages for any loss of benefits to Employee and including all legal
fees and expenses incurred by him as a result of such termination.
14. Any payment of Employer to Employee required by paragraph 13 above
shall be made in full no later than the next business day following the date on
which Notice of Termination is given as determined in paragraph 12 above or, if
applicable, within five (5) business days of an arbitrator's ruling pursuant to
paragraph 18 of this Agreement (the "Payment Date"). Any failure by Employer to
make payment in full to Employee on or before the Payment Date of all amounts
required to be paid to Employee pursuant to this Agreement shall entitle
Employee, in addition to such amounts, to liquidated damages equivalent to the
amount of salary and benefits to which Employee would have been entitled
pursuant to paragraph 3 of this Agreement (as such paragraph may hereafter be
amended) if this Agreement had not been terminated during the period beginning
with and including the Payment Date and ending on and including the date on
which Employer pays to Employee all sums owing to Employee pursuant to this
Agreement.
15. Employee shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or otherwise.
16. In recognition of Employee's decades of service to Employer,
Employer agrees that after termination of Employee's employment hereunder for
any reason, whether such termination is pursuant to paragraph 1, 6, 9, 10 or 13
of this Agreement (other than a termination due to death pursuant to paragraph
6), Employer shall provide and pay for, at a minimum, disability, medical,
hospital and other health care benefits and life insurance benefits that are no
less than the maximum benefits which were provided to Employee and any spouse
and/or children of his that were covered under Employer's plans at the time
Employee's employment is terminated (hereinafter "Post Employment Benefits").
a. Employer further agrees that Employee will not be required
to assume co-pay or employee contribution costs greater than he had been
required to assume (if any) during that period of his employment when maximum
benefits were provided to him.
b. Employer shall pay the cost of all of Post Employment
Benefits until the Employee's death, except that Employer's obligation to
provide and pay for Post Employment Benefits for Employee's spouse and/or
children shall terminate when said spouse and/or child dies or otherwise becomes
ineligible for benefits under any of the applicable plans, if such an event
occurs prior to Employee's death.
c. If Employer is unable to provide the Post Employment
Benefits as part of the plan or plans which provide benefits to other employees
of the Employer, it shall create a special or individual plan or plans to
provide the benefits; and if Employer is unable to provide such benefits through
a special or individual plan, it shall pay Employee monthly an amount, which
will equal the sum of the cost to Employee of his obtaining benefits equivalent
to the Post Employment Benefits plus any additional federal and state income tax
cost, to Employee of receiving such payments in lieu of Post Employment
Benefits.
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d. Because of the uncertainty of the effect on certain terms
of this Agreement of Internal Revenue Code ("Code") Section 409A and the
regulations and guidance interpreting and implementing Code Section 409A, with
Employee's prior written consent, Employer agrees to timely make such amendments
to this Agreement as may be necessary to avoid the imposition of penalties,
interest and additional taxes under Code Section 409A and agrees that any such
amendment will provide Employee with economically the same payments and benefits
as would have been provided hereunder prior to such amendment.
17. If, by reason of any amendment to the Internal Revenue Code of
1986, as amended, subsequent to July 1, 2005, there may be imposed upon Employee
any federal tax in excess of the amount of federal income tax that would
otherwise be imposed upon Employee upon the recognition by Employee of any
payment by Employer to Employee pursuant to paragraph 13 above as ordinary
income of Employee for federal income tax purposes, then Employee, at his sole
option, may elect to receive from Employer such lesser amount of severance pay
as Employee shall designate in his sole discretion. Such election shall be
deemed to have been properly made by Employee if set forth in Employee's Notice
of Termination provided to Employer in accordance with paragraph 11 above.
18. Any controversy, claim or dispute arising out of or relating to
this Agreement, including, without limitation, any claim for breach of this
Agreement, shall be settled by arbitration in accordance with the Rules of the
American Arbitration Association except as otherwise specifically provided in
this paragraph. Judgment upon any award rendered by the arbitrators pursuant
hereto may be entered in any court having jurisdiction thereof. Either party
shall have the right to initiate arbitration proceedings except that (i) no
arbitration shall be commenced on a controversy arising under paragraph 9 until
a decision has been made by the Board of Directors as provided therein, but
Employee may initiate arbitration prior to such a decision if he shall have been
terminated without that decision having occurred or if Employer shall have
refused to pay the fees and disbursements of Employee's counsel; (ii) paragraph
6 provides the exclusive method of determining a dispute as to whether Employee
has total disability, and (iii) Employer must apply to a court having proper
jurisdiction to obtain the injunctive relief referred to in paragraph 8. Any
arbitration shall take place in the County of Erie, State of New York, unless
both parties shall consent to another location. Employer shall pay the costs of
the arbitration.
19. Subject to the provisions of paragraph 12 of this Agreement, a
notice to a party shall be effectively given to the Employee when hand-delivered
to the Employee and to the Employer when hand-delivered to any officer of
Employer except Employee. Notice may also be effectively given on the next
business day after deposit in the U.S. mail, postage prepaid, for delivery as
registered or certified mail, return receipt requested, addressed as follows:
To Employee, at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇, unless Employee notifies Employer in writing of a new address.
To Employer, at its corporate headquarters. For all purposes of
this paragraph and paragraph 11, Employee may assume that the Employer's
corporate headquarters is ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
unless Employer notifies Employee in writing of a new address.
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20. This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and any amendment or
modification of this Agreement is without effect unless it is in a writing duly
executed by both parties hereto.
21. This Agreement is made in the State of New York and shall be
interpreted under the laws of that State.
22. If any term or provision of this Agreement shall be held to be
invalid or unenforceable for any reason, such term or provison shall be
ineffective to the extent of such invalidity or unenforceability without
invalidating the remaining terms and provisions hereof, and this Agreement shall
be construed as if such invalid or unenforceable term or provision had not been
contained herein.
23. This Agreement shall be binding upon the parties hereto, their
successors and assigns; provided, however, neither party shall assign any of its
rights hereunder without the prior written consent of the other party hereto.
Employer may not transfer, convey or otherwise dispose of all or any substantial
part of its assets or business (whether directly or indirectly, by sale, merger,
consolidation or otherwise) unless the transferee assumes in writing the
obligations of Employer hereunder or Employee in his sole discretion waives in
writing compliance with this provision.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SERVOTRONICS, INC.
[SEAL] By /s/ ▇▇▇ ▇. ▇▇▇▇▇, TREASURER/SECRETARY
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Name: ▇▇▇ ▇. ▇▇▇▇▇
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Title: Treasurer/Secretary
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ATTEST:
/s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------ /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
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▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
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