EXHIBIT 10.1
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT between Crompton & Knowles Corporation, a
Massachusetts corporation (the "Corporation"), and Vincent A.
Calarco (the "Executive"), dated this 31st day of May, 1999.
WHEREAS, the Corporation and the Executive are parties to an
employment agreement dated March 5, 1985, as amended on April 7,
1986, and further amended on February 22, 1988, and the
Corporation and the Executive wish to amend and restate such
employment agreement, and
WHEREAS, the Corporation, on behalf of itself and its
shareholders, wishes to employ the Executive, and the Executive
is willing to serve in the employ of the Corporation, on the
terms and conditions provided below;
IT IS, THEREFORE, AGREED:
1. Employment Period. The Corporation hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Corporation, for the
Employment Period. Unless sooner terminated pursuant to Section
4, the Employment Period shall be the period beginning on the
date hereof (the "Effective Date") and ending on the third
anniversary of the Effective Date; provided, however, that
beginning on the date two years after the date hereof, and on
each annual anniversary of such date (each such date being
referred to as a "Renewal Date"), the Employment Period shall be
automatically extended so as to terminate on the earlier of (x)
three years from such Renewal Date or (y) the first day of the
month coinciding with or next following the Executive's normal
retirement date under the Individual Account Retirement Plan or
any successor retirement plan ("Normal Retirement Date"), unless
at least 60 days prior to the Renewal Date the Corporation shall
give notice that the Employment Period shall not be so extended.
The period from the Effective Date until the earlier of (i) the
Date of Termination (as defined in Section 4(e)) or (ii) the end
of the period described in the preceding sentence is hereinafter
referred to as the "Employment Period."
2. Position and Duties. (a) During the Employment
Period, the Executive shall serve as the Corporation's President
and Chief Executive Officer. In that capacity the Executive
shall be a member of the Corporation's Board of Directors (the
"Board"), the Board's Executive Committee, and such other
committees of the Board as the Board may from time to time
designate. The Executive agrees to accept such employment and to
perform the responsibilities of the offices to which he is
appointed in accordance with the Bylaws of the Corporation.
(b) Excluding periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote
reasonable attention and time during normal business hours to the
business and affairs of the Corporation and, to the extent
necessary to discharge the responsibilities assigned to the
Executive hereunder, to use reasonable best efforts to perform
faithfully and efficiently such responsibilities. The Executive
may (i) serve on corporate, civic or charitable boards or
committees, (ii) deliver lectures, fulfill speaking engagements
or teach at educational institutions and (iii) manage personal
investments, so, long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the
Executive prior to the Effective Date, such prior conduct of
activities, and any subsequent conduct of activities similar in
nature and scope shall not thereafter be deemed to interfere with
the performance of the Executive's responsibilities to the
Corporation.
3. Compensation. (a) Base Salary. During the
Employment Period, the Executive shall receive a base salary
("Base Salary") at an annual rate of no less than $750,000.
During the Employment Period, the Base Salary shall be reviewed
at least annually and shall be increased at any time and from
time to time to reflect increases in the cost of living and such
other increases as shall be consistent with increases in base
salary awarded in the ordinary course of business to other key
executives. Any increase in the Base Salary shall not serve to
limit or reduce any other obligation to the Executive under this
Agreement. The Base Salary shall not be reduced after any such
increase.
(b) Annual Bonus. During the Employment Period, the
Executive shall be eligible to receive an annual cash bonus, with
a target bonus equal to 100% of his Base Salary.
(c) Incentive, Savings and Retirement Plans. The
Executive shall be entitled to participate during the Employment
Period in all savings and retirement plans and programs through
the qualified plans of the Corporation or through nonqualified
substitutes in which the Executive has agreed to participate in
lieu of the qualified plans, and all short and long-term
incentive plans and programs applicable to other key executives
or similar plans approved by the Board of Directors for the
Executive, but in no event shall such plans and programs, in the
aggregate, provide the Executive with compensation, benefits and
reward opportunities less favorable than those provided by the
Corporation and its affiliated companies for the Executive
under such plans and programs as in effect at any time during the
90-day period immediately preceding the Effective Date.
(d) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under each welfare benefit plan of the Corporation,
including, without limitation, all medical, dental, disability,
life, group life, accidental death and travel accident insurance
plans and programs of the Corporation and its affiliated
companies, as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect at any time thereafter with respect
to other key executives. Without limiting the generality of the
foregoing, the Corporation agrees to provide life insurance
coverage on the Executive, payable to a beneficiary or
beneficiaries of his designation, in an amount not less than
$500,000, $100,000 of which will be group term life insurance
paid for by the Corporation and the balance to be whole life
insurance for which the Corporation will loan the annual premium
payment to the Executive under the terms of the program provided
to other key executives of the Corporation.
(e) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the policies and procedures of the Corporation as in effect
at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect at any time thereafter with respect to other key
executives.
(f) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to fringe benefits, including without
limitation the use of an automobile, driver and payment of
related expenses, and club memberships, in accordance with the
policies of the Corporation as in effect at any time during the
90-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect at any time
thereafter with respect to other key executives.
(g) Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or offices
of a size and with furnishings and other appointments, and to
secretarial and other assistance, at least equal to those
provided to the Executive at any time during the 90-day period
immediately preceding the Effective Date or, it more favorable to
the Executive, as provided at any time thereafter with respect to
other key executives.
(h) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the policies of the Corporation as in effect at any time during
the 90-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect at any time
thereafter with respect to other key executives.
4. Termination. (a) Death or Disability. This
Agreement shall terminate automatically upon the Executive's
death. The Corporation may terminate this Agreement, after
having established the Executive's Disability (pursuant to the
definition of "Disability" set forth below), by giving to the
Executive written notice of its intention to terminate the
Executive's employment. In such a case, the Executive's
employment with the Corporation shall terminate effective on the
90th day after receipt of such notice (the "Disability Effective
Date"), unless the Executive has previously returned to full-time
performance of the Executive's duties. For purposes of this
Agreement, "Disability" means physical or mental disability
which, after the expiration of more than 26 weeks after its
commencement, is determined to be total and permanent by a
physician selected by the Corporation or its insurers and
acceptable to the Executive or the Executive's legal
representative (such agreement to acceptability not to be
unreasonably withheld).
(b) Cause. The Corporation may terminate the
Executive's employment for "Cause." For purposes of this
Agreement, "Cause" means (i) the Executive's willful and
continued failure to substantially perform assigned duties with
the Corporation (other than any such failure resulting from
incapacity due to physical or mental illness or any such actual
or anticipated failure resulting from termination for Good
Reason), after a demand for substantial performance is delivered
to the Executive by the Board, specifically identifying the
manner in which the Board believes that the duties have not been
substantially performed; or (ii) the Executive's willful conduct
which is demonstratably and materially injurious to the Company.
For purposes of this paragraph (b), no act, or failure to act,
shall be considered "willful" unless done, or omitted to be done,
not in good faith and without reasonable belief that such action
or omission was in the best interest of the Corporation.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" means
(i) (A) the assignment to the Executive of any
duties inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section
2 of this Agreement or (B) any other action by the Corporation
which results in a diminishment in such position, authority,
duties or responsibilities, other than an insubstantial and
inadvertent action which is remedied by the Corporation promptly
after receipt of notice thereof given by the Executive;
(ii) any failure by the Corporation to comply with
any of the provisions of Section 3 of this Agreement, other than
an insubstantial and inadvertent failure which is remedied by the
Corporation promptly after receipt of notice thereof given by the
Executive;
(iii) the Corporation's requiring the Executive to
be based at any office or location other than that at which the
Executive is based at the Effective Date, except for travel
reasonably required in the performance of the Executive's
responsibilities and substantially consistent with business
travel obligations of the Executive as of the Effective Date and
except for the relocation of the Executive at the Company's
headquarters in Middlebury, Connecticut;
(iv) any purported termination by the Corporation
of the Executive's employment otherwise than as permitted by this
Agreement, it being understood that any such purported
termination shall not be effective for any purpose of this
Agreement other than establishing the Date of Termination
pursuant to paragraph (e) below; or
(v) any failure by the Corporation to comply with
and satisfy Section 10(b) of this Agreement.
(d) Notice of Termination. Any termination by the
Corporation for Cause or by the Executive for Good Reason shall
be effected by Notice of Termination to the other party hereto
given in accordance with Section 11(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the termination date is other
than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 15 days after
the giving of such notice). In the case of termination for
Cause, the Notice of Termination shall not be effective unless it
takes the form of a copy of a resolution duly adopted in good
faith by the affirmative vote of the entire membership of the
Board at a meeting of the Board called and held for the purpose,
after reasonable notice and an opportunity for the Executive,
together with counsel, to be heard before the Board, which
resolution shall state that the Executive has given "Cause"
within the meaning set forth above in clause (i) or (ii) of the
second sentence of paragraph (b) above, and specifying the
particulars thereof in detail.
(e) Date of Termination. "Date of Termination" means
the date of the Executive's Death, the Disability Effective Date,
or the date of receipt of an effective Notice of Termination or
any later date specified therein, as the case may be. If the
Executive's employment is terminated by the Corporation in breach
of this Agreement, the Date of Termination shall be the date on
which the Corporation notifies the Executive of such termination.
5. Obligations of the Corporation upon Termination. (a)
Death. If the Executive's employment is terminated by reason of
the Executive's death, this Agreement shall terminate without
further obligations to the Executive's legal representatives
under this Agreement other than those obligations accrued
hereunder at the date of the Executive's death. Anything in this
Agreement to the contrary notwithstanding, the Executive's family
shall be entitled to receive benefits at least equal to those
provided by the Corporation to surviving families of executives
of the Corporation under such plans, programs and policies
relating to family death benefits, if any, as in effect at any
time during the 90-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter with
respect to other key executives and their families, including,
without limitation, the Medical Benefits (as defined below).
(b) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability, the Executive
shall be entitled after the Disability Effective Date to receive
disability and other benefits at least equal to those provided by
the Corporation to disabled employees and/or their families in
accordance with such plans, programs and policies relating to
disability, if any, as in effect during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Executive and/or the Executive's family, as in effect at any
time thereafter with respect to other key executives and their
families, including, without limitation, the Medical Benefits (as
defined below).
(c) Cause. If the Executive's employment shall be
terminated for Cause, the Corporation shall pay the Executive his
full Base Salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given and shall have
no further obligations to the Executive under this Agreement.
(d) Good Reason; Other Than for Cause or Disability.
If, during the Employment Period, the Corporation shall terminate
the Executive's employment other than for Cause, Disability, or
death, or the employment of the Executive shall be terminated by
the Executive for Good Reason:
(i) The Corporation shall pay to the Executive in a
lump sum in cash within 30 days after the Date of Termination the
aggregate of the following amounts:
(A) if not theretofore paid, the Executive's Base
Salary through the Date of Termination at the rate in effect on
the Date of Termination or, if higher, at the highest rate in
effect at any time within the 90-day period preceding the
Effective Date; and
(B) the greater of (i) a lump sum equal to the
amount of any incentive compensation which has been allocated for
the calendar year in which the Date of Termination occurs or (ii)
the product of (x) the total incentive compensation paid to the
Executive for the last full fiscal year ending during the
Employment Period and (y) the fraction obtained by dividing (i)
the number of days between the last day of the last full fiscal
year ending during the Employment Period and the Date of
Termination into (ii) 365;
(C) three times the sum of (x) the Executive's
annual Base Salary at the rate in effect at the time Notice of
Termination was given or, if higher, at the highest rate in
effect at any time within the 90-day period preceding the
Effective Date and (y) the highest of the total incentive
compensation paid to the Executive for each of the last three
full fiscal years of the Corporation during the Employment
Period;
(D) in the case of compensation previously
deferred by the Executive, all amounts of such compensation
previously deferred and not yet paid by the Corporation; and
(E) an amount equal to the present value
(determined as provided in Section 280G(d)(4) of the Internal
Revenue Code of 1986, as amended (the "Code")) amount of employer
contributions that would have been made to the Executive's
account pursuant to the Individual Account Retirement Plan and
the Employee Stock Purchase and Savings Plan if the Executive had
continued in the employ of the Corporation through the third
anniversary of the Date of Termination, with compensation equal
to the amounts set forth above in clause (C) and had the
Executive continued to contribute to the Employee Stock Purchase
and Savings Plan at the rate in effect on the Date of
Termination.
(ii) The Corporation shall, promptly upon
submission by the Executive of supporting documentation, pay or
reimburse to the Executive any costs and expenses (including
moving and relocation expenses) paid or incurred by the Executive
which would have been payable under Section 3(e) if the
Executive's employment had not terminated.
(iii) For the remainder of the Executive's life and
that of his spouse, the Corporation shall continue benefits to
the Executive and/or the Executive's family at least equal to
those which would have been provided to them in accordance with
the plans, programs and policies described in Section 3(d) of
this Agreement if the Executive's employment had not been
terminated, as in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect at any time thereafter with respect
to other key executives and their families (the "Medical
Benefits").
(iv) Until the earliest of (A) the day upon which
the Executive begins new employment and is eligible for benefits,
(B) the third anniversary of the Effective Date, or (C) the
Executive's Normal Retirement Date, the Corporation shall
continue benefits to the Executive at least equal to those which
would have been provided to him in accordance with the plans,
programs and policies described in Section 3(f) of this
Agreement, other than the Company's providing the Executive with
a driver and club memberships, if the Executive's employment had
not been terminated, as in effect at any time during the 90-day
period immediately preceding the Effective Date or, if more
favorable to the Executive, as in effect at any time thereafter
with respect to other key executives.
6. Non-exclusivity of Rights. Nothing in this Agreement
shall prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or
program provided by the Corporation or any of its affiliated
companies and for which the Executive may qualify, nor shall
anything herein limit or otherwise affect such rights as the
Executive may have under any stock option or other agreements
with the Corporation or any of its affiliated companies. Amounts
which are vested benefits or which the Executive is otherwise
entitled to receive under any plan or program of the Corporation
or any of its affiliated companies at or subsequent to the Date
of Termination shall be payable in accordance with such plan or
program.
7. Full Settlement. The Corporation's obligation to
make the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the
Corporation may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment
by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement. The Corporation
agrees to pay, to the full extent permitted by law, all legal
fees and expenses which the Executive may reasonably incur as a
result of any contest (regardless of the outcome thereof) by the
Corporation or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee
of performance thereof or as a result of any contest by the
Executive concerning the amount payable pursuant to Section 8 of
this Agreement, plus in each case interest, compounded quarterly,
on the total unpaid amount determined to be payable under this
Agreement, such interest to be calculated at a rate equal to 2%
in excess of the prime commercial lending rate announced by Chase
Manhattan Bank in effect from time to time during the period of
such nonpayment.
8. Certain Further Payments by the Company. In the
event that any amount paid or distributed to the Executive
pursuant to this Agreement (taken together with any amounts
otherwise paid or distributed to the Executive in connection with
a change of control referred to in Section 280G(b)(i)) are
subject to an excise tax under Section 4999 of the Code or any
successor or similar provision thereto (the "Excise Tax"), the
Corporation shall pay to the Executive an additional amount such
that, after taking into account all taxes (including federal,
state, local and foreign income, excise and other taxes) incurred
by the Executive on the receipt of such additional amount, the
Executive is left with the same after-tax amount the Executive
would have been left with had no Excise Tax been imposed.
9. Noncompetition and Confidential Information. (a)
During the Employment Period, and during a one-year period
following any termination of his employment other than a
termination by the Executive for Good Reason, the Executive shall
not directly or indirectly compete with the Corporation (which
shall be deemed as including any subsidiary or affiliate of the
Corporation), whether as an individual proprietor or entrepreneur
or as an officer, employee, partner, stockholder, or in any
capacity connected with any enterprise, in any business in which
the Corporation is engaged at the time of the termination of the
Executive's employment, within any state or possession of the
United States of America or any foreign country within which such
business is then being conducted, or within which business is
then specifically planned by the Corporation to be conducted.
For the purpose of the preceding sentence, conducting business,
doing business, or engaging in business shall be deemed to
embrace sales to customers or performance of services for
customers who are within a relevant geographical area, without
any necessity of any presence of the Corporation therein.
Nothing herein, however, shall prohibit the Executive from
acquiring or holding any issue of stock or securities of any
corporation which has any securities listed on a national
securities exchange or quoted in the daily listing of over-the-
counter market securities; provided that at any one time he and
members of his immediate family do not own more than five (5%)
percent of the voting securities of any such corporation.
(b) The Executive shall hold in a fiduciary capacity
for the benefit of the Corporation all secret or confidential
information, knowledge or data relating to the Corporation or any
of its affiliated companies, and their respective businesses,
which shall have been obtained by the Executive during the
Executive's employment by the Corporation or any of its
affiliated companies and which shall not be public knowledge
(other than by acts by the Executive or his representatives in
violation of this Agreement). After termination of the
Executive's employment with the Corporation, the Executive shall
not, without the prior written consent of the Corporation,
communicate or divulge any such information, knowledge or data to
anyone other than the Corporation and those designated by it. In
no event shall an asserted violation of the provisions of this
Section 9 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
10. Successors. (a) This Agreement is personal to the
Executive and without the prior written consent of the
Corporation shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Corporation and its successors. Any successor
to the Corporation shall, by an agreement in form and substance
satisfactory to the Executive, expressly assume and agree to
perform this Agreement in the same manner and to the same extent
as the Corporation would have been required to perform.
11. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without reference to principles of
conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder shall
be in writing and shall be given by hand delivery to the other
party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Vincent A. Calarco
27 Forest Glen Drive
Woodbridge, CT 06525
If to the Corporation:
Crompton & Knowles Corporation
Benson Road
Middlebury, CT 06749
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(d) The Corporation may withhold from any amounts
payable under this Agreement such Federal, state or local taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) This Agreement contains the entire understanding of
the Corporation and the Executive with respect to the subject
matter hereof and supersedes all prior agreements between them
with respect thereto, including without limitation, the
employment agreement between the Company and the Executive dated
March 5, 1985, as amended, but shall not supersede the
Supplemental Retirement Agreement between the parties dated as of
March 22, 1999.
(f) As used in this Agreement, the term "affiliated
companies" includes any company controlling, controlled by or
under common control with the Corporation.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its Board of Directors,
the Corporation has caused these presents to be executed in its
name on its behalf, all as of the day and year first above
written.
/s/Vincent A. Calarco
VINCENT A. CALARCO
CROMPTON & KNOWLES CORPORATION
By:/s/Marvin H. Happel
Title: Vice President - Organization
and Administration