Exhibit 99
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 1st day of January, 2005 by and between THE
EASTERN COMPANY, a corporation organized under the laws of the State of
Connecticut (the "Company"), and LEONARD F. LEGANZA, of 62 Tunxis Village Road,
Farmington, Connecticut (the "Executive").
W I T N E S S E T H:
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WHEREAS, the Company wishes to continue to employ the Executive in the
capacities and on the terms and conditions set forth below, and the Executive
has agreed to accept such employment on the terms set forth below.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants hereinafter set forth and other good and valuable consideration, the
Company and the Executive agree as follows:
Section 1. Definitions.
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When used herein, each of the words and phrases defined hereinafter
shall have the following meaning unless a different meaning is clearly required
by the context of the Agreement:
(a) Average Adjusted Compensation shall mean the average of the
Executive's annual compensation over the five calendar years ending prior to the
date of a Change in Control. Average Adjusted Compensation shall be determined
by taking into account all of the compensation payable to the Executive by the
Company (including any pre-tax contributions made to a cafeteria plan or a
Section 401(k) plan), but shall exclude any compensation resulting from the
exercise of stock options granted to the Executive by the Company.
(b) Average Total Compensation shall mean the average of the
Executive's annual compensation over the five calendar years ending prior to the
date of a Statutory Change in Control (or such shorter period of time during
which the Executive is employed by the Company). Average Total Compensation
shall be determined by taking into account all of the compensation payable to
the Executive by the Company (including any pre-tax contributions made to a
cafeteria plan or a Section 401(k) plan), and shall be determined pursuant to
Section 280G of the Code. If the five calendar year period includes a calendar
year in which the Executive was not employed for the entire year, the
Executive's compensation for such calendar year shall be annualized.
(c) Base Compensation shall mean the base compensation of the Executive
set forth in Section 5(a), as it may be adjusted by the Board of Directors.
(d) Beneficiary shall mean the Executive's surviving spouse.
(e) Board of Directors shall mean the board of directors of the
Company.
(f) Cause shall mean any one or more of the following, as determined in
good faith by the Board of Directors:
(i) the conviction of the Executive of (or the entry by the
Executive of a plea of guilty or nolo contendere to) a felony involving
moral turpitude;
(ii) the Executive's engaging in conduct that constitutes
willful gross neglect or willful gross misconduct in carrying out his
duties and that results in economic harm to the Company; provided,
however, that no act or failure to act will be considered to be
"willful" unless it is done, or omitted to be done, by the Executive in
bad faith or without reasonable belief that his action or omission was
in the best interests of the Company; or
(iii) the Executive's material breach of the noncompetition,
nonsolicitation or nondisclosure covenants set forth in Section 8, the
Company's code of ethics, the Company's policies with regard to trading
in its common stock, or any other applicable rules or regulations.
Notwithstanding the above, no act or omission shall constitute "Cause"
until the Board of Directors has provided the Executive with a detailed written
notice of its conclusion that such an act or omission has occurred, and then
only if the Executive has failed to correct such act or omission within a
reasonable period of time.
For purposes of this Agreement, the Executive's termination of
employment shall be deemed to be for Cause if the Board of Directors of the
Company determines, at the time of the Executive's termination of employment or
at any time subsequent to the Executive's termination of employment, that Cause
for termination exists or existed at the time of his termination of employment.
In particular, the Executive shall be deemed to have been terminated for Cause
if a material breach of the noncompetition, nonsolicitation or nondisclosure
covenants set forth in Section 8 occurs subsequent to the Executive's
termination of employment.
(g) Change of Control shall mean:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of more than 50% of either (A) the then
outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally
in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection
(i), the following acquisitions shall not constitute a Change of
Control:
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(A)any acquisition directly from the Company, (B) any acquisition by
the Company, (C) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any
corporation controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A),
(B) and (C)of subsection (iii) of this Section 1(g); or
(ii) Individuals who, as of the date hereof, constitute the
Board of Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors of
the Company; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of Directors
of the Company; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case,
unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 75% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries)
in substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be;
(B) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination; and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board of
Directors of the Company, providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
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(h) Code shall mean the Internal Revenue Code of 1986, as amended.
(i) Deferred Benefit shall mean a monthly benefit of eight thousand
three hundred thirty-three and 33/100 dollars ($8,333.33), payable for a period
of sixty (60) consecutive months.
(j) ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended.
(k) Parachute Payment Limit shall mean 2.99 times the Executive's
Average Total Compensation, as determined pursuant to Section 280G of the Code.
(l) Statutory Change in Control shall mean a change in ownership or
effective control of the Company, or a change in the ownership of a substantial
portion of the assets of the Company, as determined pursuant to Section 280G of
the Code.
(m) Tax Advisor shall mean the independent accounting firm engaged by
the Company.
(n) Total Parachute Payments shall mean any and all payments or
benefits which are in the nature of compensation and which are received (or to
be received) by the Executive in connection with a Statutory Change in Control,
as determined pursuant to Section 280G of the Code.
Section 2. Position
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The Company hereby employs the Executive, and the Executive hereby
accepts employment, as President and Chief Executive Officer of the Company for
the period from January 1, 2005 through December 31, 2006. The Board of
Directors of the Company hereby appoints the Executive to serve, and the
Executive hereby agrees to serve, as the Chairman of the Board of Directors of
the Company for the period from January 1, 2007 through December 31, 2007.
The Executive agrees to serve in the positions described above and to
devote his full working time, attention and energies to the performance of the
duties described in Section 3: (i) except for vacations in accordance with
Section 5(e) hereof and absences due to temporary illness; and (ii) except that
the foregoing shall not preclude the Executive from serving on the boards of a
reasonable number of trade associations, for-profit corporations and charitable
organizations and engaging in charitable activities and community affairs,
provided such activities collectively do not interfere with the proper
performance of the Executive's duties and responsibilities hereunder.
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Section 3. Authority, Responsibilities and Duties.
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The Executive shall have such authority, responsibilities and duties as
generally pertain to the office of President and Chief Executive Officer, and
shall have such other authority, responsibilities and duties as may reasonably
be assigned from time to time by the Board of Directors of the Company or its
designee; provided, however, that when the Executive commences to serve as the
Chairman of the Board of Directors of the Company, the Executive shall have such
authority, responsibilities and duties as generally pertain to the office of
Chairman, and shall have such other authority, responsibilities and duties as
may reasonably be assigned from time to time by the Board of Directors of the
Company or its designee.
Section 4. Term.
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The term of this Agreement shall begin as of January 1, 2005 and shall
continue until December 31, 2007.
The Company may, in its discretion, elect to renew this Agreement for
one or more additional one-year periods by giving written notice to the
Executive at least thirty (30) days prior to the end of the initial term or any
renewal period.
Section 5. Compensation and Benefits.
--------------------------
In consideration of the services performed for or on behalf of the
Company, the Company shall compensate the Executive as follows:
(a) Base Compensation. The Company shall pay the Executive, in
accordance with the Company's customary payroll practices for its senior
executive officers, Base Compensation at an annual rate determined by the Board
of Directors.
(b) Annual Bonus. For each fiscal year of the Company which ends within
the term of the Agreement, the Executive shall be entitled to participate in the
Company's annual incentive program for its senior executive officers, or such
other bonus plan or program as the Board of Directors shall establish for the
Executive in its sole discretion.
(c) Equity Incentive Plans. The Executive may be granted stock options
or other equity incentive awards in accordance with the terms of the Company's
equity incentive plans, as the Board of Directors shall determine from time to
time in its sole discretion.
(d) Other Benefits. The Executive will be eligible for and will be
entitled to participate in other benefits maintained by the Company for its
senior executive officers (including, but not limited to, medical, dental,
disability, life insurance and retirement benefits) on a basis not less
favorable than that applicable to other senior executive officers of the
Company, subject to the requirements of applicable law. The Company shall have
the right to amend or terminate any or all of such benefits at any time;
provided, however, that any such amendment or termination shall apply on the
same basis to the Executive and to all other senior executive officers of the
Company. The Executive will also be entitled to appropriate office
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space, administrative support (including but not limited to secretarial
assistance), and such other facilities and services as are suitable to the
Executive's position and adequate for the performance of the Executive's duties.
(e) Vacation. The Executive will be entitled to five (5) weeks of
vacation per calendar year, to be taken at such times and intervals as shall be
determined by the Executive, subject to the reasonable business needs of the
Company and to Company policies applicable to senior executive officers as in
effect from time to time. The Executive shall not be entitled to receive cash in
lieu of any unused vacation time. In addition, the Executive shall not be
entitled to carryover any unused vacation time to a subsequent calendar year.
(f) Business Expenses. The Executive will be entitled to reimbursement
of all reasonable business expenses, in accordance with the Company's policy as
in effect from time to time and on a basis not less favorable than that
applicable to other senior executive officers of the Company (including, without
limitation, telephone, travel and entertainment expenses incurred by the
Executive in connection with the business of the Company). All such
reimbursements shall be subject to such reasonable substantiation and
documentation as may be specified by the Company.
Section 6. Post-Termination Benefits
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Following the termination of the Executive's employment as President
and Chief Executive Officer of the Company for any reason, the Executive shall
be entitled to receive the following benefits:
(a) Deferred Compensation. Following the termination of the Executive's
employment as President and Chief Executive Officer of the Company for any
reason (other than the Company's termination of the Executive's employment for
Cause), the Executive shall be entitled to receive the deferred compensation
described in this Section 6(a).
(i) The amount of the deferred compensation payable to the
Executive shall equal: (A) the Deferred Benefit; multiplied by (B) a
fraction (not greater than one), the numerator of which is the number
of full or partial months from January 1, 2005 until the date on which
the Executive has terminated both his employment as the President and
Chief Executive Officer of the Company and his service as a member of
the Board of Directors of the Company, and the denominator of which is
thirty-six (36).
If the Executive terminates his employment as the President
and Chief Executive Officer of the Company but remains a member of the
Board of Directors of the Company, the Company shall commence payment
of the deferred compensation described in this Section 6(a)(i) as of
the later of January 1, 2008 or the first day of the month following
the date on which the Executive has terminated his employment as the
President and Chief Executive Officer of the Company. If the Executive
terminates both his employment as the President and Chief Executive
Officer of the Company and his service as a member of the Board of
Directors of the Company, the Company shall commence payment of the
deferred compensation described in this Section 6(a)(i) as of the first
day
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of the month following the date on which the Executive has terminated
both his employment as the President and Chief Executive Officer of the
Company and his service as a member of the Board of Directors of the
Company. Once the deferred compensation commences, it shall thereafter
be payable in monthly payments for a period of sixty (60) consecutive
months.
(ii) If the Executive terminates his employment as the
President and Chief Executive Officer of the Company due to his death,
the Executive's Beneficiary shall receive the Deferred Benefit. The
Deferred Benefit shall commence on the first day of the month following
the Executive's death and shall be payable until the end of a period of
sixty (60) consecutive months or until the death of the Executive's
Beneficiary (whichever occurs first).
If the Executive dies after becoming entitled to receive the
deferred compensation described in Section 6(a)(i) but before the
receipt of sixty (60) consecutive monthly payments, the balance of said
payments shall be paid to the Executive's Beneficiary until the
remainder of such sixty (60) consecutive monthly payments have been
paid or until the death of the Executive's Beneficiary (whichever
occurs first).
(b) Post-Retirement Medical Benefits. Following the termination of the
Executive's employment as President and Chief Executive Officer of the Company
for any reason (other than the Company's termination of the Executive's
employment for Cause), the Company will provide the Executive with the following
benefits:
(i) Following the Executive's termination of employment, the
Company will provide the Executive with coverage under the Company's
major medical insurance plan at the level currently in effect for
Medicare-eligible retired employees (or coverage under any successor
plan which provides substantially similar benefits). Such coverage
shall commence on the date of the Executive's termination of
employment. The cost of such coverage shall be shared by the Executive
and the Company (or by any successor of the Company) in the same
proportion as the cost of such coverage is shared by eligible retired
employees and the Company.
(ii) If the Executive terminates employment before his spouse
reaches age sixty-five (65), the Company will provide the Executive's
spouse with coverage under the Company's group medical insurance plan
at the level currently in effect for the spouses of active employees
(or coverage under any successor plan which provides substantially
similar benefits). Such coverage shall continue until the date the
Executive's spouse reaches age sixty-five (65). The cost of such
coverage shall be shared by the Executive and the Company (or by any
successor of the Company) in the same proportion as the cost of such
coverage is shared by active employees and the Company.
Following the Executive's termination of employment, the
Company will provide the Executive's spouse with coverage under the
Company's major medical insurance plan at the level currently in effect
for the Medicare-eligible spouses of retired employees (or coverage
under any successor plan which provides substantially similar
benefits). Such
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coverage shall commence on the date the Executive's spouse reaches age
sixty-five (65) or the date of the Executive's termination of
employment (whichever is later). The cost of such coverage shall be
shared by the Executive and the Company (or by any successor of the
Company) in the same proportion as the cost of such coverage is shared
by eligible retired employees and the Company.
(c) Severance Payment in the Event a Change in Control Occurs. If the
Executive's employment is terminated after a Change in Control of the Company
occurs, then the Company shall pay to the Executive a severance payment equal to
2.99 times the Executive's Average Adjusted Compensation. Average Adjusted
Compensation shall be determined as of the date of the Change in Control.
The severance payment described in this Section 6(c) shall be paid to
the Executive in a single lump sum amount within thirty (30) days following the
date of the Executive's termination of employment after a Change in Control of
the Company has occurred.
If a Change in Control occurs, the severance payment described in this
Section 6(c) shall be paid in addition to the deferred compensation described in
Section 6(a), the post-retirement medical benefits described in Section 6(b),
and any other benefits or payments to which the Executive is entitled under the
terms of any agreement, plan or policy established by the Company. In addition,
the Executive shall receive the deferred compensation described in Section 6(a),
the post-retirement medical benefits described in Section 6(b) and the severance
payment described in Section 6(c) whether or not the Executive's termination of
employment following a Change in Control was for Cause.
Notwithstanding anything in this Agreement to the contrary, in the
event that a Statutory Change in Control has occurred (whether or not a Change
in Control has occurred) and the Total Parachute Payments are determined by the
Tax Advisor not to be deductible, in whole or in part, by the Company because
they exceed the Parachute Payment Limit set forth in Section 280G of the Code,
then the severance payment described in this Section 6(c) (to the extent it is
included in the Total Parachute Payments) shall be reduced until all of the
Total Parachute Payments are deductible in accordance with Section 280G of the
Code, or the severance payment described in this Section 6(c) is reduced to
zero. For purposes of this limitation, no portion of the Total Parachute
Payments shall be taken into account to the extent that the receipt of such
payments, in the determination of the Tax Advisor, is effectively waived by the
Executive prior to the date which is fifteen (15) days following the date of the
Change in Control or the Executive's termination of employment (as the case may
be) and prior to the earlier of the date of constructive receipt and the date of
payment thereof. The determination of the Tax Advisor as to the deductibility of
the Total Parachute Payments shall be completed not later than forty-five (45)
days following the date of the Change in Control or the Executive's termination
of employment (as the case may be), and such determination shall be communicated
in writing to the Company, with a copy to the Executive, within said forty-five
(45) day period. The good faith determination of the Tax Advisor as to the
deductibility of the Total Parachute Payments shall be deemed conclusive and
binding on the Company and the Executive. The Company shall pay the fees and
other costs of the Tax Advisor hereunder. In the event that the Tax Advisor is
unable or declines to serve for purposes of making the foregoing determination,
the Company
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shall appoint another accounting firm of national reputation to serve as the Tax
Advisor, with the Executive's consent.
(d) Code Section 409A. Notwithstanding the above, in the event that the
Executive is deemed to be a "key employee" for purposes of Code Section 409A,
the payment of the post-termination benefits described in this Section 6 shall
be delayed until the earliest date permitted under Code Section 409A or any
other applicable laws and regulations.
Section 7. Provisions Applicable to Post-Termination Benefits.
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The following provisions shall apply to the payment of the
post-termination benefits described in Section 6:
(a) Funding. It is the intention of the Company, the Executive, his
Beneficiary and each other party to this Agreement that the benefits payable
under this Agreement be unfunded for tax purposes and for purposes of Title I of
ERISA. The rights of the Executive and his Beneficiary to receive such benefits
shall be solely those of a general unsecured creditor of the Company. The
Agreement constitutes a mere promise by the Company to make benefit payments in
the future.
(b) Benefits Not Assignable. Except as required by law, the right of
the Executive or his Beneficiary to any benefits payable under the Agreement:
(i) shall not be subject to voluntary or involuntary anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors of the Executive or his Beneficiary; (ii) shall not be considered an
asset of the Executive or his Beneficiary in the event of any divorce,
insolvency or bankruptcy; and (iii) shall not be subject to attachment,
execution, garnishment, sequestration or other legal or equitable process. In
the event that the Executive or his Beneficiary who is receiving or is entitled
to receive benefits under the Agreement attempts to assign, transfer or dispose
of such right, or if an attempt is made to subject said right to such process,
such assignment, transfer, disposition or process shall, unless otherwise
required by law, be null and void.
(c) Administration.
(i) The Board of Directors of the Company shall have the
responsibility for the administration of the payment of benefits under
this Agreement. The Board of Directors may, by written instruction,
designate one or more persons to carry out such responsibilities and
may, in the same manner, revoke such delegation of responsibilities;
provided, however, that in no event may the Board of Directors appoint
the Executive to carry out such responsibilities. Upon the designation
of such a person or persons and the delegation of such responsibilities
to him or them, all references in this Agreement to "Administrator"
shall be deemed to refer to such person or persons.
(ii) The Administrator shall have such authority and powers as
may be necessary to discharge its duties hereunder, including, but not
by way of limitation, the following:
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(A) to construe and interpret the Agreement and to
decide all questions of eligibility for (and determine the
amount and time of payment of) benefits hereunder;
(B) to prescribe procedures to be followed by the
Executive and his Beneficiary for the payment of benefits;
(C) to prepare and distribute information explaining
the payment of benefits hereunder; and
(D) to appoint or employ individuals to assist in the
administration of the payment of benefits hereunder and any
other agents it deems advisable, including legal counsel (who
may be counsel for the Company).
(iii) Whenever, in the Administrator's opinion, a person
entitled to receive any benefits hereunder is under a legal disability
or is incapacitated in any way so as to be unable to manage his or her
financial affairs, the Administrator may issue directions that payments
shall be made to another person for his or her benefit, or the
Administrator may direct that payments be applied for the benefit of
such person in such manner as the Administrator considers advisable.
Any payment of benefits in accordance with the provisions of this
Section 7(c)(iii) shall be a complete discharge of any liability for
the making of such payment under the provisions of the Agreement.
(d) Benefit Claims Procedure.
(i) Any claim for the payment of benefits under this Agreement
shall be made in writing to the Administrator. If such claim for
benefits is wholly or partially denied, the Administrator shall, within
ninety (90) days after receipt of the claim, notify the claimant of the
denial of the claim. Such notice of denial: (A) shall be in writing;
(B) shall be written in a manner calculated to be understood by the
claimant; and (C) shall contain (I) the specific reason or reasons for
denial of the claim, (II) a specific reference to the pertinent
provisions of the Agreement upon which the denial is based, (III) a
description of any additional material or information necessary to
perfect the claim, along with an explanation of why such material or
information is necessary, and (IV) an explanation of the claim review
procedure.
(ii) Within sixty (60) days after the receipt by the claimant
of a written notice of denial of the claim, or such later time as shall
be deemed reasonable taking into account the nature of the benefit
subject to the claim and any other attendant circumstances, the
claimant may file a written request with the Administrator that it
conduct a full and fair review of the denial of the claim for benefits.
(iii) The Administrator shall deliver to the claimant a
written decision on the claim within sixty (60) days after receipt of
the aforesaid request for review, except that if there are special
circumstances (such as the need to hold a hearing) which require an
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extension of time for processing, the aforesaid sixty (60) day period
shall be extended to one hundred twenty (120) days. Such decision
shall: (A) be written in a manner calculated to be understood by the
claimant; (B) include the specific reason or reasons for the decision;
and (C) contain a specific reference to the pertinent provisions of the
Agreement upon which the decision is based.
Section 8. Restrictive Covenants.
----------------------
(a) Noncompetition Covenant. The Executive covenants and agrees that,
while employed by the Company and for a period of two years after the
Executive's termination of employment with the Company for any reason (the
"noncompetition term"), the Executive will not, anywhere in the "restricted
area", either directly or indirectly, solely or jointly with any other person or
persons, as an employee, contractor, consultant, individual proprietor, partner,
shareholder, director, officer, member, manager, joint venturer, investor,
lender, or in any other capacity, "compete" with the business of the Company as
conducted during the noncompetition term; provided, however, that this Section
8(a) shall not apply to the Executive's passive ownership of stock in, or
service as a director of, any publicly-traded company.
As used in this Section 8(a): (i) the term "compete" shall mean
engaging, participating, or being involved in any respect in the business of, or
furnishing any aid, assistance or service of any kind to any person in
connection with, the design, manufacture, production, distribution, sale,
marketing, merchandising, import or export of any product or service which is
the same as or similar in either design or function, or both, to any product or
service at any time designed, manufactured, produced, distributed, sold,
marketed, merchandised, imported or exported by the Company; and (ii) the term
"restricted area" shall mean the entire United States and such other countries
where the Company markets and sells or intends to market and sell any product or
service at any time designed, manufactured, produced, distributed, sold,
marketed, merchandised, imported or exported by the Company.
(b) Nonsolicitation Covenant. The Executive covenants and agrees that,
while employed by the Company and for a period of two years following the
Executive's termination of employment with the Company for any reason, the
Executive will not, directly or indirectly, by any means or device whatsoever,
for the Executive, or on behalf of or in conjunction with any other person,
partnership or corporation, solicit, entice, hire, or attempt to hire or employ
any employee of the Company.
(c) Nondisclosure Covenant. The Executive covenants and acknowledges
that certain assets of the Company constitute "confidential information." As
used in this Section 8(c), the term "confidential information" means any and all
information and compilations of information, in whatever form or medium
(including any copies thereof), relating to any part of the business of the
Company, or the business of its customers, which is provided to the Executive,
or which the Executive obtains or compiles or had obtained or compiled on his
behalf, which information or compilations of information are not a matter of
public record or generally known to the public, including without limitation:
(i) financial information regarding the Company; (ii) personnel data, including
compensation arrangements relating to the Executive or any other employees of
the Company; (iii) internal plans, practices, and procedures of the Company;
(iv) the business
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methods and marketing strategies of the Company; and (v) any other information
expressly deemed confidential by the officers and directors of the Company.
The Executive covenants and agrees that, without the prior written
consent of the Company, the Executive will not use or disclose, or negligently
permit any unauthorized person to use, disclose, or gain access to, any
confidential information.
Upon termination of employment, the Executive agrees to deliver
promptly to the Company all memoranda, notes, records, manuals, or other
documents, including all copies of such materials, containing confidential
information, whether made or compiled by the Executive or furnished to him from
any source by virtue of the Executive's relationship with the Company.
Regardless of the reason for the Executive's cessation of employment, the
Executive will furnish such information as may be in the Executive's possession
and will provide such cooperation to the Company as may reasonably be requested
in connection with any claims or legal actions in which the Company is or may
become a party. The Company will reimburse the Executive for any reasonable
out-of-pocket expenses that the Executive incurs in order to satisfy his
obligations under this Section 8(c).
(d) Reformation; Injunctive and Equitable Relief. The Executive
expressly acknowledges that the Company and the Executive have carefully
considered the nature and scope of this Section 8, and that the activities,
period and area covered by this Section 8 are fair, reasonable and necessary. To
the extent that any covenant contained in this Section 8 is held to be invalid,
illegal or unenforceable because of the extent of activities, duration of such
covenant, the geographic area covered thereby, or otherwise, the Company and the
Executive agree that the court making such determination shall reform such
covenant to include as much of its nature and scope as will render it
enforceable and, in its reduced form, said covenant shall be valid, legal and
enforceable to the fullest extent of the law.
The Executive also acknowledges and agrees that, upon any breach by the
Executive of any of the covenants in this Section 8, the Company will have no
adequate remedy at law, and accordingly will be entitled to specific performance
and other appropriate injunctive and equitable relief. Nothing herein shall be
construed as prohibiting the Company from pursuing any other remedies available
to it, including the recovery of damages from the Executive.
Section 9. Applicability of Other Agreements.
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(a) Continuation of Supplemental Retirement Plan. The Supplemental
Retirement Plan for the Chief Executive Officer of The Eastern Company dated
September 9, 1998 shall not be affected by the adoption of this Agreement, and
shall continue in effect during the term of this Agreement and thereafter.
(b) Termination of Severance Agreement. The Severance Agreement between
the Company and the Executive dated February 21, 2001 is hereby terminated and
superceded by this Agreement, and the terms of such Severance Agreement shall no
longer have any force or effect.
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Section 10. General.
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(a) Notices. All notices and other communications hereunder shall be in
writing or by written telecommunication, and shall be deemed to have been duly
given if delivered personally or if sent by overnight courier or by certified
mail, return receipt requested, postage prepaid or sent by written
telecommunication or telecopy, to the relevant address set forth below, or to
such other address as the recipient of such notice or communication shall have
specified to the other party hereto in accordance with this Section 10(a):
If to the Company, to:
The Eastern Company
112 Bridge Street
P.O. Box 460
Naugatuck, CT 06770
Attn: Chairman of the Compensation Committee
of the Board of Directors
If to the Executive, at his last residence shown on the
records of the Company.
Any such notice shall be effective: (i) if delivered personally, when received;
(ii) if sent by overnight courier, when receipted for; and (iii) if mailed, five
days after being mailed as described above.
(b) Successors.
(i) This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(ii) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(iii) The Company will require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to
assume expressly and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it
if no such succession had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or otherwise.
(c) Other Plan Benefits. Nothing in this Agreement shall prevent the
Executive from receiving, in addition to any amounts he may be entitled to
receive under this Agreement, any amounts which may be distributable to him at
any time under the terms of any qualified employee benefit plan or any other
non-qualified or incentive plan or arrangement of the Company which is now in
effect or which may hereafter be adopted.
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(d) Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement, and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the amount of any payment pursuant to this Agreement), plus in
each case interest on any delayed payment at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Code; provided, however, that the
Company shall be obligated to pay the Executive such legal fees and expenses
only to the extent that the Executive is successful on the merits in a court of
law or pursuant to an arbitration proceeding, or the Company and the Executive
agree to a settlement of any such contest.
(e) Severability. If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.
(f) Waivers. No delay or omission by either party hereto in exercising
any right, power or privilege hereunder shall impair such right, power or
privilege, nor shall any single or partial exercise of any such right, power or
privilege preclude any further exercise thereof or the exercise of any other
right, power or privilege.
(g) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(h) Amendment. This Agreement may not be amended except by a written
instrument hereafter signed by the Executive and a duly authorized
representative of the Board of Directors of the Company.
(i) Governing Law. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Connecticut,
without giving effect to principles of conflicts of law.
(j) Construction. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party.
(k) Payments and Exercise of Rights After Death. Any amounts due
hereunder after the Executive's death shall be paid to the Executive's
Beneficiary.
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(l) Withholding. Any payments provided under this Agreement shall be
paid net of any applicable tax withholding required under federal, state or
local law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed and its corporate seal to be hereunto affixed, and the Executive has
hereunto set the Executive's hand and seal, as of the day and year specified
above.
ATTEST: THE EASTERN COMPANY
/s/John L. Sullivan III By /s/David C. Robinson
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Its Secretary Title: Chairman Compensation Committee
EXECUTIVE
/s/Leonard F. Leganza
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Leonard F. Leganza
Date: February 22, 2005
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