EXHIBIT 10.23 - AGREEMENT RELATING TO EMPLOYMENT
Agreement Relating to Employment in the form of the attached entered into with
the following Employee as of July 9, 1997:
G.H. Hanthorn
DATE
(Name)
One Zurn Place
Erie, PA 16502
RE: Agreement Relating To Employment
Dear Mr. :
ZURN INDUSTRIES, INC, (the "Company") considers it in the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, the Board of Directors of the Company (the
"Board") recognizes that, the possibility of a change in control may exist and
that such possibility, and the uncertainty and questions which it may arise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders.
Therefore, in order to induce you to remain in the employment of the
Company, the Company agrees that you shall receive the severance benefits set
forth in this letter agreement ("Agreement") in the event your employment with
the Company is terminated subsequent to a "change in control of the Company"
(as defined in Section 2 hereof) under the circumstances described below.
1. TERM OF AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1997; and each
January 1, thereafter, the term of this Agreement shall automatically be
extended for one additional year, provided, if a change in control of the
Company shall have occurred during the original or extended term of this
Agreement, this Agreement shall continue in effect for a period of thirty-six
(36) months beyond the month in which such change in control occurred.
2. CHANGE IN CONTROL. No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below.
For purposes of this Agreement, a "change in control of the Company" shall be
deemed to have occurred if:
(a) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended [the "Exchange
Act"], other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the Company,
or any Company owned, directly or indirectly, by the stockholders
of the Company in substantially the same proportions as their
ownership of stock of the Company) becomes the "beneficial owner"
(as defined in Rule 13d-3 promulgated under the Exchange Act),
directly or indirectly, of securities of the Company representing
20% or more of the combined voting power of the Company's then
outstanding securities;
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(b) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction
described in clauses (a), (c) or (d) of this Section) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote at least two-thirds of the
directors then still in office who either were directors at the
beginning of the period or whose election or nomination for
election was previously so approved cease for any reason to
constitute a majority thereof;
(c) the stockholders of the Company approve a merger or consolidation
of the Company with any other Company, other than (1) a merger or
consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of
the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger
or consolidation or (2) a merger or consolidation effected to
implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined)
acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or
disposition by the Company of all of substantially all of the
Company's assets.
3. TERMINATION FOLLOWING CHANGE IN CONTROL. If any of the events
described in Section 2 hereof constituting a change in control of the Company
shall have occurred, you shall be entitled to the benefits provided in
Subsection 4(iv) hereof upon the subsequent termination of your employment
during the term of this Agreement unless such termination is (a) because of
your death, Disability or Retirement, (b) by the Company for Cause, or (c) by
you other than for Good Reason.
(i) DISABILITY; RETIREMENT. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the
full-time performance of your duties with the Company for six (6)
consecutive months, and within thirty (30) days after written
notice of termination is given you shall have not returned to the
full-time performance of your duties, your employment may be
terminated for "Disability". Termination by the Company or you of
your employment based on "Retirement" shall mean termination in
accordance with the Company's retirement policy at normal
retirement age generally applicable to its salaried employees or
in accordance with any retirement arrangement established with
your consent with respect to you.
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(ii) CAUSE. Termination by the Company of your employment for "Cause"
shall mean termination upon (a) the willful and continued failure
by you to substantially perform your duties with the Company
(other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated
failure after the issuance of a Notice of Termination, as defined
in Subsection 3(iv), by you for Good Reason) after a written
demand for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in which
the Board believes that you have not substantially performed your
duties, or (b) the willful engaging by you in conduct which is
demonstrably and materially injurious to the Company, monetarily
or otherwise. For purposes (of this Subsection, no act, or failure
to act, on your part shall be deemed "willful" unless done, or
omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best
interest of the Company. You may be terminated for Cause only
after there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less then
two thirds (2/3) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together with
your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set
forth above in clauses (a) or (b) of the first sentence of this
Subsection and specifying the particulars thereof in detail.
(iii) GOOD REASON. You shall be entitled to terminate your employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your express written consent, any of the following:
(a) a substantial adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to a
change in control of the Company other than any such alteration
primarily attributable to the fact that the Company may no longer
be a public company;
(b) a reduction by the Company in your annual base salary as in effect
on the date hereof or as the same may be increased from time to
time;
(c) the failure of the Company, without your consent, to pay to you
any portion of your current compensation, or to pay to you any
portion of an installment of deferred compensation under any
deferred compensation program of the Company, within seven (7)
days of the date such compensation is due;
(d) the failure by the Company to continue in effect any compensation
plan in which you participate including but not limited to the
Company's Incentive Compensation Plan and the Company's Stock
Option Plan, or any substitute plans adopted prior to the change
in control, unless an equitable arrangement (embodied in an
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ongoing substitute or alternative plan) has been made with respect
to such plan in connection with the change in control of the
Company, or the failure by the Company to continue your
participation therein on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of
your participation relative to other participants, as existed at
the time of the change in control;
(e) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any
of the Company's pension, life insurance, medical, health and
accident, or disability plans in which you were participating at
the time of a change in control of the Company, the taking of any
action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive you of any
material fringe benefits enjoyed by you at the time of the change
in control of the Company, or the failure by the Company to
provide you with the number of paid vacation days to which you are
entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at
the time of the change in control;
(f) the failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as
contemplated in Section 5 hereof; or
(g) any purported termination of your employment which is not effected
pursuant to a Notice of Termination satisfying the requirements of
Subsection (iv) below (and, if applicable, the requirements of
Subsection (ii) above); for purposes of this Agreement, no such
purported termination shall be effective.
(h) a determination by you in good faith that, following a change in
control, you are no longer able to perform your duties and
responsibilities with the Company.
Your right to terminate your employment pursuant to this Subsection shall be
affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(iv) NOTICE OF TERMINATION. Any purported termination of your employment by
the Company or by you shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 6
hereof. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of
your employment under the provision so indicated.
(v) DATE OF TERMINATION, ETC. "Date of Termination" shall mean (a)
if your employment is terminated for Disability, thirty (30) days
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after Notice of Termination is given (provided that you shall not
have returned to the full-time performance of your duties during
such thirty (30) day period), and (b) if your employment is
terminated pursuant to Subsection (ii) and (iii) above or for any
other reason (other than Disability), the date specified in the
Notice of Termination which, in the case of a termination
pursuant to Subsection (ii) above shall not be less than thirty
(30) days, and in the case of a termination pursuant to Subsection
(iii) above shall not be less than thirty (30) nor more than sixty
(60) days, respectively, from the date such Notice of Termination
is given); provided that if within thirty (30) days after any
Notice of Termination is given the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual
written agreement of the parties, by a binding arbitration award,
or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or the time for appeal
therefrom having expired and no appeal having been perfected);
provided further that the Date of Termination shall be extended by
a notice of dispute only if such notice is given in good faith and
the party giving such notice pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the pendency of
any such dispute, the Company will continue to pay you your full
compensation in effect when the notice giving rise to the dispute
was given (including, but not limited to, base salary) and
continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice
giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under
this Subsection are in addition to all other amounts due under
this Agreement and shall not be offset against or reduce any other
amounts due under this Agreement except to the extent otherwise
provided in paragraph (c) of Subsection 4(iv).
4. COMPENSATION UPON TERMINATION OR DURING DISABILITY. Following a
change in Control of the Company, as defined by Section 2, upon
termination of your employment or during a period of disability
you shall be entitled to the following benefits:
(i) During any period that you fail to perform your full-time duties
with the Company as a result of incapacity due to physical or
mental illness, you shall continue to receive your base salary at
the rate in effect at the commencement of any such period,
together with all compensation payable to you under the Company's
long-term disability insurance program or other [plan during such
period, until this Agreement is terminated pursuant to Section
3(i) hereof. Thereafter, your benefits shall be determined in
accordance with the Company's insurance and retirement programs
then in effect.
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(ii) If your employment shall be terminated by the Company for Cause or
by you other than for Good Reason, Disability, death or
Retirement, the Company shall pay you your full base salary
through the Date of Termination at the rate in effect at the time
Notice of Termination is given, plus all other amounts to which
you are entitled under any compensation plan of the Company at the
time such payments are due, and the Company shall have no further
obligations to you under this Agreement.
(iii) if your employment shall be terminated by you for Retirement, or
by reason of your death, your benefits shall be determined in
accordance with the Company's retirement and insurance programs
then in effect.
(iv) If your employment by the Company shall be terminated (a) by the
Company other than for Cause or Disability or (b) by you for Good
Reason or Retirement, then you shall be entitled to the benefits
provided below:
(A) the Company shall pay you your full base salary through the
Date of Termination at the rate in effect at the time Notice of
Termination is given, plus other amounts to which you are entitled
under any compensation plan of the Company, at the time such
payments are due except as otherwise provided below;
(B) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as
severance pay to you a lump sum severance payment (together with
payments provided in paragraphs C, D, and E below, the "Severance
Payment") equal to 300% of the greater of (i,) your annual base
salary in effect on the Date of Termination or (ii) your annual
base salary in effect immediately prior to the change in control
of the Company and 300% of the average of the annual bonus paid to
you for the three full fiscal years preceding the termination.
(C) If any of the Severance Payments will be subject to the tax
(the "Excise Tax") imposed by section 4999 of the Internal Revenue
Code, (or any similar tax that may hereafter be imposed) the
Company shall pay to you at the time specified in Subsection (D),
below, an additional amount (the "Gross-Up Payment") such that the
net amount retained by you, after deduction of any Excise Tax on
the Total Payments (as hereinafter defined) and any federal, state
and local income tax and Excise Tax upon the payment provided for
by this subsection, shall be equal to the Total Severance
Payments. For purposes of determining whether any of the
Severance Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (a) any other payments or benefits
received or to be received by you in connection with a change in
control of the Company or your termination of employment (whether
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change in control of the Company or any person
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affiliated with the Company or such person) (which together with
the Severance Payments, constitute the "Total Payments") shall be
treated as "parachute payments" within the meaning of section
28OG(b)(2) of the Code, and all "excess parachute payments" within
the meaning of section 28OG(b)(1) shall be treated as subject to
the Excise Tax, unless in the opinion of tax counsel selected by
the Company's independent auditors and acceptable to you such
other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments
(in whole or in part) represent reasonable compensation for
services actually rendered within the meaning of section
28OG(b)(4) of the Code in excess of the base amount within the
meaning of section 28OG(b)(3) of the Code, or are otherwise not
subject to the Excise Tax, (b) the amount of the Total Payments
which shall be treated as subject to the Excise Tax shall be equal
to the lesser of (1) the total amount of the Total Payments of (2)
the amount of excess parachute payments within the meaning of
section 28OG(b)(1) (after applying clause (q) above, and (c) the
value of any non-cash benefits or any deferred payment or benefit
shall be determined by the Company's independent auditors in
accordance with the principles of section 28OG(d)(3) and (4) of
the Code. For purposes of determining the amount of the Gross-Up
Payment, you shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the
state and locality of your residence on the Date of Termination,
net of the maximum reduction in federal income taxes which could
be obtained from deduction of such state and local taxes. In the
event that the Excise Tax is subsequently determined to be less
than the amount taken into account hereunder at the time of
termination of your employment, you shall repay to the Company at
the time that the amount of such reduction in Excise Tax is
finally determined the portion of the Gross-Up Payment
attributable to such reduction (plus the portion of the Gross-Up
Payment attributable to the Excise Tax and federal and state and
local income tax imposed on the Gross-Up Payment being repaid by
you if such repayment results in a reduction in Excise Tax and/or
a federal and state and local income tax deduction) plus interest
on the amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at
the time of the termination of your employment (including by
reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall
make an additional gross-up payment in respect of such excess
(plus any interest payable with respect to such excess) at the
time that the amount of such excess is finally determined.
(D) The payment provided for in paragraph (B), above, shall be
made not later than the fifth day following the Date of
Termination, provided, however, that if the amounts of such
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payments, and the limitation on such payments set forth in
paragraph (C), above, cannot be finally determined on or before
such day, the Company shall pay to you on such day an estimate, as
determined in good faith by the Company, of the minimum amount of
such payments and shall pay the remainder of such payments
(together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth day after the
Date of Termination. In the event that the amount of the estimated
payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to
you, payable on the fifth day after demand by the Company
(together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
(E) The Company shall also pay to you all legal fees and expenses
incurred by you as a result of such termination (including all
such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce
early right or benefit provided by this Agreement).
(v) If your employment shall be terminated (a) by the Company other
than for Cause, Retirement or Disability or (b) by you for Good
Reason, then for a twenty-four (24) month period after such
termination, the Company shall arrange to provide you with life,
disability, accident and health insurance benefits substantially
similar to those which you are receiving immediately prior to the
Notice of Termination.
(vi) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided
for in this Section 4 be reduced by any compensation earned by you
as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owing by you
to the Company, or otherwise.
(vii) In addition to all other amounts payable to you under this Section
4, you shall be entitled to receive all benefits payable to you
under the Company's retirement programs.
5. SUCCESSORS; BINDING AGREEMENT
(i) 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 expressly assume 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.
Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle you to compensation
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from the Company in the same amount and on the same terms as you
would be entitled hereunder if you terminate your employment for
Good Reason following a change in control of the Company, except
for purposes of implementing the foregoing, the date on which any
succession becomes effective shall be deemed the Date of
Termination. 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.
(ii) This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee
or, if there is no such designee, to your estate.
6. PRIOR AGREEMENT. This Agreement is in full and complete
substitution for any prior employment agreement including, if applicable, the
certain Employment Agreement dated December 1, 1981 and the certain agreement
dated October 20, 1988.
7. NOTICE. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notice to the Company shall be directed to the attention of the Board
with a copy to the Secretary of the Company, or to such other address as
either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only upon
receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed
to in writing and signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the Commonwealth of Pennsylvania. All
reference to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments provided for
hereunder shall be paid net of any applicable withholding required under
federal, state or local law. The obligations of the Company under Section 4
shall survive the expiration of the term of this Agreement.
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9. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Erie, Pennsylvania in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award
in any court having jurisdiction; provided, however, that you shall be
entitled to seek specific performance of your right to be paid until the Date
of Termination during the pendency of any dispute or controversy arising under
or in connection with this Agreement.
Upon your acceptance of the terms set forth in this letter by signing and
returning a copy to the Secretary of the Company, this letter will then
constitute an agreement of the Company.
Very truly yours,
Chairman, Management Development and
Compensation Committee of the Board of Directors
AGREED TO this day
of 1997.
SIGNATURE
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