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EXHIBIT 10.16
[DATE]
DIVISION PRESIDENT VERSION
Dear ________________________:
This letter agreement (the "Agreement") sets out the agreement between
you (the "Executive") and TransTechnology Corporation (the "Corporation") with
respect to certain severance arrangements which shall apply only in the event
that a Change in Control, as hereinafter defined, of the Corporation occurs
after the date hereof.
1. For purposes of this Agreement, a "Change in Control" shall
mean the occurrence of any one (or more) of the following
events after the date of this Agreement:
a. When the Corporation acquires actual knowledge that
any person, including a group as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, is
or has become the beneficial owner of shares of the
Corporation with respect to which twenty percent
(20%) or more of the total number of votes for the
election of the Corporation's Board of Directors may
be cast;
b. As a result of, or in connection with, any cash
tender offer, exchange offer, merger or other
business combination, sale of assets or contested
election, or combination of the foregoing, persons
who were directors of the Corporation immediately
prior to such event shall cease to constitute a
majority of the Board of Directors;
c. The stockholders of the Corporation shall approve an
agreement providing either for a transaction in which
the Corporation will cease to be an independent
publicly owned corporation or for a sale or other
disposition of all or substantially all the assets of
the Corporation; or
d. A tender offer or exchange offer is made for shares
of the Corporation's common stock (other than one
made by the Corporation) and shares of common stock
are acquired thereunder.
2. In the event of a Change in Control of the Corporation, and
the termination by the Corporation of the Executive's
employment upon such Change in Control or within 24 months
thereafter for reasons other than Cause, as defined in
Paragraph 3
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below, or the Executive terminates his employment with the
Corporation for "Good Reason," as defined in Paragraph 5
below, in connection with, or within 24 months after a Change
in Control, the Corporation shall pay to the Executive an
amount equal to (a) the Executive's annual salary in effect on
the date of said termination ("Base Salary"), plus (b) the
average of his total bonuses paid or due for each of the last
2 completed fiscal years prior to the Termination Date, as
defined below (or, in the event the Executive has been
employed by the Corporation for less than 2 fiscal years and
has received only one bonus, an amount equal to the bonus
received by the Executive) plus (c) the working days pay
equivalent of earned but unused vacation and sick time, plus
(d) the fair market value of any accrued but unvested
restricted stock and stock options outstanding as of the
Executive's Termination Date, plus (e) the amount payable to
the Executive under the Corporate Severance Pay Plan of the
Corporation plus (f) all accrued and unpaid salary, less any
governmentally required withholdings on the foregoing. As used
in clause (d), the term "fair market value" means the closing
price of the common stock of the Corporation on the New York
Stock Exchange on the Termination Date. Subject to Paragraph 6
below, said lump sum shall be paid in two (2) installments,
the first installment to be in an amount which (x) does not,
in combination with all other compensation received by the
Executive in the same fiscal year, exceed the deductible limit
for the Executive's compensation under Internal Revenue Code
Section 162(m) and (y) subject to the preceding clause (x), is
equal to the maximum aggregate amount which can be paid to the
Executive without constituting Excess Parachute Payments as
defined in Paragraph 6 below. The first installment shall be
paid within 10 days of the Executive's last day of employment
with the Corporation (said last day being hereinafter the
"Termination Date") and the second installment, which shall
equal the balance due to the Executive under this Agreement,
shall be paid within 10 days of the close of the Corporation's
fiscal year in which the first installment was paid; provided
that in the event of a breach by the Corporation of this
Agreement as set out in Paragraph 10 below, the aforesaid sums
referenced in clauses 2(a) through (f) above shall be paid in
one installment within 10 days of the exercise by the
Executive of his rights under Paragraph 10. The aforesaid sums
referenced in clauses 2(a) through (f) shall be in addition to
all other amounts which may become payable to the Executive
pursuant to other agreements and plans which the Corporation
may have in force for the benefit of its executive employees
and for which the Executive is eligible, including without
limitation the agreements and plans referred to in paragraph
17 below. The Corporation shall continue to provide the
Executive for a period of 24 months from the Termination Date
with life, health, and disability insurance coverage
substantially identical to the coverage maintained for the
Executive prior to the Termination Date.
3. For purposes of this Agreement, termination for "Cause" shall
mean only the following conduct by the Executive:
a. material breach of any provision of this Agreement;
b. breach of fiduciary duty to the Corporation involving
personal gain or profit;
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c. intentional and repeated failure to perform material
stated duties;
d. conviction of any felony, any crime involving moral
turpitude, or any crime committed in the conduct of
his or her official duties which is materially
adverse to the welfare of the Corporation.
The Executive shall not be deemed to have been terminated for
Cause unless there shall have been delivered to the Executive
a copy of a resolution adopted by the affirmative vote of not
less than a majority of the entire membership of the Board of
Directors of the Corporation at a meeting of the Board of
Directors duly called and held for the purpose (and reasonable
notice to the Executive and an opportunity for the Executive,
together with his counsel, to be heard before the Board of
Directors), finding that in the good faith opinion of the
Board of Directors of the Corporation the Executive was guilty
of conduct specified in this Paragraph 3 and specifying the
particulars thereof in detail. Except in the event of a
conviction as described in subparagraph 3(d), in no event will
the Executive be subject to termination for Cause pursuant to
this Agreement unless the Executive shall have failed to cure,
correct or prevent the alleged breach or failure within thirty
(30) days after such resolution has been delivered to the
Executive.
4. This Agreement may be terminated by the Executive at any time
upon ninety (90) days' written notice to the Corporation or
upon such shorter period as may be agreed upon between the
Executive and the Chairman of the Board and Chief Executive
Officer of the Corporation. In the event of such termination
by the Executive, the Corporation shall be obligated only to
continue to pay the Executive his salary up to the date of
termination, and those retirement and/or employee benefits
which have been earned or become payable up to the date of
termination.
5. For purposes of this Agreement, "Good Reason" shall mean the
occurrence, in connection with, or within 24 months after, a
Change in Control, of any of the events or conditions
described in subparagraphs (a) through (g) hereof without the
Executive's express written consent. Executive's right to
terminate his employment pursuant to this Paragraph 5 shall
not be affected by his incapacity due to physical or mental
illness.
a. A change in the Executive's status, title, position
or responsibilities (including reporting
responsibilities) which, in the Executive's
reasonable judgment, does not represent a promotion
from his status, title, position or responsibilities
as in effect immediately prior thereto; the
assignment to the Executive of any duties or
responsibilities which, in the Executive's reasonable
judgment, are inconsistent with such status, title,
position or responsibilities; or any removal of the
Executive from or failure to reappoint him to any of
such positions, except in connection with the
termination of his employment for (i) Cause, (ii) as
a result of his death or (iii) by the Executive other
than for Good Reason;
b. A reduction by the Corporation in the Executive's
Base Salary as in effect
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on the date of a Change in Control or as the same may
be increased from time to time;
c. The intention to relocate or transfer the Executive
to a location outside a 50 mile radius of the
location which is his primary office location as of
the date immediately preceding the date of a Change
in Control.
d. The adverse and substantial alteration in the nature
and quality of the office space from which the
Executive performs his duties, including the size and
location thereof, as well as the secretarial and
administrative support provided to him;
e. The failure by the Corporation to continue to provide
the Executive with compensation and benefits provided
for under this Agreement or benefits substantially
similar to those provided under any of the employee
benefit plans in which the Executive becomes a
participant, or the taking of any action by the
Corporation which would directly or indirectly
materially reduce any of such benefits or deprive the
Executive of any material benefit enjoyed by him at
the time of the Change in Control;
f. Any material breach by the Corporation of any
provision of this Agreement; or
g. The failure of the Corporation to obtain a
satisfactory agreement from any successor or assignee
of the Corporation to assume and agree to perform
this Agreement, as contemplated in Paragraph 10
hereof.
6. If the Present Value (as defined herein) of any benefits
payable under this Agreement and any other payments otherwise
payable to the Executive by the Corporation (collectively
referred to as "Severance Benefits") which are deemed under
Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code") to constitute "Parachute Payments" (as defined in
Section 280G), is greater than three times Executive's Base
Amount (as defined herein), the Executive may elect to apply
the provisions set forth below.
a. In the event that any Severance Benefits to be made
to the Executive by the Corporation, whether pursuant
to this Agreement or otherwise, upon termination of
the Executive's employment pursuant hereto are
deemed, in the opinion of the Corporation's
independent public accountants (the "Accountants") to
constitute Parachute Payments, the Executive may,
upon written notification by the Corporation of the
determination of the Accountants, elect to receive
any combination of Severance Benefits from the
Corporation due to him as a result of termination
which equal the maximum aggregate amount which can be
paid to the Executive without constituting Excess
Parachute Payments for purposes of the Code. The
Executive undertakes to make such election in the
event that receipt by him of amounts constituting
Excess Parachute Payments will result in a net amount
payable to him after taxes which is less than the
amount he would
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be entitled to receive by making the aforesaid
election. The written notification by the Corporation
of any determination of the Accountants pursuant to
this Paragraph 6 shall be provided to the Executive
within five (5) business days of the Termination
Date, and shall (i) list all Severance Benefits which
are deemed to constitute Parachute Payments in the
opinion of the Accountants, and (ii) contain the
Corporation's opinion as to the Present Value of each
of such Severance Benefits, which opinion shall be
determined in consultation with the Accountants. Any
election by the Executive pursuant to this paragraph
shall be made by the Executive and submitted to the
Corporation by the thirtieth (30th) day following the
Termination Date, and the Corporation shall pay to
the Executive the Severance Benefits specified in
such election within five (5) business days of
receipt of such election.
b. In the event that the Executive does not file a
written election with the Corporation pursuant to
subparagraph (a) upon receipt of a written
notification by the Corporation of the Accountant's
determination that Severance Benefits to which the
Executive is entitled upon termination constitute
Excess Parachute Payments, then the Corporation shall
pay the Executive all Severance Benefits due him
pursuant to this Agreement or otherwise.
c. For purposes of this Paragraph 6, Present Value means
the value determined in accordance with the
principles of Section 1274(b)(2) of the Code under
the rules provided in Treasury Regulations under
Section 280G of the Code, and Base Amount means the
average annual compensation payable to the Executive
by the Corporation and includable in the Executive's
gross income for Federal income tax purposes during
the shorter of the period consisting of the most
recent five taxable years ending before the date of
any Change in Control or the portion of such period
during which the Executive was an employee.
d. References to Code Section 280G herein are intended
as references to Section 280G as added to the Code by
the Tax Reform Act of 1984, Pub. L. No. 98-369, 98th
Cong., 2nd Sess., and as it may be amended.
e. In the event the Corporation fails to give the
notification to the Executive of the determination by
the Accountants as contemplated by subparagraph 6(a)
hereof; or if the Accountants erroneously fail to
determine the existence of Excess Parachute Payments;
or in the event of any other circumstance caused by
the Corporation which results in the imposition of
tax pursuant to Section 4999 of the Code, then any
such tax, including any penalty or interest paid by
the Executive shall be reimbursed to the Executive by
the Corporation.
7. All reasonable legal fees, arbitration fees, and expenses paid
or incurred by the Executive relating to any dispute,
controversy or claimed breach regarding this Agreement shall
be paid or reimbursed by the Corporation, if the Executive is
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successful, or as may be determined to be appropriate by any
arbitrator's award based on the relative merits of the two
parties.
8. The Executive agrees that during the term of this Agreement,
and for a period of one (1) year commencing the Termination
Date, he will not directly or indirectly:
a. Solicit, divert or take away any of the customers,
business or patronage of the Corporation or its
subsidiaries or affiliates; or
b. Induce or attempt to influence any employee of the
Corporation or its subsidiaries or affiliates to
terminate his or her employment therewith.
c. In the event of a breach or threatened breach of the
Executive of the provisions of this Paragraph 8, the
Corporation, or any duly authorized officer thereof,
will be entitled to a temporary restraining order or
injunction.
9. The Executive shall not, during the term of this Agreement,
have any other employment (exclusive of volunteer services
with not-for-profit institutions or occasional speaking
engagements) except with the prior approval of the Chairman of
the Board and Chief Executive Officer of the Corporation.
10. The Corporation 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
Corporation, by an assumption agreement in form and substance
satisfactory to the Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if
no such succession had taken place. Failure of the Corporation
to obtain such assumption agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the
Corporation in the same amount and on the same terms that he
would be entitled to hereunder if he terminated his employment
for Good Reason in connection with, or within 24 months after,
a Change in Control.
This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by his personal or
legal representatives, successors, heirs, distributees,
devisees, legatees and permitted assigns.
11. This Agreement is personal to each of the parties hereto and,
except as provided in Paragraph 10, neither party may assign
or delegate any of its rights or obligations hereunder without
first obtaining the written consent of the other party.
12. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or mailed, certified or
registered mail, return receipt requested with postage
prepaid, or delivered by next day courier service such as is
offered by Federal Express and competing carriers, to the
following addresses or to such other address as either party
may designate by like notice.
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If to the Corporation, to:
TransTechnology Corporation
150 Allen Road
Liberty Corner, New Jersey 07938
Attention: Chief Executive Officer
If to the Executive, to:
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13. No amendments or additions to this Agreement shall be binding
unless in writing and signed by both parties.
14. The provisions of this Agreement shall be deemed severable and
the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions
hereof.
15. This Agreement shall, except to the extent that Federal law
shall be deemed to preempt it, be governed by and construed
and enforced in accordance with the laws of the State of New
Jersey applicable to contracts made and performed within the
State.
16. Except for injunctive relief, any dispute or controversy
arising under or in connection with this Agreement, or the
breach thereof, shall be settled exclusively by binding
arbitration at a site in the State of New Jersey and
administered by the American Arbitration Association ("AAA")
in accordance with the National Rules for the Resolution of
Employment Disputes of the AAA then in effect. Notwithstanding
the pendency of any arbitration proceeding, the Corporation
will continue to pay the Executive's full compensation in
effect when the dispute, controversy, or claimed breach, arose
and continue the Executive as a participant in all
compensation, benefit and insurance plans in which the
Executive was then participating, until the matter submitted
to arbitration is finally resolved. Judgment may be entered on
the arbitrator's award in any court having competent
jurisdiction.
17. Nothing in this Agreement amends or modifies, or shall be
deemed or construed to amend or modify, the terms and
provisions (including the triggers and dates of payments
thereunder) of any stock option granted by the Corporation to
the Executive, or restricted stock agreement between the
Corporation and the Executive, or the provisions of the 1992
Long Term Incentive Plan and FY'96-98 Incentive Compensation
Plan.
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18. Absent a Change in Control or unless extended in writing by
the parties hereto, this Agreement shall expire two (2) years
from the date hereof.
Please signify your agreement to the terms of this Agreement by signing
in the space provided below and returning one fully executed copy to the
undersigned.
TRANSTECHNOLOGY CORPORATION
By: _______________________________
Michael J. Berthelot
Chairman of the Board and
Chief Executive Officer
Accepted and agreed:
__________________________________
Executive
GH:1507