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EXHIBIT 10.1
AEARO CORPORATION
One Washington Mall
Boston, Massachusetts 01550
January 23, 1998
Mr. Michael McLain
325 Willow Spring Road
Indianapolis, Indiana 46240
Dear Mike:
In connection with your employment as the President and Chief Executive
Officer of Aearo Corporation (the "Company"), I have set forth below our
agreement concerning certain benefits to be paid to you while employed, and to
any severance to which you would be entitled in the event of your termination
from the Company. The terms and conditions of such agreement are as follows:
1. The Company agrees to reimburse you for any expenses that you incur during
any temporary relocation you might experience in connection with your employment
with the Company and that are includible in your income but not otherwise
deductible therefrom: the Company also agrees to provide you with compensation
equal to the amount of any income tax you may be required to pay with respect to
such reimbursements, in an amount to be determined by the Company upon your
provision of all necessary information and documentation.
2. Upon a termination of your employment without "Cause" (as defined below) by
the Company or a voluntary termination of employment for "Good Reason" (as
defined below) by you, you will resign from any corporate office you hold with
the Company, and from the Board of Directors of the Company or any of its
subsidiaries or from any committee or subcommittee thereof, effective as of the
date the written notice of your termination of employment (the "Termination
Date") is given.
3. With respect to a termination without "Cause" (defined herein) by the Company
or a voluntary termination for Good Reason (defined herein) by you, the Company
agrees, for the consideration set forth herein subject to your delivery of the
attached Release, to the following provisions:
a. to pay you an amount equal to 1.25 multiplied by the sum of your
base salary and your most recent bonus, payable in substantially equal
installments in accordance with the Company's standard payroll practices
for fifteen (15) months after such termination;
b. during the period beginning on the Termination Date and ending
fifteen (15) months thereafter ("Benefits Period"), the Company agrees to
provide you with the health and welfare benefits (including, but not
limited to, life insurance, medical, and to the extent available, dental
and vision benefits) for which you are then currently eligible at the same
cost to you as if your employment had continued; PROVIDED, HOWEVER, that in
the event you are employed by a subsequent employer within the Benefits
Period and are offered comparable health
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and welfare benefits thereby, your coverage under the Company's health and
welfare benefit plans shall cease as of the effective date of such
comparable coverage; and
c. to pay you any other compensation and benefits to which you are
otherwise entitled pursuant to the terms of any Company compensation or
benefit plan. Notwithstanding the foregoing, in the event that your
employment with the Company terminates due to your death or disability, the
Company terminates your employment without Cause, or you terminate your
employment for Good Reason, if such event occurs prior to the fifth
anniversary of the date of this Agreement and prior to the vesting of your
interest in any qualified or nonqualified pension plan of the Company, the
Company shall pay you an amount equal to the sum of any unvested portions
of benefits otherwise forfeited by you pursuant to the terms of such
Company pension plans.
As used herein, "Cause" shall be defined as (i) willful malfeasance or
willful misconduct by you in connection with your employment that is injurious
to the Company, (ii) willful, substantial and continuing refusal by you to
perform your duties hereunder or any lawful direction of the Board of Directors
of the Company, which refusal continues beyond ten days after a written demand
for substantial performance is delivered to you by the Company, (iii) an
indictment of you for any felony. Upon a termination for Cause, you shall only
be entitled to those amounts which the Company is required by law to pay. Any
termination for Cause shall be made by delivery to you of a copy of a resolution
of the Board of Directors of the Company finding in their good faith
determination, after giving you an opportunity to be heard, that you have
engaged in conduct constituting "Cause".
Also as used herein, "Good Reason" shall be deemed to exist for you to
voluntarily terminate your employment if any of the following events occur: (i)
the Company materially reduces your duties, authority or responsibilities
(except in connection with any other termination of your employment) to a level
materially inconsistent with the duties, authority and responsibilities which
would generally be performed or held by a chief executive officer of
corporations commensurate in size, type and nature to the Company, or otherwise
materially changes your secretarial support, office accommodations or other
aspects of your working conditions in ways which are inconsistent in any
significant respect with or otherwise demeaning to your position with the
Company (other than in connection with similar reductions generally affecting
other executives of the Company); (ii) the Company reduces your employee
benefits, any bonus opportunities you have, or base salary, other than a
reduction in base salary which is part of a general cost reduction affecting
substantially all of the employees of the Company which does not exceed ten
percent (10%) of your base salary; (iii) the Company fails to make, in respect
of any fiscal year, contributions in the aggregate amount of $30,000 to the
various Company qualified and nonqualified pension plans in which you will be
participating; or (iv) you give notice of your intention to terminate your
employment for any reason at any time during the 30-day period immediately
following the first anniversary of a Change in Control (as hereinafter defined).
For these purposes, a "Change in Control" shall mean, prior to the time the
Company has publicly traded common securities, (1) there occurs: (A) the sale of
more than fifty percent (50%) of the voting securities in the Company to a third
party (other than Vestar Capital Partners, L.P. ("Vestar") or an affiliate of
Vestar or an entity under the control of Vestar); (B) the sale of all or
substantially all of the assets of the Company to a third party (other than
Vestar or an affiliate of Vestar or an entity under the control of Vestar); or
(C) a merger, recapitalization, reorganization or other corporate restructuring
(any of the foregoing, a "Transaction") and (2) following such Transaction,
Vestar or an affiliate of
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Vestar no longer has the authority (by virtue of voting securities ownership or
by agreement with other voting securities owners) to elect or to designate the
election of the members of the Board of Directors of the Company (or of the
governing board of the entity resulting from such Transaction) or the entity
controlling the Company (or such resulting entity).
In order to terminate your employment for Good Reason, you must give the Company
written notice not less than thirty (30) days prior to your intended termination
and the Company must not have cured such breach within such 30-day period.
4. In the event of your voluntary termination of employment for other than Good
Reason, given with 60 days prior written notice, your death or Permanent
Disability (as defined under the long-term disability benefit plans applicable
to you as in effect on the date hereof), the Company agrees to pay you or your
beneficiary all accrued but unpaid compensation in a cash lump sum payment and
other amounts as due under the applicable Company benefit plans or as required
by law.
5. With respect to confidentiality, noncompetition, and other related issues, as
a condition of the Company's performance of its obligations arising from this
Agreement, you agree to the following:
a. You will not, without prior written consent of the Company,
divulge, disclose or make accessible to any other person, firm,
partnership, corporation or other entity any Confidential Information
pertaining to the business of the Company or any group, division,
subsidiary or affiliate of the Company or Vestar and its affiliates (the
"Restricted Group"), except when required to do so by a court of competent
jurisdiction, by any governmental agency having supervisory authority over
the business of the Restricted Group, or by any administrative body or
legislative body (including a committee thereof) with jurisdiction to order
you to divulge, disclose or make accessible such information. "Confidential
Information" will mean non-public information concerning financial data,
strategic business plans, product development (or other proprietary product
data), customer lists, marketing plans, personnel information pertaining to
present and former employees of the Restricted Group, and any other
non-public, proprietary and protected information of the Restricted Group
or their customers. Nothing herein will prevent you from using information
generally known to you or generally by persons employed in the industry so
long as it does not involved confidential information.
b. During the period of your employment and for one year after the
Termination Date, you will not, directly or indirectly, (i) either as
principal, manager, agent, consultant, officer, stockholder, partner,
investor, lender or employee or in any other capacity, carry on, be engaged
in or have any financial interest in, any business which is in competition
with the business of the Restricted Group as of the Termination Date or
with any business acquired or established by any member of the Restricted
Group thereafter if such acquisition or establishment was actively planned
or in progress while you were employed by the Company or (ii) on your own
behalf or on behalf of any person, firm or company, hire any person who has
been employed by any member of the Restricted Group at any time during the
12 months immediately preceding such hiring.
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For purposes of this paragraph, a business will be deemed to be in
competition with the Restricted Group if it is principally involved in the sale,
or other dealing in any property or the rendering of any service sold, dealt in
or rendered by the Restricted Group as a part of the business of the Company at
the Termination Date within the same geographic area in which the Restricted
Group effects such sales or dealings or renders such services. Nothing in this
paragraph will be construed so as to preclude you from (a) investing in any
publicly or privately held company, provided your beneficial ownership of any
class of such company's securities does not exceed 1% of the outstanding
securities of such class or (b) working in any sector of the safety industry
where, at the time of your termination of employment, the Company is not (i)
marketing or manufacturing products or (ii) acquiring, establishing or planning
to acquire or establish a company that markets or manufactures such products in
that sector of the market.
You agree that the covenant not to compete set forth herein is reasonable
under the circumstances and will not interfere with your ability to earn a
living or to otherwise meet your financial obligations. You and the Company
agree that if in the opinion of any court of competent jurisdiction such
restraint is not reasonable in any respect, such court will have the right,
power and authority to excise and modify such provision or provisions of this
covenant as so amended. You agree that any breach of the covenants contained in
this paragraph would irreparably injure the Company. Accordingly, you agree that
the Company may, in addition to pursuing any remedies it may have in law or in
equity, cease making any payments otherwise required by this Agreement and
obtain an injunction against you from any court having jurisdiction over the
matter restraining any further violation of this Agreement by you. This covenant
restricting your ability to compete with any member of the Restricted Group
shall supersede any other such covenants with the Restricted Group that have
been entered into on or before the date of this Agreement.
d. You will return to the Company any letters, files, documents,
equipment, supplies, security access passes, property or other items in
your possession or control which were entrusted or issued to you during the
course of your employment with the Company.
e. You will not make any material disparaging statements about the
Company, its affiliates, or their employees, officers, directors and
shareholders, or any of their policies or practices to any of their
customers, competitors, suppliers, employees, former employees, or the
press or other media in any country.
6. The Company agrees that it will not issue any press release or other public
statement containing, and will use its reasonable best efforts to prevent its
officers and directors from making, any material disparaging statements about
you.
7. If all documents relating to your employment with the Company are executed
and you commence employment therewith prior to or by January 31, 1998, the
Company agrees to pay the reasonable legal fees and expenses (as shown on
appropriate documentation) incurred by you in connection with the negotiation
and preparation of this Agreement in an amount not to exceed $30,000; PROVIDED,
HOWEVER, that in the event that such documents are not executed and you do not
commence employment with the Company, the Company will only pay up to
twenty-five percent (25%) of such legal fees and expenses.
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8. You agree to execute a release in the form attached hereto as a condition to
the receipt of any payment due under the terms of this Agreement.
9. This Agreement will be construed and interpreted, and the rights and
liabilities of the parties hereto shall be determined, in accordance with the
laws of the State of New York without regard to rules pertaining to conflict of
laws. In respect of any suit, action or proceeding arising out of or relating to
this Agreement, each of the parties hereby submits to the exclusive jurisdiction
of and hereby irrevocably waives any objection that may now or hereafter exist
to the laying of venue in any court of competent jurisdiction in the State of
Indiana, and hereby waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.
10. The Agreement may be executed in counterparts.
If the foregoing is acceptable and agreed to by you, please sign on
the line provided below to signify such acceptance and agreement and return the
executed copy to Norm Alpert.
AEARO CORPORATION
[s/Norman W. Alpert]
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By: N.W. Alpert
Title: Chairman
Accepted and Agreed
[s/Michael A. McLain]
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Mike McLain