1
Exhibit (10.3)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 23rd day of January,
1995, by and between DeVlieg-Bullard, Inc., a Delaware corporation (the
"Company"), and James F. Harnish (the "Employee").
WHEREAS, pursuant to an Asset Purchase Agreement dated the date hereof
(the "Asset Purchase Agreement"), the Company has agreed to buy substantially
all of the assets of Mideastern, Inc.;
WHEREAS, Employee is currently an employee and shareholder of
Mideastern, Inc.;
WHEREAS, the Company desires, on the terms and conditions stated
herein, to employ Employee; and
WHEREAS, the Employee desires, on the terms and conditions stated
herein, to be employed by the Company.
NOW, THEREFORE, in consideration of the promises hereof and of the
mutual promises and agreements contained herein, the parties hereto, intending
to be legally bound, hereby agree as follows:
1. Employment and Term of Employment. The Company hereby agrees
to employ the Employee, and the Employee hereby agrees to serve the Company, on
the terms and conditions set forth herein for the period commencing on the date
hereof and expiring on January 23, 1998 (the "Expiration Date"), unless sooner
terminated as hereinafter set forth.
2. Positions and Duties. The Employee shall have such powers and
duties as shall be designated by the President of the Services Group of the
Company from time to time. Employee shall devote substantially all his working
time and efforts to the business and affairs of the Company, shall use his best
efforts to advance the best interests of the Company, and shall not engage in
outside business activities which interfere with the performance of his duties
hereunder.
3. Compensation.
(a) Base Salary. The Employee shall receive a base
salary at the rate of $80,000 per annum ("Base Salary"), payable in
substantially equal periodic payments, which shall be made no less frequently
than semi-monthly during the period of the Employee's employment hereunder.
The Base Salary shall be subject to periodic review and revision by the Board
of Directors of the Company but shall not be decreased during the term of
employment hereunder.
2
(b) Incentive Compensation. In addition to Base Salary,
the Employee shall be entitled to receive annually (based upon a calendar year
calculation) the following incentive compensation:
(i) An escalating bonus based upon the Company's
sales of New Britain Parts (excluding rebuild items and customer parts repair)
("New Britain Parts") in excess of 93% of the Company's prior years' sales of
New Britain Parts ("Base Level Sales"). The Company's sales for purposes of
1994 shall be deemed to include those of Mideastern, Inc. and are as set forth
on Exhibit A hereto. Such bonus shall be calculated as follows: 2.5% of Base
Level Sales up to $100,000; 3.75% of Base Level Sales between $100,001 and
$200,000; 5.0% of Base Level Sales between $200,001 and $300,000; 6.25% of Base
Level Sales between $300,001 and $400,000; and 10.0% of Base Level Sales in
excess of $400,000. Notwithstanding the foregoing, the Base Level Sales bonus
shall not exceed $40,000, annually. In the event Base Level Sales in any
calendar year shall exceed $400,000, the amount of such excess shall be
included in Base Level Sales in the following calendar year for purposes of
calculating the Base Level Sales bonus for such year.
(ii) For any calendar year covered by this
Agreement within which the earnings (other than earnings relating to the sale
of New Britain Parts) before interest income, interest expense, taxes and
employee incentive compensation payable pursuant to employment agreements
directly attributable to the business conducted by the Company at its facility
located at 301 Pleasant Street, Abbottstown, Pennsylvania or at such other
location if the Company relocates all or any part of such business after the
date hereof exceeds $300,000, a bonus equal to 35% of Base Salary, as set forth
on Exhibit B hereto.
(c) Expenses. During the term of his employment
hereunder, the Employee shall be entitled to be reimbursed in accordance with
the policies and procedures established by the Company for all reasonable
expenses incurred by him in performing services hereunder; provided, that the
Employee properly accounts therefor in accordance with such Company policies
and procedures.
(d) Participation in Benefit Plans. The Employee shall
be entitled to participate in or receive benefits under all the Company's
employee benefit plans and arrangements in effect on the date hereof or made
available in the future to employees of the Company as the Board of Directors
of the Company shall, in its sole discretion, determine.
(e) Additional Benefits. The Employee shall be entitled
to receive those additional benefits ("Additional Benefits") set forth on
Exhibit C hereto.
4. Termination
(a) Disability. If, as a result of the Employee's
incapacity due to physical or mental illness, the Employee shall have been
absent from his duties hereunder on a full time basis for one hundred eighty
(180) consecutive days, the Company may terminate its obligations
2
3
hereunder, except for those obligations provided for in the second sentence of
Section 5(a) hereof.
(b) Termination Upon Death. If the Employee should die
during the term of this Agreement, the Company's obligations under this
Agreement shall cease, except for those obligations set forth in Section 5(b)
hereof, and the Employee's employment shall be terminated.
(c) Termination by the Company. The Company may
terminate the Employee's employment hereunder at any time for Cause or for any
other reason. For the purposes of this Agreement, "Cause" shall mean any act
that is materially inimical to the best interests of the Company and that
constitutes on the part of the Employee personal dishonesty, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform the duties required of Employee hereunder, willful violation
of any law, governmental rule or regulation (other than traffic violations or
similar offenses) or final cease and desist order, or material breach of this
Agreement.
(d) Determination of Disability. For purposes of
Sections 4(a) hereof, the determination of whether the Employee is disabled due
to physical or mental illness, or whether his health is impaired to an extent
that makes the continued performance of his duties hereunder hazardous to his
physical or mental health, shall be made by a licensed physician satisfactory
to the Employee and to the Company.
(e) Notice of Termination. Any termination by the
Company pursuant to Sections 4(a) and 4(c) hereof shall be communicated by
written notice of termination to the other party hereto.
5. Compensation Upon Termination or During Disability.
(a) During any period in which the Employee fails to
perform his duties hereunder as a result of disability due to physical or
mental illness, the Employee shall receive an amount which, when added to any
disability benefits provided for by the Company, equals his Base Salary until
the compensation and benefits received by the Employee pursuant to this
Agreement are terminated pursuant to Section 4(a) hereof. Following
termination due to disability, the Employee shall receive such benefits and be
paid such amounts as he is entitled to receive under the Company's disability
and other benefit plans then in effect.
(b) If the Employee's employment shall be terminated for
Cause or if the Employee dies or if the Employee terminates his employment for
any reason other than as a result of the Company's breach of its covenants and
agreements contained in Section 6.1 of the Asset Purchase Agreement, the
Company shall pay the Employee his Base Salary earned through the date on which
his employment is terminated. The Company shall then have no further
obligations to the Employee under this Agreement; provided, however, the
Company shall cause to be paid to the Employee, his estate or beneficiaries, as
the case may be, the benefits to which
3
4
the Employee is eligible under the Company's employee benefit plans and
incentive and deferred compensation arrangements.
(c) If the Company shall terminate the Employee's
employment under this Agreement for any reason other than pursuant to Section
4(a) hereof or for Cause pursuant to Section 4(c) hereof or in the event the
Employee terminates his employment as a result of the Company's breach of its
covenants and agreements contained in Section 6.1 of the Asset Purchase
Agreement, then, subject to the compliance by the Employee with the provisions
of Sections 7 and 8 hereof, the Company shall pay the Employee, as liquidated
damages or severance or both, (i) his Base Salary payable in substantially
equal periodic payments no less frequently than monthly for a period ending on
the Expiration Date and (ii) Incentive Compensation on an annual basis.
6. Binding Agreement. This Agreement and all obligations of the
Company hereunder shall be binding upon the successors and assigns of the
Company. This Agreement and all rights of the Employee hereunder shall inure
to the benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
7. Non-Competition. For so long as the Company is obligated to
compensate the Employee pursuant to Sections 3 or 5 of this Agreement and for a
period of three years thereafter, the Employee will not directly or indirectly
own, manage, operate, control or participate in the ownership, management,
operation or control of, or be connected as an officer, employee, partner,
director or otherwise with, or have any financial interest in, or aid or assist
anyone else in the conduct of, any business which is in substantial competition
with the principal business conducted by the Company or any subsidiary of the
Company in any area where such business is being conducted at the time of such
termination (provided that ownership of five percent (5%) or less of the voting
stock of any publicly held corporation shall not constitute a violation
hereof).
8. Unauthorized Disclosure
(a) During the period of his employment hereunder and for
a period of three years thereafter, the Employee shall not, without the prior
written consent of the Company, disclose to any person, other than a person to
whom disclosure is necessary or appropriate in connection with the performance
by the Employee of his duties hereunder, any confidential information obtained
by him while in the employ of the Company with respect to any of the Company's
products, improvements, designs, formulas, blueprints, drawings, design and
manufacturing engineering drawings, manufacturing and quality control written
standards, trade secrets, manufacturing know-how, processes, customers,
suppliers, methods of marketing or distribution, systems, procedures, plans,
proposals, or policies the disclosure of which he knows, or should have reason
to know, could be damaging to the Company or its subsidiaries or affiliates;
provided, that confidential information shall not include any information known
generally to the public (other than as a result of unauthorized disclosure by
the Employee) or
4
5
any information of a type not otherwise considered confidential by persons
engaged in the same business or a business similar to that conducted by the
Company. Following the termination of employment hereunder, the Employee shall
not disclose any confidential information of the type described above except as
may be required in the opinion of the Employee's counsel in connection with any
judicial or administrative proceeding or inquiry.
(b) The foregoing provision of this Section 8 shall be
binding upon the Employee's heirs, successors and legal representatives.
9. Remedies Upon Breach. The Employee acknowledges and agrees
that, in the event of a breach of Section 7 or Section 8 hereof by the
Employee, the Company would be irreparably harmed and that monetary damages
would be an inadequate remedy in favor of the Company. Accordingly, the
Employee and the Company agree that in the event of such a breach, the Company
shall be entitled to injunctive relief against the Employee. In addition, in
the event the Employee (i) breaches Section 7 or Section 8 hereof, (ii)
terminates his employment hereunder for any reason other than by Death,
Disability or as a result of the Company's breach of its covenants and
agreements hereunder or in Section 6.1 of the Agreement or (iii) is terminated
for Cause, the Employee shall not be entitled to any payment and no payment
shall be due and payable to Employee in respect of Employee's pro rata share of
the Earnout Note dated the date hereof and delivered pursuant to the Agreement.
10. Notice. For the purposes 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 as
follows:
If to the Employee:
James F. Harnish
301 Pleasant Street
P.O. Box 12
Abbottstown, PA 17301
If to the Company:
DeVlieg-Bullard, Inc.
One Gorham Island
Westport, CT 06880
Attn: William O. Thomas
or to such other address as any party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
5
6
11. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or government regulation or ruling.
12. Enforcement of Agreement. The costs and expenses (including
court costs and reasonable attorney's fees) incurred by the prevailing party in
connection with any litigation seeking to enforce its rights under this
Agreement shall be paid by the non-prevailing in such litigation.
13. Governing Law. This Agreement shall be construed according to
the laws of Pennsylvania, without giving effect to the principles of conflicts
of laws of such State.
14. Amendment; Modification; Waiver. This Agreement may be
amended only by the written agreement of the parties hereto. No provisions of
this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by Employee and the
Company. This Agreement will be reviewed on an annual basis by the parties
hereto and the term of this Agreement may be extended by mutual agreement of
the parties. No waiver by either party hereto at any time of any breach by the
other party hereto 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.
15. Binding Effect.
(a) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights obligations hereunder except as expressly
provided for herein. Without limiting the generality of the foregoing,
Employee's right to receive payments hereunder shall not be assignable,
transferable or delegable, whether by pledge, creation of a security interest
otherwise, other than by a transfer by his will or by the laws of descent and
distribution and, in the event of any attempted assignment or transfer contrary
to this paragraph, the Company shall have no liability to pay any amount so
attempted to be assigned, transferred or delegated.
(b) The Company and Employee recognize that each party
will have no adequate remedy at law for breach by the other of any of the
agreements contained herein and, in the event of any such breach, the Company
and Employee hereby agree and consent that the other shall be entitled to a
decree of specific performance, mandamus or other appropriate remedy to enforce
performance of this Agreement.
16. Entire Contract. This Agreement constitutes the entire
agreement and supersedes all other prior agreements, employment contracts and
understandings, both written and oral, express or implied with respect to the
subject matter of this Agreement.
6
7
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DEVLIEG-BULLARD, INC.
By: /s/ William O. Thomas
-----------------------------
Title: President
-----------------------------
/s/ James F. Harnish
-------------------------------------
James F. Harnish
7