Exhibit 10.9
AC SAFETY ACQUISITION CORP.
c/o Bear Stearns Merchant Manager II, LLC
383 Madison Avenue, 40th Floor
New York, NY 10179
To Management Employee of
AC Safety Acquisition Corp., Aearo Corporation
and/or Aearo Company set forth on the
Signature Page hereto:
Reference is made to the Agreement and Plan of Merger dated as of the
date hereof among AC Safety Holding Corp., a Delaware corporation ("Holdings"),
AC Safety Acquisition Corp., a Delaware corporation, and Aearo Corporation, a
Delaware corporation ("Aearo") (the "Merger Agreement"). Set forth below is our
agreement (the "Agreement") concerning your employment and the benefits to be
paid to you and any severance to which you would be entitled in the event of
your termination from Aearo (as the surviving corporation of the merger
contemplated by the Merger Agreement) and Aearo Company following the
consummation of such merger (the "Transaction").
1. You will continue to provide services to Holdings, Aearo, Aearo
Company and their respective subsidiaries (each, an "Employer" and collectively,
the "Employers") in the position set forth on the signature page hereto or in
any other such position that you may be assigned from time to time. You will
continue to devote your full business time to the affairs and business of each
Employer and will continue to perform the duties associated with your position
with each Employer.
2. During your employment, you shall receive an annual base salary
("Annual Base Salary"), which shall be paid in accordance with the customary
payroll practices of the Employers. Your Annual Base Salary shall initially be
equal to the base salary you currently receive from the Employers and shall be
subject to an annual review by the applicable Board of Directors (or the
compensation committee thereof, if applicable) at the end of each fiscal year
beginning with fiscal year 2005, and may be adjusted following such review as
determined by such Board of Directors or compensation committee, as applicable.
3. The Employers will establish a bonus plan for each fiscal year
beginning after fiscal year 2004 (the "Plan"). The applicable Board of Directors
(or the compensation committee thereof, if applicable) will establish
performance objectives for each year in good faith based on the Employers'
annual budget. During your employment hereunder, subject to Sections 6.a and
7.a, you will be entitled to receive an annual bonus (the "Bonus") pursuant to
the Plan based on the Employers' performance only if you are employed on the
last day of the applicable performance period. The target Bonus will be
established such that, if the performance objectives are achieved, you will
receive a Bonus equal to at least the Bonus you would have received if the
Employers' bonus arrangements with you as in existence on the date of this
Agreement were still in place and the performance thresholds set forth in the
current bonus plan were achieved. In respect of fiscal year 2004, your target
Bonus and the calculation of your actual Bonus shall be made pursuant to the
bonus arrangements that are currently in existence on the date of this
Agreement. All Bonuses shall be payable promptly after determination by the
applicable Board of Directors (or the compensation committee thereof, if
applicable) that the performance thresholds have been achieved. The bonus plan
in place as of the date of this Agreement will remain in place until at least
the second anniversary of the date hereof, it being understood that the
performance thresholds and targets set forth therein will be adjusted consistent
with past practice.
4. During your employment hereunder, you shall be entitled to
participate in all incentive, savings and retirement plans, practices, policies
and programs applicable generally to other executives of the Employers and shall
be eligible for participation in and shall receive all benefits under health and
welfare plans, practices, policies and programs provided by the Employers
(including, without limitation, medical, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other executives of the Employers. During the period commencing on the closing
of the Transaction (the "Effective Date") and ending on the second anniversary
of the "Effective Date", Aearo and Aearo Company will provide you with employee
benefits that are no less favorable in the aggregate than those provided to you
immediately prior to the date of this Agreement. During your employment, you
shall be entitled to receive (in addition to the benefits described above) such
perquisites and fringe benefits appertaining to your position in accordance with
any practice existing at the applicable Employer on the date hereof, which
perquisites and fringe benefits will be consistent with past practice.
5. Upon termination of your employment with or without "Cause" (as
defined below) by any Employer or for any reason by you, you will resign from
any corporate office you hold with any Employer (and from the Boards of
Directors of any Employer or from any committee or subcommittee thereof)
effective as of the date the written notice of your termination of employment
("Termination Date") is given.
6. If, during the period commencing on the date hereof and ending on
the second anniversary of the "Effective Date", your employment with the
Employers is terminated without "Cause" (as defined below) by an Employer or you
terminate your employment with the Employers for "Good Reason" (as defined
below), the Employers, upon the subsequent termination of your employment and
subject to your delivery of a valid Release (as defined below), agree:
a. To pay you an amount equal to 2.0 multiplied by the
sum of your then current Annual Base Salary and your
then current annual target Bonus, payable in twelve
(12) equal monthly installments commencing within
thirty (30) days after the "Termination Date";
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b. During the period beginning on the "Termination Date"
and ending twenty-four (24) months thereafter
("Benefits Period"), you will receive health and
welfare benefits (including life, long-term
disability, and accidental death and dismemberment
insurances as well as medical and dental benefits)
for which you are then currently eligible at the same
cost to you as if your employment had continued
(through COBRA or otherwise); provided, however, that
in the event you are employed by a subsequent
employer within the "Benefits Period" and are offered
comparable health and welfare benefits at no
additional cost to you, your coverage under the
existing health and welfare benefit plan shall cease
as of the effective date of coverage of such
comparable benefits;
c. To pay you an amount equal to twenty-four (24)
multiplied by the sum of the Employers' then current
aggregate monthly contribution to or monthly amount
credited to your account under your employee benefit
plans (including 401k, the Cash Balance Plan, and the
Supplemental Executive Retirement Plan), other than
any contribution made to such employee benefit plans
in respect of your reduction of your Annual Base
Salary or Bonus, payable in twelve (12) equal monthly
installments commencing within thirty (30) days after
the "Termination Date"; and
d. To pay you any other compensation and benefits to
which you are otherwise entitled pursuant to the
terms of any compensation or benefit plan.
7. Notwithstanding the foregoing, if your employment with the Employers
is terminated without "Cause" (as defined below) by an Employer, or you
terminate your employment with the Employers for "Good Reason" (as defined
below), at any time after the expiration of the two (2) year period following
the Effective Date, the Employers, upon the subsequent termination of your
employment and subject to your delivery of a valid Release, agree:
a. To pay you an amount equal to 1.5 multiplied by the
sum of your then current Annual Base Salary and your
then current annual target Bonus, payable in twelve
(12) equal monthly installments commencing within
thirty (30) days after the "Termination Date";
b. During the period beginning on the "Termination Date"
and ending eighteen (18) months thereafter ("Benefits
Period"), you will receive health and welfare
benefits (including life, long-term disability, and
accidental death and dismemberment insurances as well
as medical and dental benefits) for which you are
then currently eligible at the same cost to you as if
your employment had continued (through COBRA or
otherwise); provided, however, that in the event you
are employed by a subsequent employer within the
"Benefits Period" and are offered comparable health
and welfare benefits at no additional cost to you,
your coverage under the existing health and welfare
benefit plan shall cease as of the effective date of
coverage of such comparable benefits;
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c. To pay you an amount equal to eighteen (18)
multiplied by the sum of the Employers' then current
aggregate monthly contribution to or monthly amount
credited to your account under your employee benefit
plans (including 401k, the Cash Balance Plan, and the
Supplemental Executive Retirement Plan), other than
any contribution made to such employee benefit plans
in respect of your reduction of your Annual Base
Salary or Bonus, payable in twelve (12) equal monthly
installments commencing within thirty (30) days after
the "Termination Date"; and
d. To pay you any other compensation and benefits to
which you are otherwise entitled pursuant to the
terms of any compensation or benefit plan.
8. Upon a termination for "Cause" (as defined below) by the Employers,
or other than for "Good Reason" (as defined below) by you, you shall only be
entitled to those amounts which the Employers are required by law to pay
(including payout of Annual Base Salary through the date of termination).
9. The foregoing terms in this Agreement are as defined below:
As used herein, "Cause" shall be defined as (i) at any time prior to or
after the date hereof, willful malfeasance or willful misconduct by you in
connection with your employment that is injurious (other than de minimis
injuries) to any Employer, (ii) willful, substantial and continuing refusal by
you to perform your duties hereunder or pursuant to any lawful direction of the
Board of Directors of any Employer, in each case which are within your control
to perform and are consistent in all material respects with the duties,
authority and responsibilities of a person in the position set forth on the
signature page hereto, which refusal continues beyond ten (10) days after a
written demand for substantial performance is delivered to you by the applicable
Employer; (iii) material breach of any term or provision of this Agreement which
material breach, if capable of being cured, is not cured within thirty (30) days
of your receipt of written notice of such breach from the applicable Employer;
(iv) indictment which is or is reasonably likely to be injurious or damaging to
any Employer or conviction of you or a plea of nolo contendre by you of or to
any felony; or (v) an intentional action taken by you or your knowing failure to
act which results in a breach of any representation, warranty or covenant made
by Aearo or Aearo Company in the Merger Agreement, which has resulted in or
reasonably could be expected to have a Material Adverse Effect (as defined in
the Merger Agreement), your failure to inform us in writing prior to the date
hereof of any such breach of any representation, warranty or covenant made by
Aearo or Aearo Company in the Merger Agreement or your failure to inform us in
writing prior to the Effective Date of any such breach, in each case as
determined by a majority of the independent members of the Board of Directors of
Aearo.
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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)
Holdings, Aearo or Aearo Company materially reduces your duties, authority or
responsibilities (except in connection with any other termination of your
employment) at Aearo or Aearo Company to a level materially inconsistent with
the duties, authority and responsibilities which would generally be performed or
held by the persons with a similar title of an independently operated North
American division of a corporation commensurate in size, type and nature to
Aearo; (ii) Aearo or Aearo Company materially adversely changes or alters your
title as set forth on the signature page hereto; (iii) subject to Section 4 of
this Agreement, the Employers reduce your aggregate employee benefits (other
than reductions affecting employees, executives or senior executives generally),
any bonus opportunities you have in the aggregate, or Annual Base Salary, other
than a reduction in Annual Base Salary which is part of a general cost reduction
affecting employees, executives or senior executives generally which does not
exceed ten percent (10%) of your current Annual Base Salary as of the time of
the date of this Agreement; (iv) an Employer requires you to relocate your
primary residence; (v) your primary working location is relocated more than
fifty (50) miles away from its current location; (vi) Holdings, Aearo or Aearo
Company materially breaches any term or provision contained in this Agreement;
or (vii) Holdings, Aearo or Aearo Company materially changes or alters your
title or reporting structure; provided, however, that in each of the above
situations, you have provided prompt written notice to the applicable Employer
and at the end of the thirty (30) day period from the date of receipt of the
written notice, the applicable Employers shall not have cured the default
outlined in the written notice.
10. You agree to the following:
a. You will not, without prior written consent of Aearo,
divulge, disclose or make accessible to any other
person, firm, partnership, corporation or other
entity any "Confidential Information" pertaining to
the business of Aearo or Bear Stearns Merchant
Manager II, LLC ("BSMM") or any group, division,
subsidiary or affiliate of Aearo of BSMM or any of
BSMM's affiliates who are engaged in the same
business or businesses as Aearo or any of 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 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 involve "Confidential Information."
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b. During the period commencing on the "Effective Date"
and ending on the Non-Compete Termination Date, you
will not, directly or indirectly, 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 to your knowledge actively planned
or in progress while you were employed by Aearo and
Aearo Company. "Non-Compete Termination Date" means
the one year anniversary of (i) the "Termination
Date" in the case of either a resignation without
"Good Reason" or a termination for "Cause" or (ii)
the date you cease receiving payments hereunder from
us, Aearo or Aearo Company in the case of any other
termination.
c. If you cease to be employed by Holdings, Aearo or
Aearo Company (i) in the case of either a resignation
without "Good Reason" or a termination for "Cause",
then during the period commencing on the "Termination
Date" and ending on the later to occur of (A) the
fifth anniversary of the "Effective Date" and (B) the
one year anniversary of the "Termination Date", or
(ii) in the case of any other termination, during the
period commencing on the "Termination Date" and
ending on the one year anniversary of "Termination
Date", you will not, directly or indirectly, 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 twenty-four (24) months immediately preceding
such hiring, or solicit or induce any such employee
or any customer of the "Restricted Group" to leave
the employ of, or cease doing business with, as
applicable, the "Restricted Group," or interfere, in
any material way, with the business of the
"Restricted Group." For purposes of clarification,
this Section 10.c shall not apply to any action taken
solely by any of your employers following the
"Termination Date" if (x) you did not provide any
assistance or recommendation for the benefit of such
future employer relating to the solicitation or
hiring of any person referred to above and (y) such
person referred to above does not become employed by
the same division, department or group within such
future employer in which you are employed and does
not report to you.
d. You acknowledge that all discoveries, concepts,
ideas, inventions, innovations, improvements,
developments, methods, designs, analyses, drawings,
reports, patent applications, copyrightable work and
mask work (whether or not including any Confidential
Information) and all registrations or applications
related thereto, all other proprietary information
and all similar or related information (whether or
not patentable) which (i) relate to any Employer's
actual or anticipated business, research and
development or existing or future products or
services and (ii) are conceived, developed or made by
you (whether alone or jointly with others) while
employed by such Employer, whether before or after
the date of this Agreement ("Work Product") belong to
such Employer. You will, at Aearo Company's expense,
perform all actions reasonably requested by the board
of directors of Aearo Company (whether during or
after your employment with the Employers) to
establish and confirm such ownership (including,
without limitation, assignments, consents, powers of
attorney and other instruments).
Page 6
For purposes of this Agreement, a business will be deemed to be in
competition with the "Restricted Group" if it is 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 Aearo 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
Section 10 will be construed so as to preclude you from (a) investing in any
publicly-held company, provided your beneficial ownership of any class of such
company's securities does not exceed 5% of the outstanding securities of such
class, (b) working in any sector of the safety industry where, at the time of
your termination of employment, Aearo is not (i) marketing or manufacturing
products or (ii) to your knowledge, acquiring, establishing or planning to
acquire or establish a company that markets or manufactures such products in
that sector of the market or (c) working for any employer if (i) such employer's
aggregate revenues during the then immediately preceding twelve months derived
from operations which are in competition with the "Restricted Group" represent
less than 10% of such employer's gross revenues and you do not provide any
services directly or indirectly for such competing operations or (ii) the
"Restricted Group" has de minimis revenues resulting from businesses that are in
competition with such employer.
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 Aearo
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 Aearo. Accordingly, you agree that Aearo
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 competent 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.
a. You will return to the Employers any letters, files,
documents, equipment, supplies, security access
passes, passwords, property or other items in your
possession or control which were entrusted or issued
to you during the course of your employment with
Aearo and Aearo Company.
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b. You will not make any material disparaging statements
about Aearo, BSMM or any of their respective
affiliates, or their employees, officers, directors
or 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.
11. Aearo agrees that it will not issue any press release or other
public statement or make any other statement containing, and will use its
reasonable best efforts to prevent its officers and directors from making, any
material disparaging statements about you.
12. In consideration for AC Safety Acquisition Corp. entering into this
Agreement, you agree to execute a Release in the form attached hereto (the
"Release") upon the termination of your employment hereunder; provided, however,
that the Release shall not release the obligations of the Employers under this
Agreement.
13. 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 conflict of laws
principles.
14. This Agreement (i) supersedes and replaces all prior agreements
between you and Aearo or any of its affiliates relating to any change in control
and resultant payments and severance arrangements and (ii) from and after the
Effective Date, supersedes and replaces any and all prior severance agreements
between you and Aearo or any of its affiliates. Upon consummation of and as a
result of the Transaction, Aearo will be entitled to all of the benefits and
will be subject to all of the obligations set forth in this Agreement. If the
Merger Agreement is terminated in accordance with its terms, this Agreement will
become and null and void ab initio.
15. This Agreement shall inure to the benefit of and be binding upon
Aearo and its successors and assigns. Aearo 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 Aearo and its subsidiaries to
assume expressly and agree to perform this Agreement in the same manner and to
the same extent that Aearo would be required to perform it if no such succession
had taken place.
16. The parties shall use their good faith efforts to resolve any
controversy, claim, dispute or matter in question arising out of, or relating
to, this Agreement (each, a "Dispute"). If the parties are unable to resolve any
such Dispute within ten (10) days, such Dispute shall be submitted to final and
binding arbitration in accordance with the following provisions:
a. Any party may exercise the right to arbitrate any
Disputes against the other by sending written notice
to arbitrate to the applicable other party(ies) of
any action that gives rise to such Disputes, which
notice shall include the amount in controversy. The
written notice shall identify and describe the nature
of any and all Disputes asserted and the facts upon
which such Disputes are based.
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b. The arbitration will by conducted pursuant to the
American Arbitration Association ("AAA") arbitration
rules and procedures and by one arbitrator chosen in
accordance with the procedure used by the AAA. The
arbitrator shall not be an affiliate of any party to
the Dispute and shall not have any potential for bias
or conflict of interest with respect to any party to
the Dispute, directly or indirectly, by virtue of any
direct or indirect financial interest, family
relationship, close friendship or otherwise (the
"Arbitrator").
c. Subject to paragraph d. below, the parties shall bear
equally the costs of arbitration filing fees and the
fees of the Arbitrator and each party shall bear its
own attorneys' fees, witness fees and other costs.
The parties shall mutually agree with the Arbitrator
on the date, time and place of the arbitration. In
the event that the parties are unable to mutually
agree to the date, time, and place within the City of
New York, New York for the arbitration to be
conducted, the selected Arbitrator shall determine
the date, time, and place of the arbitration.
d. Notwithstanding the above, the losing party in any
arbitration shall be required to reimburse the
prevailing party's fees and expenses in the
arbitration, including the Arbitrator's fees,
attorneys' fees, fees for expert testimony and for
other expenses of presenting its case.
e. The Arbitrator shall have exclusive authority to
resolve any Disputes between the parties. The
Arbitrator shall have the power to award damages
against any party and to make an award granting such
further relief as he/she deems just, proper, and
equitable. The Arbitrator shall be bound to follow
New York law and case precedent, or, federal law and
case precedent, if the Dispute alleges a violation of
federal law. Any decision of the Arbitrator will not
be binding if the Arbitrator in manifest error fails
to follow the requisite New York or federal law and
case precedent. The decision of the Arbitrator can be
appealed to a court of competent jurisdiction solely
with respect to the issue of whether the Arbitrator's
decision is in such manifest error, and the party
bringing such appeal shall have the burden of proof
in establishing such manifest error. If such manifest
error is so established the Dispute will be resolved
by a different Arbitrator in accordance with this
Section 16. The Arbitrator shall render a written
arbitration decision that reveals the essential
findings and conclusions upon which the award is
based.
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f. Any award issued by an Arbitrator shall made and
delivered within 90 days of the date on which such
arbitration proceeding commenced and shall be final
and binding and enforceable in a court of competent
jurisdiction. Judgment in the award rendered by the
Arbitrator may be entered in any court having
jurisdiction thereof.
17. This Agreement may be executed in counterparts.
* * * * *
If the foregoing is acceptable and agreed to by you, please sign below
to signify such acceptance and agreement and return the executed copy to AC
Safety Acquisition Corp. You acknowledge that you have been given sufficient
time to seek advice from an attorney concerning this Agreement.
AC SAFETY ACQUISITION CORP.
By: /s/ Douglas R. Korn
------------------------------------
Name: Douglas R. Korn
Title: President
ACCEPTED AND AGREED TO AS OF
THIS 10th DAY OF MARCH, 2004:
Name: James H. Floyd
Address: 5850 N. Carrolton Avenue
Indianapolis, IN 46220
Company: AC Safety Holding Corp., Aearo Corporation and Aearo Company
Title: President and Managing Director, Aearo Europe
/s/ James H. Floyd
- ----------------------------------
(Signature)