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Exhibit
10.16
EMPLOYMENT AGREEMENT
(this “ Agreement ”) dated as of March 19,
2007, between MOMENTIVE PERFORMANCE MATERIALS INC., a
Delaware corporation (the “ Company ”) and
WAYNE HEWETT (the “ Executive
”).
WHEREAS , pursuant to
the Stock and Asset Purchase Agreement (the “ Purchase
Agreement ”) made and entered into as of the 14
th
day of September, 2006,
between General Electric Company, a New York corporation (the
“ Seller ”) and Momentive Performance Materials
Holdings Inc., a Delaware corporation (formerly known as Nautilus
Holdings Acquisition Corp.) (the “ Parent ”), an
affiliate of Apollo Management VI, LP (the “ Investor
”) and the parent corporation of the Company, the Parent has,
effective as of December 3, 2006 purchased certain entities
and assets from the Seller (collectively, the “
Transaction ”);
WHEREAS , concurrently
with the execution of the Purchase Agreement, as a condition and
inducement to the Parent’s willingness to enter into the
Purchase Agreement, the Company and the Executive entered into a
definitive term sheet with respect to the Executive’s
employment by the Company upon closing of the Transaction (the
“ Term Sheet ”); and
WHEREAS , this
Agreement is intended to replace the Term Sheet effective as of the
Effective Date (as defined below) and execution hereof by the
parties hereto; and
WHEREAS , in
connection with the Transaction, the Company desires to employ the
Executive and the Executive desires to be employed by the
Company;
NOW THEREFORE , in
consideration of the mutual covenants contained herein and other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as
follows:
Section 1. Employment
Period .
The initial term of the
Executive’s employment will commence on December 4, 2006
(the “ Effective Date ”), and end on the fifth
anniversary of the Effective Date (the “ Initial
Employment Period ”), unless terminated earlier pursuant
to Section 3 of this Agreement; provided, however, that as of
the expiration date of each of (i) the Initial Employment
Period and (ii) if applicable, any Renewal Period (as defined
below), the Employment Period will automatically be extended for a
one-year period (each, a “ Renewal Period ”),
unless either party gives at least ninety (90) days written
notice prior to such expiration date of its intention not to renew
the Employment Period (the Initial Employment Period and each
subsequent Renewal Period shall constitute the “
Employment Period ”). The Employment Period shall
automatically end upon termination of the Executive’s
employment for any reason. Upon the Executive’s termination
of employment with the Company for any reason, he shall
immediately
resign all positions (including
directorships) with the Company or any of its subsidiaries or
affiliates.
Section 2. Terms of
Employment .
(a) Position . During
the Employment Period, the Executive shall serve as the Chief
Executive Officer of the Company and perform such duties and
responsibilities customary to such position. The Executive shall
report to the Board of Directors of the Company (the “
Board ”). The Executive shall also serve as a member
of the Board and as a member of the Parent’s Board of
Directors (the “ Parent Board ”). At the request
of the Company, the Executive shall also serve as an officer of any
of its subsidiaries or affiliates without additional
compensation.
(b) Duties . During
the Employment Period, the Executive agrees to devote all of his
business time to the business and affairs of the Company and to use
the Executive’s reasonable best efforts to perform
faithfully, effectively and efficiently his responsibilities and
obligations hereunder. Notwithstanding the foregoing, nothing
herein shall prohibit the Executive from (i) serving on civic
or charitable boards or committees, (ii) delivering lectures
or fulfilling speaking engagements and (iii) managing personal
investments, so long as such activities do not interfere with the
performance of the Executive’s responsibilities
hereunder.
(c) Compensation
.
(i) Base Salary .
During the Employment Period, the Executive shall receive an
initial annual base salary in an amount equal to $650,000 (the
“ Annual Base Salary ”), which shall be paid in
accordance with the customary payroll practices of the Company (but
no less infrequently than in equal monthly installments). The Base
Salary will be reviewed by the Board or the Compensation Committee
of the Board (the “ Compensation Committee ”) or
its designee annually for increase (but not for decrease). The Base
Salary, as then increased, will be the “Base Salary”
for all purposes of this Employment Agreement.
(ii) Bonuses . During
the Employment Period, the Company shall establish an annual bonus
plan for each fiscal year of the Company (the “ Plan
”) pursuant to which the Executive will be eligible to
receive a target annual bonus in an amount equal to 100 percent of
the Annual Base Salary (the “ Bonus ”), which
Bonus may be higher or lower than this percentage based on actual
performance. With respect to the Company’s 2007 fiscal year,
the Executive will be entitled to a Bonus of no less than $425,000
(the “ First-Year Bonus ”). The Board or the
Compensation Committee will administer the Plan and, in
consultation with the Executive, establish performance objectives
for each year. The Executive’s Bonus will be determined based
on the achievement of such performance objectives for the
applicable year (the majority of which will be based on
quantitative objectives, with a small portion to be based on
qualitative objectives), provided that the Board and/or the
Compensation Committee may provide discretionary bonuses to the
Executive under the Plan. Unless the Executive is employed on the
last day of the applicable performance period, the Executive will
not be
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entitled to receive the Bonus upon the
Company’s achievement of the specified performance objectives
(subject to Section 4 of this Agreement). Except as provided
for in Section 4 of this Agreement, the Bonus shall become
payable on or before March 15 following the end of the
applicable fiscal year provided that the Board or Compensation
Committee finally determines (x) that the Company has achieved
the applicable performance objectives and (y) the amount of
Bonus that shall be paid to the Executive for the applicable Plan
year.
(iii) Supplemental Annual
Compensation in Lieu of Foregone Fringe Benefits . During the
Employment Period, the Executive shall receive a monthly amount of
$5,000, the annual total of which is equivalent to the annual value
of fringe benefits that the Executive would have otherwise received
from the Seller had the Executive remained employed with the Seller
(the “ Supplemental Annual Compensation ”). The
Supplemental Annual Compensation shall be paid in accordance with
the customary payroll practices of the Company (but no less
infrequently than in equal monthly installments).
(iv) Benefits . During
the Employment Period, the Executive shall be entitled to
participate in employee benefit plans generally made available to
senior executives of the Company (the “ Employee
Benefits” ). Notwithstanding the foregoing, during the
first year of the Employment Period, the Employee Benefits shall be
substantially equivalent to the employee benefits provided to the
Executive immediately prior to the consummation of the Transaction,
including, without limitation, pension benefits, life insurance,
disability benefits and business use of a Company aircraft to be
agreed and approved in advance by the Executive and the
Board.
(v) GE LTIP . The
Company will pay the Executive any amounts that the Executive would
have earned and been entitled to under the Seller’s Long-Term
Incentive Plan (the “ GE LTIP ”) for the
Seller’s 2007 fiscal year (based on the Seller’s
performance during the applicable performance cycle) (such amounts,
the “2007 GE LTIP Amount”). The 2007 GE LTIP Amount
shall be payable to the Executive in accordance with the GE LTIP
after it has been determined by the Seller.
(vi) Expenses . During
the Employment Period, the Executive shall be entitled to receive
reimbursement for all reasonable expenses incurred by the Executive
in performance of his duties hereunder provided that the Executive
provides all necessary documentation in accordance with Company
policy.
(vii) Vacation and
Holidays . During the Employment Period, the Executive shall be
entitled to five weeks per annum of paid vacation.
(viii) Stock Options .
The Executive and the Company acknowledge that the Parent has
granted the Executive stock options (the “ Executive
Options ”) to purchase 75,000 shares of common stock of
the Parent (the “ Common Stock ”) at an exercise
price of $100.00 per share pursuant to the terms and conditions set
forth in the Momentive Performance Materials Holdings Inc. 2006
Long-Term Incentive
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Plan (the “ Long-Term Incentive
Plan ”). The Executive Options shall be subject to the
terms of the Long-Term Incentive Plan and the Executive’s
Non-Qualified Stock Option Agreement (attached hereto as Exhibit
A).
(ix) Investment .
(A) On the Effective Date, the Executive shall purchase 10,425
shares of common stock of the Parent, par value $0.01, at a price
of $100.00 per share (the “ Purchased Shares ”)
and (B) at the conclusion of the Window Period (as defined
below), provided that the Executive has not exercised his right to
terminate employment with the Company during such Window Period,
the Executive shall purchase 14,575 shares of common stock of the
Parent, par value $0.01, at a price of $100.00 per share (the
“ Post-Window Period Purchased Shares ”). The
Purchased Shares and the Post-Window Purchased Shares shall be
subject to the terms of the Long-Term Incentive Plan and the
Executive’s Subscription Agreement (attached hereto as
Exhibit B).
(x) Notwithstanding anything
to the contrary herein, all of the Purchased Shares will be fully
vested at the Purchase Date and all Purchased Shares and, all
Executive Options and Common Stock held by the Executive pursuant
to the exercise of the Executive Options will be subject to the
terms and conditions of the Securityholders Agreement by and among
the Parent, the Executive, and other signatories thereto (the
“ Securityholders Agreement ”) (attached hereto
as Exhibit C).
Section 3.
Termination of Employment .
(a) Death or
Disability . The Executive’s employment shall terminate
automatically upon the Executive’s death. If the Executive
becomes subject to a Disability during the Employment Period
(pursuant to the definition of Disability set forth below), the
Company may give the Executive written notice in accordance with
Sections 3(f) and 10(h) of its intention to terminate the
Executive’s employment. For purposes of this Agreement,
“ Disability ” means (i) the
Executive’s inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment which can be expected to result in death or can be
expected to last for a continuous period of not less than 12
months, or (ii) the Executive is, by reason of any medically
determinable physical or mental impairment which can be expected to
last for a continuous period of not less than 12 months, receiving
income replacement benefits for a period of not less than three
months under an accident, disability or health plan covering
employees of the Company. Whether the Executive has incurred a
“Disability” shall be determined by a physician
selected by the Company or its insurers, which physician is
reasonably acceptable to the Executive (or the Executive’s
legal representative),
(b) Cause . The
Executive’s employment may be terminated at any time by the
Company for Cause. For purposes of this Agreement,
“Cause” shall mean (i) the Executive’s
commission of a felony or a crime of moral turpitude; (ii) the
Executive’s willful commission of a material act of
dishonesty involving the Company or any of its affiliates or
subsidiaries (collectively, the “ Affiliated Entities
” and each such entity, an “ Affiliated Entity
”); (iii) the Executive’s material breach of his
obligations
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hereunder or any other agreement entered
into between the Executive and the Company or any of the Affiliated
Entities; (iv) the Executive’s willful failure to
perform his material duties; (v) the Executive’s
material breach of the Company’s policies or procedures; or
(vi) any other willful misconduct by the Executive which
causes material harm to the Company or any of the Affiliated
Entities or their business reputation, including due to any adverse
publicity. A termination will not be for “Cause” under
(iii), (iv), (v) or (vi) above unless the Company shall
have given the Executive 30 days’ prior written notice
describing the alleged action(s) and then only if the Executive has
not cured such actions (provided that, in the event such breach is
not curable, no notice period shall be required).
(c) Termination Without
Cause . The Company may terminate the Executive’s
employment hereunder without Cause at any time upon thirty
(30) days prior written notice.
(d) Good Reason . The
Executive’s employment may be terminated at any time by the
Executive for Good Reason or without Good Reason upon thirty
(30) days prior written notice. For purposes of this
Agreement, “Good Reason” means voluntary resignation
after any of the following actions are taken by the Company or any
of its Affiliated Entities without the Executive’s consent:
(i) a reduction in (x) the Executive’s Annual Base
Salary or Bonus potential described in Section 2(c)(ii) of
this Agreement or (y) during the first year of the Employment
Period, the Employee Benefits; (ii) a reduction or adverse
change in the Executive’s title, duties, responsibilities or
reporting relationship to the Board (provided, however, that the
Company’s appointment and/or election of a Non-Executive
Chairman shall not constitute Good Reason), which for these
purposes shall not include the failure to maintain the Executive as
an officer of the Parent or a member of the Parent Board in the
event that (x) the Company or any successor to the Company
ceases to be owned by the Parent or any successor to the Parent or
(y) the Parent or any successor to the Parent ceases to exist
whether by merger or otherwise; (iii) relocation of the
Executive’s primary work place, as assigned to him by the
Company, beyond a fifty (50) mile radius from Wilton,
Connecticut; or (iv) any other material breach by the Company
of this Agreement. A termination will not be for “Good
Reason” under this Section 3(d) unless the Executive
shall have given the Company thirty (30) days’ prior
written notice describing the alleged action(s) and then only if
the Company has not cured such actions within thirty (30) days
after the Company’s receipt of such written
notice.
(e) Window Period
Termination . Notwithstanding anything to the contrary in this
Agreement, including, without limitation Section 1 hereof,
during the 30-day period following December 4, 2007 (the
“Window Period”), (i) the Executive will have the
right to terminate his employment for any reason or no reason,
provided that the Notice of Termination is given to the Company in
accordance with Section 10(h) of this Agreement at least 60
days in advance of the Date of Termination, and (ii) the
Company will have the right, upon written notice to the Executive
in accordance with Section 10(h) of this Agreement, to cause
the Executive to exercise his right to terminate his employment
during the Window Period (each of the foregoing, a “Window
Period
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Termination”). Prior to the
commencement of the Window Period, the Executive may waive in
writing his right to terminate during the Window Period.
(f) Notice of
Termination . Any termination by the Company for Cause or
without Cause, or by the Executive for Good Reason or without Good
Reason or during the Window Period, shall be communicated by Notice
of Termination to the other party hereto given in accordance with
Section 10(h) of this Agreement. For purposes of this
Agreement, a “Notice of Termination” means a written
notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable,
sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive’s
employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date. The failure
by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing
of Good Reason or Cause shall not waive any right of the Executive
or the Company hereunder or preclude the Executive or the Company
from asserting such fact or circumstance in enforcing the
Executive’s or the Company’s rights
hereunder.
(g) Date of
Termination . “Date of Termination” means
(i) if the Executive’s employment is terminated by the
Company for Cause, without Cause or by reason of Disability, or by
the Executive for Good Reason or without Good Reason or during the
Window Period, the date of receipt of the Notice of Termination or
any later date specified therein pursuant to Section 3(f), as
the case may be and (ii) if the Executive’s employment
is terminated by reason of death, the date of death.
Section 4.
Obligations of the Company upon Termination .
(a) With Good Reason;
Other Than for Cause . If during the Employment Period, the
Company shall terminate the Executive’s employment other than
for Cause or the Executive shall terminate his employment for Good
Reason, then the Company will provide the Executive with the
following severance payments and/or benefits:
(i) The Company shall pay to
the Executive in a lump sum (x) the Annual Base Salary through
the Date of Termination to the extent not theretofore paid, and
(y) to the extent not previously paid, the Bonus earned for
any year prior to the year in which th
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