Exhibit 10(ff)
EMPLOYMENT
AGREEMENT
EMPLOYMENT AGREEMENT (this “
Agreement ”) dated as of May 5, 2004 and effective as
of February 27, 2004 by and between MATERIAL SCIENCES CORPORATION,
a Delaware corporation and its subsidiaries (collectively, the
“ Company ”), and James J. Waclawik (“
Employee ”) (capitalized terms used herein and not
otherwise defined shall have the meanings ascribed thereto in
Section 9 hereof).
W
I T N
E S S E T H
:
WHEREAS, Employee is employed by the
Company;
WHEREAS, the Board of Directors of
the Company has determined that appropriate steps should be taken
to reinforce and encourage the continued employment and dedication
of the Company’s key personnel; and
WHEREAS, as an inducement for and in
consideration of Employee providing services as an employee and a
consultant, and taking into account Employee’s previous
agreement to terminate his supplemental employee retirement
benefits and certain long term incentive awards and stock options,
the Company agrees that Employee shall receive the compensation and
other benefits set forth in this Agreement.
NOW, THEREFORE, in consideration of
the foregoing, of the mutual covenants and agreements herein
contained and for other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged,
the parties, intending legally to be bound, hereby agree as
follows:
1. Commencement Date . This
Agreement, and all rights and obligations of the parties hereunder,
shall commence on the date hereof.
2. Employment Terms
.
(a) Position and Compensation
. The Company hereby agrees to continue to employ Employee, and
Employee hereby agrees to remain employed by the Company, from the
date of this Agreement through December 31, 2004 (at which time his
employment shall terminate). During this period, Employee shall
hold the position of Vice President, Chief Financial Officer and
Secretary; provided that the Company will change Employee’s
position to a non-officer role reporting to the Chief Executive
Officer (with duties and responsibilities of the type described in
Section 3(b) of this Agreement) at such time as the Company has
appointed (1) another individual to serve as its acting or
permanent Chief Financial Officer and (2) another (or the same)
individual to serve as its Secretary (which appointments may occur
at the same or different times); and further provided that the
Company shall have the right to terminate Employee at any time with
or without Cause and Employee shall have the right to terminate
his
employment with or without Good Reason. During
the period from March 1, 2004 through December 31, 2004, Employee
shall be entitled to the following compensation and
benefits:
(i) Employee shall receive a base
salary of $272,000 per annum (the “ Base Salary
”), payable by the Company in regular installments in
accordance with the Company’s general payroll practices (in
effect from time to time). Employee’s Base Salary shall be
retroactive to March 1, 2004.
(ii) At the time of payment of
Employee’s fiscal 2004 bonus of $50,164 under the EVA Plan
(which was approved by the Compensation and Organization Committee
in April 2004), Employee shall receive an additional discretionary
cash bonus of $200,000 for services performed in fiscal 2004, in
each case less any withholding taxes. Employee shall be entitled to
participate in the Management Incentive Plan (the
“MIP”) with respect to fiscal 2005 at a 50% bonus level
subject to attainment of the targets set forth in the MIP (which
shall be determined on a basis consistent with the performance
achievement of other MSC officers); provided that Employee’s
fiscal 2005 bonus shall be pro-rated to reflect the portion of the
fiscal year from March 1, 2004 through December 31, 2004 (i.e., an
83.33% pro ration factor).
(iii) Employee shall participate in
all Company-sponsored employee benefit programs and receive all
fringe benefits for which employees of his level are eligible,
including, without limitation, medical, dental and vision plans,
long-term disability plans, life insurance plans, and incentive,
savings, reimbursement and retirement plans; provided that (A)
Employee shall not be entitled to a car allowance and (B) Employee
has forfeited the benefits described in Sections 2(b) and 4(k)
below; and provided further that Employee’s eligibility to
participate in Company-sponsored employee benefit programs and to
receive fringe benefits shall not be adversely affected in the
event the Company changes Employee’s position to a
non-officer role pursuant to Section 2(a) above.
(b) Termination of Supplemental
Employee Retirement Plan . The Company shall pay to Employee,
in full and complete satisfaction of the Company’s
obligations under that certain Supplemental Pension Plan Agreement
dated October 1, 1990 between the Company and Employee, an amount
equal to $326,000 (less any withholding taxes) on May 31, 2004 or,
if earlier, the date of termination of employment for any
reason.
(c) Phantom Units . On the
execution date of this Agreement, Employee shall receive a grant of
(i) 19,070 phantom stock units with a vesting price of $14 per
share and an expiration date of July 31, 2006 (which includes 4,000
units granted to Employee as his fiscal year 2005 long term
incentive award) and (ii) 18,066 phantom units with a vesting price
of $15 per share and an expiration date of July 31, 2007 (which
includes 4,000 units granted to Employee as his fiscal year 2005
long term incentive award). The phantom units shall be evidenced by
an agreement in the form of Exhibit A hereto (the “
Phantom Unit Agreement ”). The Phantom Unit Agreement
shall govern the treatment of Employee’s units.
(d) Transaction Bonuses . If
the Company decides to explore the possible disposition of one or
more of its operating groups (i.e., coil coating, Quiet Steel or
Electronic
2
Materials and Devices) in whole or in part, then
Employee shall have the opportunity to earn one or more
performance-based transaction bonuses, not to exceed $100,000 in
the aggregate. The full $100,000 bonus shall be payable upon the
closing of the sale of one of the three operating groups in its
entirety (in which case, no further bonuses shall be payable under
this Section). In the event of a partial sale of an operating
group, a partial bonus shall be paid based on (1) the percentage of
the total assets of the operating group represented by the divested
assets multiplied by (2) $100,000, but in no event shall total
bonuses under this Section exceed $100,000. In order to be eligible
to receive a bonus with respect to any particular transaction, the
definitive agreement for that transaction must be signed during the
period of Employee’s service as an employee or consultant
(but the closing of that transaction may occur after the service
period ends). The bonus for any transaction will be contingent on
the closing of that transaction, and the bonus will be paid within
10 business days following the closing.
3. Termination of Employment;
Consulting Services .
(a) Employee’s employment with
the Company shall terminate at the close of business on December
31, 2004. For thirty (30) months following December 31, 2004, the
Company, at its expense, shall continue Employee’s
participation in the medical, dental and vision plans, long-term
disability plans and life insurance plans specified in Section
2(a)(iii) (or substantially comparable benefits); provided that the
Company shall not be required to make DC pension contributions on
behalf of Employee or continue Employee’s participation in
other savings, retirement or benefit plans. Following expiration of
the 30-month period, Employee shall be entitled to 18 months of
COBRA coverage at his expense. Except as set forth in Section 4(k),
all vested stock options, shares of restricted stock and other
stock or stock based awards granted by the Company to Employee
shall remain exercisable by Employee subject to the terms and
conditions of any plans which such grants or awards were made
under.
(b) From January 1, 2005 through
December 31, 2005, Employee shall serve as a consultant to the
Company. Employee’s consulting relationship shall be
evidenced by a consulting agreement in the form attached as Exhibit
B hereto.
4. Additional Understandings
.
(a) Death While an Employee .
If Employee’s employment by the Company is terminated as a
result of the occurrence of Employee’s death, the Company
shall pay to Employee’s estate (i) vacation pay (for earned
but unused vacation), (ii) the compensation and benefits specified
in Section 2(a) through December 31, 2004 and the payment specified
in Section 2(b) (to the extent not previously paid), (iii) the
bonus payable under Section 2(d) with respect to any transaction
for which a definitive agreement was signed prior to
Employee’s death (contingent on closing of such transaction)
and (iv) any death benefits available under any Company plan or
policy. Following December 31, 2004, the Company shall continue to
provide employee benefits and COBRA coverage on the terms set forth
in Section 3(a).
(b) Disability While an
Employee . If Employee’s employment is terminated by the
Company as a result of the occurrence of Disability, the Company
shall pay to Employee (i) vacation pay (for earned but unused
vacation), (ii) the compensation and other benefits specified in
Section 2(a) through December 31, 2004 and the payment specified in
Section 2(b)
3
(to the extent not previously paid), (iii) the
bonus payable under Section 2(d) with respect to any transaction
for which a definitive agreement was signed prior to
Employee’s termination (contingent on closing of such
transaction) and (iv) any disability benefits available under any
Company plan or policy. Following December 31, 2004, the Company
shall continue to provide employee benefits and COBRA coverage on
the terms set forth in Section 3(a).
(c) Termination for Cause or
without Good Reason . If the Company terminates
Employee’s employment for Cause or Employee terminates his
employment without Good Reason, the Company shall pay to Employee
vacation pay (for earned but unused vacation), the compensation and
other benefits specified in Section 2(a) through the Termination
Date and the payment specified in Section 2(b) (to the extent not
previously paid).
(d) Termination of Employment
without Cause or for Good Reason . If Employee’s
employment with the Company is terminated by the Company without
Cause or the Employee terminates his employment with the Company
for Good Reason, the Company shall pay to Employee, (x) on the
Termination Date, any vacation pay (for earned but unused vacation)
and the compensation and benefits specified in Section 2 through
the Termination Date, and (y) severance, payable in a lump sum in
cash within 5 business days following the Termination Date, in an
amount equal to his Base Salary through December 31, 2004, his
consulting compensation for 2005 and the Consulting Bonus (in each
case to the extent unpaid). The Company also shall continue to
provide employee benefits under Section 2(a)(iii) through December
31, 2004 and, following December 31, 2004, shall provide employee
benefits and COBRA coverage on the terms set forth in Section
3(a).
(e) Notice of Termination .
Any purported termination of Employee’s employment by the
Company or by Employee shall be communicated to the other party
hereto by a written notice which shall indicate the specific
termination provision of this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of Employee’s employment
under the provision so indicated.
(f) No Mitigation . Employee
shall not be required to mitigate the amount of any payment
provided for in this Section 3 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided
for in this Section 3 be reduced by any compensation earned by
Employee as the result of employment by another employer or
Successor, by retirement benefits, by offset against any amount
claimed to be owed by Employee to the Company or
otherwise.
(g) Employee’s Insurance
Policy . Employee agrees to be solely responsible for the
payment of the premiums under his long-term care insurance
policy.
(h) Personal Property . On
December 31, 2005, the Company shall transfer to Employee title to
his Company-issued laptop computer and peripherals, subject to the
deletion or removal of all Company specific and proprietary
information (financial or otherwise). At any time, Employee shall
have the right to remove from the Company’s premises and
retain the photographs and art work in his office (as well as his
personal effects). Except as described above, Employee shall return
and relinquish all rights to all Company owned or leased property
(including without limitation his Company-issued cellular
telephone) on December 31, 2005 (or such earlier date as the
Company may specify, but not prior to the termination of his
employment).
4
(i) Transition Services .
Commencing on June 1, 2005 (or earlier if the Company terminates
Employee’s employment or consulting services without Cause),
the Company shall provide outplacement services at an executive
level through one or more outside firms up to an aggregate cost of
$20,000 and in accordance with the Company’s past practice,
with such services to extend until the earlier of (x) thirty (30)
months following the termination of Employee’s employment or
(y) the date Employee secures a permanent position. Employee shall
have access to the Company’s voicemail and electronic mail
systems while a consultant and access to the Company’s
voicemail system for sixty (60) days after the end of the
consulting period.
(j) Directors’ and
Officers’ Insurance . Prior to a Change of Control, the
Company shall maintain a directors’ and officers’
liability insurance policy (with coverage for the Employee)
consistent with past practice. Employee shall be entitled to tail
coverage under such policy (to apply following the earlier of
December 31, 2004, the Termination Date or a Change of Control) on
the same terms applicable to members of the Board of Directors of
the Company; provided that such period shall be no less than three
years from the earlier of the Termination Date or Change of
Control.
(k) Long-Term Incentive .
Employee expressly agrees and acknowledges, effective as of
February 27, 2004, that Employee forfeited all right, title and
interest to (i) the long-term incentive award granted to Employee
on March 1, 2003 pursuant to the 2003 Long-Term Incentive Stock
Award Program, and (ii) options to purchase 21,596 shares of Common
Stock at $10 per share which were originally scheduled to vest on
February 28, 2005.
(l) Indemnification Agreement
. Employee expressly acknowledges and agrees that, notwithstanding
any provision or statement to the contrary contained in this
Agreement, the Indemnification Agreement between the Company and
Employee dated March 1, 2002 shall remain in full force and effect
and continue to be binding upon Employee and the Company in
accordance with its terms.
(m) Previous Agreements .
Employee and the Company expressly acknowledge and agree that this
Agreement replaces, and amends and restates in its entirety, the
Retention Agreement between the Company and Employee dated February
17, 2004 and signed on February 27, 2004. Employee and the Company
further acknowledge and agree that, effective as of February 27,
2004, the Change of Control Agreement entered into between the
Company and Employee dated June 30, 2001 and the Technology
Agreement between the Company and the Employee dated June 14, 1990
became null and void and ceased to have any force or
effect.
(n) Press Releases . Prior to
issuing any press release or otherwise making a public announcement
with respect to any termination of Employee, the Company shall
provide Employee for his review and comment a copy of such press
release or announcement and accommodate any reasonable
modifications suggested by Employee; provided that the Company
shall in any event be entitled to comply with its disclosure
obligations under the securities laws (as determined by the Company
in good faith).
5
(o) Retirement Accounts . The
Company shall take all necessary actions to cause the
Employee’s defined contribution plan account balance and
401(k) plan account balance to be distributed or transferred in
accordance with the Employee’s instructions as expeditiously
as possible following the Termination Date pursuant to the
Company’s then current practice and applicable
law.
(p) Company Successors . The
Company will require any acquiror of all or substantially all of
the business and/or assets of the Company (whether direct or
indirect, by purchase, merger, consolidation or otherwise) (a
“ Successor ”) to expressly assume and agree to
perform this Agreement in the same manner and to the same extent
that the Company would be required to perform it if no such
succession had taken place. As used in this Agreement,
“Company” shall mean the Company as hereinbefore
defined and any successor which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(q) Excise Tax Gross-Up
.
(i) In the event that Employee
becomes entitled to the payments and benefits provided under
Section 3 above and/or any other payments or benefits in connection
with a change in control or termination of Employee’s
employment with the Company (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a change in control or
any person affiliated with the Company or such person)
(collectively, the “ Payments ”), and if any of
the Payments will be subject to the tax (the “ Excise
Tax ”) imposed by Section 4999 of the Code, then (A) if
the aggregate amount of the Payments is equal to or greater than
330% of the “base amount” as defined in Section
280G(b)(3) of the Code, then the Company shall pay to Employee, at
least 30 days prior to the time payment of any such Excise Tax is
due, an additional amount (the “ Gross-Up Payment
”) such that the net amount retained by Employee, after
deduction of any Excise Tax and any federal and state and local
income tax imposed on the Gross-Up Payment, shall be equal to the
Excise Tax imposed on the Payments; and (B) if the aggregate amount
of the Payments is less than 330% of the “base amount,”
then the aggregate present value of the payments made pursuant to
the terms of this Agreement alone without taking into account
payments made pursuant to any other agreements between the Company
and Employee shall be reduced so that the Payment equals 299.99% of
the “base amount” (it being understood that in no event
shall the amount of the payment made pursuant to the terms of this
Agreement be less than $0).
(ii) For purposes of determining
whether any of the Payments will be subject to the Excise Tax and
the amount of such Excise Tax, (A) the Payments shall be treated as
“parachute payments” within the meaning of Section
280G(b)(2) of the Code, and all “excess parachute
payments” within the meaning of Section 280G(b)(l) of the
Code shall be treated as subject to the Excise Tax, unless, in the
opinion of tax counsel selected by the Company’s tax advisors
and reasonably acceptable to Employee, the Payments (in whole or in
part) do not constitute parachute payments or excess
parachute
6
payments or are otherwise not
subject to the Excise Tax, (B) the amount of the Payments which
shall be treated as subject to the Excise Tax shall be equal to the
lesser of (y) the total amount of the Payments or (z) the amount of
excess parachute payments within the meaning of Section 280G(b)(l)
(after applying clause (A) above), and (C) the value of any
non-cash benefits or any deferred payment or benefit shall be
determined by the Company’s tax advisors in accordance with
the principles of Section 280G(d)(3) and (4) of the
Code.
(iii) For purposes of determining
the amount of the Gross-Up Payment, Employee shall be deemed to pay
federal income taxes at the highest marginal rate of federal income
taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of Employee’s
residence on the Termination Date, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such
state and local taxes.
(iv) In the event that the Excise
Tax is subsequently determined to be less than the amount taken
into account hereunder at the time of termination of
Employee’s employment, Employee shall repay to the Company at
the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to
such reduction (plus the portion of the Gross-Up Payment
attributable to the Excise Tax and federal and state and local
income tax imposed on the Gross-Up Payment being repaid by Employee
if such repayment results in a reduction in Excise Tax and/or a
federal and state and local income tax deduction) plus interest on
the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the
time of the termination of Employee’s employment (including
by reason of any payment th
