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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
Commission File Number 0-24884
CANNONDALE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 06-0871823
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16 TROWBRIDGE DRIVE, BETHEL, CT 06801
(Address of principal executive offices, including
zip code)
(203) 749-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), Yes X No and (2) has been subject to such
filing requirements for the past 90 days Yes X No .
The number of shares outstanding of the issuer's Common Stock, $.01 par value,
as of May 4, 1998 was 8,108,088.
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
PAGE
(a) Index to Exhibits 4
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
CANNONDALE CORPORATION
Date: May 12, 1998 /s/ WILLIAM A. LUCA
------------------------------------
William A. Luca
Vice President of Finance, Treasurer
and Chief Financial Officer
(Principal Financial Officer
and authorized signatory)
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
10.1.11* Credit Agreement, dated February 5, 1998, between Cannondale
Europe B.V. and ABN AMRO Bank N.V.
10.68 Change of Control Employment Agreement, dated February 5, 1998,
between Cannondale Corporation and William A. Luca.
10.68.1 Change of Control Employment Agreement, dated February 5, 1998,
between Cannondale Corporation and Joseph S. Montgomery.
10.68.2 Change of Control Employment Agreement, dated February 5, 1998,
between Cannondale Corporation and John Moriarty.
10.68.3 Change of Control Employment Agreement, dated February 5, 1998,
between Cannondale Corporation and Daniel C. Alloway.
10.68.4 Cannondale Corporation Change of Control Separation Plan A.
10.68.5 Cannondale Corporation Change of Control Separation Plan B.
27* Financial Data Schedule
__________________
* Filed Previously
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Exhibit 10.68
CHANGE-OF-CONTROL
EMPLOYMENT AGREEMENT
(TIER I)
AGREEMENT by and between Cannondale Corporation, a Delaware corporation
(the "Company") and William A. Luca (the "Executive"), dated as of the fifth day
of February, 1998.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility or threat of a Change of Control (as defined
below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control and to encourage
the Executive's full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
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2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination would beneficially own, directly
or indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
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ownership existed prior to the Business Combination, and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 25 miles from
such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not
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serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this Agreement shall refer to Annual
Base Salary as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, during the
employment period the Executive shall be awarded an annual profit sharing bonus
(the "Annual Bonus"), in cash at least equal to the Executive's highest profit
sharing bonus under the Company's profit sharing plan for the last three full
fiscal years prior to the Effective Date (annualized in the event that the
Executive was not employed by the Company for the whole of such fiscal year (the
"Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the
end of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of the Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the event, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those,
provided by the Company and its affiliated companies for the Executive under
such plans, practices and programs as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall be
entitled to receive reimbursement for all reasonable expenses incurred by the
Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately
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preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, tax and financial
planning services, in accordance with the most favorable plans, practices,
programs and policies of the Company and its affiliated companies in effect for
the Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 13(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) Termination by Executive. The Executive's employment may be
terminated by the Executive for any reason or no reason.
(c) Notice of Termination. Any termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance
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with Section 13(b) of this Agreement. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) if given by the Company,
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, if given by the Company, 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 described below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice).
(d) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Executive, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Other Than for
Death or Disability. If, during the Employment Period, the Company shall
terminate the Executive's employment other than for death or Disability, or if
during the Employment Period the Executive shall terminate his employment:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the product of the higher of (I) the Recent Annual
Bonus and (II) the Annual Bonus paid or payable, including any
bonus or portion thereof which has been earned but deferred
(and annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was employed
for less than twelve full months), for the most recently
completed fiscal year during the Employment Period, if any
(such higher amount being referred to as the "Highest Annual
Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of (1) three and
(2) the sum of (x) the Executive's Annual Base Salary and (y)
the Highest Annual Bonus;
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the terms of
the appropriate plan, program, practice or
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policy, the Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies and their families, provided, however, that if the Executive
becomes re-employed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan,
the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and
to have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and
providers of which shall be selected by the Executive in his sole
discretion, but the cost to the Company of which shall not exceed
$50,000;
(iv) for three years after the Executive's Date of
Termination, the Company shall, at its sole expense as incurred,
provide the Executive with personal tax accounting and financial
planning, the scope and providers of which shall be selected by the
Executive in his sole discretion, but the cost to the Company of which
shall not exceed $15,000;
(v) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits equal to the applicable benefits provided
by the Company and affiliated companies to the estates and beneficiaries of peer
executives of the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at the time
of the Executive's death.
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(c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to those generally
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with respect to
other peer executives and their families at the time of the Executive's
Disability.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
13(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any setoff, counterclaim, recoupment, defense
or other claim, right or action which the Company may have against the Executive
or others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872 (f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company or its affiliates to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (including, without limitation, any
amounts payable pursuant to any plan, program, policy, practice, contract or
agreement of the type referred in Section 7), but determined without regard to
any additional payments
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required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provision of this Section 9(a), if it shall be determined that the Executive is
entitled to a Gross-Up Payment, but that the present value as of the date of the
Change of Control, determined in accordance with Section 280G(B)(2)(A)(ii) and
280G(d)(4) (the "Present Value") of the Payments does not exceed 110% of the
greatest Present Value of Payments (the "Reduced Amount") that could be paid to
the Executive such that the receipt thereof would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced such that their Present Value equals the
Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
LLP or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by
the Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than fifteen
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business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
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(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective business, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company 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 the Company to assume expressly 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 to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. Payments by Trust. The Company intends to establish a trust to fund
payments under this Agreement and other agreements and/or plans relating to
employee severance payments (the "Trust"). Any payments made by the Trust to the
Executive pursuant to the terms
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of this Agreement shall reduce the obligations of the Company with respect to
such payment. Except to the extent provided in the preceding sentence, neither
the establishment of the Trust, the funding thereof nor any payments made by the
Trust shall reduce or otherwise affect the obligations of the Company hereunder,
including the obligations of the Company to make the payments required
hereunder, at the times and in the amounts provided herein.
13. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
William A. Luca
12 Middleton Road
Newtown, Connecticut 06470
If to the Company:
Cannondale Corporation
16 Trowbridge Drive
Bethel, Connecticut 06810
Attention: Chief Financial Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company
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may have hereunder shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment may be terminated by either the Executive or the Company
at any time prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after this Effective Date, this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
date first above written.
/s/ WILLIAM A. LUCA
_______________________________
William A. Luca
CANNONDALE CORPORATION
/s/ JOSEPH S. MONTGOMERY
By: __________________________
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Exhibit 10.68.1
CHANGE-OF-CONTROL
EMPLOYMENT AGREEMENT
(TIER I)
AGREEMENT by and between Cannondale Corporation, a Delaware corporation
(the "Company") and Joseph S. Montgomery (the "Executive"), dated as of the
fifth day of February, 1998.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility or threat of a Change of Control (as defined
below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control and to encourage
the Executive's full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
<PAGE> 2
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination would beneficially own, directly
or indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
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ownership existed prior to the Business Combination, and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 25 miles from
such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not
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<PAGE> 4
serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this Agreement shall refer to Annual
Base Salary as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, during the
employment period the Executive shall be awarded an annual profit sharing bonus
(the "Annual Bonus"), in cash at least equal to the Executive's highest profit
sharing bonus under the Company's profit sharing plan for the last three full
fiscal years prior to the Effective Date (annualized in the event that the
Executive was not employed by the Company for the whole of such fiscal year (the
"Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the
end of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of the Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the event, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those,
provided by the Company and its affiliated companies for the Executive under
such plans, practices and programs as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall be
entitled to receive reimbursement for all reasonable expenses incurred by the
Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately
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<PAGE> 5
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, tax and financial
planning services, in accordance with the most favorable plans, practices,
programs and policies of the Company and its affiliated companies in effect for
the Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 13(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) Termination by Executive. The Executive's employment may be
terminated by the Executive for any reason or no reason.
(c) Notice of Termination. Any termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance
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<PAGE> 6
with Section 13(b) of this Agreement. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) if given by the Company,
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, if given by the Company, 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 described below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice).
(d) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Executive, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Other Than for
Death or Disability. If, during the Employment Period, the Company shall
terminate the Executive's employment other than for death or Disability, or if
during the Employment Period the Executive shall terminate his employment:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the product of the higher of (I) the Recent Annual
Bonus and (II) the Annual Bonus paid or payable, including any
bonus or portion thereof which has been earned but deferred
(and annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was employed
for less than twelve full months), for the most recently
completed fiscal year during the Employment Period, if any
(such higher amount being referred to as the "Highest Annual
Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of (1) three and
(2) the sum of (x) the Executive's Annual Base Salary and (y)
the Highest Annual Bonus;
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the terms of
the appropriate plan, program, practice or
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policy, the Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies and their families, provided, however, that if the Executive
becomes re-employed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan,
the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and
to have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and
providers of which shall be selected by the Executive in his sole
discretion, but the cost to the Company of which shall not exceed
$50,000;
(iv) for three years after the Executive's Date of
Termination, the Company shall, at its sole expense as incurred,
provide the Executive with personal tax accounting and financial
planning, the scope and providers of which shall be selected by the
Executive in his sole discretion, but the cost to the Company of which
shall not exceed $15,000;
(v) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits equal to the applicable benefits provided
by the Company and affiliated companies to the estates and beneficiaries of peer
executives of the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at the time
of the Executive's death.
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(c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to those generally
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with respect to
other peer executives and their families at the time of the Executive's
Disability.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
13(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any setoff, counterclaim, recoupment, defense
or other claim, right or action which the Company may have against the Executive
or others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872 (f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company or its affiliates to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (including, without limitation, any
amounts payable pursuant to any plan, program, policy, practice, contract or
agreement of the type referred in Section 7), but determined without regard to
any additional payments
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<PAGE> 9
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provision of this Section 9(a), if it shall be determined that the Executive is
entitled to a Gross-Up Payment, but that the present value as of the date of the
Change of Control, determined in accordance with Section 280G(B)(2)(A)(ii) and
280G(d)(4) (the "Present Value") of the Payments does not exceed 110% of the
greatest Present Value of Payments (the "Reduced Amount") that could be paid to
the Executive such that the receipt thereof would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced such that their Present Value equals the
Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
LLP or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by
the Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than fifteen
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<PAGE> 10
business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
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(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective business, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company 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 the Company to assume expressly 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 to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. Payments by Trust. The Company intends to establish a trust to fund
payments under this Agreement and other agreements and/or plans relating to
employee severance payments (the "Trust"). Any payments made by the Trust to the
Executive pursuant to the terms
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<PAGE> 12
of this Agreement shall reduce the obligations of the Company with respect to
such payment. Except to the extent provided in the preceding sentence, neither
the establishment of the Trust, the funding thereof nor any payments made by the
Trust shall reduce or otherwise affect the obligations of the Company hereunder,
including the obligations of the Company to make the payments required
hereunder, at the times and in the amounts provided herein.
13. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Joseph S. Montgomery
187 Umpawaug Road
West Redding, Connecticut 06896
If to the Company:
Cannondale Corporation
16 Trowbridge Drive
Bethel, Connecticut 06810
Attention: Chief Financial Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company
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may have hereunder shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment may be terminated by either the Executive or the Company
at any time prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after this Effective Date, this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
date first above written.
/s/ JOSEPH S. MONTGOMERY
_______________________________
Joseph S. Montgomery
CANNONDALE CORPORATION
By: /s/ WILLIAM A. LUCA
__________________________
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<PAGE> 1
Exhibit 10.68.2
CHANGE-OF-CONTROL
EMPLOYMENT AGREEMENT
(TIER II)
AGREEMENT by and between Cannondale Corporation, a Delaware corporation
(the "Company") and John Moriarty (the "Executive"), dated as of the fifth day
of February, 1998.
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company will have the continued dedication of the Executive, notwithstanding
the possibility, threat or occurrence of a Change of Control (as defined below)
of the Company. The Board believes it is imperative to diminish the inevitable
distraction of the Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to encourage the
Executive's full attention and dedication to the Company currently and in the
event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate two years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change of
Control"
<PAGE> 2
shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination would beneficially own, directly
or indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the members
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<PAGE> 3
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the second anniversary of
such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 25 miles from
such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual
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<PAGE> 4
Base Salary shall not be reduced after any such increase and the term Annual
Base Salary as utilized in this Agreement shall refer to Annual Base Salary as
so increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
(ii) Annual Bonus. In addition to Annual Base Salary, during the
Employment Period the Executive shall be awarded an annual profit sharing bonus
(the "Annual Bonus"), in cash at least equal to the Executive's highest profit
sharing bonus under the Company's profit sharing plan for the last three full
fiscal years prior to the Effective Date (annualized in the event that the
Executive was not employed by the Company for the whole of such fiscal year (the
"Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the
end of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of the Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the event, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those,
provided by the Company and its affiliated companies for the Executive under
such plans, practices and programs as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall be
entitled to receive reimbursement for all reasonable expenses incurred by the
Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any
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<PAGE> 5
time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, tax and financial
planning services, in accordance with the most favorable plans, practices,
programs and policies of the Company and its affiliated companies in effect for
the Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies. As
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 13(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of the Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices, titles
and reporting requirements),
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<PAGE> 6
authority, duties or responsibilities as contemplated by Section 4(a) of this
Agreement, or any other action by the Company which results in a diminution in
such position, authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad faith and
which is remedied by the Company promptly after receipt of notice thereof given
by the Executive;
(ii) any failure by the Company to comply with any of the
provisions of Section 4(b) of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the Effective
Date;
(iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this Agreement;
or
(v) any failure by the Company to comply with and satisfy
Section 11(c) of this Agreement.
For purposes of this Section 5(b), any good faith determination of "Good Reason"
made by the Executive shall be conclusive. Anything in this Agreement to the
contrary notwithstanding, a termination by the Executive for any reason during
the 30-day period immediately following the first anniversary of the Effective
Date shall be deemed to be a termination for Good Reason for all purposes of
this Agreement.
(c) Notice of Termination. Any termination by the Company or by the
Executive for Good Reason, shall be communicated by Notice of Termination to the
other party hereto given in accordance with Section 13(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a written notice
which (i) if given by the Company, indicates the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable, if given by the
Company, 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 described below)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving of such notice).
The failure by the Executive to set forth in the Notice of Termination any fact
or circumstance which contributes to a showing of Good Reason shall not waive
any right of the Executive, hereunder or preclude the Executive from asserting
such fact or circumstance in enforcing the Executive's rights hereunder.
(d) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company or by the Executive for Good
Reason, the date of receipt of the Notice of Termination or any later date
specified therein, as the case may be, (ii) if
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the Executive's employment is terminated by the Company other than for
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Good Reason; Other
Than for Death or Disability. If, during the Employment Period, the Company
shall terminate the Executive's employment other than for death or Disability,
or if during the Employment Period the Executive shall terminate his employment
for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the product of the (x) the higher of (I) the Recent
Annual Bonus and (II) the Annual Bonus paid or payable,
including any bonus or portion thereof which has been earned
but deferred (and annualized for any fiscal year consisting of
less than twelve full months or during which the Executive was
employed for less than twelve full months), for the most
recently completed fiscal year during the Employment Period,
if any (such amount being referred to as the "Highest Annual
Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of (1) three and
(2) the sum of (x) the Executive's Annual Base Salary and (y)
the Highest Annual Bonus;
(ii) for two years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the Company shall
continue benefits to the Executive and/or the Executive's family at
least equal to those which would have been provided to them in
accordance with the plans, programs, practices and policies described
in Section 4(b)(iv) of this Agreement if the Executive's employment had
not been terminated or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes re-employed
with another employer and is eligible to receive medical or other
welfare benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility. For purposes of determining eligibility (but not the time
of commencement of benefits) of the
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Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until two years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and
providers of which shall be selected by the Executive in his sole
discretion, but the cost to the Company of which shall not exceed
$15,000;
(iv) for two years after the Executive's Date of Termination,
the Company shall, at its sole expense as incurred, provide the
Executive with personal tax accounting and financial planning, the
scope and providers of which shall be selected by the Executive in his
sole discretion, but the cost to the Company of which shall not exceed
$10,000;
(v) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits equal to the applicable benefits provided
by the Company and affiliated companies to the estates and beneficiaries of peer
executives of the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at the time
of the Executive's death.
(c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to those generally
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with respect to
other peer executives and their families at the time of the Executive's
Disability.
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<PAGE> 9
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
13(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any setoff, counterclaim, recoupment, defense
or other claim, right or action which the Company may have against the Executive
or others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872 (f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company or its affiliates to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (including, without limitations, any
amounts payable pursuant to any plan, program, policy, practice, contract or
agreement of the type referred to in Section 7), but determined without regard
to any additional payments required under this Section 9) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provision of this Section 9(a), if it
shall be determined that the Executive is entitled to a Gross-Up Payment, but
that the present value as of the date of the
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<PAGE> 10
Change of Control, determined in accordance with Section 280G(B)(2)(A)(ii) and
280G(d)(4) (the "Present Value") of the Payments does not exceed 110% of the
greatest Present Value of Payments (the "Reduced Amount") that could be paid to
the Executive such that the receipt thereof would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced such that their Present Value equals the
Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
LLP or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by
the Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than fifteen business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
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(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the
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amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective business, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company 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 the Company to assume expressly 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 to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. Payments by Trust. The Company intends to establish a trust to fund
payments under this Agreement and other agreements and/or plans relating to
employee severance payments (the "Trust"). Any payments made by the Trust to the
Executive pursuant to the terms of this Agreement shall reduce the obligations
of the Company with respect to such payment. Except to the extent provided in
the preceding sentence, neither the establishment of the Trust, the funding
thereof nor any payments made by the Trust shall reduce or otherwise affect the
obligations of the Company hereunder, including the obligations of the Company
to make the payments required hereunder, at the times and in the amounts
provided herein.
13. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
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(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
John Moriarty
67 Brookwood Drive
Southington, Connecticut 06489
If to the Company:
Cannondale Corporation
16 Trowbridge Drive
Bethel, Connecticut 06810
Attention: Chief Financial Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(b)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment may be terminated by either the Executive or the Company
at any time prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after this Effective Date, this
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<PAGE> 14
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
date first above written.
/s/ JOHN MORIARTY
_______________________________
John Moriarty
CANNONDALE CORPORATION
By: /s/ JOSEPH S. MONTGOMERY
__________________________
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<PAGE> 1
Exhibit 10.68.3
CHANGE-OF-CONTROL
EMPLOYMENT AGREEMENT
(TIER I)
AGREEMENT by and between Cannondale Corporation, a Delaware corporation
(the "Company") and Daniel C. Alloway (the "Executive"), dated as of the fifth
day of February, 1998.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility or threat of a Change of Control (as defined
below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change of Control and to encourage
the Executive's full attention and dedication to the Company currently and in
the event of any threatened or pending Change of Control, and to provide the
Executive with compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 1(b)) on which a
Change of Control (as defined in Section 2) occurs. Anything in this Agreement
to the contrary notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to the date on which
the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
<PAGE> 2
2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (ii) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change of Control: (i) any acquisition
directly from the Company, (ii) any acquisition by the Company, (iii) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination would beneficially own, directly
or indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
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<PAGE> 3
ownership existed prior to the Business Combination, and (iii) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to continue the
Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 25 miles from
such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions, and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at a monthly rate, at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not
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<PAGE> 4
serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such increase and
the term Annual Base Salary as utilized in this Agreement shall refer to Annual
Base Salary as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling or under common
control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary, during the
employment period the Executive shall be awarded an annual profit sharing bonus
(the "Annual Bonus"), in cash at least equal to the Executive's highest profit
sharing bonus under the Company's profit sharing plan for the last three full
fiscal years prior to the Effective Date (annualized in the event that the
Executive was not employed by the Company for the whole of such fiscal year (the
"Recent Annual Bonus"). Each such Annual Bonus shall be paid no later than the
end of the third month of the fiscal year next following the fiscal year for
which the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of the Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the event, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those,
provided by the Company and its affiliated companies for the Executive under
such plans, practices and programs as in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(iv) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive's family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall be
entitled to receive reimbursement for all reasonable expenses incurred by the
Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately
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<PAGE> 5
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, tax and financial
planning services, in accordance with the most favorable plans, practices,
programs and policies of the Company and its affiliated companies in effect for
the Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
practices, programs and policies of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The Executive's
employment shall terminate automatically upon the Executive's death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 13(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the Executive's employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that, within
the 30 days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of this Agreement,
"Disability" shall mean the absence of the Executive from the Executive's duties
with the Company on a full-time basis for 180 consecutive business days as a
result of incapacity due to mental or physical illness which is determined to be
total and permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative.
(b) Termination by Executive. The Executive's employment may be
terminated by the Executive for any reason or no reason.
(c) Notice of Termination. Any termination by the Company or by the
Executive shall be communicated by Notice of Termination to the other party
hereto given in accordance
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<PAGE> 6
with Section 13(b) of this Agreement. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (i) if given by the Company,
indicates the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, if given by the Company, 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 described below) is other than the date of receipt of
such notice, specifies the termination date (which date shall be not more than
thirty days after the giving of such notice).
(d) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Executive, the date of receipt of
the Notice of Termination or any later date specified therein, as the case may
be, (ii) if the Executive's employment is terminated by the Company other than
for Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
6. Obligations of the Company upon Termination. (a) Other Than for
Death or Disability. If, during the Employment Period, the Company shall
terminate the Executive's employment other than for death or Disability, or if
during the Employment Period the Executive shall terminate his employment:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
following amounts:
A. the sum of (1) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (2) the product of the higher of (I) the Recent Annual
Bonus and (II) the Annual Bonus paid or payable, including any
bonus or portion thereof which has been earned but deferred
(and annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was employed
for less than twelve full months), for the most recently
completed fiscal year during the Employment Period, if any
(such higher amount being referred to as the "Highest Annual
Bonus") and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid
(the sum of the amounts described in clauses (1), (2), and (3)
shall be hereinafter referred to as the "Accrued
Obligations"); and
B. the amount equal to the product of (1) three and
(2) the sum of (x) the Executive's Annual Base Salary and (y)
the Highest Annual Bonus;
(ii) for three years after the Executive's Date of
Termination, or such longer period as may be provided by the terms of
the appropriate plan, program, practice or
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<PAGE> 7
policy, the Company shall continue benefits to the Executive and/or the
Executive's family at least equal to those which would have been
provided to them in accordance with the plans, programs, practices and
policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its affiliated
companies and their families, provided, however, that if the Executive
becomes re-employed with another employer and is eligible to receive
medical or other welfare benefits under another employer provided plan,
the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such
applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the
Executive for retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and
to have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred,
provide the Executive with outplacement services the scope and
providers of which shall be selected by the Executive in his sole
discretion, but the cost to the Company of which shall not exceed
$50,000;
(iv) for three years after the Executive's Date of
Termination, the Company shall, at its sole expense as incurred,
provide the Executive with personal tax accounting and financial
planning, the scope and providers of which shall be selected by the
Executive in his sole discretion, but the cost to the Company of which
shall not exceed $15,000;
(v) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other amounts
or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or
contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the
"Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the timely payment
or provision of Other Benefits. Accrued Obligations shall be paid to the
Executive's estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
shall be entitled to receive, benefits equal to the applicable benefits provided
by the Company and affiliated companies to the estates and beneficiaries of peer
executives of the Company and such affiliated companies under such plans,
programs, practices and policies relating to death benefits, if any, as in
effect with respect to other peer executives and their beneficiaries at the time
of the Executive's death.
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<PAGE> 8
(c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of Other
Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to those generally
provided by the Company and its affiliated companies to disabled executives
and/or their families in accordance with such plans, programs, practices and
policies relating to disability, if any, as in effect generally with respect to
other peer executives and their families at the time of the Executive's
Disability.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
13(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any setoff, counterclaim, recoupment, defense
or other claim, right or action which the Company may have against the Executive
or others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872 (f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company or its affiliates to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (including, without limitation, any
amounts payable pursuant to any plan, program, policy, practice, contract or
agreement of the type referred in Section 7), but determined without regard to
any additional payments
8
<PAGE> 9
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax imposed upon
the Gross-Up Payment, the Executive retains an amount of the Gross-up Payment
equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provision of this Section 9(a), if it shall be determined that the Executive is
entitled to a Gross-Up Payment, but that the present value as of the date of the
Change of Control, determined in accordance with Section 280G(B)(2)(A)(ii) and
280G(d)(4) (the "Present Value") of the Payments does not exceed 110% of the
greatest Present Value of Payments (the "Reduced Amount") that could be paid to
the Executive such that the receipt thereof would not give rise to any Excise
Tax, then no Gross-Up Payment shall be made to the Executive and the Payments,
in the aggregate, shall be reduced such that their Present Value equals the
Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
LLP or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by
the Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the
Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than fifteen
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<PAGE> 10
business days after the Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on which such claim
is requested to be paid. The Executive shall not pay such claim prior to the
expiration of the 30-day period following the date on which it gives such notice
to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive
in writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 9(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
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(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies,
and their respective business, which shall have been obtained by the Executive
during the Executive's employment by the Company or any of its affiliated
companies and which shall not be or become public knowledge (other than by acts
by the Executive or representatives of the Executive in violation of this
Agreement). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such information, knowledge or data to anyone other than the Company and those
designated by it. In no event shall an asserted violation of the provisions of
this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company 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 the Company to assume expressly 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 to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law, or otherwise.
12. Payments by Trust. The Company intends to establish a trust to fund
payments under this Agreement and other agreements and/or plans relating to
employee severance payments (the "Trust"). Any payments made by the Trust to the
Executive pursuant to the terms
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of this Agreement shall reduce the obligations of the Company with respect to
such payment. Except to the extent provided in the preceding sentence, neither
the establishment of the Trust, the funding thereof nor any payments made by the
Trust shall reduce or otherwise affect the obligations of the Company hereunder,
including the obligations of the Company to make the payments required
hereunder, at the times and in the amounts provided herein.
13. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Connecticut, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Daniel C. Alloway
34 Edgewater Commons Lane
Westport, Connecticut 06880
If to the Company:
Cannondale Corporation
16 Trowbridge Drive
Bethel, Connecticut 06810
Attention: Chief Financial Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company
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may have hereunder shall not be deemed to be a waiver of such provision or right
or any other provision or right of this Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment may be terminated by either the Executive or the Company
at any time prior to the Effective Date, in which case the Executive shall have
no further rights under this Agreement. From and after this Effective Date, this
Agreement shall supersede any other agreement between the parties with respect
to the subject matter hereof.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
date first above written.
/s/ DANIEL C. ALLOWAY
_______________________________
Daniel C. Alloway
CANNONDALE CORPORATION
By: /s/ JOSEPH S. MONTGOMERY
__________________________
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<PAGE> 1
Exhibit 10.68.4
CANNONDALE CORPORATION
CHANGE-OF-CONTROL
SEPARATION PLAN A
(TIER III)
1. Introduction. The Board of Directors of Cannondale Corporation, a
Delaware corporation (the "Company") has determined that it is in the best
interests of the Company and its shareholders to assure that the Company will
have the continued dedication of its employees, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of the Company.
The Board of Directors of the Company (the "Board") believes it is imperative to
diminish the inevitable distraction of its employees by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage its employees' full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide its employees with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of Participants (as defined below) will be satisfied. Therefore, in order to
accomplish these objectives, the Board hereby adopts the Cannondale Corporation
Change of Control Separation Plan A (the "Plan").
2. Certain Definitions. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 2(b)) on which a
Change of Control (as defined in Section 3) occurs.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate two years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Participant that the Change of Control Period shall not be so extended.
(c) "Participant" shall mean an employee who has been designated by the
Board from time to time as a participant in the Plan. Prior to the occurrence of
a Change of Control, the Board may add or remove any employee as a Participant,
and such employee's status as a Participant or a non-Participant shall be
effective as of the date of such Board action.
3. Change of Control. For the purpose of this Plan, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the
<PAGE> 2
Exchange Act) of 20% or more of either (i) the then outstanding shares of common
stock of the Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any acquisition by
the Company, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company, or (iv) any acquisition by any corporation pursuant to a
transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of
this Section 3; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination would beneficially own, directly
or indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
2
<PAGE> 3
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
4. Eligibility. All employees who are so identified from time to time
pursuant to Section 2(c) hereof shall be Participants in the Plan. The Board may
from time to time designate other employees as Participants. A Participant shall
cease to be a Participant in the Plan when he ceases to be an employee of the
Company or its affiliated companies or when his designation as a Participant is
rescinded by the Board pursuant to Section 2(c), unless such Participant is then
entitled to payment as provided in Section 7 of the Plan. A Participant entitled
to such payment shall remain a Participant in the Plan until the full amount of
all payments due hereunder has been paid to him. As used in this Plan, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
5. Termination of Employment. (a) Death or Disability. The
Participant's employment shall terminate automatically upon the Participant's
death. If the Company determines in good faith that the Disability of the
Participant has occurred (pursuant to the definition of Disability set forth
below), it may give to the Participant written notice of its intention to
terminate the Participant's employment. In such event, the Participant's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Participant (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Participant shall not
have returned to full-time performance of the Participant's duties. For purposes
of this Plan, "Disability" shall mean the absence of the Participant from the
Participant's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and reasonably acceptable to the Participant or the
Participant's legal representative.
(b) Cause. The Company may terminate the Participant's employment for
Cause. For purposes of this Plan, "Cause" shall mean:
(i) the willful and continued failure of the Participant to
perform substantially the Participant's duties with the Company or one of its
affiliated companies (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to the Participant by the Board or the Chief Executive
Officer of the Company which specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Participant has not
substantially performed the Participant's duties, or
(ii) the willful engaging by the Participant in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act on the part of the
Participant, shall be considered "willful" unless it is done, or omitted to be
done, by the Participant in bad faith or without reasonable belief that the
Participant's action or omission was in the best interests of the
3
<PAGE> 4
Company. Any act, or failure to act, based upon authority given pursuant to a
resolution duly adopted by a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively presumed to be done, or
omitted to be done, by the Participant in good faith and in the best interests
of the Company.
(c) Notice of Termination. Any termination by the Company shall be
communicated by Notice of Termination to the Participant. For purposes of this
Plan, a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Plan 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 Participant's employment under the
provision so indicated and (iii) if the Date of Termination (as described below)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving of such notice).
(d) Date of Termination. "Date of Termination" means (i) if the
Participant's employment is terminated by the Company for Cause, the date of
receipt of the Notice of Termination, (ii) if the Participant's employment is
terminated by the Company other than for Cause, the Date of Termination shall be
the date on which the Company notifies the Participant of such termination and
(iii) if the Participant's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the
Participant or the Disability Effective Date, as the case may be.
7. Obligations of the Company upon Termination. (a) Other Than for
Cause, Death or Disability. If, the Company shall terminate the Participant's
employment other than for Cause, death or Disability:
(i) the Company shall pay to the Participant in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) the sum of (1) the Participant's annual base
salary at the time of a Change of Control (the "Annual Base
Salary") through the Date of Termination to the extent not
theretofore paid, (2) any compensation previously deferred by
the Participant (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case
to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred
to as the "Accrued Obligations"); and
(B) the amount equal to the product of (1) one and
one-half and (2) the Participant's Annual Base Salary;
(ii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Participant any other
amounts or benefits required to be paid or provided or which the
Participant is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies (such other
4
<PAGE> 5
amounts and benefits shall be hereinafter referred to as the "Other
Benefits"); and
(iii) the amounts payable to the Participant hereunder shall
be reduced by any amount required to be paid to such Participant upon
termination of employment pursuant to any applicable law or regulation.
(b) Death. If the Participant's employment is terminated by reason of
the Participant's death, the Company shall have no further obligations to the
Participant's legal representatives under this Plan, other than for payment of
Accrued Obligations. Accrued Obligations shall be paid to the Participant's
estate or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination.
(c) Disability. If the Participant's employment is terminated by reason
of the Participant's Disability, the Company shall have no further obligations
to the Participant under this plan, other than for payment of Accrued
Obligations. Accrued Obligations shall be paid to the Participant in a lump sum
in cash within 30 days of the Date of Termination.
8. Non-exclusivity of Rights. Nothing in this Plan shall prevent or
limit the Participant's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Participant may qualify, nor, subject to amendment or
termination of the Plan pursuant to Section 13, shall anything herein limit or
otherwise affect such rights as the Participant may have under any contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Participant is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this Plan.
9. Full Settlement. The Company's obligation to make the payments
provided for in this Plan and otherwise to perform its obligations hereunder
shall not be affected by any setoff, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Participant or
others. In no event shall the Participant be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Participant under any of the provisions of the Plan and such amounts shall not
be reduced whether or not the Participant obtains other employment.
10. Certain Reduction of Payments by the Company. (a) Anything in the
Plan to the contrary notwithstanding, in the event it shall be determined that
any payment or distribution by the Company or its affiliated companies to or for
the benefit of a Participant (whether paid or payable or distributed or
distributable pursuant to the terms of the Plan or otherwise) (a "Payment")
would be nondeductible by the Company for Federal income tax purposes because of
Section 280G of the Code, then the aggregate present value of amounts payable or
distributable to or for the benefit of the Participant pursuant to the Plan
(such payments or distributions pursuant to the Plan are hereinafter referred to
as "Plan Payments") shall be reduced
5
<PAGE> 6
to the Reduced Amount. The "Reduced Amount" shall be an amount expressed in
present value which maximizes the aggregate present value of Plan Payments
without causing any Payment to be nondeductible by the Company because of
Section 280G of the Code. For purposes of this Section 10, present value shall
be determined in accordance with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under this Section
10 shall be made by Ernst & Young LLP (the "Accounting Firm"), which shall
provide detailed supporting calculations both to the Company and the Participant
within fifteen (15) business days of the Date of Termination or such earlier
time as is requested by the Company. Any such determination by the Accounting
Firm shall be binding upon the Company and the Participant. Within five (5)
business days of the determination by the Accounting Firm as to the Reduced
Amount, the Company shall pay to or distribute to or for the benefit of the
Participant such amounts as are then due to the Participant under the Plan. If
Plan Payments are to be reduced, the Participant shall determine which Plan
Payments shall be reduced to comply with this Section.
(c) Notwithstanding the foregoing or any other provision of
the Plan to the contrary, the limitation set forth in this Section 10 shall not
apply in the event that the Accounting Firm determines that the benefits to the
Participant under the Plan on an after-tax basis (i.e., after Federal, state and
local income and excise taxes) if such limitation is not applied would exceed
the after-tax benefits to the Participant if such limitation is applied.
11. Successors. The Company 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 the Company to assume
expressly and agree to perform the Plan in the same manner and to the same
extent that the Company would be obligated under the Plan if no succession had
taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform the Plan by operation of law, or
otherwise.
12. Duration. If a Change in Control has not occurred, the Plan shall
expire five (5) years from the date the Plan is adopted by the Board, unless
sooner terminated as provided in Section 13, or unless extended as described
below. Following the end of the five (5) year term, on each anniversary of the
Effective Date before a Change in Control, the term of the Plan shall be
automatically extended to continue for an additional one (1) year period, unless
the Board, by vote of a majority of the entire Board, determines before the
anniversary date that the term will not be extended. If a Change in Control
occurs during the term of the Plan, the Plan shall continue in full force and
effect and shall not terminate or expire until all Participants who become
entitled to payments hereunder shall have received such payments in full.
13. Amendment and Termination. The Plan may be terminated or amended in
any respect by resolution adopted by a majority of the Incumbent Board, unless a
Change in Control has previously occurred. If a Change in Control occurs, the
Plan shall no longer be subject to
6
<PAGE> 7
amendment, change, substitution, deletion, revocation or termination in any
respect whatsoever.
14. Form of Amendment. The form of any amendment or termination of the
Plan shall be a written instrument signed by a duly authorized officer or
officers of the Company, certifying that the amendment or termination has been
approved by the Incumbent Board. An amendment of the Plan shall automatically
effect a corresponding amendment to all Participant's rights hereunder. A
termination of the Plan shall automatically effect a termination of all
Participants' rights and benefits hereunder.
15. Withholding Taxes. The Company may directly or indirectly withhold
from any payments made under the Plan all Federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation or ruling.
16. Indemnification. If a Participant institutes any legal action in
seeking to obtain or enforce, or is required to defend any legal action
regarding the validity or enforceability of, any right or benefit provided by
the Plan, the Company will, if the Participant substantially prevails in such
action, pay for all reasonable legal fees and expenses incurred by such
Participant.
17. Employment Status. The Plan does not constitute a contract of
employment or impose on the Participant or the Company or any of its affiliated
companies any obligation to retain the Participant as an employee, to change the
status of the Participant's employment, or to change the Company's policies or
those of its affiliated companies regarding termination of employment. The
employment of any Participant by the Company is "at will" and, prior to the
Effective Date, the Participant's employment may be terminated by either the
Participant or the Company at any time, in which case the Participant shall have
no further rights under the Plan.
18. No Attachment. Except as required by law, no right to receive
payments under the Plan shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
19. Source of Payment. All payments provided for under the Plan shall
be paid in cash from the general funds of the Company. The Company shall not be
required to establish a special or separate fund or other segregation of assets
to assure such payments, and, if the Company shall make any investments to aid
it in meeting its obligations hereunder, the Participants shall have no right,
title or interest whatever in or to such investments except as may otherwise be
expressly provided in a separate written instrument relating to such
investments. Nothing contained in the Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between the Company and a Participant or any other
person. To the extent that any person acquires a right to receive payments from
the Company hereunder, such right shall be no greater than the right of an
unsecured general creditor of the Company.
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<PAGE> 8
20. Validity and Severability. The invalidity or unenforceability of
any provision of the Plan shall not affect the validity or enforceability of any
other provisions of the Plan, which shall remain in full force and effect, and
any prohibition of enforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
21. Governing Law. The validity, interpretation, construction and
performance of the Plan shall in all respects be governed by the laws of the
State of Connecticut, without reference to principles of conflict of laws.
22. Named Fiduciary and Administrator. For the purposes of the Employee
Retirement Income Security Act of 1974, the Company shall be the "named
fiduciary" and the "Administrator" of the Plan. The Plan Administrator shall
operate, interpret and implement the Plan. The Plan Administrator shall have all
such powers as are necessary to discharge its duties, including, but not limited
to, the interpretation and construction of all provisions of the Plan, the
determination of all questions of eligibility, participation, benefits and all
other related or incidental matters, and such duties and powers of Plan
administration which are not assumed from time to time by any other appropriate
entity, individual, or institution. The Plan Administrator shall decide all such
questions and its decisions and determinations that are not arbitrary and
capricious shall be binding and conclusive on the Company, the Participant, the
Participant's designee, and the Participant's spouse or other dependent or
beneficiary, employees, and all other interested parties. The Plan Administrator
may require each Participant to submit, in such form as it shall deem reasonable
and acceptable, proof of any information which the Plan Administrator finds
necessary or desirable for the proper administration of the Plan.
8
<PAGE> 1
Exhibit 10.68.5
CANNONDALE CORPORATION
CHANGE-OF-CONTROL
SEPARATION PLAN B
(TIER IV)
1. Introduction. The Board of Directors of Cannondale Corporation, a
Delaware corporation (the "Company") has determined that it is in the best
interests of the Company and its shareholders to assure that the Company will
have the continued dedication of its employees, notwithstanding the possibility,
threat or occurrence of a Change of Control (as defined below) of the Company.
The Board of Directors of the Company (the "Board") believes it is imperative to
diminish the inevitable distraction of its employees by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage its employees' full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide its employees with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of Participants (as defined below) will be satisfied. Therefore, in order to
accomplish these objectives, the Board hereby adopts the Cannondale Corporation
Change of Control Separation Plan B (the "Plan").
2. Certain Definitions. (a) The "Effective Date" shall mean the first
date during the Change of Control Period (as defined in Section 2(b)) on which a
Change of Control (as defined in Section 3) occurs.
(b) The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate two years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Participant that the Change of Control Period shall not be so extended.
(c) "Participant" shall mean an employee who has been designated by the
Board from time to time as a participant in the Plan. Prior to the occurrence of
a Change of Control, the Board may add or remove any employee as a Participant,
and such employee's status as a Participant or a non-Participant shall be
effective as of the date of such Board action.
3. Change of Control. For the purpose of this Plan, a "Change of
Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
<PAGE> 2
Company (the "Outstanding Company Common Stock") or (ii) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any corporation controlled by the Company, or
(iv) any acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of subsection (c) of this Section 3; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization,
merger or consolidation or sale or other disposition of all or substantially all
of the assets of the Company (a "Business Combination"), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination would beneficially own, directly
or indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination (including,
without limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the case may
be, (ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company or
such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination, and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
2
<PAGE> 3
4. Eligibility. All employees who are so identified from time to time
pursuant to Section 2(c) hereof shall be Participants in the Plan. The Board may
from time to time designate other employees as Participants. A Participant shall
cease to be a Participant in the Plan when he ceases to be an employee of the
Company or its affiliated companies or when his designation as a Participant is
rescinded by the Board pursuant to Section 2(c), unless such Participant is then
entitled to payment as provided in Section 7 of the Plan. A Participant entitled
to such payment shall remain a Participant in the Plan until the full amount of
all payments due hereunder has been paid to him. As used in this Plan, the term
"affiliated companies" shall include any company controlled by, controlling or
under common control with the Company.
5. Termination of Employment. (a) Death or Disability. The
Participant's employment shall terminate automatically upon the Participant's
death. If the Company determines in good faith that the Disability of the
Participant has occurred (pursuant to the definition of Disability set forth
below), it may give to the Participant written notice of its intention to
terminate the Participant's employment. In such event, the Participant's
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Participant (the "Disability Effective Date"),
provided that, within the 30 days after such receipt, the Participant shall not
have returned to full-time performance of the Participant's duties. For purposes
of this Plan, "Disability" shall mean the absence of the Participant from the
Participant's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness which
is determined to be total and permanent by a physician selected by the Company
or its insurers and reasonably acceptable to the Participant or the
Participant's legal representative.
(b) Cause. The Company may terminate the Participant's employment for
Cause. For purposes of this Plan, "Cause" shall mean:
(i) the willful and continued failure of the Participant to
perform substantially the Participant's duties with the Company or one of its
affiliated companies (other than any such failure resulting from incapacity due
to physical or mental illness), after a written demand for substantial
performance is delivered to the Participant by the Board or the Chief Executive
Officer of the Company which specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Participant has not
substantially performed the Participant's duties, or
(ii) the willful engaging by the Participant in illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company.
For purposes of this provision, no act or failure to act on the part of the
Participant, shall be considered "willful" unless it is done, or omitted to be
done, by the Participant in bad faith or without reasonable belief that the
Participant's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Participant in good faith
3
<PAGE> 4
and in the best interests of the Company.
(c) Notice of Termination. Any termination by the Company shall be
communicated by Notice of Termination to the Participant. For purposes of this
Plan, a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Plan 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 Participant's employment under the
provision so indicated and (iii) if the Date of Termination (as described below)
is other than the date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving of such notice).
(d) Date of Termination. "Date of Termination" means (i) if the
Participant's employment is terminated by the Company for Cause, the date of
receipt of the Notice of Termination, (ii) if the Participant's employment is
terminated by the Company other than for Cause, the Date of Termination shall be
the date on which the Company notifies the Participant of such termination and
(iii) if the Participant's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of the
Participant or the Disability Effective Date, as the case may be.
7. Obligations of the Company upon Termination. (a) Other Than for
Cause, Death or Disability. If, the Company shall terminate the Participant's
employment other than for Cause, death or Disability:
(i) the Company shall pay to the Participant in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the
following amounts:
(A) the sum of (1) the Participant's annual base
salary at the time of a Change of Control (the "Annual Base
Salary") through the Date of Termination to the extent not
theretofore paid, (2) any compensation previously deferred by
the Participant (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case
to the extent not theretofore paid (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred
to as the "Accrued Obligations"); and
(B) an amount equal to the Participant's Annual Base
Salary;
(ii) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Participant any other
amounts or benefits required to be paid or provided or which the
Participant is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its affiliated
companies (such other amounts and benefits shall be hereinafter
referred to as the "Other Benefits"); and
(iii) the amounts payable to the Participant hereunder shall
be reduced by any amount required to be paid to such Participant upon
termination of employment pursuant to any applicable law or regulation.
4
<PAGE> 5
(b) Death. If the Participant's employment is terminated by reason of
the Participant's death, the Company shall have no further obligations to the
Participant's legal representatives under this Plan, other than for payment of
Accrued Obligations. Accrued Obligations shall be paid to the Participant's
estate or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination.
(c) Disability. If the Participant's employment is terminated by reason
of the Participant's Disability, the Company shall have no further obligations
to the Participant under this plan, other than for payment of Accrued
Obligations. Accrued Obligations shall be paid to the Participant in a lump sum
in cash within 30 days of the Date of Termination.
8. Non-exclusivity of Rights. Nothing in this Plan shall prevent or
limit the Participant's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Participant may qualify, nor, subject to amendment or
termination of the Plan pursuant to Section 13, shall anything herein limit or
otherwise affect such rights as the Participant may have under any contract or
agreement with the Company or any of its affiliated companies. Amounts which are
vested benefits or which the Participant is otherwise entitled to receive under
any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement except as explicitly modified by this Plan.
9. Full Settlement. The Company's obligation to make the payments
provided for in this Plan and otherwise to perform its obligations hereunder
shall not be affected by any setoff, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Participant or
others. In no event shall the Participant be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Participant under any of the provisions of the Plan and such amounts shall not
be reduced whether or not the Participant obtains other employment.
10. Certain Reduction of Payments by the Company. (a) Anything in the
Plan to the contrary notwithstanding, in the event it shall be determined that
any payment or distribution by the Company or its affiliated companies to or for
the benefit of a Participant (whether paid or payable or distributed or
distributable pursuant to the terms of the Plan or otherwise) (a "Payment")
would be nondeductible by the Company for Federal income tax purposes because of
Section 280G of the Code, then the aggregate present value of amounts payable or
distributable to or for the benefit of the Participant pursuant to the Plan
(such payments or distributions pursuant to the Plan are hereinafter referred to
as "Plan Payments") shall be reduced to the Reduced Amount. The "Reduced Amount"
shall be an amount expressed in present value which maximizes the aggregate
present value of Plan Payments without causing any Payment to be nondeductible
by the Company because of Section 280G of the Code. For purposes of this Section
10, present value shall be determined in accordance with Section 280G(d)(4) of
the Code.
5
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(b) All determinations required to be made under this Section
10 shall be made by Ernst & Young LLP (the "Accounting Firm"), which shall
provide detailed supporting calculations both to the Company and the Participant
within fifteen (15) business days of the Date of Termination or such earlier
time as is requested by the Company. Any such determination by the Accounting
Firm shall be binding upon the Company and the Participant. Within five (5)
business days of the determination by the Accounting Firm as to the Reduced
Amount, the Company shall pay to or distribute to or for the benefit of the
Participant such amounts as are then due to the Participant under the Plan. If
Plan Payments are to be reduced, the Participant shall determine which Plan
Payments shall be reduced to comply with this Section.
(c) Notwithstanding the foregoing or any other provision of
the Plan to the contrary, the limitation set forth in this Section 10 shall not
apply in the event that the Accounting Firm determines that the benefits to the
Participant under the Plan on an after-tax basis (i.e., after Federal, state and
local income and excise taxes) if such limitation is not applied would exceed
the after-tax benefits to the Participant if such limitation is applied.
11. Successors. The Company 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 the Company to assume
expressly and agree to perform the Plan in the same manner and to the same
extent that the Company would be obligated under the Plan if no succession had
taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform the Plan by operation of law, or
otherwise.
12. Duration. If a Change in Control has not occurred, the Plan shall
expire five (5) years from the date the Plan is adopted by the Board, unless
sooner terminated as provided in Section 13, or unless extended as described
below. Following the end of the five (5) year term, on each anniversary of the
Effective Date before a Change in Control, the term of the Plan shall be
automatically extended to continue for an additional one (1) year period, unless
the Board, by vote of a majority of the entire Board, determines before the
anniversary date that the term will not be extended. If a Change in Control
occurs during the term of the Plan, the Plan shall continue in full force and
effect and shall not terminate or expire until all Participants who become
entitled to payments hereunder shall have received such payments in full.
13. Amendment and Termination. The Plan may be terminated or amended in
any respect by resolution adopted by a majority of the Incumbent Board, unless a
Change in Control has previously occurred. If a Change in Control occurs, the
Plan shall no longer be subject to amendment, change, substitution, deletion,
revocation or termination in any respect whatsoever.
14. Form of Amendment. The form of any amendment or termination of the
Plan shall be a written instrument signed by a duly authorized officer or
officers of the Company, certifying that the amendment or termination has been
approved by the Incumbent Board. An amendment of the Plan shall automatically
effect a corresponding amendment to all Participant's rights hereunder. A
termination of the Plan shall automatically effect a termination of all
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Participants' rights and benefits hereunder.
15. Withholding Taxes. The Company may directly or indirectly withhold
from any payments made under the Plan all Federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation or ruling.
16. Indemnification. If a Participant institutes any legal action in
seeking to obtain or enforce, or is required to defend any legal action
regarding the validity or enforceability of, any right or benefit provided by
the Plan, the Company will, if the Participant substantially prevails in such
action, pay for all reasonable legal fees and expenses incurred by such
Participant.
17. Employment Status. The Plan does not constitute a contract of
employment or impose on the Participant or the Company or any of its affiliated
companies any obligation to retain the Participant as an employee, to change the
status of the Participant's employment, or to change the Company's policies or
those of its affiliated companies regarding termination of employment. The
employment of any Participant by the Company is "at will" and, prior to the
Effective Date, the Participant's employment may be terminated by either the
Participant or the Company at any time, in which case the Participant shall have
no further rights under the Plan.
18. No Attachment. Except as required by law, no right to receive
payments under the Plan shall be subject to anticipation, commutation,
alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or
to execution, attachment, levy, or similar process or assignment by operation of
law, and any attempt, voluntary or involuntary, to effect any such action shall
be null, void and of no effect.
19. Source of Payment. All payments provided for under the Plan shall
be paid in cash from the general funds of the Company. The Company shall not be
required to establish a special or separate fund or other segregation of assets
to assure such payments, and, if the Company shall make any investments to aid
it in meeting its obligations hereunder, the Participants shall have no right,
title or interest whatever in or to such investments except as may otherwise be
expressly provided in a separate written instrument relating to such
investments. Nothing contained in the Plan, and no action taken pursuant to its
provisions, shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between the Company and a Participant or any other
person. To the extent that any person acquires a right to receive payments from
the Company hereunder, such right shall be no greater than the right of an
unsecured general creditor of the Company.
20. Validity and Severability. The invalidity or unenforceability of
any provision of the Plan shall not affect the validity or enforceability of any
other provisions of the Plan, which shall remain in full force and effect, and
any prohibition of enforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
21. Governing Law. The validity, interpretation, construction and
performance of the Plan shall in all respects be governed by the laws of the
State of Connecticut, without reference to principles of conflict of laws.
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22. Named Fiduciary and Administrator. For the purposes of the Employee
Retirement Income Security Act of 1974, the Company shall be the "named
fiduciary" and the "Administrator" of the Plan. The Plan Administrator shall
operate, interpret and implement the Plan. The Plan Administrator shall have all
such powers as are necessary to discharge its duties, including, but not limited
to, the interpretation and construction of all provisions of the Plan, the
determination of all questions of eligibility, participation, benefits and all
other related or incidental matters, and such duties and powers of Plan
administration which are not assumed from time to time by any other appropriate
entity, individual, or institution. The Plan Administrator shall decide all such
questions and its decisions and determinations that are not arbitrary and
capricious shall be binding and conclusive on the Company, the Participant, the
Participant's designee, and the Participant's spouse or other dependent or
beneficiary, employees, and all other interested parties. The Plan Administrator
may require each Participant to submit, in such form as it shall deem reasonable
and acceptable, proof of any information which the Plan Administrator finds
necessary or desirable for the proper administration of the Plan.
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