Exhibit 10.7
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Amendment, dated as of February 26, 2000, to Employment Agreement between the
Registrant and Xxxxx X. Xxxxxxx dated July 29, 1992, as amended.
EXHIBIT 10.7
February 26, 2000
Xx. Xxxxx X. Xxxxxxx
0000 Xxxx Xxxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Dear Xx. Xxxxxxx:
The purpose of this letter is to formally amend in writing the Employment
Agreement between Xxxx Industries, Inc. and you dated July 29, 1992, to reflect
the salary and severance changes recommended and approved by the Compensation
Committee, and effective February 26, 2000, as follows:
1. Salary: Annual Base Salary of $280,000 under Section 4(a).
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2. Severance: Under section 5(a), if terminated without good cause, the
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severance allowance increases to eighteen (18) months, from twelve (12)
months under the original contract. Please see the amended language in
Section 5 attached.
3. Profit Sharing Calculation: The formula for calculating the applicable
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profit sharing base, payable under Section 5(a) and 5(c), is clarified
pursuant to the attached amended language in Section 5.
4. Constructive Termination: Language has been added that further clarifies
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the definition of "Constructive Termination."
5. Attachments: Attachments A, B, and C have been updated to reflect your
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current position and compensation package.
All other provisions of the Employment Agreement shall remain in effect.
If you have any questions or concerns about this subject, please let me know as
soon as possible.
Thank you.
Very truly yours,
XXXX INDUSTRIES, INC.
/s/ Xxxx X. Xxxxxxxxx
Xxxx X. Xxxxxxxxx
Treasurer
NAF/lm
enclosures
cc: Mr. Xxxxx Xxxxxx
SECTION 5 - WITH AMENDED LANGUAGE
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5. Termination of Employment During the Period of Employment.
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(a) Termination by the Company without Good Cause. The Company
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may terminate the Executive's employment without Good Cause
(as defined in Section 5(f), hereof) only upon sixty (60) days
prior written notice to the Executive. If the Executive's
employment with the Company is so terminated by the Company
and such termination is not a Constructive Termination (as
defined in Section 5(f), hereof), the Company, subject to full
compliance by the Executive with the provisions of Sections 7
and 8 below, relating to "Confidential Information" and
"Competition; Detrimental Conduct," shall pay the Executive,
as severance pay, an amount equal to the compensation and
benefits that would be payable to the Executive under Sections
4(a), 4(b), and 4(d) above during the next succeeding eighteen
(18) month period if such termination of employment had not
occurred, at the time(s), in the installment(s) and on the
other terms and conditions that would apply to the payment of
such compensation, provided, however, that for purposes of
determining the amount of profit sharing payable to Executive
under this Section 5(a), such profit sharing award shall be
determined based upon the four full fiscal quarters of the
Company immediately preceding the date of the afore-described
notice to the Executive of Executive's termination hereunder,
as described below.
The aggregate amount of such profit sharing payable every
three (3) months under this Section 5(a) shall equal the (i)
the average (the "Average") of the Company's return on sales
percentage (calculated before tax or any profit-sharing award)
for the above four fiscal quarters (determined by adding the
Company's return on sales percentage for each of the above
four fiscal quarters and dividing said sum by four), and (ii)
multiplied by the Executive's multiple, as set forth in
Attachment B, used in calculating the Executive's profit
sharing award during the last full fiscal quarter of the
Company prior to the date of the above-described notice of
termination, (iii) multiplied by the Executive's annual gross
base salary as of the date such notice is given hereunder,
(iv) with the resulting product multiplied by 1.5. By way of
illustration and not limitation, in the event on July 15, the
Company gives the Executive the afore-described sixty day
notice of termination, the profit sharing award the Executive
would be entitled to hereunder would be the Average of the
return on sales percentage for the Company for the four full
fiscal quarters ending immediately prior to July 15.
Accordingly, if the return on sales percentage for quarter one
was 7%, quarter two, 11%, quarter 3, 15% and quarter four, 7%,
the Average would be determined by adding the return on sales
percentage for each of such fiscal quarters (which would
result in the sum of 40%), divided by 4, with a resulting
Average percentage of 10%. If the Executive's multiple in the
last full fiscal quarter of the Company immediately preceding
the date of notice of termination was 7, for example, the
Average percentage would be multiplied by 7, resulting in a
product of 70%, multiplied by the Executive's annual gross
base salary as of the date of such notice. If such gross base
annual salary, for example, was $100,000, the profit sharing
would equal $70,000, multiplied by 1.5 (the equivalent of
eighteen months in years) or $105,000, which would be paid in
six equal installments over the 18 month period, as part of
the severance compensation hereunder. In said example, the
Executive would, therefore, be entitled hereunder to an
aggregate severance compensation payable over said eighteen
month period equal to his annual gross base salary during said
eighteen month period, or $100,000 multiplied by 1.5 or
$150,000, plus the above-determined profit sharing award of
$105,000, for a total of $255,000, plus the other benefits and
entitlements the Executive is to receive hereunder.
For the purposes of this Agreement, a termination of
employment by the Executive that occurs after the Executive is
assigned (without his written consent) duties,
responsibilities or reporting relationships not contemplated
by Section 3 and not consistent with his position as a senior
officer, or after his duties or responsibilities contemplated
by Section 3 above are limited in any respect materially
detrimental to him, which situation is not remedied within
thirty (30) days after the Company receives written notice
from the Executive of the situation, shall be deemed a
termination by the Company without Good Cause under this
Section 5(a).
(b) Termination by the Company for Good Cause or by the Executive.
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The Company may terminate the Executive's employment with the
Company with Good Cause, or the Executive may elect to
terminate his employment with the Company for any reason, upon
thirty (30) days prior written notice to the other party
hereto. If Executive's employment by the Company is so
terminated by the Company with Good Cause or is terminated by
the Executive, and such termination is not a Constructive
Termination, the Executive shall not be entitled to receive
any compensation or benefits under Sections 4(a), 4(b), or
4(d) accruing after the date of such termination or any
payment under Section 5(a), or otherwise, and Executive shall
continue to be bound by Sections 7 and 8.
(c) Constructive Termination. If, during the period of employment,
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the Executive's employment by the Company is subject to a
Constructive Termination, or in the event that portion of the
Company's business with respect to which primarily the
Executive's duties relate, is sold, liquidated, or otherwise
ceased to be operated, then the Company shall pay the
Executive, as a severance payment, an amount equal to the
compensation and benefits that would have been payable to the
Executive under Sections 4(a), 4(b), and 4(d), hereof during
the next succeeding thirty-six (36) month period if such
termination of employment had not occurred, such sum to be
paid in a lump sum on or before the tenth day following the
date of termination, provided, however, that for the purposes
of this Section 5(c), such profit sharing award shall be
determined based upon the four full fiscal quarters of the
Company immediately preceding the date of the termination, as
described below. Notwithstanding the foregoing, in the event
the Executive's employment with the Company is terminated
within three months prior to an event which otherwise would
have give rise to a termination with respect to which the
provisions of this Section 5(c) would have been applicable,
then the provisions of this Section 5(c) shall control.
The aggregate amount of such profit sharing payable under this
Section 5(a) shall equal the (i) the Average of the Company's
return on sales percentage (calculated before tax or any
profit-sharing award) for the above four fiscal quarters
(determined by adding the Company's return on sales percentage
for each of the above four fiscal quarters and dividing said
sum by four), and (ii) multiplied by the Executive's multiple,
as set forth in Attachment B hereto, used in calculating the
Executive's profit sharing award during the last full fiscal
quarter of the Company prior to the date of the
above-described termination, (iii) multiplied by the
Executive's annual gross base salary as of the date of
termination, (iv) with the resulting product multiplied by 3.
By way of illustration and not limitation, in the event on
July 15, the Executive `s employment is terminated, the profit
sharing award the Executive would be entitled to hereunder
would be the Average of the return on sales percentage for the
Company for the four full fiscal quarters ending immediately
prior to July 15. Accordingly, if the return on sales
percentage for quarter one was 7%, quarter two, 11%, quarter
3, 15% and quarter four, 7%, the Average would be determined
by adding the
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return on sales percentage for each of such fiscal quarters
(which would result in the sum of 40%), divided by 4, with a
resulting Average percentage of 10%. If the Executive's
multiple in the last full fiscal quarter of the Company
immediately preceding the date of termination was 7, for
example, the Average percentage would be multiplied by 7,
resulting in a product of 70%, multiplied by the Executive's
annual gross base salary as of the date of such termination.
If such gross base annual salary, for example, was $100,000,
the profit sharing would equal $70,000, multiplied by 3 or
$210,000, which would be paid in the lump sum payment
described above. In said example, the Executive would,
therefore, be entitled hereunder to an aggregate severance
compensation payable in a lump sum equal to his annual gross
base salary during said three year period, or $100,000
multiplied by 3 or $300,000, plus the above-determined profit
sharing award of $210,000, for a total of $510,000, plus the
other benefits and entitlements the Executive is to receive
hereunder.
If the lump sum payment under this Section 5(c), either alone
or together with other payments which the Executive has the
right to receive from the Company, would constitute a
parachute payment (as defined in Section 280G of the Internal
Revenue Code of 1986, as amended, (the "Code"), such lump sum
severance payment shall be reduced to the largest amount as
will result in no portion of the lump sum severance payment
under this Section 5(c) being subject to the excise tax
imposed by Section 4999 of the Code. The determination of any
reduction in the lump sum severance payment under this Section
5(c) pursuant to the foregoing provision shall be made by
independent counsel to the Company in consultation with the
independent certified public accountants of the Company.
(d) Continuation of Insurance upon Termination.
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(i) Upon the termination of the employment of the
Executive pursuant to Sections 5(a), or 5(c), hereof,
the Executive shall be entitled to continuation of
coverage under the group health, life, and disability
plans then in effect covering the Executive, or such
similar plans as the Company may provide for its
executives from time to time thereafter, but in no
event shall such coverages be less favorable than the
group health, life, and disability coverages provided
by the Company as of the date hereof. The Company
shall be responsible for paying all of the costs of
such coverages that it would have paid if the
Executive was still in the employ of the Company.
Such coverages shall continue until the earlier of
the following dates: (i) the date that the Executive
is eligible for similar employer-sponsored group
coverage from a subsequent employer, or (ii) the date
the Executive attains age 65. The group health
coverage shall cover the Executive and his spouse and
dependents. The life insurance policy covering the
life of the Executive shall name as beneficiary the
person or persons designated from time to time by the
Executive.
(ii) Upon the termination of employment of the Executive
pursuant to Section 5(b), hereof, the Executive shall
be entitled only to continuation of coverage under
the group health plans then in effect covering the
Executive and only to the extent required by the
provisions of (S) 4980B of the Internal Revenue Code,
as amended, and (S)(S) 601-608 of the Employee
Retirement Income Security Act of 1974, as amended.
As permitted under such statutes, the Executive shall
be responsible for paying the full cost of such
continuation coverage.
(e) Disability of Executive. In the event of the Executive's
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disability (as hereinafter defined) during his employment
under this Agreement, the employment of the Executive and this
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Agreement may be terminated by the Company nine (9) months
after the commencement of such disability; provided, however,
that upon any such termination, the Executive shall be
entitled to payment of the Severance payments provided under
Section 5(a) hereof, reduced by any benefits he may receive
under any short term disability and long term disability plans
sponsored by the Company covering its senior management
employees at the time that the Executive's disability
commences. During the period of the Executive's disability,
the Executive shall continue to receive the compensation
provided for in this Agreement, reduced by any benefits he may
receive under any short term disability and long term
disability plans sponsored by the Company covering its senior
management employees at the time that the Executive's
disability commences. If before the end of nine months from
the first day of disability, the Executive's disability shall
have ceased, and he shall have resumed the full-time
performance of his duties under this Agreement, the Executive
shall continue to receive the compensation provided for in
this Agreement. Provided, however, that unless the Executive
shall satisfactorily perform his duties on a full-time basis
under this Agreement for a continuous period of at least sixty
(60) calendar days following a period of disability before the
Executive again becomes disabled, he shall not be entitled to
begin a new nine month period for such subsequent disability,
and the subsequent period of disability shall be added to the
first in determining whether the Executive has been disabled
for nine (9) months in connection with this Section. During
the period of his disability, the Executive shall be entitled
to benefits in accordance with and subject to the terms and
provisions of the Company's short-term disability income plan
and its long-term disability plan for its senior management
employees, as in effect at the time of the commencement of
disability. For purposes of this Agreement, "disability" shall
have the same meaning as given that term under the Company's
long term disability plan for its senior management employees,
as in effect from time to time.
(f) Definitions Applicable to this Section. For the purposes of
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this Agreement:
(i) "Good Cause" shall mean the Executive willfully or
intentionally neglects to substantially perform his
duties with the Company, or the Executive materially
breaches any provision of this Agreement, including
Section 7 below, relating to confidential
information; provided, however, that such willful or
intentional neglect of duties or the material breach
hereof continues uncured by the Executive for more
than sixty (60) days after written notice of such
neglect or material breach from the Company to the
Executive. For purposes of this Agreement, no act, or
failure to act, on the Executive's part shall be
considered "willful" or "intentional" unless done, or
omitted to be done, by him in bad faith and without
reasonable belief that his action or omission to act
was in the best interest of the Company. The Company
shall also have "Good Cause" to terminate the
Executive if the Executive commits an act or acts of
dishonesty resulting or intended to result directly
or indirectly in gain or personal enrichment at the
expense of the Company, its affiliates, or its
stockholders.
(ii) a "Constructive Termination" shall mean a termination
of this Agreement by the Executive under any of the
following circumstances:
(1) The Company is in material breach of any of
its obligations under this Agreement, and
the situation is not remedied within thirty
(30) days after the Company receives written
notice from the Executive of the situation,
or
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(2) The Executive determines in good faith that,
as a result of Change in the Control of the
Company (as defined below) there is a
substantial adverse alteration in the nature
or status of the Executive's duties or
responsibilities from those in effect
immediately prior to the change in control
of the Company, and the situation is not
remedied within thirty (30) days after the
Company receives written notice from the
Executive of such determination, or
(3) Any termination of the Employee's employment
with the Company under Sections 5(a), or
5(b) hereof, except a termination pursuant
to Section 5(b) hereof by the Company with
Good Cause, shall be deemed a Constructive
Termination if it occurs within thirty-six
(36) months following the date of a Change
in Control.
(iii) "Change in Control of the Company" shall mean an
event which shall be deemed to have occurred if:
(1) any "person" as such term is used in Section
13(d) and 14(d) of the Securities Exchange
Act of 0000, (xxx "Xxxxxxxx Xxx") (other
than Xxxx X. Xxxx, the Company, any trustee
or other fiduciary holding securities under
any employee benefit plan of the Company, or
any Company owned, directly or indirectly,
by the stockholders of the Company in
substantially the same proportions as their
ownership of stock of the Company), is or
becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the
Company representing thirty percent (30%) or
more of the combined voting power of the
Company's then outstanding securities;
(2) during any period of two consecutive years,
individuals who at the beginning of such
period constitute the Board, and any new
director (other than a director designated
by a person who has entered into an
agreement with the Company to effect a
transaction described in clause (i), (iii),
or (iv) herein) whose election by the Board
or nomination for election by the Company's
stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then
still in office who either were directors at
the beginning of the period or whose
election or nomination for election was
previously so approved, cease for any reason
to constitute at least a majority thereof;
(3) the stockholders of the Company approve a
merger or consolidation of the Company with
any other corporation, other than a merger
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or consolidation which would result in the
voting securities of the Company outstanding
immediately prior thereto continuing to
represent (either by remaining outstanding
or by being converted into voting securities
of the surviving entity) more than eighty
percent (80%) of the combined voting power
of the voting securities of the Company or
such surviving entity outstanding
immediately after such merger or
consolidation; provided, however, that a
merger or consolidation effected to
implement a recapitalization of the Company
(or similar transaction) in which no
"person" (as hereinabove defined) acquires
more than twenty-five percent (25%) of the
combined
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voting power of the Company's then
outstanding securities shall not constitute
a change of control of the Company; or
(4) the stockholders (or if stockholder approval
is not required, then the Company's Board of
Directors) of the Company approve a plan of
complete liquidation of the Company or an
agreement for the sale or disposition by the
Company of all or substantially all of the
Company's assets; or
(5) Xxxx Xxxx ceases to own capital stock of the
Company having fifty one percent (51%) of
the total voting control of the Company.
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