July 1, 1998
Xx. Xxxxxxx X. Xxxxxxx
0000 Xxxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Dear Xxxx:
This letter will serve as our agreement concerning your compensation and
the services to be provided by you to Xxxxx & Xxxx Manufacturing Company (the
"Company"). This agreement becomes effective as of July 1, 1998.
Services Rendered. You are presently serving as Chairman of the Board of
Directors of the Company. You have been providing and expect to continue
providing consulting services to the Company concerning mergers, acquisitions,
asset dispositions and other special projects that may be assigned to you from
time to time by the Board of Directors or management of the Company. You will
also be expected to perform those duties outlined in a written job description
to be approved by the Compensation Committee and the full Board of Directors
prior to July 1, 1998. It is expected that you will devote at least 80% of your
business time to the Company's business. You will report directly to the Board
of Directors.
Restricted Shares. Your base compensation for services rendered will be an
annual award at the beginning of each fiscal year of 10,500 restricted shares of
the Company's common stock. This restricted share award will be granted as of
the beginning of each fiscal year for five years, subject to prior termination
of the arrangement by the Board of Directors. The restricted shares will not
vest and may not be transferred until one year after they are issued. During the
restricted period, the restricted shares will be forfeited if you cease to be
Chairman of the Board of Directors for any reason or cease to be a member of the
Board of Directors for any reason, other than your death or disability. After
the one year restricted period, the restricted shares will vest and become
freely transferrable. The restricted shares will be issued to you in a private
placement and will not have been registered under state and federal securities
law. During the one year restriction period, you will be permitted to vote the
restricted shares and will be entitled to dividends paid on the restricted
shares. The
Xx. Xxxxxxx X. Xxxxxxx
July 1, 1998
Page 2
restricted shares will vest automatically upon a change of control of the
Company. The terms and conditions of the restricted shares will be described in
more detail in a Restricted Share Award Agreement to be signed by you and the
Company, a copy of which is attached to this letter.
EVA Bonus. During the term of this Agreement, you will be paid a bonus
based on Economic Value Added determined in the same manner as provided in the
Company's Management Incentive Compensation Plan (the EVA Bonus Plan). For
purposes of calculating an equivalent to the bonus that would be payable under
the EVA Bonus Plan, your "base" for EVA bonus purposes for each fiscal year will
equal the fair market value of the 10,500 restricted shares. Fair market value
will be the average closing price per share during the month of June as reported
in the Wall Street Journal prior to the date the restricted shares were awarded.
July 1 will be the award date for the restricted shares. Your Target Bonus
Percentage will be 65% for purposes of calculating your EVA bonus. Any bonus
earned by you will be allocated to leveraged stock options in the same
percentage as the maximum percentage of EVA bonus that the Company's President
and Chief Executive Officer is eligible to designate as his EVA Bonus Option
Amount under the EVA Bonus Plan. In addition, if the amount of leveraged stock
options that the President and Chief Executive Officer of the Company is
eligible to receive is reduced because of the limitations contained in Section
6.4(a) of the 1997 Stock Incentive Plan, then the number of leveraged stock
options that you may receive will also be reduced on a pro rata basis. Although
you are not a participant in the Company's EVA Bonus Plan, the leveraged stock
options will be granted to you on terms equivalent to the leveraged stock
options that would have been granted under the EVA Bonus Plan had you been a
participant in the EVA Bonus Plan. The options and the shares covered by the
options will be issued in a private placement and will not be registered under
state and federal securities laws.
Additional Compensation. The Company will also provide you with coverage
under the Company's medical insurance plan. The Company will lease a suitable
automobile for your use and reimburse you for automobile expenses related to the
Company's business.
Independent Contractor. We agree that you are providing services to the
Company as an independent contractor, and not as an employee. As an independent
contractor, you set your own hours and determine the manner and method of your
performance. This agreement is not an employment agreement and does not create
an employment relationship.
Xx. Xxxxxxx X. Xxxxxxx
July 1, 1998
Page 3
This agreement supersedes and replaces any and all other agreements or
arrangements and may be canceled by you or the Company at any time. This
agreement is not a commitment to nominate or elect you to the Company's Board of
Directors.
If this letter accurately reflects the agreement between you and the
Company concerning these matters, please acknowledge below and return a copy to
the Company.
Sincerely,
XXXXX & XXXX MANUFACTURING COMPANY
By:
--------------------------------
Its:
-------------------------------
Acknowledged and agreed:
/s/ Xxxxxxx X. Xxxxxxx
-----------------------
Xxxxxxx X. Xxxxxxx
RESTRICTED SHARE AWARD AGREEMENT
AGREEMENT made as of this 1st day of July, 1998, by XXXXX & XXXX
MANUFACTURING COMPANY, a Michigan corporation (the "Company"), and XXXXXXX X.
XXXXXXX, an individual (the "Grantee").
RECITALS
--------
The Company and the Grantee have entered into a consulting agreement
providing for the grant by the Company to the Grantee of restricted shares of
common stock of the Company.
The Board of Directors of the Company has approved an award of restricted
shares to the Grantee upon the terms and conditions set forth in this Agreement.
The Company and the Employee desire to confirm in this Agreement the terms,
conditions and restrictions applicable to the award of restricted stock.
NOW, THEREFORE, intending to be bound, the parties agree as follows:
1. DEFINITIONS
-----------
1.1 "Board" means the Board of Directors of the Company.
1.2 "Change in Control" shall have the meaning ascribed to such term in
Section 10.2 of the Company's 1997 Stock Incentive Plan.
1.3 "Common Stock" means the common stock of the Company, par value $2.00
per share.
1.4 "Company" means Xxxxx & Xxxx Manufacturing Company, a Michigan
corporation, its successors and assigns.
1.5 "Effective Date of this Agreement" means July 1, 1998.
1.6 "Fiscal Year" means the twelve month period ending June 30 of each
year, or such other fiscal year as may be adopted for the Company by the Board.
1.7 "Restricted Share" means a Share which is subject to the restriction
on sale, pledge or other transfer imposed by Section 3.1. An "Unrestricted
Share" is a Share which is no longer a Restricted Share.
1.8 "Reverted Shares" means Shares which have reverted to the Company
pursuant to Section 5.2.
1.9 "Shares" means the shares of Common Stock awarded, issued and
delivered to the Grantee under this Agreement. If, as a result of a stock
split, stock dividend, combination of stock, or any other change or exchange of
securities, by reclassification, reorganization, recapitalization or otherwise,
the Shares shall be increased or decreased, or changed into or exchanged for a
different number or kind of shares of stock or other securities of the Company
or another corporation, the term "Shares" shall mean and include the shares of
stock or other securities issued with respect to the Shares.
1.10 "Vested Shares" shall have the meaning expressed in Section 5.1.
2. AWARD AND ACCEPTANCE OF AWARD; TAX ELECTION
-------------------------------------------
2.1 Award. The Company confirms the award to the Grantee of 10,500 shares
of Common Stock (the "Shares") as restricted stock, upon the terms, restrictions
and conditions of this Agreement. The award of Shares shall be effective as of
the Effective Date of this Agreement. The Company agrees to issue and deliver
to the Grantee a certificate representing the Shares promptly after the
Effective Date of this Agreement.
2.2 Acceptance. The Grantee accepts this award of Xxxxxx and agrees to
hold them subject to the terms, restrictions and conditions of this Agreement.
2.3 Tax Election. The Grantee may elect to be taxed in 1998 [the year in
which this award is made] on the fair market value of the Shares awarded by
signing an election to be so taxed under Section 83(b) of the Internal Revenue
Code, and filing such election with the Internal Revenue Service within thirty
(30) days after the Effective Date of this Agreement. If the Grantee chooses
not to make such an election, the Grantee will be taxed on the fair market value
of the Shares in the year in which the restrictions lapse.
2.4 No Withholding. The Grantee recognizes that he is an independent
contractor with respect to the Company and not an employee of the Company. The
Company will not withhold any amounts from the award of Shares for tax purposes.
Xxxxxxx is responsible for his own tax consequences with respect to the award of
Shares.
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3. RESTRICTIONS ON TRANSFER OF SHARES; LAPSE OF RESTRICTIONS
---------------------------------------------------------
3.1 Transfer Prohibition. The Grantee shall not sell, pledge or otherwise
assign or transfer any Share or any interest in any Share while such Share is a
Restricted Share.
3.2 Restricted Shares. Every Share shall be a Restricted Share until the
restrictions lapse as provided in Section 3.6.
3.3 Securities Law Compliance. The Grantee shall not sell or transfer any
Share or any interest in any Share, whether such Share is or is not a Restricted
Share, unless either (a) the Company shall consent in writing to such transfer,
or (b) the Company shall have received an opinion of counsel satisfactory to the
Company to the effect that such transfer will not violate the registration
requirements imposed by the Securities Act of 1933 or any other provision of law
which the Company shall desire such opinion to cover. The Grantee acknowledges
that the Shares have not been registered under the federal securities laws or
the securities laws of any state.
3.4 Legend. Every certificate representing a Share shall at all times bear
the following legend:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions (including
forfeiture) of the Award Agreement entered into between the registered
owner and the Company, dated July 1, 1998. A copy of the Award Agreement is
on file in the offices of the Company, 0000 Xxx Xxxxxxxxxx Xxxxx, X.X.,
Xxxxx Xxxxxx, XX 00000."
3.5 Stop Transfer Instructions. The Company shall have the right to issue
instructions to the transfer agent for the shares of the Company, prohibiting
transfer of any Shares except in accordance with the requirements of this
Agreement.
3.6 Unrestricted Shares. The restrictions imposed by Section 3.1 shall
lapse at the time a Share becomes a Vested Share pursuant to Section 5.1. At
that time, the Share will be an Unrestricted Share.
3.7 New Certificate for Unrestricted Shares. If the Grantee holds a
certificate representing Shares which are no longer Restricted Shares, the
Grantee shall be entitled to receive from the Company, in exchange therefor, a
certificate representing such Unrestricted Shares, bearing a legend, if the
Company shall deem such a legend to be appropriate, only to the effect that the
transfer of such Shares is prohibited if it would violate the Securities Act of
1933, or any state securities law. If the Grantee's certificate represents both
Restricted and
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Unrestricted Shares, the Grantee shall be entitled to receive two certificates
in exchange therefor, one of which shall represent the Restricted Shares and one
of which shall represent Unrestricted Shares.
3.8 Rights of Shareholder. Except for the restrictions imposed in this
Article 3 and unless the Shares have reverted to the Company pursuant to Section
5.2, the Grantee shall have all the rights of a shareholder with respect to the
Restricted Shares, including the right to vote and to receive the dividends
declared and paid thereon.
4. ACQUISITION WARRANTIES
----------------------
In order to induce the Company to issue and deliver the Shares on the terms
of this Agreement, the Grantee warrants to and agrees with the Company as
follows:
4.1 No Participating Interest. The Grantee is acquiring the Shares for the
Grantee's own account, and has not made any arrangement to convey any interest
in the Shares to any person, other than to transfer Reverted Shares to the
Company pursuant to Section 5.3.
4.2 Ability to Evaluate. Because of the Grantee's knowledge and experience
in financial and business matters, the Grantee is capable of evaluating the
merits and risks of acquiring the Shares under the arrangements prescribed by
this Agreement.
4.3 Familiarity with Company. The Grantee is familiar with the business,
financial condition, earnings and prospects of the Company, and confirms that
the Company has not made any representation regarding the foregoing matters or
the merits of this Agreement.
4.4 All Questions Answered. The Grantee understands all of the terms of
this Agreement and the consequences to the Grantee of any actions which may be
taken under this Agreement. The Grantee confirms there are no questions relating
to any such matters which have not been answered to the Grantee's complete
satisfaction.
4.5 Accredited Investors Status. The Grantee represents and warrants to the
Company that he is an "accredited investor" as such term is defined in
Regulation D under the Securities Act of 1933, as amended, because Xxxxxxx's net
worth exceeds $1,000,000.
4.6 Separate Award. The Company and the Grantee understand that Grantee is
not a participant in the Company's 1997 Stock Incentive Plan, and this Agreement
is not subject to the Company's 1997 Stock Incentive Plan.
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5. VESTING AND REVERSION
---------------------
5.1 Vesting. All Shares shall become 100% Vested Shares on the earlier of
(i) July 1, 1999 (one year from the date of this Agreement), (ii) the occurrence
of a Change of Control, (iii) Grantee's death, or (iv) Grantee's disability,
unless prior to such time such shares revert to the Company pursuant to Section
5.2 of this Agreement because Grantee ceases to be Chairman of the board or a
member of the Board of Directors for any reason (other than death or
disability), whether Xxxxxxx's departure was because of resignation or any other
reason (other than death or disability).
5.2 Reversion. Unless already vested pursuant to Section 5.1 above, all
Shares which have not become Vested Shares shall automatically revert to the
Company if prior to July 1, 1999 (one year from the date of this Agreement)
Grantee ceases to be Chairman of the Board of Directors or a member of the Board
of Directors for any reason (other than death or disability), whether Xxxxxxx's
departure was because of resignation or any other reason. No compensation shall
be payable to the Grantee for shares which revert to the Company (other than
death or disability).
5.3 Effect of Reversion. Upon reversion of any Shares (a) absolute
ownership thereof shall automatically revert to the Company at that time, (b)
such Shares shall be deemed to be "Reverted Shares" for purposes of this
Agreement, (c) all the Grantee's rights and interests in the Reverted Shares
shall cease at that time, and (d) the Grantee shall be obligated immediately to
surrender to the Company the certificates representing the Reverted Shares, but
the failure to do so shall not impair the immediate effect of clauses (a), (b)
and (c) above.
6. GENERAL PROVISIONS
------------------
6.1 No Right to Employment. This Agreement is not an employment contract.
Grantee is an independent contractor with respect to the Company.
6.2 Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be valid and enforceable, but if any
provision of this Agreement shall be held to be prohibited or unenforceable
under applicable law (a) such provision shall be deemed amended to accomplish
the objectives of the provision as originally written to the fullest extent
permitted by law, and (b) all other provisions of this Agreement shall remain in
full force and effect.
6.3 Captions. The captions used in this Agreement are for convenience only,
do not constitute a part of this Agreement and all of the provisions of this
Agreement shall be enforced and construed as if no captions had been used.
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6.4 Complete Agreement. This Agreement and the Letter Agreement dated July
1, 1998, between the Company and Grantee contain the complete agreement between
the parties relating in any way to the subject matter of this Agreement and
supersede any prior understandings, agreements or representations, written or
oral, which may have related to such subject matter in any way.
6.5 Notices.
-------
(a) Procedures Required. Each communication given or delivered under
this Agreement must be in writing and may be given by personal delivery or
by certified mail, return receipt requested. A written communication shall
be deemed to have been given on the date it shall be delivered to the
address required by this Agreement.
(b) Communications to the Company. Communications to the Company shall
be addressed to it at the principal corporate headquarters and marked to
the attention of the Company's Executive Compensation Committee Chair.
(c) Communications to the Grantee. Every communication to the Grantee
shall be addressed to the Grantee at the address given immediately below
the Grantee's signature to this Agreement, or to such other address as the
Grantee shall specify to the Company.
6.6 Assignment. This Agreement is not assignable by the Grantee during the
Grantee's lifetime. This Agreement shall be binding upon and inure to the
benefit of (a) the successors and assigns of the Company, and (b) any person to
whom the Grantee's rights under this Agreement may pass by reason of the
Grantee's death.
6.7 Amendment. This Agreement may be amended, modified or terminated by
written agreement between the Company and the Grantee.
6.8 Waiver. No delay or omission in exercising any right hereunder shall
operate as a waiver of such right or of any other right hereunder. A waiver upon
any one occasion shall not be construed as a bar or waiver of any right or
remedy on any other occasion. All of the rights and remedies of the parties
hereto, whether evidenced hereby or granted by law, shall be cumulative.
6.9 Choice of Law. This Agreement shall be deemed to be a contract made
under the laws of the State of Michigan and for all purposes shall be construed
in accordance with and governed by the laws of the State of Michigan.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
Grantee: XXXXX & XXXX MANUFACTURING
COMPANY
/s/Xxxxxxx X. Xxxxxxx By /s/Xxxxx X. Xxxxx
----------------------------------- ------------------------------
Xxxxxxx X. Xxxxxxx
Its President
------------------------------
Address:
1848 Antisdale
-----------------------------------
Muskegon, MI 49441
-----------------------------------
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