1
EXHIBIT 10.20.1 (a)
XXXXX INDUSTRIES, INC.
000 XXXXX XXXXX XXXXXX
XXXXXXXXXX, XX 00000
As of January 15, 1999
Xx. Xxxxx Xxxxx
Xxxxx Industries, Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
RE: AMENDMENT TO NET WORTH APPRECIATION PARTICIPATION AGREEMENT
Dear Xx. Xxxxx:
This will confirm the understanding of this Corporation (the "Company")
with you with respect to our agreed amendments to your Net Worth Appreciation
Participation Agreement dated January 24, 1994 (the "Agreement").
As you know, our parent company, The Renco Group, Inc. ("Renco"), has
elected to become, for Federal Internal Revenue Code purposes, a subchapter S
corporation (instead of a subchapter C corporation), effective with its fiscal
year beginning November 1, 1998, and has designated this Company and its
subsidiaries as qualified subchapter S subsidiaries (the "S election"). This
designation is also applicable for those states which recognize such election.
This letter is intended to set forth our understanding as to the changes in the
Agreement intended to accommodate such election.
It is the intent of the parties to the Agreement that the S election not
alter the benefits payable under the Agreement; therefore we agree as follows:
A. For purposes of calculating the benefits payable under the Agreement,
the Company will continue to calculate Federal corporate income taxes and the
corporate income taxes for those jurisdictions in which the Company and its
subsidiaries do business, for fiscal periods beginning on or after November 1,
1998, as if this Company and its subsidiaries had continued to have C
corporation status, under the Federal Internal Revenue Code and under state and
local tax laws, in accordance with the provisions of generally accepted
accounting principles and the Internal Revenue Code and regulations thereunder
and under state and local tax laws applicable to C corporations as from time to
time in effect ("C Status"). Such tax calculations will include calculations of
current and deferred tax expense or benefit and current and non-current tax
assets and liabilities ("C Taxes") and the differences ("Tax Differences")
between the C Taxes and the taxes as recorded by the Company and its
subsidiaries while being designated a qualified subchapter S subsidiary ("S
Taxes").
Cumulative Income Statement Tax Difference shall be the cumulative
difference in income tax expense or benefit between the calculation of the C
Taxes and S Taxes, in each case calculated for the tax periods beginning on or
after November 1, 1998 and through the end of the calculation period. Cumulative
Cash Flow Tax Difference shall be the cumulative difference in income tax
payments, net of refunds, between the calculation of the C Taxes and S Taxes in
each case made after November 1, 1998 or, which would be in the case of C Taxes,
or are in the case of S Taxes, immediately due and payable contemporaneously
with the payment of any dividends.
2
In connection with the annual audit of the financial statements of the
Company, the Company's Board of Directors will require that the independent
public accountants issue a special report indicating their agreement with the
Tax Differences.
B. Any payment due to you under Paragraph 2 of the Agreement (the
"Termination Benefit") shall be (A) 5% of the cumulative net income, as defined,
less (B) 5% of the Cumulative Income Statement Tax Difference (the calculation
period shall end at the end of the Company's fiscal quarter immediately
preceding your date of termination) and excluding such Cumulative Income
Statement Tax Difference to the extent equal to Cumulative Cash Flow Tax
Difference utilized in calculating an Additional Compensation Benefit under
Paragraph 3.
C. Any payment due to you under Paragraph 3 of the Agreement in regard
to dividends paid by the Company (the "Additional Compensation Benefit"), shall
be (A) the excess of 5% of the cumulative dividends paid by the Company
subsequent to November 1, 1998 over 5% of any positive Cumulative Cash Flow Tax
Difference less (B) the amount of Additional Compensation Benefit previously
paid to you under Paragraph 3 subsequent to November 1, 1998.
D. Any payment due to you under Paragraph 5 of the Agreement (the "Sale
Proceeds Benefit"), shall be (A) 5% of any net proceeds, as defined, plus (B) 5%
of the cumulative dividends paid by the Company subsequent to November 1, 1998,
less (C) 5% of the Cumulative Income Statement Tax Difference through the date
of sale, and less (D) the amount of any Additional Compensation Benefits
previously paid to you under Paragraph 3 subsequent to November 1, 1998.
E. As amended hereby, the Agreement shall continue in full force and
effect.
Please confirm that the foregoing correctly sets forth our understanding
by signing and returning the enclosed duplicate of this letter.
Very truly yours,
XXXXX INDUSTRIES, INC.
/s/ Xxx Xxxx Xxxxxxx
------------------------
Xxx Xxxx Xxxxxxx
Chairman of the Board
Accepted and Agreed to:
/s/ Xxxxx Xxxxx
------------------------
Xxxxx Xxxxx
3
EXHIBIT 10.20.1 (b)
XXXXX INDUSTRIES, INC.
000 XXXXX XXXXX XXXXXX
XXXXXXXXXX, XX 00000
As of January 15, 1999
Mr. Xxxxxxx Xxxxx
Xxxxx Industries, Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
RE: AMENDMENT TO NET WORTH APPRECIATION PARTICIPATION AGREEMENT
Dear Xx. Xxxxx:
This will confirm the understanding of this Corporation (the "Company")
with you with respect to our agreed amendments to your Net Worth Appreciation
Participation Agreement dated January 24, 1994 (the "Agreement").
As you know, our parent company, The Renco Group, Inc. ("Renco"), has
elected to become, for Federal Internal Revenue Code purposes, a subchapter S
corporation (instead of a subchapter C corporation), effective with its fiscal
year beginning November 1, 1998, and has designated this Company and its
subsidiaries as qualified subchapter S subsidiaries (the "S election"). This
designation is also applicable for those states which recognize such election.
This letter is intended to set forth our understanding as to the changes in the
Agreement intended to accommodate such election.
It is the intent of the parties to the Agreement that the S election not
alter the benefits payable under the Agreement; therefore we agree as follows:
A. For purposes of calculating the benefits payable under the Agreement,
the Company will continue to calculate Federal corporate income taxes and the
corporate income taxes for those jurisdictions in which the Company and its
subsidiaries do business, for fiscal periods beginning on or after November 1,
1998, as if this Company and its subsidiaries had continued to have C
corporation status, under the Federal Internal Revenue Code and under state and
local tax laws, in accordance with the provisions of generally accepted
accounting principles and the Internal Revenue Code and regulations thereunder
and under state and local tax laws applicable to C corporations as from time to
time in effect ("C Status"). Such tax calculations will include calculations of
current and deferred tax expense or benefit and current and non-current tax
assets and liabilities ("C Taxes") and the differences ("Tax Differences")
between the C Taxes and the taxes as recorded by the Company and its
subsidiaries while being designated a qualified subchapter S subsidiary ("S
Taxes").
Cumulative Income Statement Tax Difference shall be the cumulative
difference in income tax expense or benefit between the calculation of the C
Taxes and S Taxes, in each case calculated for the tax periods beginning on or
after November 1, 1998 and through the end of the calculation period. Cumulative
Cash Flow Tax Difference shall be the cumulative difference in income tax
payments, net of refunds, between the calculation of the C Taxes and S Taxes in
each case made after November 1, 1998 or, which would be in the case of C Taxes,
or are in the case of S Taxes, immediately due and payable contemporaneously
with the payment of any dividends.
4
In connection with the annual audit of the financial statements of the
Company, the Company's Board of Directors will require that the independent
public accountants issue a special report indicating their agreement with the
Tax Differences.
B. Any payment due to you under Paragraph 2 of the Agreement (the
"Termination Benefit") shall be (A) 2% of the cumulative net income, as defined,
less (B) 2% of the Cumulative Income Statement Tax Difference (the calculation
period shall end at the end of the Company's fiscal quarter immediately
preceding your date of termination) and excluding such Cumulative Income
Statement Tax Difference to the extent equal to Cumulative Cash Flow Tax
Difference utilized in calculating an Additional Compensation Benefit under
Paragraph 3.
C. Any payment due to you under Paragraph 3 of the Agreement in regard
to dividends paid by the Company (the "Additional Compensation Benefit"), shall
be (A) the excess of 2% of the cumulative dividends paid by the Company
subsequent to November 1, 1998 over 2% of any positive Cumulative Cash Flow Tax
Difference less (B) the amount of Additional Compensation Benefit previously
paid to you under Paragraph 3 subsequent to November 1, 1998.
D. Any payment due to you under Paragraph 5 of the Agreement (the "Sale
Proceeds Benefit"), shall be (A) 2% of any net proceeds, as defined, plus (B) 2%
of the cumulative dividends paid by the Company subsequent to November 1, 1998,
less (C) 2% of the Cumulative Income Statement Tax Difference through the date
of sale, and less (D) the amount of any Additional Compensation Benefits
previously paid to you under Paragraph 3 subsequent to November 1, 1998.
E. As amended hereby, the Agreement shall continue in full force and
effect.
Please confirm that the foregoing correctly sets forth our understanding
by signing and returning the enclosed duplicate of this letter.
Very truly yours,
XXXXX INDUSTRIES, INC.
/s/ Xxx Xxxx Xxxxxxx
------------------------
Xxx Xxxx Xxxxxxx
Chairman of the Board
Accepted and Agreed to:
/s/ Xxxxxxx Xxxxx
------------------------
Xxxxxxx Xxxxx
