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EXHIBIT 99.7
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (this "Agreement") by and between Core
Industries Inc, a Nevada corporation (the "Company"), with offices at 000 X.
Xxxxxxxx Xxxxxx, Xxxxxxxxxx Xxxxx, Xxxxxxxx 00000-0000 and Xxxx X. XxxXxxxxxx
(the "Executive"), an individual residing at 000 Xxxxxxxx, Xxxxxxxxxx Xxxxx,
Xxxxxxxx 00000, dated as of the 27th day of May, 1997.
R E C I T A L S:
WHEREAS, the Company recognizes that the current business environment makes
it difficult to attract and retain highly qualified executives unless a certain
degree of security can be offered to such individuals against organizational and
personnel changes which frequently follow changes in control of a corporation;
and
WHEREAS, even rumors of acquisitions or mergers may cause executives to
consider major career changes in an effort to assure financial security for
themselves and for their families; and
WHEREAS, the Company desires to assure fair treatment of its executives in
the event of a Change in Control (as defined below) and to allow them to make
critical career decisions without undue time pressure and financial uncertainty,
thereby increasing their willingness to remain with the Company notwithstanding
the outcome of a possible Change in Control transaction; and
WHEREAS, the Company recognizes that its executives will be involved in
evaluating or negotiating any offers, proposals or other transactions which
could result in Changes in Control of the Company and believes that it is in the
best interest of the Company and its stockholders for such executives to be in a
position, free from personal financial and employment considerations, to be able
to assess objectively and pursue aggressively the interests of the Company's
stockholders in making these evaluations and carrying on such negotiations; and
WHEREAS, the Compensation Committee of the Board of Directors (the
"Committee") of the Company believes it is essential to provide the Executive
with compensation arrangements upon a Change in Control which are competitive
with those of other corporations, and in order to accomplish these objectives,
the Committee has caused the Company to enter into this Agreement.
NOW THEREFORE, the parties, for good and valuable consideration and
intending to be legally bound, agree as follows:
1. Operation and Term of Agreement. This Agreement shall be effective
immediately upon its execution. This Agreement may be terminated by the Company
upon two year's advance written notice to the Executive; provided, however, that
after a Change in Control of the Company during the term of this Agreement, this
Agreement shall remain in effect until all of the obligations of the parties
hereunder are satisfied and the Protection Period has expired. Prior to a Change
in Control, this Agreement shall immediately terminate upon termination of the
Executive's employment or upon the Executive's ceasing to be an elected officer
of the Company, except in the case of such termination under circumstances set
forth in Section 2(e) below.
2. Certain Definitions. For purposes of this Agreement, the following
definitions shall have the following meanings:
(a) "Cause" shall mean (i) actual dishonesty intended to result in
substantial personal enrichment at the expense of the Company, (ii)
conviction of a felony or (iii) repeated willful and deliberate failure or
refusal to perform the duties normally associated with the Executive's
position which is not remedied in a reasonable period of time after receipt
of written notice from the Company.
(b) "Change in Control" shall mean:
(i) on or after the date of execution of this Agreement, any person
(which, for all purposes hereof, shall include, without limitation, an
individual, sole proprietorship, partnership, unincorporated
association, unincorporated syndicate, unincorporated organization,
trust, body corporate and a trustee, executor, administrator or other
legal representative) (a "Person") or any group of two or
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more Persons acting in concert becomes the beneficial owner, directly or
indirectly, of securities of the Company representing, or acquires the
right to control or direct, or to acquire through the conversion of
securities or the exercise of warrants or other rights to acquire
securities, 40% or more of the combined voting power of the Company's
then outstanding securities; provided that for the purposes of the Plan,
(A) "voting power" means the right to vote for the election of
directors, and (B) any determination of percentage combined voting power
shall be made on the basis that (x) all securities beneficially owned by
the Person or group or over which control or direction is exercised by
the Person or group which are convertible into securities carrying
voting rights have been converted (whether or not then convertible) and
all options, warrants or other rights which may be exercised to acquire
securities beneficially owned by the Person or group or over which
control or direction is exercised by the Person or group have been
exercised (whether or not then exercisable), and (y) no such convertible
securities have been converted by any other Person and no such options,
warrants or other rights have been exercised by any other Person; or
(ii) at any time subsequent to the date of execution of this
Agreement there shall be elected or appointed to the Board of Directors
of the Company (the "Board") any director or directors whose appointment
or election by the Board or nomination for election by the Company's
shareholders was not approved by a vote of at least a majority of the
directors then still in office who were either directors on the date of
execution of this Agreement or whose election or appointment or
nomination for election was previously so approved; or
(iii) a reorganization, merger, consolidation, combination,
corporate restructuring or similar transaction (an "Event"), in each
case, in respect of which the beneficial owners of the outstanding
Company voting securities immediately prior to such Event do not,
following such Event, beneficially own, directly or indirectly, more
than 60% of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors of
the Company and any resulting Parent in substantially the same
proportions as their ownership, immediately prior to such Event, of the
outstanding Company voting securities; or
(iv) an Event involving the Company as a result of which 40% or
more of the members of the board of directors of the Parent or the
Company are not persons who were members of the Board immediately prior
to the earlier of (x) the Event, (y) execution of an agreement the
consummation of which would result in the Event, or (z) announcement by
the Company of an intention to effect the Event; or
(v) the Board adopts a resolution to the effect that, for purposes
of this Agreement, a Change in Control has occurred.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Disability," for purposes of this Agreement, shall apply to an
Executive who has applied for and is determined to be eligible to receive
disability benefits under the Company's long term disability plan.
(e) The "Change in Control Date" shall be any date during the term of
this Agreement on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if the Executive's employment or
status as an elected officer with the Company is terminated within six
months prior to the date on which a Change in Control occurs, then unless
such employment or status as an elected officer with the Company is
terminated (i) for cause, or (ii) voluntarily by the Executive, for all
purposes of this Agreement the "Change in Control Date" shall mean the date
immediately prior to the date of such termination.
(f) "Good Reason" means:
(i) the assignment to the Executive within the Protection Period of
any duties inconsistent in any respect with the Executive's position
(including status, offices, titles and reporting requirements,
authority, duties or responsibilities), or any other action which
results in a diminution in such
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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) a reduction by the Company in the Executive's base salary in
effect immediately before the beginning of the Protection Period or as
increased from time to time thereafter,
(iii) a failure by the Company to maintain plans providing benefits
at least as beneficial as those provided by any benefit or compensation
plan (including, without limitation, any incentive compensation plan,
bonus plan or program, retirement, pension or savings plan, stock option
plan, restricted stock plan, life insurance plan, health and dental plan
or disability plan) in which the Executive is participating immediately
before the beginning of the Protection Period, or if the Company has
taken any action which would adversely affect the Executive's
participation in or reduce the Executive's opportunity to benefit under
any of such plans or deprive the Executive of any material fringe
benefit enjoyed by him immediately before the beginning of the
Protection Period; provided, however, that a reduction in benefits under
the Company's tax-qualified retirement, pension or savings plans or its
life insurance plan, health and dental plan, disability plans or other
insurance plans which reduction applies equally to all participants in
the plans and has a de minimis effect on the Executive shall not
constitute "Good Reason" for termination by the Executive;
(iv) the Company's requiring the Executive, without the Executive's
written consent, to be based at any office or location in excess of 50
miles from his office location immediately before the beginning of the
Protection Period, except for travel reasonably required in the
performance of the Executive's responsibilities;
(v) any purported termination by the Company of the Executive's
employment for Cause otherwise than as expressly permitted by Section 10
of this Agreement; or
(vi) any failure by the Company to obtain the assumption of the
obligations contained in this Agreement by any successor as contemplated
in Section 9(c) of this Agreement.
(g) "Parent" means any entity which directly or indirectly through one
or more other entities owns or controls more than 50% of the voting stock
or common stock of the Company.
(h) "Protection Period" means the period beginning on the Change in
Control Date and ending on the last day of the second full calendar year
following the Change in Control Date.
(i) "Subsidiary" means a company 50% or more of the voting securities
of which are owned, directly or indirectly, by the Company.
3. Benefits Upon Termination Within a Protection Period. If, during a
Protection Period, the Executive's employment shall be terminated by the Company
other than for Cause or Disability or other than as a result of the Executive's
death or if the Executive shall terminate his employment for Good Reason, the
Company shall provide the following benefits:
(a) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the date of termination the Executive's full base
salary accrued but unpaid through the date of termination at the rate in
effect at the time of the termination plus an amount equal to the product
of (i) the "Current Year Bonus" for the Executive, which for purposes of
this Agreement shall be equal to the greater of (A) the amount of the
Executive's bonus under the applicable bonus plan for the most recent
fiscal year ending prior to the date of the Change in Control (recognizing
any election to receive stock under the Company's Stock Bonus Plan and
valuing such stock at the market price thereof on the date received by the
Executive) or (B) the target bonus established for the Executive for the
fiscal year in which the Change in Control occurs (taking into account any
election to receive stock under the Company's Stock Bonus Plan, and valuing
such stock at the closing price of the Company's common stock two trading
days after the date of the public announcement of the Change in Control),
multiplied by (ii) a fraction, the numerator of which is the number of days
in such fiscal year through the date of termination and the denominator of
which is 365; and
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(b) The Company shall pay to the Executive in a lump sum in cash
within 30 days after the date of termination a severance payment in an
amount equal to 100% of the Executive's "Annual Compensation." For purposes
of this Agreement, "Annual Compensation" shall be an amount equal to the
aggregate of the Executive's annual cash compensation (other than bonus)
from the Company and its Subsidiaries, whether paid currently or deferred
in effect immediately prior to the date of termination or Change in Control
(whichever is greater) plus the Current Year Bonus as of the year in which
the Change in Control occurs; and
(c) Within 30 days after the date of termination, upon surrender by
the Executive of his outstanding options to purchase common shares of the
Company ("Common Shares") granted to the Executive pursuant to the stock
option plans of the Company, but not including any non-vested stock options
granted on November 13, 1993 or January 11, 1994 (the "Outstanding
Options"), the Company shall pay the Executive an amount in respect of each
Outstanding Option equal to the difference between the exercise price of
such Outstanding Options and the higher of (x) the fair market value of the
Common Shares at the time of such termination, and (y) the highest price
paid for Common Shares or, in the cases of securities convertible into
Common Shares or carrying a right to acquire Common Shares, the highest
effective price (based on the prices paid for such securities) at which
such securities are convertible into Common Shares or at which Common
Shares may be acquired, by any person or group whose acquisition of voting
securities has resulted in a Change in Control of the Company. In the
alternative, the Executive may exercise his Outstanding Options, all of
which shall be immediately vested; and
(d) The Company shall provide the Executive with reasonable
outplacement services selected by the Executive, which shall be of a cost
consistent with the policies for executives serving in positions similar to
the Executive's position attached hereto as Exhibit A; and
(e) During the one year period following the date of termination, the
Company shall maintain in full force and effect for the continued benefit
of the Executive the Company's life and disability insurance programs and
the Company's medical, dental and vision plans in which the Executive was
entitled to participate immediately prior to the date of the Change in
Control, and during such one year period following the date of termination,
the Company shall maintain in full force and effect for the continued
benefit of the Executive the Company's automobile program in which the
Executive was entitled to participate immediately prior to the date of the
Change in Control. In the event the Executive's participation in any such
program or plan is barred or otherwise prevented, the Company shall provide
the Executive with after-tax cash or benefits substantially similar to and
not less favorable than the benefits which the Executive would otherwise be
entitled to receive under such program or plan; and
(f) The Company shall promptly upon a Change in Control establish a
rabbi trust arrangement for the benefit of the Executive and fund that
rabbi trust with an amount equal to the present value of the benefit
accrued under the Company's Benefit Equalization Plan for Certain Employees
of Core Industries Inc. (the "SERP Plan"), determined as of the date of the
Change in Control, using the mortality table published in Revenue Ruling
95-6, as it may be amended from time to time, and using an interest rate
equal to the average yield on 30-year Treasury Constant Maturities as
specified by the Commissioner of Internal Revenue for the third calendar
month preceding the first day of the month in which the Change in Control
occurs; and
(g) All of the Executive's benefits accrued under the supplemental
retirement plans, excess retirement plans and deferred compensation plans
maintained by the Company or any of its Subsidiaries shall become
immediately vested in full.
4. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plans, practices, policies or programs provided by the
Company or any of its Subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
Subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, practice, policy or program of the
Company or any of
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its Subsidiaries at or subsequent to the date of termination shall be payable in
accordance with such plan, practice, policy or program.
5. Full Settlement; Legal Expenses. 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 set-off, 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. The Company
agrees to pay, upon written demand therefor by the Executive, all legal fees and
expenses which the Executive may reasonably incur as a result of any dispute or
contest by or with the Company or others regarding the validity or
enforceability of, or liability under, any provision of this Agreement, if the
Executive is the prevailing party in such action. In any such action brought by
the Executive for damages or to enforce any provisions of this Agreement, he
shall be entitled to seek both legal and equitable relief and remedies,
including, without limitation, specific performance of the Company's obligations
hereunder, in his sole discretion.
6. Parachute Payments. Notwithstanding anything in this Agreement to the
contrary, in the event it shall be determined that any payment or distribution
by the Company or any other person or entity to or for the benefit of the
Executive is a "parachute payment" (within the meaning of Section 280G(b)(2) of
the Code), whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise in connection with, or arising out of,
his employment with the Company or a change in ownership or effective control of
the Company or a substantial portion of its assets (a "Payment"), and would be
subject to the excise tax imposed by Section 4999 of the Code (the "Excise
Tax"), the Payments shall be reduced (but not below zero) if and to the extent
that such reduction would result in the Executive's retaining a larger amount,
on an after-tax basis (taking into account all federal, state and local income
taxes and the imposition of the Excise Tax), than if the Executive had received
all of the Payments. If the application of the preceding sentence should require
a reduction in the Payments or other "parachute payments," unless the Executive
shall have designated otherwise, such reduction shall be implemented first, by
reducing any non-cash benefits to the extent necessary and, second, by reducing
any cash benefits to the extent necessary. In each case, the reductions shall be
made starting with the payment or benefit to be made on the latest date as of
which any Payment would be made and reducing Payments in reverse chronological
order therefrom. All determinations concerning the application of this Section 6
shall be made by a nationally recognized firm of independent accountants,
selected by the Executive and satisfactory to the Company, whose determination
shall be conclusive and binding on all parties. The fees and expenses of such
accountants shall be borne by the Company.
7. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all proprietary or confidential
information, knowledge or data relating to the Company or any of its
Subsidiaries, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
Subsidiaries and which shall not be or become public knowledge (other than by
acts of the Executive or his representatives in violation of this Agreement).
After the date of termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it.
8. 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 or Successor(s) in Interest. The
Executive may designate a Successor (or Successors) in Interest to receive
any and all amounts due the Executive in accordance with this Agreement
should the Executive be deceased at any time of payment. Such designation
of Successor(s) in Interest shall be made in writing and signed by the
Executive, and delivered to the Company pursuant to Section 10(b) hereof.
Any such designation may be made to any legal person, persons, trust or the
Executive's estate as
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he shall determine in his sole discretion. In the event any designation
shall be incomplete, or in the event the Executive shall fail to designate
a Successor in Interest, his estate shall be deemed to be his Successor in
Interest to receive such portion of all of the payments due hereunder. The
Executive may amend, change or revoke any such designation at any time and
from time to time, in the same manner. This Section 8(a) shall not
supersede any designation of beneficiary or successor in interest made by
the Executive, or separately covered, under any other plan, practice,
policy or program of the Company.
(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 and any
Parent of the Company or any successor and without regard to the form of
transaction utilized by the Parent to acquire the business 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 or Parentage had taken place. As used in
this Agreement, "Company" shall mean the Company as herein before defined
and any successor to its business and/or assets as aforesaid (and any
Parent of the Company or any successor) which is required by this clause to
assume and agree to perform this Agreement or which otherwise assumes and
agrees to perform this Agreement.
9. Notice of Termination. Any termination of the Executive's employment by
the Company for Cause or by the Executive for Good Reason shall be communicated
by Notice of Termination to the other party hereto given in accordance with
Section 10(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) 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 is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 15 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 his rights
hereunder.
10. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Michigan, 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, to the addresses
for each party as first written above or to such other address as either
party shall have furnished to the other in writing in accordance herewith.
Notices and communications to the Company shall be addressed to the
attention of the Company's President. Notice and communications shall be
effective when actually received by the addressee.
(c) Whenever reference is made herein to any specific plan or program
of the Company, to the extent that the Executive is not a participant
therein or has no benefit accrued thereunder, whether vested or contingent,
as of the Change in Control Date, then such reference herein shall be null
and void and of no effect, and the Executive shall acquire no additional
benefit as a result of such reference.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(e) The Executive's failure to insist upon strict compliance with any
provision hereof shall not be deemed to be a waiver of such provision or
any other provision thereof.
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(f) This Agreement contains the entire understanding of the Company
and the Executive with respect to the subject matter hereof, and it
supersedes any prior agreements between the Executive and the Company.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from the Committee, the Company has caused these presents
to be executed as of the day and year first above written.
EXECUTIVE CORE INDUSTRIES INC
/s/ XXXX X. XXXXXXXXXX By: /s/ XXXXXXX X. XXXXX
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Xxxx X. XxxXxxxxxx Xxxxxxx X. Xxxxx
Its Member of the Compensation Committee
of the Board of Directors
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