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EXHIBIT 10.25
AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT,
entered into as of the 31st day of December 1997, is by and between Talon
Automotive Group L.L.C. (the "Company"), a Michigan limited liability company
with offices located at 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxx, Xxxxxxxx 00000, and
the undersigned (the "Employee"), an individual.
WITNESSETH:
WHEREAS, the Employee and Company entered into that certain Deferred
Compensation Agreement dated January 1, 1997 (the "Agreement") in order to
enable the Company to provide additional incentives to the Employee to exert his
best efforts on behalf of the Company and to advance the Company's best
interests; and
WHEREAS, the Company and Employee desire to amend and restate the
Agreement, upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the Agreement is hereby amended and restated as
follows:
1. Deferred Compensation Benefits. Subject to the terms and conditions
set forth herein, the Employee shall be entitled to receive a deferred
compensation benefit from the Company equal to the Vested Portion (as
hereinafter defined) of the Allocated Amounts (as hereinafter defined), as
deferred compensation benefits, payable as set forth in Section 4 hereof.
2. Deferred Compensation Account. Subject to the terms and conditions
set forth herein, the Company shall establish a deferred compensation account
(the "Account") for the benefit of the Employee, and allocate certain amounts
(the "Allocated Amounts") to the Account determined as follows:
a. Effective as of January 1, 1997, the Company shall
allocate to the Account an amount as determined on Exhibit A attached
hereto;
b. Commencing with the calendar year ending as of December 31,
1997 (provided that the Employee shall be employed by the Company or a
member of the Talon Automotive Group on such date), and continuing for
each calendar year thereafter until the earlier of an Initial Public
Offering (as hereinafter defined), a Change of Control (as hereinafter
defined), a Bond Offering (as hereinafter defined), or a Termination
Event (as hereinafter defined), the Company shall allocate to the
Account an amount equal to Designated Percentage (as hereinafter
defined) of the Total Distributions (as hereinafter defined) for such
calendar year; provided, however, notwithstanding the foregoing:
i. For purposes of the calculation of the amounts to
be allocated to the Account pursuant to this Section 2(b),
effective as of January 1, 1998, there shall be excluded from
the amount of Total Distributions the first One Million
($1,000,000) Dollars of Total Distributions following January
1, 1998;
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ii. For the calendar year in which the earlier of
such Initial Public Offering, Change of Control, Bond Offering
or Termination Event shall occur, there shall only be
allocated to the Account an amount equal to the Designated
Percentage of the Total Distributions through the date of such
event (after taking into account any adjustment required
pursuant to Section 2(b)(i) above); and
iii. Upon the occurrence of the earlier of an Initial
Public Offering, Change of Control, Bond Offering or
Termination Event, no amounts shall be allocated to the
Account pursuant to Section 2(b) hereof following the date of
such event.
c. The outstanding balance of any Vested Portion of any
Allocated Amounts shall be increased on an annual basis from and after
the end of the calendar year in which such amounts became vested, until
the end of the calendar year immediately preceding the Termination
Event, at the rate of Six (6%) percent per annum;
d. Upon the occurrence of a Termination Event, the outstanding
balance of any Vested Portion of any Allocated Amounts shall be reduced
by an amount equal to the Designated Percentage of any Shortfall Amount
(as hereinafter defined); and
e. Upon the occurrence of a Termination Event, in the event
that the Value Increase (as defined in Exhibit A attached hereto) as of
the end of the calendar year immediately preceding the Termination
Event should be less than Thirty Six Million ($36,000,000) Dollars,
then in such event the Vested Portion of all Allocated Amounts
allocated to the account pursuant to Section 2(b) hereof shall be
reduced by an amount equal to Two and 5/10 (2.5%) percent of the
aggregate amount of all Total Distributions upon which the amounts
allocated to the account pursuant to Section 2(b) hereof were based.
3. Definitions. For purposes hereof, the following terms shall have the
following meanings:
a. "Bond Offering" shall mean any private or public offering
by the Company (or its successors in interest) of senior subordinated
notes;
b. "Designated Management Fees" shall mean the aggregate
amount of all management and consulting fees paid by the Talon
Automotive Group to Talon L.L.C. in excess of Seven Hundred Thousand
($700,000) Dollars for a particular calendar year, which amount may be
amended from time to time by the Company in its reasonable discretion.
c. "Designated Percentage" shall mean (i) for the period from
January 1, 1997 through December 31, 1997, Five and 5/10 (5.5%)
percent, and (ii) for the period after December 31, 1997, Eight (8%)
percent.
d. "Initial Public Offering" shall mean the first instance in
which the stock of the Company shall be offered for sale to the public
following a successful registration of such stock
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with the United States Securities and Exchange Commission;
e. "Fair Market Value of the Talon Automotive Group" as of the
end of any particular calendar year shall mean the combined fair market
value of all members of the Talon Automotive Group as of such date as
determined by an appraisal thereof by Xxxxx & Co. (or such other
company as designated by the Company from time to time), or in the
event that the stock (or equity interests) of any member of the Talon
Automotive Group shall be publicly traded at such date, then the
applicable fair market value of such entity shall be equal to the
closing price quotation of such stock (or equity interests) as of such
date multiplied by the total number of outstanding shares of stock (or
equity interests) of such entity as of such date;
f. "Net Shareholder Distributions" for any particular calendar
year (or other period) shall be equal to the aggregate sum of all
shareholder and equityholder dividends and distributions made in cash
by the Talon Automotive Group to their shareholders during such period;
provided, however, in the event that any member of the Talon Automotive
Group shall have elected to be treated as an S Corporation pursuant to
Sections 1361-1363 of the Internal Revenue Code of 1986 (as amended or
superseded from time to time) for such calendar year (or other period),
then Net Shareholder Distributions shall not include an aggregate
amount equal to the maximum amount of all federal and state income
taxes payable by such shareholders for such calendar year (or other
period) as a result of such S Corporation status, using a maximum
combined federal and state income tax rate equal to forty two (42%)
percent, which percentage shall be subject to adjustment by the Company
in its reasonable discretion based upon future changes in such maximum
combined federal and state income tax rate.
g. "Talon Automotive Group" shall mean and include the
Company, Hawthorne Metal Products Co., J & R Manufacturing, Inc., VS
Holdings Inc. and, effective December 8, 1997, Production Stamping,
Inc.; provided, however (i) in the event of any merger or consolidation
of any of such companies, then Talon Automotive Group shall include all
of such companies as so merged or consolidated, together with all of
their wholly-owned subsidiaries, and (ii) in the event any such entity
shall at any time cease to be under the direct or indirect control of
Xxxxxxxx X. Xxxxx and/or Xxxxxxx X. Xxxxxx and/or their respective
immediate families (or trusts for their benefit), then such entity
shall no longer be considered a member of the Talon Automotive Group.
h. "Shortfall Amount" shall mean that amount, if any, by which
the Threshold Amount (as hereinafter defined) as of the end of the
calendar year immediately preceding the Termination Event shall be in
excess of the Fair Market Value of the Talon Automotive Group as of the
end of the calendar year immediately preceding the Termination Event.
i. "Termination Event" shall mean the termination of the
Employee's employment with the Company and any member of the Talon
Automotive Group for any reason.
j. "Threshold Amount" shall be an amount computed on an annual
basis as of December 31 of each year commencing as of December 31,
1996, and shall be equal to the product of:
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i. One and 5/100 (1.05); multiplied by
ii. the sum of the following:
a. The Threshold Amount as of December 31
of the immediately preceding year; and
b. the aggregate amount of all additional
equity invested in the members of the Talon
Automotive Group by their shareholders or
equityholders during the immediately preceding
calendar year (excluding, however, any equity
invested in Production Stamping, Inc. during calendar
year 1998);
---provided, however, the Threshold Amount as of December 31, 1995
shall be equal to Eighteen Million Five Hundred Forty Four Thousand
($18,544,000) Dollars, which represents the Fair Market Value of the
Talon Automotive Group (as defined herein) as of December 31, 1995.
k. "Total Distributions" for any calendar year shall mean the
sum of the Net Shareholder Distributions (as defined herein) for such
calendar year and the Designated Management Fees (as defined herein)
for such calendar year.
l. "Vested Portion" as of any particular date occurring on or
prior to the Termination Event shall mean all Allocated Amounts which
have been allocated to the Account as of that date which is three (3)
years immediately preceding such date; provided, however,
notwithstanding the foregoing:
i. In the event that the Termination Event is
as a result of the any of the following events:
a) the Employee's Disability;
b) the Employee's death;
c) a Change of Control;
d) the Involuntary Termination of the Employee
within twenty four (24) months following a Change of Control;
or
e) a voluntary termination by the Employee of
his employment on or after that date upon which the Employee
attains the age of sixty two (62) years;
---then in any of such events, the Vested Portion as of the
date of the Termination Event shall mean all Allocated Amounts
which have been allocated to the Account as of the
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end of the immediately preceding calendar year.
ii. The Vested Portion of all Allocated Amounts
which have been allocated to the Account as of December 31,
1997 shall mean all Allocated Amounts which have been
allocated to the Account as of December 31, 1997.
iii. In the event of a Bond Offering, then the Vested
Portion as of the date of such Bond Offering shall mean all
Allocated Amounts which have been allocated to the Account
through the date of such Bond Offering.
For purposes hereof, the terms "Disability", "Change of Control" and
"Involuntary Termination" shall have the same meanings set forth in the
Company's Equity Ownership Plan.
4. Payment of Deferred Compensation Benefits. In the event of a
Termination Event, the Vested Portion of the Allocated Amounts shall be paid to
the Employee as follows:
a. The Vested Portion of the Allocated Amounts shall be paid
to the Employee in twenty (20) equal consecutive quarterly installments
commencing on the last day of the first calendar quarter which is at
least ninety (90) days following the Termination Event, and continuing
on the last day of each of the next succeeding nineteen (19) calendar
quarters thereafter;
b. The unpaid balance of the Vested Portion of the Allocated
Amounts shall bear interest from and after the Termination Event at a
per annum rate equal to the prime rate of interest charged from time to
time by the Company's primary bank, which interest shall be payable
quarterly with the foregoing installments until such amount is paid in
full;
c. Notwithstanding anything contained herein to the contrary:
i. The Company shall have the right in its sole
discretion to pay the balance of the Vested Portion of the
Allocated Amounts over a shorter period than provided herein
or in a lump sum payment as it may deem appropriate;
ii. The Company shall have the right to deduct any
federal, state, local or employment or withholding taxes which
the Company deems are required by law to be withheld from any
amounts payable to a Employee hereunder or otherwise; and
iii. In the event that the Employee shall voluntarily
terminate his employment or in the event that the Employee
should be terminated for Cause (as defined in the Company's
Equity Ownership Plan), in each case on or before December 31,
1998, then in either such event the Employee shall only be
entitled to receive Thirty Three (33%) percent of the Vested
Portion of the Allocated Amounts payable as set forth above,
and all rights to receive any other amounts or payments
hereunder (including, without limitation, all rights to the
balance of the Vested Portion of the Allocated Amounts) shall
be forfeited;
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iv. In the event that the Employee shall voluntarily
terminate his employment or in the event that the Employee
should be terminated for Cause (as defined in the Company's
Equity Ownership Plan), in each case during calendar year
1999, then in either such event the Employee shall only be
entitled to receive Sixty-Seven (67%) percent of the Vested
Portion of the Allocated Amounts payable as set forth above,
and all rights to receive any other amounts or payments
hereunder (including, without limitation, all rights to the
balance of the Vested Portion of the Allocated Amounts) shall
be forfeited;
v. In the event that the Employee shall at any time
fail to comply with the terms and conditions of Sections 5 or
6 of this Agreement, then the Employee shall only be entitled
to receive Fifty (50%) percent of the Vested Portion of the
Allocated Amounts, payable as set forth above, and all rights
to receive any other amounts or payments hereunder (including,
without limitation, the balance of the Vested Portion of the
Allocated Amounts) shall be forfeited; and
vi. In the event of a Change of Control and the
Employee is requested by the Company, its successor or the
purchaser to continue to be employed by the Company, its
successor or such purchaser for a salary and upon such other
financial terms and conditions comparable to those received by
the Employee from the Company at such time, for a minimum
period not to exceed one (1) year following such Change of
Control, the Employee shall so continue such employment, and,
in the event the Employee refuses such continued employment or
does not continue such employment for such minimum period,
then in such event the Employee shall only be entitled to
receive Fifty (50%) percent of the Vested Portion of the
Allocated Amounts, and all rights to the balance of the Vested
Portion of the Allocated Amounts and the Account shall be
forfeited.
d. In the event of a Change of Control on or before the
Termination Date, and provided the Employee has complied with the terms
of Section 4(c)(vi) hereof, then, notwithstanding anything herein to
the contrary: (i) if the Employee is requested to continue to be
employed as provided in Section 4(c)(vi) hereof, then the Vested
Portion of the Allocated Amounts shall be paid to the Employee in
twelve (12) equal consecutive quarterly installments with the first
installment commencing on the last day of the first calendar quarter
which is at least ninety (90) days following the Change of Control, or
(ii) if the Employee is not requested to continue to be employed as
provided in Section 4(c)(vi) hereof, then the Vested Portion of the
Allocated Amounts shall be paid to the Employee in eight (8) equal
consecutive quarterly installments with the first installment
commencing on the last day of the first calendar quarter which is at
least ninety (90) days following the Change of Control. The Employee
shall have the right, upon written notice thereof to the Company, to
cause the Company to place the installments payable under this Section
4(d) in escrow with an independent escrow agent appointed by the
Company in its discretion, in order to secure the payment of such
installments to the Employee, and upon terms and conditions reasonably
acceptable to the Company and the Employee.
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5. Non-Compete.
a. The Employee hereby acknowledges and recognizes the highly
competitive nature of the businesses of the Talon Automotive Group and
accordingly agrees in consideration hereof, during the period the
Employee is employed by the Company or any member of the Talon
Automotive Group and thereafter for the longer of two (2) years or that
period in which the Employee is entitled to any payments pursuant to
the terms hereof, for purposes of this Agreement, he will not directly
or indirectly (except as a passive investor in less than one (1%)
percent of the outstanding capital stock of a publicly traded
corporation or in his capacity as an employee of the Company):
i. conduct, engage in, have an interest in, or aid or
assist any person or entity in conducting, engaging or having
an interest in (whether as an owner, principal, lender,
stockholder, partner, employer, employee, consultant, officer,
director or otherwise) anywhere within the Territory (as
hereinafter defined):
(a) any business or enterprise (whether or
not for profit) which offers or performs any services
which are the same as or similar to or competitive
with those now or hereafter provided by the Company
or any member of the Talon Automotive Group; or
(b) any business or enterprise (whether or
not for profit) which develops, manufactures or sells
any products which are the same as or in any manner
similar to or competitive with those developed,
manufactured or sold the Company or any member of the
Talon Automotive Group; or
(c) any other business or enterprise
(whether or not for profit) which is competitive with
the business of the Company or any member of the
Talon Automotive Group;
ii. Solicit, divert, take away, interfere with or
accept any business from any customers, suppliers, trade or
patronage of the Company or any member of the Talon Automotive
Group, or take any actions which are materially adverse to or
materially injurious to the Company or any member of the Talon
Automotive Group or which materially and adversely affect the
business of the Company or any member of the Talon Automotive
Group or their relationships with their employees, customers
or suppliers; or
iii. Engage, employ, attempt to engage or employ or
solicit for engagement or employment any employee or sales
representative of the Company or any member of the Talon
Automotive Group, or induce or otherwise advise any employee
or sales representative to leave the employ or engagement of
the Company or any member of the Talon Automotive Group or to
engage in any of the activities prohibited hereby.
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b. For purposes hereof, the "Territory" shall mean and include
the United States of America, Canada and Mexico.
c. It is expressly understood and agreed that although the
Employee and the Company consider the provisions hereof, including the
restrictions as to Territory set forth in this Section above to be
reasonable for the purpose of preserving for the Company and each
Affiliated Group, their businesses and goodwill and other proprietary
rights.
d. Notwithstanding anything to the contrary in this Agreement,
in the event of a violation of any of the covenants set forth in this
Section 5 by the Employee, the Company shall have all of the remedies
set forth in Section 4(c)(iii) hereof; provided, however, the remedies
set forth in said Section 4(c)(iii) shall be the sole and exclusive
remedies of the Company for any violation by the Employee of such
covenants.
6. Confidentiality. The Employee shall, while employed by the Company
and thereafter, preserve in confidence all proprietary information heretofore or
hereafter acquired by him or disclosed to him relating to machines, processes,
practices, products, inventions, improvement, or developments of the Talon
Automotive Group or in which the Talon Automotive Group is interested and all
other confidential or proprietary information of any kind or nature pertaining
to the business of the Talon Automotive Group, and the Employee will not
disclose any such information to any other person without the express
authorization of the Company or make use of such information for the Employee's
personal benefit or for the benefit of any person other than the Talon
Automotive Group or assist others in using such information.
7. Employment. Nothing contained in this Agreement or in any
modifications to this Agreement shall give the Employee any right to employment
by the Company, either expressed or implied, or constitute any evidence of any
agreement or understanding, expressed or implied, that the Company will continue
to employ the Employee for any period of time or at any particular position.
8. Miscellaneous.
a. The Employee shall have the right, from time to time, in
writing on a form designated by the Company, to name the beneficiary or
beneficiaries who may be named successively or contingently, and who
may be natural persons or otherwise, to receive any benefits payable to
the Employee hereunder if the Employee shall die before receiving all
benefits. If the Employee shall decline or fail to designate a
beneficiary, the Employee's estate shall be deemed to be the Employee's
beneficiary. The Employee shall have the right to change the
beneficiary or beneficiaries from time to time (without the consent of
any prior beneficiary); provided, however, that any change shall not
become effective unless in writing and upon receipt by the Company.
b. The Company shall not in any manner be liable for or
subject to the debts of the Employee or any beneficiary. Except as
provided by the laws of descent and distribution, no benefit under this
Agreement shall at any time be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, or encumbrance of any
kind, nor shall any such
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benefit be subject to attachment or other legal process of whatever
nature, and any attempted anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment or other such legal process
shall be void and of no force or effect whatsoever. Upon any such
attempted anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment, or if by reason of Employee's bankruptcy,
divorce or other event there is a possibility that such benefits may be
received by someone other than the Employee or that such benefits may
not be enjoyed by such Employee, then in any such event the benefits
shall automatically terminate and be of no force or effect. The Company
may, in its discretion, apply to a court of competent jurisdiction for
a determination as to the rights of any person in any plan benefits,
such determination shall be final and binding upon the Company and the
Employee (including all beneficiaries or other persons claiming an
interest).
c. The obligations of the Company under this Agreement
constitute an unsecured promise to pay from the Company's general
assets as provided herein. The Company shall have no obligation to fund
or reserve any amounts for any payments hereunder and neither the
Employee nor any beneficiary shall have any security interest or claim
upon any account set aside for the payments hereunder or any other
property of the Company. The obligations of the Company under this
Agreement may be transferred or assigned to an Affiliated Company or a
successor entity, which agrees to be bound by the terms hereof,
provided, however, no such transfer or assignment shall operate as a
release of the Company from its obligations hereunder without the
written consent of the Employee, which consent shall not be
unreasonably withheld.
d. It is the desire and intent of the parties hereto that
provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement may be sought. Accordingly, to the
extent any provision hereof is deemed unenforceable by limitation
thereon, the parties agree that the same shall, nevertheless, be
enforceable to the fullest extent permissible under the laws and public
policies applied in such jurisdiction in which enforcement is sought.
Furthermore, if any particular portion of this Agreement be adjudicated
as invalid or unenforceable, such portion shall be deleted and such
deletion shall apply only with respect to the operation of such portion
in the particular jurisdiction in which such adjudication is made.
e. This Agreement constitutes the entire agreement between the
parties with regard to the subject matter hereof and shall supersede
any and all prior oral or written understandings or agreements relating
to the subject hereof. This Agreement may only be amended by written
instrument signed by each of the parties hereto.
f. Any notice required or permitted to be provided under this
Agreement shall be deemed properly furnished if in writing and if
mailed by registered or certified mail, postage prepaid with return
receipt requested, to the Employee at the address set forth below and
to the Company at its offices at 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxx,
Xxxxxxxx 00000, to the attention of its Chairman of the Board (with a
copy to Timmis & Xxxxx L.L.P., 000 Xxxxx Xxxxxx, Xxxxxxx Xxxxxxxx
00000).
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g. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Witnesses:
COMPANY:
TALON AUTOMOTIVE GROUP
L.L.C.
By
---------------------------------- -----------------------------
EMPLOYEE:
---------------------------------- -------------------------------
Xxxxxx X. Xxxxxxx
Address:
0000 Xxxxxxx Xxxxx
Xxxxxxxxx Xxxxx, Xxxxxxxx 00000
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EXHIBIT A
AMOUNT ALLOCATED TO THE ACCOUNT AS OF JANUARY 1, 1997
Effective as of January 1, 1997, there shall be allocated to the Account
an amount equal to Five and 5/10 percent of the Value Increase (as hereinafter
defined) as of December 31, 1996.
For purposes hereof, the "Value Increase" as of the end of any
particular calendar year shall be equal to that amount, if any, by which the
aggregate sum of (A) the cumulative amount of the Total Distributions for
calendar years 1996 through the end of the calendar year for which the Value
Increase is being determined, and (B) the Fair Market Value of the Talon
Automotive Group as of the end of the calendar year for which the Value Increase
is being determined, shall exceed the Threshold Amount as of the end of the
calendar year for which the Value Increase is being determined. The parties
hereto hereby acknowledge that the Value Increase as of December 31, 1996 and
the amount allocated to the Account as of January 1, 1997 has been determined as
set forth on Schedule I attached hereto.
Upon the occurrence of a Termination Event, in the event that the Value Increase
as of the end of the calendar year immediately preceding the Termination Event
should exceed Thirty Six Million ($36,000,000) Dollars, then in such event there
shall be allocated to the Account effective as of December 31, 1997 an
additional amount equal to Two and 5/10 (2.5%) percent of the Value Increase as
of December 31, 1996 (which is set forth on Schedule I attached hereto).
Upon the occurrence of a Termination Event and in the event of the existence of
any Shortfall Amount, then the amount of the reduction of the outstanding
balance of any Vested Portion of any Allocated Amounts for purposes of Section
2(d) of the Agreement shall be:
(1) First determined to be equal to Eight (8.0%) percent of the
Vested Portion of any Allocated Amounts to the Account to the
extent that any Vested Portion of such Allocated Amounts have
been determined pursuant to the above formula or the Agreement
using such Eight (8.0) percentage; and
(2) Thereafter determined to be equal to Five and 5/10 (5.5%)
percent of the Vested Portion of any Allocated Amounts to the
Account to the extent that any Vested Portion of such
Allocated Amounts have been determined pursuant to the above
formula using such Five and 5/10 (5.5) percentage.
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SCHEDULE I
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AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT,
entered into as of the 31st day of December 1997, is by and between Talon
Automotive Group L.L.C. (the "Company"), a Michigan limited liability company
with offices located at 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxx, Xxxxxxxx 00000, and
the undersigned (the "Employee"), an individual.
WITNESSETH:
WHEREAS, the Employee and Company entered into that certain Deferred
Compensation Agreement dated January 1, 1997 (the "Agreement") in order to
enable the Company to provide additional incentives to the Employee to exert his
best efforts on behalf of the Company and to advance the Company's best
interests; and
WHEREAS, the Company and Employee desire to amend and restate the
Agreement, upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth herein, the Agreement is hereby amended and restated as
follows:
1. Deferred Compensation Benefits. Subject to the terms and conditions
set forth herein, the Employee shall be entitled to receive a deferred
compensation benefit from the Company equal to the Vested Portion (as
hereinafter defined) of the Allocated Amounts (as hereinafter defined), as
deferred compensation benefits, payable as set forth in Section 4 hereof.
2. Deferred Compensation Account. Subject to the terms and conditions
set forth herein, the Company shall establish a deferred compensation account
(the "Account") for the benefit of the Employee, and allocate certain amounts
(the "Allocated Amounts") to the Account determined as follows:
a. Effective as of January 1, 1997, the Company shall allocate to
the Account an amount as determined on Exhibit A attached hereto;
b. Commencing with the calendar year ending as of December 31, 1997
(provided that the Employee shall be employed by the Company or a
member of the Talon Automotive Group on such date), and continuing for
each calendar year thereafter until the earlier of an Initial Public
Offering (as hereinafter defined), a Change of Control (as hereinafter
defined), a Bond Offering (as hereinafter defined), or a Termination
Event (as hereinafter defined), the Company shall allocate to the
Account an amount equal to Designated Percentage (as hereinafter
defined) of the Total Distributions (as hereinafter defined) for such
calendar year; provided, however, notwithstanding the foregoing:
i. For purposes of the calculation of the amounts to be allocated
to the Account pursuant to this Section 2(b), effective as of
January 1, 1998, there shall be excluded from the amount of Total
Distributions the first One Million ($1,000,000) Dollars of Total
Distributions following January 1, 1998;
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ii. For the calendar year in which the earlier of such Initial
Public Offering, Change of Control, Bond Offering or Termination
Event shall occur, there shall only be allocated to the Account an
amount equal to the Designated Percentage of the Total Distributions
through the date of such event (after taking into account any
adjustment required pursuant to Section 2(b)(i) above); and
iii. Upon the occurrence of the earlier of an Initial Public
Offering, Change of Control, Bond Offering or Termination Event, no
amounts shall be allocated to the Account pursuant to Section 2(b)
hereof following the date of such event.
c. The outstanding balance of any Vested Portion of any
Allocated Amounts shall be increased on an annual basis from and after
the end of the calendar year in which such amounts became vested, until
the end of the calendar year immediately preceding the Termination
Event, at the rate of Six (6%) percent per annum; and
d. Upon the occurrence of a Termination Event, the outstanding
balance of any Vested Portion of any Allocated Amounts shall be reduced
by an amount equal to the Designated Percentage of any Shortfall Amount
(as hereinafter defined).
3. Definitions. For purposes hereof, the following terms shall
have the following meanings:
a. "Bond Offering" shall mean any private or public offering
by the Company (or its successors in interest) of senior subordinated
notes;
b. "Designated Management Fees" shall mean the aggregate
amount of all management and consulting fees paid by the Talon
Automotive Group to Talon L.L.C. in excess of Seven Hundred Thousand
($700,000) Dollars for a particular calendar year, which amount may be
amended from time to time by the Company in its reasonable discretion.
c. "Designated Percentage" shall mean Two and 1/10 (2.1%)
percent.
d. "Initial Public Offering" shall mean the first instance in
which the stock of the Company shall be offered for sale to the public
following a successful registration of such stock with the United
States Securities and Exchange Commission;
e. "Fair Market Value of the Talon Automotive Group" as of the
end of any particular calendar year shall mean the combined fair market
value of all members of the Talon Automotive Group as of such date as
determined by an appraisal thereof by Xxxxx & Co. (or such other
company as designated by the Company from time to time), or in the
event that the stock (or equity interests) of any member of the Talon
Automotive Group shall be publicly traded at such date, then the
applicable fair market value of such entity shall be equal to the
closing price quotation of such stock (or equity interests) as of such
date multiplied by the total number of outstanding shares of stock (or
equity interests) of such entity as of such date;
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15
f. "Net Shareholder Distributions" for any particular calendar
year (or other period) shall be equal to the aggregate sum of all
shareholder and equityholder dividends and distributions made in cash
by the Talon Automotive Group to their shareholders during such period;
provided, however, in the event that any member of the Talon Automotive
Group shall have elected to be treated as an S Corporation pursuant to
Sections 1361-1363 of the Internal Revenue Code of 1986 (as amended or
superseded from time to time) for such calendar year (or other period),
then Net Shareholder Distributions shall not include an aggregate
amount equal to the maximum amount of all federal and state income
taxes payable by such shareholders for such calendar year (or other
period) as a result of such S Corporation status, using a maximum
combined federal and state income tax rate equal to forty two (42%)
percent, which percentage shall be subject to adjustment by the Company
in its reasonable discretion based upon future changes in such maximum
combined federal and state income tax rate.
g. "Talon Automotive Group" shall mean and include the
Company, Hawthorne Metal Products Co., J & R Manufacturing, Inc., VS
Holdings Inc. and, effective December 8, 1997, Production Stamping,
Inc.; provided, however (i) in the event of any merger or consolidation
of any of such companies, then Talon Automotive Group shall include all
of such companies as so merged or consolidated, together with all of
their wholly-owned subsidiaries, and (ii) in the event any such entity
shall at any time cease to be under the direct or indirect control of
Xxxxxxxx X. Xxxxx and/or Xxxxxxx X. Xxxxxx and/or their respective
immediate families (or trusts for their benefit), then such entity
shall no longer be considered a member of the Talon Automotive Group.
h. "Shortfall Amount" shall mean that amount, if any, by which
the Threshold Amount (as hereinafter defined) as of the end of the
calendar year immediately preceding the Termination Event shall be in
excess of the Fair Market Value of the Talon Automotive Group as of the
end of the calendar year immediately preceding the Termination Event.
i. "Termination Event" shall mean the termination of the
Employee's employment with the Company and any member of the Talon
Automotive Group for any reason.
j. "Threshold Amount" shall be an amount computed on an annual
basis as of December 31 of each year commencing as of December 31,
1996, and shall be equal to the product of:
i. One and 5/100 (1.05); multiplied by
ii. the sum of the following:
a. The Threshold Amount as of December 31 of the
immediately preceding year; and
b. the aggregate amount of all additional equity
invested in the members of the Talon Automotive Group by
their shareholders or
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16
equityholders during the immediately preceding calendar
year (excluding, however, any equity invested in Production
Stamping, Inc. during calendar year 1998);
---provided, however, the Threshold Amount as of December 31, 1995
shall be equal to Eighteen Million Five Hundred Forty Four Thousand
($18,544,000) Dollars, which represents the Fair Market Value of the
Talon Automotive Group (as defined herein) as of
December 31, 1995.
k. "Total Distributions" for any calendar year shall mean the
sum of the Net Shareholder Distributions (as defined herein) for such
calendar year and the Designated Management Fees (as defined herein)
for such calendar year.
l. "Vested Portion" as of any particular date occurring on or
prior to the Termination Event shall mean all Allocated Amounts which
have been allocated to the Account as of that date which is three (3)
years immediately preceding such date; provided, however,
notwithstanding the foregoing:
i. In the event that the Termination Event is as a result
of the any of the following events:
a) the Employee's Disability;
b) the Employee's death;
c) a Change of Control;
d) the Involuntary Termination of the Employee within
twenty four (24) months following a Change of Control; or
e) a voluntary termination by the Employee of his
employment on or after that date upon which the Employee
attains the age of sixty two (62) years;
---then in any of such events, the Vested Portion as of the
date of the Termination Event shall mean all Allocated Amounts
which have been allocated to the Account as of the end of the
immediately preceding calendar year.
ii. The Vested Portion of all Allocated Amounts which have
been allocated to the Account as of December 31, 1997 shall
mean all Allocated Amounts which have been allocated to the
Account as of December 31, 1997.
iii. In the event of a Bond Offering, then the Vested
Portion as of the date of such Bond Offering shall mean all
Allocated Amounts which have been allocated to the Account
through the date of such Bond Offering.
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For purposes hereof, the terms "Disability", "Change of Control" and
"Involuntary Termination" shall have the same meanings set forth in the
Company's Equity Ownership Plan.
4. Payment of Deferred Compensation Benefits. In the event of a
Termination Event, the Vested Portion of the Allocated Amounts shall be paid to
the Employee as follows:
a. The Vested Portion of the Allocated Amounts shall be paid
to the Employee in twenty (20) equal consecutive quarterly installments
commencing on the last day of the first calendar quarter which is at
least ninety (90) days following the Termination Event, and continuing
on the last day of each of the next succeeding nineteen (19) calendar
quarters thereafter;
b. The unpaid balance of the Vested Portion of the Allocated
Amounts shall bear interest from and after the Termination Event at a
per annum rate equal to the prime rate of interest charged from time to
time by the Company's primary bank, which interest shall be payable
quarterly with the foregoing installments until such amount is paid in
full;
c. Notwithstanding anything contained herein to the
contrary:
i. The Company shall have the right in its sole
discretion to pay the balance of the Vested Portion of the
Allocated Amounts over a shorter period than provided herein
or in a lump sum payment as it may deem appropriate;
ii. The Company shall have the right to deduct any
federal, state, local or employment or withholding taxes
which the Company deems are required by law to be withheld
from any amounts payable to a Employee hereunder or
otherwise; and
iii. In the event that the Employee shall voluntarily
terminate his employment or in the event that the Employee
should be terminated for Cause (as defined in the Company's
Equity Ownership Plan), in each case on or before December
31, 1998, then in either such event the Employee shall only
be entitled to receive Thirty Three (33%) percent of the
Vested Portion of the Allocated Amounts payable as set forth
above, and all rights to receive any other amounts or
payments hereunder (including, without limitation, all
rights to the balance of the Vested Portion of the Allocated
Amounts) shall be forfeited;
iv. In the event that the Employee shall voluntarily
terminate his employment or in the event that the Employee
should be terminated for Cause (as defined in the Company's
Equity Ownership Plan), in each case during calendar year
1999, then in either such event the Employee shall only be
entitled to receive Sixty-Seven (67%) percent of the Vested
Portion of the Allocated Amounts payable as set forth above,
and all rights to receive any other amounts or payments
hereunder (including, without limitation, all rights to the
balance of the Vested Portion of the Allocated Amounts)
shall be forfeited;
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18
v. In the event that the Employee shall at any time fail
to comply with the terms and conditions of Sections 5 or 6
of this Agreement, then the Employee shall only be entitled
to receive Fifty (50%) percent of the Vested Portion of the
Allocated Amounts, payable as set forth above, and all
rights to receive any other amounts or payments hereunder
(including, without limitation, the balance of the Vested
Portion of the Allocated Amounts) shall be forfeited; and
vi. In the event of a Change of Control and the Employee
is requested by the Company, its successor or the purchaser
to continue to be employed by the Company, its successor or
such purchaser for a salary and upon such other financial
terms and conditions comparable to those received by the
Employee from the Company at such time, for a minimum period
not to exceed one (1) year following such Change of Control,
the Employee shall so continue such employment, and, in the
event the Employee refuses such continued employment or does
not continue such employment for such minimum period, then
in such event the Employee shall only be entitled to receive
Fifty (50%) percent of the Vested Portion of the Allocated
Amounts, and all rights to the balance of the Vested Portion
of the Allocated Amounts and the Account shall be forfeited.
d. In the event of a Change of Control on or before the
Termination Date, and provided the Employee has complied with the terms
of Section 4(c)(vi) hereof, then, notwithstanding anything herein to
the contrary: (i) if the Employee is requested to continue to be
employed as provided in Section 4(c)(vi) hereof, then the Vested
Portion of the Allocated Amounts shall be paid to the Employee in
twelve (12) equal consecutive quarterly installments with the first
installment commencing on the last day of the first calendar quarter
which is at least ninety (90) days following the Change of Control, or
(ii) if the Employee is not requested to continue to be employed as
provided in Section 4(c)(vi) hereof, then the Vested Portion of the
Allocated Amounts shall be paid to the Employee in eight (8) equal
consecutive quarterly installments with the first installment
commencing on the last day of the first calendar quarter which is at
least ninety (90) days following the Change of Control. The Employee
shall have the right, upon written notice thereof to the Company, to
cause the Company to place the installments payable under this
Section 4(d) in escrow with an independent escrow agent appointed by
the Company in its discretion, in order to secure the payment of such
installments to the Employee, and upon terms and conditions reasonably
acceptable to the Company and the Employee.
5. Non-Compete.
a. The Employee hereby acknowledges and recognizes the
highly competitive nature of the businesses of the Talon Automotive
Group and accordingly agrees in consideration hereof, during the period
the Employee is employed by the Company or any member of the Talon
Automotive Group and thereafter for the longer of two (2) years or that
period in which the Employee is entitled to any payments pursuant to
the terms hereof, for purposes of this Agreement, he will not directly
or indirectly (except as a passive investor in less than one (1%)
percent of the outstanding capital stock of a publicly traded
corporation or in
6
19
his capacity as an employee of the Company):
i. conduct, engage in, have an interest in, or aid or
assist any person or entity in conducting, engaging or having
an interest in (whether as an owner, principal, lender,
stockholder, partner, employer, employee, consultant, officer,
director or otherwise) anywhere within the Territory (as
hereinafter defined):
(a) any business or enterprise (whether or
not for profit) which offers or performs any services
which are the same as or similar to or competitive
with those now or hereafter provided by the Company
or any member of the Talon Automotive Group; or
(b) any business or enterprise (whether or
not for profit) which develops, manufactures or sells
any products which are the same as or in any manner
similar to or competitive with those developed,
manufactured or sold the Company or any member of the
Talon Automotive Group; or
(c) any other business or enterprise
(whether or not for profit) which is competitive with
the business of the Company or any member of the
Talon Automotive Group;
ii. Solicit, divert, take away, interfere with or
accept any business from any customers, suppliers, trade or
patronage of the Company or any member of the Talon Automotive
Group, or take any actions which are materially adverse to or
materially injurious to the Company or any member of the Talon
Automotive Group or which materially and adversely affect the
business of the Company or any member of the Talon Automotive
Group or their relationships with their employees, customers
or suppliers; or
iii. Engage, employ, attempt to engage or employ or
solicit for engagement or employment any employee or sales
representative of the Company or any member of the Talon
Automotive Group, or induce or otherwise advise any employee
or sales representative to leave the employ or engagement of
the Company or any member of the Talon Automotive Group or to
engage in any of the activities prohibited hereby.
b. For purposes hereof, the "Territory" shall mean and include
the United States of America, Canada and Mexico.
c. It is expressly understood and agreed that although the
Employee and the Company consider the provisions hereof, including the
restrictions as to Territory set forth in this Section above to be
reasonable for the purpose of preserving for the Company and each
Affiliated Group, their businesses and goodwill and other proprietary
rights.
d. Notwithstanding anything to the contrary in this Agreement,
in the event of a violation of any of the covenants set forth in this
Section 5 by the Employee, the Company shall
7
20
have all of the remedies set forth in Section 4(c)(iii) hereof;
provided, however, the remedies set forth in said Section 4(c)(iii)
shall be the sole and exclusive remedies of the Company for any
violation by the Employee of such covenants.
6. Confidentiality. The Employee shall, while employed by the Company
and thereafter, preserve in confidence all proprietary information heretofore or
hereafter acquired by him or disclosed to him relating to machines, processes,
practices, products, inventions, improvement, or developments of the Talon
Automotive Group or in which the Talon Automotive Group is interested and all
other confidential or proprietary information of any kind or nature pertaining
to the business of the Talon Automotive Group, and the Employee will not
disclose any such information to any other person without the express
authorization of the Company or make use of such information for the Employee's
personal benefit or for the benefit of any person other than the Talon
Automotive Group or assist others in using such information.
7. Employment. Nothing contained in this Agreement or in any
modifications to this Agreement shall give the Employee any right to employment
by the Company, either expressed or implied, or constitute any evidence of any
agreement or understanding, expressed or implied, that the Company will continue
to employ the Employee for any period of time or at any particular position.
8. Miscellaneous.
a. The Employee shall have the right, from time to time, in
writing on a form designated by the Company, to name the beneficiary or
beneficiaries who may be named successively or contingently, and who
may be natural persons or otherwise, to receive any benefits payable to
the Employee hereunder if the Employee shall die before receiving all
benefits. If the Employee shall decline or fail to designate a
beneficiary, the Employee's estate shall be deemed to be the Employee's
beneficiary. The Employee shall have the right to change the
beneficiary or beneficiaries from time to time (without the consent of
any prior beneficiary); provided, however, that any change shall not
become effective unless in writing and upon receipt by the Company.
b. The Company shall not in any manner be liable for or
subject to the debts of the Employee or any beneficiary. Except as
provided by the laws of descent and distribution, no benefit under this
Agreement shall at any time be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, or encumbrance of any
kind, nor shall any such benefit be subject to attachment or other
legal process of whatever nature, and any attempted anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment
or other such legal process shall be void and of no force or effect
whatsoever. Upon any such attempted anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or if by reason
of Employee's bankruptcy, divorce or other event there is a possibility
that such benefits may be received by someone other than the Employee
or that such benefits may not be enjoyed by such Employee, then in any
such event the benefits shall automatically terminate and be of no
force or effect. The Company may, in its discretion, apply to a court
of competent jurisdiction for a determination as to the rights of any
person in any plan benefits, such determination shall be final and
binding upon the Company and the Employee (including all
8
21
beneficiaries or other persons claiming an interest).
c. The obligations of the Company under this Agreement
constitute an unsecured promise to pay from the Company's general
assets as provided herein. The Company shall have no obligation to fund
or reserve any amounts for any payments hereunder and neither the
Employee nor any beneficiary shall have any security interest or claim
upon any account set aside for the payments hereunder or any other
property of the Company. The obligations of the Company under this
Agreement may be transferred or assigned to an Affiliated Company or a
successor entity, which agrees to be bound by the terms hereof,
provided, however, no such transfer or assignment shall operate as a
release of the Company from its obligations hereunder without the
written consent of the Employee, which consent shall not be
unreasonably withheld.
d. It is the desire and intent of the parties hereto that
provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement may be sought. Accordingly, to the
extent any provision hereof is deemed unenforceable by limitation
thereon, the parties agree that the same shall, nevertheless, be
enforceable to the fullest extent permissible under the laws and public
policies applied in such jurisdiction in which enforcement is sought.
Furthermore, if any particular portion of this Agreement be adjudicated
as invalid or unenforceable, such portion shall be deleted and such
deletion shall apply only with respect to the operation of such portion
in the particular jurisdiction in which such adjudication is made.
e. This Agreement constitutes the entire agreement between the
parties with regard to the subject matter hereof and shall supersede
any and all prior oral or written understandings or agreements relating
to the subject hereof. This Agreement may only be amended by written
instrument signed by each of the parties hereto.
f. Any notice required or permitted to be provided under this
Agreement shall be deemed properly furnished if in writing and if
mailed by registered or certified mail, postage prepaid with return
receipt requested, to the Employee at the address set forth below and
to the Company at its offices at 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxx,
Xxxxxxxx 00000, to the attention of its Chairman of the Board (with a
copy to Timmis & Xxxxx L.L.P., 000 Xxxxx Xxxxxx, Xxxxxxx Xxxxxxxx
00000).
g. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Michigan.
9
22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Witnesses:
COMPANY:
TALON AUTOMOTIVE GROUP L.L.C.
By
---------------------------------- --------------------------------
EMPLOYEE:
---------------------------------- -------------------------------
Xxxx X. Xxxxxxxx
Address:
000 Xxxxxxxx
Xxxxxx Xxxxxx, Xxxxxxxx 00000
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23
EXHIBIT A
AMOUNT ALLOCATED TO THE ACCOUNT AS OF JANUARY 1, 1997
Effective as of January 1, 1997, there shall be allocated to the Account
an amount equal to One and 2/10 (1.2%) percent of the Value Increase (as
hereinafter defined) as of December 31, 1996.
For purposes hereof, the "Value Increase" as of the end of any
particular calendar year shall be equal to that amount, if any, by which the
aggregate sum of (A) the cumulative amount of the Total Distributions for
calendar years 1996 through the end of the calendar year for which the Value
Increase is being determined, and (B) the Fair Market Value of the Talon
Automotive Group as of the end of the calendar year for which the Value Increase
is being determined, shall exceed the Threshold Amount as of the end of the
calendar year for which the Value Increase is being determined. The parties
hereto hereby acknowledge that the Value Increase as of December 31, 1996 and
the amount allocated to the Account as of January 1, 1997 has been determined as
set forth on Schedule I attached hereto.
Upon the occurrence of a Termination Event, in the event that the Value Increase
as of the end of the calendar year immediately preceding the Termination Event
should exceed Eighteen Million ($18,000,000) Dollars, then in such event there
shall be allocated to the Account effective as of December 31, 1997 an
additional amount equal to 9/10 of One (.9%) percent of the Value Increase as of
December 31, 1996 (which is set forth on Schedule I attached hereto).
Upon the occurrence of a Termination Event and in the event of the existence of
any Shortfall Amount, then the amount of the reduction of the outstanding
balance of any Vested Portion of any Allocated Amounts for purposes of Section
2(d) of the Agreement shall be:
(1) First determined to be equal to Two and 1/10 (2.1%) percent of
the Vested Portion of any Allocated Amounts to the Account to
the extent that any Vested Portion of such Allocated Amounts
have been determined pursuant to the above formula or the
Agreement using such Two and 1/10 (2.1) percentage; and
(2) Thereafter determined to be equal to One and 2/10 (1.2%)
percent of the Vested Portion of any Allocated Amounts to the
Account to the extent that any Vested Portion of such
Allocated Amounts have been determined pursuant to the above
formula using such One and 2/10 (1.2) percentage.
24
SCHEDULE I
25
AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT
THIS AMENDED AND RESTATED DEFERRED COMPENSATION AGREEMENT, entered into as
of the 31st day of December 1997, is by and between Talon Automotive Group
L.L.C. (the "Company"), a Michigan limited liability company with offices
located at 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxx, Xxxxxxxx 00000, and the
undersigned (the "Employee"), an individual.
WITNESSETH:
WHEREAS, the Employee and Company entered into that certain Deferred
Compensation Agreement dated January 1, 1997 (the "Agreement") in order to
enable the Company to provide additional incentives to the Employee to exert his
best efforts on behalf of the Company and to advance the Company's best
interests; and
WHEREAS, the Company and Employee desire to amend and restate the
Agreement, upon the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth herein, the Agreement is hereby amended and restated as follows:
1. Deferred Compensation Benefits. Subject to the terms and conditions set
forth herein, the Employee shall be entitled to receive a deferred compensation
benefit from the Company equal to the Vested Portion (as hereinafter defined) of
the Allocated Amounts (as hereinafter defined), as deferred compensation
benefits, payable as set forth in Section 4 hereof.
2. Deferred Compensation Account. Subject to the terms and conditions set
forth herein, the Company shall establish a deferred compensation account (the
"Account") for the benefit of the Employee, and allocate certain amounts (the
"Allocated Amounts") to the Account determined as follows:
a. Effective as of January 1, 1997, the Company shall allocate to the
Account an amount as determined on Exhibit A attached hereto;
b. Commencing with the calendar year ending as of December 31, 1997
(provided that the Employee shall be employed by the Company or a member of
the Talon Automotive Group on such date), and continuing for each calendar
year thereafter until the earlier of an Initial Public Offering (as
hereinafter defined), a Change of Control (as hereinafter defined), a Bond
Offering (as hereinafter defined), or a Termination Event (as hereinafter
defined), the Company shall allocate to the Account an amount equal to
Designated Percentage (as hereinafter defined) of the Total Distributions
(as hereinafter defined) for such calendar year; provided, however,
notwithstanding the foregoing:
i. For purposes of the calculation of the amounts to
be allocated to the Account pursuant to this Section 2(b),
effective as of January 1, 1998, there shall be excluded
from the amount of Total Distributions the first One Million
($1,000,000) Dollars of Total Distributions following
January 1, 1998;
26
ii. For the calendar year in which the earlier of
such Initial Public Offering, Change of Control, Bond Offering
or Termination Event shall occur, there shall only be
allocated to the Account an amount equal to the Designated
Percentage of the Total Distributions through the date of such
event (after taking into account any adjustment required
pursuant to Section 2(b)(i) above); and
iii. Upon the occurrence of the earlier of an Initial
Public Offering, Change of Control, Bond Offering or
Termination Event, no amounts shall be allocated to the
Account pursuant to Section 2(b) hereof following the date of
such event.
c. The outstanding balance of any Vested Portion of any
Allocated Amounts shall be increased on an annual basis from and after
the end of the calendar year in which such amounts became vested, until
the end of the calendar year immediately preceding the Termination
Event, at the rate of Six (6%) percent per annum; and
d. Upon the occurrence of a Termination Event, the outstanding
balance of any Vested Portion of any Allocated Amounts shall be reduced
by an amount equal to the Designated Percentage of any Shortfall Amount
(as hereinafter defined).
3. Definitions. For purposes hereof, the following terms shall have the
following meanings:
a. "Bond Offering" shall mean any private or public offering
by the Company (or its successors in interest) of senior subordinated
notes;
b. "Designated Management Fees" shall mean the aggregate
amount of all management and consulting fees paid by the Talon
Automotive Group to Talon L.L.C. in excess of Seven Hundred Thousand
($700,000) Dollars for a particular calendar year, which amount may be
amended from time to time by the Company in its reasonable discretion.
c. "Designated Percentage" shall mean Two and 5/10 (2.5%)
percent.
d. "Initial Public Offering" shall mean the first instance in
which the stock of the Company shall be offered for sale to the public
following a successful registration of such stock with the United
States Securities and Exchange Commission;
e. "Fair Market Value of the Talon Automotive Group" as of the
end of any particular calendar year shall mean the combined fair market
value of all members of the Talon Automotive Group as of such date as
determined by an appraisal thereof by Xxxxx & Co. (or such other
company as designated by the Company from time to time), or in the
event that the stock (or equity interests) of any member of the Talon
Automotive Group shall be publicly traded at such date, then the
applicable fair market value of such entity shall be equal to the
closing price quotation of such stock (or equity interests) as of such
date multiplied by the total number of outstanding shares of stock (or
equity interests) of such entity as of such date;
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27
f. "Net Shareholder Distributions" for any particular calendar
year (or other period) shall be equal to the aggregate sum of all
shareholder and equityholder dividends and distributions made in cash
by the Talon Automotive Group to their shareholders during such period;
provided, however, in the event that any member of the Talon Automotive
Group shall have elected to be treated as an S Corporation pursuant to
Sections 1361-1363 of the Internal Revenue Code of 1986 (as amended or
superseded from time to time) for such calendar year (or other period),
then Net Shareholder Distributions shall not include an aggregate
amount equal to the maximum amount of all federal and state income
taxes payable by such shareholders for such calendar year (or other
period) as a result of such S Corporation status, using a maximum
combined federal and state income tax rate equal to forty two (42%)
percent, which percentage shall be subject to adjustment by the Company
in its reasonable discretion based upon future changes in such maximum
combined federal and state income tax rate.
g. "Talon Automotive Group" shall mean and include the
Company, Hawthorne Metal Products Co., J & R Manufacturing, Inc., VS
Holdings Inc. and, effective December 8, 1997, Production Stamping,
Inc.; provided, however (i) in the event of any merger or consolidation
of any of such companies, then Talon Automotive Group shall include all
of such companies as so merged or consolidated, together with all of
their wholly-owned subsidiaries, and (ii) in the event any such entity
shall at any time cease to be under the direct or indirect control of
Xxxxxxxx X. Xxxxx and/or Xxxxxxx X. Xxxxxx and/or their respective
immediate families (or trusts for their benefit), then such entity
shall no longer be considered a member of the Talon Automotive Group.
h. "Shortfall Amount" shall mean that amount, if any, by which
the Threshold Amount (as hereinafter defined) as of the end of the
calendar year immediately preceding the Termination Event shall be in
excess of the Fair Market Value of the Talon Automotive Group as of the
end of the calendar year immediately preceding the Termination Event.
i. "Termination Event" shall mean the termination of the
Employee's employment with the Company and any member of the Talon
Automotive Group for any reason.
j. "Threshold Amount" shall be an amount computed on an annual
basis as of December 31 of each year commencing as of December 31,
1995, and shall be equal to the product of:
i. One and 5/100 (1.05); multiplied by
ii. the sum of the following:
a. The Threshold Amount as of December 31
of the immediately preceding year; and
b. the aggregate amount of all additional
equity invested in the members of the Talon
Automotive Group by their shareholders or
3
28
equityholders during the immediately preceding
calendar year (excluding, however, any equity
invested in Production Stamping, Inc. during calendar
year 1998);
---provided, however, the Threshold Amount as of December 31, 1994
shall be equal to Sixteen Million Three Hundred Fifteen Thousand
($16,315,000) Dollars, which represents the Fair Market Value of the
Talon Automotive Group (as defined herein) as of December
31, 1994.
k. "Total Distributions" for any calendar year shall mean the
sum of the Net Shareholder Distributions (as defined herein) for such
calendar year and the Designated Management Fees (as defined herein)
for such calendar year.
l. "Vested Portion" as of any particular date occurring on or
prior to the Termination Event shall mean all Allocated Amounts which
have been allocated to the Account as of that date which is three (3)
years immediately preceding such date; provided, however,
notwithstanding the foregoing:
i. In the event that the Termination Event is as a
result of the any of the following events:
a) the Employee's Disability;
b) the Employee's death;
c) a Change of Control;
d) the Involuntary Termination of the Employee
within twenty four (24) months following a Change of Control;
or
e) a voluntary termination by the Employee of his
employment on or after that date upon which the Employee
attains the age of sixty two (62) years;
---then in any of such events, the Vested Portion as of the
date of the Termination Event shall mean all Allocated Amounts
which have been allocated to the Account as of the end of the
immediately preceding calendar year.
ii. The Vested Portion of all Allocated Amounts which
have been allocated to the Account as of December 31, 1997
shall mean all Allocated Amounts which have been allocated to
the Account as of December 31, 1997.
iii. In the event of a Bond Offering, then the Vested
Portion as of the date of such Bond Offering shall mean all
Allocated Amounts which have been allocated to the Account
through the date of such Bond Offering.
For purposes hereof, the terms "Disability", "Change of Control" and
"Involuntary
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Termination" shall have the same meanings set forth in the Company's
Equity Ownership Plan.
4. Payment of Deferred Compensation Benefits. In the event of a Termination
Event, the Vested Portion of the Allocated Amounts shall be paid to the Employee
as follows:
a. The Vested Portion of the Allocated Amounts shall be paid
to the Employee in twenty (20) equal consecutive quarterly installments
commencing on the last day of the first calendar quarter which is at
least ninety (90) days following the Termination Event, and continuing
on the last day of each of the next succeeding nineteen (19) calendar
quarters thereafter;
b. The unpaid balance of the Vested Portion of the Allocated
Amounts shall bear interest from and after the Termination Event at a
per annum rate equal to the prime rate of interest charged from time to
time by the Company's primary bank, which interest shall be payable
quarterly with the foregoing installments until such amount is paid in
full;
c. Notwithstanding anything contained herein to the contrary:
i. The Company shall have the right in its sole
discretion to pay the balance of the Vested Portion of the
Allocated Amounts over a shorter period than provided herein
or in a lump sum payment as it may deem appropriate;
ii. The Company shall have the right to deduct any
federal, state, local or employment or withholding taxes which
the Company deems are required by law to be withheld from any
amounts payable to a Employee hereunder or otherwise; and
iii. In the event that the Employee shall voluntarily
terminate his employment or in the event that the Employee
should be terminated for Cause (as defined in the Company's
Equity Ownership Plan), in each case on or before December 31,
1998, then in either such event the Employee shall only be
entitled to receive Thirty Three (33%) percent of the Vested
Portion of the Allocated Amounts payable as set forth above,
and all rights to receive any other amounts or payments
hereunder (including, without limitation, all rights to the
balance of the Vested Portion of the Allocated Amounts) shall
be forfeited;
iv. In the event that the Employee shall voluntarily
terminate his employment or in the event that the Employee
should be terminated for Cause (as defined in the Company's
Equity Ownership Plan), in each case during calendar year
1999, then in either such event the Employee shall only be
entitled to receive Sixty-Seven (67%) percent of the Vested
Portion of the Allocated Amounts payable as set forth above,
and all rights to receive any other amounts or payments
hereunder (including, without limitation, all rights to the
balance of the Vested Portion of the Allocated Amounts) shall
be forfeited;
v. In the event that the Employee shall at any time
fail to comply with the
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terms and conditions of Sections 5 or 6 of this Agreement,
then the Employee shall only be entitled to receive Fifty
(50%) percent of the Vested Portion of the Allocated
Amounts, payable as set forth above, and all rights
to receive any other amounts or payments hereunder
(including, without limitation, the balance of the Vested
Portion of the Allocated Amounts) shall be forfeited; and
vi. In the event of a Change of Control and the
Employee is requested by the Company, its successor or the
purchaser to continue to be employed by the Company, its
successor or such purchaser for a salary and upon such other
financial terms and conditions comparable to those received by
the Employee from the Company at such time, for a minimum
period not to exceed one (1) year following such Change of
Control, the Employee shall so continue such employment, and,
in the event the Employee refuses such continued employment or
does not continue such employment for such minimum period,
then in such event the Employee shall only be entitled to
receive Fifty (50%) percent of the Vested Portion of the
Allocated Amounts, and all rights to the balance of the Vested
Portion of the Allocated Amounts and the Account shall be
forfeited.
d. In the event of a Change of Control on or before the
Termination Date, and provided the Employee has complied with the terms
of Section 4(c)(vi) hereof, then, notwithstanding anything herein to
the contrary: (i) if the Employee is requested to continue to be
employed as provided in Section 4(c)(vi) hereof, then the Vested
Portion of the Allocated Amounts shall be paid to the Employee in
twelve (12) equal consecutive quarterly installments with the first
installment commencing on the last day of the first calendar quarter
which is at least ninety (90) days following the Change of Control, or
(ii) if the Employee is not requested to continue to be employed as
provided in Section 4(c)(vi) hereof, then the Vested Portion of the
Allocated Amounts shall be paid to the Employee in eight (8) equal
consecutive quarterly installments with the first installment
commencing on the last day of the first calendar quarter which is at
least ninety (90) days following the Change of Control. The Employee
shall have the right, upon written notice thereof to the Company, to
cause the Company to place the installments payable under this Section
4(d) in escrow with an independent escrow agent appointed by the
Company in its discretion, in order to secure the payment of such
installments to the Employee, and upon terms and conditions reasonably
acceptable to the Company and the Employee.
5. Non-Compete.
a. The Employee hereby acknowledges and recognizes the highly
competitive nature of the businesses of the Talon Automotive Group and
accordingly agrees in consideration hereof, during the period the
Employee is employed by the Company or any member of the Talon
Automotive Group and thereafter for the longer of two (2) years or that
period in which the Employee is entitled to any payments pursuant to
the terms hereof, for purposes of this Agreement, he will not directly
or indirectly (except as a passive investor in less than one (1%)
percent of the outstanding capital stock of a publicly traded
corporation or in his capacity as an employee of the Company):
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i. conduct, engage in, have an interest in, or aid or
assist any person or entity in conducting, engaging or having
an interest in (whether as an owner, principal, lender,
stockholder, partner, employer, employee, consultant, officer,
director or otherwise) anywhere within the Territory (as
hereinafter defined):
(a) any business or enterprise (whether or
not for profit) which offers or performs any services
which are the same as or similar to or competitive
with those now or hereafter provided by the Company
or any member of the Talon Automotive Group; or
(b) any business or enterprise (whether or
not for profit) which develops, manufactures or sells
any products which are the same as or in any manner
similar to or competitive with those developed,
manufactured or sold the Company or any member of the
Talon Automotive Group; or
(c) any other business or enterprise
(whether or not for profit) which is competitive with
the business of the Company or any member of the
Talon Automotive Group;
ii. Solicit, divert, take away, interfere with or
accept any business from any customers, suppliers, trade or
patronage of the Company or any member of the Talon Automotive
Group, or take any actions which are materially adverse to or
materially injurious to the Company or any member of the Talon
Automotive Group or which materially and adversely affect the
business of the Company or any member of the Talon Automotive
Group or their relationships with their employees, customers
or suppliers; or
iii. Engage, employ, attempt to engage or employ or
solicit for engagement or employment any employee or sales
representative of the Company or any member of the Talon
Automotive Group, or induce or otherwise advise any employee
or sales representative to leave the employ or engagement of
the Company or any member of the Talon Automotive Group or
to engage in any of the activities prohibited hereby.
b. For purposes hereof, the "Territory" shall mean and include
the United States of America, Canada and Mexico.
c. It is expressly understood and agreed that although the
Employee and the Company consider the provisions hereof, including the
restrictions as to Territory set forth in this Section above to be
reasonable for the purpose of preserving for the Company and each
Affiliated Group, their businesses and goodwill and other proprietary
rights.
d. Notwithstanding anything to the contrary in this Agreement,
in the event of a violation of any of the covenants set forth in this
Section 5 by the Employee, the Company shall have all of the remedies
set forth in Section 4(c)(iii) hereof; provided, however, the remedies
7
32
set forth in said Section 4(c)(iii) shall be the sole and exclusive
remedies of the Company for any violation by the Employee of such
covenants.
6. Confidentiality. The Employee shall, while employed by the Company
and thereafter, preserve in confidence all proprietary information heretofore or
hereafter acquired by him or disclosed to him relating to machines, processes,
practices, products, inventions, improvement, or developments of the Talon
Automotive Group or in which the Talon Automotive Group is interested and all
other confidential or proprietary information of any kind or nature pertaining
to the business of the Talon Automotive Group, and the Employee will not
disclose any such information to any other person without the express
authorization of the Company or make use of such information for the Employee's
personal benefit or for the benefit of any person other than the Talon
Automotive Group or assist others in using such information.
7. Employment. Nothing contained in this Agreement or in any
modifications to this Agreement shall give the Employee any right to employment
by the Company, either expressed or implied, or constitute any evidence of any
agreement or understanding, expressed or implied, that the Company will continue
to employ the Employee for any period of time or at any particular position.
8. Miscellaneous.
a. The Employee shall have the right, from time to time, in
writing on a form designated by the Company, to name the beneficiary or
beneficiaries who may be named successively or contingently, and who
may be natural persons or otherwise, to receive any benefits payable to
the Employee hereunder if the Employee shall die before receiving all
benefits. If the Employee shall decline or fail to designate a
beneficiary, the Employee's estate shall be deemed to be the Employee's
beneficiary. The Employee shall have the right to change the
beneficiary or beneficiaries from time to time (without the consent of
any prior beneficiary); provided, however, that any change shall not
become effective unless in writing and upon receipt by the Company.
b. The Company shall not in any manner be liable for or
subject to the debts of the Employee or any beneficiary. Except as
provided by the laws of descent and distribution, no benefit under this
Agreement shall at any time be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, or encumbrance of any
kind, nor shall any such benefit be subject to attachment or other
legal process of whatever nature, and any attempted anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance, attachment
or other such legal process shall be void and of no force or effect
whatsoever. Upon any such attempted anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or if by reason
of Employee's bankruptcy, divorce or other event there is a possibility
that such benefits may be received by someone other than the Employee
or that such benefits may not be enjoyed by such Employee, then in any
such event the benefits shall automatically terminate and be of no
force or effect. The Company may, in its discretion, apply to a court
of competent jurisdiction for a determination as to the rights of any
person in any plan benefits, such determination shall be final and
binding upon the Company and the Employee (including all beneficiaries
or other persons claiming an interest).
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c. The obligations of the Company under this Agreement
constitute an unsecured promise to pay from the Company's general
assets as provided herein. The Company shall have no obligation to fund
or reserve any amounts for any payments hereunder and neither the
Employee nor any beneficiary shall have any security interest or claim
upon any account set aside for the payments hereunder or any other
property of the Company. The obligations of the Company under this
Agreement may be transferred or assigned to an Affiliated Company or a
successor entity, which agrees to be bound by the terms hereof,
provided, however, no such transfer or assignment shall operate as a
release of the Company from its obligations hereunder without the
written consent of the Employee, which consent shall not be
unreasonably withheld.
d. It is the desire and intent of the parties hereto that
provisions of this Agreement be enforced to the fullest extent
permissible under the laws and public policies applied in each
jurisdiction in which enforcement may be sought. Accordingly, to the
extent any provision hereof is deemed unenforceable by limitation
thereon, the parties agree that the same shall, nevertheless, be
enforceable to the fullest extent permissible under the laws and public
policies applied in such jurisdiction in which enforcement is sought.
Furthermore, if any particular portion of this Agreement be adjudicated
as invalid or unenforceable, such portion shall be deleted and such
deletion shall apply only with respect to the operation of such portion
in the particular jurisdiction in which such adjudication is made.
e. This Agreement constitutes the entire agreement between the
parties with regard to the subject matter hereof and shall supersede
any and all prior oral or written understandings or agreements relating
to the subject hereof. This Agreement may only be amended by written
instrument signed by each of the parties hereto.
f. Any notice required or permitted to be provided under this
Agreement shall be deemed properly furnished if in writing and if
mailed by registered or certified mail, postage prepaid with return
receipt requested, to the Employee at the address set forth below and
to the Company at its offices at 000 Xxxxxxxx Xxxxx, Xxxxx 000, Xxxx,
Xxxxxxxx 00000, to the attention of its Chairman of the Board (with a
copy to Timmis & Xxxxx L.L.P., 000 Xxxxx Xxxxxx, Xxxxxxx Xxxxxxxx
00000).
g. This Agreement shall be governed and interpreted in
accordance with the laws of the State of Michigan.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
Witnesses:
COMPANY:
L.L.C. TALON AUTOMOTIVE GROUP
--------------------------------- By
------------------------------
EMPLOYEE:
--------------------------------- --------------------------------
Xxxxx X. Xxxxxxxx
Address:
0 Xxxxxxxx Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxx 00000
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EXHIBIT A
AMOUNT ALLOCATED TO THE ACCOUNT AS OF JANUARY 1, 1997
Effective as of January 1, 1997, there shall be allocated to the Account
an amount equal to One and 4/10 (1.4%) of the Value Increase (as hereinafter
defined) as of December 31, 1996.
For purposes hereof, the "Value Increase" as of the end of any
particular calendar year shall be equal to that amount, if any, by which the
aggregate sum of (A) the cumulative amount of the Total Distributions for
calendar years 1995 through the end of the calendar year for which the Value
Increase is being determined, and (B) the Fair Market Value of the Talon
Automotive Group as of the end of the calendar year for which the Value Increase
is being determined, shall exceed the Threshold Amount as of the end of the
calendar year for which the Value Increase is being determined. The parties
hereto hereby acknowledge that the Value Increase as of December 31, 1996 and
the amount allocated to the Account as of January 1, 1997 has been determined as
set forth on Schedule I attached hereto.
Upon the occurrence of a Termination Event, in the event that the Value Increase
as of the end of the calendar year immediately preceding the Termination Event
should exceed Eighteen Million ($18,000,000) Dollars, then in such event there
shall be allocated to the Account effective as of December 31, 1997 an
additional amount equal to One and 1/10 (1.1%) percent of the Value Increase as
of December 31, 1996 (which is set forth on Schedule I attached hereto).
Upon the occurrence of a Termination Event and in the event of the existence of
any Shortfall Amount, then the amount of the reduction of the outstanding
balance of any Vested Portion of any Allocated Amounts for purposes of Section
2(d) of the Agreement shall be:
(1) First determined to be equal to Two and 5/10 (2.5%) percent of
the Vested Portion of any Allocated Amounts to the Account to
the extent that any Vested Portion of such Allocated Amounts
have been determined pursuant to the above formula or the
Agreement using such Two and 5/10 (2.5) percentage; and
(2) Thereafter determined to be equal to One and 4/10 (1.4%)
percent of the Vested Portion of any Allocated Amounts to the
Account to the extent that any Vested Portion of such
Allocated Amounts have been determined pursuant to the above
formula using such One and 4/10 (1.4) percentage.
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SCHEDULE I
