EXHIBIT 53
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
(as restated)
AGREEMENT by and between AMERICAN PRECISION INDUSTRIES INC. (the
"Company), a Delaware corporation with its principal office at 0000 Xxxxxx
Xxxxxx, Xxxxxxx, Xxx Xxxx 00000, and Xxxxx McH. Xxxxxxxx ("Employee"), residing
at 000 Xxxxxxxxxxx Xxxx, Xxxxxxxxxxxxx, Xxx Xxxx 00000, dated as of October 15,
1999.
WITNESSETH:
WHEREAS, the Employee is currently employed by the Company in the
capacity of Vice President and Chief Financial Officer; and
WHEREAS, the Company desires to continue to provide the Employee with
additional incentive in connection with his employment by the Company; and
WHEREAS, the Employee is a member of a select management group of the
Company;
NOW, THEREFORE, the parties agree as follows:
1. Conditions.
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(a) The payment of benefits to the Employee or designated
beneficiaries under this Agreement is conditioned upon the Employee's compliance
with the terms of the this Agreement.
(b) The Company shall withhold Federal, state, and local taxes
with respect to all payments and benefits under this Agreement to the extent
required by law.
2. Normal Retirement.
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(a) If the Employee retires from employment with the Company on
or after his 65/th/ birthday or if the Employee becomes totally and permanently
disabled while employed by the Company, the Company shall pay to the Employee
the amount specified under paragraph I in Schedule A to this Agreement (the
"Normal Retirement Benefit"), reduced in accordance with Section 7.
(b) Subject to Section 8, such amount shall be paid in 180 equal
monthly installments, the first of which shall be paid within thirty days after
the Employee ceases to be employed by the Company, and the balance of which
shall be paid on or about the first business day of each following month for 179
months.
(c) If the Employee dies after becoming entitled to payment under this
Section 2, but before all of the payments provided for have been made, the
unpaid balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
3. Involuntary Termination.
-----------------------
(a) If the Employee's employment is terminated involuntarily
(that is, by the Company) before age 65, he will receive the percentage of the
Normal Retirement Benefit determined in accordance with the following vesting
schedule, reduced in accordance with Section 7:
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Percentage
Full Years of Service Vested
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Less than ten 0
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Ten 50
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Eleven 55
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Twelve 60
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Thirteen 65
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Fourteen 70
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Fifteen 75
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Sixteen 80
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Seventeen 85
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Eighteen 90
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Nineteen 95
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Twenty or more 100
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(b) Subject to Section 8, the amount so determined shall be paid in
180 equal monthly installments, the first of which shall be paid within thirty
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days after the Employee ceases to be employed by the Company, and the balance of
which shall be paid on or about the first business day of each following month
for 179 months.
(c) If the Employee dies after becoming entitled to payment under this
Section 3, but before all of the payments provided for have been made, the
unpaid balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
4. Voluntary Termination.
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If the Employee voluntarily resigns from employment with the
Company before age 65 he shall forfeit all benefits under this Agreement.
5. Early Retirement.
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(a) If the Employee voluntarily retires early, the Board of
Directors of the Company shall determine, in its discretion, whether the
Employee shall be entitled to any benefit under this Agreement.
(b) If the Employee retires early on an involuntary basis,
Xxxxxxx 0, Xxxxxxxxxxx Xxxxxxxxxxx, shall apply to determine the benefit, if
any, to which the Employee shall be entitled under this Agreement.
6. Change in Control.
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(a) As used in Section 6, the terms "Change in Control",
"Protection Period", "Company", "Cause", and "Good Reason" shall have the
meanings given to them in the Change in Control Agreement entered into by and
between the Company and the Employee as of February 25, 1997.
(b) If, during a Protection Period, the Employee's employment is
terminated by the Company other than for Cause or if the Employee terminates his
employment for Good Reason, then the Company shall pay to the Employee the
amount of the Normal Retirement Benefit under the provisions of this Section 6,
notwithstanding any conflicting provisions of Sections 2, 3, 4, or 5, but
reduced in accordance with Section 7.
(c) Subject to Section 8, such amount shall be paid in 180 equal
monthly installments, the first of which shall be paid within thirty days after
the Employee ceases to be employed by the Company and the balance of which
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shall be paid on or about the first business day of each following month for 179
months.
(d) If the Employee dies after becoming entitled to payment under
this Section 6, but before all the payments provided for have been made, the
unpaid balance of the payments shall be paid by the Company to the designated
beneficiaries when due.
7. Reduction of Benefits.
---------------------
(a) The Company and the Employee have entered into a Life
Insurance Split-Dollar Agreement dated as of May 1, 1997, pursuant to which
beneficiaries of the Employee may receive a death benefit if the Employee dies
while employed by the Company and the Employee may own an interest in the cash
surrender value of a life insurance policy (the "Policy") at the time his
employment with the Company terminates by retirement or otherwise.
Notwithstanding any contrary provision of this Agreement, the benefits the
Company is otherwise obligated to pay to the Employee pursuant to Sections 2, 3,
5, or 6 shall be reduced in the manner provided in Paragraph (b) below by the
amount of the Employee's interest in the cash surrender value of the Policy on
the date the Employee ceases to be employed by the Company.
(b) The reduction to which Paragraph (a) above refers shall be
calculated as described in (i) through (v) below as of the date on which the
Employee ceases to be employed by the Company:
(i) Calculate the monthly benefit under Sections 2, 3, 5,
or 6, as the case may be.
(ii) Convert the monthly benefit (from (i) above) into an
after-tax monthly benefit, using the after-tax rate specified under paragraph II
in Schedule A to this Agreement (the "After-Tax Rate").
(iii) Calculate the monthly annuity amount that would be
payable to the Employee monthly for 180 months if an amount equal to the
Employee's interest in the cash surrender value of the Policy were converted
into an annuity with a term certain of 180 months using an interest rate equal
to the applicable annual interest rate specified under paragraph III in Schedule
A to this Agreement (the "Applicable Annual Rate").
(iv) Convert the monthly annuity amount (from (iii) above)
into an after-tax monthly annuity amount, using the After-Tax Rate, but
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applying the After-Tax Rate only to that part of the monthly annuity amount that
would not represent the return of the Employee's investment in the Policy.
(v) Subtract the after-tax monthly annuity amount (from (iv)
above) from the after-tax monthly benefit (from (ii) above). Divide the
remainder, if any, by the After-Tax Rate; the quotient is, notwithstanding the
provisions of Sections 2, 3, 5, and 6, the monthly benefit payable for 180
months in accordance with the terms of the relevant section of this Agreement.
8. Acceleration of Payments; Frequency of Payments.
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(a) At the Company's option or, if amounts become payable on a
Change in Control pursuant to Section 6 of this Agreement, at the Employee's
option, amounts payable under this Agreement may be paid in a lump sum rather
than over a period of years, discounted at the Applicable Annual Rate in effect
as of the date the Employee ceases to be employed by the Company. Should the
Employee exercise the foregoing option, the Company shall make the lump sum
payment to the Employee within thirty days after he notifies the Company of the
exercise of the option.
(b) The Company may, at is option, but subject to Paragraph (a)
above, divide any amount due under this Agreement in any month into two or more
installments to be paid during that month at times corresponding to the
Company's regular pay dates for executive employee. The Company's exercise of
the foregoing option shall not be cause for an adjustment of the amount
otherwise payable under this Agreement.
9. Claims Procedure.
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(a) The administrator for purposes of the claims procedure under
this Agreement is the Chief Financial Officer of the Company. The business
address and telephone number of the claims administrator is: 0000 Xxxxxx Xxxxxx,
Xxxxxxx, Xxx Xxxx 00000; telephone: (000) 000-0000.
(b) The Company shall have the right to change the claims
administrator. The Company shall also have the right to change the address and
telephone number of the claims administrator. The Company shall give the
Employee written notice of any of the foregoing changes.
(c) Benefits shall be paid in accordance with the provisions of
this Agreement.
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(d) The claims administrator shall present any disputed claim for
benefits to the Compensation Committee for review. The Compensation Committee
in conjunction with the Board of Directors shall determine the disposition of
the disputed claim.
(e) If the claim is denied, either wholly or partially, notice of
the decision shall be mailed to the claimant within 90 days after the receipt of
the claim by the claims administrator.
(f) The claims administrator shall provide a written notice to
any claimant who is denied a claim for benefits under this Agreement. The notice
shall set forth the following information:
(i) the specific reasons for denial;
(ii) the specific reference to pertinent provisions of the
Agreement on which the denial is based;
(iii) a description of any additional material or
information necessary for the claimant to perfect the claim and an explanation
of why such material or information is necessary; and
(iv) appropriate information and an explanation of the
claims procedure under this Agreement to permit the claimant to submit his claim
for review.
All of this information shall be set forth in the notice in
a manner calculated to be understood by the claimant.
(g) The claims procedure under this Agreement shall allow the
claimant a reasonable opportunity to appeal a denied claim and to get a full and
fair review of that decision from the claims administrator. The claimant shall
exercise his right of appeal by submitting a written request for a review of the
denied claim to the claims administrator.
This written request for review must be submitted to the claims
administrator within sixty days after receipt by the claimant of the written
notice of denial. The claimant shall have the following rights under this appeal
procedure:
(i) to request a review upon written application to the
claims administrator;
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(ii) to review pertinent documents with regard to this
Agreement;
(iii) to submit issues and comments in writing;
(iv) to request an extension of time to make a written
submission of issues and comments; and
(v) to request that a hearing be held to consider
claimant's appeal.
(h) The claims administrator shall notify the claimant in writing of
the decision on review of the denied claim within 60 days after the receipt of
the request for review if no hearing was held, or within 120 days after the
receipt of the request for review, if an extension of time is necessary in order
to hold a hearing. If an extension of time is necessary in order to hold a
hearing, the claims administrator shall give the claimant written notice of the
extension of time and of the hearing. This notice shall be given prior to any
extension. The written notice of extension shall indicate that an extension of
time will occur in order to hold a hearing on the claimant's appeal.
The notice shall also specify the place, date, and time of that
hearing and the claimant's opportunity to participate in the hearing. It may
also include any other information the claims administrator believes may be
important or useful to the claimant in connection with the appeal.
(i) The decision to hold a hearing to consider the claimant's appeal
of the denied claim shall be within the sole discretion of the claims
administrator, whether or not the claimant requests such a hearing.
(j) The written decision on review required by Paragraph (h)
above shall contain the following information:
(i) the decisions;
(ii) the reasons for the decisions; and
(iii) specific references to the provisions of the Agreement
on which the decisions are based.
All of this information shall be written in a manner calculated to
be understood by the claimant.
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(k) The claims administrator shall be entitled to retain and rely
on the advice of experts (including without limitation attorneys and accountants
retained by the Company) in taking or refraining from taking any action or
making any decision pursuant to this Section 9. All fees and expenses of such
experts shall be paid by the Company.
10. Nature of Company's Obligation.
------------------------------
The Company's obligation under this Agreement shall be an
unfunded and unsecured promise to pay. Any assets which the Company may acquire
to help support its financial liabilities are and remain general assets of the
Company subject to the claims of its creditors. The Company does not give, nor
does this Agreement create nor the Employee receive, any beneficial ownership
interest in any asset of the Company. The Employee understands and agrees that
his participation in the acquisition of any general asset that the Company may
acquire or use to help support its financial obligations under this Agreement
shall not constitute a representation to the Employee, his designated
beneficiary, or any person claiming through the Employee that any of them has a
special or beneficial interest in such general asset.
11. No Employment Rights.
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This Agreement shall not be deemed to constitute a contract of
employment between the Company and Employee. Nothing contained in this Agreement
shall be deemed to give the Employee the right to be retained in the employ of
the Company or to interfere with the right of the Company to discharge the
Employee, nor shall it be determined to give the Company the right to require
the Employee to remain in its employ, nor shall it interfere with Employee's
right to terminate his employment.
12. Independence of Benefits.
------------------------
The benefits payable under this Agreement shall be independent
of, and in addition to, any other benefits or compensation, whether by salary,
or bonus or otherwise, payable under any other employment agreements that now or
may in the future exist between the Company and the Employee. This Agreement
between the Company and the Employee does not involve a reduction in salary or
foregoing of an increase in the future salary by the Employee. This Agreement
shall not affect or reduce the existing and future compensation and other
benefits of the Employee.
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13. Assignability.
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Except insofar as this provision may be contrary to applicable
law, no sale, transfer, alienation, assignment, pledge, collateralization, or
attachment of any benefits under this Agreement shall be valid or recognized by
the Company.
14. Payment Due Incompetents, Minors, Etc.
-------------------------------------
If it shall be found that any person to whom a payment is due
under this Agreement is unable to care for his affairs because of physical or
mental disability, or that such person is a minor, the Company shall have the
authority to cause the payments becoming due to such person to be made to the
spouse, brother, sister, or other individual with whom the person to whom the
payment is due is living, or any other individual deemed by the Company to have
incurred expense for such person otherwise entitled to payment (unless prior
claim shall have been made by a duly qualified guardian or other legal
representative), without responsibility of the Company to see the application of
such payments. Payments made pursuant to such power shall operate as a discharge
of the obligation of the Company under this Agreement to the extent of such
payments.
15. Employee Waiver.
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The Employee acknowledges and agrees that if the Agreement and
the benefits described in the Agreement constitute an employee benefit plan or
part of an employee benefit plan for purposes of Title I of the Employee
Retirement Income Security Act, as amended ("ERISA"), (a) such plan is an
unfunded plan, (b) the Employee belongs to a select group of management or
highly compensated employees, and, therefore, (c) such plan is exempt from the
participation, vesting, benefit accrual, joint and survivor and preretirement
survivor annuity, minimum funding, fiduciary responsibility, and other
requirements of Title I of ERISA. The Employee further agrees that, should the
Agreement and the benefits described in the Agreement be construed as a funded
plan or part of a funded plan for purposes of Title I of ERISA, the Employee
irrevocably waives on behalf of himself and any spouse to whom he may now or in
the future be married, any rights and claims the Employee or his spouse or both
of them may have now or in the future under Title I of ERISA with respect to
such plan. The Employee acknowledges that he has had sufficient opportunity to
review this waiver with counsel.
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16. Designation of Beneficiary.
--------------------------
The Employee may designate a beneficiary to receive any amounts
due under Sections 2(a), 3(c), or 6(d) of this Agreement after his death. A
designation of a beneficiary shall be made in writing, signed by the Employee,
and delivered to the Company. If the Employee is married and elects to designate
someone other than his spouse as beneficiary, the spouse's written consent shall
be required. If the Employee has not designated a beneficiary, payment of such
amounts shall be made to the Employee's surviving spouse or, if there be none,
to his estate. This Section 16 shall not supersede any designation of
beneficiary made by the Employee pursuant to or provided for under any other
plan or program of the Company.
17. Amendment.
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During the lifetime of the Employee, this Agreement may be
amended or terminated at any time, in whole or in part, by a written agreement
of the parties; provided, however, that this Agreement may not be amended in a
manner that would materially increase the cost to the Company without the
approval of the Board of Directors.
18. Plan Administrator.
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The plan administrator shall be the Compensation Committee of the
Board of Directors of the Company. The plan administrator shall administer this
Agreement, construe its terms, and make all determinations necessary under this
Agreement and shall have complete discretion in doing so.
19. Requirements and Benefits if Executive Is Employee of Subsidiary.
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If the Employee is an employee of any subsidiary of the Company,
he shall be entitled to all of the rights and benefits of this Agreement as
though he were an employee of the Company, and the term "Company" as used in
this Agreement shall be construed to include the subsidiary by which the
Employee is employed. The Company guarantees the performance of its subsidiary
under this Agreement.
20. Notices.
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All notices, requests, demands and other communications required
or permitted to be given under this Agreement shall be in writing and shall
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be deemed duly given upon their delivery or mailing, as the case may be, if
delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid:
(a) If to the Company, to:
American Precision Industries Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Chairman, Compensation Committee
(b) If to the claims administrator, to:
American Precision Industries Inc.
0000 Xxxxxx Xxxxxx
Xxxxxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer
(c) If to the Employee or claimant, to:
Xxxxx McH. Xxxxxxxx
000 Xxxxxxxxxxx Xxxx
Xxxxxxxxxxxxx, Xxx Xxxx 00000
or to such other address as any of the foregoing shall have specified by notice
given in said manner to each of the others.
21. Miscellaneous.
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This Agreement constitutes the entire agreement between the
parties with respect to the subject matter of this Agreement. This Agreement
shall be governed by the laws of the State of New York, except to the extent
Federal law supersedes. This Agreement is solely between the Company and the
Employee. However, it shall be binding upon the designated recipients,
beneficiaries, heirs, executors, and administrators of the Employee and upon the
successors and assigns of the Company. Headings in this Agreement are for
reference purposes only and shall not be deemed to have any substantive effect.
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IN WITNESS WHEREOF, the Employee has executed this Agreement, and the
Company, pursuant to the authorization of its Board of Directors, has caused
this Agreement to be executed, as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/Xxxx Xxxxxxxxxxx
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/s/Xxxxx McH. Xxxxxxxx
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Xxxxx McH. Xxxxxxxx
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SCHEDULE A
Effective as of October 15, 1999
I. Normal Retirement Benefit
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The Normal Retirement Benefit is an amount equal to three times the
Employee's current annual base salary.
II. After-Tax Rate
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The After-Tax Rate is the percentage that is the remainder after the
subtraction from (i) 100 percent of (ii) the effective marginal tax rate
applicable to the Employee on the date as of which a calculation is being
made. The Company shall determine the effective marginal tax rate
applicable to the Employee as of the calculation date, taking into account
federal, state, and local income tax rates; the hospital insurance tax rate
under the Federal Insurance Contribution Act; the deduction (for income tax
purposes) for state and local income taxes; and no income other than income
attributable to the Company. An amount shall be converted to an after-tax
amount by multiplying it by the After-Tax Rate in effect for the
calculation date.
III. Applicable Annual Rate
----------------------
The Applicable Annual Rate is the annual rate of interest determined for a
given calendar year as follows: For each calendar year, the Company shall
obtain quotes from the Guardian Life Insurance Company and two other A+
rated life insurance companies on the single premium that would be required
in January of that year to purchase an immediate annuity policy paying a
fixed monthly benefit for a term certain of 180 months. The premiums
quoted shall be translated into discount rates. The highest of the three
discount rates shall be the Applicable Annual Rate in effect for
calculations made as of any date during the given calendar year.
