EXHIBIT 10.7
PACIFIC MOTOR TRANSPORT COMPANY
0000 XX. XXXXXX XXXXXXXXX, XXXXX 000
XXXXXXXXX, XXXXXXXXXX 00000
March 31, 1997
Xx. Xxxxxx X. Xxxxx
0000 Xxxx Xxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Employment Agreement
--------------------
Dear Mr. Xxxxxx:
This letter sets forth the terms of your continued employment with
Pacific Motor Transport Company (the "Company").
1. Duties. On the terms and subject to the conditions contained in
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this Agreement, you will be employed as the President of ABL-TRANS, a division
of the Company (the "Company"), and shall perform such duties and services
consistent with such position as may reasonably be assigned to you from time to
time by the Board of Directors or by the President of the Company.
2. Term. Unless sooner terminated in accordance with the applicable
----
provisions of this Agreement, your employment hereunder shall be for the period
(including any extensions thereof, the "Employment Period") commencing on the
date hereof (the "Commencement Date") and initially ending on the second
anniversary of the date hereof. Subject to the applicable provisions of Section
8 of this Agreement regarding earlier termination, the Employment Period shall
be extended automatically one day prior to each anniversary of the Commencement
Date, beginning with the second anniversary thereof, for an additional period of
one year.
3. Time to be Devoted to Employment. During the Employment Period,
--------------------------------
you will devote your working energies, efforts, interest, abilities and time
exclusively to the business and affairs of the Company. You will not engage in
any other business or activity which, in the reasonable judgment of the Board of
Directors of the Company, would conflict or interfere with the performance of
your duties as set forth herein, whether
Mr. Xxxxxx Xxxxx
March 31, 1997
Page 2
or not such activity is pursued for gain, profit or other pecuniary advantage.
4. Base Salary; Bonus; Benefits.
----------------------------
(a) During the Employment Period, the Company (or any of its
affiliates) shall pay you a minimum annual base salary (the "Base Salary") of
$200,000, payable in such installments (but not less often than monthly) as is
generally the policy of the Company with respect to the payment of regular
compensation to its executive officers. The Base Salary may be increased from
time to time in the sole discretion of the Board of Directors of the Company.
During the Employment Period, you will also be entitled to four weeks vacation
per year and such other benefits as may be made available to other executive
officers of the Company generally, including, without limitation, (i)
participation in such health, life and disability insurance programs and
retirement or savings plans as the Company may from time to time maintain in
effect and (ii) the use of a vehicle provided by the Company or an equivalent
monthly car allowance in accordance with the Company's policy with respect to
its senior executives.
(b) In addition to the Base Salary and benefits set forth in
paragraph (a) above, you will be entitled to receive a cash incentive bonus, if
any, with respect to each fiscal year of the Company occurring during the
Employment Period, as provided in this paragraph. The bonus, if any, for each
fiscal year of the Company ending on or prior to December 31, 2001, shall be
calculated in the manner set forth on Annex A attached to this Agreement and
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shall be due and payable as soon as practicable, but in no event later than 30
days, following the Company's receipt from its public accountants of the audited
financial statements of the Company. If your employment with the Company is
terminated for any reason other than without "cause" pursuant to Section 8(b),
the Company will not pay you a bonus with respect to the fiscal year in which
your employment is terminated or thereafter. If your employment with the Company
is terminated without "cause" as provided in Section 8(b) below, you will be
entitled to receive that portion of the bonus payable for such fiscal year pro
rated through the date of such termination based on the number of days elapsed
through the termination date over 365 days, payable in accordance with the
second sentence of this Section 4(b). For each fiscal year ending after December
31, 2001, the amount of the bonus and the criteria therefor shall be determined
by the Board of Directors. In the event that the Company consummates any mergers
or
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March 31, 1997
Page 3
acquisitions (whether of assets, stock or other interests) or other
extraordinary transactions, the Board of Directors shall in good faith make such
adjustments to the targets set forth on Annex A for Operating Income (as
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defined on Annex A) to take into account the effects of any such acquisition
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or transaction.
5. Reimbursement of Expenses. During the Employment Period, the
-------------------------
Company shall reimburse you in accordance with Company policy for all reasonable
and necessary traveling expenses and other disbursements incurred by you for or
on behalf of the Company in connection with the performance of your duties
hereunder upon presentation of appropriate receipts or other documentation
therefor, in accordance with all applicable policies of the Company.
6. Options. The Company will grant you options (the "Options") to
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purchase shares of common stock, $.01 par value (the "Common Stock"), of the
Company pursuant to the Company's 1997 Stock Option Plan (the "Option Plan").
The Options will be evidenced by a Stock Option Agreement between you and the
Company. The Option Plan and the Stock Option Agreement will contain all of the
terms and conditions of your Options.
7. Disability or Death. If, during the Employment Period, you are
-------------------
incapacitated or disabled by accident, sickness or otherwise (hereinafter, a
"Disability") so as to render you mentally or physically incapable of
performing the services required to be performed by you under this Agreement
for an aggregate of 210 days in any period of 360 consecutive days, the
Company may, at any time thereafter, at its option, terminate your employment
under this Agreement immediately upon giving you written notice to that
effect. In the event of your death, your employment will be deemed terminated
as of the date of death.
Mr. Xxxxxx Xxxxx
March 31, 1997
Page 4
Mr. Xxxxxx Xxxxx
March 31, 1997
Page 5
8. Disclosure of Information.
-------------------------
(a) From and after the date hereof, you shall not at any time use
or disclose to any person or entity (other than any officer, director, employee,
affiliate or representative of the Company), except as required in connection
with the performance of your duties under and in compliance with this Agreement
and as required by law and judicial process, any Confidential Information (as
hereinafter defined) heretofore acquired or acquired during the Employment
Period for any reason or purpose whatsoever, nor shall you make use of any of
the
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March 31, 1997
Page 6
Confidential Information for your own purposes or for the benefit of any
person or entity except the Company or any subsidiary thereof.
(b) For purposes of this Agreement, "Confidential Information"
shall mean (i) the Intellectual Property Rights (as hereinafter defined) of the
Company and its subsidiaries and (ii) all other information of a proprietary or
confidential nature relating to the Company or any subsidiary thereof, or the
business or assets of the Company or any such subsidiary, including, without
limitation, books, records, agent and independent contractor lists and related
information, customer lists and related information, vendor lists and related
information, supplier lists and related information, distribution channels,
pricing information, cost information, marketing plans, strategies, forecasts,
financial statements, budgets and projections, other than (i) information which
is generally available to the public on the date hereof, or which becomes
generally available to the public after the date hereof without action by you or
(ii) information which you receive from a third party who does not have any
independent obligation to the Company to keep such information confidential.
(c) As used herein, the term "Intellectual Property Rights" means
all industrial and intellectual property rights, including, without limitation,
patents, patent applications, patent rights, trademarks, trademark applications,
trade names, service marks, service xxxx applications, copyrights, copyright
applications, know-how, certificates of public convenience and necessity,
franchises, licenses, trade secrets, proprietary processes and formulae,
inventions, development tools, marketing materials, instructions, confidential
information, trade dress, logos and designs and all documentation and media
constituting, describing or relating to the foregoing, including, without
limitation, manuals, memoranda and records.
9. Noncompetition Covenant.
-----------------------
(a) You acknowledge and recognize that during the Employment
Period you will be privy to Confidential Information. You further acknowledge
and recognize that the relationships with vendors, agents and customers of the
Company that you have developed prior to the date hereof and those that you will
maintain or develop during the Employment Period with the use and assistance of
the Company and its properties and assets are of special and unique value to the
Company and its affiliates and that the Company would find it extremely
difficult to
Mr. Xxxxxx Xxxxx
March 31, 1997
Page 7
replace you. Accordingly, in consideration of the premises contained herein and
the consideration you will receive hereunder (including, without limitation, the
severance compensation described in Section 9(b)(ii), if applicable), without
the prior written consent of the Company, you shall not, at any time during the
Employment Period and the period beginning on the effective date of any
termination of your employment with the Company and its subsidiaries and ending
on the third anniversary thereof, (a) directly or indirectly engage in,
represent in any way, or be connected with, any Competing Business (as defined
below), whether such engagement shall be as an officer, director, owner,
employee, partner, affiliate or other participant in any Competing Business, (b)
assist others in engaging in any Competing Business in the manner described in
clause (a) above, (c) induce other employees of the Company, PMT or any of their
respective subsidiaries to terminate their employment with the Company or any of
their respective subsidiaries or to engage in any Competing Business or (d)
induce any customer, vendor or agent or any other person or entity with which
the Company or any subsidiary or affiliate thereof has a business relationship,
contractual or otherwise, to terminate or alter such business relationship. This
covenant is considered an integral part of this Agreement. The foregoing
restriction shall not apply to your ownership of publicly traded securities
which represent not more than 5% of the ownership interests of the issuer.
(b) You understand that the foregoing restrictions may limit your
ability to earn a livelihood in a business similar to the business of the
Company or any subsidiary or affiliate thereof, but you nevertheless believe
that you have received and will receive sufficient consideration and other
benefits as an employee of the Company and under the terms of this Agreement to
justify clearly such restrictions which, in any event (given your education,
skills and ability), you do not believe would prevent you from earning a living.
(c) As used herein, the term "Competing Business" shall mean any
business conducted in any city or county in any state of the United States which
is engaged in (A) intermodal marketing or (B) providing flatbed specialized
hauling services utilizing owner-operators or agents; provided, however, that an
entity which has separate divisions or business units, one or more of which are
engaged in a business described in clause (A) or (B) hereof, will not be deemed
a Competing Business with respect to those portions of such entity which are not
engaged in a business described in clause (A) or (B) above so long as
Mr.Xxxxxx Xxxxx
March 31, 1997
Page 8
the Employee's association with any such separate division or business unit
(fully taking into account his functions and the nature of his work at such
division or business unit) does not relate in any material respect to such
portion of such business which would be a Competing Business hereunder.
(d) Notwithstanding anything contained in this Agreement to the
contrary, if, following the termination of your employment with the Company
and/or its subsidiaries, the Company fails to pay to you any sums due under
Section 9(b)(ii) hereof and (i) you have complied in all material respects with
all of the provisions of the last sentence of Section 9(b)(ii) and (ii) such
failure to pay continues for a period of fifteen (15) days following receipt by
the Company of written notice thereof, the restrictions contained in this
Section 11 shall terminate and be of no further force or effect. Any termination
of the restrictions contained in this Section 11 pursuant to this subsection (d)
shall not affect the Company's obligations under this Agreement or constitute a
waiver by you of any other rights or remedies you may have against the Company
for breach of any term hereof.
10. Inventions Assignment. During the Employment Period, you shall
---------------------
promptly disclose, grant and assign to the Company for its sole use and benefit
any and all inventions, improvements, technical information and suggestions
reasonably relating to the business of the Company, PMT or any of their
respective subsidiaries (collectively, the "Inventions") which you may develop
or acquire during the Employment Period (whether or not during usual working
hours), together with all patent applications, letters patent, copyrights and
reissues thereof that may at any time be granted for or with respect to the
Inventions. In connection therewith (a) you shall, at the expense of the Company
(including a reasonable payment (based on your last per diem earnings) for the
time involved if you are not then in the Company's employ or receiving severance
payments from the Company pursuant to Section 9(b)(ii)), promptly execute and
deliver such applications, assignments, descriptions and other instruments as
may be necessary or proper in the opinion of the Company to vest title to the
Inventions and any patent applications, patents, copyrights, reissues or other
proprietary rights related thereto in the Company and to enable it to obtain and
maintain the entire right and title thereto throughout the world; and (b) you
shall render to the Company, at its expense (including a reasonable payment
(based on your last per diem earnings) for the time involved if you are not then
in the Company's employ or receiving severance payments from the Company
Mr. Xxxxxx Xxxxx
March 31, 1997
Page 9
pursuant to Section 9(b)(ii)), reasonable assistance as it may require in the
prosecution of applications for said patents, copyrights, reissues or other
proprietary rights, in the prosecution or defense of interference's which may be
declared involving any said applications, patents, copyrights or other
proprietary rights and in any litigation in which the Company may be involved
relating to the Inventions.
11. Assistance in Litigation. At the request and expense of the
------------------------
Company (including a reasonable payment (based on your last per diem earnings)
for the time involved if you are not then in the Company's employ or receiving
severance payments from the Company pursuant to Section 9(b)(ii)) and upon
reasonable notice, you shall, at all times during and after the Employment
Period, furnish such information and assistance to the Company as it may
reasonably require in connection with any issue, claim or litigation in which
the Company may be involved. If such a request for assistance occurs after the
expiration of the Employment Period, then you will only be required to render
assistance to the Company to the extent that you can do so without materially
affecting your other business obligations.
12. Entire Agreement; Amendment and Waiver. This agreement and the
--------------------------------------
other writings referred to herein contain the entire agreement between the
parties hereto with respect to the subject matter hereof and thereof and
supersede any prior agreement between you and the Company or any predecessor of
the Company or any of their respective affiliates (including, without
limitation, that certain letter agreement dated January 29, 1997, among you, Eos
Partners, L.P., and the other parties thereto). No waiver, amendment or
modification of any provision of this Agreement shall be effective unless in
writing and signed by each party hereto. The waiver by either party of a breach
of any provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach by such other party.
13. Notices. All notices or other communications pursuant to this
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Agreement shall be in writing and shall be deemed to be sufficient if delivered
personally, telecopied, sent by nationally-recognized, overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
Mr. Xxxxxx Xxxxx
March 31, 1997
Page 10
(a) if to the Company, to:
Pacific Motor Transport Company
00000 Xxx Xxxx Xxxxx
Xxxxxxxxx, XX 00000
Attention: President
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
with a copy to:
Eos Partners, L.P.
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxx
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
(b) if to you, to:
Xx. Xxxxxx X. Xxxxx
0000 Xxxx Xxxxxxx
Xxxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
14. Headings. The section headings in this Agreement are for
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convenience only and shall not control or affect the meaning of any provision of
this Agreement.
15. Severability. In the event that any provision of this Agreement
------------
is determined to be partially or wholly invalid, illegal or unenforceable in any
jurisdiction, then such provision shall, as to such jurisdiction, be modified or
restricted to the extent necessary to make such provision valid, binding and
enforceable, or if such provision cannot be modified or restricted, then such
provision shall, as to such jurisdiction, be deemed to be excised from this
Agreement; provided, however, that the binding effect and enforceability of the
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remaining provisions of this Agreement, to the extent the economic benefits
conferred upon the parties by virtue of this Agreement remain substantially
unimpaired, shall not be affected or impaired in any manner, and any such
invalidity, illegality or unenforceability with respect to such provisions shall
not
Mr. Xxxxxx Xxxxx
March 31, 1997
Page 11
invalidate or render unenforceable such provision in any other jurisdiction.
16. Remedies. You acknowledge and understand that the provisions of
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this Agreement are of a special and unique nature, the loss of which cannot be
adequately compensated for in damages by an action at law, and thus, the breach
or threatened breach of the provisions of this Agreement would cause the Company
irreparable harm. You further acknowledge that in the event of a breach of any
of the covenants contained in paragraphs 10, 11, or 12, the Company shall be
entitled to immediate relief enjoining such violations in any court or before
any judicial body having jurisdiction over such a claim. All remedies hereunder
are cumulative, are in addition to any other remedies provided for by law and
may, to the extent permitted by law, be exercised concurrently or separately,
and the exercise of any one remedy shall not be deemed to be an election of such
remedy or to preclude the exercise of any other remedy.
17. Representation. You hereby represent and warrant to the Company
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that (a) the execution, delivery and performance of this Agreement by you does
not breach, violate or cause a default under any agreement, contract or
instrument to which you are a party or any judgment, order or decree to which
you are subject and (b) you are not a party to or bound by any employment
agreement, consulting agreement, noncompete agreement, confidentiality agreement
or similar agreement with any other person or entity.
18. Benefits of Agreement; Assignment. The terms and provisions of
---------------------------------
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors, assigns, representatives, heirs and
estate, as applicable. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assignable by any party hereto
without the consent of the other party hereto.
19. Counterparts. This Agreement may be executed in any number of
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counterparts, and each such counter part shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
20. Governing Law. This Agreement shall be governed by and construed
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in accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any
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March 31, 1997
Page 12
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of California.
Mr. Xxxxxx Xxxxx
March 31, 1997
Page 13
21. Mutual Waiver of Jury Trial. BECAUSE DISPUTES ARISING IN
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CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE
LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR
DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO
ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT OR ANY DOCUMENTS RELATED HERETO.
If the above terms are satisfactory to you, please acknowledge our
agreement by signing the enclosed copy of this letter in the space provided
below and returning it to the undersigned.
Very truly yours,
PACIFIC MOTOR TRANSPORT COMPANY
By:_____________________________
Name:
Title:
Accepted and agreed to:
_____________________________
[Name]
ANNEX A
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INCENTIVE BONUS PROGRAM
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The Company will pay a cash incentive bonus based upon the Operating
Income (as hereinafter defined) of the Company for each fiscal year set forth
below occurring during the Employment Period. The amount of the Bonus so
payable will be based on the Company's achieving Operating Income (as defined
below) targets set by the President of the Company (which will be identical for
the President of the Company and the Presidents of the Company's PACER and ABL-
TRANS divisions), but which in no event will be lower than the target amounts
set forth below (with the amount of the Bonus payable being calculated
accordingly at the rate of $6,000 of Bonus per $100,000 of Operating Income).
For purposes of this Agreement, "Operating Income" means the operating income of
the Company, determined on a consolidated basis (if applicable) and in
accordance with generally accepted accounting principles consistently applied
for the fiscal year in question, as set forth on the audited statement of income
of the Company for the fiscal year in question; provided, however, Operating
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Income shall (x) exclude management fees, non-operating gains and losses as
determined by the Board of Directors and such other non-cash items as shall be
determined by the Board of Directors and (y) be determined after giving effect
to any bonus payable by the Company to management or employees of the Company
hereunder or otherwise.
MINIMUM OPERATING INCOME TARGETS
AND CORRESPONDING BONUS CALCULATION
FISCAL YEAR 1997
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If Operating Income is: The Amount of Bonus will be:
------------------------- ----------------------------
less than $3,050,000 $ 0
equal to or greater than $35,000
$3,050,000 but less than
$3,150,000
equal to or greater than $41,000
$3,150,000 but less than
$3,250,000
equal to or greater than $47,000
$3,250,000 but less than
$3,350,000
equal to or greater than $53,000
$3,350,000 but less than
$3,450,000
equal to or greater than $59,000
$3,450,000 but less than
$3,550,000
equal to or greater than $65,000
$3,550,000 but less than
$3,650,000
equal to or greater than $71,000
$3,650,000 but less than
$3,750,000
equal to or greater than $77,000
$3,750,000 but less than
$3,850,000
equal to or greater than $83,000
$3,850,000
FISCAL YEAR 1998
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If Operating Income is: The Amount of Bonus will be:
---------------------- ----------------------------
less than $3,288,400 $ 0
equal to or greater than $35,000
$3,288,400 but less than
$3,388,400
equal to or greater than $41,000
$3,388,400 but less than
$3,488,400
equal to or greater than $47,000
$3,488,400 but less than
$3,588,400
equal to or greater than $53,000
$3,588,400 but less than
$3,688,400
equal to or greater than $59,000
$3,688,400 but less than
$3,788,400
equal to or greater than $65,000
$3,788,400 but less than
$3,888,400
equal to or greater than $71,000
$3,888,400 but less than
$3,988,400
equal to or greater than $77,000
$3,988,400 but less than
$4,088,400
equal to or greater than $83,000
$4,088,400
FISCAL YEAR 1999
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If Operating Income is: The Amount of Bonus will be:
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less than $3,561,200 $ 0
equal to or greater than $35,000
$3,561,200 but less than
$3,661,200
equal to or greater than $41,000
$3,661,200 but less than
$3,761,200
equal to or greater than $47,000
$3,761,200 but less than
$3,861,200
equal to or greater than $53,000
$3,861,200 but less than
$3,961,200
equal to or greater than $59,000
$3,961,200 but less than
$4,061,200
equal to or greater than $65,000
$4,061,200 but less than
$4,161,200
equal to or greater than $71,000
$4,161,200 but less than
$4,261,200
equal to or greater than $77,000
$4,261,200 but less than
$4,361,200
equal to or greater than $83,000
$4,361,200
FISCAL YEAR 2000
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If Operating Income is: The Amount of Bonus will be:
----------------------- ----------------------------
less than $3,906,100 $ 0
equal to or greater than $35,000
$3,906,100 but less than
$4,006,100
equal to or greater than $41,000
$4,006,100 but less than
$4,106,100
equal to or greater than $47,000
$4,106,100 but less than
$4,206,100
equal to or greater than $53,000
$4,206,100 but less than
$4,306,100
equal to or greater than $59,000
$4,306,100 but less than
$4,406,100
equal to or greater than $65,000
$4,406,100 but less than
$4,506,100
equal to or greater than $71,000
$4,506,100 but less than
$4,606,100
equal to or greater than $77,000
$4,606,100 but less than
$4,706,100
equal to or greater than $83,000
$4,706,100
FISCAL YEAR 2001
----------------
If Operating Income is: The Amount of Bonus will be:
----------------------- ----------------------------
less than $4,152,800 $ 0
equal to or greater than $35,000
$4,152,800 but less than
$4,252,800
equal to or greater than $41,000
$4,252,800 but less than
$4,352,800
equal to or greater than $47,000
$4,352,800 but less than
$4,452,800
equal to or greater than $53,000
$4,452,800 but less than
$4,552,800
equal to or greater than $59,000
$4,552,800 but less than
$4,652,800
equal to or greater than $65,000
$4,652,800 but less than
$4,752,800
equal to or greater than $71,000
$4,752,800 but less than
$4,852,800
equal to or greater than $77,000
$4,852,800 but less than
$4,952,800
equal to or greater than $83,000
$4,952,800
