Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of March 7, 2005
is entered into by and between The Middleby Corporation, a Delaware corporation
(the "Company"), Middleby Marshall Inc., a Delaware corporation ("MMI"),
(collectively the "Employer"), and Xxxxxxx X. XxxxXxxxxx ("Employee").
R E C I T A L S
The Employer is a party to a severance agreement with Employee, dated
March 1, 2004, (the "Prior Agreement") and a retention agreement with Employee,
dated July 22, 2004, (the "Retention Agreement"), each of which is intended to
be superceded by this Agreement.
The Employer desires to continue and extend the term of employment of
Employee as Vice President and Chief Financial Officer of the Company and as
Vice President and Chief Financial Officer of MMI, and Employee desires to serve
the Employer in such capacities, all on the terms and conditions hereinafter
provided.
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, Employee's employment by the Employer, the compensation to be
paid Employee while employed by the Employer, and other good and valuable
consideration, the receipt and sufficiency of which is acknowledged, the parties
agree as follows:
1. Employment. The Employer agrees to employ Employee and Employee agrees to
be employed by the Employer subject to the terms and provisions of this
Agreement.
2. Term. The employment of Employee by Employer as provided in Section 1 will
be for a period commencing on the date of this Agreement (the "Effective
Date") and ending on March 1, 2010, unless sooner terminated as hereinafter
provided.
3. Duties. Employee shall serve as Vice President and Chief Financial Officer
of the Company and Vice President and Chief Financial Officer of MMI, or in
such other executive capacities as the Board of Directors of the Company or
MMI, as applicable, may designate and shall have such powers and duties as
may be from time to time prescribed by the Board of Directors of the
Company or MMI, as applicable. Employee shall devote substantially all of
his time and effort as reasonably may be required for him to perform the
duties and responsibilities to be performed by him under the terms of this
Agreement.
4. Compensation.
(a) Base Salary. The Employer shall pay to Employee a base salary at a
rate per annum of $250,000, payable in accordance with the normal
payroll practices of Employer.
(b) Incentive Compensation. Employee shall be eligible to participate in
the Management Incentive Plan previously adopted by the Employer,
subject to all terms and conditions thereof. Under such plan, if the
Employer attains certain pre-established performance goals (attainment
of such goals to be determined after taking into account any incentive
compensation to be paid to Employee and any other participating
employees under the Plan), Employee shall be entitled to receive (i)
80% of his Base Salary as in effect at the beginning of the fiscal
year to which the award relates, and (ii) for each year, an additional
$5,800 for each $120,000 by which the Employer's actual EBITDA exceeds
the goal. The performance goals, which are based on the Employer's
EBITDA, are set forth on Exhibit A hereto. The maximum bonus payable
to Employee under the Management Incentive Plan shall be $600,000 and
the Employer will modify the Management Incentive Plan accordingly.
Notwithstanding the foregoing, the Employee's participation in the
Management Incentive Plan with respect to fiscal year 2004 shall not
be affected hereby and shall be governed by the terms of the
Management Incentive Plan as in effect for Employee immediately prior
to the date hereof.
(c) Restricted Stock Grant. The Company shall cause Employee to be granted
an aggregate of 50,000 shares of restricted stock of the Company
pursuant to the 1998 Stock Incentive Plan (the "Restricted Stock"),
under the terms and conditions set forth in the form of Restricted
Stock Agreement attached hereto as Exhibit B.
5. Termination.
(a) Employee's employment hereunder may be terminated by Employer or by
Employee at any time, or by the death of Employee. Such termination
shall automatically terminate all of the Employer's obligations not
theretofore accrued under this Agreement other than as specifically
set forth in this Agreement or in any employee benefit plan, program
or arrangement in which Employee participates. If the Employer
terminates Employee's employment under this Agreement (as hereafter
amended or extended) without "Cause," as defined below, or if
employment is terminated due to Employee's death or disability,
incentive compensation under the Management Incentive Plan for any
year shall be deemed to have accrued as of the date of termination if
and to the extent that incentive compensation under the Management
Incentive Plan would have been payable to Employee if he had been
employed on the last day of such fiscal year and shall be (i) pro
rated based on the number of days that Employee was employed during
the fiscal year and (ii) payable in the following fiscal year, on the
earlier of April 1 or at the same time as incentive compensation under
the Management Incentive Plan for such year is paid to those employees
who are still employed by the Employer.
(b) Notwithstanding anything to the contrary contained in this Agreement,
in the event that (i) the Employer terminates Employee's employment
under this Agreement (as hereafter amended or extended) without
"Cause," as defined below, (for this purpose, not including
termination due to Employee's death or disability) or (ii) Employee
terminates his employment under this Agreement within the six-month
period immediately following a "Change in Control" (as defined below),
by providing written notice of such termination to the Employer,
Employee shall be entitled to an amount equal to two (2) times the sum
of (A) Employee's annual base salary for the full calendar year
immediately prior to the date of the termination and (B) the greater
of (x) the amount of Employee's incentive compensation under the
Management Incentive Plan with respect to the full calendar year
immediately prior to the date of the termination and (y) the average
of Employee's incentive compensation under the Management Incentive
Plan for each of the two calendar years immediately prior to the date
of the termination, payable in one lump sum within thirty (30) days of
the date of termination.
(c) For purposes of this Section 5, the term "Cause" shall mean gross
negligence, willful misconduct, breach of fiduciary duty involving
personal profit, substance abuse, or commission of a felony.
(d) For purposes of this Agreement, the term "Change in Control" shall
mean an increase, on or after the date of this Agreement, in ownership
to twenty percent (20%) or more of the outstanding voting securities
of the Company held by any person or group of persons who are acting
together for the purpose of acquiring, holding, voting or disposing of
such voting securities; provided, however, that an increase in
ownership to twenty (20%) or more of the outstanding voting securities
of the Company held by Employee or group of persons which includes
Employee who are acting together for the purpose of acquiring,
holding, voting or disposing of such voting securities shall not
constitute a Change in Control.
Example 1: On April 16, 2004 individual A owns 2.42% of the total
outstanding voting securities of Company. Thereafter, individual A
commences a series of open market and private purchases, and on
January 10, 2005 for the first time his holdings exceed 20% of the
outstanding voting securities of the Company. A Change of Control
occurs on January 10, 2005.
Example 2: On a date subsequent to this Agreement individual B, who
owned no voting securities of Company prior to the date of this
Agreement, commences a series of open market and private purchases,
and on January 11, 2005 for the first time his holdings exceed 20% of
the outstanding voting securities of the Company. A Change of Control
occurs on January 11, 2005.
(e) Parachute Payments
(i) To the extent that any amount payable to Employee (hereunder
or otherwise) alone or together with other compensation
constitutes a "parachute payment" within the meaning of
section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended, (the "Code") that would result in some or all of
the compensation owed being characterized as "excess
parachute payments" (as defined by section 280G(b)(1) of the
Code), and would, therefore, be subject to an excise tax
under section 4999 of the Code (the "Excise Tax"), the
Employer shall pay to Employee, at the time specified below,
that additional amount (the "Gross-Up Payment") necessary to
reimburse Employee for the amount of any (i) Excise Tax,
(ii) federal, state and local income and employment taxes
(including additional Excise Tax) payable with respect to
the Gross-Up Payment, and (iii) interest, penalties or
additions to tax payable by Employee with respect to the
Excise Tax or the Gross-Up Payment. For purposes of
determining the amount of the Gross-Up Payment, Employee
shall be deemed to pay federal income taxes at the highest
marginal rates of taxation applicable to individuals as are
in effect in the calendar year in which the Gross-Up Payment
is to be made and state and local income taxes at the
highest marginal rates of taxation applicable to individuals
as are in effect in the state and locality of Employee's
residence, and/or any other state or locality that may be
applicable, in the calendar year in which the Gross-Up
Payment is to be made, net of the maximum reduction in
federal income taxes that can be obtained from deduction of
such state and local taxes, taking into account any
limitations applicable to individuals subject to federal
income tax at the highest marginal rates.
(ii) The Gross-Up Payments provided for in Section 5(e)(i) above
shall be made upon the earlier of (i) the payment to
Employee of compensation in the nature of a parachute
payment or (ii) the imposition upon Employee or payment by
Employee of any Excise Tax.
(iii) If it is established pursuant to a final determination of a
court or an Internal Revenue Service proceeding that the
Excise Tax is less than the amount taken into account under
Section 5(e)(i) above, Employee shall repay to the Employer
within thirty (30) days of Employee's receipt of notice of
such final determination the portion of the Gross-Up Payment
attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and
employment taxes imposed on the Gross-Up Payment being
repaid by Employee, if such repayment results in a reduction
in Excise Tax or a federal, state and local income tax
deduction). If it is established pursuant to a final
determination of a court or an Internal Revenue Service
proceeding that the Excise Tax exceeds the amount taken into
account under Section 5(e)(i) above (including by reason of
any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the
Employer shall make any additional Gross-Up Payment in
respect of such excess within thirty (30) days of the
Employer's receipt of notice of such final determination.
(iv) Notwithstanding anything contained herein or in the
Management Incentive Plan to the contrary, the amount of any
payments made pursuant to this Section 5(e) shall be
excluded from the calculation of EBITDA under the Management
Incentive Plan for purposes of determining bonuses
thereunder.
6. Payment. Payment of all compensation and benefits to Employee hereunder
shall be made in accordance with the relevant policies of the Employer in
effect from time to time and shall be subject to all applicable employment
and withholding taxes.
7. Successors. This Agreement shall be binding upon, and inure to the benefit
of and be enforceable by, Employer and its successors and assigns. This
Agreement shall inure to the benefit of Employee's heirs, legatees, legal
representatives and assigns, but neither this Agreement nor any right or
interest hereunder shall be assignable by Employee without Employer's prior
written consent.
8. Notices. All notices, requests, demands and other communications made or
given in connection with this Agreement shall be in writing and shall be
deemed to have been duly given (a) if delivered, at the time delivered or
(b) if mailed, at the time mailed at any general or branch United States
Post Office enclosed in a certified post-paid envelope addressed to the
address of the respective parties as follows:
To the Company: 0000 Xxxxxxxxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
To MMI: 0000 Xxxxxxxxxxx Xxxxx
Xxxxx, Xxxxxxxx 00000
Attention: Chief Executive Officer
To Employee: Xxxxxxx X. XxxxXxxxxx
0000 Xxxxxxxxxxx Xxxxx,
Xxxxx, Xxxxxxxx 00000
or to such other address as the party to whom notice is to be given may
have previously furnished to the other party in writing in the manner set
forth above, provided that notices of changes of address shall only be
effective upon receipt.
9. Modifications and Waivers. This Agreement may be modified or amended only
by a written instrument executed by Employer and Employee. No term or
condition of this Agreement shall be deemed to have been waived nor shall
there be any estoppel to enforce any provision of this Agreement except by
written instrument of the party charged with such waiver or estoppel.
10. Entire Agreement. This Agreement supersedes all prior agreements between
the parties hereto relating to the subject matter hereof, including but not
limited to the Prior Agreement and the Retention Agreement, and constitutes
the entire agreement of the parties hereto relating to the subject matter
hereof. However, nothing in this Agreement is intended or shall be
interpreted to reduce the rate or eliminate any portion of Employee's
compensation or benefits in effect immediately prior to the date hereof.
11. Law Governing. The validity, interpretation, construction, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Illinois without regard to principles of conflicts of laws.
12. Invalidity. The invalidity or unenforceability of any term or terms of this
agreement shall not invalidate, make unenforceable or otherwise affect any
other term of this Agreement which shall remain in full force and effect.
13. Headings. The headings contained herein are for reference only and shall
not affect the meaning or interpretation of this Agreement.
14. Joint and Several. The liability hereunder of the Company and MMI shall be
joint and several.
15. Other Agreements. Employer agrees to modify any and all agreements, plans
and contracts as may be necessary to effectuate the terms of this
Agreement; provided, however, that to the extent shareholder approval is
required by applicable law or regulation to effectuate any such
modification, such modification shall be subject to shareholder approval.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year set forth above.
EMPLOYEE THE MIDDLEBY CORPORATION
/s/ Xxxxxxx X. Xxxxxxxxxx By /s/ Xxxxx X. Xxxxxxx
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MIDDLEBY MARSHALL INC.
By /s/ Xxxxx X. Xxxxxxx
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EXHIBIT A
EBITDA Goals
The following are the EBITDA goals to be used for purpose of determining
incentive compensation under the Management Incentive Plan as set forth in the
Agreement to which this Exhibit is attached:
Year 2005 2006 2007 2008 2009 2010 2011
-------------- ------------- ------------ ------------- ------------- ------------ ------------- ------------
EBITDA Goal* 48,985,685 54,863,967 61,447,643 68,821,360 77,079,923 86,329,515 96,689,057
-------------- ------------- ------------ ------------- ------------- ------------ ------------- ------------
*Notes Regarding EBITDA Goals
Calculation of EBITDA. EBITDA shall be determined in the discretion of the
Committee administering the MICP in accordance with Generally Accepted
Accounting Principles. However, EBITDA shall exclude foreign exchange
gains/losses and non-cash equity compensation and shall take into account any
and all bonuses and incentive compensation payable to Company employees,
including incentive compensation payable to employees participating under the
MICP for the applicable year. The Committee administering the MICP shall have
the authority to make appropriate adjustments to EBITDA goals to reflect the
impact of extraordinary items not reflected in such goals. For purposes of the
MICP, extraordinary items shall include (1) any profit or loss attributable to
acquisitions or dispositions of stock or assets, (2) any changes in accounting
standards or treatments that may be required or permitted by the Financial
Accounting Standards Board or adopted by the Company or its subsidiaries after
the goal is established, (3) all items of gain, loss or expense for the year
related to restructuring charges for the Company or its subsidiaries, (4) all
items of gain, loss or expense for the year determined to be extraordinary or
unusual in nature or infrequent in occurrence or related to the disposal of a
segment of a business (including but not limited to any costs allocated to the
Company by any entity that acquires the Company), (5) all items of gain, loss or
expense for the year related to discontinued operations that do not qualify as a
segment of a business as defined in APB Opinion No. 30 (or successor
literature), (6) the impact of capital expenditures, (7) the impact of share
repurchases and other changes in the number of outstanding shares, (8) fees and
expenses associated with a business transaction such as investment banking fees
and/or legal, accounting or tax planning fees, and (9) such other items as may
be pre-scribed by Section 162(m) of the Code and the treasury regulations
thereunder as may be in effect from time to time, and any amendments, revisions
or successor provisions and any changes thereto.
If actual EBITDA for any particular full year exceeds the goal for that year to
the extent that it also exceeds the goal for the next following year, the EBITDA
goal for such next following year shall be automatically increased to equal the
actual EBITDA for such prior year. EBITDA goals for subsequent years do not
automatically change. For example, if the actual EBITDA for 2005 is $60,000,000,
then the EBITDA Goal for 2006 will automatically increase to $60,000,000;
however, the EBITDA goals for 2007 through 2011 shall not automatically adjust
at that time.
