EXHIBIT 10.4
M-TRON INDUSTRIES, INC.
000 XXXXXXX XXXXXX
X.X. XXX 000
XXXXXXX, XX 00000
January 7, 1999
Xxxxxx X. Xxxxxxx
00000 Xxxxx Xxxxxx
Xxxxx Xxxx Xxxx, XX 00000
Dear Xxx:
The following summarizes our agreement regarding your retention by M-tron
Industries, Inc. (the "Company"), effective January 24, 2000.
1. POSITION. You will serve as President and Chief Executive Officer of
the Company. You will also be made a director of the Company.
2. COMPENSATION. You are to receive a base salary, bonus potential and
equity incentive as set forth herein.
(a) BASE SALARY. Your initial base salary will be $175,000 per
year payable semi-monthly.
(b) BONUS PROGRAM. You will develop and recommend to the Board
of Directors of the Company a bonus program applicable to you and the
other principal executives of the Company for Year 2000 and beyond.
(c) BONUS. Your bonus for the year ended December 31, 2000
will be not less than $100,000 provided that the Company meets its plan
target for EBITDA (calculated in the manner as set forth in Schedule A
hereto) of $3,832,000 for said year. The upside follows the formula in
the bonus program adopted in Paragraph 2.(b) above. The bonus will be
paid as soon as practical after the end of Year 2000.
(d) EQUITY INCENTIVE. It is the parties' intention to provide
you with an equity incentive, intended to be approximately 3% as set
forth herein.
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(i) COMPANY GOES PUBLIC. If the Company shall complete an
initial public offering ("IPO") of its common stock
during your employment and prior to January 24, 2003,
you shall be entitled to purchase at the time of the
IPO shares of common stock of the Company equal to 3%
of the outstanding shares of common stock immediately
after the IPO. The purchase price for the stock will be
33 1/3% of the public offering price payable in cash
or, with the Company's agreement, structured notes
secured by the stock. The exact structure of your
ownership will be structured by the Company at the time
with the Company's tax, book accounting and "blue sky"
law implications taking dominant importance versus your
tax position. It is anticipated that the Company will
adopt a stock option program at the time of an IPO and
you will be entitled to participate therein. You will
agree to such restrictions on the shares of stock or
options acquired by you as the underwriters for the IPO
may request. The certificates for such shares and for
any shares of Xxxxx Corporation issued pursuant to
Paragraph 2(d)(ii) shall contain such legends including
without limitation a securities acts legend as the
Company deems appropriate.
(ii) COMPANY DOES NOT GO PUBLIC. If the Company has not
done an IPO by January 24, 2003 and if you are then
employed by the Company, you shall be entitled, upon
any termination of your employment to an inputed equity
value benefit ("IEVB") equal to 3% of the increase in
the economic value of the Company from January 1, 2000
through the end of the last fiscal quarter next
preceding termination of your employment (the
"Valuation Date"). The economic value of the Company at
January 1, 2000 shall be deemed to be 7.5 times the
EBITDA (plus cash and marketable securities and minus
debt) of the Company for the year ended December 31,
1999 (calculated in the manner set forth on Schedule A
hereto), and the value at the Valuation date shall be
7.5 times the EBITDA (plus cash and marketable
securities and minus debt) of the Company for the
twelve months ended on the Valuation Date (with EBITDA
for such twelve month period being calculated in the
same manner as on Schedule A). Should there have been
any stock issued in connection with any acquisition
included in the calculation, the value of the stock
issued, at the time of issuance, will be deemed to be
debt for purposes of the calculation. The IEVB shall,
at the Company's option, be payable either in (a) cash
in three (3) equal installments payable on the first,
second and third anniversary dates of the
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date of your termination of employment and such
deferred payments shall bear interest on the
outstanding principal amount at an annual rate equal
to eight percent (8%), which interest shall be
payable in arrears on each of said anniversary dates
or (ii) in common stock of Xxxxx Corporation valued
at the average closing market price thereof for the
ten trading days on which the stock traded prior to
the date of payment. For purposes of this Paragraph
2(d)(ii) only, any sale by Xxxxx Corporation of a
majority of common stock of the Company (other than
to its shareholders or in a public offering) or any
sale by the Company of all or substantially all of
its assets (excluding its investment in Spinnaker
Industries, Inc. and any successor investments to
Spinnaker Industries, Inc.), in each case other than
to an "affiliate" (i.e., a person or entity that
directly or indirectly through one or more
intermediaries controls, or is controlled by, or is
under common control with the person or entity) of
the Company, shall be deemed to be a termination of
employment effective as of the date of such event
(with you being deemed to have satisfied the three
year vesting requirement).
(e) EMPLOYEE BENEFIT PROGRAMS. You will also be entitled to
participate in all salaried employee benefit programs in effect from
time to time at the Company in accordance with their terms.
3. TERM. The term of this Agreement is two years, subject to earlier
termination. In the event that you are terminated prior to the
expiration of your employment term as provided in this Section 3
("Terminated") without "good cause," you will be entitled to receive a
termination payment equal to your base salary for the remainder of the
two year term, payable over such term when salary would otherwise have
been payable, as your compensation for such termination. In the event
that you are terminated for "good cause," then you shall be entitled
only to your base salary through the date of Termination.
In the event that you are terminated due to a "disability," you shall
be entitled to receive your base salary through the date of
Termination. You will also be entitled to receive any disability
benefits that the Company may have provided to you pursuant to Section
2(e) of this Agreement. A "disability" will have been deemed to occur
if, as a result of your incapacity due to physical or mental illness,
you shall have been absent from the full time performance of your
duties under this agreement for a period of three (3) consecutive
months. The determination of such a disability may be verified, at the
Company's request, by a doctor or
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medical group selected by the Company.
In the event of your death, your estate shall be entitled to receive
your base salary through the date of your death and any other benefits
to which your estate may be entitled pursuant to Section 2(e) of this
agreement.
4. YANKTON. You will move to the Yankton, ND area as soon as practicable.
The Company will reimburse you for moving expenses pursuant to the
terms of the Company's general policy, subject to a maximum of $50,000.
5. RULES/CONFIDENTIALITY/NON-COMPETE. You shall obey all rules,
regulations and policies of the Company including, without limitation
those set out in the Salaried Employees Handbook as it may be amended
from time to time. In addition, you agree to be bound by the
confidentiality and non-competition provisions set forth in Schedule B
hereto.
6. (a) For purposes of this Agreement, "good cause" shall mean that you
shall have (i) willfully or grossly neglected your duties as President,
Chief Executive Officer and a director of the Company and those that
may be assigned to you by the Board of Directors of the Company or any
subsidiary, (ii) continually failed to devote your full time and
attention to the Company and its subsidiaries and your duties, (iii)
committed fraud, embezzlement or misappropriation in connection with
your employment with the Company or any subsidiary, (iv) committed a
felony or crime involving moral turpitude, or (v) materially breached
any covenants or obligations contained in this Agreement or any other
agreement or instrument applicable to you.
(b) All calculations of EBITDA, cash, marketable securities, and debt
and/or other value or economic value of the Company contemplated in
this Agreement shall exclude entirely the Company's investment in
Spinnaker Industries, Inc. and any successor investments to Spinnaker
Industries, Inc. It is also understood that the Company would probably
determine not to include any investment in Spinnaker Industries, Inc.
and any successor investments to Spinnaker Industries, Inc. in any IPO.
7. This Agreement shall be governed by the internal law of the State of
Delaware.
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If the above is acceptable to you, please sign below where indicated.
Very truly yours,
M-tron Industries, Inc.
AGREED AND ACCEPTED:
Xxxxxx X. Xxxxxxx By:
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By:
----------------------
Date:
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SCHEDULE B
CONFIDENTIALITY. You covenant and agree with the Company that you will not
either during the term of your employment, or at any time thereafter, directly
or indirectly, divulge, communicate or disclose to anyone any information
concerning the business or affairs of the Company without regard to whether the
information would be deemed confidential, material or important; provided,
however, that this provision shall not apply, during your employment with the
Company, to disclosure by you in the ordinary course of the Company's business
in furtherance of the Company's business and subject to confidentiality
agreements as appropriate. In this regard, you also acknowledge having read a
document entitled "Xxxxx Corporation and Subsidiaries Policy Statement on
Business Conduct and Conflicts of Interest," the terms of which are adopted as
part of this agreement by reference thereto. Upon any termination of employment
you will return to the Company all materials in your possession, (including
copies and computer materials) relating to the Company or its business.
NON-COMPETE. The Company and you mutually acknowledge that the Company's
operations are global in nature and it has customers/suppliers world-wide.
During the term of your employment and for a period of two years immediately
after termination of employment, you will not, either directly or indirectly,
make known or divulge to anyone the names or addresses of any of the
customers/suppliers of the Company who were customers/suppliers during your
employment; provided, however, that this provision shall not apply, during your
employment with the Company, to disclosure by you in the ordinary course of the
Company's business in furtherance of the Company's business and subject to
confidentiality agreements as appropriate. Furthermore, you will not, during the
term of your employment and for a period of two years immediately after
termination of employment, directly or indirectly, (i) act as a director,
officer or executive or managerial employee of, consultant to, or own more than
1% of any class of stock of, any person or entity that competes with the Company
as to any products or services manufactured, distributed, marketed, sold or
offered for sale during the term of your employment; provided that you may be
employed by a multi-industry company if you work solely for a subsidiary or
division which does not, directly or indirectly, so compete with the Company, do
not provide, directly or indirectly, any advise or assistance to any part of the
multi-industry company that does so compete with the Company, and do not
otherwise, directly or indirectly, violate any provisions of this Schedule B,
(ii) either for yourself or any other person, firm or corporation, call upon,
solicit, divert or take away or attempt to solicit, divert, call upon or take
away any of the customers/suppliers of the Company who were customers/suppliers
during your employment or any officers, employees or agents of the Company.
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The provisions of this Schedule B shall be limited to the extent necessary to
comply with any applicable law which might otherwise invalidate any provision(s)
of this Schedule B.
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DRAFT
M-TRON INDUSTRIES, INC.
000 XXXXXXX XXXXXX
X.X. XXX 000
XXXXXXX, XX 00000
October , 2000
Xx. Xxxxxx X. Xxxxxxx
C/o M-tron Industries, Inc.
000 Xxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxx, XX 00000
Dear Xx. Xxxxxxx:
We refer to the Letter Agreement (the "Agreement") dated January 7,
2000, between M-tron Industries, Inc. ("M-tron-SD") and yourself relating to
your employment by M-tron-SD and, in particular, to Paragraph 2(d)(i) thereof.
As you know, M-tron Industries, Inc., a Delaware corporation
("M-tron-D") and the proposed successor to the business of M-tron-SD, is filing
a registration statement with the Securities and Exchange Commission with
respect to a rights offering (the "Offering") of up to approximately 1,007,000
shares of its Class A Common Stock to the shareholders of Xxxxx Corporation. In
connection therewith, M-tron-SD and you hereby agree to amend Paragraph 2(d)(i)
of the Agreement in its entirety to read as follows:
"Upon consummation of the Rights Offering (the "Closing"), you will be
granted options to purchase 225,000 shares of Class A Common Stock of M-tron-D
at an option price of $5 per share. In addition, on each of the first three
anniversaries of Closing, you will be granted options to purchase 75,000 shares
of Class A Common Stock of M-tron-D at an option price equal to the fair market
value of a share of Class A Common Stock on the date of grant; provided however,
that (i) you are an employee of M-tron-D on the date of grant and (ii) the net
income of M-tron-D
for the preceding calendar year (determined by M-tron-D in accordance with
generally accepted accounting principles ("GAAP") equals at least 18% of the
average of the beginning and ending shareholders equity of M-tron-D for that
year (determined by M-tron-D in accordance with GAAP). If the Closing shall take
place in December 2000, the reference to "preceding calendar year" shall mean
the calendar year of the date of grant for purposes of satisfying the foregoing
net income proviso.
The options will be granted under M-tron-D's 2000 Stock Option Plan
(the "Plan"). The options so granted will vest as to 75% of the options in a
grant on the third anniversary of the date of grant and as to 25% of the options
in a grant on the fourth anniversary of the date of grant. The options shall
expire on the tenth anniversary of the date of grant subject to earlier
termination if your employment with M-tron-D shall for any reason terminate
prior to such tenth anniversary. The options shall be subject to such terms and
conditions as the Committee administering the Plan shall determine."
This Amendment shall become effective upon the Closing and shall become
null and void if, for any reason the Rights Offering is not consummated.
Except as amended hereby, the Agreement shall remain in full force and
effect.
Very truly yours,
M-tron Industries, Inc.,
A South Dakota corporation
By:
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Xxxxx X. Xxxxxxxx, Xx.
Chairman
Agreed and accepted:
L.S.
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Xxxxxx X. Xxxxxxx
