Exhibit 99.7
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
This Amendment No. 2 to Employment Agreement (this "Agreement") is made and
entered into as of June 8, 1997, by and between Prime Service, Inc., a Delaware
corporation and successor by merger to Primeco Inc., a Texas corporation
("Employer"), and Xxxxx X. Xxxxxxxx ("Employee").
WHEREAS, Employer and Employee have entered into an Employment Agreement,
dated as of December 2, 1994 (as amended pursuant to Amendment No. 1 to
Employment Agreement, dated as of October 25, 1996, the "Employment Agreement");
WHEREAS, Employer and Employee desire to amend the Employment Agreement to
address the possibility of a change in control of Employer;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. Defined Terms.
(a) Capitalized terms not defined herein shall have the meanings set
forth in the Employment Agreement.
(b) As used herein and in the Employment Agreement, the following
terms shall have the following meanings:
"Change in Control" shall mean any of the following events:
(i) any Person, other than Investcorp S.A., its affiliates and the
executive officers of Employer ("Permitted Holders"), becomes the
beneficial owner (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a Person shall be deemed
to have beneficial ownership of shares that such Person has a right to
acquire only if such right to acquire is immediately exercisable) of
more than 50% of the shares of capital stock of Employer normally
entitled to vote for the election of directors; or (ii) at any time
(a) Employer shall consolidate, merge, or effect a share exchange with
any other Person unless after giving effect thereto more than 50% of
the shares of capital stock of the continuing or surviving Person (or
an affiliate of such Person that controls such Person) normally
entitled to vote for directors shall be beneficially owned by
Permitted Holders or (b) Employer shall sell or otherwise transfer
more than 50% of the assets or earning power of Employer and its
subsidiaries (taken as a whole) to any Person. For this definition,
"Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Securities Exchange Act of 1934 and used in
Sections 13(d) and 14(d) thereof, including a "group" as used in
Section 13(d) thereof.
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"Change in Control Date" shall mean the date immediately prior to
the effectiveness of a Change in Control.
2. Amendments. If a Change in Control occurs, the Employment Agreement
shall be amended, effective as of the Change in Control Date, as set forth in
this Section 2:
(a) Exhibit B to the Employment Agreement shall be restated in its
entirety to read as appended hereto.
(b) Section 4 of the Employment Agreement is amended by deleting the
words "payments or" from the second sentence thereof.
(c) Section 6.1 of the Employment Agreement is amended by adding a
new Section 6.1(e) to read as follows:
(e) FOR GOOD REASON. At the option of Employee, at any time
prior to the Expiration Date, for any of the following reasons (each a
"Good Reason"), whereupon Employer shall become obligated to make
those payments set forth in Section 7.1(d) hereof: (i) there is a
material adverse change in Employee's title from that which he held on
the Change in Control Date (provided that the removal of or failure to
elect Employee as a director of the Company shall not constitute "Good
Reason"); (ii) Employee's duties as an employee are materially reduced
or diminished from those in effect on the Change in Control Date
without Employee's written consent; (iii) Employer reduces Employee's
compensation after the Change in Control Date; (iv) Employer amends or
modifies the Program or benefits as in effect on the Change in Control
Date in any manner materially adverse to Employee's interest
thereunder; or (v) Employer requires that Employee's employment be
based more than 60 miles from the location of Employer's executive
offices on the Change in Control Date, without Employee's written
consent.
(d) Section 7.1(a) of the Employment Agreement is restated in its
entirety to read as follows:
(a) If Employer terminates Employee's employment for Cause or if
Employee voluntarily terminates his employment other than for Good
Reason, Employer's obligation to compensate Employee shall in all
respects cease as of the Date of Termination, except that Employer
shall pay Employee the Base Salary accrued under Section 3 hereof and
the reimbursable expenses incurred under Section 5 hereof up to such
Date of Termination (the "Accrued Obligations");
(e) Section 7.1(d) of the Employment Agreement is restated in its
entirety to read as follows:
(d) If Employee's employment is terminated by Employer pursuant
to Section 6.1(d) or by Employee for Good Reason pursuant to
Section 6.1(e), Employer's obligation to compensate Employee shall in
all respects cease, except
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that within thirty (30) days after the Date of Termination Employer
shall pay to Employee the Accrued Obligations, and for the period
ending on the earlier of the Expiration Date or the second anniversary
of the Date of Termination (the "Severance Period"), Employer shall:
(i) pay to Employee, at Employee's election, (A) on a
monthly basis, for each month in the Severance Period, an amount
equal to one-twelfth (1/12th) of the annual Base Salary of
Employee in effect at the Date of Termination or the Change in
Control Date, whichever is greater, or (B) in a single payment,
made within thirty (30) days after the Date of Termination, the
aggregate amount of such monthly Base Salary payments for the
Severance Period (the "Continuation Payments");
(ii) pay to Employee: (A) at Employee's election, (1) on a
monthly basis, for each month in the Severance Period, an amount
equal to one-twelfth (1/12th) of the bonus payment payable to him
under the Program for the fiscal year prior to the fiscal year in
which the Date of Termination occurs (each a "Monthly Bonus
Payment") or (2) in a single payment, made within thirty (30)
days after the Date of Termination, the aggregate amount of all
Monthly Bonus Payments for the Severance Period; and (B) if the
Date of Termination occurs in the 1997 fiscal year, in a single
payment made within thirty (30) days after the Date of
Termination, an amount equal to the bonus payment paid to him
under the Program for the 1996 fiscal year (annualized, if
Employee was employed by Employer for less than all of such
fiscal year), prorated for the period from the beginning of the
1997 fiscal year through the Date of Termination; and
(iii)continue to maintain, during the Severance Period
for the benefit of Employee and his dependents, basic health,
dental and life insurance and related medical expenses coverage
(including disability and hospitalization coverage) (the
"Continuation Benefits") on terms no less favorable to Employee
than Employer provides to its executive officers generally, as
such benefits may be modified from time to time during the
Severance Period.
During the Severance Period, Employee shall be required to make any
contributions required to maintain such Continuation Benefits, which
may be withheld from the Continuation Payments (if monthly payments
thereof are elected by Employee); provided that such contributions are
also required to be made by Employer's executive officers generally.
If at any time during the Severance Period Employee shall obtain
employment with a third party (the "Substitute Employer") in which
Employee is entitled to receive basic health benefits in connection
with such employment on terms provided by the Substitute Employer to
its similarly situated employees generally, Employer shall no longer
be required to provide Continuation Benefits to Employee, regardless
of whether such benefits differ in
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any respect from the Continuation Benefits. Employer shall be excused
from its obligations to make payments under this Section 7.1(d)
if Employee breaches its obligations hereunder (including its
obligations under Article 8 hereof).
(f) Section 8.4(a) of the Employment Agreement is amended by
restating the first sentence thereof in its entirety to read as follows:
(a) Employee acknowledges and recognizes the highly competitive
nature of Employer's business and, in consideration of the
payment by Employer to Employee of amounts that may hereafter be
paid to Employee pursuant to Sections 7.1 or 8.4(d) hereof,
Employee agrees that during the period (the "Covered Time")
(i) for a termination pursuant to a Notice of Termination,
beginning on the Date of Termination and ending (A) if Employee's
employment is terminated for any reason other than pursuant to
Section 6.1(d) hereof or Section 6.1(e) hereof, on the second
anniversary of the Date of Termination or (B) if Employee's
employment is terminated pursuant to Section 6.1(d) hereof or
Section 6.1(e) hereof on the earlier of the second anniversary of
the Date of Termination or the last day of the Severance Period,
or (ii) for a termination on the expiration of the term of this
Agreement (but subject to compliance with Section 8.4(d) hereof),
beginning on the date of such expiration and ending on the date
(not later than the first anniversary of the date of such
expiration) established pursuant to Section 8.4(d) hereof,
Employee will not compete with the business of Employer, which
means that Employee will not engage, directly or indirectly, in
the "Covered Business" (as hereinafter defined) in any state of
the United States of America in which the Employer is conducting
business or proposes to conduct business as of the Date of
Termination and any states contiguous therewith (these areas are
hereinafter collectively referred to as the "Covered Area").
(g) Section 8.4(d) of the Employment Agreement is hereby restated in
its entirety to read as follows:
(d) If the term of this Agreement (and any extensions
thereof) expires pursuant to Section 1 hereof, Employer may elect
to have the Covered Time extend from the date of expiration of
the term of this Agreement (and any extensions thereof) up to and
through the first anniversary of such date by delivering written
notice to Employee (specifying the duration of such Covered
Time), within ten (10) days of the date of expiration, that
Employer has elected to continue to pay to Employee the monthly
Continuation Payments in the amount described in
Section 7.1(d)(i)(A) hereof (treating such Covered Time as the
Severance Period for such purpose) and provide the Continuation
Benefits as described in Section 7.1(d)(iii) hereof (treating
such Covered Time as the Severance Period for such purpose) (on
terms no less favorable to Employee than Employer provides to its
executive officers generally, as
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such benefits may be modified from time to time) for each month of
such Covered Time. During such Covered Time, Employee shall be
required to make any contributions required to maintain such
Continuation Payments; provided that such contributions are also
required to be made by the Employer's executive officers
generally. If at any time during such Covered Time Employee
shall obtain employment with a Substitute Employer in which
Employee is entitled to receive basic health benefits in
connection with such employment on terms provided by the
Substitute Employer to its similarly situated employees
generally, Employer shall no longer be required to provide
Continuation Benefits to the Employee, regardless of whether
such benefits differ in any respect from the Continuation
Benefits. Employer shall be excused from its obligations to make
payments under this Section 8.4(d) if Employee breaches its
obligations hereunder.
3. Stock Option Vesting. Notwithstanding the vesting schedules provided
in the Stock Option Agreement, dated as of December 2, 1994, as amended, or the
Stock Option Agreement, dated as of October 25, 1996, each between Employer and
Employee (collectively, the "Stock Option Agreements"), all options granted
thereunder shall become immediately exercisable upon a Change in Control unless
prior thereto such options shall have been exercised or shall have expired.
4. Golden Parachute Gross-Up.
(a) If the aggregate of the benefit payments under this Agreement and
the Stock Option Agreements would cause the payment of one or more of such
benefit payments to constitute an "excess parachute payment" as defined in
Section 280G(b) of the Internal Revenue Code ("Code"), then Employer will
pay to the Internal Revenue Service for the account of Employee, when
Employee's underlying tax liability is due and payable (but subject to
paragraphs (b), (c) and (d) below), an additional amount in cash (the
"Gross-Up Payment") equal to the amount necessary to cause the net amount
retained by Employee, after deduction of any (i) excise tax on the payments
under this Agreement and the Stock Option Agreements, (ii) federal, state
or local income tax on the Gross-Up Payment, and (iii) excise tax on the
Gross-Up Payment, to be equal to the aggregate remuneration Employee would
have received under this Agreement and the Stock Option Agreements,
excluding such Gross-Up Payment (net of all federal, state and local excise
and income taxes), as if Sections 280G and 4999 of the Code (and any
successor provisions thereto) had not been enacted into law.
(b) The Gross-Up Payment provided for in paragraph (a) above shall
not be made unless Employee provides written notice to Employer setting
forth, in reasonable detail, the amounts and calculation of such benefit
payments constituting "excess parachute payments" and accompanied by a
written opinion of a nationally recognized accounting firm confirming that
such benefit payments constitute "excess parachute payments," with such
notice and opinion received by Employer prior to the time that Employee
pays any tax based on or files any tax return claiming receipt of "excess
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parachute payments." The reasonable fees and expenses of obtaining such
opinion shall be paid by Employer.
(c) Upon receipt of the opinion described in paragraph (b) above,
Employer will have thirty (30) days to notify Employee whether it wishes to
obtain an opinion (the "Second Opinion") from a nationally recognized
accounting firm selected by Employer that such benefit payments constitute
"excess parachute payments." Employer shall have thirty (30) days to
obtain the Second Opinion. If the accounting firm rendering the Second
Opinion concludes that such benefit payments do not constitute "excess
parachute payments," Employee and Employer shall each prepare their
respective tax returns on that basis.
(d) If based on the Second Opinion Employee does not report the
receipt of any "excess parachute payments," then notwithstanding any other
provision of this Agreement or the Stock Option Agreements, Employer shall
nevertheless be liable for the Gross-Up Payment provided for in paragraph
(a) above if Employee provides copies to Employer within ten (10) days of
any and all notices or other correspondence from a tax authority of an
examination of Employee's returns for the tax periods in which Employee
received payments under this Agreement and the Stock Option Agreements
("Examination Notice"), and provides Employer with the right to represent
Employee in connection with any such examination. Employer also agrees to
indemnify Employee from and hold harmless Employee against any costs
reasonably incurred by Employee in connection with any such Examination
Notice to the extent attributable to the receipt by Employee of amounts
considered "excess parachute payments" contrary to the conclusion of the
Second Opinion.
5. Other Terms and Conditions. Except as expressly amended or modified
in this Agreement, all terms and conditions of the Employment Agreement and the
Stock Option Agreements remain in full force and effect.
6. Termination. This Agreement, including the amendments and
modifications of the Employment Agreement and the Stock Option Agreements
effected hereby, shall cease to have any force or effect if (a) on September 30,
1997, there shall not be in effect a binding definitive agreement, providing for
a Change in Control, to which Employer or any of its controlling stockholders is
party, or (b) a Change in Control shall not have occurred by December 31, 1997.
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IN WITNESS WHEREOF, each of the parties to this Agreement has executed and
delivered this Agreement as of the date first written above.
EMPLOYER:
PRIME SERVICE, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Title: Chairman of the Board, President and
Chief Executive Officer
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EMPLOYEE:
/s/ Xxxxx X. Xxxxxxxx
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Xxxxx X. Xxxxxxxx
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EXHIBIT B
1997 THROUGH 2001
For 1997 through 2001, cash bonuses under the Management Cash Bonus
Incentive Program are payable to participants in the program in a given year if
the Company's Earnings Before Interest, Taxes, Depreciation and Amortization
("EBITDA") for such year equals or exceeds 90% of the EBITDA target in the
Company's budget for such year, as approved by the Board, provided that the
EBITDA target for 1997 is $135 million, as set forth in the Employer's 1997
budget. EBITDA targets for 1998-2001 shall be as set by the Board in its sole
discretion. EBITDA targets shall be subject to change in the discretion of the
Board for any change to the capital structure of the Company in connection with
any acquisitions, equity offerings or other transactions that would, or would be
likely to, materially affect EBITDA or net income. The percentage of Base
Salary payable as bonus shall be determined as follows:
% of EBITDA % of Base Salary
Target Achieved Payable as Bonus(1)
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Equal To Or Greater Than: But Less Than:
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0 90 0
90 100 50-80
100 110 60-100
110 120 100-105
120 130 105-110
130 140 110-115
140 150 115-120
150 160 120-125
160 170 125-130
170 180 130-135
180 190 135-140
190 200 140-145
200 -- 145-150
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(1) The Board in its discretion shall set the bonus percentage amount for
each fiscal year within the ranges indicated, but not less than the bottom of
the range. The bonus percentage will be determined on an individual basis and
may differ among eligible employees.
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