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EXHIBIT 10.2
February 13, 1997
Xxxxxxx X. Xxxxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxxxxx, XX 00000
Dear Xxxx:
The Board of Directors of The Monarch Machine Tool Company (the "Company") is
pleased to offer you the position as President and Chief Executive Officer of
the Company. This letter, when signed by you below, will constitute the
agreement between the Company and you concerning your terms of employment with
the Company.
The terms of your employment with the Company are as follows:
A. POSITION AND OFFICES. You will be employed as the President
and Chief Executive Officer of the Company and be appointed to
the Board of Directors of the Company for an initial term
expiring at the Company's Annual Meeting of Shareholders in
1998.
B. BASE ANNUAL SALARY. Your base annual salary through February
28, 1998 is $215,000, payable in accordance with the Company's
normal payment schedule for executive officers. The
Compensation Committee of the Board will review your base
annual salary in February 1998 for the purpose of considering
whether an increase, commencing March 1, 1998 is appropriate.
C. ANNUAL INCENTIVE BONUS. The Company will pay you a guaranteed
cash bonus of $100,000 in March 1998. In connection with your
annual salary review in February 1998, the Compensation
Committee will establish an annual incentive cash bonus
arrangement for you.
D. STOCK OPTIONS. The Compensation Committee will grant you
nonqualified stock options to purchase a total of 75,000
Common Shares of the Company at an option exercise price equal
to the average of the high and low prices of the Common Shares
on
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February 13, 1997
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the New York Stock Exchange for the last business day
immediately preceding the date you sign this letter agreement.
Such options would become exercisable as follows:
1. Options to purchase 25,000 shares become exercisable
on the day immediately following any consecutive
10-day trading period during which the closing price
of the Common Shares on each trading day during the
period was $15 per share or more;
2. Options to purchase an additional 25,000 shares
become exercisable on the day immediately following
any consecutive 10-day trading period during which
the closing price of the Common Shares on each
trading day during the period was $18 per share or
more; and
3. Options to purchase an additional 25,000 shares
become exercisable on the day immediately following
any consecutive 10-day trading period during which
the closing price of the Common Shares on each
trading day during the period was $20 per share or
more.
In addition, on March 1, 2003 or the date there is a Change of
Control of the Company (as defined below), any of such options
that were not then exercisable would automatically become
exercisable. The options, if not previously exercised, would
expire the earlier of 30 days after your cessation of
employment with the Company or 10 years after the date of
grant. The option price, as well as any income taxes
associated with the exercise of the option, would be payable
in cash or by delivery of any unrestricted Common Shares of
the Company owned by you at the time of exercise.
In future years, you would be eligible for grants of options
under the Company's 1994 Employees Stock Option Plan.
"Change of Control" means the lease, sale, or other
disposition of all or substantially all of the assets of the
Company to other corporations, firms, or individuals or of a
merger, consolidation, combination [as defined in Section
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February 13, 1997
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1701.01(Q) of the Ohio Revised Code], or majority share
acquisition [as defined in Section 1701.01(R) of the Ohio
Revised Code] involving the Company and as a result of which
the holders of shares of the Company prior to the transaction
would become, by reason of the transaction, the holders of
such number of shares of the surviving or acquiring
corporation as entitle them to exercise less than one-third of
the voting power of the surviving or acquiring corporation in
the election of directors.
E. RESTRICTED SHARES. You would also be issued, on
the same date you are granted options, 17,000
Common Shares of the Company as a "restricted
share award." Such shares would vest as follows:
8,500 shares on March 1, 1998 if you were
employed by the Company on such date and an
additional 8,500 shares on March 1, 1999 if you
are employed by the Company on such date.
F. RETIREMENT PLAN. If you are employed by the
Company on March 1, 1998, the Company will
establish an arrangement under which you would
receive an additional five years of credited
service for the purpose of calculating any
retirement benefit payable to you under the
Company's Retirement Plan applicable to executive
officers.
G. RELOCATION ARRANGEMENTS. In connection with your
relocation to Ohio, the Company would provide the
following:
1. A normal and customary allowance to cover your moving
expenses; and
2. The Company would make available to you a loan equal
to the mortgage on your present residence. The loan
would bear interest at a rate equal to the Company's
cost of funds under its Credit Agreement with First
Chicago NBD, which is currently approximately 6.5%
per annum. The loan would be repayable in full,
together with accrued interest, on the earlier of the
sale of your present residence or March 1, 1998.
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H. HEALTH AND LIFE INSURANCE. Officers of the Company are
provided health insurance coverage at no cost and life
insurance, which, in your case, would be approximately
$300,000. The Company will review the possibility of
purchasing additional insurance on your behalf, up to three
times your base annual salary.
If you have any questions concerning any of the foregoing, please feel free to
review the matter with me.
The Board of Directors is enthused about you joining the Company, and while
there will be challenges, they are confident that there are significant
opportunities to improve significantly the Company's performance and to enhance
shareholder value.
Very truly yours,
The Monarch Machine Tool Company
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
Acting President and CEO
ACCEPTED AND AGREED TO:
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/s/Xxxxxxx X. Xxxxxxx Dated: February 14, 1997
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Xxxxxxx X. Xxxxxxx
cc: Xxxxxxx X. Xxxxxx
Xxxxxx X. Xxxxx
