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EXHIBIT 10.7
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered into as
of August 1, 2000, by and between XXXXXXX & XXXXXX CORPORATION, a Delaware
corporation (the "Company"), and XXXXXX XXXXXXX (the "Executive").
Statement of Purpose
The Company wishes to encourage the continued service and dedication of
Executive in the event of any actual or contemplated Change in Control (as
defined below) of the Company. The Company has determined that these objectives
are best accomplished by providing Executive with individual financial security
pursuant to the terms of this Agreement, which the Company believes are fair and
reasonable and consistent with the practices of other major corporations.
NOW, THEREFORE, in consideration of the premises and mutual convenants
herein contained, the Company and Executive hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) Change in Control means and shall be deemed to have occurred
upon:
(i) the acquisition, directly or indirectly, by any
"person" (within the meaning of Section (13(d) or
14(d) of the Securities Exchange Act of 1934, (as
amended) within any 12 month period of more than 80%
of the combined voting power of the then outstanding
voting securities of the Company entitled to vote
generally in the election of directors, including,
but not limited to, by merger, consolidation or
similar corporate transaction or by purchase;
excluding, however, the following ("Excluded
Transactions"): (A) any acquisition of beneficial
ownership by the Company, any subsidiary of the
Company, Xxxxxxxxxxx Xxxxxxx Partners, L.P.,
Blackstone Capital Partners L.P. or an affiliate of
any of the foregoing, (B) any acquisition by an
employee benefit plan (or related trust) sponsored or
maintained by the Company or any subsidiary of the
Company, and (C) any merger, consolidation or other
form of business acquisition or combination
transaction in which, immediately after the
transaction and giving effect thereto and the
issuance of securities therein, holders of Common
Stock of the Company beneficially own or are entitled
to receive equity securities of the acquiring,
surviving or resulting entity (or any parent company
or
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other affiliate thereof) that, in the aggregate,
represent more than 20% of the combined voting power
entitled to be cast generally; or
(ii) the sale of any business, businesses or assets of the
Company in any single transaction or series of
related transactions effected within any 12 month
period, which, on an aggregate basis, produced at
least 80% of the consolidated net sales of the
Company, calculated by giving pro forma effect to
such transactions, and any acquisitions effected
during the relevant period, for the fiscal year
immediately preceding such transaction or, if
applicable, the first such transaction in the 12
month period in which the transaction or series of
related transactions occurred, excluding, however,
any Excluded Transaction.
(b) Change in Control Period means the period commencing three
months prior to the date of a Change in Control and ending on
the first anniversary of such date or if later, the expiration
of the 45 day period referred to in Section 1 (d)(3) below.
(c) Code means the Internal Revenue Code of 1986, as amended.
(d) Constructive Termination means a termination of Executive's
employment by Executive during a Change in Control Period
which is due to:
(i) the involuntary relocation of Executive to any office
or location more fifty (50) miles from the office or
location at which Executive is then located;
(ii) a material reduction in Executive's total
compensation and benefit package; or
(iii) a significant reduction in Executive's
responsibilities, position or authority (including
changes resulting from the assignment to Executive of
any duties inconsistent with his responsibilities,
position or authority in effect immediately prior to
the Change in Control Period);
provided, however, that, notwithstanding any other provision hereof, no
event or circumstance will constitute "Constructive Termination" for
purposes of this Agreement (A) if Termination For Cause exists or (B)
unless (1) Executive shall have given notice to the Company of
Executive's determination of the occurrence of such event, (2) such
event constitutes one of the events specified in clauses (i) - (iii)
above, and (3) such event shall be continuing as of the end of 45 days
after the giving of such notice.
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(e) Date of Termination means the later of (i) the date of receipt
of the Notice of Termination by the Company or Executive, as
the case may be, or (ii) any later date specified therein
(which shall be not more than thirty (30) days after giving of
such notice).
(f) ERISA means the Employee Retirement Income Security Act of
1974, as amended.
(g) Involuntary Termination means a termination of Executive's
employment by the Company during a Change in Control Period
other than a Termination for Cause. Termination of Executive's
employment during a Change in Control Period by reason of
Executive's death or disability shall not be considered an
Involuntary Termination.
(h) Notice of Termination means a written notice which (i)
indicates the specific termination provision in this Agreement
relied upon, (ii) sets forth in reasonable detail the facts
and circumstances claimed to provide the basis for termination
of Executive's employment under the provision so indicated,
and (iii) if the termination date is other than the date of
receipt of such notice, specifies the termination date (which
shall be not more than thirty (30) days after the giving of
such notice).
(i) Termination For Cause means a termination of Executive's
employment by the Company as a result of:
(i) Executive's fraud or misappropriation with respect to
the business of the Company or intentional damage to
the property or business of the Company or any
substantial asset;
(ii) willful failure by Executive to perform his duties
and responsibilities and to carry out his authority.
(iii) willful malfeasance or misfeasance or breach of
fiduciary duty or misrepresentation to the Company or
it stockholders;
(iv) willful failure to act in accordance with any
specific lawful instructions of the Chairman and CEO
or a majority of the Board of Directors of the
Company; or
(v) conviction of Executive of a felony.
2. Benefits Upon Involuntary Termination or Constructive
Termination During Change in Control Period. Subject to the
limitations of Section 3, in the event of an Involuntary
Termination or Constructive Termination of Executive for which
the Date of Termination is within a Change in Control Period,
the Company shall pay to Executive the following benefits in a
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lump sum payment (without discounting to present value) within
30 days of the Date of Termination:
(a) to the extent not theretofore paid, Executive's base
salary through the Date of Termination;
(b) a pro rata bonus equal to (1) Executive's target
bonus immediately preceding the Change in Control
Period multiplied by (2) a fraction, the numerator of
which is the number of whole months (rounded for
portions of months) elapsed in the relevant bonus
year prior to the Date of Termination, and the
denominator of which is 12;
(b) twenty-four (24) months of base salary based on the
monthly rate of base salary in effect immediately
preceding the Change in Control Period, or if
greater, the rate of Base Salary in effect
immediately preceding the Date of Termination; and
(c) Executive's target annual bonus in effect immediately
preceding the Change in Control Period multiplied by
two (2).
In addition, (i) the Company shall offer Executive the opportunity to
purchase his Company automobile at its net book value as of the Date of
Termination, (ii) Executive shall be deemed to continue as an employee
of the Company for 2 years following the Date of Termination for
purposes of eligibility and vesting (but not benefit accrual), under
any otherwise applicable retirement income plan or arrangement, and
(iii) Executive will be entitled to continue to participate in all
welfare benefit plans for such 2 year period, or, if earlier, the
period ending on the date the Executive obtains new full-time
employment. Subject to the limitations of Section 3, the Company shall
also reimburse Executive for the cost of any continued coverage elected
by Executive for himself and his eligible dependents under the
Company's group health plan(s) at the end of the welfare benefit
continuation period described in clause (iii) of the immediately
preceding sentence pursuant to Section 4980B of the Code and Section
601 et seq. of ERISA.
3. Limitation on Benefits.
(a) General. Any benefits payable or to be provided to Executive,
whether pursuant to this Agreement or otherwise, which
constitute Parachute Payments (as defined below) shall be
subject to the limitation of this Section 3 so that the
benefits payable or to be provided to Executive under this
Agreement, as well as any payments or benefits provided
outside of this Agreement, shall not cause the Company to have
paid an Excess Parachute Payment (as defined below).
Accordingly, anything in this Agreement to the contrary
notwithstanding, in the event that the certified public
accountants regularly employed by the Company
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immediately prior to a Change in Control (the "Accounting
Firm") shall determine that Executive's receipt of all
Parachute Payments would cause the Company to pay an Excess
Parachute Payment, it shall determine the Reduced Amount, and
the aggregate Parachute Payments shall be reduced to such
Reduced Amount in accordance with the provisions of Section 3
(c) below.
(b) Definitions. For purpose of this Section 3;
(ii) "Excess Parachute Payment" shall have the
same meaning as the term "excess payment"
defined in Section 280G(b)(1) of the Code;
(ii) "Parachute Payment" shall mean any payment
or distribution in the nature of
compensation to or for the benefit of
Executive which is contingent on a "change"
under and within the meaning of Section
280G(b)(2)(A)(i) of the Code, whether paid
or payable pursuant to this Agreement or
otherwise.
(iii) "Present Value" shall mean such value
determined in accordance with Section
280G(d)(4) of the Code; and
(iv) "Reduced Amount" shall mean the the largest
aggregate amount of Parachute Payments
Executive may receive without causing the
Company to have paid an Excess Parachute
Payment.
(c) Limitation. If the Accounting Firm determines that Parachute
Payments should be limited to the Reduced Amount, the Company
shall promptly give Executive notice to that effect and a copy
of the detailed calculation thereof, and Executive may then
elect, in Executive's sole discretion, which and how much of
the Parachute Payments, including without limitation Parachute
Payments made outside of this Agreement, shall be eliminated
or reduced (as long as after such election the Present Value
of the aggregate Parachute Payments is equal to the Reduced
Amount), and shall advise the Company in writing of such
election within 10 days of Executive's receipt of notice. If
no such election is made by Executive within such 10 days
period, the Company may elect which of the Parachute Payments,
including without limitation Parachute Payments made outside
of this Agreement, shall be eliminated or reduced (as long as
after such election the Present Value of the aggregate
Parachute Payments is equal to the Reduced Amount) and shall
notify Executive promptly of such election. All determinations
made by the Accounting Firm under this Section 3 shall be
binding upon the Company and Executive and shall be made
within 45 days immediately following the
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Date of Termination. As promptly as practicable following such
determination, the Company shall pay to or distribute for the
benefit of Executive such Parachute Payments as are then due
to Executive under this Agreement.
4. Non-Exclusivity of Rights. Nothing in this Agreement shall
prevent or limit Executive's continuing or future eligibility
or participation in any benefits, bonus, incentive or other
plan provided by the Company and for which Executive may
qualify, nor shall anything herein limit or otherwise affect
such rights as Executive may have under any stock option or
other agreements with the Company. Amounts which are vested
benefits or which Executive is otherwise entitled to receive
under any plan or program of the Company subsequent to the
Date of Termination shall be payable in accordance with such
plan or program.
5. Full Settlement. The Company's obligation to make payments
provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or
action which the Company may have against Executive or other
parties. In no event shall Executive be obligated to seek
other employment or take any other action by way of mitigation
of the amounts payable to Executive under any of the
provisions of this Agreement. The Company agrees to pay, to
the full extent provided by law, all legal fees and expenses
which Executive may reasonably incur as a result of any
contest by the Company or others of the validity or
enforceability of, or liability under, any provision of this
Agreement or as a result of any contest by Executive about the
amount of any payment pursuant to this Agreement.
6. No Duplication of Benefits. Notwithstanding anything to the
contrary herein, the lump sum payment due to Executive under
Section 2 hereof shall be reduced by the amount of cash
severance or salary continuation benefits paid to Executive
pursuant to any other plan or policy of the Company or a
written employment agreement between the Company (or one of
its affiliates) and Executive, it being the intent of the
parties that Executive shall not receive post-employment
benefits hereunder and under such other plan, policy or
written employment agreement.
7. Succession. This Agreement shall inure to the benefit of and
shall be binding upon the Company and it successors and
assignees, but, without the prior written consent of
Executive, this Agreement may not be assigned other than in
connection with a merger, sale, consolidation or similar
transaction of all or substantially all of the business and/or
assets of the Company in which the successor or assignee
assumes (whether by operation of law or express assumption)
all obligations of the Company hereunder. The Company shall
require any successor to assume and
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agree to perform this Agreement in the same manner and to the
same extent that the Company would be required to perform it
if no such succession had taken place. The obligations and
duties of Executive hereunder shall be personal and not
assignable otherwise than by the laws of descent and
distribution.
8. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed, construed
and interpreted in accordance with the laws of the State of
Michigan.
(b) Notices. All notices and communications hereunder shall be in
writing and shall be given by hand delivery to the other party
by registered or certified mail, return receipt requested,
postage prepaid, or by overnight mail, addressed as follows:
If to Executive:
Xx. Xxxxxx Xxxxxxx
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If to the Company:
Xxxxxxx & Xxxxxx Corporation
0000 Xxx Xxxx Xxxxx
Xxxx, Xxxxxxxx 00000
Attention: Chairman and Chief Executive Officer
or to such other addresses as either party shall have
furnished to the other in writing in accordance herewith.
Notice and communications shall be effective when actually
received by the addressee.
(c) Validity. The invalidity or unenforceability of any provision
of this contract shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) Tax Withholding. The Company may withhold from any amounts
payable under this Agreement such federal, state and local
taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) Waiver. The waiver of the breach of any term or of any
condition of this Agreement shall not be deemed to constitute
the waiver of any other breach of the same or any other term
or condition hereof.
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(f) Entire Agreement. This instrument contains the entire
agreement of the parties relating to the subject matter
hereof, and it replaces and supersedes any prior agreements
between the parties relating to said subject matter. No
modifications of this Agreement shall be valid unless made in
writing and signed by the parties hereto.
(g) No Right of Employment. Executive and the Company acknowledge
that the employment of Executive by the Company is "at will",
and prior to the date of a Change in Control, may be
terminated by either Executive or the Company at any time.
Upon a termination of Executive's employment prior to the date
of a Change in Control, there shall be no further rights under
this Agreement and this Agreement shall terminate and be of no
further force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
EXECUTIVE:
/s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx
COMPANY:
XXXXXXX & XXXXXX CORPORATION
BY: /s/ Xxxxxx X. Xxxxx
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XXXXXX X. XXXXX
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
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