Exhibit 10.7
EMPLOYMENT AGREEMENT
AGREEMENT made as of June 16, 1999, between Motor Coach
Industries International, Inc. (formerly, Transportation Manufacturing
Operations, Inc.), a Delaware corporation (the "Company"), and Xxxxxx Xxxxx
Xxxxxx (the "Executive").
WHEREAS, pursuant to the Investment Agreement (the "Investment
Agreement") dated as of June 11, 1999, among Xxxxxx Xxxxxxxxxx & Levy Fund III,
L.P. ("JLL"), CIBC WG Argosy Merchant Fund 2, L.L.C., ("CIBC Argosy"),
Co-investment Merchant Fund 3, LLC ("CMF" and, together with JLL and CIBC
Argosy, the "Investors") and Consorcio G Grupo Xxxx, S.A. de C.V., ("Xxxx"), the
Investors, purchased certain securities of the Company (the "Investment") and,
simultaneously therewith, the Company repurchased from Xxxx certain of its
securities; and
WHEREAS, the Executive has experience in (a) the designing,
manufacturing, assembling and marketing of coaches of monocoque or unitized
construction configuration, (b) the distribution of replacement parts to the
intercity coach and transit bus markets (the "Business") and (c) the
manufacturing of products in Mexico; and
WHEREAS, the Executive has extensive experience and
relationships that are beneficial to the Company in Mexico and Latin America,
which he has agreed to utilize for the benefit of the Company; and
WHEREAS, in connection with the Investment, the Company
desires that the Executive serve as Chairman (the "Chairman") of the Board of
Directors of each of (a) the Company, (b) the Company's subsidiaries (the
"Subsidiaries"), and (c) MCII Holdings (USA), Inc., (together with the Company
and the Subsidiaries, the "Company Parties"), to assist in the management of the
Business and the Executive desires to hold such positions under the terms and
conditions of this Agreement; and
WHEREAS, the parties desire to enter into this Agreement
setting forth the terms and conditions of the employment relationship of the
Executive with the Company Parties.
NOW, THEREFORE, intending to be legally bound hereby, the
parties agree as follows:
1. EMPLOYMENT. Each of the Company Parties hereby
employs the Executive, and the Executive hereby accepts employment with the
Company Parties, upon the terms and subject to the conditions set forth herein.
2. TERM.
(a) Subject to Section 9 hereof, the term of the
employment by the Company Parties of the Executive pursuant to this Agreement
(the "Term") is for an initial period commencing on the date hereof and
terminating on the fifth anniversary hereof (the "Initial Term").
(b) Commencing on the fifth anniversary hereof
and each anniversary of such date thereafter (each, an "Anniversary Date"), the
Term shall automatically be extended for an additional year unless, not later
than sixty (60) days immediately preceding an Anniversary Date, the Executive
gives notice to the Company Parties that he does not wish to extend the Term.
3. POSITION. During the Term, the Executive shall serve
as the Chairman of the Board of Directors of each of the Company Parties and
shall report only to each respective Board of Directors.
4. DUTIES. During the Term, the Executive shall devote
sufficient time and attention to the business and affairs of each of the Company
Parties as are commensurate with his responsibilities as Chairman of each such
entity. During the Term, the Executive shall, among other things, assist the
Company in relocating and overseeing the Company's operations in Mexico, assist
the Company in entering new markets in Latin America for new and used coach
sales, oversee the Company's purchasing program and reduce material costs.
5. SALARY. During the Term, the Company shall pay to the
Executive a base salary at the rate of $1,500,000 per year (the "Base Salary").
The Base Salary shall be payable to the Executive in substantially equal
installments in accordance with the Company's normal payroll practices.
6. BUSINESS EXPENSES. The Executive shall be reimbursed
by the Company, on behalf of all of the Company Parties, for all reasonable and
necessary business expenses incurred by him in connection with his employment
(including,
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without limitation, expenses for travel and entertainment incurred in
conducting or promoting business for the Company Parties) upon timely
submission by the Executive of receipts and other documentation as required
by the Internal Revenue Code of 1986, as amended (the "Code"), and in
accordance with the Company's normal expense reimbursement policies.
7. OTHER BENEFITS. During the Term, the Executive
shall be eligible to participate fully in all health and other employee
benefit arrangements available to senior executive officers of the Company
generally.
8. OWNERSHIP OF INTELLECTUAL PROPERTY. All intellectual
property conceived or developed by the Executive during the Term which relate to
any of the Company Parties shall belong to and constitute property of the
Company Parties.
9. TERMINATION OF AGREEMENT. The employment by the
Company of the Executive pursuant to this Agreement shall not be terminated
prior to the end of the then current Term hereof except as set forth in this
Section 9.
(a) If the Executive's employment with the
Company Parties is terminated (x) by mutual written agreement of the Company and
the Executive, (y) by the Executive's death or Disability (as defined herein),
or (z) by the Company for Cause (as defined herein), the Executive (or the
Executive's beneficiaries or representatives) shall be entitled to receive all
Base Salary to be paid or provided to the Executive under this Agreement through
the Date of Termination (as defined in Section 9(c)).
(i) DISABILITY. The Executive's
employment by the Company Parties pursuant to this Agreement may be
terminated by written notice to the Executive by the Company or to the
Company by the Executive in the event that (A) the Executive becomes
unable to perform his normal duties by reason of physical or mental
illness or accident for any six (6) consecutive month period, or (B)
the Company receives written opinions from both a physician for the
Company and a physician for the Executive that the Executive will be so
disabled.
(ii) CAUSE. This Agreement may be
terminated by the Company by written notice ("Notice of Termination")
to the Executive for Cause which means the determination, in good
faith, by the Board of Directors of the Company, after Notice of
Termination to the Executive and a reasonable opportunity to cure, that
one or more of the following events has occurred: (A) the Executive has
failed to perform his material duties in a
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reasonably satisfactory manner; (B) any reckless or grossly negligent
act by the Executive having the effect of injuring the interest,
business or reputation of any of the Company Parties in any material
respect; (C) the Executive's commission of any felony (including entry
of a NOLO CONTENDERE plea); or (D) any misappropriation or
embezzlement by the Executive of the property of any of the Company
Parties.
(b) CHANGE OF CONTROL. This Agreement shall
terminate upon the consummation of a Change of Control, in which event, the
Executive shall be entitled to a lump sum payment of $6,000,000 and no more. For
purposes of this Agreement, a "Change of Control" means the occurrence of any of
the following events:
(i) (a) any Person or group of related
Persons for purposes of Section 13(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (a "Group"), other than the
Investors and Xxxx or any of their respective affiliates, becomes the
beneficial owner (as defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all securities that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time) of 50% or more of the
total voting or economic power of MCII Holding's outstanding securities
and (b) the Investors and Xxxx or any of their respective affiliates no
longer have the power to elect a majority of the directors of the Board
of Directors of MCII Holdings;
(ii) the occurrence of any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all or substantially all of the assets of MCII
Holdings to any Person or Group other than the Investors and Xxxx or
any of their respective affiliates;
(iii) during any period of two
consecutive years, individuals who at the beginning of such period
constituted the Board of Directors of MCII Holdings (together with any
new directors whose election by the Board of Directors of MCII Holdings
or whose nomination for election by the stockholders of MCII Holdings
has been approved by the Investors and Xxxx or a majority of the
directors then still in office who either were directors at the
beginning of such period or whose election or recommendation for
election was previously so approved) cease to constitute a majority of
the Board of Directors of MCII Holdings; or
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(iv) the approval by the holders of
securities of MCII Holdings of any plan or proposal for the liquidation
or dissolution of the MCII Holdings.
(c) DATE OF TERMINATION. The Executive's Date of
Termination shall be (i) the date agreed upon in the mutual written agreement of
the parties, (ii) in the case of the Executive's death, the date of the
Executive's death, (ii) in the event of Executive's Disability, the last day the
Executive worked at the Company or (iii) if the Executive's employment is
terminated for Cause, the date on which a Notice of Termination is given.
10. REPRESENTATIONS.
(a) The Company represents and warrants that
this Agreement has been authorized by all necessary corporate action of the
Company and is a valid and binding agreement of the Company enforceable against
both in accordance with its terms.
(b) The Executive represents and warrants that
he is not a party to any agreement or instrument which would prevent him from
entering into or performing his duties in any way under this Agreement.
11. ASSIGNMENT; BINDING AGREEMENT. This Agreement is a
personal contract and the rights and interests of the Executive hereunder may
not be sold, transferred, assigned, pledged, encumbered, or hypothecated by him,
except as otherwise expressly permitted by the provisions of this Agreement.
This Agreement shall inure to the benefit of and be enforceable by the Executive
and his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive should
die while any amount would still be payable to him hereunder had the Executive
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to his devisee, legatee or
other designee or, if there is no such designee, to his estate.
12. NON-COMPETITION COVENANTS. During the Term and until
the third anniversary of the expiration thereof, or in the event of a Change of
Control, until the third anniversary of the consummation of the Change of
Control, the Executive shall not, directly or indirectly, (a) participate in the
ownership, management, operation or control of, or be connected with or employed
by, or act as a consultant for, or have any financial interest in or aid or
knowingly assist any other Person in the conduct of, any business or entity
which (i) engages in any aspect of
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the Business, (ii) is contemplating engaging in such Business or (iii)
provides any services that compete with those services provided by any of the
Company Parties, in the case of (i), (ii) and (iii), anywhere within the
Western Hemisphere or (b) hire any officer or other employee of the Company
Parties or solicit or direct anyone else to solicit any officer or other
employee of the Company Parties (i) to terminate his or her employment or
other relationship with the Company Parties or (ii) to seek or accept
employment or other affiliation with any other entity (other than any
solicitation directed at the public in general in publications available to
the public in general).
13. CONFIDENTIALITY COVENANT. The Executive agrees that
he will not at any time during the Term or at any time thereafter, directly or
indirectly, use for his own account, or disclose to any person, firm or
corporation, other than authorized officers, directors and employees of the
Company Parties, Confidential Information (as hereinafter defined) of the
Company. As used herein, "Confidential Information" of the Company Parties means
information of any kind, nature or description which is disclosed to or
otherwise known to the Executive as a direct or indirect consequence of his
association with any of the Company Parties, which information is not generally
known to the public or in the businesses in which the Company Parties are
engaged or which information relates to specific investment opportunities within
the scope of the business of the Company Parties which were considered by any of
the Company Parties during the Term.
14. ENTIRE AGREEMENT. This Agreement contains all the
understandings between the parties hereto pertaining to the matters referred to
herein, and supersedes any other undertakings and agreements, whether oral or in
writing, previously entered into by them with respect thereto. The Executive
represents that, in executing this Agreement, he does not rely and has not
relied upon any representation or statement not set forth herein made by any of
the Company Parties with regard to the subject matter or effect of this
Agreement or otherwise.
15 AMENDMENT OR MODIFICATION; WAIVER. No provision of
this Agreement may be amended or waived, unless such amendment or waiver is
agreed to in writing, signed by the Executive and by a duly authorized officer
of the Company. No waiver by any party hereto of any breach by another party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same time, any prior time or any subsequent time.
16 NOTICES. Any notice to be given hereunder shall be in
writing and shall be deemed given when delivered personally, sent by courier or
facsimile or
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registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such
other address as such party may subsequently give notice hereunder in writing:
To the Executive at:
Xxxxxx Xxxxx Xxxxxx
Consorcio G Grupo Xxxx, S.A. de C.V.
Tlacoquemecatl Xx. 00
Xxxxxxx Xxx Xxxxx
00000, Xxxxxx X.X., Xxxxxx
Facsimile: 000-000-000-0000
with a copy to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: M. Xxxxxx Xxxxxx, Esquire
Facsimile: (000) 000-0000
To the Company at:
Motor Coach Industries International, Inc.
00 Xxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxx Xxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxx, Esquire
Any notice delivered personally or by courier under this
Section 16 shall be deemed given on the date delivered and any notice sent by
facsimile or registered or certified mail, postage prepaid, return receipt
requested, shall be
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deemed given on the date transmitted by facsimile or mailed.
17 SEVERABILITY. If any provision of this Agreement or
the application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law. Moreover, if any one or more of the provisions
contained in this Agreement shall be held to be excessively broad as to
duration, activity or subject, such provisions shall be construed by limiting
and reducing them so as to be enforceable to the fullest extent permitted by
law.
18 SURVIVORSHIP. The respective rights and obligations
or the parties hereunder shall survive any termination of this Agreement to the
extent necessary to the intended preservation of such rights and obligations.
19 GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to its conflicts of laws principles.
20 HEADINGS. All descriptive headings of sections and
paragraphs in this Agreement are intended solely for convenience, and no
provision of this Agreement is to be construed by reference to the heading of
any section or paragraph.
21 WITHHOLDING. All payments to the Executive under this
Agreement shall be reduced by all applicable withholding required by federal,
state or local law.
22 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this
Employment Agreement as of the date first above written.
MOTOR COACH INDUSTRIES INTERNATIONAL, INC.
By:
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Name:
Title:
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Xxxxxx Xxxxx Xxxxxx
