EXHIBIT 10(m)
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EMPLOYMENT AGREEMENT
between
THE HYDRAULIC COMPANY
and
JACK E. MCGREGOR
dated as of January 1, 1990
THIS AGREEMENT, made effective as of January 1, 1990 by and
between THE HYDRAULIC COMPANY (the "Company"), a Delaware
corporation, and JACK E. McGREGOR, of 863 Old Academy Road,
Fairfield, Connecticut (the "Executive"),
WITNESSETH THAT:
WHEREAS:
1. The Executive is a principal officer of the Company and
an integral part of its senior management who participates in the
decision-making process relative to short and long-term planning
and policy for the Company;
2. The Board of Directors of the Company, at its meeting
on December 19, 1989, determined that it would be in the best
interests of the Company and its shareholders to assure
continuity in the management of the Company's administration and
operations by entering into an employment agreement to retain the
services of the Executive on an extended basis during a period of
intended diversification; and
3. The Executive is willing to continue to serve the
Company as a member of its senior management on the terms and
conditions set forth herein;
NOW THEREFORE, it is hereby agreed by and between the
parties hereto as follows:
1. Employment. The Company agrees to continue the
Executive in its employ, and the Executive agrees to remain in
the employ of the Company, for the period stated in Paragraph 3
hereof and upon the other terms and conditions herein provided.
2. Position and Responsibilities. During the period of
his employment hereunder, the Executive agrees to serve as
President of the Company for the period for which he is and shall
from time to time be elected, as its Chief Executive Officer, and
to be responsible for the general management of the affairs of
the Company, reporting directly to the Board of Directors of the
Company. During said period the Executive agrees to perform such
services not inconsistent with his position as shall from time to
time be requested of him by the Board of Directors including
service, if elected, as an officer and director of any subsidiary
or affiliate of the Company.
3. Term and Duties.
(a) Term of Employment. The term of the Executive's
employment under this Agreement shall be deemed to have commenced
as of the date first above written and shall continue for a
period of thirty-six full calendar months thereafter, subject to
extension as hereinafter provided. On the first day of each month
following the date first above written, the
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term of the Executive's employment under this Agreement shall be
automatically extended unless prior thereto the Company shall
deliver to the Executive or the Executive shall deliver to the
Company written notice that such term of employment shall not be
extended, in which case such term shall end at the expiration of
the then existing term of employment under this Agreement,
including any previous extensions, and shall not be further
extended except by agreement of the Company and the Executive.
Any such automatic extension shall be for one additional full
calendar month (for a total term upon such extension of thirty-
six full calendar months), unless the Executive will attain age
62 prior to completion of thirty-six full calendar months
following the extension date, in which case the term of the
Executive's employment under this Agreement shall terminate on
the last day of the month in which the Executive attains age 62.
(b) Duties. During the period of employment
hereunder and except for illness or incapacity and reasonable
vacation periods (which shall not be less than 25 days in any
calendar year), the Executive's business time, attention, skill
and efforts shall be exclusively devoted to the business and
affairs of the Company and its subsidiaries; provided, however,
that nothing in this Agreement shall preclude the Executive from
devoting time during reasonable periods required for
(i) serving as an officer, director or member of a
committee of any company or organization involving
no conflict of interest with the Company or any of
its subsidiaries or affiliates,
(ii) delivering lectures and fulfilling speaking
engagements, and
(iii) engaging in charitable and community activities,
provided that such activities do not materially
affect or interfere with the performance of the
Executive's obligations to the Company.
4. Compensation.
(a) For all services rendered by the Executive in any
capacity during employment under this Agreement, including
services as an executive, officer, director, or member of any
committee of the Company or any subsidiary or affiliate thereof,
the Company shall pay the Executive a base salary at the rate of
not less than $200,000 per year, subject to such periodic
increases as the Board shall deem appropriate in accordance with
the Company's customary procedures and practices regarding the
salaries of senior management employees. Such salary shall be payable
in accordance with the customary payroll practices of the Company, but
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in no event less frequently than monthly. Such
periodic increases in salary, once granted, shall not be subject
to revocation.
(b) Executive shall be entitled to participate in any
Company incentive or bonus plan covering some or all of its
executive officers that is in effect during the period of his
employment hereunder and to receive benefits thereunder on a
basis consistent with the overall administration and intent of
any such plan and with past practice, if any, under such plan.
(c) Nothing in this Agreement shall preclude or affect
any rights or benefits that may now or hereafter be provided for
the Executive or for which the Executive may be or become
eligible under any other form of compensation or employee benefit
plan now existing or that may hereafter be adopted or awarded by
the Company or mandated by law. Specifically, the Executive
shall:
(i) Participate in the Company's Retirement Plan for
Employees of The Hydraulic Company as well as any
related program under any "excess benefit plan"
that may be adopted during the period of the
Executive's employment hereunder and in which the
Executive is designated by the Company's Board of
Directors to participate (hereinafter referred to
collectively as the "Retirement Program");
(ii) participate to the permitted extent the Executive
wishes in The Employee Savings and Investment Plan
of the Company and related program under any
excess benefit plan (hereinafter referred to
collectively as the "Thrift and Savings Program");
(iii) participate in any Employee Stock Ownership Plan
that may subsequently be adopted by the Company;
(iv) participate in the salary continuation program in
the event of death in accordance with Board policy
for Company officers;
(v) participate in the Company's death and disability
benefit plans and its medical, dental and health
and welfare plans;
and
(vi) participate in equivalent successor plans of the
Company for which senior management employees are
eligible;
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provided, however, that, subject to Paragraph 7(c)(iv), nothing
in this Agreement shall preclude the Company from emending or
terminating any such plan or program, on the condition that such
amendment or termination is applicable to all of the Company's
senior management employees generally.
(d) In addition to any life insurance benefits
included in Paragraph 4(c) hereof, during the term of employment
hereunder the Company agrees to obtain and maintain, for the
purpose of providing a supplemental retirement benefit to the
Executive, a policy of life insurance on the life of the
Executive in the face amount of $300,000 (Guardsman Life
Insurance Policy number U 800004942). The Company shall be the
owner and beneficiary of said policy and shall receive all
payments made under said policy as a means of funding the
benefits payable under this Paragraph 4(d). Amounts payable to
the Executive or to such beneficiary as he may designate in
writing to the Company (the "Executives Beneficiary") under this
Paragraph 4(d) shall be in addition to any retirement benefits
which may be paid to the Executive under the Retirement Plan for
Employees of The Hydraulic Company or any successor plan and
shall be distributed in accordance with the following options and
conditions:
(i) Upon retirement at age 62, the Executive shall
receive, at his option, which shall be exercised
not later than October 1, 1996, either
(A) the amount of $44,000 each year for a period
of ten years, which amount would continue to
be paid to the Executive's Beneficiary for
the remainder of said ten-year period in the
event of the Executive's death during said
period, or
(B) the amount of $33,200 each year for the
remainder of his life;
(ii) Should the Executive die while employed by the
Company before reaching the age of 62, the
Executive's Beneficiary shall receive, in addition
to any other benefits which may be payable
pursuant to any provision of Paragraphs 4(c) or 6
of this Agreement in connection with his death,
the amount of $44,000 each year for a period of
ten years following the Executive's death;
(iii) If the Executive's employment with the Company is
terminated for any reason other than one of those
specified in Paragraph 7(a) of this Agreement by
either the Company or the Executive before the Executive
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reaches the age of 62, the Executive may
elect, by notice to the Company upon such
termination, either
(A) to be paid each year for a period of ten
years the amount which corresponds to his
years of service (which service shall, in the
event of termination pursuant to Paragraph
7(c) of this Agreement, include credit for
the unexpired portion of the term of
employment provided for in Paragraph 3(a) of
this Agreement) as an employee of the Company
as set forth on Exhibit A hereto, which
amount would continue to be paid to the
Executive's Beneficiary for the remainder of
said ten-year period in the event of the
Executive's death during said period,
(B) to be paid each year for the remainder of his
life the amount which corresponds to his
years of service (which service shall, in the
event of termination pursuant to Paragraph
7(c) of this Agreement, include credit for
the unexpired portion of the term of
employment provided for in Paragraph 3(a) of
this Agreement) as an employee of the Company
as set forth on Exhibit B hereto, or
(C) to take ownership of said Guardsman life
insurance policy and any cash value therein
at the time of termination of employment, in
which event the Executive shall, if prior to
April 1, 1991, assume any remaining premium
obligations and shall pay the Company such
amount as may be necessary to achieve an
equitable adjustment between the cash value
of said policy at such time (which, in the
event of termination pursuant to Paragraph
7(c) of this Agreement, shall be extended to
the expiration of the term of employment
provided for in Paragraph 3(a) of this
Agreement) and the actuarial value of the
benefits which would otherwise have been
payable to the Executive pursuant to
Paragraph 4(d)(iii)(A) or (B) hereof;
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(iv) One-twelfth of the amount of annual benefits
payable to the Executive pursuant to this
Paragraph 4(d) shall, unless otherwise set forth
in this Agreement or otherwise subsequently agreed
to in writing by the parties hereto, be paid to
the Executive on the first day of each month
during the period in which such benefits are
payable commencing with the month following the
Executive's 62nd birthday or death, whichever is
applicable, and continuing until all such benefits
have been paid;
(v) After April 1, 1991 the Executive, if still
employed by the Company, may, as an alternative to
the payment of benefits otherwise provided in this
Paragraph 4(d), elect to take ownership of said
Guardsman life insurance policy in its entirety
subject, however, to a right of reversion to the
Company in the event of forfeiture of benefits as
set forth in Paragraph 4(d)(vi) hereof, which
shall be reflected in an appropriate endorsement
to said policy;
(vi) Notwithstanding any provisions herein to the
contrary, all supplemental retirement benefits and
all other benefits provided pursuant to this
Paragraph 4(d) and by or in connection with said
Guardsman life insurance policy to the Executive
or the Executive's Beneficiary shall be forfeited
by the Executive if he remains in the employment
of the Company after the month in which he reaches
the age of 62, and the Company shall be entitled
to surrender said Guardsman life insurance policy
for its then cash value.
5. Business Expenses. The Company shall pay or reimburse
the Executive for all reasonable travel and other expenses
incurred in connection with the performance of the Executive's
duties under this Agreement in accordance with such procedures as
the Company may from time to time establish. The Company further
agrees to furnish the Executive with a private office and a
private secretary and such other assistance and accommodations,
including an automobile and appropriate club membership, as shall
be suitable to the character of the Executive's position with the
Company and adequate for the performance of the Executive's
duties under this Agreement.
6. Additional Benefits. Nothing in this Agreement shall
affect the Executive's eligibility to participate in all group
health, dental, hospitalization, life, travel or accident or other
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insurance plans or programs and all other perquisites,
fringe benefits or retirement plans or additional compensation,
including termination pay programs, which the Company may now or
hereafter, in its sole and absolute discretion, make available to
its senior management employees generally, and the Executive
shall be eligible to receive, during the period of employment
under this Agreement, all benefits and emoluments for which key
employees are eligible under every such plan, program, perquisite
or arrangement to the extent permissible under the general terms
and provisions thereof.
7. Termination of Employment. Notwithstanding any of
the provision of this Agreement, the Executive's employment under
this Agreement may be terminated:
(a) by the Company, in the event of the Executive's
serious, willful misconduct in respect of the Executive's duties
under this Agreement, including conviction for a felony or
perpetration of a common law fraud which has resulted or is
likely to result in material economic damage to the Company or
any of its subsidiaries, by written notice to the Executive,
specifying the event relied upon for such termination;
(b) by either the Company or the Executive, if the
Executive accepts employment or a consulting position with
another Company; or
(c) by the Executive, in the event any (i) failure to
elect or reelect or to appoint or reappoint the Executive to the
offices of President and Chief Executive Officer of the Company
or other material change by the Company of the Executive's
functions, duties or responsibilities which change would cause
the Executive's position with the Company to become of less
dignity, responsibility, importance or scope from the position
and attributes thereof described in Paragraph 2 above, (ii)
assignment or reassignment by the Company or by one of its
subsidiaries of the Executive to another place of employment
outside of Fairfield County, Connecticut, (iii) liquidation,
dissolution, consolidation, or acquisition or merger of the
Company, or transfer of all or substantially all of its assets
other than a transaction in which a successor corporation with a
net worth at least equal to that of the Company assumes this
Agreement and all obligations and undertakings of the Company
hereunder, or (iv) reduction in the Executive's total
compensation and benefits, as specified in Paragraph 4 above and
as currently provided, or other material breach of this Agreement
by the Company or any of its subsidiaries, by thirty (30) days
written notice to the Company, specifying the event relied upon
for such termination and given within 180 days after such event.
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8. Payments Upon Termination of Employment. In the
event of any termination by the Executive pursuant to Paragraph
7(c) above, or in the event the Executive's employment under this
Agreement is terminated by the Company for any reason other than
one of those specified in Paragraphs 7(a) or 7(b) above, the
Company shall, as liquidated damages or severance pay, or both,
promptly pay to the Executive and provide the Executive and the
dependents, beneficiaries and estate of the Executive as follows:
(a) The Company shall pay the Executive, at his
option, either as a lump sum or in equal monthly installments
over the unexpired portion of the term of employment provided for
in Paragraph 3(a) above, a cash amount equal to the present value
of the excess of (i) the salary provided in Paragraph 4(a) above,
including the increases therein provided, for the unexpired
portion of the term of employment provided for in Paragraph 3(a)
above (commencing with the month in which termination shall have
occurred) less the amounts, if any, the Executive would have paid
in cash in respect of employee benefits provided for in Paragraph
4(c)(v) above if the Executive were still employed, over (ii) the
amounts, if any, paid to the Executive pursuant to any severance
or termination pay program or arrangement of the Company or any
of its subsidiaries, provided, however, that in no event shall
the amount paid hereunder exceed 2.9 times the Executive's annual
salary.
(b) The Company shall also pay the Executive a lump
sum cash amount equal to the present value of the excess of (i)
the aggregate benefit that would have been paid under the
Retirement Program described in Paragraph 4(c)(i) above as in
effect on the date first above written, if the Executive had
continued to be employed at an annual rate of compensation equal
to that used to calculate the payments provided by Paragraph 7(a)
above, and to be entitled to service credit for eligibility and
benefit purposes during the unexpired portion of the term of
employment provided for in Paragraph 3(a) above, said benefit to
be calculated on the basis of the higher of the Executive's
salary for the 12 months immediately preceding the month in which
termination shall have occurred or the compensation amount used
in the benefit formula under said Retirement Program, and
assuming that the Executive is fully vested in such benefit, over
(ii) the aggregate benefit actually payable under the Retirement
Program and any successor retirement program of the Company
consisting of a tax-qualified pension plan and a related excess
benefit plan. In clarification of the immediately preceding
sentence, the aggregate benefit that would have been paid under
the Retirement Program shall be calculated as of the normal or early
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retirement date for which the Executive would have
qualified, assuming the Executive were still employed on that
date and were fully vested in such benefit, and which would
produce the highest present value.
(c) The Company shall also pay the Executive a limp
sum cash amount equal to the present value of the aggregate
contributions or payments, if any, that would have been made by
the Company or any of its subsidiaries under the Thrift and
Savings Program and Employee Stock Ownership Plan described in
Paragraph 4(c)(ii) and (iii) above or any successor program of
the Company in effect on the date on which termination shall have
occurred, if the Executive had continued to be employed, and to
participate in the Thrift and Savings Program and Employee Stock
Ownership Plan or such successor programs to the same extent as
the Executive participated for the last month during which the
Executive was permitted to participate, during the unexpired
portion of the term of employment provided for in Paragraph 3(a)
above at an annual rate of compensation equal to that used to
calculate the payments provided by Paragraph 7(a) above.
(d) For purposes of calculating the lump sum cash
payments provided by Paragraphs 7(a), (b) and (c) above, present
value shall be determined by using a discount factor equal to one
percentage point below the prime rate as published in The Wall
Street Journal as of the date on which termination shall have
occurred.
(e) For a period of 24 months (commencing with the
month in which termination shall have occurred), the Executive
shall continue to be entitled to all employee benefits provided
for in Paragraph 4(c)(v) above, as if the Executive were still
employed during such period under this Agreement, with benefits
based upon the compensation used to calculate the payments
provided by Paragraph 8(a) above, and if and to the extent that
such benefits shall not be payable or provided under any such
plan, the Company shall pay or provide such benefits on an
individual basis. The medical, dental, health and welfare
benefits provided for in Paragraph 4(c)(v) above, in accordance
with this Paragraph 8(e) shall be secondary to any comparable
benefits provided by another employer provided that an
appropriate refund is made of any reduction in the amount paid
pursuant to Paragraph 8(a)(i) which had assumed that such
benefits would be primary.
9. Source of Payments; Interest. All payments provided for
in Paragraphs 4, 5, 6 and 8 above shall be paid in cash from the
general funds of the Company. Any payments not
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made within thirty (30) days after termination or such time as they may
otherwise be due hereunder shall bear interest at the interest
rate used to establish the discount factor provided for in
Paragraph 8(d). The Company shall not be required to establish a
special or separate fund or other segregation of assets to assure
such payments.
10. Litigation Expenses.
(a) In the event of any litigation or other proceeding
between the Company and the Executive with respect to the subject
matter of this Agreement and the enforcement of rights hereunder,
the Company shall reimburse the Executive for all reasonable
costs and expenses relating to such litigation or other
proceeding, including reasonable attorney's fees and expenses,
provided that such litigation or proceeding results in any
(i) settlement requiring the Company to make a payment
to the Executive, or
(ii) judgment or order in favor of the executive
enforcing any provision of this Agreement or
awarding any payment or other consideration to the
Executive, regardless of whether such judgment or
order is subsequently reversed on appeal or in a
collateral proceeding.
In no event shall the Executive be required to reimburse the
Company for any of the costs and expenses relating to such
litigation or other proceeding. The obligation of the Company
under this Paragraph 10 shall survive the termination for any
reason of this Agreement (whether such termination is by the
Company, by the Executive, upon the expiration of this Agreement
or otherwise).
11. Income Tax Withholding. The Company may withhold from
any payments made under this Agreement all Federal, State, City
or other taxes as shall be required pursuant to any law or
governmental regulation or ruling.
12. Entire Understanding. This Agreement contains the
entire understanding between the Company and the Executive with
respect to the subject matter hereof and supersedes any prior
employment agreement between the Company and the Executive,
including the employment agreement dated as of January 1, 1986,
except that this Agreement shall not affect or operate to reduce
any benefit or compensation inuring to the Executive of a kind
elsewhere provided and not expressly provided in this Agreement.
13. Severability. If, for any reason, any one or more of
the provisions or part of a provision contained in this Agreement
shall be held to be invalid, illegal or unenforceable in any
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respect, such invalidity, illegality or unenforceability shall
not affect any other provision or part of a provision of this
Agreement not held so invalid, illegal or unenforceable, and each
other provision or part of a provision shall to the full extent
consistent with law continue in full force and effect. If this
Agreement is held invalid or cannot be enforced, then to the full
extent permitted by law any prior agreement between the Company
and the Executive shall be deemed reinstated as if this Agreement
had not been executed.
14. Consolidation, Merger, or Sale of Assets. Nothing in
this Agreement shall preclude the Company from consolidating or
merging into or with or transferring all or substantially all of
its assets to, another corporation or acquiring entity which
assumes this Agreement and all obligations and undertakings of
the Company hereunder. Upon such a consolidation, merger or
transfer of assets and assumption, the term, "the Company", as
used herein shall mean such other corporation or acquiring entity
and this Agreement shall continue in full force and effect.
15. Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be given in
writing and shall be deemed to have been duly given if delivered
or mailed, postage prepaid, first class as follows:
(a) to the Company:
The Hydraulic Company
835 Main Street
Bridgeport, Connecticut 06601
Attention: Secretary
(b) to the Executive:
Mr. Jack E. McGregor
863 Old Academy Road
Fairfield, Connecticut 06430
or to such other address as either party shall have previously
specified in writing to the other.
16. No Attachment. Except as required by law, no right to
receive payments under this Agreement shall be subject to
anticipation, commutation, alienation, sale, assignment,
encumbrances, charge, pledge, or hypothecation or to execution,
attachment, levy, or similar process or assignment by operation
of law, or any attempt, voluntary or involuntary, to effect any
such action shall be null, void and of no effect.
17. Binding Agreement. This Agreement shall be binding
upon, and shall inure to the benefit of, the Executive and the
Company and their respective permitted successors and assigns.
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18. Modification and Waiver. This Agreement may not be
modified or amended except by an instrument signed by the parties
hereto. No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be any estoppel against the
enforcement of any provision of this Agreement except by written
instrument signed by the party charged with such waiver or
estoppel. No such written waiver shall be deemed a continuing
waiver unless specifically stated therein, and each such waiver
shall operate only as to the specific term or condition waived
and shall not constitute a waiver of such term or condition for
the future or as to any act other than that specifically waived.
19. Headings of No Effect. The Paragraph headings
contained in this Agreement are included solely for convenience
of reference and shall not in any way affect the meaning or
interpretation of any of the provisions of this Agreement.
20. Governing Law. This Agreement and its validity
interpretation, performance, and enforcement shall be governed by
the laws of the State of Connecticut.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed and its seal to be affixed hereunto by its officers
thereunto duly authorized, and the Executive has signed this
Agreement, all as of the date first above written.
ATTEST: THE HYDRAULIC COMPANY
____________________________ By _____________________________
William S. Warner
Chairman of the Board
______________________________
Jack E. McGregor
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