Exhibit 12
[First Alert Letterhead]
April 15, 1997
Mr. Douglas H. Kellam
17 Overdale Road
Rye, NY 10580
Dear Doug:
This letter will serve to supplement my previous employment offer letter to you
of March 17, 1997. That earlier letter did not cover the subject of severance
but we had several discussions about that subject prior to your decision to
accept our offer. This letter will serve to document our understanding regarding
the circumstances under which you will be entitled to severance pay and the
extent of those benefits.
The details of the terms of this severance arrangement are set forth in the
attached Exhibit 1 which are substantially identical to the terms of
arrangements which have been provided to certain other executive officers.
Sincerely,
/s/ B. Joseph Messner
B. Joseph Messner
President and
Chief Executive Officer
Exhibit 1
1. Severance Benefits
First Alert, Inc. or its wholly-owned subsidiary, BRK Brands, Inc., (the
"Company") shall provide Douglas H. Kellman (the "Executive") with the benefits
set forth in Section 3 of this Exhibit 1 if his employment is terminated by the
Company without cause attributable to the Executive. The Executive shall not be
entitled to the benefits set forth in Section 3 if:
a) The Executive voluntarily terminates his employment with the Company;
b) The Executive dies or becomes incapacitated during the term of his
employment; or
c) The Executive's employment is terminated by the Company for one or more of
the following reasons:
1) The Executive has been convicted of, or has pleaded guilty or nolo
contendere to any felony or a crime involving moral turpitude;
2) The Executive has materially failed or refused to perform his duties
hereunder and such material failure or refusal has continued for a
period of ten (10) days following written notice of such failure or
refusal in reasonable detail, it being understood that the Company's
failure to achieve its business plan or projections shall not itself be
considered a failure or refusal to perform duties;
3) The Executive has breached any provision of his Confidential
Information and Inventions Agreement ("Confidentiality Agreement") with
the Company; or
4) The Executive has committed any fraud, embezzlement, misappropriation
of funds, breach of fiduciary duty or other act of dishonesty,
intentional malfeasance against the Company or material breach of
Company policy.
2. Notice of Termination
Termination of the Executive's employment with the Company by the Company or
by the Executive shall be communicated by written "Notice of Termination" to the
other party at their last known address.
3. Specific Benefits
a) Subject to the conditions set forth in Section 1 and as specified in this
Section 3, the Executive shall be entitled to receive the following
benefits:
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1) Periodic Payments. The Executive shall be paid a monthly termination
benefit in an amount equal to 1/12th of his annual base salary in
effect as of the termination date less any applicable payroll or other
taxes required by law to be withheld ("monthly payment"). For purposes
of this Agreement, "annual base salary" shall not include any cost of
living adjustments, bonus payments, or other forms of supplementary
compensation. Provided that Executive complies with his obligations
under the Confidentiality Agreement and is otherwise entitled to
benefits under Section 1, Executive shall continue to receive such
monthly payments until such time as he becomes employed, he dies, he
becomes incapacitated, or he has received a total of 12 such
monthly payments, whichever occurs first. Said monthly payments shall
be paid on the last business day of the month beginning with the first
month following the date of termination.
2) Accrued But Unused Vacation Time. The Company shall pay to the
Executive, in a lump sum within 31 days after the termination date, all
vacation time accrued but unused by the Executive prior to the
termination date.
3) Insurance Benefits. Subject to his payment of the employee contribution
or share as specified in the Company's employee benefit plans and his
continuing compliance with the Confidentiality Agreement, the Executive
shall continue to participate, to the same extent and level he was
participating as of the termination date in any life, accident,
disability, health and dental insurance plans and other similar fringe
benefits of the Company, until the date of the last monthly payment
due him under Section 3(a)(1) above.
b) It is understood and agreed that the Company's obligation to make monthly
payments as specified in Section 3(a)(1) and to allow continuing
participation in employee benefit plans as specified in Sections 3(a)(2)
and (3) is contingent upon the Executive's continuing compliance with his
obligations under the Confidentiality Agreement. If the Company determines
that the Executive has failed to comply with said obligations, it may cease
making the monthly payments and cease any contribution for employee
benefits and may further recover from the Executive any monthly payments
made to and any monthly premium payments made for the Executive prior to
the date of its determination but after the Executive initially failed to
comply.
c) It is further understood and agreed that the Executive will promptly notify
the Company if he obtains other employment and the Executive promises that
he will return any monthly payment erroneously made to him prior to the
Company's receipt of notification of the Executive's other employment
together with a reimbursement of any premium payment erroneously made on
his behalf by the Company prior to its receipt of such notice.
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d) Finally, it is understood and agreed that the monthly payments specified in
Section 3(a)(1) shall be reduced to the extent of any unemployment or other
insurance benefits paid to the Executive by the State or the Company.
4. Limitation on Payments. Anything herein to the contrary notwithstanding, in
no event shall the present value of all payments made to the Executive by
the Company hereunder which constitute "parachute payments" (within the
meaning of Section 280(G)(b)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"), without regard to clause A(ii) thereof), when
aggregated with any other payments made by the Company to the Executive
which constitute "parachute payments" (as so defined), exceed 299% of the
Executive's "base amount" (within the meaning of said Section 280(G))
unless the applicable percentage of the holders of the Company's common
stock outstanding as of the date of such payments shall approve such
payments after appropriate disclosure. The Company agrees to make
reasonable efforts to obtain such stockholder approval. For the purposes
hereof, the "present value" of any payment shall be determined in
accordance with Section 280(G) of the Code.
5. Assignment and Transfer
a) The Executive. Neither this Exhibit 1 nor any of the rights, duties or
obligations of the Executive shall be assignable by the Executive, nor
shall any of the payments required or permitted to be made to the Executive
by this Exhibit 1 be encumbered, transferred or in any way anticipated.
b) The Company. This Exhibit 1 shall not be terminated by the merger or
consolidation of the Company with any corporate or other entity or by the
transfer of all or substantially all of the assets of the Company to any
other person, corporation, firm or entity, and the provisions of this
Exhibit 1 shall inure to the benefit of any such successor in interest to
the Company. It is further intended that the provisions of this Exhibit 1
shall be binding on any such successor in interest to the Company, provided
that if the terms of such merger, consolidation or transfer render it
impractical to pay the benefits provided by this Exhibit 1, the Company
shall only be required to make reasonable efforts to procure the payment of
equivalent benefits.
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