EXHIBIT 10(k)
AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the
23rd day of July, 1999, by and between PEERLESS MFG. CO. (the
"Company"), and GILBERT DARWYN CORNWELL (the "Executive").
WHEREAS, the Executive serves as a senior executive of the Company;
WHEREAS, the Executive possesses knowledge of the business and
affairs of the Company, its policies, methods, personnel and plans for
the future; and
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that the Executive's contribution to the growth and success
of the Company has been substantial and wishes to offer an inducement
to the Executive to remain in the employ of the Company;
NOW, THEREFORE, in consideration of the foregoing and of the
respective covenants and agreements of the parties herein contained,
this Agreement sets forth benefits which the Company will pay to
Executive in the event of termination of Executive's employment, except
as a result of death, disability, retirement or termination by the
Company for Cause, following a "Change in Control" of the Company (in
each case as such terms or events are defined or discussed herein):
1. Term. The term of this Agreement shall continue until the
earlier of (i) the expiration of the third anniversary of the
occurrence of a Change in Control, (ii) the Executive's death, or (iii)
the Executive's earlier voluntary retirement (except for those events
described in Section 3(a)(2)); provided, however, that on each
anniversary of the Change in Control, the period referenced in Section
(i) above shall automatically be extended for an additional year
unless, not later than 90 calendar days prior to such anniversay date,
the Company shall have given written notice to the Executive that it
does not wish to have the term extended.
2. Definitions.
(a) Affiliate and Associate. "Affiliate" and "Associate" shall
have the respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Securities Exchange Act of
1934, as amended (the "Exchange Act") in effect on the date of this
Agreement.
(b) Cause. For "Cause" shall mean that the Executive shall
have committed:
(i) The conviction of Executive, by a court of competent
jurisdiction, of any felony;
(ii) Commission by Executive of an intentional material
act of fraud to his pecuniary benefit in connection with his duties or
in the course of his employment with the Company, as reasonably
determined by the Board;
(iii) The intentional and continued failure by Executive
to substantially perform his duties hereunder, or the intentional
wrongdoing by Executive resulting in material injury to the Company.
No act, or failure to act, on the part of Executive shall be deemed
"intentional" unless done, or omitted to be done, by Executive not in
good faith and without reasonable belief that his action or omission
was in the best interests of the Company.
(c) Change in Control. A "Change in Control" of the Company
shall have occurred if at any time during the term of this Agreement
any of the following events shall occur:
(i) The Company is merged, consolidated or reorganized into
or with another corporation or other legal person and as a result of
such merger, consolidation or reorganization less than 50.1% of the
combined voting power to elect Directors of the then outstanding
securities of the remaining corporation or legal person or its ultimate
parent immediately after such transaction is available to be received
by all stockholders on a pro rata basis and is actually received in
respect of or exchange for voting securities of the Company pursuant to
such transaction;
(ii) The Company sells all or substantially all of its
assets to any other corporation or other legal person not controlled by
or under common control with the Company;
(iii) Any person or group (including any "person" as such
term is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange
Act has become the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities which when added to
any securities already owned by such person would represent in the
aggregate 50% or more of the then outstanding securities of the Company
which are entitled to vote to elect Directors;
(iv) If at any time, the Continuing Directors then
serving on the Board cease for any reason to constitute at least a
majority thereof;
(v) Any occurrence that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A or any
successor rule or regulation promulgated under the Exchange Act; or
(vi) Such other events that cause a change in control of
the Company, as determined by the Board in its sole discretion;
provided, however, that a Change in Control of the Company shall not be
deemed to have occurred as the result of any transaction having one or
more of the foregoing effects if such transaction is proposed by, and
includes a significant equity participation of, executive officers of
the Company as constituted immediately prior to the occurrence of such
transaction or any Company employee stock ownership plan or pension
plan.
(d) Code. The "Code" shall mean the Internal Revenue Code of
1986, as amended.
(e) Continuing Director. A "Continuing Director" shall mean a
Director of the Company who (i) is not an Acquiring Person, an
Affiliate or Associate, a representative of an Acquiring Person or
nominated for election by an Acquiring Person, and (ii) was either a
member of the Board of Directors of the Company on the date of this
Agreement or subsequently became a Director of the Company and whose
initial election or initial nomination for election by the Company's
stockholders was approved by a majority of the Continuing Directors
then on the Board of Directors of the Company.
(f) Acquiring Person: An "Acquiring Person" shall mean any
person (as defined in Section 2(d)(iii) of this Agreement) that,
together with all Affiliates and Associates of such person, is the
beneficial owner of 15% or more of the outstanding Common Stock. The
term "Acquiring Person" shall not include the Company, any subsidiary
of the Company, any employee benefit plan of the Company or subsidiary
of the Company, any person holding Common Stock for or pursuant to the
terms of any such plan, or Donald A. Sillers, Jr. or members of his
immediate family.
(g) Employment Term. The "Employment Term" shall be the period
of employment under this Agreement commencing on the day prior to a
Change in Control and continuing until the expiration of this
Agreement.
(h) Severance Compensation. The "Severance Compensation"
shall be:
(i) A lump sum amount equal to 299% of Executive's average
annual compensation reported on his Form W-2 paid by the Company
includable in gross income during the five most recent full calendar
years prior to the Change in Control; provided, however, that in no
event shall the Company pay or be obligated to pay that portion of the
amount due which would result in any payment to or for the benefit of
Executive being an "excess parachute payment" within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended (the
"Code"), in the opinion of tax counsel selected by the Company's
independent accountants and acceptable to Executive, and which would
result in the imposition of an excise tax under Section 4999 of the
Code ("Excess Parachute Payment"). Any payment made pursuant to this
Section shall be reduced only in the amount necessary to avoid
characterization of such payment as an Excess Parachute Payment and
only after reduction, to the extent necessary, of any other payments
(other than payments made under this Agreement) which when aggregated
with the payments hereunder result in the imposition of such excise tax
under Section 4999 of the Code; and
(ii) For a period of three years, provide Executive with
benefits substantially similar to those which Executive was entitled to
receive immediately prior to the date of termination under all of the
Company's "employee welfare benefit plans" within the meaning of
Section 3(1) of The Employee Retirement Income Security Act of 1974, as
amended. Notwithstanding the foregoing provisions of this Section, no
benefits shall be provided or payments made pursuant to this subsection
to the extent that the effect thereof would result in a reduction of
the Severance Payment under subsection (h)(i).
(i) Termination Date. The "Termination Date" shall be the date
upon which the Executive or the Company effectively terminates the
employment of the Executive.
3. Rights of Executive Upon Change in Control Termination
(a) The Company shall provide the Executive, within ten days
following the Termination Date, Severance Compensation in lieu of
compensation to the Executive for periods subsequent to the Termination
Date, but without affecting the rights of the Executive at law or in
equity, if, following the occurrence of a Change in Control, any of the
following events shall occur:
(1) the Company terminates the Executive's employment during
the Employment Term other than for any of the following reasons:
(i) the Executive dies:
(ii) the Executive becomes permanently disabled and is
unable to work for a period of 180 consecutive days; or
(iii) for Cause.
(2) the Executive terminates his employment after such Change
in Control and the occurrence of at least one of the following events:
(i) a change in the positions held by Executive or an
adverse change in the nature or scope of the authorities, functions or
duties attached to the positions with the Company that the Executive
had immediately prior to the Change in Control, any reduction in the
Executive's salary during the Employment Term or any reduction in bonus
or incentive compensation (based upon the dollar amount of bonus or
incentive compensation that the Executive received from the Company for
the fiscal year preceding the year in which the Change in Control
occurred or for the fiscal year preceding the year in which the
Termination Date occurs, whichever is the larger amount) or a
significant reduction in scope or value of the aggregate other monetary
or nonmonetary benefits to which the Executive was entitled from the
Company immediately prior to the Change in Control, any of which is not
remedied within ten calendar days after receipt by the Company of
written notice from the Executive of such change, reduction, alteration
or termination, as the case may be;
(ii) a determination by the Executive made in good faith
that as a result of a Change in Control and a change in circumstances
thereafter significantly affecting his position, changes in the
composition or policies of the Board, or of other events of material
effect, he has been rendered substantially unable to carry out, or has
been substantially hindered in the performance of, the authorities,
functions or duties attached to his position immediately prior to the
Change in Control, which situation is not remedied within ten calendar
days after receipt by the Company of written notice from the Executive
of such determination;
(iii) a change in the positions held by Executive or the
occurrence, as determined by Executive in good faith, of an adverse
change in the nature or scope of his authorities, powers, functions,
responsibilities or duties as the Chairman of the Board, President and
Chief Executive Officer of the Company; any reduction in Salary; any
reduction in Executive's bonus or incentive compensation (based upon
the greater of the dollar amount of bonus and other incentive
compensation that Executive received for the year preceding the Change
in Control or the average yearly amount of bonus and incentive
compensation that Executive received during the five years preceding
the Change in Control); a termination, reduction or alteration of the
disability policies or life or disability insurance benefits maintained
for Executive, any alteration or reduction of expense allowances or
reimbursement policies; or a reduction in scope or value of the
aggregate other benefits to which Executive was entitled prior to the
Change in Control;
(iv) the liquidation, dissolution, merger, consolidation
or reorganization of the Company or transfer of all or substantially
all of its business and/or assets, unless the successor or successors
(by liquidation, merger, consolidation, reorganization or otherwise) to
which all or substantially all of its business and/or assets have been
transferred (directly or by operation of law) shall have specifically
assumed all duties and obligations of the Company under this Agreement
pursuant to Section 16;
(v) the relocation of the Company's principal executive
offices, or the requirement by the Company that Executive have as his
principal location of work any location not within the greater Dallas,
Texas metropolitan area or that he travel away from his office in the
course of discharging his duties hereunder significantly more (in terms
of either consecutive days or aggregate days in any calendar year) than
required of him prior to the Change in Control; or
(vi) the Company commits any breach of this Agreement.
(b) Notwithstanding the above section or any other provision of
this Agreement, in no event shall the Company pay or be obligated to
pay the Executive an amount which would be an Excess Parachute Payment.
For purposes of this Agreement, the term "Excess Parachute Payment"
shall mean any payment or any portion thereof which would be an "excess
parachute payment" within the meaning of Section 280G of the Code, and
would result in the imposition of an excise tax under Section 4999 of
the Code, in the opinion of tax counsel selected by the Company's
independent accountants and acceptable to the Executive. If it is
established pursuant to a final determination of a court or an Internal
Revenue Service administrative appeals proceeding that, notwithstanding
the good faith of the Executive and the Company in applying the terms
of this Agreement, a payment (or portion thereof) made is an Excess
Parachute Payment, then, except as hereafter provided, the Executive
shall have an obligation to repay the Company upon demand an amount
equal to the minimum amount (but without interest) necessary to ensure
that no payment made or to be made by the Company pursuant to this
Agreement is an Excess Parachute Payment; provided, however, that if,
in the opinion of tax counsel selected by the Company's independent
accountants and acceptable to the Executive, such repayment will not
ensure that no Excess Parachute Payment would be made hereunder, then
(1) no such repayment obligation will exist and (2) the Company shall
pay to the Executive an additional amount in cash equal to the amount
necessary to cause the amount of the aggregate after-tax cash
compensation and benefits otherwise receivable by the Executive to be
equal to the aggregate after-tax cash compensation and benefits he
would have received as if Sections 280G and 4999 of the Code had not
been enacted.
(c) Upon written notice given by the Executive to the Company
prior to the receipt of Severance Compensation, the Executive, at his
sole option, may elect to have all or any part of any such amount paid
to him, without interest, on an installment basis selected by him.
(d) The payment of Severance Compensation by the Company to the
Executive shall not affect any rights and benefits which the Executive
may have pursuant to any other agreement, policy, plan, program or
arrangement of the Company providing benefits to the Executive prior to
the Termination Date, which rights shall be governed by the terms
thereof, except that payments hereunder after termination shall reduce
by an equal amount any sums payable after termination under the
Employment Agreement, dated the date hereof, by and between the Company
and the Executive. The Company shall provide to the Executive
throughout the Employment Term benefits substantially similar to those
which the Executive was receiving or entitled to receive immediately
prior to the Termination Date. Such benefits as provided by the
Company, however, shall be reduced to the extent comparable benefits
are actually received by the Executive during the Employment Term as a
result of employment other than with the Company.
(e) The Company shall have no right of set-off or counterclaim
in respect of any claim, debt or obligation against any payment or
benefit to or for the benefit of the Executive provided for in this
Agreement.
(f) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment required to be made
hereunder on a timely basis, the Company shall pay interest on the
amount thereof on demand at an annualized rate of interest equal to
120% of the then applicable Federal rate determined under Section
1274(d) of the Code, compounded semi-annually (but in no event shall
such interest exceed the highest lawful rate).
(g) Any termination of Executive's employment or removal of
Executive as an elected officer of the Company following the
commencement of any discussion authorized by the Board with a third
person that ultimately results in a Change in Control involving that
person or a different third party shall be deemed to be a termination
or removal of Executive after a Change in Control for purposes of this
Agreement and shall entitle Executive to all benefits under this
Agreement.
4. No Mitigation Required. In the event that this Agreement or
the employment of the Executive hereunder is terminated, the Executive
shall not be obligated to mitigate his damages nor the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise, and except for the termination of benefits pursuant to
Section 3(d), the acceptance of employment elsewhere after termination
shall in no way reduce the amount of Severance Compensation payable
hereunder.
5. Successors; Binding Agreement.
(a) The Company will require any successor and any corporation
or other legal person (including any "person" as defined in Section
2(d)(iii) of this Agreement) which is in control of such successor (as
"control" is defined in Regulation 230.405 or any successor rule or
regulation promulgated under the Securities Act of 1933, as amended) to
all or substantially all of the business and/or assets of the Company
(by purchase, merger, consolidation or otherwise), by agreement in form
and substance satisfactory to the Executive, to expressly assume and
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. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall be a
material breach of this Agreement by the Company. Notwithstanding the
foregoing, any such assumption shall not, in any way, affect or limit
the liability of the Company under the terms of this Agreement or
release the Company from any obligation hereunder. As used in this
Agreement, "Company" shall mean the Company as herein before defined
and any succcssor to its business and/or all or part of its assets as
aforesaid which executes and delivers the agreement provided for in
this Section 5 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
(b) This Agreement and all rights of the Executive hereunder
shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
6. Notice. The Company shall give written notice to Executive
within ten days after any Change in Control. Failure to give such
notice shall constitute a material breach of this Agreement. For
purposes of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed
to have been duly given when delivered or received after being mailed
by United States registered mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
Gilbert Darwyn Cornwell
2202 Greenbriar Court
Grand Prairie, TX 75050
If to the Company:
Peerless Mfg. Co.
Attn: Secretary
2819 Walnut Hill Lane
Dallas, TX 75229
or to such other address as any party may have furnished to the other
in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
7. Miscellaneous. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such
officer as may be specifically designated by the Board. No waiver by
either party hereto of, or compliance with, any condition or provision
of this Agreement to be performed by such other party shall be deemed a
waiver of similar or dissimilar provisions or conditions at the same or
at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, unless specifically referred to
herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this agreement. The
validity, interpretation, construction and performance of this
Agreement shall be governed by the substantive laws of the State of
Texas, without regard to principles of conflicts of law.
8. Validity. The invalidity or unenforceability of any provision
or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all
of which together will constitute one and the same instrument.
10. Employment Rights. Nothing expressed or implied in this
Agreement shall create any right or duty on the part of the Company or
the Executive to have the Executive remain in the employment of the
Company prior to any Change in Control; provided, however, that any
termination of employment of the Executive or removal of the Executive
as Chairman of the Board and an elected officer of the Company
following the commencement of any discussion authorized by the Board of
Directors of the Company with a third person that ultimately results in
a Change in Control shall be deemed to be a termination or removal of
the Executive after a Change in Control for purposes of this Agreement
and shall entitle the Executive to all Severance Compensation.
Notwithstanding any other provision hereof to the contrary, the
Executive may, at any time during the Employment Term, upon the giving
of 30 days prior written notice, terminate his employment with the
Company. If this Agreement or the employment of the Executive is
terminated under circumstances in which the Executive is not entitled
to any Severance Compensation, the Executive shall have no further
obligation or liability to the Company hereunder or otherwise with
respect to his prior or any future employment by the Company.
11. Withholding of Taxes. The Company may withhold from any
amounts payable under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or government regulation
or ruling; provided, however, that no withholding pursuant to Section
4999 of the Code shall be made unless, in the opinion of tax counsel
selected by the Company's independent accountant and acceptable to the
Executive, such withholding relates to payments which result in the
imposition of an excise tax pursuant to Section 4999 of the Code.
12. Enforcement Fees. All costs of litigation necessary for
Executive to defend the validity of this Agreement are to be paid by
Employer or its successors or assigns. The Company shall pay and be
solely responsible for any and all attorneys' and related fees and
expenses incurred by the Executive as a result of the Company's failure
to perform this Agreement or any provision thereof or as a result of
the Company or any person contesting the validity or enforceability of
this Agreement or any provision thereof as aforesaid.
13. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Executive is intended to be exclusive
of any other right or remedy, and every right and remedy shall, to the
extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or
in equity or otherwise. The assertion or employment of any right or
remedy hereunder, or otherwise, including with respect to Executive's
rights under that certain Employment Agreement of even date herewith,
shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective on the date and year first above written.
PEERLESS MFG. CO.
____________________________________
Sherrill Stone
Chairman of the Board
By Order of the Board of Directors
EXECUTIVE
____________________________________
Gilbert Darwyn Cornwell