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EXHIBIT 10.4[11][e]
March 29, 1994
Mr. Loren H. Hildebrand
38362 Crocus Lane
Palm Desert, CA 92260
Dear Loren:
In connection with, and in consideration of, your continuing services in the
position of Executive Vice President - Sales with Lewis Galoob Toys, Inc. (the
"Company"), the Company hereby offers you the following:
1. a. If you are terminated by the Company for reasons other than
"cause" (as hereinafter defined), or other than in connection
with a change in control of the Company (which is provided for
in paragraph 2 below), you will receive a continuation of your
base annual salary ("Salary Continuation") that is in effect
as of the date of termination of your employment ("Termination
Date") and a continuation of certain other benefits as
hereinafter provided ("Other Benefits", and collectively with
the Salary Continuation "Severance Benefits"), for a maximum
period of twelve (12) months from and after the Termination
Date ("Extension Period"); provided, however, that from and
after your Termination Date you will not receive or be
entitled to any continuation of any bonus or profit sharing
participation or eligibility for any part or all of the
Company's fiscal year in which the Termination Date occurs.
Except as provided below, Salary Continuation during the
Extension Period will be paid on the Company's normal payroll
schedule. If, however, during the Extension Period you
commence regular full-time employment elsewhere, your ongoing
Severance Benefits shall cease as of the date you commence
said employment; provided, however, that as of that date a
calculation shall be made to determine the aggregate amount of
Salary Continuation (excluding Other Benefits) that remains
unpaid and which you would have otherwise been entitled to
receive during the remaining portion of the Extension Period,
and the Company shall promptly pay you a lump sum (minus
withholdings and other required deductions) of an amount equal
to one-half (1/2) of that
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Salary Continuation calculation.
b. The Other Benefits referred to in paragraph 1.a. above include
all medical, health and welfare and insurance benefits that
were in effect and in which you participated as of the
Termination Date and these will continue during the Extension
Period until the earlier to occur of twelve (12) months from
the Termination Date or the date you commence regular
full-time employment elsewhere. The provisions and conditions
covering these Other Benefits, including but not limited to
the amount of any contributions to be made by you on a monthly
or other periodic basis, will be governed by the various plans
as they are in effect from time to time. Notwithstanding the
foregoing, earned Flexible Time Off ("FTO") stops accruing
and/or being earned as of your Termination Date and all
contributions to the Company's 401k and "cafeteria" benefit
plan shall stop as of the Termination Date.
c. Your automobile allowance and automobile program benefits,
including your Company gasoline credit card and reimbursement
for maintenance, insurance and other auto-related expenses,
will cease as of the Termination Date and will not be extended
to you during the Extension Period. The amount constituting
the Salary Continuation that you are paid during the Extension
Period will be adjusted downward to eliminate the monthly auto
allowance that you were receiving immediately prior to the
Termination Date.
d. For purposes of this letter, "regular full-time employment
elsewhere" shall not include or be deemed to include any
situation where you become self-employed, or any
self-employment circumstances where you own or control at
least 51% percent of the stock or other controlling equity of
an entity that serves as your employer and was created after
the Termination Date solely for the purpose of your ongoing
employment.
e. For purposes of this letter, "cause" shall mean:
i. Your gross neglect, knowing refusal or wilful failure
to properly perform the material duties and
responsibilities of your position or to properly
perform to a material extent the reasonable
directives or instructions of your immediate
supervisor, whether any of the foregoing is evidenced
by a single act or a series of acts;
ii. Your gross neglect, knowing refusal or wilful failure
to adhere or conform to, or abide by, the Company's
policies and procedures, whether evidenced by a
single act or a series of acts;
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iii. Any act or acts of dishonesty, gross negligence,
wilfulness, theft, fraud, violations of law
(including, but not limited to, convictions of a
felony or other crime involving moral turpitude, or
the entering of a guilty plea or a plea of nolo
contendre in connection with any such felony or moral
turpitude charge) or other intentional conduct,
whether or not in the course of or outside the scope
of your employment, which in the reasonable opinion
of the Company has had, or may or will have, a
material adverse effect on the Company's business,
property, goodwill or reputation.
2. Change in Control
a. For purposes of this letter, a "change in control" of the
Company shall be deemed to occur as of the date on which: (i)
a person or entity or group of persons or entities, acting in
concert ("Person") shall, in a transaction in which the
Company is not a party, become the direct or indirect
beneficial owner (within the meaning of Rule 13d-3 of the
Securities and Exchange Act of 1934, as amended from time to
time) of securities of the Company representing fifty-one
percent (51%) or more of the combined voting power of the
issued and outstanding voting securities of the Company (a
"Majority Owner") and/or (ii) the majority of the Company's
Board of Directors is no longer comprised of the incumbent
Directors who constitute the Board of Directors on the date of
this letter and any other individual(s) who becomes a Director
subsequent to the date of this letter whose election or
nomination for election as a Director, as the case may be, was
approved by at least a majority of the Directors who comprise
the incumbent Directors as of the date of such election or
nomination ("Incumbent Directors"); provided, however, that if
the composition of the Company's Board of Directors changes
after or in conjunction with a transaction to which the
Company is a party that results in a Person becoming a
Majority Owner then, for purposes of this Paragraph 3(a), and
notwithstanding the approval of the majority of the Incumbent
Directors, a change in control will be deemed to have taken
place if there is a change in more than one-third (1/3) of the
Board of Directors during the twelve (12) month period
following such a transaction or in more than one-half (1/2) of
the Board of Directors during the twenty-four (24) month
period following such a transaction.
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b. Subject to paragraph 2.d. below, if within a period of
eighteen (18) months following the date of such a change in
control:
-- you are either terminated for reasons other than
cause, or
-- you experience a material diminution of your job
responsibilities or authority or a demotion in the
level of your reporting relationship or a reduction
in your then-existing salary, or you are required to
relocate outside of the San Francisco Bay area, and
within thirty (30) days from the occurrence of such
act you exercise your right to terminate your
employment by written notice to the Company,
then upon such Termination Date you will receive the following:
(i) A lump sum payment (minus withholdings and other
required deductions) of an amount equal to two (2)
times your total base annual salary that is in effect
immediately prior to the Termination Date, plus
twenty-four (24) times the amount to which you are
then entitled for the monthly automobile allowance;
and
(ii) An additional lump sum payment (minus withholdings
and other required deductions) of an amount equal to
the greater of two (2) times: (x) the bonus that was
actually paid to you for the year's results for the
Company's fiscal year immediately preceding the year
in which your Termination Date occurs, or (y) the
bonus anticipated, if any, for the current fiscal
year in which your Termination Date occurs based upon
the actual results as compared to the Company's
financial plan as of such Termination Date. For
clarification purposes, an example of this
alternative bonus calculation is set forth in
Schedule 1, which is attached hereto and hereby made
part of this letter. It is also acknowledged that
the amount payable under this subparagraph may be
zero if there was no bonus paid in the preceding year
and no bonus anticipated in the current year as of
the Termination Date.
c. Subject to paragraph 2.d. below, in addition to the lump sum
payments provided for in paragraph 2.b. above, upon
termination of your employment pursuant to such paragraph 2.b.
you will also receive and be entitled to the following:
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(i) All Other Benefits that were in effect and in which
you participated immediately prior to the Termination
Date, for a period of twenty-four (24) months
following the Termination Date. The provisions and
conditions covering these Other Benefits, including
but not limited to the amount of any contributions to
be made by you on a monthly or other periodic basis,
will be governed by the various plans as they are in
effect from time to time. Notwithstanding the
foregoing, earned FTO stops accruing and/or being
earned as of your Termination Date and all
contributions to the Company's 401k and "cafeteria"
benefit plan shall stop as of the Termination Date.
(ii) In addition to the lump sum payment of the monthly
automobile allowance (referred to in paragraph
2.b.(i) above), for the period of twenty four (24)
months following the Termination Date you will be
entitled to continue to receive reimbursement for
items such as automobile maintenance, insurance and
other auto- related expenses, including the use of a
Company gasoline credit card, all in accordance with
the Company's executive automobile allowance and
reimbursement program as it is in effect on the
Termination Date and from time to time thereafter.
d. It is acknowledged and understood that the compensation plus
other benefits for which you are otherwise eligible pursuant to
a change in control of the Company in accordance with
paragraphs 2b. and c. above may constitute "parachute payments"
within the meaning of Section 280G of the Internal Revenue Code
of 1986, as amended (the "Code"), and that payment of the
aggregate total of such compensation and benefits could
constitute an "excess parachute payment" under Section 280G of
the Code if it equals an amount in excess of 2.99 times your
"Base Amount" as that term is defined in said Section 280G,
thereby resulting in some or all of such aggregate total being
subject to the excise tax under Section 4999 of the Code. (See
attached letter from Shereff, Friedman for further
explanation.) It is agreed that in such event the aggregate
total of such compensation and benefits shall be reduced by
the minimum amount necessary so that no portion thereof will be
subject to the excise tax under Section 4999 of the Code. It
is also understood and agreed that the Company will not
"gross-up" or make any other additional payments to you that
are intended, directly or indirectly, to partially or wholly
offset any such excise tax obligations.
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3. This letter and the other documents expressly referenced herein
constitute the sole and exclusive agreement between you and the
Company with regard to the specific subject matter contained herein
concerning your severance for a termination other than for cause, the
definition of "cause", and a change in control, and this letter
supersedes and replaces that portion of any prior agreement or
covenant, whether written or oral, between you and the Company
expressly covering any one or more of these specific items. However,
subject to this paragraph 3 and except as expressly set forth and/or
amended herein, any other written agreement that you have with the
Company concerning your current employment will remain in full force
and effect.
4. The terms and conditions of this letter shall continue in full force
and effect for a period of twenty-four (24) months from the date of
this letter, at which time such terms and conditions shall
automatically terminate unless renewed in writing by the Company, or
unless prior to that date you have been terminated pursuant to the
terms hereof or a change in control has occurred in which event the
terms and conditions of this letter will continue for the purposes
thereof.
Please sign and date the duplicate originals of this letter in the place
provided below, retain one fully executed original for your file and return the
other fully executed original to my attention.
Sincerely yours,
LEWIS GALOOB TOYS, INC.
/s/ William G. Catron
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William G. Catron
Executive Vice President,
General Counsel and
Chief Administrative Officer
ACCEPTED AND AGREED TO THIS 29th DAY OF March, 1994:
/s/ Loren H. Hildebrand
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Loren H. Hildebrand
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Attachments - Schedule 1
SCHEDULE 1
BONUS CALCULATION EXAMPLE
Pursuant to paragraph 2.b.(ii) of the letter dated March 30, 1995, to which
this Schedule is attached, assume that the executive has a bonus potential
based upon achievement of the annual income plan as follows:
PLAN BONUS POTENTIAL
---- ---------------
150% 100%
125% 75%
100% 50%
90% 25%
Assume that the executive in question has a maximum bonus potential of 75% of
base salary. As the table above illustrates, at 150% of plan, that executive
can earn the maximum available bonus or, in this case, 75% of base. If the
executive in question had a base salary of $250,000 per year, then the maximum
bonus potential in the year for that executive would be $187,500.
Let us assume that the termination of employment for this executive pursuant to
paragraph 3.b. of the letter occurs as of June 30 of a particular year. If the
net income plan for the Company through June 30 of the year in question was to
earn $1 million, and actual earning were $1.5 million, then the executive in
question would qualify for a bonus of 2 X $187,500 as the bonus plan component
pursuant to paragraph 3.b.(ii)(y) of the letter. In the event that this
payment is larger than 2 X the bonus paid to the executive in connection with
the previous year's results, he would be paid 2 X $187,500 pursuant to
paragraph 3.b.(ii). In the event that the bonus paid to the executive in
connection with the previous year's results was higher than $187,500, the
executive will be paid 2 X the previous year's bonus payment, as the payment
component pursuant to paragraph 3.b.(ii).
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