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EXHIBIT 10.7
Date: May 29, 1996
Dr. Frank J. Preston
50 Spring Road
Carlisle, PA 17013
Dear Frank:
Masland Corporation (the "Company") considers it essential to its best
interest and the best interests of its stockholders to foster the continuous
employment of key management personnel.
The Board of Directors of the Company (the "Board") has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management, including
yourself, to their assigned duties. In order to induce you to remain in the
employ of the Company, and in consideration of your agreement to the
termination of any existing employment contract you may have with the Company
or any predecessor; the Company agrees that you shall receive, upon the terms
and conditions set forth herein, the compensation and benefits set forth in
this letter agreement ("Agreement") during the Term hereof.
1. Term of Agreement. This Agreement shall commence as of the date of the
consummation the Offer (as defined in that certain Agreement and Plan of Merger
dated May 23, 1996 (the "Merger Agreement") (the "Effective Date") by and among
Lear Corporation ("Lear"), PA Acquisition Corp. and the Company) and, unless
earlier terminated as provided herein, shall continue in effect until the
fourth anniversary of such date (the "Term"); provided, that this Agreement
shall be of no force or effect unless and until the Offer is consummated. The
Term may be extended pursuant to paragraph 12, hereafter.
2. Terms of Employment. During the Term, you agree to be a full-time
employee of the Company serving in the position of Corporate Senior Vice
President of Lear and President of the Masland Division and to devote
substantially all of your working time and attention to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities associated with your position as Corporate Senior Vice
President of Lear and President of the Masland Division, to use your best
efforts to perform faithfully and efficiently such responsibilities. In
addition, you agree to serve in such other capacities or offices to which you
may be assigned, appointed or elected from time to time by the Board or the
Board of Directors of Lear. Nothing herein shall prohibit you from devoting
your time to civic and community activities, serving as a member of the Board
of Directors of other corporations who do not compete with the Company
(provided that you have received prior written approval from the Company's
Chairman) or managing personal investments, as long as the foregoing do not
interfere with the performance of your duties hereunder.
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3. Compensation.
(i) As compensation for your services, under this Agreement, you
shall be entitled to receive an initial base salary of $275,000 per
annum, to be paid in accordance with existing payroll practices for
executives of the Company. Increases in your base salary, if any,
shall be determined by the Compensation Committee of Lear. In
addition, you shall be eligible to receive an annual incentive
compensation bonus ("Bonus") to be determined from time to time by
the Compensation Committee of the Board of Directors of Lear.
(ii) In addition to compensation provided for in Subsection (i) of
this Section 3, the Company agrees (A) to provide the same or
comparable benefits with respect to any compensation or benefit plan
in which you participate as of the Effective Date which is material
to your total compensation (including, without limitation, the
Supplement Employee Retirement Pension Agreement dated March 30,
1995 with Frank J. Preston), unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan; and (B) to maintain your ability to
participate therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the
opportunities provided and the level of your participation relative
to other participants, than exists on the Effective Date.
(iii) The Company shall reimburse you for all reasonable travel,
entertainment and other business expenses incurred by you in the
performance of your responsibilities under this Agreement promptly
upon receipt of written substantiation of such expenses. You shall
also be paid all additional amounts necessary to discharge all
federal and state tax liabilities incurred by you that are
attributable to all deemed compensation arising as a consequence of
your personal use of property owned or leased by the Company,
excepting only your personal use of any Company aircraft, including
federal and state taxes assessed against such additional
compensation.
(iv) You shall be entitled to perquisites available to all other
executives of the Company and shall be entitled to 4 weeks of
vacation per year.
(v) Upon consummation of the Merger, the options to purchase
60,000 shares of Common Stock, $.01 par value per share, of the
Company ("Company Common Stock") granted to you on January 3, 1995
and 30,000 shares of Company Common Stock granted to you on May 11,
1995, in each case under the 1993 Stock Option Incentive Plan of the
Company, shall (i) become options to purchase Common Stock, $.01
par value per share, of Lear pursuant to Section 6.07 of the Merger
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Agreement and (ii) shall all become vested and exercisable upon
consummation of the Merger.
4. Termination of Employment. Your employment may be terminated by
either the Company or you by giving a Notice of Termination, as defined in
Subsection (iv) of this Section 4. If your employment should terminate during
the Term, your entitlement to benefits shall be determined in accordance with
Section 5 hereof.
(i) Disability. If, as a result of your incapacity due to physical
or mental illness, you are unable to perform your duties hereunder
for more than six consecutive months or six months aggregate during
any twelve month period, your employment may be terminated for
"Disability".
(ii) Cause. Termination of your employment for "Cause" shall mean
termination upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any
such failure resulting from your Disability), (B) the engaging by
you in conduct which is significantly injurious to the Company,
monetarily or otherwise, (C) your conviction of a felony, (D) your
abuse of illegal drugs or other controlled substances or your
habitual intoxication, or (E) the breach of any of your material
obligations hereunder including without limitation any breach of
Section 9 or 10 hereof. For purposes of this Subsection, no act or
failure to act, on your part shall be deemed "willful" unless
knowingly done, or omitted to be done, by you not in good faith and
without reasonable belief that your action or omission was in the
best interest of the Company.
(iii) Good Reason. For purposes of this Agreement, "Good Reason"
shall mean the occurrence, without your express written consent, of
any of the following circumstances unless such circumstances are
fully corrected prior to the Date of Termination specified in the
Notice of Termination, as such terms are defined in Subsections (v)
and (iv) of this Section 4, respectively, given in respect thereof:
(A) The permanent assignment to you of any duties inconsistent
with your status as an executive officer of the Company, your
physical relocation on a permanent basis to an area outside of
the metropolitan Detroit area, a substantial adverse
alteration in the nature or status of your responsibilities
from those in effect immediately prior to such assignment of
duties, your removal from any office specified in Section 2
hereof;
(B) Any reduction by the Company in your base salary as in
effect from time to time, except for across-the-board salary
reductions similarly affecting all executive officers of the
Company;
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(C) The failure by the Company to pay or provide to you within
seven (7) days of receipt by the Company of your written
demand any amounts of base salary or Bonus or any benefits
which are due, owing and payable to you pursuant to the terms
hereof, except pursuant to an across-the-board compensation
deferral similarly affecting all executive officers, or to pay
to you any portion of an installment of deferred compensation
due under any deferred compensation program of the Company;
(D) Except in the case of across-the-board reductions,
deferrals or eliminations similarly affecting all executive
officers of the Company, the failure by the Company to (i)
continue in effect any compensation plan in which you
participate which is material to your total compensation,
including but not limited to the Company's plans currently in
effect or hereafter adopted, and any plans adopted in
substitution therefore, or (ii) continue to provide you with
benefits substantially similar, in aggregate, to the
Company's life insurance, medical, dental, health, accident or
disability plans in which you are participating at the date of
this Agreement; or
(E) The failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform
this Agreement, as contemplated in Section 7 hereof.
Your continued employment with the Company shall not constitute
consent to, or a waiver of rights with respect to, any circumstance
constituting Good Reason hereunder.
(iv) Notice of Termination. Any termination of your employment by
the Company or by you shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 8
hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination
provision in this agreement relied upon, if any, and shall set forth
in reasonable detail the facts and circumstances claimed to provide
a basis for termination of your employment under the provision so
indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean
(A) if your employment is terminated for Disability pursuant to
Subsection (i) of this Section 4, thirty (30) days after Notice of
Termination is given (provided that you shall not have returned to
the full-time performance of your duties during such thirty (30) day
period), (B) if your employment is terminated by reason of your
death, the date of your death, (C) if by you for Good Reason or by
either party for any other reason (other than Disability, death, or
your voluntary resignation without Good Reason),
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the date specified in the Notice of Termination (which, in the
case of a termination by you for Good Reason, shall not be less than
thirty (30) nor more than sixty (60) days from the date such Notice
of Termination is given), and (D) if your employment is terminated
by your voluntary resignation without Good Reason (as defined in
Subsection (iii) of this Section 4), the Date of Termination shall
be forty-five (45) days from the date such Notice of Termination is
given or such other date as may be identified by the Company.
Unless the Company instructs you not to do so, you shall continue to
perform services as provided in this Agreement through the Date of
Termination.
5. Compensation Upon Termination or During Disability. Upon termination
of your employment with the Company during the Term, you shall be entitled to
the following compensation and benefits:
(i) If your employment is terminated for Disability, you shall
receive until the end of the Term all compensation payable to you
under the Company's disability and medical plans and programs, as in
effect on the Date of Termination plus an additional payment from
the Company (if necessary) such that the aggregate amount received
by you in the nature of salary continuation from all sources equals
your base salary at the rate in effect on the Date of Termination.
After the end of the Term, your benefits shall be determined under
the Company's retirement, insurance and other compensation programs
then in effect in accordance with the terms of such programs,
provided that such terms shall not be less advantageous to you than
the terms of such programs in effect as of the Effective Date.
(ii) If your employment shall be terminated (A) by the Company for
Cause, or (B) by you other than for Good Reason, the Company shall
pay you your full base salary through the Date of Termination, at
the rate in effect at the time Notice of Termination is given, plus
all other amounts to which you are entitled under any compensation
or benefit plans of the Company at the time such payments are due,
and the Company shall have no further obligations to you under this
Agreement. Provided, however, that if your employment is terminated
by your voluntary resignation without Good Reason, you shall be
compensated per this Paragraph only to the extent that you actively
performed your assigned responsibilities through the Date of
Termination.
(iii) If your employment shall be terminated by reason of your
death, the Company shall pay your estate or designated beneficiary
(as designated by you by written notice to the Company, which
designation shall remain in effect for the remainder of the Term and
any extensions thereof until revoked or a new beneficiary is
designated, in either case by written notice to the Company) your
full base salary
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through the Date of Termination and for a period
of 12 whole calendar months thereafter plus, if the Date of
Termination shall not occur on the first day of a calendar month,
the balance of the month in which the Date of Termination occurs, at
the rate in effect at the time of your death, plus any Bonus earned,
prorated for the portion of the Bonus measurement period occurring
prior to the date of your death, plus all other amounts to which you
are entitled under any compensation or benefit plans of the Company
at the date of your death, and the Company shall have no further
obligation to you, your beneficiaries or your estate under this
Agreement.
(iv) If your employment shall be terminated (a) by the Company other
than for Cause or Disability or (b) by you for Good Reason, then you
shall be entitled to the benefits provided below:
(A) The Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time
Notice of Termination is given (or, if greater, at the rate in
effect 30 days prior to the time Notice of Termination is
given), plus all other amounts to which you are entitled under
any compensation or benefit plans of the Company, including
without limitation, any Bonus measurement period occurring
prior to the Date of Termination, at the time such payments
are due, except as otherwise provided below;
(B) in lieu of any further salary payment to you for periods
subsequent to the Date of Termination, the Company shall pay
to you your full base salary at the rate in effect immediately
prior to the time Notice of Termination is given (or, if
greater, at the rate in effect 30 days prior to the time
Notice of Termination is given), payable periodically in
accordance with past payroll practices, until the end of the
Term;
(C) in lieu of any further Bonus payments to you for periods
subsequent to the Date of Termination, the Company shall pay
to you a Bonus payable in each March following the Date of
Termination in respect of the previous plan fiscal year equal
to the quotient obtained by aggregating the Bonuses received
by you in respect of the two plan fiscal years ending prior to
the Date of Termination (the "Bonus Period") and dividing such
sum by two. Such Bonus shall be paid in respect of each
plan fiscal year or portion thereof ending after the Date of
Termination until the end of the Term, and shall be prorated
for partial years, if any, including without limitation the
portion of the calendar year occurring after the Date of
Termination and the final plan fiscal year in respect of which
any such March Bonus is payable pursuant to this Section
5(iv)(C). Provided, however, that the amount of bonus to be
paid pursuant to
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this Paragraph shall not be greater than the amount of
bonus that would have been paid in accordance with Bonus
Plans, existing from time to time, had your employment not
been terminated;
(D) until the end of the Term, you will continue to
participate in all other compensation and benefit plans
(including perquisites) in which you were participating
immediately prior to the time Notice of Termination is given,
or comparable plans substituted therefor; provided, however,
that if you are ineligible, (e.g., by operation of law or the
terms of the applicable plan to continue to participate in
any such plan) the Company will provide you with a comparable
level of compensation or benefits;
(E) the Company shall also pay to you all reasonable legal
fees and expenses incurred by you in contesting or disputing
any such termination or in seeking to obtain or enforce any
right or benefit provided by this Agreement if such
termination is determined by arbitration to have been for Good
Reason or other than Cause or Disability; and
(F) if you should die after the Date of Termination and prior
to the end of the period of payment provided for in paragraphs
(B), (C), and (D) hereof, the Company shall pay your estate or
your designated beneficiary any amounts that are or become
payable pursuant to any of such paragraphs until the end of
the Term.
(v) In addition to all other amounts payable to you under this
Section 5, you shall be entitled to receive all benefits payable to
you pursuant to the terms of any plan or agreement of the Company
relating to retirement benefits.
6. Travel. You shall be required to travel to the extent necessary for
the performance of your responsibilities under this Agreement.
7. Successors; Binding Agreement. The Company will, by Agreement in form
and substance satisfactory to you, require any successor (whether direct or
indirect, by purchase merger, consolidation or otherwise) to all or
substantially all the business and/or assets of the Company, 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 assumption
and agreement prior to the effectiveness of any such succession shall entitle
you to compensation from the Company in the same amount and on the same terms
as you would be entitled to hereunder if you terminate your employment for Good
Reason, except that for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be deemed the Date of
Termination. As used in this Agreement,
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"Company" shall mean the Company as herein before defined and any
successor to its business and/or assets as aforesaid which assumes and agrees
to perform this Agreement by operation of law, or otherwise.
8. Notices. For the purpose 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 mailed by United States
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the
Secretary of the Company (or, if you are the Secretary at the time such notice
is to be given, to the Chairman of the Company's Board of Directors), or to
such other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
9. Noncompetition.
(i) Until the Date of Termination, you agree not to enter into
competitive endeavors and not to undertake any commercial activity
which is contrary to the best interests of Lear, the Company or
their respective affiliates, including becoming an employee, owner
(except for passive investments of not more than one percent of the
outstanding shares of, or any other equity interest in, any company
or entity listed or traded on a national securities exchange or in
an over-the-counter securities market), officer, consultant, agent
or director of any firm or person which either directly or
indirectly competes with a line or lines of business of Lear or the
Company. Notwithstanding any provision of this Agreement to the
contrary, you agree that your breach of the provisions of this
Section 9(i) shall permit the Company to terminate your employment
for Cause.
(ii) If you are terminated for Cause or if you resign, until the
later of (A) one year after the Date of Termination and (B) the
conclusion of any period that you continue to be paid your salary
(including any other payments in lieu of salary) pursuant to Section
5 hereof and for one year thereafter, or you are terminated other
than for Cause, until the later of (A) the Date of Termination and
(B) the conclusion any period that you continue to be paid your
salary (including any other payment in lieu of salary) pursuant to
Section 5 hereof, you agree not to become an employee, owner (except
for passive investments of not more than
one percent of the outstanding shares of, or any other equity
interest in, any company or entity listed or traded on a national
securities exchange or in an over-the-counter securities market),
consultant, officer, agent or director of any firm or person which
directly or indirectly competes with a line or lines of business of
Lear or the Company. During the period of payment provided in
Section 5 hereof, you will be available, consistent
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with other responsibilities that you may then have, to answer
questions and provide advice to the Company. Notwithstanding
anything in this Agreement to the contrary, you agree that, from
and after any breach by you of the provisions of this Section 9(ii),
the Company shall cease to have any obligations to make payments to
you under this Agreement.
(iii) If you are terminated for Cause or if you resign, until the
later of (A) one year after the Date of Termination and (B) the
conclusion of any period that you continue to be paid your salary
(including any other payments in lieu of salary) pursuant to Section
5 hereof and for one year thereafter, or if you are terminated
other than for Cause, until the later of (A) the Date of Termination
and (B) the conclusion of any period that you continue to be paid
your salary (including any other payment in lieu of salary) pursuant
to Section 5 hereof, you shall not directly or indirectly, either on
your own account or with or for anyone else, (X) solicit or attempt
to solicit any of Lear or the Company's customers (Y) solicit or
attempt to solicit for any business endeavor any employee of Lear or
the Company or (Z) otherwise divert or attempt to divert from Lear
or the Company any business whatsoever or interfere with any
business relationship between Lear or the Company and any other
person.
(iv) You acknowledge and agree that damages for breach of the
covenant not to compete in this Section 9 will be difficult to
determine and will not afford a full and adequate remedy, and
therefore agree that the Company, in addition to seeking actual
damages pursuant to Section 11 hereof, may seek specific enforcement
of the covenant not to compete in any court of competent
jurisdiction, including, without limitation, by the issuance of a
temporary or permanent injunction, without the necessity of a bond.
You and the Company agree that the provisions of this covenant not
to compete are reasonable. However, should any court or arbitrator
determine that any provision of this covenant not to compete is
unreasonable, either in period of time, geographical area, or
otherwise, the parties agree that this covenant not to compete
should be interpreted and enforced to the maximum extent which such
court or arbitrator deems reasonable.
10. Confidentiality.
(i) You shall not knowingly use, disclose or reveal to any
unauthorized person, during or after the Term, any trade secret or
other confidential information relating to the Company or any of its
affiliates, or any of their respective businesses or principals,
such as, without limitation, dealers' or distributor's lists,
information regarding personnel and manufacturing processes,
marketing and sales plans, and all other such information; and you
confirm that such information is the exclusive
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property of the Company and its affiliates. Upon termination
of your employment, you agree to return to the Company on demand of
the Company all memoranda, books, papers, letters and other data,
and all copies thereof or therefrom, in any way relating to the
business of the Company and its affiliates, whether made by you or
otherwise in your possession.
(ii) Any ideas, processes, characters, productions, schemes, titles,
names, formats, adaptations, plots, slogans, catchwords, incidents,
treatment, and dialogue which you may conceive, create, organize,
prepare or produce during the period of your employment and which
ideas, processes, etc. relate to any of the businesses of the
Company, shall be owned by the Company and its affiliates whether or
not you should in fact execute an assignment thereof or other
instrument or document which may be reasonably necessary to protect
and secure such rights to the Company.
(iii) Notwithstanding anything in this Agreement to the contrary,
you agree that from and after any breach by you of the provisions of
this Section 10 during any period of payment provided in Section 5
hereof, the Company shall cease to have any obligations to make
payments to you under this Agreement.
11. Arbitration.
(i) Except as contemplated by Section 9 and Section 11 (iii)
hereof, any dispute or controversy arising under or in connection
with this Agreement that cannot be mutually resolved by the parties
to this Agreement and their respective advisors and representatives
shall be settled exclusively by arbitration in Southfield, Michigan
before one arbitrator of exemplary qualifications and stature, who
shall be selected jointly by an individual to be designated by the
Company and an individual to be selected by you, or if such two
individuals cannot agree on the selection of the arbitrator, who
shall be selected pursuant to the procedures of the American
Arbitration Association.
(ii) The parties agree to use their best efforts to cause (a)
the two individuals set forth in the preceding Section 11 (i), or,
if applicable, the American Arbitration Association, to appoint the
arbitrator within 30 days of the date that a party hereto notifies
the other party that a dispute or controversy exists that
necessitates the appointment of an arbitrator, and (b) any
arbitration hearing to be held within 30 days of the date of
selection of the arbitrator, and, as a condition to his or her
selection, such arbitrator must consent to be available for a
hearing at such time.
(iii) Judgment may be entered on the arbitrator's award in any court
having jurisdiction, provided that you shall be entitled to seek
specific performance of your
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right to be paid and to participate in benefit programs during
the pendency of any dispute or controversy arising under or in
connection with this Agreement. The Company and you hereby agree
that the arbitrator shall be empowered to enter an equitable decree
mandating specific performance of the terms of this Agreement.
(iv) If you prevail in full or in substantial part, the Company
shall bear all expenses of the arbitrator incurred in any
arbitration hereunder. The Company agrees to pay your reasonable
and documented legal fees and expenses in connection with any
arbitration hereunder if you prevail in full or in substantial part.
12. Extension of Term. The Term of this Agreement shall be automatically
extended for a period of one year on each anniversary of the Effective Date of
this Agreement; said automatic extension commencing on the second anniversary
of the Effective Date. There shall be no renewal of the Term after the Date of
Termination.
13. Modifications. No provision of this Agreement may be modified,
amended, waived or discharged unless such modification, amendment, waiver or
discharge is agreed to in writing and signed by both you and such officer of
the Company as may be specifically designated by the Board.
14. No Implied Waivers. Failure of either party at any time to require
performance by the other party of any provision hereof shall in no way affect
the full right to require such performance at any time thereafter. Waiver by
either party of a breach of any obligation hereunder shall not constitute a
waiver of any succeeding breach of the same obligation. Failure of either
party to exercise any of its rights provided herein shall not constitute a
waiver of such right.
15. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Michigan.
16. Payments Net of Taxes. Any payments provided for herein which are
subject to Federal, State or local tax or other withholding requirements, shall
have such amounts withheld prior to payment.
17. Survival of Obligations. The obligations of the Company under Section
5(iii) and your obligations under Sections 9 and 10 hereof shall survive the
expiration of the Term of this Agreement.
18. Capacity of Parties. The parties hereto warrant that they have the
capacity and authority to execute this Agreement.
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19. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of the Agreement, which shall remain in full force and effect.
20. 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.
21. Entire Agreement. This Agreement and any attachments hereto, contain
the entire agreement by the parties with respect to the matters covered herein
and supersedes any prior agreement (including without limitation any prior
employment agreement), condition, practice, custom, usage and obligation with
respect to such matters insofar as any such prior agreement, condition,
practice, custom, usage or obligation might have given rise to any enforceable
right. No agreements, understandings or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement.
[signature page follows]
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If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
MASLAND CORPORATION
BY: /s/ William J. Branch
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Agreed to this 29th day of May, 1996
BY: /s/ Frank J. Preston
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Dr. Frank J. Preston
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