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Exhibit 10.7
BONUS AGREEMENT
This BONUS AGREEMENT ("Agreement"), dated as of January 5, 1998, is
among SH Holdings Corp. ("Holdings"), Steel Heddle Mfg. Co. ("Steel Heddle,"
and together with Holdings and any of their subsidiaries, the "Company") and
the employees of the Company signatory hereto (each an "Executive" and
collectively, the "Executives"). Certain capitalized terms used in this
Agreement are defined in paragraph 8 hereof.
1. Target Bonus. For the fiscal year beginning on January 5, 1998 and
ending on January 2, 1999 (the "1998 Fiscal Year"), and each fiscal
year thereafter during the term hereof, each Executive shall be
entitled to an annual bonus ("Target Bonus") in an amount equal to (x)
his Base Salary times (y) the applicable Bonus Percentage set forth on
Attachment 1 to such Executive's copy of this Agreement.
A Target Bonus shall only be payable to the Executives if the Company
meets its performance goal (the "Target") established by the Board of
Directors of EBIT equal to $19,369,000 (before non-recurring or
extraordinary expense add-backs) for the 1998 Fiscal Year.
2. Target Bonus Portion. If the Company's performance level is not at
Target, each Executive shall be entitled to an annual bonus ("Target
Bonus Portion"), if any, in an amount equal to his Target Bonus
adjusted as follows:
(i) if actual EBIT is greater than ninety percent (90%) of Target for
such fiscal year but not greater than one hundred percent (100%) of
Target for such fiscal year, the Target Bonus Portion for such fiscal
year shall equal the sum of (x) sixty percent (60%) of Target Bonus
plus (y) the Target Bonus multiplied by the following fraction:
4 x [ actual EBIT - (90% of Target) ]
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Target
(ii) if actual EBIT is greater than one hundred percent (100%) of
Target for such fiscal year but not greater than one hundred twenty
percent (120%) of Target for
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such fiscal year, the Target Bonus Portion for such fiscal year shall
equal the sum of (x) seventy percent (70%) of Target Bonus plus (y)
the Target Bonus multiplied by the following fraction:
3 x [ actual EBIT - (90% of Target) ]
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Target
(iii) if actual EBIT is greater than one hundred twenty percent (120%)
of Target for such fiscal year, then the Target Bonus Portion with
respect to such fiscal year shall equal one hundred sixty percent
(160%) of the Target Bonus.
Determinations of the amount of EBIT and all other matters in connection with
the Target Bonus and the Target Bonus Portion shall be made in good faith by
the Board of Directors, based upon the Company's financial statements (to the
extent possible), and such determination, if made in good faith, shall be
conclusive and binding upon the Company and the Executives. In the event of
any acquisition, merger, recapitalization or other similar event, or any change
in generally accepted accounting principles or the application thereof, the
Board of Directors, in its sole discretion, may make such adjustments to the
Target, to the calculation of the Target Bonus and the Target Bonus Portion, to
the definition of EBIT or to the other provisions hereof as the Board of
Directors may deem necessary or reasonably desirable so that the right of each
Executive to a Target Bonus or Target Bonus Portion hereunder shall
appropriately relate to the results of operations of the consolidated assets of
the Company and its Subsidiaries after giving effect to such event. Each
determination of the Target Bonus or Target Bonus Portion shall use as a
reference point the Company's annual audited financial statements, and, if made
in good faith, shall be conclusive and binding upon the Company and the
Executives, absent manifest error.
3. Termination of Employment.
a. If an Executive's employment ends before the end of a fiscal
year for any of the following reasons:
i. in the event of the Executive's death;
ii. in the event of the Executive's Incapacity;
iii. in the event the Executive terminates his employment
with the Company for Good Reason;
iv. in the event the Company terminates Executive's
employment without Cause; or
v. in the event of retirement which entitles the
Executive to receive benefits under the Company's
retirement plans,
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then the Executive shall be paid his Target Bonus or Target Bonus Portion, as
applicable, prorated for the time of his actual employment during the fiscal
year.
b. If an Executive's employment ends for a reason other than
those enumerated in subparagraph 3.a above, the Executive
shall not receive a bonus based on the Company's performance
for the fiscal year.
Notwithstanding any Target Bonus or Target Bonus Portion to be paid by the
Company to an Executive pursuant to this paragraph 3, this Agreement shall
automatically terminate upon the termination of an Executive's employment with
the Company for any reason.
4. Payment. Payment of all amounts due under this Agreement shall be
made promptly after audited financial statements for the fiscal year
are sent to shareholders.
5. Term. Subject to earlier termination as provided in paragraph 3, this
Agreement shall be effective for the 1998 Fiscal Year and shall renew
annually for one-year terms unless terminated pursuant to the terms
hereof. This Agreement may be terminated or the provisions hereof
modified by the Board of Directors for any subsequent fiscal year if
the Board takes actions, and the written notice thereof is given, at
least ninety (90) days prior to the beginning of such fiscal year.
6. Termination of Prior Bonus Plans and Agreements. Each Executive
hereby agrees that the terms of this Agreement shall determine any and
all rights and obligations relating to performance bonuses or
profit-sharing awards owed to the Executive by the Company. Any plan
or policy of the Company (including its Annual Bonus Plan for 1997)
and any prior agreement, whether written or oral, between the Company
and any Executive relating to the payment of any performance bonus or
profit-sharing award to the Executive by the Company is hereby
terminated and of no effect. Consistent with the understanding of the
Company and the Executives, the terms of this performance
bonus/profit-sharing Agreement may be amended from time to time based
on the Company's attaining certain performance goals established with
regard to changing circumstances of the Company.
7. Definitions.
"Base Salary" means, with respect to an Executive, the annual salary
of the Executive as established by the Company with respect to that Executive.
Each Executive's Base Salary for the 1998 Fiscal Year is set forth on
Attachment 1 to such Executive's copy of this Agreement. For the fiscal year
commencing January 3, 1999, each Executive's Base Salary shall increase by 3%
per annum.
"Bonus Percentage" means, with respect to an Executive, the percentage
set forth in paragraph 1 with respect to that Executive.
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"Board" means the Board of Directors of SH Holdings Corp. or Steel
Heddle Mfg. Co.
"Cause" means (a) a material failure, refusal or neglect to perform
and discharge the duties and responsibilities of the Executive's employment,
(b) a willful action that is materially inconsistent with the Executive's
employment, (c) a material breach of fiduciary duties by the Executive as an
officer or member of the Board or any of its subsidiaries or affiliates, (d)
gross misconduct by the Executive that is injurious to the Company or any of
its subsidiaries or affiliates, or (e) conviction of a felony involving the
personal dishonesty of the Executive.
"Company" means SH Holdings Corp., Steel Heddle Mfg. Co. and any of
their subsidiaries.
"EBIT" shall mean, with respect to any fiscal period, the consolidated
net income of the Company and its subsidiaries for such fiscal period
determined in accordance with generally accepted accounting principles, plus
(1) all amounts deducted in computing such net income in respect of interest
accrued, plus (2) all amounts deducted in computing such net income in respect
of taxes based upon or measured by income, plus, (3) all amounts deducted in
computing such net income in respect of fees paid or accrued to BCC Industrial
Services, Inc., or any successor thereto or affiliate thereof performing
similar services if such successor or affiliate is also an affiliate of the
Company, plus (4) all expenses incurred by the Company in connection with any
transaction resulting in a change of control of the Company or its parent or a
recapitalization or refinancing determined in accordance with generally
accepted accounting principles on a consolidated basis, minus (5) all amounts
added in computing such net income resulting from extraordinary or
non-recurring gains or from the write-up of any assets, and minus (6) any
amounts included in net income in respect of income earned or accrued other
than in the ordinary conduct of the Company's business.
"Executive" means any employee of the Company signatory hereto.
"1998 Fiscal Year" means the fiscal year commencing on January 5, 1998
and ending on January 2, 1999.
"Good Reason" means (a) any removal of the Executive from the position
indicated in paragraph 1 hereof except in connection with termination of the
Executive's employment for Cause or a reduction in the Executive's Base Salary,
or (b) a reduction in benefits payable under this Agreement or under the
Severance Policy of the Company adopted by the Company on December 5, 1997, or
(c) any other willful action by the Company that is materially inconsistent
with the terms of this Agreement.
"Incapacity" means physical disability which renders an Executive
unable to satisfactorily perform his duties.
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"Target" means the performance goals of the Company, measured in terms
of EBIT, as established by Company management and approved by the Board of
Directors as part of its annual operating plan. For the 1998 Fiscal Year,
Target is EBIT equal to $19,369,000 (before non-recurring or extraordinary
expense add-backs).
"Target Bonus" means, with respect to an Executive, the annual bonus
amount to be paid by the Company to such Executive pursuant to paragraph 1.
"Target Bonus Percentage" means the percentage set forth in paragraph
2 with respect to the Company's relevant Target Percentage Level.
"Target Bonus Portion Amount" means, with respect to an Executive, the
annual bonus amount, expressed as a percentage of the applicable Target Bonus
for such Executive, to be paid by the Company to such Executive pursuant to
paragraph 2.
"Target Percentage Level" means the performance level of the Company,
expressed as a percentage of Target.
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If the foregoing corresponds with your understanding of our agreement,
kindly sign this letter and return a copy to the undersigned, whereupon it
shall become a binding agreement between the Company and each of you.
Very truly yours,
SH HOLDINGS CORP.
By:/s/ Benjamin G. Team
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Title: President
STEEL HEDDLE MFG. CO.
By: /s/ Benjamin G. Team
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Title: President
Accepted and agreed to by the following Executives:
/s/ Benjamin G. Team
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Benjamin G. Team
/s/ Robert W. Dillon
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Robert W. Dillon
/s/ Jerry B. Miller
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Jerry B. Miller
/s/ J. Brant Connor
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J. Brant Conner
/s/ Thomas A. Korbutt
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Thomas A. Korbutt
/s/ Edward J. Treglia
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Edward J. Treglia
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/s/ John D. Wright
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John D. Wright
/s/ C. Randall Boggs
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C. Randall Boggs
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ATTACHMENT 1
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1998
Bonus Fiscal Year
Name Title Percentage Base Salary
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Benjamin G. Team President and Chief 45% $294,000
Executive Officer
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ATTACHMENT 1
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1998
Bonus Fiscal Year
Name Title Percentage Base Salary
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Robert W. Dillon Executive Vice 45% $219,000
President
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ATTACHMENT 1
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1998
Bonus Fiscal Year
Name Title Percentage Base Salary
---- ----- ---------- -----------
Jerry B. Miller Vice President - 45% $187,000
Finance & Secretary
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ATTACHMENT 1
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1998
Bonus Fiscal Year
Name Title Percentage Base Salary
---- ----- ---------- -----------
J. Brant Conner Sales Manager 25% $135,000
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ATTACHMENT 1
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1998
Bonus Fiscal Year
Name Title Percentage Base Salary
---- ----- ---------- -----------
Thomas A. Korbutt Vice President - 25% $125,000
Frame Division
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ATTACHMENT 1
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1998
Bonus Fiscal Year
Name Title Percentage Base Salary
---- ----- ---------- -----------
Edward J. Treglia Manager - Rolled 25% $90,000
Products Division
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ATTACHMENT 1
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1998
Bonus Fiscal Year
Name Title Percentage Base Salary
---- ----- ---------- -----------
John D. Wright Manager - Heddle 25% $110,000
Division
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ATTACHMENT 1
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1998
Bonus Fiscal Year
Name Title Percentage Base Salary
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C. Randall Boggs Manager - Reed 25% $100,000
Division