EXHIBIT 10(l)
AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into to be
effective as of the 20th day of July 2001, by and between PEERLESS MFG. CO. (the
"Company"), and ROY C. CUNY (the "Executive"), and amends in part and restates
and supersedes in its entirety that certain Agreement between the Company and
the Executive dated May 16, 2000.
WHEREAS, the Executive serves as a senior executive of the Company;
WHEREAS, the Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods, personnel and plans for the
future;
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;
WHEREAS, the parties desire to enter into this Agreement to set forth
the benefits which the Company will pay to Executive in the event of a "Sale of
the Company" or termination of Executive's employment under certain
circumstances following a "Change in Control" of the Company (in each case as
such terms or events are defined or discussed herein);
NOW, THEREFORE, in consideration of the foregoing and of the respective
covenants and agreements of the parties herein contained the parties agree as
follows:
1. Term. The term of this Agreement shall continue until the earliest
of (i) subject to the proviso at the end of this sentence, 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 resignation (except for those
events described in Section 3(a)(2)); provided, however, that during the term of
this Agreement, on each anniversary of a Change in Control, the three year
period referenced in clause (i) above shall automatically be extended for an
additional 12 months unless, not later than 60 calendar days prior to such
anniversary date, the Company shall have given written notice to the Executive
that it does not wish to have the term extended.
2. Definitions.
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(a) Acquiring Person. An "Acquiring Person" shall mean any person
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 trust with respect
thereto) or subsidiary of the Company, any person holding
Common Stock of the Company for or pursuant to the terms of
any such plan, or Donald A. Sillers, Jr. or members of his
immediate family.
(b) Affiliate and Associate. "Affiliate" and "Associate" shall
have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and
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Regulations under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") in effect on the date of this
Agreement.
(c) Cause. For "Cause" shall mean any of the following shall have
occurred:
(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; or
(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.
(d) 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;
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(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, 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 both (1) proposed by, and (2) 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.
(e) Code. The "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(f) 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.
(g) Disabled. "Disabled" means any mental or physical impairment
lasting more than 180 calendar days that prevents Executive from
performing the essential functions of his position with or
without reasonable accommodation, as determined by a physician
mutually agreeable to Executive and the Company. Executive agrees
to submit to appropriate medical examinations and authorize his
physicians to release medical information necessary to determine
whether Executive is "Disabled" for purposes of this Agreement.
(h) 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.
(i) Purchase Price. "Purchase Price" means the gross value of all
cash, securities and other property paid directly or indirectly
by an acquiror to a seller or sellers in connection with a Sale
of the Company. The value of any securities (whether debt or
equity) or other property shall be determined as follows: (i) the
value of securities that are freely tradeable in an established
public market will be determined on the basis of the average
closing market price on the last five trading days preceding one
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business day prior to the closing of a Sale of the Company and
(ii) the value of securities that are not freely tradeable or
have no established public market and the value of consideration
that consists of other property, will be the fair market value
thereof, as reasonably determined by the Company no later than
one business day prior to the closing of a Sale of the Company.
The Purchase Price will not be deemed to include the principal
amount of any indebtedness for borrowed money assumed or
acquired, directly or indirectly, by the acquiring party or any
of its affiliates in a Sale of the Company or retired, defeased
or otherwise cancelled in connection with a Sale of the Company.
(j) Sale Bonus. Shall have the meaning set forth in Section 4(a).
(k) Sale of the Company. A "Sale of the Company" means the
consummation of a sale by the Company to any entity not
affiliated with or controlled by the Company of (i) 51% or more
of the outstanding capital stock of the Company through purchase,
merger, consolidation, combination or otherwise or (ii) all or
substantially all of the assets of the Company.
(l) 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 for
the five most recent full calendar years (or such
fewer full calendar years if Executive has served
less than five full calendar years) prior to the
Change in Control; provided, however, that if at any
date of determination, Executive has not been
employed for a full calendar year, such lump sum
amount will equal 299% of Executive's then current
salary annualized; 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.
(m) Termination Date. The "Termination Date" shall be the effective
date upon which the Executive or the Company terminates the
employment of the Executive.
3. Rights of Executive Upon Change in Control and Subsequent
Termination.
(a) The Company shall provide the Executive, within ten days
following the Termination Date, Severance Compensation, but
without affecting the rights of the Executive or the Company at
law or in equity, if, following the occurrence of a Change in
Control, any of the following events shall occur:
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(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 Disabled; 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) an adverse 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 base
salary during the Employment Term or any adverse change in
the calculation of the annual bonus or incentive
compensation 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) 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
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(iv) the Company commits any breach (including under Section 6
below) of this Agreement which is not cured within ten
calendar days after receipt by the Company of written notice
from Executive of such breach.
(b) In the event that the total compensation paid to Executive as
severance in the event of a Change in Control, taking into account all
cash payments, shares of stock, accelerated vesting of stock options,
and bonuses, if any, is found to constitute "an excess parachute
payment" within the meaning of Section 280G of the Code, then the
Company will pay to Executive, in addition to the Severance
Compensation, an additional amount which, after reduction for income
taxes and excise taxes on such additional amount, is sufficient to
provide for the payment of any excise tax that may be due by Executive
on the total compensation amount.
(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
with the Company 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 of employment under the Employment Agreement, dated the
date hereof, by and between the Company and the Executive.
(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) If any of the events set forth in Section 3(a)(1) or 3(a)(2) occurs
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.
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4. Sale Bonus.
(a) If a Sale of the Company occurs on or before July 1, 2002, in addition
to any other payments, bonuses or amounts that Executive may be
entitled to under any other agreements with the Company, Executive
will be entitled to a cash payment in an amount equal to (i) the
Purchase Price divided by the number of issued and outstanding shares
of capital stock of the Company as of the closing of the Sale of the
Company, times (ii) 17,500, minus (iii) $455,000 (such amount being,
the "Sale Bonus"). The Sale Bonus will be subject to deduction and
withholding authorized or required by applicable law. The Sale Bonus
will be payable by the Company in full in cash at the closing of a
Sale of the Company. However, the Company will have no obligation to
pay Executive the Sale Bonus under this Section 4 if (1) a Sale of the
Company does not occur on or before July 1, 2002, or (2) even though a
Sale of the Company occurs on or before July 1, 2002, prior to the
closing of the Sale of the Company, (x) Executive voluntarily
terminates his employment with the Company, dies or becomes Disabled,
(y) the Company terminates Executive for Cause, or (z) Executive
breaches any of the material terms of this Agreement or the terms of
the Employment Agreement, dated July 20, 2001, by and between the
Company and Executive. The calculation of the Sale Bonus is based in
part on the number of issued and outstanding shares of the Company's
common stock (clause (ii)) as well as historical trading prices of
such shares (clause (iii)) as of the date hereof. Clauses (ii) and/or
(iii) of the calculation of the Sale Bonus will be adjusted as is
necessary to reflect the same economic terms in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the
Company's common stock after the date hereof, but will not be adjusted
upon the occurrence of any other dilutive event.
(b) In the event that the total compensation paid to Executive in the
event of a Sale of the Company, taking into account all cash payments,
shares of stock, accelerated vesting of stock options, and bonuses, if
any, is found to constitute "an excess parachute payment" within the
meaning of Section 280G of the Code, then the Company will pay to
Executive, in addition to the compensation paid as the Sale Bonus, an
additional amount which, after reduction for income taxes and excise
taxes on such additional amount, is sufficient to provide for the
payment of any excise tax that may be due by Executive on the total
compensation amount received by Executive.
5. 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 the acceptance of
employment elsewhere after termination shall in no way reduce the amount of
Severance Compensation payable hereunder.
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6. Successors; Binding Agreement.
(a) The Company will require any successor and any corporation or other
legal person 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 successor to its business and/or all or part of its assets as
aforesaid which executes and delivers the agreement provided for in
this Section 6 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.
7. 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:
Roy C. Cuny
4716 Lakeside
Colleyville, Texas 76034
If to the Company:
Peerless Mfg. Co.
2819 Walnut Hill Lane
Dallas, Texas 75229
Attn: Chairman of the Board
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.
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8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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, dated
July 20, 2001, shall not prevent the concurrent assertion or employment of any
other appropriate right or remedy.
15. Governing Law. This Agreement will be governed by and construed in
accordance with the internal laws of the State of Texas.
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16. Disputes. The parties to this Agreement agree that in the event there
is a dispute or controversy between them that cannot be settled through direct
discussions, it is in the best interests of all for such dispute or controversy
to be resolved in the shortest time and with the lowest cost of resolution as
practicable. Consequently, any such dispute, controversy or claim between the
parties to this Agreement will not be litigated, but instead will be resolved by
arbitration in accordance with Title 9 of the U.S. Code (United States
Arbitration Act) and the Commercial Arbitration Rules of the American
Arbitration Association (the "Rules"), and judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof. The
arbitration will be before one neutral arbitrator and will proceed under the
Expedited Procedures of said Rules. The arbitration will be held in Dallas,
Texas, or such other place as may be selected by mutual agreement. The
arbitrator will have the discretion to order a prehearing exchange of
information by the parties, and to set limits for both the scope and time period
of such exchange. All issues regarding exchange requests will be decided by the
arbitrator. Neither party nor the arbitrators may disclose the existence,
content or results of any arbitration hereunder, unless required to do so by
court or regulatory order, without the prior written consent of both parties.
Fees and expenses of the arbitration itself will be borne by the parties
equally. The arbitrator will also be authorized to award to the prevailing party
all or that fraction of its reasonable costs and fees as is deemed equitable.
IN WITNESS WHEREOF, the parties have executed this Agreement effective on
the date and year first above written.
PEERLESS MFG. CO.
/s/ SHERRILL STONE
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Sherrill Stone,
Chairman of the Board,
Chief Executive Officer and President
EXECUTIVE
/s/ ROY C. CUNY
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Roy C. Cuny
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