EXHIBIT 10(n)
AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into to be
effective as of the 16th day of July, 2003 (the "Effective Date"), by and
between PEERLESS MFG. CO. (the "Company"), and WILLIAM T. STROHECKER
("Executive").
WHEREAS, the Board of Directors of the Company (the "Board") believes
Executive will contribute substantially to the Company and wishes to offer an
inducement to Executive to become an employee 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 termination
of Executive's employment following a "Change in Control" of the Company, except
as a result of death, disability, voluntary resignation or termination by the
Company for Cause (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 commence on the sixth
month anniversary of the Effective Date and 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) Executive's death, or
(iii) 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 Executive that it does not
wish to have the term extended.
2. Definitions.
(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 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 or crime involving moral
turpitude;
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(ii) commission by Executive of an act of fraud or other
act reflecting unfavorably upon the public image of
the Company as reasonably determined by the Board;
(iii) the failure by Executive to substantially perform his
duties hereunder, or the wrongdoing by Executive
resulting in injury to the Company, in each case as
reasonably determined by the Board;
(iv) the failure by Executive to follow a directive of the
Board or the Chief Executive Officer of the Company;
or
(v) violation of any policies or procedures of the
Company, including without limitation, any human
relations policy.
(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;
(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
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(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 (or that will last) more than 180 consecutive or
non-consecutive calendar days that prevents Executive from
performing the essential functions of his position with or
without reasonable accommodation, as determined by a competent
physician chosen by the Company and consented to by Executive
or his legal representative, which consent will not be
unreasonably withheld or delayed. 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
immediately prior to a Change in Control and continuing until
the expiration of this Agreement.
(i) Severance Compensation. The "Severance Compensation" shall
be:
(i) A lump sum amount equal to 150% 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 that
Executive has been an employee of the Company (or
such fewer full calendar years if Executive has been
an employee less than five full calendar years) prior
to the Change in Control; provided, however, that if
on the date of determination, Executive has not been
an employee of the Company for a full calendar year,
such lump sum amount will equal 150% of Executive's
then current base salary (excluding bonus and
incentive compensation) annualized; and
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(ii) For a period of 12 months, 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.
(j) Termination Date. The "Termination Date" shall be the
effective date upon which Executive or the Company terminates
the employment of Executive with the Company.
3. Rights of Executive Upon Change in Control and Subsequent
Termination.
(a) The Company shall provide Executive, within ten days following
the Termination Date, Severance Compensation, but without
affecting the rights of Executive or the Company at law or in
equity, if, following the occurrence of a Change in Control,
any of the following two events shall occur:
(1) the Company terminates Executive's employment during
the Employment Term except for any of the following
reasons:
(i) Executive dies;
(ii) Executive becomes Disabled; or
(iii) for Cause; or
(2) 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 Executive had immediately prior
to the Change in Control, any reduction in
Executive's base salary (excluding bonus and
incentive compensation) 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
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 Executive of such
change, reduction, alteration or
termination, as the case may be;
(ii) a determination by 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
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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 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
(iv) the Company commits any breach (including
under Section 5 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 Executive to the Company prior to
the receipt of Severance Compensation, 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
Executive shall not affect any rights and benefits which
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 as of the Effective Date, by and between the Company and
Executive, as may be amended, restated or modified.
(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 Executive provided for in
this Agreement.
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(f) Without limiting the rights of 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 prior to a Change in Control but 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, such event
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 Executive hereunder is terminated, 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.
5. 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 reasonably satisfactory to 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 a substantial 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 Executive hereunder shall
inure to the benefit of and be enforceable by Executive's
personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
6. Notice. 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:
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If to Executive:
William T. Strohecker
2328 Eldger Drive
Plano, Texas 75025
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. Notwithstanding the foregoing, the party receiving
notice may waive any provision of this Section 6 in its sole and absolute
discretion.
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 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.
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 Executive
to have Executive remain in the employment of the Company prior to any Change in
Control.
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.
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12. Enforcement Fees. All costs of litigation necessary for
Executive to successfully defend the validity of this Agreement are to be paid
by the Company 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
Executive as a result of the Company's failure to perform this Agreement or any
provision thereof (as determined in binding arbitration or by a court of
competent jurisdiction) or as a result of the Company unsuccessfully 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 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 as of the Effective Date, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
14. Governing Law. This Agreement will be governed by and
construed in accordance with the internal laws of the State of Texas, without
giving effect to any conflicts of law rule or principle that might require the
application of the laws of another jurisdiction.
15. 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 arbitrator 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.
Administrative fees and expenses of the arbitration itself will be borne by the
parties equally except as provided in Section 12 above or unless otherwise
required by law, a court of competent jurisdiction or the Rules. 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. Costs of a party's
representation by counsel or preparation costs for hearing are not considered
administrative fees and expenses for purposes hereof.
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IN WITNESS WHEREOF, the parties have executed this Agreement effective
on the date and year first above written.
PEERLESS MFG. CO.
/s/ Sherrill Stone
------------------------------
Sherrill Stone,
Chairman of the Board and
Chief Executive Officer
EXECUTIVE
/s/ William T. Strohecker
------------------------------
William T. Strohecker
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