Exhibit 10.1
EMPLOYMENT LETTER BETWEEN THE REGISTRANT AND
BERNARD C. FAULKNER, DATED FEBRUARY 4, 2000
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February 4, 2000
Mr. Bernard Faulkner
3914 Charmal Place
Charlotte, NC 28226
Dear Bernie:
Thank you for your comprehensive analysis of Hurco's offer of employment and
your relocation plan.
The following offer of employment, including compensation, explanation of
benefits and relocation reimbursement plan supercedes my previous offer dated
January 31, 2000, and has taken into consideration both your proposals and the
needs of Hurco.
Position and Responsibilities:
o President of Hurco's North American operations.
o Assume effective date of March 1, 2000.
o The responsibilities include direct management of Autocon Technologies,
Inc., Hurco Machine Tool Products and Hurco Metal Fabrication Products
effective March 1, 2000, in lieu of a phased-in transition, which was
discussed in our previous offer.
Compensation:
o Base salary $150,000 annually.
o Annual compensation and performance review January 2001.
o Executive Bonus Plan - The Company's Bonus Plan is November 1, 1999 to
October 31, 2000, our fiscal year.
o Annual bonus potential - $50,000.
o Thirty percent of your bonus is based on performance compared
to specific personal objectives.
o Thirty percent of your bonus is based on performance compared to
Division Operating Profit Business Plans.
o Forty percent of your bonus is based on the Corporation's
performance when compared to the annual Corporate Financial Plan.
o You would have 8 months to affect the Fiscal 2000 Plan. Your Fiscal
2000 bonus potential assuming a March 1, 2000 start
date: 8/12 of $50,000 = $33,328.
o In consideration of product training, organization analysis and
immediate management responsibility of all three Divisions, the Company
would guarantee $16,000 of a potential $33,328 bonus. The $16,000
guarantee, and any additional bonus earned, would be paid during
January 2001.
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o Specific personal, division and corporate financial objectives would be
prepared and agreed upon with you during the first 30 days of
employment.
o Stock options: 25,000 options subject to grant by the Compensation
Committee and in accordance with the Company's 1997 Stock Option Plan.
The option price will be the market price of the Company's stock at the
date of grant.
o You are eligible to participate in the Executive Management Deferred
Compensation Plan. An outline of the Plan is attached.
o The Company's 401(k) Plan contributes $.50 for each employee dollar
invested, up to the maximum allowed by law and in accordance with the
formula outlined in the Benefits Plan previously sent to you.
o Automobile: The Company agrees to pay for the remainder of your
existing car lease and insurance up to a maximum of $8,400 per annum or
$700 per month, or until the automobile is out of warranty, whichever
comes first.
Social or Country Club:
o The Company will pay up to $200.00 per month dues and in addition,
would pay normal expenses associated with the business
use of the club.
Vacation:
o Three weeks vacation would be available during year 2000.
Split Dollar Life Insurance:
o You are eligible to participate in the executive split dollar life
insurance program in accordance with the split dollar insurance plan
attached.
Health Coverage:
o The health plan, which you previously received, is supplemented by an
S125 Medical Reimbursement Plan that permits $3,900 tax-deferred per
year for ineligible medical or dental expenses. Orthodontia is not
covered by the health plan and therefore the S125 Plan could be used.
The Company would pay your COBRA costs for health insurance prior to
your eligibility under Hurco's health plan.
Relocation Plan:
o Reimbursable expenses: The Company has modified the relocation
policy in consideration of your special circumstances.
o Assumption - the family relocates by June 30, 2000.
o The Company will reimburse you the following expenses in accordance
with the terms in the following paragraphs.
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o Temporary housing expenses during the period of March 1, 2000 to June
30, 2000. This includes payment of monthly rent, utilities, rented
furniture, telephone, one-bedroom apartment up to $1,600 per month for
four months.
o Travel expenses between Charlotte and Indianapolis March 1, 2000 to
June 30, 2000: Advance ticket purchases should be made in order to
minimize cost. Assume 6 trips (every two weeks) and assume between
family cars and company leased vehicles, a rental car expense would not
be required. Some trips could be tied in with sales calls to the area.
o Travel expenses for your family while house hunting: Reasonable travel
(advance tickets, economy) and lodging and meal expenses for up to
three house-hunting trips (for a maximum total 10 days, including one
trip with the children. Assume the rented apartment would cover lodging
expenses other than the children's trip.
o Temporary housing expense for the family in Indianapolis, assuming the
relocation to Indianapolis occurs in advance of the availability of the
Indianapolis residence: The Company would assume the month-to-month
costs up to a maximum of three months and for rental of apartment and
furniture and utilities or the equivalent hotel costs. The employee is
responsible for meals.
o The Company will pay reasonable expenses for travel and lodging and
meals for your family during the relocation trip to the new location.
Moving Expenses:
o The Company will reimburse all reasonable expenses associated with the
shipping of household furnishings and personal property, as well as
shipper's charges for shipping containers, packing and unpacking,
insurance and reasonable fees for storage up to 60 days. Any unusual
moving and installation/set-up expenses relating to personal property
such as boats, recreational vehicles, aircraft, livestock, etc. will
not be reimbursed by the Company.
Sale of Principal Residence:
o The Company will reimburse the employee all reasonable and customary
expenses connected with the sale of employee's home, such as brokerage
and legal fees customary in the area, tax stamps, recording fees,
appraisal costs, advertising expense. In the event that you sell your
own home, without the use of a realtor, the Company will pay a bonus of
50.0 percent of the customary real estate fee to the employee as a
bonus for selling the home without real estate agent fees. The employee
and the Company must agree on the range of asking price, marketing
plans and period of time this personal sales plan would continue.
Incidental Expenses:
o To compensate for incidental and out-of-pocket expenses, not expressly
reimbursed under this policy, the Company will pay $6,000 for such
incidental expenses related to the relocation.
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Accounting Treatment of Relocation Expenses:
o After filing your 2000 tax returns in 2001, Hurco's tax manager will
calculate what your Federal, State and Local taxes payable for 2000
would have been exclusive of the relocation costs included in adjusted
gross income and the related deductible moving expenses. Both the
"with" and "without" calculations of taxes payable will exclude capital
gains/losses and any significant non-recurring income, such as
severance pay from your prior employer received after being employed by
Hurco. The incremental income taxes paid as a result of the relocation
expenses will be "grossed up" based on an effective Federal, State and
Local tax rate of 34%. Example: If the incremental taxes paid are
$10,000, the reimbursement will be $10,000 / (1-34%) equals $15,151.
Employment Termination Agreement:
o In the event Hurco terminates your employment as President, of Hurco's
North American operations, Hurco shall pay you twelve (12) months
severance, at the then present base salary rate, from the date you are
relieved of your responsibilities which would be thirty (30) days
following written notice. Health and life insurance benefits will be
maintained during the twelve-month severance period or until you have
obtained alternate employment, if earlier. The Corporation will also
provide you with the services of a professional outplacement firm.
o In the event you resign prior to the termination of your employment,
Hurco will not be obligated to continue making salary payments after
your last day of employment.
o If you resign during the first year of employment, you will repay the
Company the total relocation expenses.
Carrying Costs of Prior Home:
o The Company policy will not pay for the costs of the prior home if the
purchase of the new home occurs prior to closing the sale of the prior
home.
Accommodations:
o The Company's policy does not include the provision for a bridge loan
assuming the new house is purchased prior to the sale of the existing
home.
Expenses Associated with the Purchase of a New Home:
o The Company policy does not reimburse the employee for expenses on the
purchase of a new home
Cost of Living:
o Attached is a cost of living comparison between Charlotte and
Indianapolis. Please note the 4.65% net benefit for sales/income tax by
moving to Indianapolis. This represents approximately $7,000 savings on
$150,000 annual income.
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Bernie, I believe this revised offer provides compensation, benefits and
relocation plan which is commensurate with the responsibilities and relocation
timetable. I am hopeful you accept this offer as I look forward to working with
you again. Please call me if you have questions. I would appreciate your
acceptance by signing this acknowledgement by February 7, 2000.
Sincerely,
/s/ Brian D. McLaughlin
Brian D. McLaughlin
President and CEO
Acknowledged and accepted,
/s/ Bernard Faulkner February 8, 2000
Bernard Faulkner Date
