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FORM 10-Q/A
(Amendment No. 1)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the forty weeks ended March 6, 1998 Commission file number 0-6566
Thorn Apple Valley, Inc.
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(Exact name of Registrant as specified in its charter)
<TABLE>
<S><C>
Michigan 38-1964066
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
26999 Central Park Blvd., Suite 300, Southfield, Michigan 48076
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (248) 213-1000
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</TABLE>
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No .
At March 6, 1998, there were 6,130,817 shares of Common Stock outstanding.
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Item 6. Exhibits and Reports on Form 8-K
(a) Furnish the exhibits required by Item 601 of Regulation S-K (Section
229.601 of this chapter).
(b) Reports on Form 8-K. State whether any reports on Form 8-K have been
filed during the quarter for which this report is filed, listing the
items reports, any financial statements filed, and the dates of any
such reports.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Thorn Apple Valley, Inc.
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(Registrant)
Date: May 12, 1998 By: /s/ Louis Glazier
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Louis Glazier
Executive Vice President -
Finance and Administration
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EXHIBIT INDEX TO
THORN APPLE VALLEY, INC.
FORM 10-Q/A
Exhibits
10.1 Change of Control Agreement, dated February 24, 1998, between Edward E.
Boan and Thorn Apple Valley, Inc.
10.2 Change of Control Agreement, dated February 24, 1998, between Keith
Jahnke and Thorn Apple Valley, Inc.
10.3 Change of Control Agreement, dated February 24, 1998, between Louis
Glazier and Thorn Apple Valley, Inc.
10.4 Change of Control Agreement, dated February 24, 1998, between Joel
Dorfman and Thorn Apple Valley, Inc.
27 Financial Data Schedule
<PAGE> 1
Exhibit 10.1
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (this "Agreement") by and between
Thorn Apple Valley, Inc., a Michigan corporation (the "Company"), with offices
at 26999 Central Park Blvd., Suite 300, Southfield, Michigan 48076 and Edward E.
Boan (the "Executive"), an individual residing at 11199 Silver Lake Road,
Brighton, Michigan 48116, dated as of the 24th day of February, 1998.
R E C I T A L S:
WHEREAS, the Company recognizes that the current business environment
makes it difficult to attract and retain highly qualified executives unless a
certain degree of security can be offered to such individuals against
organizational and personnel changes which frequently follow changes in control
of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause executives to
consider major career changes in an effort to assure financial security for
themselves and for their families; and
WHEREAS, the Company recognizes that its executives will be involved in
evaluating or negotiating any offers, proposals or other transactions which
could result in a Change in Control of the Company (as defined below) and
believes that it is in the best interest of the Company and its shareholders for
such executives to be in a position, free from personal financial and employment
considerations, to be able to assess objectively and pursue aggressively the
interests of the Company's shareholders in making these evaluations and carrying
on such negotiations; and
WHEREAS, the Ad Hoc Committee of the Board of Directors (the
"Committee") of the Company believes it is essential to provide the Executive
with compensation arrangements upon a Change in Control which are competitive
with those of other corporations, and in order to accomplish these objectives,
the Committee has caused the Company to enter into this Agreement.
NOW THEREFORE, the parties, for good and valuable consideration and
intending to be legally bound, agree as follows:
1. Operation and Term of Agreement. This Agreement shall be effective
immediately upon its execution. This Agreement may be terminated by the Company
upon two year's advance written notice to the Executive; provided, however, that
after a Change in Control of the Company during the term of this Agreement, this
Agreement shall remain in effect until all of the obligations of the parties
hereunder are satisfied. Prior to a Change in Control, this Agreement shall
immediately terminate upon termination of the Executive's employment or upon the
Executive's ceasing to be an elected officer of the Company, except in the case
of such termination under circumstances set forth in Section 2(e) below.
<PAGE> 2
2. Certain Definitions. For purposes of this Agreement, the following
definitions shall have the following meanings:
(a) "Cause" shall mean (i) actual dishonesty intended to
result in substantial personal enrichment at the expense of the Company, (ii)
conviction of a felony or (iii) repeated willful and deliberate failure or
refusal to perform the duties normally associated with the Executive's position
which is not remedied in a reasonable period of time after receipt of written
notice from the Company.
(b) "Change in Control" shall mean:
(i) on or after the date of execution of this
Agreement, any person (which, for all purposes hereof, shall include, without
limitation, an individual, sole proprietorship, partnership, unincorporated
association, unincorporated syndicate, unincorporated organization, trust, body
corporate and a trustee, executor, administrator or other legal representative)
(a "Person") or any group of two or more Persons acting in concert, excluding
the Company's current officers and directors, becomes the beneficial owner,
directly or indirectly, of securities of the Company representing, or acquires
the right to control or direct, or to acquire through the conversion of
securities or the exercise of warrants or other rights to acquire securities,
40% or more of the combined voting power of the Company's then outstanding
securities; provided that for the purposes of this Agreement, (A) "voting power"
means the right to vote for the election of directors, and (B) any determination
of percentage combined voting power shall be made on the basis that (x) all
securities beneficially owned by the Person or group or over which control or
direction is exercised by the Person or group which are convertible into
securities carrying voting rights have been converted (whether or not then
convertible) and all options, warrants or other rights which may be exercised to
acquire securities beneficially owned by the Person or group or over which
control or direction is exercised by the Person or group have been exercised
(whether or not then exercisable), and (y) no such convertible securities have
been converted by any other Person and no such options, warrants or other rights
have been exercised by any other Person; or
(ii) at any time subsequent to the date of execution
of this Agreement there shall be elected or appointed to the Board of
Directors of the Company (the "Board") any director or directors whose
appointment or election by the Board or nomination for election by the
Company's shareholders was not approved by a vote of at least a majority of the
directors then still in office who were either directors on the date of
execution of this Agreement or whose election or appointment or nomination for
election was previously so approved; or
(iii) a reorganization, merger, consolidation,
combination, corporate restructuring or similar transaction (an "Event"), in
each case, in respect of which the beneficial owners of the outstanding Company
voting securities immediately prior to such Event do not, following such Event,
beneficially own, directly or indirectly, more than 60% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the Company and any resulting Parent in
substantially the same proportions as their ownership, immediately prior to such
Event, of the outstanding Company voting securities; or
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(iv) an Event involving the Company as a result of
which 40% or more of the members of the board of directors of the Company are
not persons who were members of the Board immediately prior to the earlier of
(x) the Event, (y) execution of an agreement the consummation of which would
result in the Event, or (z) announcement by the Company of an intention to
effect the Event; or
(v) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Change in Control has occurred.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Disability," for purposes of this Agreement, shall apply
to Executive if he has applied for and is determined to be eligible to receive
disability benefits under the Company's long term disability plan.
(e) The "Change in Control Date" shall be any date during the
term of this Agreement on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if the Executive's employment or
status as an elected officer with the Company is terminated within six months
prior to the date on which a Change in Control occurs, then unless such
employment or status as an elected officer with the Company is terminated (i)
for Cause, or (ii) voluntarily by the Executive, for all purposes of this
Agreement the "Change in Control Date" shall mean the date immediately prior to
the date of such termination.
(f) "Subsidiary" means a company 50% or more of the
voting securities of which are owned, directly or indirectly, by the Company.
3. Benefits Upon Change in Control. If a Change in Control of the
Company occurs during the term of this Agreement and during the term of
Executive's employment with the Company or with any Subsidiary, the Company
shall provide the following benefits:
(a) The Company shall pay to the Executive in a lump
sum in cash within 30 days after the Change of Control Date the sum of
$562,500; and
(b) Within 30 days after the Change in Control Date, upon
surrender by the Executive of his outstanding options to purchase common shares
of the Company ("Common Shares") granted to the Executive pursuant to the stock
option plans of the Company (the "Outstanding Options"), the Company shall pay
the Executive an amount in respect of each Outstanding Option (whether wholly-
or partially-vested or not vested) equal to the difference between the exercise
price of such Outstanding Options and the higher of (x) the fair market value of
the Common Shares at the time of such termination, and (y) the highest price
paid for Common Shares by any person or group whose acquisition of voting
securities has resulted in a Change in Control of the Company. In the
alternative, the Executive may exercise his Outstanding Options, all of which
shall be immediately vested; and
(c) During the two year period following the Change in Control
Date, the Company shall maintain in full force and effect for the continued
benefit of the Executive (i) the
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Company's life and disability insurance programs and the Company's medical,
dental and vision plans in which the Executive was entitled to participate
immediately prior to the date of the Change in Control, and (ii) the Company's
automobile program in which the Executive was entitled to participate
immediately prior to the date of the Change in Control. In the event the
Executive's participation in any such program or plan is barred or otherwise
prevented, the Company shall provide the Executive with after-tax cash or
benefits substantially similar to and not less favorable than the benefits which
the Executive would otherwise be entitled to receive under such program or plan.
4. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plans, practices, policies or programs provided by the
Company or any of its Subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
Subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, practice, policy or program of the
Company or any of its Subsidiaries at or subsequent to the Change in Control
Date shall be payable in accordance with such plan, practice, policy or program.
5. Full Settlement; Legal Expenses. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement.
The Company agrees to pay, upon written demand therefor by the Executive, all
legal fees and expenses which the Executive may reasonably incur as a result of
any dispute or contest by or with the Company or others regarding the validity
or enforceability of, or liability under, any provision of this Agreement. In
any such action brought by the Executive for damages or to enforce any
provisions of this Agreement, he shall be entitled to seek both legal and
equitable relief and remedies, including, without limitation, specific
performance of the Company's obligations hereunder, in his sole discretion.
6. Parachute Payments. Notwithstanding anything in this Agreement to
the contrary, in the event it shall be determined that any payment or
distribution by the Company or any other person or entity to or for the benefit
of the Executive is a "parachute payment" (within the meaning of Section
280G(b)(2) of the Code), whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection with, or
arising out of, his employment with the Company or a change in ownership or
effective control of the Company or a substantial portion of its assets (a
"Payment"), and would be subject to the excise tax imposed by Section 4999 of
the Code (the "Excise Tax"), the Payments shall be reduced (but not below zero)
to the extent necessary to avoid the imposition of such Excise Tax. If the
application of the preceding sentence should require a reduction in the Payments
or other "parachute payments," unless the Executive shall have designated
otherwise, such reduction shall be implemented first, by reducing any non-cash
benefits to the extent necessary and, second, by reducing any cash benefits to
the extent necessary. In each case, the reductions shall be made
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starting with the payment or benefit to be made on the latest date as of which
any Payment would be made and reducing Payments in reverse chronological order
therefrom. All determinations concerning the application of this Section 6 shall
be made by a nationally recognized firm of independent accountants, selected by
the Executive and satisfactory to the Company, whose determination shall be
conclusive and binding on all parties. The fees and expenses of such accountants
shall be borne by the Company.
7. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all proprietary or confidential
information, knowledge or data relating to the Company or any of its
Subsidiaries, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
Subsidiaries and which shall not be or become public knowledge (other than by
acts of the Executive or his representatives in violation of this Agreement).
After the date of termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it.
8. Consulting and Noncompetition. If a Change in Control of the Company
occurs during the term of this Agreement and during the term of Executive's
employment with the Company or with any Subsidiary, then:
(a) For a period of six months following the termination of
his employment, the Executive shall make himself available by phone upon
reasonable notice, and shall also make himself available in person, at such
location as the Company and the Executive shall agree, upon reasonable notice,
subject to the Executive's prior commitments; provided, however, that the
Executive shall not be required to make himself available for more than five
days per month. The Executive shall consult with the Company with respect to
matters raised by the Company within his knowledge or experience.
(b) As consideration for the Executive's consulting services
and agreement not to compete as provided in this Section 8, the Company shall
pay the Executive a consulting and noncompetition fee equal to $187,500. Such
fee shall be paid to the Executive in a lump sum in cash within 30 days after
the Change in Control Date.
(c) The Company shall pay or reimburse the Executive for all
reasonable expenses actually incurred or paid by the Executive in the
performance of the Executive's services under Section 8(a) of this Agreement
upon presentation of expense statements or vouchers or such other supporting
information as the Company may reasonably require. If the Executive shall agree
to consult at a location away from the metropolitan area of his then current
residence, the Company shall pay his reasonable travel and lodging expenses in
connection therewith.
(d) For a period of six months following the termination of
his employment, the Executive shall not, either directly or indirectly, through
any person or entity:
<PAGE> 6
(i) engage in any activities or conduct any
businesses which are in competition with the activities engaged in or business
conducted by the Company during the term of the Executive's employment with the
Company, or
(ii) be engaged by, consult with, or invest in, any
person or entity wherever located, which conducts a business in competition with
the business conducted by the Company during the term of the Executive's
employment with the Company, except that the Executive may, at any time, own
stock in a corporation which may be in competition with the Company, whose
shares are listed for trading on a national or regional stock exchange or trade
on the over-the-counter market, provided that the Executive owns, in the
aggregate, fewer than 5% of the issued and outstanding shares of such
corporation.
(e) The covenants and obligations contained in Section 7 and
in Section 8(c) of this Agreement relate to matters which are of a special,
unique and extraordinary character and a violation of any of the terms of such
Sections shall cause irreparable injury to the Company, the amount of which
shall be difficult if not impossible to estimate or determine and which cannot
be adequately compensated. Therefore, the Company shall be entitled to an
injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining any violation or threatened violation of any
of such terms by the Executive and such other persons as the court orders. In no
event shall an asserted violation of the provisions of Section 7 or of Section 8
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives or "Successor(s) in Interest." The Executive may designate
a Successor (or Successors) in Interest to receive any and all amounts due the
Executive in accordance with this Agreement should the Executive be deceased at
any time of payment. Such designation of Successor(s) in Interest shall be made
in writing and signed by the Executive, and delivered to the Company pursuant to
Section 10(b) hereof. Any such designation may be made to any legal person,
persons, trust or the Executive's estate as he shall determine in his sole
discretion. In the event any designation shall be incomplete, or in the event
the Executive shall fail to designate a Successor in Interest, his estate shall
be deemed to be his Successor in Interest to receive such portion of all of the
payments due hereunder. The Executive may amend, change or revoke any such
designation at any time and from time to time, in the same manner. This Section
9(a) shall not supersede any designation of beneficiary or successor in interest
made by the Executive, or separately covered, under any other plan, practice,
policy or program of the Company.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
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(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, without regard
to the form of transaction utilized to acquire the business or assets of the
Company, to assume expressly 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 transaction involving a successor had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets as aforesaid which is required by this
clause to assume and agree to perform this Agreement or which otherwise assumes
and agrees to perform this Agreement.
10. Miscellaneous.
(a) This Agreement and any and all disputes arising hereunder
or related hereto shall be governed by and construed in accordance with the laws
of the State of Michigan, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, to the addresses
for each party as first written above or to such other address as either party
shall have furnished to the other in writing in accordance herewith. Notices and
communications to the Company shall be addressed to the attention of the
Company's President. Notices and communications shall be effective when actually
received by the addressee.
(c) Whenever reference is made herein to any specific plan or
program of the Company, to the extent that the Executive is not a participant
therein or has no benefit accrued thereunder, whether vested or contingent, as
of the Change in Control Date, then such reference herein shall be null and void
and of no effect, and the Executive shall acquire no additional benefit as a
result of such reference.
(d) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(e) The Executive's failure to insist upon strict compliance
with any provision hereof shall not be deemed to be a waiver of such provision
or any other provision thereof.
(f) This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter hereof, and it
supersedes any prior agreements with respect to the subject matter hereof
between the Executive and the Company.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from the Committee, the Company has caused these
presents to be executed as of the day and year first above written.
<PAGE> 8
EXECUTIVE THORN APPLE VALLEY, INC.
/s/ Edward E. Boan By /s/ J.C. Canepa
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Edward E. Boan John C. Canepa
Its Chairman of the Ad Hoc Committee
of the Board of Directors
<PAGE> 1
Exhibit 10.2
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (this "Agreement") by and between
Thorn Apple Valley, Inc., a Michigan corporation (the "Company"), with offices
at 26999 Central Park Blvd., Suite 300, Southfield, Michigan 48076 and Keith
Jahnke (the "Executive"), an individual residing at 6530 Commerce Road, West
Bloomfield, Michigan 48324, dated as of the 24th day of February, 1998.
R E C I T A L S:
WHEREAS, the Company recognizes that the current business environment
makes it difficult to attract and retain highly qualified executives unless a
certain degree of security can be offered to such individuals against
organizational and personnel changes which frequently follow changes in control
of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause executives to
consider major career changes in an effort to assure financial security for
themselves and for their families; and
WHEREAS, the Company recognizes that its executives will be involved in
evaluating or negotiating any offers, proposals or other transactions which
could result in a Change in Control of the Company (as defined below) and
believes that it is in the best interest of the Company and its shareholders for
such executives to be in a position, free from personal financial and employment
considerations, to be able to assess objectively and pursue aggressively the
interests of the Company's shareholders in making these evaluations and carrying
on such negotiations; and
WHEREAS, the Ad Hoc Committee of the Board of Directors (the
"Committee") of the Company believes it is essential to provide the Executive
with compensation arrangements upon a Change in Control which are competitive
with those of other corporations, and in order to accomplish these objectives,
the Committee has caused the Company to enter into this Agreement.
NOW THEREFORE, the parties, for good and valuable consideration and
intending to be legally bound, agree as follows:
1. Operation and Term of Agreement. This Agreement shall be effective
immediately upon its execution. This Agreement may be terminated by the Company
upon two year's advance written notice to the Executive; provided, however, that
after a Change in Control of the Company during the term of this Agreement, this
Agreement shall remain in effect until all of the obligations of the parties
hereunder are satisfied. Prior to a Change in Control, this Agreement shall
immediately terminate upon termination of the Executive's employment or upon the
Executive's ceasing to be an elected officer of the Company, except in the case
of such termination under circumstances set forth in Section 2(e) below.
2. Certain Definitions. For purposes of this Agreement, the following
definitions shall have the following meanings:
<PAGE> 2
(a) "Cause" shall mean (i) actual dishonesty intended to
result in substantial personal enrichment at the expense of the Company, (ii)
conviction of a felony or (iii) repeated willful and deliberate failure or
refusal to perform the duties normally associated with the Executive's position
which is not remedied in a reasonable period of time after receipt of written
notice from the Company.
(b) "Change in Control" shall mean:
(i) on or after the date of execution of this
Agreement, any person (which, for all purposes hereof, shall include, without
limitation, an individual, sole proprietorship, partnership, unincorporated
association, unincorporated syndicate, unincorporated organization, trust, body
corporate and a trustee, executor, administrator or other legal representative)
(a "Person") or any group of two or more Persons acting in concert, excluding
the Company's current officers and directors, becomes the beneficial owner,
directly or indirectly, of securities of the Company representing, or acquires
the right to control or direct, or to acquire through the conversion of
securities or the exercise of warrants or other rights to acquire securities,
40% or more of the combined voting power of the Company's then outstanding
securities; provided that for the purposes of this Agreement, (A) "voting power"
means the right to vote for the election of directors, and (B) any determination
of percentage combined voting power shall be made on the basis that (x) all
securities beneficially owned by the Person or group or over which control or
direction is exercised by the Person or group which are convertible into
securities carrying voting rights have been converted (whether or not then
convertible) and all options, warrants or other rights which may be exercised to
acquire securities beneficially owned by the Person or group or over which
control or direction is exercised by the Person or group have been exercised
(whether or not then exercisable), and (y) no such convertible securities have
been converted by any other Person and no such options, warrants or other rights
have been exercised by any other Person; or
(ii) at any time subsequent to the date of execution
of this Agreement there shall be elected or appointed to the Board of
Directors of the Company (the "Board") any director or directors whose
appointment or election by the Board or nomination for election by the
Company's shareholders was not approved by a vote of at least a majority of the
directors then still in office who were either directors on the date of
execution of this Agreement or whose election or appointment or nomination for
election was previously so approved; or
(iii) a reorganization, merger, consolidation,
combination, corporate restructuring or similar transaction (an "Event"), in
each case, in respect of which the beneficial owners of the outstanding Company
voting securities immediately prior to such Event do not, following such Event,
beneficially own, directly or indirectly, more than 60% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the Company and any resulting Parent in
substantially the same proportions as their ownership, immediately prior to
such Event, of the outstanding Company voting securities; or
(iv) an Event involving the Company as a result of
which 40% or more of the members of the board of directors of the Company are
not persons who were members of the Board immediately prior to the earlier of
(x) the Event, (y) execution of an agreement the
<PAGE> 3
consummation of which would result in the Event, or (z) announcement by the
Company of an intention to effect the Event; or
(v) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Change in Control has occurred.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Disability," for purposes of this Agreement, shall apply
to Executive if he has applied for and is determined to be eligible to receive
disability benefits under the Company's long term disability plan.
(e) The "Change in Control Date" shall be any date during the
term of this Agreement on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if the Executive's employment or
status as an elected officer with the Company is terminated within six months
prior to the date on which a Change in Control occurs, then unless such
employment or status as an elected officer with the Company is terminated (i)
for Cause, or (ii) voluntarily by the Executive, for all purposes of this
Agreement the "Change in Control Date" shall mean the date immediately prior to
the date of such termination.
(f) "Subsidiary" means a company 50% or more of the voting
securities of which are owned, directly or indirectly, by the Company.
3. Benefits Upon Change in Control. If a Change in Control of the
Company occurs during the term of this Agreement and during the term of
Executive's employment with the Company or with any Subsidiary, the Company
shall provide the following benefits:
(a) The Company shall pay to the Executive in a lump sum in
cash within 30 days after the Change of Control Date the sum of $562,500; and
(b) Within 30 days after the Change in Control Date, upon
surrender by the Executive of his outstanding options to purchase common shares
of the Company ("Common Shares") granted to the Executive pursuant to the stock
option plans of the Company (the "Outstanding Options"), the Company shall pay
the Executive an amount in respect of each Outstanding Option (whether wholly-
or partially-vested or not vested) equal to the difference between the exercise
price of such Outstanding Options and the higher of (x) the fair market value of
the Common Shares at the time of such termination, and (y) the highest price
paid for Common Shares by any person or group whose acquisition of voting
securities has resulted in a Change in Control of the Company. In the
alternative, the Executive may exercise his Outstanding Options, all of which
shall be immediately vested; and
(c) During the two year period following the Change in Control
Date, the Company shall maintain in full force and effect for the continued
benefit of the Executive (i) the Company's life and disability insurance
programs and the Company's medical, dental and vision plans in which the
Executive was entitled to participate immediately prior to the date of the
Change in Control, and (ii) the Company's automobile program in which the
Executive was entitled to participate immediately prior to the date of the
Change in Control. In the event the Executive's participation in any such
program or plan is barred or otherwise prevented, the
<PAGE> 4
Company shall provide the Executive with after-tax cash or benefits
substantially similar to and not less favorable than the benefits which the
Executive would otherwise be entitled to receive under such program or plan.
4. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plans, practices, policies or programs provided by the
Company or any of its Subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
Subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, practice, policy or program of the
Company or any of its Subsidiaries at or subsequent to the Change in Control
Date shall be payable in accordance with such plan, practice, policy or program.
5. Full Settlement; Legal Expenses. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement.
The Company agrees to pay, upon written demand therefor by the Executive, all
legal fees and expenses which the Executive may reasonably incur as a result of
any dispute or contest by or with the Company or others regarding the validity
or enforceability of, or liability under, any provision of this Agreement. In
any such action brought by the Executive for damages or to enforce any
provisions of this Agreement, he shall be entitled to seek both legal and
equitable relief and remedies, including, without limitation, specific
performance of the Company's obligations hereunder, in his sole discretion.
6. Parachute Payments. Notwithstanding anything in this Agreement to
the contrary, in the event it shall be determined that any payment or
distribution by the Company or any other person or entity to or for the benefit
of the Executive is a "parachute payment" (within the meaning of Section
280G(b)(2) of the Code), whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection with, or
arising out of, his employment with the Company or a change in ownership or
effective control of the Company or a substantial portion of its assets (a
"Payment"), and would be subject to the excise tax imposed by Section 4999 of
the Code (the "Excise Tax"), the Payments shall be reduced (but not below zero)
to the extent necessary to avoid the imposition of such Excise Tax. If the
application of the preceding sentence should require a reduction in the Payments
or other "parachute payments," unless the Executive shall have designated
otherwise, such reduction shall be implemented first, by reducing any non-cash
benefits to the extent necessary and, second, by reducing any cash benefits to
the extent necessary. In each case, the reductions shall be made starting with
the payment or benefit to be made on the latest date as of which any Payment
would be made and reducing Payments in reverse chronological order therefrom.
All determinations concerning the application of this Section 6 shall be made by
a nationally recognized firm of independent accountants, selected by the
Executive and satisfactory to the Company, whose determination shall be
conclusive and binding on all parties. The fees and expenses of such accountants
shall be borne by the Company.
<PAGE> 5
7. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all proprietary or confidential
information, knowledge or data relating to the Company or any of its
Subsidiaries, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
Subsidiaries and which shall not be or become public knowledge (other than by
acts of the Executive or his representatives in violation of this Agreement).
After the date of termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it.
8. Consulting and Noncompetition. If a Change in Control of the Company
occurs during the term of this Agreement and during the term of Executive's
employment with the Company or with any Subsidiary, then:
(a) For a period of six months following the termination of
his employment, the Executive shall make himself available by phone upon
reasonable notice, and shall also make himself available in person, at such
location as the Company and the Executive shall agree, upon reasonable notice,
subject to the Executive's prior commitments; provided, however, that the
Executive shall not be required to make himself available for more than five
days per month. The Executive shall consult with the Company with respect to
matters raised by the Company within his knowledge or experience.
(b) As consideration for the Executive's consulting services
and agreement not to compete as provided in this Section 8, the Company shall
pay the Executive a consulting and noncompetition fee equal to $187,500. Such
fee shall be paid to the Executive in a lump sum in cash within 30 days after
the Change in Control Date.
(c) The Company shall pay or reimburse the Executive for all
reasonable expenses actually incurred or paid by the Executive in the
performance of the Executive's services under Section 8(a) of this Agreement
upon presentation of expense statements or vouchers or such other supporting
information as the Company may reasonably require. If the Executive shall agree
to consult at a location away from the metropolitan area of his then current
residence, the Company shall pay his reasonable travel and lodging expenses in
connection therewith.
(d) For a period of six months following the termination of
his employment, the Executive shall not, either directly or indirectly, through
any person or entity:
(i) engage in any activities or conduct any
businesses which are in competition with the activities engaged in or business
conducted by the Company during the term of the Executive's employment with the
Company, or
(ii) be engaged by, consult with, or invest in, any
person or entity wherever located, which conducts a business in competition with
the business conducted by the Company during the term of the Executive's
employment with the Company, except that the Executive may, at any time, own
stock in a corporation which may be in competition with the Company, whose
shares are listed for trading on a national or regional stock exchange or trade
<PAGE> 6
on the over-the-counter market, provided that the Executive owns, in the
aggregate, fewer than 5% of the issued and outstanding shares of such
corporation.
(e) The covenants and obligations contained in Section 7 and
in Section 8(c) of this Agreement relate to matters which are of a special,
unique and extraordinary character and a violation of any of the terms of such
Sections shall cause irreparable injury to the Company, the amount of which
shall be difficult if not impossible to estimate or determine and which cannot
be adequately compensated. Therefore, the Company shall be entitled to an
injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining any violation or threatened violation of any
of such terms by the Executive and such other persons as the court orders. In no
event shall an asserted violation of the provisions of Section 7 or of Section 8
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives or "Successor(s) in Interest." The Executive may designate
a Successor (or Successors) in Interest to receive any and all amounts due the
Executive in accordance with this Agreement should the Executive be deceased at
any time of payment. Such designation of Successor(s) in Interest shall be made
in writing and signed by the Executive, and delivered to the Company pursuant to
Section 10(b) hereof. Any such designation may be made to any legal person,
persons, trust or the Executive's estate as he shall determine in his sole
discretion. In the event any designation shall be incomplete, or in the event
the Executive shall fail to designate a Successor in Interest, his estate shall
be deemed to be his Successor in Interest to receive such portion of all of the
payments due hereunder. The Executive may amend, change or revoke any such
designation at any time and from time to time, in the same manner. This Section
9(a) shall not supersede any designation of beneficiary or successor in interest
made by the Executive, or separately covered, under any other plan, practice,
policy or program of the Company.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, without regard
to the form of transaction utilized to acquire the business or assets of the
Company, to assume expressly 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 transaction involving a successor had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets as aforesaid which is required by this
clause to assume and agree to perform this Agreement or which otherwise assumes
and agrees to perform this Agreement.
<PAGE> 7
10. Miscellaneous.
(a) This Agreement and any and all disputes arising hereunder
or related hereto shall be governed by and construed in accordance with the laws
of the State of Michigan, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, to the addresses
for each party as first written above or to such other address as either party
shall have furnished to the other in writing in accordance herewith. Notices and
communications to the Company shall be addressed to the attention of the
Company's President. Notices and communications shall be effective when actually
received by the addressee.
(c) Whenever reference is made herein to any specific plan or
program of the Company, to the extent that the Executive is not a participant
therein or has no benefit accrued thereunder, whether vested or contingent, as
of the Change in Control Date, then such reference herein shall be null and void
and of no effect, and the Executive shall acquire no additional benefit as a
result of such reference.
(d) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(e) The Executive's failure to insist upon strict compliance
with any provision hereof shall not be deemed to be a waiver of such provision
or any other provision thereof.
(f) This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter hereof, and it
supersedes any prior agreements with respect to the subject matter hereof
between the Executive and the Company.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from the Committee, the Company has caused these
presents to be executed as of the day and year first above written.
EXECUTIVE THORN APPLE VALLEY, INC.
/s/ Keith Jahnke By /s/ J.C. Canepa
- --------------------------- -----------------------------------
Keith Jahnke John C. Canepa
Its Chairman of the Ad Hoc Committee
of the Board of Directors
<PAGE> 1
Exhibit 10.3
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (this "Agreement") by and between
Thorn Apple Valley, Inc., a Michigan corporation (the "Company"), with offices
at 26999 Central Park Blvd., Suite 300, Southfield, Michigan 48076 and Louis
Glazier (the "Executive"), an individual residing at 6153 Dakota Circle,
Bloomfield Hills, Michigan 48301, dated as of the 24th day of February, 1998.
R E C I T A L S:
WHEREAS, the Company recognizes that the current business environment
makes it difficult to attract and retain highly qualified executives unless a
certain degree of security can be offered to such individuals against
organizational and personnel changes which frequently follow changes in control
of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause executives to
consider major career changes in an effort to assure financial security for
themselves and for their families; and
WHEREAS, the Company recognizes that its executives will be involved in
evaluating or negotiating any offers, proposals or other transactions which
could result in a Change in Control of the Company (as defined below) and
believes that it is in the best interest of the Company and its shareholders for
such executives to be in a position, free from personal financial and employment
considerations, to be able to assess objectively and pursue aggressively the
interests of the Company's shareholders in making these evaluations and carrying
on such negotiations; and
WHEREAS, the Ad Hoc Committee of the Board of Directors (the
"Committee") of the Company believes it is essential to provide the Executive
with compensation arrangements upon a Change in Control which are competitive
with those of other corporations, and in order to accomplish these objectives,
the Committee has caused the Company to enter into this Agreement.
NOW THEREFORE, the parties, for good and valuable consideration and
intending to be legally bound, agree as follows:
1. Operation and Term of Agreement. This Agreement shall be effective
immediately upon its execution. This Agreement may be terminated by the Company
upon two year's advance written notice to the Executive; provided, however, that
after a Change in Control of the Company during the term of this Agreement, this
Agreement shall remain in effect until all of the obligations of the parties
hereunder are satisfied. Prior to a Change in Control, this Agreement shall
immediately terminate upon termination of the Executive's employment or upon the
Executive's ceasing to be an elected officer of the Company, except in the case
of such termination under circumstances set forth in Section 2(e) below.
2. Certain Definitions. For purposes of this Agreement, the following
definitions shall have the following meanings:
<PAGE> 2
(a) "Cause" shall mean (i) actual dishonesty intended to
result in substantial personal enrichment at the expense of the Company, (ii)
conviction of a felony or (iii) repeated willful and deliberate failure or
refusal to perform the duties normally associated with the Executive's position
which is not remedied in a reasonable period of time after receipt of written
notice from the Company.
(b) "Change in Control" shall mean:
(i) on or after the date of execution of this
Agreement, any person (which, for all purposes hereof, shall include, without
limitation, an individual, sole proprietorship, partnership, unincorporated
association, unincorporated syndicate, unincorporated organization, trust, body
corporate and a trustee, executor, administrator or other legal representative)
(a "Person") or any group of two or more Persons acting in concert, excluding
the Company's current officers and directors, becomes the beneficial owner,
directly or indirectly, of securities of the Company representing, or acquires
the right to control or direct, or to acquire through the conversion of
securities or the exercise of warrants or other rights to acquire securities,
40% or more of the combined voting power of the Company's then outstanding
securities; provided that for the purposes of this Agreement, (A) "voting power"
means the right to vote for the election of directors, and (B) any determination
of percentage combined voting power shall be made on the basis that (x) all
securities beneficially owned by the Person or group or over which control or
direction is exercised by the Person or group which are convertible into
securities carrying voting rights have been converted (whether or not then
convertible) and all options, warrants or other rights which may be exercised to
acquire securities beneficially owned by the Person or group or over which
control or direction is exercised by the Person or group have been exercised
(whether or not then exercisable), and (y) no such convertible securities have
been converted by any other Person and no such options, warrants or other rights
have been exercised by any other Person; or
(ii) at any time subsequent to the date of execution
of this Agreement there shall be elected or appointed to the Board of Directors
of the Company (the "Board") any director or directors whose appointment or
election by the Board or nomination for election by the Company's shareholders
was not approved by a vote of at least a majority of the directors then still in
office who were either directors on the date of execution of this Agreement or
whose election or appointment or nomination for election was previously so
approved; or
(iii) a reorganization, merger, consolidation,
combination, corporate restructuring or similar transaction (an "Event"), in
each case, in respect of which the beneficial owners of the outstanding Company
voting securities immediately prior to such Event do not, following such Event,
beneficially own, directly or indirectly, more than 60% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the Company and any resulting Parent in
substantially the same proportions as their ownership, immediately prior to such
Event, of the outstanding Company voting securities; or
(iv) an Event involving the Company as a result of
which 40% or more of the members of the board of directors of the Company are
not persons who were members of the Board immediately prior to the earlier of
(x) the Event, (y) execution of an agreement the
<PAGE> 3
consummation of which would result in the Event, or (z) announcement by the
Company of an intention to effect the Event; or
(v) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Change in Control has occurred.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Disability," for purposes of this Agreement, shall apply
to Executive if he has applied for and is determined to be eligible to receive
disability benefits under the Company's long term disability plan.
(e) The "Change in Control Date" shall be any date during the
term of this Agreement on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if the Executive's employment or
status as an elected officer with the Company is terminated within six months
prior to the date on which a Change in Control occurs, then unless such
employment or status as an elected officer with the Company is terminated (i)
for Cause, or (ii) voluntarily by the Executive, for all purposes of this
Agreement the "Change in Control Date" shall mean the date immediately prior to
the date of such termination.
(f) "Subsidiary" means a company 50% or more of the voting
securities of which are owned, directly or indirectly, by the Company.
3. Benefits Upon Change in Control. If a Change in Control of the
Company occurs during the term of this Agreement and during the term of
Executive's employment with the Company or with any Subsidiary, the Company
shall provide the following benefits:
(a) The Company shall pay to the Executive in a lump sum in
cash within 30 days after the Change of Control Date the sum of $750,000; and
(b) Within 30 days after the Change in Control Date, upon
surrender by the Executive of his outstanding options to purchase common shares
of the Company ("Common Shares") granted to the Executive pursuant to the stock
option plans of the Company (the "Outstanding Options"), the Company shall pay
the Executive an amount in respect of each Outstanding Option (whether wholly-
or partially-vested or not vested) equal to the difference between the exercise
price of such Outstanding Options and the higher of (x) the fair market value of
the Common Shares at the time of such termination, and (y) the highest price
paid for Common Shares by any person or group whose acquisition of voting
securities has resulted in a Change in Control of the Company. In the
alternative, the Executive may exercise his Outstanding Options, all of which
shall be immediately vested; and
(c) During the two year period following the Change in Control
Date, the Company shall maintain in full force and effect for the continued
benefit of the Executive (i) the Company's life and disability insurance
programs and the Company's medical, dental and vision plans in which the
Executive was entitled to participate immediately prior to the date of the
Change in Control, and (ii) the Company's automobile program in which the
Executive was entitled to participate immediately prior to the date of the
Change in Control. In the event the Executive's participation in any such
program or plan is barred or otherwise prevented, the
<PAGE> 4
Company shall provide the Executive with after-tax cash or benefits
substantially similar to and not less favorable than the benefits which the
Executive would otherwise be entitled to receive under such program or plan.
4. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plans, practices, policies or programs provided by the
Company or any of its Subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
Subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, practice, policy or program of the
Company or any of its Subsidiaries at or subsequent to the Change in Control
Date shall be payable in accordance with such plan, practice, policy or program.
5. Full Settlement; Legal Expenses. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement.
The Company agrees to pay, upon written demand therefor by the Executive, all
legal fees and expenses which the Executive may reasonably incur as a result of
any dispute or contest by or with the Company or others regarding the validity
or enforceability of, or liability under, any provision of this Agreement. In
any such action brought by the Executive for damages or to enforce any
provisions of this Agreement, he shall be entitled to seek both legal and
equitable relief and remedies, including, without limitation, specific
performance of the Company's obligations hereunder, in his sole discretion.
6. Parachute Payments. Notwithstanding anything in this Agreement to
the contrary, in the event it shall be determined that any payment or
distribution by the Company or any other person or entity to or for the benefit
of the Executive is a "parachute payment" (within the meaning of Section
280G(b)(2) of the Code), whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection with, or
arising out of, his employment with the Company or a change in ownership or
effective control of the Company or a substantial portion of its assets (a
"Payment"), and would be subject to the excise tax imposed by Section 4999 of
the Code (the "Excise Tax"), the Payments shall be reduced (but not below zero)
to the extent necessary to avoid the imposition of such Excise Tax. If the
application of the preceding sentence should require a reduction in the Payments
or other "parachute payments," unless the Executive shall have designated
otherwise, such reduction shall be implemented first, by reducing any non-cash
benefits to the extent necessary and, second, by reducing any cash benefits to
the extent necessary. In each case, the reductions shall be made starting with
the payment or benefit to be made on the latest date as of which any Payment
would be made and reducing Payments in reverse chronological order therefrom.
All determinations concerning the application of this Section 6 shall be made by
a nationally recognized firm of independent accountants, selected by the
Executive and satisfactory to the Company, whose determination shall be
conclusive and binding on all parties. The fees and expenses of such accountants
shall be borne by the Company.
<PAGE> 5
7. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all proprietary or confidential
information, knowledge or data relating to the Company or any of its
Subsidiaries, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
Subsidiaries and which shall not be or become public knowledge (other than by
acts of the Executive or his representatives in violation of this Agreement).
After the date of termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it.
8. Consulting and Noncompetition. If a Change in Control of the Company
occurs during the term of this Agreement and during the term of Executive's
employment with the Company or with any Subsidiary, then:
(a) For a period of six months following the termination of
his employment, the Executive shall make himself available by phone upon
reasonable notice, and shall also make himself available in person, at such
location as the Company and the Executive shall agree, upon reasonable notice,
subject to the Executive's prior commitments; provided, however, that the
Executive shall not be required to make himself available for more than five
days per month. The Executive shall consult with the Company with respect to
matters raised by the Company within his knowledge or experience.
(b) As consideration for the Executive's consulting services
and agreement not to compete as provided in this Section 8, the Company shall
pay the Executive a consulting and noncompetition fee equal to $250,000. Such
fee shall be paid to the Executive in a lump sum in cash within 30 days after
the Change in Control Date.
(c) The Company shall pay or reimburse the Executive for all
reasonable expenses actually incurred or paid by the Executive in the
performance of the Executive's services under Section 8(a) of this Agreement
upon presentation of expense statements or vouchers or such other supporting
information as the Company may reasonably require. If the Executive shall agree
to consult at a location away from the metropolitan area of his then current
residence, the Company shall pay his reasonable travel and lodging expenses in
connection therewith.
(d) For a period of six months following the termination of
his employment, the Executive shall not, either directly or indirectly, through
any person or entity:
(i) engage in any activities or conduct any
businesses which are in competition with the activities engaged in or business
conducted by the Company during the term of the Executive's employment with the
Company, or
(ii) be engaged by, consult with, or invest in, any
person or entity wherever located, which conducts a business in competition with
the business conducted by the Company during the term of the Executive's
employment with the Company, except that the Executive may, at any time, own
stock in a corporation which may be in competition with the Company, whose
shares are listed for trading on a national or regional stock exchange or trade
<PAGE> 6
on the over-the-counter market, provided that the Executive owns, in the
aggregate, fewer than 5% of the issued and outstanding shares of such
corporation.
(e) The covenants and obligations contained in Section 7 and
in Section 8(c) of this Agreement relate to matters which are of a special,
unique and extraordinary character and a violation of any of the terms of such
Sections shall cause irreparable injury to the Company, the amount of which
shall be difficult if not impossible to estimate or determine and which cannot
be adequately compensated. Therefore, the Company shall be entitled to an
injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining any violation or threatened violation of any
of such terms by the Executive and such other persons as the court orders. In no
event shall an asserted violation of the provisions of Section 7 or of Section 8
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives or "Successor(s) in Interest." The Executive may designate
a Successor (or Successors) in Interest to receive any and all amounts due the
Executive in accordance with this Agreement should the Executive be deceased at
any time of payment. Such designation of Successor(s) in Interest shall be made
in writing and signed by the Executive, and delivered to the Company pursuant to
Section 10(b) hereof. Any such designation may be made to any legal person,
persons, trust or the Executive's estate as he shall determine in his sole
discretion. In the event any designation shall be incomplete, or in the event
the Executive shall fail to designate a Successor in Interest, his estate shall
be deemed to be his Successor in Interest to receive such portion of all of the
payments due hereunder. The Executive may amend, change or revoke any such
designation at any time and from time to time, in the same manner. This Section
9(a) shall not supersede any designation of beneficiary or successor in interest
made by the Executive, or separately covered, under any other plan, practice,
policy or program of the Company.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, without regard
to the form of transaction utilized to acquire the business or assets of the
Company, to assume expressly 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 transaction involving a successor had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets as aforesaid which is required by this
clause to assume and agree to perform this Agreement or which otherwise assumes
and agrees to perform this Agreement.
<PAGE> 7
10. Miscellaneous.
(a) This Agreement and any and all disputes arising hereunder
or related hereto shall be governed by and construed in accordance with the laws
of the State of Michigan, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, to the addresses
for each party as first written above or to such other address as either party
shall have furnished to the other in writing in accordance herewith. Notices and
communications to the Company shall be addressed to the attention of the
Company's President. Notices and communications shall be effective when actually
received by the addressee.
(c) Whenever reference is made herein to any specific plan or
program of the Company, to the extent that the Executive is not a participant
therein or has no benefit accrued thereunder, whether vested or contingent, as
of the Change in Control Date, then such reference herein shall be null and void
and of no effect, and the Executive shall acquire no additional benefit as a
result of such reference.
(d) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(e) The Executive's failure to insist upon strict compliance
with any provision hereof shall not be deemed to be a waiver of such provision
or any other provision thereof.
(f) This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter hereof, and it
supersedes any prior agreements with respect to the subject matter hereof
between the Executive and the Company.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from the Committee, the Company has caused these
presents to be executed as of the day and year first above written.
EXECUTIVE THORN APPLE VALLEY, INC.
/s/ Louis Glazier By /s/ J.C. Canepa
- -------------------------------- -------------------------------------
Louis Glazier John C. Canepa
Its Chairman of the Ad Hoc Committee
of the Board of Directors
<PAGE> 1
Exhibit 10.4
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT (this "Agreement") by and between
Thorn Apple Valley, Inc., a Michigan corporation (the "Company"), with offices
at 26999 Central Park Blvd., Suite 300, Southfield, Michigan 48076 and Joel
Dorfman (the "Executive"), an individual residing at 1771 Blue Heron Court,
Bloomfield Hills, Michigan 48302, dated as of the 24th day of February, 1998.
R E C I T A L S:
WHEREAS, the Company recognizes that the current business environment
makes it difficult to attract and retain highly qualified executives unless a
certain degree of security can be offered to such individuals against
organizational and personnel changes which frequently follow changes in control
of a corporation; and
WHEREAS, even rumors of acquisitions or mergers may cause executives to
consider major career changes in an effort to assure financial security for
themselves and for their families; and
WHEREAS, the Company recognizes that its executives will be involved in
evaluating or negotiating any offers, proposals or other transactions which
could result in a Change in Control of the Company (as defined below) and
believes that it is in the best interest of the Company and its shareholders for
such executives to be in a position, free from personal financial and employment
considerations, to be able to assess objectively and pursue aggressively the
interests of the Company's shareholders in making these evaluations and carrying
on such negotiations; and
WHEREAS, the Ad Hoc Committee of the Board of Directors (the
"Committee") of the Company believes it is essential to provide the Executive
with compensation arrangements upon a Change in Control which are competitive
with those of other corporations, and in order to accomplish these objectives,
the Committee has caused the Company to enter into this Agreement.
NOW THEREFORE, the parties, for good and valuable consideration and
intending to be legally bound, agree as follows:
1. Operation and Term of Agreement. This Agreement shall be effective
immediately upon its execution. This Agreement may be terminated by the Company
upon two year's advance written notice to the Executive; provided, however, that
after a Change in Control of the Company during the term of this Agreement, this
Agreement shall remain in effect until all of the obligations of the parties
hereunder are satisfied. Prior to a Change in Control, this Agreement shall
immediately terminate upon termination of the Executive's employment or upon the
Executive's ceasing to be an elected officer of the Company, except in the case
of such termination under circumstances set forth in Section 2(e) below.
2. Certain Definitions. For purposes of this Agreement, the following
definitions shall have the following meanings:
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(a) "Cause" shall mean (i) actual dishonesty intended to
result in substantial personal enrichment at the expense of the Company, (ii)
conviction of a felony or (iii) repeated willful and deliberate failure or
refusal to perform the duties normally associated with the Executive's position
which is not remedied in a reasonable period of time after receipt of written
notice from the Company.
(b) "Change in Control" shall mean:
(i) on or after the date of execution of this
Agreement, any person (which, for all purposes hereof, shall include, without
limitation, an individual, sole proprietorship, partnership, unincorporated
association, unincorporated syndicate, unincorporated organization, trust, body
corporate and a trustee, executor, administrator or other legal representative)
(a "Person") or any group of two or more Persons acting in concert, excluding
the Company's current officers and directors, becomes the beneficial owner,
directly or indirectly, of securities of the Company representing, or acquires
the right to control or direct, or to acquire through the conversion of
securities or the exercise of warrants or other rights to acquire securities,
40% or more of the combined voting power of the Company's then outstanding
securities; provided that for the purposes of this Agreement, (A) "voting power"
means the right to vote for the election of directors, and (B) any determination
of percentage combined voting power shall be made on the basis that (x) all
securities beneficially owned by the Person or group or over which control or
direction is exercised by the Person or group which are convertible into
securities carrying voting rights have been converted (whether or not then
convertible) and all options, warrants or other rights which may be exercised to
acquire securities beneficially owned by the Person or group or over which
control or direction is exercised by the Person or group have been exercised
(whether or not then exercisable), and (y) no such convertible securities have
been converted by any other Person and no such options, warrants or other rights
have been exercised by any other Person; or
(ii) at any time subsequent to the date of execution
of this Agreement there shall be elected or appointed to the Board of Directors
of the Company (the "Board") any director or directors whose appointment or
election by the Board or nomination for election by the Company's shareholders
was not approved by a vote of at least a majority of the directors then still in
office who were either directors on the date of execution of this Agreement or
whose election or appointment or nomination for election was previously so
approved; or
(iii) a reorganization, merger, consolidation,
combination, corporate restructuring or similar transaction (an "Event"), in
each case, in respect of which the beneficial owners of the outstanding Company
voting securities immediately prior to such Event do not, following such Event,
beneficially own, directly or indirectly, more than 60% of the combined voting
power of the then outstanding voting securities entitled to vote generally in
the election of directors of the Company and any resulting Parent in
substantially the same proportions as their ownership, immediately prior to such
Event, of the outstanding Company voting securities; or
(iv) an Event involving the Company as a result of
which 40% or more of the members of the board of directors of the Company are
not persons who were members of the Board immediately prior to the earlier of
(x) the Event, (y) execution of an agreement the
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consummation of which would result in the Event, or (z) announcement by the
Company of an intention to effect the Event; or
(v) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Change in Control has occurred.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Disability," for purposes of this Agreement, shall apply
to Executive if he has applied for and is determined to be eligible to receive
disability benefits under the Company's long term disability plan.
(e) The "Change in Control Date" shall be any date during the
term of this Agreement on which a Change in Control occurs. Anything in this
Agreement to the contrary notwithstanding, if the Executive's employment or
status as an elected officer with the Company is terminated within six months
prior to the date on which a Change in Control occurs, then unless such
employment or status as an elected officer with the Company is terminated (i)
for Cause, or (ii) voluntarily by the Executive, for all purposes of this
Agreement the "Change in Control Date" shall mean the date immediately prior to
the date of such termination.
(f) "Subsidiary" means a company 50% or more of the voting
securities of which are owned, directly or indirectly, by the Company.
3. Benefits Upon Change in Control. If a Change in Control of the
Company occurs during the term of this Agreement and during the term of
Executive's employment with the Company or with any Subsidiary, the Company
shall provide the following benefits:
(a) The Company shall pay to the Executive in a lump sum in
cash within 30 days after the Change of Control Date the sum of $1,500,000; and
(b) Within 30 days after the Change in Control Date, upon
surrender by the Executive of his outstanding options to purchase common shares
of the Company ("Common Shares") granted to the Executive pursuant to the stock
option plans of the Company (the "Outstanding Options"), the Company shall pay
the Executive an amount in respect of each Outstanding Option (whether wholly-
or partially-vested or not vested) equal to the difference between the exercise
price of such Outstanding Options and the higher of (x) the fair market value of
the Common Shares at the time of such termination, and (y) the highest price
paid for Common Shares by any person or group whose acquisition of voting
securities has resulted in a Change in Control of the Company. In the
alternative, the Executive may exercise his Outstanding Options, all of which
shall be immediately vested; and
(c) During the two year period following the Change in Control
Date, the Company shall maintain in full force and effect for the continued
benefit of the Executive (i) the Company's life and disability insurance
programs and the Company's medical, dental and vision plans in which the
Executive was entitled to participate immediately prior to the date of the
Change in Control, and (ii) the Company's automobile program in which the
Executive was entitled to participate immediately prior to the date of the
Change in Control. In the event the Executive's participation in any such
program or plan is barred or otherwise prevented, the
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Company shall provide the Executive with after-tax cash or benefits
substantially similar to and not less favorable than the benefits which the
Executive would otherwise be entitled to receive under such program or plan.
4. Non-exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plans, practices, policies or programs provided by the
Company or any of its Subsidiaries and for which the Executive may qualify, nor
shall anything herein limit or otherwise affect such rights as the Executive may
have under any stock option or other agreements with the Company or any of its
Subsidiaries. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, practice, policy or program of the
Company or any of its Subsidiaries at or subsequent to the Change in Control
Date shall be payable in accordance with such plan, practice, policy or program.
5. Full Settlement; Legal Expenses. The Company's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which the Company may have
against the Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement.
The Company agrees to pay, upon written demand therefor by the Executive, all
legal fees and expenses which the Executive may reasonably incur as a result of
any dispute or contest by or with the Company or others regarding the validity
or enforceability of, or liability under, any provision of this Agreement. In
any such action brought by the Executive for damages or to enforce any
provisions of this Agreement, he shall be entitled to seek both legal and
equitable relief and remedies, including, without limitation, specific
performance of the Company's obligations hereunder, in his sole discretion.
6. Parachute Payments. Notwithstanding anything in this Agreement to
the contrary, in the event it shall be determined that any payment or
distribution by the Company or any other person or entity to or for the benefit
of the Executive is a "parachute payment" (within the meaning of Section
280G(b)(2) of the Code), whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise in connection with, or
arising out of, his employment with the Company or a change in ownership or
effective control of the Company or a substantial portion of its assets (a
"Payment"), and would be subject to the excise tax imposed by Section 4999 of
the Code (the "Excise Tax"), the Payments shall be reduced (but not below zero)
to the extent necessary to avoid the imposition of such Excise Tax. If the
application of the preceding sentence should require a reduction in the Payments
or other "parachute payments," unless the Executive shall have designated
otherwise, such reduction shall be implemented first, by reducing any non-cash
benefits to the extent necessary and, second, by reducing any cash benefits to
the extent necessary. In each case, the reductions shall be made starting with
the payment or benefit to be made on the latest date as of which any Payment
would be made and reducing Payments in reverse chronological order therefrom.
All determinations concerning the application of this Section 6 shall be made by
a nationally recognized firm of independent accountants, selected by the
Executive and satisfactory to the Company, whose determination shall be
conclusive and binding on all parties. The fees and expenses of such accountants
shall be borne by the Company.
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7. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all proprietary or confidential
information, knowledge or data relating to the Company or any of its
Subsidiaries, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
Subsidiaries and which shall not be or become public knowledge (other than by
acts of the Executive or his representatives in violation of this Agreement).
After the date of termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
communicate or divulge any such information, knowledge or data to anyone other
than the Company and those designated by it.
8. Consulting and Noncompetition. If a Change in Control of the Company
occurs during the term of this Agreement and during the term of Executive's
employment with the Company or with any Subsidiary, then:
(a) For a period of six months following the termination of
his employment, the Executive shall make himself available by phone upon
reasonable notice, and shall also make himself available in person, at such
location as the Company and the Executive shall agree, upon reasonable notice,
subject to the Executive's prior commitments; provided, however, that the
Executive shall not be required to make himself available for more than five
days per month. The Executive shall consult with the Company with respect to
matters raised by the Company within his knowledge or experience.
(b) As consideration for the Executive's consulting services
and agreement not to compete as provided in this Section 8, the Company shall
pay the Executive a consulting and noncompetition fee equal to $500,000. Such
fee shall be paid to the Executive in a lump sum in cash within 30 days after
the Change in Control Date.
(c) The Company shall pay or reimburse the Executive for all
reasonable expenses actually incurred or paid by the Executive in the
performance of the Executive's services under Section 8(a) of this Agreement
upon presentation of expense statements or vouchers or such other supporting
information as the Company may reasonably require. If the Executive shall agree
to consult at a location away from the metropolitan area of his then current
residence, the Company shall pay his reasonable travel and lodging expenses in
connection therewith.
(d) For a period of six months following the termination of
his employment, the Executive shall not, either directly or indirectly, through
any person or entity:
(i) engage in any activities or conduct any
businesses which are in competition with the activities engaged in or business
conducted by the Company during the term of the Executive's employment with the
Company, or
(ii) be engaged by, consult with, or invest in, any
person or entity wherever located, which conducts a business in competition with
the business conducted by the Company during the term of the Executive's
employment with the Company, except that the Executive may, at any time, own
stock in a corporation which may be in competition with the Company, whose
shares are listed for trading on a national or regional stock exchange or trade
<PAGE> 6
on the over-the-counter market, provided that the Executive owns, in the
aggregate, fewer than 5% of the issued and outstanding shares of such
corporation.
(e) The covenants and obligations contained in Section 7 and
in Section 8(c) of this Agreement relate to matters which are of a special,
unique and extraordinary character and a violation of any of the terms of such
Sections shall cause irreparable injury to the Company, the amount of which
shall be difficult if not impossible to estimate or determine and which cannot
be adequately compensated. Therefore, the Company shall be entitled to an
injunction, restraining order or other equitable relief from any court of
competent jurisdiction, restraining any violation or threatened violation of any
of such terms by the Executive and such other persons as the court orders. In no
event shall an asserted violation of the provisions of Section 7 or of Section 8
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
9. Successors.
(a) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives or "Successor(s) in Interest." The Executive may designate
a Successor (or Successors) in Interest to receive any and all amounts due the
Executive in accordance with this Agreement should the Executive be deceased at
any time of payment. Such designation of Successor(s) in Interest shall be made
in writing and signed by the Executive, and delivered to the Company pursuant to
Section 10(b) hereof. Any such designation may be made to any legal person,
persons, trust or the Executive's estate as he shall determine in his sole
discretion. In the event any designation shall be incomplete, or in the event
the Executive shall fail to designate a Successor in Interest, his estate shall
be deemed to be his Successor in Interest to receive such portion of all of the
payments due hereunder. The Executive may amend, change or revoke any such
designation at any time and from time to time, in the same manner. This Section
9(a) shall not supersede any designation of beneficiary or successor in interest
made by the Executive, or separately covered, under any other plan, practice,
policy or program of the Company.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, without regard
to the form of transaction utilized to acquire the business or assets of the
Company, to assume expressly 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 transaction involving a successor had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets as aforesaid which is required by this
clause to assume and agree to perform this Agreement or which otherwise assumes
and agrees to perform this Agreement.
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10. Miscellaneous.
(a) This Agreement and any and all disputes arising hereunder
or related hereto shall be governed by and construed in accordance with the laws
of the State of Michigan, without reference to principles of conflict of laws.
The captions of this Agreement are not part of the provisions hereof and shall
have no force or effect. This Agreement may not be amended or modified otherwise
than by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, to the addresses
for each party as first written above or to such other address as either party
shall have furnished to the other in writing in accordance herewith. Notices and
communications to the Company shall be addressed to the attention of the
Company's President. Notices and communications shall be effective when actually
received by the addressee.
(c) Whenever reference is made herein to any specific plan or
program of the Company, to the extent that the Executive is not a participant
therein or has no benefit accrued thereunder, whether vested or contingent, as
of the Change in Control Date, then such reference herein shall be null and void
and of no effect, and the Executive shall acquire no additional benefit as a
result of such reference.
(d) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
(e) The Executive's failure to insist upon strict compliance
with any provision hereof shall not be deemed to be a waiver of such provision
or any other provision thereof.
(f) This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter hereof, and it
supersedes any prior agreements with respect to the subject matter hereof
between the Executive and the Company.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from the Committee, the Company has caused these
presents to be executed as of the day and year first above written.
EXECUTIVE THORN APPLE VALLEY, INC.
/s/ Joel Dorfman By /s/ J.C. Canepa
- -------------------------- ----------------------------------
Joel Dorfman John C. Canepa
Its Chairman of the Ad Hoc Committee
of the Board of Directors
