<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 27,1996
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from __________ to __________
Commission file number 1-5601
AMERICAN PRECISION INDUSTRIES INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 16-1284388
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2777 WALDEN AVENUE, BUFFALO, NEW YORK 14225
- -------------------------------------- ---------
(Address of principal executives offices) (Zip Code)
(716) 684-9700
----------------------------------------------------
(Registrant's telephone number, including area code)
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--- ---
Number of shares of outstanding stock
on November 7, 1996 7,223,088
This document contains pages 1 - 81 inclusive.
<PAGE> 2
AMERICAN PRECISION INDUSTRIES INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
----------------------------------
(Unaudited)
<TABLE>
<CAPTION>
THIRD QUARTER ENDED NINE MONTHS ENDED
------------------------------------ -------------------------------------
1996 1995 1996 1995
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
NET SALES $ 31,599,000 $ 20,800,000 $ 84,978,000 $ 60,316,000
INVESTMENT INCOME 59,000 50,000 243,000 183,000
----------------- ----------------- ----------------- ------------------
REVENUES 31,658,000 20,850,000 85,221,000 60,499,000
----------------- ----------------- ----------------- ------------------
COSTS AND EXPENSES
Cost of products sold 20,986,000 13,536,000 56,976,000 40,388,000
Selling and administrative 7,215,000 5,075,000 18,847,000 13,835,000
Research and product development 479,000 266,000 1,260,000 838,000
Interest and debt expense 379,000 54,000 901,000 171,000
----------------- ----------------- ----------------- ------------------
29,059,000 18,931,000 77,984,000 55,232,000
----------------- ----------------- ----------------- ------------------
EARNINGS BEFORE INCOME TAXES 2,599,000 1,919,000 7,237,000 5,267,000
FEDERAL AND STATE INCOME TAXES 863,000 719,000 2,529,000 1,903,000
----------------- ----------------- ----------------- ------------------
NET EARNINGS $ 1,736,000 $ 1,200,000 $ 4,708,000 $ 3,364,000
================= ================= ================= ==================
NET EARNINGS PER SHARE $0.24 $0.17 $0.66 $0.48
================= ================= ================= ==================
DIVIDENDS DECLARED PER SHARE $.0650 $.0650 $.195 $0.1925
================= =============== =============== ================
AVERAGE SHARES OUTSTANDING 7,207,000 7,101,000 7,176,000 7,078,000
================= ================= ================= ==================
</TABLE>
<PAGE> 3
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- --------------------------
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
SEPTEMBER DECEMBER
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 372,000 $ 2,486,000
Accounts receivable less allowance for
doubtful accounts of $496,000 and $264,000 19,656,000 12,691,000
Marketable securities 250,000 3,493,000
Inventories 16,723,000 10,589,000
Prepaid expenses 1,740,000 967,000
Deferred income tax benefit 1,403,000 1,389,000
Prepaid income taxes 144,000 --
----------- -----------
TOTAL CURRENT ASSETS 40,288,000 31,615,000
----------- -----------
INVESTMENTS 4,313,000 6,277,000
OTHER ASSETS
Cost in excess of net assets acquired 4,440,000 2,153,000
Prepaid pension cost 2,140,000 2,140,000
Net cash value of life insurance 2,639,000 2,222,000
Other 903,000 1,115,000
----------- -----------
10,122,000 7,630,000
----------- -----------
PROPERTY, PLANT AND EQUIPMENT
Land 665,000 211,000
Buildings and improvements 10,266,000 6,183,000
Machinery, equipment and furniture 29,979,000 22,265,000
Construction in process 4,662,000 1,450,000
----------- -----------
45,572,000 30,109,000
Less accumulated depreciation 20,352,000 17,840,000
----------- -----------
NET PROPERTY, PLANT AND EQUIPMENT 25,220,000 12,269,000
----------- -----------
$79,943,000 $57,791,000
=========== ===========
</TABLE>
<PAGE> 4
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- --------------------------
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
SEPTEMBER DECEMBER
----------- -----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ -- $ 2,602,000
Accounts payable 8,272,000 5,136,000
Accrued compensation and payroll taxes 4,945,000 3,566,000
Other accrued expenses 1,431,000 757,000
Dividends payable 469,000 463,000
Current portion of long-term obligations 1,252,000 628,000
----------- -----------
TOTAL CURRENT LIABILITIES 16,369,000 13,152,000
----------- -----------
DEFERRED INCOME TAXES 1,251,000 1,251,000
OTHER NONCURRENT LIABILITIES 568,000 413,000
LONG-TERM OBLIGATIONS, LESS CURRENT PORTION 23,400,000 8,628,000
SHAREHOLDERS' EQUITY
Common stock, par value $.66 2/3 a share:
Authorized - 10,000,000 shares
Issued - 7,585,042 and 7,502,000 shares 5,057,000 5,001,000
Additional paid-in capital 10,134,000 9,532,000
Retained earnings 26,002,000 22,629,000
Net unrealized gain on marketable securities
and investments -- 23,000
----------- -----------
41,193,000 37,185,000
Less cost of 374,262 treasury shares 2,838,000 2,838,000
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 38,355,000 34,347,000
----------- -----------
$79,943,000 $57,791,000
=========== ===========
</TABLE>
<PAGE> 5
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
- ------------------------------------
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
1996 1995
September September
------------ -----------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income $ 4,708,000 $ 3,364,000
Adjustments to reconcile net income to cash and
and cash equivalents provided by operating activities:
Depreciation and amortization 2,944,000 2,025,000
Gain on sale of investments and fixed assets (19,000) 10,000
Increase in supplemental benefit program 74,000 101,000
Recognition of pension income under FASB #87 -- (233,000)
Stock compensation programs 166,000 --
Change in various allowance accounts 312,000 (66,000)
Treasury stock issued as bonus -- 24,000
(Increase) Decrease in:
Accounts receivable (2,224,000) (1,428,000)
Inventories (2,216,000) (1,852,000)
Prepaid expenses (585,000) 189,000
Prepaid income taxes (228,000) --
Net cash value of life insurance (417,000) (554,000)
Other assets, net 12,000 (325,000)
Increase (Decrease) in:
Accounts payable 1,374,000 315,000
Accrued expenses (412,000) 120,000
Federal and state income taxes -- 173,000
Other noncurrent liabilities (11,000) (81,000)
------------ -----------
Net cash provided by Operating Activities 3,478,000 1,782,000
------------ -----------
Cash Flows from Investing Activities
Investments in Gettys and Ketema net of cash and cash
equivalents acquired (17,292,000) --
Purchases of investments and marketable securities (94,000) --
Additions to property, plant and equipment (5,529,000) (3,098,000)
Proceeds from investments 5,291,000 1,474,000
Proceeds from sale of fixed assets 49,000 20,000
------------ -----------
Net cash (used) by Investing Activities (17,575,000) (1,604,000)
------------ -----------
Cash Flows from Financing Activities
Exercise of stock options 658,000 389,000
Payment of long-term obligations, including current maturities (600,000) (274,000)
Dividends paid (1,397,000) (1,343,000)
Increase in long-term borrowings 15,924,000 --
(Decrease) in short-term borrowings (2,602,000) (835,000)
------------ -----------
Net cash provided (used) by Financing Activities 11,983,000 (2,063,000)
------------ -----------
Net (Decrease) in Cash and Cash Equivalents (2,114,000) (1,885,000)
Cash and Cash Equivalents at Beginning of Year 2,486,000 2,135,000
============ ===========
Cash and Cash Equivalents at End of Period $ 372,000 $ 250,000
============ ===========
</TABLE>
<PAGE> 6
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Third Quarter Ended September 27, 1996
------------------------------------------
Note A Consolidated Financial Statements
- ------ ---------------------------------
The Consolidated Balance Sheet as of September 27, 1996, the
Consolidated Statement of Earnings, and the Consolidated
Statement of Cash Flows for the periods ended September 27, 1996
and September 29, 1995 have been prepared by the Company without
audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present
fairly the financial position, results of operations, and changes
in cash flow at September 27, 1996 and for all periods presented
have been made. The Consolidated Balance Sheet as of September
27, 1996 includes the assets, liabilities, and resulting goodwill
of API Ketema Inc. ("Ketema") and API Gettys Inc. ("Gettys")
acquired as of April 1, 1996 and April 29, 1996, respectively.
The Consolidated Statement of Earnings and Cash Flows for the
period ended September 27, 1996 also includes the results of
Ketema and Gettys since the dates of acquisition.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with Generally
Accepted Accounting Principles have been condensed or omitted. It
is suggested these condensed consolidated financial statements be
read in conjunction with the financial statements and the notes
thereto included in the Company's December 29, 1995 Annual Report
to Shareholders.
NOTE B Inventories
- ------ -----------
It is not practical to determine raw material, work in process,
and finished goods inventories during interim periods.
<PAGE> 7
Note C Long-Term Obligations
- ------ ---------------------
<TABLE>
<CAPTION>
September 27, 1996
-------------------------------------------------------------
Outstanding Current Long-Term
-------------------------------------------------------------
<S> <C> <C> <C>
Industrial Revenue $ 13,642,000 $ 1,075,000 $ 12,567,000
Bonds
Supplemental Benefit 1,110,000 177,000 933,000
Program
Revolving Credit Debt 9,900,000 -- 9,900,000
--------------- ---------------- ---------------
$ 24,652,000 $ 1,252,000 $ 23,400,000
=============== ================ ===============
</TABLE>
Note D Earnings Per Share
- ------ ------------------
Earnings per share are based on the weighted average number of
shares outstanding.
<PAGE> 8
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
Components of Consolidated Statement of Earnings
Expressed as a Percentage of Revenues
------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1996 1995
September September September September
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues 100.0 100.0 100.0 100.0
Costs and Expenses
Cost of products sold 66.3 64.9 66.9 66.8
Selling and administrative 22.8 24.3 22.1 22.9
Research and product development 1.5 1.3 1.5 1.4
Interest and debt expense 1.2 0.3 1.1 0.3
--------------- --------------- --------------- ---------------
91.8 90.8 91.6 91.4
--------------- --------------- --------------- ---------------
Earnings before Income Taxes 8.2 9.2 8.4 8.6
Federal and State Income Taxes 2.7 3.4 2.7 3.1
--------------- --------------- --------------- ---------------
Net Earnings 5.5 5.8 5.7 5.5
=============== =============== =============== ===============
Federal and State Income Taxes
as a percentage of earnings
before income taxes 33.2 37.5 34.9 36.1
=============== =============== =============== ===============
</TABLE>
<PAGE> 9
MANAGEMENT'S DISCUSSION AND ANALYSIS AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
REVENUES
Consolidated revenues for the third quarter and nine months of 1996 increased
51.8% and 40.9%, respectively, as compared to the same periods of the preceding
year. Sales within the Heat Transfer segment increased 71.3% and 53.3%,
respectively, over the comparable quarter and nine months of 1995. This increase
is attributable to higher sales of the extended surface heat transfer equipment,
which continues to far surpass 1995 levels, as well as increased sales volume of
our air-cooled product line to new and existing customers. The Motion
Technologies segment sales increased 46.0% and 42.5%, respectively, over the
comparable quarter and nine months of 1995. This increase is the direct result
of increased sales volume of all the products offered by the Motion Technologies
segment to both new and existing customers. Both the third quarter and nine
months results of 1996 for the Heat Transfer and Motion Technologies segments
were favorably impacted by sales and earnings from Ketema and Gettys, which were
acquired by the Company as of April 1, 1996 and April 29, 1996, respectively.
Sales within the Electronic Components segment for the third quarter of 1996
increased 1.2%, while sales for the nine months remained relatively consistent
with the comparable period of 1995.
Bookings of customer orders in the third quarter and nine months of 1996 were
$32.7 million and $88.6 million, respectively, up 32.9% and 24.9% over bookings
in the same periods last year. The backlog of customer orders at September 27,
1996 stood at $39.5 million, up 22.8% from $32.2 million on September 29, 1995.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses, expressed as a percentage of net sales,
declined for the third quarter and nine months of 1996 as compared with the
comparable periods in 1995. The dollar increase is primarily the result of
increased sales commissions and provisions made under the Company's incentive
compensation program.
INTEREST AND DEBT EXPENSE
The increase in interest and debt expense is due to the combination of the
industrial revenue bond financing obtained at the end of 1995 for the
construction of the new Air Technologies facility as well as debt incurred for
the acquisition of Ketema and Gettys.
<PAGE> 10
RESEARCH AND PRODUCT DEVELOPMENT
The increase in research and product development in the third quarter and nine
months of 1996 of 80.1% and 50.4%, respectively, reflects the additional
activity of Gettys acquired as of April 29, 1996, as well as the Company's
commitment to the continued improvement of existing products and the design of
new products.
NET EARNINGS
Net earnings increased 44.7% in the third quarter of 1996 and 40.0% for the nine
month as compared to similar periods in 1995, which is primarily due to the
increased level of sales discussed above, offset by higher interest and debt
expense.
<PAGE> 11
FINANCIAL POSITION
On March 29, 1996, the Company concluded a Credit Agreement with Marine Midland
Bank which provided a Revolving Credit facility of $20,000,000. The Revolving
Credit matures on March 29, 1999, at which time the Company may convert the
amount outstanding under the Revolving Credit to a term loan payable over four
years. The interest rate on the Revolving Credit as of September 27, 1996, under
the LIBOR Rate Option in the Credit Agreement, was 6.13%.
On April 1, 1996, the Company borrowed $12,700,000 under the Credit Agreement in
connection with the Ketema acquisition and borrowed an additional $4,000,000 on
April 19, 1996 relating to the Gettys acquisition.
Relative to the Ketema acquisition, the Company concluded a $6,000,000 15-year
bond financing with the Grand Prairie Industrial Development Authority on August
7,1996. Substantially all the proceeds from this financing were applied to
reduce the outstanding debt under the Revolving Credit. In connection with the
bond financing, the Revolving Credit facility was reduced from $20,000,000 to
$16,000,000.
Concurrent with the closing of the aforementioned Credit Agreement, the Company
reduced its short-term line of credit with Marine Midland Bank from $10 million
to $5 million. The Company has utilized this short-term line of credit from time
to time in amounts not exceeding $2,000,000 at any time during the nine months
ended September 27, 1996.
Comparative information on the Company's liquidity position follows ($000
omitted):
<TABLE>
<CAPTION>
1996 1995
September September
-------------------- --------------------
<S> <C> <C>
Net working capital $23,919 $18,463
Current ratio 2.46 2.40
Cash, cash equivalents
and marketable securities $ 622 $ 5,979
For the nine months ended
--------------------------------------------
1996 1995
September September
-------------------- --------------------
Cash flow from operations $ 3,478 $ 1,782
Capital expenditures $ 5,529 $ 3,098
</TABLE>
Investments reflected in the Company's balance sheet at September 27, 1996 and
December 29, 1995 represent the proceeds of a bond financing concluded on
December 22, 1995 for the construction of the new Airtech Division facility.
<PAGE> 12
PART II
-------
OTHER INFORMATION
-----------------
ITEM 5. Other Information
On November 5, 1996, the Registrant entered into an agreement in
principle to acquire all of the outstanding stock of Portescap
SA, a manufacturer of motion technology products with its
principal facilities in Switzerland, from Inter Scan Holding AG
for a purchase price of approximately $37.8 million, consisting
of convertible preferred stock of $23.2 million, an exchangeable
note of $6.8 million, and cash of $7.8 million. Subject to
approval by the Registrant's shareholders, the note will be
exchangeable into additional shares of convertible preferred
stock. The convertible preferred stock, including the stock
issued in exchange for the note, would be convertible at
approximately $17 per share into 1,775,000 shares of the
Registrant's common stock. The Registrant and Inter Scan Holding
AG are discussing the detailed terms of this proposed
transaction. If final terms are agreed to, the Registrant
anticipates closing the transaction in the early part of the
first quarter of 1997.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10
<TABLE>
<S> <C>
i. Form of Change in Control Agreement between American *
Precision Industries Inc. and James W. Bingel, John
M. Murray, Craig J. Van Tine, and Richard S. Warzala
dated October 21, 1996.
ii. Change in Control Agreement between American *
Precision Industries Inc. and Kurt Wiedenhaupt dated
July 1, 1996.
iii. Amendment to and Restatement of Executive Employment *
Agreement between American Precision Industries Inc.
and Kurt Wiedenhaupt dated July 1, 1996.
</TABLE>
<PAGE> 13
<TABLE>
<S> <C>
iv. First Amendment to American Precision Industries *
Inc. Grant of Restricted Stock and Bonus to Kurt
Wiedenhaupt dated July 1, 1996.
v. Executive Supplemental Retirement Plan (as restated) *
between American Precision Industries Inc. and Kurt
Wiedenhaupt dated July 1, 1996.
vi. Amendment to Life Insurance Split-Dollar Agreement *
between American Precision Industries Inc. and Kurt
Wiedenhaupt dated as of July 1, 1994.
vii. Life Insurance Split-Dollar Agreement (as restated) *
between American Precision Industries Inc. and Kurt
Wiedenhaupt dated July 1, 1996.
27 Financial Data Schedule *
* Documents filed herewith
</TABLE>
(b) Reports on Form 8-K
There were no reports on Form 8-K for the three months
ended September 27, 1996.
<PAGE> 14
AMERICAN PRECISION INDUSTRIES
AND SUBSIDIARIES
* * * * * *
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES
--------------------------------------------------
LITIGATION REFORM ACT OF 1995
-----------------------------
With the exception of historical factual information, the statements made
in this Form 10-Q constitute forward-looking statements based upon current
expectations and are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve certain assumptions, risks and uncertainties that could
cause actual results to differ materially from those included in or
contemplated by the statements. These assumptions, risks and uncertainties
include, but are not limited to, the possibility that the acquisition
referred to may not occur. Registrant disclaims any obligation to update
any forward-looking statements as a result of developments occurring after
the filing of this Form 10-Q.
* * * * * *
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.
AMERICAN PRECISION INDUSTRIES INC.
/s/ John M. Murray
------------------------------------
John M. Murray
Vice President Finance and Treasurer
/s/ Thomas M. Huebsch
------------------------------------
Thomas M. Huebsch
Chief Accounting Officer
November 13, 1996
<PAGE> 15
EXHIBIT INDEX
-------------
10 i. Form of Change in Control Agreement between American Precision
Industries Inc. and James W. Bingel, John M. Murray, Craig J.
Van Tine, and Richard S. Warzala dated October 21, 1996.
ii. Change in Control in Agreement between American Precision
Industries Inc. and Kurt Wiedenhaupt dated July 1, 1996.
iii. Amendment to and Restatement of Executive Employment Agreement
between American Precision Industries Inc. and Kurt Wiedenhaupt
dated July 1, 1996.
iv. First Amendment to American Precision Industries Inc. Grant of
Restricted Stock and Bonus to Kurt Wiedenhaupt dated July 1,
1996.
v. Executive Supplemental Retirement Plan (as restated) between
American Precision Industries Inc. and Kurt Wiedenhaupt dated
July 1, 1996.
vi. Amendment to Life Insurance Split-Dollar Agreement between
American Precision Industries Inc. and Kurt Wiedenhaupt dated
as of July 1, 1994.
vii. Life Insurance Split-Dollar Agreement (as restated) between
American Precision Industries Inc. and Kurt Wiedenhaupt dated
July 1, 1996.
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10(i)
CHANGE IN CONTROL AGREEMENT
---------------------------
AGREEMENT by and between American Precision Industries Inc., a
Delaware corporation (the "Company"), with offices at 2777 Walden Avenue,
Buffalo, New York 14225 and____________________(the "Executive"), an individual
residing at___________________________________________________, dated as of the
1st day of JULY, 1996.
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 their families; and
WHEREAS, the Company desires to assure fair treatment of its
executives in the event of a Change in Control (as defined below) and to allow
them to make critical career decisions without undue time pressure and financial
uncertainty, thereby increasing their willingness to remain with the Company
notwithstanding the outcome of a possible Change in Control transaction; 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 Changes in Control of the Company and
believes that it is in the best interest of the Company and its stockholders 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 stockholders in making these evaluations and carrying
on such negotiations; and
WHEREAS, the Board of Directors (the "Board") of the Company
believes it is essential to provide the Executive with compensation arrangements
upon a Change in Control which provide the Executive with individual financial
security and which are competitive with those of other corporations, and in
order to accomplish these objectives, the Board 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 twenty-four (24) months' 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
- 1 -
<PAGE> 2
satisfied and the Protection Period has expired. 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 words and phrases shall have the following meanings:
(a) "Cause" shall mean (i) the continued failure by
the Executive to perform his material responsibilities and duties hereunder
(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness), (ii) the engaging by the Executive in willful or
reckless conduct which is demonstrably injurious to the Company monetarily or
otherwise, (iii) the conviction of the Executive of a felony, or (iv) the
commission or omission of any act by the Executive that is materially inimical
to the best interests of the Company and that constitutes on the part of the
Executive common law fraud or malfeasance, misfeasance or nonfeasance of duty;
provided, however, that "cause" shall not include the Executive's lack of
professional qualifications. For purposes of this Agreement, an act, or failure
to act, on the Executive's part shall be considered "willful" or "reckless" only
if done, or omitted to be done, by him not in good faith and without reasonable
belief that his action or omission was in the best interest of the Company. The
Executive's employment shall not be deemed to have been terminated for "cause"
unless the Company shall have given or delivered to the Executive (A) reasonable
notice setting forth the reasons for the Company's intention to terminate the
Executive's employment for "cause," (B) a reasonable opportunity, at any time
during the thirty-day period after the Executive's receipt of such notice, for
the Executive, together with his counsel, to be heard before the Board, and (C)
a Notice of Termination (as defined in Section 9 below) stating that, in the
good faith opinion of not less than a majority of the entire membership of the
Board, the Executive was guilty of the conduct set forth in clauses (i), (ii),
(iii) or (iv) of the first sentence of this Section 2(a).
(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 who or which 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, 25% 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
- 2 -
<PAGE> 3
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 any
director or directors whose appointment or election to the Board or nomination
for election by the Company's stockholders was not approved by a vote of at
least a majority of the directors then 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 50% 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 33% or more of the members of the board of directors of the
Parent or 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.
(c) "Code" shall mean the Internal Revenue Code of
1986, as amended.
(d) "Disability," for purposes of this Agreement,
shall mean total disability as defined in any long-term disability plan
sponsored by the Company in which the Executive participates, or, if there is no
such plan or it does not define such term, then it shall mean the physical or
mental incapacity of the Executive which prevents him from substantially
performing the duties of the office or position to which he was elected or
appointed by the Board for a period of at least 180 days and the incapacity is
expected to be permanent and continuous through the Executive's 65th birthday.
(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, and it is reasonably
demonstrated that such termination (i) was at the request of a
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<PAGE> 4
third party who has taken steps reasonably calculated or intended to effect a
Change in Control or (ii) otherwise arose in connection with or anticipation of
a Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination.
(f) "Good Reason" means:
(i) the assignment to the Executive within the
Protection Period of any duties inconsistent in any respect with the Executive's
position (including status, offices, titles and reporting requirements,
authority, duties or responsibilities), or any other action which results in a
diminution in such position, authority, duties or responsibilities excluding for
this purpose an isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) a reduction by the Company in the Executive's base
salary in effect immediately before the beginning of the Protection Period or as
increased from time to time thereafter;
(iii) a failure by the Company to maintain plans
providing benefits at least as beneficial as those provided by any benefit or
compensation plan (including, without limitation, any incentive compensation
plan, bonus plan or program, retirement, pension or savings plan, life insurance
plan, health and dental plan or disability plan) in which the Executive is
participating immediately before the beginning of the Protection Period, or any
action taken by the Company which would adversely affect the Executive's
participation in or reduce the Executive's opportunity to benefit under any of
such plans or deprive the Executive of any material fringe benefit enjoyed by
him immediately before the beginning of the Protection Period; PROVIDED,
HOWEVER, that a reduction in benefits under the Company's tax-qualified
retirement, pension or savings plans or its life insurance plan, health and
dental plan, disability plans or other insurance plans which reduction applies
equally to all participants in the plans and has a DE MINIMIS effect on the
Executive shall not constitute "Good Reason" for termination by the Executive;
(iv) the Company's requiring the Executive, without the
Executive's written consent, to be based at any office or location in excess of
50 miles from his office location immediately before the beginning of the
Protection Period, except for travel reasonably required in the performance of
the Executive's responsibilities;
(v) any purported termination by the Company of the
Executive's employment for Cause otherwise than as referred to in Section 9 of
this Agreement; or
(vi) any failure by the Company to obtain the
assumption of the obligations contained in this Agreement by any successor as
contemplated in Section 8(c) of this Agreement.
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<PAGE> 5
(g) "Parent" means any entity which directly or indirectly
through one or more other entities owns or controls more than 50% of the voting
stock or common stock of the Company.
(h) "Protection Period" means the period beginning on the
Change in Control Date and ending on the last day of the thirty-sixth (36th)
calendar month following the Change in Control Date.
(i) "Subsidiary" means a company 50% or more of the voting
securities of which are owned, directly or indirectly, by the Company.
3. BENEFITS UPON TERMINATION WITHIN A PROTECTION PERIOD. If,
during a Protection Period, the Executive's employment is terminated by the
Company other than for Cause or Disability or other than as a result of the
Executive's death or the Executive terminates his employment for Good Reason,
the Company shall pay to the Executive in a lump sum in cash within 10 days
after the date of termination the aggregate of the following amounts and shall
provide the following benefits:
(a) The Executive's full base salary and vacation pay (for
vacation not taken) accrued but unpaid through the date of termination at the
rate in effect at the time of the termination plus an amount equal to the
product of the Executive's normative bonus under the applicable bonus plan for
the fiscal year including the date of termination and a fraction, the numerator
of which is the number of days in such fiscal year through the date of
termination and the denominator of which is 365; and
(b) The amount in the "bonus bank" for the Executive under
all bonus plans in which the Executive participates; and
(c) A lump sum severance payment in an amount equal to 100%
of the Executive's "Annual Compensation." For purposes of this Agreement,
"Annual Compensation" shall be an amount equal to the aggregate of the
Executive's annual base salary from the Company and its Subsidiaries as set by
the Board and in effect immediately prior to the date of termination or Change
in Control (whichever is greater) plus the highest bonus accrued by the Company
for the Executive in any of the Company's three fiscal years preceding the date
of termination or Change in Control (whichever is greater); and
(d) Within 30 days of the date of termination, upon
surrender by the Executive of his outstanding options to purchase common shares
of the Company ("Common Shares") granted to the Executive by the Company (the
"Outstanding Options") and any stock appreciation rights ("SARs"), an amount in
respect of each Outstanding Option and SAR (whether vested or not) equal to the
difference between the exercise price of such Outstanding Options and SARs and
the higher of (x) the fair market value of the Common Shares at the time of such
termination (but not less than the closing price for the Common Shares on the
New York Stock Exchange, or such other national stock exchange on which such
shares may be listed, on the last trading day such shares traded prior to the
date of
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<PAGE> 6
termination), and (y) the highest price paid for Common Shares or, in the cases
of securities convertible into Common Shares or carrying a right to acquire
Common Shares, the highest effective price (based on the prices paid for such
securities) at which such securities are convertible into Common Shares or at
which Common Shares may be acquired, by any person or group whose acquisition of
voting securities has resulted in a Change in Control of the Company; PROVIDED,
HOWEVER, that this Section 3(d) shall not apply to the surrender of any
Outstanding Option that is an incentive stock option (within the meaning of
Section 422 of the Code); and
(e) A lump sum payment equal to 35% of the Executive's Annual
Compensation, such payment representing an agreed substitute for three years'
additional entitlement to (A) benefits and service credit for benefits (or
similar payments) under any pension, savings, defined contribution and other
deferred compensation plans maintained by the Company and (B) any medical
insurance, life insurance, health and accident, disability and other employee
benefit plans, programs and arrangements with the Company (including, without
limitation, provision of, or payment in lieu of, an automobile); and
(f) All of the Executive's benefits accrued under the supplemental
retirement plans, excess retirement plans and deferred compensation plans
maintained by the Company or any of its Subsidiaries shall become immediately
vested in full; and
(g) All of the Executive's Outstanding Options shall become
immediately vested and exercisable in full.
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 date of termination
shall be payable in accordance with such plan, practice, policy or program;
PROVIDED, HOWEVER, that the Executive shall not be entitled to severance pay, or
benefits similar to severance pay, under any plan, practice, policy, or program
generally applicable to employees of the Company or any of its Subsidiaries.
5. FULL SETTLEMENT; NO OBLIGATION TO SEEK OTHER EMPLOYMENT; 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
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<PAGE> 7
Executive may reasonably incur as a result of any dispute or contest (regardless
of the outcome thereof) 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. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution made, or benefit
provided (including, without limitation, the acceleration of any payment,
distribution or benefit and the acceleration of exercisability of any stock
option or stock appreciation right), by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code (or any similar
excise tax) or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any Excise Tax, income tax or payroll tax) imposed upon the Gross-Up
Payment and any interest or penalties imposed with respect to such taxes, the
Executive retains from the Gross-Up Payment an amount equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 6(c), all determinations
required to be made under this Section 6, including determination of whether a
Gross-Up Payment is required and of the amount of any such Gross-Up Payment,
shall be made by the independent public accounting firm which is then retained
by the Company to audit its financial statements (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the date of termination, if applicable, or
such earlier time as is requested by the Company, provided that any
determination that an Excise Tax is payable by the Executive shall be made on
the basis of substantial authority. The initial Gross-Up Payment, if any, as
determined pursuant to this Section 6(b), shall be paid to the Executive within
five business days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with a written opinion that he has substantial
authority not to report any Excise Tax on his Federal income tax return. Any
determination by the Accounting Firm meeting the requirements of this Section
6(b) shall be binding upon the Company and the Executive; subject only to
payments pursuant to the following sentence based on a determination that
additional Gross-Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such additional
payments, including any interest and penalties, are referred to herein as the
"Gross-Up Underpayment"). In the event that the Company exhausts its remedies
pursuant to Section 6(c) and the Executive thereafter is required to make a
payment of any Excise
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<PAGE> 8
Tax, the Accounting Firm shall determine the amount of the Gross-Up Underpayment
that has occurred and any such Gross-Up Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive. The fees and disbursements
of the Accounting Firm shall be paid by the Company.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but not later than ten business days after the Executive receives
written notice of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which he gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim and that it will bear the costs and
provide the indemnification as required by this sentence, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company and reasonably satisfactory to
the Executive,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax, income tax or payroll tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 6(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; PROVIDED, HOWEVER, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the
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<PAGE> 9
Executive, on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax, income tax or payroll tax,
including interest or penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
AND FURTHER PROVIDED that any extension of the statute of limitations relating
to the payment of taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due shall be limited solely to such
contested amount, unless the Executive agrees otherwise. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 6(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 6(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 6(c) a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then any obligation of the Executive to repay such advance shall
be forgiven and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
7. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret 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. In no event shall an asserted violation of the
provisions of this Section 7 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
8. 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
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<PAGE> 10
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 12(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 8(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 and any Parent of
the Company or any successor and 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 succession or
parentage had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid (and any Parent of the Company or any successor) which is required
by this clause to assume and agree to perform this Agreement or which otherwise
assumes and agrees to perform this Agreement.
9. NOTICE OF TERMINATION. Any termination of the Executive's employment by
the Company for Cause or by the Executive for Good Reason shall be communicated
by Notice of Termination to the other party hereto given in accordance with
Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii) if the date of
termination is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 15 days after the giving of
such notice). The failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
10. REQUIREMENTS AND BENEFITS IF EXECUTIVE IS EMPLOYEE OF SUBSIDIARY OF
COMPANY. If the Executive is an employee of any Subsidiary of the Company, he
shall be entitled to all of the rights and benefits of this Agreement as though
he were an employee of the Company and the term "Company" as used herein shall
be deemed to include the
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<PAGE> 11
Subsidiary by whom the Executive is employed. The Company hereby unconditionally
and irrevocably guarantees the performance of its Subsidiary hereunder.
11. ARBITRATION. The Company and the Executive shall attempt to resolve
between them any dispute which arises hereunder. If they cannot agree within ten
(10) days after either party submits a demand for arbitration to the other
party, then the issue shall be submitted to arbitration with each party having
the right to appoint one (1) arbitrator and those two (2) arbitrators mutually
selecting a third arbitrator. The rules of the American Arbitration Association
for the arbitration of commercial disputes shall apply and the decision of 2 of
the 3 arbitrators shall be final. The arbitrators must reach a decision within
sixty (60) days after the selection of the third arbitrator. The arbitration
shall take place in Buffalo, New York. The arbitrators shall apply Delaware law.
12. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, 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 Corporate Secretary. Notice 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 Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
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<PAGE> 12
(f) 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.
(g) Except in the case of termination of employment or elected officer
status under the circumstances set forth in Section 2(e) above, upon a
termination of the Executive's employment or upon the Executive's ceasing to be
an elected officer of the Company, in each case, prior to the Change in Control
Date, there shall be no further rights under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from the Board, the Company has caused this Agreement to be
executed as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ Kurt Wiedenhaupt
------------------------------------
Kurt Wiedenhaupt President
and Chief Executive Officer
EXECUTIVE
--------------------------------------
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<PAGE> 1
EXHIBIT 10(ii)
CHANGE IN CONTROL AGREEMENT
---------------------------
AGREEMENT by and between American Precision Industries Inc., a
Delaware corporation (the "Company"), with offices at 2777 Walden Avenue,
Buffalo, New York 14225 and KURT WIEDENHAUPT (the "Executive"), an individual
residing at 280 CARNOUSTIE ROAD, EAST AURORA, NEW YORK 14052, dated as of the
1st day of JULY, 1996.
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 their families; and
WHEREAS, the Company desires to assure fair treatment of its
executives in the event of a Change in Control (as defined below) and to allow
them to make critical career decisions without undue time pressure and financial
uncertainty, thereby increasing their willingness to remain with the Company
notwithstanding the outcome of a possible Change in Control transaction; 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 Changes in Control of the Company and
believes that it is in the best interest of the Company and its stockholders 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 stockholders in making these evaluations and carrying
on such negotiations; and
WHEREAS, the Board of Directors (the "Board") of the Company
believes it is essential to provide the Executive with compensation arrangements
upon a Change in Control which provide the Executive with individual financial
security and which are competitive with those of other corporations, and in
order to accomplish these objectives, the Board 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 twenty-four (24) months' 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
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<PAGE> 2
satisfied and the Protection Period has expired. 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 words and phrases shall have the following meanings:
(a) "Cause" shall mean (i) the continued failure by
the Executive to perform his material responsibilities and duties hereunder
(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness), (ii) the engaging by the Executive in willful or
reckless conduct which is demonstrably injurious to the Company monetarily or
otherwise, (iii) the conviction of the Executive of a felony, or (iv) the
commission or omission of any act by the Executive that is materially inimical
to the best interests of the Company and that constitutes on the part of the
Executive common law fraud or malfeasance, misfeasance or nonfeasance of duty;
provided, however, that "cause" shall not include the Executive's lack of
professional qualifications. For purposes of this Agreement, an act, or failure
to act, on the Executive's part shall be considered "willful" or "reckless" only
if done, or omitted to be done, by him not in good faith and without reasonable
belief that his action or omission was in the best interest of the Company. The
Executive's employment shall not be deemed to have been terminated for "cause"
unless the Company shall have given or delivered to the Executive (A) reasonable
notice setting forth the reasons for the Company's intention to terminate the
Executive's employment for "cause," (B) a reasonable opportunity, at any time
during the thirty-day period after the Executive's receipt of such notice, for
the Executive, together with his counsel, to be heard before the Board, and (C)
a Notice of Termination (as defined in Section 9 below) stating that, in the
good faith opinion of not less than a majority of the entire membership of the
Board, the Executive was guilty of the conduct set forth in clauses (i), (ii),
(iii) or (iv) of the first sentence of this Section 2(a).
(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 who or which 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, 25% 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
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<PAGE> 3
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 any
director or directors whose appointment or election to the Board or nomination
for election by the Company's stockholders was not approved by a vote of at
least a majority of the directors then 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 50% 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 33% or more of the members of the board of directors of the
Parent or 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.
(c) "Code" shall mean the Internal Revenue Code of
1986, as amended.
(d) "Disability," for purposes of this Agreement,
shall mean total disability as defined in any long-term disability plan
sponsored by the Company in which the Executive participates, or, if there is no
such plan or it does not define such term, then it shall mean the physical or
mental incapacity of the Executive which prevents him from substantially
performing the duties of the office or position to which he was elected or
appointed by the Board for a period of at least 180 days and the incapacity is
expected to be permanent and continuous through the Executive's 65th birthday.
(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, and it is reasonably
demonstrated that such termination (i) was at the request of a
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<PAGE> 4
third party who has taken steps reasonably calculated or intended to effect a
Change in Control or (ii) otherwise arose in connection with or anticipation of
a Change in Control, then for all purposes of this Agreement the "Change in
Control Date" shall mean the date immediately prior to the date of such
termination.
(f) "Good Reason" means:
(i) the assignment to the Executive within the
Protection Period of any duties inconsistent in any respect with the Executive's
position (including status, offices, titles and reporting requirements,
authority, duties or responsibilities), or any other action which results in a
diminution in such position, authority, duties or responsibilities excluding for
this purpose an isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Company promptly after receipt of notice
thereof given by the Executive;
(ii) a reduction by the Company in the Executive's base
salary in effect immediately before the beginning of the Protection Period or as
increased from time to time thereafter;
(iii) a failure by the Company to maintain plans
providing benefits at least as beneficial as those provided by any benefit or
compensation plan (including, without limitation, any incentive compensation
plan, bonus plan or program, retirement, pension or savings plan, life insurance
plan, health and dental plan or disability plan) in which the Executive is
participating immediately before the beginning of the Protection Period, or any
action taken by the Company which would adversely affect the Executive's
participation in or reduce the Executive's opportunity to benefit under any of
such plans or deprive the Executive of any material fringe benefit enjoyed by
him immediately before the beginning of the Protection Period; PROVIDED,
HOWEVER, that a reduction in benefits under the Company's tax-qualified
retirement, pension or savings plans or its life insurance plan, health and
dental plan, disability plans or other insurance plans which reduction applies
equally to all participants in the plans and has a DE MINIMIS effect on the
Executive shall not constitute "Good Reason" for termination by the Executive;
(iv) the Company's requiring the Executive, without the
Executive's written consent, to be based at any office or location in excess of
50 miles from his office location immediately before the beginning of the
Protection Period, except for travel reasonably required in the performance of
the Executive's responsibilities;
(v) any purported termination by the Company of the
Executive's employment for Cause otherwise than as referred to in Section 9 of
this Agreement; or
(vi) any failure by the Company to obtain the
assumption of the obligations contained in this Agreement by any successor as
contemplated in Section 8(c) of this Agreement.
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<PAGE> 5
(g) "Parent" means any entity which directly or indirectly
through one or more other entities owns or controls more than 50% of the voting
stock or common stock of the Company.
(h) "Protection Period" means the period beginning on the
Change in Control Date and ending on the last day of the thirty-sixth (36th)
calendar month following the Change in Control Date.
(i) "Subsidiary" means a company 50% or more of the voting
securities of which are owned, directly or indirectly, by the Company.
3. BENEFITS UPON TERMINATION WITHIN A PROTECTION PERIOD. If,
during a Protection Period, the Executive's employment is terminated by the
Company other than for Cause or Disability or other than as a result of the
Executive's death or the Executive terminates his employment for Good Reason,
the Company shall pay to the Executive in a lump sum in cash within 10 days
after the date of termination the aggregate of the following amounts and shall
provide the following benefits:
(a) The Executive's full base salary and vacation pay (for
vacation not taken) accrued but unpaid through the date of termination at the
rate in effect at the time of the termination plus an amount equal to the
product of the Executive's normative bonus under the applicable bonus plan for
the fiscal year including the date of termination and a fraction, the numerator
of which is the number of days in such fiscal year through the date of
termination and the denominator of which is 365; and
(b) The amount in the "bonus bank" for the Executive under
all bonus plans in which the Executive participates; and
(c) A lump sum severance payment in an amount equal to 350%
of the Executive's "Annual Compensation." For purposes of this Agreement,
"Annual Compensation" shall be an amount equal to the aggregate of the
Executive's annual base salary from the Company and its Subsidiaries as set by
the Board and in effect immediately prior to the date of termination or Change
in Control (whichever is greater) plus the highest bonus accrued by the Company
for the Executive in any of the Company's three fiscal years preceding the date
of termination or Change in Control (whichever is greater); and
(d) Within 30 days of the date of termination, upon
surrender by the Executive of his outstanding options to purchase common shares
of the Company ("Common Shares") granted to the Executive by the Company (the
"Outstanding Options") and any stock appreciation rights ("SARs"), an amount in
respect of each Outstanding Option and SAR (whether vested or not) equal to the
difference between the exercise price of such Outstanding Options and SARs and
the higher of (x) the fair market value of the Common Shares at the time of such
termination (but not less than the closing price for the Common Shares on the
New York Stock Exchange, or such other national stock exchange on which such
shares may be listed, on the last trading day such shares traded prior to the
date of
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<PAGE> 6
termination), and (y) the highest price paid for Common Shares or, in the cases
of securities convertible into Common Shares or carrying a right to acquire
Common Shares, the highest effective price (based on the prices paid for such
securities) at which such securities are convertible into Common Shares or at
which Common Shares may be acquired, by any person or group whose acquisition of
voting securities has resulted in a Change in Control of the Company; PROVIDED,
HOWEVER, that this Section 3(d) shall not apply to the surrender of any
Outstanding Option that is an incentive stock option (within the meaning of
Section 422 of the Code); and
(e) A lump sum payment equal to 50% of the Executive's Annual
Compensation, such payment representing an agreed substitute for three years'
additional entitlement to (A) benefits and service credit for benefits (or
similar payments) under any pension, savings, defined contribution and other
deferred compensation plans maintained by the Company and (B) any medical
insurance, life insurance, health and accident, disability and other employee
benefit plans, programs and arrangements with the Company (including, without
limitation, provision of, or payment in lieu of, an automobile); and
(f) All of the Executive's benefits accrued under the supplemental
retirement plans, excess retirement plans and deferred compensation plans
maintained by the Company or any of its Subsidiaries shall become immediately
vested in full; and
(g) All of the Executive's Outstanding Options shall become
immediately vested and exercisable in full.
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 date of termination
shall be payable in accordance with such plan, practice, policy or program;
PROVIDED, HOWEVER, that the Executive shall not be entitled to severance pay, or
benefits similar to severance pay, under any plan, practice, policy, or program
generally applicable to employees of the Company or any of its Subsidiaries.
5. FULL SETTLEMENT; NO OBLIGATION TO SEEK OTHER EMPLOYMENT; 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
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<PAGE> 7
Executive may reasonably incur as a result of any dispute or contest (regardless
of the outcome thereof) 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. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution made, or benefit
provided (including, without limitation, the acceleration of any payment,
distribution or benefit and the acceleration of exercisability of any stock
option or stock appreciation right), by the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined without regard to any
additional payments required under this Section 6) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code (or any similar
excise tax) or any interest or penalties are incurred by the Executive with
respect to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any Excise Tax, income tax or payroll tax) imposed upon the Gross-Up
Payment and any interest or penalties imposed with respect to such taxes, the
Executive retains from the Gross-Up Payment an amount equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Section 6(c), all determinations
required to be made under this Section 6, including determination of whether a
Gross-Up Payment is required and of the amount of any such Gross-Up Payment,
shall be made by the independent public accounting firm which is then retained
by the Company to audit its financial statements (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the date of termination, if applicable, or
such earlier time as is requested by the Company, provided that any
determination that an Excise Tax is payable by the Executive shall be made on
the basis of substantial authority. The initial Gross-Up Payment, if any, as
determined pursuant to this Section 6(b), shall be paid to the Executive within
five business days of the receipt of the Accounting Firm's determination. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with a written opinion that he has substantial
authority not to report any Excise Tax on his Federal income tax return. Any
determination by the Accounting Firm meeting the requirements of this Section
6(b) shall be binding upon the Company and the Executive; subject only to
payments pursuant to the following sentence based on a determination that
additional Gross-Up Payments should have been made, consistent with the
calculations required to be made hereunder (the amount of such additional
payments, including any interest and penalties, are referred to herein as the
"Gross-Up Underpayment"). In the event that the Company exhausts its remedies
pursuant to Section 6(c) and the Executive thereafter is required to make a
payment of any Excise
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<PAGE> 8
Tax, the Accounting Firm shall determine the amount of the Gross-Up Underpayment
that has occurred and any such Gross-Up Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive. The fees and disbursements
of the Accounting Firm shall be paid by the Company.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of a Gross-Up Payment. Such notification shall be given as soon as
practicable but not later than ten business days after the Executive receives
written notice of such claim and shall apprise the Company of the nature of such
claim and the date on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which he gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim and that it will bear the costs and
provide the indemnification as required by this sentence, the Executive shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company and reasonably satisfactory to
the Executive,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax, income tax or payroll tax, including
interest and penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this Section 6(c), the Company shall control all
proceedings taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; PROVIDED, HOWEVER, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the
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<PAGE> 9
Executive, on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax, income tax or payroll tax,
including interest or penalties with respect thereto, imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
AND FURTHER PROVIDED that any extension of the statute of limitations relating
to the payment of taxes for the taxable year of the Executive with respect to
which such contested amount is claimed to be due shall be limited solely to such
contested amount, unless the Executive agrees otherwise. Furthermore, the
Company's control of the contest shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 6(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 6(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 6(c) a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then any obligation of the Executive to repay such advance shall
be forgiven and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
7. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret 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. In no event shall an asserted violation of the
provisions of this Section 7 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
8. 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
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<PAGE> 10
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 12(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 8(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 and any Parent of
the Company or any successor and 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 succession or
parentage had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business and/or assets
as aforesaid (and any Parent of the Company or any successor) which is required
by this clause to assume and agree to perform this Agreement or which otherwise
assumes and agrees to perform this Agreement.
9. NOTICE OF TERMINATION. Any termination of the Executive's employment by
the Company for Cause or by the Executive for Good Reason shall be communicated
by Notice of Termination to the other party hereto given in accordance with
Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii) if the date of
termination is other than the date of receipt of such notice, specifies the
termination date (which date shall be not more than 15 days after the giving of
such notice). The failure by the Executive to set forth in the Notice of
Termination any fact or circumstance which contributes to a showing of Good
Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
10. REQUIREMENTS AND BENEFITS IF EXECUTIVE IS EMPLOYEE OF SUBSIDIARY OF
COMPANY. If the Executive is an employee of any Subsidiary of the Company, he
shall be entitled to all of the rights and benefits of this Agreement as though
he were an employee of the Company and the term "Company" as used herein shall
be deemed to include the
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<PAGE> 11
Subsidiary by whom the Executive is employed. The Company hereby unconditionally
and irrevocably guarantees the performance of its Subsidiary hereunder.
11. ARBITRATION. The Company and the Executive shall attempt to resolve
between them any dispute which arises hereunder. If they cannot agree within ten
(10) days after either party submits a demand for arbitration to the other
party, then the issue shall be submitted to arbitration with each party having
the right to appoint one (1) arbitrator and those two (2) arbitrators mutually
selecting a third arbitrator. The rules of the American Arbitration Association
for the arbitration of commercial disputes shall apply and the decision of 2 of
the 3 arbitrators shall be final. The arbitrators must reach a decision within
sixty (60) days after the selection of the third arbitrator. The arbitration
shall take place in Buffalo, New York. The arbitrators shall apply Delaware law.
12. MISCELLANEOUS.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, 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 Corporate Secretary. Notice 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 Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
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<PAGE> 12
(f) 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.
(g) Except in the case of termination of employment or elected officer
status under the circumstances set forth in Section 2(e) above, upon a
termination of the Executive's employment or upon the Executive's ceasing to be
an elected officer of the Company, in each case, prior to the Change in Control
Date, there shall be no further rights under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant
to the authorization from the Board, the Company has caused this Agreement to be
executed as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ John M. Murray
------------------------------------
John M. Murray, Vice President
- Finance and Treasurer
/s/ James J. Tanous
-------------------------------------
James J. Tanous, Secretary
EXECUTIVE
/s/ Kurt Wiedenhaupt
-------------------------------------
Kurt Wiedenhaupt
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<PAGE> 1
EXHIBIT 10(iii)
AMENDMENT TO AND RESTATEMENT OF
EXECUTIVE EMPLOYMENT AGREEMENT
------------------------------
This AGREEMENT, dated as of July 1, 1996, is by and between KURT
WIEDENHAUPT, residing at 280 Carnoustie Road, East Aurora, New York 14052 (the
"Executive") and AMERICAN PRECISION INDUSTRIES INC., a Delaware corporation with
its principal office at 2777 Walden Avenue, Buffalo, New York 14225 (the
"Company").
R E C I T A L S :
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WHEREAS, the Executive and the Company are parties to an Executive
Employment Agreement (the "Former Employment Agreement") whereby the Executive
has been retained by the Company as its President and Chief Executive Officer
since July 1, 1992; and
WHEREAS, the Executive and the Company have entered into a Change in
Control Agreement dated as of July 1, 1996 (the "Change in Control Agreement")
whereby the Company has agreed to pay certain severance benefits to the
Executive under certain conditions defined in that agreement; and
WHEREAS, the Executive and the Company desire to amend the Former
Employment Agreement to delete the provisions in that agreement which are either
duplicative of or inconsistent with this Agreement, and to delete certain other
provisions in the Former Employment Agreement which are no longer applicable.
<PAGE> 2
NOW, THEREFORE, in consideration of the promises and the mutual agreements
herein contained, the Company and the Executive agree as follows:
AMENDMENT OF FORMER EMPLOYMENT AGREEMENT
The Executive and the Company hereby amend the Former Employment Agreement
to (i) delete all references to any severance payments under that agreement
related to any "change in control," (ii) delete other provisions in the Former
Employment Agreement which are no longer applicable, and (iii) add certain other
provisions which are helpful in updating the parties' intentions as reflected in
that agreement. The Former Employment Agreement, as hereby amended, is hereby
restated in its entirety, and as restated shall supersede the Former Employment
Agreement in its entirety:
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
This AGREEMENT, dated as of July 1, 1996, is by and between KURT
WIEDENHAUPT (the "Executive") and AMERICAN PRECISION INDUSTRIES INC (the
"Company").
1. EMPLOYMENT.
-----------
The Company agrees to employ the Executive, and the Executive agrees to
remain in the employ of the Company, for the period and on the other terms and
conditions set forth below.
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<PAGE> 3
2. PERIOD OF EMPLOYMENT.
---------------------
The period of employment under this Agreement shall continue until the
close of business on June 30, 1997 (the "Period of Employment").
3. POSITIONS AND RESPONSIBILITIES; PLACE OF PERFORMANCE.
-----------------------------------------------------
(a) During the Period of Employment, the Executive agrees to serve the
Company and the Company agrees to employ the Executive as its President and
Chief Executive Officer, as such positions are defined in the Company's By-Laws
as they may be amended from time to time. The Executive also agrees to serve
during all or part of the Period of Employment, as requested by the Company, as
a Director of the Company and as an officer and director of any of the Company's
subsidiaries or affiliates, without any compensation therefor other than that
specified in this Agreement. During the Period of Employment, the Executive
shall devote all of his normal work week, attention, skill and efforts to the
faithful performance of his duties hereunder.
(b) In connection with his employment hereunder, the Executive shall
be based at the principal office of the Company in Buffalo, New York.
(c) The Executive shall be subject to the terms, conditions and
benefits set out in the Company's Handbook for Salaried Employees and its
policies relating to its employees, as
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<PAGE> 4
amended from time to time, which are not inconsistent with the terms and
conditions of this Agreement.
(d) In the event the Company's Board of Directors determines that it
is in the Company's best interest that the Executive become a citizen of the
United States, the Executive shall use his best efforts to apply for and obtain
United States citizenship.
4. REGULAR COMPENSATION.
---------------------
(a) For the performance of his duties under this Agreement during the
Period of Employment the Company shall pay the Executive a fixed annual salary
of $300,000 ("Initial Annual Salary").
(b) The Executive's Initial Annual Salary shall be reviewed annually
by the Compensation Committee of the Board of Directors of the Company, subject
to approval by the Company's Board of Directors, but shall not be reduced
without his written consent below the Initial Annual Salary during the Period of
Employment.
(c) The Executive's salary shall be payable in accordance with the
Company's customary practice for its other executives. Notwithstanding the
foregoing, the Executive shall be entitled to defer the receipt of his salary
and/or bonus pursuant to procedures adopted or plans maintained by the Company.
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<PAGE> 5
5. PARTICIPATION IN ECONOMIC VALUE ADDED BONUS PLAN.
-------------------------------------------------
The Executive shall continue to participate in the Company's Economic
Value Added Bonus Plan, as the same may be in effect from time to time.
6. PARTICIPATION IN SUPPLEMENTAL BENEFIT PLAN.
-------------------------------------------
The Executive shall continue to participate in the Company's Executive
Supplemental Death Benefit and Retirement Plan, as the same may be in effect
from time to time (the "Supplemental Plan").
7. ADDITIONAL BENEFITS.
--------------------
(a) In addition to the benefits provided in paragraphs 5 and 6 above,
the Executive shall be eligible to participate in and receive benefits under any
incentive compensation plan or arrangement, any defined benefit retirement plan,
defined contribution retirement plan, supplemental retirement plan, health and
dental plan, disability plan, survivor income plan, and other employee benefit
or compensation plan or arrangement (collectively, "Benefit Plans"), made
available by the Company or a subsidiary or affiliate to all of its senior
executives from time to time, subject to and on a basis consistent with the
terms, conditions and overall administration of such Benefit Plans.
(b) The Executive shall be entitled to four (4) weeks of paid vacation
during each calendar year during the
- 5 -
<PAGE> 6
Period of Employment, plus all paid holidays given by the Company to its other
senior executives.
(c) The Company shall reimburse the Executive for the initiation fees
and periodic dues and assessments paid by the Executive in connection with his
membership in a country club and city club in the Buffalo, New York area, which
clubs are approved by the Compensation Committee of the Board of Directors of
the Company as suitable for Company-related entertaining and other functions.
(d) The Company shall provide the Executive with an automobile
approved by the Compensation Committee of the Board of Directors of the Company
as suitable to his executive position.
(e) The Company shall provide the Executive with disability insurance
policies which shall cover 60% of his annual compensation (subject to maximum
disability benefit payments imposed by the insurers) until he reaches age 65 in
the event that he is totally disabled for more than 180 days. The Executive
shall pay the premium applicable to the disability coverage offered by the
Company to its other employees, and the Company shall pay the premium applicable
to the disability coverage in excess of that coverage.
(f) The Company shall promptly pay (or reimburse the Executive for)
all reasonable expenses incurred by him in the performance of his duties
hereunder, including business travel
- 6 -
<PAGE> 7
and entertainment expenses. The Executive shall furnish to the Company such
receipts and records as the Company may require to verify the foregoing
expenses.
8. TERMINATION PRIOR TO A CHANGE IN CONTROL; SEVERANCE BENEFITS.
-------------------------------------------------------------
(a) Subject to the terms and conditions set forth in this paragraph 8,
the Company or the Executive may terminate the employment of the Executive prior
to a "change in control," as that term is defined in the Change in Control
Agreement, and thereby end the Period of Employment, by giving at least thirty
(30) days' written notice to the other. The date of termination of employment
shall not be more than forty-five (45) days after the date of notice.
Terminations of employment after a "change in control" shall be governed by the
Change in Control Agreement.
(b) If the employment of the Executive is terminated by the Company
for any reason other than (i) for "cause" or (ii) as a result of the death of
the Executive, or (iii) as a result of the total "disability" of the Executive,
then the Executive shall be entitled to the following benefits:
A. All unpaid salary for the balance of the
Period of Employment, PLUS credit for any vacation earned but
not taken, PLUS the amount of any bonus which has been awarded
but not paid under any existing bonus plan (notwithstanding
any provisions of any such plan to the contrary), PLUS an
amount equal to
- 7 -
<PAGE> 8
one-sixth (1/6) of the total of the annual bonuses actually
awarded to him during the three (3) years immediately
preceding the year of termination, plus all benefits in which
he is vested as of the date of termination under all Benefit
Plans including the Supplemental Plan (notwithstanding any
provisions of any such plans to the contrary), PLUS
reimbursement for expenses not previously reimbursed through
the date of termination. Except as set forth below, all of
these payments will be paid on the dates that they would
otherwise have been paid if the Executive's employment with
the Company had not been terminated. At the Company's sole
option, any amounts due under this subparagraph A may be paid
in a lump sum rather than over a period of time, discounted at
the prime rate of interest charged at that time by Marine
Midland Bank, N.A.
B. The Company shall maintain at its cost,
for the balance of the Period of Employment but not beyond the
time that the Executive secures other employment, any group
health insurance and group term life insurance coverage which
was in effect with respect to the Executive and his family on
the date of termination of the Executive's employment
hereunder, to the extent that such group coverage is available
- 8 -
<PAGE> 9
following the termination of the Executive's
employment.
(c) Upon the total "disability" of the Executive for a continuous
period of 180 days, the Company may terminate the employment of the Executive,
the term of employment shall end immediately, and the Company shall pay him his
salary through the end of the month in which such termination occurs plus credit
for any vacation earned but not taken and the amount of any bonus for the past
year which has not been paid under any existing bonus plan together with
reimbursement for expenses not previously reimbursed and the Company shall have
no further obligations to the Executive under this Agreement. "Disability," as
used herein, shall mean the physical or mental incapacity of the Executive which
prevents him from substantially performing his duties as President and Chief
Executive Officer of the Company for a period of at least 180 days and the
incapacity is expected to be permanent and continuous through the Executive's
65th birthday.
(d) Upon the death of the Executive, the Period of Employment shall
end immediately.
(e) If the employment of the Executive is terminated by the Company
for "cause," the Executive's salary (at the rate most recently determined)
together with reimbursement for expenses not previously reimbursed shall be paid
through the
- 9 -
<PAGE> 10
date of termination of employment, and the Company shall have no further
obligation to the Executive under this Agreement.
(f) "Cause" means (i) the continued failure by the Executive to
perform his material responsibilities and duties hereunder (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness), (ii) the engaging by the Executive in willful or reckless conduct
which is demonstrably injurious to the Company monetarily or otherwise, (iii)
the conviction of the Executive of a felony, or (iv) the commission or omission
of any act by the Executive that is materially inimical to the best interests of
the Company and that constitutes on the part of the Executive common law fraud
or malfeasance, misfeasance or nonfeasance of duty; provided, however, that
"cause" shall not include the Executive's lack of professional qualifications.
For purposes of this subparagraph 8(f), an act, or failure to act, on the
Executive's part shall be considered "willful" or "reckless" only if done, or
omitted to be done, by him not in good faith and without reasonable belief that
his action or omission was in the best interest of the Company. The Executive's
employment shall not be deemed to have been terminated for "cause" unless the
Company shall have given or delivered to the Executive (A) reasonable notice
setting forth the reasons for the Company's intention to terminate the
Executive's employment for "cause," (B) a reasonable opportunity, at any time
during the thirty-day period after the Executive's receipt of such notice, for
the Executive, together with his
- 10 -
<PAGE> 11
counsel, to be heard before the Board of Directors of the Company, and (C) a
Notice of Termination (as defined below) stating that, in the good faith opinion
of not less than a majority of the entire membership of the Board, the Executive
was guilty of the conduct set forth in clauses (i), (ii), (iii) or (iv) of the
first sentence of this subparagraph 8(f).
(g) Any termination by the Company for "cause" shall be communicated
by Notice of Termination to the Executive given in accordance with paragraph 12
of this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision of
this Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specifies the termination
date (which date shall, except as otherwise expressly provided herein, be not
more than fifteen (15) days after the giving of such notice). In the event of a
termination by the Company for "cause," the Notice of Termination shall not be
effective unless delivered in accordance with requirements set forth in the last
sentence of subparagraph 8(f).
9. DISCLOSURE OF INFORMATION.
--------------------------
(a) The Executive will not at any time use or disclose to any third
party any confidential information or trade secrets relating to the business of
the Company, including
- 11 -
<PAGE> 12
business methods and techniques, patents, copyrights, trade secrets,
manufacturing know-how, research data, marketing and sales information, customer
lists, vendor lists, investment strategies, compensation plans, pricing data,
and any other information concerning the business of the Company, its manner of
operation, its plans, or other information not disclosed to the general public
or known in the industry in which the Company is engaged (hereinafter
collectively referred to as "Confidential Information"), except for disclosure
necessary for the Executive to perform his duties hereunder and carry on the
work of the Company, or disclosure required by any law, rule, regulation or
court order, or disclosure which the Executive reasonably believes would subject
him or the Company to liability if not made. This covenant will survive the
termination of this Agreement.
(b) The Executive agrees to deliver promptly to the Company on
termination of his employment with the Company for any reason or at any time the
Company may so request all memoranda, notes, records, reports, manuals,
financial reports and documents relating to Confidential Information and the
Company's business which he may then possess or have under his control.
10. COVENANT NOT TO COMPETE.
------------------------
(a) The Executive will not, directly or indirectly, own, manage,
operate, control, or participate in the
- 12 -
<PAGE> 13
ownership, management, operation, or control of, or be connected as an officer,
employee, partner, director, consultant, or otherwise with, or have any
financial interest in, or aid or assist anyone else in the conduct of, any
business that is in substantial competition with any business conducted by the
Company or any of its subsidiaries or affiliates during the period of the
Executive's employment with the Company or within sixty (60) days thereafter.
Ownership of one percent (1%) or less of the voting stock of any publicly held
corporation shall not constitute a violation of this paragraph.
(b) The Executive's covenant set forth in paragraph 10(a) shall apply
(i) during the Period of Employment, (ii) for a period of one (1) year after the
end of the Period of Employment or the termination of the Executive's employment
if the Executive terminates his employment other than for "good reason"
following a "change in control," as such terms are defined in the Change in
Control Agreement, or the Company terminates his employment for "cause," or
(iii) for a period of six (6) months after the termination of the Executive's
employment by the Company for other than "cause."
11. ENTIRE AGREEMENT.
-----------------
The terms and provisions of this Agreement constitute the entire
agreement between the parties and supersede any previous oral or written
communications, representations, or agreements with respect to the subject
matter hereof.
- 13 -
<PAGE> 14
12. NOTICE.
-------
Any notices given hereunder shall be in writing and shall be given by
personal delivery or by certified or registered mail, return receipt requested,
addressed to:
If to the Company:
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, New York 14225
Attention: Chairman of the Compensation
Committee of the Board of Directors
If to the Executive:
Mr. Kurt Wiedenhaupt
280 Carnoustie Road
East Aurora, New York 14052
13. EXECUTIVE ASSIGNMENT.
---------------------
No interest of the Executive or his spouse or any other beneficiary
under this Agreement, or any right to receive any payments or distributions
hereunder, shall be subject in any manner to sale, transfer, assignment, pledge,
attachment, garnishment, or other alienation or encumbrance of any kind, nor may
such interest or right to receive a payment or distribution be taken,
voluntarily or involuntarily, for the satisfaction of the obligations or debts
of, or other claims against, the Executive or his spouse or other beneficiary,
including claims for alimony, support, separate maintenance, and claims in
bankruptcy proceedings.
- 14 -
<PAGE> 15
14. WAIVER.
-------
No waiver by any party at any time of any breach by another party of,
or compliance with, any condition or provision of this Agreement to be performed
by the other party shall be deemed a waiver of any other provisions or
conditions at the same time or at any prior or subsequent time.
15. PAYMENTS IN EVENT OF DEATH.
---------------------------
Upon the death of the Executive all amounts payable hereunder to the
Executive shall be paid to the person or persons designated by him as his
beneficiary or beneficiaries hereunder, or if no such person is designated then
to his devisee, legatee or other designee, or in their absence to his estate.
16. APPLICABLE LAW.
---------------
This Agreement shall be construed and interpreted in accordance with
the internal substantive laws of the State of Delaware without taking into
account its laws on the conflict of law.
17. ARBITRATION.
------------
The Company and the Executive shall attempt to resolve between them
any dispute which arises hereunder. If they cannot agree within ten (10) days
after either party submits a demand for arbitration to the other party, then the
issue shall
- 15 -
<PAGE> 16
be submitted to arbitration with each party having the right to appoint one (1)
arbitrator and those two (2) arbitrators mutually selecting a third arbitrator.
The rules of the American Arbitration Association for the arbitration of
commercial disputes shall apply and the decision of 2 of the 3 arbitrators shall
be final. The arbitration shall take place in Buffalo, New York. The arbitrators
shall apply Delaware law.
18. NO PAYMENTS WHILE IN DEFAULT.
-----------------------------
The Company shall not be required to make any payments to the
Executive otherwise required under this Agreement if prior to or at the time
such payment is due the Executive is in breach of his obligations under
paragraphs 9 or 10 of this Agreement.
19. DEFINITION OF AFFILIATE.
------------------------
An "affiliate" of, or person "affiliated" with a specified person, as
used in this Agreement, shall mean a person that directly, or indirectly through
one or more intermediaries, controls or is controlled by, or is under common
control with, the person specified.
20. AMENDMENT.
----------
This Agreement shall be amended only by a written document signed by
each party hereto.
- 16 -
<PAGE> 17
21. REDUCTION OF PARACHUTE PAYMENTS AND EXCESSIVE EMPLOYEE REMUNERATION.
--------------------------------------------------------------------
(a) In the event that a determination is made by the independent firm
of public accountants regularly employed by the Company that (i) the Executive
would, except for this paragraph 21, be subject to the excise tax provisions of
Section 4999 of the Internal Revenue Code of 1986 (the "Code"), or any successor
sections thereof, as a result of a "parachute payment" (as defined in Section
280G(b)(2)(A) of the Code) made by the Company to the Executive pursuant to this
Agreement or any other agreement, plan or arrangement, or (2) a federal income
tax deduction would not be allowed to the Company for all or a part of such
payments by reason of Section 280G(a) of the Code (or any successor provision),
the payments to which the Executive would otherwise be entitled hereunder shall
be reduced, eliminated, or postponed in such amounts as are required to reduce
the aggregate "present value" (as defined in Section 280G(d)(4) of the Code) of
such payments to one dollar less than an amount equal to three times the
Executive's "base amount" (as defined in Sections 280G(b)(3)(A) and 280G(d)(1)
and (2) of the Code), to the end that the Executive is not subject to tax
pursuant to such Section 4999 and no deduction is disallowed by reason of such
Section 280G(a). To achieve such reduction in aggregate present value, the
Executive shall determine which item or items payable hereunder shall be
reduced, eliminated, or postponed, the amount of each such reduction,
elimination, or postponement, and the period of each postponement. The Company
shall direct its
- 17 -
<PAGE> 18
independent public accountants to review the payments made to the Executive and
shall provide to the Executive such information as is reasonably necessary for
the Executive to make the determinations contemplated in this paragraph.
(b) In the event that a determination is made by the independent firm
of public accountants regularly employed by the Company that the Company would
not be allowed to deduct remuneration payable to the Executive as a result of
the limits imposed by Section 162(m) of the Code, or any successor sections
thereof, the payments to which the Executive would otherwise be entitled
hereunder shall be reduced, eliminated, or postponed in such amounts as are
required to avoid the limits imposed by Section 162(m). The procedures set forth
in subparagraph 21(a) to accomplish such reduction, elimination or postponement
shall apply to this subparagraph 21(b).
22. INCONSISTENT PROVISIONS.
------------------------
In the event that there is any inconsistency or conflict between the
terms, provisions or conditions of this Agreement and the Change in Control
Agreement, the terms, provisions or conditions in the Change in Control
Agreement shall control.
- 18 -
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Amendment to and
Restatement of Executive Employment Agreement on the dates set opposite their
signatures below.
THE EXECUTIVE:
Dated: October 4, 1996 /s/ KURT WIEDENHAUPT
---------------------------------
KURT WIEDENHAUPT
AMERICAN PRECISION INDUSTRIES INC.
Dated: October 4, 1996 By /s/ JOHN M. MURRAY
-------------------------------
JOHN M. MURRAY
Vice President -
Finance and Treasurer
Dated: October 4, 1996 By /s/ JAMES J. TANOUS
-------------------------------
JAMES J. TANOUS
Secretary
- 19 -
<PAGE> 1
EXHIBIT 10(iv)
FIRST AMENDMENT TO
AMERICAN PRECISION INDUSTRIES INC.
GRANT OF RESTRICTED STOCK AND BONUS
TO
KURT WIEDENHAUPT
This AGREEMENT, entered into as of July 1, 1996, is by and between American
Precision Industries Inc. (the "Corporation") and Kurt Wiedenhaupt (the
"Executive").
R E C I T A L S
- - - - - - - -
A. The Corporation granted 4,000 shares of the common stock, $.66-2/3 par
value per share, of the Corporation to the Executive under the terms of an
Agreement entered into by and between the Corporation and the Executive dated as
of May 1, 1995 (the "Agreement").
B. The Board of Directors of the Corporation and the Executive have
determined that the Agreement's definition of certain terms by reference to the
Executive's employment agreement should be changed to refer to the Change in
Control Agreement entered into by and between the Corporation and the Executive
dated as of July 1, 1996 (the "Change in Control Agreement") and that other
references to the employment agreement should be deleted from the Agreement.
NOW, THEREFORE, the Corporation and the Executive agree to amend the
Agreement as follows, effective as of July 1, 1996:
1. Paragraph 7 of the Agreement is amended to read as follows:
(a) During the "Restricted Period" as defined below, none of the
Restricted Shares may be sold, exchanged, transferred, assigned, pledged,
hypothecated, or otherwise disposed of. The "Restricted Period" is the period
beginning on the Date of Grant and ending on the earliest to occur of the
following: (i) April 30, 2000, (ii) the death of the Executive, or (iii) the
termination of the Executive's employment with the Corporation (A) by the
Corporation for a reason other than "Cause," (B) on account of the "Disability"
of the Executive, or (C) by the Executive for "Good Reason" following a "Change
in Control," as such terms are, or may be, defined in the Change in Control
Agreement.
<PAGE> 2
(b) If the Executive's employment with the Corporation is
terminated during the Restricted Period under any circumstances other than those
described under clause (ii) or (iii) of paragraph 7(a), the Executive shall
forfeit the Restricted Shares on the date of the termination of his employment.
In such a case, the Executive shall assign the certificate or certificates for
the Restricted Shares to the Corporation as soon as practicable following the
termination of his employment.
2. Paragraph 10 of the Agreement is amended to read as follows:
10. Compensation realized or recognized by the Executive in
connection with this Agreement including, but not limited to, compensation that
may be realized upon the grant of the Restricted Shares, the payment of the cash
bonus, the payment of dividends or other distributions with respect to the
Restricted Shares, and the expiration of the Restricted Period, shall not be
considered compensation for the purposes of any employee benefit plan of the
Corporation (including but not limited to any supplemental plan), except as the
Corporation may determine in its sole discretion.
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ John M. Murray
-------------------------------------------
John M. Murray,
Vice President-Finance and Treasurer
By /s/ James J. Tanous
-------------------------------------------
James J. Tanous, Secretary
/s/ Kurt Wiedenhaupt
---------------------------------------------
Kurt Wiedenhaupt, individually
- 2 -
<PAGE> 1
EXHIBIT 10(v)
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
(as restated)
AGREEMENT by and between AMERICAN PRECISION INDUSTRIES INC. (the
"Company"), a Delaware corporation with its principal office at 2777 Walden
Avenue, Buffalo, New York 14225, and KURT WIEDENHAUPT ("Employee"), residing at
280 Carnoustie Road, East Aurora, New York 14052, first dated as of July 1,
1992, as amended and restated as of July 1, 1996.
W I T N E S S E T H :
- - - - - - - - - - -
WHEREAS, the Employee is currently employed by the Company in the
capacities of President and Chief Executive Officer; and
WHEREAS, the Company desires to continue to provide the Employee with
additional incentive in connection with his employment by the Company; and
WHEREAS, the Employee is a member of a select management group of the
Company;
NOW, THEREFORE, the parties agree as follows:
1. Conditions.
-----------
(a) The payment of benefits to the Employee or designated
beneficiaries under this Agreement is conditioned upon the Employee's compliance
with the terms of this Agreement.
(b) The Company shall withhold Federal, state, and local taxes from
all payments under this Agreement to the extent required by law at the time such
payments are made.
2. Normal Retirement.
------------------
(a) If the Employee's employment with the Company ceases on or after
his sixty-fifth birthday because of normal retirement or if the Employee becomes
totally and permanently disabled while employed by the Company, the Company
shall pay to the Employee the amount specified under paragraph I in Schedule A
to this Agreement (the "Normal Retirement Benefit").
(b) Subject to Sections 6 and 7, such amount shall be paid in 180
equal monthly installments, the first of which shall be paid within thirty days
after the Employee ceases to be employed by the Company, and the balance of
which shall be paid on or about the first business day of each month thereafter
for 179 months.
<PAGE> 2
(c) In the event that the Employee dies before all of the payments
provided for have been made, the unpaid balance of the payments due shall
continue to be paid by the Company to the designated beneficiaries.
3. Involuntary Termination.
------------------------
(a) If the Employee's employment is terminated involuntarily (that is,
by the Company) before age sixty-five, he will receive that percentage of the
Normal Retirement Benefit determined in accordance with the following vesting
schedule:
<TABLE>
<CAPTION>
Full Years of Service Percentage Vested
--------------------- -----------------
<S> <C>
Five years or less 50
Six years 60
Seven years 70
Eight years 80
Nine years 90
Ten years or more 100
</TABLE>
(b) Subject to Sections 6 and 7, the amount so determined shall be
paid in 180 equal monthly installments, the first of which shall be paid within
thirty days after the Employee ceases to be employed by the Company, and the
balance of which shall be paid on or about the first business day of each month
thereafter for 179 months.
(c) In the event that the Employee dies before all of the payments
provided for have been made, the unpaid balance of the payments due shall
continue to be paid by the Company to the designated beneficiaries.
4. Voluntary Termination.
----------------------
(a) If the Employee quits before age sixty-five he will have ten
percent of the Normal Retirement Benefit for each full year of service with the
Company.
(b) Subject to Sections 6 and 7, the amount so determined shall be
paid in 180 equal monthly installments, the first of which shall be paid within
thirty days after the Employee ceases to be employed by the Company, and the
balance of which shall be paid on or about the first business day of each month
thereafter for 179 months.
(c) In the event that the Employee dies before all of the payments
provided for have been made, the unpaid balance of the payments due shall
continue to be paid by the Company to the designated beneficiaries.
- 2 -
<PAGE> 3
5. Change in Control.
------------------
(a) As used in this Section 5, the terms "Change in Control",
"Protection Period", "Company", "Cause", and "Good Reason" shall have the
meanings given to them in the Change in Control Agreement entered into by and
between the Company and the Employee as of July 1, 1996.
(b) If, during a Protection Period, the Employee's employment is
terminated by the Company other than for Cause or the Employee terminates his
employment for Good Reason, then the Company shall pay to the Employee the
amount of the Normal Retirement Benefit under the provisions of this Section 5,
notwithstanding any conflicting provisions of Section 2, 3, or 4.
(c) Subject to Sections 6 and 7, such amount shall be paid in 180
equal monthly installments, the first of which shall be paid within thirty days
after the Employee ceases to be employed by the Company and the balance of which
shall be paid on or about the first business day of each month thereafter for
179 months.
(d) In the event that the Employee dies before all the payments
provided for have been made, the unpaid balance of the payments due shall
continue to be paid by the Company to the designated beneficiaries.
6. Reduction of Benefits.
----------------------
(a) The Company and the Employee have entered into a Life Insurance
Split-Dollar Agreement dated as of August 26, 1992, pursuant to which the
Employee's designated beneficiaries may receive a death benefit in the event of
the Employee's death while employed by the Company and the Employee may own an
interest in the cash surrender value of a life insurance policy (the "Policy")
at the time his employment with the Company terminates by retirement or
otherwise. Therefore, notwithstanding any other provision of this Agreement to
the contrary, the benefits that the Company is obligated to pay to the Employee
pursuant to Sections 2, 3, 4 and 5 shall be reduced in the manner provided in
Paragraph (b) below by the amount of the Employee's interest in the cash
surrender value of the Policy at the date of the Employee's retirement,
termination, or total and permanent disability, whichever first occurs.
(b) The reduction under Paragraph (a) above shall be calculated as
follows as of the date on which the Employee ceases to be employed by the
Company:
(i) Calculate the monthly benefit under Section 2, 3, 4, or 5, as
the case may be.
- 3 -
<PAGE> 4
(ii) Convert the monthly benefit (from (i) above) into an
after-tax monthly benefit, using the after-tax rate specified under paragraph II
in Schedule A to this Agreement (the "After-Tax Rate").
(iii) Calculate the monthly annuity amount that would be payable
to the Employee monthly for 180 months if an amount equal to the Employee's
interest in the cash surrender value of the Policy were converted into an
annuity with a term certain of 180 months using an interest rate equal to the
applicable annual interest rate specified under paragraph III in Schedule A to
this Agreement (the "Applicable Annual Rate").
(iv) Convert the monthly annuity amount (from (iii) above) into
an after-tax monthly annuity amount, using the After-Tax Rate, but applying the
After-Tax Rate only to that part of the monthly annuity amount that would not
represent the return of the Employee's investment in the policy.
(v) Subtract the after-tax monthly annuity amounts (from (iv)
above) from the after-tax monthly benefit (from (ii) above). Divide the
remainder, if any, by the After-Tax Rate; the quotient is, notwithstanding the
provisions of Sections 2, 3, 4, and 5, the monthly benefit payable for 180
months in accordance with the terms of the relevant section of this Agreement.
7. Acceleration of Payments; Frequency of Payments.
------------------------------------------------
At the Company's option or, should amounts become payable pursuant to
Section 5 of this Agreement, at the Employee's option, amounts that become
payable under this Agreement may be paid in a lump sum rather than over a period
of years, discounted at the Applicable Annual Rate in effect as of the date the
Employee ceases to be employed by the Company. Should the Employee exercise the
foregoing option, the Company shall make the lump sum payment to Employee within
thirty days after he gives notice of the exercise of said option to the Company.
The Company may, at its option, but subject to the preceding paragraph
of this Section 7, divide any amount due under this Agreement in any month into
two or more installments to be paid during that month at times corresponding to
the Company's regular pay dates for executive employees. The Company's exercise
of the foregoing option shall not be cause for an adjustment of the amount
otherwise payable under this Agreement.
- 4 -
<PAGE> 5
8. Administrator and Claims Procedure.
-----------------------------------
(a) The Administrator for purposes of the claims procedure under this
Agreement is the Vice President of Finance of the Company. The business address
and telephone number of the Administrator is: 2777 Walden Avenue, Buffalo, New
York 14225; telephone: (716) 684-9700.
(b) The Company shall have the right to change the Administrator. The
Company shall also have the right to change the address and telephone number of
the Administrator. The Company shall give the Employee written notice of any of
the foregoing changes.
(c) Benefits shall be paid in accordance with the provisions of this
Agreement.
(d) The Administrator shall present any disputed claim for benefits to
the Compensation Committee for review. The Compensation Committee in conjunction
with the Board of Directors shall determine the disposition of the disputed
claim.
(e) If the claim is denied, either wholly or partially, notice of the
decision shall be mailed to the Claimant within ninety days after the receipt of
the claim by the Administrator.
(f) The Administrator shall provide a written notice to any Claimant
who is denied a claim for benefits under this Agreement. The notice shall set
forth the following information:
(i) the specific reasons for the denial;
(ii) the specific reference to pertinent provisions of the
Agreement on which the denial is based;
(iii) a description of any additional material or information
necessary for the Claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(iv) appropriate information and an explanation of the claims
procedure under this Agreement to permit the Claimant to submit his claim for
review.
All of this information shall be set forth in the notice in a
manner calculated to be understood by the Claimant.
- 5 -
<PAGE> 6
(g) The claims procedure under this Agreement shall allow the Claimant
a reasonable opportunity to appeal a denied claim and to get a full and fair
review of that decision from the Administrator. The Claimant shall exercise his
right of appeal by submitting a written request for a review of the denied claim
to the Administrator.
This written request for review must be submitted to the Administrator
within sixty days after receipt by the Claimant of the written notice of denial.
The Claimant shall have the following rights under this appeal procedure:
(i) to request a review upon written application to the
Administrator;
(ii) to review pertinent documents with regard to this Agreement;
(iii) to submit issues and comments in writing;
(iv) to request an extension of time to make a written submission
of issues and comments; and
(v) to request that a hearing be held to consider Claimant's
appeal.
(h) The Administrator shall notify the Claimant in writing of the
decision on review of the denied claim within 60 days after the receipt of the
request for review if no hearing was held, or within 120 days after the receipt
of the request for review, if an extension of time is necessary in order to hold
a hearing. If an extension of time is necessary in order to hold a hearing, the
Administrator shall give the Claimant written notice of the extension of time
and of the hearing. This notice shall be given prior to any extension. The
written notice of extension shall indicate that an extension of time will occur
in order to hold a hearing on the Claimant's appeal.
The notice shall also specify the place, date, and time of that
hearing and the Claimant's opportunity to participate in the hearing. It may
also include any other information the Administrator believes may be important
or useful to the Claimant in connection with the appeal.
(i) The decision to hold a hearing to consider the Claimant's appeal
of the denied claim shall be within the sole discretion of the Administrator,
whether or not the Claimant requests such a hearing.
(j) The written decision on review required by Paragraph (h) above
shall contain the following information:
- 6 -
<PAGE> 7
(i) the decisions;
(ii) the reasons for the decisions; and
(iii) specific references to the provisions of the Agreement on
which the decisions are based.
All of this information shall be written in a manner calculated
to be understood by the Claimant.
(k) The Administrator shall be entitled to retain and rely on the
advice of experts (including without limitation attorneys and accountants
retained by the Company) in taking or refraining from taking any action or
making any decision pursuant to this Section 8. All fees and expenses of such
experts shall be paid by the Company.
9. Nature of Company's Obligation.
-------------------------------
The Company's obligation under this Agreement shall be an unfunded and
unsecured promise to pay. Any assets which the Company may acquire to help cover
its financial liabilities are and remain general assets of the Company subject
to the claims of its creditors. The Company does not give, nor does this
Agreement create nor the Employee receive, any beneficial ownership interest in
any asset of the Company. The Employee understands and agrees that his
participation in the acquisition of any general asset which the Company may
acquire or use to help support its financial obligations under this Agreement
shall not constitute a representation to the Employee, his designated
beneficiary, or any person claiming through the Employee that any of them has a
special or beneficial interest in such general asset.
10. No Employment Rights.
---------------------
This Agreement shall not be deemed to constitute a contract of
employment between the Company and Employee. Nothing contained in this Agreement
shall be deemed to give to Employee the right to be retained in the employ of
the Company or to interfere with the right of the Company to discharge the
Employee, nor shall it be determined to give to the Company the right to require
the Employee to remain in its employ nor shall it interfere with Employee's
right to terminate his employment.
11. Independence of Benefits.
-------------------------
The benefits payable under this Agreement shall be independent of, and
in addition to, any other benefits or compensation, whether by salary, or bonus
or otherwise, payable under any other employment agreements that now exist or
may hereafter exist from
- 7 -
<PAGE> 8
time to time between the Company and the Employee. This Agreement between the
Company and the Employee does not involve a reduction in salary or foregoing of
an increase in future salary by the Employee. Nor does the Agreement in any way
affect or reduce the existing and future compensation and other benefits of the
Employee.
12. Assignability.
--------------
Except insofar as this provision may be contrary to applicable law, no
sale, transfer, alienation, assignment, pledge, collateralization, or attachment
of any benefits under this Agreement shall be valid or recognized by the
Company.
13. Payment Due Incompetents. Minors. Etc.
--------------------------------------
If it shall be found that any person to whom a payment is due
hereunder is unable to care for his affairs because of physical or mental
disability, or that such person is a minor, the Company shall have the authority
to cause the payments becoming due to such person to be made to the spouse,
brother, sister, or other individual with whom the person to whom the payment is
due is living, or any other individual deemed by the Company to have incurred
expense for such person otherwise entitled to payment (unless prior claim shall
have been made by a duly qualified guardian or other legal representative),
without responsibility of the Company to see to the application of such
payments. Payments made pursuant to such power shall, to the extent thereof,
operate as a complete discharge of the obligation of the Company hereunder.
14. Employee Waiver.
----------------
The Employee acknowledges and agrees that if the Agreement and the
benefits described in the Agreement constitute an employee benefit plan or part
of an employee benefit plan for purposes of Title I of the Employee Retirement
Income Security Act, as amended ("ERISA"), (i) such plan is an unfunded plan,
(ii) the Employee belongs to a select group of management or highly compensated
employees, and, therefore, (iii) such plan is exempt from the participation,
vesting, benefit accrual, joint and survivor and preretirement survivor annuity,
minimum funding, fiduciary responsibility, and other requirements of Title I of
ERISA. The Employee further agrees that, should the Agreement and the benefits
described in the Agreement be construed as a funded plan or part of a funded
plan for purposes of Title I of ERISA, the Employee irrevocably waives on behalf
of himself and any spouse to whom he may now or in the future be married, any
rights and claims the Employee or his spouse or both of them may have now or in
the future under Title I of ERISA with respect to such plan. The Employee
acknowledges that he has had sufficient opportunity to review this waiver with
counsel.
- 8 -
<PAGE> 9
15. Amendment.
----------
During the lifetime of the Employee, this Agreement may be amended or
terminated at any time, in whole or in part, by the mutual written agreement of
the parties; provided, however, that this Agreement may not be amended in a
manner which would materially increase the cost to the Company without the
approval of the Board of Directors.
16. Plan Administrator.
-------------------
The plan administrator shall be the Compensation Committee of the
Board of Directors of the Company. The plan administrator shall administer this
Agreement, construe its terms, and make all determinations necessary under this
Agreement and shall have complete discretion in doing so.
17. Notices.
--------
All notices, requests, demands and other communications which are
required or permitted to be given under this Agreement shall be in writing and
shall be deemed duly given upon the delivery or mailing thereof, as the case may
be, if delivered personally or sent by registered or certified mail, return
receipt requested, postage prepaid:
(a) If to the Company, to:
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, New York 14225
Attention: Chairman, Compensation Committee
(b) If to the Administrator, to:
American Precision Industries Inc.
2777 Walden Avenue
Buffalo, New York 14225
Attention: Vice President of Finance
(c) If to the Employee or Claimant, to:
Mr. Kurt Wiedenhaupt
280 Carnoustie Road
East Aurora, New York 14052
- 9 -
<PAGE> 10
or to such other address as any of the foregoing shall have specified by notice
given in said manner to each of the others.
18. Miscellaneous.
--------------
This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof. This Agreement shall be
governed by the laws of the State of New York, except to the extent that Federal
law supersedes. This Agreement is solely between the Company and the Employee.
However, it shall be binding upon the designated recipients, beneficiaries,
heirs, executors and administrators of the Employee and upon the successors and
assigns of the Company. Headings in this Agreement are for reference purposes
only and shall not be deemed to have any substantive effect.
IN WITNESS WHEREOF, the Executive has executed this Agreement, and the
Company, pursuant to the authorization of its Board of Directors, has caused
this Agreement to be executed, as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ John M. Murray
----------------------------------------
John M. Murray, Vice President
- Finance and Treasurer
By /s/ James J. Tanous
----------------------------------------
James J. Tanous, Secretary
/s/ Kurt Wiedenhaupt
------------------------------------------
Kurt Wiedenhaupt
- 10 -
<PAGE> 11
SCHEDULE A
Effective as of July 1, 1996
I. Normal Retirement Benefit
-------------------------
The Normal Retirement Benefit as in effect on July 1, 1996, is
$1,676,534. The Normal Retirement Benefit shall be adjusted
automatically as of July 1 of each year after 1996 to reflect changes
in the cost of living, using the following procedure:
The Normal Retirement Benefit in effect as of the immediately preceding
July 1 shall be increased or decreased by a factor derived from the
Consumer Price Index for All Urban Consumers (1982-84 = 100) published
by the United States Bureau of Labor Statistics for the month of June
preceding the date as of which the adjustment is being made. The Normal
Retirement Benefit to be used as the basis for the calculation of any
benefit payable under this Agreement is the Normal Retirement Benefit
in effect as of the July 1 preceding (or, if applicable coincident
with) the date the Employee ceases to be employed by the Company.
II. After-Tax Rate
--------------
The After-Tax Rate is the percentage that is the remainder after the
subtraction from (i) 100 percent of (ii) the effective marginal tax
rate applicable to the Employee on the date as of which a calculation
is being made. The Company shall determine the effective marginal tax
rate applicable to the Employee as of the calculation date, taking into
account federal, state, and local income tax rates; the hospital
insurance tax rate under the Federal Insurance Contribution Act; the
deduction (for income tax purposes) for state and local income taxes;
and no income other than income attributable to the Company. An amount
shall be converted to an after-tax amount by multiplying it by the
After-Tax Rate in effect for the calculation date.
III. Applicable Annual Rate
----------------------
The Applicable Annual Rate is the annual rate of interest determined
for a given calendar year as follows: For each calendar year, the
Company shall obtain quotes from the Guardian Life Insurance Company
and two other A+ rated life insurance companies on the single premium
that would be required in January of that year to purchase an immediate
annuity policy paying a fixed monthly benefit for a term certain of 180
months. The premiums quoted shall be translated into discount rates.
The highest of the three discount rates shall be the Applicable Annual
Rate in effect for calculations made as of any date during the given
calendar year.
<PAGE> 1
EXHIBIT 10(vi)
AMENDMENT TO
LIFE INSURANCE SPLIT-DOLLAR AGREEMENT
AGREEMENT by and between AMERICAN PRECISION INDUSTRIES INC., a Delaware
corporation with its principal office at 2777 Walden Avenue, Buffalo, New York
14225 (the "Company"), and KURT WIEDENHAUPT ("Executive"), residing at 280
Carnoustie Road, East Aurora, New York 14052, dated as of July 1, 1994.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Company and the Executive enter into an agreement entitled
the Life Insurance Split-Dollar Agreement, dated as of August 26, 1992; and
WHEREAS, the Board of Directors of the Company has authorized the following
amendment to the Life Insurance Split-Dollar Agreement, and the Executive has
agreed to the amendment
NOW, THEREFORE, the Life Insurance Split-Dollar Agreement is amended as
follows, effective July 1, 1994:
1. Paragraph 3 of the Life Insurance Split-Dollar Agreement is amended to
read as follows:
3. PAYMENT OF PREMIUMS. On or before the due date of each annual premium on
the Policy, or within the grace period allowed by the Policy or the Insurer for
the payment of such annual premium, and for so long as the Executive is employed
by the Company before attaining the age of 65, the Company shall pay a portion
of the annual premium on the Policy. The portion of each such annual premium to
be paid by the Company shall be determined by the Company in its discretion
from year to year. The Executive shall pay the balance of each such annual
premium, on or before its due date or within the grace period allowed by the
Policy or the Insurer for the payment of such annual premium.
IN WITNESS WHEREOF, the Executive had executed this Agreement, and the
Company pursuant to the authorization of its Board of Directors, has caused this
Agreement to be executed, as of the day and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ John M. Murray
-----------------------------------------------
John M. Murray,
Vice President - Finance and Treasurer
By /s/ James J. Tanous
-----------------------------------------------
James J. Tanous, Secretary
/s/ Kurt Wiedenhaupt
-------------------------------------------------
Kurt Wiedenhaupt, individually
<PAGE> 1
EXHIBIT 10(vii)
LIFE INSURANCE SPLIT-DOLLAR AGREEMENT
(as restated)
AGREEMENT by and between AMERICAN PRECISION INDUSTRIES INC., a Delaware
corporation with its principal office at 2777 Walden Avenue, Buffalo, New York
14225 (the "Company"), and KURT WIEDENHAUPT ("Executive"), residing at 280
Carnoustie Road, East Aurora, New York 14052, first dated as of August 26, 1992,
as amended and restated as of July 1, 1996.
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Executive is currently serving as President and Chief
Executive Officer of the Company; and
WHEREAS, the Company desires to continue to assist the Executive in
providing protection for the Executive's family (or other beneficiaries) in the
event of the Executive's death while employed by the Company and in augmenting
his assets at the time of his retirement or other termination of employment; and
WHEREAS, the Company has determined that this assistance can best be
provided under a "split-dollar" arrangement; and
WHEREAS, the Executive has applied for and has taken delivery of Insurance
Policy No. 3705278 issued by Guardian Life Insurance Company (the "Insurer") in
the original face amount of $1,583,240.00 on the life of the Executive (the
"Policy");
NOW, THEREFORE, the parties agree as follows:
1. OWNERSHIP OF POLICY. The Executive will continue to be the owner of the
Policy in accordance with the terms and provisions of this Agreement.
2. ASSIGNMENT. The Executive has executed a collateral assignment (the
"Assignment") of a partial interest in the Policy to the Company in accordance
with the terms of Paragraph of this Agreement. The "Assignee's Interest" to
which the Assignment refers means the Company's interests in the Policy's death
benefit and cash surrender value as described in Paragraph of this Agreement.
The Assignment shall terminate upon the termination of this Agreement in
accordance with the terms of Paragraph of this Agreement.
3. PAYMENT OF PREMIUMS. On or before the due date of each annual premium on
the Policy, or within the grace period allowed by the Policy or the Insurer for
the payment of such annual premium, and for so long as the Executive is employed
by the Company before attaining the age of 65, the Company shall pay a portion
of the annual premium on the Policy. The portion of each such annual premium to
be paid by the
<PAGE> 2
Company shall be determined by the Company in its discretion from year to year.
The Executive shall pay the balance of each such annual premium, on or before
its due date or within the grace period allowed by the Policy or the Insurer for
the payment of such annual premium.
4. ADDITIONAL COMPENSATION. The Company shall pay to the Executive as
additional compensation an amount equal to (i) the portion of each annual
premium to be paid by the Executive pursuant to Paragraph 3 of this Agreement
plus (ii) an amount such that, after payment of taxes at the marginal rate (as
defined in Schedule A to this Agreement) on the entire additional compensation
payment, the Executive would have left an amount equal to the portion of the
annual premium payment to be paid by the Executive. The Company shall pay such
additional compensation to the Executive, subject to any applicable payroll tax
withholding, by the end of the grace period allowed by the Policy or the Insurer
for the payment of the annual premium.
5. ALLOCATION OF POLICY VALUES. During the term of this Agreement, the
Executive shall retain a death benefit from the Policy equal to the amount
specified in Schedule A to this Agreement. The remaining proceeds payable from
the Policy upon the death of the Executive shall be payable to the Company under
the Assignment. During the term of this Agreement, the Company's interest in the
cash surrender value of the Policy pursuant to the Assignment shall be equal to
the lesser of the sum of premiums paid by the Company on the Policy or the cash
surrender value of the Policy. The Company's interest in the cash surrender
value shall be payable to the Company upon the termination of the Executive's
employment with the Company other than by reason of death. The Company shall
furnish to the Executive a schedule after each anniversary of the Policy showing
the relative allocations of the cash surrender value of the Policy.
6. DESIGNATION OF BENEFICIARY. The Executive shall have the right to name
the beneficiary or beneficiaries of the Policy, who, upon the death of the
Executive shall receive the proceeds of the Executive's interest in the death
benefit of the Policy in accordance with Paragraph below. If the Executive
elects to name someone other than his spouse as beneficiary, a written consent
from the spouse will be required.
7. DEATH CLAIMS. In the event of the Executive's death, the Executive's
personal representative and the Company will promptly take all steps necessary
to cause the death benefits provided under the Policy to be paid by the Insurer.
The Policy shall provide by endorsement or otherwise that in the event of the
death of the Executive while the Policy is in full force and effect during the
term of this Agreement, there shall be paid to the beneficiary or beneficiaries
designated by the Executive as provided in Paragraph of this Agreement, that
portion of the death benefit retained by the Executive as provided in Paragraph
of this Agreement, and the remaining proceeds from the Policy shall be paid
directly to the Company.
- 2 -
<PAGE> 3
8. POLICY LOANS. While this Agreement is in effect and except as provided
in Paragraph of this Agreement, there shall be no loans made to the Company or
the Executive secured by the Policy.
9. TERMINATION OF POLICY. The Executive agrees that while this Agreement is
in full force and effect, he will not, without the consent of the Company, sell,
transfer, surrender, assign, or otherwise terminate the Policy.
10. TERMINATION OF EMPLOYMENT. Upon the termination of the Executive's
employment with the Company, the Executive shall pay to the Company (through a
loan secured by the Policy or from other funds) an amount equal to the Company's
interest in the cash surrender value of the Policy (as specified in Paragraph of
this Agreement). Upon such payment no other amount will be due to the Company
under this Agreement and the Company shall release the Assignment. The Executive
will thereafter own the Policy free from the terms of this Agreement.
11. TERMINATION OF AGREEMENT. This Agreement shall terminate upon the
termination of the Executive's employment with the Company and the satisfaction
of the Company's interest in the Policy under the Assignment as provided in
Paragraph of this Agreement.
12. EXECUTIVE WAIVER. The Executive acknowledges and agrees that if the
Agreement and the benefits described in the Agreement constitute an employee
benefit plan or part of an employee benefit plan for purposes of Title I of the
Employee Retirement Income Security Act, as amended ("ERISA"), (i) the plan is a
welfare plan and not a pension plan and, therefore, is exempt from the
participation, vesting, benefit accrual, joint and survivor and preretirement
survivor annuity, and other requirements of Title I of ERISA, and (ii) the
Executive irrevocably waives, on behalf of himself and any spouse to whom he may
now or in the future be married, any rights and claims the Executive or his
spouse or both of them may have now or in the future under Title I of ERISA with
respect to such plan, even if it should be construed as a pension plan. The
Executive has had sufficient opportunity to review this waiver with counsel. The
Company shall administer this Agreement, construe its terms, and make all
determinations necessary under this Agreement and shall have complete discretion
in doing so.
13. AMENDMENT OF AGREEMENT. This Agreement shall not be modified or amended
except by a written amendment signed by the Company and the Executive. This
Agreement shall be binding on the beneficiaries, heirs, and personal
representatives of the Executive and the successors and assigns of the Company.
14. STATE LAW. This Agreement shall be subject to and shall be construed
under the laws of the State of New York.
- 3 -
<PAGE> 4
15. PARAGRAPH READINGS. Paragraph headings as to contents of particular
paragraphs of this Agreement are inserted only for convenience and are in no way
to be construed as part of the provisions of this Agreement or as a limitation
on the scope of particular paragraphs to which they refer.
16. EFFECTIVE DATE OF RESTATEMENT. The amendment of the Agreement as set
forth in this document is effective as of July 1, 1996.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
AMERICAN PRECISION INDUSTRIES INC.
By /s/ John M. Murray
-----------------------------------------------
John M. Murray,
Vice President - Finance and Treasurer
By /s/ James J. Tanous
-----------------------------------------------
James J. Tanous, Secretary
/s/ Kurt Wiedenhaupt
-------------------------------------------------
Kurt Wiedenhaupt, individually
- 4 -
<PAGE> 5
SCHEDULE A
Effective as of July 1, 1996
I. Marginal Tax Rate
-----------------
The marginal tax rate is the marginal tax rate applicable to the
Employee on the date as of which a premium payment is made, as
determined by the Company. The Company shall determine the marginal tax
rate applicable to the Employee as of the premium payment date, taking
into account federal, state, and local income tax rates; the hospital
insurance tax rate under the Federal Insurance Contribution Act; the
deduction (for income tax purposes) for state and local income taxes;
and no income other than income attributable to the Company.
II. Death Benefit
-------------
The death benefit as in effect on July 1, 1996, is $1,676,534. The
death benefit shall be adjusted automatically as of July 1 of each year
after 1996 to reflect changes in the cost of living, using the
following procedure:
The death benefit in effect as of the immediately preceding July 1
shall be increased or decreased by a factor derived from the Consumer
Price Index for All Urban Consumers (1982-84 = 100) published by the
United States Bureau of Labor Statistics for the month of June
preceding the date as of which the adjustment is being made.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000005657
<NAME> AMERICAN PRECISION INDUSTRIES INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1997
<PERIOD-END> SEP-29-1996
<CASH> 372,000
<SECURITIES> 250,000
<RECEIVABLES> 19,656,000
<ALLOWANCES> 496,000
<INVENTORY> 16,723,000
<CURRENT-ASSETS> 40,288,000
<PP&E> 45,572,000
<DEPRECIATION> 20,352,000
<TOTAL-ASSETS> 79,943,000
<CURRENT-LIABILITIES> 16,369,000
<BONDS> 0
0
0
<COMMON> 5,057,000
<OTHER-SE> 33,298,000
<TOTAL-LIABILITY-AND-EQUITY> 79,943,000
<SALES> 31,599,000
<TOTAL-REVENUES> 31,658,000
<CGS> 20,986,000
<TOTAL-COSTS> 29,059,000
<OTHER-EXPENSES> 7,694,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 379,000
<INCOME-PRETAX> 2,599,000
<INCOME-TAX> 863,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,736,000
<EPS-PRIMARY> .24
<EPS-DILUTED> 0
</TABLE>
