SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934 for the quarterly period ended September 30,
1997, 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 No. 0-13805
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Michigan (State of incorporation)
38-0983610 (IRS Employer Identification Number)
168 Louis Campau Promenade. N.W., Suite 400, Grand Rapids, MI,
49503
(616) 336-9400
(Address of principal executive offices, zip code, telephone
number)
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 / /
The number of shares outstanding of registrant's common stock, par
value $1.00 per share, at November 1, 1997 was 4,272,406 shares.
<PAGE> 2
PART I. FINANCIAL INFORMATION, ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
September 30 December 31
1997 1996
----------- -----------
(Unaudited)
CURRENT ASSETS:
Accounts receivable, less allowances $14,569,500 $20,721,800
Inventories: Raw Materials 6,384,700 6,841,400
Work in Process 3,134,400 3,380,900
Finished Goods 8,759,200 10,389,900
----------- -----------
18,278,300 20,612,200
Prepaid expenses and other current assets 3,110,000 1,459,400
----------- -----------
Total current assets 35,957,800 42,793,400
PROPERTY AND EQUIPMENT:
Land 265,300 265,300
Buildings and improvements 13,939,300 13,715,300
Machinery and equipment 33,569,800 32,375,700
Construction in progress 1,502,200 760,200
----------- -----------
49,276,600 47,116,500
Less accumulated depreciation (26,281,500) (23,558,900)
----------- -----------
22,995,100 23,557,600
OTHER ASSETS 762,800 154,500
----------- -----------
$59,715,700 $66,505,500
=========== ===========
CURRENT LIABILITIES:
Accounts payable $ 2,866,000 $6,144,500
Payroll and related benefits 3,050,400 2,203,500
Accrued allowances 2,161,500 2,733,100
Other current liabilities 2,487,800 3,271,900
Current portion of long term debt 500,000 500,000
----------- -----------
Total current liabilities 11,065,700 14,853,000
LONG-TERM DEBT 5,000,000 11,100,000
OTHER LONG-TERM LIABILITIES 3,167,400 2,584,000
SHAREHOLDERS' EQUITY:
Common Stock 4,272,400 4,246,400
Additional paid-in capital 20,932,500 20,842,300
Retained earnings 15,277,700 12,879,800
----------- -----------
40,482,600 37,968,500
----------- -----------
$59,715,700 $66,505,500
=========== ===========
See accompanying notes to condensed consolidated financial statements
<PAGE> 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
Three Months Ended Nine Months
Ended
September 30 September 30
1997 1996 1997 1996
----------- ----------- ----------- -----------
Net sales $22,816,800 $31,661,100 $73,020,500 $83,227,000
Cost of sales 18,903,000 25,074,800 60,101,100 66,479,200
----------- ----------- ----------- -----------
Gross profit 3,913,800 6,586,300 12,919,400 16,747,800
Selling, general and
administrative 5,052,600 5,673,100 16,288,300 15,501,500
----------- ----------- ----------- -----------
Operating
income (loss) (1,138,800) 913,200 (3,368,900) 1,246,300
Other expense (income):
Litigation settlement
income, net (3,930,700)
Interest expense 31,300 161,200 273,600 349,100
Other, net (1,600) 2,400 (35,400) (6,100)
----------- ----------- ---------- -----------
29,700 163,600 (3,692,500) 343,000
----------- ----------- ----------- -----------
Pretax income (loss) (1,168,500) 749,600 323,600 903,300
Income taxes (benefit) (409,000) 224,900 (2,074,300) 271 000
----------- ----------- ------------ -----------
NET INCOME (LOSS) $ (759,500) $ 524,700 $ 2,397,900 $ 632,300
=========== =========== ============ ===========
Average number of common
and common equivalent
shares outstanding 4,282,300 4,271,900 4,288,500 4,245,300
========= ========= ========= =========
Earnings (loss) per share $(0.18) $0.12 $0.56 $0.15
======= ===== ===== =====
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
Nine Months Ended
September 30
1997 1996
---------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES $8,223,300 $(2,673,300)
CASH FLOWS USED IN INVESTING ACTIVITIES:
Purchases of property and equipment (2,239,500) (2,306,300)
Other 13,600
---------- -----------
Net cash used in investing activities (2,239,500) (2,292,700)
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from revolving credit agreement 5,500,000 5,700,000
Payments on revolving credit agreement (11,600,000) (1,000,000)
Issuance of common stock 116,200 266,000
---------- ----------
Net cash provided by (used in)
financing activities (5,983,800) 4,966,000
---------- ----------
NET INCREASE IN CASH AND EQUIVALENTS 0 0
CASH AND EQUIVALENTS AT BEGINNING OF YEAR 0 0
---------- ----------
CASH AND EQUIVALENTS AT END OF QUARTER $ 0 $ 0
========== ==========
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTE 1--BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have
been prepared by Ameriwood Industries International Corporation
("Ameriwood" or the "Company"), without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these condensed consolidated
financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in Ameriwood's 1996
annual report on Form 10-K.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share". The Statement simplifies the standards for computing earnings
per share, replacing the presentation of primary earnings per share
with a presentation of basic earnings per share. SFAS No. 128 requires
dual presentation of basic and diluted earnings per share on the face
of the income statement for all entities with complex capital
structures. Basic earnings per share is computed by dividing income
available to common stockholders by the weighted-average number of
common shares outstanding. Diluted earnings per share is computed
similarly to fully diluted earnings per share pursuant to APB Opinion
No. 15, Earnings per Share, which is superseded by this Statement.
This Statement is effective for financial statements issued for
periods ending after December 15, 1997, with early application being
prohibited. The Company has not yet determined the impact of this
Statement on its consolidated financial statements.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments necessary to
present fairly the financial position of the Company as of September
30, 1997 and December 31, 1996 and the results of its operations and
its cash flows for the three and nine month periods ended September
30, 1997 and 1996. All such adjustments are of a normal and recurring
nature. Operating results for the three and nine months ended
September 30, 1997 are not necessarily indicative of the results of
operations for the year ending December 31, 1997.
NOTE 2--SHAREHOLDER LITIGATION AND SETTLEMENTS
In April 1997, the Company reached a settlement related to its long-
standing litigation against its former auditors. The litigation
related to services provided to the Company from 1986 to 1990. Under
the terms of the settlement, which was reached in U.S. District Court
for the Western District of Michigan, in Grand Rapids, Mich.,
Ameriwood received $6.25 million, before related expenses, in April
1997. Additionally, a counterclaim against the Company was dropped.
The settlement resulted in a one-time after-tax gain of $4.7 million,
or $1.10 per share for the first quarter ended March 31, 1997. The
recovery is considered a return of capital and therefore, is not
subject to income taxes.
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Consolidated net sales for the third quarter were $22.8 million
compared to $31.7 million in the same period last year. Furniture
sales were down 32%, primarily due to sales declines in the warehouse
club and office superstore channels. Custom Solutions sales were down
19%, the result of continued softness in the speaker related portion
of the consumer electronics market, and BIC sales were flat.
Consolidated net sales year-to-date were $73.0 million, a decline of
$10.2 million or 12% from the prior year-to-date. Furniture sales
were down 16%, Custom Solutions sales were flat, and BIC sales were up
10%.
Gross margin declined to 17.2% for the quarter and 17.7% year-to-date
compared to 20.9% and 20.1% respectively in 1996. The decline in
gross margin is due principally to reduced sales volume and
unfavorable overhead absorption variances from adjusted production
schedules.
SG&A expense for the third quarter was down $620,000 from the prior
year period. The decrease is the result of both a reduction in
allowances that are classified as selling expense, reduced commissions
related to lower volume, and significant cost reduction efforts that
were implemented in August.
For the quarter ended September 30, 1997, the Company reported a net
loss of $759,500, or $0.18 per share, compared to net income of
$524,700, or $0.12 per share, for the same period in 1996. For the
nine months ended September 30, 1997, net income was $2,397,900, or
$0.56 per share, compared to net income of $632,300, or $0.15 per
share, in the prior year.
Included in income for the first nine months of 1997 is a one-time
after-tax gain of $4.7 million, net of related expenses for a
settlement related to litigation against the Company's former
auditors. Please see Note 2-Shareholder Litigation and Settlements in
the accompanying financial statements. Excluding the effect of the
one-time gain, results of operations for the first nine months of 1997
would have been a loss of $2,344,700, or $0.55 per share.
CAPITAL RESOURCES AND LIQUIDITY
Working capital remains strong at $24.9 million, but is down from a
year end level of $27.9 million, due to a decrease in net accounts
receivables and and inventories. The declines are the result of a
continued effort to manage inventory levels, strong efforts in credit
and collection, and a decline in sales volume.
Current liabilities were down $3.8 million from year end levels; lower
than planned production schedules reduced purchases which created a
lower accounts payable liability. Borrowings under the Company's
revolving credit facility were $500,000 at the end of the third
quarter as compared to $6.6 million at the end of 1996. Funds from
the litigation settlement were used to pay down borrowings in April
1997.
<PAGE> 7
Capital expenditures and commitments of $3.6 million for the first
nine months of 1997 consisted mainly of expenditures for machinery and
equipment related to improving product design capabilities and
manufacturing efficiencies. Ameriwood is currently planning total
capital expenditures for 1997 of approximately $10 million. This
increased investment will, among other things, enable the Company to
offer more innovative designs to meet consumers' needs.
Management believes the Company's present liquidity, combined with
cash flow from future operations, and the Company's revolving credit
facility, will be adequate to fund operations and capital expenditures
for the remainder of 1997 and 1998. In the event more funds are
required, additional long-term borrowings are an alternative for
meeting liquidity and capital resource needs.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. Reference is made to the index on page 9 of this Form
10-Q.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during
the three months ended September 30, 1997.
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION
November 11, 1997 /s/ Charles R. Foley
---------------------
Charles R. Foley
President and Chief Executive Officer
(Principal Executive Officer)
November 11, 1997 /s/ Marlan R. Smith
----------------------
Marlan R. Smith
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE> 9
EXHIBIT INDEX
- ----------------------------------------------------------------------------
3(a) Restated Articles of Incorporation, as amended June 24, 1993
(filed as exhibit to Form 10-K for the year ended December 31, 1993
and incorporated by reference)
3(b) Bylaws, as amended through January 28, 1996 (filed as exhibit to
Form 10-K for the year ended December 31, 1995 and incorporated by
reference)
4(a) Indenture of Trust relating to $5,000,000 Michigan Strategic
Fund Industrial Development Revenue Bonds due in 2006, and related
Loan Agreement, Letter of Credit Agreement, Mortgage and Security
Agreement and Irrevocable Transferable Letter of Credit (filed as
exhibits to Form 10-K for the year ended December 31, 1989 and
incorporated by reference)
4(b) Second Amendment, dated June 19, 1992, to Letter of Credit with
Harris Trust and Savings Bank, dated November 1, 1986 (filed as
exhibit to Form 10-Q for the quarter ended June 30, 1992 and
incorporated by reference)
4(c) Third Amendment, dated January 13, 1995, to Letter of Credit
with Harris Trust, dated November 1, 1986 (filed as exhibit to Form 10-
K for the year ended December 31, 1994 and incorporated by reference)
4(d) Letter of Credit Agreement Waiver with Harris Trust and Savings
Bank, dated February 27, 1996 (filed as exhibit to Form 10-K for the
year ended December 31, 1995 and incorporated by reference)
4(e) Fourth Amendment, dated August 2, 1996, to Letter of Credit with
Harris Trust and Savings Bank, dated November 1, 1986 (filed as
exhibit to Form 10-Q for the quarter ended June 30, 1996 and
incorporated by reference)
4(f) Credit Agreement with Harris Trust and Savings Bank and The
First National Bank of Chicago, dated January 13, 1995 (filed as
exhibit to Form 10-K for the year ended December 31, 1994 and
incorporated by reference)
4(g) First Amendment to Credit Agreement and Waiver with Harris Trust
and Savings Bank, dated February 27, 1996 (filed as exhibit to Form 10-
K for the year ended December 31, 1995 and incorporated by reference)
4(h) Second Amendment to Credit Agreement with Harris Trust and
Savings Bank, dated August 2, 1996 (filed as exhibit to Form 10-Q for
the quarter ended June 30, 1996 and incorporated by reference)
4(i) Ameriwood Industries International Corporation common stock
certificate specimen (filed as exhibit to Form 10-Q for the quarter
ended March 31, 1993 and incorporated by reference)
4(j) Rights Agreement, dated April 4, 1996, between Ameriwood
Industries and Harris Trust, as Rights Agent (filed as exhibit to Form
10-Q for the quarter ended June 30, 1996 and incorporated by
reference)
The following contracts identified with "*" are agreements or
compensation plans relating to executive officers, directors or
related parties.
*10(a) 1984 Incentive Stock Option Plan, as amended (filed as exhibit
to Form 10-K for the year ended December 31, 1990 and incorporated by
reference)
<PAGE> 10
*10(b) Ameriwood Industries 1993 Stock Incentive Plan (filed as
Exhibit A to the definitive proxy statement dated May 10, 1993
relating to the Company's 1993 annual meeting incorporated by
reference)
*10(c) Ameriwood Industries 1992 Non-Employee Directors' Stock Option
Plan (filed with the definitive proxy statement dated June 26, 1992
relating to the Company's 1992 annual meeting and incorporated by
reference)
*10(d) Ameriwood Industries 1995 Non-Employee Directors' Stock Option
Plan (filed with the definitive proxy statement dated April 12, 1995
relating to the Company's 1995 annual meeting and incorporated by
reference)
*10(e) Form of Stock Option Agreement dated February 14, 1991 with
Neil L. Diver (filed as exhibit to Form 10-K for the year ended
December 31, 1990 and incorporated by reference)
*10(f) Rospatch Corporation Annual Incentive Plan (filed as exhibit
to Form 10-K for the year ended December 31, 1990 and incorporated by
reference)
*10(g) Non-employee directors consultation fee arrangements (filed as
exhibit to Form 10-K for the year ended December 31, 1992 and
incorporated by reference)
*10(h) Form of Indemnity Agreement entered into between the
registrant and certain executive officers and directors (filed as
exhibit to Form 10-K for the year ended December 31, 1994 and
incorporated by reference)
*10(i) Form of Management Retention Agreement entered into between
the registrant and certain executive officers
*10(j) Form of Variable Life Policy for certain executive officers of
the registrant (filed as exhibit to Form 10-K for the year ended
December 31, 1993 and incorporated by reference)
*10(k) Form of Split-Dollar Life Insurance Agreement entered into
between the registrant and certain executive officers (filed as
exhibit to Form 10-K for the year ended December 31, 1993 and
incorporated by reference)
*10(l) Form of Collateral Assignment Agreement entered into between
the registrant and certain executive officers (filed as exhibit to
Form 10-K for the year ended December 31, 1993 and incorporated by
reference)
*10(m) Form of Severance Compensation Agreement entered into between
the registrant and certain executive officers (filed as exhibit to
Form 10-K for the year ended December 31, 1993 and incorporated by
reference)
*10(r) Letter agreement regarding duties as Interim President and CEO
dated February 22, 1996 between the registrant and Charles R. Foley
(filed as exhibit to Form 10-K for the year ended December 31, 1995
and incorporated by reference)
<PAGE> 11
*10(s) Severance Compensation Agreement entered into between the
registrant and Charles R. Foley, dated April 8, 1997 (filed as
exhibit to Form 10-Q for the quarter ended June 30, 1997 and
incorporated by reference)
*10(t) Contingent Supplemental Executive Retirement Plan entered into
between the registrant and certain executive officers dated July 15,
1997
27 Financial Data Schedule
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION
171 MONROE AVENUE, N.W., SUITE 600
GRAND RAPIDS, MI 49503
Mr. Charles R. Foley
Ameriwood Industries International Corporation
171 Monroe Avenue, N.W.
Grand Rapids, MI 49503
Re: Management Retention Agreement
Dear Mr. Foley:
Ameriwood Industries International Corporation (the
"Corporation") considers it essential to the best interests
of its shareholders to foster the continuous employment of
key management personnel. In this connection, the Board of
Directors of the Corporation (the "Board") recognizes that,
as is the case with many publicly held corporations, the
possibility of a change in control of the Corporation may
exist and that such possibility, and the uncertainty and
questions which it may raise among management, may result in
the departure or distraction of management personnel to the
detriment of the Corporation and its shareholders.
The Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and
dedication of members of management, including you, to their
assigned duties without distraction in the face of
potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the
Corporation, and as consideration for your execution of the
release described in Subsection 4(C) hereof, which release
is an integral part of this Agreement, the Corporation
agrees that you shall receive the benefits set forth in this
letter agreement ("Agreement").
1. Term of Agreement. This Agreement shall commence on the
date hereof and shall continue in effect while you continue
to be employed by the Corporation, and for such further
period as may be required for the Corporation to perform its
obligations hereunder in the event of the termination of
your employment in circumstances giving rise to your
entitlement to benefits as provided in this Agreement.
2. Change in Control. No benefits shall be payable
hereunder unless there shall have been a Change in Control
of the Corporation, as set forth below. For purposes of
this Agreement, a "Change in Control" shall be deemed to
have occurred if:
(A) Any "Person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), is or becomes the "Beneficial Owner"
(as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing
25% or more of the combined voting power of the
Corporation's then outstanding securities; provided,
however, in determining whether a Change in Control has
occurred, the Corporation's outstanding securities that are
acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which would
cause a Change in Control. A "Non-Control Acquisition"
shall mean an acquisition by (i) an employee benefit plan
(or a trust forming a part thereof) maintained by (a) the
Corporation or (b) any corporation or other Person of which
a majority of its voting power or its voting equity
securities or equity interest is owned, directly or
indirectly, by the Corporation (for purposes of this
definition, a "Subsidiary") (ii) the Corporation or its
Subsidiaries, or (iii) any Person in connection with a "Non-
Control Transaction" (as hereinafter defined).
(B) During any period of twelve consecutive months,
individuals who are members of the Board (the "Incumbent
Board"), cease for any reason to constitute at least a
majority of the members of the Board; provided, however,
that if the election, or nomination for election by the
Corporation's common shareholders, of any new directors was
approved by a vote of at least a majority of the Incumbent
Board, such new director shall, for purposes of the
Agreement, be considered as a member of the Incumbent Board;
provided further, however, that no individual shall be
considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an
actual or threatened "Election Contest" (as described in
Rule 14a-11 promulgated under the Exchange Act) or other
actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Incumbent Board (a
"Proxy Contest") including by reason of any agreement
intended to avoid or settle any Election Contest or Proxy
Contest;
(C) The shareholders of the Corporation approve a merger,
consolidation, or reorganization of the Corporation with any
other corporation or entity, unless such merger,
consolidation, or reorganization is a "Non-Control
Transaction." A "Non-Control Transaction" shall mean a
merger, consolidation or reorganization of the Corporation
where:
(i) the shareholders of the Corporation immediately before
such merger, consolidation or reorganization, own directly
or indirectly immediately following such merger,
consolidation or reorganization, at least seventy-five (75%)
of the combined voting power of the outstanding voting
securities of the corporation resulting from such merger,
consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as their
ownership of the Corporation's outstanding securities
immediately before such merger, consolidation or
reorganization; and
(ii) the individuals who were members of the Incumbent
Board immediately prior to the execution of the agreement
providing for such merger, consolidation or reorganization
constitute at least a majority of the members of the board
of directors of the Surviving Corporation, or a corporation
beneficially directly or indirectly owning a majority of the
outstanding voting securities of the Surviving Corporation;
and
(iii) no Person was a Beneficial Owner of twenty-five
percent (25%) or more of the combined voting power of the
Surviving Corporation's then outstanding voting securities,
except the following: (i) the Corporation, (ii) any
Subsidiary, (iii) any employee benefit plan (or any trust
forming a part thereof) maintained by the Corporation, the
Surviving Corporation, or any Subsidiary, or (iv) any Person
who, immediately prior to such merger, consolidation or
reorganization was a Beneficial Owner of twenty-five percent
(25%) or more of the then outstanding voting securities of
the Corporation.
(D) The shareholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for
the sale or disposition by the Corporation of all, or
substantially all, of the Corporation's assets (other than a
transfer to a Subsidiary).
3.Termination Following Change in Control. After a Change
in Control of the Corporation shall have occurred, you shall
be entitled to the benefits
(A) provided in Subsection 4(C), (D) and (F) hereof upon
the subsequent termination of your employment within two (2)
years following the effective date of such Change in Control
of the Corporation, unless such termination is (i) because
of your death, Disability or voluntary Retirement, (ii) by
the Corporation for Cause, or (iii) by you other than for
Good Reason (except during the Window Period as provided in
Section 3(B)); or
(B) provided in Subsection 4(G) hereof upon the subsequent
termination of your employment by you during the 30-day
period commencing on the first anniversary of the effective
date of such Change in Control (the "Window Period").
3.1 Disability; Voluntary Retirement. If, as a result of
your incapacity due to physical or mental illness, you shall
have been absent from the full-time performance of your
duties with the Corporation for six (6) consecutive months,
and within thirty (30) days after written notice you shall
not have returned to the full-time performance of your
duties (provided a Change in Control had not occurred prior
to said notice), your rights under this Agreement shall be
terminated due to "Disability". Termination of your rights
under this Agreement shall not impair any rights to
reinstatement that you may have under any other plan or
policy maintained by the Corporation, but any such
reinstatement would not revive your rights under this
Agreement. Termination by you of your employment based on
voluntary "Retirement" shall mean termination in accordance
with the Corporation's retirement policy (including any
early retirement policy adopted before a Change in Control)
generally applicable to its salaried employees or in
accordance with any retirement arrangement established with
your consent with respect to you.
3.2 Cause. Termination by the Corporation of your
employment for "Cause" shall mean termination upon:
(A) The reckless and continued failure by you to remedy
deficiencies and resume substantial performance of the
duties associated with your employment by the Corporation
within thirty (30) days following the date a written demand
for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in
which the Board believes that you have not substantially
performed your duties; provided that you need not respond to
such demand in respect of:
(i) any such failure resulting from your incapacity due to
physical or mental illness, or
(ii) any such actual or anticipated failure after the
issuance of a Notice of Termination by you for Good Reason
as defined in Subsections 3.4 and 3.3, respectively; or
(B) The reckless engaging by you in conduct which is
demonstrably and materially injurious to the Corporation,
monetarily or otherwise, including but not limited to
embezzlement, theft, fraud or other felony involving the
Corporation or its assets.
Notwithstanding the foregoing, you shall not be deemed to
have been terminated for Cause unless and until there shall
have been delivered to you a copy of a resolution duly
adopted by the affirmative vote of a majority of the Board
at a meeting of the Board called and held for such purpose
(after at least 15 business days' notice to you and an
opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of
the Board you were guilty of conduct set forth above in
clauses (A) or (B) of the first sentence of this Subsection
3.2 and specifying the particulars thereof in detail. For
purposes of this Subsection 3.2, no act, or failure to act,
on your part shall be deemed "reckless" unless done, or
omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the
best interest of the Corporation.
3.3 Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean, without your express, written
consent, the occurrence of any of the following cir
cumstances unless, in the case of paragraphs (A), (E), (F),
(G) or (H) , such circumstances are fully corrected prior to
the Date of Termination specified in the Notice of
Termination, as defined in Subsections 3.5 and 3.4,
respectively, given in respect thereof:
(A) The assignment to you of any duties inconsistent with
your status as Chief Executive Officer of the Corporation or
such other executive officer position to which you may in
the future be appointed by the Board (and which you accept)
or a substantial alteration in the nature or status of your
responsibilities from those in effect immediately prior to
the Change in Control;
(B) A reduction by the Corporation in your annual base
compensation or target incentive compensation as in effect
on the date hereof or as the same may be increased from time
to time, except for across-the-board salary reductions
similarly affecting all salaried personnel of the
Corporation and all salaried personnel of any person in
control of the Corporation;
(C) The Corporation's requiring you to be based anywhere
other than the Corporation's principal executive offices; or
the relocation of such offices from their location on the
date hereof to a location which increases your one-way
commute from your principal residence (measured over the
shortest reasonable route) by more than 50 miles;
(D) The failure by the Corporation, without your consent,
to pay to you any portion of your base or incentive
compensation;
(E) The failure by the Corporation to continue in effect
any compensation or retirement plan in which you participate
immediately prior to the Change in Control which is material
to your total compensation, including, but not limited to,
the Annual Incentive Plan, the 1993 Stock Incentive Plan,
and the Ameriwood Affiliated Employee Stock Ownership and
Savings Plan (the "ESOP-Savings Plan") or any substitute
plans adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan
that is no less favorable to you than the plan(s) replaced,
or the failure by the Corporation to continue your
participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, in terms of
(i) the amount of benefits provided, (ii) the level of your
participation relative to other participants, or (iii) (if
applicable) funding or vesting when compared to the relevant
plan provisions which existed at the time of the Change in
Control;
(F) The failure by the Corporation to continue to provide
you with benefits substantially similar to those currently
provided to you under any of the Corporation's life
insurance, medical, health and accident, or disability
plans, the taking of any action by the Corporation which
would directly or indirectly materially reduce any of such
benefits or deprive you of any material fringe benefit
currently provided to you, or the failure by the Corporation
to provide you with the number of paid vacation days to
which you are entitled on the basis of years of service or
position with the Corporation in accordance with the
Corporation's current vacation policy, or the failure of the
Corporation to provide you with a working environment
(including office accommodations, staff and location) which
is substantially equivalent to that currently provided to
you, except in each case for across-the-board reductions
similarly affecting all salaried personnel of the
Corporation and all salaried personnel of any person in
control of the Corporation;
(G) The failure of the Corporation to obtain a satisfactory
agreement from any successor to assume and agree to perform
this Agreement, as contemplated in Section 7 hereof; or
(H) Any purported termination of your employment which is
not effected pursuant to a Notice of Termination satisfying
the requirements of Subsection 3.4 below (and, if
applicable, the requirements of Subsection 3.2 above); for
purposes of this Agreement, no such purported termination
shall be effective.
Your right to terminate your employment pursuant to this
Subsection 3.3 shall not be affected by your incapacity due
to physical or mental illness. Your continued employment
shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason
hereunder.
3.4 Notice of Termination. Any purported termination of
your employment by the Corporation or by you shall be
communicated by written Notice of Termination to the other
party hereto in accordance with Section 9 hereof. For
purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to
provide a basis for termination of your employment under the
provision so indicated.
3.5 Date of Termination. "Date of Termination" shall mean
thirty (30) days after Notice of Termination is given.
4. Compensation Upon Termination or During Disability.
Following a Change in Control, as defined by Section 2, upon
termination of your employment or during a period of
disability you shall be entitled to the following benefits:
(A) During any period that you fail to perform your
full-time duties with the Corporation as a result of
incapacity due to physical or mental illness, you shall
continue to receive your base compensation, together with
prorated incentive compensation in accordance with the terms
of the governing plan, at the rate in effect at the
commencement of any such period, as reduced by any
compensation or benefits payable to you under any disability
plan of the Corporation, until your employment is terminated
in accordance with the terms of the applicable plan or
policy maintained by the Corporation or until your
reinstatement in accordance with such plan or policy;
provided that your rights under this Agreement remain
subject to termination in accordance with Subsection 3.1
hereof. In the event your employment shall be terminated by
reason of your voluntary Retirement or your death, your
benefits shall be determined under the Corporation's
retirement, insurance and other compensation programs then
in effect in accordance with the terms of such programs.
(B) If your employment shall be terminated by the
Corporation for Cause or by you (except during the Window
Period as provided in Section 3(B)) other than for Good
Reason, Disability, death or voluntary Retirement, the
Corporation shall pay you your full base compensation and a
pro-rated share of your target incentive compensation
(determined in a manner not less favorable to you than that
used in the determination of such target incentive
compensation for 1996), and continue to provide you with
life, disability, accident, health insurance and other
benefits, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all
other amounts to which you are entitled under any
compensation plan of the Corporation at the time such
payments are due, and the Corporation shall have no further
obligations to you under this Agreement.
(C) If your employment by the Corporation shall be
terminated within two (2) years following the effective date
of a Change in Control, either (a) by the Corporation other
than for Cause, voluntary Retirement, death or Disability,
(b) by you for Good Reason, then you shall be entitled to
the benefits provided below:
(i) The Corporation shall (a) pay you your full base
compensation and a pro-rated share of your target incentive
compensation (determined in a manner not less favorable to
you than that used in the determination of such target
incentive compensation for 1996 and only to the extent not
paid at the effective date of a Change in Control pursuant
to Section 5(C)), (b) reimburse you for all reasonable and
necessary expenses incurred on behalf of the Corporation
during the period ending on the Date of Termination, (c)
compensate you for all accrued but unused vacation and sick
leave and (c) continue to provide you with life, disability,
accident, health insurance and all other benefits, through
the Date of Termination at the rate in effect immediately
prior to the occurrence of the circumstance giving rise to
the Notice of Termination, plus all other amounts to which
you are entitled under any compensation plan of the
Corporation, at the time such payments are due.
(ii) In lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the
Corporation shall pay as severance pay to you a lump sum
severance payment (the "Severance Payments") equal to two
(2) times the sum of (a) your annual base compensation
(including any amounts contributed by you to the
ESOP-Savings Plan or any successor plan, and any amounts
otherwise deferred) in effect immediately prior to the
occurrence of the circumstance giving rise to the Notice of
Termination given in respect thereof, plus (b) your target
incentive compensation for the calendar year in which such
Notice of Termination is given, plus (c) an amount equal to
9.5% of your total base and incentive compensation for such
calendar year (up to the applicable limit imposed by Section
415 of the Internal Revenue Code of 1986, as amended (the
"Code")) representative of the Corporation's matching and
discretionary contributions to the ESOP-Savings Plan. To
the extent permitted by the ESOP-Savings Plan, all or part
of the amount described in (c) shall be contributed directly
to said Plan, provided the Corporation's total liability
under this Agreement would not thereby be increased. As a
condition precedent to said lump sum payment, you shall be
required to execute a release in the form attached as
Exhibit A, or in such revised form as the Corporation's
legal counsel may prepare to conform to intervening changes
in applicable law.
(iii) The payments provided for in paragraph (ii) above,
shall be made not later than the fifteenth business day
following the Date of Termination (or such later date as may
be required for observation of time periods prescribed in
the release required by paragraph (C)(ii), above).
(iv) The Corporation also shall pay to you all reasonable
legal fees and expenses incurred by you as a result of such
termination, not to exceed, however, Fifty Thousand Dollars
($50,000) (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or
in seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with any tax
audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or
benefit provided hereunder). Such payments shall be made
within five (5) days after your request for payment
accompanied with such evidence of fees and expenses incurred
as the Corporation reasonably may require.
(D) If your employment shall be terminated (i) by the
Corporation other than for Cause, voluntary Retirement or
Disability, or (ii) by you for Good Reason, then for a 24
month period after such termination, the Corporation shall
arrange to provide you with life, disability, accident, and
health insurance benefits substantially similar to those
which you are receiving immediately prior to the
circumstance giving rise to the Notice of Termination.
Should you die prior to expiration of said 24 month period,
coverage which had been provided for your spouse and
dependents shall be continued at no cost to them for the
remainder of such period (or for such shorter period as they
are eligible for benefits under the terms of the plan(s) in
question). Benefits otherwise receivable by you pursuant to
this Subsection 4(D) shall be reduced to the extent
comparable benefits are actually received by you during the
24 month period following your termination, and any such
benefits actually received by you shall be reported to the
Corporation. The conclusion of such 24 month period shall
be defined the "qualifying event" in respect of the rights
of you, your spouse and/or your dependents to purchase
"continuation coverage" during a subsequent "period of
coverage," in accordance with 601-608 of the Employee
Retirement Income Security Act of 1974, as amended.
(E) Subject to Subsection 4(D), you shall not be required
to mitigate the amount of any payment provided for in this
Section 4 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in
this Section 4 be reduced by any compensation earned by you
as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to
be owed by you to the Corporation, or otherwise, except as
specifically provided in this Section 4.
(F) In addition to all other amounts payable to you under
this Section 4, you shall be entitled to receive all
benefits payable to you under the ESOP-Savings Plan and any
other plan or agreement relating to retirement benefits.
(G) If your employment by the Corporation shall be
terminated by you during the Window Period, then you shall
be entitled to the payments and benefits provided for in
Subsection 4(C)(i); the payments and benefits provided for
in Subsection 4(C)(ii), except that the Severance Payment
shall be the sum of (a), (b) and (c) of Subsection 4(C)(ii)
instead of two times the sum of (a), (b) and (c); the
payments and benefits provided for in Subsection 4(C)(iv);
the payment and benefits provided for in Subsection 4(D),
except that the period such benefits will be provided shall
be 12 months instead of 24 months; and the payment and
benefits provided for in Subsection 4(F).
(H) If your employment is terminated by the Corporation or
by you for Good Reason during a nine month period ending
with a Change in Control, provided such termination was not
for Cause, then you shall be entitled to the payments and
benefits provided for in (C) (ii) and (iv), (D) and (F)
above as if the Corporation had terminated your employment
on the first business day after such Change in Control
occurs.
5.Other Effects of a Change in Control. Upon a Change in
Control
(A) Immediately upon the effective date of the Change in
Control, the restrictions on any outstanding options, stock
appreciation rights or awards granted to you under any
compensation or retirement plan, including, but not limited
to, the Annual Incentive Plan, the 1993 Stock Incentive
Plan, and the Ameriwood Affiliated Employee Stock Ownership
and Savings Plan, or any substitute plans adopted prior to
the Change in Control, shall lapse and such awards shall
become 100% vested.
(B) Immediately upon the effective date of the Change in
Control, if the Change in Control event is a merger,
consolidation or reorganization of the Corporation with or
into another corporation, other than a merger, consolidation
or reorganization in which the Corporation is the surviving
corporation, each outstanding option to acquire securities
(the "Underlying Securities") of the Corporation shall
automatically be converted into options to receive, in lieu
of the Underlying Securities to be issued pursuant to such
options, the kind and amount of stock, other securities,
money, and property receivable upon such merger,
consolidation or reorganization by holders of the Underlying
Securities with respect to the Underlying Securities
outstanding immediately prior to such merger, consolidation
or reorganization.
(C) Immediately upon the effective date of the Change in
Control, the Corporation shall pay to you an amount equal to
the pro-rated Bonus (as hereinafter defined). The pro-rated
Bonus is an amount equal to your target incentive
compensation for the calendar year in which the Change in
Control occurred (determined in a manner not less favorable
to you than that used in the determination of such target
incentive compensation for 1996) (the "Bonus") multiplied by
a fraction the numerator of which is the number of days in
such calendar year through the effective date of the Change
in Control and the denominator of which is 365.
(D) At the end of the year in which the Change in Control
is effective, the Corporation shall pay to you an amount
equal to the greater of (i) the balance of the Bonus not
paid pursuant to subsection (C) above, or (ii) if any new
incentive compensation plan is made effective for you during
such year, the amount to be paid pursuant to such incentive
compensation plan.
(E) Immediately upon the effective date of the Change in
Control, you shall be entitled to the benefits of the
Supplemental Executive Retirement Plan ("SERP"). Benefits
to be paid pursuant to the SERP will be fully earned and
100% vested. Benefits to be paid pursuant to the SERP will
be based on (i) your term of employment with the Corporation
as of the effective date of the Change in Control (giving
credit to you for the full year of employment in which the
Change in Control is effective), (ii) the continuation of
your employment term after the Change in Control, (iii) in
the event your employment is terminated within two (2) years
following the effective date of a Change in Control, either
(a) by the Corporation other than for Cause, voluntary
Retirement, death or Disability (b) by you for Good Reason,
you shall be given credit for an additional two full years
of employment, and (iv) in the event your employment is
terminated by you during the Window Period, you shall be
given credit for an additional one full year of employment.
Upon the effective date of the Change in Control, a Trust
shall be created for your benefit and the benefit of other
employees entitled to participate in the SERP, and shall be
funded. The Trust shall be funded in accordance with the
provisions of the SERP .
6. Excise Tax Payments.
(A) If any payment or benefit (within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended (the "Code"), to you or for your benefit paid or
payable or distributed or distributable pursuant to the
terms of this Agreement or otherwise in connection with, or
arising out of, your employment with the Corporation or a
change in ownership or effective control of the Corporation
or of a substantial portion of its assets (a "Payment" or
"Payments"), would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are
incurred by you 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 you will be entitled to receive an additional payment
(a "Gross-Up Payment") in an amount such that after payment
by you of all taxes (including any interest or penalties,
other than interest and penalties imposed by reason of your
failure to file timely a tax return or pay taxes shown due
on your return, imposed with respect to such taxes and the
Excise Tax to the extent such failure was not caused by the
Corporation's failure to comply with this Agreement),
including an Excise Tax imposed upon the Gross-Up Payment,
you retain an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(B) An initial determination as to whether a Gross-Up
Payment is required pursuant to this Agreement and the
amount of the Gross-Up Payment shall be made at the
Corporation's expense by an accounting firm selected by the
Corporation and reasonably acceptable to you (the
"Accounting Firm"). The Accounting Firm shall provide its
determination (the "Determination"), together with detailed
supporting calculations and documentation to the Corporation
and you within five days of the effective date of your
termination if applicable, or such other time as requested
by the Corporation or by you (provided you reasonably
believe that any of the Payments may be subject to the
Excise Tax). The Accounting Firm shall furnish you with an
opinion reasonably acceptable to you stating its
Determination with such analysis and support as is
professionally prudent in the circumstances. The Gross-Up
Payment, if any, as determined pursuant to this Section 6
shall be paid by the Corporation to you within five days of
the receipt of the Determination. Within ten days of the
delivery of the Determination to you, you shall have the
right to dispute the Determination ("Dispute"). The
existence of the Dispute shall not in any way affect your
right to receive the Gross-Up Payment in accordance with the
Determination. Upon the final resolution of a Dispute, the
Corporation shall promptly pay to you any additional amount
required by such resolution. If there is no Dispute, the
Determination shall be binding, final and conclusive upon
the Corporation and you subject to the application of
Section 6 (C) below.
(C) Notwithstanding anything contained in this Agreement to
the contrary, in the event that, according to the
Determination, an Excise Tax will be imposed on any Payment
or Payments, the Corporation shall pay to the applicable
government taxing authorities as Excise Tax withholding, the
amount of the Excise Tax that the Corporation has actually
withheld from the Payment or Payments.
7. Successors; Binding Agreement.
(i) The Corporation shall obtain the agreement of 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 Corporation to expressly
assume and agree to perform this Agreement in the same
manner and to the same extent that the Corporation would be
required to perform it if no such succession had taken
place. If the form of such succession is (a) an acquisition
of the assets or securities of the Corporation by an entity
that is owned or controlled, directly or indirectly, by a
third "Person" (as such term is defined in Section 2 hereof)
or (b) a merger with such an entity, then the Corporation
shall also obtain from such Person (as well as from such
entity) an express assumption of and agreement to perform
this Agreement in the same manner and to the same extent
that the Corporation would be required to perform it if no
such succession had taken place.
(ii) This Agreement shall inure to the benefit of, and be
enforceable by, your personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If you should die while any amount
would still be payable to you hereunder if you had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement
to the beneficiary designated by you on a form provided by
the Administrator (provided that you may change such
beneficiary from time to time by filing a new form); or, if
there is no such beneficiary, to your estate.
8. Claims and Disputes; Arbitration. (i) Claims for
benefits under this Agreement shall be made in writing to
such person or persons (the "Administrator") as you (or, if
applicable, your beneficiary) and the Corporation shall
mutually agree upon as being qualified and available to
carry out the duties of Administrator, as hereinafter
described. A copy of such claim shall simultaneously be
furnished to the Corporation. The Administrator shall
provide a reasonable opportunity (not to exceed 30 days) for
both parties to present relevant evidence and shall schedule
a hearing if required by applicable law or if the
Administrator otherwise determines to hold a hearing. The
Administrator shall, within a reasonable period of time but
not later than 30 days after receipt of the claim or the
date of a hearing, whichever is later, provide written
notice of disposition of the claim. If the claim is denied
in whole or in part, such notice shall also set forth:
(A) The specific reason or reasons for denial; and
(B) Specific reference to the pertinent provisions of the
Agreement on which the denial is based.
Unless waived by the Corporation in writing, you shall be
required to exhaust your remedies under the foregoing claims
procedure as a condition precedent to filing a claim for
arbitration in accordance with Subsection 8(ii).
(ii) Any controversy or claim arising out of or relating to
this Agreement or the breach thereof, shall be settled by
binding arbitration in Kent County, Michigan in accordance
with the laws of the State of Michigan by three arbitrators,
one of whom shall be appointed by the Corporation, one by
you (or in the event of your prior death, your beneficiary)
and the third of whom shall be appointed by the first two
arbitrators. The arbitration shall be conducted as a de
novo review in accordance with the Commercial Arbitration
Rules of the American Arbitration Association. Judgment
upon the award rendered by the arbitrators may be entered in
any court having jurisdiction thereof.
9. Notice. For the purpose of this Agreement, notices and
all other communications provided for in the Agreement shall
be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered or
certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first
page of this Agreement, provided that all notices to the
Corporation shall be directed to the attention of the Board
with a copy to the Secretary of the Corporation, or to such
other address as either party may have furnished to the
other in writing in accordance herewith, except that notice
of change of address shall be effective only upon receipt.
10. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and signed
by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of
any breach by the other party hereto of, or in compliance
with, any condition or provision, of this Agreement to be
performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No oral agreements or
representations with respect to the subject matter hereof
have been made by either party which are not expressly set
forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be
governed by the laws of the State of Michigan, except to the
extent preempted by Federal law. All references to sections
of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any
payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or
local law. Nothing contained in this Agreement shall be
deemed to create an employment contract between you and the
Corporation for any fixed period of time or to change in any
respect the nature or extent of your rights to continue in
the employ of the Corporation (subject to the Corporation's
obligations to perform its required obligations under this
Agreement).
11. Validity. The invalidity or unenforceability or any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
12. Counterparts. This Agreement may be executed in
several counterparts, each of which shall be deemed to be an
original but all of which together will constitute one and
the same instrument.
13. Legal Representation. You acknowledge that this
Agreement was drafted by the law firm of Varnum, Riddering,
Schmidt & Howlett LLP, counsel solely to the Corporation,
and that you have had the opportunity to seek independent
legal (including tax) advice. You specifically waive any
actual or apparent conflict of interest of Varnum,
Riddering, Schmidt & Howlett in connection with its services
regarding this Agreement.
If this letter sets forth our agreement on the subject
matter hereof, kindly sign and return to the Corporation the
enclosed copy of this letter which will then constitute our
agreement on this subject.
Sincerely,
AMERIWOOD INDUSTRIES
INTERNATIONAL CORPORATION
By: /s/ Neil Diver
- ---------------------
Neil Diver
Chairman of the Board of Directors
Agreed to this 31st day of July, 1997.
/S/ Charles R. Foley
- --------------------
Charles R. Foley, Chief Executive Officer
AGREEMENT TO RELEASE ALL CLAIMS
1. In consideration for a severance payment and other
benefits under the Management Retention Agreement dated as
of July 15, 1997 and to which I would not otherwise be
entitled, and for other good, valuable and separate
consideration, I, Charles R. Foley, individually, on behalf
of myself and on behalf of my respective heirs, legal
representatives and assigns, do hereby forever and fully
release and discharge Ameriwood Industries International
Corporation ("Ameriwood"), its predecessors, subsidiaries,
successors, affiliates, distributors, dealers, directors,
officers, agents and employees (hereinafter the "Released
Parties") from all actions, causes of action, claims,
demands, damages (including compensatory, exemplary,
statutory and punitive damages), attorneys' fees, costs,
debts, sums of money, bills, covenants, contracts, liens,
controversies, agreements, promises and executions of any
kind, in law, equity or otherwise, which I, individually or
in any representative capacity have or have ever had (as an
employee (including officer), participant in any pension or
welfare plan, or shareholder) against the Released Parties
because of or arising out of any employment-related or
shareholder-related matter and/or event occurring on or
before the date I sign this Agreement to Release All Claims
(hereinafter "Release"). This Release specifically
includes, by way of illustration but not limitation, any and
all matters arising out of my employment with Ameriwood and
my separation from that employment, including without
limitation, any purported violation of federal, state or
local statutory, constitutional or common law, executive
order, ordinance or regulation, including the Age
Discrimination in Employment Act ("ADEA"), Title VII of the
Civil Rights Act of 1964, The Americans with Disabilities
Act, Michigan's Elliott-Larsen Civil Rights Act, Michigan's
Worker's Disability Compensation Act, all claims of any
conceivable kind for tortious conduct and claims of breach
of express or implied contract. This Agreement is not
intended to release any accrued claims for compensation or
for welfare plan benefits, retirement plan benefits,
incentive compensation benefits, option plan benefits,
and/or vested pension benefits that have accrued but remain
unpaid as of the date hereof, any claim under the Management
Retention Agreement dated as of July 15, 1997,any claim to
indemnification arising under Ameriwood's articles of
incorporation or bylaws or under any express agreement to
which Ameriwood and I are parties, or any direct claim in a
securities law or corporate law cause of action against any
one or more Released Parties, based on acts or omissions
taking place or first discovered subsequent to the date of
this Release, or, if initiated before the date of this
Release, in which I am a passive party, not involved in any
way in the production of documents, evidence, or ideas used
in the development of that claim, provided my own acts or
omissions as an employee, officer, director or agent of any
Released Party are not in issue.
2. In further consideration of the severance payment, other
benefits, and other good, valuable and separate
consideration, I promise that I will not begin any legal,
equitable or administrative proceeding against any or all of
the Released Parties for any claim of the kind described in
paragraph 1 arising on or before the date I sign this
Release, and that this Release will serve as a defense to
and a basis for an injunction against any legal, equitable
or administrative proceeding I or my heirs, legal
representatives or assigns begin against the Released
Parties for any such claim arising on or before the date I
sign this Release.
3. In further consideration of the severance payment, other
benefits, and other good, valuable and separate
consideration, I promise and agree to waive reinstatement to
any position with any of the Released Parties and further
promise and agree not to apply for a position in the future
with any Released Party that was previously my employer.
4. In further consideration of the severance payment, other
benefits, and other good, valuable and separate
consideration, I promise and agree that neither I nor anyone
acting on my behalf will disclose the terms of this Release.
I understand that such nondisclosure is a material
consideration for the Released Parties having entered into
this Release.
5. This Release, and all of its terms and provisions, shall
be construed in accordance with the laws of Michigan. If
any provision of this Release shall for any reason be held
invalid or unenforceable, such invalidity or
unenforceability shall not affect any other provision in
this Release, and this Release shall be construed as though
the invalid or unenforceable provision was never included.
6. I acknowledge that I have been advised to consult with
an attorney before signing this Release.
7. I acknowledge that my employer has given me a period of
21 days within which to consider signing this Release.
8. I understand that for seven days after I sign this
Release I may revoke it, and that this Release shall not
become effective or enforceable until the seven day period
has expired.
9. I HAVE CAREFULLY READ THIS RELEASE, I HAVE HAD THE
OPPORTUNITY TO DISCUSS ITS PROVISIONS WITH AN ATTORNEY, I
FULLY UNDERSTAND THIS RELEASEE AND I FREELY AND VOLUNTARILY
SIGN IT.
10.I have signed this Release on: _________________
THIS IS A RELEASE READ BEFORE SIGNING
In the presence of:
- -----------------------
- -----------------------
Charles R. Foley
*********************************************************
Managment Retention Agreements in the foregoin form have
been entered into between the registrar and the following
persons:
Charles R. Foley
T. Scott Kearney
William J. Maddox
Ronald J. Myers
Marlan R. Smith
THE AMERIWOOD CONTINGENT
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
PENSION PLAN
This Retirement Plan is adopted by Ameriwood Industries International
Corporation (the "Company").
ARTICLE I PURPOSE
The Company is adopting this Plan known as the Ameriwood Contingent
Supplemental Executive Retirement Plan (the "Plan") to provide
additional retirement benefits for a select group of managing
employees if the Company experiences a "change in control" as defined
later in this document. This Plan is intended as a non-qualified
retirement plan that will be exempt from requirements of Parts 2, 3,
and 4 of subtitle B of Title I of ERISA, and is not intended to
satisfy the requirements of Section 401(a) of the Code.
The Plan will be in effect immediately but the employees who are
designated as Participants will not have any rights under the Plan
unless and until there is a change in control of the Company. The
rights of Participants will "spring" into existence upon a change in
control.
ARTICLE II DEFINITIONS AND CONSTRUCTION
2.1 Definitions: The following words or phrases, when used in this
Agreement, will have the following meanings:
(a) Accrued Benefit: The portion of a normal retirement benefit
earned as of the date of a Change in Control and any date thereafter.
It is a monthly benefit commencing at normal retirement date and
computed in accordance with the normal retirement benefit formula in
Section 4.2, using the Participant's average monthly compensation,
years of service and ESOP account balances on the date of computation
and the Social Security benefits payable at age 65 according to the
schedule in effect on the date of computation. Social security
benefits will be based on the assumption of constant future earnings.
(b) Actuarial Equivalent: Equivalence in the present value of
various forms of payment. Present values will be determined by the
actuaries chosen by the Company based on the 1983 group annuity
mortality table and interest at the rate of 7-1/2% per annum.
(c) Average Monthly Compensation: The result obtained by dividing by
60 the total compensation of a Participant during the five (5) consecu
tive calendar years in which compensation was highest during the last
10 calendar years of his employment with the Company.
(d) Cause: Used as defined in the Participant's Management Retention
Agreement.
(e) Change in Control: Used as defined in the Participant's
Management Retention Agreement.
(f) Code: The Internal Revenue Code of 1986, as amended from time to
time.
(g) Committee: The persons appointed under the provisions of Article
XV to assist the Company in administering the Plan.
(H) Company: Ameriwood Industries International Corporation, a
Michigan corporation, or its successor.
(i) Compensation: The total of all amounts paid to or accrued for a
Participant by the Company as salary and bonuses for services rendered
during the year. This will be the gross amount of salary and bonuses
before any reductions for elective contributions to any plans
maintained by the Company pursuant to Code Sections 125 or 401(k).
(j) Disability: Used as defined in the Participant's Management
Retention Agreement.
(k) ERISA: Public Law No. 93-406, the Employee Retirement Income
Security Act of 1974, as amended from time to time.
(l) Former Participant: A person whose employment with the Company
has terminated but who has an interest in the Plan.
(m) Good Reason: Used as defined in the Participant's Management
Retention Agreement.
(n) Management Retention Agreement: The Management Retention
Agreement governing severance benefits and other matters upon a Change
in Control to which each Participant is a party, as it may be amended
from time to time.
(o) Normal Retirement Date: The Participant's 62nd birthday.
(p) Participant: A person participating in the Plan in accordance
with the provisions of Article III and employed by the Company or
another member of the controlled group.
(q) Plan: The Ameriwood Contingent Supplemental Executive Retirement
Plan as set forth in this document and any later amendments.
(r) Plan Year: The "fiscal year" of the Plan which will be the
period of 12 consecutive months ending on December 31 of every year.
(s) Primary Social Security Benefit: The primary insurance amount
to which the participant is entitled under the Social Security Act
then in effect if the Participant were age 62, did not have a spouse
or other dependent and, during the period between the date of
computation and the Participant's 62nd birthday, the Participant's
compensation continued at the same rate as of the time of the
calculation. A Participant's primary social security benefit as thus
computed will not be changed as a result of any increase or decrease
in his social security benefits after the date on which benefits
become payable under this Plan.
(t) Retirement: Used as defined in the Participant's Management
Retention Agreement.
(u) Service: The period of Participant's employment with the Company
computed in accordance with Section 3.2 and used to determine
eligibility for benefits under this Plan.
(v) Window Period. Used as defined in the Participant's Management
Retention Agreement.
2.2 Construction. The masculine gender is used throughout the Plan
for purpose of simplicity only and is intended to include the feminine
gender.
ARTICLE III PARTICIPATION AND SERVICE
3.1 Participation. Participation in the Plan will be limited to a
select group of management employees who are designated by the Board
of Directors of the Company and will not be effective until there is a
Change in Control of the Company. The following officers have been
designated as eligible to participate in the Plan:
Charles R. Foley, President and Chief Executive Officer
William J. Maddox, Senior Vice President - Operations
Marlan R. Smith, Vice President and Chief Financial Officer
The directors may designate additional management employees as
eligible to be Participants in the future.
3.2 Service. A Participant's eligibility for benefits under the Plan
will be based on his years of service. Each of the initial
Participants named in Section 3.1 will receive a year of service for
the calendar year ending on December 31, 1997. A Participant will be
credited with a year of service for the Plan Year in which a Change in
Control is effective (excluding 1997) and each other calendar year
during which the Participant has, in the past, completed or will, in
the future, complete not less than 25 weeks of service with the
Company. A week of service means each week or portion of a week for
which a Participant is paid or entitled to payment for the performance
of duties with the Company or for which back pay, irrespective of
mitigation of damages, has been awarded to the Participant or agreed
to by the Company.
Each Participant shall be credited with a week of service for any week
or portion of a week during which he performs no duties for the
Company by reason of vacation, illness, incapacity, jury duty, or
leave of absence for which he is directly or indirectly paid or
entitled to payment by the Company. A Participant shall not be
credited with more than one year of service under this subparagraph of
Section 3.2 for any single continuous period during which he performs
no duties for the Company.
Payments considered for purposes of the foregoing shall include
payments unrelated to the length or the period during which no duties
are performed but shall not include payments made solely as
reimbursement for medical related expenses or solely for the purpose
of complying with applicable workmen's compensation, unemployment
compensation or disability insurance laws.
If a Participant's employment with the Company is terminated (a) by
the Participant during the Window Period or (b) within two (2) years
following the effective date of a Change in Control either (i) by the
Company other than for Cause, voluntary retirement, death or
Disability or (ii) by the Participant for Good Reason , the
Participant will be credited with two extra years of service for
purposes of calculating his benefits under the Plan.
ARTICLE IV NORMAL RETIREMENT BENEFIT
4.1 Eligibility. A normal retirement benefit will be paid to each
Participant whose employment with the Company terminates after he has
reached his normal retirement date.
4.2 Amount of Benefit. The normal retirement benefit will be
monthly payments for the life of the Participant equal to the
difference between the following (a) and (b):
(a) 2.5% of the Participant's average monthly compensation multiplied
by his years of service, or 50% of his average monthly compensation,
whichever amount is smaller; minus
(b) The sum of the following:
(i) 50% of the Participant's monthly primary social security benefit;
and
(ii) The actuarial equivalent monthly benefit available from the
Participant's Company-provided ESOP account and matching account
balances in the Ameriwood Industries Employee Stock Ownership and
Savings Plan.
Participants who receive benefits in the form of a joint and survivor
annuity or other optional form of payment will have their benefits
adjusted by the amount necessary to make the optional form of payment
the actuarial equivalent of the benefit provided in this Section.
4.3 Effect of Postponed Retirement. A Participant who continues
employment beyond his normal retirement date will not receive any
retirement benefit payments until the first day of the month after his
employment terminates. When payments begin, the amount of the monthly
retirement benefit will be equal to the greater of the following:
(a) The actuarial equivalent of the monthly benefit to which he was
entitled on his normal retirement date; or
(b) The monthly retirement benefit based on his years of service and
average monthly compensation at retirement.
4.4 Commencement of Benefits. Payment of normal retirement benefits
will commence on the first day of the month after the Participant
satisfies the requirements for eligibility and be payable in
accordance with Article VIII.
ARTICLE V EARLY RETIREMENT BENEFIT
5.1 Eligibility. A Participant whose employment with the Company
terminates after he has attained age 55 and completed six (6) or more
years of service will be entitled to receive an early retirement
benefit beginning on the first day of the month following the month of
termination.
5.2 Amount of Benefit. The early retirement benefit will be equal to
his Accrued Benefit. If payment of benefits is to commence prior to
normal retirement date, the monthly benefit will be reduced by the
percentage shown in the following table for each year by which the
date of commencement of payment precedes the participant's normal
retirement date. If the starting date falls between the ages shown
on the schedule, then the reduction will be determined by
interpellation.
Age When Payments Commence % Reduction
- -------------------------- -----------
61 10
60 18
59 26
58 33
57 39
56 45
55 50
5.3 Commencement of Benefits. Payment of early retirement benefits
will commence on the first day of the month after the Participant
satisfies the requirements and requests payment, and will be payable
in accordance with Article VIII.
ARTICLE VI DEFERRED VESTED BENEFIT
6.1 Eligibility. A Participant will be eligible for a deferred
vested benefit if his employment with the Company terminates after he
has completed at least three (3) years of vesting service.
6.2 Amount of Benefit. The amount of a Participant's deferred vested
benefit will be equal to his "vested percentage" of his Accrued
Benefit. The vested percentage will be determined on the basis of his
years of service and the following vesting schedule:
YEARS OF SERVICE VESTED PERCENTAGE
- ---------------- -----------------
Less than 3 Years 0%
3 Years 60%
4 Years 80%
5 Years or more 100%
6.3 Commencement, Duration, and Form of Payment. Payment of the
deferred vested benefit will commence on the former Participant's
normal retirement date. If the former Participant satisfied the
service requirement for an early retirement benefit on his date of
termination, the deferred vested benefit will be payable commencing on
the first day of the month following the birthday on which he would
have been eligible for early retirement, but the payments will be
reduced in accordance with the formula in Section 5.2.
ARTICLE VII PRE-RETIREMENT SURVIVING SPOUSE BENEFIT
7.1 Eligibility. The spouse of a Participant will receive a
survivor's benefit if the Participant:
(a) Dies while employed by the Company after becoming eligible for an
early or normal retirement benefit, or a deferred vested benefit; and
(b) Is survived by a spouse to whom he has been married for at least
one (1) year at the time of his death.
7.2 Amount of Benefit. The survivor's benefit will be computed as if
the deceased Participant had retired in the manner for which he was
eligible on the day before his death and elected payment of his
retirement benefit in the form of a joint and 100% survivor annuity
with his spouse.
7.3 Commencement, Duration, and Form of Payment. The survivor's
benefit will be payable in the form of a monthly pension commencing on
the first day of the month following the Participant's death or the
date on which the Participant would have been eligible to begin
receiving early retirement benefits, whichever date is later, and
continuing every month thereafter to and including the month in which
the surviving spouse dies. The Committee may, at the request of the
spouse, authorize payment in any of the optional forms available to a
Participant.
ARTICLE VIII PAYMENT OF RETIREMENT BENEFITS
8.1 Standard Benefit. Benefits will be paid as follows unless an
optional form of benefit is requested by the Participant and selected
by the Committee:
(a) If the Participant is not married at the time benefit payments
begin, the benefit will be payable in monthly installments from the
commencement date to and including the month in which the Participant
dies; and
(b) If the Participant is married at the time payments begin,
benefits will be paid in the form of a joint and 66-2/3% survivor
annuity with the spouse.
A joint and 66-2/3% survivor annuity is an annuity commencing
immediately that will provide monthly payments to the Participant from
the commencement date to and including the month in which he dies and,
thereafter, monthly payments to the spouse, if surviving, for the
balance of her life in an amount equal to 66-2/3% of the monthly
payments to the Participant. The amount of the monthly payments under
the joint and 66-2/3% survivor annuity will be adjusted so that the
payments to the Participant and his spouse will be the actuarial
equivalent of payments for the life of the Participant only.
8.2 Post-Retirement Surviving Spouse Benefit. The surviving spouse
of a former Participant will be entitled to a benefit if:
(a) The former Participant's employment with the Company terminated
after he had satisfied the requirements for normal retirement, early
retirement, or deferred vested benefits under the Plan;
(b) The former Participant died before he had begun to receive
payment of benefits under the Plan; and
(c) The former Participant had been married to his spouse for a
period of at least one (1) year on the date of his death.
The post-retirement surviving spouse benefit will be computed as if
the former Participant had elected payment of his retirement benefit
in the form of a joint and 66-2/3% survivor annuity with his spouse.
Payment will commence as of the first day of the month following the
Participant's death or the date on which the Participant would have
been eligible to begin receiving early retirement benefits, whichever
date is later, and will continue every month thereafter to and
including the month in which the surviving spouse dies.
8.3 Optional Forms of Benefit. A Participant may request payment in
one of the optional forms described below if he files a written
application with the Committee before the date on which the first
benefit payment is made. Upon receipt of such application, the
Committee may direct the trustee to distribute benefits in any of the
following methods requested by the Participant :
(a) Monthly payments for a period of 10 years or the Participant's
lifetime, whichever period is longer;
(b) Monthly payments during the lifetime of the Participant only;
(c) Monthly payments in the form of a joint and 75% or 100% survivor
annuity with the Participant's spouse; or
(d) A single lump sum payment of the actuarially equivalent present
value of the benefit.
8.4 Reduction of Benefits for Benefits Received Under Other Plans or
Statutes. Any benefits payable under this Plan will be reduced, dollar
for dollar, but not below zero, for any benefits the Participant
receives under any of the following during or with respect to any
period for which he is also entitled to benefits under this Plan:
(a) Any workers disability compensation benefits, except fixed statu
tory payments for the loss of any bodily member or loss of industrial
vision or redemption awards paid prior to the date on which the
Participant was eligible for benefits under this Plan. If the
Participant receives a lump sum settlement with respect to a workers
compensation claim, the amount of the settlement will be divided by
the maximum monthly payment to which the Participant would have been
entitled under the workers compensation statute in order to determine
the period with respect to which the workers compensation benefits are
paid;
(b) Any sickness or accident benefits under any other plan to which
the Company has contributed; or
(c) Any unemployment benefits which are charged to the Company's
account or otherwise affect the Company's rate for unemployment taxes.
8.5 Payment Pursuant to Qualified Domestic Relations Orders.
Benefits payable pursuant to a qualified domestic relations order will
be made in accordance with the order and upon proper application by
the alternate payee. Payment to the alternate payee may begin anytime
after the earlier of the following:
(a) The date on which the Participant is entitled to payment of
benefits under the Plan; or
(b) The later of the following:
(i) The date the Participant attains age 50; or
(ii) The earliest date on which the Participant could begin receiving
benefits if his employment terminated.
8.6 Additional Benefits Payable with Respect to Excise Tax Payments.
If any payment or benefit payable to, or for the benefit of, a
Participant under this Plan will subject the Participant to an excise
tax under Section 4999 of the Code, or if any interest or penalties
are payable with respect to any such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Participant
will be entitled to receive an additional payment (a "gross-up
payment") in an amount, such that after payment by the Participant of
all taxes (including any interest or penalties, other than interest
and penalties imposed by reason of the Participant's failure to file
timely a tax return or pay taxes shown due of the Participant's
return, imposed with respect to such taxes and the Excise Tax to the
extent such failure was not caused by the Company's failure to comply
with this Plan) including the Excise Tax imposed on the gross-up
payment, the Participant retains an amount of the gross-up payment
equal to the Excise Tax imposed upon the payments or benefits.
The initial determination as to whether a gross-up payment is required
under this Plan, the time or times when the Excise Tax will be due and
payable by the Participant and the amount of the gross-up payment will
be made at the Company's expense by an accounting firm selected by the
Company and reasonably acceptable to the Participant (the "accounting
firm"). The accounting firm will provide a written report of such
determination together with detailed supporting calculations and
documentation to the Company and the Participant within 5 days of the
Participant's termination of employment, or such other time as
requested by the Company or the Participant when it is anticipated
that benefits or payments under the Plan are required or will be made.
The accounting firm will furnish the Participant with an opinion
reasonably acceptable to the Participant stating its determination of
the gross-up payment with such analysis and support as may be
professionally prudent under the circumstances.
The gross-up payment will be paid by the Company to the Participant at
the earlier of (i) the time the excise tax under Section 4999 of the
Code is due, and (ii) the time when benefits under the Plan are paid
to or for the benefit of the Participant. If the gross-up payment is
made at the time benefits are paid, the gross-up payment amount will
be determined with respect to benefits or payments to be make in each
year and paid in installments with, and in proportion to, the benefit
payments to, or for the benefit of, the Participant.
ARTICLE IX FUNDING OF PLAN
This Plan is intended to be "unfunded" as that term is used in ERISA
and benefits under the Plan that are payable from the general assets
of the Company. The Company will, upon a Change in Control,
establish a trust in the form attached as Attachment A and fund the
Trust as follows:
(a) Immediately after the Change in Control, the Company will deposit
in the Trust an amount equal to the actuarial equivalent present
value of the Accrued Benefit earned by each Participant at the time of
the Change in Control; and
(b) If a Participant's employment with the Company is terminated (a)
by the Participant during the Window Period or (b) within two (2)
years following the effective date of a Change in Control either (i)
by the Company other than for Cause, voluntary retirement, death or
Disability or (ii) by the Participant for Good Reason, the Company
will deposit in the Trust an additional amount equal to the
actuarially equivalent present value of any additional Accrued Benefit
earned by the Participant since the time of the Change in Control.
The assets of the Trust will be subject at all times to the claims of
the creditors of the Company. If the assets of the Trust are
insufficient to pay benefits due to any Participant, the Company will
pay the benefits directly to the Participant and/or his beneficiaries.
ARTICLE X ADMINISTRATION
10.1 Plan Administrator. The Company will be the Plan administrator
and will be responsible for the proper administration of the Plan.
10.2 Records and Reports. The Company will exercise such authority
and responsibility as it deems appropriate in order to comply with
ERISA with regard to records of Participant's vesting service and
benefit service, notices and reports to Participants, and annual
reports to the Internal Revenue Service, the Department of Labor, and
the Pension Benefit Guaranty Corporation.
10.3 Appointment of Committee. The Company may appoint a Committee
to assist in the administration of the Plan. The Committee will
consist of as many persons as may be appointed by the Company and will
serve at the pleasure of the Company. All usual and reasonable
expenses of the Committee will be paid by the Company. If a Committee
is not appointed, all duties assigned to the Committee in this Plan
will be performed by the Company.
10.4 Claims Procedure. The Committee will make all determinations
concerning benefits based on its interpretation of the terms of the
Plan. Any denial of benefits by the Committee will be stated in
writing by the Committee and delivered or mailed by certified mail,
return receipt requested, to the Participant or beneficiary within 90
days after the receipt of the request for benefits. The notice will
set forth the reasons for the denial in language that may be
understood by the Participant and will specify the Plan provisions
upon which the denial was based. If the denial is based on the failure
of the Participant or beneficiary to supply certain materials or
information, the notice will so state. The notice will advise that
the denial may be appealed to the Committee and will include an
explanation of the appeal procedure.
The Committee will adopt a procedure for reviewing appeals of denials
of claim benefits. The procedure will include the following:
(a) The claimant or his duly authorized representative may initiate
an appeal by written request for review delivered to the Committee not
later than sixty (60) days after receipt by the claimant of the notice
of denial;
(b) The claimant or his duly authorized representative may review
documents pertinent to the appeal and may submit written statements of
issues and arguments relevant to the appeal to the Committee;
(c) The Committee will return its decision on the appeal not later
than sixty (60) days after receipt of the request for review; and
(d) The claimant will be advised in writing of the decision on the
appeal including the reasons for the decision in language that may be
understood by the claimant with references to the Plan provisions upon
which the decision is based.
10.5 Rules and Decisions. The Committee may adopt such rules as it
deems necessary and appropriate. All rules and decisions of the
Committee will be consistently applied to all Participants in similar
circumstances. When making a determination or calculation, the
Committee may rely upon its interpretation of the terms of the Plan
and information furnished by a Participant or beneficiary, the
Company, the legal counsel of the Company and the trustee.
10.6 Committee Procedures. The Committee may act at a meeting or in
writing without a meeting. The Committee may elect one of its members
as chairman, appoint a secretary who need not be a Committee member,
and advise the trustee of such actions in writing. The secretary will
keep a record of all meetings and forward all necessary communications
to the Company and the trustee. The Committee may adopt such bylaws
and regulations as it deems desirable for the conduct of its affairs.
All decisions of the Committee will be made by the vote of the
majority including actions in writing taken without a meeting.
10.7 Authorization of Benefit Payments. The Committee will issue
directions to the trustee concerning all benefits which are to be paid
from the trust pursuant to the provisions of the Plan.
10.8 Application and Forms for Benefits. The Committee may require a
Participant to complete and file an application for a benefit and all
other forms approved by the Committee and to furnish all pertinent
information requested by the Committee. The Committee may rely upon
all such information including the Participant's current mailing
address.
10.9 Facility of Payment. Whenever, in the Committee's opinion, a
person entitled to receive any benefit is under a legal disability or
is incapacitated in any way so as to be unable to manage his financial
affairs, the Committee may direct the trustee to make payments to such
person or to his legal representative, or to a relative or friend of
such person for his benefit, or the Committee may direct the trustee
to apply the payment for the benefit of such person in such manner as
the Committee considers advisable. If a person entitled to receive
benefits is a minor and the value of the benefit exceeds $5,000, the
Trustee may either delay payment of the benefit until the minor has
attained the age of majority or pay the benefit to a person who has
been named by a court of competent jurisdiction as conservator of the
estate of the minor or to another similar court-appointed fiduciary.
Any payment of a benefit in accordance with the provisions of this
section will discharge all liability for such benefit under the
provisions of the Plan.
ARTICLE XI AMENDMENT OF PLAN
Amendments may be made to this Plan from time to time by the Company
with the consent of the Participants. Notwithstanding the foregoing,
amendments may be made to this Plan from time to time by the Company
without the consent of the Participant, (i) to add to the duties or
obligations of the Company for the benefit of the Participant; and
(ii) to cure any ambiguity, to correct or supplement any provision in
this Plan that may be inconsistent with any other provision in this
Plan or the Management Retention Agreement, or to make any other
provisions with respect to matters or questions arising under this
Plan that will not be inconsistent with the provisions of this Plan.
No amendment may reduce the Accrued Benefit of any Participant,
eliminate or reduce an early retirement benefit, or change the
actuarial assumptions so as to reduce the amount of an Accrued
Benefit, optional benefit, or early retirement benefit.
ARTICLE XII NONALIENATION OF BENEFITS AND DOMESTIC RELATIONS ORDERS
12.1 Nonalienation of Benefits. No interest, right, or claim in or
to any part of the trust or any benefit payable from the trust will be
assignable, transferable, or subject to sale, assignment,
hypothecation, anticipation, garnishment, attachment, execution, or
levy of any kind and the Trustee will not recognize any attempt to so
transfer, assign, sell, hypothecate, or anticipate the same except to
the extent required by law. This provision will not apply to any
"qualified domestic relations order," as defined in Code Section
414(p), or any domestic relations order entered before 1985.
12.2 Procedure for Domestic Relations Orders. Whenever the Company
is served with a domestic relations order from a court of competent
jurisdiction, the Company will follow the following procedure in
determining whether the order constitutes a "qualified domestic
relations order" that would be exempt from the general spendthrift
protection of this Article:
(a) The Company will notify the Participant and any "alternate
payees" named in the order that the order was served on the Company
and that objections concerning the order must be submitted in writing
within 15 days;
(b) The Company will determine whether the order is a "qualified
domestic relations order" as defined in Code Section 414(p) and notify
the Participant and each alternate payee of its determination. If the
Company determines that the order is a qualified domestic relations
order, the Company will direct the Trustee to make payment in
accordance with the order except that payment will not be made until
the Participant has attained the age and service requirements for
early retirement benefits under Section 5.1;
(c) During the period in which the Company is determining the status
of the order, payment of any benefits in dispute will be deferred and
the amount of the disputed payments will be segregated in a separate
account in the Plan. If the order is determined to be a qualified
domestic relations order within 18 months after segregation of the
benefits in dispute, the Company will direct the Trustee to pay the
segregated amount, plus earnings, to the persons entitled to receive
them in accordance with the order;
(d) If the Company determines that the order is not a qualified
domestic relations order, or if the 18 month period described in (c)
has expired and the qualification issue has not been resolved, the
Company will direct the Trustee to pay the segregated funds to the
person or persons who would have received them if the order had not
been served on the Company. If the Company determines that the order
is a qualified domestic relations order after expiration of the 18
month period, the order will be applied prospectively only;
(e) If the order is determined not to be a qualified domestic
relations order, any amounts segregated pursuant to this procedure
will be restored to the account of the Participant or distributed to
the Participant if eligible for distribution; and
(f) The Company will notify the Participant and all other alternate
payees named in the order of its decision concerning the qualified
status of the order. Payments pursuant to the order will be made as
soon as practicable after the status of the order has been determined
or as soon as the amounts become payable pursuant to this Plan.
ARTICLE XIII MISCELLANEOUS
13.1 Status of Participants. No Participant will have any right or
claim to any benefits under the Plan except in accordance with the
provisions of the Plan. The adoption of the Plan will not be
construed as creating any contract of employment between the Company
and any Participant or to otherwise confer upon any Participant or
other person any legal right to continuation of employment, nor as
limiting or qualifying the right of the Company to discharge any
Participant without regard to any effect the discharge might have upon
his rights under the Plan.
13.2 No Interest in Company Affairs. Nothing contained in this Plan
will be construed as giving any Participant, employee, or beneficiary
an equity or other interest in the assets, business, or affairs of the
Company or the right to examine any of the books and records of the
Company.
13.3 Governing Law. This Plan will be interpreted, construed, and
enforced in accordance with the laws of the State of Michigan, except
where the state law is preempted by ERISA or the Code.
13.4 Severability of Provisions. If any provisions of the Plan will
at any time be declared void and unenforceable, the other provisions
will be severable and will not be affected thereby.
IN WITNESS WHEREOF, the Company has adopted this Plan as of the 15th
day of July, 1997.
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION
By /s/ Neil L. Diver
- --------------------
Neil L. Diver, Chairman of the Board
ATTEST:
By: /s/ Marlan R. Smith
- ------------------------
Marlan R. Smith
Secretary
ATTACHMENT A
AMERIWOOD CONTINGENT SUPPLEMENTAL RETIRED EXECUTIVE TRUST
This Trust Agreement is made by and between Ameriwood Industries
International Corporation (the "Company") and ---------- (the
"Trustee"). This Agreement is made with reference to the following:
A. The Company has adopted the Ameriwood Contingent Supplemental
Executive Retirement Plan (the "Plan") as a nonqualified deferred
compensation plan;
B. The Company wishes to establish a trust as a means for paying
benefits under the Plan, but wishes to have the trust assets remain
subject to the claims of the creditors of the Company so that the Plan
will qualify as an "unfunded" arrangement that will be exempt from
most of the requirements of the Employee Retirement Security Act of
1974 ("ERISA").
NOW, THEREFORE, the parties hereby establish the Ameriwood Contingent
Supplemental Executive Retirement Trust which will be held and
administered as follows:
ARTICLE I ESTABLISHMENT OF TRUST
1.1 Company hereby deposits with Trustee $100 which will become the
principal of the Trust to be held, administered and disposed of by
Trustee as provided in this Trust Agreement.
1.2 The Trust hereby established will be irrevocable.
1.3 The Trust is intended to be a grantor trust, of which Company is
the grantor, within the meaning of subpart E, part I, subchapter J,
chapter 1, subtitle A of the Internal Revenue Code of 1986, as
amended, and will be construed accordingly.
1.4 The assets of the Trust will be used exclusively for the uses and
purposes of Plan participants and general creditors as herein set
forth. Plan participants and their beneficiaries will have no
preferred claim on, or any beneficial ownership interest in, any
assets of the Trust. Any rights created under the Plan and this Trust
Agreement will be mere unsecured contractual rights of Plan
participants and their beneficiaries against Company. Any assets held
by the Trust will be subject to the claims of Company's general
creditors under federal and state law in the event of Insolvency, as
defined in Section 3(a).
1.5 Company may make additional deposits of cash or other property in
trust with Trustee to augment the principal to be held, administered
and disposed of by Trustee as provided in this Trust Agreement.
ARTICLE II PAYMENTS TO PLAN PARTICIPANTS AND THEIR BENEFICIARIES
2.1 Company will deliver to Trustee from time to time written
instructions concerning payment of benefits from the Trust to or in
respect of Plan participants. Except as otherwise provided herein,
Trustee will make payments to the Plan participants and their
beneficiaries in accordance with such instructions. The Trustee will
make provision for the reporting and withholding of any federal, state
or local taxes that may be required to be withheld with respect to
payments to plan participants and beneficiaries, and will pay amounts
withheld to the appropriate taxing authorities or determine that such
amounts have been reported, withheld and paid by Company.
2.2 The entitlement of a Plan participant or beneficiary to benefits
under the Plan will be determined by Company and any claim for
benefits will be considered and reviewed under the procedures set out
in the Plan.
2.3 Company may make payment of benefits directly to Plan
participants or beneficiaries as they become due under the terms of
the Plan. Company will notify Trustee of its decision to make payment
of benefits directly prior to the time amounts are payable to
participants or their beneficiaries. In addition, if the assets of
the Trust are not sufficient to make payments of benefits, Trustee
will notify Company and Company will make the balance of each such
payment as it falls due.
ARTICLE III TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO TRUST
BENEFICIARY
WHEN COMPANY IS INSOLVENT
3.1 Trustee will cease payment of benefits to Plan participants and
their beneficiaries if the Company is Insolvent. Company will be
considered "Insolvent" for purposes of this Trust Agreement if Company
is unable to pay its debts as they become due, or Company is subject
to a pending proceeding as a debtor under the United States Bankruptcy
Code.
3.2 The assets of the Trust will be subject to claims of general
creditors of Company under federal and state law as set forth below.
(a) The Chief Executive Officer of Company will inform Trustee in
writing of Company's Insolvency. If a person claiming to be a
creditor of Company alleges in writing to Trustee that Company has
become Insolvent, Trustee will determine whether Company is Insolvent
and discontinue payment of benefits to Plan participants or their
beneficiaries.
(b) Unless Trustee has actual knowledge of Company's Insolvency, or
has received notice from Company or a person claiming to be a creditor
alleging that Company is Insolvent, Trustee will have no duty to
inquire whether Company is Insolvent. Trustee may in all events rely
on such evidence concerning Company's solvency as may be furnished to
Trustee and that provides Trustee with a reasonable basis for making a
determination concerning Company's solvency.
(c) If at any time Trustee has determined that Company is Insolvent,
Trustee will discontinue payments to Plan participants or their
beneficiaries and will hold the assets of the Trust for the benefit of
Company's general creditors.
(d) Trustee will resume the payment of benefits to Plan participants
or their beneficiaries in accordance with Article II of this Trust
Agreement only after Trustee has determined that Company is not or is
no longer Insolvent.
3.3 If the Trustee discontinues the payment of benefits and
subsequently resumes payments, the next payment will include the
amount of all payments due to Plan participants and beneficiaries for
the period of discontinuance of payments minus the payments made by
the Company during the period of discontinuance of payments from the
Trust.
ARTICLE IV PAYMENTS TO COMPANY
Except as provided in Article III hereof, Company will have no right
or power to direct Trustee to return to Company or to divert to others
any of the Trust assets until all payment of benefits have been made
to Plan participants and their beneficiaries pursuant to the term of
the Plan.
ARTICLE V POWERS AND DUTIES OF TRUSTEE
5.1 General Powers. The Trustee will have exclusive authority and
discretion to manage and control the assets of the Trust except that:
(a) It will disburse benefit payments in accordance with written
directions from the Company; and
(b) The Company may direct, by written notice to the Trustee, the
segregation of any portion of the Trust into a separate investment
account or accounts, and appoint an investment manager to direct the
investment and reinvestment of any such investment account. Any such
investment manager will either be:
(1) Registered as an investment adviser under the Investment Advisers
Act of 1940;
(2) A bank, as defined in that Act; or
(3) An insurance company qualified to perform investment management
services under the laws of more than one state.
If investment of the Trust is to be directed in whole or in part by an
investment manager, the Company will deliver to the Trustee a copy of
the instruments appointing the investment manager and evidencing the
investment manager's acceptance of such appointment, an acknowledgment
by the investment manager that it is a fiduciary of the Plan, and
evidence of the investment manager's current registration under the
1940 Act. The Trustee will be fully protected in relying upon such
instruments until otherwise notified in writing by the Company.
5.2 Relationship with Investment Manager. If an investment manager
is appointed in accordance with the provisions of Section 5.1:
(a) The Trustee will follow the directions of the investment manager
regarding the investment and reinvestment of the investment account.
The Trustee will be under no duty or obligation to review any
investment to be acquired, held, or disposed of pursuant to such
directions, nor to make any recommendations with respect to the
disposition or continued retention of any such investment. The
Trustee will have no liability or responsibility for acting or not
acting pursuant to the direction of, or failing to act in the absence
of, any direction from the investment manager, unless the Trustee
knows that by such action or omission it would be itself committing or
participating in a breach of fiduciary duty by the investment manager.
(b) The investment manager may issue orders for the purchase or sale
of securities directly to a broker. In order to facilitate such
transactions, the Trustee, upon request, will execute and deliver
appropriate trading authorizations. Written notification of the
issuance of each such order will be given promptly to the Trustee by
the investment manager; the execution of each such order will be
confirmed by written advice to the Trustee by the broker. Such
notification will be authority for the Trustee to pay for securities
purchased against receipt and to deliver securities sold against
payment.
(c) If an investment manager resigns or is removed by the Company,
the Trustee, upon receiving written notice from the Company that it is
to resume the responsibility of management, will manage the investment
of the investment account unless and until it will be notified in
accordance with the provisions of Section 5.1 of the appointment of
another investment manager.
(d) The accounts, books, and records of the Trustee will reflect the
segregation of any portion or portions of the Trust in a separate
investment account or accounts.
5.3 Payments by Trustee. The Trustee will pay benefits from the
Trust to or for the account of participants or beneficiaries in the
amount and manner, and at such time and addresses, as directed in
writing by the Company. The Trustee will make such other payments as
directed in writing by the Company.
5.4 Accounts and Records. The Trustee will keep accurate and
detailed records of the Trust on a cash basis. The fiscal year of the
Trust will be the year adopted by the Company for federal income tax
purposes unless another year is agreed upon between the Company and
the Trustee. Each year, the Trustee will furnish the Company with an
annual report showing all receipts and disbursements and other
transactions, together with a list of the assets held at the end of
such year showing the costs and the fair market value of each item.
The Company may approve such accounting by written notice delivered to
the Trustee or by failure to object to such accounting in writing
delivered to the Trustee within 180 days. The Company will have the
right to examine the books and records of the Trust at any time. The
Trustee will have the right to have its accounts settled by judicial
proceeding if it so elects.
5.5 Valuation of Assets. The Trustee will not amortize premiums paid
for bonds or other obligations purchased at a price above their par
value nor accumulate discounts by reason of the purchase of such
securities at prices below their par value. The Trustee may, in
determining the market value of the Trust, use any recognized method
reasonably calculated to reflect the current value of the Trust
assets.
5.6 Reporting. The Trustee will, within the time prescribed by law,
file with the Internal Revenue Service and with other appropriate
regulatory agencies any reports or statements which by law are
required to be filed by it. The Trustee will have no responsibility
for the preparation or filing of any reports, returns, or documents
required by law to be filed by the Company other than those explicitly
agreed upon in writing by the Trustee and the Company.
5.7 Miscellaneous. The Trustee will not be responsible for enforcing
payment of or collecting any contribution to be made by the Company or
any participants, or enforcing payment of or collecting any funds held
by the Company on behalf of participants for the purpose of making
contribution to the Plan.
ARTICLE VI INVESTMENT OF THE TRUST
6.1 General Investment Powers. The Trustee will invest and reinvest
the principal and income of the Trust, without distinction between
principal and income, in the interest-bearing deposits of the Trustee,
real estate, interests in real estate, leaseholds, insurance and
annuity contracts, common stocks, bonds, notes, mortgages, contracts,
debentures, mutual funds, tangible personal property, leases, and such
other personal or real property as the Trustee deems advisable and
believes would be purchased by persons of prudence, discretion, and
intelligence in such matters who are seeking preservation of capital
and reasonable income, whether or not such investment or reinvestment
would otherwise be permissible for the investment of trust funds under
any present or future laws; provided, however, that in the event an
investment manager is appointed, the Trustee will invest and reinvest
the segregated portion of the Trust that is in a separate investment
account or accounts pursuant to the written directions of the
investment manager.
6.2 Specific Investment Powers. The Trustee is authorized and
empowered as follows:
(a) To sell, exchange, convey, assign, transfer, or otherwise dispose
of, and also to grant options with respect to, any property, whether
real or personal, at any time held by the Trustee, in such manner and
for such consideration and upon such terms and conditions as the
Trustee may deem advisable;
(b) To retain, manage, operate, repair, and improve, and to mortgage
or lease for any period, any real estate or tangible personal property
held by the Trustee;
(c) To compromise, compound, arbitrate, or settle any claim, debt, or
obligation due to it or from it as Trustee and to reduce the rate of
interest on, extend or otherwise modify, or foreclose upon, default,
or otherwise enforce any such obligation;
(d) To vote in person or by proxy any stocks, bonds, or other
securities held by it; to exercise any options available to any
stocks, bonds, or other securities; to exercise any rights to
subscribe for additional stocks, bonds, or other securities, and to
make necessary payments for such rights; and to join in or oppose any
reorganization, recapitalization, consolidation, sale, or merger;
(e) To make, execute, acknowledge, and deliver deeds, leases, assign
ments, documents of transfer, and other instruments that may be
necessary to carry out the powers granted by this Agreement;
(f) To enforce any right, obligation, or claim in its absolute
discretion and, in general, to protect in any way the interest of the
Trust, either before or after default, and in its absolute discretion
to abstain from the enforcement of any right, obligation, or claim and
to abandon any property, whether real or personal, which at any time
may be held by it;
(g) To cause any investments in the Trust to be registered in or
transferred into its name or the name of its nominee or nominees or to
retain them unregistered or in form permitting transfer by delivery,
but the books and records of the Trustee will at all times show that
all such investments are part of the Trust;
(h) To employ accountants, auditors, actuaries, and attorneys,
including accountants, auditors, actuaries, and attorneys of the
Company, as well as other advisors and agents, and to delegate to them
such ministerial and limited discretionary duties as it sees fit, and
to pay their reasonable expenses and compensation from the Trust;
(i) To employ agents and investment advisors which may be
subsidiaries or affiliates of the Trustee, to employ legal counsel
whenever necessary to protect the interest of the trust or the
participants, and to pay the reasonable fees and expenses of the
agents activities, actuaries, plan administrators, advisors and
counsel. The agents or counsel may be counsel for the Company as well
as the Trustee;
(j) To apply for, purchase, hold, or transfer, in accordance with
written instructions from the Company, annuity contracts by which the
Company may choose to provide benefits; and
(k) to do all other acts and to exercise any other powers which it
may deem necessary and proper to carry out its duties as Trustee under
this Trust Agreement.
ARTICLE VII RESPONSIBILITY OF TRUSTEE
7.1 Trustee will act with the care, skill, prudence and diligence
under the circumstances then prevailing that a prudent person acting
in like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims,
provided, however, that Trustee will incur no liability to any person
for any action taken pursuant to a direction, request or approval
given by Company which is contemplated by, and in conformity, the
terms of the Plans or this Trust and is given in writing by Company.
In the event of a dispute between Company and a party, Trustee may
apply to a court of competent jurisdiction to resolve the dispute.
7.2 If Trustee undertakes or defends any litigation arising in
connection with this Trust, Company agrees to indemnity Trustee
against Trustee's costs, expenses and liabilities (including without
limitation, attorneys' fees and expenses) relating thereto and to be
primarily liable for such payments. If Company does not pay such
costs, expenses and liabilities in a reasonably timely manner, Trustee
may obtain payment from the Trust.
7.3 Trustee may consult with legal counsel (who may also be counsel
for Company generally) with respect to any of its duties or
obligations hereunder.
7.4 Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals to assist it in
performing any of its duties or obligations hereunder.
7.5 Trustee will have all powers conferred on Trustees by applicable
law, unless expressly provided otherwise herein, provided, however,
that if an insurance policy is held as an asset of the Trust, Trustee
will have no power to name a beneficiary of the policy other than the
Trust, to assign the policy (as distinct from conversion of the policy
to a different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
ARTICLE VIII COMPENSATION AND EXPENSES OF TRUSTEE
Company will pay all administrative and Trustee's fees and expenses.
If not so paid, the fees and expenses will be paid from the Trust.
ARTICLE IX RESIGNATION AND REMOVAL OF TRUSTEE
9.1 Trustee may resign at any time by written notice to Company,
which will be effective 60 days after receipt of such notice unless
Company and Trustee agree otherwise.
9.2 Trustee may be removed from Company on 60 days notice or upon
shorter notice accepted by Trustee
9.3 Upon resignation or removal of Trustee and appointment of a
successor Trustee, all assets will subsequently be transferred to the
successor Trustee. The transfer will be completed within 60 days
after receipt of notice of resignation, removal or transfer, unless
Company extends the time limit.
9.4 If Trustee resigns or is removed, the Company will appoint a
successor trustee by the effective date of the resignation or removal.
If no such appointment has been made, Trustee may apply to a court of
competent jurisdiction for appointment of a successor or for
instructions. All expenses of Trustee in connection with the
proceeding will be allowed as administrative expenses of the Trust.
ARTICLE X AMENDMENT OR TERMINATION
10.1 This Trust Agreement may be amended by a written instrument
executed by Trustee and Company. Notwithstanding the foregoing, no
such amendment will conflict with the terms of the Plan or make the
Trust revocable.
10.2 The Trust will not terminate until the date on which Plan
participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms of the Plan. Upon termination of the
Trust any assets remaining in the Trust will be returned to Company.
ARTICLE XI MISCELLANEOUS
11.1 Any provision of this Trust Agreement prohibited by law will be
ineffective to the extent of any such prohibition, without
invalidating the remaining provisions.
11.2 Benefits payable to Plan participants and their beneficiaries
under this Trust Agreement may not be anticipated, assigned,
alienated, pledged, encumbered or subjected to attachment,
garnishment, levy, execution or other legal or equitable process.
11.3 This Trust Agreement will be governed by and construed in
accordance with the laws of Michigan except to the extent that state
laws are preempted by the federal statute known as the Employee
Retirement Income Security Act of 1974.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed this --- day of ------.
AMERIWOOD INDUSTRIES INTERNATIONAL CORPORATION
By:
- ------------------------
Charles A. Foley
Its President
TRUSTEE:
By:
- -------------------------
Its ---------------------
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
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<CURRENT-ASSETS> 35,957,800
<PP&E> 49,276,600
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0
0
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