Exhibit 10.38
EXECUTIVE
AGREEMENT
This Executive Agreement
(“Agreement”) between Huttig Building Products, Inc., a
Delaware corporation, with its principal office located at 555
Maryville University Drive, Suite 240, St. Louis, Missouri
63141, (the “Company”) and Jon Vrabely
(“Executive”) is effective as of the 4th day of
December, 2006.
In consideration of the premises and
the representations, warranties, covenants and agreements contained
herein, the Company and Executive agree as follows:
1. Employment .
Provided that he remains employed with the Company as of such date,
effective January 1, 2007, the Company shall employ Executive
as its President and Chief Executive Officer (“CEO”),
and, Executive agrees to be employed by the Company in such
capacity, subject to the terms and conditions of this Agreement. In
Executive’s capacity as President and CEO, he shall render
such services as are consistent with such position and shall report
directly to the Company’s Board of Directors (the
“Board”). During the Term (defined below), Executive
shall devote all of his working time and efforts to the business
and affairs of the Company and its subsidiaries and shall not
engage in activities that interfere in any way with such
performance.
2. Term of Employment
. If not earlier terminated in accordance with the terms of this
Agreement, this Agreement and Executive’s employment shall
begin on January 1, 2007 (“Commencement Date”) and
shall continue through December 31, 2008 (the
“Term”); notwithstanding the foregoing, the Term shall
be extended and this Agreement shall remain in effect during the
Protected Period (as defined in Paragraph 4(c)(i)
below).
3. Compensation and
Benefits .
(a) Base Compensation
.
(i) In general, for all services
rendered by Executive under this Agreement on behalf of the
Company, the Company shall pay to Executive a base salary of Four
Hundred Thousand and No/100 Dollars ($400,000.00) per year, as such
salary may be increased from time to time by the Board, payable in
accordance with the Company’s normal payroll
practices.
(ii) In no way limiting the
foregoing, at all times during the Protected Period,
Executive’s annual base salary shall be at least equal to
twelve times the highest monthly base salary paid or payable to
Executive by the Company during the twelve-month period immediately
preceding the month in which the Protected Period Effective Date
occurs.
(iii) In this Agreement, “Base
Salary” shall be as determined in accordance with Paragraph
3(a)(i) or 3(a)(ii), as applicable.
(b) Restricted
Stock . On the Commencement Date, Executive shall be granted
75,000 shares of restricted stock of the Company, granted under and
subject to the terms of the 2005 Executive Incentive Compensation
Plan. The restricted stock shall be also granted pursuant to a
restricted stock agreement which shall provide, among other things,
that the Company’s right of forfeiture shall lapse 1/3
rd
on each
of the first, second and third anniversaries of the Commencement
Date, subject to the terms of this Agreement and the restricted
stock agreement.
(c) EVA Plan . Executive
shall be entitled to continue to participate, as of the
Commencement Date, in the Company’s EVA Incentive
Compensation Plan (“EVA Plan”) and to be eligible to
earn up to 30% of the EVA bonus pool each year during the Term,
subject to and in accordance with its terms, as it may be amended
from time to time. Such bonus referred to herein as the
“Annual Bonus.”
(d) Vacation and Other Benefit
Plans and Arrangements . Executive shall be entitled to
participate in such other vacation and benefit plans and
arrangements as may be offered by the Company to similarly situated
executive officers of the Company; provided that, nothing contained
herein shall or shall be deemed to require the Company to develop
or continue to maintain any particular plan or
arrangement.
(e) Automobile . During the
Term, the Company shall lease on Executive’s behalf an
automobile, in accordance with the Company’s standard
practices and procedures.
4. Termination
.
(a) Termination, In General .
This Agreement may terminate prior to the end of the Term specified
in Paragraph 2 above for any reason, including upon
Executive’s death or Disability (as defined in Paragraph
4(d)(v)). The provisions of this Paragraph 4(a) shall apply prior
to the Protected Period Effective Date (defined below), and
payments and benefits provided under this Paragraph 4(a) shall be
in lieu of any payment or benefit provided under Paragraph 4(d). In
the event of a termination for any reason, the Company shall pay to
Executive (or his estate, in the event of his death) upon the last
date of employment (the “Termination Date”) all amounts
of accrued and owing compensation, including Base Salary through
the Termination Date, accrued but unpaid or unused vacation as may
be required under applicable law, and any other amounts of
compensation or timely submitted reimbursements accrued and owing
as of the Termination Date (the “Accrued
Obligations”).
(i) Termination by the Company
Without Cause . If the Company terminates Executive’s
employment without Cause, or fails to renew Executive’s
employment at the end of the Term for reasons that do not
constitute Cause, in exchange for a release of all claims Executive
may have against the Company, its affiliates, and its or their
officers, directors, employees and agents, Executive shall receive
an amount equal to two times his then current Base Salary plus two
times the Average Annual Bonus (“Severance Payment”).
The “Average Annual Bonus” shall be the average bonus
paid or payable to Executive by the Company and its affiliated
companies in respect of the three fiscal years immediately
preceding the fiscal year in which the termination
occurs.
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(ii) The Severance Payment shall be
paid to Executive in 24 equal monthly installments, beginning
with the first month following the month in which employment
terminates. Payments made pursuant to this Paragraph 4(a) shall be
in lieu of, and non-duplicative of, payments under any other
agreement between Executive and the Company. The right to payments
contemplated in this Paragraph 4(a) shall cease if Executive
breaches any material provision of any agreement between Executive
and the Company, including without limitation Paragraph 5 or any
other material term of this Agreement. This paragraph shall survive
termination of this Agreement.
(iii) Definition of Cause .
For purposes of this Agreement, Cause shall constitute either
(i) personal dishonesty or breach of fiduciary duty involving
personal profit at the expense of the Company; (ii) repeated
failure of Executive to perform his duties hereunder which are
demonstrably willful and deliberate on his part and which are not
remedied in a reasonable period of time after receipt of written
notice from the Company; (iii) the commission of a criminal
act related to the performance of duties, or the furnishing of
proprietary confidential information about the Company to a
competitor, or potential competitor, or third party whose interests
are adverse to those of the Company; (iv) intoxication by
alcohol or drugs during work hours; (v) conviction of a
felony; or (vi) any breach of any material Company policy or
any material term of this Agreement or any other agreement by and
between Executive and the Company.
(b) Termination During the
Protected Period . The provisions of this Paragraph 4(b) shall
apply on and after the Protected Period Effective Date (defined
below) and shall remain in effect during the Protected Period, and
payments and benefits provided under this Paragraph 4(b) shall be
in lieu of any payment or benefit provided under Paragraph 4(a). If
Executive’s employment terminates after the Protected Period
Effective Date, the following shall apply:
(i) Cause; Other Than for Good
Reason . If Executive’s employment shall be terminated
for Cause during the Protected Period, this Agreement shall
terminate without further obligations to Executive other than the
obligation to pay to Executive his Base Salary through the Date of
Termination plus the amount of any compensation previously deferred
by Executive (together with accrued interest thereon, if any). If
Executive terminates employment other than for Good Reason during
the Protected Period, this Agreement shall terminate without
further obligations to Executive, other than those obligations
accrued or earned and vested (if applicable) by Executive through
the Date of Termination, including for this purpose, all Accrued
Obligations. All such payments hereunder shall be paid to Executive
in a lump sum in cash within 30 days of the Date of
Termination.
(ii) Death or Disability . If
Executive’s employment is terminated by reason of
Executive’s death or Disability during the Protected Period,
Executive or his beneficiary or estate (as the case may be) shall
be paid
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(A) Executive’s full annual
Base Salary through the Date of Termination at the rate in effect
on the Date of Termination or, if higher, at the highest annual
rate in effect at any time from the 90-day period preceding the
Protected Period Effective Date through the Date of Termination
(the “Highest Base Salary”), (B) the product of
the Annual Bonus paid to Executive for the last full fiscal year
and a fraction, the numerator of which is the number of days in the
then current fiscal year through the Date of Termination, and the
denominator of which is 365 and (C) any compensation
previously deferred by Executive (together with accrued interest
thereon, if any) and not yet paid by the Company and any accrued
vacation pay not yet paid by the Company (such amounts specified in
clauses (A), (B) and (C) are hereinafter referred to as
“Protected Period Accrued Obligations”).
(1) All such Protected Period
Accrued Obligations shall be paid to Executive or his estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination.
(2) Anything in this Agreement to
the contrary notwithstanding, Executive or his estate or
beneficiary, as applicable, shall be entitled to receive death or
disability benefits at least equal to the most favorable benefits
provided by the Company and any of its subsidiaries to surviving
families of employees (in the case of death) of the Company and
such subsidiaries, or, in the case of Disability, to disabled
employees and/or their families, under such plans, programs,
practices and policies relating to disability or family death
benefits, if any, in accordance with the most favorable plans,
programs, practices and policies of the Company and its
subsidiaries in effect at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to
Executive and/or Executive’s family, as in effect on the date
of Executive’s death or Disability with respect to other key
employees of the Company and its subsidiaries and their
families.
(iii) Without Cause or for Good
Reason . If Executive terminates his employment for Good Reason
or his employment is terminated by the Company without Cause during
the Protected Period, Executive shall receive:
(1) To the extent not theretofore
paid, Executive’s Highest Base Salary through the Date of
Termination; and
(2) The product of (x) the
greater of the Annual Bonus paid or payable (annualized for any
fiscal year consisting of less than twelve full months or for which
Executive has been employed for less than twelve full months) to
Executive for the most recently completed fiscal year during the
Employment Period, if any, or the Average Annual Bonus, such
greater amount being hereafter referred to as the “Highest
Annual Bonus,” and (y) a fraction, the numerator of
which is the number of days in the current fiscal year through the
Date of Termination, and the denominator of which is
365;
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(3) The product of (x) two and
(y) the sum of (i) the Highest Base Salary and
(ii) the Average Annual Bonus; and
(4) In the case of compensation
previously deferred by Executive, all amounts previously deferred
(together with accrued interest thereon, if any) and not yet paid
by the Company, and any accrued vacation pay not yet paid by the
Company; and
(5) For two years after the Date of
Termination, or such longer period as any plan, program, practice
or policy may provide, the Company shall continue benefits to
Executive and/or Executive’s family at least equal to those
which would have been provided to them as if Executive’s
employment had not been terminated, in accordance with the most
favorable employee welfare benefit plans (as such term is defined
in Section 3(1) of the Employee Retirement Income Security Act
of 1974, as amended) of the Company and its subsidiaries (including
health insurance and life insurance) during the 90-day period
immediately preceding the Effective Date or, if more favorable to
Executive, as in effect at any time thereafter with respect to
other key employees and their families, and for purposes of
eligibility for retiree benefits pursuant to such employee welfare
benefit plans, Executive shall be considered to have remained
employed for such two-year period and to have retired on the last
day of such period.
(6) All such payments under this
Paragraph 4(b)(iii) shall be paid to Executive in a lump sum in
cash within 30 days of the Date of Termination.
(c) Notwithstanding any other
provision to the contrary, with respect to the timing of payments
under Paragraph 4(a) or 4(b), if, at the time of Executive’s
termination, Executive is deemed to be a “specified
employee” (within the meaning of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”),
and any successor statute, regulation and guidance thereto) of the
Company, then only to the extent necessary to comply with the
requirements of Code Section 409A, any payments to
which Executive may become entitled under Paragraph 4(b)
which are subject to Code Section 409A (and not otherwise
exempt from its application) will be withheld until the first
business day of the seventh month following the termination of
Executive’s employment, at which time Executive shall be
paid an aggregate amount of payments otherwise due to the
Executive under the terms of Paragraph 4(a) or 4(b) for the
preceding 6-month period, as applicable.
(d) Definitions .
(i) Protected Period, Protected
Period Effective Date . The “Protected Period”
shall begin on the closing date of a transaction constituting
a
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Change of Control (defined below)
(the “Protected Period Effective Date”) and ending upon
the first to occur of the date that is 36 months from the Protected
Period Effective Date and the first day of the month next following
Executive’s normal retirement date (“Normal Retirement
Date”) under the Huttig Building Products, Inc.
Savings & Investment Plan, or any successor retirement
plan (the “Retirement Plan”); provided that, if
Executive’s employment with the Company is terminated prior
to the date on which a Change of Control occurs, and it is
reasonably demonstrated that such termination (A) was at the
request of a third party who has taken steps reasonably calculated
to effect a Change of Control or (B) otherwise arose in
connection with or anticipation of a Change of Control, then for
all purposes of this Agreement, and specifically without
limitation, the “Protected Period Effective Date” shall
mean the date immediately prior to the date of Executive’s
termination.
(ii) Cause . Cause during the
Protected Period shall have the same meaning as set forth in
Paragraph 4(a)(iii) above.
(iii) Good Reason .
“Good Reason” means Executive’s good faith
determination that any of the following has occurred:
(1) Executive’s Base Salary is
(A) less than twelve times the highest monthly base salary
paid or payable to him by the Company during the twelve-month
period immediately preceding the month in which the Protected
Period Effective Date occurs, (B) not reviewed at least
annually or has not been increased at any time and from time to
time in a m
