Companys covered employees. Covered employees include (1) an employee who is the Principal Executive Officer or the Principal Financial Officer at any time during the year,
(2) the other three most highly compensated officers, other than the Principal Executive Officer or the Principal Financial Officer, and (3) any individual who was a covered employee at any time after December 31, 2016.
Prior to 2018, Section 162(m) exempted qualifying performance based compensation from the $1 million limitation, if certain
requirements were met. The Tax Cuts and Jobs Act (TCJA) eliminated the exemption for performance based compensation other than with respect to payments made pursuant to certain grandfathered arrangements entered prior to
November 2, 2017. While the Companys incentive plans were previously structured to try and qualify as performance based compensation, that exemption will no longer be available for future tax years (other than with respect to certain
grandfathered arrangements as noted above). The Committee expects in the future to authorize compensation in excess of $1,000,000 to named executive officers that will not be deductible under Section 162(m) when it believes
doing so is in the best interests of the Company and its shareholders.
We adopted ASC 718 (ASC 718) effective
December 1, 2005. In determining equity compensation awards for Fiscal 2019, we generally considered the potential expense of our compensation awards under ASC 718 and the impact on earnings per share. We concluded that the award levels
are in the best interests of our shareholders given competitive compensation practices among our peer companies, the awards potential expense, our performance and the impact of the awards on executive motivation and retention.
Employment Agreements
Each NEO, with
the exception of John J. Shalam, the Chairman of the Board, and Edward D. Mas, President of Voxx Automotive Corp., has an employment agreement with either the Company, or certain of its wholly owned subsidiaries, which provide for severance pay and
other benefits upon a termination of employment. Each NEOs employment agreement requires the payment of compensation to the executives if their employment terminates under certain circumstances.
Patrick M. Lavelle
On June 11,
2007, the Companys Board of Directors authorized and approved a three-year employment contract effective March 1, 2007 with Mr. Patrick M. Lavelle (the Employment Agreement). A copy of the Employment Agreement was filed
as Exhibit 10 to the Companys Report on
Form 8-K
filed on June 15, 2007 with the Securities and Exchange Commission.
The Employment Agreement will be automatically renewed for successive one year periods unless either party notifies the other of his or its
intention not to renew the Employment Agreement not less than one hundred eighty (180) days prior to the expiration of the initial or any renewal term, as the case may be. On March 1, 2018, the contract automatically renewed for another
one year.
During the term of the Employment Agreement, the Company will pay Mr. Lavelle an annual base salary of Seven Hundred Fifty
Thousand Dollars ($750,000) per annum. Pursuant to the Employment Agreement, Mr. Lavelle, effective as of the first fiscal year the Company achieves any
year-end
pre-tax
profit, and for each fiscal year thereafter during the employment period, shall have credited to the Lavelle Account Two Hundred Fifty Thousand Dollars ($250,000) for Mr. Lavelles benefit,
which sum shall be in addition to any other amounts that the Company may be required to pay for Mr. Lavelles benefit under any deferred compensation plan established for the benefit of Mr. Lavelle and/or any other key executives of
the Company.
In addition, the Company will pay Mr. Lavelle an annual bonus of Two Hundred Fifty Thousand Dollars ($250,000) for each
and every Five Million Dollars ($5,000,000) of
pre-tax
profit earned by the Company during the fiscal year (including certain adjustments). In addition, the Employment Agreement provides for an annual
discretionary merit based bonus, at the sole discretion of the Board, based on the Companys performance.
If Mr. Lavelles
employment is terminated by the Company without cause or by Mr. Lavelle for good reason, which is defined to include, among other things, a Change of Control (as defined in the Employment Agreement), the Employment Agreement with
Mr. Lavelle provides for post-employment benefits including payment of base salary through termination, any bonuses awarded and not yet paid, a cash payment equal to the average of the Annual Incentive Bonuses (as defined in the Employment
Agreement) awarded in the two years immediately preceding termination, vested benefits, and two years base salary, all as set forth in the Employment Agreement.
Mr. Lavelle is subject to
non-compete
restrictions during his employment and for 24 months
following termination, and
non-solicitation
during his employment and for 12 months following termination.
The above is a summary of the terms of the Employment Agreement and is qualified in its entirety by reference to the Employment Agreement.
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