EXHIBIT 10.16
Xxxxx & Xxxxx Company
Xxx Xxxxxxxxxx Xxxxxx
Xxxxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
November 15, 1995
Xx. Xxxxx X. Xxxxxxxx
0000 Xxxxxxxxxxxx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
Re: LETTER AGREEMENT OF EMPLOYMENT
------------------------------
Dear Xxxxx:
This letter confirms the terms of your employment with Xxxxx & Xxxxx
Company (the "Company").
POSITION. You will be Chief Executive Officer and President of the
Company. You will be elected to serve on the Board of Directors of the
Company, and during the Period of Contract Employment (as defined below)
you will be nominated to serve as a director upon expiration of your term
as a director and will serve as a director at the pleasure of the Company's
stockholders. You will also serve as Chief Executive Officer, and be a
member of the Board of Directors, of such subsidiaries of the Company as
the Board of Directors of the Company determines (the "Designated
Subsidiaries"). You will serve at the pleasure of the Board of Directors
of the Company and will report directly to the Chairman and Board of
Directors of the Company. In such capacities, you will work closely with
other members of the management team to accomplish the goals of the Company
and the Designated Subsidiaries.
DUTIES AND RESPONSIBILITIES. Subject to control of the Board of
Directors of the Company and the Designated Subsidiaries, you will direct
the day-to-day operations of the Company and the Designated Subsidiaries
and you will formulate plans and policies to achieve overall corporate
objectives and targeted profitability, including: (i) creating, approving
and implementing broad corporate policies, procedures and organizational
structure; (ii)
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establishing and monitoring short-term and long-term plans consistent with
overall profit and growth objectives; (iii) providing advice, guidance and
direction to carry out major plans and procedures consistent with policies
established by Board
of Directors of the Company or a Designated Subsidiary; (iv) monitoring and
analyzing operating results to ensure that corporate performance is
satisfactorily maintained; and (v) performing additional assignments as
directed by the Chairman of the Company or the Board of Directors of the
Company or the Designated Subsidiaries.
PERIOD OF CONTRACT EMPLOYMENT. As used herein, the term "Period of
Contract Employment" means the period beginning on the date hereof and
ending on the earlier of December 31, 2000 or at the time of the
Termination of Contract Employment (as defined below under the caption
"Termination"). The Period of Contract Employment may be extended by a
written agreement signed by you and the Company; PROVIDED, that if the
Company offers to extend your employment beyond December 31, 2000, such
offer must include a compensation arrangement that includes an amount of
Base Salary (as defined below under the caption "Annual Base
Salary") equal to or greater than the amount of Base Salary paid or payable
during calendar year 2000 and, with respect to Target Bonus (as defined
below under the caption "Bonus Compensation"), includes an amount equal to
or greater than the Target Bonus applicable in calendar year 2000.
Notwithstanding the foregoing, neither you nor the Company will have any
obligation to extend the Period of Contract Employment. If you remain in
the employ of the Company following the Period of Contract Employment and
any extension thereof in accordance with this paragraph, such employment
will be at will unless different terms of employment are established in
writing.
ANNUAL BASE SALARY. During the Period of Contract Employment the
Company agrees to pay you a base salary (the "Base Salary") in the annual
amount set forth below:
Calendar Base Salary
-------- -----------
Year
----
1995 $350,000 (prorated for portion of year employed
by the Company)
1996 $350,000
1997 $350,000
1998 $380,000
1999 $400,000
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2000 $415,000
The Base Salary will be payable as current salary, in installments
(not less frequent than monthly) subject to all applicable withholding and
deductions, in accordance with the Company's customary payroll practices.
BONUS COMPENSATION. During the Period of Contract Employment, you
will be entitled to receive annual bonus compensation ("Bonus
Compensation") comprised of a target bonus (the "Target Bonus") and a
special bonus (the "Special Bonus"). Bonus Compensation, if earned, will
be payable after December 31 of the calendar year in which the Bonus
Compensation was earned in one lump sum in accordance with the Company's
customary payroll practices, but in no event later than 90 days after the
end of such calendar year.
During the Period of Contract Employment and upon the completion of
each of the calendar years 1996 and 1997, the Company agrees to pay you a
minimum Target Bonus equal to $175,000 with a maximum bonus amount to be
established in the sole discretion of the Compensation Committee of the
Company's Board of Directors (the "Compensation Committee") based on the
achievement of performance factors to be established by the Compensation
Committee after consultation with you. During the Period of Contract
Employment and with respect to calendar year 1998 and calendar years
thereafter, you will be eligible to receive a Target Bonus based upon
achievement of performance factors to be established by the Compensation
Committee after consultation with you. For each performance factor, after
consultation with you the Compensation Committee will establish
quantitative performance standards and an accompanying Target Bonus equal
to fifty percent (50%) of your Base Salary for the applicable year, subject
to increase or decrease in the event such quantitative performance
standards are exceeded or not met, as the case may be.
During the Contract Period of Employment, you will be eligible to
receive a Special Bonus with respect to calendar years 1998, 1999 and 2000.
The Special Bonus will be payable in the event the Company's Net Income for
the twelve months ending December 31 of a given year equals or exceeds a
level as set forth below (the "Earnings Level"). For purposes of
determining whether the Earnings Level is achieved for a given calendar
year, Net Income means after-tax, net income as reported in the Company's
Consolidated Statement of Operations in a manner consistent with the
Company's accounting practices used as of the date hereof but excluding
extraordinary items of income and expense.
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For purposes of this letter agreement, any annual amount of depreciation
and amortization expense in excess of $2,000,000 will be deemed an
extraordinary expense and will not be included in determining Net Income.
You will have the right to request the Company's principal accounting
officer to provide a presentation of the Company's Net Income for a given
calendar year calculated in a manner consistent with the accounting
practices used as of the date hereof.
Calendar Year Earnings Level
------------- --------------
1998 $14,500,000
1999 $17,000,000
2000 $20,000,000
In the event the Company achieves the Earnings Level during a given
calendar year, the Company agrees to pay you a Special Bonus equal to
$333,000 (the "Special Bonus Amount"). In the event the Company achieves
at least eighty-five percent (85%) but less than one hundred percent (100%)
of the Earnings Level in a given calendar year, the Company agrees to pay
you a pro-rata share of the Special Bonus Amount in an amount equal to the
percentage of the Earnings Level achieved by the Company that year. To the
extent that the Company's Net Income for a given calendar year exceeds the
Earnings Level, you will have the right to deduct the aggregate amount of
such excess in such portions as you direct (PROVIDED that the aggregate
amount of such portions does not exceed the aggregate amount of such
excess) from the specified Earnings Level of any preceding and/or any
succeeding calendar year for which you were eligible to earn a Special
Bonus but for which the full Special Bonus Amount was not earned, and the
Company agrees to pay you the Special Bonus for such prior and/or
succeeding calendar year in accordance with the Earnings Level, as
adjusted.
EQUITY INCENTIVE. Concurrent with the execution of this letter
agreement and pursuant to the Company's 1990 Amended and Restated Stock Option
Plan (the "Plan"), the Company has granted you a non-qualified stock option (the
"Option") to purchase 500,000 shares of the Company's common stock, $.01 par
value per share (the "Common Stock"), at an exercise price equal to the closing
price of the Common Stock on The New York Stock Exchange on the date of such
grant. The Option vests in five equal, annual installments commencing on
December 31, 1996, provided you are still employed by the Company on each such
installment date. Notwithstanding the foregoing, the option agreement with
respect to the Option (the "Stock Option Agreement") provides that the Option
becomes fully vested in the
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event the Company achieves the Earnings Level in calendar year 1998 or 1999 or
in the event of a Change of Control Termination (as defined below under the
caption "Change of Control Termination"). Except as otherwise provided herein
or in the Stock Option Agreement and subject to the following paragraph, the
Option may be exercised at any time in accordance with the provisions of the
Plan, if and to the extent vested, until the tenth anniversary of the date of
grant.
The Company will amend the Plan to permit you to exercise the Option
as contemplated by this letter agreement and the grant of the Option is
subject to such amendment. The failure of the Company to amend the Plan
during calendar year 1996 shall entitle you to terminate your employment as
if a Change of Control Termination had occurred.
BENEFITS. During the Period of Contract Employment, you will be
entitled to participate in or receive benefits under any employee benefit
plan or other arrangement including, but not limited to, any medical,
dental, retirement, disability, life insurance, sick leave and vacation
plans or arrangements generally made available by the Company to its
executive officers, subject to and on a basis consistent with the terms,
conditions and overall administration of such plans or arrangements;
PROVIDED, that such plans and arrangements are made available at the
discretion of the Company and nothing in this letter agreement establishes
any right on your part to the availability or continuance of any such plan
or arrangement.
EXPENSES AND OFFICE SPACE. The Company agrees that during the Period
of Contract Employment, you will be reimbursed for reasonable documented
traveling and entertainment expenses directly related to the business of
the Company or any Designated Subsidiary and you will be furnished office
space, assistance and accommodations within the Company's place of business
suitable to the character of your position with the Company and adequate
for the performance of your duties hereunder. The Company also will
reimburse you for membership fees to organizations and societies related to
the Company's business. During the Period of Contract Employment, you
agree that you will maintain and use your private airplane as may be
necessary or required to perform and fulfill your duties and
responsibilities with the Company. To the extent that you pilot yourself
for business air travel, the Company will reimburse you at the standard
coach fare for such air travel.
RELOCATION AND REIMBURSEMENT. You will be resident in
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the Company's offices located in Rosemont, Illinois and you agree to
relocate to the Chicago area within such time period as is
appropriate to effect your orderly transition to your position with the
Company or following the reasonable request of the Board of
Directors of the Company on or after July 1, 1996. You will be entitled
to reimbursement for the reasonable expenses for moving household
goods incurred by you in connection with your relocation from Atlanta,
Georgia to the Chicago area, for the customary commission paid by
you in connection with the sale of your current, primary residence in
Atlanta, and for the customary closing costs paid by you in
connection with the purchase of a residence in the Chicago area. The
Company is not obligated to purchase your Atlanta residence. The
Company will reimburse you for the cost of coach-class plane fare
for a reasonable number of round-trips for you and/or your wife from
Atlanta in connection with searching for a residence in the Chicago
area. During the first 90 days of your temporary residence in the
Chicago area, the Company will reimburse you for reasonable and
customary expenses incurred by you in connection with commuting to or
from the Company's Rosemont offices (including accommodation, meals
and transportation). The Company will not reimburse you for any tax
liability associated with your movement of household goods, the
commission paid by you in connection with the sale of your
residence or the closing costs associated with the purchase of a
residence in the Chicago area. Except as set forth above, you will
bear all expenses, costs and capital losses associated with your
relocation.
TERMINATION. Your employment hereunder will terminate upon the first
to occur of the following circumstances (any such termination and any
termination pursuant to this section is referred to herein as a
"Termination of Contract Employment").
EXPIRATION. Your employment hereunder will terminate on December
31, 2000 unless you and the Company agree to extend the Period of
Contract Employment pursuant to the paragraph above captioned "Period
of Contract Employment." In the event of such termination, you will
be paid:
(i) all earned but unpaid Base Salary (including any of such
amount deferred, which amount of deferred Base Salary will be
paid within five business days after the date of termination
notwithstanding anything herein to the contrary) to and including
the date of termination, payable
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in a lump sum within five business days after the date of
termination;
(ii) all earned but unpaid Bonus Compensation (including any of
such amount deferred, which amount of deferred Bonus Compensation
will be paid within five business days after the date of
termination notwithstanding anything herein to the contrary) to
and including the date of termination, payable when such amount
would have been otherwise payable in accordance with the
Company's customary payroll practices but in no event later than
April 1, 2001; and
(iii) six months' Base Salary (based on the Base Salary paid
during the first six months of the calendar year 2000), payable
over the first six months of 2001 when such amounts would have
been otherwise payable in accordance with the Company's customary
payroll practices, PROVIDED that the Company will not be
obligated to make any payment to you pursuant to this clause
(iii) if, on or prior to June 30, 2000, the Company offers to
extend your employment for at least one year and such offer
includes a compensation arrangement that includes an amount of
Base Salary equal to or greater than the amount of Base Salary
paid or payable during calendar year 2000 and with respect to
Target Bonus, includes an amount equal to or greater than the
Target Bonus applicable in calendar year 2000, and you decline
such offer.
After expiration of your initial term of employment with the
Company pursuant to this subsection, the Option may be exercised in
accordance with the Plan through the term of the Option and thereafter
any unexercised portion of the Option will be forfeited.
DEATH OR DISABILITY. Your employment hereunder will terminate
upon your death or disability. In the event of such termination, you
or your estate will be paid:
(i) all earned but unpaid Base Salary (including any of such
amount deferred) to and including the date of termination,
payable in a lump sum within five business days after the date of
termination;
(ii) all Bonus Compensation earned with respect to
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calendar years ended prior to the date of termination
(including any of such amount deferred, which amount of deferred
Bonus Compensation will be paid within five business days after
the date of termination notwithstanding anything herein to the
contrary) but which is unpaid as of the date of termination,
payable in a lump sum within five business days after the
effective date of the termination, PROVIDED that in the event the
Company has not determined as of the date of termination the
amount of Bonus Compensation payable pursuant to this clause
(ii), the amount paid pursuant to this clause (ii) will be
calculated based upon 80% of Company projections for the calendar
year immediately preceding the effective date of termination, and
PROVIDED FURTHER that in the event the amount of any projected
Bonus Compensation paid pursuant to this clause (ii) is greater
or less than the actual amount of Bonus Compensation as
calculated in accordance with the Company's customary payroll
practices (which calculation will be completed not later than 90
days after the end of the calendar year immediately preceding the
termination) then the Company will give you notice of such
difference within five business days after making such
determination and you or the Company, as the case may be, agree
to pay the other party the amount of such difference within 10
business days after such notice is delivered to you;
(iii) a pro-rata share of the Target Bonus calculated as follows:
(A) if the termination occurs on or before June 30 of a
given year, you will receive the established Target Bonus
for that year pro-rated for the percentage of the year you
were employed by the Company, payable in a lump sum within
five business days after the effective date of termination;
or
(B) if the termination occurs on or after July 1 of a given
year, you will receive:
(I) the established Target Bonus for that year pro-
rated up to June 30 of that year, payable in a lump sum
within five business days after the effective date of
termination; and
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(II) the pro-rata share of the Target Bonus for the
calendar year in which the termination occurred based
on the percentage of the year you were employed by the
Company less the amount in clause (I) above, payable in
a lump sum when such amount would have been otherwise
payable in accordance with the Company's customary
payroll practices; and
(iv) if the termination occurs on or after January 1, 1998 and
after comparing the Company's financial performance through the
end of the month nearest to the date of termination against the
approved Company financial plan for the same period, the Company
has achieved a level of Net Income such that on a pro forma basis
taking into consideration the actual financial performance to the
date of termination the Company would have achieved the specified
Earnings Level for the calendar year in which the termination
occurred, you will receive a pro-rata share of the Special Bonus
for the calendar year in which the termination occurred based on
the percentage of the calendar year you were employed by the
Company, payable in a lump sum by the later to occur of five
business days after the date of termination or two business days
after the Company prepares final financial reports for the end of
the month nearest to the date of termination, which reports will
be prepared no later than 12 business days after the end of such
month; and
(v) any amounts payable to you by reason of the Company's
disability or other benefit plans in effect and applicable to you
at the time of such termination, payable when such amounts would
be otherwise payable in accordance with the terms and provisions
of such plans.
The Option, to the extent vested at the date of termination, may
be exercised in accordance with the Plan within twelve months after
termination of your employment with the Company pursuant to this
subsection and any unexercised portion of the Option will be
forfeited.
For purposes of this subsection, "disability" means your failure,
during the Period of Contract
64
Employment, to render services to the Company for a continuous period
of 120 days because of your physical or mental disability during said
period. If there should be any dispute between the Company and you as
to your physical or mental disability at any time, such question will
be settled by the opinion of an impartial reputable physician agreed
upon for the purpose by the Company and you or our respective
representatives, or failing such agreement within ten days of a
written request therefor by either of us to the other, then one
designated by the then president of the Chicago Medical Society. The
certificate of such physician as to the matter in dispute will be
final and binding on you and the Company.
Nothing in this subsection will be construed to waive your
rights, if any, under existing law including the Family and Medical
Leave Act and the Americans with Disabilities Act and the provisions
of this subsection will be construed so as to assure compliance with
such laws.
COMPANY CONVENIENCE. The Company may terminate your employment
hereunder without cause at any time by giving written notice
("Termination Notice") to you. Such termination will become effective
upon the date specified in the Termination Notice, which date will be
on or after the date such Termination Notice is delivered to you. In
the event of such termination, you will be paid:
(i) all earned but unpaid Base Salary (including any of such
amount deferred) to and including the date of termination,
payable in a lump sum within five business days after the date of
termination;
(ii) the amount of Base Salary you would have otherwise earned
during the twelve months following the termination, payable over
a twelve month period when such amounts would have been otherwise
payable in accordance with the Company's customary payroll
practices;
(iii) all Bonus Compensation earned with respect to calendar
years ended prior to the date of termination (including any of
such amount deferred, which amount of deferred Bonus Compensation
will be paid within five business days after the date of
termination notwithstanding anything herein to the contrary) but
which is
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unpaid as of the date of termination, payable in a lump sum
within five business days after the effective date of the
termination, PROVIDED that in the event the Company has not
determined as of the date of termination the amount of Bonus
Compensation payable pursuant to this clause (iii), the amount
paid pursuant to this clause (iii) will be calculated based upon
80% of Company projections for the calendar year immediately
preceding the effective date of termination, and PROVIDED FURTHER
that in the event the amount of any projected Bonus Compensation
paid pursuant to this clause (iii) is greater or less than the
actual amount of Bonus Compensation as calculated in accordance
with the Company's customary payroll practices (which calculation
will be completed not later than 90 days after the end of the
calendar year immediately preceding the termination) then the
Company will give you notice of such difference within five
business days after making such determination and you or the
Company, as the case may be, agree to pay the other party the
amount of such difference within 10 business days after such
notice is delivered to you;
(iv)
(A) if the effective date of the termination is prior to
January 1, 1998:
(I) the pro-rata share of the Target Bonus for the
calendar year in which the termination occurred based
on the percentage of the calendar year you were
employed by the Company, payable in a lump sum within
five business days after the date of termination; and
(II) an amount equal to fifty percent (50%) of the Base
Salary that you would have otherwise earned during the
calendar year following the year in which the
termination occurred, payable in equal installments
over the twelve months following the effective date of
the termination in accordance with the Company's
customary payroll practices; or
(B) if the effective date of the termination
66
is on or after January 1, 1998:
(I) an amount based on Target Bonus calculated as
follows:
(a) if the termination occurs on or before June 30
of a given year, you will receive the established
Target Bonus for that calendar year pro-rated for
the percentage of the calendar year you were
employed by the Company, payable in a lump sum
within five business days after the effective date
of termination; or
(b) if the termination occurs on or after July 1
of a given year, you will receive:
(1) the established Target Bonus for that
year pro-rated up to June 30 of that year,
payable in a lump sum within five business
days after the effective date of termination;
and
(2) the pro-rata share of the Target Bonus
for the calendar year in which the
termination occurred based on the percentage
of the year you were employed by the Company
less the amount in clause (1) above, payable
in a lump sum when such amount would have
been otherwise payable in accordance with the
Company's customary payroll practices; and
(II) if the termination occurs on or after January 1,
1998 and after comparing the Company's financial
performance through the end of the month nearest to the
date of termination against the approved Company
financial plan for the same period, the Company has
achieved a level of Net Income such that on a pro forma
basis taking into
67
consideration the actual financial performance to the
date of termination the Company would have achieved the
specified Earnings Level for the calendar year in which
the termination occurred, you will receive a pro-rata
share of the Special Bonus for the calendar year in
which the termination occurred based on the percentage
of the calendar year you were employed by the Company,
payable in a lump sum by the later to occur of five
business days after the date of termination or two
business days after the Company prepares final
financial reports for the end of the month nearest to
the date of termination, which reports will be prepared
no later than 12 business days after the end of such
month; and
(III) an amount equal to fifty percent (50%) of the
Base Salary that you would have otherwise earned during
the calendar year following the year in which the
termination occurred, payable in equal installments
over the twelve months following the effective date of
the termination in accordance with the Company's
customary payroll practices.
The Option, to the extent vested at the date of termination, may
be exercised in accordance with the Plan within 24 months after the
effective date of termination of your employment with the Company
pursuant to this subsection and any unexercised portion of the Option
will be forfeited.
EXECUTIVE CONVENIENCE. You may terminate your employment
hereunder without cause at any time by giving a Termination Notice to
the Company. Such termination will become effective upon the date
specified in the Termination Notice, provided that such date is at
least sixty days after the date of the Termination Notice. In the
event of such termination, you will be paid:
(i) all earned but unpaid Base Salary (including any of such
amount deferred) to date of termination, payable in a lump sum
within five business days after the effective date of the
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termination; and
(ii) all Bonus Compensation earned with respect to calendar years
ended prior to the date of termination (including any of such
amount deferred, which amount of deferred Bonus Compensation will
be paid within five business days after the date of termination
notwithstanding anything herein to the contrary) but which is
unpaid as of the date of termination, payable in a lump sum
within five business days after the effective date of the
termination, PROVIDED that in the event the Company has not
determined as of the date of termination the amount of Bonus
Compensation payable pursuant to this clause (ii), the amount
paid pursuant to this clause (ii) will be calculated based upon
80% of Company projections for the calendar year immediately
preceding the effective date of termination, and PROVIDED FURTHER
that in the event the amount of any projected Bonus Compensation
paid pursuant to this clause (ii) is greater or less than the
actual amount of Bonus Compensation as calculated in accordance
with the Company's customary payroll practices (which calculation
will be completed not later than 90 days after the end of the
calendar year immediately preceding the termination) then the
Company will give you notice of such difference within five
business days after making such determination and you or the
Company, as the case may be, agree to pay the other party the
amount of such difference within 10 business days after such
notice is delivered to you.
The Option, to the extent vested at the date of termination, may
be exercised in accordance with the Plan within three months after the
effective date of termination of your employment with the Company
pursuant to this subsection and any unexercised portion of the Option
will be forfeited.
FOR CAUSE BY COMPANY. The Company may terminate your employment
at any time for cause by giving a Termination Notice to you. Unless
otherwise specified in the Termination Notice, such termination will
become effective immediately upon giving of such Termination Notice.
In the event of such termination, the terms with respect to Base
Salary, Bonus Compensation and the Option will be the same as those
set forth in the paragraph captioned "--Executive Convenience." For
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purposes of this subsection, "cause" means: (i) your failure to remedy
any breach of this letter agreement or serious breach of Company
policy, or any gross negligence on your part, which failure or gross
negligence shall continue for 30 days after receipt of written notice
from the Company's Board of Directors regarding such breach or gross
negligence; or (ii) serious, willful misconduct by you, including,
self-dealing, disloyalty, the commission of any felony, or any act of
dishonesty, fraud or other crime against the Company or a Designated
Subsidiary.
CHANGE OF CONTROL. You or the Company may terminate your
employment hereunder (a "Change of Control Termination") after the
occurrence of a Trigger Event or of both (a) a Change of Control and
(b) any Termination Event by giving a Termination Notice to the other
party. Such termination will become effective upon the date specified
in the Termination Notice, which date shall be on or after the date
such Termination Notice is delivered to the other party. In the event
of a Change of Control Termination, the terms with respect to Base
Salary, Bonus Compensation and severance will be the same as those set
forth in the paragraph captioned "--Company Convenience"; PROVIDED
that the amounts required to be paid pursuant to clauses (ii) and
(iv)(B)(III) therein will be payable within five business days after
the date of termination. The Option will become fully vested in the
event of a Change of Control Termination and may be exercised in
accordance with the Plan within 24 months after the effective date of
termination of your employment with the Company pursuant to this
subsection and any unexercised portion of the Option will be
forfeited.
For purposes of this subsection, Trigger Event means (i) the
Company is liquidated or the Company sells or disposes of all or
substantial assets of the Company such that your ability to earn the
Target Bonus and/or the Special Bonus will be materially jeopardized
solely as a result of such sale, disposition or liquidation and/or
(ii) the securities of Company cease for more than 60 consecutive days
to be listed or quoted on any national securities exchange or market,
PROVIDED that this clause (ii) will not be deemed a Trigger Event if
the Company uses its best efforts to have the securities of the
Company listed or quoted on any national securities exchange or
market. Notwithstanding anything herein to the contrary, no
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Trigger Event will be deemed to have occurred for purposes of this
letter agreement if in connection with or by virtue of such Trigger
Event, you receive an amount equal to the established Target Bonus for
the calendar year in which such Trigger Event occurred, an amount
equal to the Special Bonus Amount, if any, payable in such year, and
an amount equal to or greater than $10.00 for each share of Common
Stock vested pursuant to the Option.
For purposes of this subsection, Change of Control means the
occurrence of one or more of the following events:
(1) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (together
with any comparable provisions of any successor statute, the "Exchange
Act")) becomes a "beneficial owner" (as such term is defined in Rule
13d-3 promulgated under the Exchange Act) (other than the Company, any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company, any employee benefit plan of the Company
or its affiliates, or any corporation owned, directly or indirectly,
by the stockholders of the Company, in substantially the same
proportions as their ownership of stock of the Company), directly or
indirectly, of securities of the Company, representing thirty percent
(30%) or more of the combined voting power of the Company's then
outstanding securities; or
(2) persons who, as of the date of this letter agreement,
constituted the Company's Board of Directors (the "Incumbent Board")
cease for any reason including, without limitation, as a result of a
tender offer, proxy contest, merger or similar transaction or event,
to constitute at least one-third (1/3) of the Board of Directors,
provided that any person becoming a director of the Company subsequent
to the date of this letter agreement whose election was approved by at
least a majority of the directors then comprising the Incumbent Board
will, for purposes of this clause (2), be considered a member of the
Incumbent Board; or
(3) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or other
entity, other than (a) a merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining
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outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation or (b) a
merger or consolidation effected to implement a recapitalization of
the Company (or similar transaction) in which no "person" (as
hereinabove defined) acquires more than fifty percent (50%) of the
combined voting power of the Company's then outstanding securities.
Notwithstanding anything in the foregoing to the contrary, no
Change of Control will be deemed to have occurred for purposes of this
letter agreement by virtue of or in connection with (i) any
transaction which results in you, or any "person" (as such term is
used in Sections 13(d) or 14(d)(2) of the Exchange Act) which includes
you, acquiring, directly or indirectly, 30% or more of the combined
voting power of the Company's then outstanding securities, or (ii) any
distribution by Warburg, Xxxxxx Investors, L.P. or its affiliates
(collectively, "Warburg") of the Company's securities to investors of
Warburg.
For purposes of this subsection, Termination Event means the
occurrence of one or more of the following events:
(1) a material adverse change of your title or position or a
material adverse change in the responsibilities and/or duties
exercised by you before the Change of Control; or
(2) as a result of a Change of Control, you are unable to
exercise substantially the responsibilities, authorities, powers,
functions or duties exercised by you before the Change of Control; or
(3) the relocation beyond the Chicago metropolitan area (MSA) or
beyond 25 miles of your residence or the offices at which you are
principally employed as of the Change of Control; or
(4) a reduction of your Base Salary or a material reduction in
your ability to earn a Target Bonus and/or Special Bonus solely by
reason of (a) the Company's entering one or more new core businesses
and/or (b) the Company's accelerating expenditures in a manner
materially different than that before the Change of
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Control with the express purpose of decreasing the amount of Net
Income during the remaining Period of Contract Employment and
increasing Net Income thereafter, PROVIDED that this clause (4) will
be deemed a Termination Event only after an event described in clauses
(1), (2) and (3) under Change of Control above.
For purposes of this letter agreement, Bonus Compensation will be
earned only upon completion of the entire calendar or fiscal year with
respect to which such Bonus Compensation is calculated; PROVIDED that a
pro-rata share of Bonus Compensation may be earned in accordance with the
provisions of this letter agreement under the captions "Termination--Death
or Disability," "--Company Convenience" and "--Change of Control." The
Company reserves the right to change its fiscal year and the Company and
you agree to use reasonable good faith efforts to adjust the terms and
provisions of this letter agreement so that the parties are in
substantially the same economic position after such change in the fiscal
year.
FULL-TIME EXECUTIVE. You hereby covenant and agree that during the
Period of Contract Employment you will faithfully and in conformity with
the directions of the Company's Board of Directors perform the duties of
your employment hereunder, and that you will be a full-time employee of the
Company and that you will devote to the performance of said duties all such
time and attention as said duties reasonably require, taking, however, from
time to time (as the Company agrees that you may) reasonable vacations.
NO DETRACTION FROM PERFORMANCE. You hereby consent and agree that
during the Period of Contract Employment you will not, without the express
consent of the Company's Board of Directors or a committee thereof to which
such authority is delegated by the Company's Board of Directors, become
actively associated with or engaged in any business other than that of the
Company, or a division, or subsidiary of the Company that would detract
from the performance of your duties to the Company or any Designated
Subsidiary, and you will do nothing inconsistent with such duties.
Notwithstanding anything herein to the contrary, you may serve on any Board
of Directors or similar governing body of an organization that is not a
Competing Business, and you may continue to serve on any Board of Directors
or similar governing body on which you currently serve, including the Board
of Directors of Avalon.
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CONFIDENTIAL INFORMATION. It is recognized by you and the Company
that your duties during the Period of Contract Employment will entail the
receipt of confidential information concerning not only the Company's and
the Designated Subsidiaries' current operations and procedures but also
their respective short-term and long-term plans. You hereby covenant and
agree that during the Period of Contract Employment and at any time
thereafter, you will not disclose to anyone outside of the Company or any
Designated Subsidiary, except as appropriate in the course of performing
your duties hereunder, or use in any activity or business (other than the
business of the Company or a Designated Subsidiary), Confidential
Information (as defined below) relating to the business of the Company or a
Designated Subsidiary, in any way obtained by you while employed by the
Company, unless authorized in writing by the Company or a Designated
Subsidiary, as the case may be. For purposes of this letter agreement, the
term "Confidential Information" includes all information of any nature and
in any form which is owned by the Company or a Designated Subsidiary and
which is not publicly available or generally known to persons engaged in
businesses similar to that of the Company or a Designated Subsidiary,
including, but not limited to, research techniques; patents and patent
applications; inventions and improvements, whether patentable or not;
development projects; computer software and related documentation and
materials; designs, practices, processes, methods, know-how and other facts
relating to the business of the Company or a Designated Subsidiary;
practices, processes, methods, know-how and other facts related to sales,
advertising, promotions, financial matters, customers, customer lists or
customers' purchases of goods or services from the Company or a Designated
Subsidiary; industry contracts; and all other secrets and information of a
confidential and proprietary nature. In the event that you are requested
or required in connection with a legal proceeding or civil investigative
demand to disclose any Confidential Information, you will provide the
Company with prompt written notice of any such request or requirement so
that the Company may seek a protective order or other appropriate remedy
and/or waive compliance with the provisions of this letter agreement. If,
in the absence of a protective order or other remedy or the receipt of a
waiver by the Company, you are nonetheless legally compelled to disclose
Confidential Information in connection with such proceedings, then
notwithstanding anything in this paragraph to the contrary, you may,
without liability hereunder, disclose in any such proceedings only that
portion of Confidential Information that you are legally required to
disclose; PROVIDED, that you exercise your best efforts to
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preserve the confidentiality of the Confidential Information, including,
without limitation, by cooperating with the Company to obtain an
appropriate protective order or other reliable assurance that confidential
treatment will be accorded the Confidential Information. The agreements
set forth in this paragraph will not terminate upon the Termination of
Contract Employment.
CONFLICT OF INTEREST AND BUSINESS ETHICS STATEMENT. You hereby
covenant and agree that you will comply with and, if requested, execute
such statements relating to conflicts of interest or business ethics in
forms satisfactory to the Company's Board of Directors and that during the
Period of Contract Employment you will not knowingly engage in any activity
which would violate any such statement unless it is otherwise authorized by
this letter agreement.
COMPETING BUSINESS. You hereby covenant and agree that, during the
Period of Contract Employment and for one year following the Termination of
Contract Employment, you will not have any investment in a Competing
Business (as defined below) other than an equity interest of less than five
percent (5%) of any company whose securities are listed on The New York
Stock Exchange, The American Stock Exchange or quoted on NASDAQ and will
not render personal services to any Competing Business in any manner,
including, without limitation, as owner, partner, director, trustee,
officer, employee, consultant or advisor thereof. For purposes of this
letter agreement, "Competing Business" means any business which derives a
substantial portion of its revenue from business similar or competitive to
that now, or at any time during the Period of Contract Employment,
conducted by the Company or any Designated Subsidiary, in any metropolitan
area, city, county or other political subdivision, where the Company or any
Designated Subsidiary presently does business or, at any time during the
Period of Contract Employment, will do business. If you breach the
agreement contained in this paragraph, such breach may render you liable to
the Company for damages therefor and entitle the Company to enjoin you from
making such investment or from rendering such personal services. In
addition, the Company will have the right in such event to enjoin you from
disclosing any Confidential Information concerning the Company or any
Designated Subsidiary to any Competing Business, to enjoin any Competing
Business from receiving you or using any such Confidential Information
and/or to enjoin any Competing Business from retaining or seeking to retain
any other employees of the Company or a Designated Subsidiary.
Notwithstanding anything herein to the contrary, you may serve on any Board
of Directors or
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similar governing body of an organization that is not a Competing Business,
and you may continue to serve on any Board of Directors similar governing
body on which you currently serve, including the Board of Directors of
Avalon.
NO SOLICITATION. You hereby covenant and agree that during the Period
of Contract Employment and for two years following the Termination of
Contract Employment, you will not, for yourself or any third party,
directly or indirectly, (i) divert or attempt to divert from the Company or
a Designated Subsidiary any business of any kind in which the Company or a
Designated Subsidiary is engaged, including, without limitation, the
solicitation of its customers or interference with any of its suppliers or
customers; or (ii) solicit for employment any person employed by the
Company or a Designated Subsidiary during the period of such person's
employment.
REMEDIES. You and the Company agree that the Company will be
irreparably harmed by any violation or threatened violation of any of the
foregoing provisions of the paragraphs captioned "Full-Time Executive," "No
Detraction from Performance," "Confidential Information," "Conflict of
Interest and Business Ethic Statement," "Competing Business" and "No
Solicitation" if such provisions are not specifically enforced and
therefore that the Company will be entitled to an injunction restraining
any violation of such provisions by you, or any other appropriate decree of
specific performance. Such remedies will not be exclusive and will be in
addition to any other remedy to which the Company may be entitled under
this letter agreement or at law.
GOVERNING LAW. This letter agreement is being made and executed in
and is intended to be performed in the State of Illinois and will be
governed, construed, interpreted and enforced in accordance with the
substantive laws of the State of Illinois, without regard to the conflict
of laws principles thereof.
ENTIRE AGREEMENT. This letter agreement and the Stock Option
Agreement comprise the entire agreement between you and the Company
relating to the subject matter hereof and as of the date hereof, supersede,
cancel and annul all previous employment agreements between the Company
(and/or its predecessors) and you, as the same may have been amended or
modified, and any of your rights thereunder other than for compensation
accrued thereunder as of the date hereof, and supersede, cancel and annul
all other prior written and oral agreements between you and the Company or
any predecessor to
76
the Company. The terms of this letter agreement are intended by you and
the Company to be the final expression of our agreement with respect to
your employment by the Company and may not be contradicted by evidence of
any prior or contemporaneous agreement. In the event of any conflict
between this letter agreement and the Stock Option Agreement, the Stock
Option Agreement will control.
DISPUTES. Any dispute or controversy arising under, out of, in
connection with or in relation to this letter agreement will be finally
determined and settled by arbitration. Arbitration will be initiated by
one party making written demand upon the other party and simultaneously
filing the demand together with required fees in the office of the American
Arbitration Association (the "AAA") in Chicago, Illinois. The arbitration
proceeding will be conducted in Chicago, Illinois by a single arbitrator in
accordance with the Expedited Procedures of the Employment Dispute
Resolutions Rules of the American Arbitration Association (the "EDR
Rules"), except as otherwise provided herein. The arbitrator will be
appointed expeditiously in accordance with the EDR Rules and the arbitrator
will be mindful of the mutual desire of the parties to conduct the
arbitration in an expeditious and efficient manner and the arbitrator is
hereby authorized to manage the proceedings in order to accomplish such
desire. Except as required by the arbitrator, the parties will have no
obligation to comply with discovery requests made in the arbitration
proceeding. The arbitration award will be a final and binding
determination of the dispute and will be fully enforceable as an
arbitration award in any court having jurisdiction and venue over such
parties. The prevailing party (as determined by the arbitrator) will be
awarded by the arbitrator such party's attorneys' fees and expenses in
connection with such proceeding, in addition to any other relief that may
be granted. The non-prevailing party (as determined by the arbitrator)
will pay the arbitrator's fees and expenses.
SEVERABILITY; ENFORCEABILITY. In the event that the provisions of the
paragraphs captioned "Competing Business" and "No Solicitation", or any
portion thereof, should ever be adjudicated by a court of competent
jurisdiction in proceedings to which the Company is a proper party to
exceed the time or geographic or other limitations permitted by applicable
law, then such provisions will be deemed reformed to the maximum time or
geographic or other limitations permitted by applicable law, as determined
by such court in such action, the parties hereby acknowledging their desire
that in such event such action to be taken. Without
77
limiting the foregoing, the covenants contained herein will be construed as
separate covenants covering their respective subject matters, including,
without limitation, with respect to (a) each of the separate cities,
counties, metropolitan areas, and each other political subdivision of the
United States in which any of the Company or the Designated Subsidiaries or
their respective successors now transact any business or propose to
transact business, (b) each business now conducted by the Company or any
Designated Subsidiary or their successors, and (c) the Company and the
Designated Subsidiaries and their successors separately. In addition to
the above, all provisions of this letter agreement are severable, and the
invalidity or unenforceability of any provision or provisions of this
letter agreement or portions or aspects thereof will not affect the
validity or enforceability of any other provision, or portion of this
letter agreement, which will remain in full force and effect as if executed
with the unenforceable or invalid provision or portion or aspect thereof
modified, as set forth above.
NOTICES. Any notice, request, claim, demand, document and other
communication hereunder to any party will be effective upon receipt (or
refusal of receipt) and will be in writing and delivered personally or sent
by telecopy or certified or registered mail, postage prepaid, as follows:
if to the Company, addressed to the attention of its General Counsel at the
address above with a copy to Xxxxx & Xxxxx Company, 00000 X. Xxxxxxx Xxxx,
Xxxxx 000, Xxxxxxxx, XX 00000, attention: General Counsel; and if to you,
at the address set forth below under your signature; or at any other
address as any party has specified by notice in writing to the other party.
COUNTERPARTS. This letter agreement may be executed in several
counterparts, each of which will be deemed to be an original, but all of
which together will constitute one and the same agreement.
AMENDMENTS; WAIVERS. This letter agreement may not be modified,
amended, or terminated except by an instrument in writing, approved by the
Company's Board of Directors and signed by you and the Company. By an
instrument in writing similarly executed, you or the Company may waive
compliance by the other party with any provision of this letter agreement
that such other party was or is obligated to comply with or perform;
PROVIDED, that such waiver will not operate as a waiver of, or estoppel
with respect to, any other or subsequent failure. No failure to exercise
and no delay in exercising any right, remedy or power hereunder will
preclude any other or further exercise of any other
78
right, remedy or power provided herein or by law or in equity.
NO INCONSISTENT ACTIONS. You and the Company will not voluntarily
undertake or fail to undertake any action or course of action inconsistent
with, or to avoid or evade, the provisions or essential intent of this
letter agreement. Furthermore, it is the intent of the Company and you
hereto to act in a fair and reasonable manner with respect to the
interpretation and application of the provisions of this letter agreement.
ATTORNEYS' FEES. The Company agrees to reimburse you for reasonable
attorneys' fees incurred by you in connection with negotiating and
executing this letter agreement up to a maximum amount of $10,000.
We look forward to working with you.
If this letter accurately reflects our agreement, please sign and
return to the Company the enclosed duplicates of this letter whereupon this
letter will become a binding agreement between the Company and you in accordance
with its terms.
Very truly yours,
XXXXX & XXXXX COMPANY
/s/ Xxx X. Xxxxxxx
Xxx X. Xxxxxxx
Chairman
CONFIRMED AND ACCEPTED as of the
date first above written.
/S/ XXXXX X. XXXXXXXX
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Xxxxx X. Xxxxxxxx
Address: 3937 XXXXXXXXXXXX XXXXX
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ALPHARETTA, GEORGIA
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