EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT made as of this 30th day of June, 1998, by
and between PROMOTIONAL MARKETING, L.L.C., an Illinois limited liability company
(hereinafter, the "Company"), and XXXX X. XXXXXX, XX., a resident of Illinois
(hereinafter, "Executive").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company and Executive desire to enter into this Agreement
whereby the Company will receive the services, skills and expertise of Executive
for the period and on the terms and conditions hereinafter set forth;
WHEREAS, prior to the date hereof, Executive was a manager and a member
of the Company, engaged in the advertising and promotional business;
WHEREAS, contemporaneously with the execution hereof, the Company
merged with Upshot Acquiring Corp. ("Acquiror Sub") pursuant to that certain
Agreement and Plan of Merger and Plan of Reorganization dated as of June 30,
1998 among the Company, Acquiror Sub, HA-LO Industries, Inc. ("Acquiror"), the
Executive and the other members of the Company (the "Merger Agreement"); and
WHEREAS, in the course of Executive's involvement with the Company,
Executive has (i) had access to and learned the confidential information and
trade secrets of the Company, and (ii) established relationships with the
Company's customers and personnel, all of the foregoing being a part of the
goodwill of the Company.
NOW, THEREFORE, in consideration of the foregoing, and of the mutual
covenants contained in this Agreement, and as a material inducement to the
Company's execution, delivery and performance of the Merger Agreement, the
Company and Executive hereby agree as follows:
1. ENGAGEMENT. Subject to all the terms and conditions of this
Agreement, the Company hereby employs Executive as one of the Managers of the
Company and Executive hereby accepts such employment.
2. TERM. The engagement of Executive hereunder shall, except upon
earlier termination, be for a term (the "Term") commencing on the date of this
Agreement (the "Effective Date"), and ending on December 31, 2002. The Term
shall be extended beyond such date only upon the express written consent of the
parties.
3. EMPLOYMENT SERVICES. During the Term of his employment pursuant to
this Agreement, Executive shall render his services to the Company, or otherwise
as Executive and Company shall mutually agree. In the performance of his duties
hereunder, Executive shall report to the Managers of the Company (other than
Executive) or to such other executive officer of the Company or its affiliates
as the Majority of the Managers of the Company directs. Executive shall devote
all of his working time, efforts and his energy and skill to promote the
interests of the Company (which shall include all subsidiaries and affiliates of
the Company and Acquiror), and agrees that during the Term he will not engage in
any other business activity or have business pursuits or interests except
activities or interests which the Majority of the Managers reasonably determines
do not conflict or interfere with the performance of the Executive's duties and
obligations hereunder.
4. SALARY.
(a) BASE SALARY. In consideration of the services to be
rendered by Executive to the Company pursuant to this Agreement, the
Company agrees to pay to Executive during the Term, and Executive
agrees to accept a base salary ("Base Salary") of one-hundred fifty
thousand dollars ($150,000) per annum during calendar year 1998
(prorated to reflect that Executive will only be employed for a portion
of 1998) and, thereafter at the rate of two-hundred thousand dollars
($200,000) per annum (subject to applicable withholdings) payable in
accordance with the Company's normal payroll practices). If and to the
extent the Executive receives payments under any disability plans or
policies maintained by the Company, the Base Salary shall be reduced
dollar for dollar by the amount of payments so made to the Executive or
for his benefit.
(b) Intentionally Omitted.
(c) BONUS. For the period commencing the date hereof and
ending December 31, 1998, Executive may receive a bonus as the Majority
of the Managers of the Company shall determine in its sole discretion.
With respect to each remaining calendar year of the Term (each, a
"Measurement Period"), Executive shall be entitled to receive a bonus
(hereinafter, the "Bonus") determined as follows:
(i) For each Measurement Period, the Company shall
determine its pre-tax income (each, a "Measurement Period Pre-Tax Income"). In
the event the Measurement Period Pre-Tax Income for any Measurement Period is
equal to or greater than the Measurement Period Pre-Tax Income for the
immediately preceding Measurement Period (or, in the case of the first
Measurement Period, is equal to or greater than the pre-tax income for the
Company's fiscal year ended December 31, 1998
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(the "1998 Pre-Tax Income")), the Company shall pay Executive a Bonus in an
amount determined as follows:
(A) If the ratio of the Measurement Period Pre-Tax Income for
any Measurement Period to the Measurement Period Pre-Tax Income for the
immediately preceding Measurement Period (or, in the case of the first
Measurement Period, the 1998 Pre-Tax Income) (the "Pre-Tax Income
Growth Ratio") is equal to or greater than 1.30 but less than 1.40, the
Bonus for such Measurement Period shall equal twenty-five thousand
dollars ($25,000) plus the product of (a) the ratio of (y) the Pre-Tax
Income Growth Ratio less 1.30 to (z) one-tenth (.10) and (b) fifty
thousand dollars ($50,000);
(B) If the Pre-Tax Income Growth Ratio is equal to or greater
than 1.40 but less than 1.50, the Bonus for such Measurement Period
shall equal seventy-five thousand dollars ($75,000) plus the product of
(a) the ratio of (y) the Pre-Tax Income Growth Ratio less 1.40 to (z)
one-tenth (.10) and (b) seventy-five-thousand dollars ($75,000); and
(C) If the Pre-Tax Income Growth Ratio is equal to or greater
than 1.50, the Bonus for such Measurement Period shall equal
one-hundred and fifty thousand dollars ($150,000).
(ii) For purposes hereof, pre-tax income shall be (a)
determined in accordance with United States generally accepted accounting
principles and standards ("GAAP"), applied on a basis consistent with those of
prior periods and (b) incorporate the accounting methods, policies, practices
and procedures, and classification, judgments and estimation methodology used by
the Company in determining the 1998 Pre-Tax Income to the extent consistent with
GAAP.
(iii) In the event the Company, directly or
indirectly acquires one or more entities which requires Executive to devote
substantial time as an employee, then the pre-tax income of such other entities
shall be included in the calculation of Measurement Period Pre-Tax Income
provided, however, that as a condition of such inclusion the Company and
Executive shall mutually agree to revise the Pre-Tax Income Growth Ratio
calculations set forth in paragraphs (i)(A), (B) and (C) hereof to reflect such
acquisition or acquisitions.
(iv) The Bonus shall be paid to Executive by the
Company as soon as practicable following the close of each calendar year of the
Term (commencing with the end of the first Measurement Period) and the Company's
determination of the Measurement Period Pre-Tax Income for the Measurement
Period then ended.
5. EMPLOYEE BENEFITS; EXPENSE REIMBURSEMENT.
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(a) During the Term of this Agreement, Executive shall be
entitled to participate in any tax-qualified profit sharing, pension,
retirement or insurance (including life and medical insurance) plan
maintained by the Company and made generally available to employees of
the Company.
(b) Subject to the rules, policies and regulations of the
Company in effect from time to time and applicable to its employees,
Executive shall be entitled to reimbursement by the Company for
reasonable and customary travel, business, entertainment and other
business related expenses incurred by him in carrying out his duties
under this Agreement in a manner consistent with past practices.
6. OTHER ACKNOWLEDGMENTS; ACCEPTANCE OF ORDERS. Except to the extent
expressly inconsistent with the provisions of this Agreement, Executive shall
strictly adhere to all policies and procedures established by the Company from
time to time in its sole and exclusive discretion, generally applicable to all
executive's of the Company and disclosed to Executive.
7. TERMINATION.
(a) GENERALLY. Except as otherwise provided herein, the Term
of this Agreement and Executive's employment hereunder shall terminate
upon the first to occur of the following events: (1) stated expiration
in accordance with Section 2 hereof, (2) the mutual agreement of the
Company and Executive to so terminate this Agreement, (3) the Company's
election to terminate this Agreement or Executive's employment
hereunder "For Cause" (as hereinafter defined) or (4) the death or
Disability of Executive. The term "Disability" shall mean any mental,
physical or emotional disability or condition which lasts for one
hundred eighty (180) days or more within any nine (9) month period, and
which prevents Executive from fully performing his duties hereunder.
Disability shall be determined by a Chicago-area physician mutually
selected by the Company and Executive.
(b) FOR CAUSE. The term "For Cause" shall mean any one of the
following: (1) notice by the Company of the commission by Executive of
a breach of any material covenant, provision, term or condition set
forth in this Agreement and the failure to cure such breach (or
persuade the Company that no such breach occurred) within thirty (30)
days following notice thereof from the Company; (2) the conviction by
Executive of, or plea of NOLO CONTENDERE to, a felony or crime
involving moral turpitude; (3) the conviction by Executive of, or plea
of NOLO CONTENDERE an act of personal dishonesty or fraud involving
personal profit, including, without limitation, theft, embezzlement,
fraud or other misappropriation of property; (4) the commission by
Executive of an act which a majority of the Company's Managers has
reasonably found to have involved willful misconduct or gross
negligence on the part of Executive, and which has or may reasonably
have a
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material adverse affect on the revenues, profits or reputation of the
Company; or (5) after notice and seven (7) days to cure, Executive's
continued exhibition of habitual absenteeism (without explanation
satisfactory to the majority of the Managers of the Company), or
Executive's continued inability or repeated failure to perform any
lawful and reasonable directives or rules required in connection with
Executive's employment and position with the Company.
(c) CHANGE OF CONTROL. Executive shall be entitled to
terminate this Agreement, without liability or obligation to the
Company in respect of such early termination, at any time during the
twelve month period following any Change of Control (as hereinafter
defined) provided Executive provides the Company with at least six
months advance notice of Executive's exercise of such right of
termination pursuant to this Section7(c). As used herein, a "Change of
Control" shall mean any transaction or series of related transactions
pursuant to any single person, entity or group of related entities
acquires fifty percent (50%) or more of the issued and outstanding
shares of common stock of Acquiror.
(d) EFFECT UPON TERMINATION.
(i) In the event the Term of this Employment
Agreement is terminated pursuant to Section 7(a), (b) or (c) hereof,
except as otherwise provided herein, all rights, duties and obligations
of the parties pursuant to this Employment Agreement shall terminate,
except to the extent that Executive's compensation earned through the
date of termination.
(ii) In the event Executive's employment shall
terminate pursuant to the terms of this Agreement, Executive shall not
be entitled to severance pay notwithstanding any contrary policies and
practices of the Company.
(e) SURVIVAL OF COVENANTS. Notwithstanding anything herein to
the contrary, upon termination of the Term of this Employment Agreement
for any reason, the provisions of this Section 7 and the terms and
conditions of Sections 8 through 13 of this Employment Agreement shall
remain in full force and effect and shall be binding on and enforceable
against Executive and the Company as though such termination had not
occurred. Executive hereby acknowledges that his agreement to the
survival to the terms and conditions of Sections 8 through 13 of this
Employment Agreement constitute a material inducement to the Company to
enter into this Agreement.
8. EXECUTIVE'S REPRESENTATION. Executive hereby represents and warrants
to and with the Company that he is not subject to any covenants, agreements or
restrictions, including without limitation any covenants, agreement or
restrictions arising out of Executive's prior employment or independent
contractor relationships, which would be
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breached or violated by Executive's execution of this Agreement or by
Executive's performance of his duties hereunder.
9. CONFIDENTIALITY. Executive acknowledges that by virtue of his
employment with the Company he will be or has been exposed to or has access to
confidential information regarding the Company's and Acquiror's business of the
most sensitive nature, including but not limited to, trade secrets and
proprietary information, all of which are proprietary to the Company or
Acquiror, as the case may be. Executive further acknowledges that it would be
possible for an employee, upon termination of his association with the Company,
to use the knowledge or information obtained while working for or with the
Company or Acquiror to benefit other individuals or entities. Executive
acknowledges that the Company and Acquiror has expended, and in reliance on this
Agreement is willing to consummate the transactions contemplated by the Merger
Agreement and to continue to expend considerable time and resources in the
development of certain confidential information used in connection with their
business and in the acquisition of analogous information of Acquiror pursuant to
the Merger Agreement, including without limitation business strategies and
goals, accounting methodology, pricing systems, advertising brochures and
materials, graphic and other designs, marketing programs and techniques,
copyrighted and non-copyrighted software source codes or object codes,
technology applications and advances, customer, client, and customer and client
prospect lists or records, customer information, customer xxxx-ups, information
regarding independent contractors and vendors, confidential information and
trade secrets of third parties, supplier information, and, generally, the
confidential information of the Company or Acquiror which gives, or may give,
the Company or Acquiror an advantage in the marketplace against their respective
competitors (all of the foregoing [including, expressly such similar information
of Acquiror] being herein referred to collectively as "Proprietary
Information"), and which will be (or had been) disclosed to or learned by
Executive solely for the purpose of Executive's employment with the Company or
Acquiror; PROVIDED, HOWEVER, the term "Proprietary Information" shall not
include information which (a) has been publicly disclosed by the Company or
Acquiror, (b) is independently developed by a party other than the Company,
Acquiror or Executive other than on the Company's or Acquiror's behalf, (c) is
generally known without breach of an agreement with the Company or Acquiror
within the industry or lines of business engaged in by the Company or Acquiror,
or (d) constitutes Executive's general business knowledge. Executive
acknowledges that the Proprietary Information constitutes a proprietary and
exclusive interest of the Company and Acquiror and, therefore, agrees that
during the Term and thereafter, for any reason whatsoever, he shall hold and
keep secret the Proprietary Information as described herein and the confidential
information of the customers or clients of the Company or of Acquiror which
Executive learns or had learned in his capacity as an employee of the Company or
Acquiror (the "Customer Information"), as to which Executive at any time during
his employment shall become informed, and Executive shall not directly or
indirectly disclose any Proprietary Information or Customer Information to any
person, firm or corporation or use the same except in connection with the
business and affairs of the Company.
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10. NON-DISTURBANCE; NON-DISPARAGEMENT. Executive covenants that for a
period equal to (the "Restricted Period") the greater of (a) five (5) years from
the date hereof and (b) the Term and for a period to three (3) years thereafter,
Executive shall not, directly or indirectly, as an employee, agent, salesman or
member of any person, corporation, firm or otherwise (a) solicit any employee,
agent or independent contractor, account executive, sales representative of the
Company or Acquiror or make such other contact with the employees, agents or
independent contractors, account executives or sales representatives of the
Company or Acquiror, the product of which contact will or may yield a
termination of the employment, agency or independent contractor, account
executive or sales representative relationship of such employees, agents or
independent contractor sales representative from the Company or Acquiror, or (b)
make, whether in writing or orally, disparaging statements or inferences with
respect to the Company or Acquiror, their respective businesses, officers or
shareholders (other than statements required in connection with matters asserted
by the Executive in the enforcement of his rights hereunder).
11. NON-COMPETITIVE COVENANTS. Executive covenants that during the
Restricted Period, Executive shall not, directly or indirectly, in the
continental United States, and in any province or other political jurisdiction
of any other foreign jurisdiction within which the Company engages in business
and derives revenues (collectively, the "Subject Jurisdictions"), for his own
account, or as an employee, consultant, agent, partner, joint venturer,
beneficiary of a trust or trustee of a trust, owner or officer of any other
person, firm, partnership, corporation, trust or other entity, or in any other
capacity, in any way conduct or engage in a business (a) which directly competes
with the business as engaged in by the Company as of the date hereof and as of
the date of termination of Executive's employment (collectively, the "Business")
for any reason or (b) in which Executive, directly or indirectly, uses or
discloses Proprietary Information; provided, however, that Executive's ownership
of less than five percent (5%) of the issued and outstanding securities of any
corporation or other entity whose securities are listed and traded on a
nationally registered securities exchange or market (a "Public Company") for
whom the Executive is not actively involved in any capacity shall not constitute
a violation of this Section 11.
12. NON-SOLICITATION. Executive hereby covenants and agrees that,
during the Restricted Period, for any reason whatsoever, he shall not, directly
or indirectly, as an employee, consultant, agent, partner, beneficiary of a
trust or trustee of a trust, joint venturer, owner or officer of any other
person, firm, partnership, trust, corporation or other entity, or in any other
capacity, in any way call upon or solicit, any person or entity which was or is,
a Customer or Client or Prospective Customer or Client of the Company or
Acquiror to sell products or render services which compete with the Business as
now or hereafter conducted; provided, however, that Executive's ownership of
less than five percent (5%) of the issued and outstanding securities of any
Public Company for whom the Executive is not actively involved in any capacity
shall not constitute a violation of this
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Section 12. For purposes of this Agreement, (i) the term "Customer or Client"
shall mean any person, firm, partnership, corporation, trust or other entity to
whom the Company or Acquiror has sold goods or services within the twelve (12)
month period prior to the date of Executive's termination of employment with the
Company and (ii) the term "Prospective Customer or Client" shall mean any
person, firm, partnership, trust, corporation or other entity to whom the
Company, has made a written presentation or proposal, or presented written
materials at a meeting, within the twelve (12) month period prior to the date of
Executive's termination of employment with the Company.
13. RETURN OF MATERIALS. Executive will, at any time upon the request
of the Company, and in any event upon the termination of his employment, for
whatever reason, immediately return and surrender to the Company originals and
all copies of all records, notes, memoranda, electronic files, personal
computers, computer discs, computer equipment, software, telephones, price
lists, customer and customer prospect lists, business plans, recordings and
other documents and other property belonging to the Company, created or obtained
by Executive as a result of or in the course of or in connection with
Executive's employment with the Company or Acquiror; provided, however, if the
Company shall request that such records and other documents be returned prior to
the termination of this Agreement, the Company will afford the Employee access
to such records and other documents as are reasonably required in the
performance of the Employee's duties hereunder. Executive acknowledges that all
such materials are, and will always remain, the exclusive property of the
Company.
14. REMEDIES.
(a) Executive further acknowledges that in the event his
employment with the Company terminates for any reason, he will be able
to earn such a livelihood without violating the foregoing restrictions
and that his ability to earn a livelihood without violating such
restrictions is a material condition to his continued employment with
the Company.
(b) Executive acknowledges that compliance with the
restrictive covenants set forth in Sections 10 through 13 herein is
necessary to protect the business, goodwill and Proprietary Information
of the Company and that a breach of these restrictions will irreparably
and continually damage the Company for which money damages may not be
adequate. Consequently, Executive agrees that, in the event that he
breaches or threatens to breach any of these covenants, the Company
shall be entitled to both (1) a temporary, preliminary or permanent
injunction in order to prevent the continuation of such harm, and (2)
money damages insofar as they can be determined. Nothing in this
Agreement, however, shall be construed to prohibit the Company from
also pursuing any other remedy, the parties having agreed that all
remedies are to be cumulative. The parties expressly agree that the
Company may choose to enforce the restrictive covenants
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in Sections 10 through 13 hereof, in part, or to enforce any of said
restrictive covenants to a lesser extent than that set forth herein.
(c) REVISION. In the event that any of the provisions,
covenants, warranties or agreements in this Agreement are held to be in
any respect an unreasonable restriction upon or are otherwise invalid,
for whatsoever cause, then the court so holding shall reduce and is so
authorized to reduce, the territory to which it pertains and/or the
period of time in which it operates, or the scope of activity to which
it pertains or effect any other change to the extent necessary to
render any of the restrictions of this Agreement enforceable.
15. GENERAL PROVISIONS.
(a) SEVERABILITY. Each of the terms and provisions of this
Agreement is to be deemed severable in whole or in part and, if any
term or provision of the application thereof in any circumstances
should be invalid, illegal or unenforceable, the remaining terms and
provisions or the application thereof to circumstances other than those
as to which it is held invalid, illegal or unenforceable, shall not be
affected thereby and shall remain in full force and effect.
(b) BINDING AGREEMENT. This Agreement shall be binding upon
the parties, their heirs, successors, personal representatives and
assigns. The Company may assign this Agreement to any successor in
interest to the business, or part thereof, of the Company including,
but not limited to, Acquiror or any of its subsidiaries or affiliates.
Executive may not assign any of his obligations or duties hereunder.
(c) CONTROLLING LAW AND JURISDICTION. This Agreement shall be
governed by and interpreted and construed according to the laws of the
State of Illinois. Executive hereby consents to the jurisdiction of the
state and federal courts in Illinois in the event that any disputes
arise under this Agreement.
(d) ENTIRE AGREEMENT. This instrument contains the entire
agreement of the parties with regard to the subject matter hereof, and
may not be changed orally, but only by an agreement in writing signed
by the parties hereto.
(e) FAILURE TO ENFORCE. The failure to enforce any of the
provisions of this Agreement shall not be construed as a waiver of such
provisions. Further, any express waiver by any party with respect to
any breach of any provision hereunder by any other party shall not
constitute a waiver of such party's right to thereafter fully enforce
each and every provision of the Agreement.
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(f) SURVIVAL. The obligations contained in this Agreement
shall survive the termination, for any reason whatsoever, for cause or
otherwise, of Executive's employment with the Company.
(g) HEADINGS. All numbers and heading of sections are for
reference only and are not intended to qualify, limit or otherwise
affect the meaning or interpretation of any Section.
(h) NOTICES. All notices which are required, permitted or
contemplated hereunder to be given or made shall be given or made in
writing by certified mail (return receipt requested) to Executive at
0000 Xxxxx Xxxxxxx, #0, Xxxxxxx, Xxxxxxxx 00000 and to the Company at
0000 Xxxx Xxxxx Xxxxxx, Xxxxx, Xxxxxxxx, 00000, Attention: Xx. Xxx
Xxxxxxxx.
(i) GENDER. The masculine, feminine or neuter pronouns used
herein shall be interpreted without regard to gender, and the use of
the singular or plural shall be deemed to include the other whenever
the context so requires.
(j) LEGAL FEES. In the case of any legal action taken by any
party hereto against any one or more of the other parties hereto, the
prevailing party or parties to such action shall be entitled to
reimbursement of all reasonable costs and expenses (including but not
limited to reasonable attorneys fees and expenses) incurred by the
prevailing party in connection with such action.
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WHEREFORE, the parties have executed this Agreement on the date and
year first above written.
PROMOTIONAL MARKETING, L.L.C. EXECUTIVE:
By:_________________________________ ____________________________________
Its:______________________________ Xxxx X. Xxxxxx, Xx.
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