Exhibit 10.7
UNITED INDUSTRIES CORPORATION
CHAIRMAN'S AGREEMENT
THIS CHAIRMAN'S AGREEMENT (this "AGREEMENT"), dated as of July
20, 1999, is entered into by and among United Industries Corporation, a Delaware
corporation (the "COMPANY") and Xxxxx Xxxxx ("EXECUTIVE"). Certain capitalized
terms used but not otherwise defined herein are defined in SECTION 9.
Executive and the Company are parties to that certain
Consulting Agreement (the "CONSULTING AGREEMENT") and that certain Stock Option
Agreement (the "JANUARY OPTION AGREEMENT"), both dated as of January 20, 1999.
The Company and Executive desire to enter into an agreement
relating to Executive's engagement by the Company in the positions of board
member and chairman. Simultaneously with the execution of this Agreement, the
parties hereto have entered into a Stock Option Agreement (the "STOCK OPTION
AGREEMENT").
The parties hereto, in exchange for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, hereby agree as follows:
PART I. BOARD MEMBERSHIP TERMS
1. BOARD MEMBERSHIP AND DUTIES.
(a) The Company hereby engages Executive, and Executive hereby
accepts such engagement with the Company, as a member of the Board and as the
Company's Chairman on the terms and conditions specified herein.
(b) Executive shall devote his best efforts to the interests
of the Company, which interests may change from time to time, and shall devote
such time to his position as the duties and responsibilities of his position
reasonably require.
(c) Executive shall perform such duties and functions
commensurate with his position as may be reasonably assigned or delegated to him
from time to time by the Board. Executive acknowledges that such duties and
functions may or may not involve performance of services for or on behalf of
affiliates of the Company.
2. TERM AND TERMINATION.
(a) TERM. The "TERM" of Executive's engagement by the Company
is from the date hereof until the "TERMINATION DATE", which is defined as the
earlier of (i) the date of termination of Executive's engagement pursuant to any
one or more of SECTIONS 2(b), 2(c) or 2(d) of this Agreement and (ii) the
"PAYOUT DATE", which shall be the later of (x) the one-year anniversary hereof
and (y) the date which is six months after the date that a new chief executive
officer is hired by the Company (provided that if such chief executive officer
is not still employed by the Company at the end of such six-month period, this
clause (y) shall apply to his successor). Executive is an independent contractor
and not an employee of the Company and his engagement by the Company may be
terminated by Executive, in his sole and arbitrary discretion, at any time with
or without good reason, or by the Company, in the Company's sole and arbitrary
discretion, at any time with or without cause, by delivery of a written
termination notice to the other party, in each case subject to the consequences
in SECTION 4.
(b) DEATH. If Executive dies during the Term, the Termination
Date shall be the date of his death.
(c) TERMINATION BY EXECUTIVE. If Executive terminates his
engagement by the Company, the Termination Date shall be the date on which
Executive's termination notice is given to the Company, or such later date
indicated on such termination notice, which may not be more than thirty (30)
days nor less than fourteen (14) days from its receipt by the Company; PROVIDED
that upon receipt of Executive's termination notice, the Company may, in its
sole discretion, request that Executive cease some or all of his services prior
to the date referenced in such notice and Executive shall promptly comply with
such request, it being understood that such request will not change the
Termination Date specified in this SECTION 2(C).
(d) TERMINATION BY THE COMPANY. If the Company terminates
Executive's engagement (or if until Executive is removed by a vote of the
directors or stockholders of the Company in accordance with the Company's
constituent documents), the Termination Date shall be the date on which the
Company's notice is given to Executive, or such later date indicated in such
termination notice, which may not be more than thirty (30) days from its receipt
by Executive. The Company may, in its sole discretion, elect to remove Executive
from the position of Chairman without removing him from his position as a member
of the Board, in which case the Term shall continue until later terminated
pursuant to this SECTION 2.
3. COMPENSATION.
(a) During the Term, Executive's compensation for his services
hereunder shall consist of (a) Base Salary plus (b) Incentive Compensation, if
any.
(b) "BASE SALARY" shall be paid by the Company to Executive at
an annual rate of $300,000, payable in arrears in equal monthly installments,
subject to periodic review by the
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compensation committee of the Board for increase only, any such increased salary
thereafter constituting "BASE SALARY."
(c) "INCENTIVE COMPENSATION," if any, is equal to the sum of
the following three amounts, up to a maximum of 60% of Base Salary in any given
year, it being understood that no Incentive Compensation is required to be paid
in any year in which the Company's actual EBITDA for the year in question is not
at least 90% of Target EBITDA for such year:
(i) If the Company's actual EBITDA for the year in
question equals or exceeds 90% of Target EBITDA for such year,
Incentive Compensation will equal the product of (A) Base
Salary multiplied by (B) 25%; plus
(ii) Incentive Compensation will increase by an
amount equal to the product of (A) Base Salary multiplied by
(B) 2.5% multiplied by (C) the number of percentage points by
which the Company's actual EBITDA for the year in question
exceeds 90% of Target EBITDA for such year (for example, if
the Company's actual EBITDA was 93% of Target EBITDA for the
year in question, the number derived in clause (C) would be 3
(i.e., 93%-90% = 3)), up to a maximum of 25% of Base Salary in
any year; plus
(iii) Incentive Compensation will increase by an
amount equal to the product of (A) Base Salary multiplied by
(B) 2% multiplied by (C) the number of percentage points by
which the Company's actual EBITDA for the year in question
exceeds 100% of the Target EBITDA for such year (for example,
if the Company's actual EBITDA was 103% of Target EBITDA for
the year in question, the number derived in clause (C) would
be 3 (i.e., 103%-100% = 3)).
All Incentive Compensation due hereunder shall be payable promptly after the
Company has received audited financial statements from its independent
accountants for the year in question which set forth such accountant's
determination of actual EBITDA for such year and not later than at or about the
time bonuses are paid to the Company's other senior executives whose bonuses are
determined based on the receipt of the Company's audited financial statements..
The formula for determining Incentive Compensation provided for in this SECTION
3 shall not be changed during the Term without Executive's consent.
(d) STOCK OPTIONS. The Company shall grant Executive options
to purchase 300,000 shares of Common Stock, all on the terms and conditions
contained in the Company's 1999 Stock Option Plan approved by the Board and in
the Stock Option Agreement.
4. TERMINATION PROVISIONS.
(a) If Executive terminates his engagement by the Company,
then:
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(i) Executive shall be entitled to Base Salary for
the period ending on the Termination Date; and
(ii) Executive shall be entitled to any unpaid
Incentive Compensation for any calendar year ending prior to
the year in which the Termination Date occurs, as well as any
Incentive Compensation for the calendar year in which the
Termination Date occurs pro-rated based on the portion of Base
Salary paid to Executive by the Company in such year.
(b) If the Company terminates Executive's engagement or if
Executive's services terminate by reason of his death, then in either such case:
(i) Executive shall be entitled to Base Salary for
the period ending on the Payout Date; and
(ii) Executive shall be entitled to any unpaid
Incentive Compensation for any calendar year ending prior to
the year in which Executive is last entitled to receive his
Base Salary pursuant to SECTION 4(b)(i), as well as Incentive
Compensation for the calendar year in which Executive is last
entitled to receive his Base Salary pursuant to SECTION
4(b)(i) pro-rated based on the portion of Base Salary paid to
Executive the Company in such year.
(c) Any amounts owed by the Company to Executive pursuant to
SECTION 4(b) shall be paid at such times and in such manner as if the
termination giving rise to such payments had not occurred (with the Company
retaining the right to prepay all or any portion of such amount at any time in
its sole discretion). The Company's obligation to make any payments pursuant to
SECTION 4(b) shall be conditioned upon Executive's continued and continuing
compliance with the terms and conditions of this Agreement.
5. EXPENSES. The Company shall reimburse Executive for all reasonable
expenses incurred in the performance of his duties in accordance with the
expense reimbursement policy of the Company with respect to members of the Board
in effect at the time.
6. CONFIDENTIAL INFORMATION. Executive acknowledges that the
information, observations and data relating to the business of the Company and
its subsidiaries which Executive shall obtain during the course of his
association with the Company and its subsidiaries and his performance under this
Agreement are the property of the Company and its subsidiaries. Executive agrees
that he shall not use for his own purposes or disclose to any third party any of
such information, observations or data without the prior written consent of the
Board, unless and to the extent that (i) the aforementioned matters become
generally known to or generally available for use by the public, in each case
other than as a result of Executive's acts or omissions, (ii) disclosure is
compelled by law or judicial, administrative or regulatory action or proceeding
or (iii) disclosure is reasonably necessary in order for Executive to enforce
his rights under this Agreement or to defend himself in
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any judicial, administrative or regulatory action or proceeding to which the
Company or its affiliates are directly or indirectly a party.
7. SPECIAL BONUS. Promptly after the Payout Date, the Compensation
Committee of the Board shall consider and grant the payment of a one-time
special bonus for Executive if and only if a new chief executive officer has
been hired by the Company and has been employed by the Company for at least six
months as of the Payout Date. Such bonus shall be a minimum of $300,000 and may,
in the Compensation Committee's sole discretion, be increased to a maximum of
$500,000. The Compensation Committee shall use its reasonable discretion in
determining the appropriateness and magnitude of such bonus based upon the
Company's performance during the Term and the success of the transition to the
new chief executive officer of the Company.
8. STATUS OF CONSULTING AGREEMENT. Executive and the Company
acknowledge and agree that beginning on the date hereof and ending on the Payout
Date, all of Executive's and the Company's rights and obligations under the
Consulting Agreement shall be suspended, including, without limitation, the
rendering of services by Executive and the payment of compensation by the
Company. Beginning on the first day after the Payout Date, the Consulting
Agreement shall be reinstated and shall continue in full force and effect for
the remainder of the Consulting Period (as defined therein), if any, in
accordance with its terms.
9. SURVIVAL. SECTION 4 and SECTIONS 6 through 13 shall survive and
continue in full force in accordance with their terms notwithstanding the
termination of the Term.
10. DEFINITIONS. The following definitions shall be applied to the
capitalized terms used in this Agreement for all purposes, unless otherwise
clearly indicated:
(a) DEFINED TERMS.
"BOARD" means the Company's board of directors.
"BUSINESS" means the business conducted by the Company
including, without limitation, (a) the production and sale of termiticide
products and (b) the business conducted by the Company's Spectrum and Chemsico
Divisions.
"EBITDA" means, for a given period, the consolidated Company's
accounting earnings of the Company and its consolidated Subsidiaries before
taking into account any interest expense, provision for income taxes or
depreciation or amortization expense, excluding for this purpose extraordinary
gains and losses unless included in the determination of Target EBITDA.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
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"TARGET EBITDA" means the annual performance goal for the
Company approved by the Board in its reasonable discretion with the input of
Executive, with Target EBITDA for fiscal 1999 being $85,400,000 or such lower
target as the Board (or a committee thereof) may determine in its reasonable
discretion. The Board shall use reasonable efforts to determine Target EBITDA
for any fiscal year after 1999 no later than the 90th day of the fiscal year of
the Company to which it relates.
(b) OTHER DEFINITIONS. The terms set forth below are defined
on the following pages of this Agreement:
Agreement..........................................- 1 -
Base Salary........................................- 2 -
Company............................................- 1 -
Consulting Agreement...............................- 1 -
Executive..........................................- 1 -
Incentive Compensation.............................- 3 -
January Option Agreement...........................- 1 -
Payout Date........................................- 2 -
Stock Option Agreement.............................- 1 -
Term...............................................- 2 -
Termination Date...................................- 2 -
11. INDEMNIFICATION. Without prejudice to (or enlargement or other
modification of) any existing rights of indemnification as an officer or
director enjoyed by Executive, the Company will defend and indemnify and hold
Executive harmless for serving as a director and Chairman to the same extent as
the Company indemnifies its officers and directors under the Company's articles
of incorporation and bylaws as in effect on the date hereof, and Executive shall
be entitled to the protection of any insurance policies the Company may elect to
maintain generally for the benefit of its directors or officers (and to the
extent the Company maintains such an insurance policy or policies, Executive
shall be covered by such policy or policies, in accordance with its or their
terms to the maximum extent of the coverage provided for any other Company
officer or director). No amendment to the Company's Certificate of Incorporation
or bylaws after the date of this Agreement which reduces the scope of
indemnification of officers and directors shall affect the rights of Executive
under this Agreement.
12. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
TO THE COMPANY
United Industries Corporation
0000 Xxxx Xxxxxxxxx
Xx. Xxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Chief Financial Officer
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WITH A COPY TO
Xxxxxx X. Xxx Equity Fund IV, L.P.
c/o Xxxxxx X. Xxx Company
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: X. Xxxxxx Xxxx
Xxxxx Xxxxxx
TO EXECUTIVE
Xxxxx Xxxxx
0000 Xxxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Telecopy: (000) 000-0000
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S.
mail.
13. GENERAL PROVISIONS.
(a) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(b) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way, other than the Consulting Agreement and the January Option Agreement.
(c) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(d) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Executive, the Company and their
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respective successors and assigns; PROVIDED that the rights and obligations of
Executive under this Agreement shall not be assignable.
(e) GOVERNING LAW. ALL ISSUES AND QUESTIONS CONCERNING THE
CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT AND THE
EXHIBITS AND SCHEDULES HERETO SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICT OF LAW RULES OR PROVISIONS (WHETHER OF THE STATE OF DELAWARE OR
ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF DELAWARE.
(f) REMEDIES. Each of the parties to this Agreement shall be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorney's fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages would not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(g) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the prior written consent of the Company and
Executive.
(h) THIRD-PARTY BENEFICIARY. There are no beneficiaries to
this Agreement other than the signatories hereto.
(i) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the state in which the Company's chief executive office is located,
the time period shall be automatically extended to the business day immediately
following such Saturday, Sunday or legal holiday.
(j) ASSIGNMENT. Nothing in this Agreement shall preclude the
Company from consolidating or merging into or with, or transferring all or
substantially all of its assets to, another corporation; PROVIDED that the
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Company to assume this Agreement. As used in this Agreement,
"COMPANY" shall mean the Company, as defined above, and any successor to its
business and/or assets as aforesaid which assumes this Agreement by operation of
law or otherwise.
(k) TAX RETURNS. It is intended that the fees paid to
Executive hereunder shall constitute revenues to Executive and (unless otherwise
required by law) the Company will not withhold any amounts therefrom as federal
income tax withholding from wages or as employee contributions under the Federal
Insurance Contribution Act or any other state or federal law. Executive shall
file all tax returns and reports required to be filed by him on the basis that
Executive
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is an independent contractor, rather than an employee, as defined in Treasury
Regulation Section 31.3121(d)-1(c)(2).
(l) MITIGATION BY EXECUTIVE. In no event shall Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not Executive obtains
other employment.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
UNITED INDUSTRIES CORPORATION
By:________________________________
Its:_______________________________
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XXXXX XXXXX
