EMPLOYMENT AGREEMENT
Exhibit 10.10
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT made as of this 21st day of August, 1995
("Agreement"), by and among IMT ACQUISITION CORP., a Delaware corporation (the
"Company"), APOLLO HOLDING, INC., a Delaware corporation ("Apollo") and XXXXXXX
X. XXXXXXXXX, an individual (the "Executive").
WITNESSETH:
WHEREAS, Apollo and the Company have entered into the Agreement and Plan of
Merger dated as of April 6, 1995 (the "Merger Agreement") with Intermetrics,
Inc., a Delaware corporation ("Intermetrics"), pursuant to which, among other
things, the Company will merge (the "Merger") with and into Intermetrics and the
holders of the then outstanding shares of the common stock of Intermetrics will
receive a price of $6.80 per share.
WHEREAS, Apollo and the Company (references hereinafter to Company include
the Surviving Corporation as defined in the Merger Agreement) wish to retain the
services of the Executive as Chairman and Chief Executive Officer of Apollo and
the Company and the Executive is willing, upon the terms and conditions herein
set forth, to serve as Chairman and Chief Executive Officer of Apollo and the
Company.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants contained in this Agreement, the Company and the Executive, intending
to be legally bound hereby, agree as follows:
1. Employment; Purchase of Apollo Common Stock.
(a) Subject to the terms and conditions hereinafter set forth, Apollo and
the Company hereby each employ the Executive as Chairman (subject to being
reelected each year by the Board of Directors of the Company) and Chief
Executive Officer of Apollo and the Company, and the Executive hereby accepts
such employment.
(b) As a condition to his employment under this Agreement, at or prior to
the Closing Date under the Merger Agreement, Executive agrees to (or to cause
AFH Partners, L.P. ("AFH") to):
(i) purchase 1 share of Common Stock of Apollo ("Common Stock") for $100
which will be exchanged at Closing for Class A Common Stock;
(ii) purchase 42,400 shares of Class A Common Stock for $265,000 (based on
a price per share of $6.25); and
(iii) contribute cash plus all of the outstanding shares of Intermetrics
owned by AFH to the capital of Apollo in an aggregate amount of $735,000
in exchange for 117,600 shares of Class A Common Stock of Apollo to be
owned by AFH (based on a price per share of $6.25).
Executive's contribution to capital will in the aggregate have a value of (A)
$735,OOO equal to 13.87% of the outstanding shares of
Common Stock of Apollo on the Closing Date, and (B) $265,000 equal to 5% of the
outstanding shares of Apollo on the Closing Date. The Executive agrees to
execute or cause AFH to execute the (i) Subscription and Stockholders Agreement
dated as of August 21, 1995, among Apollo and its stockholders (the
"Stockholders Agreement"), and (ii) Escrow Agreement dated as of June 9, 1995
among Apollo, AFH and Shereff, Friedman, Xxxxxxx & Xxxxxxx, L.L.C.
2. Term. The term of employment of the Executive by the Company pursuant to
this Agreement (the "Employment Term") shall commence with the Closing Date (as
defined in the Merger Agreement) ("Commencement Date"), and shall terminate
upon the earlier of (a) the fifth anniversary of the Commencement Date or (b)
the date on which the employment of the Executive hereunder is terminated
pursuant to Section 7 hereof.
3. Duties and Authority. During the Employment Term, the Executive shall
render his services to the Company and Apollo as Chairman and Chief Executive
Officer of the Company and Apollo. In addition to the foregoing, the Executive
shall hold, without additional compensation therefor, a seat on Apollo's and the
Company's Board of Directors, and such other offices, directorships or
memberships on committees of Apollo and/or any direct or indirect subsidiary of
Apollo to which, from time to time during the Employment Term, the Executive may
be elected or appointed. During the Employment Term, the Executive shall devote
his full business time, efforts, energy and skill solely to the business of the
Company in accordance with the reasonable directions and policies of the Board
of Directors of Apollo and in accordance with Executive's talent, skill and
experience in a prudent manner and will use his best efforts to promote the
interests thereof. The Executive may continue to serve as an outside director
for those companies and organizations listed on Schedule 5. The Executive shall
have the authority to cause and direct the business of the Company to be carried
out within the business and financial objectives of the Company's strategic,
capital and annual business plans as approved by the Board of Directors of
Apollo and the Company. Apollo and the Company shall not demote the Executive
from his position as Chief Executive Officer of the Company and Apollo.
4. Compensation.
(a) Base Salary. In consideration of the services to be rendered by
the Executive pursuant to this Agreement, including, without limitation,
any services which may be rendered by the Executive as an officer,
director or member of any committee of Apollo or any direct or indirect
subsidiary of Apollo, the Company shall pay or cause to be paid to the
Executive during the Employment Term, and the Executive shall accept,
compensation at the rate of three hundred thousand dollars ($300,000.00)
per annum (the "Base Salary"). The Base Salary shall increase by at least
five percent each anniversary date of this Agreement, plus by such
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additional amounts as may be approved from time to time by the Board of
Directors of Apollo, in its sole discretion. In addition, commencing April
1, 1997 and each April 1 thereafter during the Employment Term, the
Executive shall be paid a tax anticipation payment ("TAP") of fifty
thousand dollars ($50,000) by the Company (provided that if Executive's
employment is terminated because the Employment Term has ended, the final
payment shall be paid to Executive on the termination date). The Company's
obligation to pay Base Salary and TAP shall begin to accrue on the
Commencement Date and shall be payable in accordance with the standard
payroll practices of the Company which are in effect from time to time
during the Employment Term. The Executive's Base Salary and TAP shall be
subject to all applicable withholding and other taxes.
(b) Performance Options. Apollo hereby issues Executive options
("Performance Options") to purchase up to an aggregate maximum of 50,880
shares (the "Maximum Option Shares"), which is equal to 6% of the Common
Stock outstanding at the time of the Merger, of Class D Common Stock at
the Option price of $6.25 per share ("Option Price") which are exercisable
if the terms and conditions set forth below in this subsection (b) are
satisfied. The Performance Options shall be granted for a ten-year period
commencing on the Commencement Date, and shall become exercisable if,
subject to Section 4(e), the Executive is employed by the Company on the
date the Performance Options become exercisable (unless Executive is not
employed because of the expiration of the five-year term of this
Agreement), after the Company's receipt of its audited financial
statements for a relevant fiscal year and if:
(i) (A) For each fiscal year during the five-year fiscal
period commencing with the end of Apollo's 1997 fiscal year
((2/28/97) and ending at the end of Apollo's 2001 fiscal year
(2/28/01) (although Executive shall have a period of 90 days
thereafter to exercise the Performance Options), Executive shall be
entitled to exercise Performance Options to purchase 10,176 shares,
which is equal to 1.2% of the Common Stock outstanding at the time
of the Merger, of Class D Common Stock at the Option Price per share
if Apollo achieves the annual earnings ("Annual Earnings") and
cumulative earnings ("Cumulative Earnings") targets set forth on
Schedule 1 of this Agreement; or
(B) For each fiscal year during the five-year period
commencing with the end of Apollo's 1997 fiscal year (2/28/97) and
ending 90 days after the end of Apollo's 2001 fiscal year (2/28/01)
in which Performance Options do not become exercisable by the
Executive pursuant to the preceding subparagraph (A), the Board of
Directors of Apollo shall have the full and complete discretion to
permit exercises by the Executive of Performance Options to purchase
2,544 shares, which is equal to .3% of the Common Stock outstanding
at the
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time of the Merger, of the Class D Common Stock at the Option Price per share.
(ii) Subject to Section 4(e) (which is applicable if Executive's employment
has been terminated, other than due to the expiration of the term of this
Agreement, prior to an Exit Event), upon the occurrence of an Exit Event (as
defined below), irrespective of when such event occurs, if (x) the Cumulative
Earnings targets set forth on Schedule 1 to this Agreement up to the date when
the Exit Event occurs have been achieved, or (y) the Exit Event conditions set
forth in Section 4(c)(ii)(x) and (y) are met, the Executive shall be entitled to
exercise Performance Options to purchase the Maximum Option Shares (after
deducting the number of Performance Options previously exercised pursuant to
subsection 4(b), such adjusted number being referred to herein as the "Adjusted
Maximum Option Shares") at the Option Price per share.
(iii) Within 90 days after termination of Apollo's 2001 fiscal year, if the
Cumulative Earnings target set forth on Schedule 1 to this Agreement has been
achieved, the Executive shall be entitled to exercise Performance Options to
purchase the Adjusted Maximum Option Shares at the Option Price per share,
provided, however, that the foregoing shall not apply if the Executive's
employment has been terminated for cause or if the Executive voluntarily
terminates employment prior to the end of the Employment Term. This provision
shall apply if the Executive's employment is terminated pursuant to Sections
7(a), 7(b) or 7(c).
(iv) For purposes of this Agreement, the term "Exit Event" shall mean (A)
(I) the sale, in a single transaction or series of related transactions, of
50.01% or more of the consolidated assets of Apollo generating 50.01% of the
consolidated revenues (including Intermetrics, as successor by merger) or (II)
after September 30, 1995, a change of 50.01% or more in the beneficial ownership
of the outstanding Common Stock of Apollo or the Company on September 30, 1995
(other than changes in beneficial ownership because of transfers of Common Stock
of Apollo to Permitted Transferees as defined in the Stockholders Agreement or
pursuant to Section 5.11 of the Stockholders Agreement), (B) the merger or
consolidation of Apollo or the Company into another company where Apollo or the
Company is not the surviving entity or where the stockholders of Apollo or the
Company prior to the merger or consolidation do not own such number of the
shares of the surviving entity as is sufficient to control the surviving entity,
or (C) a public offering is completed which results in aggregate gross proceeds
of sale of at least $18,750,000, and the Company's or Apollo's outstanding
Common Stock having an aggregate market valuation of at least $75,000,000; or
the Company or Apollo has a class of common
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stock registered under the Securities Exchange Act of 1934 and the conditions
set forth in Section 4(c)(ii)(x) and (y) have been met.
(v) For purposes of this Section 4(b), Annual Earnings and Cumulative
Earnings shall be computed based upon the guidelines set forth in Schedule 1 to
this Agreement.
(c) Sale Bonus Options.
(i) Subject to Section 4(e) (which is applicable if Executive's employment
has been terminated prior to an Exit Event), in addition to the Maximum Option
Shares granted pursuant to Section 4(b) of this Agreement, Apollo hereby issues
Executive options for a ten year period commencing on the Commencement Date (the
"Sale Bonus Options") to purchase an additional 33,920 shares, which is equal to
4% of the Common Stock Outstanding at the time of the Merger, of Class D Common
Stock at the Option Price which are exercisable only if the conditions set forth
in Section 4(c)(ii)(x), (y) and (z) are satisfied. If the conditions are
satisfied the Sale Bonus Options shall be exercisable for one day only, such day
being the date of the closing of the Exit Event.
(ii) At the time of an Exit Event, the following conditions must be met:
(x) the internal rate of return to the holders of Apollo's Common Stock
who purchased at the Closing (the "Original Holders") exceeds 40% in the
aggregate, after dilution for exercise of warrants and options issued by
Apollo, based on the Common Stock issued to all Original Holders at the
Closing;
(y) the value of the Original Holders' Common Stock is at least $26.5
million in cash or in value of other consideration, after dilution for
exercise of warrants and options issued by Apollo, net of all expenses of
sale (or if some of the shares of the Original Holders' Common Stock have
been redeemed or repurchased by Apollo prior to the Exit Event and retired
and/or canceled or held as treasury stock, such lower cash or value number
equal to five times the Original Holders' investment in the shares issued
pursuant to the Stockholders Agreement and not previously redeemed,
repurchased or held by Apollo as treasury stock at the time of the Exit
Event; and
(z) after giving effect to the exercise of the Sale Bonus Options
(including the dilution resulting therefrom), the return received by the
Original Holders of the Company must be equal to or more than a 40%
internal rate of return and must be equal to or more than five times their
investment in the Securities ("Stockholder's Dilution");
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provided, however, that the Executive may exercise that portion of Sale
Bonus Options as do not cause a Stockholder's Dilution.
(d) Bonuses. The Executive shall be entitled to receive two cash
bonuses ("Cash Bonus"), each in the amount of $132,500, to be paid to the
Executive by the Company on September 15, 1996, and on September 15, 1997,
provided that on such dates the Executive is employed by the Company
pursuant to this Employment Agreement; and such Cash Bonus shall be applied
by the Executive to repay the Equity Investment Loan (as described in
Section 5 (b)). If Executive is terminated for Cause pursuant to Section
7(a) hereof, or voluntarily terminates employment, Executive shall receive
that portion of the Cash Bonus determined by multiplying the number of
months that Executive has been employed hereunder (excluding partial
months) divided by 24 and multiplied by $265,000 less any Cash Bonus which
Executive has already received; provided that such Cash Bonus is used to
pay the Equity Investment Loan.
(e) Adjustment on Termination. In the event that Executive is
terminated pursuant to Section 7(b), (c) or (d) of this Agreement prior to
an Exit Event:
(i) the following shall apply to the Sale Bonus Options
(Section 4(c) of this Agreement): at the time of the Exit Event, the
Executive shall be entitled to exercise 5% of the total Sale Bonus
Options (to the extent each would have been earned) for each
calendar quarter or portion thereof the Executive was employed by
the Company during the period from the Commencement Date to the
Termination Date up to the maximum number of Sale Bonus Options
which may be issued to Executive; and
(ii) The following shall apply to the Performance Options
(Section 4(b)(i) and (ii) of this Agreement): the Executive shall be
entitled to exercise a pro rata percentage of the Performance
Options under Section 4(b)(i) and (ii) of this Agreement (to the
extent that such Options would have been earned) for the full fiscal
year in which the Termination Date occurs determined by multiplying
10,176 by a fraction, the numerator of which is the number of fiscal
quarters or portion thereof in the fiscal year up to the Termination
Date and the denominator of which is 4.
With respect to options issued pursuant to Section 4(e)(ii), any exercise
by Executive of his put rights under Section 5.05 or 5.06 or any exercise by
Apollo of its call rights under Section 5.05 or 5.06 of the Stockholders
Agreement, shall also apply to the same percentage of Performance Options issued
under Section 4(e)(ii), except that the issuance date of such Securities shall
be deemed to be the date of exercise of such Performance Options for purposes of
calculating the Redemption Price (as defined in the Stockholders Agreement).
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All Performance Options which become exercisable shall remain vested
whether or not the Executive remains employed by the Company.
(f) Preemptive Rights. The number of Performance Options and Sales Bonus
Options shall be subject to the same anti-dilution protections, if any, that
all Stockholders of Apollo may have with respect to shares of common stock of
Apollo, as a group, on a pro rata basis with all other Stockholders including,
without limitation pursuant to Section 5.09 of the Stockholders Agreement. If
the number of Performance Options and Sales Bonus Options are adjusted pursuant
to this provision, the exercise price of said options shall be adjusted if
appropriate to maintain the relative rights of Executive and the other
Stockholders, as determined in good faith by the Board of Directors of Apollo.
(g) In the event of a stock split, stock dividend, reverse stock split or
similar change in the Company's capital structure, appropriate adjustment in the
number of option shares and the exercise price thereof shall be made by the
Board of Directors of the Company in their absolute discretion in order to
maintain the relative interests of the Company and the Executive.
5. Employment Benefits and Loans. (a) Benefits. During the Employment Term,
the Executive shall be entitled to the following employment benefits
(collectively, the "Benefits"):
(i) four weeks paid vacation in each year of the Employment Term and
sick leave in accordance with the Company's policies from time to time in
effect for executive officers of the Company;
(ii) participation, subject to qualification requirements and
provided Executive meets eligibility requirements, in medical or
hospitalization plans, life insurance policies, dental plans and long-term
and short-term disability policies which are presently in effect or
hereinafter instituted by the Company and applicable to its executive
officers generally ("Company-sponsored benefits") the Company agrees to
pay in full for Executive's coverage under such policies;
(iii) participation, subject to continued maintenance thereof by the
Company and provided Executive meets eligibility and classification
requirements, in other employee benefit plans which are from time to time
applicable to the Company's executive officers generally;
(iv) in addition to the Company's life insurance policies provided
to executive officers, the Company will pay Executive the actual cost of
life insurance premiums for life insurance obtained by the Company on the
life of Executive in the amount of $1,000,000 payable to beneficiaries
designated by Executive;
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(v) the Company shall reimburse Executive for reasonable documented
moving expenses plus any amount Executive is required to pay for income
tax as a result of receipt of such moving expenses, up to an aggregate
maximum amount of $15,000; and
(vi) the Company shall provide Executive a car in accordance with
the Company's policies with respect to cars.
Executive agrees to submit to an annual physical examination, which examination
shall take place in the metropolitan Boston or New York City area (the "Area"),
at the Company's expense prior to the execution of this Agreement with respect
to life and disability insurance to be maintained on Executive by the Company.
Each year during which this Agreement is in effect the Company agrees to pay for
one physical examination in the Area, and the Executive agrees to have such
annual physical examination. The Executive agrees to deliver to the Company
pursuant to this Agreement, copies of any physical examination reports received
from the doctor conducting the examination. The Executive's coverage under the
life and disability insurance policies referenced throughout this Agreement
shall be in force with the insurance company selected by the Company no later
than forty-five (45) days after the Commencement Date or such later date as the
Company can obtain such policies using its best efforts.
(b) Loans. On the Closing Date under the Merger Agreement, Apollo
shall cause the Company to make a loan to the Executive in the aggregate
amount of $265,000 (the "Equity Investment Loan"), which Equity
Investment Loan shall be a full recourse loan to the Executive, of which
the Executive shall use the Equity Investment Loan solely to purchase
42,400 shares of Class A Common Stock of Apollo (based on a price per
share of $6.25). A form of the secured promissory note evidencing the
Equity Investment Loan is attached hereto as Schedule 2 to this Agreement
(the "Note") and a Pledge Agreement securing payment of the Note is
attached hereto as Schedule 3. Upon termination of employment, Executive
shall apply any Cash Bonus received at termination to the Equity
Investment Loan and to the extent the Equity Investment Loan is not paid
in full, the Executive shall have forty-five days from the date of
termination to pay off the Note. If the Note is not paid within such time
period, the balance of the Note shall be canceled and Executive shall
endorse over to the Company that number of shares purchased by the Note
and not paid for upon cancellation of the Note in accordance with the
Pledge Agreement. Commencing on December 1, 1995 and on December 1 of each
year thereafter during the Employment Term, the Executive shall be paid an
amount equal to the pre-tax amount of the interest charged to the
Executive for the $265,000 Equity Investment Loan made to the Executive
("Interest Component"). The Interest Component shall be subject to all
applicable withholding and other taxes.
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6. Expenses. During the Employment Term, the Company will reimburse the
Executive, upon presentation of proper vouchers, for all reasonable travel,
entertainment and other out-of-pocket expenses reasonably and appropriately
incurred by the Executive in the performance of his duties hereunder.
7. Termination.
(a) Cause. The Company may, at any time, and in its sole discretion,
terminate the employment of the Executive hereunder for Cause, effective
as of the date (the "Termination Date") of written notice (the
"Termination Notice") to the Executive specifying the nature of such
Cause. For purposes of this Agreement, "Cause" shall mean if the Executive
(i) fails or refuses to act in any material respect in accordance with the
reasonable directions of the Board of Directors or Chief Executive Officer
of Apollo or the Company in a manner that would constitute an act of
insubordination or is in continuing willful material breach of this
Agreement; provided, however, that in such case the Company shall give
Executive a Termination Notice specifying the directions the Executive
failed to follow or the material breach of this Agreement, and the
Executive shall have a reasonable period of time after the date of the
notice to cure such action; (ii) has been convicted of a felony; or (iii)
has committed any act of fraud, misappropriation of funds or embezzlement
in connection with his employment. During the cure period referred to in
subsection (i) the Board of Directors of Apollo may cause the Company to
suspend the employment of the Executive hereunder if the conduct of the
Executive constituting Cause is deemed to have a potential negative effect
on the Company in the Board of Director's sole determination. If the
Executive has not cured such action within the specified cure period, the
employment of the Executive shall be terminated by the Company for Cause.
If the employment of the Executive hereunder is terminated pursuant to
this Section 7(a), the Company and Apollo shall have no further
obligations to the Executive hereunder after the Termination Date other
than the payment of Base Salary accrued and unpaid under Section 4 hereof
through the Termination Date, or except as otherwise provided by law.
(b) Termination by the Company for actions other than Cause. After
two years from the date of closing of the Merger, for actions other than
Cause, the Company may, at any time, and in its sole discretion, terminate
the employment of the Executive hereunder for any or no reason by delivery
to him of a Termination Notice; provided, however, the Company may not
terminate Executive for any reason other than for Cause if the Annual and
Cumulative Targets set forth on Schedule 1 are being met. Such termination
shall be effective on the date of the Termination Notice; provided,
however, that (i) the Company shall continue to pay the Executive, for a
period ("Payment Period") of the lesser of (i) thirty-six (36) months
following the Termination Date, or (ii) the remaining term of this
Agreement, the Executive's Base Salary (not to exceed
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an aggregate amount of $900,000 or $25,000 per month) plus TAP in
accordance with the provisions of Section 4(a) hereof and medical benefits
as in effect during the year of such termination and disability benefits
set forth in Section 7(c) (payment by the Company for Base Salary shall be
mitigated to the extent that during the 24 to 36 month period following
the termination hereunder (to the extent any of such period is part of the
Payment Period), Executive becomes employed by a third party and payment
by the Company for TAP, medical and disability insurance coverage for the
Executive shall be terminated at the earlier of the end of the Payment
Period or when Executive becomes employed by a third party); and (ii) the
benefits in Section 4(e) of this Agreement shall apply. The Executive
shall also be entitled to exercise the applicable "put" provision under
the Stockholders Agreement with respect to shares of Apollo Common Stock
owned by the Executive set forth in the Stockholders Agreement. If the
employment of the Executive hereunder is terminated pursuant to this
Section 7 (b) the Company and Apollo shall have no further obligations
hereunder except as expressly provided herein, or as otherwise provided by
1aw.
(c) Disability.
(i) Temporary Disability. In the event that any time during the
Employment Term, the Executive, due to physical or mental injury, illness,
disability or incapacity, shall fail to render satisfactorily the services
to be performed by the Executive under this Agreement either for a
consecutive period of three (3) months or for a non-consecutive period of
six (6) months within any twelve month period, the Board of Directors of
the Company may, at its option, determine that such disability is long
term or place the Executive on temporary disability leave during the
subsequent pendency of such injury, illness, disability or incapacity for
a period of up to three (3) months or until subparagraph (c)(ii) becomes
applicable if the Executive is disabled for more than three months, during
which period the Company shall continue to pay (to the extent not paid
pursuant to disability insurance provided by the Company) to the Executive
the Base Salary as provided in Section 4(a) and the Company-Sponsored
Benefits, but only to the extent permitted by such policies or plans.
(ii) Long-Term Disability. If such injury, illness, disability or
incapacity persists and is long-term (any such disability shall be deemed
to be long-term in nature if the Executive's physician advises the Board
of Directors of Apollo that such disability can be expected to last for a
period of at least six consecutive months or for a period of 6 months in
any 12 month period) and Executive meets the definition of disability
under the Company's disability policies, the Company shall have the option
at any time after the Executive is on disability leave to terminate the
employment of the Executive hereunder upon not less than thirty (30) days'
written notice to the Executive. In addition to the Company's rights set
forth in the preceding sentence, if at any
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time the Company receives the written opinion of two doctors (one doctor
to be selected by each of the Company and the Executive, and if such
doctors disagree as to whether the Executive is suffering from a long-term
disability, a third doctor will be selected mutually by the Executive and
the Company, whose determination will be final) that the Executive cannot
render satisfactorily the services to be performed by him under this
Agreement because of a long-term disability, the Board of Directors of the
Company may terminate the Executive's employment hereunder within thirty
(30) days of receipt of such doctors' reports. The Company can require
Executive to have the physical examinations described in the preceding
sentence at any time for the purpose of determining whether or not
Executive has a long-term disability, and Executive agrees to submit to
such examinations upon request of the Company. If the employment of the
Executive hereunder is terminated pursuant to this Section 7(c) because of
a long-term disability, the Executive shall receive the following from the
Company (i) benefits under the Company's long-term disability policy and
medical benefits for a period commencing on the Termination Date and
ending on Executive's sixty-fifth birthday, (ii) for the first 12 months
following disability, $25,000 per month, TAP, Interest Component and Bonus
(less amounts received under subparagraph (i) above), and thereafter
$10,000 per month (less amounts received under subparagraph (i) above) or
such greater amount as the Company's regular disability insurance policy
permits, (iii) the rights set forth in Section 4(e) of this Agreement, and
(iv) at no greater out-of-pocket cost to the Executive than incurred prior
to termination, the Company-sponsored Benefits, but only to the extent
permitted by such policies or plans. The Executive shall also be entitled
to exercise the applicable "put" provision contained in the Stockholders
Agreement with respect to shares of Apollo Common Stock owned by the
Executive subject to the limitations set forth in the Stockholders
Agreement. If the employment of the Executive hereunder is terminated
pursuant to this Section 7(c), the Company and Apollo shall have no
further obligations hereunder except as expressly provided under this
Section 7(c), or as otherwise provided by law.
(iii) Executive's Health. Executive hereby represents to Apollo and
the Company that as of the date of execution of this Agreement, and that
to the best of his knowledge, he is in good health and is not aware of any
health condition that could lead to a temporary or long-term disability.
(d) Death. If the Executive dies during the Employment Term, the
employment of the Executive hereunder shall terminate immediately upon the
death of the Executive. If the employment of the Executive hereunder is
terminated pursuant to this Section 7(d), the Company and Apollo shall
have no further obligations hereunder after the Termination Date other
than the payment to the Executive's estate, legal representatives, heirs,
successors, assigns or other beneficiaries of (i) accrued Base Salary (as
in effect during the year of such death) up to the date of the
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Executive's death, (ii) the rights set forth in Section 4(e) of this
Agreement, and (iii) at no greater out-of-pocket cost to the Executive
than incurred prior to termination, the Company-sponsored Benefits, but
only to the extent permitted by such policies or plans. The Executive's
estate, legal representatives, heirs, successors, assigns or other
beneficiaries shall be entitled to the benefit of the exercise of the
applicable "put" provision under the Stockholders Agreement with respect
to Apollo's Common Stock owned by the Executive at his death subject to
the limitations set forth in the Stockholders Agreement. If the employment
of the Executive hereunder is terminated pursuant to this Section 7(d)
the Company shall have no further obligations hereunder except as
expressly provided under this Section 7(d), or as otherwise provided by
law.
(e) Change of Control. In the event that there is a change of
control of the Company, including an Exit Event (as defined in Section
4(b)(iv) hereof) other than a public offering of 20% or more of the common
stock of Apollo or the Company (a "Change of Control"), which Change of
Control event is being negotiated or takes place at any time during which
Executive's full time employment is continuing hereunder, and this
Agreement is expressly assumed by the party effecting such Change of
Control, the Executive shall subject to the terms hereof continue to
render his services to the Company pursuant to Section 3 above, for a
period of 18 months from the date of the consummation or closing of the
event constituting the Change of Control, even if it is beyond the term of
this Agreement, after which period the Executive may elect to discontinue
his services to the Company. Notwithstanding any such discontinuance by
the Executive, the Company shall continue to pay the Executive his Base
Salary plus TAP, in accordance with Section 4 hereof, and shall continue
to provide Benefits (as defined in Section 5 hereof) to the Executive, in
each case for the remainder of the Employment Term.
(f) Notice of Termination. Any termination of the Executive's
employment by the Company pursuant to Section 7(a), (b), (c) or (d) shall
be communicated by a written Termination Notice to the Executive in
accordance with Section 11 hereof. For purposes of this Agreement, a
"Termination Notice" shall mean only a notice which is based upon, and
shall indicate, the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(g) Voluntary Termination. If the Executive voluntarily terminates
his employment hereunder, the Company and Apollo shall have no further
obligations to the Executive hereunder after the date of voluntary
termination other than the payment of Base Salary and TAP accrued and
unpaid under Section 4 hereof through the date of voluntary termination,
or except as otherwise provided by the
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Stockholders Agreement or by law, except that Performance Options that
have vested shall remain vested.
8. Disclosure of Information. The Executive shall not, during or after the
Employment Term, disclose any confidential or proprietary information of the
Company to any person, firm, corporation, association, limited liability
company, or other entity (other than the Company, its affiliates or subsidiaries
or officers thereof or other than as necessary in the performance of his duties
as Executive) for any reason or purpose whatsoever, nor shall the Executive make
use of any such confidential or proprietary information for his own purpose or
for the benefit of any person, firm, limited liability company, corporation or
other entity, except the Company. As used in this Section 8, the term
"confidential or proprietary information" means all information which is known
to the Company or the Executive or to employees, former employees, consultants
or others in a confidential relationship with the Company, is specific to the
Company or is developed by the Company regarding the industry and relates to
matters such as trade secrets, research and development activities, computer or
multimedia related software or software concepts in development, books and
records, customer lists, vendor lists, suppliers, distribution channels, pricing
information and private processes as they may exist from time to time which the
Executive acquired or obtained by virtue of work heretofore performed for the
Company; provided, that the term "confidential or proprietary information" shall
not include (i) information that is or becomes generally available to the public
(other than as a result of an unauthorized disclosure by the Executive), (ii)
information which must be disclosed by law but only to the extent necessary to
comply with such law, and (iii) information which must be disclosed in order for
him to carry out his duties under this Agreement but only to the extent
necessary to carry out said duties.
9. Noncompetition. The Executive agrees to the noncompetition provisions
set forth in Schedule 4 hereto. The parties mutually agree to the importance of
the provisions of Schedule 4 to this Agreement and to Apollo's decision to
purchase Intermetrics.
10. Conflicting Agreements. The Executive hereby represents and warrants to
the Company that (a) neither the execution of this Agreement by the Executive
nor the performance by the Executive of any of his obligations or duties
hereunder will conflict with or violate or constitute a breach of the terms of
any employment or other agreement to which the Executive is a party or by which
the Executive is bound, and (b) the Executive is not required to obtain the
consent of any person, firm, corporation, limited liability company or other
entity in order to enter into this Agreement or to perform any of his
obligations or duties hereunder.
11. Notices. Any notice, request, information or other document to be given
under this Agreement to any party by any other
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party shall be in writing and delivered personally, sent by registered or
certified mail, postage prepaid, delivered by a nationally recognized overnight
courier service or transmitted by facsimile machine addressed as follows:
If to the Company or Apollo:
Apollo Holding, Inc.
c/o Xxxx X. Xxxx/Xxxxx X. Xxxxxxx, L.L.C.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Windels, Marx, Davies & Ives
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Facsimile No. (000) 000-0000
-and-
Intermetrics, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxxxxx 00000
Attention: Chief Executive Officer
Facsimile No. (000) 000-0000
If to the Executive:
Xxxxxxx X. Xxxxxxxxx
00 Xxxxx Xxxxxx Xxxx
Xxxxxx Xxxxx, Xxx Xxxxxx 00000
Facsimile No. (000) 000-0000
or at his then current address included in the employment
records of the Company
with a copy to:
Shereff, Friedman, Xxxxxxx & Xxxxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxx, Esq.
Facsimile No. (000) 000-0000
or to such other address as a party hereto may hereafter designate in writing to
the other party, provided that any notice of a change of address shall become
effective only upon receipt thereof.
12. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the Company and the
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Executive and their respective heirs, legal representatives, successors and
permitted assigns.
13. Entire Agreement. This Agreement and the Stockholders Agreement contain
the entire understanding between the Company, Apollo and the Executive with
respect to the employment of the Executive and supersedes all prior negotiations
and understandings between the Company, Apollo and the Executive with respect to
the employment of the Executive by the Company. This Agreement may not be
amended or modified except by a written instrument signed by the Company, Apollo
and the Executive.
14. Severability. In the event any one or more provisions of this Agreement
is held to be invalid or unenforceable, such illegality or unenforceability
shall not affect the validity or enforceability of the other provisions hereof
and such other provisions shall remain in full force and effect, unaffected by
such invalidity or unenforceability.
15. Applicable Law; Submission to Arbitration. This Agreement and the
rights, obligations and relations of the parties hereto shall be governed by
and construed and enforced in accordance with the laws of the State of New York
without giving effect to the principles of conflicts of law thereof. If there is
a conflict between the laws of New York and any other state with respect to this
Agreement, the provisions of New York law shall govern, except that with respect
to corporate matters concerning Apollo or the Company, Delaware law shall
govern.
Any disputes hereunder which cannot be resolved by negotiation between the
parties hereto shall be submitted to, and determined by, arbitration in
accordance with the Arbitration Rules of the American Arbitration Association,
and the parties hereto agree to be bound by the final award of the arbitration
panel (which shall be comprised of three members, one to be selected by each of
Apollo and the Executive, and the third to be mutually selected by Apollo and
the Executive) in any such proceeding. The arbitration panel shall apply the law
of the State of New York. Arbitration may be held in the State of New York, the
Borough of Manhattan, or such other place as the parties hereto may mutually
agree. Judgment upon the award by the arbitration panel may be entered and
enforced in any court having jurisdiction thereof. The arbitration panel may
order injunctive relief against any party.
16. Headings. The headings of sections and subsections of this Agreement
are for convenience of reference only and are not to be considered in construing
this Agreement.
17. Execution in Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all of
which, when taken together, shall constitute one and the same instrument.
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18. Indemnification.
(a) The Company and Apollo shall indemnify and hold harmless Executive to
the fullest extent permitted by law as it presently exists or may be hereafter
amended, if Executive is a party or is threatened to be made party to any action
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that Executive is or was a director or officer of the Company
or Apollo, or is or was serving at the request of the Company or Apollo any
other enterprise as a director, officer, employee or agent; provided, however,
the Company and Apollo shall not indemnify Executive for any proceeding
initiated by him unless the proceeding was authorized by the Board of
Directors. Executive shall not be liable to the Company, Apollo or their
stockholders for monetary damages for breach of fiduciary duty as a director,
except of liability (i) for any breach of the director's duty of loyalty to
Apollo or the Company or their respective stockholders; (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under Section 174 of the Delaware General
Corporation Law; or (iv) for any transaction from which the Executive derived an
improper personal benefit. The Company and/or Apollo shall be entitled to direct
the defense of any claim for which it is providing indemnification, at the
Company's expense. The Company and/or Apollo shall keep Executive informed on a
timely basis of the status of all legal proceedings relating to this
indemnification and shall provide copies of all documents relating the legal
proceedings to Executive or at his request, Executive's legal counsel.
(b) The Company and Apollo shall also indemnify Executive for advance
expenses incurred in connection with any proceeding described above to the
fullest extent permitted by Section 145(e) of the General Corporation Law as in
effect on the date hereof or as it may be hereafter amended. Expenses incurred
in defending any threatened or pending civil, criminal, administrative or
investigative action, suit or proceeding shall be paid by Apollo and the Company
in advance of the final disposition of such action, suit or proceeding, to the
extent permitted by law, upon receipt of an undertaking by or on behalf of the
Executive to repay such amount if it is ultimately determined, in a final
non-appealable judgment of a court of competent jurisdiction, that Executive is
not entitled to be indemnified against such expenses. This undertaking by
Executive shall be an unqualified general undertaking, but no security for such
undertaking will required.
(c) Executive's right hereunder will be in addition to any indemnification
provided to Executive by any law, agreement, Board resolution, provision of the
Articles of Incorporation (or Certificate of Incorporation) or By-laws of the
Company or Apollo, or otherwise. All of Executive's rights hereunder will
continue even after Executive has ceased to be a director, officer, employee or
agent of the Company and/or Apollo for any reason, will inure to
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the benefit of the heirs, executors and administrators of Executive, and will
survive termination of this Agreement. Apollo and the Company shall be jointly
and severally liable to Executive with respect to any amounts which become due
to be paid to or for the benefit of Executive hereunder.
19. Securities Purchase Agreements. The Executive agrees and he shall cause
AFH Partners, L.P. to agree not sell any Securities (as defined in the
Stockholders Agreement) if such sale would cause a default under Section
9.7(b)(II) of the Securities Purchase Agreements dated August 31, 1995 between
the Company, Apollo and each of Massachusetts Mutual Life Insurance Company,
MassMutual Corporate Investors, MassMutual Participation Investors, MassMutual
Corporate Value Partners Limited.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
IMT ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Treasurer
APOLLO HOLDING, INC.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Treasurer
/s/ Xxxxxxx X. Xxxxxxxxx
--------------------------------
XXXXXXX X. XXXXXXXXX
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SCHEDULE 1
EBITDA DEFINITION
This definition of EBITDA is intended to clearly define earnings derived
solely from the normal operations of the Company on a consolidated basis (for
the President and the Chief Executive Officer, excluding the earnings which
result from the acquisition of any business after the closing ("Closing") of the
Merger Agreement).
EBITDA, with respect to any fiscal period, shall be obtained from the
Company's consolidated annual audited income statement and shall be defined as
follows:
(i) Operating income plus interest income and less interest expense;
(ii) plus depreciation, amortization and other similar non-cash charges,
software development and design and research and development
expenses in the aggregate in excess of $100,000 not reimbursed by a
third party at the time of the expense;
(iii) plus consulting fees described in Sections 3(a)(i) and (ii) of the
Consulting Agreement between the Company and Xxxx X. Xxxx/Xxxxx X.
Xxxxxxx, L.L.C. and the Consulting Agreement between the Company and
the Westgate Capital Co.;
(iv) plus any charges to income related to the grant, issuance or
exercise of stock options to management of, or lenders to, Apollo,
the Company or their subsidiaries;
(v) less extraordinary and nonoperating gains and plus extraordinary and
nonoperating losses, including, without limitation, any prepayment
penalties resulting from the retirement of debt before its scheduled
repayment date;
(vi) plus any expenses incurred or minus reimbursement received, both net
of reserves, in settlement of any claims or other items related to
the assets and liabilities of Apollo or the Company for events
occurring prior to the closing of the Merger Agreement;
(vii) plus the special bonuses to be paid to Xxxxxxx X. Xxxxxxxxx by the
Company on September 15, 1996 and September 15, 1997;
(viii) plus travel, lodging and entertainment expense for Directors of
Apollo and the Company;
(ix) minus gains or plus losses from the sale of assets other than
write-offs in the ordinary course of business;
(x) plus charges amortized or expensed relating to future acquisitions
of Apollo or the Company;
(xi) plus extraordinary litigation expenses and extraordinary legal and
accounting expenses;
(xii) plus amortization or expenses relating to asset write-ups in
connection with the acquisition of the Company; and
(xiii) plus in the first twelve months only, expenses for special
consultants, not in the ordinary course, but this adjustment shall
be limited to a maximum of $100,000.
In the event of a loss from a catastrophe or other casualty loss, an act of
God (including, but not limited to, fire, flood, wind damage, lightning or other
event), industrial sabotage, labor strikes, disputes or work stoppages or any
other unforeseen event (whether at the Company or at any of its vendors), which
such event or events shall cause a disruption or cessation of all or a portion
of the normal business operations of the Company for a period of forty-eight
hours or longer, then for purposes of the determination of operating earnings,
to the extent that the Company is not reimbursed by its business interruption
insurance policy, the final amount will be credited with an amount equal to the
product of the daily average operating earnings for the period of the Company's
normal business operation for the two most recent fiscal years (as adjusted by
an aggregate annual amount [including depreciation and amortization as set forth
in Intermetrics' financial statements] of plus $1,915,000 for 1994 and by plus
$3,257,000 for 1995, respectively), whichever is larger, and the number of days
that the normal business operations were disrupted or ceased.
SPECIFIC ANNUAL AND CUMULATIVE TARGETS(1)
($ In Thousands)
EBITDA LESS INTEREST EXPENSE INTEREST
EXPENSE
FISCAL CUMULATIVE ASSUMED IN
YEAR ANNUAL TARGET TARGET ANNUAL TARGET
------ --------------- ------------- ---------------
1996(2) (STUB) $ 1,906 $ 1,906 $ 667
l997(3) 5,002 6,908 1,333
1998 7,247 14,155 1,321
1999 7,379 21,534 1,290
2000 8,330 29,864 1,246
2001 9,159 39,023 1,183
----------------------
(1) Targets are stated after interest expense. Interest expense is assumed to
be 10% for purposes of the target figures and interest expense is based on
the scheduled amortization of the senior and subordinated notes; however,
the target figures will be increased or decreased by the difference between
the 10% interest rate and the actual interest rate.
(2) This achievement will be measured from the date of closing through the end
of the fiscal year and pro-rated against a full year achievement target
EBITDA less Interest Expense of $3,812.
(3) The stub year (1996) will be added with the first full fiscal year (1997)
to determine both the annual and cumulative target for the first of the
five fiscal years for which Performance Options may be earned pursuant to
Section 4(b) of the Employment Agreement.
SCHEDULE 2 and SCHEDULE 3
See Tab 25
Schedule 4
Non-Competition
The Executive hereby acknowledges and recognizes his possession of
confidential or proprietary information and the competitive nature of the
business of Apollo, the Company and any of their direct or indirect subsidiaries
(referred to in this Schedule 4, as the "Company") and accordingly agrees that,
in consideration of the premises contained herein, he will not, from and after
the Employment Term and for a period of three (3) years following the
termination of employment for any reason whatsoever under this Agreement, (i)
directly or indirectly engage in any Competitive Business (as hereinafter
defined), whether such engagement shall be as an employer, officer, director,
owner, employee, partner or other participant in any of the (A) states of the
United States or (B) other geographic areas outside the United States in which
the Company currently, or at any time during Employment Term or the three year
period after Executive's termination, is doing business, (ii) assist others in
the foregoing clause (i), or (iii) induce employees of the Company to terminate
their employment with the Company or engage in any Competitive Business in any
of the (A) states of the United States or (B) other geographic areas outside the
United States in which the Company currently, or at any time during Employment
Term or the three year period after Executive's termination, is doing business.
The Executive's ownership of not more than the lesser of $500,000 of value or
one quarter of one percent (.25%) of the outstanding capital stock of any public
corporation shall not (in itself) be deemed to be engaging in any Competitive
Business for purposes of this Section. As used in this Section, the term
"Competitive Business" means and includes any business, whether serving
government, commercial, private or other customers, in which the Company is
engaged in, or proposes to engage in pursuant to actual proposals or bona fide
plans to propose, during the period Executive is employed by the Company or the
two years prior to the closing of the Merger, including, without limitation
(i) systems engineering, software design services and software coding
including (x) analysis and design, (y) coding development, test and
integration and (z) operational support and maintenance;
(ii) multimedia programming services, development software, computer
multimedia systems;
(iii) tools for embedded systems development; and
(iv) software for operation and testing of manufacturing plants and
products.
Executive agrees that during the term of this Agreement, without the prior
written consent of the Company, the Executive shall not (i) solicit, employ or
otherwise engage, or assist in the
solicitation, employment or engagement as an employee, independent consultant or
otherwise, any person who is an employee of the Company or was an employee of
the Company during the 18 months prior to Executive's termination, or in any
manner induce or attempt to induce any employee of the Company to terminate his
or her employment with the Company; or (ii) tortiously interfere with the
relationship of the Company with any person, including any person who at any
time during Executive's employment with the Company was an employee, a
customer, a vendor, a supplier or a consultant of, or to, the Company.
The parties mutually agree to the importance of the provisions of this
Schedule 4 to the Employment Agreement with respect to Apollo's acquisition of
the Company pursuant to the Merger Agreement.
SCHEDULE 5
Non-Profit Organizations
on which Executive serves as a Director
1. National Urban League
2. Bloomfield College
3. A+ For Kids Teachers Foundation
4. Foundation for Minority Interests
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