EXHIBIT 2.I.1
RELEASE AND COVENANTS AGREEMENT
THIS RELEASE AND COVENANTS AGREEMENT (this "Agreement"), is made as of the
7th day of June, 2002, by and between AMERICAN CAPITAL STRATEGIES, LTD., a
Delaware corporation with its principal place of business at 0 Xxxxxxxx Xxxxx
Xxxxxx, 00xx Xxxxx, Xxxxxxxx, Xxxxxxxx 00000 (the "Corporation"), and XXXX
XXXXXXXXXX, an individual residing at 000 Xxxx 00xx Xxxxxx, Xxxxxxxxx #0X, Xxx
Xxxx, Xxx Xxxx 00000 ("Xxxxxxxxxx").
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to a certain Second Amended and
Restated Employment Agreement dated as of May 12, 2001 (the "Employment
Agreement"); and
WHEREAS, as of even date herewith, the Corporation and Xxxxxxxxxx are
entering into the Amended and Restated Split Dollar Agreement (the "Amended
Split Dollar Agreement"), and the obligations of Xxxxxxxxxx set forth below,
including certain covenants concerning confidential information, competition and
solicitation of employees, are important considerations for the Corporation's
agreement to provide benefits to Xxxxxxxxxx under the Amended Split Dollar
Agreement.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements and covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. Special Payment; Termination of Employment.
(a) The Corporation has paid to Xxxxxxxxxx the amount of $21,000, less
applicable withholding taxes, in consideration of certain services rendered in
connection with the Corporation's investment in Goldman Industrial Group
("Goldman"). Such payment shall not be considered to be compensation for
purposes of the Corporation's bonus plan. However, Xxxxxxxxxx will be entitled
to a special bonus equal to ($33,000/($25,000*X))*.02*Y, where X = the lesser of
10.5 and the number of months between 2/15/02 and the earlier of 6/30/03 and the
Determination Date (as defined herein), and Y = the value of the current ACAS
investment in Goldman as of such date (the "Valuation Date"). The "Determination
Date" is the date on which a Plan of Reorganization is consummated in the
Goldman bankruptcy proceeding, or, if sooner, the date on which at least
one-half of the Corporation's Goldman notes are assumed by an entity other than
Goldman or paid or restructured in connection with a Section 363 sale. The value
of such ACAS investment as of the Valuation Date shall be the most recent
valuation on or before the Valuation Date as used by ACAS for its public
reporting purposes, unless another value is readily ascertainable from the plan
of reorganization or Section 363 sale as of the Determination Date. Such bonus
will be paid promptly following its determination and will be subject to
customary withholding requirements.
(b) Xxxxxxxxxx'x employment with the Corporation and the Employment
Agreement will be deemed to terminate as of the date hereof for all purposes
including, without limitation, the Corporation's Employee Stock Ownership Plan,
the Corporation's stock option plans and the Corporation's stock option loan
plans.
2. Mutual Release.
(a) Xxxxxxxxxx, on his own behalf and on behalf of his heirs,
representatives and assigns, hereby waives, releases, and forever and
irrevocably discharges the Corporation, and its agents, attorneys, officers,
directors, employees, successors and assigns (collectively, the "Corporation
Released Parties") from any and all obligations, debts, demands, claims and
liabilities of every kind and nature, either in law or in equity, that
Xxxxxxxxxx may now have, may in the future have or may ever have had, against
the Corporation Released Parties arising in any manner from or in any manner
related, directly or indirectly, to Xxxxxxxxxx'x service or employment as a
director, officer and/or an employee of the Corporation including, without
limitation, the circumstances relating to the termination thereof; excepting
only the continuing obligations of the Corporation resulting from the provisions
of the Option Exercise Agreement entered into by and among the parties hereto
bearing the date of August 6, 1999, this Agreement and the Amended Split Dollar
Agreement (collectively, the "Surviving Agreements").
(b) The Corporation, on its own behalf and on behalf of its successors and
assigns, hereby waives, releases, and forever and irrevocably discharges
Xxxxxxxxxx, and his agents, attorneys, heirs, representatives and assigns
(collectively, the "Xxxxxxxxxx Released Parties") from any and all obligations,
debts, demands, claims and liabilities of every kind and nature, either in law
or in equity, that the Corporation may now have, may in the future have or may
ever have had against the Xxxxxxxxxx Released Parties arising in any manner from
or in any manner related to, directly or indirectly, Xxxxxxxxxx'x service or
employment as a director, officer and/or an employee of the Corporation
including, without limitation, the circumstances relating to the termination
thereof; excepting only the continuing obligations of Xxxxxxxxxx resulting from
the provisions of the Surviving Agreements.
3. Covenants of Xxxxxxxxxx
(a) Certain Definitions. For purposes of this Agreement, the following terms
shall have the following respective meanings:
"Board of Directors" shall mean the Board of Directors of the Corporation.
"Confidential Information" shall mean information concerning the business
activities and plan for business activities of the Corporation, its affiliates
and its portfolio companies (including, without limitation, methods, procedures,
practices, products, files, documents, computer programs, customer lists and
requirements, financial data, and costs and billing practices).
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust and an unincorporated organization.
(b) Confidential Information
(i) Xxxxxxxxxx recognizes that the services to be performed by him for
the Corporation were special, unique, and extraordinary and that, by reason
of his employment with the Corporation, he has acquired Confidential
Information concerning the operation of the Corporation, the use or
disclosure of which would cause the Corporation substantial loss and damages
that could not be readily calculated and for which no remedy at law would be
adequate. Accordingly, Xxxxxxxxxx agrees that he will not (directly or
indirectly) at any time, (i) knowingly use for an improper
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personal benefit or for the benefit of another Person with whom Xxxxxxxxxx
is affiliated any Confidential Information that he may learn or has learned
by reason of his employment with the Corporation or (ii) disclose any such
Confidential Information to any Person except (A) as required by applicable
law, (B) in connection with the enforcement of his rights under this
Agreement, (C) in connection with any disagreement, dispute or litigation
(pending or threatened) between Xxxxxxxxxx and the Corporation or (D) with
the prior written consent of the Board of Directors. As used herein,
"Confidential Information" includes information with respect to Subject
Investments; provided, however, that such term, shall not include any
information that (x) is or becomes generally known or available other than
as a result of a disclosure by Xxxxxxxxxx, (y) is or becomes known or
available to Xxxxxxxxxx on a non-confidential basis from a source (other
than the Corporation) that, to Xxxxxxxxxx'x knowledge, is not prohibited
from disclosing such information to Xxxxxxxxxx by a legal, contractual,
fiduciary or other obligation to the Corporation or (z) with regard to
Subject Investments, is or becomes known or available to Xxxxxxxxxx other
than by or through the Corporation.
(ii) Xxxxxxxxxx confirms that all Confidential Information is the
exclusive property of the Corporation. All business records, papers and
documents kept or made by Xxxxxxxxxx while employed by the Corporation
relating to the business of the Corporation shall be and remain the property
of the Corporation at all times. Upon the request of the Corporation at any
time, Xxxxxxxxxx shall promptly deliver to the Corporation, and shall retain
no copies of, any written materials, records and documents made by
Xxxxxxxxxx or coming into his possession while employed by the Corporation
concerning the business or affairs of the Corporation other than personal
materials, records, documents (including notes and correspondence) of
Xxxxxxxxxx not containing proprietary information relating to such business
or affairs, and board materials previously provided to Xxxxxxxxxx in
connection with his role as a member of the Corporation's Board of
Directors. Notwithstanding the foregoing, Xxxxxxxxxx shall be permitted to
retain copies of, or have access to, all such materials, records and
documents relating to any disagreement, dispute or litigation (pending or
threatened) between Xxxxxxxxxx and the Corporation. In addition, Xxxxxxxxxx
shall be entitled to retain a copy of the Corporation's Outlook database as
such exists on or prior to the date of the Agreement.
(c) Covenant Not to Compete or Solicit
(i) For so long as the Amended Split Dollar Agreement shall remain in
effect (the "Restricted Period"), Xxxxxxxxxx, unless he receives the prior
written consent of the Board of Directors, shall not own an interest in,
manage, operate, join, control, lend money or render financial or other
assistance to or participate in or be connected with, as an officer,
employee, partner, stockholder, consultant or otherwise, any Person (each, a
"Subject Person") (i) that competes with the Corporation or any wholly-owned
subsidiary of the Corporation in investing or consulting with small or
medium sized businesses in the United States with regard to change in
control transactions, a result of which is an employee stock ownership plan
that owns more than 51% of the subject business or (ii) that solicits, for
the purpose of providing debt or equity financing, or provides debt or
equity financing to any Person (each, a "Subject Investment") (A) who is
listed on Appendix A hereto, (B) to whom the Corporation or a wholly-owned
subsidiary of the Corporation is currently a lender or in which the
Corporation or a subsidiary of the Corporation is currently an investor
other than as a result of the ownership of publicly-traded
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securities or (C) where the Xxxxxxxxxx first learned of a lending or
investing opportunity with regard to such Person from or through the
Corporation. The Board of Directors shall not unreasonably withhold its
consent to a transaction whereby a Subject Person would purchase a
controlling interest in a Subject Investment.
(iii) Xxxxxxxxxx has carefully read and considered the provisions of
this Paragraph 3(c) and, having done so, agrees that the restrictions set
forth in this Paragraph 3(c) (including the Restricted Period, scope of
activity to be restrained and the geographical scope) are fair and
reasonable and are reasonably required for the protection of the interests
of the Corporation, its officers, directors, employees, creditors and
shareholders. Xxxxxxxxxx understands that the restrictions contained in this
Paragraph 3(c) may limit his ability to engage in a business similar to the
Corporation's business, but acknowledges that he will receive sufficiently
high remuneration and other benefits from the Corporation hereunder to
justify such restrictions.
(iv) During the Restricted Period, Xxxxxxxxxx shall not, whether for his
own account or for the account of any other Person (excluding the
Corporation), intentionally (i) solicit, endeavor to entice or induce any
employee of the Corporation to terminate his employment with the Corporation
or accept employment with anyone else or (ii) interfere in a similar manner
with the business of the Corporation, except for those employees who the
Corporation and Xxxxxxxxxx agree are exempt from the applicability of this
paragraph at the time of hiring.
(v) In the event that any provision of this Paragraph 3(c) relating to
the Restricted Period or the areas of restriction shall be declared by a
court of competent jurisdiction to exceed the maximum time period or areas
such court deems reasonable and enforceable, the Restricted Period or areas
of restriction deemed reasonable and enforceable by the court shall become
and thereafter be the maximum time period and/or areas.
(e) Injunctive Relief. Xxxxxxxxxx acknowledges that a breach of any of the
covenants contained in this Article 5 may result in material irreparable injury
to the Corporation for which there is no adequate remedy at law, that it will
not be possible to measure damages for such injuries precisely and that, in the
event of such a breach, any payments remaining under the terms of this Agreement
shall cease and the Corporation shall be entitled to obtain a temporary
restraining order or a preliminary or permanent injunction restraining
Xxxxxxxxxx from engaging in activities prohibited by this Article 5 or such
other relief as may required to specifically enforce any of the covenants
contained in this Article 5. Xxxxxxxxxx agrees to and hereby does submit to in
personam jurisdiction before each and every such court for that purpose.
(f) Early Termination. At the option of Xxxxxxxxxx on thirty (30) days
advance written notice to the Corporation, Xxxxxxxxxx may terminate the
Restricted Period. Such a termination shall not affect any of the rights or
obligations of the parties hereunder that are not specifically limited in their
duration to the Restricted Period.
4. Miscellaneous. This Agreement constitutes the entire agreement between
the parties hereto with regard to the subject matter hereof and supersedes all
prior negotiations, representations and agreements, either written or oral,
between them except for the Surviving Agreements. There are no conditions,
agreements, or representations between the parties except those expressed
herein. This Agreement may be altered, modified, amended, or repealed only by a
duly executed written instrument signed by the parties hereto. This Agreement
shall be governed by the law of the State of Maryland,
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without giving effect to the conflicts of laws provisions thereof. Each party
binds himself or itself and his or its heirs, successors, legal representatives
and assigns in respect to all covenants and agreements contained herein. Except
as specifically contemplated herein, nothing herein shall be construed as giving
any right or benefit hereunder to anyone other than the parties hereto. Any
notices provided for herein shall be delivered in writing addressed to the
parties at the addresses first set forth above (and, in the case of the
Corporation attention: Compliance Officer) and sent by hand delivery, overnight
parcel express service provided by a recognized national carrier or by certified
United States first class mail, return receipt requested.
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IN WITNESS WHEREOF, the parties have executed this Agreement under seal as
of the date first hereinabove written.
WITNESS: XXXXXXXXXX:
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(Seal)
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Xxxx Xxxxxxxxxx
AMERICAN CAPITAL STRATEGIES, LTD.,
A Delaware Corporation
By: (Seal)
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Name:
Title
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