Exhibit 10.19
TRANSACTION BONUS AGREEMENT
THIS TRANSACTION BONUS AGREEMENT, is entered into as of October 3,
2002, between Xxxx Industries, Inc., a Delaware corporation (the "Company") and
Xxxx Xxx (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board") continues
to explore and consider various strategic alternatives for the Company,
including without limitation, a possible sale or merger of the Company or a sale
of all or a portion of the assets of the Company;
WHEREAS, the Board has determined that it is in the best interests of
the Company and its stockholders and other stakeholders to provide certain key
executives and consultants (the "Participants"), including the Executive, bonus
opportunities pursuant to an agreement in substantially the form of this
Agreement (but not necessarily with the same bonus opportunity amounts for each
Participant) (each such agreement, a "Transaction Bonus Agreement"), in order to
provide the Participants with the proper incentive to maximize the value
received by the Company's stockholders and other stakeholders as a result of or
in connection with a Sale Transaction (as hereinafter defined); and
WHEREAS, in consideration for the opportunity to earn a transaction
bonus as described herein, the Executive desires to waive any right he may have
to receive any severance payments or benefits from the Company pursuant to the
last sentence of Section 5(c) of the employment agreement that the Executive has
entered into with the Company, dated as of May 13, 2002 (the "Employment
Agreement") that the Executive could otherwise become entitled to following the
termination or non-renewal of the Employment Agreement.
NOW, THEREFORE, in consideration of the Executive's continued
employment and other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. TRANSACTION BONUS. Subject to Section 8 below, in the event (a)
the Company consummates a Sale Transaction (as defined below) on or prior to
December 31, 2004 with a Person (as the term person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) that
has entered into a definitive agreement with or has submitted a written proposal
to the Company regarding the Sale Transaction prior to December 31, 2003, and
(b) the Executive is employed by the Company on the date of the closing of the
Sale Transaction or has been terminated by the Company without "Cause" or has
resigned for "Good Reason" (as such terms are defined in the Employment
Agreement), the Executive shall be eligible for a transaction bonus in an
amount, if any, determined as follows:
(x) in the event of a Sale Transaction defined in Section 3(a)
of this Agreement that results in proceeds to the Company distributable to its
stockholders ("Distributable Assets"), following one or more distributions by
the Company to its stockholders of Distributable Assets having an aggregate fair
market value of at least $2.5 million, the Executive shall be entitled to
receive the sum of: (A) $20,000, plus (B) .91% of such Distributable Assets held
by the Company immediately prior to the distribution to shareholders in excess
of the sum of (i) $2.5 million and (ii) the aggregate amount of all bonuses
payable to all Participants, including the Executive, pursuant to Section
1(x)(A) of each of their Transaction Bonus Agreements; provided, however, that
if the Distributable Assets are distributed to stockholders in more than one
installment, this provision shall be applied at the time of each such
installment taking into account all prior distributions and bonus payments made
to the Executive hereunder; provided, further, however, that if the amount of
Distributable Assets in excess of $2.5 million is not sufficient to pay the sum
of all of the bonus amounts payable pursuant to Section 1(x)(A) of each
Transaction Bonus Agreement (the "Aggregate Threshold Bonus Amount"), the
Executive shall receive his pro-rata portion of such excess based on his
proportionate share of the Aggregate Threshold Bonus Amount.
(y) in the event of a Sale Transaction defined in Section 3(b)
of this Agreement that results in the holders of shares of the common stock, par
value $0.01 per share, of the Company (the "Common Stock") receiving proceeds
(the "Equity Value") of at least $2.5 million in the aggregate, the sum of (A)
$20,000, plus (B) .91% of the amount by which the Equity Value exceeds $2.5
million.
Any such bonus shall be paid to the Executive within 30 days following
the date such bonus becomes payable.
2. SEVERANCE OFFSET. Notwithstanding the foregoing, any transaction
bonus (or portion thereof) that becomes payable hereunder shall be reduced (but
not by more than 50%) by the amount of any cash severance that the Executive has
received or become entitled to receive from the Company prior to the date of
payment of the transaction bonus.
3. DEFINITION OF "SALE TRANSACTION". For purposes of this Agreement,
the term "Sale Transaction" means:
(a) The sale or other disposition of operating assets of the
Company representing more than 25% of the fair market value of all of the
Company's operating assets, as determined by the Board in good faith, to any
Person, other than to any corporation or other Person of which a majority of its
voting power or its voting equity securities or equity interest is owned,
directly or indirectly, by the Company (a "Related Entity"), or
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(b) A merger, consolidation or reorganization with or into the
Company or in which securities of the Company are issued (a "Merger"), if the
stockholders of the Company immediately before such Merger own, directly or
indirectly, immediately following the Merger, less than (50%) of the outstanding
common stock and the combined voting power of the outstanding voting securities
of (x) the corporation resulting from such Merger (the "Surviving Corporation")
and (y) any corporation owning, directly or indirectly, fifty percent (50%) or
more of the combined voting power of the then outstanding voting securities of
the Surviving Corporation.
4. WAIVER OF SEVERANCE. The Executive hereby agrees that the last
sentence of Section 5(c) of the Employment Agreement is deleted and shall no
longer have any force or effect.
5. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties hereto with respect to the subject matter hereof
and supersedes all prior agreements, written or oral, between them as to such
subject matter. This Agreement may not be amended, nor may any provision hereof
be modified or waived, except by an instrument in writing duly signed by the
party to be charged.
6. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Illinois, without reference
to the principles of conflict of laws.
7. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
8. TERMINATION OF AGREEMENT. The parties hereto acknowledge and
agree that (i) the Company is required to file this Agreement as an exhibit to
the periodic report (either a Form 10-K or Form 10-Q) required to be filed by
the Company with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934 (the "Exchange Act") for the period in which
this Agreement is executed and becomes effective, (ii) that the financial terms
set forth in Section 1 of this Agreement (other than the terms set forth in
Sections 1(x)(A) and 1(y)(A)) (the "Confidential Terms") are confidential and
proprietary and disclosure of the Confidential Terms could adversely effect the
Company's consideration of various strategic alternatives referred to in the
recitals hereof and the consummation of a Sale Transaction and (iii)
accordingly, the Company shall seek confidential treatment, pursuant to Rule
24b-2 under the Exchange Act, of the Confidential Terms. In the event the SEC
denies the Company's request for confidential treatment of the Confidential
Terms (or the agreement setting forth the Confidential Terms) and as a result of
such denial, the Confidential Terms would, if Sections 1 through 4, inclusively,
of this Agreement were to remain in effect, become a matter of public record
before the date on which the Company enters into a definitive agreement
regarding a Sale Transaction, Sections 1 through 4, inclusive, of this
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Agreement shall automatically terminate in their entirety at such time and
become null and void and no bonus shall be payable under Sections 1 and 3 hereof
and the Company and the Executive hereby agree to negotiate in good faith to
seek to reach agreement on a new agreement intended to provide to the Executive
an appropriate bonus in the event of the consummation of a Sale Transaction.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by authority of its Board of Directors and the Executive has hereunto
set his hand, on the day and year first above written.
XXXX INDUSTRIES, INC.
By: /s/ Xxxxx X. Xxxxxxxxx
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Name: Xxxxx X. Xxxxxxxxx
Title: President and Chief Executive Officer
EXECUTIVE
/s/ Xxxx Xxx
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Xxxx Xxx
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