Exhibit 10.1
AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT
THIS AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT (the "AMENDMENT") is made
and entered into as of February 22, 2001 (the "Effective Date") by and among
PROMOTIONAL MARKETING, L.L.C., an Illinois limited liability company
("EMPLOYER", "COMPANY" or "UPSHOT"), XXXX X. XXXXXX, XX. ("EXECUTIVE") and HA-LO
INDUSTRIES, INC., an Illinois corporation ("HA-LO" or "ACQUIROR").
WHEREAS, Employer and Executive have previously entered into an
Employment Agreement, dated as of June 30, 1998 (as amended, the "EMPLOYMENT
AGREEMENT"); and
WHEREAS, the Employment Agreement has heretofore been amended pursuant
to Amendment No. 1 to Employment Agreement by and between the parties hereto
dated as of July 31, 2000 ("Amendment No. 1");
WHEREAS, as of the date hereof, Executive is the Chief Executive Officer
of HA-LO and a Manager of UPSHOT; and
WHEREAS, the parties wish to further amend certain provisions of the
Employment Agreement:
NOW, THEREFORE, in consideration of the foregoing, the parties hereto
agree as follows, all effective as of the Effective Date:
1. Each of the above recitals are incorporated in the Amendment and are
binding upon the parties hereof. Capitalized terms used herein shall have the
meaning set forth in Employment Agreement (as heretofore amended) unless
otherwise defined herein.
2. Effective on the Effective Date, the Executive resigns as the Chief
Executive Officer of HA-LO and agrees to tender his resignation from each board
of director or each position as an officer of any subsidiary, direct or
indirect, of HA-LO (other than UPSHOT, UPSHOT (New York), Inc., or Upshot
Integrated, Inc.) or upon the request of his successor as HA-LO's Chief
Executive Officer (the "CEO").
3. Section 3 of the Employment Agreement shall be restated in its
entirety as follows:
"3. EMPLOYMENT SERVICES. During the term of his employment
pursuant to this Agreement, Executive shall render his services to the
Company. In the performance of his duties hereunder, Executive shall
report to the CEO. Executive shall devote his full time and best
efforts, energy and skill in the rendition of his services as the Chief
Executive Officer and President of UPSHOT, shall perform such duties
commensurate with such position and shall also devote his energy and
skill to the promotion of the interests of the Company (which shall
include all subsidiaries and affiliates of the Company and the
Acquiror), specifically including the disposition of the Company.
Executive further agrees that during the Term he will not engage in any
other business
activity or have business pursuits or interests except activities or
interests which the CEO determines do not conflict or interfere with the
performance of the Executive's duties and obligations hereunder. On or
before March 31, 2001, the Executive shall have completed and shall have
delivered to the CEO, monthly budgets for UPSHOT for the calendar year
2001 reasonably acceptable to the CEO. UPSHOT's performance shall be
discussed and reported to the CEO as reasonably requested by the CEO but
no less frequently than monthly. The CEO shall direct the Executive and
UPSHOT to take appropriate action in the event that actual performance
of UPSHOT with respect to EBITDA (as herein defined), revenue or expense
results do not reflect budgeted amounts."
4. The Employment Agreement shall be amended by (i) denoting the initial
paragraph of Section 3 as paragraph "(a)" and (ii) by the addition of the
following Section 3(b):
"(b) So long as the Executive is employed hereunder, the
Board shall place the Executive's name in nomination as a member
of the Board of Directors at each of the 2001 and 2002 annual
meetings of the Stockholders of HA-LO and the Board shall
recommend to the HA-LO stockholders to vote for Executive's
election as a member of the Board of Directors. In the event of
the Sale of UPSHOT (as herein defined) or in the event the
Executive is no longer employed by UPSHOT, the Executive would
immediately upon request of the CEO, tender his resignation to
the CEO as a member of the Board of Directors of HA-LO."
5. Reference is made to Section 4 of Amendment No. 1. The parties agree
that (i) the options granted pursuant to subsections (c) and (d) of such Section
are hereby terminated and (ii) the options granted pursuant to subsections (e)
and (f) of such Section shall be amended by substituting the following for the
proviso that appears at the end of each subsection:
"PROVIDED, HOWEVER, that Executive remains the Chief Executive
Officer of UPSHOT on such date, retained such position at any
time within ninety days prior to the date of such measurement, or
HA-LO or UPSHOT has terminated Executive's employment other than
For Cause or Disability prior to the date of such measurement."
6. The Employment Agreement shall be amended by the addition of the
following Section 4(d):
"(d) SUCCESS BONUS. In the event of the Sale of UPSHOT
during the Term while the Executive is employed hereunder, the
Executive would receive a bonus equal to the greater of (a)
$1,466,250 (three times the success bonus received by Xxxxx
Xxxxxxx) or (b) a portion of the 'Aggregate Consideration' (as
defined below) determined as follows: 50% of the Aggregate
Consideration in excess of $80 million up to and including $100
million will be paid to the Executive and the UPSHOT Management
Team (as herein defined) and 20% of the Aggregate
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Consideration in excess of $100 million shall be paid to the
Executive and the UPSHOT Management Team.
(i) 'Aggregate Consideration' shall mean the total amount
of consideration that HA-LO and/or its shareholders, affiliates,
direct or indirect subsidiaries (including the Company), and
creditors receive from an acquiror including but not limited to
cash, stock, assumption of borrowed debt, earn-out or other
contingent consideration;
(ii) Except as otherwise provided herein, the portion of
the Aggregate Consideration payable to the Executive on the one
hand, and to the UPSHOT Management Team, on the other hand will
be allocated 50% to the Executive and 50% to the UPSHOT
Management Team. For purposes hereof, the UPSHOT Management Team
shall mean such employees of UPSHOT as shall be selected together
by the Executive and the CEO, allocations to be made amongst the
members of UPSHOT Management Team jointly by the CEO and the
Executive.
(iii) Except as set forth in the following sentence, the
portion of the Aggregate Consideration payable to the Executive
and the UPSHOT Management Team will be paid in the same form, in
the same manner and at the same time as which the Aggregate
Consideration as is paid to HA-LO and/or its shareholders.
Notwithstanding the foregoing, any portion of the Aggregate
Consideration that is attributable to a buyer's assumption of the
borrowed debt of HA-LO or UPSHOT shall be paid to the Executive
and the UPSHOT Management Team in cash at closing of such a
transaction.
(iv) For purposes hereof, the term 'Sale of UPSHOT' shall
mean the sale of substantially all of the assets or the sale or
transfer by HA-LO of more than 50% of its equity interest in
UPSHOT (whether by sale of stock, merger or consolidation) or the
change of control (as herein defined) of HA-LO, in all cases to a
third party, the primary owner of which is not affiliated with
HA-LO.
(v) For purposes hereof, the term 'change of control in
HA-LO' shall mean a sale of all or substantially all of the
assets or capital stock of HA-LO to a third party, the primary
owner of which is not affiliated with HA-LO. In the event of a
change of control of HA-LO prior to a sale of UPSHOT, HA-LO and
the Executive will agree upon an appraiser or other appropriate
methodology to allocate a portion of the overall purchase price
of HA-LO to UPSHOT to determine if a bonus is payable pursuant to
Section 4(d) hereof.
(vi) In the event a Sale of UPSHOT has not occurred on or
before December 31, 2002 (and the Executive is employed
hereunder), the Executive would be entitled to receive a bonus as
follows: if UPSHOT's
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EBITDA exceeds $6,000,000 for the calendar year ended 2001, the
Executive and the UPSHOT Management Group, collectively, would
receive 20% of such excess amount; if UPSHOT's EBITDA exceeds
$8,000,000 for the calendar year ended 2002, the Executive and
the Upshot Management Group, collectively would receive 20% of
such excess amount. The parties acknowledge that in the event
that a Sale of UPSHOT has not occurred prior to December 31,
2002, the UPSHOT Management Group (exclusive of the Executive)
shall be entitled to receive ten percent (10%) of (i) the amount
by which EBITDA exceeds $5,000,000 but is less than $6,000,000
for calendar year 2001 and (ii) the amount by which EBITDA
exceeds $6,000,000 but is less than $8,000,000 for calendar year
2002. HA-LO or UPSHOT shall pay the amounts due under this
subsection (vi) in cash and as soon as the financial results are
available. For purposes of this subsection (vi), allocation of
the foregoing amounts shall be made in accordance with subsection
(ii) above. For purposes of this Employment Agreement, EBITDA
shall mean the earnings before interest, taxes, depreciation, and
amortization of UPSHOT as determined by HA-LO in accordance with
generally accepted accounting principles, consistently applied,
exclusive of any charges and/or allocations to earnings other
than associated with the actual operations of UPSHOT (such as
parent management fees, parent charges, any required pushdown
accounting charges and other non-operating (non-UPSHOT) charges).
All expenses attributable to the 25th and 26th floors of 000 Xxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx shall be borne by HA-LO and shall not
be reflected as expenses of UPSHOT; the parties acknowledge that
the 26th floor of such building has heretofore been subleased and
it is contemplated that the 25th floor shall be subleased after
June 1, 2001 (or such earlier date, in the good faith
determination of the CEO that such space will not be needed by
UPSHOT).
(vii) For purposes of this Section 4(d), the term
'UPSHOT' shall include Promotional Marketing LLC, Upshot (New
York), Inc. and Upshot Integrated, Inc.
(viii) Subject to the next two sentences, neither HA-LO
nor UPSHOT will have any obligation to pay the Executive any
bonus or other payment described in this Section 4(d) in the
event of the termination of the Executive's employment for any
reason whatsoever, whether pursuant to the terms of this
Employment Agreement or otherwise, it being the express
understanding of the parties hereto that the Executive's receipt
and entitlement to the amounts set forth in this Section 4(d) are
contingent upon his employment with UPSHOT. If HA-LO and/or
UPSHOT enters into a Letter of Intent or a definitive agreement
with respect to a particular Sale of UPSHOT, then HA-LO and
UPSHOT shall have an obligation to pay the Executive a bonus or
other payment described in this Section 4(d), when due, with
respect to such Sale, of UPSHOT unless HA-LO and/or UPSHOT
terminates the Executives employment pursuant to the terms of
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the Employment Agreement. If on September 1, 2002, the Executive
is employed hereunder, then HA-LO and UPSHOT shall have an
obligation to pay the Executive a bonus or other obligation with
respect to Section 4(d)(vi), when due, unless HA-LO and/or UPSHOT
terminates Executive's employment pursuant to the terms of the
Employment Agreement.
7. Section 5(b) of the Agreement shall be amended by the addition of
the following sentence at the conclusion of such subsection:
"Notwithstanding the foregoing, the Executive shall be entitled
to reimbursement for the cost of the use of one automobile in
accordance with past practices. The Executive will assume
responsibility for the obligations of the Range Rover - Rhino
lease including the monthly payments. HA - LO will assume
responsibility for the obligations of the Mercedes Benz CL 600
lease and the Audi (which Xx. Xxxxxxxx currently drives) lease
including the monthly payments."
8. Clause (a) of Section 11 of the Employment Agreement shall be
deleted in its entirety and the following shall be inserted in its place and
stead:
"(a) which is in the promotional marketing, event
marketing, direct marketing or environmental branding business"
9. HA-LO shall promptly reimburse the Executive for his reasonable
and necessary legal expenses in the negotiation and drafting of this Amendment
in amount not to exceed $10,000.00.
10. This Amendment may be signed in single or separate counterparts,
each of which shall constitute an original with the same effect as if each of
the parties had signed the same document. All counterparts shall be construed
together and shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed the Amendment as of
the date and year first above written.
:PROMOTIONAL MARKETING, L.L.C.
____________________________
Xxxx X. Xxxxxx, Xx.
By:________________________________
Its:________________________________
HA-LO INDUSTRIES, INC.
By:_______________________________
Its:_______________________________
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