Exhibit 10.5
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made by and between XXXXXX XXXXXXXXXX LTD.,
a New York corporation, with an office at 10,000 Xxxxxx Xxxxx, Xxxxxxxx, Xxx
Xxxx 00000 (the "Corporation") and XXXXXX X. XXXXXXX, residing at 00 Xxxx Xxxxx
Xxx, Xxxxxx, Xxx Xxxx 00000 (the "Executive").
INTRODUCTORY STATEMENT. The Executive has previously served as
President and Chief Executive Officer of the Corporation under an employment
agreement dated January 1, 1992 and a written extension thereof dated January
25, 1997. After all payments are made under tacit agreement and extension, that
agreement and extension are cancelled and superseded in their entirety by this
Agreement, and this Agreement satisfies the condition of Section 7.5(f) of the
Stock Purchase Agreement between WGL Holdings, Inc. and the Corporation (the
"Stock Purchase Agreement"). The Corporation desires to secure the future
services of the Executive as President, Chief Executive Officer, and Chairman of
the Board of the Corporation, and the Executive desires to accept such
employment upon the terms and conditions contained in this Agreement. Therefore,
in consideration of the mutual covenants and agreements contained in this
Agreement, the parties agree as follows:
1. TERM OF EMPLOYMENT.
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1.1 INITIAL TERM. Subject to the terms and conditions, set
forth in this Agreement, the Corporation hereby agrees to employ the Executive
for a period beginning on the Effective Date of this Agreement and ending on
June 30, 2000, or until earlier terminated as provided herein.
1.2 EFFECTIVE DATE. Fur purposes of this Agreement, the term
"Effective Date" shall mean the Closing Date (as defined in the Stock Purchase
Agreement). It is the intention of the parties that this Agreement be executed
prior to the Closing Date (as defined, in the Stock Purchase Agreement), and be
held in escrow and become effective upon
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consummation of the transaction described in the Stock Purchase Agreement (the
"Acquisition"), and the Executive's acquisition of 285,000 shares of common
stock of WGL Holdings, Inc. for an aggregate purchase price of $285,000
simultaneous with such consummation. The parties agree that the Corporation
shall implement an equity plan for benefit of the Executive and other members of
the Corporation's management on the terms outlined in Exhibit A, which shall be
attached hereto and made a part hereof.
1.3 EXTENSIONS. The Agreement shall be automatically extended
for additional one-year periods beyond the existing term of the Agreement
(subject to written modifications acceptable to both parties), unless either the
Corporation or the Executive gives timely notice to the other party that the
term of the Agreement shall not be so extended. Notice under this Section,
whether given by the Corporation or the Executive, shall be given in writing and
must be delivered not later than twelve (12) months prior to the date (including
extensions) the Agreement would otherwise terminate.
2. EMPLOYMENT; DUTIES.
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Subject to the formal election by the Board of Directors
in the exercise of its judgment, the Corporation does hereby employ the
Executive, and the Executive does hereby accept employment by the Corporation,
as President, Chief Executive Officer, and Chairman of the Board of the
Corporation. As an executive officer of the Corporation, the Executive shall
perform his duties and discharge his responsibilities in accordance with the
by-laws of the Corporation and as the Board of Directors of the Corporation
shall from time to time reasonably direct recognizing the nature and scope of
the Executive's employment. Subject to yearly election by the Board of
Directors, it is contemplated that the Executive will continue to be elected to
the position of President, Chief Executive Officer, and Chairman of the Board of
the Corporation during the term of this Agreement.
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The Executive agrees to perform his duties and discharge his
responsibilities in a faithful manner and to the best of his ability. The
Executive agrees to devote his full business time and attention to the
supervision and conduct of the business and affairs of the Corporation and to
faithfully and to the best of his ability promote the interests of the
Corporation. The Executive further agrees that he will engage in no outside
business concerns or activities, and shall not accept other gainful employment,
without the Corporation's written consent. The Corporation hereby acknowledges
and consents to the Executive continuing as a Member of the Board of Directors
of Analogic, Inc. and a Member of the Board of Directors and other membership
related activities of HIMA and HCIA.
3. COMPENSATION AND OTHER BENEFITS.
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3.1 BASE SALARY. So long as the Executive is employed by the
Corporation pursuant to this Agreement, the Corporation agrees that the
Executive shall receive a base salary earned and payable in bi-weekly
installments. As of the Effective Date of this Agreement, the base salary is
$285,000 per year.
The Compensation Committee of the Board of Directors (the
"Compensation Committee"), with the concurrence of the Board of Directors, shall
in good faith review the performance and salary of the Executive on an annual
basis, and shall consider appropriate increases in such salary based on the
successful achievement of agreed upon operating objectives. Such review shall be
made as soon as practicable after the audited financial statements of the
Corporation for the past year are available, and any salary increase authorized
by the Compensation Committee shall be effective at the time specified by the
Committee.
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Notwithstanding the foregoing, for years after 1997, the
Executive's base salary may, at the discretion of the Compensation Committee of
the Board of Directors, be increased annually by an amount that is at least
equal to the cost of living increase as determined by the Compensation
Committee.
3.2 ANNUAL BONUS. For each year, including 1997, the Executive
shall be entitled to a bonus targeted at 75% of the base salary paid to the
Executive under this Agreement during the year if the Corporation achieves the
target earnings before income tax, depreciation and amortization ("Target
EBITDA"). The annual Target EBITDA shall be determined for all years, including
1997, by agreement between the Executive and the Compensation Committee. The
Target EBITDA for each year generally shall be as reflected in the annual budget
of the Corporation.
For purposes of computing and paying the annual bonus, the
following rules, shall apply:
(a) FLOOR EBITDA. In addition to the annual Target
EBITDA, the Executive and the Compensation Committee shall agree upon the
minimum amount of earnings before income tax, depreciation and amortization
("Floor EBITDA") required for the Executive to receive any annual bonus for the
year. The Floor EBITDA for each year generally shall be as reflected in the
annual budget of the Corporation.
(b) DETERMINING TARGET AND FLOOR EBITDAS. The Target and
Floor EBITDAs agreed upon by the parties shall be determined after deducting all
profit sharing and compensation payments, including payment of the Executive's
bonus payment due under this Agreement. The Target and Floor EBITDAs for any
year shall be further adjusted for any future recapitalization, stock split,
merger or acquisition, or any other unusual or extraordinary item that would
require adjustment of the EBITDA. For purposes of
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calculating the annual bonus, (1) all calculations shall be based on the annual
audited financial statements of the Corporation, (ii) all items shall be
classified consistently from year to year and from target amounts to actual
amounts, and (iii) the Compensation Committee shall make appropriate adjustments
for extraordinary items as described above.
(c) EBITDA CALCULATIONS. For purposes of the 1997 annual
bonus, the 1997 Target and Floor EBITDAs for the 1997 year, as defined in (h)
below, shall be determined in good faith by agreement of the parties to this
Agreement and such determination shall be made by disregarding all items related
to the Acquisition, including without limitation, change-in-control payments and
any other one-time or other extraordinary compensation amounts payable to the
Executive and others in connection with the Acquisition.
(d) BONUS AMOUNT. If the Floor EBITDA for any year is
achieved, the annual bonus will equal 50% of actual base salary paid to the
Executive under this Agreement for such year. If the Target EBITDA for any year
is achieved, the annual bonus will equal 75% of base salary paid to the
Executive under this Agreement for such year. If the actual EBITDA for the year
in greater than the Floor EBITDA, but less than the Target EBITDA for the year
the annual bonus amount for such year will be extrapolated accordingly. If the
actual EBITDA for the year is less than the Floor EBITDA, the Executive shall
not receive any annual bonus for such year. If the actual EBITDA for the Year is
greater than the Target EBITDA, then the annual bonus amount will be increased
from 75% of base salary by one percent of base salary for each $100,000 by which
the actual EBITDA is greater than the Target EBITDA.
Notwithstanding the foregoing, the bonus amount for the 1997
year shall be determined by taking into account only that base salary paid to
the Executive under this Agreement during the 1997 year.
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(e) COMPUTATION OF BONUS AMOUNT. Computation of the
annual bonus shall be made by the Compensation Committee. The determination of
the Compensation Committee shall be final and conclusive.
(f) TIME OF BONUS PAYMENT. The annual bonus shall be paid
to the Executive within 30 calendar days after the receipt of the annual audited
financial statements of the Corporation.
(g) FORM OF BONUS PAYMENT. The annual bonus shall be paid
to the Executive in the form of a lump sum payment. The Executive, however,
shall have the option to defer payment of all or a portion of the annual bonus
by entering into a written deferral agreement prior to the date the annual bonus
is payable. Any annual bonus, or portion thereof, that is deferred by the
Executive shall be contributed to, and held in, a rabbi trust established by the
Corporation. The Corporation shall reasonably agree to the terms and conditions
for the deferred payment of the annual bonuses. Such terms and conditions,
including the length of the deferral and the method of paying the deferred
amounts, shall be set forth in a deferral agreement executed by the Executive
and the Corporation. To the extent permitted by law, the assets of the rabbi
trust shall be invested at the discretion of the Executive, and may not be
invested in stock of the Corporation.
(h) YEAR. For purposes of this Section, the term "year"
means the calendar year. Notwithstanding the preceding, the "1997 year" shall be
the period beginning on the Effective Date and ending on December 31, 1997.
3.3 OTHER BENEFITS. During the term of the Executive's
employment under this Agreement, the Executive shall receive the fringe benefits
provided for the executive officers of the Corporation that may be authorized
from time to time by the Board of
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Directors of the Corporation in its sole discretion, including, but not limited
to, the following:
(a) LIFE INSURANCE. The Corporation shall provide and
maintain, at the Corporation's sole expense, term life insurance with a total
face value of not less than $250,000 on the life of the Executive. The death
beneficiary with respect to such term life insurance shall be the person
designated by the Executive in his sole discretion. This amount includes (and is
not in addition to) any insurance that may be provided generally to executive
officers. The Corporation will also endeavor to obtain from the life insurance
carrier the option to purchase, at the Executive's sole option and expense,
supplemental life insurance coverage or life insurance covering his dependents
at favorable rates to be determined in advance by the carrier.
(b) FINANCIAL PLANNER. Every year, including 1997, the
Corporation shall reimburse the Executive for the reasonable fees and expenses,
not to exceed $5,000, for services rendered by a financial planner selected by
the Executive, in his sole discretion. In addition to any reimbursements
payable to the Executive under this paragraph, the Executive shall receive an
additional payment (a "Gross-Up Payment") in an amount such that after Payment
by the Executive of all taxes imposed on the reimbursement and the Gross-Up
Payment, the Executive retains an amount of the reimbursement and Gross-Up
Payment equal to the reimbursement payable to the Executive under this
paragraph.
(c) AUTOMOBILE. The Corporation shall pay the costs of
leasing to the Executive a Ford Expedition equipped with all options and
features selected by the Executive, including the Xxxxx Xxxxx options package,
or, at the Executive's option, the equivalent thereof. In addition, the
Executive shall have the right of first refusal to purchase the vehicle for the
buy-out price stated in the lease at the end of the three-year term.
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(d) VACATION. The Executive shall be entitled to a total
of 160 hours of vacation in each calendar year, at such times as shall be agreed
upon by the Corporation and the Executive and subject to the Corporation's
generally applicable procedures on carryover and accrual. These hours include
(and are not in addition to) any vacation time that may be provided generally to
executive officers.
(e) DISABILITY. The Corporation shall reimburse the
Executive for any premiums paid by the Executive, whether for an individual or
group Policy maintained by the Corporation or for an individual policy selected
and maintained by the Executive or a combination thereof, for disability
insurance that provides the Executive with after-tax disability income equal to
50% of his base salary in effect at the time of a disability. In addition to
any reimbursement payable to the Executive under this paragraph, the Executive
shall receive a Gross-Up Payment, the amount of which shall be determined in the
same manner as described in paragraph (b). Notwithstanding the foregoing, (1)
the Corporation shall not be required to reimburse the Executive for any
premiums paid by the Executive with respect to any disability insurance policy
purchased after the Effective Date, unless (i) the Executive passes any physical
examination required for such policy, and (ii) such policy provides for "any
occupation coverage," and (2) the Corporation shall reimburse the Executive, in
the case of any Executive-maintained policy described above, only to the extent
of premiums related to an amount equal to (i) the after-tax 50% level described
above less (ii) the after-tax percentage level provided in a policy or policies
maintained by the Corporation.
3.4 WITHHOLDING. The Corporation shall deduct or withhold from
salary payments, and from all other payments made to the Executive pursuant to
this Agreement, all amounts which may be required to be deducted or withheld
under any applicable law now in effect or which may become effective during the
term of this Agreement (including but not limited to Social Security
contributions and income tax withholdings).
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4. REIMBURSEMENT FOR EXPENSES.
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The Corporation shall reimburse the Executive for expenses
which the Executive may from time to time reasonably incur on behalf of and at
the request of the Corporation in the performance of his responsibilities and
duties under this Agreement, provided that the Executive shall be expected to
exercise reasonable and prudent expense control practices which are subject to
audit by a designated representative of the Compensation Committee.
5. DEATH OR PERMANENT DISABILITY OF EXECUTIVE.
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5.1 BENEFITS. If the Executive dies or becomes permanently
disabled during the term of this Agreement, the Corporation shall pay to the
Executive's spouse, if surviving, or legal representatives, in the case of the
Executive's death, or to the Executive, in the case of the Executive's permanent
disability, the following compensation and benefits:
(a) SALARY CONTINUATION. The Corporation shall continue
to pay the base salary at the same rate and in the same manner as in effect at
the time the Executive dies or becomes permanently disabled, for the balance of
the term of this Agreement (including any one-year extensions under Section 1.3
that have commenced at the time of such death or disability). If the Executive
dies after becoming permanently disabled and while payments are being made under
this subsection, the remaining payments shall be made to the Executive's spouse,
if surviving, or legal representatives.
(b) ANNUAL BONUS. The annual bonus payable pursuant to
Section 3.2 shall be calculated at the end of the year in which the Executive
dies or becomes permanently disabled, as the case may be, and a fraction of such
bonus shall be payable to the Executive's spouse, if surviving, or legal
representatives in, the case of the Executive's
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death, or to the Executive, in the case of the Executive becoming permanently
disabled. For purposes of this paragraph, the fraction generally shall be
determined using a numerator equal to the number of days that elapse from, and
including, January 1 of the year in which the Executive dies or becomes
permanently disabled until, and including, the date of death or such disability,
as the case may be, and a denominator equal to 365. If the Executive dies or is
permanently disabled during the 1997 year, the numerator shall be equal to the
number of days that elapse from, and including, the Effective Date until, and
including, the date of such death or disability, and the denominator shall be
equal to the number of days in the 1997 year.
(c) STOCK OPTIONS/CORPORATION STOCK. Any and all stock
options granted to the Executive with respect to which he is not yet vested on
the date he dies or becomes permanently disabled, as the case may be, shall be
forfeited and canceled. If the Executive dies or becomes permanently disabled
prior to a Qualified IPO, for a period of twelve (12) months after such death or
disability, the Corporation shall have the right, but not the obligation, to
purchase (i) any and all shares of capital stock of the Corporation, owned or
previously owned by the Executive or his assignee, and (ii) any and all stock
options granted to the Executive in which he is vested on the date he dies or
becomes permanently disabled, at the Fair Market Value for such shares or
options on the date the Executive dies or becomes permanently disabled.
5.2 "PERMANENTLY DISABLED." For purposes of this Agreement,
the Executive shall be "permanently disabled" if he is determined to be
permanently disabled for Purposes of any disability insurance policy maintained
by the Corporation that covers the Executive. If the Corporation maintains no
such policy, the Executive shall be "permanently disabled" if he has a
disability because of which the Executive is physically or mentally unable to
substantially perform his regular duties as President, Chief Executive Officer
or Chairman of the Board of the Corporation for a sufficiently long period of
time such that the
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business of the Corporation could be materially adversely affected. Any question
as to the existence, extent or potentiality of disability of the Executive upon
which the Executive and the Corporation cannot agree shall be determined by a
qualified independent physician jointly selected by the Executive and the
Corporation (or if the Executive is unable to make such a selection, it shall be
made by an adult member of his immediate family). The determination of such
physician, made in writing to the Corporation and to the Executive, shall be
final and conclusive for all purposes of this Agreement. In the event the
Executive is permanently disabled, the Executive shall cease to be employed on
the last day of the month in which the Executive's disability is determined by
written agreement of the Executive and the Corporation, or the written
determination of a physician, as the case may be.
6. TERMINATION OF EMPLOYMENT.
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6.1 TERMINATION WITHOUT CAUSE. If, at any time prior to
termination of this Agreement other than for cause (as defined in Section 6.4),
the Corporation terminates the Executive's employment, the Corporation shall
provide the Executive with the following payments and benefits:
(a) SALARY. A lump sum payment, within thirty (30) days
of such termination, in an amount equal to the greater of (i) $285,000, or (ii)
the Executive's annual base salary in effect under Section 3.1 on the date of
his termination.
(b) ANNUAL BONUS. An annual bonus for the calendar year
in which termination occurs in an amount equal to 75% of the Executive's base
salary in effect at the time of termination, payable without regard to the
actual performance of the Corporation for that year, and payable following the
end of such year the time it would normally be paid.
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(c) OPTIONS/CORPORATION STOCK. Any and all stock options
granted to the Executive with respect to which he is not yet vested on the date
of his termination under this Section shall be forfeited and canceled (except
that if such termination occurs during the initial term of employment ending
June 30, 2000, any remaining performance options shall be vested (without regard
to any Super Performance options, which will be canceled) in the same proportion
that options theretofore subject to vesting have actually been vested, up to
100% thereof annually).
If the termination occurs prior to a Qualified IPO, for a
period of twelve (12) months after the date of the Executive's termination, the
Corporation shall have the right, and the Executive shall have the right to
require the Corporation, to purchase from the Executive (i) all shares of
capital stock of the Corporation owned or previously owned by the Executive or
his assignee, and (ii) any and all stock options granted to the Executive with
respect to which he is vested on the date of his termination (including without
limitation those options vested in connection with the termination), at the Fair
Market Value for such shares and options. If the Corporation exercises its right
to purchase such shares and options from the Executive, the purchase price shall
be paid to the Executive in a single lump sum cash payment. If the Executive
exercises his right to require the Corporation to purchase such shares and
options, payment shall be made in three equal annual installments on the first,
second and third anniversaries of the Executive's termination.
6.2 TERMINATION WITH GOOD REASON.
(a) REDUCTION IN DUTIES/COMPENSATION. The Corporation
shall not significantly reduce the scope of the Executive's duties under the
Agreement, materially diminish the Executive's title, significantly reduce the
total potential compensation under the Agreement, including, without limitation,
fringe benefits and payments at death, or require the Executive to relocate to a
location where the Corporation currently does not have, or is
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not currently discussing or contemplating building or placing a facility (each
such event a "Reduction Event"). The Executive at any time during the six (6)
month period following a Reduction Event may voluntarily terminate his
employment and receive the payments and benefits described in paragraph (c)
below.
(b) MATERIAL BREACH BY THE CORPORATION. If there is a
material breach by the Corporation of this Agreement which the Corporation fails
to cure within 30 days after its receipt of written notice thereof, the
Executive at anytime during the six (6) month period following the end of such
30-day period may voluntarily terminate his employment and receive the payments
and benefits described in paragraph (c) below.
(c) BENEFITS. If the Executive terminates his employment
under this Section, the Corporation shall provide the Executive with the
following payments and benefits:
(1) SALARY. A lump sum payment, within thirty (30)
days of such termination, in an amount equal to the greater of (i) $285,000 or
(ii) the Executive's annual base salary in effect under Section 3.1 on the date
of his termination.
(2) ANNUAL BONUS. The annual bonus payable pursuant
to Section 3.2 shall be calculated at the end of the year in which the Reduction
Event occurs, and a fraction of such bonus shall be payable to the Executive.
For purposes of this subparagraph, the fraction shall be determined using a
numerator equal to the number of days that elapse from, and including, January 1
of the year in which the Reduction Event occurs until, and including, the day of
such Reduction Event, and a denominator equal to 365. No annual bonus shall be
payable to the Executive for any year commencing after a Reduction Event.
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(3) OPTIONS/CORPORATION STOCK. With respect to any
and all capital stock of the Corporation owned or previously owned by the
Executive or his assignee, and any and all stock options granted to the
Executive, the Corporation and the Executive shall have the same rights and
obligations as described in Section 6.1 (c).
6.3 CHANGE IN CONTROL.
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(a) IN GENERAL. If the Executive's employment is
terminated (except for a termination for cause under Section 6.4) within six (6)
months prior to or twelve (12) months following a Change in Control, the
Corporation shall provide the Executive with the following payments and
benefits;
(1) SALARY. A lump sum payment, within thirty (30)
days of such termination, in an amount equal to the Executive's annual base
salary in effect under Section 3.1 on the date of such termination.
(2) ANNUAL BONUS. An annual bonus for the calendar
year in which termination occurs in an amount equal to 75% of the Executive's
base salary in effect at the time of termination, payable without regard to the
actual performance of the Corporation for that year, and payable following the
end of such year at the time it would normally be paid.
(3) CORPORATION STOCK. The Executive shall be fully
vested in any and all performance stock options (provided that Super Performance
options shall continue to be outstanding pursuant to their terms) granted to the
Executive. The Executive shall have the right to exercise all unexercised
options, including those options vested in connection with such termination, for
a period of not less than twelve (12) months commencing on the date of the
Executive's termination under this Section.
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If the termination under this Section occurs prior to a
Qualified IPO, the Executive, for a period of twelve months following the date
of termination, shall have the right, but not the obligation, to require the
Corporation to purchase, for cash payable at the time of the sale, (i) all
shares of capital stock of the Corporation owned or previously owned by the
Executive or his assignee, and (ii) any and all stock options granted to the
Executive with respect to all of which he is vested at the time of his
termination (including without limitation those options vested in connection
with the termination), at the Fair Market Value for such shares and options,
provided, that all performance options (but not Super Performance options) shall
be vested upon the Executive's termination under this Section.
(b) DEFINITION. For purposes of this Agreement, the
term "Change in Control" shall mean any of the following events:
(i) All or substantially all of the assets of the
Corporation are sold as an entirety to any person or entity or group
(within the meaning of Rule 13d-5 under the Exchange Act and Sections
13(d) and 14(d) of the Exchange Act (a "Group")) other than a Group
including WGL Holdings, Inc. or its affiliates or related parties,
(ii) The stockholders of the Corporation approve a
plan of liquidation or dissolution (other than in connection with a
merger between or among the affiliates of the Corporation); or
(iii) Any person, entity or Group (other than WGL
Holdings, Inc., its affiliates or their related parties) becomes
directly or indirectly, the "beneficial owner," as defined in Rule
13d-3 under the Exchange Act (in a single transaction or in a related
series of transactions, by way of merger, consolidation or other
business combination or otherwise) of
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more than the greater of (1) 40 percent of the total voting power
entitled to vote in the election of directors of the Corporation (or
such other persons surviving the transaction) and (2) the total voting
power entitled to vote in the election of directors of the Corporation
beneficially owned by WGTL Holdings, Inc., its affiliates or their
related parties.
6.4 TERMINATION FOR CAUSE.
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(a) IN GENERAL. The Corporation may terminate the
Executive's employment in the event that the Executive shall do or cause to be
done any act which constitutes "cause" (as hereinafter defined) for termination.
For purposes of this Agreement, "cause" shall be deemed to mean a material
breach by the Executive of this Agreement, gross negligence or willful
misconduct in the performance of his duties, dishonesty to the Corporation, or
the commission of a felony that results in a conviction in a court of law.
(b) OBLIGATIONS. Should the Executive's employment be
terminated by the Corporation for cause, (1) the Corporation shall pay the
Executive his base salary and other compensation under Article 3 of this
Agreement which has accrued as of the date of such termination (excluding any
annual bonus payable pursuant to such Article 3), (2) any and all stock options
granted to the Executive in which he is not yet vested on the date of such
termination shall be forfeited and canceled, and (3) for a period of twelve (12)
months after such termination, the Corporation shall have the right, but not the
obligation, to purchase from the Executive (A) all shares of capital stock owned
or previously owned by the Executive or his assignee (except to the extent such
shares of capital stock were sold in the public market following a Qualified
IPO), and (B) any and all stock options with respect to which the Executive is
vested on the date of such termination, and in such a purchase, the Corporation
shall purchase all such shares and options at a price equal to the lesser of
cost
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thereof to the Executive or the Fair Market Value for such shares and options
(less the principal amount of any notes due to the Corporation from the
Executive, which notes shall be canceled to the extent that such notes are less
than or equal to such purchase price; any excess shall continue in full force
and effect). The purchase price shall be paid by the Corporation by delivery of
a promissory note, subordinated to all debt of the Corporation, bearing interest
at 7% per annum (which interest may be payable by delivery of notes of like
tenor in principal amount equal to the interest then due) with a maturity one
year beyond the maturity of the Corporation's subordinated debt at Closing of
the Acquisition.
6.5 TERMINATION WITHOUT GOOD REASON.
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(a) IN GENERAL. The Executive shall be entitled to
terminate his employment without good reason at any time. For purposes of this
Section, an election by the Executive under Section 1.3 not to extends this
Agreement beyond the earlier of (i) the date of a Qualified IPO or (ii) June
30, 2002, shall be treated as a termination without good reason under this
Section.
(b) OBLIGATIONS. If the Executive's employment
terminates under this Section (1) no additional compensation after the date of
such termination and no annual bonus shall be payable by the Corporation to the
Executive, (2) any and all stock options in which the Executive is not vested on
the date of such termination shall be forfeited and canceled, and (3) if the
termination occurs prior to the earlier of (i) a Qualified IPO, or (ii) June 30,
2002, the Corporation shall, for a period of twelve (12) months after the
termination have the right, but not the obligation, to purchase from the
Executive (i) all shares of capital stock of the Corporation owned or previously
owned by the Executive or his assignee, and (ii) any and all stock options in
which the Executive is vested on the date of such termination, and in such a
purchase the Corporation shall purchase all such shares and options at a price
equal to the lesser of cost thereof to the Executive or the Fair Market
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Value for such shares and options. The Corporation shall pay the purchase price
in the form of three (3) equal annual installments on the first, second and
third anniversaries of the Executive's termination.
6.6 OPTIONS/CORPORATION STOCK.
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(a) FAIR MARKET VALUE. For purposes of this Agreement,
and notwithstanding any provisions to the contrary in any shareholder or stock
option agreement between the Executive and the Corporation, the "Fair Market
Value" of the capital stock of the Corporation, or of any stock options granted
to the Executive, shall mean the value of such stock or options determined by a
certified independent appraiser selected by the Executive and the Corporation.
With respect to any independent appraisal of the Corporation's stock under this
Agreement, in all cases where an independent appraiser is not mutually agreed
upon, each of the parties will select a certified appraiser and those two
appraisers will select a third certified appraiser, whose appraisal shall be
binding on the parties.
(b) PURCHASE RIGHTS. For purposes of the capital stock
and stock option purchase rights set forth in Sections 5.1(c), 6.1(c),
6.2(c)(3), 6.3(a)(3), 6.4(b)(3) and 6.5(b)(3):
(1) capital stock and stock options shall include
only such stock and stock options acquired by the Executive in connection with
his employment by the Corporation;
(2) the right of the Corporation to purchase, and
the right of the Executive to require the Corporation, to purchase capital stock
of the Corporation owned or previously owned by the Executive, shall apply to
shares of capital stock of the Corporation and WGL Holdings, Inc. acquired by
the Executive pursuant to the terms of the equity plan set forth in Exhibit A;
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(3) the right of the Corporation to purchase, and
the right of the Executive to require the Corporation, to purchase any and all
stock options granted to the Executive, shall apply equally to options to
purchase either the capital stock of the Corporation or capital stock of WGL
Holdings, Inc.; and
(4) WGL Holdings, Inc. shall have the right to
exercise the purchase rights or obligations, as the case may be, on behalf of
the Corporation.
(c) EXERCISE OF OPTIONS. With respect to any
unexercised options that are not cancelled upon termination of the Executive's
employment, including those options vested in connection with the termination,
the Executive shall have the right to exercise all unexercised options for a
period of not less than twelve (12) months commencing on the date of the
Executive's termination.
(d) QUALIFIED IPO. For purposes of the Agreement, the
term "Qualified IPO" means a consummated initial public offering of common
shares of the Corporation or WGL Holdings, Inc. which is underwritten on a firm
commitment basis by a nationally-recognized investment banking firm.
(e) INCONSISTENT TERMS. To the extent that the terms of
this Agreement are specifically inconsistent with any provisions in any
shareholder or stock option agreement between the Executive and the Corporation
and WGL Holdings, Inc., the terms of this Agreement shall supersede the terms of
any such shareholder or stock option agreement.
7. CONFIDENTIALITY.
---------------
The Executive shall not, except as required in the performance
of his duties under this Agreement, divulge to any person, at any time during or
after the term of his
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employment with the Corporation, any trade secret of the Corporation, any
privileged or confidential information gained as a result of his employment with
the Corporation, or any document, writing or other tangible item containing or
relating to any such trade secret or privileged or confidential information.
8. NON-COMPETITION.
---------------
8.1 During the term of this Agreement and for a period of
twenty-four (24) months after (a) the termination of the Agreement or (b) the
end of the last pay period in respect of which the Executive receives any
compensation or other annual bonus pursuant to the Agreement (except that if the
Executive is terminated by the Corporation without cause, the provisions of
this Article 8 shall be inapplicable), the Executive agrees that he shall not
directly or indirectly, for his own account or as agent, employee, officer,
director, trustee, consultant or shareholder of any person (except for a ten
percent (10%) interest or less in any publicly traded corporation) or a member
of any firm or otherwise, anywhere in the sales territory of the Corporation
engage or attempt to engage in any business activity which is the same as,
substantially similar to or directly competitive with the business of the
Corporation as conducted by it during the term of this Agreement, or
substantially similar to or directly competitive with the related business
activities of the 10 largest customers of the Corporation, ranked by gross
sales, at the time of the termination of the Agreement.
8.2 During the term of this Agreement and for a period of one
year from the date of termination of this Agreement for any reason, the
Executive agrees that he shall not, directly or indirectly, for his own account
or as agent, employee, officer, director, trustee, consultant or shareholder of
any person, or member of any firm or otherwise, employ or solicit the employment
of any person employed by the Corporation within twenty-four (24) months prior
to the date of the Executive's termination.
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9. RIGHTS TO DISCOVERIES.
---------------------
The Executive agrees that all ideas, inventions (whether
patentable or unpatentable), trademarks and other developments or improvements
conceived, developed or acquired by the Executive, whether or not during working
hours, at the premises of the Corporation or elsewhere, alone or with others,
that are within the scope of the Corporation's business operations or that
relate to any work or projects of the Corporation, shall be the sole and
exclusive property of the Corporation. The Executive agrees to disclose promptly
and fully to the Corporation all such ideas, inventions, trademarks or other
developments and, at the request of the Corporation, the Executive shall submit
to the Corporation a full written report thereof regardless of whether the
request for written report is made after the termination of this Agreement. The
Executive agrees that during the term of this Agreement and thereafter, upon the
request of the Corporation and at its expense, he shall execute and deliver any
and all applications, assignments and other instruments which the Corporation
shall deem necessary or advisable to transfer to and vest in the Corporation the
Executive's entire right, title and interest in and to all such ideas,
inventions, trademarks or other developments and to permit and enable the
Corporation to apply for and obtain patents or copyright or trademark
registrations for any such patentable or copyrightable or trademarkable ideas,
inventions, trademarks and other developments, throughout the world. To the
extent applicable law provides that any such idea, invention, trademark or other
development belongs to the Executive rather than the Corporation, the Executive
hereby grants to the Corporation a royalty-free, non-exclusive, worldwide
perpetual license to use such idea, invention, trademark or other development
for no added consideration other than that which is given in connection with
this Agreement.
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10. DOCUMENTS.
---------
In addition to the obligations under Articles 7, 8 and 9, the
Executive shall execute any documents relating to the subject of those Articles
as required generally by the Corporation of its executive officers and such
documents already executed or executed after the effective date of this
Agreement shall thereby become part of this Agreement. In the case of any
inconsistency between such documents and this Agreement, the broader provisions
shall prevail.
11. NOTICES.
-------
All notices and other communications given pursuant to this
Agreement shall be in writing and shall be deemed given only when (a) delivered
by hand, (b) transmitted by telex, telecopier or other form of electronic
transmission (provided that a copy is sent at approximately the same time by
first class mail), or (c) received by the addressee, if sent by registered or
certified mail, return receipt requested, or by Express Mail, Federal Express or
other overnight delivery service, to the appropriate party at the address given
below for such party (or to such other address designated by the party in
writing and delivered to the other party pursuant to this Article 11.
If to the Corporation: Corporate Secretary
Xxxxxx Xxxxxxxxxx Ltd.
10,000 Xxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxx 00000
Telecopier:
Attention:
With a copy to: Xxxxx Xxxxxxx
Telecopier:
Attention:
If to the Executive: Xxxxxx X. Xxxxxxx
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00 Xxxx Xxxxx Xxx
Xxxxxx, Xxx Xxxx 00000
Telecopier:
With a copy to: _____________________________
_____________________________
_____________________________
Telecopier:
12. EQUITABLE RELIEF.
----------------
The Executive acknowledges that the Corporation will
suffer damages incapable of ascertainment in the event that any of the
provisions of Article 7, 8, 9 or 10 hereof are breached and that the Corporation
will be irreparably damaged in the event that the provisions of Articles 7, 8, 9
and 10 are not enforced. Therefore, should any dispute arise with respect to the
breach or threatened breach of Articles 7, 8, 9 or 10 of this Agreement, the
Executive agrees and consents that in addition to any and all other remedies
available to the Corporation, an injunction or restraining order or other
equitable relief may be issued or ordered by a court of competent jurisdiction
restraining any breach or threatened breach of Articles 7, 8, 9 or 10 of this
Agreement. The Executive agrees not to urge in any such action that an adequate
remedy exists at law. The Executive consents to jurisdiction in New York and
venue in Erie County for purposes of all claims arising under this Agreement.
13. TERM OF AGREEMENT.
-----------------
For the limited purpose of making payments hereunder, and not,
for example, for purposes of extending the periods referenced in Article 8, this
Agreement shall not terminate until all payments hereunder have been made.
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14. MISCELLANEOUS.
-------------
This Agreement shall be governed by the internal domestic laws
of the State of New York without reference to conflict of laws principles. This
Agreement shall be binding upon and inure to the benefit of the legal
representatives, successors and assigns of the parties hereto (provided,
however, that the Executive shall not have the right to assign this Agreement in
view of its personal nature). All headings and subheadings are for convenience
only and are not of substantive effect. Except as otherwise specifically
provided for herein, this Agreement constitutes the entire agreement between the
parties hereto with respect to the subject matter hereof and supersedes all
prior negotiations, understandings and writings (or any part thereof) whether
oral or written between the parties hereto relating to the subject matter
hereof. Except as specifically referenced herein, no agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party that are not expressly set
forth in this Agreement. No provision of this Agreement may be waived, modified
or amended, orally or by any course of conduct, unless such waiver, modification
or amendment is set forth in a written agreement duly executed by both of the
parties hereto. If any article, section, portion, subsection or subportion of
this Agreement shall be determined to be unenforceable or invalid, then such
article, section, portion, subsection or subportion shall be modified in the
letter and spirit of this Agreement to the extent permitted by applicable law so
as to be rendered valid and any such determination shall not affect the
remainder of this Agreement, which shall be and remain binding and effective as
against all parties hereto.
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date set forth below.
Dated: July 9, 1997 /s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxx
XXXXXX XXXXXXXXXX LTD. by its
shareholder as of the Acquisition
WGL HOLDINGS, INC.
Dated: July 9, 1997 /s/ Xxxxx Xxxxxxx
-----------------------------------
Title
-00-
XXXXX XX XXX XXXX )
: SS.
COUNTY OF NEW YORK )
On this 9th day of July, 1997, before me personally came
Xxxxxx X. Xxxxxxx, to me known and known to me to be the same person described
in and who executed the foregoing instrument, and he duly acknowledged that he
executed the same.
/S/ XXXXXXX XXXXXX
---------------------------------
XXXXXXX X. XXXXXX
Notary Public, State of New York
No. 01MA5076163
Qualified in New York County
Commission Expires 0000
XXXXX XX XXX XXXX )
: SS.
COUNTY OF NEW YORK )
On this 9th day of July, before me personally came Xxxxx
Xxxxxxx, to me personally known who, being by me duly sworn, did depose and say
that he resides at No. 000 X 00xx Xxxxxx in the City of New York, State of New
York; that he is the President of WGL HOLDINGS, INC., the shareholder as of the
Acquisition of Xxxxxx Xxxxxxxxxx Ltd., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the Board of Directors of said corporation.
/S/ XXXXXXX XXXXXX
--------------------------------
XXXXXXX X. XXXXXX
Notary Public, State of New York
No. 01MA5076163
Qualified in New York County
Commission Expires 1999
