AGREEMENT
Exhibit
10.1
AGREEMENT
made and entered into by and between Katy Industries, Inc. (the “Company”), a
Delaware corporation, with its principal place of business at 0000 X. Xxxxx Xx.
Xxxxx 000, Xxxxxxxxx, XX 00000, and Xxxxx X. Xxxxxxx (the “Executive”),
effective as of the 21st day of April 2008.
WHEREAS,
the operations of the Company and its Affiliates are a complex matter requiring
direction and leadership in a variety of arenas, including financial, strategic
planning, regulatory, community relations and others;
WHEREAS,
the Executive is possessed of certain experience and expertise that qualify him
to provide the direction and leadership required by the Company and its
Affiliates; and
WHEREAS,
subject to the terms and conditions hereinafter set forth, the Company therefore
wishes to employ the Executive as its President and Chief Executive Officer and
the Executive wishes to accept such employment;
NOW,
THEREFORE, in consideration of the foregoing promises and the mutual promises,
terms, provisions and conditions set forth in this Agreement, the parties hereby
agree:
1. Employment. Subject
to the terms and conditions set forth in this Agreement, the Company hereby
offers and the Executive hereby accepts employment.
2. Term. The
term of the Executive’s employment hereunder shall commence as of April 21, 2008
(the “Employment Date”) and shall continue until termination as hereafter
provided. The Executive may be terminated by the Company or resign at
will at any time subject to the provisions of Section 5 below. The
term of this Agreement is hereafter referred to as “the term of this Agreement”
or “the term hereof”.
3. Capacity and
Performance.
(a) During
the term hereof, the Executive shall serve the Company as its President and
Chief Executive Officer. In addition, the Executive shall be
appointed to serve as a director of the Company and a member of the Executive
Committee of the Board of Directors of the Company (the “Board”) upon the
commencement of his employment hereunder, and shall so serve without additional
compensation. At the expiration of the term of such initial
appointment, the Executive shall again serve as a director of the Company and a
member of the Executive Committee of the Board, if so re-elected or re-appointed
from time to time, and shall so serve without additional compensation; provided,
however, that the Executive’s failure to be so re-elected or re-appointed shall
not constitute a breach of this Agreement. The Executive shall resign
immediately from the Board, and all committees thereof, upon termination of his
employment hereunder.
(b) During
the term hereof, the Executive shall be employed by the Company on a full-time
basis, and shall have and perform such usual and customary duties,
responsibilities, and authority of a Chief Executive Officer and President on
behalf of the Company and its Affiliates.
(c) During
the term hereof, the Executive shall devote his full business time (except for
permitted vacation periods and reasonable periods of illness or other
incapacity) and his efforts, business judgment, skill and knowledge exclusively
to the advancement of the business and interests of the Company and its
Affiliates and to the discharge of his duties and responsibilities
hereunder. The Executive shall not engage in any other business
activity or serve in any industry, trade, professional, governmental or academic
position during the term of this Agreement, except as may be expressly approved
in advance by the Board in writing.
(d) The
foregoing restrictions shall not limit or prohibit the Executive from engaging
in passive investment, inactive business ventures, and community, charitable,
and social activities, including without limitation serving as a member of
boards of directors (or other similar bodies) of entities not engaged in
competition with the Company or any of its Affiliates, in each case, so long as
such activities do not interfere with the Executive’s performance and
obligations hereunder, and provided, further, that the Executive shall not serve
as a member of a board of directors of a publicly-traded Company without the
Board’s prior approval (which approval shall not be unreasonably
withheld).
(e) It is
anticipated that during the term hereof, the headquarters of the Company will be
relocated from Arlington, Virginia to the greater St. Louis, Missouri
metropolitan area. The Executive shall be required to maintain his
office at the Company’s headquarters in St. Louis and will be required to
commute to St. Louis each week to perform his duties and responsibilities
hereunder; provided, however, that the Executive shall not be required to
relocate his primary residence from the Atlanta, Georgia area.
4. Compensation and
Benefits. As compensation for all services performed by the
Executive under and during the term hereof and subject to performance of the
Executive’s duties and obligations to the Company and its Affiliates, pursuant
to this Agreement or otherwise:
(a) Base
Salary. During the term hereof, the Company shall pay the
Executive a base salary at the rate of Four Hundred Thousand Dollars
($400,000.00) per annum, payable in accordance with the payroll practices of the
Company for its executives and subject to increase from time to time by the
Compensation Committee of the Board, in its sole and unreviewable
discretion. The Board will review the Executive’s performance and his
base salary annually. Such base salary, as from time to time
increased, is hereafter referred to as the “Base Salary”.
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(b) Annual Bonus
Compensation. During the term hereof, the Executive will be
eligible to earn an annual bonus of up to 70% of Base Salary actually paid to
the Executive (the “Target Bonus”), subject to the achievement of performance
targets set by the Board, after consultation with the Executive, and subject
further to the terms of the Company’s management incentive plan (the “Bonus
Plan”). The performance targets for each fiscal year will be set by
the Board, after consultation with the Executive, within sixty (60) days of the
beginning of said fiscal year. The amount of any Target Bonus awarded
shall be determined by the Board based upon the achievement of said performance
targets and the terms and conditions of the Bonus
Plan. Notwithstanding the above, for fiscal year 2008, the Executive
will receive the full Target Bonus amount, with no pro-ration, regardless of
whether or not the performance targets are achieved.
(c) Supplemental Bonus
Compensation. During the term hereof, the Executive will be
eligible to receive an additional, annual, supplemental bonus for performance
materially in excess of annual targets. The decision whether to award
a supplemental bonus and the amount of any such bonus shall be determined by the
Compensation Committee of the Board in its good faith discretion.
(d) Timing of Bonus
Payments. Any bonus due to the Executive under Sections 4(b)
or 4(c) hereof in respect of a calendar year shall be paid to the Executive as
soon as practicable after the end of such calendar year (the Company will
endeavor to pay the bonus not later than April 1 of the year following the year
in which the bonus was earned, but in all events will pay the bonus not later
than December 31 of the year following the year in which the bonus was
earned).
(e) Stock
Options. Subject to the approval of the Board, the Executive
shall be granted an option to purchase a total of 750,000 shares of common stock
of the Company (the “Option”), subject to the terms and conditions set forth in
any applicable award agreement, in the 2008 Chief Executive Officer’s Plan and
in any other applicable plan or agreement. The Option will be
exercisable at the price of the Company’s shares on the Over-the-Counter
Bulletin Board (“OTC BB”) on the date of the grant. The Option shall
vest in three (3) equal installments on the first, second and third
anniversaries of the Executive’s Employment Date, and shall have a maximum
exercise period of ten (10) years from the grant date. In the event
of termination of the Executive’s employment without Cause during the term
hereof, as set forth more fully in the Option award agreement and the applicable
plan documents, the Executive shall be entitled to exercise the vested portion
of the Option for ninety (90) days following the date of termination of
employment. The unvested portion of the Option shall be canceled as
of the date of termination of employment upon a termination of employment
pursuant to Section 5(c) or 5(e)(i) hereof. The unvested portion of
the Option shall be canceled as of the ninety-first (91) day following a
termination pursuant to Sections 5(a), 5(b), 5(d) or 5(e)(ii) hereof, provided
that no Change in Control occurs prior to such date. Upon the
occurrence of a Change in Control at any time during the Executive's employment
hereunder or prior to the ninety-first (91) day following a termination pursuant
to Sections 5(a), 5(b), 5(d) or 5(e)(ii) hereof, the unvested portion of the
Option shall vest and become immediately exercisable. During the term
hereof, the following provisions shall also apply:
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(i) If there
is a Change in Control, the Company will make a special bonus payment to the
Executive (the “Change in Control Bonus”), such Change in Control Bonus to be
equal to (Y) the amount by which the purchase price per share of the Company’s
Common Stock (or, in the case of a Change of Control pursuant to clause (ii) of
the definition thereof, the amount of cash proceeds per common share received by
the Company’s common stockholders as a result of such transaction) exceeds
$6.00, multiplied by (Z) 565,775. The Change in Control Bonus shall
be payable upon the closing of the Change in Control, but in no event later than
March 15 of the year following the year in which the Change in Control
occurs.
(ii) Except as
specifically provided in Section 4(e)(i) above, nothing herein shall prohibit or
restrict the Company from taking any corporate action or engaging in any
corporate transaction of any kind, including, without limitation, the issuance
and sale of additional shares of capital stock of the Company, any merger,
consolidation, liquidation or sale of assets, or create in the Executive any
rights to acquire or receive additional shares of capital stock of the Company
or otherwise be protected against dilution.
(iii) The
Company agrees that if the Executive elects to request that the Company file a
Form S-8 with the United States Securities and Exchange Commission in connection
with any of the securities described in Section 4(e) hereof, the Company shall
file such Form S-8, provided that the Executive must pay to the Company, fifty
percent (50%) of all costs and fees, including applicable attorneys’ fees,
associated with the preparation and filing of such Form S-8.
(f) Vacations. During
the term hereof, the Executive shall be entitled to four (4) weeks of vacation
per annum, to be taken at such times and intervals as shall be determined by the
Executive, subject to the reasonable business needs of the
Company. The Executive shall be entitled to cash compensation in lieu
of vacation time not taken during the term hereof only to the extent approved by
the Board or its designee in writing.
(g) Other
Benefits. During the term hereof and subject to any
contribution therefor generally required of employees of the Company, the
Executive shall be entitled to participate in any and all employee benefit plans
from time to time in effect for employees of the Company generally, except to
the extent such plans are in a category of benefit otherwise provided to the
Executive. Such participation shall be subject to (i) the terms of
the applicable plan documents, (ii) generally applicable Company policies and
(iii) the discretion of the Board or any administrative or other committee
provided for in or contemplated by such plan. The Company may alter,
modify, add to or delete its employee benefit plans at any time as it, in its
sole judgment, determines to be appropriate, without recourse by the Executive;
provided, however, that any such alteration, modification, addition, or deletion
applies to the Company’s executive officers or employees generally.
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(h) Automobile. During
the term hereof, the Company will pay the Executive an automobile allowance of
One Thousand Five Hundred Dollars ($1,500.00) per month (the “Car
Allowance”). To the extent the Car Allowance results in the
Executive’s recognition of taxable income, he will be grossed up for applicable
income taxes (the “Automobile Gross-Up Payments”), such that the Executive
receives the full net amount of the Car Allowance. Automobile
Gross-Up Payments shall constitute taxable income to the Executive.
(i) Club Membership and Closing
Cost Payment. Beginning in 2009 and continuing during the term
hereof, the Company will reimburse the Executive for dues paid to maintain a
membership in a country club of his choosing not to exceed Ten Thousand Dollars
($10,000.00) per year (the “Dues Benefit”). In addition, during 2008
the Executive shall be entitled to a one-time lump sum payment in an amount not
to exceed Ten Thousand Dollars ($10,000.00) as reimbursement for closing costs
incurred by the Executive in connection with his purchase of a residence in the
St. Louis, Missouri metropolitan area (the “Closing Cost
Payment”). To the extent the Dues Benefit or Closing Cost Payment
results in the Executive’s recognition of taxable income, he will be grossed up
for applicable income taxes (the “Dues and Closing Cost Gross-Up Payments”) such
that the Executive receives the full net amount of such Dues Benefit or Closing
Cost Payment. Dues and Closing Cost Gross-Up Payments shall
constitute taxable income to the Executive.
(j) Executive
Physical. Every other year during the term hereof, the Company
shall reimburse the Executive for the cost to him of an executive physical
examination, to the extent such cost is not covered by applicable
insurance.
(k) Travel
Expenses. During the term hereof, the Company shall reimburse
the Executive for out-of-pocket expenses he incurs in connection with his weekly
travel from Atlanta, Georgia to St. Louis, Missouri, subject to any reasonable
restrictions on such expenses set by the Board or Company policy and such
reasonable substantiation and documentation as may be specified by the Company
from time to time (the “Travel Expenses”). To the extent the Travel
Expenses result in the Executive’s recognition of taxable income, he will be
grossed up for applicable income taxes (the “Travel Expenses Gross-Up
Payments”), such that the Executive receives the full net amount of the Travel
Expenses. Travel Expenses Gross-Up Payments shall constitute taxable
income to the Executive.
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(l) Business
Expenses. The Company shall pay or reimburse the Executive for
reasonable, customary and necessary business expenses incurred or paid by the
Executive in the performance of his duties and responsibilities hereunder,
subject to such reasonable substantiation and documentation as may be specified
by the Board or Company policy from time to time.
(m) Legal
Fees. Within thirty (30) days following the submission by the
Executive of reasonable substantiation and documentation as may be specified by
the Company, the Company shall reimburse the Executive for reasonable legal fees
he incurs with respect to the negotiation and preparation of this Agreement (the
“Legal Fees Payment”). To the extent the Legal Fees Payment results
in the Executive’s recognition of taxable income, he will be grossed up for
applicable income taxes (the “Legal Fees Gross-Up Payment”) such that the
Executive receives the full net amount of the Legal Fees
Payment. Legal Fees Gross-Up Payment shall constitute taxable income
to the Executive.
(n) Additional Gross
Up. In the event that it is determined that any payment
or benefit (or the acceleration of any payment or benefit) provided by the
Company to or for the benefit of the Executive under this Agreement or otherwise
will be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code or any successor provision ("Section 4999"), the Company will,
prior to the date on which any amount of the excise tax must be paid or
withheld, make an additional lump-sum payment (the "4999 Gross-Up Payment") to
the Executive. The 4999 Gross-Up Payment will be sufficient, after giving effect
to all federal, state and other taxes and charges (including interest and
penalties, if any) with respect to the 4999 Gross-Up Payment, to make the
Executive whole for all taxes (including withholding taxes) and any associated
interest and penalties, imposed under or as a result of Section 4999; for the
avoidance of doubt, the 4999 Gross-Up Payment shall be in an amount sufficient
to make the Executive whole for all taxes (including any interest or penalties
imposed with respect to such taxes, but excluding any income taxes and penalties
imposed pursuant to Section 409A of the Code), including income and excise
taxes, imposed on the 4999 Gross-Up Payment.
(i) Determinations
under this Section 4(n) will be made by the Company’s tax accountant as of the
effective time of the Change in Control.
(ii) If the
Internal Revenue Service asserts a claim that, if successful, would require
Company to make a gross-up payment or an additional gross-up payment, Company
and Executive will cooperate fully in resolving the controversy with the
Internal Revenue Service.
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(o) Timing of Reimbursements and
Gross-Up Payments. Any reimbursements to which the Executive
may be entitled pursuant to this Agreement shall be provided promptly, but no
later than December 31 of the year following the year in which the expense is
incurred and shall be provided in compliance with Section 409A of the Internal
Revenue Code of 1986, as amended (“Section 409A”) or an exemption
therefrom. Further, any such reimbursement that would
constitute nonqualified deferred compensation subject to Section 409A shall be
subject to the following additional rules: (i) no reimbursement of any such
expense shall affect the Executive’s right to reimbursement of any such expense
in any other taxable year; and (ii) the right to reimbursement shall not be
subject to liquidation or exchange for any other benefit. In the
event that a Gross-Up Payment is payable to the Executive under this Agreement,
the Company will provide the Executive with such payment no later than the end
of the calendar year following the calendar year in which the underlying tax is
paid.
5. Termination of Employment
and Severance Benefits. The Executive’s employment hereunder
shall terminate under the following circumstances:
(a) Death. In
the event of the Executive’s death during the term hereof, the Company shall pay
to the Executive’s designated beneficiary or, if no beneficiary has been
designated by the Executive, to his estate, (i) any earned and unpaid Base
Salary through the date of his death, payable in accordance with the normal
payroll practices of the Company; (ii) a pro rata portion of the bonus that
would have been earned by the Executive pursuant to Section 4(b) hereof with
respect to the year in which termination occurs, if any, had the Executive
remained employed through the end of the performance period, payable in a
lump-sum at such time as such bonus would otherwise have been paid had the
Executive’s employment not terminated in accordance with Section 4(d) hereof
(the “Pro Rata Bonus”), (iii) any bonus amounts previously awarded pursuant to
Section 4(b) hereof but not yet paid on the date of termination, payable in
accordance with Sections 4(b) and 4(d) hereof (“Previously Awarded Bonus”) and
(iv) reimbursement for expenses accrued and payable under Section 4(l) hereof
through the date of death, payable in accordance with Sections 4(l) and 4(o)
hereof.
(b) Disability.
(i) The
Company may terminate the Executive’s employment hereunder, upon written notice
to the Executive, in the event that, in the good faith judgment of the Company,
the Executive becomes disabled during his employment hereunder through any
illness, injury, accident or condition of either a physical or psychological
nature and, as a result, is unable to perform substantially all of his duties
and responsibilities hereunder for one hundred twenty (120) days during any
period of three hundred and sixty-five (365) consecutive calendar
days. The Board may designate another employee to act in the
Executive’s place during any period of the Executive’s disability.
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(ii) If any
question shall arise as to whether during any period the Executive is disabled
through any illness, injury, accident or condition of either a physical or
psychological nature so as to be unable to perform substantially all of his
duties and responsibilities hereunder, the Executive may, and at the request of
the Company shall, submit to a medical examination by a licensed physician with
the appropriate specialty selected by the Company and practicing within a
100-mile radius of the city or township nearest to the Executive’s place of
residence to whom the Executive or his duly appointed guardian, if any, has no
reasonable objection to determine whether the Executive is so disabled and such
determination shall for the purposes of this Agreement be conclusive of the
issue. If such question shall arise and the Executive shall fail to
submit to such medical examination, the Company’s determination of the issue
shall be binding on the Executive.
(iii) Upon the
giving of notice of termination of the Executive’s employment hereunder, the
Company shall have no further obligation or liability to the Executive, other
than for (1) Base Salary earned and unpaid through the date of termination,
payable in accordance with the normal payroll practices of the Company; (2) the
Pro Rata Bonus; (3) any Previously Awarded Bonus and (4) reimbursement for
expenses accrued and payable under Section 4(l) hereof through the date of
termination, payable in accordance with Sections 4(l) and 4(o)
hereof.
(c) By the Company for
Cause. The Company may terminate the Executive’s employment
hereunder for Cause at any time upon written notice to the Executive setting
forth in reasonable detail the nature of such Cause. The following,
shall constitute Cause for termination:
(i) Willful
failure to perform, or gross negligence in the performance of, the Executive’s
material duties and responsibilities to the Company and its Affiliates;
or
(ii) Material
breach by the Executive of any material provision of this Agreement;
or
(iii) Commission
of a material act of fraud or embezzlement, or commission of any material
dishonesty with regard to the Company or any of its Affiliates; or
(iv) Conviction
of, or plea of nolo contendere to, a felony or other crime involving moral
turpitude.
In the
event that any of the foregoing events or conditions under clauses (i) or (ii)
above is reasonably capable of being cured, the Company shall provide written
notice to the Executive describing the nature of such event or condition, and
the Executive shall, thereafter, have ten (10) business days from receipt of
such notice to cure such event or condition. Upon the giving of
notice of termination of the Executive’s employment hereunder for Cause, the
Company shall have no further obligation or liability to the Executive, other
than for Base Salary earned and unpaid through the date of termination, payable
in accordance with the normal payroll practices of the Company, and
reimbursement for expenses accrued and payable under Section 4(l) hereof through
the date of termination, payable in accordance with Sections 4(l) and 4(o)
hereof.
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(d) By the Company without
Cause. The Company may terminate the Executive’s employment
hereunder without Cause at any time upon written notice to the
Executive. In the event of such termination, the Company shall pay
the Executive: (i) any Base Salary earned and unpaid through the date of
termination, payable in accordance with the normal payroll practices of the
Company, (ii) any Previously Awarded Bonus, (iii) a Pro Rata Bonus, and (iv)
reimbursement for expenses accrued and payable under Section 4(l) hereof through
the date of termination, payable in accordance with Sections 4(l) and 4(o)
hereof; further, in lieu of any severance or
benefits that may otherwise be payable to the Executive under any other plan,
policy or agreement as a result of such termination, the Company shall provide
the Executive with the following severance benefits (the “Severance
Benefits”)
(i) If the
Company terminates the Executive without Cause on or before April 21, 2009, the
Company shall continue to pay the Executive his Base Salary at the rate in
effect on the date of termination and continue the medical and welfare benefits
provided pursuant to Section 4(g), for a period of twelve (12) months from the
date of termination; or
(ii) If the
Company terminates the Executive without Cause after April 21, 2009, the Company
shall continue to pay the Executive his Base Salary at the rate in effect on the
date of termination and continue the medical and welfare benefits provided
pursuant to Section 4(g), for a period of eighteen (18) months from the date of
termination.
(e) By the
Executive.
(i) Other
than in connection with a termination for "Good Reason," the Executive may
terminate his employment hereunder at any time upon thirty (30) days’ notice to
the Company. In the event of termination of the Executive pursuant to
this Section 5(e)(i), the Board may elect to waive the period of notice, or any
portion thereof, and, if the Board so elects, the Company will pay the Executive
his Base Salary for the notice period (or for any remaining portion of the
period). The Company shall have no further obligation or liability to
the Executive other than Base Salary for the notice period and reimbursement for
expenses accrued and payable under Section 4(m) hereof through the date of
termination.
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(ii) The
Executive may terminate his employment at any time for Good Reason after the
occurrence without the Executive's consent of any of the conditions described
below, provided that the Executive gives written notice to the Company of the
condition within thirty (30) days of the occurrence of the condition, and
provided further that the Company shall have thirty (30) days to remedy the
condition and, if the condition is not so remedied, that the executive terminate
his employment hereunder within thirty (30) days hereafter For
purposes of this Agreement, "Good Reason" shall mean and refer to (1) material
diminution in the Executive's duties, authority or responsibilities; (2) any
reduction by the Company of the Executive's Base Salary as in effect on the
Executive's Employment Date, as the same may be increased from time to time, or
a reduction of the potential annual Target Bonus expressed as a percent of base
salary (subject to attainment of goals, Board discretion and other conditions of
the applicable bonus program); or (3) a material breach of any material
provision of this Agreement, including but not limited to the Company's
obligations to provide the benefits specified in Section 4 hereof. In
connection with a termination of his employment by the Executive for Good
Reason, in lieu of any severance or benefits that may otherwise be payable to
the Executive under any other plan, policy or agreement as a result of such
termination, the Company shall provide the Executive with the following
Severance Benefits:
A. If the
Executive terminates his employment with Good Reason on or before April 21,
2009, the Company shall continue to pay the Executive his Base Salary at the
rate in effect on the date of termination and continue the medical and welfare
benefits provided pursuant to Section 4(g), for a period of twelve (12) months
from the date of termination; or
B. If the
Executive terminates his employment with Good Reason after April 21, 2009, the
Company shall continue to pay the Executive his Base Salary at the rate in
effect on the date of termination and continue the medical and welfare benefits
provided pursuant to Section 4(g), for a period of eighteen (18) months from the
date of termination.
(f) Upon a Change in
Control. If the Company terminates the Executive’s employment
pursuant to Section 5(d) within ninety (90) days before or one hundred eighty
(180) days after the effective date of a Change in Control, then, in lieu of any
payments to or on behalf of the Executive under Section 5(d) hereof as may be
applicable, and in lieu of any severance or benefits that may otherwise be
payable to the Executive under any other plan, policy or agreement as a result
of such termination, the Company shall continue to pay the Executive’s Base
Salary at the rate in effect on the date of termination for a period of
twenty-four (24) months from the date of termination (the “Change in Control
Severance Benefits”) and shall continue the medical and welfare benefits
provided pursuant to Section 4(g) for the same period.
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6. Effect of Termination,
Timing of Severance Payments and 409A. The provisions of this
Section 6 shall apply to termination pursuant to Section 5 or
otherwise.
(a) Payment
by the Company of any Base Salary, Pro Rata Bonus, Previously Awarded Bonus,
Severance Benefits, Change in Control Severance Benefits and expenses that may
be due to the Executive in each case under the applicable termination provision
of Section 5 shall constitute the entire obligation of the Company to the
Executive. In order to receive any Severance Benefits or Change in
Control Severance Benefits pursuant to Sections 5(d), 5(e)(ii) or 5(f) hereof,
the Executive must execute and return to the Company a timely and effective
general release of claims in the form attached hereto as Exhibit A and deliver
it to the Company within thirty (30) calendar days of the date his employment
terminates. Severance Benefits and Change in Control Severance
Benefits to which the Executive may be entitled hereunder shall be payable in
accordance with the normal payroll practices of the Company, with the first
payment, which shall be retroactive to the date immediately following the date
the Executive’s employment terminated, being due and payable on the Company’s
next regular payday for executives that follows the effective date of the
release of claims.
(b) Except as
required by law or by the other applicable provisions of this Agreement,
benefits shall terminate pursuant to the terms of the applicable benefit plans
based on the date of termination of the Executive’s employment without regard to
any continuation of Base Salary or other payment to the Executive following such
date of termination.
(c) Provisions
of this Agreement shall survive any termination if so provided herein or if
necessary or desirable fully to accomplish the purposes of such provision,
including without limitation the obligations of the Executive under Sections 7,
8 and 9 hereof. The obligation of the Company to make payments to or
on behalf of the Executive under Sections 5(d), 5(e) or 5(f) hereof is expressly
conditioned upon the Executive’s continued full performance of obligations under
Sections 7, 8 and 9 hereof. The Executive recognizes that, except as
expressly provided in Sections 5(d), 5(e) or 5(f), no compensation is earned or
due after termination of employment.
(d) For
purposes of Section 409A, all references in this Agreement to termination of
employment or similar terms, when used in a context that bears upon the payment
or timing of payment of any amounts or benefits that constitute or could
constitute “nonqualified deferred compensation” within the meaning of Section
409A shall be construed to require a “separation from service” (as defined
below). In addition, each payment made under this Agreement shall be
treated as a separate payment and the right to a series of installment payments
under this Agreement is to be treated as a right to a series of separate
payments.
(e) If at the
time of the Executive’s Separation from Service, the Executive is a “specified
employee,” as hereinafter defined, any and all amounts payable under this
Section 5 in connection with such Separation from Service that constitute
deferred compensation subject to Section 409A, as determined by the Company, and
that would (but for this sentence) be payable within six months following such
Separation from Service, shall instead be paid on the date that follows the date
of such Separation from Service by six (6) months. For purposes of
this Section 6(e) and all other purposes under this Agreement:
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(i) “Separation
from Service” shall mean a “separation from service” (as that term is defined at
Section 1.409A-1(h) of the Treasury Regulations) from the Company and from all
other corporations and trades or businesses, if any, that would be treated as a
single “service recipient” with the Company under Section 1.409A-1(h)(3) of the
Treasury Regulations). The Company may, but need not, elect in writing, subject
to the applicable limitations under Section 409A, any of the special elective
rules prescribed in Section 1.409A-1(h) of the Treasury Regulations for purposes
of determining whether a “separation from service” has occurred. Any
such written election shall be deemed part of the Agreement.
(ii) “Specified
Employee” shall mean an individual determined by the Committee or its delegate
to be a specified employee as defined in subsection (a)(2)(B)(i) of Section
409A. The Company may, but need not, elect in writing, subject to the
applicable limitations under Section 409A, any of the special elective rules
prescribed in Section 1.409A-1(i) of the Treasury Regulations for purposes of
determining “specified employee” status. Any such written election
shall be deemed part of the Agreement.
7. Confidential
Information.
(a) The
Executive acknowledges that the Company and its Affiliates continually develop
Confidential Information, that the Executive may develop Confidential
Information for the Company or its Affiliates and that the Executive may learn
of Confidential Information during the course of employment. The
Executive will comply with the policies and procedures of the Company and its
Affiliates for protecting Confidential Information and shall never disclose to
any Person (except as required by applicable law or for the good faith
performance of his duties and responsibilities to the Company and its
Affiliates), or use for his own benefit or gain, any Confidential Information
obtained by the Executive incident to his employment or other association with
the Company or any of its Affiliates. The Executive understands that
this restriction shall continue to apply after his employment terminates,
regardless of the reason for such termination.
(b) All
documents, records, tapes and other media of every kind and description relating
to the business, present or otherwise, of the Company or its Affiliates and any
copies, in whole or in part, thereof (the “Documents”), whether or not prepared
by the Executive, shall be the sole and exclusive property of the Company and
its Affiliates. The Executive shall safeguard all Documents and shall
surrender to the Company at the time his employment terminates, or at such
earlier time or times as the Board or its designee may specify, all Documents
then in the Executive’s possession or control. The Executive shall be
permitted to retain his address book.
12
8. Assignment of Rights to
Intellectual Property. The Executive shall promptly and fully
disclose all Intellectual Property to the Company. The Executive
hereby assigns and agrees to assign to the Company (or as otherwise directed by
the Company) the Executive’s full right, title and interest in and to all
Intellectual Property. The Executive agrees to execute any and all
applications for domestic and foreign patents, copyrights or other proprietary
rights (which documents shall be prepared at the Company’s expense) and to do
such other acts (including without limitation the execution and delivery of
instruments of further assurance or confirmation) requested by the Company to
assign the Intellectual Property to the Company and to permit the Company to
enforce any patents, copyrights or other proprietary rights to the Intellectual
Property. The Executive will not charge the Company for time spent in
complying with these obligations. All copyrightable works that the
Executive creates shall be considered “work made for hire”.
9. Restricted
Activities. The Executive agrees that some restrictions on his
activities during and after his employment are necessary to protect the
goodwill, Confidential Information, trade secrets, and other legitimate
interests of the Company and its Affiliates:
(a) While the
Executive is employed by the Company and for the duration of the Non-Competition
Period, the Executive shall not, directly or indirectly, whether as owner,
partner, investor, consultant, agent, employee, co-venturer or otherwise,
compete with the Company or any of its Affiliates or undertake any planning for
any business competitive with the Company or any of its Affiliates within the
Restricted Territory. The foregoing, however, shall not prohibit the
Executive's employment by a multi-division business or enterprise of which one
division of such business or enterprise engages in business competitive with the
Company or any of its Affiliates, provided that the Executive does
not provide services of any kind, directly or indirectly, including without
limitation by providing information of any kind, to such competing division, nor
shall it prohibit the Executive, during the Non-Competition Period, from seeking
other employment, provided such search activities do not otherwise violate the
provisions of this Section 9. For purposes of this Agreement,
“Restricted Territory” means (i) any state in the continental United States;
(ii) Alaska and Hawaii; (iii) any other territory or possession of the United
States; and (iv) any other country in which any Product has been manufactured,
provided, sold or offered or promoted for sale by the Company or any of its
Affiliates at any time during the Employment Period or with respect to which the
Company or any of its Affiliates has devoted substantial expense in anticipation
of launching into such geographic area a portion of their
business. Specifically, but without limiting the foregoing, the
Executive agrees not to engage in any manner in any activity that is directly or
indirectly competitive or potentially competitive with the business of the
Company or any of its Affiliates as conducted or under consideration at any time
during the Executive’s employment. Restricted activity includes
without limitation accepting employment or a consulting position with any Person
who is, or at any time within twelve (12) months prior to termination of the
Executive’s employment has been, a customer of the Company or any of its
Affiliates. For the purposes of this Section 9, the business of the
Company and its Affiliates shall include all Products and the Executive’s
undertaking shall encompass all items, products and services that may be used in
substitution for Products.
13
(b) The
Executive agrees that, during his employment with the Company, he will not
undertake any outside activity, whether or not competitive with the business of
the Company or its Affiliates, that could reasonably give rise to a conflict of
interest or otherwise interfere with his duties and obligations to the Company
or any of its Affiliates.
(c) Recognizing
the Company’s legitimate interest in maintaining a stable workforce, the
Executive further agrees that while he is employed by the Company and during the
Non-Competition Period, the Executive will not hire or attempt to hire any
employee of the Company or any of its Affiliates, assist in such hiring by any
Person, encourage any such employee to terminate his or her relationship with
the Company or any of its Affiliates (except while the Executive is employed by
the Company, provided such action is taken in the good faith performance of his
duties and in the interest of the Company), or solicit or encourage any customer
or vendor of the Company or any of its Affiliates to terminate its relationship
with them (except while the Executive is employed by the Company, provided such
action is taken in the good faith performance of his duties and in the interest
of the Company), or, in the case of a customer, to conduct with any Person any
business or activity which such customer conducts or could conduct with the
Company or any of its Affiliates. For the avoidance of doubt, it is
understood that neither (1) advertising for employment or business in mass media
not targeted at specific employees, customers, or vendors of the Company or any
of its Affiliates nor (2) providing customary employment references upon request
of an employee of the Company or engaging in customary disciplinary or other
performance-related counseling sessions with employees during the term of the
Executive’s employment shall constitute a breach of this Section
9(c).
(d) For the
purposes of this Agreement, the "Non-Competition Period" shall mean the period
beginning on the date that the Executive's employment hereunder is terminated
and ending eighteen (18) months thereafter; provided, however, that if the
Executive is eligible to receive Severance Benefits under any provision of
Section 5(d), 5(e), or 5(f), then the Non-Competition Period shall end at the
expiration of the number of months provided for the payment of
Severance Benefits under the applicable provision of Section 5(d), 5(e) or
5(f).
10. Enforcement of
Covenants. The Executive acknowledges that he has carefully
read and considered all the terms and conditions of this Agreement, including
the restraints imposed upon him pursuant to Sections 7, 8 and 9
hereof. The Executive agrees that said restraints are necessary for
the reasonable and proper protection of the Company and its Affiliates and that
each and every one of the restraints is reasonable in respect to subject matter,
length of time and geographic area. The Executive further
acknowledges that, were he to breach any of the covenants contained in Sections
7, 8 or 9 hereof, the damage to the Company would be irreparable. The
Executive therefore agrees that the Company, in addition to any other remedies
available to it, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach by the Executive of any of said
covenants, without having to post bond. The parties further agree
that, in the event that any provision of Section 7, 8 or 9 hereof shall be
determined by any court of competent jurisdiction to be unenforceable by reason
of its being extended over too great a time, too large a geographic area or too
great a range of activities, such provision shall be deemed to be modified to
permit its enforcement to the maximum extent permitted by law.
14
11. Conflicting
Agreements. The Executive hereby represents and warrants that
the execution of this Agreement and the performance of his obligations hereunder
will not breach or be in conflict with any other agreement to which the
Executive is a party or is bound and that the Executive is not now subject to
any covenants against competition or similar covenants that would affect the
performance of his obligations hereunder. The Executive will not
disclose to or use on behalf of the Company any proprietary information of a
third party without such party’s consent.
12. Indemnification. The
Company shall indemnify the Executive to the extent provided in its then current
Articles or By-Laws. For the avoidance of doubt, any rights the
Executive may have to indemnification pursuant to the then-current Articles or
By-Laws will survive termination of the Executive’s employment in accordance
with their terms. The Executive agrees to promptly notify the Company
of any actual or threatened claim arising out of or as a result of his
employment with the Company.
13. Definitions. Words
or phrases which are initially capitalized or are within quotation marks shall
have the meanings provided in this Section 13 and as provided elsewhere
herein. For purposes of this Agreement, the following definitions
apply:
(a) “Affiliates”
means all persons and entities directly or indirectly controlling, controlled by
or under common control with the Company, where control may be by either
management authority or equity interest.
(b) “Change
in Control” means (i) a sale or transfer (in one or a series of related
transactions) of 100% of the Company’s outstanding capital stock to one Person
or a group of Persons acting in concert; (ii) a sale or transfer (in one or a
series of related transactions) of all or substantially all of the Company’s
operating subsidiaries or assets to one Person or a group of Persons acting in
concert; or (iii) a transaction or transactions in which any Person or a group
of Persons acting in concert acquires stock of the Company in an amount greater
than that held by Kohlberg & Co. LLC (“Kohlberg”) and Kohlberg Affiliates
and in which Kohlberg relinquishes control of the Board.
(c) “Confidential
Information” means any and all information of the Company and its Affiliates
that is not generally known by others with whom they compete or do business, or
with whom they plan to compete or do business and any and all information,
publicly known in whole or in part or not, which, if disclosed by the Company or
its Affiliates would assist in competition against them. Confidential
Information includes without limitation such information relating to (i) the
development, research, testing, manufacturing, marketing and financial
activities of the Company and its Affiliates, (ii) the Products, (iii) the
costs, sources of supply, financial performance and strategic plans of the
Company and its Affiliates, (iv) the identity and special needs of the customers
of the Company and its Affiliates and (v) the people and organizations with whom
the Company and its Affiliates have business relationships and those
relationships. Confidential Information also includes comparable
information that the Company or any of its Affiliates have received belonging to
others or which was received by the Company or any of its Affiliates with any
understanding that it would not be disclosed. Confidential
Information will not include any information that has been published in a form
generally available to the public prior to the date the Executive proposes to
disclose or use such information. Confidential information will not
be deemed to have been published merely because individual portions of the
information have been separately published, but only if all material features
comprising such information have been published in combination.
15
(d) “Intellectual
Property” means inventions, discoveries, developments, methods, processes,
compositions, works, concepts and ideas (whether or not patentable or
copyrightable or constituting trade secrets) conceived, made, created, developed
or reduced to practice by the Executive (whether alone or with others, whether
or not during normal business hours or on or off Company premises) during the
Executive’s employment and during the period of six (6) months immediately
following termination of his employment that relate to either the Products or
any prospective activity of the Company or any of its Affiliates.
(e) “Kohlberg
Affiliates” means all persons and entities directly or indirectly controlling,
controlled by or under common control with Kohlberg & Co. LLC, where control
may be either management authority or equity interest.
(f) “Person”
means an individual, a corporation, an association, a partnership, an estate, a
trust and any other entity or organization, other than the Company or any of its
Affiliates.
(g) “Products”
mean all products planned, researched, developed, tested, manufactured, sold,
licensed, leased or otherwise distributed or put into use by the Company or any
of its Affiliates, together with all services provided or planned by the Company
or any of its Affiliates, during the Executive’s employment.
14. Withholding. All
payments made by the Company under this Agreement shall be reduced by any tax or
other amounts required to be withheld by the Company under applicable
law.
15. Assignment. Neither
the Company nor the Executive may make any assignment of this Agreement or any
interest herein, by operation of law or otherwise, without the prior written
consent of the other; provided, however, that the Company may assign its rights
and obligations under this Agreement without the consent of the Executive in the
event that the Company shall hereafter affect a reorganization, consolidate
with, or merge into, any other Person or transfer all or substantially all of
its properties or assets to any other Person. This Agreement shall
inure to the benefit of and be binding upon the Company and the Executive, their
respective successors, executors, administrators, heirs and permitted
assigns. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation, or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the manner and to the same extent
that the Company would be required to perform it if no succession had taken
place, and will provide the Executive with evidence of such
assumption.
16
16. Severability. If
any portion or provision of this Agreement shall to any extent be declared
illegal or unenforceable by a court of competent jurisdiction, then the
remainder of this Agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared illegal or
unenforceable, shall not be affected thereby, and each portion and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by
law.
17. Waiver. No
waiver of any provision hereof shall be effective unless made in writing and
signed by the waiving party. The failure of either party to require
the performance of any term or obligation of this Agreement, or the waiver by
either party of any breach of this Agreement, shall not prevent any subsequent
enforcement of such term or obligation or be deemed a waiver of any subsequent
breach.
18. Notices. Any
and all notices, requests, demands and other communications provided for by this
Agreement shall be in writing and shall be effective when delivered in person or
deposited in the United States mail, postage prepaid, registered or certified,
and addressed to the Executive at his last known address on the books of the
Company or, in the case of the Company, at its principal place of business,
attention of the Chief Financial Officer, or to such other address as either
party may specify by notice to the other actually received.
19. Entire
Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and conditions of the
Executive’s employment.
20. Amendment. This
Agreement may be amended or modified only by a written instrument signed by the
Executive and by an expressly authorized representative of the
Company.
21. Headings. The
headings and captions in this Agreement are for convenience only and in no way
define or describe the scope or content of any provision of this
Agreement.
22. Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be an
original and all of which together shall constitute one and the same
instrument.
23. Governing
Law. This is a Missouri contract and shall be construed and
enforced under and be governed in all respects by the laws of the State of
Missouri, without regard to the conflict of laws principles
thereof.
17
(remainder
of page purposely left blank)
18
IN
WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the
Company, by its duly authorized representative, and by the Executive, as of the
date first above written.
|
THE
EXECUTIVE:
|
KATY
INDUSTRIES, INC.
|
| /s/ Xxxxx X. Xxxxxxx |
By:
/s/ Xxxxxxx X.
Xxxxxxx
|
|
Xxxxx
Xxxxxxx
|
|
|
Title:
Chairman of the Board of
Directors
|
|
|
|
EXHIBIT
A
Release
of Claims
RELEASE OF CLAIMS
FOR AND IN CONSIDERATION OF the
benefits to be provided me in connection with the termination of my employment,
as set forth in the agreement between me and Katy Industries,
Inc. (the "Company") dated as of April 21, 2008 (the “Agreement”),
which are conditioned on my signing this Release of Claims and to which I am not
otherwise entitled, I, on my own behalf and on behalf of my heirs,
executors, administrators, beneficiaries, representatives and assigns, and all
others connected with or claiming through me, hereby release and forever
discharge the Company, its subsidiaries and other affiliates and all of their
respective past, present and future officers, directors, trustees, shareholders,
employees, agents, general and limited partners, members, managers, joint
venturers, representatives, successors and assigns, and all others connected
with any of them, both individually and in their official capacities, from any
and all causes of action, rights or claims of any type or description, known or
unknown, which I have had in the past, now have, or might now have, through the
date of my signing of this Release of Claims, in any way resulting from, arising
out of or connected with my employment by the Company or any of its subsidiaries
or other affiliates or the termination of that employment or pursuant to any
federal, state or local law, regulation or other requirement (including without
limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act, the Americans with Disabilities Act, and the fair employment
practices laws of the state or states in which I have been employed by the
Company or any of its subsidiaries or other affiliates, each as amended from
time to time).
Excluded
from the scope of this Release of Claims is (i) any claim arising under the
terms of the Agreement after the effective date of this Release of Claim and
(ii) any right of indemnification or contribution that I have pursuant to the
Articles of Incorporation or By-Laws of the Company or any of its subsidiaries
or other affiliates.
In
signing this Release of Claims, I acknowledge my understanding that I may not
sign it prior to the termination of my employment, but that I may consider the
terms of this Release of Claims for up to twenty-one (21) days (or such longer
period as the Company may specify) from the later of the date my employment with
the Company terminates or the date I receive this Release of
Claims. I also acknowledge that I am advised by the Company and its
subsidiaries and other affiliates to seek the advice of an attorney prior to
signing this Release of Claims; that I have had sufficient time to consider this
Release of Claims and to consult with an attorney, if I wished to do so, or to
consult with any other person of my choosing before signing; and that I am
signing this Release of Claims voluntarily and with a full understanding of its
terms.
I further
acknowledge that, in signing this Release of Claims, I have not relied on any
promises or representations, express or implied, that are not set forth
expressly in the Agreement. I understand that I may revoke this
Release of Claims at any time within seven (7) days of the date of my signing by
written notice to the General Counsel of the
Company and that this Release of Claims will take effect only upon the
expiration of such seven-day revocation period and only if I have not timely
revoked it.
Intending
to be legally bound, I have signed this Release of Claims under seal as of the
date written below.
Signature:
_____________________________________________
Name
(please
print): ____________________________________
Date
Signed: ___________________________________________
