1
EXHIBIT 10.3
November 11, 1999
Xx. Xxxxxxx Xxxx
Premark International, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Re: Letter of Understanding
Dear Xx. Xxxx:
As you know, Illinois Tool Works Inc. ("ITW") and a wholly owned
subsidiary of ITW ("Merger Sub") have entered into an Agreement and Plan of
Reorganization (the "Merger Agreement") with Premark International, Inc.
("Premark") with respect to the proposed transaction (the "Transaction") whereby
Merger Sub will be merged with and into Premark. I am writing to confirm how ITW
will treat the Transaction for purposes of your Employment Agreement that
becomes effective upon a change of control of Premark (your "Change of Control
Agreement") and to briefly describe your going forward relationship with ITW. If
the approach outlined in this letter is acceptable to you, please sign it and
return it to Xxxx Xxxxxx, Senior Vice President, Human Resources, by
November 12, 1999. An additional copy of this letter is enclosed for your files.
ITW acknowledges that the Transaction will result in circumstances
constituting "Good Reason" under your Change of Control Agreement that will
enable you to terminate employment immediately upon the closing and receive the
benefits thereunder. However, in order to encourage continuity following the
closing, ITW will pay you, or cause Premark to pay you, $1,110,000 on or as soon
as practicable following the closing of the Transaction. This payment is in lieu
of the amounts that would be due you under Section 6(a)(i) of your Change of
Control Agreement were you to terminate your employment for Good Reason. In
addition, if your employment is terminated within the first three years
following the closing of the Transaction for any reason other than "cause" (as
defined in your Change of Control Agreement), you will be entitled to the
benefit continuation provisions under Section 6(a)(ii) of your Change of Control
Agreement (including but not limited to lifetime medical benefits) except that
the benefits provided shall be based solely on the then existing ITW benefit
programs in which you participate at that time, as they may be amended from time
to time. Section 9 of your Change of Control Agreement will continue to apply to
all payments received from ITW or Premark, including but not limited to payments
under this letter.
Exh. 10.3-1
2
Going forward, Sections 3 through 6 of your Change of Control Agreement
will no longer be in effect (except as specifically provided above) and you will
be an at-will employee of ITW. Your current base salary will continue as your
initial base salary after the closing of the Transaction. Your annual incentive
opportunities will be comparable to those for similarly situated employees of
ITW. You have agreed, however, to continue in the employ of ITW at a minimum for
such reasonable period, not in excess of one year, following the closing of the
Transaction as ITW may request (the "Transition Period"). In consideration of
the payments made under the preceding paragraph, you agree that should your
employment be terminated during the one-year period following the closing of the
Transaction, you will not be entitled to severance payments under any severance
plan of ITW. However, ITW will not be entitled to, and will not attempt to,
recoup from you any of the payments or benefits described in the preceding
paragraph of this letter even if you terminate your employment during the
Transition Period.
The terms of this letter and the Executive Noncompetition Agreement
dated as of the date hereof, set forth our entire agreement as to the terms of
your employment with ITW and your rights under the Change of Control Agreement
provided that such terms do not preclude pooling of interests accounting for the
Transaction. If it is determined that any payment pursuant thereto would
preclude such accounting treatment, such payment will not be made and ITW and
you agree to negotiate in good faith modified terms of employment which will not
preclude such accounting treatment; provided, however, that you may in that
event at your discretion elect to have your employment, and any termination
thereof, governed by the terms of your Change of Control Agreement unmodified by
this letter.
I look forward to working with you as a member of the ITW team. If you
have any questions regarding this letter, give Xxxx Xxxxxx a call at (847)
000-0000.
Very truly yours,
/s/ W. Xxxxx Xxxxxxx
W. Xxxxx Xxxxxxx
Chairman and Chief Executive Officer
Acknowledged and agreed to
this 12th day of
November, 1999.
/s/ Xxxxxxx Xxxx
---------------------------
Xxxxxxx Xxxx
Exh. 10.3-2
