EXHIBIT 10.4
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into as of
July 1, 1996 by and between AHI HOLDING CORP., a Delaware corporation (the
"Company") and Xxxxxx X. Xxxxxxx ("Executive").
WHEREAS, the Company has acquired, pursuant to a Merger Agreement dated as
of April 12, 1996, and currently operates certain trade exposition and
publishing businesses; and
WHEREAS, the Company wishes to employ Executive and Executive is prepared
to serve in those capacities required by the Company.
NOW, THEREFORE, the parties agree as follows:
1. Position and Authority. The Company agrees to employ the Executive,
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and the Executive accepts such employment and agrees to serve the Company as the
Chairman of the Board of Directors and Chief Executive Officer of the Company
and its respective Subsidiaries, for the compensation and benefits detailed in
Sections 3 and 4 hereof. It is understood that the Executive will report
directly to the Board of Directors and that no other officer shall regularly so
report. The Executive shall be the highest ranking officer of the Company and
shall have (in all cases subject to the overall authority and control of the
Board of Directors) such authority as is typical for executives having similar
positions in similar companies. A "Subsidiary" shall be any company in which
the Company beneficially owns more than 50% of the voting power of such
company's outstanding voting securities.
2. Duties. Executive shall devote substantially all of his business time
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(subject to four weeks of vacation, or such greater amount as is authorized by
the Board of Directors) to the affairs of the Company during the employment
term, except as may be consented to by the Board of Directors. Notwithstanding
the foregoing, to the extent that it does not materially interfere with the
performance of his duties, Executive may devote such business time as is
reasonably necessary to his duties as a director of not more than two business
corporations not affiliated with the Company, and Executive may devote business
time to any charitable or not-for-profit activities. Executive shall perform
such duties and responsibilities as the Board of Directors of the Company may
from time to time reasonably determine, provided that such duties and
responsibilities are consistent with Executive's position as Chief Executive
Officer of the Company and do not diminish Executive's authority as set forth in
Section 1 hereof. Executive will not be required to relocate his permanent
residence outside of Boston, Massachusetts.
3. Base Compensation and Bonus.
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(a) Base Composition. Executive will be compensated at a base salary
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rate of $400,000 per year (or such higher rate as may be set from time to time
by the Board of Directors in its discretion) during the employment term. Base
compensation will be paid in installments on the same schedule as the Company's
Subsidiaries generally pay their employees. All compensation and benefits will
be subject to reduction by all federal, state, local and other withholdings and
similar taxes and payments required by applicable law.
(b) Bonus for the Fiscal Year Ended December 31, 1996. The Executive
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shall receive a bonus of $100,000 for the fiscal year ended December 31, 1996.
(c) Bonus for Subsequent Fiscal Years. In addition to Executive's
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base compensation, Executive will receive bonus compensation based on the
relationship between the Company's actual earnings before interest, taxes,
depreciation and amortization ("EBITDA") for each fiscal year starting with the
fiscal year ending December 31, 1997 (determined based on the Company's audited
financial statements for such fiscal year) and the EBITDA set for such year in
the Company "Adjusted Business Plan" (as defined below) as follows:
Actual EBITDA Bonus
as a Percentage (as a Percentage
of Plan of Base Salary
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Less than 80% No bonus
100% 50% of Base Salary
120% or More 100% of Base Salary
If actual EBITDA as a percentage of the Company's Adjusted Business Plan falls
between 80% and 120%, the amount of bonus shall be pro rated on a straight-line
basis. In no case shall bonus payable under this Section 3(c) exceed 100% of
Base Salary unless agreed to by the Board of Directors in its absolute
discretion.
The "Adjusted Business Plan" shall be the Company's business plan for the
fiscal year in question as approved by the Board of Directors with the consent
of Executive, appropriately adjusted for acquisitions or dispositions during the
year as determined by the Board of Directors in good faith. If the Board and
the Executive do not adopt a mutually satisfactory business plan prior to the
beginning of any fiscal year, the business plan for purposes of this Section
3(c) shall be the business plan submitted to Chemical
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Bank and dated May, 1996, subject to adjustment as provided above for
acquisitions and dispositions occurring after May 31, 1996.
Any bonus payable under this Section 3(c) shall be paid not later than 60
days after the applicable fiscal year end.
4. Benefits.
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(a) During Executive's employment by the Company, Executive will
receive the same (or substantially similar) employee benefits to those provided
by the Company or its Subsidiaries to other members of senior management from
time to time, including, without limitation, medical and dental insurances,
disability insurance and life insurance (the latter in an amount of not less
than $1,200,000); provided, that regardless of whether or not paid for other
members of senior management, the Company shall pay the entire amount of any
premium for life insurance in an amount of $1,200,000 and disability insurance
provided by the Company to Executive under this Agreement.
(b) During and after the employment term the Company agrees that if
Executive is made a party, or compelled to testify or otherwise participate in,
any action, suit or proceeding (a "Proceeding"), by reason of the fact that he
is or was a director or officer of the Company or any of its Subsidiaries,
Executive shall be indemnified by the Company as provided in Section 145 of the
Delaware General Corporation Law or (but not to any lesser extent) as authorized
by the Company's certificate of incorporation or bylaws or resolutions of the
Company's Board of Directors against all cost, expense, liability, damage and
loss reasonably incurred or suffered by Executive in connection therewith, and
such indemnification shall continue as to Executive even if he has ceased to be
a director or officer of the Company or Subsidiary for the period of any
applicable statute of limitations or, if longer, for the period in which any
such Proceeding which commenced within the period of any such statute of
limitations is pending. The Company shall advance to Executive all reasonable
costs and expenses incurred by him in connection with a Proceeding within 20
days after receipt by the Company of a written request for such advance. Such
request shall include an itemized list of the costs and expenses and an
undertaking by Executive to repay the amount of such advance if it shall
ultimately be determined, in a final judgment for which the time to appeal has
expired, that, pursuant to applicable law, he is not entitled to be indemnified
against such costs and expenses.
(c) The Company will reimburse Executive for his reasonable and
customary business expenses, including travel, accommodations and meals. Such
reimbursement shall include the reasonable cost of travel to and from Boston
(other than commuting expenses) and accommodations and meals when outside of
Boston.
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(d) The Company shall lease in Boston office space, reasonably
satisfactory to Executive, at which the Company's principal executive offices
shall be located, including Executive's principal office. Any leasehold
improvements reasonably necessary to prepare such office space for use as the
Company's principal executive office, and all reasonably necessary office
equipment, shall be paid for by the Company. The Company shall provide
Executive with a secretary and such additional office staff as the Board of
Directors and Executive shall determine.
5. Stock Option Plan. The Company shall establish a Stock Option Plan
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for employees of the Company or its Subsidiaries other than Executive or other
members of AHI Advanstar LLC ("LLC"), which plan shall permit the grant of
options covering (as of May 15, 1997) not less than 7,452 shares (as adjusted
for stock splits, stock dividends, reverse stock splits and similar transactions
on such terms as the Board deems appropriate). In the event that additional
capital is invested in the Company after May 15, 1997 by any person up to a
total aggregate investment (including capital already invested) of $200,000,000,
additional shares will be made available for the grant of options under the
option plan such that the number of Company shares subject to such options
equals the number of shares of Common Stock of the Company outstanding
multiplied by a percentage (expressed as a decimal) equal to the difference
between (A) and (B), where (A) is 18.0% (reduced by the amount, if any, by which
the Carried Interest Percentage of Solomon under the LLC Operating Agreement is
less than 2.5%) and (B) is the aggregate Carried Interest Percentage of all
Members of the LLC as it may be adjusted from time to time by the operating
agreement of the LLC. This Section 5 shall terminate upon the occurrence of a
Final Liquidity Event under the LLC Operating Agreement.
6. Term. This Agreement shall have a term of four (4) years, provided
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that Sections 9 and 10 shall survive such expiration in accordance with their
terms.
7. Termination.
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(a) This Agreement may be terminated by the Company at any time for
Cause upon written notice to Executive, which notice shall specify the reason
for termination. Such notice shall be given at any time prior to termination in
the case of matters described in clauses (B) or (C), and shall be given not less
than 30 days prior to the date of termination, in the case of matters described
in clauses (A), (D) or (E), and in the case of matters described in clauses (A),
(D) or (E) shall be rescinded if the Executive cures any misconduct, negligent
act, breach or failure giving rise to such notice to the reasonable satisfaction
of the Board of Directors, including curing any damage suffered by the Company
as a result thereof. As used herein, "Cause" shall mean (A) willful misconduct
or gross negligence by Executive in respect of his material obligations under
this Agreement, (B) conviction of a felony involving moral turpitude, (C) theft
of Company property or other disloyal or dishonest conduct of the Executive that
materially
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xxxxx the Company or its business or (in the case of dishonest conduct)
undermines the confidence of the Board in the Executive, (D) willful breach of
this Agreement, or (E) willful failure to observe Company policies or carry out
the directives of the Board of Directors that are not inconsistent with the
position of Executive as provided in Section 1 hereof.
(b) Executive may terminate this Agreement for Good Reason by giving
thirty (30) days prior written notice to the Company. Good Reason shall exist
only if (i) Executive is removed or is not re-appointed as the Company's Chief
Executive Officer, except in connection with termination of this Agreement by
the Company for Cause or due to death or Disability (as defined below), (ii)
Executive is assigned duties, or authority is withdrawn from Executive,
inconsistent with Executive's authority pursuant to Section 1, without
Executive's express written consent, (iii) breach by the Company of any material
obligation of the Company under this Agreement or (iv) Xxxxxxx & Xxxxxxxx (as
defined in the operating agreement of LLC) shall cease to beneficially own at
least 50% of the membership interests in LLC or, following dissolution of LLC,
at least 50% of the voting securities of the Company, and, in either such case,
another person or group (as defined in Section 13 of the Securities Exchange
Act) beneficially owns a greater percentage of such membership interests or
voting securities.
(c) Should the Executive terminate this Agreement for Good Reason, or
should the Company terminate this Agreement without Cause, then the Executive
shall be entitled to receive, for a period of one year, the salary and the
benefits provided for in Sections 3 and 4 hereof (provided, that any bonus under
Section 3(c) will be payable only with respect to that portion of the fiscal
year in which Executive's employment was terminated (or any prior fiscal year
for which bonus remains unpaid)); bonus for any partial fiscal year shall be
determined by multiplying the bonus Executive would have received had he
continued to work for the Company during the entire fiscal year by a fraction,
the numerator of which is the number of days in the fiscal year during which
Executive was employed by the Company, and the denominator of which is 365 (such
amount the "Pro Rata Bonus Amount"). If any such benefits cannot be legally
provided, or the provision thereof would disqualify any plan for favorable tax
treatment under the Internal Revenue Code, a financially equivalent substitute
shall be provided. The Company shall have no obligation to Executive under this
Section 8(c) if Executive breaches the provisions of the letter agreement
referred to in Section 9. This clause (c) shall not apply to a termination
under clause (d) below.
(d) This Agreement shall terminate automatically upon Executive's
death. This Agreement may be terminated by the Company upon written notice to
Executive, or by Executive upon written notice to the Company, upon Executive's
Disability. For purposes of this Agreement, "Disability" means the Executive's
suffering of a disability which shall have prevented him from performing his
obligations hereunder
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for a period of at least 120 consecutive days or 180 non-consecutive days in any
365 day period. In the event of termination of this Agreement due to Executive's
death or Disability, in addition to any salary due to Executive as of the date
of death or Disability and remaining unpaid, Executive shall be entitled to
receive, at such time as Executive would otherwise would have received such sum,
the Pro Rata Bonus Amount for the portion of the fiscal year in which
Executive's death or Disability occurred during which Executive was employed by
the Company.
(e) If the Company terminates this Agreement with Cause or if the
Executive terminates this Agreement without Good Reason, or if this Agreement is
terminated under clause (d) above, then the Executive shall, from the date of
such termination, no longer be entitled to any compensation under Sections 3 or
4 (other than, in the case of termination for Disability, disability benefits as
provided pursuant to Section 4 and, in the case of termination for death or
Disability, any bonus payable pursuant to clause (d) above). Nothing in this
clause (e) shall effect Executive's rights under Company health and disability
plans in which Executive participates to the extent such plans provide for
benefits to be paid following the termination of employment.
(f) Termination of this Agreement shall not discharge any liability
existing at the date of termination. Further, notwithholding any termination,
the provisions of Sections 9 and 10 shall survive in accordance with their
terms.
8. Effective Date. This Agreement shall take effect as of July 1, 1996.
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9. Non-Competition and Confidentiality. Executive shall execute and
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deliver a letter agreement in the form of Exhibit A hereto.
10. Arbitration. Any claim arising out of or relating to this Agreement
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(including disputes regarding the presence or absence of "Cause" or "Good
Reason" in the event of a termination), or otherwise arising out of or relating
to the Executive's employment by the Company, will be subject to arbitration in
San Francisco, California (if brought by Executive) or Boston, Massachusetts (if
brought by the Company), in accordance with the Federal Arbitration Act and the
rules of the American Arbitration Association relating to commercial disputes.
The prevailing party in any such arbitration shall be entitled to recover from
the other party its reasonable expenses incurred in connection with such
arbitration, including the reasonable fees and expenses of counsel.
11. Severability. If any provision of this Agreement is determined to be
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invalid or unenforceable, it shall be adjusted rather than voided, to achieve
the intent of the parties to the extent possible, and the remainder of the
Agreement shall be enforced to the maximum extent possible.
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12. Entire Agreement. This Agreement constitutes the entire agreement
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between Executive and the Company with respect to the terms and conditions of
the employment of Executive by the Company, and supersedes all prior or
concurrent arrangements, discussions, agreements or understandings with respect
to your employment.
13. Governing Law. This Agreement shall be governed by the laws of
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California without regard to principles of conflicts of law.
14. Expenses. The Company shall pay, or reimburse Executive for, the
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reasonable out-of-pocket expenses incurred by Executive in negotiating,
executing and delivering this Agreement and the related agreements executed and
delivered in connection herewith (including the reasonable fees and expenses of
legal counsel), up to a maximum of $50,000.
15. Notice. Any notice, or other written communication to be given
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pursuant to this Agreement for whatever reason shall be deemed duly given and
received (a) if delivered personally, from the date of delivery, or (b) by
certified mail, postage pre-paid, return receipt requested, three (3) days after
the date of mailing, addressed to the above parties as follows:
If to the Company:
AHI HOLDING CORP.
c/o Hellman & Xxxxxxxx
Xxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxxx
with a copy to:
Heller, Ehrman, White & XxXxxxxxx
000 Xxxx Xxxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx X. Xxxxx, Esq.
If to Executive:
Xxxxxx Xxxxxxx
000 Xxxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
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with a copy to:
Xxxxx, Xxxxxxx & Xxxxxxxxx, LLP
High Street Tower
000 Xxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attn: F. Xxxxxx Xxxxxx, Esq.
16. Certain Definitions. Capitalized terms not otherwise defined herein
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shall have the meaning ascribed to such terms in the Stockholders Agreement of
even date herewith.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
date and year first above written.
AHI HOLDING CORP.
By: /s/ Xxxxxxxx X. Xxxxx
________________________
Name: Xxxxxxxx X. Xxxxx
Title: Vice President
/s/ Xxxxxx X. Xxxxxxx
__________________________________
Xxxxxx X. Xxxxxxx
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EXHIBIT A
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AHI Holding Corp.
July 1, 1996
Xxxxxx X. Xxxxxxx
000 Xxxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Dear Xx. Xxxxxxx:
You are to be employed by AHI Holding Corp. (the "Company" and, together
with Advanstar Holdings, Inc. and its subsidiaries "Advanstar"). In
consideration of your employment with the Company, you and the Company agree as
follows:
1. Non-Competition. You agree that you will not, during the course of
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your employment with the Company or for the Non-Compete Period following the
termination of such employment, compete with Advanstar, as defined in paragraph
4 below. As used herein "Non-Compete Period" means (a) if your employment is
terminated by the Company without Cause (as defined therein) or by you for Good
Reason (as defined therein), six months or (b) if your employment is terminated
for any other reason, one year.
2. Confidentiality. You acknowledge that your association with
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Advanstar will bring you into close contact with many confidential affairs of
Advanstar, including information about costs, profits, markets, sales,
publications, key personnel, pricing policies, operational methods, other
business affairs, methods and other information not readily available to the
public, and plans for future development. In recognition of the foregoing, you
covenant and agree that you will keep confidential all material confidential to
Advanstar that is not otherwise in the public domain and that you will not
intentionally disclose any such information to anyone outside Advanstar or make
any use thereof for your own benefit or for any purpose other than the
advancement of the business of Advanstar at any time except with the prior
written consent of Advanstar as evidenced by a certified resolution of the Board
of Directors of the Company. For purposes of this Agreement, the following
information shall be deemed not to constitute confidential information of
Advanstar:
(a) Any information developed independently by you;
(b) Information that was received by you from a third-party, which,
to your knowledge, is not bound by an agreement of
confidentiality with Advanstar; or
(c) Any information that is in the public domain or generally
available to the public.
3. No Solicitation of Employees. You covenant that during the
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Non-Compete Period you will not, and no person, corporation, partnership, or
other entity over which you exercise control (whether as an officer, director,
sole proprietor, holder, debt or equity securities, consultant, partner, or
otherwise) will, directly or indirectly (a) enter into any written or oral
agreement or understanding relating to the services of any person who is then
employed by Advanstar or, in the case of any employee other than secretaries,
clerks and similar employees fulfilling merely clerical functions, who has been
so employed within the preceding six months, or (b) solicit, or bid against
Advanstar in an attempt to be awarded, any trade show or exposition business, or
any publishing contract, from any party sponsoring or arranging any trade show
or exposition, or publishing or sponsoring any publication, in either case with
which Advanstar then has such a relationship or contract.
4. Certain Definitions. For purposes of this Letter Agreement,
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competition with Advanstar shall include carrying on any business that is
competitive with the business of Advanstar, in the United States or in any other
country in which Advanstar conducts business as of the termination of your
employment. For purposes of this Letter Agreement, (a) the business of Advanstar
will be deemed to include (without limitation) the organization of trade shows
and expositions of the type and with respect to the industries held by Advanstar
as of the termination of your employment (it being understood that industry
shall be analogized to the categories of the category system of the Standard
Rate Data Service) and the publication (including electronic publication) of
trade journals and other magazines aimed at the particular businesses,
industries or professions (as defined by category according to the category
system of the Standard Rate Data Service) at which Advanstar's operations are
aimed, and (b) each of the following activities (without limitation) will be
deemed to constitute to carrying on business: to engage in, work with, have
interest in, advise, lend money to, guarantee the debts or obligations of, or
permit one's name or any part thereof to be used in connection with, an
enterprise or endeavor either individually, in partnership, or in conjunction
with any person, firm, association, company, or corporation, whether as
principal, agent, shareholder (other than holding of less than 1% of the voting
securities of any public company or 5% of the voting securities of any private
company), employee, director, consultant, or in any other capacity or manner
whatsoever.
5. Severability. The scope and effect of the terms and provisions
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contained in this Letter Agreement (including the noncompetition covenant
contained in Section 1) will be as broad in time (but not beyond the time
periods specified herein), geography, and all other respects as is permitted by
applicable law. If arbitrators, a court, or another body of competent
jurisdiction determine that any term or provision of this Agreement is excessive
in scope, then if possible such term or provision will be adjusted (rather than
voided) in accordance with the purpose stated in the preceding sentence and with
applicable law, but in such a manner as to minimize the change in the provision.
If such term or provision cannot be so adjusted, then it will be struck. All
other terms and provisions of this Letter Agreement will be deemed valid and
enforceable to the full extent possible.
6. Remedies. If any of the covenants or agreements in Sections 1, 2 or
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3 are violated or threatened to be violated, you agree and acknowledge that such
violation or threatened violation will cause irreparable injury to Advanstar,
and that the remedy at law of Advanstar for any such violation or threatened
violation will be inadequate and that Advanstar will be entitled to obtain any
injunction prohibiting a continuance or occurrence of such violations or
threatened violations in addition to (not in limitation of) any other rights or
remedies available at law or in equity. Your services hereunder are of a
special, unique, unusual, extraordinary character which gives them peculiar
value, the loss of which cannot be reasonably or adequately computed in damages.
The provisions of this Letter Agreement will be binding upon and inure to
the benefit of our respective heirs, executives, administrators, successors and
assigns. This Letter Agreement will be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
Very truly yours,
AHI HOLDING CORP.
By: /s/ Xxxxxxxx X. Xxxxx
__________________________
ACCEPTED AND AGREED:
/s/ Xxxxxx X. Xxxxxxx
______________________________
Xxxxxx X. Xxxxxxx
