Exhibit 10.6
DEFERRED COMPENSATION AGREEMENT
This DEFERRED COMPENSATION AGREEMENT (the "Agreement") is dated as of the
15th day of February 1999, between Morningstar, Inc. (the "Company"), and Xxx
Xxxxxxxx (the "Employee"), a key employee of the Company. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed to such terms
in the Option Agreements (as defined below).
SECTION 1. DEFERRED COMPENSATION AWARD.
Pursuant to the terms of two option agreements, each dated April 30, 1999
(collectively, the "Option Agreements"), the Company has granted to the Employee
stock option awards (the "Options") to purchase all or any part of an aggregate
of 500,000 shares of the Company's Common Stock (the "Shares").
Subject to the adjustment provided for in Section 2 below, on any date the
Employee (or any permitted assignee of Employee) exercises the right to purchase
one or more Shares pursuant to the Options, the Company, within three (3)
business days of such exercise, shall pay to the Employee an amount equal to the
Per Share Amount for each Share so acquired (the "Deferred Compensation"). Such
payment shall be in the form of cash or, at the election of the Company, shares
of the Company's Common Stock having an aggregate Fair Market Value equal to the
amount of Deferred Compensation payable in respect of each Option exercise. For
purposes of this Agreement, an exercise of an Option shall include any
cancellation, exchange or surrender of such Option for value in connection with
any merger, consolidation or sale of the Company's Common Stock.
For purposes of this Agreement, Per Share Amount shall mean $8.075 times a
fraction, the numerator of which is Fair Market Value and the denominator of
which is $8.30; provided; however, that in no event shall the Per Share Amount
exceed $8.075.
This Agreement shall not permit the Employee to defer the receipt of any
regular compensation, fees, or bonus payable to him by the Company during any
year.
SECTION 2. ADJUSTMENT OF DEFERRED COMPENSATION AMOUNT.
The Company's obligation to pay Deferred Compensation shall not be
increased by any imputed interest or earnings amount. If the number of Shares
subject to Option under an Option Agreement is adjusted for any reason, the
Deferred Compensation amount payable under this Agreement shall be adjusted at
the same time and in the same manner so as to provide an economically equivalent
value to the Employee.
SECTION 3. FORFEITURE OF DEFERRED COMPENSATION.
The Employee shall only be entitled to payment of all or any part of the
Deferred Compensation at the time he exercises a like portion of the Options. If
all or any portion of the
Options expires unexercised, the Employee shall not be entitled to that portion
of the Deferred Compensation.
SECTION 4. PAYMENTS IN THE EVENT OF THE EMPLOYEE'S DEATH.
If the Employee terminates employment due to death, and the Employee's
estate exercises the Option, in accordance with an Option Agreement, the Company
will pay any Deferred Compensation amounts due under this Agreement to the
Employee's estate or such other beneficiary as the Employee has designated in
writing to the Company.
SECTION 5. TRANSFERABILITY OF DEFERRED COMPENSATION RIGHTS.
The Employee may not sell, transfer, pledge, assign or otherwise alienate
or hypothecate his rights under this Agreement, in any manner, by operation of
law, or otherwise, other than by will or by the laws of descent and
distribution, and the Employee's rights under this Agreement will not be subject
to execution, attachment, or similar process. Other than as provided in Section
4 above, the Deferred Compensation will be paid only to the Employee.
SECTION 6. TAX WITHHOLDING.
The Company will withhold from its Deferred Compensation payments the
amount of tax it deems necessary to satisfy all applicable tax withholding
obligations.
SECTION 7. NO LIMITATION ON RIGHTS OF THE COMPANY.
Nothing in this Agreement shall in any way affect the right or power of
the Company to make adjustments, reclassifications or changes in its capital or
business structure, or to merge, consolidate, dissolve, liquidate, sell or
transfer all or any part of its business or assets.
SECTION 8. AGREEMENT NOT A CONTRACT OF EMPLOYMENT.
This Agreement is not a contract of employment, and no terms of the
Employee's employment will be affected in any way by this Agreement, except to
the extent specifically expressed herein. This Agreement will not be construed
as conferring any legal rights on the Employee to continue to be employed, nor
will it interfere with the Company's right to discharge the Employee or to deal
with him regardless of the existence of this Agreement.
SECTION 9. SUCCESSORS.
All obligations of the Company under this Agreement will be binding on any
successor to the Company, whether the existence of the successor results from a
direct or indirect purchase of all or substantially all of the business and/or
assets of the Company, or a merger, consolidation, or otherwise.
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SECTION 10. GOVERNING LAW.
This Agreement will be construed and enforced in accordance with, and
governed by, the laws of the State of Illinois, determined without regard to its
conflict of law rules.
SECTION 11. EFFECT ON OPTION AGREEMENTS.
This Agreement shall have no effect on the Employee's rights under the
Option Agreements.
SECTION 12. EMPLOYEE'S RIGHTS UNSECURED.
This right of the Employee or his designated beneficiary to receive a
distribution hereunder shall be an unsecured claim against the general assets of
the Company, and neither the Employee nor his designated beneficiary shall have
any rights in or against any specific assets of the Company.
SECTION 13. AMENDMENTS TO AGREEMENT.
This Agreement may be amended at any time by written agreement between the
Company and the Employee.
SECTION 14. EXPENSES.
The Company shall pay any costs of administering this Agreement.
IN WITNESS WHEREOF, the Company and the Employee have duly executed this
Agreement as of the date first written above.
MORNINGSTAR, INC.
/s/ Xxx Xxxxxxxx By: /s/ Xxx Xxxxxxxx
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XXX XXXXXXXX
Its: Chairman
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