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EXHIBIT 10.1
November 11, 1999
Xx. Xxxxx X. Xxxxxxx
Premark International, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxxxxx 00000-0000
Re: Letter of Understanding
Dear Xx. Xxxxxxx:
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, prior to
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, $4,000,000 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.
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
Exh. 10.1-1
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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. You will be a Vice- Chairman of ITW, will have general
responsibility for the operations of those units of ITW that were previously
part of Premark and will report directly to me.
Your initial base salary will be $750,000. Your annual incentive
opportunities will be comparable to similarly situated employees of ITW. We will
make a payment to you of $1,500,000 on or as soon as practicable following the
closing of the Transaction in recognition that ITW does not maintain a long-term
incentive plan similar to the plan maintained by Premark and in consideration
for your agreement to continue in the employ of ITW through the Transition
Period.
You will receive total qualified and nonqualified pension benefits for
your years of employment with ITW which are equal to the benefit which would be
determined under the benefit formula of the ITW pension plan at the time your
employment ends (a) disregarding any limitations on considered compensation or
on benefits under the qualified ITW pension plan which are imposed by law, (b)
recognizing your prior service with Premark for vesting and early retirement
eligibility purposes, and (c) taking into account your compensation with Premark
for purposes of calculating your final average compensation. In addition,
provided that you are in the employ of ITW on the last day of the Transition
Period, you will be credited with 10 years of benefit accrual service for your
pre-Transaction service with Premark. For purposes of the preceding sentence, if
your employment is terminated by ITW without "cause" (as defined in your Change
of Control Agreement), you will be deemed to have been employed on the last day
of the Transition Period. You will also receive years of benefit accrual service
for your actual service with ITW from the closing of the Transaction forward.
The foregoing amount shall not be offset by any benefits accrued prior to the
closing of the Transaction with respect to your service with Premark prior to
such closing, but shall be offset by the actual benefits accrued after the
Transaction date under any qualified or nonqualified pension plan maintained by
ITW or any of its subsidiaries including Premark.
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.
Exh. 10.1-2
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I look forward to working with you as a member of the ITW team and
expect that you will help me build ITW into an even stronger organization than
it is today. If you have any questions regarding this letter, do not hesitate to
call.
Very truly yours,
/s/ W. Xxxxx Xxxxxxx
Acknowledged and agreed to W. Xxxxx Xxxxxxx
this 11th day of November, 1999. Chairman and Chief Executive Officer
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
Exh. 10.1-3
