EXHIBIT 10.3
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT was made and entered into on the 20th day of
November, 1996, effective for all purposes as of the date specified below in
Section 2, and is now amended and restated effective as of September 18, 1998,
by and between ECHELON INTERNATIONAL CORPORATION, a Florida corporation (the
"Company"), and XXXXXX X. XXXXXXX, residing at 000 Xxxxxx Xxx, Xx. Xxxxxxxxxx,
Xxxxxxx 00000 (the "Executive").
W I T N E S S E T H:
1. EMPLOYMENT
The Company hereby employs the Executive, and the Executive hereby
accepts such employment, upon the terms and subject to the conditions set forth
in this Agreement.
2. TERM
Subject to the provisions for termination as hereinafter provided, the
term of employment under this Agreement shall begin as of the completion of the
"Distribution" as that term is defined in the Company's Registration Statement
on Form 10, as amended (the "Distribution"), and shall continue through December
31, 1999, provided, however, that beginning on January 1, 1998 and on each
January 1st thereafter (each such January 1 being referred to as a "Renewal
Date"), the term of this Agreement shall automatically be extended for an
additional one year so that on each Renewal Date the then remaining unexpired
term of this Agreement shall be three years, unless either party gives the other
written notice of termination at least ninety (90) days prior to any such
Renewal Date.
3. COMPENSATION
(a) BASE SALARY. The Company shall pay to the Executive as basic
compensation for all services rendered by the Executive during the term of this
Agreement a basic annualized salary of $280,000 per year, or such other sum in
excess of that amount as the parties may agree on from time to time or as
provided in the next sentence (as in effect from time to time, the "Base
Salary"), payable monthly or in other more frequent installments, as determined
by the Company. The Board of Directors of the Company (the "Board of Directors")
shall have no authority to reduce the Executive's Base Salary in effect from
time to time. In addition, the Board of Directors, in its discretion, may award
a bonus or bonuses to the Executive in addition to the bonuses provided for in
Section 3(b).
(b) BONUSES. In addition to the Base Salary to be paid pursuant to
Section 3(a), for each of the Company's three fiscal years ending December 31,
1997, December 31, 1998 and
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December 31, 1999 during the term of this Agreement, the Company shall pay as
incentive compensation the annual bonuses, to the extent earned, specified on
Exhibit A to this Agreement. For each fiscal year ending after December 31,
1999, the Company shall pay to the Executive as incentive compensation annual
bonuses in accordance with comparable incentive bonus plan(s) adopted by the
Board of Directors of the Company.
(c) CERTAIN PLANS AND INITIAL AWARD. (i) It is anticipated that the
Company will adopt certain incentive compensation plans, including a long term
incentive plan (the "LTIP"), providing for annual or other periodic awards to
key employees of, among other things, restricted stock, and a stock option plan
(the "ISO/NSO Plan"), providing for the annual or other periodic issuance of
options to purchase the Company's common stock. The LTIP and ISO/NSO Plan are
referred to collectively in this Agreement as the "Plans." The Executive will be
given an opportunity to participate in the Plans, in accordance with and subject
to the terms of the Plans as they may be adopted, amended and administered from
time to time.
(ii) In addition to the incentive compensation referred to in
Section 3(c)(i), the Company hereby agrees to issue to the Executive under the
LTIP, effective immediately following the completion of the Distribution, that
number of shares of the Company's common stock (the "Initial Restricted Stock")
as will equal three percent (3%) of the shares of the Company's common stock
distributed in the Distribution, which Initial Restricted Stock shall be subject
to risk of forfeiture, which risk will lapse as to one-fourth of the shares of
the Initial Restricted Stock on January 31, 1998, and as to an additional
one-fourth of the Initial Restricted Stock on each of January 31, 1999, January
31, 2000 and January 31, 2001. Accordingly, as of January 31, 2001, all risks of
forfeiture shall have lapsed as to all the Initial Restricted Stock.
(iii) In addition to the incentive compensation referred to in
Section 3(c)(i) and the Initial Restricted Stock, the Company hereby agrees to
grant to the Executive under the LTIP, effective immediately following the
completion of the Distribution, options to purchase that number of shares of the
Company's common stock (the "Initial Options") as will equal two percent (2%) of
the shares of the Company's common stock distributed in the Distribution, which
Initial Options shall be exercisable as to one-third of the shares of common
stock covered by the Initial Options on January 31, 1998, and as to an
additional one-third of such shares on each of January 31, 1999 and January 31,
2000. The exercise price for the Initial Options shall be the closing price on
the New York Stock Exchange (or such other market on which the Company's stock
trades if it is not listed on the New York Stock Exchange) on the trading day
which is the eighth month anniversary of the day of the completion of the
Distribution (the "Option Pricing Date"), or if the Option Pricing Date is not a
trading day, the first trading day thereafter.
(iv) Any and all risks of forfeiture shall lapse as to all of
the Initial Restricted Stock and the Initial Options shall be fully vested and
shall be exercisable as to all of the shares of common stock covered by the
Initial Options upon (i) the death of the Executive or termination of employment
upon the "Permanent Disability" (as that term is defined in Section 7(b)(ii) of
this Agreement) of the Executive, (ii) the termination of employment of the
Executive by the Company "Without Good Cause" (as that term is defined in
Section 8(b)(iii) of this Agreement) or (iii) the occurrence of a "Change in
Control" (as that term is defined in Section 8(d)(i) of this Agreement).
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(d) REIMBURSEMENT. The Company shall reimburse the Executive, in
accordance with the Company's policies and practices for senior management, for
all reasonable expenses incurred by the Executive in the performance of the
Executive's duties under this Agreement, provided, however, that the Executive
must furnish to the Company an itemized account, satisfactory to the Company, in
substantiation of such expenditures.
(e) CERTAIN BENEFITS. The Executive shall be entitled to such fringe
benefits including, but not limited to, medical and other insurance benefits as
may be provided from time to time by the Company to other senior officers of the
Company. In addition, without restricting the foregoing, the Company shall
provide the Executive at the Company's sole cost and expense with (i) a policy
or policies of term life insurance (the "Basic Life Insurance") providing, among
other things, basic death benefits of not less than two times the Base Salary in
effect from time to time, (ii) directors and officers liability insurance with
coverage, terms and limits suitable for the chief executive officer of a New
York Stock Exchange listed company comparable in financial size and wherewithal
to that of the Company and (iii) a monthly allowance of $500 cash to reimburse
the Executive for the use and maintenance of his automobile in furtherance of
the business and affairs of the Company, provided that the Executive shall at
all times insure the Executive and the Company in such amounts as may be
reasonably requested by the Company against claims for bodily injury, death and
property damages occurring as a result of its use. The Company shall use its
reasonable best efforts to make available to the Executive in providing and
paying for the Basic Life Insurance the opportunity to purchase at the
Executive's sole cost and expense additional life insurance with a basic death
benefit (the "Optional Life Insurance") equal to two times the Executive's Base
Salary in effect from time to time (affording the Executive the opportunity to
have basic death benefit life insurance coverage equal to four times such Base
Salary). The Company will use its reasonable best efforts to effect the transfer
of the ownership to the Executive of the policy or policies for the Basic Life
Insurance and the Optional Life Insurance, if any, upon the termination of the
Executive's employment by the Company. After the Executive's termination,
payment of any premiums would be the obligation of the Executive.
(f) OTHER INCENTIVE AND BENEFIT PLANS. The Executive shall be eligible
to participate, in accordance with the terms of such plans as they may be
adopted, amended and administered from time to time, in incentive, bonus,
benefit or similar plans, including without limitation, any stock option, bonus
or other equity ownership plan, any short, mid or long term incentive plan and
any other bonus, pension or profit sharing plans established by the Company from
time to time.
4. DUTIES
(a) GENERAL. The Executive is engaged as the Chief Executive Officer
and President of the Company and initially shall be elected as a director of the
Company. In addition, at the request of the Board of Directors, the Executive
shall serve in the same position or positions in any wholly owned subsidiary or
affiliate of the Company, without any additional compensation. The Executive's
duties shall be commensurate with those customarily associated with the chief
executive of a corporation comparable to the Company.
(b) SPECIFIC. In addition to his general duties, responsibilities and
authority as Chief
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Executive Officer and President, and without in any way intending to diminish
the Executive's duties, responsibilities and authority, the Executive's duties,
responsibilities and authority shall include but not be limited to (i)
suggesting to the Board of Directors persons who should serve as executive
officers for the Company and suggesting the duties, salaries, annual raises and
(except as may be limited by the specific provisions of bonus and incentive
plans adopted by the Company) the bonuses for such persons and the Board shall
give due and proper consideration to such suggestions, (ii) determining who
shall serve in all positions below the level of executive officer, and
determining the duties, salaries, annual raises and (except as may be limited by
the specific provisions of bonus and incentive plans adopted by the Company) the
bonuses for such persons, with authority to delegate authority regarding such
junior personnel to other members of senior management, (iii) participating in
consultation with the Board of Directors in the development and implementation
of the Company's strategic business plans and (iv) retaining consultants,
professionals and other independent contractors for the Company's business;
provided, however, that the selection of the Company's independent certified
public accountants and general counsel shall be made with the concurrence of the
Board of Directors.
(c) INDEMNIFICATION. To the fullest extent permitted by law, the
Company shall indemnify and hold harmless the Executive for all liabilities,
costs, expenses and damages arising out of or in connection with the Executive's
service to the Company under this Agreement. In furtherance of this indemnity,
the Company shall enter into an indemnification agreement, in form and substance
reasonably satisfactory to the Executive and the Company. In addition, the
indemnity provided hereunder shall extend to service by the Executive as an
officer or director, or service in a similar capacity, for any civic, community
or charitable organization, provided such service is undertaken at the request
of or with the knowledge and acquiescence of the Company. The foregoing
indemnification shall be in addition to any rights or benefits the Executive may
have under statute, the Bylaws or Articles of Incorporation of the Company,
under a policy of insurance, or otherwise.
5. EXTENT OF SERVICES; VACATIONS AND DAYS OFF
(a) EXTENT OF SERVICES. During the term of the Executive's employment
under this Agreement, except during customary vacation periods and periods of
illness, the Executive shall devote full-time energy and attention during
regular business hours to the benefit and business of the Company as may be
reasonably necessary in performing the Executive's duties pursuant to this
Agreement. Notwithstanding the foregoing, the Executive may (i) serve on
corporate, trade association, civic, religious or charitable boards or
committees, (ii) deliver lectures, fulfill speaking engagements or teach at
educational institutions and (iii) manage personal investments, so long as such
activities do not materially interfere with the performance of the Executive's
duties and responsibilities and do not create a conflict of interest.
(b) VACATIONS. The Executive shall be entitled to vacations with pay
and to such personal and sick leave with pay in accordance with the policy of
the Company as may be established from time to time by the Company and applied
to other senior officers of the Company. In no event shall the Executive be
entitled to fewer than four weeks' annual vacation. Unused vacation days may be
carried over from one year to the next for a period of up to three years. Any
vacation days which remain unused on the third anniversary of the end of the
fiscal year to which
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they originally related shall expire and shall thereafter no longer be useable
by the Executive.
6. FACILITIES
The Company shall provide the Executive with a fully furnished office,
and the facilities of the Company shall be generally available to the Executive
in the performance of the Executive's duties pursuant to this Agreement, it
being understood and contemplated by the parties that all equipment, supplies
and office personnel required in the performance of the Executive's duties under
this Agreement shall be supplied by and at the sole expense of the Company.
7. ILLNESS OR INCAPACITY, TERMINATION ON DEATH, ETC.
(a) DEATH. If the Executive dies during the term of the Executive's
employment, the Company shall pay to the estate of the Executive within 30 days
after the date of death such Base Salary and any cash bonus compensation earned
pursuant to the provisions of any incentive compensation plan then in effect but
not yet paid, as would otherwise have been payable to the Executive up to the
end of the month in which the Executive's death occurs. After receiving the
payments provided in this Section 7(a), the Executive and the Executive's estate
shall have no further rights under this Agreement (other than those rights
already accrued).
(b) DISABILITY. (i) During any period of disability, illness or
incapacity during the term of this Agreement which renders the Executive at
least temporarily unable to perform the services required under this Agreement,
the Executive shall receive the Base Salary payable under Section 3(a) of this
Agreement plus any cash bonus compensation earned pursuant to the provisions of
any incentive compensation plan then in effect but not yet paid, less any cash
benefits received by him under any disability insurance carried by or provided
by the Company. Upon the Executive's "Permanent Disability" (as defined below),
which Permanent Disability continues during the payment periods specified
herein, the Company shall pay to the Executive for the period of time specified
below an amount (the "Disability Payment") equal to the (i) sum of (A) the Base
Salary paid in the same monthly or other period installments as in effect at the
time of the Executive's Permanent Disability plus (B) an amount equal to the
target level of the annual cash bonus payable to the Executive under the
Company's Management Incentive Compensation Plan as described on Exhibit A or
any similar bonus or incentive plans or programs then in effect (the "MICP
Target Amount") in respect of the fiscal year during which the Executive's
Permanent Disability occurred, which MICP Target Amount shall be paid in pro
rata equal monthly installments over the period of time specified below (ii)
reduced by the amount of any monthly payments under any policy of disability
income insurance paid for by the Company which payments are received during the
time when any Disability Payment is being made to the Executive following the
Executive's Permanent Disability. For so long as the Executive's Permanent
Disability continues, the Disability Payment shall be paid by the Company to the
Executive in equivalent installments at the same time or times as would have
been the case for payment of Base Salary over the unexpired term of this
Agreement if the Executive had not become permanently disabled and had remained
employed by the Company hereunder, but in no case shall such period exceed 36
months. The Executive may be entitled to
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receive payments under any disability income insurance which may be carried by
or provided by the Company from time to time. Upon "Permanent Disability" (as
that term is defined in Section 7(b)(ii) below) of the Executive, except as
provided in this Section 7(b) all rights of the Executive under this Agreement
(other than rights already accrued) shall terminate.
(ii) The term "Permanent Disability" as used in this Agreement
shall mean, in the event a disability insurance policy is maintained by the
Company covering the Executive at such time and is in full force and effect, the
definition of permanent disability set forth in such policy. In the event no
disability insurance policy is maintained at such time and in full force and
effect, "Permanent Disability" shall mean the inability of the Executive, as
determined by the Board of Directors of the Company, by reason of physical or
mental disability to perform the duties required of him under this Agreement for
a period of one hundred and eighty (180) days in any one-year period. Successive
periods of disability, illness or incapacity will be considered separate periods
unless the later period of disability, illness or incapacity is due to the same
or related cause and commences less than six months from the ending of the
previous period of disability. Upon such determination, the Board of Directors
may terminate the Executive's employment under this Agreement upon ten (10)
days' prior written notice. If any determination of the Board of Directors with
respect to permanent disability is disputed by the Executive, the parties hereto
agree to abide by the decision of a panel of three physicians. The Executive and
Company shall each appoint one member, and the third member of the panel shall
be appointed by the other two members. The Executive agrees to make himself
available for and submit to examinations by such physicians as may be directed
by the Company. Failure to submit to any such examination shall constitute a
breach of a material part of this Agreement.
8. OTHER TERMINATIONS
(a) BY THE EXECUTIVE. (i) The Executive may terminate the Executive's
employment hereunder upon giving at least ninety (90) days' prior written
notice. In addition, the Executive shall have the right to terminate the
Executive's employment hereunder on the conditions and at the times provided for
in Section 8(d) of this Agreement.
(ii) If the Executive gives notice pursuant to Section 8(a)(i)
above, the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing.
In any such event, the Executive shall be entitled to receive only the Base
Salary not yet paid, as would otherwise have been payable to the Executive up to
the end of the month specified as the month of termination in the termination
notice. In the event the Executive gives notice pursuant to Section 8(a)(i)
above but specifies a termination date in excess of ninety (90) days from the
date of such notice, the Company shall have the right (but not the obligation)
to accelerate the termination date to any date prior to the date specified in
the notice that is in excess of ninety (90) days from the date of the notice,
and the Company shall have the right (but not the obligation) to relieve the
Executive, in whole or in part, of the Executive's duties under this Agreement,
or direct the Executive to no longer perform such duties, or direct that the
Executive should no longer report to work, or any combination of the foregoing;
provided, however, that in any such event the Executive shall be entitled to
receive the Base Salary, as
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would otherwise have been payable to the Executive up to the end of the month of
the termination date properly selected by the Company. Upon receiving the
payments provided for under this Section 8(a), all rights of the Executive under
this Agreement (other than rights already accrued) shall terminate.
(b) TERMINATION FOR "GOOD CAUSE". (i) Except as otherwise provided in
this Agreement, the Company may terminate the employment of the Executive
hereunder only for "good cause," which shall mean (a) the willful, substantial,
continued and unjustified refusal of the Executive substantially to perform his
duties with the Company to the extent of his ability to do so (other than any
failure due to physical or mental incapacity) or (b) willful misconduct
materially and demonstrably injurious to the Company, financially or otherwise,
in each case, as determined in the reasonable discretion of the Board of
Directors, but with respect to each of the foregoing bases for termination
specified in the preceding clause, only if (1) the Executive has been provided
with written notice of any assertion that there is a basis for termination for
good cause which notice shall specify in reasonable detail specific facts
regarding any such assertion and the Executive has been given a reasonable
period of time within which to remedy or cure the problem or complaint, (2) such
notice is provided to the Executive a reasonable time before the Board of
Directors meets to consider any possible termination for cause, (3) at or prior
to the meeting of the Board of Directors to consider the matters described in
the written notice, an opportunity is provided to the Executive and his counsel
to be heard by the Board of Directors with respect to the matters described in
the written notice, before it acts with respect to such matter, (4) any
resolution or other action by the Board of Directors with respect to any
deliberation regarding or decision to terminate the Executive for good cause is
duly adopted by a vote of a majority of the entire Board of Directors of the
Company at a meeting of the Board duly called and held and (5) the Executive is
promptly provided with a copy of the resolution or other corporate action taken
with respect to such termination. No act or failure to act by the Executive
shall be considered willful unless done or omitted to be done by him not in good
faith and without reasonable belief that his action or omission was in the best
interests of the Company.
(ii) If the employment of the Executive is terminated for good
cause under Section 8(b)(i) of this Agreement, the Company shall pay to the
Executive any Base Salary earned prior to the effective date of termination but
not yet paid and any cash bonus compensation earned pursuant to the provisions
of any incentive compensation plan then in effect but not paid to the Executive
prior to the effective date of such termination. Under such circumstances, such
payments shall be in full and complete discharge of any and all liabilities or
obligations of the Company to the Executive hereunder, and the Executive shall
be entitled to no further benefits under this Agreement (other than rights
already accrued).
(iii) Termination of the employment of the Executive other
than as expressly specified above in Section 8(b)(i) for good cause shall be
deemed to be a termination of employment "Without Good Cause."
(c) TERMINATION WITHOUT GOOD CAUSE. (i) Notwithstanding any other
provision of this Agreement, the Company shall have the right to terminate the
Executive's employment Without Good Cause pursuant to the provisions of this
Section 8(c). If the Company shall terminate the employment of the Executive
Without Good Cause effective on a date earlier than the termination date
provided for in Section 2 (with the effective date of termination as so
identified
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by the Company being referred to herein as the "Accelerated Termination Date"),
the Executive, until the end of the term of this Agreement then in effect as
provided for in Section 2, but in no case shall such period exceed 36 months, or
until the date which is 24 months after the Accelerated Termination Date,
whichever is greater, shall continue to receive (1) the Base Salary, paid in the
same monthly or other periodic installments as in effect prior to the
Accelerated Termination Date (2) an equal monthly pro rata portion of an amount
of cash equal to the MICP Target Amount (as that term is defined in Section
7(b)(i)) in respect of the year during which the Executive's employment
terminates, multiplied times the number of years (or fractions thereof)
remaining in the then unexpired term of this Agreement or multiplied times two,
whichever is greater, plus (3) an equal monthly pro rata portion of an amount of
cash equal to the cash value of any bonus paid or to be paid to the Executive in
the form of performance shares or restricted stock under the LTIP as described
on Exhibit A or any similar bonus or incentive plans or programs then in effect
(valued, if applicable under the terms of such plans or programs, at the greater
of the closing price on the New York Stock Exchange, or other such market on
which the Company's stock trades if it is not listed on the New York Stock
Exchange, on the first trading day of the plan or program cycle or the
Accelerated Termination Date, or if the Accelerated Termination Date is not a
trading day, on the first trading day thereafter) in respect of the then-current
three year cycles of such plans or programs or such other cycle as is then in
effect, calculated as if the then-current cycles were completed and the target
levels attained (the "LTIP Target Amount"), which cash payment shall be in lieu
and in full satisfaction any rights under the LTIP in respect of such stock or
shares as described in Exhibit A or any similar bonus or incentive plans or
programs in effect at the time of such payment (all of which stock or shares
shall be cancelled upon such payment and receipt); provided however, if the
Accelerated Termination Date is prior to January 1, 1998, the amount of cash
payable to the Executive under the LTIP shall be $630,000, and (4) any other
cash or other bonus compensation earned prior to the date of such termination
pursuant to the terms of all incentive compensation plans then in effect other
than the Company's Management Incentive Compensation Plan as described on
Exhibit A or any similar bonus or incentive plans or programs then in effect;
provided that, notwithstanding such termination of employment, the Executive's
covenants set forth in Section 10 and Section 11 are intended to and shall
remain in full force and effect and provided further that in the event of such
termination, the Company shall have the right (but not the obligation) to
relieve the Executive, in whole or in part, of the Executive's duties under this
Agreement, or direct the Executive to no longer perform such duties, or direct
that the Executive no longer be required to report to work, or any combination
of the foregoing.
(ii) The parties agree that, because there can be no exact
measure of the damage that would occur to the Executive as a result of a
termination by the Company of the Executive's employment Without Good Cause, the
payments and benefits paid and provided pursuant to this Section 8(c) shall be
deemed to constitute liquidated damages and not a penalty for the Company's
termination of the Executive's employment Without Good Cause.
(d) CHANGE IN CONTROL. (i) For purposes of this Agreement, a "Change in
Control" shall mean the first to occur of:
(1) a change in control of the Company of a nature that
is required, pursuant to the Securities Exchange Act
of 1934 (the "1934 Act"), to be reported in response
to Item 1(a) of a Current Report on Form 8-K or Item
6(e) of
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Schedule 14A under the 1934 Act (in each case under
this Agreement, references to provisions of the 1934
Act and the rules and regulations promulgated
thereunder being understood to refer to such law,
rules and regulations as the same are in effect on
November 1, 1996); or
(2) the acquisition of "Beneficial Ownership" (as defined
in Rule 13d-3 under the 0000 Xxx) of the Company's
securities comprising 35% or more of the combined
voting power of the Company's outstanding securities
by any "person" (as that term is used in Sections
13(d) and 14(d)(2) of the 1934 Act and the rules and
regulations promulgated thereunder, but not including
any trustee or fiduciary acting in that capacity for
an employee benefit plan sponsored by the Company)
and such person's "affiliates" and "associates" (as
those terms are defined under the 1934 Act), but
excluding any ownership by the Executive and his
affiliates and associates; or
(3) the failure of the "Incumbent Directors" (as defined
below) to constitute at least a majority of all
directors of the Company (for these purposes,
"Incumbent Directors" means individuals who were the
directors of the Company on November 1, 1996, and,
after his or her election, any individual becoming a
director subsequent to November 1, 1996, whose
election, or nomination for election by the Company's
stockholders, is approved by a vote of at least
two-thirds of the directors then comprising the
Incumbent Directors, except that no individual shall
be considered an Incumbent Director who is not
recommended by management and whose initial
assumption of office as a director is in connection
with an actual or threatened "election contest"
relating to the "election of directors" of the
Company, as such terms are used in Rule 14a-11 of
Regulation 14A under the 0000 Xxx); or
(4) the closing of a sale of all or substantially all of
the assets of the Company;
(5) the Company's adoption of a plan of dissolution or
liquidation; or
(6) the closing of a merger or consolidation involving
the Company in which the Company is not the surviving
corporation or if, immediately following such merger
or consolidation, less than seventy-five percent
(75%) of the surviving corporation's outstanding
voting stock is held or is anticipated to be held by
persons who are stockholders of the Company
immediately prior to such merger or consolidation.
(ii) If a Change in Control occurs, (I) any outstanding
indebtedness or obligation of the Executive to the Company or its affiliates
shall immediately and automatically be cancelled and deemed satisfied in full
(notwithstanding any other terms of such indebtedness or obligation to the
contrary), and the Company shall pay or reimburse the Executive for any income
or employment taxes imposed with respect to or arising out of such cancellation
or any payment or reimbursement under this clause (I); and (II) the Executive
shall have the right,
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exercisable for a period of one year thereafter, to immediately terminate this
Agreement by delivering a written statement to that effect to the Company
(irrespective of any termination or purported termination of this Agreement or
the Executive's employment hereunder by the Company on or at any time following
such Change in Control) and upon such a termination the Executive shall have the
right to receive and the Company shall be obligated to pay or provide to or on
behalf of the Executive: (A) as soon as reasonably practicable, but in no event
following thirty (30) days, after the Executive delivers such statement to the
Company, in cash a lump sum payment in an amount equal to the sum of (1) the
"Control Cash Payment" as that term is defined in Section 8(d)(iii) of this
Agreement; (2) three times the annual Base Salary then in effect (or in effect
immediately prior to the Change in Control, if greater), (3) three times the
maximum level of the annual cash bonus payable to the Executive under the
Company's Management Incentive Compensation Plan as described on Exhibit A (or
any similar bonus or incentive plans or programs then in effect), applicable to
the year in which employment terminates or the immediately preceding year, if
greater, (4) the cash value of the LTIP Target Amount (as that term is defined
in Section 8(c)), which cash payment shall be in lieu and in full satisfaction
of any rights under the LTIP in respect of such stock or shares as described in
Exhibit A or any similar bonus or incentive plans or programs in effect at the
time of such payment (all of which stock or shares shall be cancelled upon such
payment and receipt), other than any outstanding options to purchase the
Company's common stock held by the Executive (which shall not be so cancelled),
and (5) the additional payments necessary to discharge certain tax liabilities
(the "Gross Up") as that term is defined in Section 13 of this Agreement; and
(B) for a twenty-four (24) month period after the date on which the Executive
delivers such statement to the Company, the benefits described in Section 3(e)
of this Agreement that were provided to the Executive (and his spouse and
dependents, if applicable) immediately prior to the Change in Control (on terms,
conditions and benefit levels no less favorable than those in effect immediately
prior to the Change in Control), including, without limitation, medical and
other health benefits, Basic Life Insurance and Optional Life Insurance,
contributions or benefits under all applicable tax-qualified or non-qualified
profit-sharing, savings, pension, retirement or deferred compensation plans, and
all benefits and amounts forfeited by the Executive on account of termination of
the Executive's employment under any employee benefit plans or programs of the
Company or its affiliates, but excluding disability benefits and directors and
officers liability insurance coverage, at the Company's sole cost and expense;
provided that the Company may, in its discretion, pay the Executive a cash
lump-sum equal to the economic equivalent of any such benefits (for example, the
total gross premiums due for any insurance coverage for the applicable period)
on an after-tax basis, as determined by the Company in good faith and reasonably
acceptable to the Executive, in lieu of providing such benefits in kind (the sum
of the foregoing amounts and benefits described in clauses (I) and (II) above,
other than the Gross Up, being referred to as the "Change in Control Payment").
If the Executive fails to exercise his rights under clause (II) of this Section
8(d)(ii) within one year following a Change in Control, such rights shall expire
and be of no further force or effect.
(iii) The "Control Cash Payment" shall be (A) $500,000 if the
first event to occur that constitutes a Change in Control occurs on or before
December 31, 1997; (B) $1,000,000, if the first event to occur that constitutes
a Change in Control occurs after December 31, 1997 but on or before December 31,
1998; (C) $1,500,000, if the first event to occur that constitutes a Change in
Control occurs after December 31, 1998 but on or before December 31, 1999; or
(D) $2,000,000, if the first event to occur that constitutes a Change in Control
occurs at any time
10
after December 31, 1999.
(e) INTENTIONS REGARDING CERTAIN STOCK AND BENEFIT PLANS. Except as
otherwise provided herein, upon any termination of the Executive's employment
Without Good Cause or upon the occurrence of a Change in Control, it is the
intention of the parties that any and all vesting or performance requirements or
conditions affecting any outstanding restricted stock, performance stock, stock
option, stock appreciation right, bonus, award, right, grant or any other
incentive compensation under any of the Plans, under this Agreement, or
otherwise received, shall be deemed to be fully satisfied and any risk of
forfeiture with respect thereto shall be deemed to have lapsed.
(f) CERTAIN RIGHTS MUTUALLY EXCLUSIVE. The provisions of Section 8(c)
and Section 8(d) are mutually exclusive, provided, however, that if within one
year following commencement of an 8(c) payout there shall be a Change in Control
as defined in Section 8(d)(i), then the Executive shall be entitled to the
amounts and benefits payable to the Executive under Section 8(d)(ii) and Section
8(d)(iii) reduced by the amount that the Executive has received under Section
8(c) up to the date of the Change in Control. The triggering of the payment and
benefit requirements of Section 8(d) shall cause the provisions of Section 8(c)
to become inoperative.
9. DISCLOSURE
The Executive agrees that during the term of the Executive's employment
by the Company, the Executive will disclose and disclose only to the Company all
ideas, methods, plans, developments or improvements known by him which relate
directly or indirectly to the business of the Company, whether acquired by the
Executive before or during the Executive's employment by the Company. Nothing in
this Section 9 shall be construed as requiring any such communication where the
idea, plan, method or development is lawfully protected from disclosure as a
trade secret of a third party or by any other lawful prohibition against such
communication. The covenants of this Section 9 shall not be violated by ordinary
and customary communications with reporters, bankers and securities analysts and
other members of the investment community.
10. CONFIDENTIALITY
The Executive agrees to keep in strict secrecy and confidence any and
all information the Executive assimilates or to which the Executive has access
during the Executive's employment by the Company and which has not been publicly
disclosed and is not a matter of common knowledge in the fields of work of the
Company. The Executive agrees that both during and after the term of the
Executive's employment by the Company, the Executive will not, without the prior
written consent of the Company, disclose any such confidential information to
any third person, partnership, joint venture, company, corporation or other
organization. The foregoing covenants shall not be breached to the extent that
any such confidential information becomes a matter of general knowledge other
than through a breach by the Executive of the Executive's obligations under this
Section 10.
11
11. NONCOMPETITION AND NONSOLICITATION
(a) GENERAL. The Executive hereby acknowledges that, during and solely
as a result of the Executive's employment by the Company, the Executive has
received and shall continue to receive: (1) special training and education with
respect to the operations of the Company's real estate development and
management businesses and its leasing, lending and financing activities, and
other related matters, and (2) access to confidential information and business
and professional contacts. In consideration of the special and unique
opportunities afforded to the Executive by the Company as a result of the
Executive's employment, as outlined in the previous sentence, the Executive
hereby agrees to the restrictive covenants in this Section 11.
(b) NONCOMPETITION. During the term of the Executive's employment,
whether pursuant to this Agreement, any automatic or other renewal hereof or
otherwise, and, except as may be otherwise herein provided, for a period of two
(2) years after the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive shall not, directly
or indirectly, enter into, engage in, be employed by or consult with any
business which competes with the Company's real estate lending, leasing,
development or management businesses in Florida; provided, however, that, the
foregoing to the contrary notwithstanding, the restrictions of this Section
11(b) shall not apply following termination of the Executive's employment under
paragraph (c) or (d) of Section 8 of this Agreement in connection with a Change
in Control. The Executive shall not engage in such prohibited activities, either
as an individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, or representative or
salesman for any person, firm, partnership, corporation or other entity so
competing with the Company. The restrictions of this Section 11 shall not be
violated by (i) the ownership of no more than 2% of the outstanding securities
of any company whose stock is traded on a national securities exchange or is
quoted in the Automated Quotation System of the National Association of
Securities Dealers (NASDAQ), or (ii) other outside business investments that do
not in any manner conflict with the services to be rendered by the Executive for
the Company and that do not diminish or detract from the Executive's ability to
render the Executive's required attention to the business of the Company.
(c) NONSOLICITATION. During the Executive's employment with the Company
and, except as may be otherwise herein provided, for a period of two (2) years
following the termination of the Executive's employment with the Company,
regardless of the reason for such termination, the Executive agrees the
Executive will refrain from and will not, directly or indirectly, as an
individual, partner, officer, director, stockholder, employee, advisor,
independent contractor, joint venturer, consultant, agent, representative,
salesman or otherwise solicit any of the employees of the Company to terminate
their employment; provided, however, that, the foregoing to the contrary
notwithstanding, the restrictions of this Section 11(c) shall not apply
following termination of the Executive's employment under paragraph (c) or (d)
of Section 8 of this Agreement in connection with a Change in Control.
(d) TERM EXTENDED OR SUSPENDED. The period of time during which the
Executive is prohibited from engaging in certain business practices pursuant to
Sections 11(b) or (c) shall be extended by any length of time during which the
Executive is in breach of such covenants.
12
(e) ESSENTIAL ELEMENT. It is understood by and between the parties
hereto that the foregoing restrictive covenants set forth in Sections 11(a)
through (c) are essential elements of this Agreement, and that, but for the
agreement of the Executive to comply with such covenants, the Company would not
have agreed to enter into this Agreement. Such covenants by the Executive shall
be construed as agreements independent of any other provision in this Agreement.
The existence of any claim or cause of action of the Executive against the
Company, whether predicated on this Agreement, or otherwise, shall not
constitute a defense to the enforcement by the Company of such covenants.
(f) SEVERABILITY. It is agreed by the Company and Executive that if any
portion of the covenants set forth in this Section 11 are held to be invalid,
unreasonable, arbitrary or against public policy, then such portion of such
covenants shall be considered divisible both as to time and geographical area.
The Company and Executive agree that, if any court of competent jurisdiction
determines the specified time period or the specified geographical area
applicable to this Section 11 to be invalid, unreasonable, arbitrary or against
public policy, a lesser time period or geographical area which is determined to
be reasonable, non-arbitrary and not against public policy may be enforced
against the Executive. The Company and the Executive agree that the foregoing
covenants are appropriate and reasonable when considered in light of the nature
and extent of the business conducted by the Company.
12. SPECIFIC PERFORMANCE
The Executive agrees that damages at law will be an insufficient remedy
to the Company if the Executive violates the terms of Sections 9, 10 or 11 of
this Agreement and that the Company would suffer irreparable damage as a result
of such violation. Accordingly, it is agreed that the Company shall be entitled,
upon application to a court of competent jurisdiction, to obtain injunctive
relief to enforce the provisions of such Sections, which injunctive relief shall
be in addition to any other rights or remedies available to the Company. The
Executive agrees to pay to the Company all reasonable costs and expenses
incurred by the Company relating to the enforcement of the terms of Sections 9,
10 or 11 of this Agreement, including reasonable fees and reasonable
disbursements of counsel selected by the Company (during investigation and
before and at trial and in appellate proceedings).
13. PAYMENT OF EXCISE TAXES
(a) PAYMENT OF EXCISE TAXES. If the Executive is to receive any (1)
Change in Control Payment under Section 8(d), (2) any benefit or payment under
Section 7 as a result of or following the death or Permanent Disability of the
Executive, (3) any benefit or payment under Section 8(c) as a result of or
following any termination of employment hereunder Without Good Cause, or (4) any
benefit or payment under the Plans as a result of a Change in Control, following
the death or Permanent Disability of the Executive or following the termination
of employment hereunder Without Good Cause (such sections being referred to as
the "Covered Sections" and the benefits and payments to be received thereunder
being referred to as the "Covered Payments"), the Executive shall be entitled to
receive the amount described below to the extent applicable. If any Covered
Payment(s) under any of the Covered Sections or any other
13
payments, awards, benefits or distributions (or any acceleration or vesting of
any such payment, award, benefit or distribution) received or to be received by
or on behalf of the Executive in connection with a Change in Control or the
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, program, arrangement or agreement with the Company
or any other person which effectuates a Change in Control, or any affiliate of
the Company or such other person) (collectively, the "Payments") are subject to
the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (as
amended from time to time, the "Code"), or any successor or similar provision of
the Code (the "Excise Tax"), the Company shall pay the Executive an additional
amount (the "Gross Up") such that the net amount retained by the Executive after
deduction of any Excise Tax on the Payments and any federal, state and local
income or employment tax, social security tax, excise tax, or any interest or
penalties imposed on any amounts paid under this Section 13 shall, be equal to
the Payments.
(b) CERTAIN ADJUSTMENT PAYMENTS. For purposes of determining the Gross
Up, the Executive shall be deemed to pay the federal income tax at the highest
marginal rate of taxation (currently 39.6%) in the calendar year in which the
payment to which the Gross Up applies is to be made and state and local income
taxes (if any) at the highest marginal rate of taxation in the state and
locality of Executive's residence on the last day of such calendar year. The
determination of whether such Excise Tax is payable and the amount thereof shall
be made upon the opinion of tax counsel selected by the Company and reasonably
acceptable to the Executive ("Tax Counsel"), applying the rules set forth in the
next sentence. For purposes of determining whether any of the Covered Payments
will be subject to the Excise Tax and the amount of the Excise Tax: (1) all
Payments shall be treated as "parachute payments," within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments," within the meaning
of Section 280G(b)(1) of the Code, shall be treated as subject to the Excise
Tax, unless in the opinion of Tax Counsel such Payments (other than Covered
Payments), in whole or in part, do not constitute such parachute payments, or
such excess parachute payments, in whole or in part, represent reasonable
compensation for services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the "base amount," within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;
and (2) the value of any non-cash or deferred payments or benefits shall be
determined by a "big five" (or equivalent) international accounting firm
selected by the Company and reasonably acceptable to the Executive in accordance
with the principles of Section 280G(d)(3) and (4) of the Code. The Gross Up, if
any, that is due under this Section 13 shall be paid to the Executive in cash in
a lump sum within thirty (30) days after the date on which the amount thereof
has been determined or is reasonably determinable by Tax Counsel, and, in any
event, not later than thirty (30) days following termination of the Executive's
employment under this Agreement; provided that if the amount of the Gross Up
cannot be finally determined at or before such time, the amount paid shall be
the estimated full amount of the Gross Up as reasonably determined by Tax
Counsel in good faith in accordance with the principles described in this
Section 13. The Executive shall be entitled to retain his own advisor to verify,
and consult with Tax Counsel in connection with, any determination or
computation related to the Excise Tax and/or Gross Up. If Tax Counsel's opinion
is not finally accepted by the Internal Revenue Service upon audit or otherwise,
or such an estimated Gross Up is paid, then appropriate adjustments shall be
computed (with additional Gross Up, if applicable) by such Tax Counsel based
upon the final amount of the Excise Tax so determined; any additional amount due
the Executive as a result of such adjustment shall be paid to the Executive by
the Company in cash in a lump sum within thirty (30) days of such
14
computation (including any interest or penalties owed by the Executive to the
Federal government by reason of any such underpayment), or any amount due the
Company as a result of such adjustment shall be paid to the Company by the
Executive in cash in a lump sum within thirty (30) days of such computation. All
fees, costs and expenses of Tax Counsel and any accounting firm or other advisor
retained in accordance with this Section 13 shall be borne solely by the
Company.
14. MISCELLANEOUS
(a) WAIVER OF BREACH. The waiver by either party to this Agreement of a
breach of any of the provisions of this Agreement by the other party shall not
be construed as a waiver of any subsequent breach by such other party.
(b) COMPLIANCE WITH OTHER AGREEMENTS. The Executive represents and
warrants that the execution of this Agreement by him and the Executive's
performance of the Executive's obligations hereunder will not conflict with,
result in the breach of any provision of or the termination of or constitute a
default under any Agreement to which the Executive is a party or by which the
Executive is or may be bound.
(c) BINDING EFFECT; ASSIGNMENT. The rights and obligations of the
Company under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of the Company. This Agreement is a personal
employment contract and the rights, obligations and interests of the Executive
hereunder may not be sold, assigned, transferred, pledged or hypothecated.
(d) ENTIRE AGREEMENT. This Agreement contains the entire agreement and
supersedes all prior agreements and understandings, oral or written, with
respect to the subject matter hereof; provided, however, that nothing contained
in this Agreement shall be deemed to limit, reduce, waive or adversely affect
the benefits, payments and rights of participation to which the Executive and
his dependents and beneficiaries are entitled under the generally applicable
terms and conditions of any plan, policy, program or arrangement in which the
Executive or any such dependent or beneficiary participates during, and
following termination for any reason of, the Executive's employment under this
Agreement, or otherwise pursuant to applicable law. This Agreement may be
changed only by an agreement in writing signed by the party against whom any
waiver, change, amendment, modification or discharge is sought.
(e) HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
(f) NO DUTY TO MITIGATE. The Executive shall be under no duty to
mitigate any loss of income as result of the termination of his employment
hereunder and any payments due the Executive upon termination of employment
shall not be reduced in respect of any other employment compensation received by
the Executive following such termination.
(g) FLORIDA LAW. This Agreement shall be construed pursuant to and
governed by the
15
substantive laws of the State of Florida (except that any provision of Florida
law shall not apply if the law of a state or jurisdiction other than Florida
would otherwise apply).
(h) VENUE; PROCESS. The parties to this Agreement agree that
jurisdiction and venue in any action brought pursuant to this Agreement to
enforce its terms or otherwise with respect to the relationships between the
parties shall properly lie in and only in the Circuit Court of the Sixth
Judicial Circuit of the State of Florida in and for Pinellas County (the
"Circuit Court") and the parties agree that jurisdiction shall not properly lie
in any other jurisdiction provided, however, if jurisdiction does not properly
lie with the Circuit Court, the parties agree that jurisdiction and venue shall
properly lie in and only in the United States District Court for the Middle
District of Florida, Tampa Division. The parties hereby waive any objections
which they may now or hereafter have based on venue and/or forum non conveniens
and irrevocably submit to the jurisdiction of any such court in any legal suit,
action or proceeding arising out of or relating to this Agreement. The parties
further agree that the mailing by certified or registered mail, return receipt
requested, of any process required by any such court shall constitute valid and
lawful service of process against them, without the necessity for service by any
other means provided by statute or rule of court.
(i) SEVERABILITY. Any provision of this Agreement which is determined
by a court of competent jurisdiction to be prohibited, unenforceable or not
authorized in any jurisdiction shall, as to such jurisdiction, be ineffective to
the extent of such prohibition, unenforceability or non-authorization without
invalidating the remaining provisions hereof or affecting the validity,
enforceability or legality of such provision in any other jurisdiction. In any
such case, such determination shall not affect any other provision of this
Agreement, and the remaining provisions of this Agreement shall remain in full
force and effect. If any provision or term of this Agreement is susceptible to
two or more constructions or interpretations, one or more of which would render
the provision or term void or unenforceable, the parties agree that a
construction or interpretation which renders the term or provision valid shall
be favored.
(j) DEDUCTION FOR TAX PURPOSES. The Company's obligations to make
payments under this Agreement are independent of whether any or all of such
payments are deductible expenses of the Company for federal income tax purposes.
(k) ENFORCEMENT. If, within 10 days after demand to comply with the
obligations of one of the parties to this Agreement served in writing on the
other, compliance or reasonable assurance of compliance is not forthcoming, and
the party demanding compliance engages the services of an attorney to enforce
rights under this Agreement, the prevailing party in any action shall be
entitled to recover all reasonable costs and expenses of enforcement (including
reasonable attorneys' fees and reasonable expenses during investigation, before
and at trial and in appellate proceedings). In addition, each of the parties
agrees to indemnify the other in respect of any and all claims, losses, costs,
liabilities and expenses, including reasonable fees and reasonable disbursements
of counsel (during investigation prior to initiation of litigation and at trial
and in appellate proceedings if litigation ensues), directly or indirectly
resulting from or arising out of a breach by the other party of their respective
obligations hereunder. The parties' costs of enforcing this Agreement shall
include prejudgment interest. Additionally, if any party incurs any
out-of-pocket expenses in connection with the enforcement of this Agreement, all
such amounts shall accrue interest at 10% per annum (or such lower rate as may
be required to
16
avoid any limit imposed by applicable law) commencing 30 days after any such
expenses are incurred.
(l) NOTICES. All notices which are required or may be given under this
Agreement shall be in writing and shall be deemed to have been duly given when
received if personally delivered; when transmitted if transmitted by telecopy or
similar electronic transmission method; one working day after it is sent, if
sent by recognized expedited delivery service; and three days after it is sent,
if mailed, first class mail, certified mail, return receipt requested, with
postage prepaid. In each case notice shall be sent to:
To the Company: Echelon International Corporation.
Xxx Xxxxxxxx Xxxxx
Xx. Xxxxxxxxxx, XX 00000
Attn: Chairman of the Board
Telecopy: (000) 000-0000
To the Executive at the Executive's address herein first above written,
or to such other address as either party may specify by written notice to the
other.
17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ATTEST: ECHELON INTERNATIONAL CORPORATION
(Corporate Seal)
________________________________ By:____________________________________
Secretary Name: Xxxxx X. Xxxxxxx
Title:
Date:_______________________
Witnesses: EXECUTIVE
________________________________ ______________________________________
As to Executive XXXXXX X. XXXXXXX
18
EXHIBIT A
TO
EMPLOYMENT AGREEMENT BETWEEN XXXXXX X. XXXXXXX AND
ECHELON INTERNATIONAL CORPORATION,
AMENDED AND RESTATED EFFECTIVE AS OF SEPTEMBER 18, 1998
The Company will establish a Management Incentive Compensation Plan
("MICP") and Long Term Incentive Plan ("LTIP") for its senior management in
which the Executive will participate. During the first three full fiscal years
of the Company's operation following the completion of the Spinoff ending on
December 31, 1997, 1998 and 1999, respectively, and thereafter, as approved by
the Board of Directors or the Compensation Committee thereof, while the
Executive continues to be employed by the Company under this Agreement (the
"Covered Years"), the MICP will provide for annual cash bonuses based upon the
Company's net income for each of the Covered Years. The LTIP will provide the
opportunity to earn restricted shares based upon the Company's cumulative
results of operation for three year cycles, beginning with the three year cycle
comprising the Covered Years ending December 31, 1999 (the "Cycle Years"). The
Executive's participation in the MICP and the LTIP during the Covered Years
shall be based upon the criteria and shall include awards with the values
indicated in the tables set forth below and as more fully described in this
Exhibit A.
MICP
During each of the Covered Years, (i) all MICP bonuses shall be paid in
cash; (ii) if Threshold Net Income is not achieved, no MICP cash bonus will be
paid; (iii) if actual net income exceeds Threshold Net Income, but is less than
Target Net Income, or exceeds Target Net Income but is less than Maximum Net
Income, the percentage of the MICP bonus shall be proportionately increased
above the Threshold bonus amount or the Target Bonus amount, as the case may be,
and (iv) if actual net income equals or exceeds Maximum Net Income, the Maximum
MICP cash bonus will be paid, but no additional cash bonus will be payable under
the MICP regardless of the amount by which actual net income in that Covered
Year exceeds Maximum Net Income. The following table sets forth information
regarding the MICP Net Income Threshold, Target and Maximum and cash bonuses.
19
------------------------------ --------------- --------------- ---------------
MICP 1997 1998 1999
------------------------------ --------------- --------------- ---------------
THRESHOLD
------------------------------ --------------- --------------- ---------------
Net Income $1,584,274 $1,768,816 $2,132,640
------------------------------ --------------- --------------- ---------------
MICP Cash Bonus $70,000 $70,000 $70,000
(% of Base Salary) (25%) (25%) (25%)
------------------------------ --------------- --------------- ---------------
TARGET
------------------------------ --------------- --------------- ---------------
Net Income $2,112,366 $2,358,422 $2,843,521
------------------------------ --------------- --------------- ---------------
MICP Cash Bonus $140,000 $140,000 $140,000
(% of Base Salary) (50%) (50%) (50%)
------------------------------ --------------- --------------- ---------------
MAXIMUM
------------------------------ --------------- --------------- ---------------
Net Income $2,640,457 $2,948,027 $3,554,401
------------------------------ --------------- --------------- ---------------
MICP Cash Bonus $210,000 $210,000 $210,000
(% of Base Salary) (75%) (75%) (75%)
------------------------------ --------------- --------------- ---------------
Notwithstanding the foregoing and the information contained in any of
the tables contained in this Exhibit, and regardless of the actual net income
achieved by the Company in the first Covered Year, the MICP cash bonus shall not
be less than the amount of the MICP cash bonus that would be payable if the
Target Net Income was achieved in the first Covered Year (50% of Base Salary).
20
LTIP
1997, 1998, 1999 CYCLE YEARS
The sum of each year's Threshold Net Income for the three 1997, 1998
and 1999 Cycle Years shall be referred to as the "Threshold LTIP Net Income";
the sum of each year's Target Net Income for the three such Cycle Years shall be
referred to as "Target LTIP Net Income"; and the sum of each year's Maximum Net
Income for the three such Cycle Years shall be referred to as "Maximum LTIP Net
Income," in each case, as set forth in the following tables:
----------------------- ------------------ ------------------ ------------------- --------------------
LTIP 1997 1998 1999 LTIP NET INCOME
----------------------- ------------------ ------------------ ------------------- --------------------
THRESHOLD THRESHOLD
----------------------- ------------------ ------------------ ------------------- ---------------------
Net Income $1,584,274.00 $1,768,816.00 $2,132,640.00 $5,485,730.00
----------------------- ------------------ ------------------ ------------------- ---------------------
TARGET TARGET
----------------------- ------------------ ------------------ ------------------- ---------------------
Net Income $2,112,366.00 $2,358,422.00 $2,843,521.00 $7,314,309.00
----------------------- ------------------ ------------------ ------------------- ---------------------
MAXIMUM MAXIMUM
----------------------- ------------------ ------------------ ------------------- ---------------------
Net Income $2,640,457.00 $2,948,027.00 $3,554,401.00 $9,142,885.00
----------------------- ------------------ ------------------ ------------------- ---------------------
The following table sets forth information regarding the Threshold,
Target and Maximum LTIP Net Income and values associated with achieving such
levels of cumulative net income:
--------------------------- ----------------------
LTIP THREE YEARS ENDING
DECEMBER 31, 1999
--------------------------- ----------------------
THRESHOLD
--------------------------- ----------------------
Cumulative Net Income $5,485,730.00
--------------------------- ----------------------
LTIP Value $315,000
(% of Base Salary) (37.5%)
--------------------------- ----------------------
TARGET
--------------------------- ----------------------
Cumulative Net Income $7,314,309.00
--------------------------- ----------------------
LTIP Value $630,000
(% of Base Salary) (75%)
--------------------------- ----------------------
MAXIMUM
--------------------------- ----------------------
Cumulative Net Income $9,142,885.00
--------------------------- ----------------------
LTIP Value $945,000
(% of Base Salary) (112.5%)
--------------------------- ----------------------
For purposes of administering the LTIP, during the 1997, 1998, 1999
three-year cycle, (i)
21
all LTIP awards shall be paid in the form of restricted shares; (ii) the number
of restricted shares shall be determined by dividing the dollar value of the
Maximum LTIP Value, $945,000, by the closing price on January 1, 1998, or the
first trading day thereafter, on the New York Stock Exchange (or such other
market on which the Company's stock trades if it is not listed on the New York
Stock Exchange); (iii) the restricted shares, among other things, shall be
subject to a risk of forfeiture if and to the extent that the performance
criteria set forth in this Exhibit A with respect to the 1998, 1999, 2000 Cycle
Years are not met; (iv) if actual cumulative net income for the three-year
period ending December 31, 1999, does not equal or exceed Threshold LTIP Net
Income for such period, all restricted shares shall be forfeited, and no LTIP
bonus will have been earned; (v) if actual cumulative net income for the three
year period ending December 31, 1999, exceeds Threshold LTIP Net Income, but is
less than Target LTIP Net Income, for such period, or exceeds Target LTIP Net
Income, but is less than Maximum LTIP Net Income, for such period, the
percentage of the LTIP restricted shares as to which the risk of forfeiture
shall lapse shall be proportionately increased above the Threshold bonus amount
or the Target bonus amount, as the case may be; and (vi) if cumulative net
income for the three-year period ending December 31, 1999 equals or exceeds
Maximum LTIP Net Income for such period, the risk of forfeiture shall lapse as
to all restricted shares, but no additional shares will be issuable under the
LTIP regardless of the amount by which actual cumulative net income for the
three years ending December 31, 1999 exceeds such Maximum LTIP Net Income.
1998, 1999, 2000 CYCLE YEARS
The sum of each year's Threshold Net Income for the three 1998, 1999
and 2000 Cycle Years shall be referred to as the "Threshold LTIP Net Income";
the sum of each year's Target Net Income for the three such Cycle Years shall be
referred to as "Target LTIP Net Income"; and the sum of each year's Maximum Net
Income for the three such Cycle Years shall be referred to as "Maximum LTIP Net
Income," in each case, as set forth in the following tables:
LTIP 1998 1999 2000 LTIP NET INCOME
----------------------- ------------------ ------------------ ------------------- ---------------------
THRESHOLD THRESHOLD
----------------------- ------------------ ------------------ ------------------- ---------------------
Net Income $1,768,816.00 $2,132,640.00 $4,848,000.00 $8,749,456.00
----------------------- ------------------ ------------------ ------------------- ---------------------
TARGET TARGET
----------------------- ------------------ ------------------ ------------------- ---------------------
Net Income $2,358,422.00 $2,843,521.00 $6,464,000.00 $11,665,943.00
----------------------- ------------------ ------------------ ------------------- ---------------------
MAXIMUM MAXIMUM
----------------------- ------------------ ------------------ ------------------- ---------------------
Net Income $2,948,027.00 $3,554,401.00 $8,080,000.00 $14,582,428.00
----------------------- ------------------ ------------------ ------------------- ---------------------
The following table sets forth the incremental annual award correlating
to the Threshold, Target and Maximum LTIP Net Income and values associated with
achieving such levels of cumulative net income:
22
------------------------- ----------------------
LTIP THREE YEARS ENDING
DECEMBER 31, 2000
------------------------- ----------------------
THRESHOLD
------------------------- ----------------------
Cumulative Net Income $8,749,456.00
------------------------- ----------------------
LTIP Value $105,000
(% of Base Salary) (37.5%)
------------------------- ----------------------
TARGET
------------------------- ----------------------
Cumulative Net Income $11,665,943.00
------------------------- ----------------------
LTIP Value $210,000
(% of Base Salary) (75%)
------------------------- ----------------------
MAXIMUM
------------------------- ----------------------
Cumulative Net Income $14,582,428.00
------------------------- ----------------------
LTIP Value $315,000
(% of Base Salary) (112.5%)
------------------------- ----------------------
For purposes of administering the LTIP, during the 1998, 1999, 2000
three-year cycle, (i) all LTIP awards shall be paid in the form of restricted
shares; (ii) the number of restricted shares shall be determined by dividing the
dollar value of the Maximum LTIP Value, $315,000, by the closing price on
February 4, 1998, or the first trading day thereafter, on the New York Stock
Exchange (or such other market on which the Company's stock trades if it is not
listed on the New York Stock Exchange); (iii) the restricted shares, among other
things, shall be subject to a risk of forfeiture if and to the extent that the
performance criteria set forth in this Exhibit A with respect to the 1998, 1999,
2000 Cycle Years are not met; (iv) if actual cumulative net income for the
three-year period ending December 31, 2000, does not equal or exceed Threshold
LTIP Net Income for such period, all restricted shares shall be forfeited, and
no LTIP bonus will have been earned; (v) if actual cumulative net income for the
three year period ending December 31, 2000, exceeds Threshold LTIP Net Income,
but is less than Target LTIP Net Income, for such period, or exceeds Target LTIP
Net Income, but is less than Maximum LTIP Net Income, for such period, the
percentage of the LTIP restricted shares as to which the risk of forfeiture
shall lapse shall be proportionately increased above the Threshold bonus amount
or the Target Bonus amount, as the case may be; and (vi) if cumulative net
income for the three-year period ending December 31, 2000 equals or exceeds
Maximum LTIP Net Income for such period, the risk of forfeiture shall lapse as
to all restricted shares, but no additional shares will be issuable under the
LTIP regardless of the amount by which actual cumulative net income for the
three years ending December 31, 2000 exceeds such Maximum LTIP Net Income.
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