EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter the "Agreement"), dated January
27, 1999, by and between AHC I Acquisition Corporation ("AHC"), AKI Holding
Corp. ("Holding"), and AKI, Inc. ("AKI") (AHC, Holding and AKI, collectively
referred to as the "Company"), and Xxxxxxx X. Xxx (the "Executive").
WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, upon the terms and conditions set forth
in this Agreement.
NOW, THEREFORE, in consideration of the premises and the obligations
undertaken by the parties pursuant hereto and other good and valuable
consideration, the Company and the Executive agree as follows:
1. Employment. Subject to the terms and conditions of this
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Agreement, during the Term (as defined below) the Company will employ the
Executive, and the Executive will be employed exclusively by the Company. The
Executive will hold the offices of Chief Executive Officer of AHC, Holding and
AKI and, on or before July 1, 1999, Chairman of AKI, and, with the consent of
the Executive, such additional offices as the Board of Directors of the Company
(the "Board") may from time to time determine. Executive shall also serve on the
Board for no additional consideration. Except as otherwise provided herein, the
Executive will devote his full-time business efforts to the Company. The
Executive shall report directly to the Board. All Company functions shall report
to Executive. Executive shall have such duties and authorities that are
customary for someone of his position. Executive's services hereunder shall be
performed at the Company's principal executive offices in New York City and the
Executive agrees to travel from time to time and to render his services in other
locations in which the Company does business consistent with its reasonable
business needs. Notwithstanding the foregoing, to the extent such service will
not materially interfere with the performance of Executive's duties hereunder or
breach Sections 8, 9, 10, 11, or 12 of this Agreement, he may serve in (a) any
other position(s) with nonprofit organizations and (b) with the consent of the
Board, as a corporate director for any other entity(ies).
2. Term. Unless sooner terminated pursuant to this Agreement, the
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initial term of the Executive's employment shall commence on February 1, 1999
(the "Commencement Date") and shall end on the third anniversary thereof (the
"Term"); provided, that, beginning on the first anniversary of the Commencement
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Date, the Term shall be automatically extended for one (1) additional day, each
day, unless either party provides written notice of non-renewal, in which case
the Term shall expire two (2) years thereafter.
3. Compensation.
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(a) During the Term, the Company will pay the Executive a
salary (the "Base Salary") at the annual rate (pro-rated for portions of any
year) of $600,000, subject to increase in the sole discretion of the Board or a
duly authorized committee thereof; provided, that, such increase for any year
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shall be no less than the percent increase in the consumer price index, with
respect to New York, New York for that year. The Base Salary will be paid to
Executive in accordance with the Company's regular payroll policy for senior
executives of the Company.
(b) For each of the fiscal years (or portion thereof) of
the Company during the Term, the Board shall establish target EBITDA (as defined
below) projections ("Target EBITDA") for the Company. If less than 80% Target
EBITDA is achieved for a fiscal year, Executive shall receive no bonus, if 80%
of Target EBITDA is achieved for a fiscal year, Executive shall receive a bonus
equal to 25% of Base Salary, if 100% of Target EBITDA is achieved for a fiscal
year, Executive shall receive a bonus equal to 100% of Base Salary, and if 150%
of Target EBITDA or more is achieved for a fiscal year, Executive shall receive
a bonus equal to 200% of Base Salary (the "Bonus"). If EBITDA achieved for any
fiscal year exceeds 80% Target EBITDA, but is less than 100% Target EBITDA, the
Bonus shall be such percentage of Base Salary between 25% and 100%, calculated
on a straight-line basis, as corresponds to the relative achievement of Target
EBITDA, with 25% corresponding to 80% Target EBITDA and 100% corresponding to
100% Target EBITDA. If EBITDA achieved for any fiscal year exceeds 100% Target
EBITDA, but is less than 150% Target EBITDA, the Bonus shall be such percentage
of Base Salary between 100% and 200%, calculated on a straight-line basis, as
corresponds to the relative achievement of Target EBITDA, with 100%
corresponding to 100% Target EBITDA and 200% corresponding to 150% Target
EBITDA. Notwithstanding the foregoing, the Bonus for the 1999 fiscal year shall
be prorated in the portion that the number of days worked for the Company by the
Executive during the 1999 fiscal year bears to 365; provided, that, such 1999
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fiscal year Bonus shall not be less than $250,000.
(c) "EBITDA" for a fiscal year (i) shall mean income from
continuing operations, before extraordinary items, of the Company and its
subsidiaries for such fiscal year, determined in accordance with U.S. generally
accepted accounting principles consistently applied in accordance with the
accounting methodologies and procedures of the Company and its subsidiaries,
plus depreciation and amortization of the Company and its subsidiaries for such
period to the extent any such expense was deducted in computing such income from
operations, (ii) shall reflect as an expense any expense or charge relating to
the Bonus earned by the Executive pursuant to clause (b) above, but shall not
reflect as an expense any Acquisition Bonus (as provided below) paid or accrued
during that period, (iii) shall not reflect as an expense any extraordinary
charges relating to any Company restructuring, reorganization, mass layoff or
plant closing and (iv) shall be subject to adjustment as set forth in paragraph
(d) below.
(d) From time to time, the Board shall make such
adjustments in the EBITDA for a fiscal year, which adjustments shall be in
amounts as determined in the Board's reasonable discretion, so that
extraordinary charges or credits and the impact of any acquired businesses or
divestitures do not distort or affect the calculation in a manner inconsistent
with its purpose, which inconsistency shall be determined by the Board in its
reasonable discretion in consultation with Executive. The determinations of the
Board as provided above shall be final, conclusive and binding on all parties,
including Executive, absent proof of error.
(e) The Bonus, if any, for any fiscal year will be paid to
Executive in accordance with the Company's regular payroll policy for senior
executives of the Company within two weeks after the date of the delivery of the
Audit Opinion from the Company's independent auditors in connection with the
annual audit.
(f) During the Term, if the Company, or any subsidiary(ies)
thereof, acquires another entity, the Executive shall receive an acquisition
bonus ("Acquisition Bonus") based on the Value of the Transaction (as defined
below); provided that, without the specific approval of the Board, no such
Acquisition Bonus shall be payable in respect of any such acquisition that is
initiated during a Disability Period (as defined in Section 5(b)). The amount of
the Acquisition Bonus will be 1% on the first $25,000,000 of the Value of the
Transaction, 0.5% on the next $25,000,000 and 0.25% thereafter. Such Acquisition
Bonus will be paid to Executive within two weeks of the closing of the
acquisition transaction. "Value of the Transaction" means the total purchase
price paid for the equity of the acquired entity plus debt assumed of the
acquired entity as determined in good faith by the Board. Notwithstanding the
foregoing, in the event any earn-outs are paid to the seller in any acquisition
by the Company, within two weeks following such payment, Executive shall receive
an additional amount equal to the difference between the amount of the
Acquisition Bonus that would have been paid had the amount of such earn-out
payment been included in the Value of the Transaction and the amount of the
Acquisition Bonus actually paid.
4. Executive Benefits.
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(a) During the Term, the Executive shall be entitled to
participate in such retirement, profit sharing and pension plans and life and
other insurance programs, as well as other benefit programs, which are available
to senior executives of the Company, subject to the Company's policies with
respect to all of such benefits or insurance programs or plans; provided,
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however, that except as expressly set forth herein, the Company shall not be
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obligated to institute or maintain any particular benefit or insurance program
or plan or aspect thereof. Notwithstanding the foregoing, during the Term and
provided Executive is insurable, Executive shall be entitled to, at the sole
cost of the Company, (i) medical and dental insurance coverage for himself, his
spouse and dependant children without deductibles and without coinsurance
requirements, such medical policy to have a lifetime cap of no less than
$1,000,000 per family member, without pre-existing condition limitation, and
such policy shall pay for annual medical examinations for Executive, his spouse
and dependant children and (ii) a term life insurance policy for Executive,
entitling Executive's beneficiaries to at least twice Executive's Base Salary,
with an opportunity for Executive to purchase supplemental coverage.
(b) The Executive shall be entitled to four weeks vacation
per annum during the Term, to be scheduled at mutually agreeable times and to be
taken in accordance with the Company's policies.
(c) The Company shall reimburse the Executive for all
reasonable expenses, including, but not limited to, the use of a cellular phone
for Company business and the establishment and maintenance of a home office for
Company business, undertaken on behalf of the Company in accordance with the
Company's policies, including requirements with respect to reporting and
documentation of such expenses. In addition, the Company shall reimburse
Executive for the reasonable automobile expenses incurred by Executive for
business purposes, including, but not limited to, parking in New York City.
(d) The Company shall reimburse the Executive for, or pay
on Executive's behalf, reasonable attorneys' fees and expenses incurred in
connection with the preparation, review, negotiation, execution and delivery of
this Agreement and any other option agreement or other document or instrument
executed in connection herewith.
(e) The Company shall reimburse Executive the cost for
maintaining a membership at the Alpine Country Club; provided, that, such
reimbursement shall not exceed $15,000 annually.
(f) Immediately following the close of the two potential
acquisition transactions for which the Company is presently engaged in
discussions, but in no event later than June 30, 1999, AHC shall grant Executive
an option to acquire AHC common stock in an amount which would represent 5% of
AHC's issued and outstanding common stock on a fully diluted basis on
substantially the same terms and conditions as set forth on Exhibit A.
(g) The Company shall pay for the reasonable dues, fees and
costs of maintaining Executive's membership to one professional association
chosen by Executive.
5. Death; Disability.
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(a) Death. The Term shall immediately terminate upon the
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Executive's death; provided, that the obligations of the Company upon the
Executive's death shall be as set forth in Section 6(c)(i)(B).
(b) Disability. If during the Term of this Agreement the
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Executive becomes unable to perform his duties and responsibilities to the
Company or any of its subsidiaries for a period of six months or nine months in
any consecutive twelve month period by reason of physical or mental illness,
injury, infirmity or condition ("Disability"): (i) the Base Salary otherwise
payable during the Disability Period (as herein defined) shall nevertheless be
payable on the terms set forth herein to the Executive as a disability benefit
("Disability Benefit") but shall be reduced by disability insurance proceeds (as
adjusted to an equivalent taxable benefit) pursuant to any benefit plan of the
Company as provided in Section 4(a) or pursuant to any individual disability
policy with respect to such Disability, including social security; and (ii) the
Company shall not have the right to terminate this Agreement due to such
Disability prior to the expiration of the Disability Period. Any dispute as to
the existence of a Disability shall be resolved by an independent physician
mutually acceptable to the Company and the Executive and such resolution shall
be final, conclusive and binding on all parties. As used herein, the term
"Disability Period" shall mean the period commencing on the first day of the
calendar month following the month during which such Disability occurs and
ending on the first to occur of the following: (i) the expiration of this
Agreement; (ii) if the Disability is continuous throughout the six consecutive
months following the month during which the Disability occurs, then the last day
of such sixth consecutive calendar month; and (iii) if the Disability is
intermittent during any 12 calendar months following the month during which the
Disability initially occurs, then the last day of such 12th calendar month. The
Company shall have the right to terminate the Term at the expiration of the
Disability Period if and only if the Disability of the Executive is then
continuing. Upon such termination, the obligation of the Company shall be set
forth in Section 6(c)(i)(C).
6. Other Termination.
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(a) Termination by the Company. The Company shall have the
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right, at its election, to terminate the Executive's employment under this
Agreement by written notice to the Executive for "Cause" (as defined below) or
for any other reason. As used herein, Cause shall be deemed to exist where (i)
the Board shall have notified the Executive in writing of its reasonable
determination that there shall have occurred any intentional or willful failure,
or failure due to bad faith, by the Executive to perform his duties hereunder,
or that the Executive has breached any of his material covenants under this
Agreement; (ii) the Executive's conviction of, or entry of a plea of nolo
contendere in respect of, any felony or a misdemeanor that, in the case of a
misdemeanor, results in, or is reasonably expected to result in, material
economic or reputational injury to the Company or any parent or subsidiary
corporation or any affiliate thereof; (iii) the Executive shall have engaged in
gross negligence or willful misconduct that is materially economically injurious
to the Company or any parent or subsidiary corporation or any affiliate thereof;
or (iv) ) any material breach of this Agreement by the Executive. The Company
may terminate this Agreement for Cause only if the Company shall have given
written notice to the Executive specifying the claimed Cause; and in the case of
(i) and (iv) above, the Executive fails to cure (if curable) the claimed breach
within 30 days after receipt of the applicable notice. If the Company terminates
the Executive's employment for Cause, the Company shall pay the Executive the
amounts set forth in (c)(i)(A) below. If the Company terminates the Executive's
employment under this Agreement for any reason other than Cause, death, or
Disability, the Company shall pay the Executive the amounts set forth in
(c)(i)(D) below.
(b) Termination by the Executive. The Executive shall have
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the right, at his election, to terminate this Agreement for "Good Reason" (as
defined below) by written notice to the Company to that effect within 30 days of
Executive's knowledge of an event giving rise to Good Reason. As used herein,
Good Reason shall mean any of the following (without the Executive's consent):
(i) any relocation of the Executive's principal office at the Company to a
location outside of New York City, except for required travel in connection with
the Company's business; (ii) any reduction in the Executive's title or reporting
responsibilities or any material reduction in the Executive's duties or
responsibilities; (iii) any failure to pay the Executive his compensation under
Sections 3 and 4 when due pursuant to the terms of this Agreement; (iv) any
material breach of this Agreement by the Company; (v) any termination of
employment by Executive for any reason that occurs within 90 days following the
first anniversary of a Change in Control (as defined below) or (vi) any
termination of the Executive's employment under this Agreement by the Executive
within 30 days following the Company providing notice to Executive under Section
2 hereof not to extend the Term. The Executive may terminate this Agreement for
Good Reason only if the Executive shall have given written notice to the Company
specifying the claimed Good Reason, and the Company fails to correct (if
correctable) the claimed breach within 30 days after the receipt of the
applicable notice. For purposes of this Agreement, a "Change in Control" of the
Company occurs if (i) any "Person" (as such term is used in Sections 13(d) and
14 of the Securities Exchange Act of 1934, as amended ("Exchange Act")), other
than (A) DLJ Merchant Banking II, Inc. or any of its affiliates or any
combination thereof (collectively, the "DLJ Entities"), (B) Xxxxxxx X. Xxx or
any of his affiliates or any combination thereof (collectively, the "Fox
Parties"), or (C) any combination of DLJ Entities and/or the Fox Parties, is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of more than 50% of the total combined voting
power of all classes of capital stock of the Company normally entitled vote for
the election of directors of the Company or (ii) the Board shall approve a sale
of all or substantially all of the assets of the Company, in one transaction or
a series of related transactions, other than to an entity owned or controlled by
the DLJ Entities or the Fox Parties or any combination thereof.
(c) Effect of Termination.
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(i) Upon termination of the Executive's
employment under this Agreement by reason of the causes
described below, the following shall be applicable to sums
otherwise due to the Executive, notwithstanding anything to
the contrary herein:
(A) should this Agreement be terminated by
the Company for Cause or by the Executive for any reason other
than Good Reason, the Executive shall have no right to any
further compensation beyond the date of termination of the
Agreement; provided, that, Executive's Base Salary shall
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accrue and be paid through the date of such termination and
Executive shall be entitled to any bonus payment due pursuant
to Section 3(b) for the fiscal year prior to the fiscal year
in which such termination occurred;
(B) should this Agreement be terminated by
reason of the Executive's death, the Executive's Base Salary
shall accrue and be paid through the date of death; to the
extent not previously paid, any bonus payment due pursuant to
Section 3(b) for the fiscal year prior to the fiscal year in
which death occurred shall be paid; and any bonus payment due
pursuant to Section 3(b) for the fiscal year in which death
occurred shall be prorated to reflect only that portion of the
year during which the Executive performed services hereunder;
(C) should this Agreement be terminated by
reason of Disability pursuant to Section 5(b), the Executive's
Base Salary shall accrue and be paid through the end of the
Disability Period; to the extent not previously paid, any
bonus payment due pursuant to Section 3(b) for the fiscal year
prior to the fiscal year in which Disability occurred shall be
paid; any bonus payment due pursuant to Section 3(b) for the
fiscal year in which Disability occurred shall be prorated to
reflect only that portion of the year prior to the end of the
Disability Period; and
(D) should this Agreement be terminated by
the Executive for Good Reason, or by the Company for any
reason other than Cause or the Executive's death or
Disability, the Executive's Base Salary shall accrue and be
paid through the date of such termination; and, to the extent
not previously paid, any bonus payment due pursuant to Section
3(b) for the fiscal year prior to the fiscal year in which
termination occurred shall be paid. In addition, in such
event, the Executive shall be entitled to receive severance
payments in an amount equal to his Base Salary for the
remainder of the Term, but not more than twenty-four months.
Such Base Salary shall be payable to Executive in the
following manner: (i) one-half of such amount shall be due and
payable upon such termination and (ii) one-half of such amount
shall be due and payable in twelve equal monthly installments
after such termination. In addition, Executive shall receive a
pro-rata Bonus for the year of termination at the same time as
the Bonus would otherwise be payable; provided, that,
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Executive would be entitled to a Bonus had he remained
employed through the end of the fiscal year in which the
termination occurred. Notwithstanding the foregoing, in the
event the Executive breaches the provisions of Section 8, 9,
10, 11 or 12 hereof, then the Company shall have no obligation
to pay any amounts due under the preceding sentences of this
clause (D) in respect of the period from and after the date on
which such breach occurs.
(ii) In the event of termination of the
Executive's employment under this Agreement, whether by the
Company or the Executive, or pursuant to the expiration of
this Agreement in accordance with Section 2, the Executive
shall be deemed to have resigned all offices and directorships
held with the Company and any direct or indirect parent or
subsidiary Company and any affiliate thereof and shall deliver
such resignations or other instruments as reasonably requested
by the Company in connection with or evidencing such
resignations; provided that such resignations shall not be
deemed to constitute a waiver of any right to indemnification
accrued to the benefit of the Executive prior thereto.
(iii) In all cases of termination, whether by the
Company or the Executive, or pursuant to the expiration of
this Agreement in accordance with Section 2, the Company will
reimburse the Executive for all out-of-pocket expenses with
respect to which the Executive is entitled pursuant to Section
4(c) through the date of termination and he shall be entitled
to any earned, but unpaid Acquisition Bonus due pursuant to
Section 3(f). All payments shall be made for purposes of this
Section 6(c)(iii) at the time they would have been made if
this Agreement had not been terminated.
(iv) In the event of termination of the
Executive's employment under this Agreement, whether by the
Company or the Executive, or pursuant to the expiration of the
Agreement in accordance with Section 2, the payments, if any,
required to be provided to Executive pursuant to this Section
6 shall be in full and complete satisfaction of any and all
obligations owing to Executive pursuant to this Agreement.
7. Mitigation. The Company acknowledges that upon any termination
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of the Executive's employment, the Executive shall not have any obligation to
seek or obtain other employment in any position to mitigate any damages to which
the Executive may be entitled by reason of any termination of this Agreement
(whether by the Company without Cause or otherwise).
8. Return of Property and Nondisclosure. Upon termination or
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expiration of his employment, the Executive will promptly deliver to the Company
all data, lists, information, memoranda, documents and all other property
belonging to the Company or containing "Confidential Information" or "Trade
Secrets" of the Company (both as defined below), including, among other things,
that which relates to services performed by the Executive for the Company, or
was created or obtained by the Executive while performing services for the
Company or by virtue of the Executive's relationship with the Company, except
that Executive shall have no obligation to deliver to the Company his rolodex,
calendars and any documents containing Executive's personal contacts or
information. Except as required in order to perform his obligations under this
Agreement, the Executive shall not, without the express prior written consent of
the Company, disclose or divulge to any other person or entity, or use or modify
for use, directly or indirectly, in any way, for any person or entity any of the
Company's Confidential Information or Trade Secrets at any time (during or after
the Executive's employment) during which data or information continues to
constitute Confidential Information or a Trade Secret. For purposes of this
Agreement, "Confidential Information" of the Company shall mean any valuable,
competitively sensitive data and information related to the Company's business
other than Trade Secrets that are not generally known by or readily available to
the Company's competitors other than as a result of a disclosure directly or
indirectly by the Executive. "Trade Secrets" shall mean information or data of
the Company including, but not limited to, technical or non-technical data,
financial information, programs, devices, methods, techniques, drawings,
processes, financial plans, product plans, or lists of actual or potential
customers or suppliers, that: (a) derive economic value, actual or potential,
from not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from their disclosure or
use; and (b) are the subject of efforts that are reasonable under the
circumstances to maintain their secrecy. To the extent that the foregoing
definition is inconsistent with a definition of "trade secret" mandated under
applicable law, the latter definition shall govern for purposes of interpreting
the Executive's obligations under this Agreement.
9. Noncompetition. The Executive acknowledges that he has
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substantial experience and expertise in the business of the Company and that, as
such, the services to be performed by him are of a special, unique, unusual,
extraordinary and intellectual character. The Executive further acknowledges
that the nature of the services, position and expertise of the Executive are
such that he is capable of competing with the Company. In consideration of this
Employment Agreement, the Executive shall not, without the prior written consent
of the Board, during the "Restricted Period" (a) directly or indirectly be
employed by or render any advice or services, whether or not for compensation,
to any "Person" engaged in any "Competitive Business," (b) directly or
indirectly engage in any Competitive Business, (c) directly or indirectly be
interested, whether or not for compensation, in any Competitive Business as an
individual, partner, shareholder, creditor, director, officer, principal, agent,
employee, trustee, consultant, advisor or in any other relationship or capacity;
provided, however, that in the case of a Competitive Business whose shares of
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common stock are traded on a national securities exchange in the United States
or in the over-the-counter market, the Executive may acquire, directly or
indirectly, an interest in such shares of common stock not to exceed five
percent (5%) of the outstanding shares of common stock of such company. For
purposes of this Section, "Restricted Period" shall mean while the Executive is
employed by the Company and either for a period of two years thereafter if
Executive is terminated by the Company without Cause or by Executive for Good
Reason or for a period of one year thereafter if Executive is terminated for any
other reason. For purposes of this Section, any "Competitive Business" shall
mean any Person that is engaged in the manufacturing of, acting as the selling
agent or other representative for a manufacturer of, or otherwise selling and
causing (on such Person's behalf, other than as the ultimate customer) the
manufacturing of, olfactory, cosmetic/skincare (including but not limited to
treatment, makeup and lipstick) and flavor sampling products, nail and haircare
sampling products and single dosage sampling products in the United States,
Canada, Europe, South America, Asia, Australia and the Middle East. For purposes
of this Section, "Person" shall mean any Company, partnership, association,
trust, individual or any other entity. In the event that any provision of this
Section is considered by a court of competent jurisdiction to be excessive in
its duration, in the area to which it applies or in any other respect, it shall
be considered modified and valid for such duration, for such area and in such
other, respects as such court may determine reasonable under the circumstances.
Notwithstanding the foregoing, nothing contained in this Section 9 shall prevent
Executive from engaging in the activities described in clauses (a) and (b) of
this paragraph with any Person who conducts a Competitive Business if such
Competitive Business represents less than 5% of the consolidated net revenues of
such Person; provided that Executive does not directly engage in such
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Competitive Business for such Person.
10. Nonsolicitation. During the Restricted Period, the Executive
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will not, directly or indirectly, without the prior written consent of the
Company as approved by the Board, solicit or attempt to solicit any employee,
consultant, contractor or other personnel of the Company to terminate, alter or
lessen that party's affiliation with the Company or to violate the terms of any
agreement or understanding with the Company except in the furtherance of the
Executive's duties hereunder.
11. Original Material. The Executive acknowledges that the
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compensation paid to the Executive by the Company during the Executive's
employment by the Company is intended to and does compensate the Executive for
the Executive's originality, innovativeness and inventiveness as it relates to
the Company or its business. The Executive agrees that any inventions,
discoveries, improvements, ideas, concepts or original works of authorship
relating to the Company or its business, including, without limitation, computer
apparatus, programs and manufacturing techniques, whether or not protectable by
patent or copyright, that have been originated, developed, made, conceived,
authored or reduced to practice by the Executive alone or jointly with others
during the term of Executive's employment with the Company shall be the property
of and belong exclusively to the Company. The Executive shall promptly and fully
disclose to the Company the origination or development by the Executive of any
such material, shall provide the Company with any information. that it may
reasonably request about such material and shall execute such agreements,
assignments or other instruments as may be reasonably requested by the Company
to reflect such ownership by the Company.
12. Post-Employment Property. The Executive agrees that any and
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all intellectual property that the Executive invents, discovers, originates,
makes, conceives, creates or authors either solely or jointly with others and
that is the result of or is substantially derived from Confidential Information
or Trade Secrets and is reduced to writing, drawings or practice within two
years after the termination of the Executive's employment by the Company for any
reason, with or without Cause, shall be the sole and exclusive property of the
Company. The Executive shall promptly and fully disclose all such property to
the Company, shall provide the Company with any information that it may
reasonably request about such property and shall execute such agreements,
assignments or other instruments as may be reasonably requested by the Company
to reflect such ownership by the Company.
13. Taxes, etc. All compensation payable to Executive hereunder is
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stated in gross amount and such compensation and all other compensation payable
or deemed to be payable to Executive hereunder or pursuant to any other
compensation, benefit or similar plan or arrangement of the Company or any
direct or indirect parent or subsidiary Company shall be subject to all
applicable withholding taxes, other normal payroll and any other amounts
required to be withheld by any federal, state, local or foreign statute, law,
regulation, ordinance or order (collectively, "Withholding Amounts"). To the
extent not withheld by the Company or any direct or indirect parent or
subsidiary Company, the Executive shall be liable for and shall remit to the
Company or any direct or indirect parent or subsidiary Company any such
Withholding Amounts; provided that in lieu thereof, the Company or any direct or
indirect parent or subsidiary Company shall have the right to setoff any such
Withholding Amounts against any and all amounts owed or payable to the
Executive.
14. Specific Remedies. In the event of the violation or threatened
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violation by the Executive of any of the covenants or provisions of Sections 8,
9, 10, 11 or 12 hereof, the Company shall have (i) the right and remedy of
specific enforcement and performance of Sections 8, 9, 10, 11 and 12, including
injunctive relief, it being acknowledged and agreed that any such violation or
threatened violation will cause irreparable injury to the Company and that
monetary damages will not provide an adequate remedy to the Company, and (ii)
rights to any and all damages available as a matter of law.
15. Notices. Any notices required to be given hereunder shall be
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in writing and shall be deemed given when personally delivered, telexed or sent
certified mail, return receipt requested, or sent via express air delivery
service, to the parties at the addresses set forth below, or at such other
address as a party shall have given notice thereof to the other party:
Executive:
Xxxxxxx X. Xxx
X.X. Xxx 000
Xxxxxx, Xxx Xxxxxx 00000-0000
Company:
AKI, Inc.
0000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Chief Financial Officer
With a copy to:
DLJ Merchant Banking
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxxxx Xxxx
16. General.
(a) This Agreement shall be governed by and construed under
the laws and decisions of the State of New York with respect to contracts and
agreements which are entirely made and entered into therein, without regard to
such states conflict of law principles. Any dispute, controversy or claim
arising out of or in connection with this Agreement shall be determined and
settled by arbitration in the County of New York, State of New York conducted
under the commercial arbitration rules of the American Arbitration Association
("AAA") in accordance with the then existing rules, regulations, practices and
procedures of the AAA, provided, however, that if the Company or the Executive
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seek injunctive relief to prohibit violations of this Agreement, the party
seeking such relief shall be entitled to do so in a Court of Law, including,
without limitation, the Supreme Court of the State of New York, County of New
York.
(b) This Agreement contains the entire understanding of the
parties hereto with respect to the subject matter hereof and supersedes all
previous written and oral agreements between the parties with respect to the
subject matter set forth herein.
(c) This Agreement may not be modified or amended except by
a writing signed by both of the parties hereto.
(d) Any provision of this Agreement that is deemed invalid,
illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and
subject to this section, be ineffective to the extent of such invalidity,
illegality or unenforceability, without affecting in any way the remaining
provisions hereof in such jurisdiction or rendering that or any other provision
of this Agreement invalid, illegal or unenforceable in any other jurisdiction.
If the covenant should be deemed invalid, illegal or unenforceable because its
scope is considered excessive, such covenant shall be modified so that the scope
of the covenant is reduced only to the minimum extent necessary to render the
modified covenant valid, legal and enforceable.
(e) The following provisions of this Agreement shall
survive its expiration or termination for any reason: Sections 7, 8, 9, 10, 11,
12, 13, 14, 15 and 16.
(f) This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same agreement.
(g) The headings and titles to the paragraphs of this
Agreement are inserted for convenience only and shall not be deemed a part of or
affect the construction or interpretation of any provisions hereof.
(h) All references to Sections shall, unless otherwise
specified, be to Sections of this Agreement.
(i) By executing this Agreement, Executive represents that
neither (i) the negotiation or execution of this Agreement nor (ii) the
performance of his duties and obligations hereunder, shall violate any other
agreement to which Executive is bound or subject.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year first above written.
AHC I Acquisition Corporation
By: /s/ Xxxxxxxx Xxxx
--------------------------------
Xxxxxxxx Xxxx
AKI Holding Corp.
By: /s/ Xxxxxxxx Xxxx
--------------------------------
Xxxxxxxx Xxxx
AKI, Inc.
By: /s/ Xxxxxxxx Xxxx
--------------------------------
Xxxxxxxx Xxxx
Xxxxxxx X. Xxx
By: /s/ Xxxxxxx X. Xxx
--------------------------------
Xxxxxxx X. Xxx
Exhibit A - Stock Option Terms
* Executive will be granted options to acquire _____ shares (representing
5% of the total shares outstanding on a fully diluted basis on date of
grant) under AHC I Acquisition Corp. 1998 Stock Option Plan with an
exercise price equal to $1.00 per share. In the event DLJ makes an
additional investment in the common equity of the Company, Executive
shall be entitled to an additional grant of shares representing 5% of
the shares issued with respect to the first $15 million invested; 2% of
the shares issued with respect to the next $15 million invested; and 1%
of the shares issues with respect to any investment thereafter (in each
case calculated after giving effect to the shares covered by such
options).
* To the extent permitted under Section 422 of the Internal Revenue Code
of 1986, as amended, all Options shall be "incentive stock options."
* 25% of the Options will vest on July 1, 1999. An additional 8-1/3% of
the Options will vest on each of July 1, 2000, 2001 and 2002 (the "Time
Vested Options"). In addition, 16- 2/3% of the Options will vest as of
June 30 of each of 2000, 2001 and 2002, subject to achievement of Plan
EBITDA (as defined below) for the relevant fiscal year (the
"Performance Vested Options"). Plan EBITDA will be determined on the
grant date in the same manner as Target EBITDA is determined in the
Employment Agreement. Notwithstanding the foregoing, provided Executive
is then employed, all Options shall vest upon the eighth anniversary of
the date of grant. Upon a Change in Control (as defined in the
Employment Agreement), each Time Vested Option and Performance Vested
Option may, at the discretion Committee, be terminated within a
specified number of days after notice to Executive, in which case
Executive will receive, in respect of each share which such Option then
is exercisable after taking into account the vesting of the Option as a
result of such Change in Control as provided herein, an amount equal to
the excess of the then fair market value of such share over the
exercise price per share, payable in the same consideration received by
the stockholders of the Company upon the closing of such transaction.
All Time Vested Options will become exercisable upon a Change in
Control. Performance Vested Options shall immediately become
exercisable to purchase that number of shares of the Company subject to
the Option that would otherwise be exercisable upon the achievement of
Ceiling EBITDA for fiscal years of the Company that have not been
concluded at the time of the Change in Control; provided, however, that
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upon such a Change in Control the DLJ Entities (as defined in the
Employment Agreement) shall have realized aggregate cash proceeds from
the sale or other disposition of their equity interests (whether common
or preferred) in the Company to third parties not affiliated with the
DLJ Entities of at least the following: (i) if the Change in Control
occurs prior to December 15, 1999, the DLJ Entities shall have realized
an amount equal to at least 200% of their Equity Investment (as
defined); (ii)if the Change in Control occurs on or after December 15,
1999 but prior to December 15, 2000, the DLJ Entities shall have
realized an amount equal to at least 300% of their Equity Investment;
and (iii) if the Change in Control occurs on or after December 15,
2000, the DLJ Entities shall have realized an amount equal to at least
350% of their Equity Investment. "Equity Investment" shall mean the
aggregate amount invested by the DLJ Entities in equity interests
(whether common or preferred) in the Company or any of its affiliates.
* If Plan EBITDA is not achieved in a particular year, but Floor EBITDA
is achieved (90% of Plan EBITDA for the relevant year), then a pro-rata
portion of such Options will vest on a straight-line basis based on the
ratio of (i) the excess of actual EBITDA over Floor EBITDA and (ii) the
excess of Plan EBITDA over Floor EBITDA. In addition, excess Plan
EBITDA may be carried forward and backward, subject to Ceiling EBITDA
(110% of Plan EBITDA for the relevant year).
* There will not be adjustments to Plan EBITDA for acquisitions if DLJ
Merchant Banking does not make an additional investment in the Company.
EBITDA targets will be adjusted in the same fashion as provided in the
Employment Agreement.
* Upon grant of such Options, Executive shall sign and become a party to
the Shareholders Agreement and shall be subject to all of the terms and
conditions thereof.
* Options expire upon the earliest to occur of the following: (i)
expiration of 10 years from the date of grant; (ii) 30-days following a
voluntary termination of employment by Executive (unvested options are
cancelled); (iii) immediately upon termination by the Company for Cause
(vested and unvested); (iv) 90-days following a termination of
employment for Good Reason or by the Company without Cause (unvested
options are cancelled upon termination); (v) one-year following a
termination for Disability or death (unvested options are cancelled
upon termination). Notwithstanding the foregoing, in the event
Executive is terminated by the Company without Cause or by the
Executive for Good Reason within 6-months of the date that a tranche of
Time Vested Options would otherwise become vested, then Executive shall
become vested in a pro-rata portion of such tranche on a straight-line
basis based on the ratio of (i) the number of days worked in such
vesting cycle over (ii) 365.
* To the extent permitted under applicable law, including federal and
state securities law, the Option Agreement shall permit share
withholding for the payment of any taxes and shall permit cashless
exercise; provided, that, such cashless exercise does not result in an
accounting charge for the Company.
