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Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), dated as of May 29, 1997, by and
among ACORN PRODUCTS, INC., a Delaware corporation ("Acorn"), and UNIONTOOLS,
INC., a Delaware corporation ("UnionTools" and, together, with Acorn, the
"Company"), and XXXX XXXXXX, an individual residing in the State of Ohio (the
"Executive").
W I T N E S S E T H
WHEREAS, the Executive wishes to continue to serve as President and
Chief Executive Officer of the Company and the Company wishes to secure the
services of the Executive under the terms described below.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants contained in this Agreement, the parties hereto agree as
follows:
1. Term of Employment. The Company hereby employs the Executive for a term
(the "Term") of five years commencing upon the date hereof, which Term shall
automatically be extended for, and include, successive one-year periods
thereafter unless written notice of non-renewal is provided at least 90 days, if
by the Executive, or one year, if by the Company, prior to the expiration of the
then current Term. In the event of non-renewal of the Term, the obligations and
covenants of the parties hereunder shall be of no further force and effect as of
the end of the Term, except those obligations which shall survive this Agreement
as set forth in Section 12, and except for vested fringe benefits and
compensation earned by the Executive pursuant to Section 3 up to the termination
date.
2. Duties of Executive. During the Term, the Executive shall perform the
duties of President of Acorn and President and Chief Executive Officer of Union
Tools. Subject to supervision by the Board of Directors of each such corporation
and by the Chief Executive Officer of Acorn, if other than the Executive, the
Executive shall have overall charge of the business affairs of the Company, with
the duties, responsibilities and authorities normally associated with such
position. The Executive also shall serve as a director of Acorn and UnionTools
and as an officer and/or director of one or more affiliates and subsidiaries of
Acorn and UnionTools (the "Subsidiaries") as Acorn's Board of Directors shall
request and shall be entitled to no additional remuneration for such service.
During the Term, the Executive shall devote substantially all of his
business time and efforts to the business and affairs of the Company and will
not engage in any activity which interferes with the performance of his duties
hereunder.
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3. Compensation.
3.1 Base Salary. In consideration of the Executive's service
hereunder, the Company shall pay to the Executive an annual base salary of
$296,000 (the "Base Salary"). The Base Salary shall be payable in accordance
with the standard policies of the Company in existence from time to time,
subject to any deductions required by law.
Beginning on January 1, 1998, the Base Salary shall be increased
annually on January 1 of each year during the Term of this Agreement by the
Percentage Increase (as defined below) of the Consumer Price Index for All Urban
Consumers for All Cities for all items as published by the Bureau of Labor
Statistics of the United States Department of Labor (the "Index") for the 12
months ending immediately prior to such January 1. For purposes hereof,
"Percentage Increase" shall mean such percentage equal to the fraction, the
numerator of which shall be the Index for the immediately preceding December
less the Index for the second preceding December, and the denominator of which
shall be the Index for the second preceding December.
3.2 Bonus. In addition to the Base Salary, the Executive shall be
entitled to a cash bonus (the "Annual Cash Bonus") within three months after the
end of each fiscal year of the Company, with the amount thereof to be determined
at the discretion of the Board of Directors and payable in accordance with the
standard policies of the Company in existence from time to time, subject to any
deductions required by law.
In addition to the Annual Cash Bonus, if (i) the Executive is
employed by the Company on January 5, 1998, (ii) the Executive has died prior to
January 5, 1998 or (iii) the Executive's employment has been terminated, other
than by the Executive (except pursuant to Section 4.1(b) hereof) or pursuant to
Section 4.4 hereof, the Company shall pay to the Executive (or his estate or
personal representative, if applicable) on January 12, 1998 a cash bonus of
$260,000 (the "One-Time Cash Bonus"). The Annual Cash Bonus and the One-Time
Cash Bonus collectively are referred to herein as the "Bonuses".
3.3 Additional Benefits. In addition to the compensation explicitly
provided for herein, the Executive shall be entitled to such fringe benefits as
are made available generally to the senior executives of the Company, including
participation in such pension, group life, disability, health and other similar
benefit or insurance programs as are now or hereafter made available generally
to such executives, including any "top hat" pension program which the Company
may adopt for some or all of its senior executives during the Term. Without
limiting the foregoing, the Executive shall be entitled to a car allowance in
the amount of $750 per month and the Executive shall be entitled to membership
in one country or other social club selected by him and approved by the Company.
All benefits payable pursuant to this Section 3.3 are herein referred to as the
"Additional Benefits".
3.4 Expenses. The Executive shall be reimbursed by the Company for
all reasonable, out-of-pocket ordinary and necessary business expenses incurred
by the Executive for the purpose of and in connection with the performance of
the Executive's services hereunder. Such reimbursement shall be made upon
presentation of vouchers or other
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statements itemizing such expenses in reasonable detail consistent with the
Company's policies.
3.5. Vacation. The Executive shall be entitled to such
amount of paid vacation during each year as shall be afforded to the
other senior executives of the Company.
3.6. Life Insurance, Disability. The Company shall maintain for the
Executive during the Term a term life insurance policy of not less than $750,000
and disability insurance providing benefits upon disability at least equal to
70% of the Base Salary. The Executive shall be entitled to designate the
beneficiaries of such policies.
4. Termination of Employment.
4.1 Termination Without Cause; Resignation for Good Reason.
(a) Termination Without Cause. During the Term, the
Company may terminate this Agreement without Cause, effective upon
the occurrence of any of the following events:
(i) 30 days after written notice is delivered to the
Executive by the Company of the determination of the permanent
disability of the Executive, defined for purposes of this
subparagraph (a) as incapacity of the Executive to fulfill his
normal duties and responsibilities hereunder for a period of 120
work days out of 150 consecutive work days by reason of physical or
mental disability as determined by a medical doctor reasonably
acceptable to both the Board of Directors of Acorn and the Executive
or his personal representative and confirmed in writing by such
doctor, which confirmation shall be submitted to the Board of
Directors of Acorn and to the Executive or his personal
representative;
(ii) the death of the Executive; or
(iii) 60 days after written notice of termination is
delivered to the Executive by the Company for any reason other than
pursuant to subsections (a)(i) or (a)(ii) of this Section or Section
4.4 hereof.
(b) Resignation for Good Reason. During the Term, the
Executive may terminate this Agreement for Good Reason 30 days after
written notice is delivered to the Company by the Executive. "Good Reason"
shall mean (i) a material adverse change or diminution in the Executive's
duties or responsibilities, offices, facilities, staff assistance, fringe
benefits or other indicia of the Executive's position or (ii) any other
material breach by the Company of its obligations under this Agreement.
"Good Reason" shall not include relocation of the Executive's personal
residence or office pursuant to the relocation of the Company's executive
offices from Columbus, Ohio.
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(c) Upon termination of this Agreement pursuant to this
Section 4.1, the obligations and covenants of the parties hereunder shall
be of no further force and effect, except those obligations which shall
survive this Agreement as set forth in Section 12 and except for the
payment obligations of the Company set forth in Section 4.2 below.
4.2 Payment Obligations of the Company upon Termination Without
Cause or Resignation for Good Reason. In the event of any termination of this
Agreement pursuant to Section 4.1 hereof, the Company shall be obligated to the
Executive as follows:
(a) In the event of termination pursuant to Section 4.1(a)(i)
or (ii), the Executive or his estate, as the case may be, shall be
entitled to receive (i) all compensation and other benefits, including,
without limitation, the Base Salary, any Bonuses and Additional Benefits
to which the Executive is entitled through the date of such termination
and (ii) the Additional Benefits for a period of one year after such
termination. If, for any reason, the Company cannot provide any such
Additional Benefits, it shall pay to the Executive the present value
thereof in cash at an assumed per annum interest rate of seven percent
(7%).
(b) In the event of termination pursuant to Section
4.1(a)(iii) or (b), the Executive or his estate shall be entitled to
receive (i) all compensation and other benefits, including, without
limitation, the Base Salary, any Bonuses and Additional Benefits to which
the Executive is entitled through the date of such termination, (ii) a
lump sum payment, to be paid on the fifth day following the date of
termination of the Executive's employment, in an amount equal to all Base
Salary due the Executive through the Term and (iii) the Additional
Benefits for a period of one year after such termination. If, for any
reason, the Company cannot provide any such Additional Benefits, it shall
pay to the Executive the present value thereof in cash at an assumed per
annum interest rate of seven percent (7%).
(c) In the event of termination pursuant to Section
4.1(a)(iii) or (b) within two years following a Change of Control, the
Executive or his estate also shall be entitled to receive a lump sum
payment, to be paid on the fifth day following the date of termination of
the Executive's employment, in an amount equal to the difference between
(i) three times the highest aggregate annual compensation (including
salary, bonuses and incentive payments) includible in gross income paid to
the Executive during any one of the three taxable years preceding the date
of the Executive's termination minus (ii) the compensation received by the
Executive pursuant to clause (ii) of Section 4.2(b).
For purposes of this Section 4.2, the following terms shall have the
following meanings:
"Affiliate" of any specified Person (as defined in Section 13(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")) shall mean
(i) any other Person, directly or indirectly, controlling or controlled by or
under direct or indirect common control
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with such specified Person or (ii) any Person who is a director or officer (a)
of such Person, (b) of any subsidiary of such Person or (c) of any Person
described in clause (i) above. For purposes of this definition, "control" when
used with respect to any Person means the power to direct the management and
policies of such Person, directly or indirectly, whether through the ownership
of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meaning correlative to the foregoing.
A "Change of Control" occurs upon any of the following events: (i)
the acquisition by any Person (as defined in Section 13(d) of the Exchange Act),
other than TCW or Oaktree, of beneficial ownership (as defined in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except such Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the passage
of time) of securities of the Company (a) having 25% or more of the total voting
power of the then outstanding voting securities of the Company and (b) having
more voting power than the securities of the Company beneficially owned by
Oaktree; (ii) during any 12 month period, a change in the Board of Directors of
Acorn occurs such that Incumbent Members (as defined below) do not constitute a
majority of the Board of Directors of Acorn; (iii) a sale of all or
substantially all of the assets of Acorn or UnionTools; or (iv) the consummation
of a merger or consolidation of the Company with any other Person, provided,
however, that no Change of Control shall have occurred pursuant to this clause
(iv) if (A) after such merger or consolidation the voting securities of Acorn
prior to such merger or consolidation continue to represent more than 50% of the
combined voting power of such Person or (B) if such merger or consolidation does
not result in a material change in the beneficial ownership of Acorn's voting
securities.
"Incumbent Members" shall mean the members of the Board of Directors
of Acorn on the date immediately preceding the commencement of a twelve-month
period, provided that any person becoming a Director during such twelve-month
period whose election or nomination for election was approved by a majority of
the Directors who, on the date of such election or nomination for election,
comprised the Incumbent Members shall be considered one of the Incumbent Members
in respect of such twelve-month period.
"Oaktree" shall mean Oaktree Capital Management, LLC and its
Affiliates, including any partnerships, separate accounts or other entities
managed by Oaktree.
"TCW" shall mean: TCW Special Credits Plus Fund; TCW Special Credits
Fund III; TCW Special Credits Fund IIIb; TCW Special Credits Fund IV; TCW
Special Credits Trust; TCW Special Credits Trust IIIb; TCW Special Credits Trust
IV; TCW Special Credits Trust IVa; TCW Special Credits, as investment manager of
Delaware State Employees' Retirement Fund, Weyerhaeuser Company Pension Trust
and The Common Fund for Bond Investments; and any of their respective
Affiliates.
4.3 Payment Obligations of the Company Upon Non-Renewal of the
Agreement. If the Company provides the Executive with notice of non-renewal
pursuant to Section 1 hereof, the Executive shall be entitled to receive a lump
sum payment, to be paid on the fifth day following the expiration of the Term,
in an amount equal to the Executive's then-
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current Base Salary; provided, however, that if this Agreement subsequently is
terminated pursuant to Section 4.1(a)(iii) or 4.1(b), the Company shall also be
obligated to make payments to the Executive pursuant to Section 4.2(b).
4.4 Termination for Cause. During the Term, this Agreement may be
terminated for Cause effective upon receipt by the Executive of the Company's
written notice specifying a valid basis for termination of the Executive for
Cause. "Cause" shall mean:
(a) the Executive's criminal conviction for fraud,
embezzlement, misappropriation of assets or any other felony
(excluding traffic violations); or
(b) the continuance of willful and repeated failures by the
Executive to perform his obligations under this Agreement which have not
been cured by the Executive within thirty (30) days following receipt of
written notice from the Board of Directors of Acorn specifying such
failure and the action required by the Executive to cure such breach of
his obligations hereunder.
Upon termination of this Agreement by the Company for Cause,
the obligations and covenants of the parties hereunder shall be of no
further force and effect, except those obligations which shall survive
this Agreement as set forth in Section 12, and except for vested fringe
benefits and compensation earned by the Executive pursuant to Section 3 up
to the termination date.
5. Pension Plans. The Executive shall participate in the pension plans of
the Company for purposes of receiving the pension benefits contemplated by
Section 3.5. For purposes of calculating years of service, vesting, benefit
accrual and other terms under such plans and any other plans in which the
Executive is eligible to participate pursuant to Section 3.5, the Executive
shall be deemed to have been employed by Union Tools since June 1, 1991 and, if
terminated pursuant to Sections 4.1(a) or 4.1(b), the Executive shall receive
credit for the period of time corresponding to the remainder of the Term, for
such purposes to be not less than three years from the date of such termination.
To the extent the Company is not able by the terms of such plans to extend
or continue participation by the Executive under such plans in accordance with
this Section 5, whether because of the sale of Union Tools, termination of the
employment of the Executive or otherwise, the Company shall provide on a
supplemental basis benefits equal to the additional amounts which the Executive
would have received under such plans if participation had been extended as
required.
6. Non-Competition; Confidentiality.
6.1 Non-Competition. At all times during the Term, and for a period
of (a) one year thereafter in the event of termination of this Agreement by the
Company pursuant to Section 4.4 hereof or termination of this Agreement by the
Executive before the end of the Term or (b) six months thereafter in the event
of non-renewal of the term of this Agreement at
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the election of the Executive, the Executive shall not commit any Prohibited
Acts (as defined in Section 6.2 below).
For purposes of this Section 6.1, the following terms shall have the
following meanings:
"Direct Competitor" shall mean any company which is or becomes a
significant and direct competitor of Acorn, UnionTools or the Subsidiaries on or
after the date of this Agreement. A company will be considered a significant and
direct competitor of Acorn, UnionTools or the Subsidiaries if such company
acquires a 10% or greater market share in the United States of any product
category which accounts for 10% or more of the revenue of Acorn, UnionTools and
the Subsidiaries on a consolidated basis in any of the last three fiscal years.
"Prohibited Acts" shall mean owning, managing, operating,
controlling or participating in the ownership, management, operation or control
of, or being connected as an officer, employee, partner, director, agent or
consultant of, or having any financial interest in, any Direct Competitor.
6.2 De Minimis Stock Ownership. Notwithstanding any other provisions
of this Section 6, ownership of five percent (5%) or less of any class of voting
securities of a company listed on a nationally recognized stock exchange or for
which prices are quoted on the NASDAQ National Market shall not constitute a
violation hereof.
6.3 Confidentiality. The Executive agrees, at all times during and
after the Executive's employment hereunder, to hold in strictest confidence, and
not to disclose to any person, firm or corporation, without the express written
authorization of the Board of Directors of Acorn, any trade secrets, such as
inventions, processes, formulae, programs, data, any financial information or
any secret or confidential information relating to the research and development
program, products, vendor and marketing programs, customers, customers'
information, sales or business of the Company, except as such disclosure or use
may be required in connection with his work for the Company or is published or
otherwise readily available to the public or becomes known to the public other
than by breach by him of this Agreement.
The Executive further agrees, upon termination of this Agreement, to
promptly deliver to the Company all notes, books, engineering records,
correspondence, drawings, magnetic tape, punch cards, computer storage
information or media, and any and all other written and graphical records in his
possession or under his control relating to the past, present or future
business, products, or projects of the Company.
6.4 Remedies. It is recognized that damages in the event of breach
by the Executive of this Section 6 would be difficult, if not impossible, to
ascertain, and it is therefore agreed that the Company, in addition to and
without limiting any other remedy or right it may have, shall have the right to
an injunction or other equitable relief, in any court of competent jurisdiction,
enjoining any such breach, and the Executive hereby waives any and
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all defenses he may have on the ground of lack of jurisdiction or competence of
the court to grant such an injunction or other equitable relief. The existence
of this right shall not preclude or impair any other rights and remedies at law
or in equity that the Company may have.
7. Indemnification. The Company will indemnify the Executive against all
costs, charges and expenses (including reasonable attorneys' fees) incurred or
sustained by him in connection with any claim, action, suit or proceeding to
which he may be made a party by reason of his being an officer, director or
employee of the Company or the Subsidiaries, provided the Executive acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was illegal. In
addition, the Company shall indemnify the Executive for all costs, including
reasonable attorneys' fees, incurred by the Executive in connection with any
successful action by the Executive to enforce or otherwise determine or insure
compliance by the Company with the terms of this Agreement.
8. Certain Additional Payments by the Employers. Anything in this
Agreement to the contrary notwithstanding, in the event it shall be determined
that any payment or distribution by the Company to or for the benefit of the
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement (a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, collectively, the "Excise Tax"), then the
Executive shall be entitled to receive an additional payment (the "Excise Tax
Payment") in an amount equal to the Excise Tax imposed upon the Payment and any
additional payments made pursuant to this Section 8.
9. Assignability; Binding Nature.
(a) This Agreement shall inure to the benefit of the Company
and the Executive and their respective successors, heirs (in the case of
the Executive) and assigns. For purposes of this Agreement, the term
"successor" of the Company shall include any person or entity, whether
direct or indirect, whether by purchase, merger, consolidation, operation
of law, assignment or otherwise who acquires or controls all or
substantially all of the assets of Acorn or UnionTools.
(b) The Company shall require any successor of the Company, by
an agreement in form and substance reasonably satisfactory to the
Executive, to expressly assume and agree to be bound by the terms of this
Agreement in the same manner and to the same extent that the Company would
be required to perform if no succession had occurred. The Company shall be
in material breach of this Agreement if any such successor fails to
expressly assume or otherwise agree to guaranty performance of this
Agreement to the extent the Company was obligated prior to any succession.
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(c) Except as expressly stated in Section 9(a) above, this
Agreement shall be non-assignable by either the Company or the Executive
without the prior written consent of all parties hereto.
10. Notices. Any notice hereunder shall be properly given if by
personal delivery or registered or certified mail, return receipt
requested, as follows:
If to Executive, at his address as it appears on the payroll records of
Union Tools.
If to the Company to:
Acorn Products, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
Attention: President
with a copy to:
Xxxxx X. Xxxxxx, Esq.
Xxxxxx, Xxxx & Xxxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, X.X. 00000-0000
or to such other addresses as the parties may designate in writing.
11. Integration; Modification. Except for the letter agreement, dated as
of the date hereof, among Acorn, UnionTools and the Executive, this Agreement
shall supersede all previous negotiations, commitments and writings with respect
to the employment of the Executive. This Agreement may not be released,
discharged, abandoned, changed or modified in any manner, except by an
instrument in writing signed on behalf of each of the parties hereto. The
failure of any party hereto to enforce at any time any of the provisions of this
Agreement shall in no way be construed to be a waiver of any such provisions,
nor in any way to affect the validity of this Agreement or the right of any
party thereafter to enforce each and every such provisions. No waiver of any
breach of this Agreement shall be held to be a waiver of any other or subsequent
breach.
12. Survival of Certain Obligations. Except as otherwise specifically
provided for herein, the obligations of the parties pursuant to Sections 3.3,
3.4, 4.2, 6, 7, 8 and this Section 12 shall survive the termination of this
Agreement.
13. Severability. If any term or provisions of this Agreement is declared
invalid by a court of competent jurisdiction the remaining terms and provisions
of this Agreement shall remain unimpaired. If any term or provisions of Section
6 of this Agreement, or portion thereof, is so broad in scope or duration as to
be unenforceable, such provision or portion thereof shall be interpreted to be
only so broad as is enforceable.
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14. Captions. The captions appearing in this Agreement are
inserted only as a matter of convenience and as a reference and in no way
define, limit or describe the scope or intent of this Agreement or any of
the provisions hereof.
15. Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic substantive laws of the State of New York without
giving effect to any choice or conflict of laws provisions or rule that would
cause the application of the domestic substantive laws of any other
jurisdiction.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has duly executed
this Agreement as of the date first above written.
ACORN PRODUCTS, INC.
By: /s/ Xxxxx X. Xxxxxx
---------------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman of the Board
UNION TOOLS, INC.
By: /s/ Xxxxx X. Xxxxxx
----------------------------
Name: Xxxxx X. Xxxxxx
Title: Chairman of the Board
/s/ Xxxx Xxxxxx
--------------------------------
Xxxx Xxxxxx
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