February 1, 2001
Dear Xxxxxx X. Xxxxxx:
Pursuant to authorization of its Board of Directors (the "Board"), this letter
will set forth certain of the terms and conditions of your continuing employment
by Federal Signal Corporation ("Federal") as an executive officer of Federal. By
your acceptance hereof you agree that your employment shall continue upon the
terms and conditions hereinafter set forth.
1. Term, Compensation and Services
1.1 The term of your employment pursuant to this agreement shall continue
from the date hereof until the December 31 following your 65th birthday, subject
to earlier termination of employment by Federal or you as hereinafter provided.
1.2 During the term of your employment, you will be compensated at the
annual rate as may from time to time be fixed by resolution of the Board,
provided, however, that your annual rate of compensation shall in no event be
less than $325,000 and provided further that such minimum annual rate may be
increased by resolution of the Board which resolution shall be binding on
Federal for the remaining term of this agreement. Your annual compensation shall
be payable monthly and you shall be reimbursed for business, travel and
entertainment expenses in accordance with Federal's prevailing policies. In its
discretion, the Board may pay you additional salary or bonuses.
1.3 You agree to devote your full business time and efforts to the
rendition of such services to Federal as may be designated by the chief
executive officer or the Board, subject, however, to customary vacations and
provided that you shall be excused from performing services during any period of
absence or inability relating to illness or physical or mental disability. You
will at all times be subject to the direction and supervision of the chief
executive officer and the Board. You may devote a reasonable amount of time to
civic and community affairs but shall not perform services during the term of
your employment for any other business organization in any capacity without the
prior consent of the Board.
2. Termination
2.1 Your employment shall be subject to termination by Federal at any time
for cause if you shall fail in any material respect to perform your duties
hereunder (other than by reason of illness or physical or mental disability),
shall breach any provision hereof in any material respect, or shall engage in
any dishonest or fraudulent acts or conduct in the performance of your duties to
Federal. Termination by Federal pursuant to the preceding sentence shall require
that you receive thirty days prior written notice of the basis for termination
and that you fail to cure or correct the basis for the termination during such
thirty day period. In addition, you may, at your option, voluntarily terminate
your employment hereunder by giving Federal at least 90 days prior written
notice thereof. Upon any termination under this paragraph 2.1, all obligations
of Federal hereunder shall immediately terminate and, without limiting the
foregoing, Federal shall have no obligation under this agreement to make
payments to you in respect of any period subsequent to such termination.
However, termination under this paragraph shall not affect Federal's
obligations, if any, to make payments as required by other compensation or
employee benefit plans maintained by Federal.
2.2 Your employment shall be subject to termination by Federal at any time
without cause by notifying you in writing of such termination not less than ten
days prior to the effective date thereof. Upon any termination of employment
pursuant to this paragraph 2.2, Federal shall be obligated to pay to you, or to
your designated beneficiary if you shall not be living, an amount equal to one
year's salary at the minimum annual rate then in effect, or, if less, an amount
equal to the period from termination until the December 31 following your 65th
birthday. The total amount owing to you or your designated beneficiary under
this paragraph 2.2 shall be paid in twelve equal monthly installments.
Installment payments shall commence as soon as practicable following the
effective date of termination and shall not bear interest. For purposes of this
paragraph 2.2 any material breach by Federal of its obligations hereunder which
are not cured after thirty days written notice given to Federal by you, may, at
your option, be treated by you as a termination of your employment without
cause. Amounts payable to you under this paragraph 2.2 shall be in addition to
other payments, if any, required by other compensation or employee benefit plans
maintained by Federal.
2.3 (a) In the event that a "change of control" (as hereinafter defined)
of Federal occurs during the term of this agreement, you may at your option
terminate this agreement any time during the one year following such change of
control by giving thirty days prior written notice of termination to Federal.
Upon such termination, Federal shall be obligated to pay to you or your
designated beneficiary (if you are deceased), immediately in one lump sum an
amount equal to your average annualized W-2 compensation for the five most
recent taxable years ending before the date on which the change of control
occurs, multiplied by three and then reduced by $1.00. In the event of
termination by you under this paragraph 2.3, you shall also be entitled to
receive all payments and compensation under any other compensation or employee
benefit plans of Federal. Furthermore, to the extent you are not fully vested
under any such plan, amounts payable under any such other plan shall be
supplemented by Federal to the extent necessary so that the amounts payable
under such plan are at least equal to the amount you would have received had you
remained employed by Federal at the minimum salary then in effect until your
65th birthday.
(b) A "change of control" shall mean (i) the filing with the
Securities and Exchange Commission by any person or "group" of a report
disclosing beneficial ownership by such person or group of shares of stock
entitled to cast more than 40% of the votes in the election of directors, or
(ii) the election of any person or persons as a director or directors at a
meeting of Federal's stockholders at which proxies solicited on behalf of
Federal's Board or management were not voted in favor of the election of such
person or persons, or (iii) the occurrence of any other event which would
require an affirmative response to Item 6(e) of Schedule 14A (the Proxy
Statement Disclosure Rules) as now in effect, regarding a change of control. The
date of a change of control specified in clause (iii) shall be the date Federal
is first advised by its counsel or counsel specified in the next sentence that
an event of the type specified in clause (iii) has occurred. Any dispute as to
whether an event specified in clause (iii) of the preceding sentence has
occurred shall be conclusively resolved by an opinion of independent counsel
selected by the Chairman of the Securities Law Committee of the Chicago Bar
Association, which may be requested by you or Federal at any time.
2.4 In the event of your death prior to the effective date of any
termination of your employment pursuant to paragraphs 2.1, 2.2 or 2.3 hereof,
Federal shall be obligated to pay to your designated beneficiary, in not more
than eighteen equal monthly installments, an amount equal to one year's
compensation at the minimum annual rate in effect hereunder at the date of
death. Installment payments shall commence as soon as practicable following the
date of death and shall not bear interest.
2.5 In no event shall any termination of your employment under any
provision of this agreement relieve you from complying fully with your
agreements set forth in paragraphs 3.1 and 3.2 hereof.
3. Non-competition and Trade Secrets Agreements
3.1 During the term of your employment and for a period of thirty-six
months following termination of employment for any reason, or following
expiration of the term hereof, you agree that you will not directly or
indirectly act as an officer, director, consultant, employee or principal for
any entity which is competitive with Federal. An entity is deemed competitive
with Federal if it is engaged in a line of business in which Federal has derived
at least 10% of its revenues during the two years prior to termination of
employment in the same geographic area in which Federal conducts such business.
3.2 You further covenant that at no time following such termination of
employment will you, without prior written consent of Federal, divulge to anyone
any trade secret or confidential corporation information concerning Federal or
otherwise use any such information to the detriment of Federal.
3.3 Paragraph 3.1 shall not prohibit you from investing in any securities
of any corporation which is competitive with Federal whose securities, or any of
them, are listed on a national securities exchange or traded in the
over-the-counter market if you shall own less than 3% of the outstanding voting
stock of such corporation.
4. General Provisions
4.1 In the event you shall inquire, by written notice to Federal, whether
any proposed action on your part would be considered by Federal to be prohibited
by or in breach of the terms hereof, Federal shall have forty-five days after
the giving of such notice, to express in writing to you its position with
respect thereto, and in the event such writing shall not be given to you, such
proposed action (as set forth in your notice to Federal) shall not be a
violation of or in breach of the terms hereof.
4.2 The term "designated beneficiary" as used in this agreement shall mean
such person or persons as you designate to receive payments hereunder in the
latest written notice received by the Company from you which specifies a person
or persons as a designated beneficiary hereunder and in the absence of such
written notice shall mean your estate. Federal may conclusively rely on any
written notice specifying or changing a designated beneficiary which it believes
to be authentic.
4.3 Except as context otherwise requires, reference herein to Federal
shall include its subsidiaries and references to the Board shall include
committees thereof to the extent that any applicable powers of the Board are or
shall be delegated to any such committees.
4.4 The terms and conditions hereof shall constitute the entire agreement
between the parties and shall supersede all prior written or oral understandings
between you and Federal concerning the subject matter hereof. The agreement may
not be amended or altered except in writing signed by the parties and approved
by a resolution of the Board. Neither party may assign its rights hereunder
without the written consent of the other.
4.5 All notices required or permitted to be given pursuant to this
agreement shall be given in writing, if to you, then at the address set forth at
the beginning hereof or at such other address as you may specify in writing to
Federal; and, if to Federal, then to the Secretary of Federal at Federal's
corporate office. All notices shall be deemed to have been given when delivered
in person, or if mailed, 48 hours after depositing same in the United States
mail, properly addressed, and postage prepaid.
4.6 In the event that you or your designated beneficiary shall be required
to commence litigation to enforce you rights under this agreement or otherwise
your rights under this agreement shall ever be involved in any litigation, the
Company shall indemnify you or your designated beneficiary against all costs and
expenses (including attorneys fees) reasonably incurred by you in connection
with such litigation except to the extent that it is determined by the court in
such litigation that you are not entitled to such indemnification because you
breached your obligations hereunder. The Company shall, prior to the outcome or
settlement of such litigation, advance funds to you or your designated
beneficiary as you or your designated beneficiary request for the purpose of
paying your reasonable legal fees and expenses pending the outcome or settlement
of such litigation provided that, as a condition of such advances, you or your
designated beneficiary execute a written undertaking agreeing to return to the
Company all amounts so advanced together with 12% per annum interest thereon if
it is determined by the court that you are not entitled to indemnification under
this paragraph 4.6.
Very truly yours,
FEDERAL SIGNAL CORPORATION
By: /s/ Xxxx X. Xxxxx
Chairman of the Compensation
and Benefits Committee
Acceptance:
The foregoing terms and
conditions are accepted and
agreed to effective this _____
day of _____________, 2001
/s/ Xxxxxx X. Xxxxxx
