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EXHIBIT 10.4
TRANSITIONAL EMPLOYMENT AGREEMENT
This Transitional Employment Agreement ("Agreement") is made as of this
___ day of January, 1998, by and between _________________________________ (the
"Employer") and the undersigned executive officer (the "Executive").
W I T N E S S E T H:
WHEREAS, the Executive has been employed for some years by the
Employer; and
WHEREAS, the Employer wishes to assure both itself and the Executive of
continuity of management in the event of any actual Change in Control (as
defined in Paragraph 2) of the Employer on the terms and conditions set forth
herein; and
WHEREAS, the Executive desires to provide such services and continuity;
and
WHEREAS, to achieve this purpose, the Board of Directors of the
Employer considered and approved this Agreement to be entered into with the
Executive as being in the best interests of the Employer and its stockholders;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties hereto agree as follows:
1. OPERATION OF AGREEMENT. The "Effective Date of this Agreement" shall
be the date on which a Change in Control occurs, and this Agreement shall not
have any force or effect whatsoever prior to that date.
2. CHANGE IN CONTROL. For the purposes of this Agreement, a "Change in
Control" shall be deemed to occur when and only when: (a) any "person" or
"group" (as such terms are used in Sections 3(a), 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended, and regulations promulgated
thereunder), is or becomes the beneficial owner of more than fifty percent (50%)
of the total voting power of the Voting Stock (as defined below) of the Employer
or any direct or indirect parent ("Parent") of the Employer, if applicable,
other than (i) a trustee or other fiduciary holding securities under any
employee benefit plan of the Employer, its successors or any of their Parents or
subsidiaries, (ii) an entity owned directly or indirectly by the stockholders of
the Employer, its successors or their Parents in substantially the same
proportions as their ownership of stock in said entity prior to attaining such
beneficial interest, or (iii) any person or group who, as of December 1, 1997 is
the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Employer or its Parent, if applicable,
representing more than fifty percent (50%) of the total voting power of the then
outstanding securities of said entity entitled to vote generally in the election
of directors (or similar positions) (each a "Controlled Entity"); (b) there
shall occur the sale of a division(s) or assets constituting more than forty
percent (40%) in value of the assets of the Employer to any person or entity
other than a Controlled Entity and such sale results in a material change in the
nature or amount of the business of the Employer as it was conducted immediately
prior to such sale.
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3. EMPLOYMENT. The Employer hereby agrees to continue the Executive in
its employ for a period of [twelve (12)/twenty-four (24)] months commencing on
the Effective Date of this Agreement (the "Employment Period"), with the same
director and officer titles, duties and responsibilities as in effect
immediately prior to the Effective Date of this Agreement. The Executive agrees
that during the Employment Period he or she shall continue to devote such time
to his or her executive duties as devoted prior to the Effective Date of the
Agreement and shall perform such duties faithfully; provided, however, that
Executive's continued service for other corporations and entities, and on any
other corporate, civic, charity or foundation board shall not be deemed to
breach Executive's obligations hereunder.
4. COMPENSATION, COMPENSATION PLANS, BENEFITS AND PERQUISITES. During
the Employment Period, the Executive shall:
(a) Receive an annual salary and director's fees at a rate which
is not less than his or her rate of annual salary and
director's fees immediately prior to the Effective Date of
this Agreement, with the opportunity for increases from time
to time thereafter which are in accordance with the regular
practices of the Employer or its affiliates (which for
purposes of this Agreement, shall mean any corporation or
enterprise which, as of a given date, is a member of the same
controlled group of entities, the same group of trades or
businesses under common control or the same affiliated service
group, determined in accordance with Section 414(b), (c), (m)
or (o) of the Code (as defined in Paragraph 7 hereof), as is
the Employer) with respect to executives with comparable
duties;
(b) Be eligible to participate on a comparable basis, in each
calendar year during which the Employment Period runs, in an
annual bonus program maintained by the Employer or its
affiliates in which executives with comparable duties are
eligible to participate;
(c) Be eligible to participate on a comparable basis in the stock
option or other equity incentive plans and any other bonus
incentive compensation plans (collectively, the "Incentive
Plans"), maintained from time to time by the Employer or its
affiliates during the Employment Period and in which
executives with comparable duties are eligible to participate,
and the Executive's benefits, if any, in any Incentive Plans
existing on the date hereof shall not be reduced or
eliminated;
(d) Be entitled to participate (i) in any group or executive
medical, dental, disability, life insurance, retirement,
profit sharing, thrift and other plans and programs, including
nonqualified and deferred compensation plans and programs,
maintained from time to time by the Employer or its affiliates
during the Employment Period and in which similarly situated
executives (with comparable duties) are eligible to
participate and (ii) in special medical
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or life insurance arrangements, and profit sharing
contributions to any deferred compensation plan maintained by
the Employer to the same extent the Executive participated in
such benefits before the Effective Date of the Agreement; and
(e) Be entitled to receive vacation and perquisites which are
provided by the Employer or its affiliates from time to time
during the Employment Period to executives with comparable
duties, but in no event less favorable than the vacation and
perquisites to which he or she was entitled immediately prior
to the Effective Date of this Agreement (including, but not
limited to, company car and allowances, club memberships and
dues, subscriptions and travel).
5. TERMINATION DURING EMPLOYMENT PERIOD.
(a) For purposes of this Agreement, the term "termination" shall
mean (i) termination by the Employer of the employment of the
Executive with the Employer and all of its affiliates during
the Employment Period for any reason other than death,
disability or "cause" (as defined below), or (ii) resignation
of the Executive for "constructive discharge" (as defined
below).
(b) The term "constructive discharge" shall mean the Executive's
resignation from the Employer and all of its affiliates upon
any one of the following:
(i) the failure of the Employer to pay or provide the
compensation, benefits and perquisites contemplated
by Paragraph 4;
(ii) there shall have occurred a material diminution in
the Executive's title, duties or responsibilities
from those in effect prior to the Effective Date of
this Agreement;
(iii) the Employer changes the Executive's (A) primary
employment location to a place that is more than 35
miles from Executive's primary employment location as
of the Effective Date of the Agreement and/or (B)
regularly scheduled work hours significantly from
such hours as of the Effective Date of the Agreement;
and/or
(iv) [commencing ninety days after the Effective Date of
the Agreement,] at any time for any reason prior to
the first anniversary of the Effective Date of the
Agreement.
(c) The term "cause" means (i) felony indictment or conviction,
other than a felony predicated upon the Executive's vicarious
liability or (ii) the Executive's continued and willful
failure to substantially perform his or her
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duties under this Agreement. For purposes of this Paragraph,
no act or failure to act on the Executive's part will be
considered "willful" unless done, or omitted to be done, by
him or her not in good faith and without reasonable belief
that his or her action or omission was in the interests of the
Employer or its affiliates or not opposed to the interests of
the Employer or its affiliates.
6. TERMINATION BENEFITS. In the event of a termination of the Executive
during the Employment Period, the Employer shall provide and the Executive shall
be entitled to receive the following benefits (the "Termination Benefits") upon
execution by Executive of a release, in substantially the form attached hereto
as Exhibit A, of all claims (other than claims for benefits granted under this
Agreement) against Employer, the Resulting Entity and their affiliates and
successors:
(a) The Executive shall, notwithstanding his or her termination,
be entitled to receive salary payments and director's fees
from the date of his termination and continuing until the
[first/second] anniversary of said termination date (the
"Salary Continuation Period"); which period shall be treated
hereunder as a continuation of the Employment Period. These
sums shall be paid at the greater of the rate required by
Paragraph 4(a) and that in effect immediately prior to
termination.
(b) In addition to the payments under (a) above, the Executive
shall receive a bonus payment with respect to each calendar
year ending during Salary Continuation Period equal to the
annual cash bonus paid (including, for this purpose, bonus
amounts declared but deferred pursuant to the Executive's
election) during the year immediately preceding the Effective
Date of the Agreement, or if greater, the date of termination,
plus a pro rata payment for the calendar year in
which such Salary Continuation Period ends based on such
average annual cash bonus. The bonus payments for each
calendar year shall be made at such times and in such manner
as they would have been paid had the Executive's employment
not been terminated.
(c) Upon the expiration of the Employment Period, including,
without limitation the Salary Continuation Period, the
Executive (and, if applicable, his or her dependents) shall be
entitled to maintain group medical and dental coverage under
the continuation coverage provisions of such plans ("COBRA
Coverage"), which entitlement shall, notwithstanding any other
provisions of the group plan to the contrary, be subject to
termination only in the event of the failure of the Executive
or the dependent to timely pay the appropriate premium for
such coverage (which, in this case, shall be the premium that
would be paid on the same cost-sharing basis as if the
Executive continued to be actively employed by the Employer),
provided that such coverage shall be secondary to any group
coverage (including Medicare or any government- sponsored or
mandated program) subsequently obtained or covering the
Executive or dependent.
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7. ADJUSTMENT DUE TO EXCISE TAX.
(a) If it is determined (in the reasonable opinion of independent
public accountants then regularly retained by the Employer in
consultation with tax counsel acceptable to Executive), that
any amount payable to Executive by Employer under this
Agreement or any other plan, program or agreement under which
Executive participates or is a party would constitute an
"Excess Parachute Payment" within the meaning of Section 280G
(or any similar provision) of the Internal Revenue Code of
1986, as amended from time to time (the "Code"), subject to
the excise tax imposed by Section 4999 of the Code, as amended
from time to time (the "Excise Tax"), then the Termination
Benefits payable to the Executive shall be reduced to the
extent necessary so that no portion of the amounts payable to
the Executive is subject to the Excise Tax. Executive shall be
responsible for any and all Excise Tax (or similar taxes
imposed upon such payments).
(b) The determination of the amount of reduction, if any, in the
amounts payable to the Executive shall be made in good faith
by the Employer's chief financial officer after consultation
with the advisors then regularly retained by the Employer and
tax counsel acceptable to the Executive, and a written
statement setting forth the calculation thereof shall be
provided to the Executive. If amounts payable to the Executive
are to be reduced pursuant to this Paragraph 7, the Executive,
in consultation with the chief financial officer, shall
determine the compensation and benefits to be so reduced.
8. NO OBLIGATION TO MITIGATE DAMAGES. The Executive shall not be
obligated to seek other employment in mitigation of amounts payable or
arrangements made under the provisions of this Agreement and the obtaining of
any such other employment shall in no event effect any reduction of the
Employer's obligations under this Agreement.
9. ENFORCEMENT; ARBITRATION.
(a) Both the Employer and the Executive (or any successor) shall
have the right and option to elect to have any dispute or
controversy arising under or in connection with this
Agreement, or any plan, program or arrangement referred to
herein, or any breach thereof, settled exclusively by
arbitration, conducted before an arbitrator in accordance with
rules of the American Arbitration Association then in effect.
Judgment may be entered on the award of the arbitrator in any
court having jurisdiction. Any such arbitration shall be held
in Chicago, Illinois.
(b) The Employer shall pay all reasonable legal fees, costs of
litigation, and other reasonable expenses incurred by the
Executive or any successor who is successful pursuant to legal
judgment, arbitration or settlement in a challenge
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resulting from the Employer's refusal to pay any amounts due
under this Agreement or any plan, program or arrangement
referred to herein to which it is determined that the
Executive or successor is entitled, or as a result of the
Employer's contesting the validity, enforceability or
interpretation of this Agreement or any such plan, program or
arrangement.
(c) Each of the Employer or the Executive or any successor shall
provide written notice ("initial notice") at least fifteen
(15) business days prior to the commencement of any legal
action or claim under this Agreement or any plan, program or
arrangement referred to herein, which initial notice shall
indicate whether such party is invoking arbitration pursuant
to Paragraph 9(a) above. If such party is not electing to
invoke arbitration, then the other party may by written notice
within ten (10) business days following receipt of the initial
notice elect to invoke arbitration pursuant to said Paragraph
9(a).
10. INDEMNIFICATION. In the event that legal action is instituted
against the Executive during or after the term of his or her employment by a
third party (or parties) based on the performance or nonperformance by Executive
of his or her duties as an officer or director of the Employer or any of its
affiliates or a fiduciary of any benefit plan maintained by the Employer or any
of its affiliates during his or her employment with the Employer, the Resulting
Entity, their successors (collectively, the "Indemnifying Party") or their
affiliates, the Indemnifying Party will assume the defense of such action by its
attorney or attorneys selected by the Indemnifying Party and will advance the
costs and expenses thereof (including reasonable attorneys' fees) and will
indemnify the Executive against any judgment or amounts paid in settlement of
said actions in accordance with its charter, by-laws, insurance and applicable
law, without prejudice to or waiver by the Indemnifying Party of its rights and
remedies against Executive. In the event that there is a settlement or final
judgment entered against Executive in any such litigation, and the Indemnifying
Party's Board of Directors determines that Executive should, in accordance with
the Indemnifying Party's charter, by-laws, insurance and applicable law,
reimburse the Indemnifying Party, Executive shall be liable to the Indemnifying
Party for all such costs, expenses, damages and other amounts paid or incurred
by the Indemnifying Party in the defense, settlement or other resolution of any
such litigation (the "Reimbursement Amount"). The Reimbursement Amount shall be
paid by Executive within thirty (30) days after rendition of the final judgment.
The Indemnifying Party shall be entitled to set off the reimbursement amount
against all sums which may be owed or payable by the Indemnifying Party to
Executive hereunder or otherwise. The parties shall cooperate in the defense of
any asserted claim, demand or liability against Executive or the Indemnifying
Party or its subsidiaries or affiliates. The term "final judgment" as used
herein shall be defined to mean the decision of a court of competent
jurisdiction, and in the event of an appeal, then the decision of the appellate
court, after petition for rehearing has been denied, or the time for filing the
same (or the filing of further appeal) has expired.
The rights to indemnification under this Paragraph 10 shall be in
addition to any rights which Executive may now or hereafter have under the
charter or By-Laws of the Indemnifying Party or any of its affiliates, under any
insurance contract maintained by the Indemnifying Party or any of its affiliates
or any agreement between Executive and the Indemnifying Party or any of its
affiliates.
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11. PAYMENT IN THE EVENT OF DEATH. Upon the death of the Executive
prior to a termination, any payment due and owing by the Employer to Executive
under this Agreement shall be made to such beneficiary as Executive may
designate in writing, or failing such designation, the executor of his or her
estate. Upon the death of the Executive after a termination has occurred, then
the beneficiary designated by the Executive or, if no beneficiary has been
designated, his or her executor shall be entitled to a lump sum death benefit
equal to the present value of the payments that were remaining to be paid under
Paragraph 6(a) as of the date of death. Such lump sum present value payment
shall be determined using an interest rate per annum equal to the prime rate of
interest as published in The Wall Street Journal (Midwest Edition) on the first
business day of the month in which the Executive's death occurred and shall be
paid within 30 days of the date of death. Such payments shall be in addition to
the amount of the bonus payment, if any, which may thereafter be due under
Paragraph 6(b), any other death benefits provided by the Employer or under any
plan, program or arrangement maintained by the Employer.
12. NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address he or she has
filed in writing with the Employer or, in the case of the Employer, at its
principal executive offices.
13. CONFIDENTIAL INFORMATION. Executive acknowledges that during the
course of his or her employment he or she has learned or will learn or develop
Confidential Information (as that term is defined in this Paragraph 13).
Executive further acknowledges that unauthorized disclosure or use of such
Confidential Information, other than in discharge of Executive's duties, will
cause Employer or its affiliates irreparable harm.
For purposes of this Paragraph, Confidential Information means trade
secrets (such as technical and non-technical data, a program, method, technique
or process) and other proprietary information concerning the products, processes
or services of Employer or its affiliates, including but not limited to:
computer programs; marketing, or organizational research and development;
business plans; revenue forecasts; personnel information, including the identity
of other employees of Employer, its successors or their affiliates, their
responsibilities, competence, abilities, and compensation; pricing and financial
information; current and prospective customer lists and information on customers
or their employees; information concerning planned or pending acquisitions or
divestitures; and information concerning purchases of major equipment or
property, which information: (a) has not been made generally available to the
public in violation of a confidentiality agreement, fiduciary duty or similar
obligation; and (b) is useful or of value to the current or anticipated
business, or research or development activities of Employer or its affiliates;
or (c) has been identified as confidential by: (i) Executive, or (ii) to
Executive's knowledge, by Employer, its successors or their affiliates, either
orally or in writing.
Except in the course of his or her employment and in the pursuit of the
business of Employer, its successor or their affiliates, Executive shall not,
during the course of his or her employment, including, without limitation the
Salary Continuation Period, for any reason, directly or indirectly, disclose,
publish, communicate or use on his or her behalf or another's behalf, any
confidential information, proprietary information or other data of Employer, its
successors or their affiliates.
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14. RETURN OF EMPLOYER'S PROPERTY.
All notes, reports, plans, memoranda or other documents created,
developed, generated or held by Executive during his or her employment
concerning or related to Employer's, its successors or their affiliates'
business, and whether containing or relating to Confidential Information or not,
are the property of Employer, its successors or their affiliates, as applicable,
and will be promptly delivered to Employer, its successors or their affiliates
upon termination of Executive's employment for any reason whatsoever.
15. NON-SOLICITATION.
(a) Customers. Executive shall not for any reason during his or
her employment or the Salary Continuation Period
(collectively, the "Non- Solicitation Period"), either as an
individual, on his or her own account, or as an agent,
employee, director, shareholder or otherwise, directly or
indirectly, solicit, induce or encourage, or attempt to
solicit, induce or encourage any customer of the Employer, the
Resulting Entity, their affiliates or their successors not to
do business with the Employer, the Resulting Entity, their
affiliates or their successors. For purposes of this Paragraph
15, such customers and such affiliates shall be limited to
those persons or entities which are customers or affiliates as
of the date immediately preceding the date of the Executive's
termination of employment. Nothing in this Agreement shall be
deemed to limit or otherwise prohibit Executive from
continuing or commencing service with any other corporations
and entities or on any corporate or other board, so long as
Executive does not violate his or her obligations under this
Paragraph 15 or any other provision of this Agreement.
(b) Inducement of Other Employees. During the Non-Solicitation
Period, Executive will not directly or indirectly solicit,
induce or encourage any person who, as of the date immediately
preceding the date of the termination of Executive's
employment, is an employee of Employer, the Resulting Entity,
their affiliates or their successors to terminate his
relationship with Employer, the Resulting Entity, their
affiliates or their successors.
16. REMEDIES.
Executive warrants and represents that: (i) Executive has read and
understands this Agreement; (ii) Executive has had an opportunity to consult
with legal counsel in connection herewith; (iii) the restraints and agreements
herein provided are fair and reasonable; (iv) enforcement of the provisions of
Paragraphs 13, 14 and 15 will not cause him undue hardship; and (v) that the
above restrictions are reasonable in scope and duration and are the least
restrictive means to protect the Employer's, the Resulting Entity's, their
affiliates' and their successors' legitimate and proprietary business interests
and property from irreparable harm.
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Executive acknowledges that failure to comply with the terms of this
Agreement will cause irreparable damage to Employer or its affiliates.
Therefore, Executive agrees that, notwithstanding Paragraph 9 (Enforcement;
Arbitration) above, Employer, the Resulting Entity and their successors shall
have the right to seek specific performance, injunctive relief (without bond)
and other equitable relief, as well as maintain an action for damages in any
court of competent jurisdiction (in addition to any other remedies available at
law or in equity) for Executive's breach or threatened breach of the
restrictions contained in Paragraphs 13, 14 and 15 and the existence of any
claim or cause of action Executive may have against Employer will not constitute
a defense thereto. Executive further agrees to pay reasonable attorney fees and
costs of litigation incurred by Employer, the Resulting Entity, their affiliates
or their successors in any proceeding relating to the enforcement of said
provisions or to any alleged breach thereof in which Employer, the Resulting
Entity, their affiliates or their successors prevail.
In the event of a breach or a violation by Executive of any of the
covenants and provisions of this Agreement, the running of the Non-Solicitation
Period (but not of Executive's obligation thereunder), shall be tolled during
the period of the continuance of any actual breach or violation.
17. NON-ALIENATION. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Agreement, and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by operation
of law, except by will or the laws of descent and distribution.
18. GOVERNING LAW. The provisions of this Agreement shall be construed
in accordance with the laws of the State of Illinois.
19. AMENDMENT. This Agreement may be amended or canceled by mutual
agreement of the parties in writing (which, with respect to the Employer in the
case of an amendment prior to the Effective Date of the Agreement, shall have
been approved by resolution of a majority of the non-employee members of the
Board of Directors of the Employer) without the consent of any other person and,
so long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
20. BINDING EFFECT; SUCCESSORS. Except as otherwise provided herein,
this Agreement shall be binding upon and inure to the benefit of the Employer
and any successors of the Employer or the Resulting Entity and to the benefit of
Executive's executors, administrators, legal representatives, heirs and
legatees. The Employer shall require any successor or assignee, whether direct
or indirect, by purchase, merger, consolidation or otherwise, expressly and
unconditionally to assume and agree to perform the Employer's obligations under
this Agreement, whereupon such successor or assignee shall become the Employer
hereunder.
21. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, it
is the intent of the parties that this Agreement be construed or reformed to the
fullest extent possible so as to be enforceable and be in conformance with the
manner in which it was originally intended to operate, including, without
limitation, the deletion or modification of any invalid or unenforceable
provision.
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IN WITNESS WHEREOF, the Executive has hereunto set his or her hand and,
pursuant to the authorization from its Board of Directors, the Employer has
caused this Agreement to be executed in its name on its behalf all as of the day
and year first above written.
EXECUTIVE:
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EMPLOYER:
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By:
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Its:
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WITNESS:
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A Director of
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OFFICERS EXECUTING
TRANSITIONAL EMPLOYMENT AGREEMENTS
A. EXECUTIVE OFFICER GROUP (term of agreement is 24 months; ability to
resign for one year from the effective date
of the agreement)
1. Xxxxxx X. Xxxxx
2. Xxxxxx X. Xxxxxxx
3. Xxxx X. Xxxxxx
4. Xxxxx X. XxXxxxx
5. Xxxxxxx X. Xxxxxx
6. Xxxxx Xxxxx
B. SENIOR OFFICER GROUP (term of agreement is
12 months; ability to resign
limited to period between 90 days and one
year after the effective date of the
agreement)
1. Xxxxxxx Xxxxxxxxx
2. Xxxx Xxxxxxxx
