EXHIBIT 10.5(c)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of June 1, 1999, by and between,
Strategic Capital Management, Inc., a Delaware corporation, with its principal
United States office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Company"), and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, residing at ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ("Executive").
W I T N E S S E T H:
WHEREAS, U.S. Industries, Inc., a Delaware corporation, with its
principal United States office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ("USI") intends to transfer all or a part of the assets constituting USI's
diversified segment (the "Diversified Segment") and other assets of USI (such
assets collectively "USI Diversified") to a newly constituted wholly owned
subsidiary of USI ("Newco") and to spinoff Newco to the shareholders of USI (a
spinoff with ▇▇▇▇ ▇▇▇▇ as Chairman and Chief Executive Officer of Newco is
referred to herein as the "Spinoff");
WHEREAS, effective on June 1, 1999 (the "Commencement Date"), the
Company desires to employ the Executive as an executive of the Company;
WHEREAS, the Company and Executive desire to enter into this agreement
(the "Agreement") as to the terms of his employment by the Company and to embody
the terms of Executive's prospective employment by Newco subsequent to the
Spinoff;
WHEREAS, effective on the consummation of the Spinoff (the "Spinoff
Date"), Strategic Capital Management, Inc. and USI shall cause Newco to employ
the Executive as Executive Vice President - Operations and the Agreement will be
assigned to, and assumed by, Newco.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the parties
agree as follows:
1. Term of Employment; Assignment to Newco. (a) Except for earlier
termination as provided in Section 7 hereof, Executive's employment under this
Agreement shall be for a two-year term (the "Employment Term") commencing on the
Commencement Date and ending two (2) years thereafter; provided that if the
Executive is not physically or mentally capable of performing the duties set
forth in Section 2 herein on the Commencement Date (as reasonably determined by
the Company in its sole discretion) this Agreement shall be null and void ab
initio. Subject to Section 7 hereof, the Employment Term shall be automatically
extended for additional terms of successive two (2) year periods unless the
Company or the Executive gives written notice to the other at least ninety (90)
days prior to the expiration of the then current Employment Term of the
termination of Executive's employment hereunder at the end of such current
Employment Term.
(b) On the Spinoff Date, this Agreement shall, without any further
action of the parties, be deemed assigned to and assumed by Newco, and USI and
Strategic Capital Management, Inc. shall be released from all obligations
hereunder (and USI shall be released from all obligations under the Guaranty
annexed hereto) except as set forth in Section 13 hereof and the Guaranty as it
applies to such Section. Unless the context otherwise clearly requires, subject
to Section 16(d), the term "Company" as used herein shall be deemed to refer to
Strategic Capital Management, Inc. prior to the Spinoff Date and Newco on and
after the Spinoff Date.
2. Positions. (a) Executive shall serve as Executive Vice President -
Operations of the Company. If requested by the Board of Directors of the Company
(the "Board") or the Chairman and so elected by the stockholders of the Company,
Executive shall also serve on the Board without additional compensation.
Executive shall also serve, if requested by the Board, the Chairman or the
President, as an executive officer and director of subsidiaries and a director
of associated companies of the Company and shall comply with the policy of the
Compensation Committee of the Company's Board (the "Compensation Committee")
with regard to retention or forfeiture of the director's fees.
(b) Executive shall report to any more senior officer of the Company
as designated by the Chairman or the President and, shall have such duties and
authority, consistent with his then position as shall be assigned to him from
time to time by the Board, the Chairman, the President or such other more senior
officer(s) of the Company.
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(c) During the Employment Term, Executive shall devote substantially
all of his business time and efforts to the performance of his duties hereunder;
provided, however, that Executive shall be allowed, to the extent that such
activities do not materially interfere with the performance of his duties and
responsibilities hereunder, to manage his personal financial and legal affairs
and to serve on corporate, civic, or charitable boards or committees
Notwithstanding the foregoing, the Executive shall only serve on corporate
boards of directors if approved in advance by the Board and shall not serve on
any corporate board of directors if such service would be inconsistent with his
fiduciary responsibilities to the Company, as determined by the Board.
3. Base Salary. During the Employment Term, the Company shall pay
Executive a base salary at the annual rate of not less than $250,000. Base
salary shall be payable in accordance with the usual payroll practices of the
Company. Executive's Base Salary shall be subject to annual review by the Board
or the Compensation Committee (commencing on the first day of the Company's 2001
fiscal year) during the Employment Term and may be increased, but not decreased,
from time to time by the Board or the Compensation Committee, except that, prior
to a Change in Control, as defined in Section 11 hereof, and after the Spinoff
Date, it may be decreased proportionately in connection with an across the board
decrease applying to all senior executives of the Company. The base salary as
determined as aforesaid from time to time shall constitute "Base Salary" for
purposes of this Agreement.
4. Incentive Compensation. (a) Bonus. Provided the Spinoff is
consummated, for each fiscal year or portion thereof during the Employment Term,
beginning October 1, 1999, Executive shall, subject to shareholder approval as
and to the extent required by Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), be eligible to participate in an incentive pay
plan of the Company that provides an annualized cash target bonus opportunity
equal to at least 70% of Base Salary.
(b) Long Term Compensation. For each fiscal year or portion thereof
during the Employment Term, after the Spinoff Date, Executive shall be eligible
to participate in any long-term incentive compensation plan generally made
available to senior executives of the Company in accordance with and subject to
the terms of such plan.
(c) Equity. (i) Options. Pursuant to a stock option plan satisfying
the requirements of Code Section 162(m), the Company shall, after the Spinoff
Date, recommend to the Compensation Committee that Executive be granted, three
separate grants of nonqualified stock options (the "Options") to purchase the
number of shares of Common Stock of the Company
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("Common Stock") determined for each grant by dividing $500,000 by the fair
market value of the Common Stock on the date of grant as determined under the
applicable stock option plan (the "Fair Market Value"). It shall be recommended
that the first grant of options be made within the fifteen (15) day period
following the date "regular way trading" of the Common Stock commences,
excluding the period of "when issued trading" ("Regular Way Trading"), the
second grant of options be made after the fifteenth (15th) day and before the
thirtieth (30th) day following the commencement of Regular Way Trading, and the
third grant of options be made after the thirtieth (30th) day and before
the forty-fifth (45th) day following the commencement of Regular Way Trading.
The Company shall recommend that the Options shall have an exercise price equal
to the Fair Market Value. It shall be recommended that the stock option grants
shall provide that the Options shall become exercisable with respect to 25% of
such Options on each of the first four anniversaries of October 1, 1999,
provided that Executive is employed by the Company on such vesting date, and
further provided that it shall be recommended that such Options shall fully vest
upon a Change in Control, as defined in Section 11 hereof, and that the next
tranche vest upon a termination event described in Section 7(a)(i), (ii), (iii)
or (iv).
(ii) Common Stock Purchase. The parties acknowledge that the Executive
has indicated that, within the one year period following the Spinoff Date,
assuming he is then employed by the Company, the Executive intends to purchase
the number of shares of Common Stock of the Com pany ("Common Stock") equal to
the lesser of: (x) the number of shares of Common Stock with an aggregate value
at the time of purchase of $250,000 or (y) 0.125 percent of the issued and
outstanding Common Stock on the day after the Spinoff Date; provided that the
one year period shall be extended day for day to the extent that the Executive
is restricted by legal constraints from purchasing the required amount of such
Common Stock and further provided that any shares of Common Stock of the Company
owned within any employee benefit plan qualified under Section 401(a) of the
Internal Revenue Code (referred to herein as "Tax Qualified") or any individual
retirement account may be counted towards such requirement.
(iii) Special Bonus. If the Spinoff occurs, Executive shall be
entitled to receive on the later of (x) thirty (30) days following the Spinoff
Date or (y) January 15, 2000, a special bonus for his efforts with regard to the
Spinoff, in the amount of fifty thousand dollars ($50,000) (the "Special
Bonus").
(d) Other Compensation. The Company may, upon recommendation of the
Compensation Committee, award to the Executive such other bonuses and
compensation as it deems appropriate and reasonable.
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5. Employee Benefits and Vacation. (a) During the portion of the
Employment Term prior to the Spinoff Date, Executive shall be entitled to
participate in welfare benefit plans and arrangements and car allowances and
other fringe benefits and perquisite programs substantially similar to those
provided to comparable executives of USI, but not in any pension or profit
sharing type plans. During the portion of the Employment Term effective on and
after the Spinoff, Executive shall be entitled to participate in all pension,
retirement, savings, welfare and other employee benefit plans and arrangements
and fringe benefits and perquisites generally maintained by the Company from
time to time for the benefit of senior executive officers of the Company in each
case in accordance with their respective terms as in effect from time to time
(other than any special arrangement entered into by contract with an executive)
and shall be given service credit under such plans from the Commencement Date
for all purposes under such plans and arrangements. Except as otherwise required
by the Employee Retirement Income Security Act of 1974, as amended or other
applicable law, or as provided in the prior sentence, Executive's employment
with USI, ▇▇▇▇▇▇ Industries, or their respective predecessors or any other prior
employer of Executive prior to the Spinoff Date shall not be used or otherwise
recognized for any purpose under any Company sponsored employee benefit plan or
program.
(b) During the Employment Term, Executive shall be entitled to
vacation each year in accordance with the Company's policies in effect from time
to time, but in no event less than four (4) weeks paid vacation per calendar
year. The Executive shall also be entitled to such periods of sick leave as is
customarily provided by the Company for its senior executive employees.
6. Business Expenses. The Company shall reimburse Executive for the
travel, entertainment and other business expenses incurred by Executive in the
performance of his duties hereunder, in accordance with the Company's policies
as in effect from time to time.
7. Termination. (a) The employment of Executive under this Agreement
shall terminate upon the earliest to occur of any of the following events:
(i) the death of the Executive;
(ii) the termination of the Executive's employment by the Company
due to the Executive's Disability pursuant to Section 7(b) hereof;
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(iii) the termination of the Executive's employment by the
Executive on or after the Spinoff Date in connection with events that
occur or occurred on or after the Spinoff Date for Good Reason
pursuant to Section 7(c) hereof;
(iv) the termination of the Executive's employment by the Company
without Cause;
(v) the termination of employment by the Executive without Good
Reason upon sixty (60) days prior written notice;
(vi) the termination of employment by the Executive with or
without Good Reason during the thirty (30) day period commencing six
(6) months after a Change in Control (such thirty (30) day period
being referred to herein as the "Change in Control Protection
Period"), provided that the Executive shall have a right to terminate
employment pursuant to this Section 7(a)(vi) and receive the amounts
under Section 8(c)(A)(i) and (ii) unless simultaneous with the Change
in Control, the Company or the person or entity triggering the Change
in Control delivers to the Executive an irrevocable direct pay letter
of credit with regard to the amounts under Section 8(c)(A)(i) and (ii)
and satisfying the requirements of Section 7(g) hereof;
(vii) the termination of the Executive's employment by the
Company for Cause pursuant to Section 7(e);
(viii) the retirement of the Executive by the Company at or after
his sixty-fifth birthday to the extent such termination is
specifically permitted as a stated exception from applicable federal
and state age discrimination laws based on position and retirement
benefits;
(ix) the occurrence of: (I) a Sale Event, (II) an Abandoned
Spinoff or (III) a Change in Control of USI. For purposes of this
Agreement: (x) "Sale Event" shall mean, prior to the Spinoff occurring
or being publicly announced as being abandoned by the Board of
Directors of USI and in both cases prior to June 30, 2000 (provided,
however, that this date shall be extended to September 30, 2000 if,
prior to June 30, 2000, USI receives a private letter ruling from the
Internal Revenue Service providing that the stock dividend that will
occur pursuant
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to the Spinoff will be a tax-free distribution and providing such
other relief and approvals as requested in the ruling (the "Outside
Date")) and prior to a Change in Control of USI, one or more closings
occur that result in more than 75% of the assets constituting the
Diversified Segment as of the date hereof being sold (or otherwise
disposed of) to one or more persons or entities and/or distributed to
shareholders through a dividend (but not including the Spinoff or an
event which would be an Abandoned Spinoff);
(y) "Abandoned Spinoff" shall mean, no Sale Event or Spinoff occurs
prior to the Outside Date, USI publicly announces that its Board has
abandoned the Spinoff or a transaction which would be a Spinoff occurs
except that ▇▇▇▇ ▇▇▇▇ is not Chairman and Chief Executive Officer of
Newco at such time; and
(z) "Change in Control of USI" shall mean a Change in Control (within
the meaning of Section 11 hereof but substituting USI for the Company)
prior to the earliest of the Spinoff, a Sale Event or an Abandoned
Spinoff (each of (a)(ix) (I),(II) or (III) referred to as a "Section
7(a)(ix) Event").
(b) Disability. If by reason of the same or related physical or mental
illness or incapacity, (i) the Executive is unable to carry out his material
duties pursuant to this Agreement for more than six (6) months in any twelve
(12) consecutive month period or (ii) the Chairman of USI determines in good
faith that that Executive will not be able to be a full time active executive of
the Company on the Spinoff Date and for a continuing period thereafter, the
Company may terminate Executive's employment for Disability. In the case of (i)
such termination shall be upon thirty (30) days written notice by a Notice of
Disability Termination, at any time thereafter during such twelve month period
while Executive is unable to carry out his duties as a result of the same or
related physical or mental illness or incapacity and, in the case of (ii)
immediately upon written notice at any time on or prior to the Spinoff Date. In
the case of (ii), the Agreement will not be assigned to, or assumed by, Newco
and the Executive shall be treated under Section 8(b) as if he was terminated
for a Disability immediately after the Spinoff Date. A Termination under (i)
shall not be effective if Executive returns to the full time performance of his
material duties within such thirty (30) day period.
(c) Termination for Good Reason. A Termination for Good Reason means a
termination by Executive by written notice given within ninety (90) days after
the occurrence of the Good Reason event, unless such circumstances are fully
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corrected prior to the date of termination specified in the Notice of
Termination for Good Reason (as defined in Section 7(d) hereof). For purposes of
this Agreement, "Good Reason" shall mean the occurrence or failure to cause the
occurrence, as the case may be, without Executive's express written consent, of
any of the following circumstances that occur on or after the Spinoff Date: (i)
any material diminution of Executive's positions, duties or responsibilities
hereunder (except in each case in connection with the termination of Executive's
employment for Cause or Disability or as a result of Executive's death, or
temporarily as a result of Executive's illness or other absence), or, after a
Change in Control, the assignment to Executive of duties or responsibilities
that are inconsistent with Executive's then position; (ii) removal of, or the
nonreelection of, the Executive from the officer positions, if any, with the
Company specified herein without election to a higher position; (iii) a
relocation of the Company's executive office in New Jersey to a location more
than both thirty-five (35) miles from Iselin, New Jersey and thirty-five (35)
miles from the Executive's residence at the time of relocation; (iv) after a
Change of Control, a failure by the Company (A) to continue any bonus plan,
program or arrangement in which Executive is entitled to participate immediately
prior to the Change of Control (the "Bonus Plans"), provided that any such Bonus
Plans may be modified at the Company's discretion from time to time but shall be
deemed terminated if (x) any such plan does not remain substantially in the form
in effect prior to such modification and (y) if plans providing Executive with
substantially similar benefits are not substituted therefor ("Substitute
Plans"), or (B) to continue Executive as a participant in the Bonus Plans and
Substitute Plans on at least the same basis as to potential amount of the bonus
as Executive participated in prior to any change in such plans or awards, in
accordance with the Bonus Plans and the Substitute Plans; (v) any material
breach by the Company of any provision of this Agreement, including without
limitation Section 13 hereof; (vi) if on the Board at the time of a Change in
Control, Executive's removal from or failure to be reelected to the Board
thereafter; (vii) a failure of any successor to assume in a writing delivered to
Executive upon the assignee becoming such, the obligations of the Company
hereunder; or (viii) a failure of the Company to grant stock options within
ninety (90) days after the Spinoff Date in an aggregate amount of exercise price
(which shall be fair market value at the time of grant) multiplied by number of
options of at least $1,500,000 and, as to other provisions materially in the
aggregate no less favorable to the Executive than the recommendations required
by Section 4(c)(ii) hereof.
(d) Notice of Termination for Good Reason. A Notice of Termination for
Good Reason shall mean a notice that shall indicate the specific termination
provision in Section 7(c) relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for Termination for Good
Reason. The failure by Executive to set forth in the Notice of
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Termination for Good Reason any facts or circumstances which contribute to the
showing of Good Reason shall not waive any right of Executive hereunder or
preclude Executive from asserting such fact or circumstance in enforcing his
rights hereunder. The Notice of Termination for Good Reason shall provide for a
date of termination not less than ten (10) nor more than sixty (60) days after
the date such Notice of Termination for Good Reason is given, provided that in
the case of the events set forth in Section 7(c)(ii) or (iii) the date may be
two (2) days after the giving of such notice.
(e) Cause. Subject to the notification provisions of Section 7(f)
below, Executive's employment hereunder may be terminated by the Company for
Cause. For purposes of this Agreement, the term "Cause" shall be limited to (i)
willful misconduct by Executive with regard to the Company or its business,
assets or employees; (ii) the refusal of Executive to follow the proper written
direction of the Board or a more senior officer of the Company, provided that
the foregoing refusal shall not be "Cause" if Executive in good faith believes
that such direction is illegal, unethical or immoral and promptly so notifies
the Board or the more senior officer (whichever is applicable); (iii)
substantial and continuing willful refusal by the Executive to attempt to
perform the duties required of him hereunder (other than any such failure
resulting from incapacity due to physical or mental illness) after a written
demand for substantial performance is delivered to the Executive by the Board or
a more senior officer of the Company which specifically identifies the manner in
which it is believed that the Executive has substantially and continually
refused to attempt to perform his duties hereunder; (iv) the Executive being
convicted of a felony (other than a felony involving a motor vehicle); (v) the
breach by Executive of any material fiduciary duty owed by Executive to the
Company; or (vi) Executive's dishonesty, misappropriation or fraud with regard
to the Company (other than good faith expense account disputes).
(f) Notice of Termination for Cause. A Notice of Termination for Cause
shall mean a notice that shall indicate the specific termination provision in
Section 7(e) relied upon and shall set forth in reasonable detail the facts and
circumstances which provide for a basis for Termination for Cause. The date of
termination for a Termination for Cause shall be the date indicated in the
Notice of Termination. Any purported Termination for Cause which is held by a
court not to have been based on the grounds set forth in this Agreement or not
to have followed the procedures set forth in this Agreement shall be deemed a
Termination by the Company without Cause.
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(g) The irrevocable direct pay letter of credit required to be
delivered pursuant to Section 7(a)(vi) hereof shall be in amount equal to the
amount the Executive would be entitled to under Section 8(c)(A)(i) and (ii)
hereof if he were terminated without Cause upon the Change in Control and have
an expiration date of no less than two (2) years after the Change in Control.
The Executive shall be entitled to draw on the letter of credit upon
presentation to the issuing bank of a demand for payment signed by the Executive
that states that (i) (A) a Good Reason event has occurred and the Executive
would be entitled to payment under Section 8(c) of this Agreement if he elected
to terminate employment for Good Reason or (B) six (6) months and not more than
six (6) months and thirty (30) days has expired since the Change in Control or
(C) the Executive is entitled to payment under Section 8(c) of this Agreement
and (ii) assuming the event set forth in (i) entitled him to payment under
Section 8(c) of this Agreement, the amount the Company would be indebted to him
at the time of presentation under Section 8(c)(A)(i) and (ii) if he then was
eligible to receive payments under Section 8(c). There shall be no other
requirements (including no requirement that the Executive first makes demand
upon the Company or that the Executive actually terminates employment) with
regard to payment of the letter of credit. To the extent the letter of credit is
not adequate to cover the amount owed to the Executive by the Company under this
Agreement, is not submitted by the Executive or is not paid by the issuing bank,
the Company shall remain liable to the Executive for the remainder owed the
Executive pursuant to the terms of this Agreement. To the extent any amount is
paid under the letter of credit it shall be a credit against any amounts the
Company then or thereafter would owe to the Executive under Section 8(c) of this
Agreement. The letter of credit shall be issued by a national money center bank
with a rating of at least A by Standard & Poor's Ratings Services. The Company
shall bear the cost of the letter of credit.
8. Consequences of Termination of Employment on or After the Spinoff.
(a) Death. If, Executive's employment is terminated during the Employment Term
on or after the Spinoff Date by reason of Executive's death, the employment
period under this Agreement shall terminate without further obligations to the
Executive's legal representatives under this Agreement except for: (i) any
compensation earned but not yet paid, including and without limitation, any
bonus if declared or earned but not yet paid for a completed fiscal year, any
amount of Base Salary earned but unpaid, any accrued vacation pay payable
pursuant to the Company's policies, the Special Bonus to the extent earned but
not paid and any unreimbursed business expenses payable pursuant to Section 6
(collectively "Accrued Amounts") which amounts shall be promptly paid in a lump
sum to Executive's estate; (ii) the product of (x) the target annual bonus for
the fiscal year of the Executive's death, multiplied by (y) a fraction, the
numerator of which is the
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number of days of the current fiscal year during which the Executive was
employed by the Company, and the denominator of which is 365, which bonus shall
be paid when bonuses for such period are paid to the other executives; (iii)
subject to Sections 10 and 12, any other amounts or benefits owing to the
Executive under the then applicable employee benefit plans, long term incentive
plans or equity plans and programs of the Company which shall be paid in
accordance with such plans and programs; (iv) payment on a monthly basis of six
(6) months of Base Salary, which shall be paid to Executive's spouse, or if he
is not married to the Executive's estate or if she shall predecease him, then to
the Executive's children (or their guardian if one is appointed) in equal
shares; and (v) payment of the spouse's and dependent's COBRA coverage premiums
to the extent, and so long as, they remain eligible for COBRA coverage, but in
no event more than three (3) years.
(b) Disability. If, Executive's employment is terminated during the
Employment Term and on or after the Spinoff Date by reason of Executive's
Disability, Executive shall be entitled to receive the payments and benefits to
which his representatives would be entitled in the event of a termination of
employment by reason of his death (other than life insurance benefits), provided
that the payment of Base Salary shall be reduced by the projected amount he
would receive under any long-term disability policy or program maintained by the
Company during the six (6) month period during which Base Salary is being paid.
(c) Termination by Executive for Good Reason or for any Reason During
the Change in Control Protection Period or Termination by the Company without
Cause or Nonextension of the Term by the Company. If on or after the Spinoff
Date (i) outside of the Change in Control Protection Period, Executive
terminates his employment hereunder for Good Reason during the Employment Term,
(ii) if a Change in Control occurs and during the Change in Control Protection
Period Executive terminates his employment for any reason, (iii) Executive's
employment with the Company is terminated by the Company without Cause or (iv)
Executive's employment with the Company terminates as a result of the Company
giving notice of nonextension of the Employment Term pursuant to Section 1(a)
hereof, Executive shall be entitled to receive the Accrued Amounts and shall,
subject to Section 10(b) hereof, be entitled to receive, (A) in a lump sum
within ten (10) days after compliance with such Section 10(b), (i) two (2) times
Base Salary and (ii) if such termination is after a Change in Control, two (2)
times the highest annual bonus paid or, if declared or earned but not yet paid
for a completed fiscal year, payable to Executive for any of the previous three
(3) completed fiscal years by the Company (provided that, if this Section 8(c)
becomes applicable in reference to the bonus for the fiscal years ending on or
about September 30,
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2000 or 2001, the bonus to be used for the foregoing calculation shall be deemed
to be the higher of the respective bonus declared or earned for such year or
$175,000); (B) any other amounts or benefits owing to Executive under
the then applicable employee benefit, long term incentive or equity plans and
programs of the Company which shall be paid in accordance with such plans and
programs; (C) if not vested in a Company maintained Tax Qualified defined
benefit plan, a payment equal to the product of (i) the lump sum value of any
benefit accrued under such Tax Qualified defined benefit plan, if any, on the
date of termination (as determined in accordance with the provisions of such
plan as then in effect, including the applicable mortality factor, but utilizing
a lump sum discount rate equal to the plan's long-term investment rate of return
assumption for valuation purposes), and (ii) a fraction, the numerator of which
is equal to the number of full months worked by the Executive following the
Commencement Date and the denominator of which is sixty (60); (D) if such
termination is after a Change in Control, two (2) years of additional service
and compensation credit (at his then compensation level) for pension purposes
under any defined benefit type qualified or nonqualified pension plan or
arrangement of the Company, which payments shall be made through and in
accordance with the terms of the nonqualified defined benefit pension
arrangement if any then exists, or, if not, in an actuarially equivalent lump
sum (using the actuarial factors then applying in the Company's defined benefit
plan covering Executive); (E) if such termination is after a Change in Control,
two (2) years of the maximum Company contribution (assuming Executive deferred
the maximum amount and continued to earn his then current salary) under any type
of qualified or nonqualified 401(k) plan (payable at the end of each such year);
and (F) payment by the Company of the premiums for the Executive and his
dependents' health coverage for two (2) years under the Company's health plans
which cover the senior executives of the Company or materially similar benefits.
Payments under (F) above may at the discretion of the Company be made by
continuing participation of Executive in the plan as a terminee, by paying the
applicable COBRA premium for Executive and his dependents, or by covering
Executive and his dependents under substitute arrangements.
(d) Termination with Cause or Voluntary Resignation without Good
Reason or Retirement. If, Executive's employment hereunder is terminated on or
after the Spinoff Date (i) by the Company for Cause, (ii) by Executive without
Good Reason outside of the Change in Control Protection Period, or (iii) by the
Company pursuant to Section 7(a)(viii) hereof, the Executive shall be entitled
to receive only his Base Salary through the date of termination, the Special
Bonus if earned but unpaid and any unreimbursed business expenses payable
pursuant to Section 6 and, if the Executive has retired pursuant to the
Company's retirement programs, any bonus that has been declared or earned but
not yet paid for a completed fiscal year. All other benefits (including, without
limitation,
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options and the vesting thereof) due Executive following such termination of
employment shall be determined in accordance with the Company's plans and
programs.
9. Consequences of Termination of Employment Prior to the Spinoff
Date. (a) Death, Disability, Termination with Cause, Voluntary Resignation. If
Executive's employment hereunder is terminated prior to the Spinoff Date and
prior to a Section 7(a)(ix) Event (i) by reason of death, (ii) by reason of
Executive's Disability, (iii) by the Company for Cause, or (iv) by Executive,
the Executive shall be entitled to receive only his Base Salary through the date
of termination, any earned but unpaid bonus, if any, and any unreimbursed
business expenses payable pursuant to Section 6, provided that if such
termination is by Executive and occurs within fifteen (15) days after the
earlier of the Company notifying Executive in writing or issuing a formal public
announcement that the Spinoff will take place but at least one of Bearing
Inspection, Inc., Atech Turbine Components, Inc., Huron, Inc. or Rexair, Inc. is
not part of the Spinoff, Executive shall be treated as provided in (b) below.
All other benefits due Executive following such termination of employment shall
be determined in accordance with the Company's plans and programs.
(b) Termination by the Company without Cause or Occurrence of Section
7(a)(ix) Event. If (i) prior to the earlier to occur of a Section 7(a)(ix) Event
or Spinoff Date, Executive's employment hereunder is terminated by the Company
without Cause or (ii) Executive's employment hereunder is terminated as a result
of the occurrence of a Section 7(a)(ix) Event, the Executive shall, subject to
Sections 10 and 12, be entitled to receive (A) if such termination occurs prior
to January 1, 2000, in a lump sum within five (5) days after such termination,
an amount equal to six (6) month's Base Salary or (B) if such termination occurs
after December 31, 1999 and prior to the Outside Date, in a lump sum within five
(5) days after such termination, an amount equal to twelve (12) month's Base
Salary plus $14,583 per month for each complete month (and pro rata for any
partial month) of employment on or after October 1, 1999. In addition to the
foregoing, Executive shall be entitled to receive the amounts and benefits
described in Section 9(a) above.
10. (a) No Mitigation; Set-Off. In the event of any termination of
employment under Sections 8 or 9, Executive shall be under no obligation to seek
other employment and there shall be no offset against any amounts due Executive
under this Agreement on account of any remuneration attributable to any
subsequent employment that Executive may obtain. Any amounts due under Sections
8 and 9 are in the nature of severance payments and are not in the nature of a
penalty. Such amounts are inclusive,
13
and in lieu of any, amounts payable under any other salary continuation or cash
severance arrangement of the Company and to the extent paid or provided under
any other such arrangement shall be offset from the amount due hereunder.
(b) Executive agrees that, as a condition to receiving the payments
and benefits provided under Sections 8(c) and 9(b) hereunder he will execute,
deliver and not revoke (within the time period permitted by applicable law) a
release of all claims of any kind whatsoever against the Company, its
affiliates, officers, directors, employees, agents and shareholders in the then
standard form being used by the Company for senior executives (but without
release of right of indemnification hereunder, equity grants, or benefit plans
that by their terms are intended to survive termination of his employment).
11. Change in Control. For purposes of this Agreement, the term
"Change in Control" shall mean the occurrence of any of the following on or
after the Spinoff Date (i) any "person" as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934 ("Act") (other than the
Company, any trustee or other fiduciary holding securities under any employee
benefit plan of the Company, or any company owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of Common Stock of the Company), is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Act), directly or indirectly, of securities
of the Company representing twenty-five percent (25%) or more of the combined
voting power of the Company's then outstanding securities; (ii) during any
period of two (2) consecutive years (not including any period prior to the
Spinoff Date), individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in clause (i), (iii), or (iv) of this paragraph) whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote of
at least two-thirds of the directors then still in office who either were
directors at the beginning of the two-year period or whose election or
nomination for election was previously so approved, cease for any reason to
constitute at least a majority of the Board; (iii) a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no person acquires more than twenty-five percent (25%) of the combined
voting power of the Company's then outstanding
14
securities shall not constitute a Change in Control of the Company; or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or the sale or disposition by the Company of all or substantially all of
the Company's assets other than (x) the sale or disposition of all or
substantially all of the assets of the Company to a person or persons who
beneficially own, directly or indirectly, at least fifty percent (50%) or more
of the combined voting power of the outstanding voting securities of the Company
at the time of the sale or (y) pursuant to a spinoff type transaction, directly
or indirectly, of such assets to the stockholders of the Company. In no event
shall the Spinoff in and of itself constitute a Change in Control for purposes
of this Agreement.
12. Confidential Information and Non-Solicitation of the Company. (a)
(i) Executive acknowledges that as a result of his employment by the Company,
Executive will obtain secret and confidential information as to the Company and
its affiliates and the Company and its affiliates will suffer substantial
damage, which would be difficult to ascertain, if Executive should use such
confidential information and that because of the nature of the information that
will be known to Executive it is necessary for the Company and its affiliates to
be protected by the Confidentiality restrictions set forth herein.
(ii) Executive acknowledges that the retention of nonclerical
employees employed by the Company and its affiliates in which the Company and
its affiliates have invested training and depends on for the operation of their
businesses is important to the businesses of the Company and its affiliates,
that Executive will obtain unique information as to such employees as an
executive of the Company and will develop a unique relationship with such
persons as a result of being an executive of the Company and, therefore, it is
necessary for the Company and its affiliates to be protected from Executive's
Solicitation of such employees as set forth below.
(iii)Executive acknowledges that the provisions of this Agreement are
reasonable and necessary for the protection of the businesses of the Company and
its affiliates and that part of the compensation paid under this Agreement and
the agreement to pay severance in certain instances is in consideration for the
agreements in this Section 12.
(b) Solicitation shall mean: recruiting, soliciting or inducing, of
any nonclerical employee or employees of the Company or its affiliates to
terminate their employment with, or otherwise cease their relationship with, the
Company or its affiliates or hiring or assisting another person or entity to
hire any nonclerical employee of the Company or its affiliates or any person
15
who within six (6) months before had been a nonclerical employee of the Company
or its affiliates and were recruited or solicited for such employment or other
retention while an employee of the Company, provided, however, that solicitation
shall not include any of the foregoing activities engaged in with the prior
written approval of the Chief Executive Officer of the Company.
(c) If any restriction set forth with regard to Solicitation is found
by any court of competent jurisdiction, or an arbitrator, to be unenforceable
because it extends for too long a period of time or over too great a range of
activities or in too broad a geographic area, it shall be interpreted to extend
over the maximum period of time, range of activities or geographic area as to
which it may be enforceable. If any provision of this Section 12 shall be
declared to be invalid or unenforceable, in whole or in part, as a result of the
foregoing, as a result of public policy or for any other reason, such invalidity
shall not affect the remaining provisions of this Section which shall remain in
full force and effect.
(d) During and after the Employment Term, Executive shall hold in a
fiduciary capacity for the benefit of the Company and its affiliates all secret
or confidential information, knowledge or data relating to the Company and its
affiliates, and their respective businesses, including any confidential
information as to customers of the Company and its affiliates, (i) obtained by
Executive during his employment by the Company and its affiliates and (ii) not
otherwise public knowledge or known within the applicable industry. Executive
shall not, without prior written consent of the Company, unless compelled
pursuant to the order of a court or other governmental or legal body having
jurisdiction over such matter, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
In the event Executive is compelled by order of a court or other governmental or
legal body to communicate or divulge any such information, knowledge or data to
anyone other than the foregoing, he shall promptly notify the Company of any
such order and he shall cooperate fully with the Company in protecting such
information to the extent possible under applicable law.
(e) Upon termination of his employment with the Company and its
affiliates, or at any time as the Company may request, Executive will promptly
deliver to the Company, as requested, all documents (whether prepared by the
Company, an affiliate, Executive or a third party) relating to the Company, an
affiliate or any of their businesses or property which he may possess or have
under his direction or control other than documents provided to Executive in his
capacity as a participant in any employee benefit
16
plan, policy or program of the Company or any agreement by and between Executive
and the Company with regard to Executive's employment or severance.
(f) Furthermore, in the event of any termination of Executive's
employment for any reason whatsoever, whether by the Company or by Executive and
whether or not for Cause, Good Reason or non-extension of the Employment Term,
Executive for two (2) years thereafter will not engage in Solicitation.
(g) In the event of a breach or potential breach of this Section 12,
Executive acknowledges that the Company and its affiliates will be caused
irreparable injury and that money damages may not be an adequate remedy and
agree that the Company and its affiliates shall be entitled to injunctive relief
(in addition to its other remedies at law) to have the provisions of this
Section 12 enforced. It is hereby acknowledged that the provisions of this
Section 12 are for the benefit of the Company and all of the affiliates of the
Company before and after the Spinoff Date and each such entity may enforce the
provisions of this Section 12 and only the applicable entity can waive the
rights hereunder with respect to its confidential information and employees.
(h) Furthermore, in the event of breach of this Section 12 by
Executive, while he is receiving amounts under Section 8(c) or 9(b) hereof,
Executive shall not be entitled to receive any future amounts pursuant to
Sections 8(c) or 9(b) hereof.
13. Indemnification. (a) The Company agrees that if Executive is made
a party to or threatened to be made a party to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was a director, employee or officer of the
Company and/or any affiliate of the Company, or is or was serving at the request
of any of such companies as a director, officer, member, employee, fiduciary or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including, without limitation, service with respect to employee
benefit plans, whether or not the basis of such Proceeding is alleged action in
an official capacity as a director, officer, member, employee, fiduciary or
agent while serving as a director, officer, member, employee, fiduciary or
agent, he shall be indemnified and held harmless by the Company to the fullest
extent authorized by Delaware law (or, if other than the Company, the law
applicable to such company), as the same exists or may hereafter be amended,
against all Expenses incurred or suffered by Executive in connection therewith,
and such indemnification shall continue as to Executive even if Executive has
ceased to be an officer, director, member, fiduciary or agent, or is no longer
employed
17
by the applicable company, and shall inure to the benefit of his heirs,
executors and administrators. With respect to the obligations set forth in this
Section 13, the Company shall retain such obligations in respect of any act,
omission or circumstance that occurred on or prior to the Spinoff, and Newco
shall become liable hereunder with respect to any Proceeding which arises out of
or relates to events occurring after the Spinoff, except to the extent that the
liability relates to service with or for another assignee under Section 16(d)
hereof.
(b) As used in this Agreement, the term "Expenses" shall include,
without limitation, damages, losses, judgments, liabilities, fines, penalties,
excise taxes, settlements and costs, attorneys' fees, accountants' fees, and
disbursements and costs of attachment or similar bonds, investigations, and any
expenses of establishing a right to indemnification under this Agreement.
(c) Expenses incurred by Executive in connection with any Proceeding
shall be paid by the Company in advance upon request of Executive and the giving
by the Executive of any undertakings required by applicable law.
(d) Executive shall give the Company notice of any claim made against
him for which indemnity will or could be sought under this Agreement. In
addition, Executive shall give the Company such information and cooperation as
it may reasonably require and as shall be within Executive's power and at such
times and places as are reasonably convenient for Executive.
(e) With respect to any Proceeding as to which Executive notifies the
Company of the commencement thereof:
(i) The Company will be entitled to participate therein at its own
expense; and
(ii) Except as otherwise provided below, to the extent that it may
wish, the Company jointly with any other indemnifying party similarly notified
will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Executive. Executive also shall have the right to employ his own
counsel in such action, suit or proceeding and the fees and expenses of such
counsel shall be at the expense of the Company.
(f) The Company shall not be liable to indemnify Executive under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent. The Company shall not settle any action or claim in
any manner
18
which would impose any penalty or limitation on Executive without Executive's
written consent. Neither the Company nor Executive will unreasonably withhold or
delay their consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses incurred
in defending a Proceeding in advance of its final disposition conferred in this
Section 13 shall not be exclusive of any other right which Executive may have or
hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the applicable company, agreement, vote of
stockholders or disinterested directors or otherwise.
(h) The Company agrees to obtain Officer and Director liability
insurance policies covering Executive and shall maintain at all times during the
Employment Term coverage under such policies in the aggregate with regard to all
officers and directors, including Executive, of an amount not less than $20
million. The Company shall maintain for a six (6) year period commencing on the
date the Executive ceased to be an employee of the Company, Officer and Director
liability insurance coverage for events occurring during the period the
Executive was an employee or director of the Company in the same aggregate
amount and under the same terms as are maintained for its active officers and
directors. The phrase "in the same aggregate amount and under the same terms"
shall include the same level of self-insurance by the Company as shall be
maintained for active officers and directors.
(i) This Section 13 shall not create or expand any rights to
indemnification in favor of Executive with respect to service with USI, the
Company or their affiliates prior to the date hereof.
14. Special Tax Provision. (a) Anything in this Agreement to the
contrary notwithstanding, in the event that any amount or benefit paid, payable,
or to be paid, or distributed, distributable, or to be distributed to or with
respect to Executive by the Company (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in a change of ownership covered by Section
280G(b)(2) of the Code or any person affiliated with the Company or such person)
as a result of a change in ownership of the Company or a direct or indirect
parent thereof after the Spinoff covered by Code Section 280G(b)(2)
(collectively, the "Covered Payments") is or becomes subject to the excise tax
imposed by or under Section 4999 of the Code (or any similar tax that may
hereafter be imposed), and/or any interest or penalties with respect to such
excise tax (such excise tax, together with such interest and penalties, is
hereinafter collectively referred to as the "Excise Tax"), the
19
Company shall pay to Executive an additional amount (the "Tax Reimbursement
Payment") such that after payment by Executive of all taxes (including, without
limitation, any interest or penalties and any Excise Tax imposed on or
attributable to the Tax Reimbursement Payment itself), Executive retains an
amount of the Tax Reimbursement Payment equal to the sum of (i) the amount of
the Excise Tax imposed upon the Covered Payments, and (ii) without duplication,
an amount equal to the product of (A) any deductions disallowed for federal,
state or local income or payroll tax purposes because of the inclusion of the
Tax Reimbursement Payment in Executive's adjusted gross income, and (B) the
highest applicable marginal rate of federal, state or local income taxation,
respectively, for the calendar year in which the Tax Reimbursement Payment is
made or is to be made. The intent of this Section 14 is that (a) the Executive,
after paying his Federal, state and local income tax and any payroll taxes on
Executive, will be in the same position as if he was not subject to the Excise
Tax under Section 4999 of the Code and did not receive the extra payments
pursuant to this Section 14 and (b) that Executive should never be
"out-of-pocket" with respect to any tax or other amount subject to this Section
14, whether payable to any taxing authority or repayable to the Company, and
this Section 14 shall be interpreted accordingly.
(b) Except as otherwise provided in Section 14(a), for purposes of
determining whether any of the Covered Payments will be subject to the Excise
Tax and the amount of such Excise Tax,
(i) such Covered Payments will be treated as "parachute payments"
(within the meaning of Section 280G(b)(2) of the Code) and such payments in
excess of the Code Section 280G(b)(3) "base amount" shall be treated as subject
to the Excise Tax, unless, and except to the extent that, the Company's
independent certified public accountants appointed prior to the change in
ownership covered by Code Section 280G(b)(2) or legal counsel (reasonably
acceptable to Executive) appointed by such public accountants (or, if the public
accountants decline such appointment and decline appointing such legal counsel,
such independent certified public accountants as promptly mutually agreed on in
good faith by the Company and the Executive) (the "Accountant"), deliver a
written opinion to Executive, reasonably satisfactory to Executive's legal
counsel, that Executive has a reasonable basis to claim that the Covered
Payments (in whole or in part) (A) do not constitute "parachute payments", (B)
represent reasonable compensation for services actually rendered (within the
meaning of Section 280G(b)(4) of the Code) in excess of the "base amount"
allocable to such reasonable compensation, or (C) such "parachute payments" are
otherwise not subject to such Excise Tax (with appropriate legal authority,
detailed analysis and explanation provided therein by the Accountants); and
20
(ii) the value of any Covered Payments which are non-cash benefits or
deferred payments or benefits shall be determined by the Accountant in
accordance with the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Tax Reimbursement
Payment, Executive shall be deemed:
(i) to pay federal, state, local income and/or payroll taxes at the
highest applicable marginal rate of income taxation for the calendar year in
which the Tax Reimbursement Payment is made or is to be made, and
(ii) to have otherwise allowable deductions for federal, state and
local income and payroll tax purposes at least equal to those disallowed due to
the inclusion of the Tax Reimbursement Payment in Executive's adjusted gross
income.
(d)(i)(A) In the event that prior to the time the Executive has filed
any of his tax returns for the calendar year in which the change in ownership
event covered by Code Section 280G(b)(2) occurred, the Accountant determines,
for any reason whatever, the correct amount of the Tax Reimbursement Payment to
be less than the amount determined at the time the Tax Reimbursement Payment was
made, the Executive shall repay to the Company, at the time that the amount of
such reduction in Tax Reimbursement Payment is determined by the Accountant, the
portion of the prior Tax Reimbursement Payment attributable to such reduction
(including the portion of the Tax Reimbursement Payment attributable to the
Excise Tax and federal, state and local income and payroll tax imposed on the
portion of the Tax Reimbursement Payment being repaid by the Executive, using
the assumptions and methodology utilized to calculate the Tax Reimbursement
Payment (unless manifestly erroneous)), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code.
(B) In the event that the determination set forth in (A) above is made
by the Accountant after the filing by the Executive of any of his tax returns
for the calendar year in which the change in ownership event covered by Code
Section 280G(b)(2) occurred but prior to one (1) year after the occurrence of
such change in ownership, the Executive shall file at the request of the Company
an amended tax return in accordance with the Accountant's determination, but no
portion of the Tax Reimbursement Payment shall be required to be refunded to the
Company until actual refund or credit of such portion has been made to the
Executive,
21
and interest payable to the Company shall not exceed the interest received or
credited to the Executive by such tax authority for the period it held such
portion (less any tax the Executive must pay on such interest and which he is
unable to deduct as a result of payment of the refund).
(C) In the event the Executive receives a refund pursuant to (B) above
and repays such amount to the Company, the Executive shall thereafter file for
refunds or credits by reason of the repayments to the Company.
(D) The Executive and the Company shall mutually agree upon the course
of action, if any, to be pursued (which shall be at the expense of the Company)
if the Executive's claim for refund or credit is denied.
(ii) In the event that the Excise Tax is later determined by the
Accountants or the Internal Revenue Service to exceed the amount taken into
account hereunder at the time the Tax Reimbursement Payment is made (including
by reason of any payment the existence or amount of which cannot be determined
at the time of the Tax Reimbursement Payment), the Company shall make an
additional Tax Reimbursement Payment in respect of such excess (plus any
interest or penalties payable with respect to such excess) once the amount of
such excess is finally determined.
(iii) In the event of any controversy with the Internal Revenue
Service (or other taxing authority) under this Section 14, subject to subpart
(i)(D) above, the Executive shall permit the Company to control issues related
to this Section 14 (at its expense), provided that such issues do not
potentially materially adversely affect the Executive, but the Executive shall
control any other issues. In the event the issues are interrelated, the
Executive and the Company shall in good faith cooperate so as not to jeopardize
resolution of either issue, but if the parties cannot agree Executive shall make
the final determination with regard to the issues. In the event of any
conference with any taxing authority as to the Excise Tax or associated income
taxes, the Executive shall permit the representative of the Company to accompany
him and the Executive and his representative shall cooperate with the Company
and its representative.
(iv) With regard to any initial filing for a refund or any other
action required pursuant to this Section 14 (other than by mutual agreement) or,
if not required, agreed to by the Company and the Executive, the Executive shall
cooperate
22
fully with the Company, provided that the foregoing shall not apply to actions
that are provided herein to be at the sole discretion of the Executive.
(e) The Tax Reimbursement Payment, or any portion thereof, payable by
the Company shall be paid not later than the fifth (5th) day following the
determination by the Accountant and any payment made after such fifth (5th) day
shall bear interest at the rate provided in Code Section 1274(b)(2)(B). The
Company shall use its best efforts to cause the Accountant, to promptly deliver
the initial determination required hereunder and, if not delivered, within
ninety (90) days after the change in ownership event covered by Section
280G(b)(2) of the Code, the Company shall pay the Executive the Tax
Reimbursement Payment set forth in an opinion from counsel recognized as
knowledgeable in the relevant areas selected by the Executive, and reasonably
acceptable to the Company, within five (5) days after delivery of such opinion.
The amount of such payment shall be subject to later adjustment in accordance
with the determination of the Accountant as provided herein.
(f) The Company shall be responsible for all charges of the Accountant
and if (e) is applicable the reasonable charges for the opinion given by
Executive's counsel.
(g) The Company and the Executive shall mutually agree on and
promulgate further guidelines in accordance with this Section 14 to the extent,
if any, necessary to effect the reversal of excessive or shortfall Tax
Reimbursement Payments. The foregoing shall not in any way be inconsistent with
Section 14(d)(i)(D) hereof.
15. Legal and Other Fees and Expenses. In the event that a claim for
payment or benefits under this Agreement is disputed, the Company shall pay all
reasonable attorney, accountant and other professional fees and reasonable
expenses incurred by Executive in pursuing such claim, provided the Executive is
successful with regard to a material portion of his claim.
16. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey without reference to
principles of conflict of laws.
23
(b) Entire Agreement/Amendments. This Agreement and the instruments
contemplated herein, contain the entire understanding of the parties with
respect to the employment of Executive by the Company from and after the
Commencement Date and supersedes any prior agreements between the Company and
Executive with respect thereto. There are no restrictions, agreements, promises,
warranties, covenants or undertakings between the parties with respect to the
subject matter herein other than those expressly set forth herein and therein.
This Agreement may not be altered, modified, or amended except by written
instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict adherence
to any term of this Agreement on any occasion shall not be considered a waiver
of such party's rights or deprive such party of the right thereafter to insist
upon strict adherence to that term or any other term of this Agreement. Any such
waiver must be in writing and signed by Executive or an authorized officer of
the Company, as the case may be.
(d) Assignment. This Agreement shall not be assignable by Executive.
This Agreement shall be assignable by the Company only (i) as contemplated in
Section 1(b), (ii) prior to the Spinoff to either an entity which is owned in
whole by USI or (iii) after the Spinoff to an acquirer of all or substantially
all of the assets of the Company, provided such acquirer promptly assumes all of
the obligations hereunder of the Company in a writing delivered to the Executive
and otherwise complies with the provisions hereof with regard to such
assumption. Upon such assignment and assumption, all obligations of the Company
herein, shall be the obligations the assignee entity or acquirer, as the case
may be. Executive acknowledges that he is aware that the Company contemplates
assigning this Agreement to Newco on or promptly after the Spinoff.
(e) Successors; Binding Agreement; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees legatees and permitted assignees of the parties hereto.
(f) Communications. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given (i) when faxed or delivered, or (ii) two
(2) business days after being mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed to
24
the respective addresses set forth on the initial page of this Agreement,
provided that all notices to the Company shall be directed to the attention of
the Senior Vice President, General Counsel and Secretary of the Company, or to
such other address as any party may have furnished to the other in writing in
accordance herewith. Notice of change of address shall be effective only upon
receipt.
(g) Withholding Taxes. The Company may withhold from any and all
amounts payable under this Agreement such Federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.
(h) Survivorship. The respective rights and obligations of the parties
hereunder, including without limitation Section 13 hereof, shall survive any
termination of Executive's employment to the extent necessary to the agreed
preservation of such rights and obligations.
(i) Counterparts. This Agreement may be signed in counterparts, each
of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
(j) Headings. The headings of the sections contained in this Agreement
are for convenience only and shall not be deemed to control or affect the
meaning or construction of any provision of this Agreement.
(k) Executive's Representation. The Executive represents and warrants
to the Company that there is no legal impediment to him performing his
obligations under this Agreement and neither entering into this Agreement nor
performing his contemplated service hereunder will violate any agreement to
which he is a party or any other legal restriction.
25
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
STRATEGIC CAPITAL MANAGEMENT, INC.
By:
-------------------------------
Name:
Title:
-------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
26
GUARANTY
The undersigned entity, U.S. Industries, Inc. ("USI"), does hereby
agree to the terms contained herein, and guarantee the payment of the
obligations of Strategic Capital Management Inc. (the "Company") under the
employment agreement by and between ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and the Company, dated as
of June 1, 1999 (the "Employment Agreement") that become due prior to or upon
the earliest to occur of the Spinoff Date, a Sale Event, an Abandoned Spinoff
and a Change of Control of USI (all as defined in the Employment Agreement),
including the payments of any and all monies which the Company is obligated to
pay to Executive prior to the Spinoff Date in accordance with the terms of the
Employment Agreement, as well as the obligations under Section 13 of the
Employment Agreement. Upon the Spinoff, this Guaranty shall become of no further
force or effect except with regard to Section 13 of the Employment Agreement as
it applies to the period prior to the Spinoff and obligations for the period
prior to the Spinoff that remain unfulfilled as of the Spinoff Date. This is a
guaranty of payment and not collection.
U.S. Industries, Inc.
By
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Name:
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Title:
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Date:
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