EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of December 4, 2000, by and between
LCA Group Inc., a Delaware corporation (the "Company"), with its principal
office at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇ ▇'▇▇▇▇▇
("Executive").
W I T N E S S E T H:
-------------------
WHEREAS, Executive is currently employed by U.S. Industries, Inc.
("USI");
WHEREAS, USI intends to transfer all or a part of the assets
constituting USI's Lighting Corporation of America segment and certain other
assets of USI's industrial tools business to the Company, a newly constituted
wholly owned subsidiary of USI, and to spin off the Company to the shareholders
of USI (the "Spinoff");
WHEREAS, effective as of the consummation of the Spinoff (the
"Commencement Date"), the Company will employ Executive as its Chairman and
Chief Executive Officer and the Executive is willing to serve in such capacity;
and
WHEREAS, the Company and the Executive desire to enter into this
agreement (the "Agreement") as to the terms of employment by the Company, under
which the Executive's employment shall commence on the Commencement Date.
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. Except for earlier termination as provided in
Section 7 hereof, Executive's employment under this Agreement shall be for a
three (3) year term (said term, as the same may be extended, being referred to
as the "Employment Term") commencing on the Commencement Date. Subject to
earlier termination pursuant to Section 7 hereof, the Employment Term shall be
automatically extended for additional terms of successive three (3) year periods
unless the Company or 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. Notwithstanding the foregoing, this Agreement shall be null and
void if the Spinoff is not consummated by January 31, 2001.
2. Positions. Executive shall serve as the Chairman and Chief Executive
Officer of the Company. During the Employment Term, Executive shall also serve
on the Board of Directors or other managing board of the Company (the "Board")
without additional compensation. Executive shall also serve, if requested by the
Board, as an executive officer and
2
director of subsidiaries and a director of associated companies of the Company
and shall comply with the policy of the Compensation Committee of the Board (the
"Compensation Committee") with regard to retention or forfeiture of the
director's fees.
(a) Executive shall report directly to the Board and shall have such
duties and authority, consistent with his position as the Chairman and Chief
Executive Officer of the Company, as shall be assigned to him from time to time
by the Board. Executive's powers and authority shall be superior to those of any
other officer or employee of the Company and all employees of the Company shall
report to Executive or his designees.
(b) 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 passive personal investments and to
serve on corporate, civic, or charitable boards or committees. Notwithstanding
the foregoing, Executive may serve on corporate boards of directors or advisory
committees only if approved in advance by the Board (which approval may be
withdrawn at any
3
time) and shall not serve on any corporate board of directors or advisory
committees if such service would be inconsistent with his fiduciary
responsibilities to the Company. Executive currently serves on the managing
board of Strategic Industries, LLC and the board of directors of Rexair
Holdings, Inc. and such service is hereby approved by the Board effective as of
the Commencement Date.
3. Base Salary. During the Employment Term, the Company shall pay
Executive a base salary at the annual rate of not less than $500,000. 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 and may be increased, but not decreased, from time
to time by the Board or the Compensation Committee, except, prior to a Change in
Control, as defined in Section 11 hereof, 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. For each fiscal year or portion
thereof during the Employment Term, Executive shall be eligible to participate
in an incentive pay
4
plan of the Company in accordance with, and subject to the terms of such plan
established upon recommendation of the Compensation Committee that provides an
annualized cash bonus opportunity with a target bonus potential equal to at
least one hundred percent (100%) of Base Salary (the "Target Bonus").
(b) Equity. The Executive shall be entitled to participate in any
equity plan established by the Company for which he is eligible at such level
and on such terms as established by the Board or the Compensation Committee.
Notwithstanding the foregoing, any equity granted to the Executive that is
effective on or after the Commencement Date shall fully vest upon a termination
of Executive's employment pursuant to Sections 7(a)(i)-(iv) hereof, or upon a
Change in Control of the Company.
(c) Other Compensation. The Company may, upon recommendation of the
Compensation Committee or the Board, award to Executive such other bonuses and
compensation as it deems appropriate and reasonable.
(d) Assumption. Effective on the Commencement Date, the Company shall
assume all employment-related obligations with respect to benefits and
compensation programs earned by Executive based on Executive's employment with
USI prior to the Spinoff.
5. Employee Benefits and Vacation. (a) During the Employment Term,
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 the senior executives of the Company, in accordance with their
respective terms as in effect from time to time (other than any special
5
arrangement entered into by contract with an executive), provided, however, such
employee benefit plans shall provide a level of benefits, coverages and
perquisites no less favorable in the aggregate than what was provided to
Executive by USI immediately prior to the Spinoff. Notwithstanding the
foregoing, after a Change in Control, during the Employment Term, Executive
shall be entitled to (i) coverage and benefits at least equal in the aggregate
to the benefits provided under the benefit plans and programs, including,
without limitation, any life insurance, medical insurance, disability, pension,
savings, incentive, retirement and other plans and programs, of the Company
applicable to Executive immediately prior to such Change in Control, and (ii)
any fringe benefits and perquisites of at least equal value to those provided by
the Company to Executive immediately prior to the Change in Control. If
Executive is currently provided with a leased automobile or an automobile
allowance, the Company shall, as of the Commencement Date, continue the same
arrangement that currently exists, but reserves the right, upon recommendation
of the Compensation Committee, to modify the arrangement or change the level of
allowances in the future. To the extent permitted under applicable law, the
Company shall not treat as compensation to Executive fringes and perquisites
provided to Executive or the items under Section 6 below.
(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.
Executive shall also be entitled to such periods of sick leave as is customarily
provided by the Company for its senior executive employees.
6
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 occurrence of any of the following events:
(i) the death of Executive;
(ii) the termination of Executive's employment by the Company due
to Executive's Disability pursuant to Section 7(b) hereof;
(iii) the termination of Executive's employment by Executive for
Good Reason pursuant to Section 7(c) hereof;
(iv) the termination of Executive's employment by the Company
without Cause;
(v) the termination of employment by Executive without Good Reason
upon sixty (60) days prior written notice;
(vi) the termination of employment by Executive, with or without
Good Reason during the period running from the date of a Change in
Control to twenty-
7
four (24) months after the date of such Change in Control (such period
shall be referred to herein as the "Change in Control Protection
Period") provided that the foregoing commencement date of such right to
terminate employment pursuant to this Section 7(a)(vi) shall be delayed
until six (6) months after the Change in Control if simultaneous with
the Change in Control, the Company or the person or entity triggering
the Change in Control delivers to 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 (and
further provided that the foregoing shall in no way affect full vesting
of any equity granted to the Executive upon a Change in Control in
accordance with Section 4(b) hereof);
(vii) the termination of Executive's employment by the Company for
Cause pursuant to Section 7(e);
(viii) the retirement of 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.
(b) Disability. If, by reason of the same or related physical or mental
illness or incapacity, Executive is unable to carry out his material duties
pursuant to this Agreement for more than one hundred eighty (180) days (whether
or not business days) in any twelve (12)
8
consecutive month period, the Company may terminate Executive's employment for
Disability upon thirty (30) days prior written notice, by a Notice of Disability
Termination, at any time thereafter during such twelve (12) month period in
which Executive is unable to carry out his duties as a result of the same or
related physical or mental illness or incapacity. Such termination shall not be
effective if Executive returns to the full time performance of his material
duties within such thirty (30) day notice 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. 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, unless such circumstances are fully corrected prior to
the date of termination specified in the Notice of Termination for Good Reason
(as defined in Section 7(d) hereof): (i) any demotion of Executive from his
position as Chairman and Chief Executive Officer or any diminution of
Executive's duties or responsibilities hereunder
9
(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, the
assignment to Executive of duties or responsibilities that are inconsistent with
Executive's position; (ii) removal of, or the nonreelection of, Executive from
the officer positions with the Company specified herein; (iii) a relocation of
the Company's principal executive offices to a location more than both
twenty-five (25) miles from the current location and twenty-five (25) miles from
Executive's residence at the time of the relocation; (iv) after a Change in
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 in 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
and substantially the same level of criteria for
10
achievability thereof as Executive participated in immediately 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 12 hereof; (vi) Executive's
removal from or failure to be reelected to the Board; or (vii) failure of any
successor to assume in a writing delivered to Executive upon the assignee
becoming such, the obligations of the Company hereunder.
(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 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.
11
(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 which
has a material adverse effect on the Company; (ii) the refusal of Executive to
follow the proper written direction of the Board, 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;
(iii) substantial and continuing willful refusal by 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 Executive by the Board which
specifically identifies the manner in which it is believed that Executive has
substantially and continually refused to attempt to perform his duties
hereunder; (iv) Executive being convicted of a felony (other than a felony
involving a traffic infraction); (v) the breach by Executive of any material
fiduciary duty owed by Executive to the Company which has a material adverse
effect on the Company; or
12
(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. Further, a
Notification for Cause shall be required to include a copy of a resolution duly
adopted by at least two-thirds of the entire membership of the Board at a
meeting of the Board which was called for the purpose of considering such
termination and which Executive and his representative had the right to attend
and address the Board, finding that, in the good faith opinion of the Board,
Executive engaged in conduct set forth in the definition of Cause herein and
specifying the particulars thereof in reasonable detail. 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.
13
(g) The irrevocable direct pay letter of credit required to be
delivered pursuant to Section 7(a)(vi) or Section 11(b)(i) hereof shall be in an
amount equal to the amount Executive would be entitled to under Section 8(c)(A)
hereof if he was 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.
Executive shall be entitled to draw on the letter of credit upon presentation to
the issuing bank of a demand for payment signed by Executive that states that:
(i) (A) a Good Reason event has occurred and 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 has expired since the Change in
Control or (C) 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) if he then was eligible
to receive payments under Section 8(c). There shall be no other requirements
(including no requirement that Executive first makes demand upon the Company or
that 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
14
amount owed to Executive by the Company under this Agreement, is not submitted
by Executive or is not paid by the issuing bank, the Company shall remain liable
to Executive for the remainder owed 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
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
and Poors. The Company shall bear the cost of the letter of credit.
8. Consequences of Termination of Employment. (a) Death. If Executive's
employment is terminated during the Employment Term by reason of Executive's
death, the employment period under this Agreement shall terminate without
further obligations to Executive's legal representatives under this Agreement
except for: (i) any compensation earned but not yet paid, including without
limitation, any earned but unpaid bonus for any prior fiscal year, any amount of
Base Salary or deferred compensation accrued or earned but unpaid, any accrued
vacation pay payable pursuant to the Company's policies and any unreimbursed
business expenses payable pursuant to Section 6, which amounts, except as
otherwise provided under any plans or programs, 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 Executive's death, multiplied by (y) a fraction, the
numerator of which is the number of days of the current fiscal year during which
Executive was employed by the Company, and the denominator of which is 365,
which bonus shall be paid when
15
bonuses for such period are paid to the other executives; (iii) subject to
Sections 4(b) hereof, any other amounts or benefits owing to Executive under the
then applicable employee benefit plans, long term incentive plans or equity
plans or compensation programs of the Company, which shall be paid in accordance
with such plans or programs; (iv) payment on a monthly basis of twelve (12)
months of Base Salary, which shall be paid to Executive's spouse, or if he is
not married or if she shall predecease him, then to Executive's estate; and (v)
payment of the spouse's and dependent's medical, hospital and dental coverage or
insurance premiums for three (3) years. Payments under (v) above may at the
discretion of the Company be made by paying the applicable COBRA premium for
Executive's spouse and dependents, or by covering his spouse and dependents
under substitute arrangements.
(b) Disability. If Executive's employment is terminated 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 twelve (12) month period during
which Base Salary is being paid.
(c) Termination by Executive for Good Reason or Termination by the
Company without Cause or Nonextension of the Term by the Company. If (w)
Executive terminates his employment hereunder for Good Reason during the
Employment Term, (x) Executive's employment with the Company is terminated by
the Company without Cause, (y) Executive resigns with or without Good Reason
during the Change in Control Protection Period or (z) Executive's employment
with the Company terminates as a result of the Company giving
16
notice of nonextension of the Employment Term pursuant to Section 1 hereof,
Executive shall be entitled to receive, subject to Section 9(b) and (c) and
Section 10 hereof, (A) in a lump sum within five (5) days after such
termination, an amount aggregating three (3) times the sum of Base Salary and
the Target Bonus, (B) in a lump sum, any unreimbursed business expenses payable
pursuant to Section 6, any accrued but unpaid Base Salary, any earned but unpaid
bonus for any completed prior fiscal year and any accrued vacation pay payable
pursuant to the Company's policies; (C) subject to Section 4(b) and 9 hereof,
any other amounts or benefits due Executive under the then applicable employee
benefit plans of the Company as shall be determined and paid, in accordance with
such plans, policies and practices; (D) three (3) 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) three (3) 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) continued coverage provided
by the Company for Executive and his dependents' health coverage for the lesser
of three (3) years, or until Executive is eligible for the benefit plan of
another employer of the Executive, under the Company's health plans which cover
the senior executives of the Company or materially similar benefits. Coverage
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
17
the applicable COBRA premium for Executive and his dependents, or by covering
Executive and his dependents under substitute arrangements.
(d) Termination for Cause or Voluntary Resignation without Good Reason
or Retirement. If Executive's employment hereunder is terminated (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, Executive shall be entitled to receive only his Base Salary
through the date of termination, any earned but unpaid bonus, and any
unreimbursed business expenses payable pursuant to Section 6. Subject to Section
4 hereof, all other benefits (including without limitation any equity grants)
due Executive following such termination of employment shall be determined in
accordance with the plans, policies and practices of the Company.
9. No Mitigation; Set-Off. (a) In the event of any termination of
employment under Section 8, 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 Section 8 are in the
nature of severance payments, or liquidated damages, or
18
both, and are not in the nature of a penalty. Such amounts are inclusive, 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 Section 8(c) hereunder Executive 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 the right of
indemnification hereunder or under the Company's By-laws or rights under benefit
or equity plans or under this Agreement that by their terms are intended to
survive termination of his employment).
(c) Upon any termination of employment, Executive hereby resigns as an
officer and director of the Company, any subsidiary and any affiliate and as a
fiduciary of any benefit plan of any of the foregoing. Executive shall promptly
execute any further documentation thereof as requested by the Company and, if
the Executive is to receive any payments from the Company, execution of such
further documentation shall be a condition thereof.
10. Confidential Information, Non-Competition and Non-Solicitation of
the Company. (a) (i) Executive acknowledges that as a result of Executive's
employment by the Company, Executive will obtain secret and confidential
information as to the Company and its
19
affiliates and create relationships with customers, suppliers and other persons
dealing with 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 or take advantage of such
relationship and that because of the nature of the information that will be
known to Executive and the relationships created it is necessary for the Company
and its affiliates to be protected by the prohibition against Competition as set
forth herein, as well as 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 10.
20
(b) Competition shall mean: participating, directly or indirectly, as
an individual proprietor, partner, stockholder, officer, employee, director,
joint venturer, investor, lender, consultant or in any capacity whatsoever
(within the United States of America, or in any country where the Company or its
affiliates do business) in a lighting business in competition with any lighting
business conducted by the Company, provided, however, that such participation
shall not include (i) the mere ownership of not more than one percent (1%) of
the total outstanding stock or public debt of a publicly held company; or (ii)
any activity engaged in with the prior written approval of the Board or the
Chief Executive Officer.
(c) 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 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.
(d) If any restriction set forth with regard to Competition or
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 10 shall be declared to be invalid or unenforceable, in whole or in
part, as a result of the foregoing, as
21
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.
(e) 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 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.
(f) 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 Executive may possess or
have under Executive's direction or control other than documents provided to
Executive in Executive's capacity as a participant in any employee benefit plan,
policy or program
22
of the Company or any agreement by and between Executive and the Company with
regard to Executive's employment or severance.
(g) During the Employment Term and for two (2) years following a
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 will not engage in Solicitation.
(h) During the Employment Term and for one (1) year following a
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 will not enter into Competition
with the Company or its affiliates.
(i) In the event of a breach of this Section 10, 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 seek injunctive relief (in addition to its other
remedies at law) to have the provisions of this Section 10 enforced. It is
hereby acknowledged that the provisions of this Section 10 are for the benefit
of the Company and all of the affiliates of the Company and each such entity may
enforce the provisions of this Section 10 and only the applicable entity can
waive the rights hereunder with respect to its confidential information and
employees.
11. Change in Control. For purposes of this Agreement, the term "Change
in Control" shall mean (i) any "person" as such term is used in Sections 13(d)
and 14(d) of the Exchange Act (other than the Company, any trustee or other
fiduciary holding securities under
23
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 Exchange 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,
individuals who at the beginning of such period constitute the Board of
Directors, 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 paragraph (i), (iii), or (iv) of this section) whose election by
the Board of Directors 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 of Directors; (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 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 consummation of the sale or disposition by the Company of all or
substantially all of the Company's assets other than (x) the sale
24
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.
12. Indemnification. (a) The Company and any other entity that becomes
the Company agree 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 or officer of the Company, such other company and/or any
other affiliate of any of such companies, 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 applicable 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 by the Company, and shall inure to the benefit of his
heirs, executors and administrators.
25
(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 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
26
(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 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 12 shall not be exclusive of any other right which Executive may have or
hereafter may acquire under any statute,
27
provision of the certificate of incorporation or by-laws of the Company,
agreement, vote of stockholders or disinterested directors or otherwise.
(h) Each entity which is or becomes the Company hereunder agrees to
obtain Officer and Director liability insurance policies covering Executive and
shall maintain at all times following the Commencement Date and 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 and each other entity which becomes the Company shall
maintain for a six (6) year period commencing on the date Executive ceases to be
an employee of such entity, Officer and Director liability insurance coverage
for events occurring during the period Executive was an employee or director of
such entity 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.
13. 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
28
(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 Internal Revenue Code of 1986, as amended (the "Code")
Section 280G(b)(2) 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 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 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 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 13 is that (a) 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 13 and (b) that Executive should never be
"out-of-pocket" with respect to any tax or other
29
amount subject to this Section 13, whether payable to any taxing authority or
repayable to the Company, and this Section 13 shall be interpreted accordingly.
(b) Except as otherwise provided in Section 13(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 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
30
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
(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 and/or local income 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 tax purposes at least equal to those disallowed due to the
31
inclusion of the Tax Reimbursement Payment in Executive's adjusted
gross income.
(d)(i)(A) In the event that prior to the time 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,
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 tax imposed on the portion of the
Tax Reimbursement Payment being repaid by 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.
32
(B) In the event that the determination set forth in (A) above is
made by the Accountant after the filing by 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, 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
Executive, and interest payable to the Company shall not exceed the interest
received or credited to Executive by such tax authority for the period it held
such portion (less any tax 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 Executive receives a refund pursuant to (B)
above and repays such amount to the Company, Executive shall thereafter file for
refunds or credits by reason of the repayments to the Company.
33
(D) 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 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 13, subject to subpart
(i)(D) above, Executive shall permit the Company to control issues related to
this Section 13 (at its expense), provided that such issues do not potentially
materially adversely affect Executive, but Executive shall control any other
issues. In the event the issues are interrelated, Executive and the Company
34
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, Executive
shall permit the representative of the Company to accompany him and 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 13 (other than by mutual agreement) or,
if not required, agreed to by the Company and Executive, Executive shall
cooperate fully with the Company, provided that the foregoing shall not apply to
actions that are provided herein to be at the sole discretion of 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,
35
within ninety (90) days after the change in ownership event covered by Section
280G(b)(2) of the Code, the Company shall pay Executive the Tax Reimbursement
Payment set forth in an opinion from counsel recognized as knowledgeable in the
relevant areas selected by 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 clause (e) above is applicable the reasonable charges for the opinion
given by Executive's counsel.
(g) The Company and Executive shall mutually agree on and promulgate
further guidelines in accordance with this Section 13 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
13(d)(i)(D) hereof.
14. 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, unless the Executive's
position is found to be frivolous or not taken in good faith.
15. Miscellaneous.
36
(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.
(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 date
hereof and supersedes any prior agreements between the Company and Executive.
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.
37
(d) Assignment. This Agreement shall not be assignable by Executive.
This Agreement shall be assignable by the Company only to an acquiror of all or
substantially all of the assets of the Company, provided such acquiror promptly
assumes all of the obligations hereunder of the Company in a writing delivered
to Executive and otherwise complies with the provisions hereof with regard to
such assumption.
(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 the Company's
address set forth on the initial page of this Agreement and the most recent
address on file for the Executive with the Company, provided that all notices to
the Company shall be
38
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 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.
39
(k) Executive's Representation. 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
LCA Group Inc.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
/s/ ▇▇▇▇▇ ▇'▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇'▇▇▇▇▇
40