TARGET LOGISTICS, INC. BALTIMORE, MARYLAND 21230
Exhibit
10.3
EXECUTION
COPY
TARGET
LOGISTICS, INC.
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September
17, 2007
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Dear
Phil:
The
purpose of this letter is to set forth the terms of your compensation upon
termination of your employment with Target Logistics, Inc., a Delaware
corporation (“Target”),
in
the event of a Change in Control.
Payments
and benefits provided by this letter agreement are in lieu of any payments
or
benefits to which you may be entitled under any other Target severance program
or arrangement. Furthermore, this is not a contract of employment and nothing
contained herein shall confer on you any right to be retained, in any position,
as an employee, consultant or officer of Target or any of its subsidiaries
(the
“Companies”)
either
before or after a Change in Control.
1. Definitions.
As used
in this letter agreement, the following terms shall have the meanings set forth
below:
(a) “Board”
means
the Board of Directors of Target.
(b) “Change
in Control”
means
the first to occur of any one of the following events:
(i) any
“Person,”
as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of
1934 (the “Exchange
Act”)
(other
than (A) Target, or (B) any person or entity which currently owns more than
20%
of Voting Securities), is or becomes the “beneficial owner” (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly (not including any
securities acquired directly from Target), of 25% or more of Target’s then
outstanding securities eligible to vote in the election of the Board
(“Voting
Securities”),
provided that the entry into an agreement to purchase such Voting Securities
shall not constitute a Change in Control until the consummation of the
transactions contemplated by any such agreement;
(ii) the
following individuals cease for any reason to constitute a majority of the
number of directors then serving on the Board: individuals who, on the date
hereof, were members of the Board and any new director (other than a director
whose initial assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation, relating
to the election of directors of Target) whose appointment or election by the
Board or nomination for election by Target’s stockholders was approved or
recommended by a vote of at least two-thirds (2/3) of the directors then still
in office who either were directors on the date hereof or whose appointment,
election or nomination for election was previously so approved or recommended;
(iii) there
is
consummated a merger or consolidation of Target with any other corporation
or
entity, or Target issues Voting Securities in connection with a merger or
consolidation of any direct or indirect subsidiary of Target with any other
corporation, other than (A) a merger or consolidation that would result in
the
holders of Voting Securities outstanding immediately prior thereto continuing
to
own (either by such Voting Securities remaining outstanding or by such Voting
Securities being converted into Voting Securities of the surviving or parent
entity) more than 50% of Target’s then outstanding Voting Securities or 50% of
the combined voting power of such surviving or parent entity outstanding
immediately after such merger or consolidation or (B) a merger or consolidation
effected to implement a recapitalization of Target (or similar transaction)
in
which no Person, directly or indirectly, acquired 25% or more of Target’s then
outstanding Voting Securities (not including any securities acquired directly
from Target); or
(iv) the
consummation of a plan of complete liquidation of Target or the consummation
of
an agreement for the sale or disposition by Target of all or substantially
all
of Target’s assets (or any transaction having a similar effect), other than a
sale or disposition by Target of all or substantially all of Target’s assets to
an entity, at least 50% of the combined voting power of the voting securities
of
which are owned directly or indirectly by stockholders of Target in
substantially the same proportions as their ownership of Target immediately
prior to such sale.
2. Payments
Upon Termination of Employment upon or following a Change in
Control.
If,
within the period beginning on a Change in Control and ending six (6) months
following the date of such Change in Control, your employment with Target
terminates for any reason whatsoever, including, without limitation, your
resignation, then contingent upon your execution of a release in favor of Target
substantially in the form annexed hereto as Exhibit
A
within
45 days following termination of your employment and not revoking such release,
you shall be entitled to the following payments and benefits:
(a) Severance.
Within
60 days following the termination of your employment, Target shall pay you
a
lump sum cash payment of $300,000.
(b) Health
and Welfare Benefits.
By
executing this letter agreement, you elect continuation coverage (as defined
in
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (COBRA))
under Target’s medical and dental plans as in effect at the time of the
termination of your employment (the “Health
Plans”).
Except as otherwise provided in this paragraph 2(b), Target shall pay the full
premiums for you and any dependents eligible for continuation coverage under
COBRA for 18 months following the date you terminate employment. For the period
beginning 18 months after the date you terminate employment and continuing
until
the date that is 36 months after the date you terminate employment, Target
will
pay you at the end of each month an amount equal to the amount of the premiums
which Target would have paid for such month (or eligible portion thereof) had
you and your dependents remained on the Health Plans, which amount shall be
determined using the premium cost in effect on the date your employment is
terminated. On the date you secure subsequent employment with comparable medical
and dental coverage (which you have no obligation to pursue), all right to
benefits under this paragraph not already paid shall be forfeited. You agree
that in consideration of the payment of cost of COBRA coverage to execute all
necessary documentation acknowledging proper COBRA notice and coverage. You
further agree to promptly notify Target in the event that secure subsequent
employment with a comparable medical and dental coverage benefit.
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Your
employment with Target will be considered terminated on the date you incur
a
separation from service (within the meaning of Treasury Regulation Section
1.409A-1(h)(1)) from Target and any entity required to be aggregated with Target
under Treasury Regulation Section 1.409A-1(h)(3).
3. Withholding
Taxes.
Target
may withhold from all payments or benefits due to you hereunder or under any
other plan or arrangement of the Companies all taxes which, by applicable
federal, state, local or other law, Target determines it is required to withhold
therefrom.
4. Parachute
Payment Taxes.
(a) Anything
in this letter agreement to the contrary notwithstanding, in the event it shall
be determined that any payment or distribution by Target to you or for your
benefit (a “Payment”)
would
be subject to the excise tax (the “Excise
Tax”)
imposed by Section 4999 of the Internal Revenue Code of 1986 (the “Code”),
then,
prior to the making of any Payment to you, a calculation shall be made comparing
(i) the net after-tax benefit to you of the Payment after payment of the Excise
Tax, to (ii) the net after-tax benefit to you if the Payment had been limited
to
the extent necessary to avoid being subject to the Excise Tax. If the amount
calculated under (i) above is less than the amount calculated under (ii) above,
then the Payment shall be limited to the extent necessary to avoid being subject
to the Excise Tax (the “Reduced
Amount”).
In
that event, you shall direct which Payments are to be modified or
reduced.
(b) The
determination of whether an Excise Tax would be imposed, the amount of such
Excise Tax, and the calculation of the amounts referred to Section 4(a)(i)
and
(ii) above shall be made by Target’s regular independent accounting firm at the
expense of Target or, at your election and expense, a nationally recognized
independent accounting firm (the “Accounting
Firm”)
which
shall provide detailed supporting calculations. Any determination by the
Accounting Firm shall be binding upon you and Target. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Payments to which you are entitled to, but did not receive pursuant to Section
4(a), could have been made without the imposition of the Excise Tax
(“Underpayment”).
In
such event, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be paid by Target to you
or
for your benefit within 30 days following such determination by the Accounting
Firm.
(c) In
the
event that the provisions of Code Section 280G and 4999 or any successor
provisions are repealed without succession, this Section 4 shall be of no
further force or effect.
5. No
Duty to Mitigate.
You will
have no duty to mitigate your damages, including any duty to seek other
employment, in the event of any breach by Target of this letter agreement or
otherwise. In no event shall any amount payable to you hereunder be subject
to
offset for any compensation or other amount received from any third
party.
6. Covenants.
As a
condition precedent to and in consideration of your receipt of the payments
and
benefits set forth above:
(a) You
agree
to return all written or electronic documents of the Companies to Target
immediately upon termination of your employment with Target.
(b) You
agree
that during the period of your employment with Target, and for a period ending
with the expiration of 24 months following your termination of employment with
Target, you shall not, without the written consent of Target:
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(i) recruit
or solicit any employee of the Companies for employment or for retention as
a
consultant or service provider;
(ii) hire
or
participate (with another company or third party) in the process of hiring
(other than for Target) any person who is then an employee of the Companies,
or
provide names or other information about the Companies’ employees to any person
or business (other than Target) under circumstances that could lead to the
use
of that information for purposes of recruiting or hiring;
(iii) interfere
with the relationship of the Companies with any of their employees, agents,
or
representatives;
(iv) solicit
or induce, or in any manner attempt to solicit or induce, any client, customer,
or prospective client or customer of the Companies (1) to cease being, or not
to
become, a customer of the Companies or (2) to divert any business of such
client, customer, or prospective client or customer from the Companies;
or
(v) otherwise
interfere with, disrupt, or attempt to interfere with or disrupt, the
relationship, contractual or otherwise, between the Companies and any of their
customers, clients, prospects, suppliers, consultants, or employees.
(c) You
agree
that during the period of your employment with Target, and for a period ending
with the expiration of six months following your termination of employment
with
Target, you shall not, without the written consent of Target, either
individually or as an officer, director, stockholder, member, partner, agent,
consultant or principal of another business firm engage in, or be connected
in
any manner with, any business operating anywhere in the world (whether as an
employee, consultant, agent, principal, director, officer, member, partner
or
shareholder, other than as a passive shareholder of a public company of which
you own less than 1%) that is in direct competition with any freight forwarding
or logistics services business of the Companies, or any other current or planned
business of the Companies of which you are aware (“Competitive Business”) or be
employed by any entity or person that controls a Competitive Business. For
purposes of this letter, “freight forwarding” means the sale, solicitation,
acceptance of and arrangement for the movement of freight either domestically
or
internationally. The Companies or any Person who acquires 25% or more of
Target’s Voting Securities in a Change in Control shall bear the burden of
proving a breach of this Section 6(c).
(d) You
agree
to cooperate with the Companies and to provide all information that the
Companies may hereafter reasonably request with respect to any matter involving
your present or former relationship with the Companies, the work you have
performed, or present or former employees of the Companies so long as such
requests do not unreasonably interfere with any other job or important personal
activity in which you are engaged. Target agrees to reimburse you for all
reasonable costs and expenses you incur in connection therewith.
(e) You
agree
that, with regard to all confidential technical, business, tax, financial or
proprietary knowledge and information you have obtained while employed by any
of
the Companies (“Proprietary
Information”),
you
will not at any time disclose any such Proprietary Information to any person,
firm, corporation, association, governmental agency, employee, or entity or
use
any such Proprietary Information for your own benefit or for the benefit of
any
other person, firm, corporation or other entity, except the Companies and except
as may be required by court order or subpoena. You agree to notify Target as
soon as practicable after your receipt of such a court order or subpoena. For
purposes of this letter agreement, the term “Proprietary Information” does not
include information that (i) is in the public domain, (ii) was known to you
prior to your employment with the Companies as evidenced by written records
in
your possession prior to such disclosure; or (iii) was lawfully disclosed to
you
following the end of your employment with the Companies by a third party under
no obligation of confidentiality.
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7. Binding
Agreement; Successors.
This
letter agreement shall not be terminated by any Change in Control. In the event
of any Change in Control, the provisions of this letter agreement shall be
binding upon the surviving corporation, and such surviving corporation shall
be
treated as Target hereunder. This letter agreement shall inure to the benefit
of
and be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
you
die while any amounts would be payable to you hereunder had you continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this letter agreement to such person or persons
appointed in writing by you to receive such amounts or, if no person is so
appointed, to your estate.
8. Governing
Law and Miscellaneous.
The law
of the State of Maryland shall govern this letter agreement without giving
effect to its conflict of law principles. Should a court of competent
jurisdiction find that any provision of this letter agreement is void, voidable,
illegal, or unenforceable, no other provision shall be affected thereby and
the
balance shall be interpreted in a manner that gives effect to the intent of
the
parties. The parties agree that the normal rule of construction that holds
that
all ambiguities are construed against the drafting party will not apply to
the
interpretation of this letter agreement. You and Target acknowledge that this,
along with the release attached as Exhibit
A,
is our
entire agreement. We further acknowledge that the headings in this letter
agreement are for convenience only and have no bearing on the meaning of this
letter agreement.
Please
sign and date this letter agreement and return the signed copy to the Company
at
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| Very truly yours, | ||
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| /s/ | ||
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President
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AGREED
AND ACKNOWLEDGED:
/s/
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September
17, 2007
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Exhibit
A
GENERAL
EXECUTIVE RELEASE AND WAIVER
Reference
is made
to that
certain letter agreement dated September 17, 2007 by and between Target
Logistics, Inc.,
a
Delaware corporation (“Target”),
and
the undersigned with respect to the terms of severance payments upon a change
in
control of Target (the “CIC
Agreement”).
Capitalized terms not defined herein shall have the meaning ascribed to such
terms in the CIC Agreement.
For
good
and valuable consideration,
as set
forth in the CIC Agreement (which is incorporated herein by reference as if
set
forth fully herein and made a part hereof), the receipt, sufficiency and
adequacy of which are hereby acknowledged the undersigned agrees as follows:
1. Acknowledgment
and Release.
The
undersigned hereby accepts the severance package provided under the CIC
Agreement and hereby releases, discharges, and agrees to hold harmless the
Companies, their predecessors, successors, their boards of directors and their
members, employees, officers, parent, shareholders, employee benefit plans
and
their plan administrators, trusts, trustees, heirs, successors, and assigns
(hereinafter referred to in this Release collectively as the “Releasees”),
from
all claims, liabilities, demands, and causes of action at law or equity, known
or unknown, fixed or contingent, which the undersigned has, may have, will
have,
or claims to have against the Releasees as a result of the undersigned’s
employment and/or this separation and the conclusion of the undersigned’s
employment with the Releasees at any time up to and including the date of the
execution of this letter agreement, excluding all claims that arise out of
an
asserted breach of the CIC Agreement. The undersigned’s agreement pursuant to
this General Executive Release and Waiver is hereinafter referred to as the
“Release”.
This
includes, but is not limited to, claims arising under federal, state, or local
laws prohibiting employment discrimination, including Title VII of the Civil
Rights Act of 1964, as amended, the Age Discrimination in Employment Act, as
amended (including the Older Workers Benefit Protection Act), the Employment
Retirement Income Security Act of 1974, as amended, the Equal Pay Act, the
Fair
Labor Standards Act, as amended, the Maryland Human Relations Act, the Maryland
Wage Payment and Collection Act, as amended, claims growing out of any legal
restrictions on an employer’s right to terminate its employees in any
jurisdiction, such as claims for wrongful or constructive discharge, breach
of
any express or implied contract, and/or any claims on any basis whatsoever
regarding the undersigned’s status, pay, position, or title while employed by
the Releasees. Excluded from this Release are claims which cannot be lawfully
waived, including the right to file an administrative charge of discrimination
with federal or state agencies. However, the undersigned is waiving all rights
to monetary recovery in connection with any such charge. The undersigned
specifically promises not to ▇▇▇ the Releasees in any forum for any of the
above-mentioned claims.
2. Governing
Law.
Except
to the extent governed by Federal law, the law of the State of Maryland shall
govern this Release without giving effect to its conflict of law principles.
Should a court of competent jurisdiction find that any provision of this Release
is void, voidable, illegal, or unenforceable, no other provision shall be
affected thereby and the balance shall be interpreted in a manner that gives
effect to the intent of the parties. The parties agree that the normal rule
of
construction that holds that all ambiguities are construed against the drafting
party will not apply to the interpretation of this Release.
3. Time
to Consider.
The
undersigned acknowledges that he has been advised that he has [twenty-one
(21)] days
from
the date of receipt of this Release to consider all the provisions of the
Release and does hereby knowingly and voluntarily waive said given twenty-one
day period. THE UNDERSIGNED FURTHER ACKNOWLEDGES THAT HE HAS READ THE RELEASE
CAREFULLY, HAS BEEN ADVISED BY TARGET TO, AND HAS IN FACT, CONSULTED AN
ATTORNEY, AND FULLY UNDERSTANDS THAT BY SIGNING BELOW HE IS GIVING UP CERTAIN
RIGHTS WHICH HE MAY HAVE TO ▇▇▇ OR ASSERT A CLAIM AGAINST THE RELEASEES AS
DESCRIBED HEREIN. THE UNDERSIGNED ACKNOWLEDGES THAT HE HAS NOT BEEN FORCED
OR
PRESSURED IN ANY MANNER WHATSOEVER TO SIGN THIS RELEASE AND AGREES TO ALL OF
ITS
TERMS VOLUNTARILY.
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4. Revocation.
The
undersigned reserves the right to revoke the Release within seven (7) days
from
the date of the execution of the Release, with respect to all claims referred
to
herein (including, without limitation, any and all claims arising under ADEA).
If the undersigned revokes the Release, Target will not be obligated to honor
its obligations under the CIC Agreement.
5. No
Admission.
This
Release does not constitute an admission of liability or wrongdoing of any
kind
by the undersigned.
In
witness whereof,
the
undersigned has executed this Release as of the ___ day of _____________,
2007.
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