Exhibit 10.8
FORM OF INCENTIVE COMPENSATION AGREEMENT
THIS AGREEMENT is made as of _________, 1999, by and among CenterPoint Advisors,
Inc., a Delaware corporation ("CenterPoint"), [Founder/CenterPoint Advisors,
Inc.], a ________ corporation (the "Company"), and the persons listed on Exhibit
A attached hereto (as such Exhibit is amended in accordance with the terms
hereof, the "Participants").
WHEREAS, an entity or entities in which the Participants own, directly or
indirectly, all of the equity or membership interests has entered into a Merger
Agreement dated as of March 31, 1999 by and among the parties hereto (the
"Merger Agreement"), whereby such entity or entities has agreed to merge with
one or more subsidiaries of CenterPoint;
WHEREAS, the Participants will occupy a position of trust and confidence with
the Company after the date of this Agreement and during the period of this
Agreement will become familiar with the Company's proprietary and confidential
information;
WHEREAS, the agreements and covenants contained herein are essential to protect
the Company and its goodwill and CenterPoint would not complete the transactions
contemplated by the Merger Agreement without the rights and protection that this
Agreement provides with respect to proprietary and confidential information and
post-termination restrictions;
WHEREAS, the parties' obligation to consummate the transactions contemplated by
the Merger Agreement is subject to the condition that the parties hereto execute
and deliver this Agreement;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained in this Agreement, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Services; Authority. Each Participant, severally and not jointly, promises
to perform and discharge in a manner deemed adequate by the Committee such
duties as may be assigned by the Committee from time to time and to comply with
all policies and procedures established by the CenterPoint Board of Directors in
effect from time to time; provided, however, that such policies and procedures
shall not be materially inconsistent with the delegation of authority contained
in this Agreement. Each Participant shall obtain and maintain such licenses,
credentials or other certifications required to perform his or her services for
the Company. The Company shall reimburse each Participant for all direct costs
incurred to maintain such licenses, credentials or certifications.
The Committee shall have general control of and responsibility for ordinary
course, day-to-day operations of the Company, including (i) acceptance,
management and termination of client and prospective client relationships, (ii)
client billing and collection, (iii) staffing, quality control and the
management of professional engagements, (iv) hiring, retention, training,
compensation, benefits and other similar matters concerning personnel, (v)
business development and marketing, (vi) management of facilities and equipment
and (vii) establishing policies and procedures to implement the foregoing.
Such operations shall be conducted in compliance with applicable laws as well as
the annual budget developed by the Committee and CenterPoint. Such operations
shall be conducted consistent with generally applicable policies and procedures
established by CenterPoint's Board of Directors not materially inconsistent with
the delegation of authority contained in this Agreement; provided that any such
policy or procedure that modifies the aggregate benefits provided to employees
under any employee benefit program in place as of the date hereof must be
approved by the affirmative vote of two-thirds of the members of CenterPoint's
Board of Directors. For so long as this Agreement is in force and effect,
CenterPoint and the Company acknowledge and agree that the power and authority
of the Company's directors and officers to manage the business and affairs of
the Company shall be subject to the delegation of authority to the Committee
contained in this Agreement.
2. Compensation.
(a) Base Pool. The Base Pool for any calendar year shall be an amount equal
to Base Earnings less Contribution plus the Bonus Pool for the prior calendar
year; provided that for the year 2000, the Base Pool shall not be less than the
Base Pool for the year 1999 (without regard to any adjustment specified in
paragraph 2(e) hereof). "Base Earnings" means $________, /1/ as adjusted
pursuant to paragraphs 3(b) and (c). "Contribution" means $ _________, as
adjusted pursuant to paragraph 3(c).
(b) Payments of Base Pool. At or about the beginning of each annual period,
the Committee shall determine a base salary for each Participant for such
period. Such base salary may be changed at any time and from time to time by the
Committee. Changes in base salary that are inconsistent with the Company's prior
practice shall be subject to the review and approval of CenterPoint, which
approval shall not be unreasonably withheld. In no event shall the aggregate of
all Participants' base salaries and Indirect Costs exceed 75% (85% for 1999 and
2000) of the Base Pool. The Company shall pay to each Participant the base
salary in substantially equal installments twice monthly or at such other time
or times as may be determined by the Company. The Company shall have the right
to deduct any federal, state or local taxes required by law to be withheld with
respect to any payment hereunder and pay the applicable amounts to the
appropriate taxing authority.
(c) Bonus Pool. The Bonus Pool for any calendar year shall be an amount
equal to (x) the Unpaid Base Amount plus (y) the Earned Bonus Amount. The
"Unpaid Base Amount" for any year means the amount of Base Earnings for such
year less the amount of Contribution for such year less the amount of base
salaries and Indirect Costs paid from the Base Pool for such year. The "Earned
Bonus Amount" for any year means 60% of the number that results from subtracting
(x) the amount of Base Earnings for such year from (y) the amount of actual
Operating Earnings for such year.
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/1/An estimated amount of Operating Earnings for the Company for the four
calendar quarters ended prior to closing, including agreed upon add-backs.
Following the closing, CenterPoint's accountants will calculate the actual
amount of Operating Earnings for such period (including agreed upon add-backs)
and Base Earnings shall be such actual amount.
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(d) Calculation and Payment of Bonus Pool.
(i) Within 60 days after the end of each calendar year, the Company
shall calculate the amount of the Bonus Pool with respect to the preceding
calendar year and submit such calculation to CenterPoint for review. CenterPoint
shall have 30 days to review and approve such calculation. After the
determination and review of the Bonus Pool, the Committee shall determine the
incremental compensation ("Bonus") payable to each Participant. The aggregate of
all Bonus payments shall not exceed the amount of the Bonus Pool. Within 10 days
after the determination of the Bonus payment, the Company shall pay to each
recipient the Bonus established with respect to such period; provided that the
Company shall have the right to deduct from all such payments any federal, state
or local taxes required by law to be withheld with respect to such payment and
pay the applicable amounts to the appropriate taxing authority.
(ii) If the Bonus Pool is a negative number, the Company shall not pay
any Bonus with respect to such year and at the option of the Committee (i) the
Company shall deduct an amount of such deficiency determined by the Committee
from the next succeeding payment(s) owing to such Participant or (ii) each
Participant shall promptly refund to the Company such amount as determined by
the Committee. A person who ceases to be a Participant will continue to be
liable for any payment for such year under this subparagraph.
(e) Adjustment for calendar year 1999. For purposes of all calculations
and payments with respect to the calendar year 1999, all amounts shall be
adjusted based on the seasonality percentages set forth on Exhibit B attached
hereto. For example, if this Agreement becomes effective at the end of the first
quarter of 1999, then Base Earnings and Contribution for 1999 will be 100 minus
the applicable cumulative percent as shown on Exhibit B of the amount calculated
for the calendar year 1999. If this Agreement becomes effective at any time
other than the end of a calendar quarter, the applicable percentage shall be an
interpolation of the amounts shown on Exhibit B based on the days elapsed
between the two calendar quarters. The amount of Operating Earnings for 1999
shall be determined for the period from the date hereof to and including
December 31, 1999.
3. Participants.
(a) The initial Participants are listed on Exhibit A hereto. Subject to
the approval of CenterPoint, which approval shall not be unreasonably withheld
or delayed, the Committee, on behalf of the Company, may designate additional
Participants from time to time. No person shall become a Participant unless such
person agrees in writing to be subject to and bound by all of the terms,
conditions and restrictions of this Agreement by signing an Instrument of
Accession substantially in the form of Exhibit C hereto. A person shall cease to
be a Participant at such time as determined by the Committee.
(b) For any person who initially becomes a Participant after being an
employee of the Company, effective as of the time such person becomes a
Participant, the amount of Base Earnings for such year shall be adjusted by
adding the salary, bonus and Indirect Costs associated with such person paid or
payable with respect to the portion of the prior calendar year that corresponds
to the portion of the then current calendar year that such person will be a
Participant. Effective for the next calendar year, the amount of Base Earnings
shall be readjusted by subtracting the preceding
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adjustment and adding the salary, bonus and Indirect Costs associated with such
person paid or payable with respect to the calendar year prior to the year such
person initially became a Participant.
(c) For any person who initially becomes a Participant as a result of an
acquisition of any professional services practice, effective as of the time such
person becomes a Participant, the amount of Base Earnings and Contribution shall
be adjusted as approved by the Committee and CenterPoint, which adjustments
shall reflect the amount of expected margin contributed by such acquisition as
determined by the terms of such acquisition, including as expenses any
compensation to any parties who become Participants in connection with such
acquisition and any overhead allocation and return on invested capital
allocation with respect thereto.
4. Restrictive Covenants.
(a) If, during the period ending with the second anniversary of the day
any Participant ceases to be employed by the Company (the "Restrictive Period"),
such Participant,
directly or indirectly, whether individually or as an officer,
director, shareholder, owner, partner, joint venturer, employee, independent
contractor, consultant or advisor to or of any entity, or in any other capacity,
engages, participates or invests in any business that renders services similar
to the business conducted by CenterPoint and its subsidiaries to any person or
entity that was a client of CenterPoint and its subsidiaries (including the
Company) at or within one year of the earlier of such Participant's termination
of employment or such engagement, participation or investment,
such Participant agrees to pay to the Company 125% of the greater of
(i) the average annual fees charged by CenterPoint and its subsidiaries to
any such client for the prior three year period (or the average annualized fees
for the time such clients were served by CenterPoint and its subsidiaries if
less than three years) or
(ii) the fees charged by CenterPoint and its subsidiaries to any such
client during the most recent 12 month period;
provided, however, that nothing contained herein shall prevent Participant from
investing in up to 1% of the outstanding stock of any such business that is
publicly-traded and listed on a recognized national, international or regional
securities exchange or traded in the U.S. over-the-counter market, but only if
Participant is not actively involved in, and does not render consulting services
to, such business.
Such amount is payable within 10 days after receipt by Participant of notice
from the Company that any amount is due to the Company. Any unpaid amount shall
bear interest at the rate of two percent over the highest "prime rate" of
interest reported by The Wall Street Journal on the date of such notice.
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(b) If during the Restrictive Period, such Participant solicits for
employment or engagement, or influences or induces to leave the employment, or
knowingly causes to be employed or engaged, any employee of, or person engaged
by, CenterPoint or any of its subsidiaries, such Participant agrees to pay the
Company an amount equal to 50% of the greater of such person's total cash
compensation for the (i) 12 month period ending prior to, or (ii) if known, the
12 month period ending after, such person's termination of employment with
CenterPoint or its subsidiaries. Such amount is payable within 10 days after
receipt by Participant of notice from the Company that any amount is due to the
Company. Any unpaid amount shall bear interest at the rate of two percent over
the highest "prime rate" of interest reported by The Wall Street Journal on the
date of such notice.
(c) During the Restrictive Period, such Participant shall not knowingly
enter into, or call upon or request non-public information for the purpose of
entering into, a merger, consolidation, purchase of a material equity interest
or material assets, tender offer, recapitalization, accumulation of equity,
proxy solicitation or other business combination (an "Acquisition Transaction")
with any entity with respect to which CenterPoint or any of its subsidiaries has
made an offer or proposal for, or entered into discussions or negotiations for,
or evaluated with the intent of making a proposal for, an Acquisition
Transaction, within the prior six-month period.
(d) Participant acknowledges and agrees that the covenants set forth in
this Agreement (collectively, the "Restrictive Covenants") are reasonable and
necessary for the protection of the Company's and CenterPoint's goodwill and
business interests, that irreparable injury will result to the Company if
Participant breaches any of the terms of said Restrictive Covenants, and that in
the event Participant breaches or threatens to breach any such Restrictive
Covenants, the Company will have no adequate remedy at law. Participant
accordingly agrees that in the event Participant breaches or threatens to breach
any of the Restrictive Covenants, the Company shall be entitled to immediate
temporary injunctive and other equitable relief, without the necessity of
showing actual monetary damages. Nothing contained herein shall be construed as
prohibiting the Company from pursuing any other remedies available to it for
such breach or the threat of such a breach by Participant, including the
recovery of any damages which it is able to prove. If any court of competent
jurisdiction shall at any time deem the Restrictive Covenants to be
unreasonable, the other provisions of this Agreement shall nevertheless stand,
the Restrictive Covenants shall be deemed to be amended as may be considered
reasonable by such court, and as so amended shall be enforced.
(e) The Restrictive Covenants set forth in this paragraph 4 shall not
apply to any Participant who ceases to be employed by the Company if CenterPoint
fails to make funds available to the Company such that the Company fails to make
any payment of the Base Pool or Bonus Pool that is required to be made pursuant
to the terms of this Agreement and such failure continues for a period of 30
days after CenterPoint's receipt of notice of such failure from such Participant
(a "Default"). If a Participant ceases to be employed by the Company following a
Default, CenterPoint agrees that it will not seek to enforce against such
Participant the covenants contained in Section 13.1 (a) through (c) of the
Merger Agreement.
5. Intellectual Property Rights. Participant will promptly communicate,
disclose and transfer to the Company free of all encumbrances and restrictions
(and will execute and deliver any papers and take any reasonable action at any
time deemed reasonably necessary by the Company to further establish such
transfer) all of Participant's right, title and interest in and to all ideas,
discoveries,
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inventions and improvements relating to the Company's business created,
originated, developed or conceived of by Participant solely or jointly with
others during the term of Participant's employment with the Company, whether or
not during normal working hours. Participant agrees that all right, title and
interest in and to all such ideas, discoveries, inventions and improvements
shall belong solely to the Company, whether or not they are protected or
protectible under applicable patent, trademark, service xxxx, copyright or trade
secret laws. Participant agrees that all work or other material containing or
reflecting any such ideas, discoveries, inventions or improvements shall be
deemed work made for hire as defined in Section 101 of the Copyright Act, 15
U.S.C.(S)101. Such transfer shall include all patent rights, copyrights,
trademark and service xxxx rights, and trade secret rights (if any) to such
ideas, discoveries, inventions and improvements in the United States and in all
other countries. Participant further agrees, at the expense of the Company, to
take all such reasonable actions and to execute and deliver all such assignments
and other lawful papers relating to any aspect of the prosecution of such rights
in the United States and all other countries as the Company may request at any
time during the period that Participant is employed with the Company or after
termination thereof.
6. Confidential Information. Other than in the performance of his or her
duties as an employee of the Company, during the Restrictive Period and
thereafter, Participant shall keep secret and retain in strictest confidence,
and shall not, without the prior written consent of the Company, directly or
indirectly furnish, make available or disclose to any third party or use for the
benefit of himself or any third party, any information relating to the business
or affairs of CenterPoint and its subsidiaries ("Confidential Information"),
including, but not limited to, information relating to financial statements,
employees, clients, suppliers, pricing, marketing, equipment, programs,
strategies, analyses, profit margins, or other proprietary information of or
used by CenterPoint or its subsidiaries in connection with the business
conducted by each of them; provided, however, that Confidential Information
shall not include any information which is in the public domain or becomes known
in the industry through no wrongful act on the part of Participant. Participant
acknowledges that the Confidential Information is vital, sensitive, confidential
and proprietary to the Company and CenterPoint.
7. Return of Company Materials Upon Termination. Participant acknowledges that
all price lists, sales manuals, catalogs, binders, forms, policies, training
materials, client lists and other client information, supplier lists and other
supplier information, financial information, memoranda, correspondence and other
records or documents including information stored on computer disks or in
computer readable form, containing Confidential Information prepared by
Participant or coming into Participant's possession by virtue of Participant's
employment by the Company is and shall remain the property of the Company and
that upon termination of Participant's employment with the Company, Participant
shall return immediately to the Company all such items, together with all copies
thereof, in Participant's possession.
8. Definitions.
(a) "Committee" means the committee determined pursuant to the agreement
dated as of ____________, 1999, as amended, among the Participants.
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(b) "Indirect Costs" means all costs paid by the Company with respect to
any person's employment, including FICA and Medicare taxes, medical, life and
disability insurance, contributions to defined benefit or defined contribution
plans, personal use of automobiles and airplanes, social and athletic clubs,
personal use of business clubs, and other similar fringe or personal benefits,
policies, programs or arrangements, but excluding appropriate travel and
entertainment expenses for the promotion of the Company's business incurred by
Participants that may be reimbursed in accordance with the Company's policies
and procedures in effect from time to time.
(c) "Operating Earnings" means, for any period, the sum of:
(i) the net income (or loss) of the Company and its consolidated subsidiaries,
excluding:
. provisions for income taxes,
. interest expense other than as related to capital leases, which capital leases
shall be treated as if they were operating leases for purposes of the
calculation of Operating Earnings,
. depreciation expense except to the extent such expense exceeds the amount of
depreciation expense reflected in the calculation of Base Earnings,
. any amortization of excess purchase price and any other expenses resulting
directly from payment of the consideration associated with the transaction
contemplated by the Merger Agreement,
. any extraordinary items,
. the income (or loss) of any Person in which any other Person (other than the
Company or its consolidated subsidiaries) has a joint interest except to the
extent of the amount of dividends or other distributions actually paid to the
Company or its consolidated subsidiaries by such Person during such period,
. any CenterPoint corporate allocations other than (i) for the expenses incurred
by CenterPoint for business functions that were formerly conducted by the
Company in an amount initially not to exceed the amount of expenses of such
functions then incurred by the Company and (ii) as determined by CenterPoint's
Board of Directors (which determination may otherwise increase or decrease the
amount of Operating Earnings) in connection with any change to employee benefits
and policies affecting all of the Founding Companies (as such term is defined in
the Merger Agreement) whereby any Founding Company suffers a net incremental
expense adversely affecting net income without receiving a corresponding
increase in the benefits provided,
. expenses in connection with any acquisition of a professional services
practice completed prior to the transaction contemplated by the Merger
Agreement,
. the base salary, Bonus and Indirect Costs of any Participant, and
less
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(ii) if there is a Deficiency, the amount resulting from multiplying the
Deficiency by the rate of interest payable at the end of the calendar year by
CenterPoint on its senior unsecured debt or, if CenterPoint does not have senior
unsecured debt outstanding, then the highest "prime rate" of interest reported
by The Wall Street Journal at the end of the calendar year plus 200 basis
points. A "Deficiency" is the negative number, if any, resulting from
subtracting (i) the product of Base DSO times Average Daily Revenue for the
period for which any Deficiency is being determined from (ii) the sum of the
Company's net accounts receivable and net work-in-process at the end of such
period. "Average Daily Revenue" means, for any period, the amount of net revenue
of the Company during such period divided by the number of days in such period.
"DSO" means (i) the sum of the Company's net accounts receivable and net
work-in-process at the end of any period divided by (ii) Average Daily Revenue
for such period. "Base DSO" means the average amount of DSO determined for the
Professional Services Firms with respect to the period in which any Deficiency
is being determined or, for all periods ending prior to the fourth anniversary
hereof, the amount of DSO for the Company determined for the 1998 calendar year,
if greater.
Except as specifically provided to the contrary, all amounts shall be
determined in accordance with generally accepted accounting principles set forth
in the opinions and pronouncements of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board and Securities and Exchange Commission or their respective
successors, consistently applied and maintained throughout the periods
indicated.
(d) "Person" means any natural person, corporation, partnership, limited
liability company or other business structure as a separate legal entity.
(e) "Professional Services Firms" means Berry, Dunn, XxXxxx & Parker,
Follmer, Rudzewicz & Co., Grace & Company, Xxxxxxxxx, Xxxxxx & Van Trigt, Xxxx
Frankfort Xxxxx & Xxxx, Xxxxxxx Xxxxxx & Xxxxxxxxx, Simione, Scillia, Xxxxxx &
Xxxxxxx and Xxxxxx Xxxx & Xxxxxx.
(f) "Pro Rata Share" with respect to any Participant means the percentage
amount that such Participant's base salary for the applicable period and Bonus
for the preceding period bears to the sum of all Participants' base salaries and
Bonuses for such periods.
9. Miscellaneous.
(a) This Agreement will be governed by and construed in accordance with the
internal law (and not the law of conflicts) of the State of Illinois.
(b) This Agreement does not create any partnership, joint venture or
fiduciary relationship of any kind between any Participant and the Company. This
Agreement shall not be deemed to limit in any way the Company's rights or powers
with respect to its operations, funding, sale or closure, or obligate the
Company in any way with respect to the funding or continuation of its
operations. This Agreement shall not be deemed to create a contract of
employment between the Company and any Participant and shall create no right in
any Participant to continue in the Company's employ for any specific period of
time.
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(c) The rights of a Participant or any person claiming through a
Participant are solely those of an unsecured general creditor of the Company and
the Company's obligation shall be an unfunded and unsecured promise to pay. No
Participant or any other person has any rights, interests or prior claims
whatsoever in the Company's assets. The Company's obligations under this
Agreement will be satisfied from the general assets of the Company, and any
asset that may be used or acquired by the Company shall not be deemed to be held
under any trust or escrow for the benefit of the Participants, nor shall it be
considered security for the performance of the Company's obligations.
(d) This Agreement constitutes the entire agreement between the parties
and supersedes any prior understandings and agreements between the parties
relating to its subject matter. This Agreement shall not confer any rights or
remedies upon any person other than the parties and their permitted assigns.
(e) No Participant may directly or indirectly transfer, assign, convey,
sell, encumber or in any way alienate ("Transfer") any interest in this
Agreement. To the fullest extent permitted by law, Transfers in violation of
this paragraph shall be null and void ab initio.
(f) To the extent permitted by applicable law, the Company shall have the
right to offset amounts owed to any Participant pursuant to this Agreement by
any Losses for which CenterPoint or the Company is entitled to indemnification
under the Merger Agreement.
(g) This Agreement may be modified, altered, supplemented or amended
pursuant to a written agreement executed by CenterPoint, the Company and
Participants whose aggregate Pro Rata Share for the then current calendar year
is at least ____% of the sum of all Participants' base salaries for such period
and Bonuses for the prior period. This Agreement may also be modified, altered,
supplemented or amended in a manner that affects all Professional Services Firms
in the same manner pursuant to a written instrument executed by CenterPoint and
the Company and upon the affirmative vote of (i) all representatives of
Professional Services Firms if such action is to be effective prior to the third
anniversary of the date hereof, (ii) at least 75% of the representatives of
Professional Services Firms if such action is to be effective after the third
anniversary of the date hereof. A representative of a Professional Services
Firms shall be the person designated by such entity to serve as a director of
CenterPoint or if no such person is designated, then a person designated by the
Committee. Any modification, alteration, supplement or amendment in accordance
with the provisions hereof shall be effective with respect to all Participants.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
CENTERPOINT ADVISORS, INC.
By:_____________________________________
Its:____________________________________
[FOUNDER/CENTERPOINT, INC.]
By:_____________________________________
Its:____________________________________
[PARTICIPANTS]
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EXHIBIT A
Participants
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EXHIBIT C
Instrument of Accession
-----------------------
The undersigned, in connection with becoming a Participant under the
Incentive Compensation Agreement dated as of _____, 1999 by and among
[Founder/CenterPoint Advisors, Inc.] (the "Company") and the other parties
thereto (as amended, the "Agreement"), hereby agrees to become subject to and
bound by all of the terms, conditions and restrictions of the Agreement. This
instrument shall take effect and shall become an integral part of the Agreement
immediately upon execution and delivery to the Company.
IN WITNESS WHEREOF, this instrument has been duly executed by the
undersigned.
Dated:________________________
________________________________________
Printed Name:___________________________
