Exhibit 10.5
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UNITED INDUSTRIES CORPORATION
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT (this "Agreement"), dated as of
January 20, 1999, is entered into by and among United Industries Corporation, a
Delaware corporation (the "Company"), Xxxxxx Xxxxxxxx ("Executive") and the
Trust established by that certain Trust Agreement, dated as of the date hereof,
by and between the Company and Xxxxxxx X. Xxxxx, as trustee (the "Trust").
Certain capitalized terms used but not otherwise defined herein are defined in
Section 11.
The Company, Executive and the Trust desire to enter into an
agreement relating to Executive's employment by the Company and pursuant to
which the Trust shall purchase, and the Company shall sell, for an aggregate
purchase price of $1,000,000.00, 100,000 shares of Class A Voting Common Stock
and 100,000 shares of Class B Non-Voting Common Stock (collectively, the "Common
Stock"). The Common Stock and all other capital stock of the Company hereafter
acquired by Executive and/or the Trust (including, without limitation, shares of
Common Stock purchased upon the exercise of the Options) are sometimes
collectively referred to as "Executive Securities." The Executive Securities are
subject to certain transfer restrictions and repurchase rights as set forth
herein.
Simultaneously with the execution of this Agreement, the
parties hereto have entered into a Stock Option Agreement in the form of Annex A
attached hereto.
The parties hereto, in exchange for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, hereby agree as follows:
PART I. EMPLOYMENT TERMS
1. Employment and Duties.
(a) The Company shall employ Executive, and Executive hereby
accepts employment with the Company, as a Senior Vice President pursuant to the
terms and conditions of this Agreement. Executive shall report to the President
of the Company and/or the Board. The Company shall not assign to Executive
duties or functions which are outside of Executive's areas of competence in
order to use Executive's failure to perform as a basis for termination for
Cause.
(b) Executive shall devote his best efforts to the interests
of the Company, which interests may change from time to time, and shall devote
such time to his employment as the duties and responsibilities of his position
reasonably require.
(c) Executive shall perform such duties and functions
commensurate with his position as may be reasonably assigned or delegated to him
from time to time by the Company's President or Board. Executive acknowledges
that such executive duties and functions may or may not involve performance of
services for or on behalf of affiliates of the Company.
(d) The principal office of the Company at the date hereof,
which is Executive's primary place of employment, is situated in St. Louis,
Missouri. While the duties of Executive will require him to travel, Executive
shall not be required to change his principal residence from St. Louis to a
locale other than a locale in which the Company's principal office may be
situated at the time.
(e) The provisions of Exhibit 1(e) are hereby acknowledged
as obligations of Executive both during the Term of his employment and
thereafter.
2. Term and Termination.
(a) Term. The "Term" of Executive's employment is from the
date hereof until the "Termination Date", which is defined as the earlier of (i)
December 31, 2001 or (ii) the date of termination of Executive's employment
pursuant to any one or more of Sections 2(b), 2(c), 2(d) or 2(e) of this
Agreement; provided that the date in clause (i) above shall be automatically
extended by one year on December 31, 2001, and on each subsequent anniversary
thereof. Executive is an at-will employee of the Company and such employment may
be terminated by Executive, in his sole and arbitrary discretion, at any time
with or without Good Reason, or by the Company, in the Company's sole and
arbitrary discretion, at any time with or without Cause, by delivery of a
written termination notice to the other party, in each case subject to the
consequences in Section 4.
(b) Death. If Executive dies during the Term, the
Termination Date shall be the date of his death.
(c) Disability. If Executive becomes Disabled during the
Term, the Termination Date shall be the date as of which such Disability is
determined. Subject to applicable law, "Disability" means such physical, mental
or psychological condition or other impairment that prevents Executive from
effectively performing the duties of his employment for more than ninety (90)
calendar days in any six (6) consecutive months commencing on the initial date
of such impairment commencing on the initial date of such impairment. In
connection with any Disability (or possible Disability):
(i) Executive shall cooperate with any physicians
engaged by the Company to examine Executive to determine whether or
not Executive is Disabled, and each of Executive and the Company
irrevocably consents to disclosure to each of them by any such
physicians of all matters relating to such examinations.
(ii) The determination of Disability shall be by
agreement of the Company and Executive, or if Executive's condition
is such that he is unable to participate in such
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determination, then by agreement of the Company and Executive's
spouse or whoever else is then acting on his behalf, and if the
parties involved in such determination are unable to reach agreement
within 10 days of a request by either party, then the issue shall be
decided by a physician chosen by the Company and reasonably
acceptable to Executive. The Company will pay all expenses incurred
in the determination of whether Executive is Disabled.
(d) Termination By Executive. If Executive terminates his
employment, with or without Good Reason, the Termination Date shall be the date
on which Executive's termination notice is given to the Company, or such later
date indicated on such termination notice, which may not be more than thirty
(30) days nor less than fourteen (14) days from its receipt by the Company;
provided that upon receipt of Executive's termination notice, the Company may,
in its sole discretion, request that Executive cease his employment activities
prior to the date referenced in such notice and Executive shall promptly comply
with such request, it being understood that such request will not change the
Termination Date specified in this Section 2(d) or affect the characterization
of the termination of Executive's employment.
(e) Termination by the Company. If the Company terminates
the employment of Executive, with or without Cause, the Termination Date shall
be the date on which the Company's termination notice is given to Executive, or
such later date indicated on such termination notice, which may not be more than
thirty (30) days from its receipt by Executive.
(f) Reversal of Determination. If Executive's employment is
terminated by the Company for Cause or by Executive for Good Reason, and it is
thereafter judicially determined that Cause or Good Reason as appropriate for
such termination does not exist, then Executive's employment shall be deemed to
have been terminated without Cause or Good Reason as appropriate as of the
Termination Date. If matters constituting Cause or Good Reason as appropriate
become known to the Company or to Executive subsequent to the time that
Executive's employment is terminated, then either party may, by delivery of
written notice to the other party, treat such termination as being for Cause or
Good Reason as appropriate.
(g) Definition of Cause. "Cause" for termination by the
Company of Executive's employment means:
(i) the commission by Executive of any willful
act against the interests of the Company which causes or is intended
to cause harm to the Company or any of its Stockholders. For purposes
of this definition, no act or failure to act on the part of Executive
shall be considered "willful" unless it is done, or omitted to be
done, by Executive in bad faith or without reasonable belief that
Executive's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon specific instructions
given pursuant to a resolution duly adopted by the Board or directed
by the President of the Company or based upon the written advice of
regular outside counsel for the Company shall be
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conclusively presumed to be done, or omitted to be done, by Executive
in good faith and in the best interests of the Company;
(ii) Executive has been convicted of, or pleads
nolo contendere with respect to, any felony, or of any lesser crime
or offense having as its predicate element fraud, dishonesty or
misappropriation of the property of the Company;
(iii) the habitual drug addiction or habitual
intoxication of Executive which negatively impacts his job
performance; or
(iv) Executive breaches any of the terms of this
Agreement or any other agreement between Executive and the Company
which breach is not cured within twenty (20) days after the delivery
of notice in writing from the Board to Executive of such breach,
which notice indicates the Company's intention to terminate
Executive's employment hereunder if such breach is not cured within
such twenty (20) day period and describes the nature of such breach.
(h) Definition of Good Reason. "Good Reason" for termination
by Executive of Executive's employment means (i) a material breach by the
Company of its obligations under this Agreement which is not cured (if curable)
within twenty (20) days after written notice by Executive to the Company, (ii)
the Company requiring Executive to move his primary place of employment by more
than seventy-five (75) miles, if such move increases Executive's commute from
his primary residence, without Executive's written consent thereto; provided
that Executive must notify the Company in writing of his intent to terminate his
employment pursuant to this Section 2(h)(ii) prior to the sixtieth day after the
earlier of (x) the date that the Company notifies Executive in writing of its
intent to relocate and (y) the date that such relocation occurs, and (iii) the
failure of any successor to the Company to assume this Agreement as set forth in
Section 13(k).
3. Compensation.
(a) Executive's compensation for his services hereunder
shall consist of (a) Base Salary, plus (b) Incentive Compensation, if any, plus
(c) Benefits.
(b) "Base Salary" shall be paid by the Company to Executive
at an annual rate of $300,000, payable in arrears in equal monthly installments.
Under no circumstances may the Base Salary be decreased during the Term.
(c) "Incentive Compensation," if any, is equal to the sum of
the following three amounts, up to a maximum of 60% of Base Salary in any given
year, it being understood that no Incentive Compensation is required to be paid
in any year in which the Company's actual EBITDA for the year in question is not
at least 90% of Target EBITDA for such year:
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(i) If the Company's actual EBITDA for the year
in question equals or exceeds 90% of Target EBITDA for such
year, Incentive Compensation will equal the product of (A)
Base Salary multiplied by (B) 25%; plus
(ii) Incentive Compensation will increase by an
amount equal to the product of (A) Base Salary multiplied
by (B) 2.5% multiplied by (C) the number of percentage
points by which the Company's actual EBITDA for the year in
question exceeds 90% of Target EBITDA for such year (for
example, if the Company's actual EBITDA was 93% of Target
EBITDA for the year in question, the number derived in
clause (C) would be 3 (i.e., 93%-90% = 3)), up to a maximum
of 25% of Base Salary in any year; plus
(iii) Incentive Compensation will increase by an
amount equal to the product of (A) Base Salary multiplied
by (B) 2% multiplied by (C) the number of percentage points
by which the Company's actual EBITDA for the year in
question exceeds 100% of the Target EBITDA for such year
(for example, if the Company's actual EBITDA was 103% of
Target EBITDA for the year in question, the number derived
in clause (C) would be 3 (i.e., 103%-100% = 3)).
All Incentive Compensation due hereunder shall be payable promptly after the
Company has received audited financial statements from its independent
accountants for the year in question which set forth such accountant's
determination of actual EBITDA for such year and not later than at or about the
time bonuses are paid to the Company's other senior executives whose bonuses are
determined based on the receipt of the Company's audited financial statements.
The formula for determining Incentive Compensation provided for in this Section
3 shall not be changed during the Term without Executive's consent. The minimum
amount of Incentive Compensation in respect of 1999 shall be $65,000.
(d) "Benefits" consist of whatever, if any, health,
hospitalization, sick pay, life insurance, disability insurance, profit sharing,
pension, 401(k), and deferred compensation plans and programs that the Company
may have in effect from time to time for its employees who are not members of a
collective bargaining unit, all of which Executive shall be entitled to
participate in on a basis commensurate with his position. Executive shall also
be entitled to four (4) calendar weeks paid vacation each year, in addition to
regularly scheduled holidays. The Company may initiate, change and discontinue
any such plans and programs at any time; provided that no such change shall be
effective as to Executive unless it is also effective as to the other senior
managers of the Company. If any of such plans or programs require contributions
by employees, Executive shall pay the contributions required by his
participation at a rate no greater than that applicable to any senior executive
of the Company.
(e) Stock Options. The Company shall grant Executive options
(the "Options") to purchase 600,000 shares of Common Stock, all on the terms and
conditions contained in the Company's 1999 Stock Option Plan approved by the
Board and in a Stock Option Agreement in the
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form of Annex A attached hereto. Shares of Common Stock acquired through the
exercise of options shall be referred to herein as "Option Shares."
(f) Signing Bonus. Upon the beginning of Executive's
employment with the Company, the Company shall pay to Executive a signing bonus
of $40,000.
4. Termination Provisions.
(a) If the Company terminates Executive's employment for
Cause, or if Executive terminates his employment without Good Reason, then in
any such case
(i) Executive shall be entitled to Base Salary
and Benefits for the period ending on the Termination Date;
and
(ii) Executive shall be entitled to any unpaid
Incentive Compensation for any calendar year ending prior
to the year in which the Termination Date occurs, as well
as any Incentive Compensation for the calendar year in
which the Termination Date occurs pro-rated based on the
portion of Base Salary paid to Executive by the Company in
such year.
(b) If the Company terminates Executive's employment without
Cause, if Executive terminates his employment for Good Reason or if Executive's
employment terminates by reason of his death or Disability, then in any such
case
(i) Executive shall be entitled to Base Salary
and Benefits for the period ending on the Termination Date;
(ii) Executive shall be entitled to any unpaid
Incentive Compensation for any calendar year ending prior
to the year in which the Termination Date occurs, as well
as Incentive Compensation for the calendar year in which
the Termination Date occurs pro-rated based on the portion
of Base Salary paid to Executive by the Company in such
year (it being agreed that if the Termination Date is prior
to January 1, 2000, in no event shall the amount of
Executive's Incentive Compensation payable pursuant to this
Section 4(b)(ii) be less than the amount referenced in the
last sentence of Section 3(c)); and
(iii) if, and only if, Executive (or his estate,
guardian or personal representative, as the case may be)
signs and delivers to the Company a complete general
release of claims in the form of Annex B attached hereto,
then Executive shall be entitled to his Base Salary (but no
Incentive Compensation) for the period commencing on the
Termination Date and ending on the later of (x) December
31, 2001 and (y) the date which is one year after the
Termination Date, together with any other Benefits as may
be provided under the terms of any applicable written plan,
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program or arrangement of the Company applicable to senior
executives of the Company.
If Executive does not comply with the terms of Section 4(b)(iii), above, within
30 days after the Termination Date, then Executive shall only be entitled to
payments as set forth in Sections 4(b)(i), and 4(b)(ii), above, and the Company
shall not be responsible for any further payments to Executive.
(c) Any amounts owed by the Company to Executive pursuant to
Section 4(b)(iii) shall be paid at such times and in such manner as if the
termination giving rise to such payments had not occurred (with the Company
retaining the right to prepay all or any portion of such amount at any time in
its sole discretion). The Company's obligation to make any payments pursuant to
Section 4(b) shall be conditioned upon Executive's continued and continuing
compliance with the terms and conditions of this Agreement (including, without
limitation, Section 6 hereof).
(d) Except as otherwise specified herein, if Executive's
employment terminates on any date other than the last day of a month,
Executive's compensation for that month shall be calculated on the basis of a
fraction, the numerator of which is the number of calendar days during that
month that Executive is in the Company's employ and the denominator of which is
the number of days in that month.
5. Expenses.
(a) The Company shall reimburse Executive for all reasonable
expenses incurred in the performance of his duties in accordance with the
expense reimbursement policy of the Company with respect to senior executives of
the Company in effect at the time.
(b) If the Company requires Executive to locate outside of
St. Louis, then the Company shall reimburse Executive for his reasonable
relocation expenses in accordance with the expense reimbursement policy of the
Company in effect at the time.
6. Noncompetition, Nonsolicitation, Confidentiality.
As a material inducement to the Company to enter into this
Agreement and in consideration of the payment by the Company of the compensation
detailed herein to Executive:
(a) During the period (the "Noncompete Period") beginning on
the date hereof and ending on the later of (x) the first anniversary of the
Termination Date and (y) if severance payments are owed to Executive by the
Company pursuant to Section 4(b)(iii), above, the last date on which such
payments are due to be paid to Executive (notwithstanding any reduction in such
payments pursuant to Section 4(c)), Executive shall not, without the prior
written consent of the Company (which consent may be granted or withheld in the
Company's sole discretion), directly or indirectly, Participate in any line of
business in which the Business is actively engaged or any line of business
competitive with the Business anywhere in the United States and any other
country in
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which the Company does business as of the Closing (the "Competitive
Activities"). For purposes of this Agreement, the term "Participate" includes
any direct or indirect interest in, or providing any direct or indirect
assistance (whether financial, advisory or otherwise) to, any enterprise (or any
affiliate thereof), whether as an officer, director, employee, partner, member,
sole proprietor, agent, representative, independent contractor, consultant,
creditor, stockholders, unitholder, owner or otherwise; provided that the term
"Participate" shall not include ownership of less than 2% of the Common Stock of
a publicly-held corporation whose Common Stock is traded on a national
securities exchange or in the over-the-counter market. The parties agree that,
without violating this Section 6(a), Executive may accept employment with any
Person which engages in Competitive Activities; provided that such Person's
business is diversified (and has separate and distinct divisions) and Executive
is employed in a part of its business which does not engage in Competitive
Activities; provided further that the Company, prior to Executive accepting such
employment, shall receive separate written assurances satisfactory to the
Company from the board of directors of such Person and Executive acknowledging
that Executive is bound by this Section 6, the terms of which such Person has
read, and covenanting that Executive will not render services directly or
indirectly in connection with any product, process, system or service of any
person or organization other than the Company, in existence or under
development, which is the same as or competes with a product, process, system or
service upon which Executive has worked during the last two years of Executive's
employment by the Company or about which Executive acquires Confidential
Information.
(b) During the Noncompete Period, Executive (a) except with
respect to Executive's personal secretary, shall not, directly or indirectly
contact, approach or solicit for the purpose of offering employment to or hiring
(whether as an employee, consultant, agent, independent contractor or otherwise)
or actually hire any person employed by the Company during the Noncompete Period
and (b) shall not induce or attempt to induce any customer or other business
relation of the Company to cease doing business with the Company or to engage in
any business relationship which might materially harm the Company.
(c) Executive acknowledges that certain of the information,
observations and data relating to the Company which he possesses or has obtained
as an employee, officer, director or stockholder of the Company is the
confidential and proprietary property of the Company ("Confidential
Information"). Executive agrees that he shall not, directly or indirectly, use
for his own purposes or use for or disclose to any third party any of such
Confidential Information without the prior written consent of the Company,
unless and to the extent that the aforementioned matters (i) become generally
known to and available for use by the public other than as a result of a
Executive's acts or omissions to act, or (ii) Executive is required by order of
a court of competent jurisdiction (by subpoena or similar process) to disclose
or discuss any Confidential Information (provided that in such case, Executive
shall promptly inform the Company of such order, shall cooperate with the
Company at the Company's expense in attempting to obtain a protective order or
to otherwise restrict such disclosure, and shall only disclose Confidential
Information to the minimum extent necessary to comply with any such court
order). This Section 6(c) shall not apply to disclosures of Confidential
Information by Executive during his employment with the Company
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in the ordinary course of business that he reasonably believes are necessary or
appropriate and in the Company's best interests.
(d) The parties hereto acknowledge and agree that the
Company will suffer irreparable harm from a breach by Executive of any of the
covenants or agreements contained in this Section 6. In the event of an alleged
or threatened breach by Executive of any of the provisions of this Section 6,
the Company or their successors or assigns may, in addition to all other rights
and remedies existing in its or their favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other equitable
relief in order to enforce or prevent any violations of the provisions hereof.
Executive acknowledges and agrees that the restrictions contained in this
Section 6 are reasonable.
(e) If, at the time enforcement is sought of any of the
provisions of this Section 6, a court holds that the restrictions stated herein
are unreasonable under the circumstances then existing, the parties hereto agree
that the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.
Executive agrees that the covenants made in this Section 6 shall be construed as
an agreement independent of any other provision of this Agreement and shall
survive any order of a court of competent jurisdiction terminating any other
provision of this Agreement.
PART II. PURCHASE OF EXECUTIVE SECURITIES
7. Purchase and Sale of Executive Securities.
(a) Common Stock. Upon execution of this Agreement, the
Trust shall purchase, and the Company shall sell, 100,000 shares of the
Company's Class A Voting Common Stock and 100,000 shares of the Company's Class
B Non-Voting Common Stock at a price of $5.00 per share (the "Purchased Stock").
The Company shall deliver to the Trust the certificates representing such shares
of Common Stock, and the Trust shall deliver to the Company the aggregate amount
of $1,000,000 (the "Purchase Price").
(b) Certain Representations and Warranties. In connection
with the purchase and sale of the Executive Securities hereunder, Executive
hereby represents and warrants to the Company that:
(i) The Executive Securities to be beneficially
acquired by Executive pursuant to this Agreement shall be acquired
for his own account and not with a view to, or intention of,
distribution thereof in violation of the Securities Act, or any
applicable state securities laws, and the Executive Securities shall
not be disposed of in contravention of the Securities Act or any
applicable state securities laws;
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(ii) Executive is an executive officer of the
Company, is sophisticated in financial matters and is able to
evaluate the risks and benefits of the investment in the Executive
Securities;
(iii) Executive is an "accredited investor" as
defined under Regulation D promulgated under the Securities Act;
(iv) Executive is able to bear the economic risk
of his investment in the Executive Securities for an indefinite
period of time because the Executive Securities have not been
registered under the Securities Act and, therefore, cannot be sold
unless subsequently registered under the Securities Act or an
exemption from such registration is available;
(v) Executive has had an opportunity to ask
questions and receive answers concerning the terms and conditions of
the offering of Executive Securities and has had full access to such
other information concerning the Company as he has requested.
Executive has reviewed, or has had an opportunity to review, a copy
of the Recapitalization Agreement, the Stockholders Agreement, all of
the exhibits thereto and all of the other agreements contemplated
hereby and thereby;
(vi) This Agreement constitutes the legal, valid
and binding obligation of Executive, enforceable in accordance with
its terms, and the execution, delivery and performance of this
Agreement by Executive do not and shall not conflict with, violate or
cause a breach of any material agreement, contract or instrument to
which Executive is a party or any judgment, order or decree to which
he is subject; and
(vii) Executive is a United States citizen and a
resident of the State of Missouri.
(c) Certain Representations and Warranties of the Company.
In connection with the purchase and sale of the Executive Securities hereunder,
the Company hereby represents and warrants to Executive that:
(i) The Company is duly organized, validly
existing and in good standing under the laws of the State of
Delaware;
(ii) The execution, delivery and performance of
this Agreement will not violate, conflict with or result in any
breach of the Company's organizational documents or any terms or
conditions of any material agreements to which the Company is a
party;
(iii) Any Executive Securities to be delivered
pursuant to this Agreement, including the shares of Common Stock
issuable upon exercise of the Options, shall, when
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delivered, be duly authorized, validly issued, fully paid and
non-assessable and will not be subject to pre-emptive or similar
rights; and
(iv) The holders of least 75% of the Company's
voting common stock have reviewed this Agreement and the Stock Option
Agreement attached hereto as Annex A and have approved the terms and
conditions contained herein and therein, including, without
limitation, those terms and conditions relating to contingent
payments that may be due to Executive upon a Sale of the Company and
may have otherwise constituted an "excess parachute payment" pursuant
to Section 280G of the Internal Revenue Code of 1986, as amended and
a copy of such consent is attached hereto as Exhibit 7(c)(iv).
(d) Additional Representation and Warranty. As an inducement
to the Company to sell the Executive Securities to Executive, and as a condition
thereto, Executive acknowledges and agrees that neither the issuance of the
Executive Securities to Executive nor any provision contained herein shall
entitle him to remain in the employment of the Company and its Subsidiaries or
affect the right of the Company or Executive to terminate his employment at any
time, in accordance with the provisions of Section 4 hereof.
(e) Compensation Arrangements. The Company and Executive
acknowledge and agree that this Agreement has been executed and delivered, and
the Executive Securities have been issued hereunder, in connection with and as a
part of the compensation and incentive arrangements between the Company and
Executive.
(f) Payments to the Trust. In consideration of Executive's
agreement to continue employment with the Company, the Company hereby agrees to
accelerate the payment of all amounts owed to Executive by the Company pursuant
to that certain Contract for Release in Event of Sale dated as of January 1,
1997 by and between the Company and Executive. Notwithstanding the terms of such
agreement, the Company shall pay to the Trust, on behalf of Executive, a portion
of the Share (as defined therein) equal to the Purchase Price immediately upon
the execution of the election attached as Annex C hereto. The Company shall pay
the remainder of the Share (net of any withholding obligations) to Executive
immediately upon the execution of such election (the aggregate amount paid on
the date hereof to the Trust and Executive (prior to withholding) with respect
to the Share is referred to as the "Estimated Share Amount"). The amounts paid
to the Trust on behalf of Executive pursuant to such election are for the sole
benefit of the Trust, and Executive has no right or ability to receive such
amounts except as provided in the Trust's constituent documents. Executive and
the Company acknowledge and agree that the final determination of the amount of
the Share is contingent upon the final determination by the Company of the
Company's Stockholders Equity as of December 31, 1998, as reflected on the
Company's audited financial statements. If the amount of the Share as finally
determined (based on the final determination of 12/31/98 Stockholders Equity) is
less than the Estimated Share Amount, Executive shall promptly pay to the
Company an amount of cash equal to such shortfall. If the amount of the Share as
finally determined (based on the final determination of 12/31/98 Stockholders
Equity) is greater than the
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Estimated Share Amount, the Company shall promptly pay to Executive an amount of
cash equal to such excess, net of any withholding obligations.
8. Repurchase Option.
(a) Right of Repurchase. In the event Executive ceases to be
employed by the Company and its Subsidiaries for any reason (the "Termination"),
the Executive Securities (whether held by Executive or the Trust or one or more
of their transferees) shall be subject to repurchase by the Company pursuant to
the terms and conditions set forth in this Section 8 (the "Repurchase Option").
(b) Purchase Price. Any repurchase of Executive Securities
pursuant to the Repurchase Option shall be at the "Repurchase Price" described
in this Section 8(b) determined as of the date of the Termination. If
Executive's employment is terminated by Executive without Good Reason prior to
the fifth anniversary of the date hereof or by the Company for Cause, the
Repurchase Price for all of the Option Shares shall be the lower of (i) the Fair
Market Value therefor and (ii) the Original Cost therefor. If Executive's
employment is terminated for any other reason, the Repurchase Price for all
Option Shares shall be the Fair Market Value therefor. Notwithstanding the
reason for the termination of Executive's employment, the Repurchase Price for
all Purchased Shares shall be the Fair Market Value therefor.
(c) Repurchase by the Company. The Company may elect to
purchase all or any portion of the Executive Securities at the Repurchase Price
by delivering written notice (the "Repurchase Notice") to Executive within 120
days after the Termination. The Repurchase Notice shall set forth the number of
shares to be acquired from Executive and/or the Trust and/or their transferees
(if any), the aggregate consideration to be paid for such securities, and the
time and place for the closing of the transaction (the "Repurchase Closing").
The Company may, in its sole discretion, assign its rights pursuant to this
Section 8 to the holders of its capital stock (other than Executive and any
other Stockholder whose shares are being repurchased) pro rata on the basis of
the number of shares owned (with subsequent re-offer in the event of under
subscription); provided that any such assignees shall comply with the terms of
this Section 8.
(d) Repurchase Closing. The closing of the purchase of the
Executive Securities pursuant to the Repurchase Option shall take place on the
date designated by the Company in the Repurchase Notice which date shall not be
more than 60 days nor less than 10 days after the delivery of such notice
delivered. Subject to Section 8(e), the Company shall pay for the Executive
Securities to be purchased pursuant to the Repurchase Option by delivery of a
check or wire transfer of funds. The Company shall be entitled to receive
customary representations and warranties regarding good title to such
securities, free and clear of any liens or encumbrances, power and authority,
due execution, and enforceability.
(e) Certain Restrictions. Notwithstanding anything to the
contrary contained in this Agreement, all repurchases of Executive Securities by
the Company shall be subject to
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applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If any
such restrictions prohibit the repurchase of Executive Securities hereunder
which the Company is otherwise entitled or required to make, the time periods
provided in this Section 8 shall be suspended, and the Company shall make such
repurchases as soon as it is permitted to do so under such restrictions with
interest at an annual rate of 7%. In addition, the Company may pay the
Repurchase Price for such Executive Securities by offsetting any bona fide debts
owed by Executive to the Company.
(f) Termination of Repurchase Option. The Repurchase Option
set forth in this Section 8 shall continue with respect to all Executive
Securities following any Transfer thereof; provided that such Repurchase Option
shall terminate effective immediately after the consummation of a Sale of the
Company or a Public Offering of the Company's equity securities in which the
Company receives net proceeds of at least $100 million; and provided further
that, with respect to each share of Executive Securities, the Repurchase Option
with respect to such share shall terminate immediately upon the Transfer of such
share pursuant to a Public Sale.
9. Restrictions on Transfer.
(a) Stockholders Agreement. The Executive Securities are
subject to the restrictions on Transfer set forth in the Stockholders Agreement.
(b) Legend. The certificates representing the Executive
Securities shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE
ORIGINALLY ISSUED ON JANUARY 20, 1999 HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD, ASSIGNED, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF WITHOUT AN EFFECTIVE
REGISTRATION UNDER THE ACT OR AN EXEMPTION THEREFROM. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT
TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE
OPTIONS, AND CERTAIN OTHER AGREEMENTS SET FORTH IN A
MANAGEMENT AGREEMENT BETWEEN THE COMPANY AND XXXXXX
XXXXXXXX DATED AS OF JANUARY 20, 1999, AS AMENDED AND
MODIFIED FROM TIME TO TIME. A COPY OF SUCH AGREEMENT MAY BE
OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL
PLACE OF BUSINESS WITHOUT CHARGE."
- 13 -
10. Survival. Section 4 and Sections 6 through 13 shall survive and
continue in full force in accordance with their terms notwithstanding any
termination of the Employment Period.
11. Definitions. The following definitions shall be applied to the
capitalized terms used in this Agreement for all purposes, unless otherwise
clearly indicated:
(a) Defined Terms.
"Board" means the Company's board of directors.
"Business" means the business conducted by the Company
including, without limitation, (a) the production and sale of termiticide
products and (b) the business conducted by the Company's Spectrum and Chemsico
Divisions.
"EBITDA" means, for a given period, the consolidated
Company's accounting earnings of the Company and its consolidated Subsidiaries
before taking into account any interest expense, provision for income taxes or
depreciation or amortization expense, excluding for this purpose extraordinary
gains and losses unless included in the determination of Target EBITDA.
"Executive Securities" has the meaning set forth in the
Preamble. Executive Securities shall continue to be Executive Securities in the
hands of any holder other than Executive and except as otherwise provided
herein, each such other holder of Executive Securities shall succeed to all
rights and obligations attributable to Executive as a holder of Executive
Securities hereunder. Executive Securities shall also include securities of the
Company issued with respect to Executive Securities by way of a stock split,
stock dividend or other recapitalization.
"Fair Market Value" of each share of any class or type of
Executive Security means the fair value of such shares or such class or type of
Executive Security determined in good faith by the Board, based on the
assumption of an arms-length transaction between a willing buyer and a willing
seller, taking into account all reasonable and customary factors relevant to
value including, without limitation, the fact that there may be no public market
for the Company's securities, but not including any minority discount; provided
that, until the first anniversary hereof, the "Fair Market Value" of each share
of Executive Securities shall not be less than the Original Cost of such share.
"Independent Third Party" means any Person who, immediately
prior to the contemplated transaction, does not own in excess of 50% of the
Company's voting common stock on a fully-diluted basis (a "50% Owner"), who is
not an affiliate of any such 50% Owner, who is not the spouse or descendent (by
birth or adoption) of any such 50% Owner or a trust for the benefit of any such
50% Owner and/or such other Persons, and who is not a Person who through
contract or other arrangements (other than arrangements entered into in
connection with the contemplated transactions) would be an affiliate immediately
after the contemplated transaction.
- 14 -
"Original Cost" for each share of Common Stock shall be
equal to $5.00 (as proportionately adjusted for all subsequent stock splits,
stock dividends and other recapitalizations).
"Person" means an individual, a partnership, a corporation,
a limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means the sale in an underwritten public
offering registered under the Securities Act of shares of any class of the
Company's Common Stock.
"Public Sale" means any sale pursuant to a Public Offering
or any sale to the public pursuant to Rule 144 promulgated under the Securities
Act effected through a broker, dealer or market maker.
"Sale of the Company" means (a) the acquisition by an
Independent Third Party of voting securities of (x) the Company or (y) the
surviving entity in any reorganization, merger or consolidation (each an
"Acquisition") involving the Company (any such entity referred to herein as the
"Corporation") where such Acquisition causes such Independent Third Party to own
more than fifty percent (50%) of the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote generally in
the election of directors, other than acquisitions by the Xxxxxx X. Xxx Company
or its affiliates, (b) the approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company, (c) the acquisition by an
Independent Third Party of more than 50% of the Company's assets determined on a
consolidated basis or (d) if individuals who constitute the Board on the date of
the Company's initial Public Offering of equity securities (the "Incumbent
Board") cease for any reason to constitute at least a majority of the Board
thereafter, it being understood that any individual becoming a director
subsequent to such date whose election, or nomination for election, is, at any
time, approved by a vote of at least a majority of the directors comprising the
Incumbent Board shall be considered a member of the Incumbent Board.
"Securities Act" means the Securities Act of 1933, as
amended from time to time.
"Stockholders" means the Persons holding the outstanding
Common Stock or other equity interests of the Company at the time in question.
"Stockholders Agreement" means that certain Stockholders
Agreement, dated as of the date hereof, by and among the Company, Executive and
certain other Persons listed on the signature pages thereto.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership, association or other
business entity of which (i) if a corporation, a majority of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that
- 15 -
Person or a combination thereof, or (ii) if a limited liability company,
partnership, association or other business entity, a majority of the limited
liability company, partnership or other similar ownership interest thereof is at
the time owned or controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control the managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Target EBITDA" means the annual performance goal for the
Company approved by the Board in its reasonable discretion with the input of
Executive, with Target EBITDA for fiscal 1999 being $85,400,000. The Board shall
use reasonable efforts to determine Target EBITDA for any fiscal year after 1999
no later than the 90th day of the fiscal year of the Company to which it
relates.
"Transfer" has the meaning ascribed to such term in the
Stockholders Agreement.
- 16 -
(b) Other Definitions. The terms set forth below are defined
on the following pages of this Agreement:
Agreement ................................................................... - 1 -
Base Salary ................................................................. - 4 -
Benefits .................................................................... - 5 -
Cause ....................................................................... - 3 -
Common Stock ................................................................ - 1 -
Company ..................................................................... - 1 -
Competitive Activities....................................................... - 8 -
Confidential Information..................................................... - 8 -
Disability .................................................................. - 2 -
Executive ................................................................... - 1 -
Executive Securities ........................................................ - 1 -
Good Reason ................................................................. - 4 -
Incentive Compensation....................................................... - 4 -
Noncompete Period ........................................................... - 7 -
Option Shares ............................................................... - 6 -
Options ..................................................................... - 5 -
Participate ................................................................. - 8 -
Purchase Price .............................................................. - 9 -
Purchased Stock ............................................................. - 9 -
Repurchase Closing .......................................................... - 00 -
Xxxxxxxxxx Xxxxxx ........................................................... - 00 -
Xxxxxxxxxx Option ........................................................... - 12 -
Repurchase Price ............................................................ - 12 -
Term ........................................................................ - 2 -
Termination ................................................................. - 12 -
Termination Date ............................................................ - 2 -
Trust ....................................................................... - 1 -
12. Notices. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to the recipient at the address below
indicated:
To the Company
United Industries Corporation
0000 Xxxx Xxxxxxxxx
Xx. Xxxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
To Executive
Xxxxxx Xxxxxxxx
0000 Xxxxxxxxxxxx
Xxxxxxxxxxxx, XX 00000
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S.
mail.
- 17 -
13. General Provisions.
(a) Expenses. The Company will pay the reasonable and
documented hourly legal fees and legal expenses of Executive's counsel in
connection with the negotiation and execution of this Agreement and the
agreements contemplated hereby.
(b) Severability. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) Complete Agreement. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way including, without limitation, that certain Employment Agreement by and
between the Company and Executive dated as of January 1, 1998 and that certain
Contract for Release in the Event of Sale by and between the Company and
Executive dated as of January 1, 1997.
(d) Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) Successors and Assigns. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Executive, the Company and their respective successors and assigns (including
subsequent holders of Executive Securities); provided that the rights and
obligations of Executive under this Agreement shall not be assignable except in
connection with a permitted Transfer of Executive Securities.
(f) Governing Law. The laws of the state of Missouri shall
govern all issues and questions concerning the employment of Executive, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of Missouri or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
Missouri. All other issues and questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the exhibits and schedules
hereto shall be governed by, and construed in accordance with, the laws of the
State of Delaware, without giving effect to any choice of law or conflict of law
rules or provisions (whether of the State of
- 18 -
Delaware or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of Delaware.
(g) Remedies. Each of the parties to this Agreement shall be
entitled to enforce its rights under this Agreement specifically, to recover
damages and costs (including reasonable attorney's fees) caused by any breach of
any provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages would not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
(h) Amendment and Waiver. The provisions of this Agreement
may be amended and waived only with the prior written consent of the Company,
the Trust and Executive.
(i) Third-Party Beneficiary. There are no beneficiaries to
this Agreement other than the signatories hereto.
(j) Business Days. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or legal
holiday in the state in which the Company's chief executive office is located,
the time period shall be automatically extended to the business day immediately
following such Saturday, Sunday or legal holiday.
(k) Assignment. Nothing in this Agreement shall preclude the
Company from consolidating or merging into or with, or transferring all or
substantially all of its assets to, another corporation; provided that the
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Company to assume this Agreement. As used in this Agreement,
"Company" shall mean the Company, as defined above, and any successor to its
business and/or assets as aforesaid which assumes this Agreement by operation of
law or otherwise.
(l) Withholding. All amounts payable to Executive as
compensation hereunder shall be subject to customary withholding by the Company.
(m) Mitigation by Executive. In no event shall Executive be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to Executive under any of the provisions of this
Agreement and such amounts shall not be reduced whether or not Executive obtains
other employment.
* * * *
- 19 -
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
UNITED INDUSTRIES CORPORATION
By:
----------------------------------------
Its:
----------------------------------------
--------------------------------------------
XXXXXX XXXXXXXX
--------------------------------------------
XXXXXXX X. XXXXX, in his capacity as trustee
of that certain Trust Agreement, dated as of
January 20, 1999, by and between the Company
and Xxxxxxx X. Xxxxx, as trustee
- 20 -
