EXHIBIT 10(rr)
EMPLOYMENT AGREEMENT
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THIS AGREEMENT is made as of the 1st day of June, 1999, by and between ICF
Xxxxxx International, Inc., a Delaware corporation (the "Corporation"), and
Xxxxxxx X. X'Xxxxxx, a resident of the Commonwealth of Virginia (the
"Executive").
WHEREAS, the Executive is currently an employee of the Corporation; and
WHEREAS, the Corporation and the Executive wish to revise and document the
terms of the employment relationship;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
made herein, and intending to be legally bound hereby, the Corporation and the
Executive agree as follows:
1. Employment; Duties.
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(a) Employment and Employment Period. The Corporation shall employ
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the Executive to serve as Chief Financial Officer and Executive Vice President
of ICF Xxxxxx International, Inc., as set forth below, for a continuous period
until December 31, 2000 (the "Employment Period"). The Employment Period may be
extended by mutual agreement of the parties.
(b) Offices and Duties. Executive shall serve as Chief Financial
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Officer and Executive Vice President of ICF Xxxxxx International, Inc. The
Executive shall report to the President and Chief Executive Officer of the
Corporation and shall be a member of all senior management groups of the
Corporation. The Executive's offices shall be located at the Corporation's
headquarters building in Fairfax, Virginia.
(c) Devotion to Interests of the Corporation. Except as expressly
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authorized by the Corporation's Board of Directors (the "Board") or the
Compensation and Human Resources Committee of the Board (the "Compensation
Committee"), until the effective date of notice of termination of the
Executive's employment by either the Executive or the Corporation, the Executive
will not, without the prior written consent of the Company, directly or
indirectly engage in any other business activities or pursuits, except
activities in connection with (i) any professional, charitable or civic
activities (other than as an officer or board member), (ii) personal
investments, and (iii) serving as an executor, trustee or in another similar
fiduciary capacity for a non-commercial entity; provided, however, that any such
activities do not materially interfere with the performance of his
responsibilities and obligations pursuant to this Agreement. The Executive
shall use his best efforts to promote the interests and welfare of the
Corporation.
2. Compensation and Fringe Benefits.
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(a) Base Compensation. The Corporation shall pay the Executive a base
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salary at the rate of $260,000 per year through June 1, 2000, in installments in
accordance with the Corporation's regular practice for compensating executive
personnel. The amount of the Executive's base compensation shall be subject to
adjustment as recommended by the Compensation Committee.
(b) Annual Incentive Bonus. The Executive is entitled to an annual
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incentive bonus in an amount not to exceed $330,000 (representing a bonus
opportunity equal to 50% of the Executive's initial annual base salary that is
contingent on satisfaction of operational objectives and a special bonus
opportunity of $200,000 that is contingent on satisfaction of recapitalization
objectives) payable at the time and contingent upon the extent to which the
Corporation achieves specified objectives set forth at Attachment A. In
subsequent years, Executive shall be entitled to a bonus opportunity as set by
the Compensation Committee in its discretion.
(c) Retention Bonus. The Executive shall be entitled to a retention
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bonus in the amount of $75,000, payable promptly following execution of this
Agreement. The Executive will be entitled to a second retention bonus in the
amount of $55,000, payable on May 1, 2000, provided that the Executive is
employed with the Corporation on May 1, 2000.
(d) Fringe Benefits. The Executive shall also be entitled to such
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fringe benefits as are generally made available by the Corporation to executive
personnel. Such benefits shall include participation in the Corporation's
defined contribution retirement plan, 401(k) Plan, and health, term life and
disability insurance programs. The Executive also will be reimbursed for
reasonable expenses incurred in connection with travel and entertainment related
to the Corporation's business and affairs and will be paid by the Corporation in
a manner consistent with past practice and as amended by any subsequent changes
of corporate policy.
3. Trade Secrets. The Executive shall not use or disclose any of the
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Corporation's trade secrets or other confidential information. The term "trade
secrets or other confidential information" includes, by way of example, matters
of a technical nature, such as scientific, trade and engineering secrets, "know-
how", formulae, secret processes or machines, inventions, computer programs
(including documentation of such programs) and research projects, and matters of
a business nature, such as proprietary information about costs, profits,
markets, sales, lists of customers, plans for future development, and other
information of a similar nature that is designated as confidential or generally
maintained as confidential or proprietary by the Corporation. After termination
of the Executive's employment, the Executive shall not use or disclose trade
secrets or other confidential information unless such information becomes a part
of the public domain other than through a breach of the Corporation's policies
or is disclosed to the Executive by a third party who is entitled to receive and
disclose such information.
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4. Return of Documents and Property. Upon the effective date of notice of
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the Executive's or the Corporation's election to terminate the Executive's
employment, or at any time upon the request of the Corporation, the Executive
(or his heirs or personal representatives) shall deliver to the Corporation (a)
all documents and materials containing trade secrets or other confidential
information relating to the Corporation's business and affairs, and (b) all
documents, materials and other property belonging to the Corporation, which in
either case are in the possession or under the control of the Executive (or his
heirs or personal representatives).
5. Discoveries and Works. All discoveries and works made or conceived by
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the Executive during his employment by the Corporation, jointly or with others,
that relate to the Corporation's activities shall be owned by the Corporation.
The term "discoveries and works" includes, by way of example, inventions,
computer programs (including documentation of such programs), technical
improvements, processes, drawings and works of authorship. The Executive shall
(a) promptly notify, make full disclosure to, and execute and deliver any
documents requested by, the Corporation to evidence or better assure title to
such discoveries and works in the Corporation, (b) assist the Corporation in
obtaining or maintaining for itself at its own expense United States and foreign
patents, copyrights, trade secret protection or other protection of any and all
such discoveries and works, and (c) promptly execute, whether during his
employment by the Corporation or thereafter, all applications or other
endorsements necessary or appropriate to maintain patents and other rights for
the Corporation and to protect its title thereto. Any discoveries and works
which, within six months after the termination of the Executive's employment by
the Corporation, are made, disclosed, reduced to a tangible or written form or
description, or are reduced to practice by the Executive and which pertain to
the business carried on or products or services being sold or developed by the
Corporation at the time of such termination shall, as between the Executive and
the Corporation, be presumed to have been made during the Executive's employment
by the Corporation. Set forth on Schedule 5 attached hereto is a list of
inventions, patented or unpatented, including a brief description thereof, which
are owned by the Executive, which the Executive conceived or made prior to his
employment by the Corporation and which are excluded from this Agreement.
6. Termination.
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(a) Upon 30 days' prior written notice the Corporation may terminate
the Executive's employment, with or without "cause," as defined in Section 6(f)
below. Upon 30 days' prior written notice the Executive may terminate his
employment, with or without "good reason," as defined in Section 6(e) below.
Upon any termination of the Executive's employment for any reason, the
Corporation shall:
(i) pay to the Executive any unpaid salary through the date of
termination;
(ii) pay to the Executive any unpaid bonus payments earned
through the date of termination under the terms of
applicable bonus arrangements; and
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(iii) provide to or for the benefit of the Executive the
benefits, if any, otherwise expressly provided under this
Section 6, Section 7 or Section 8, as applicable.
Any payments under this Section 6, Section 7 or Section 8 that are to be made in
connection with the termination of Executive's employment will be paid in cash
(with deduction of such amount as may be required to be withheld under
applicable law and regulations) within ten business days of Executive's
termination of employment. All other compensation and employment benefit
arrangements provided for in this Agreement shall cease upon such termination
of employment except to the extent required by law or otherwise expressly
provided by such arrangement. The Executive hereby agrees that he shall not
under any circumstances be entitled to benefits under the Corporation's Senior
Executive Officer's Severance Plan as in effect on the date hereof
notwithstanding anything to the contrary herein or under the terms of such plan,
and hereby releases any claims for benefits under such plan.
(b) In the event the Corporation terminates the Executive's
employment without "cause" or the Executive terminates his employment for "good
reason," then, in addition to the benefits provided for under Sections 6(a)(i)
and 6(a)(ii) and subject to the provisions of Section 8, the Corporation shall
pay to the Executive a severance payment equal to two times the Executive's
annual base salary. In addition, all unvested stock options and any other
equity-based compensation arrangements will vest in full on the effective date
of such termination and all vested stock options shall be exercisable for the
shorter of one (1) year from the date of such termination and until they expire
in accordance with their original maximum term.
(c) In the event the Corporation terminates the Executive's
employment for "cause," then, in addition to the benefits provided for under
Sections 6(a)(i) and 6(a)(ii), all unvested stock options and any other equity-
based compensation arrangements shall be terminated and all vested stock options
shall be exercisable for the shorter of thirty (30) days from the date of such
termination and until they expire in accordance with their original maximum
term.
(d) In the event the Executive terminates his employment without
"good reason," then, in addition to the benefits provided for under Sections
6(a)(i) and 6(a)(ii), all unvested stock options and any other equity-based
compensation arrangements shall be terminated and all vested stock options shall
be exercisable for the shorter of one (1) year from the date of such termination
and until they expire in accordance with their original maximum term.
(e) For purposes of this Agreement, the Executive shall be considered
to have "good reason" to terminate his employment if without his express written
consent (i) the responsibilities of the Executive are substantially reduced or
altered (except in connection with the termination of his employment voluntarily
by the Executive, by the Corporation for "cause," or under the circumstances
described in Section 8 hereof), (ii) Executive's annual base salary is reduced,
or (iii) the Executive's offices are relocated anywhere other than within a
fifty (50) mile radius of his office in Fairfax, Virginia.
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(f) For purposes of this Agreement, the Corporation shall have
"cause" to terminate the Executive's employment hereunder upon (i) the
continued, willful and deliberate failure of the Executive to perform his
duties, in a manner substantially consistent with the manner prescribed by the
Board or the Chief Executive Officer of the Corporation (other than any such
failure resulting from his incapacity due to physical or mental illness), (ii)
the engaging by the Executive in misconduct materially and demonstrably
injurious to the Corporation, (iii) the conviction of the Executive of
commission of a felony, whether or not such felony was committed in connection
with the Corporation's business, or (iv) the circumstances described in Section
8 hereof, in which case the provisions of Section 8 shall govern the rights and
obligations of the parties.
7. Change in Control.
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(a) All unvested stock options or any other equity-based compensation
arrangements theretofore granted to Executive shall vest in full on the date of
a "Change in Control" (as defined in Section 7(d) below).
(b) In the event that the Corporation terminates the Executive's
employment with the Corporation without "cause" within twelve months after a
"Change in Control" (as defined in Section 7(d) below), or if the Executive
terminates his employment with the Corporation for "good reason" within twelve
months after a "Change in Control" (as defined in Section 7(d) below), then, in
addition to the benefits provided for under Sections 6(a)(i) and 6(a)(ii), the
Corporation shall pay to the Executive a severance payment equal to two times
the Executive's annual base salary. In addition, all vested stock options shall
be exercisable for the shorter of one (1) year from the date of such termination
and until they expire in accordance with their original maximum term.
(c) If the Executive terminates his employment with the Corporation
without "good reason" within twelve months after a Change in Control, then, in
addition to the benefits provided for under Sections 6(a)(i) and 6(a)(ii), all
vested stock options shall be exercisable for the shorter of one (1) year from
the date of such termination and until they expire in accordance with their
original maximum term.
(d) For purposes of this Agreement, "Change in Control" shall mean an
occurrence of any of the following events:
(i) an acquisition (other than directly from the Corporation)
of any voting securities of the Corporation (the "Voting
Securities") by any "person or group" (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934) other than an employee benefit plan of the
Corporation, immediately after which such person or group
has "Beneficial Ownership" (within the meaning of Rule
13d-3 under the Exchange Act) of more than thirty-five
percent (35%) of the combined voting power of the
Corporation's then outstanding Voting Securities;
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(ii) approval by the stockholders of (1) a merger,
consolidation or reorganization involving the Corporation,
unless the company resulting from such merger,
consolidation or reorganization (the "Surviving
Corporation") shall adopt or assume this Agreement and
either (A) the stockholders of the Corporation immediately
before such merger, consolidation or reorganization own,
directly or indirectly immediately following such merger,
consolidation or reorganization, at least fifty percent
(50%) of the combined voting power of the Surviving
Corporation in substantially the same proportion as their
ownership immediately before such merger, consolidation or
reorganization, or (B) at least a majority of the members
of the Board of Directors of the Surviving Corporation
were directors of the Corporation immediately prior to the
execution of the agreement providing for such merger,
consolidation or reorganization, (2) a complete
liquidation or dissolution of the Corporation, or (3) a
sale or transfer of all or substantially all of the assets
of the Corporation or of assets that during the current or
either of the prior two fiscal years accounted for more
than 50% of the Company's revenues or income (in each
case, other than to a wholly-owned Subsidiary), provided,
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however, that the disposition of assets in connection with
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the sale of the Environment and Facilities Management
(EFM) Group or the Consulting Group shall not be included
in determining whether there has been a Change in Control;
(iii) if for any reason a majority of the Board is not comprised
of "Continuing Directors," where a "Continuing Director"
of the Corporation as of any date means a member of the
Board who (1) was a member of the Board on April 19, 1999
or (2) was nominated for election or elected to the Board
with the affirmative vote of at least two-thirds of the
directors who were Continuing Directors at the time of
such nomination or election; provided, however, that no
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individual initially elected or nominated as a director of
the Corporation as a result of an actual or threatened
election contest with respect to directors or any other
actual or threatened solicitation of proxies or consents
by or on behalf of any person other than the Board shall
be deemed to be a Continuing Director; or
(iv) such other events as the Board or a duly authorized
committee of the Board from time to time may specify.
(e) In the event that, as a result of payments to or for the benefit
of Executive under this Agreement or otherwise in connection with a Change in
Control, any state, local or federal taxing authority imposes any taxes on the
Executive that would not be imposed but for
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the occurrence of a Change in Control, including any excise tax under Section
4999 of the Internal Revenue Code and any successor or comparable provision,
then, in addition to the benefits provided for under Sections 6(a)(i) and
6(a)(ii) and under Sections 7(a), 7(b) and 7(c), the Corporation (including any
successor to the Corporation) shall pay to the Executive at the time any such
tax becomes payable an amount equal to the amount of any such tax imposed on the
Executive (the amount of any such payment, the "Parachute Tax Reimbursement").
In addition, the Corporation (including any successor to the Corporation) shall
"gross up" such Parachute Tax Reimbursement by paying to the Executive at the
time any such tax becomes payable an additional amount equal to the aggregate
amount of any additional taxes (whether income taxes, excise taxes, special
taxes, employment taxes or otherwise) that are payable by the Executive as a
result of the Parachute Tax Reimbursement being payable to the Executive and/or
as a result of the additional amounts payable to the Executive pursuant to this
sentence, such that after payment of such additional taxes the Executive shall
have been paid on an after-tax basis an amount equal to the Parachute Tax
Reimbursement.
8. Disability; Death.
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(a) If, prior to the expiration or termination of the Employment
Period, the Executive shall be unable to perform his duties by reason of
disability or impairment of health for at least six consecutive calendar months,
the Corporation shall have the right to terminate the Executive's employment on
account of disability by giving written notice to the Executive to that effect,
but only if at the time such notice is given such disability or impairment is
still continuing. In the event of a dispute as to whether the Executive is
disabled within the meaning of this Section 8(a), either party may from time to
time request a medical examination of the Executive by a doctor appointed by the
Chief of Staff of a hospital selected by mutual agreement of the parties, or as
the parties may otherwise agree, and the written medical opinion of such doctor
shall be conclusive and binding upon the parties as to whether the Executive has
become disabled and the date when such disability arose. The cost of any such
medical examinations shall be borne by the Corporation. If the Corporation
terminates the Executive's employment on account of disability, then, in
addition to the benefits provided for under Sections 6(a)(i) and 6(a)(ii), all
unvested stock options and any other equity-based compensation arrangements
shall be terminated and all vested stock options shall be exercisable for the
shorter of one (1) year from the date of such termination and until they expire
in accordance with their original maximum term.
(b) If, prior to the expiration or termination of the Employment
Period, the Executive shall die, then, in addition to the benefits provided for
under Sections 6(a)(i) and 6(a)(ii), the Employment Period shall terminate
without further notice. In such an event, all unvested stock options and any
other equity-based compensation arrangements shall be terminated and all vested
stock options shall be exercisable for the shorter of one (1) year from the date
of Executive's death and until they expire in accordance with their original
maximum term.
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(c) Nothing contained in this Section 8 shall impair or otherwise
affect any rights and interests of the Executive under any insurance
arrangements, death benefit plan or other compensation plan or arrangement of
the Corporation which may be adopted by the Board.
9. Non-Competition/Non-Solicitation.
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(a) Non-Competition. The Executive agrees that for a period
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commencing on the Effective Date and ending (i) on the date of termination of
the Executive's employment (x) by the Corporation for reasons that do not
constitute "cause" as defined in Section 6, above, or (y) by the Executive for
"good reason" as defined in Section 6(b), above, or (ii) one year following
termination of the Executive's employment (x) by the Corporation for "cause" or
(y) by the Executive for reasons that do not constitute "good reason", provided
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that the Corporation is not in material breach of this Agreement (the "Non-
Competition Period"), the Executive will not, except as otherwise provided
herein, engage or participate, directly or indirectly, as principal, agent,
employee, employer, consultant, stockholder, partner or in any comparable
capacity, in the conduct or management of, or own any stock or any other equity
investment in or debt of, any business which is competitive with any business
conducted by the Corporation. Notwithstanding the foregoing, this provision
shall not prohibit the Executive from providing advice to one or more
competitive business(es) as a consultant, provided, however, that such
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consulting services do not entail Executive advising one or more competitive
business(es) on substantially a full-time basis.
For the purpose of this Agreement, a business shall be considered to be
competitive with the business of the Corporation only if such business is
engaged in providing services similar to (i) any service currently provided by
the Corporation or provided by the Corporation during the Employment Period
other than services provided solely by the Corporation's Consulting Group; (ii)
any service which in the ordinary course of business during the Non-Competition
Period evolves from or results from enhancements to the services provided by the
Corporation as of the Effective Date or during the Non-Competition; or (iii) any
future service of the Corporation as to which the Executive materially and
substantially participated in the design or enhancement.
(b) Non-Solicitation of Employees. During the Non-Competition Period,
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the Executive will not (for the Executive's own benefit or for the benefit of
any person or entity other than the Corporation) solicit, or assist any person
or entity other than the Corporation to solicit, any officer, director,
executive or employee of the Corporation or its affiliates to leave his or her
employment.
(c) Reasonableness. The Executive acknowledges that (i) the markets
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served by the Corporation are national and international and are not dependent
on the geographic location of executive personnel or the businesses by which
they are employed, (ii) the length of the Non-Competition Period is related to
the length of the Employment Period and the Corporation's agreement to provide
severance benefits as set forth in Sections 6 or 7, above, that, under certain
circumstances, will provide additional compensation to Executive upon the
termination of the Executive's employment; and (iii) the above covenants
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are reasonable on their face, and the parties expressly agree that such
restrictions have been designed to be reasonable and no greater than is required
for the protection of the Corporation.
(d) Investments. Nothing in this Agreement shall be deemed to
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prohibit Executive from owning equity or debt investments in any corporation,
partnership or other entity which is competitive with the Corporation, provided
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that such investments (i) are passive investments and constitute five percent
(5%) or less of the outstanding equity securities of such an entity the equity
securities of which are traded on a national securities exchange or other public
market, or (ii) are approved by the Corporation.
10. Waiver. The waiver of the breach of any term or provision of this
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Agreement shall not operate as or be construed to be a waiver of any other or
subsequent breach of this Agreement. Failure by the Executive or the
Corporation to insist upon strict compliance with any provision of this
Agreement or to assert any right the Executive or the Corporation may have
hereunder, including, without limitation, the right of the Executive to
terminate employment for "good reason," shall not be deemed to be a waiver of
such provision or right or of any other provision or rights under this
Agreement.
11. Enforcement. The Executive agrees that the Corporation's remedies at
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law for any breach or threat of breach by him of Sections 3, 4, 5, or 9 hereof
will be inadequate, and that the Corporation shall be entitled to an injunction
or injunctions to prevent breaches of Sections 3, 4, 5, or 9 hereof and to
enforce specifically the terms and provisions thereof, in addition to any other
remedy to which the Corporation may be entitled at law or equity. If the
Corporation sues to enforce Sections 3, 4, 5, or 9 hereof and fails to prevail
in such proceeding, the court shall award to the Executive his reasonable fees
for his attorneys, the reasonable expenses of his witnesses, and any other
reasonable expenses incurred in connection with the proceeding to the extent
that the court determines that the Executive has prevailed in such proceeding.
12. Arbitration. Any dispute or claim other than those referred to in
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Section 11, arising out of or relating to this Agreement or otherwise relating
to the employment relationship between the Executive and the Corporation, shall
be submitted to Arbitration, in Fairfax County, Virginia, before a single
arbitrator, in accordance with the rules of the American Arbitration Association
as the exclusive remedy for such claim or dispute. The Executive and the
Corporation agree that such arbitration will be confidential and no details,
descriptions, settlements or other facts concerning such arbitration shall be
disclosed or released to any third party without the specific written consent of
the other party, unless required by law or court order or in connection with
enforcement of any decision in such arbitration. Any damages awarded in such
arbitration shall be limited to the contract measure of damages, and shall not
include punitive damages. In any proceeding, whether commenced by the Executive
or by the Corporation, the arbitrator shall award to the Executive his
reasonable fees for his attorneys, the reasonable expenses of his witnesses, and
any other reasonable expenses incurred in connection with the arbitration to the
extent that the arbitrator determines that the Executive has prevailed in such
proceeding.
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13. Full Settlement. The Corporation's obligation to make any payments
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provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Corporation may have against
the Executive or others. In no event shall the Executive be obligated to seek
other employment or take other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement, and such
amounts shall not be reduced whether or not the Executive obtains other
employment.
14. Severability. Should any provision of this Agreement be determined to
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be unenforceable or prohibited by any applicable law, such provision shall be
ineffective to the extent, and only to the extent, of such unenforceability or
prohibition without invalidating the balance of such provision or any other
provision of this Agreement, and any such unenforceability or prohibition in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
15. Counterparts. This Agreement may be executed in any number of
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counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute one and the same
instrument.
16. Assignment. The Executive's rights and obligations under this
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Agreement shall not be assignable by the Executive. The Corporation's rights
and obligations under this Agreement shall not be assignable by the Corporation
except as incident to the transfer, by merger or otherwise, of all or
substantially all of the business of the Corporation in a transaction in which
the successor entity remains obligated under, or by operation of law or
otherwise assumes, the Corporation's obligations under this Agreement. In the
event of any such assignment by the Corporation, all rights of the Corporation
hereunder shall inure to the benefit of the assignee.
17. Notices. Any notice required or permitted under this Agreement shall
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be deemed to have been effectively made or given if in writing and personally
delivered or sent by registered or certified U.S. mail, UPS or FedEx, properly
addressed in a sealed envelope, with delivery charges prepaid. Unless otherwise
changed by notice, notice shall be properly addressed to Executive if addressed
to:
Xxxxxxx X. X'Xxxxxx
0000 X Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
and properly addressed to the Corporation if addressed to:
ICF Xxxxxx International, Inc.
0000 Xxx Xxxxxxx
Xxxxxxx, Xxxxxxxx 00000-0000
Attn: General Counsel
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18. Miscellaneous. This Agreement constitutes the entire agreement, and
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terminates and supersedes all prior agreements, of the parties hereto relating
to the subject matter hereof, and there are no written or oral terms or
representations made by either party other than those contained herein, except
that nothing contained in this Agreement shall invalidate or supersede the terms
of any previously or subsequently granted stock options or other equity-based
compensation arrangements (including without limitation the provisions thereof
relating to post-termination exercisability) to the extent that such stock
options or arrangements provide more favorable terms to the Executive. The
validity, interpretation, performance and enforcement of this Agreement shall be
governed by the laws of the Commonwealth of Virginia. The headings contained
herein are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the day and year first above written.
______________________________________________
Xxxxxxx X. X'Xxxxxx, Executive
ICF XXXXXX INTERNATIONAL, INC.
By____________________________________________
Xxxxx X. X'Xxxxx
Chair, Compensation and Human Resources Committee,
Board of Directors
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SCHEDULE 5
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Inventions Owned by the Executive
NONE
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ATTACHMENT A
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Title: Chief Financial Officer
Overview:
. This Attachment A describes the annual incentive bonus plan in which the
named executive will participate from 6/1/99 through 5/31/00.
. The executive's performance will be assessed against the following objectives
as described in this Attachment A:
- Cost Savings
- EBITDA Improvement
- Completion of Recapitalization
COST SAVINGS
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Goal: $19 million in total Company cost savings achieved between 3/31/99 and
11/30/99
Measurement:
Reduction in the annualized run rate of the Company's costs, exclusive of the
costs associated with the discontinued operations of the EFM and Consulting
Groups, as set forth in the financial statements of the Company as filed with
the Securities and Exchange Commission and prepared in accordance with GAAP on a
consistent basis, as compared to the annualized run rate of such costs for the
quarter ended March 31, 1999.
Cost savings will be measured on three Measurement Dates as indicated below, and
will be based on costs for the month ending on each of the three Measurement
Dates. For purposes of measuring cost reductions, costs will be categorized as
either direct (those incurred directly and solely for the benefit of a project)
or indirect (those incurred for the general operations of the Company).
Direct Costs:
To reflect the fact that direct costs may increase as the business begins to
prosper, direct cost reductions will be measured as follows:
Changes in direct subcontract and materials will be excluded from measurement.
Changes in direct labor and fringe benefits will be measured based on the change
in the relationship of such costs to service revenue.
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Example of Direct Cost Savings Calculation:
Annualized Rate
Thru March 31, 1999 at Measurement Date
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Service revenue 27,877 $111,000
Direct labor and fringe 17,837 66,600
Direct labor and fringe costs
as a % of service revenue 64% 60%
Improvement in gross margins 4%
Actual annual labor and fringe $ 66,600
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Savings credit $ 2,664
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Indirect Costs:
The measurement of indirect cost savings will be calculated from costs for the
month ending on the Measurement Date, excluding any costs incurred prior to the
Measurement Dates set forth below that were incurred to effect future cost
reductions, such as severance, lease buyouts, litigation defense costs and
settlements, employee retention incentives, and any other nonrecurring costs
incurred outside the ordinary course of business for a non-troubled company
(collectively, "Restructuring Costs").
Total annualized indirect costs as of the March 31, 1999 financial statements
was $68,468 (none of which were Restructuring Costs).
Example of Indirect Cost Savings Calculation:
Indirect cost benchmark - March 31, 1999 $68,468
Total indirect costs incurred during
measurement period $ 5,000
Less: Restructuring Costs (500)
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Adjusted indirect costs incurred during
measurement period $ 4,500
-------
Annualized $54,000
-------
Savings from indirect costs $14,468
=======
Thus, under the foregoing two examples, "Cost Savings" (in thousands) for the
month would equal $17,102, which is the sum of $2,664 (annualized direct cost
savings) and $14,468 (annualized indirect cost savings).
Following each Measurement Date the executive shall submit to the Compensation
and Human Resources Committee (the "Compensation Committee") a report showing
the computation of
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Operating Cost savings in accordance with this Attachment A and the amount of
bonus, if any, due with respect to the period ending on the Measurement Date.
Target Cost Savings Bonus: $65,000
Performance Measurement and Payout:
. Performance is measured on the three Measurement Dates shown below:
. At each Measurement Date, the actual bonus earned will be calculated by
multiplying (i) the target bonus amount, by (ii) the percentage (but not more
than 100%) that actual cost savings achieved for the month ending on the
Measurement Date bears to total target cost savings (i.e., $19 million), by
(iii) the appropriate timing incentive for the Measurement Date as specified
in the table below. This amount will be reduced by the amount of any cost
savings bonus earned at an earlier Measurement Date.
Measurement Date Timing Incentive
---------------- ----------------
7/31/99 100%
9/30/99 95%
11/30/99 85%
. Incentive earned will be paid within 10 days after review of the computation
of cost savings as of each Measurement Date by the Compensation Committee.
EBITDA IMPROVEMENT
------------------
Goal: Annual run rate of $6 million of EBITDA (excluding Xxxxxx-Xxxx)
Target Incentive: $65,000
Performance Measurement and Payout:
. Performance will be measured by comparing the Company's actual EBITDA annual
run rate for the five months ending May 31, 2000 (excluding Xxxxxx-Xxxx), as
reported in the Company's financial statements, to the EBITDA target of $6
million (excluding Xxxxxx-Xxxx).
. A minimum of 50% of the goal must be achieved to qualify for payment. If less
than 50% of the goal is achieved, no EBITDA improvement incentive will be
paid.
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. The target incentive will be multiplied by the actual percentage (but not
more than 100%) of EBITDA achieved as follows:
Percentage Earned = Actual EBITDA
-------------
$6 million
. Up to 100% of target incentive can be earned.
. Following May 31, 2000, the executive shall submit to the Compensation
Committee a report showing the computation of the amount of bonus, if any,
due hereunder. Incentive earned will be paid within 10 days after review of
the computation by the Compensation Committee.
RECAPITALIZATION
----------------
Goal: Four performance objective targets to be accomplished by 12/31/99 based
upon planning, management, negotiating, obtaining acceptance of and implementing
a recapitalization plan approved by the Board of Directors:
Noteholder Acceptance of Plan
Shareholder Acceptance of Plan
Close New Credit Facility
Close Recapitalization Plan
Target Incentive:
Noteholder Acceptance of Plan $60,000
Shareholder Acceptance of Plan $40,000
Close New Credit Facility $40,000
Close Recapitalization Plan $60,000
Performance Measurement and Payout:
. Once a performance objective target is met, payout will occur within 30 days.
. A performance objective target must be met by 12/31/99 to qualify for
payment.
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