DIVESTMENT INCENTIVE PROGRAM
This Divestment Incentive Program is hereby entered
into this 8th day of September 1998, between AAF-McQuay Inc.
(hereinafter "the Company") and Michael J. Christopher
(hereinafter "Employee"), who are collectively referred to
herein as the "Parties."
WHEREAS, the Company's shareholder plans to sell the
Company, and the Company wants to provide an incentive
package to certain key employees in exchange for their
agreement to remain employed up to and beyond the sale of
the Company.
NOW, THEREFORE, in consideration of the mutual promises
contained herein, and other good and valuable consideration
as hereinafter recited, the receipt and adequacy of which
are hereby acknowledged, the parties, intending to be
legally bound, covenant and agree as follows:
1. The Employee agrees to continue his employment
with the Company in his position as Executive Vice
President, and to perform his customary and
regular duties, up to and including the effective
date of the sale of the Company (the "Effective
Date"). The Company agrees that it will continue
to pay the Employee his salary at his current
monthly rate of $17,681 (Seventeen Thousand, Six
Hundred, Eighty One Dollars). The Employee
further agrees that, if the purchasing company
makes a written offer to the Employee on or prior
to the Effective Date of a comparable position for
at least two years along with comparable salary
and benefits in a location not requiring the
Employee to relocate, the Employee will accept
that employment and remain employed by the
purchasing company for at least two years after
the Effective Date. An offer or request pursuant
to this paragraph 1 is hereinafter referred to as
a "Continued Employment Offer."
2. If the Employee agrees to, and remains, employed
as described in paragraph 1 above, and if he has
not breached any of the provisions of this
Agreement (including, without limitation, sections
4 and 5 hereof) (a "Breach"), he will be eligible
to receive the following additional incentive
payments:
(a) If the Employee remains employed up to and
including the Effective Date and the
purchasing company does not make a Continued
Employment Offer, the Company agrees to pay
the Employee $424,360, (Four Hundred Twenty
Four Thousand Dollars), which amount is equal
to 24 months compensation at his current
rate, as severance pay, less applicable
withholding tax. This severance pay will be
considered earned as of the first business
day after the Effective Date and will be paid
to the Employee within one week after the
Effective Date. If the Employee's
employment with the Company is terminated
without cause prior to the expiration of two
years from the date of acceptance of his
Continued Employment Offer, this severance
pay will be considered earned as of the first
business day after such termination and will
be paid to the Employee within one week after
such termination.
(b) Provided that the Company is sold prior to
the Termination Date of this Agreement, it is
the Company's intention to create a bonus
pool (the "Executive Bonus Pool"). The
Employee's share of the Executive Bonus Pool
will be a function both of the Employee's
base salary and a performance factor.
Individual payouts will be based on appraised
performance during the sale process by the
Employee's direct supervisor and additional
higher levels of senior management, including
the CEO. In addition, potential payouts,
less applicable withholding tax, will be
based upon the selling price and the ultimate
equity proceeds received by the current
shareholder as described below:
Employee Employee Equity Employee's Potential
Proceeds to Share of Executive
Shareholder Bonus Pool
Michael J. * $ 0
Christopher
* $175,030
* $288,173
* $420,299
* $569,304
Interpolation will apply based on actual
equity proceeds to shareholder. In addition,
the Potential Bonus amounts listed above are
based on the assumption that the Employee
meets or exceeds the expectations of
management during the sale process and are
subject to change.
If the Employee remains employed up to and
including the Effective Date and the
purchasing company makes a Continued
Employment Offer, 50% of the Employee's
share, if any, of the Executive Bonus Pool
will be paid to the Employee on the Effective
Date and 50% of the Employee's share, if any,
of the Executive Bonus Pool will be paid to
the Employee on the first anniversary of the
Effective Date. If the Employee remains
employed up to and including the Effective
Date and the purchasing company does not make
a Continued Employment Offer, 100% of the
Employee's share, if any, of the Executive
Bonus Pool will be paid to the Employee on
the Effective Date.
3. If the Employee's employment with the Company
terminates for any reason (other than a
termination without cause) prior to the Effective
Date or, in the event the purchasing company makes
a Continued Employment Offer, or if the Employee
commits a Breach, the Company shall have no
obligation to make any payments of any kind to the
Employee, including but not limited to severance
payments or, in certain cases, incentive payments
as described above.
4. The Employee recognizes that the Company's
business interests require a confidential
relationship between the Company and the Employee.
Accordingly, THE EMPLOYEE AGREES DURING HIS
EMPLOYMENT WITH THE COMPANY FOR A TWO-YEAR PERIOD
THEREAFTER TO KEEP CONFIDENTIAL AND NOT TO
DISCLOSE TO ANYONE ANY CONFIDENTIAL OR PROPRIETARY
INFORMATION OF THE COMPANY, INCLUDING
PARTICIPATION IN THIS DIVESTMENT INCENTIVE
PROGRAM.
5. The Parties agree that any breach by the Employee
of the confidentiality provisions in this
Agreement will cause immediate, material and
irreparable injury and damage, and that there is
no adequate remedy at law for such breach. In the
event of a breach of the confidentiality
provisions of the Agreement, the Company or its
successor shall be entitled immediately to seek
enforcement of this Agreement in a court of
competent jurisdiction by means of a decree of
specific performance, and injunction without the
posting of a bond, any other form of equitable
relief, and any other remedy it may have at law or
in equity. In the event that a court holds any
provision of this Agreement to be unenforceable,
the parties agree that that provision shall be
reduced to the degree necessary to render it
enforceable without affecting the rest of this
Agreement.
6. In the event any dispute arises under this
Agreement that is adjudicated to a final verdict
in the Employee's favor by a court of competent
jurisdiction, no further appeal is permitted and
the Employee has complied with paragraph 4 hereof,
the Company shall reimburse the Employee for his
reasonable expenses of counsel incurred in
connection with such dispute from the time the
Company is notified of the dispute to its final
adjudication.
7. Any other provision of this Agreement
notwithstanding, this Agreement shall terminate
and no longer be of any force or effect (i)
immediately if the Company aborts the sale process
and, (ii) in any case if a sale of the Company has
not occurred on or before June 30, 1999 (the
"Termination Date").
8. Each of the parties hereto (a) consents to submit
himself or itself to the personal jurisdiction of
any federal court located in the State of Maryland
or any Maryland State court in the event any
dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b)
agrees that he or it will not attempt to deny or
defeat such personal jurisdiction by motion or
other request for leave from any such court, and
(c) agrees that he or it will not bring any action
relating to this Agreement or any of the
transactions contemplated by this Agreement in any
court other than a federal court sitting in the
State of Maryland or a Maryland State court.
9. This Agreement supersedes all prior Agreements
between the parties concerning the subject matter
hereof, and this Agreement constitutes the entire
Agreement between the parties with respect to the
subject matter hereof. This Agreement may be
modified only by a written instrument signed by
the Employee and by the President of the Company.
The validity and construction of this Agreement
and any of its provisions shall be determined
under the laws of the State of Maryland.
10. The Employee acknowledges that he has read this
Agreement in its entirety, understands all of its
terms and conditions, that he has the opportunity
to consult with any individuals of his choice
including legal counsel of his choice, that he is
entering into this Agreement of his own free will,
without coercion from any source, and that he
agrees to abide by all of the terms and conditions
herein contained.
IN WITNESS HEREOF, the parties have duly executed this
Agreement as of the day and year first written above.
WITNESS: AAF-McQUAY INC.
/S/ JOAN SEIVWRIGHT By: /S/ JOSEPH B. HUNTER
Joseph B. Hunter
President and Chief
Executive Officer
/S/ RONALD J. PEDERSON /S/ MICHAEL J.
CHRISTOPHER
Employee
* Portions of this document have been omitted pursuant to a
request for confidential treatment. The full documents have
been filed separately.