Exhibit 10.5(e)
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of July 1, 1999, by and
between, U.S. Industries, Inc., a Delaware corporation, with its principal
United States office at 101 Wood Avenue South, Iselin, New Jersey 08830 ("USI"),
and Gary K. Meuchel residing at 304 Greenview Ridge, Duncan, South Carolina
29334-9244 ("Executive").
W I T N E S S E T H:
WHEREAS, Executive is currently employed as Vice
President-Human Resources of Lighting Corporation of America, a subsidiary
of USI;
WHEREAS, USI intends to transfer all or a part of the assets
constituting USI's diversified segment (the "Diversified Segment") and other
assets of USI (such assets collectively "USI Diversified") to a newly
constituted wholly owned subsidiary of USI (the "Company") and to spinoff the
Company to the shareholders of USI (a spinoff with John Raos as Chairman and
Chief Executive Officer of the Company is referred to herein as the "Spinoff");
WHEREAS, effective on the consummation of the Spinoff (the
"Commencement Date"), the Company desires to employ the Executive as Vice
President-Human Resources of the Company at its principle executive offices to
be established in New Jersey and the Executive is willing to serve in such
capacities;
WHEREAS, USI and the Executive desire to enter into this
agreement (the "Agreement") as to the terms of his employment by the Company,
under which the Executive's employment shall commence on the Commencement Date
and which Agreement will be assigned by USI to the Company upon or prior to
consummation of the Spinoff, and to embody the terms of Executive's prospective
employment by the Company subsequent to the Spinoff.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
parties agree as follows:
1. Term of Employment. Except for earlier termination as
provided in Section 7 hereof, Executive's employment under this Agreement shall
be for a two-year term (the "Employment Term") commencing on the Commencement
Date and ending two (2) years thereafter; provided that if the Executive is not
physically or mentally capable of performing the duties set forth in Section 2
herein on the Commencement Date (as reasonably determined by the Company in its
sole discretion) this Agreement shall be null and void ab initio. Subject to
Section 7 hereof, the Employment Term shall be automatically extended for
additional terms of successive two (2) year periods unless the Company or the
Executive gives written notice to the other at least ninety (90) days prior to
the expiration of the then current Employment Term of the termination of
Executive's employment hereunder at the end of such current Employment Term.
Notwithstanding the foregoing, this Agreement shall be null and void if the
Spinoff is not consummated by June 30, 2000; provided, however, that this date
will be extended to September 30, 2000 if prior to June 30, 2000 USI receives a
private letter ruling from the Internal Revenue Service providing that the stock
dividends that will occur pursuant to the Spinoff will be a tax-free
distribution and providing such other relief and approvals as requested in the
ruling.
2. Positions. (a) Executive shall serve as Vice
President-Human Resources of the Company. If requested by the Board of Directors
of the Company (the "Board") or the Chairman and so elected by the stockholders
of the Company, Executive shall also serve on the Board without additional
compensation. Executive shall also serve, if requested by the Board, the
Chairman or the President, as an executive officer and director of subsidiaries
and a director of associated companies of the Company and shall comply with the
policy of the Compensation Committee of the Company's Board (the "Compensation
Committee") with regard to retention or forfeiture of the director's fees.
(b) Executive shall report to any more senior officer of the
Company as designated by the Chairman or the President and, shall have such
duties and authority, consistent with his then position as shall be assigned to
him from time to time by the Board, the Chairman, the President or such other
more senior officer(s) of the Company.
(c) During the Employment Term, Executive shall devote
substantially all of his business time and efforts to the performance of his
duties hereunder; provided, however, that Executive shall be allowed, to the
extent that such activities do not materially interfere with the performance of
his duties and responsibilities hereunder, to manage his personal financial and
legal affairs and to serve on corporate, civic, or charitable boards or
committees. Notwithstanding the foregoing, the Executive shall only serve on
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corporate boards of directors if approved in advance by the Board and shall not
serve on any corporate board of directors if such service would be inconsistent
with his fiduciary responsibilities to the Company, as determined by the Board.
3. Base Salary. During the Employment Term, the Company shall
pay Executive a base salary at the annual rate of not less than $165,000. Base
salary shall be payable in accordance with the usual payroll practices of the
Company. Executive's Base Salary shall be subject to annual review by the Board
or the Compensation Committee (commencing on the first day of the Company's 2001
fiscal year) during the Employment Term and may be increased, but not decreased,
from time to time by the Board or the Compensation Committee, except that, prior
to a Change in Control, as defined in Section 10 hereof, it may be decreased
proportionately in connection with an across the board decrease applying to all
senior executives of the Company. The base salary as determined as aforesaid
from time to time shall constitute "Base Salary" for purposes of this Agreement.
4. Incentive Compensation. (a) Bonus. For each fiscal year or
portion thereof during the Employment Term, Executive shall, subject to
shareholder approval as and to the extent required by Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), be eligible to
participate in an incentive pay plan of the Company that provides an annualized
cash target bonus opportunity equal to at least 55% of Base Salary.
(b) Equity. Pursuant to a stock option plan satisfying the
requirements of Code Section 162(m), the Company shall, after the Commencement
Date, recommend to the Compensation Committee that Executive be granted, three
separate grants of nonqualified stock options (the "Options") to purchase the
number of shares of Common Stock of the Company ("Common Stock") determined for
each grant by dividing $220,000 by the fair market value of the Common Stock on
the date of grant as determined under the applicable stock option plan (the
"Fair Market Value"). It shall be recommended that the first grant of options be
made within the fifteen (15) day period following the date "regular way trading"
of the Common Stock commences, excluding the period of "when issued trading"
("Regular Way Trading"), the second grant of options be made after the fifteenth
(15th) day and before the thirtieth (30th) day following the commencement of
Regular Way Trading, and the third grant of options be made after the thirtieth
(30th) day and before the forty-fifth (45th) day following the commencement of
Regular Way Trading. The Company shall recommend that the Options shall have an
exercise price equal to the Fair Market Value. It shall be recommended that the
stock option grants shall provide that the Options shall become exercisable with
respect to 25% of such Options on each of the first four
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anniversaries of October 1, 1999, provided that Executive is employed by the
Company on such vesting date, and further provided that it shall be recommended
that such Options shall fully vest upon a Change in Control, as defined in
Section 10 hereof, and that the next tranche vest upon a termination event
described in Section 7(a)(i), (ii), (iii) or (iv).
(c) Long Term Compensation/SERP Benefits. USI's subsidiary
Lighting Corporation of America currently maintains a Long Term Incentive Plan
("LTIP") and a Supplemental Executive Retirement Plan ("SERP"). Upon the Spinoff
the Executive's account balance in the LTIP and SERP shall be transferred to
similar arrangements with the Company. The Company shall have no obligation to
put additional amounts in or provide additional accruals under an LTIP or SERP
type plan and may continue them or discontinue them in the judgment of its
Compensation Committee or Board, but the Executive shall at all times be fully
vested in his transferred account balance benefit accruals thereunder and
earnings (if any) thereon. For each fiscal year or portion thereof during the
Employment Term, after the Spinoff Date, Executive shall be eligible to
participate in any long-term incentive compensation plans or supplemental
executive retirement plans made available to vice presidents of the Company.
(d) Other Compensation. The Company may, upon recommendation
of the Compensation Committee, award to the Executive such other bonuses and
compensation as it deems appropriate and reasonable.
5. Employee Benefits and Vacation. (a) During the Employment
Term, Executive shall be entitled to participate in all pension, retirement,
savings, welfare and other employee benefit plans and arrangements and fringe
benefits and perquisites generally maintained by the Company from time to time
for the benefit of vice presidents of the Company in each case in accordance
with their respective terms as in effect from time to time (other than any
special arrangement entered into by contract with an executive) and, except as
otherwise determined by the Compensation Committee, the Executive's employment
with USI (including its subsidiaries while subsidiaries) or any of its
predecessors prior to the Commencement Date (as reflected in USI's books and
records) shall be recognized for all purposes under any Company sponsored
pension, retirement, savings, welfare and other employee benefit plans or
arrangements established within the six (6) month period following the
Commencement Date.
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(b) During the Employment Term, Executive shall be entitled to
vacation each year in accordance with the Company's policies in effect from time
to time, but in no event less than four (4) weeks paid vacation per calendar
year. The Executive shall also be entitled to such periods of sick leave as is
customarily provided by the Company for its senior executive employees.
6. Business Expenses. The Company shall reimburse Executive
for the travel, entertainment and other business expenses incurred by Executive
in the performance of his duties hereunder, in accordance with the Company's
policies as in effect from time to time.
7. Termination. (a) The employment of Executive under this
Agreement shall terminate upon the earliest to occur of any of the following
events:
(i) the death of the Executive;
(ii) the termination of the Executive's employment
by the Company due to the Executive's Disability pursuant to
Section 7(b) hereof;
(iii) the termination of the Executive's employment
by the Executive for Good Reason pursuant to Section 7(c)
hereof;
(iv) the termination of the Executive's employment
by the Company without Cause;
(v) the termination of employment by the Executive
without Good Reason upon sixty (60) days prior written notice;
(vi) the termination of employment by the Executive
with or without Good Reason during the thirty (30) day period
commencing one (1) year after a Change in Control (such thirty
(30) day period being referred to herein as the "Change in
Control Protection Period"), provided that the Executive shall
have a right to terminate employment pursuant to this Section
7(a)(vi) and receive the amounts under Section 8(c)(A)(i) and
(ii) unless simultaneous with the Change in Control, the
Company or the person or entity triggering the Change in
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Control delivers to the Executive an irrevocable direct pay
letter of credit with regard to the amounts under Section
8(c)(A)(i) and (ii) and satisfying the requirements of Section
7(g) hereof;
(vii) the termination of the Executive's employment
by the Company for Cause pursuant to Section 7(e);
(viii) the retirement of the Executive by the Company
at or after his sixty-fifth birthday to the extent such
termination is specifically permitted as a stated exception
from applicable federal and state age discrimination laws
based on position and retirement benefits;
(b) Disability. If by reason of the same or related physical
or mental illness or incapacity, the Executive is unable to carry out his
material duties pursuant to this Agreement for more than six (6) months in any
twelve (12) consecutive month period, the Company may terminate Executive's
employment for Disability upon thirty (30) days written notice by a Notice of
Disability Termination, at any time thereafter during such twelve month period
while Executive is unable to carry out his duties as a result of the same or
related physical or mental illness or incapacity. Such termination shall not be
effective if Executive returns to the full time performance of his material
duties within such thirty (30) day notice period.
(c) Termination for Good Reason. A Termination for Good Reason
means a termination by Executive by written notice given within ninety (90) days
after the occurrence of the Good Reason event, unless such circumstances are
fully corrected prior to the date of termination specified in the Notice of
Termination for Good Reason (as defined in Section 7(d) hereof). For purposes of
this Agreement, "Good Reason" shall mean the occurrence or failure to cause the
occurrence, as the case may be, without Executive's express written consent, of
any of the following circumstances: (i) any material diminution of Executive's
positions, duties or responsibilities hereunder (except in each case in
connection with the termination of Executive's employment for Cause or
Disability or as a result of Executive's death, or temporarily as a result of
Executive's illness or other absence); (ii) removal of, or the nonreelection of,
the Executive from the officer positions, if any, with the Company specified
herein without election to a materially comparable or higher position; (iii) (A)
a relocation of the Company's executive office in New Jersey to a location more
than both thirty-five (35) miles from Iselin, New Jersey and thirty-five (35)
miles from the Executive's residence at the time of relocation or (B) relocation
of the Executive's office to a location more than thirty-five (35) miles from
the Company's executive offices in New
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Jersey; (iv) after a Change of Control, a failure by the Company (A) to continue
any bonus plan, program or arrangement in which Executive is entitled to
participate immediately prior to the Change of Control (the "Bonus Plans"),
provided that any such Bonus Plans may be modified at the Company's discretion
from time to time but shall be deemed terminated if (x) any such plan does not
remain substantially in the form in effect prior to such modification and (y) if
plans providing Executive with substantially similar benefits are not
substituted therefor ("Substitute Plans"), or (B) to continue Executive as a
participant in the Bonus Plans and Substitute Plans on at least the same basis
as to potential amount of the bonus as Executive participated in prior to any
change in such plans or awards, in accordance with the Bonus Plans and the
Substitute Plans; (v) any material breach by the Company of any provision of
this Agreement, including without limitation Section 12 hereof; (vi) a failure
of any successor to assume in a writing delivered to Executive upon the assignee
becoming such, the obligations of the Company hereunder; or (vii) a failure of
the Company to grant stock options within ninety (90) days after the
Commencement Date in an aggregate amount of exercise price (which shall be fair
market value at the time of grant) multiplied by number of options of at least
$660,000 and, as to other provisions materially in the aggregate no less
favorable to the Executive than the recommendations required by Section 4(b)
hereof.
(d) Notice of Termination for Good Reason. A Notice of
Termination for Good Reason shall mean a notice that shall indicate the specific
termination provision in Section 7(c) relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
Termination for Good Reason. The failure by Executive to set forth in the Notice
of Termination for Good Reason any facts or circumstances which contribute to
the showing of Good Reason shall not waive any right of Executive hereunder or
preclude Executive from asserting such fact or circumstance in enforcing his
rights hereunder. The Notice of Termination for Good Reason shall provide for a
date of termination not less than ten (10) nor more than sixty (60) days after
the date such Notice of Termination for Good Reason is given, provided that in
the case of the events set forth in Section 7(c)(ii) or (iii) the date may be
two (2) days after the giving of such notice.
(e) Cause. Subject to the notification provisions of Section
7(f) below, Executive's employment hereunder may be terminated by the Company
for Cause. For purposes of this Agreement, the term "Cause" shall be limited to
(i) willful misconduct by Executive with regard to the Company or its business,
assets or employees; (ii) the refusal of Executive to follow the proper written
direction of the Board or a more senior officer of the Company, provided that
the foregoing refusal shall not be "Cause"
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if Executive in good faith believes that such direction is illegal, unethical or
immoral and promptly so notifies the Board or the more senior officer (whichever
is applicable); (iii) substantial and continuing willful refusal by the
Executive to attempt to perform the duties required of him hereunder (other than
any such failure resulting from incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to the
Executive by the Board or a more senior officer of the Company which
specifically identifies the manner in which it is believed that the Executive
has substantially and continually refused to attempt to perform his duties
hereunder; (iv) the Executive being convicted of a felony (other than a felony
involving a motor vehicle); (v) the breach by Executive of any material
fiduciary duty owed by Executive to the Company; or (vi) Executive's dishonesty,
misappropriation or fraud with regard to the Company (other than good faith
expense account disputes).
(f) Notice of Termination for Cause. A Notice of Termination
for Cause shall mean a notice that shall indicate the specific termination
provision in Section 7(e) relied upon and shall set forth in reasonable detail
the facts and circumstances which provide for a basis for Termination for Cause.
The date of termination for a Termination for Cause shall be the date indicated
in the Notice of Termination. Any purported Termination for Cause which is held
by a court not to have been based on the grounds set forth in this Agreement or
not to have followed the procedures set forth in this Agreement shall be deemed
a Termination by the Company without Cause.
(g) The irrevocable direct pay letter of credit required to be
delivered pursuant to Section 7(a)(vi) hereof shall be in amount equal to the
amount the Executive would be entitled to under Section 8(c)(A)(i) and (ii)
hereof if he were terminated without Cause upon the Change in Control and have
an expiration date of no less than two (2) years after the Change in Control.
The Executive shall be entitled to draw on the letter of credit upon
presentation to the issuing bank of a demand for payment signed by the Executive
that states that (i) (A) a Good Reason event has occurred and the Executive
would be entitled to payment under Section 8(c) of this Agreement if he elected
to terminate employment for Good Reason or (B) one (1) year and not more than
one (1) year and thirty (30) days has expired since the Change in Control or (C)
the Executive is entitled to payment under Section 8(c) of this Agreement and
(ii) assuming the event set forth in (i) entitled him to payment under Section
8(c) of this Agreement, the amount the Company would be indebted to him at the
time of presentation under Section 8(c)(A)(i) and (ii) if he then was eligible
to receive payments under Section 8(c). There shall be no other requirements
(including no requirement that the Executive first makes demand upon the Company
or that
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the Executive actually terminates employment) with regard to payment of
the letter of credit. To the extent the letter of credit is not adequate to
cover the amount owed to the Executive by the Company under this Agreement, is
not submitted by the Executive or is not paid by the issuing bank, the Company
shall remain liable to the Executive for the remainder owed the Executive
pursuant to the terms of this Agreement. To the extent any amount is paid under
the letter of credit it shall be a credit against any amounts the Company then
or thereafter would owe to the Executive under Section 8(c) of this Agreement.
The letter of credit shall be issued by a national money center bank with a
rating of at least A by Standard & Poors Ratings Services. The Company shall
bear the cost of the letter of credit.
8. Consequences of Termination of Employment. (a) Death. If
Executive's employment is terminated during the Employment Term on or after the
Spinoff Date by reason of Executive's death, the employment period under this
Agreement shall terminate without further obligations to the Executive's legal
representatives under this Agreement except for: (i) any compensation earned but
not yet paid, including and without limitation, any bonus if declared or earned
but not yet paid for a completed fiscal year, any amount of Base Salary earned
but unpaid, any accrued vacation pay payable pursuant to the Company's policies,
and any unreimbursed business expenses payable pursuant to Section 6
(collectively "Accrued Amounts") which amounts shall be promptly paid in a lump
sum to Executive's estate; (ii) the product of (x) the target annual bonus for
the fiscal year of the Executive's death, multiplied by (y) a fraction, the
numerator of which is the number of days of the current fiscal year during which
the Executive was employed by the Company, and the denominator of which is 365,
which bonus shall be paid when bonuses for such period are paid to the other
executives; (iii) subject to Sections 9 and 11, any other amounts or benefits
owing to the Executive under the then applicable employee benefit plans, long
term incentive plans or equity plans and programs of the Company which shall be
paid in accordance with such plans and programs; (iv) payment on a monthly basis
of three (3) months of Base Salary, which shall be paid to Executive's spouse,
or if he is not married to the Executive's estate or if she shall predecease
him, then to the Executive's children (or their guardian if one is appointed) in
equal shares; and (v) payment of the spouse's and dependent's COBRA coverage
premiums to the extent, and so long as, they remain eligible for COBRA coverage,
but in no event more than three (3) years.
(b) Disability. If, Executive's employment is terminated by
reason of Executive's Disability, Executive shall be entitled to receive the
payments and benefits to which his representatives would be entitled in the
event of a termination of employment by reason of his death (other than life
insurance benefits), provided that the payment of Base Salary shall be reduced
by the
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projected amount he would receive under any long-term disability policy
or program maintained by the Company during the three (3) month period during
which Base Salary is being paid.
(c) Termination by Executive for Good Reason or for any Reason
During the Change in Control Protection Period or Termination by the Company
without Cause or Nonextension of the Term by the Company. If (i) outside of the
Change in Control Protection Period, Executive terminates his employment
hereunder for Good Reason during the Employment Term, (ii) if a Change in
Control occurs and during the Change in Control Protection Period Executive
terminates his employment for any reason, (iii) Executive's employment with the
Company is terminated by the Company without Cause or (iv) Executive's
employment with the Company terminates as a result of the Company giving notice
of nonextension of the Employment Term pursuant to Section 1(a) hereof,
Executive shall be entitled to receive the Accrued Amounts and shall, subject to
Sections 9(b) and 11(h) hereof, be entitled to receive, (A) (i) two (2) times
Base Salary, to be paid, if such termination is after a Change in Control, in
one lump sum within ten (10) days after compliance with Section 9(b)
hereof, or otherwise to be paid one (1) times Base Salary in a lump sum and one
(1) times Base Salary in twelve (12) equal monthly installments commencing one
(1) month after the aforementioned lump sum is paid and (ii) if such termination
is after a Change in Control, two (2) times the highest annual bonus paid or, if
declared or earned but not yet paid for a completed fiscal year, payable to
Executive for any of the previous two (2) completed fiscal years by the Company
or USI; (B) any Accrued Amounts at the date of termination; (C) any other
amounts or benefits owing to Executive under the then applicable employee
benefit, long term incentive or equity plans and programs of the Company which
shall be paid in accordance with such plans and programs; (D) if such
termination is after a Change in Control, two (2) years of additional service
and compensation credit (at his then compensation level) for pension purposes
under any defined benefit type qualified or nonqualified pension plan or
arrangement of the Company, which payments shall be made through and in
accordance with the terms of the nonqualified defined benefit pension
arrangement if any then exists, or, if not, in an actuarially equivalent lump
sum (using the actuarial factors then applying in the Company's defined benefit
plan covering Executive); (E) if such termination is after a Change in Control,
two (2) years of the maximum Company contribution (assuming Executive deferred
the maximum amount and continued to earn his then current salary) under any type
of qualified or nonqualified 401(k) plan (payable at the end of each such year);
and (F) payment by the Company of the premiums for the Executive and his
dependents' health coverage for two (2) years under the Company's health plans
which cover the senior executives of the Company or materially similar benefits.
Payments under (F) above may at the discretion of the Company be
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made by continuing participation of Executive in the plan as a terminee, by
paying the applicable COBRA premium for Executive and his dependents, or by
covering Executive and his dependents under substitute arrangements.
(d) Termination with Cause or Voluntary Resignation without
Good Reason or Retirement. If, Executive's employment hereunder is terminated
(i) by the Company for Cause, (ii) by Executive without Good Reason outside of
the Change in Control Protection Period, or (iii) by the Company pursuant to
Section 7(a)(viii) hereof, the Executive shall be entitled to receive only his
Base Salary through the date of termination and any unreimbursed business
expenses payable pursuant to Section 6 and, if the Executive has retired
pursuant to the Company's retirement programs, any bonus that has been declared
or earned but not yet paid for a completed fiscal year. All other benefits
(including, without limitation, options and the vesting thereof) due Executive
following such termination of employment shall be determined in accordance with
the Company's plans and programs.
9. (a) No Mitigation; Set-Off. In the event of any termination
of employment under Section 8, Executive shall be under no obligation to seek
other employment and there shall be no offset against any amounts due Executive
under this Agreement on account of any remuneration attributable to any
subsequent employment that Executive may obtain. Any amounts due under Sections
8 and 9 are in the nature of severance payments and are not in the nature of a
penalty. Such amounts are inclusive, and in lieu of any, amounts payable under
any other salary continuation or cash severance arrangement of the Company and
to the extent paid or provided under any other such arrangement shall be offset
from the amount due hereunder.
(b) Executive agrees that, as a condition to receiving the
payments and benefits provided under Section 8(c) hereunder he will execute,
deliver and not revoke (within the time period permitted by applicable law) a
release of all claims of any kind whatsoever against the Company, its
affiliates, officers, directors, employees, agents and shareholders in the then
standard form being used by the Company for senior executives (but without
release of right of indemnification hereunder, equity grants, or benefit plans
that by their terms are intended to survive termination of his employment).
10. Change in Control. For purposes of this Agreement, the
term "Change in Control" shall mean (i) any "person" as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 ("Act") (other
than the Company, any trustee or other fiduciary holding securities under any
employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Common Stock of the
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Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the Company's
then outstanding securities; (ii) during any period of two (2) consecutive years
(not including any period prior to the Commencement Date), individuals who at
the beginning of such period constitute the Board, and any new director (other
than a director designated by a person who has entered into an agreement with
the Company to effect a transaction described in clause (i), (iii), or (iv) of
this paragraph) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
two-year period or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority of the Board;
(iii) a merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than fifty percent (50%) of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than twenty-five percent
(25%) of the combined voting power of the Company's then outstanding securities
shall not constitute a Change in Control of the Company; or (iv) the
stockholders of the Company approve a plan of complete liquidation of the
Company or the sale or disposition by the Company of all or substantially all of
the Company's assets other than (x) the sale or disposition of all or
substantially all of the assets of the Company to a person or persons who
beneficially own, directly or indirectly, at least fifty percent (50%) or more
of the combined voting power of the outstanding voting securities of the Company
at the time of the sale or (y) pursuant to a spinoff type transaction, directly
or indirectly, of such assets to the stockholders of the Company. In no event
shall the Spinoff in and of itself constitute a Change in Control for purposes
of this Agreement; provided, however, that the provisions of this Section 10
shall be operative immediately after consummation of the Spinoff.
11. Confidential Information and Non-Solicitation of the
Company. (a) (i) Executive acknowledges that as a result of his employment by
the Company, Executive will obtain secret and confidential information as to the
Company and its affiliates and the Company and its affiliates will suffer
substantial damage, which would be difficult to ascertain, if Executive should
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use such confidential information and that because of the nature of the
information that will be known to Executive it is necessary for the Company and
its affiliates to be protected by the Confidentiality restrictions set forth
herein.
(ii) Executive acknowledges that the retention of nonclerical
employees employed by the Company and its affiliates in which the Company and
its affiliates have invested training and depends on for the operation of their
businesses is important to the businesses of the Company and its affiliates,
that Executive will obtain unique information as to such employees as an
executive of the Company and will develop a unique relationship with such
persons as a result of being an executive of the Company and, therefore, it is
necessary for the Company and its affiliates to be protected from Executive's
Solicitation of such employees as set forth below.
(iii) Executive acknowledges that the provisions of this
Agreement are reasonable and necessary for the protection of the businesses of
the Company and its affiliates and that part of the compensation paid under this
Agreement and the agreement to pay severance in certain instances is in
consideration for the agreements in this Section 11.
(b) Solicitation shall mean: recruiting, soliciting or
inducing, of any nonclerical employee or employees of the Company or its
affiliates to terminate their employment with, or otherwise cease their
relationship with, the Company or its affiliates or hiring or assisting another
person or entity to hire any nonclerical employee of the Company or its
affiliates or any person who within six (6) months before had been a nonclerical
employee of the Company or its affiliates and were recruited or solicited for
such employment or other retention while an employee of the Company, provided,
however, that solicitation shall not include any of the foregoing activities
engaged in with the prior written approval of the Chief Executive Officer of the
Company.
(c) If any restriction set forth with regard to Solicitation
is found by any court of competent jurisdiction, or an arbitrator, to be
unenforceable because it extends for too long a period of time or over too great
a range of activities or in too broad a geographic area, it shall be interpreted
to extend over the maximum period of time, range of activities or geographic
area as to which it may be enforceable. If any provision of this Section 11
shall be declared to be invalid or unenforceable, in whole or in part, as a
result of the foregoing, as a result of public policy or for any other reason,
such invalidity shall not affect the remaining provisions of this Section which
shall remain in full force and effect.
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(d) During and after the Employment Term, Executive shall hold
in a fiduciary capacity for the benefit of the Company and its affiliates all
secret or confidential information, knowledge or data relating to the Company
and its affiliates, and their respective businesses, including any confidential
information as to customers of the Company and its affiliates, (i) obtained by
Executive during his employment by the Company and its affiliates and (ii) not
otherwise public knowledge or known within the applicable industry. Executive
shall not, without prior written consent of the Company, unless compelled
pursuant to the order of a court or other governmental or legal body having
jurisdiction over such matter, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
In the event Executive is compelled by order of a court or other governmental or
legal body to communicate or divulge any such information, knowledge or data to
anyone other than the foregoing, he shall promptly notify the Company of any
such order and he shall cooperate fully with the Company in protecting such
information to the extent possible under applicable law.
(e) Upon termination of his employment with the Company and
its affiliates, or at any time as the Company may request, Executive will
promptly deliver to the Company, as requested, all documents (whether prepared
by the Company, an affiliate, Executive or a third party) relating to the
Company, an affiliate or any of their businesses or property which he may
possess or have under his direction or control other than documents provided to
Executive in his capacity as a participant in any employee benefit plan, policy
or program of the Company or any agreement by and between Executive and the
Company with regard to Executive's employment or severance.
(f) Furthermore, in the event of any termination of
Executive's employment for any reason whatsoever, whether by the Company or by
Executive and whether or not for Cause, Good Reason or non-extension of the
Employment Term, Executive for two (2) years thereafter will not engage in
Solicitation.
(g) In the event of a breach or potential breach of this
Section 11, Executive acknowledges that the Company and its affiliates will be
caused irreparable injury and that money damages may not be an adequate remedy
and agree that the Company and its affiliates shall be entitled to injunctive
relief (in addition to its other remedies at law) to have the provisions of this
Section 11 enforced. It is hereby acknowledged that the provisions of this
Section 11 are for the benefit of the Company and all of the
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affiliates of the Company before and after the Spinoff Date and each such entity
may enforce the provisions of this Section 11 and only the applicable entity can
waive the rights hereunder with respect to its confidential information and
employees.
(h) Furthermore, in the event of breach of this Section 11 by
Executive, while he is receiving amounts under Section 8(c) hereof, Executive
shall not be entitled to receive any future amounts pursuant to Section 8(c)
hereof.
12. Indemnification. (a) The Company agrees that if Executive
is made a party to or threatened to be made a party to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director, employee or
officer of the Company and/or any affiliate of the Company, or is or was serving
at the request of any of such companies as a director, officer, member,
employee, fiduciary or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including, without limitation, service with
respect to employee benefit plans, whether or not the basis of such Proceeding
is alleged action in an official capacity as a director, officer, member,
employee, fiduciary or agent while serving as a director, officer, member,
employee, fiduciary or agent, he shall be indemnified and held harmless by the
Company to the fullest extent authorized by Delaware law (or, if other than the
Company, the law applicable to such company), as the same exists or may
hereafter be amended, against all Expenses incurred or suffered by Executive in
connection therewith, and such indemnification shall continue as to Executive
even if Executive has ceased to be an officer, director, member, fiduciary or
agent, or is no longer employed by the applicable company, and shall inure to
the benefit of his heirs, executors and administrators.
(b) As used in this Agreement, the term "Expenses" shall
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements and costs, attorneys' fees, accountants'
fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Expenses incurred by Executive in connection with any
Proceeding shall be paid by the Company in advance upon request of Executive and
the giving by the Executive of any undertakings required by applicable law.
(d) Executive shall give the Company notice of any claim made
against him for which indemnity will or could be sought under this Agreement. In
addition, Executive shall give the Company such information and cooperation as
it may reasonably require and as shall be within Executive's power and at such
times and places as are reasonably convenient for Executive.
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(e) With respect to any Proceeding as to which Executive
notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate
therein at its own expense; and
(ii) Except as otherwise provided below, to the
extent that it may wish, the Company jointly with any other indemnifying party
similarly notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Executive. Executive also shall have the right to
employ his own counsel in such action, suit or proceeding and the fees and
expenses of such counsel shall be at the expense of the Company.
(f) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any action or
claim in any manner which would impose any penalty or limitation on Executive
without Executive's written consent. Neither the Company nor Executive will
unreasonably withhold or delay their consent to any proposed settlement.
(g) The right to indemnification and the payment of expenses
incurred in defending a Proceeding in advance of its final disposition conferred
in this Section 12 shall not be exclusive of any other right which Executive may
have or hereafter may acquire under any statute, provision of the certificate of
incorporation or by-laws of the applicable company, agreement, vote of
stockholders or disinterested directors or otherwise.
(h) The Company agrees to obtain Officer and Director
liability insurance policies covering Executive and shall maintain at all times
during the Employment Term coverage under such policies in the aggregate with
regard to all officers and directors, including Executive, of an amount not less
than the greater of: (i) the amount of coverage maintained by the Company for
the Chairman and Chief Executive Officer of the Company or (ii) $10 million. The
Company shall maintain for a six (6) year period commencing on the date the
Executive ceased to be an employee of the Company, Officer and Director
liability insurance coverage for events occurring during the period the
Executive was an employee or director of the Company in the same aggregate
amount and under the same terms as are maintained for its active officers and
directors. The phrase "in the same aggregate amount and under the same terms"
shall include the same level of self-insurance by the Company as shall be
maintained for active officers and directors.
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(i) This Section 12 shall not create or expand any rights to
indemnification in favor of Executive with respect to service with USI, the
Company or their affiliates prior to the date hereof.
13. Special Tax Provision. (a) Anything in this Agreement to
the contrary notwithstanding, in the event that any amount or benefit paid,
payable, or to be paid, or distributed, distributable, or to be distributed to
or with respect to Executive by the Company (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in a change of ownership covered by Section
280G(b)(2) of the Code or any person affiliated with the Company or such person)
as a result of a change in ownership of the Company or a direct or indirect
parent thereof after the Spinoff covered by Code Section 280G(b)(2)
(collectively, the "Covered Payments") is or becomes subject to the excise tax
imposed by or under Section 4999 of the Code (or any similar tax that may
hereafter be imposed), and/or any interest or penalties with respect to such
excise tax (such excise tax, together with such interest and penalties, is
hereinafter collectively referred to as the "Excise Tax"), the Company shall pay
to Executive an additional amount (the "Tax Reimbursement Payment") such that
after payment by Executive of all taxes (including, without limitation, any
interest or penalties and any Excise Tax imposed on or attributable to the Tax
Reimbursement Payment itself), Executive retains an amount of the Tax
Reimbursement Payment equal to the sum of (i) the amount of the Excise Tax
imposed upon the Covered Payments, and (ii) without duplication, an amount equal
to the product of (A) any deductions disallowed for federal, state or local
income or payroll tax purposes because of the inclusion of the Tax Reimbursement
Payment in Executive's adjusted gross income, and (B) the highest applicable
marginal rate of federal, state or local income taxation, respectively, for the
calendar year in which the Tax Reimbursement Payment is made or is to be made.
The intent of this Section 13 is that (a) the Executive, after paying his
Federal, state and local income tax and any payroll taxes on Executive, will be
in the same position as if he was not subject to the Excise Tax under Section
4999 of the Code and did not receive the extra payments pursuant to this Section
13 and (b) that Executive should never be "out-of-pocket" with respect to any
tax or other amount subject to this Section 13, whether payable to any taxing
authority or repayable to the Company, and this Section 13 shall be interpreted
accordingly.
(b) Except as otherwise provided in Section 13(a), for
purposes of determining whether any of the Covered Payments will be subject to
the Excise Tax and the amount of such Excise Tax,
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(i) such Covered Payments will be treated as
"parachute payments" (within the meaning of Section 280G(b)(2) of the Code) and
such payments in excess of the Code Section 280G(b)(3) "base amount" shall be
treated as subject to the Excise Tax, unless, and except to the extent that, the
Company's independent certified public accountants appointed prior to the change
in ownership covered by Code Section 280G(b)(2) or legal counsel (reasonably
acceptable to Executive) appointed by such public accountants (or, if the public
accountants decline such appointment and decline appointing such legal counsel,
such independent certified public accountants as promptly mutually agreed on in
good faith by the Company and the Executive) (the "Accountant"), deliver a
written opinion to Executive, reasonably satisfactory to Executive's legal
counsel, that Executive has a reasonable basis to claim that the Covered
Payments (in whole or in part) (A) do not constitute "parachute payments", (B)
represent reasonable compensation for services actually rendered (within the
meaning of Section 280G(b)(4) of the Code) in excess of the "base amount"
allocable to such reasonable compensation, or (C) such "parachute payments" are
otherwise not subject to such Excise Tax (with appropriate legal authority,
detailed analysis and explanation provided therein by the Accountants); and
(ii) the value of any Covered Payments which are
non-cash benefits or deferred payments or benefits shall be determined by the
Accountant in accordance with the principles of Section 280G of the Code.
(c) For purposes of determining the amount of the Tax
Reimbursement Payment, Executive shall be deemed:
(i) to pay federal, state, local income and/or
payroll taxes at the highest applicable marginal rate of income taxation for the
calendar year in which the Tax Reimbursement Payment is made or is to be made,
and
(ii) to have otherwise allowable deductions for
federal, state and local income and payroll tax purposes at least equal to those
disallowed due to the inclusion of the Tax Reimbursement Payment in Executive's
adjusted gross income.
(d)(i)(A) In the event that prior to the time the Executive
has filed any of his tax returns for the calendar year in which the change in
ownership event covered by Code Section 280G(b)(2) occurred, the Accountant
determines, for any reason whatever, the correct amount of the Tax Reimbursement
Payment to be less than the amount determined at the time the Tax
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Reimbursement Payment was made, the Executive shall repay to the Company, at the
time that the amount of such reduction in Tax Reimbursement Payment is
determined by the Accountant, the portion of the prior Tax Reimbursement Payment
attributable to such reduction (including the portion of the Tax Reimbursement
Payment attributable to the Excise Tax and federal, state and local income and
payroll tax imposed on the portion of the Tax Reimbursement Payment being repaid
by the Executive, using the assumptions and methodology utilized to calculate
the Tax Reimbursement Payment (unless manifestly erroneous)), plus interest on
the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code.
(B) In the event that the determination set forth in (A) above
is made by the Accountant after the filing by the Executive of any of his tax
returns for the calendar year in which the change in ownership event covered by
Code Section 280G(b)(2) occurred but prior to one (1) year after the occurrence
of such change in ownership, the Executive shall file at the request of the
Company an amended tax return in accordance with the Accountant's determination,
but no portion of the Tax Reimbursement Payment shall be required to be refunded
to the Company until actual refund or credit of such portion has been made to
the Executive, and interest payable to the Company shall not exceed the interest
received or credited to the Executive by such tax authority for the period it
held such portion (less any tax the Executive must pay on such interest and
which he is unable to deduct as a result of payment of the refund).
(C) In the event the Executive receives a refund pursuant to
(B) above and repays such amount to the Company, the Executive shall thereafter
file for refunds or credits by reason of the repayments to the Company.
(D) The Executive and the Company shall mutually agree upon
the course of action, if any, to be pursued (which shall be at the expense of
the Company) if the Executive's claim for refund or credit is denied.
(ii) In the event that the Excise Tax is later
determined by the Accountants or the Internal Revenue Service to exceed the
amount taken into account hereunder at the time the Tax Reimbursement Payment is
made (including by reason of any payment the existence or amount of which cannot
be determined at the time of the Tax Reimbursement Payment), the Company shall
make an additional Tax Reimbursement Payment in respect of such excess (plus any
interest or penalties payable with respect to such excess) once the amount of
such excess is finally determined.
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(iii) In the event of any controversy with the
Internal Revenue Service (or other taxing authority) under this Section 13,
subject to subpart (i)(D) above, the Executive shall permit the Company to
control issues related to this Section 13 (at its expense), provided that such
issues do not potentially materially adversely affect the Executive, but the
Executive shall control any other issues. In the event the issues are
interrelated, the Executive and the Company shall in good faith cooperate so as
not to jeopardize resolution of either issue, but if the parties cannot agree
Executive shall make the final determination with regard to the issues. In the
event of any conference with any taxing authority as to the Excise Tax or
associated income taxes, the Executive shall permit the representative of the
Company to accompany him and the Executive and his representative shall
cooperate with the Company and its representative.
(iv) With regard to any initial filing for a refund
or any other action required pursuant to this Section 13 (other than by mutual
agreement) or, if not required, agreed to by the Company and the Executive, the
Executive shall cooperate fully with the Company, provided that the foregoing
shall not apply to actions that are provided herein to be at the sole discretion
of the Executive.
(e) The Tax Reimbursement Payment, or any portion thereof,
payable by the Company shall be paid not later than the fifth (5th) day
following the determination by the Accountant and any payment made after such
fifth (5th) day shall bear interest at the rate provided in Code Section
1274(b)(2)(B). The Company shall use its best efforts to cause the Accountant,
to promptly deliver the initial determination required hereunder and, if not
delivered, within ninety (90) days after the change in ownership event covered
by Section 280G(b)(2) of the Code, the Company shall pay the Executive the Tax
Reimbursement Payment set forth in an opinion from counsel recognized as
knowledgeable in the relevant areas selected by the Executive, and reasonably
acceptable to the Company, within five (5) days after delivery of such opinion.
The amount of such payment shall be subject to later adjustment in accordance
with the determination of the Accountant as provided herein.
(f) The Company shall be responsible for all charges of the
Accountant and if (e) is applicable the reasonable charges for the opinion given
by Executive's counsel.
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(g) The Company and the Executive shall mutually agree on and
promulgate further guidelines in accordance with this Section 13 to the extent,
if any, necessary to effect the reversal of excessive or shortfall Tax
Reimbursement Payments. The foregoing shall not in any way be inconsistent with
Section 13(d)(i)(D) hereof.
14. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey without
reference to principles of conflict of laws.
(b) Entire Agreement/Amendments. This Agreement and the
instruments contemplated herein, contain the entire understanding of the parties
with respect to the employment of Executive by the Company from and after the
Commencement Date and supersedes any prior agreements between the Company or its
subsidiaries and Executive with respect thereto. There are no restrictions,
agreements, promises, warranties, covenants or undertakings between the parties
with respect to the subject matter herein other than those expressly set forth
herein and therein. This Agreement may not be altered, modified, or amended
except by written instrument signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to that term or any other term of this Agreement.
Any such waiver must be in writing and signed by Executive or an authorized
officer of the Company, as the case may be.
(d) Assignment. This Agreement shall not be assignable by
Executive. This Agreement shall be assignable by the Company only to an acquirer
of all or substantially all of the assets of the Company, provided such acquirer
promptly assumes all of the obligations hereunder of the Company in a writing
delivered to the Executive and otherwise complies with the provisions hereof
with regard to such assumption. This Agreement may be assigned by USI to the
Company and upon assumption of the Agreement by the Company, USI shall be
released from any further obligations or liabilities hereunder.
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(e) Successors; Binding Agreement; Third Party Beneficiaries.
This Agreement shall inure to the benefit of and be binding upon the personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees legatees and permitted assignees of the parties hereto.
(f) Communications. For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given (i) when faxed or delivered, or (ii)
two (2) business days after being mailed by United States registered or
certified mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the initial page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the
Chairman and Chief Executive Officer of the Company or to such other address as
any party may have furnished to the other in writing in accordance herewith.
Notice of change of address shall be effective only upon receipt.
(g) Withholding Taxes. The Company may withhold from any and
all amounts payable under this Agreement such Federal, state and local taxes as
may be required to be withheld pursuant to any applicable law or regulation.
(h) Survivorship. The respective rights and obligations of the
parties hereunder, including without limitation Section 12 hereof, shall survive
any termination of Executive's employment to the extent necessary to the agreed
preservation of such rights and obligations.
(i) Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
(j) Headings. The headings of the sections contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
(k) Executive's Representation. The Executive represents and
warrants to the Company that there is no legal impediment to him performing his
obligations under this Agreement and neither entering into this Agreement nor
performing his contemplated service hereunder will violate any agreement to
which he is a party or any other legal restriction.
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(l) Relocation of Executive. Executive shall be relocated in
accordance with the terms of the Prescolite Relocation Policy.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
U.S. INDUSTRIES, INC.
By:
--------------------------------
Name:
Title:
-----------------------------------
Gary K. Meuchel
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