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[AQUA-CHEM, INC. LETTERHEAD]
EXHIBIT 10.20
February 11, 1998
Mr. James W. Hook
2230 Nemeskal
Maple City, Michigan 49664
Dear Jay:
This letter will set forth our agreement in connection with your
serving as a member of the Board of Directors (and any Committees thereof) of
Aqua-Chem, Inc. ("AQM"). The arrangements set forth herein shall be effective as
of January 23, 1998 and shall continue in effect for so long as you continue to
be a director. In that regard, nothing contained herein shall obligate you to
continue to serve as a director of AQM for any specific period or term or confer
upon you any right to continue to serve as a director of AQM for any specific
period or term. Accordingly, AQM by majority vote of its Stockholders or Board
of Directors and you each have the right to terminate your being an AQM director
at any time.
CASH FEE.
Upon your acceptance of this Agreement, AQM will pay you a one time fee
of Twenty Thousand Dollars ($20,000.00). In addition, for so long as you are a
member of the Board of Directors, AQM will pay you Two Thousand Five Hundred
Dollars ($2,500) on the first day of February, April, July and November of each
year. Consistent with the preceding quarterly payment schedule, upon your
acceptance of this Agreement, AQM will pay you $2,500, representing the payment
due on February 1, 1998.
INDEMNIFICATION AGREEMENT.
Simultaneous with your acceptance of this Agreement, AQM will enter
into an Indemnification Agreement with you in the form attached hereto as
Exhibit A.
GRANT OF OPTIONS.
AQM hereby grants you an option (subject to the vesting and
anti-dilution provisions hereinafter set forth) to purchase one thousand one
hundred twenty-five (1,125) shares of $.01 par value common stock of AQM
(hereinafter respectively referred to as the "Options" and the "Stock")
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EXHIBIT 10.20
at a price of Three and 75/100 Dollars ($3.75) per share, which shall be payable
in full upon exercise of the Option. Except as hereinafter set forth in the next
paragraph, all Options granted hereunder shall expire and terminate ten years
from the date of this letter. Options granted hereunder are so called
Non-Qualified or Non-Statutory Options and do not constitute Incentive Stock
Options within the meaning of Section 423 of the Internal Revenue Code. You
shall be responsible for any and all taxes due in connection with the grant or
exercise of the Options and/or the subsequent sale or other disposition of Stock
acquired pursuant to the exercise of the Options. Options shall be exercised by
written notice addressed to AQM accompanied by a check for the full purchase
price. As a condition precedent to the exercise of any Option, AQM reserves the
right to require you to represent to it that such exercise is for investment
only and not with a view to distribution and such other matters as may be
necessary to comply with applicable laws or regulations. If at any time the
Board of Directors of AQM in its sole discretion determines that the listing,
registration, or qualification of shares of Stock issuable hereunder on any
securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition of, or in connection with the issue, transfer or purchase of Stock,
the Options granted hereunder may not be exercised in whole or in part unless
such listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the AQM Board. The
granting of the Options shall not confer any rights as a stockholder unless and
until an Option is validly exercised and a certificate issued. Nothing contained
herein shall confer any security interest or other interest in any assets of AQM
and you shall be a general unsecured creditor of AQM with respect to any amounts
which may become due you pursuant to the terms hereof.
VESTING
The Options shall vest and become exercisable at the rate of two
hundred twenty-five (225) per year commencing on December 31, 1998 through and
including December 31, 2002. Notwithstanding the foregoing, in the event that
prior to December 31 of any calendar year, (a) AQM becomes a party to an
agreement that contemplates the sale of all of the issued and outstanding stock
of AQM ("Stock Sale"), (b) AQM becomes a party to a merger or consolidation
agreement that contemplates that AQM will not be the surviving corporation of
the merger or consolidation ("Reorganization"), or (c) you cease for any reason
to be a member of the Board of Directors ("Termination") then, in any of such
events (hereinafter referred to as a "Triggering Event"): (a) if the Stock Sale,
Reorganization or Termination actually occurs on or before June 30 of such
calendar year, all Options schedule to vest on December 31 of such calendar year
and all Options scheduled to vest in subsequent calendar years shall be null and
void and (b) if the Stock Sale, Reorganization or Termination actually occurs
after June 30 of such calendar year, the Options scheduled to vest during on
December 31 of such calendar year shall become immediately vested and
exercisable in full upon the occurrence of the Triggering Event and all Options
scheduled
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EXHIBIT 10.20
to vest in subsequent calendar years shall be null and void. Notwithstanding
anything to the contrary herein (a) upon the consummation of a Stock Sale or
Reorganization all Options previously granted which have not been exercised
shall expire and terminate and (b) all Options previously granted which have
not been exercised shall expire and terminate on the ninetieth (90th) day
following a Termination.
ANTI-DILUTION AND ADMINISTRATION.
Notwithstanding anything to the contrary herein, the AQM Board of
Directors (or such Committee thereof as the Board may designate) shall have the
right to and shall: (a) adjust the number of shares, the price of shares and/or
the class of shares to which the Options apply, but only to prevent the dilution
or enlargement of rights, including, without limitation, adjustments in the
event of stock dividends, stock splits, recapitalizations, mergers,
consolidations, combinations or exchanges of shares, separations, spin-offs,
reorganizations, liquidations and the like; (b) interpret, administer and, to
the extent necessary to comply with the provisions of Section 16 of the
Securities Act of 1934, the requirements of Rule 16b-3 and other applicable laws
and regulations, modify the provisions set forth herein. Any such action taken
or determination made in good faith by the AQM Board of Directors or such
Committee as the Board may designate shall be final and binding.
NONTRANSFERABILITY OF OPTIONS.
No Option may be transferred, assigned, pledged or hypothecated
(whether by operation of law or otherwise), except as provided by will or the
applicable laws of descent and distribution, and no Option shall be subject to
execution, attachment or similar process. Any attempted assignment, transfer,
pledge, hypothecation or other disposition of an Option not specifically
permitted herein shall be null and void.
PUT - CALL PROVISIONS
Upon your death or disability (as defined in Section 22(e)(3) of the
Internal Revenue Code) and continuing thereafter at any time or times until the
consummation of an initial public offering of the Stock, (a) you, or in the
event of your death, your personal representative and/or heirs (hereinafter
referred to as the "Selling Stockholder") shall have the right ("Put"),
exercisable by written notice to AQM, to require AQM to purchase all or any
portion of the Stock acquired pursuant to the exercise of the Options and (b)
AQM shall have the right ("Call"), exercisable by written notice, to require
you, or in the event of your death, your personal representative and/or heirs
(hereinafter again referred to as the "Selling Stockholder") to sell all or any
portion of the Stock acquired pursuant to the exercise of the Options. The per
share price for the Stock purchased
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EXHIBIT 10.20
and sold pursuant to the exercise of a Put or Call shall be "Market Price" as
hereinafter defined. The closing of the purchase and sale of Stock pursuant to
the exercise of a Put or Call shall occur at AQM's principal office at the date
and time specified by AQM by written notice to the Selling Stockholder, which
shall be (a) not less than ten (10) days after the date of receipt of the
written notice specifying date and time of closing and (b) not more than ninety
(90) days after receipt of the initial notice of exercise of the Put or Call. At
the closing, the Selling Stockholder shall deliver certificates duly endorsed
for transfer evidencing ownership of the Stock being purchased and sold and such
other agreements as AQM may reasonably require to confirm that it is acquiring
the Stock free and clear of any claims of any nature whatsoever, and against
delivery of the same, AQM shall pay the Selling Stockholder (by certified or
bank cashier's check or wire transfer of immediately available funds to such
account as the Selling Stockholder shall direct in writing) an amount equal to
(a) the Market Price, multiplied by (b) the number of shares of Stock being
purchased and sold. As used herein, "Market Price" shall mean the fair market
value of one share of Stock as of the date of receipt of written notice of
exercise of a Put or Call as determined by an independent appraiser (the
"Independent Appraiser") appointed by the Board of Directors of AQM. The
Independent Appraiser shall be appointed within ten (10) days of receipt of
written notice of exercise of a Put or Call and shall be instructed to complete
the valuation within thirty (30) days after appointment. The Selling Stockholder
and AQM shall execute such agreements as the Independent Appraiser shall
require. The fees and expenses of the Independent Appraiser shall be paid by AQM
and the determination of the Independent Appraiser shall be final and binding
upon AQM and the Selling Stockholder.
RIGHT OF FIRST REFUSAL.
AQM shall have a right of first refusal with respect to any sale,
transfer, gift, assignment, pledge, encumbrance or other disposition of Stock
acquired pursuant to the exercise of an Option. In the event you receive a bona
fide offer to purchase or desire to sell, transfer, assign, pledge, encumber or
otherwise dispose of any Stock acquired pursuant to the exercise of an Option,
you shall deliver written notice thereof to AQM stating the terms of such
proposed sale, transfer, gift, assignment, encumbrance or disposition, which
notice shall also specify the number of shares of Stock involved, the price per
share, if any, and the name and address of the proposed transferee. AQM shall
have the right (exercisable by written notice to you during the thirty (30) day
period following the date of AQM's receipt the initial written notice from you)
to elect to purchase all or less than all of the shares of Stock specified in
your written notice at a per share price equal to (a) in the case of a proposed
pledge, encumbrance, gift or similar disposition, the Market Price (as defined
in the preceding paragraph and determined as of the date of AQM's receipt of the
written notice from you), or (b) in the case of a proposed sale, the lesser of
the Market Price or the price
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EXHIBIT 10.20
contained in the bona fide offer and specified in your written notice. The time
and place of closing and the deliveries at closing shall be as specified in the
preceding paragraph. In the event AQM does not exercise the right of first
refusal as to all of the shares of Stock specified in your written notice, you
may during the ninety (90) day period after the expiration of AQM's right of
first refusal, dispose of any shares of Stock specified in your initial written
notice which were not purchased by AQM but only upon the terms and to the
transferee specified in your initial written notice to AQM. After the expiration
of such ninety (90) day period, no shares of Stock acquired upon exercise of an
Option may thereafter be transferred or encumbered without again complying with
the provisions set forth herein. Any attempted transfer not in compliance with
the preceding provisions shall be null and void. The right of first refusal set
forth herein shall terminate upon the consummation of an initial public offering
of the Stock.
LEGEND.
All certificates evidencing shares of Stock acquired pursuant to the
exercise of an Option shall bear a legend as follows:
The shares of Aqua-Chem, Inc. evidenced by this certificate have not
been registered under any securities laws and may only be sold,
transferred otherwise disposed of in compliance with applicable
securities laws. In particular, the shares evidenced by this
certificate have not been registered under the Securities Acts of 1933,
as amended (the "Securities Act") and may not be sold, transferred or
otherwise dispose of unless (1) an effective registration statement
under the Securities Act shall then be in effect with respect to such
shares, or (2) the Company shall have received an opinion of counsel
reasonably acceptable to the Company at any proposed sale, transfer or
other disposition of such shares is exempt from registration under the
Securities Act. The shares evidenced by this certificate are further
subject to a right of first refusal and call as set forth in a letter
agreement dated February 9, 1998, a copy of which is available for
inspection at the offices of the Company.
MISCELLANEOUS PROVISIONS.
Any notices required or permitted hereunder shall be sufficiently given
if in writing and personally delivered, sent by registered mail or facsimile
addressed: (a) if to you or any permitted transferee, to your address or, if to
a permitted transferee, to such permitted transferee's address, as set forth in
the books and records of AQM; or (b) if to AQM, at the principal office of AQM
clearly marked "Attention: Board of Directors". If any provision of this
agreement shall be determined to be invalid or unenforceable, such determination
shall not affect the validity or enforceability of any other provision of this
agreement and the same shall be enforced as if such
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EXHIBIT 10.20
invalid or unenforceable provision had not been included. This agreement
contains the entire agreement of the parties and, except as expressly provided
to the contrary herein, may only be modified by a written instrument signed by
AQM and you. This agreement shall be governed by the laws of the State of
Wisconsin and any dispute hereunder shall be resolved in accordance with the
rules of the American Arbitration Association by binding arbitration in
Milwaukee, Wisconsin, by a panel of three arbitrators, with you and AQM each
appointing one arbitrator and the two arbitrators so appointed then appointing a
third arbitrator.
If you are in agreement with the preceding, please so indicate by
signing and returning the enclosed copy of this letter.
Very truly yours,
/s/ Jeffrey A. Miller
------------------------
Jeffrey A. Miller
Agreed to and accepted this 19 day of February, 1998.
/s/ James W. Hook
- ----------------------
James W. Hook
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EXHIBIT A EXHIBIT 10.20
AGREEMENT
AGREEMENT made and entered into effective as of the _____ day of
January, 1998 by and between Aqua-Chem, Inc., a Delaware corporation with
principal offices in Milwaukee, Wisconsin (hereinafter sometimes referred to as
AQM) and Jay Hook (hereinafter sometimes referred to as "Mr. Hook").
WITNESSETH:
WHEREAS, AQM desires Mr. Hook to become a member of the AQM Board of
Directors;
WHEREAS, as an inducement to Mr. Hook to become a director, AQM has
agreed to indemnify Mr. Hook and hold him harmless as hereinafter set forth in
this Agreement; and
WHEREAS, Mr. Hook, in reliance upon AQM's undertakings as hereinafter
set forth in this Agreement, is willing to serve as a director.
NOW, THEREFORE, in consideration of the premises AQM and Mr. Hook
hereby agrees as follows:
1. DEFINITIONS. As used herein, the following terms shall have the
following meanings:
(a) "Expenses" include fees, costs, charges, disbursements,
attorney fees and any other Expenses incurred in connection
with a Proceeding (as hereinafter defined).
(b) "Liability" includes the obligation to pay a judgment,
settlement, penalty, assessment, forfeiture or fine,
including an excise tax assessed with respect to any
employee benefit plan, and reasonable Expenses.
(c) "Party" includes an individual who was or is, or who is
threatened to be made, a named defendant or respondent in a
Proceeding.
(d) "Proceeding" means any threatened, pending or completed
civil, criminal, administrative or investigative action,
suit, arbitration or other Proceeding, whether formal or
informal, which involves foreign, federal, state or local
law and which is brought by or in the right of AQM or by any
other person.
2. MANDATORY INDEMNIFICATION.
(a) AQM shall indemnify Mr. Hook and in the event of his death,
his estate, personal representative and heirs (hereinafter
collectively referred to as the "Indemnified Party"), to the
extent that the Indemnified Party has been successful on the
merits or otherwise in the defense of a Proceeding, for all
reasonable Expenses incurred in the Proceeding if the
Indemnified Party was a party because Mr. Hook
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is or was a director and/or officer of AQM.
(b) AQM shall also indemnify the Indemnified Party against
Liability incurred by the Indemnified Party in a Proceeding
the Indemnified Party was a party to because Mr. Hook was or
is a director and/or officer of AQM, unless Liability was
incurred because Mr. Hook breached or failed to perform a
duty that he owes to AQM and the breach or failure to
perform constitutes any of the following:
1. A willful failure to deal fairly with AQM, Inc. or
its shareholders in connection with a matter in which
Mr. Hook has a material conflict of interest.
2. A violation of the criminal law, unless Mr. Hook
had reasonable cause to believe that his conduct was
lawful or no reasonable cause to believe that his
conduct was unlawful.
3. A transaction from which Mr. Hook derived an
improper personal profit.
4. Willful misconduct.
(c) Determination of whether indemnification is required under
this Section 2 shall be made under Section 5 of this
Agreement.
(d) The termination of a Proceeding by judgment, order,
settlement or conviction, or upon a plea of no contest or an
equivalent plea, does not, by itself, create a presumption
that indemnification of the Indemnified Party is not
required under this section.
3. ALLOWANCE OF EXPENSES AS INCURRED. Upon written request by an
Indemnified Party who is a party to a Proceeding, AQM shall pay or
reimburse the Indemnified Party's reasonable Expenses as incurred if
the Indemnified Party provides AQM with all of the following:
(a) Written affirmation of the Indemnified Party's good faith
belief that Mr. Hook has not breached or failed to perform
his duties to AQM.
(b) A written undertaking, executed personally or on behalf of
the Indemnified Party, to repay the allowance and to pay
interest (at an interest rate equal to the rate then
currently paid by AQM on borrowed funds) on the allowance to
the extent that it is ultimately determined under Section 5
of this Agreement that indemnification under Section 2 of
this Agreement is not required and that indemnification is
not ordered by a court under Section 4 of this Agreement.
The undertaking under this Section shall be an unlimited and
unsecured general obligation of the Indemnified
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EXHIBIT 10.20
Party.
4. COURT-ORDERED INDEMNIFICATION.
(a) An Indemnified Party who is a party to a Proceeding may
apply for indemnification to, or for a review of an adverse
determination under Section 5 of this Agreement by, the
court conducting the Proceeding or to the Circuit Court for
Milwaukee County, Wisconsin and shall be entitled to
indemnification as hereinafter provided in Section 4(b).
(b) The Indemnified Party shall be entitled to indemnification
if the court determines either of the following:
(i) That the Indemnified Party is entitled to
indemnification under Section 2 of this
Agreement. If the court also determines that
AQM unreasonably refused the request for
indemnification, AQM shall pay the Indemnified
Party's reasonable Expenses incurred to obtain
the court-ordered indemnification.
(ii) That the Indemnified Party is fairly and
reasonably entitled to indemnification in view
of all the relevant circumstances, regardless
of whether indemnification is required under
Section 2 of this Agreement.
5. DETERMINATION OF RIGHT TO INDEMNIFICATION. The Indemnified Party
shall select one of the following means of determining his or her right
to indemnification:
(a) By a majority vote of a quorum of the Board of Directors of
AQM consisting of directors who are not at the time parties
to the same or related Proceedings. If a quorum of
disinterested directors cannot be obtained, by majority vote
of a committee duly appointed by the Board of Directors of
AQM and consisting solely of two or more directors who are
not at the time parties to the same or related Proceedings.
Directors who are parties to the same or related Proceedings
may participate in the designation of members of the
committee.
(b) By independent legal counsel selected by a majority vote of
a quorum of the Board of Directors or its committee in the
manner prescribed in (a) above or, if unable to obtain such
a quorum or committee, by a majority vote of the full board
of directors, including directors who are parties to the
same or related Proceedings.
(c) By a panel of three arbitrators consisting of one arbitrator
selected by those directors entitled under (b) above to
select independent legal counsel, one arbitrator selected by
the Indemnified Party and one arbitrator selected by the two
arbitrators previously selected.
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6. ADDITIONAL RIGHTS. In addition to the specific rights to
indemnification set forth herein, the Indemnified Party shall be
entitled to such additional rights to indemnification as may from time
to time be provided or permitted under AQM's Certificate of
Incorporation or by-laws or the general business corporation laws of
Delaware or Wisconsin; provided, however, that no provision under any
of the foregoing shall serve to diminish any rights of indemnification
otherwise specifically granted under this Agreement.
7. MISCELLANEOUS MATTERS. This Agreement shall be governed by the
laws of the State of Wisconsin, may only be amended by written
instrument signed by Mr. Hook and AQM and shall inure the benefit of
and be binding upon the parties and their heirs, personal
representatives, successors and assigns; provided, however, that no
assignment by operation of law or otherwise shall relieve a party of
its obligations hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first above written.
AQUA-CHEM, INC.
/s/ Jay Hook By: /s/ Jeffrey A. Miller
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Jay Hook Chairman and CEO
/s/ James W. Hook By:
--------------------------------
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