EXHIBIT 10.11
UNITED INDUSTRIES CORPORATION
CHAIRMAN'S AGREEMENT
THIS CHAIRMAN'S AGREEMENT (this " Agreement"), dated as of July __,
1999, is entered into by and among United Industries Corporation, a Delaware
corporation (the " Company") and David Jones (" Executive"). Certain capitalized
terms used but not otherwise defined herein are defined in Section 9.
Executive and the Company are parties to that certain Consulting
Agreement (the " Consulting Agreement") and that certain Stock Option Agreement
(the " January Option Agreement"), both dated as of January 20, 1999.
The Company and Executive desire to enter into an agreement
relating to Executive's engagement by the Company in the positions of board
member and chairman. Simultaneously with the execution of this Agreement, the
parties hereto have entered into a Stock Option Agreement (the " Stock Option
Agreement").
The parties hereto, in exchange for good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, hereby agree as follows:
PART I. BOARD MEMBERSHIP TERMS
1. Board Membership and Duties.
a. The Company hereby engages Executive, and Executive hereby
accepts such engagement with the Company, as a member of the Board and as the
Company's Chairman on the terms and conditions specified herein.
b. Executive shall devote his best efforts to the interests of the
Company, which interests may change from time to time, and shall devote such
time to his position as the duties and responsibilities of his position
reasonably require.
Executive shall perform such duties and functions commensurate with his
position as may be reasonably assigned or delegated to him from time to time by
the Board. Executive acknowledges that such duties and functions may or may not
involve performance of services for or on behalf of affiliates of the Company.
2. Term and Termination.
a. Term. The " Term" of Executive's engagement by the Company is from
the date hereof until the " Termination Date", which is defined as the earlier
of (i) the date of termination of Executive's engagement pursuant to any one or
more of Sections 2(b), 2(c) or 2(d) of this
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Agreement and (ii) the " Payout Date", which shall be the later of (x) the
one-year anniversary hereof and (y) the date which is six months after the date
that a new chief executive officer is hired by the Company (provided that if
such chief executive officer is not still employed by the Company at the end of
such six-month period, this clause (y) shall apply to his successor). Executive
is an independent contractor and not an employee of the Company and his
engagement by the Company may be terminated by Executive, in his sole and
arbitrary discretion, at any time with or without good reason, or by the
Company, in the Company's sole and arbitrary discretion, at any time with or
without cause, by delivery of a written termination notice to the other party,
in each case subject to the consequences in Section 4.
(b). Death. If Executive dies during the Term, the Termination Date
shall be the date of his death.
(c). Termination By Executive. If Executive terminates his engagement
by the Company, the Termination Date shall be the date on which Executive's
termination notice is given to the Company, or such later date indicated on such
termination notice, which may not be more than thirty (30) days nor less than
fourteen (14) days from its receipt by the Company; provided that upon receipt
of Executive's termination notice, the Company may, in its sole discretion,
request that Executive cease some or all of his services prior to the date
referenced in such notice and Executive shall promptly comply with such request,
it being understood that such request will not change the Termination Date
specified in this Section 2(c).
(d). Termination by the Company. If the Company terminates Executive's
engagement (or if until Executive is removed by a vote of the directors or
stockholders of the Company in accordance with the Company's constituent
documents), the Termination Date shall be the date on which the Company's notice
is given to Executive, or such later date indicated in such termination notice,
which may not be more than thirty (30) days from its receipt by Executive. The
Company may, in its sole discretion, elect to remove Executive from the position
of Chairman without removing him from his position as a member of the Board, in
which case the Term shall continue until later terminated pursuant to this
Section 2.
3. Compensation.
a. During the Term, Executive's compensation for his services hereunder
shall consist of (a) Base Salary plus (b) Incentive Compensation, if any.
b. " Base Salary" shall be paid by the Company to Executive at an
annual rate of $300,000, payable in arrears in equal monthly installments,
subject to periodic review by the compensation committee of the Board for
increase only, any such increased salary thereafter constituting "Base Salary."
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c. " Incentive Compensation," if any, is equal to the sum of the
following three amounts, up to a maximum of 60% of Base Salary in any given
year, it being understood that no Incentive Compensation is required to be paid
in any year in which the Company's actual EBITDA for the year in question is not
at least 90% of Target EBITDA for such year:
i. If the Company's actual EBITDA for the year in question equals
or exceeds 90% of Target EBITDA for such year, Incentive
Compensation will equal the product of (A) Base Salary
multiplied by (B) 25%; plus
ii. Incentive Compensation will increase by an amount equal to the
product of (A) Base Salary multiplied by (B) 2.5% multiplied
by (C) the number of percentage points by which the Company's
actual EBITDA for the year in question exceeds 90% of Target
EBITDA for such year (for example, if the Company's actual
EBITDA was 93% of Target EBITDA for the year in question, the
number derived in clause (C) would be 3 (i.e., 93%-90% = 3)),
up to a maximum of 25% of Base Salary in any year; plus
iii. Incentive Compensation will increase by an amount equal to the
product of (A) Base Salary multiplied by (B) 2% multiplied by
(C) the number of percentage points by which the Company's
actual EBITDA for the year in question exceeds 100% of the
Target EBITDA for such year (for example, if the Company's
actual EBITDA was 103% of Target EBITDA for the year in
question, the number derived in clause (C) would be 3 (i.e.,
103%-100% = 3)).
All Incentive Compensation due hereunder shall be payable promptly after the
Company has received audited financial statements from its independent
accountants for the year in question which set forth such accountant's
determination of actual EBITDA for such year and not later than at or about the
time bonuses are paid to the Company's other senior executives whose bonuses are
determined based on the receipt of the Company's audited financial statements..
The formula for determining Incentive Compensation provided for in this Section
3 shall not be changed during the Term without Executive's consent.
d. Stock Options. The Company shall grant Executive options to purchase
300,000 shares of Common Stock, all on the terms and conditions contained in the
Company's 1999 Stock Option Plan approved by the Board and in the Stock Option
Agreement.
4. Termination Provisions.
a. If Executive terminates his engagement by the Company, then:
i. Executive shall be entitled to Base Salary for the
period ending on the Termination Date; and
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ii. Executive shall be entitled to any unpaid Incentive
Compensation for any calendar year ending prior to the year in which the
Termination Date occurs, as well as any Incentive Compensation for the calendar
year in which the Termination Date occurs pro-rated based on the portion of Base
Salary paid to Executive by the Company in such year.
b. If the Company terminates Executive's engagement or if Executive's
services terminate by reason of his death, then in either such case:
i. Executive shall be entitled to Base Salary for the period
ending on the Payout Date; and
ii. Executive shall be entitled to any unpaid Incentive
Compensation for any calendar year ending prior to the year in
which Executive is last entitled to receive his Base Salary
pursuant to Section 4(b)(i), as well as Incentive Compensation
for the calendar year in which Executive is last entitled to
receive his Base Salary pursuant to Section 4(b)(i) pro-rated
based on the portion of Base Salary paid to Executive the
Company in such year.
c. Any amounts owed by the Company to Executive pursuant to
Section 4(b) shall be paid at such times and in such manner as if the
termination giving rise to such payments had not occurred (with the Company
retaining the right to prepay all or any portion of such amount at any time in
its sole discretion). The Company's obligation to make any payments pursuant to
Section 4(b) shall be conditioned upon Executive's continued and continuing
compliance with the terms and conditions of this Agreement.
5. Expenses. The Company shall reimburse Executive for all reasonable
expenses incurred in the performance of his duties in accordance with the
expense reimbursement policy of the Company with respect to members of the Board
in effect at the time.
6. Confidential Information. Executive acknowledges that the information,
observations and data relating to the business of the Company and its
subsidiaries which Executive shall obtain during the course of his association
with the Company and its subsidiaries and his performance under this Agreement
are the property of the Company and its subsidiaries. Executive agrees that he
shall not use for his own purposes or disclose to any third party any of such
information, observations or data without the prior written consent of the
Board, unless and to the extent that (i) the aforementioned matters become
generally known to or generally available for use by the public, in each case
other than as a result of Executive's acts or omissions, (ii) disclosure is
compelled by law or judicial, administrative or regulatory action or proceeding
or (iii) disclosure is reasonably necessary in order for Executive to enforce
his rights under this Agreement or to defend himself in any judicial,
administrative or regulatory action or proceeding to which the Company or its
affiliates are directly or indirectly a party.
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7. Special Bonus. Promptly after the Payout Date, the Compensation
Committee of the Board shall consider and grant the payment of a one-time
special bonus for Executive if and only if a new chief executive officer has
been hired by the Company and has been employed by the Company for at least six
months as of the Payout Date. Such bonus shall be a minimum of $300,000 and may,
in the Compensation Committee's sole discretion, be increased to a maximum of
$500,000. The Compensation Committee shall use its reasonable discretion in
determining the appropriateness and magnitude of such bonus based upon the
Company's performance during the Term and the success of the transition to the
new chief executive officer of the Company.
8. Status of Consulting Agreement. Executive and the Company acknowledge
and agree that beginning on the date hereof and ending on the Payout Date, all
of Executive's and the Company's rights and obligations under the Consulting
Agreement shall be suspended, including, without limitation, the rendering of
services by Executive and the payment of compensation by the Company. Beginning
on the first day after the Payout Date, the Consulting Agreement shall be
reinstated and shall continue in full force and effect for the remainder of the
Consulting Period (as defined therein), if any, in accordance with its terms.
9. Survival. Section 4 and Sections 6 through 13 shall survive and
continue in full force in accordance with their terms notwithstanding the
termination of the Term.
10. Definitions. The following definitions shall be applied to the
capitalized terms used in this Agreement for all purposes, unless otherwise
clearly indicated:
a. Defined Terms.
"Board" means the Company's board of directors.
"Business" means the business conducted by the Company including,
without limitation, (a) the production and sale of termiticide products and (b)
the business conducted by the Company's Spectrum and Chemsico Divisions.
"EBITDA" means, for a given period, the consolidated Company's
accounting earnings of the Company and its consolidated Subsidiaries before
taking into account any interest expense, provision for income taxes or
depreciation or amortization expense, excluding for this purpose extraordinary
gains and losses unless included in the determination of Target EBITDA.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
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"Target EBITDA" means the annual performance goal for the
Company approved by the Board in its reasonable discretion with the input of
Executive, with Target EBITDA for fiscal 1999 being $85,400,000 or such lower
target as the Board (or a committee thereof) may determine in its reasonable
discretion. The Board shall use reasonable efforts to determine Target EBITDA
for any fiscal year after 1999 no later than the 90th day of the fiscal year of
the Company to which it relates.
b. Other Definitions. The terms set forth below are defined on the
following pages of this Agreement:
Agreement:
Base Salary:
Company:
Consulting Agreement:
Executive:
Incentive Compensation:
January Option Agreement:
Payout Date:
Stock Option Agreement:
Term:
Termination Date:
Indemnification. Without prejudice to (or enlargement or other modification of)
any existing rights of indemnification as an officer or director enjoyed by
Executive, the Company will defend and indemnify and hold Executive harmless for
serving as a director and Chairman to the same extent as the Company indemnifies
its officers and directors under the Company's articles of incorporation and
bylaws as in effect on the date hereof, and Executive shall be entitled to the
protection of any insurance policies the Company may elect to maintain generally
for the benefit of its directors or officers (and to the extent the Company
maintains such an insurance policy or policies, Executive shall be covered by
such policy or policies, in accordance with its or their terms to the maximum
extent of the coverage provided for any other Company officer or director). No
amendment to the Company's Certificate of Incorporation or bylaws after the date
of this Agreement which reduces the scope of indemnification of officers and
directors shall affect the rights of Executive under this Agreement.
11. Notices. Any notice provided for in this Agreement must be in writing
and must be either personally delivered, mailed by first class mail (postage
prepaid and return receipt requested) or sent by reputable overnight courier
service (charges prepaid) to the recipient at the address below indicated:
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To the Company
United Industries Corporation
8825 Page Boulevard
St. Louis, MO 63114
Telecopy: (314) 253-5941
Attention: Chief Financial Officer
with a copy to
Thomas H. Lee Equity Fund IV, L.P.
c/o Thomas H. Lee Company
75 State Street
Boston, MA 02109
Telecopy: (617) 227-3514
Attention: C. Hunter Boll
Scott Schoen
To Executive
David Jones
4596 Signature Drive
Middleton, WI 53562
Telecopy: (608) 828-9721
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement shall be deemed to have been given when so delivered
or sent or, if mailed, five days after deposit in the U.S. mail.
12. General Provisions.
a. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
b. Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
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agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way,
other than the Consulting Agreement and the January Option Agreement.
c. Counterparts. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
d. Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by
Executive, the Company and their respective successors and assigns; provided
that the rights and obligations of Executive under this Agreement shall not be
assignable.
e. Governing Law. All issues and questions concerning the construction,
validity, enforcement and interpretation of this Agreement and the exhibits and
schedules hereto shall be governed by, and construed in accordance with, the
laws of the State of Delaware, without giving effect to any choice of law or
conflict of law rules or provisions (whether of the State of Delaware or any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware.
f. Remedies. Each of the parties to this Agreement shall be entitled to
enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorney's fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor. The parties hereto agree and acknowledge that money damages would not be
an adequate remedy for any breach of the provisions of this Agreement and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
g. Amendment and Waiver. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company and
Executive.
h. Third-Party Beneficiary. There are no beneficiaries to this
Agreement other than the signatories hereto.
i. Business Days. If any time period for giving notice or taking action
hereunder expires on a day which is a Saturday, Sunday or legal holiday in the
state in which the Company's chief executive office is located, the time period
shall be automatically extended to the business day immediately following such
Saturday, Sunday or legal holiday.
j. Assignment. Nothing in this Agreement shall preclude the Company
from consolidating or merging into or with, or transferring all or substantially
all of its assets to, another corporation; provided that the Company will
require any successor
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(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company to assume this
Agreement. As used in this Agreement, "Company" shall mean the Company, as
defined above, and any successor to its business and/or assets as aforesaid
which assumes this Agreement by operation of law or otherwise.
k. Tax Returns. It is intended that the fees paid to Executive
hereunder shall constitute revenues to Executive and (unless otherwise required
by law) the Company will not withhold any amounts therefrom as federal income
tax withholding from wages or as employee contributions under the Federal
Insurance Contribution Act or any other state or federal law. Executive shall
file all tax returns and reports required to be filed by him on the basis that
Executive is an independent contractor, rather than an employee, as defined in
Treasury Regulation ss.31.3121(d)_1(c)(2).
l. Mitigation by Executive. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement and
such amounts shall not be reduced whether or not Executive obtains other
employment.
* * * *
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
UNITED INDUSTRIES CORPORATION
By:
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Its:
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DAVID JONES
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